WOODLAND ASSOCIATES P.LTD, V. ITO WD 5(3)(4),

MA 751/MUM/2012

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 0354 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 26-04-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 13-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENA
• Assessee Lawyers: K K LALKAKA
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH, G MUMBAI BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER MA NO: 751/MUM/2012 ARISING OUT OF : 5031/MUM/2011 ASSESSMENT YEAR : 2007-08 WOODLAND ASSOCIATES PVT. LTD. C-17, WOODLANDS DR. G. DESHMUKH MARG MUMBAI-400 026. PAN NO. AAACW 1307 P INCOME TAX OFFICER WARD -5(3)(4) AAYAKAR BHAVAN, MARINE DRIVE MUMBAI. (APPLICANT) VS. (RESPONDENT) APPLICANT BY : SHRI K.K. LALKAKA RESPONDENT BY : SHRI OM PRAKASH MEENA DATE OF HEARING : 12.04.2013 DATE OF PRONOUNCEMENT : 26.04.2013 ORDER PER RAJENDRA SINGH (AM). THIS MISCELLANEOUS APPLICATION HAS BEEN FILED BY TH E ASSESSEE REQUESTING FOR RECTIFICATION OF THE ORDER PASSED BY THE TRIBUNAL IN ITA NO.5031/MUM/2011 FOR THE ASSESSMENT YEAR 2007-08 DA TED 21.11.2012 ON THE GROUND OF SOME APPARENT MISTAKE IN THE PORTION OF THE ORDER RELATING TO DETERMINATION OF THE ANNUAL VALUE OF TH E PROPERTY LET OUT TO THE DAUGHTER OF THE MANAGING DIRECTOR. 2. THE ASSESSEE OWNED A FLAT IN NEW WOODLAND CO-OPE RATIVE HOUSING SOCIETY SITUATED IN A PRIME LOCALITY OF SOU TH MUMBAI WHICH HAD BEEN LET OUT TO MS. SNEHAL JALAN, A SHARE HOLDE R AND DAUGHTER OF THE MANAGING DIRECTOR WHO HAD CONTROLLING INTERE STS IN THE MA NO.751/M/12 ARISING OU T OF ITA NO.5031/M/11 A.Y: 07-08 2 COMPANY. THE TRIBUNAL HELD, AFTER DETAILED EXAMINAT ION AND AFTER CONSIDERING SEVERAL JUDGMENTS ON THE SUBJECT THAT A NNUAL VALUE HAS TO BE DETERMINED ON THE BASIS OF FAIR RENT PREVAILI NG IN THE MARKET ON COMPARATIVE BASIS. THE ARGUMENT OF THE ASSESSEE THAT PROPERTY WAS COVERED UNDER RENT CONTROL ACT AND THEREFORE S TANDARD RENT SHOULD BE TAKEN AS FAIR RENT WAS NOT ACCEPTED BY TH E TRIBUNAL. THE TRIBUNAL OBSERVED THAT THOUGH THE MAHARASHTRA RENT CONTROL ACT WAS APPLICABLE TO PROPERTY LET OUT TO INDIVIDUALS, THE SAID ACT WOULD NOT APPLY IN CASE OF COLOURABLE TRANSACTIONS SUCH A S THE CASE OF THE ASSESSEE IN WHICH THE FLAT HAD BEEN LET OUT AT LOW RENT TO THE DAUGHTER OF THE MANAGING DIRECTOR WHO HAD CONTROLLI NG INTERESTS IN THE COMPANY. THIS WAS ONLY AN ARRANGEMENT TO REDUCE TAX LIABILITY. THE TRIBUNAL HELD THAT PROVISIONS OF THE RENT CONTR OL ACT COULD BE APPLIED ONLY IN CASE OF BONAFIDE LETTING OUT OF THE PROPERTY AND NOT IN CASE OF COLOURABLE TRANSACTIONS. THE LD. AR ARGU ED THAT ONCE PROPERTY HAD BEEN LET OUT TO AN INDIVIDUAL WHETHER RELATED OR NOT, RENT CONTROL ACT WOULD APPLY AND RENT COULD NOT BE CHARGED HIGHER THAN THE STANDARD MARKET RENT. HOWEVER WE FIND THAT THE TRIBUNAL HAS ALREADY CONSIDERED THE ISSUE AND DECIDED THAT S UCH COLOURABLE TRANSACTIONS HAVE TO BE DISCARDED AND RENT CONTROL ACT COULD NOT BE APPLIED IN SUCH CASES. THIS IS AN ARGUABLE ISSUE AN D THEREFORE, IN SUCH CASES NO ACTION CAN BE TAKEN UNDER SECTION 254 (2) OF THE INCOME TAX ACT UNDER WHICH ONLY PATENT AND OBVIOUS MISTAKES CAN BE RECTIFIED. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE MISCELLANEOUS APPLICATION ON THIS ISSUE. MA NO.751/M/12 ARISING OU T OF ITA NO.5031/M/11 A.Y: 07-08 3 3. THE SECOND MISTAKE POINTED OUT BY THE ASSESSEE I S THAT WHILE WORKING OUT THE COMPARATIVE MARKET RATE, THE TRIBUN AL HAD NOT TAKEN INTO CONSIDERATION THE MARKET RATE OF FLAT NO .21C WHICH WORKED OUT TO RS.27/- PER SQ.FT. THE TRIBUNAL HAD ONLY CONSIDERED THE RATE OF RS.157/- PER SQ.FT. IN CASE OF FLAT NO. 11C AND RATE OF RS.100/- PER SQ.FT. IN CASE OF FLAT NO.18/B-2. THER EFORE, IT HAS BEEN POINTED OUT THAT THERE IS AN APPARENT MISTAKE IN TH E ORDER OF THE TRIBUNAL IN NOT TAKING AVERAGE OF ALL THREE FLATS L OCATED IN THE SAME BUILDING. IT HAS ALSO BEEN POINTED OUT THAT THE SAI D FLATS WERE LET OUT 5-6 YEARS LATER THAN THE FLAT UNDER CONSIDERATION W HICH HAD BEEN LET OUT IN THE YEAR 1999 AND THEREFORE WHILE WORKING OU T THE MARKET RENT, DISCOUNT AT THE RATE OF 5% PER YEAR SHOULD HA VE BEEN GIVEN. 3.1 WE HAVE HEARD BOTH PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. WE DO NOT FIND ANY APPARENT MISTAKE IN THE ORDER OF THE TRIBUNAL. WHILE WORKING OUT THE MARKET RENT, THE TRIBUNAL HAD CONSIDERED THE COMPARATIVE C ASE IN THE SAME BUILDING. THE FLAT NO.21C WAS NOT CONSIDERED BY THE TRIBUNAL AS THE SAME WAS NOT COMPARABLE SINCE THE LAND LORD IN THAT CASE HAD TAKEN DEPOSIT OF RS.3.00 CRORES WHICH WAS THE REASON FOR LOW RENT AND THEREFORE, THE SAID CASE COULD NOT BE COMPARED TO T HE CASE OF THE ASSESSEE OR THE OTHER TWO CASES IN WHICH NO DEPOSIT S HAD BEEN TAKEN. THUS, IN CONSIDERING ONLY THE CASES IN WHICH NO DEPOSITS HAD BEEN TAKEN, THERE IS NO APPARENT MISTAKE IN THE ORD ER OF THE TRIBUNAL. THE ARGUMENT BASED ON DISCOUNT @ 5% ON TH E GROUND OF MA NO.751/M/12 ARISING OU T OF ITA NO.5031/M/11 A.Y: 07-08 4 EARLIER LETTING OUT IS ALSO NOT ACCEPTABLE. SUCH AR GUMENTS ARE VALID WHEN THE PROPERTY HAD BEEN LET OUT TO AN INDEPENDEN T 3 RD PARTY AS IN THOSE CASES ONCE PROPERTY IS LET OUT AND OCCUPIE D THERE IS CONSTRAINT ON REVISING THE RENT WHICH IS NOT SO IF THE PROPERTY IS LET OUT TO SELF OR TO SOME CLOSE RELATIVE. IN SUCH CASE S IF THE ASSESSEE WANTS TO LET OUT PROPERTY AT MARKET RATE AT ANY POI NT OF TIME, THERE IS NO SUCH DIFFICULTY AS IS THERE IN CASE OF 3 RD PARTY LETTING OUT. WE THEREFORE, DO NOT SEE ANY APPARENT MISTAKE IN THE O RDER OF THE TRIBUNAL ON THESE ACCOUNTS. IN ANY CASE, THESE ARE ARGUABLE ISSUES ON WHICH NO ACTION CAN BE TAKEN UNDER SECTION 254(2 ). 4. THE ASSESSEE HAS ALSO POINTED OUT APPARENT MISTA KE IN RELATION TO NATURE OF INTEREST INCOME RECEIVED FROM ICDS AND BILL DISCOUNTING. IT HAS BEEN POINTED OUT THAT IT WAS UN DERSTOOD DURING APPELLATE PROCEEDINGS THAT THE ISSUE WILL BE RESTOR ED TO THE FILE OF AO FOR ASCERTAINING EXACT FACTS AND, THEREFORE, NO ARGUMENTS WERE ADVANCED BY THE ASSESSEE. THEREFORE, IT HAS BEEN SU BMITTED THAT THERE IS AN APPARENT MISTAKE IN THE ORDER OF THE TR IBUNAL IN NOT RESTORING THE ISSUE AND DECIDING THE SAME ON MERIT. 4.1 WE HAVE HEARD BOTH PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THERE IS NOTHING O N RECORD WHICH SHOWS THAT THE TRIBUNAL HAD GIVEN ANY INDICATION TH AT THE MATTER WILL BE RESTORED TO THE FILE OF AO. THE TRIBUNAL HAD PAS SED AN ORDER AFTER CONSIDERING ALL THE ASPECTS. THE TRIBUNAL NOTED THA T IN ASSESSMENT YEAR 2005-06 THE SAME ASPECT HAD BEEN EXAMINED AND THE AO IN MA NO.751/M/12 ARISING OU T OF ITA NO.5031/M/11 A.Y: 07-08 5 THE SCRUTINY ASSESSMENT MADE UNDER SECTION 143(3) H AD TREATED THE INCOME AS INCOME FROM OTHER SOURCES WHICH HAD BEEN ACCEPTED BY THE ASSESSEE AS NO APPEAL WAS FILED. THE TRIBUNAL H AS ALSO CONSIDERED THE ARGUMENT OF THE ASSESSEE THAT IN SUB SEQUENT YEARS BUSINESS INCOME DECLARED HAS BEEN ACCEPTED BUT REJE CTED THE SAME ON THE GROUND THAT IN SUBSEQUENT YEARS ASSESSMENTS WERE COVERED UNDER SUMMARY SCHEME IN WHICH AO WAS NOT EMPOWERED TO TAKE ANY VIEW REGARDING COMPUTATION OF INCOME. THE LD. A R HAD REFERRED TO CERTAIN LETTERS PLACED AT PAGE 83 TO 104 OF THE PAPER BOOK WHICH HAD ALSO BEEN DULY CONSIDERED BY THE TRIBUNAL. THE TRIBUNAL HAD DECIDED THE ISSUE BY WAY OF A REASONED AND SPEAKING ORDER. WE DO NOT SEE ANY APPARENT MISTAKE IN THE ORDER WHICH CAN BE RECTIFIED UNDER SECTION 254(2). WE, ACCORDINGLY REJECT THE CL AIM OF THE ASSESSEE. 5. IN THE RESULT, THE MISCELLANEOUS APPLICATION OF THE ASSESSEE STANDS REJECTED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.04.2013. SD/- SD/- ( H.L. KARWA) ( RAJENDRA SINGH ) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 26.04.2013. JV. MA NO.751/M/12 ARISING OU T OF ITA NO.5031/M/11 A.Y: 07-08 6 COPY TO: THE APPLICANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.