SHARVIL AJAYKUMAR SHRIDHAR,AHMEDABAD V. THE DY.CIT, CENTRAL CIRCLE-2(4), AHMEDABAD

ITSSA 69/AHD/2024

AI Insights

The case involves two separate appeals by Ajaykumar Dahyabhai Shridhar and Sharvil Ajaykumar Shridhar against the orders of the Commissioner of Income Tax (Appeals) - 12, Ahmedabad, concerning the assessment years 2019-20 and 2020-21. The appeals were related to a common search action under section 132 of the Income Tax Act, 1961, conducted on 28/01/2020. The primary issues were the taxation of deemed rental income from a co-owned property and the addition of unexplained jewellery found during the search. The Tribunal consolidated the hearings for convenience and found in favor of the assessees on both counts, leading to the deletion of the contested additions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 39129 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2019-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B. P. SRIVASTAV
• Section: 143(3); 153A; 22; 69A

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ,“ए“ अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ A ” BENCH, AHMEDABAD BEFORE SHRI KUL BHARAT, VICE PRESIDENT AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER 1. IT(SS)A No.67/Ahd/2024, Asst.Year 2019-20 2. IT(SS)A No.68/Ahd/2024, Asst.Year 2020-21 3. IT(SS)A No.69/Ahd/2024, Asst.Year 2019-20 1-2. Ajaykumar Dahyabhai Shridhar Shridhar Aalaym Taltej-Shilaj Road, Thaltej Ahmedabad-380 059 PAN: ACVPS 6867 Q 3. Sharvil Ajakumar Shridhar Shridhar Aalayam Thaltej-Shilaj Road, Thaltej Ahmedabad- 380 059 PAN: AZBPS 5343 N Vs 1-3. The Dy.CIT Central Circle-2(4), Ahmedabad अपीलाथ\u0017/ (Appellant) ….. \u0018\u0019 यथ\u0017/ (Respondent) Assessee(s) by : Shri Darshan Gandhi, Adv. Revenue by : Shri B.P. Srivastav, Sr.DR सुनवाई की तारीख/Date of Hearing : 29 /01/2025 घोषणा की तारीख /Date of Pronouncement: 31 /01/2025 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER These three appeals filed by two different Assessees are directed against separate orders dated 15/07/2024 (in the case of Ajaykumar Dahyabhai Shridhar) and dated 16/07/2024 (in the case of Sharvil Ajaykumar Shridhar) passed by the Ld.Commissioner of Income Tax (Appeals)-12, Ahmedabad [hereinafter referred to as “CIT(A)”] u/s.250 (6) of IT(SS)A Nos.67, 68 & 69/Ahd/2024 Ajaykumar Dahyabhai Shridhar & Sharvil Ajaykumar Shridhar vs. DCIT AYs: 2019-20 & 2020-21 2 the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Years (AYs) 2019-20 & 2020-21. 2. At the outset, it was stated that both the assessees were subjected to a common search action u/s.132 of the Act carried out on 28/01/2020, as a consequence of which assessment u/s.153A r.w.s.143(3) of the Act was framed on them. It was contended that the issue arising in IT(SS)A Nos.67 & 69/Ahd/2024, for AY 2019-20, relating to the different two assessees Shri Ajaykumar Dahyabhai Shridhar and Sharvil Ajaykumar Shridhar, was identical. That, the remaining appeal in IT(SS)A No.68/Ahd/2024 relating to Shri Ajaykumar Dahyabhai Shridhar, for AY 2020-21, involved a different issue, but since it arose on account of assessment framed from common search action, therefore it was pleaded that all appeals be heard together. 3. The Ld.DR had no objection to the same. All the appeals were, therefore, taken up together for hearing for the sake of convenience. 4. The Ld.Counsel for the assessee contended that he shall first be dealing with the two appeals in IT(SS)A Nos.67 & 69/Ahd/2024 which involved identical issue. He stated that the issue involved in both the cases related to subjecting to tax the annual value of property co- owned by both the assessees, in terms of section 22 & section 23 of the Act, under the head “income from house property”. The facts relating to the case and the basis for making addition, it was contended was identical in both the cases. The Ld.Counsel for the assessee, therefore, contended that he shall be arguing the IT(SS)A Nos.67, 68 & 69/Ahd/2024 Ajaykumar Dahyabhai Shridhar & Sharvil Ajaykumar Shridhar vs. DCIT AYs: 2019-20 & 2020-21 3 appeals, dealing with the facts in the case of IT(SS)A No.67/Ahd/2024 pertaining to the assessee Shri Ajaykumar Dahyabhai Shridhar. IT(SS)A No.67/Ahd/2024 for AY 2019-20 5. Brief facts relating to the case are that a search action u/s.132 of the Act was carried out on the assessee on 28/01/2020. Thereafter, proceedings were initiated by the AO for making assessment u/s.153A of the Act ,during the course of which he noted that the assessee had offered rental income of Rs.9 lakhs from property owned by him, i.e. Iscon Elegance for taxation from A.Y 2014-15 to A.Y 2016-17, but had not offered rent income in the impugned year. The property was noted to be in joint ownership with his son Sh.Sharvil Ajay Shridhar (the other assessee before us). Show-cause notice was issued to the assessee proposing deemed rental income to be added to the income of the assessee even if the same was not let out during the year. Due reply was filed by the assessee contending that the property, on which deemed rent was being proposed, was not a residential property and, therefore, provisions of section 23 of the Act were not applicable. The assessee also contended that the property was a commercial property and, therefore, was exempt from being subject to tax u/s.23 of the Act. The AO rejected the contention of the Ld.Counsel for the assessee stating that the provisions of the law in this regard was very clear ,subjecting the annual value of any property to tax. He thereafter held that the impugned property being vacant, it was liable to tax in terms of provisions of section 23(1)(c) of the Act. He accordingly proceeded to estimate the annual value of the property, taking it to be the rental income returned to tax by the assessee in the preceding years of Rs.9 lakhs, and treating it to be the deemed annual value of the impugned IT(SS)A Nos.67, 68 & 69/Ahd/2024 Ajaykumar Dahyabhai Shridhar & Sharvil Ajaykumar Shridhar vs. DCIT AYs: 2019-20 & 2020-21 4 property. He thereafter computed the income liable to tax on account of the said property after granting 30% standard deduction. Accordingly income of Rs.6,30,000/- was treated as Income from House Property and added to the total income of the assessee . 6. The matter was carried in appeal before the Ld.CIT(A) where the assessee reiterated his contentions. The assessee also contended before the Ld.CIT(A) that the property was used by him for his own business purposes and, therefore, also it was not liable to be taxed in terms of the provisions of section 22 of the Act. The Ld.CIT(A), however, rejected the contention of the assessee noting that it was not substantiated with any evidence. He further confirmed the action of the AO in computing the house property income in terms of provisions of section 23(1)(c) of the Act of Rs.6,30,000/-. The findings of the Ld.CIT(A), in this regard, are contained at paragraph No.7.2 of his order are as under: “7.2 I have carefully considered the Assessment Order and submission filed by the appellant. It is not in dispute that appellant owned office of the Iscon Elegance on which house property income was not shown during the year but on the same property, rent income to the tune of Rs.9,00,000/- was offered for taxation from Α.Υ.2014-15 to A.Y.2016-17. The reason for not showing house property income is that this property was used by the appellant for the own business purpose. However, appellant did not discharge its onus that these properties were utilized as commercial building for the business of the appellant apart from claim of commercial building expenses. In absence of evidence of usage of this property as commercial building for the purpose of appellant's business, I uphold the stand of the AO that this property is liable for tax for house property income. The basis of calculating house property income is as per the provision of section 23(1)(c) of the Act and therefore addition made by the assessing officer of Rs.6,30,000/- is hereby confirmed. These grounds of appeal No.2 & 3 are dismissed.” 7. Aggrieved by the same, the assessee has come up in appeal before us raising the following effective grounds: IT(SS)A Nos.67, 68 & 69/Ahd/2024 Ajaykumar Dahyabhai Shridhar & Sharvil Ajaykumar Shridhar vs. DCIT AYs: 2019-20 & 2020-21 5 “1. The Id. AO has erred in passing assessment order u/s. 153A r.w.s. 143(3) of the Income Tax Act, 1961. The order passed is bad-in-law, null, void and without jurisdiction. 2. The Id. AO erred in law and on facts by treating office of Iscon Elegance as vacant and estimated deemed rent at Rs. 9 lakh, whereas, the office was used by appellant for own business purposes. Therefore, provisions of section 23(c) are not applicable. It is therefore prayed that addition of deemed rent may kindly be deleted. 3. The Id. AO erred in law and on facts making addition of deemed rent at Rs. 9 lakh of office at Iscon Elegance, on the basis that the same was given on rent in past years and estimated deemed rent at the same amount. Without prejudice to the Ground no. 2 above, it is prayed that no deemed rent can be estimated as per provisions of section 23(1)(c) of the IT Act. It is therefore prayed that addition of deemed rent may kindly be deleted. . . 5. Your appellant also reserves its right to submit details in connection with the aforesaid additions / disallowances as fresh evidence as per Rule 46A of the I.T. Rules, 1962 at the time of hearing of this appeal.” 8. During the course of hearing before us, arguments with respect to Ground No. 3 were raised contending that the authorities below had erred in determining the Annual Value of the property at Rs.9 lakhs applying section 23(1)(c) of the Act. His contention was that the said section provided for determination of annual value of property which was vacant for whole or part of the year. That, as per the section, the actual rent received, even if less than the fair rent of the property, was to be treated as the Annual Value of such vacant property. His contention was that in the present case, the authorities below had, noting the property to be vacant and applying section 23(1)(c) of the Act, treated the fair rent of the property as its annual value, which was grossly incorrect. IT(SS)A Nos.67, 68 & 69/Ahd/2024 Ajaykumar Dahyabhai Shridhar & Sharvil Ajaykumar Shridhar vs. DCIT AYs: 2019-20 & 2020-21 6 9. The Ld.DR responded by admitting that the authorities below had invoked the wrong section in the present case, but he contended that mere invoking of wrong section would not be fatal to the taxability of income in the present case. 10. We have heard both the parties. The issue for adjudication is whether the annual value of the property owned by the assessee has been correctly determined as per the provisions of law, for taxing the same under the head “Income from House Property”. 10.1. The facts not disputed are that the assessee is the owner of a property, Iscon Elegance, which he co-owns with his son Sh.Sharvil Ajay Shridhar (the other assessee before us). The assessee had offered rental income of Rs.9 lakhs from this property for taxation from A.Y 2014-15 to A.Y 2016-17, but had not offered rent income in the impugned year. 10.2. The case of the Revenue is that the property being vacant its Annual Value is to be determined as per section 23(1)(c) of the Act and subjected to tax u/s. 22 of the Act as “Income from House Property”. The AO therefore has applied section 23(1)(c) of the Act for determining its Annual Value and has taken the rent received by the assessee in the preceding years of Rs.9 lakhs as its Annual Value. 10.3. The contention of the assessee is that as per section 23(1)(c) of the Act only actual rent received could be treated as Annual Value and there was no scope at all for deeming the fair rent as its Annual Value at all, which therefore the Revenue authorities have wrongly done. IT(SS)A Nos.67, 68 & 69/Ahd/2024 Ajaykumar Dahyabhai Shridhar & Sharvil Ajaykumar Shridhar vs. DCIT AYs: 2019-20 & 2020-21 7 10.4. We have gone through the provisions of section 23 of the Act which are as under: “Section 23 in The Income Tax Act, 1961 23. [ Annual value how determined. [ Substituted by Act 14 of 2001, Section 14, for Section 23 (w.e.f. 1.4.2002).] (1)For the purposes of section 22, the annual value of any property shall be deemed to be- (a)the sum for which the property might reasonably be expected to let from year to year; or (b)where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or (c)where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable: [Provided that the taxes levied by the local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation. - For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot realise]”. 10.5. Clearly the impugned section provides for the mechanism for determining annual value of property in different situations, for the purposes of taxing the same u/s.22 of the Act. As per sub-clause(a) of sub-section(1) of Section 23 of the Act, the annual value is the sum for which the property IT(SS)A Nos.67, 68 & 69/Ahd/2024 Ajaykumar Dahyabhai Shridhar & Sharvil Ajaykumar Shridhar vs. DCIT AYs: 2019-20 & 2020-21 8 might reasonably be expected to let from year-to-year. That is its fair letting value. Sub-clause(b) deals with a situation where the annual rent received or receivable exceeds the fair letting value, treating the higher actual rent received/receivable to be the annual value of the property. Sub-clause(c), which the Revenue authorities have invoked in the present case, deals with a situation where a property is vacant during the whole or any part of the previous year and owing to it the annual rent received or receivable is less than the sum for which it can be reasonably let out. In such a situation, the annual rent so received or receivable, which is less that the fair rental value of the property , is to be treated as the annual value of the property. Therefore, it is only as per sub-clause(a), that the fair letting out value of the property is treated as the annual value, while sub clause (b) & (c) treat actual rent received as the annual value in the situation where actual rent exceeds the fair letting value and where it is less than the fair letting value on account of the property being vacant. 10.6. In the facts of the present case where section 23(1)(c) of the Act has been applied for determining the Annual Value of the property noted to be vacant by the AO, treating its fair rent of Rs.9 lacs as the Annual Value, we hold, is clearly not as per the said section. Even the Ld.DR has fairly admitted to the same. 10.7. The income therefore computed of Rs.6.30 lakhs is, we hold, incorrect. We are unable to agree with the contention of the Ld.DR that it is a mere invoking of incorrect section by the AO. The AO has noted the property to be vacant. Section 23(1)(a) and 23(1)(b) of the Act do not apply to situation IT(SS)A Nos.67, 68 & 69/Ahd/2024 Ajaykumar Dahyabhai Shridhar & Sharvil Ajaykumar Shridhar vs. DCIT AYs: 2019-20 & 2020-21 9 where the property is vacant. Therefore, it cannot be said that the AO has merely invoked the wrong section in the facts of the present case. The contention of the Ld.DR needs, therefore, to be rejected. 10.8. In the light of the same, we hold that the addition made of Rs.6,30,000/- under the head “Income From House Property”, is not in accordance with the provisions of law and is therefore directed to be deleted. Ground No.3 is therefore allowed. 11. Having deleted the addition made while adjudicating ground No.3 of the appeal, we do not consider it necessary to deal with the rest of the grounds raised by the assessee. 12. Appeal of the assessee is allowed in above terms. 13. In effect, the assessees’ appeal(s) in IT(SS)A Nos.67 & 69/Ahd/2024 (in the case(s) of Ajaykumar Dahyabhai Shridhar & Sharvil Ajaykumar Shridhar respectively) for AY 2019-20 stand allowed in above terms. 14. We shall now take up the assessee’s appeal in IT(SS)A No.68/Ahd/2024 for AY 2020-21 in the case of Ajaykumar Dahyabhai Shridhar. 14.1. This appeal pertains to AY 2020-21 arising from the same cause of action, of search conducted on the assessee on 28/01/2020. In the impugned year, addition to the tune of Rs.4,72,850/- was made to the income of the assessee on account of jewellery seized during search the source of which IT(SS)A Nos.67, 68 & 69/Ahd/2024 Ajaykumar Dahyabhai Shridhar & Sharvil Ajaykumar Shridhar vs. DCIT AYs: 2019-20 & 2020-21 10 remained unexplained in assessment framed u/s.143(3) r.w.s.153A of the Act. The grounds raised read as under: “1. Ground No. 1 Jewellery of Family Members: The Id. CIT(A) erred in confirming addition u/s 69A rws 115BBE of the jewellery found and seized amounting to Rs.4,72,850/- as the same belongs to appellant's mother and family members of the appellant. It is therefore prayed that jewellery belonging to appellant's family members should not be taxed in the hands of appellant. Therefore, addition so made may kindly be deleted. 2. Ground No. 2 Valuation of Jewellery: The Id. CIT(A) erred in confirming addition u/s 69A rws 115BBE of the jewellery found and seized amounting to Rs.4,72,850/-, as the difference of jewellery is lesser than 1% of jewellery found and the valuation of accounted jewellery is of Rs.567.91 lakh, whereas, total jewellery found in search is of Rs.526.79 lakh. Such differences are on account of weight difference /valuation difference. It is therefore prayed that seized jewellery is explained jewellery. Therefore, addition so made may kindly be deleted. 3 Ground: The appellant reserves its right to submit further details in connection with additions /disallowances made by AO as fresh evidence at the time of hearing of Appeal. 4. Ground: Your appellant craves liberty to add, to alter, to modify, to amend or to withdraw/delete any of the grounds of appeal at any time, on or before the hearing of appeal.” 14.2. The contention of the Ld.Counsel for the assessee was that the addition made by the Ld.AO and confirmed by the Ld.CIT(A) was a miniscule portion of the total jewellery found from the assessee so as to be treated as unexplained. He pointed out that total jewellery of Rs.5,26,79,378/- was found during search in the locker of the assessee held with ICICI Bank and out of the same, jewellery to the tune of Rs.5,18,21,909/- was explained by him and also not seized by the Department. It was only the remaining jewellery of Rs.4,72,850/- which was seized as remaining unexplained IT(SS)A Nos.67, 68 & 69/Ahd/2024 Ajaykumar Dahyabhai Shridhar & Sharvil Ajaykumar Shridhar vs. DCIT AYs: 2019-20 & 2020-21 11 regarding the source His contention therefore was that the addition made to the income of the assessee was unjustified and needed to be deleted. 14.3. We are in complete agreement with the Ld.Counsel for the assessee. 15. Admittedly, out of the total jewellery of Rs.5.28 crores found with the assessee, it was only jewellery amounting to Rs.4.07 lakhs which was found to be unexplained, which is not even 1% of the total jewellery found with the assessee. Jewellery found during search relates to that acquired over a number of years right from birth of an assessee to various occasions celebrated in his life and those acquired even otherwise. There is also the aspect of valuation of jewellery which brings in an element of estimation in the value of jewellery. Surely the onus is completely on the assessee to explain the sources from where it is acquired , but ,considering the period over which it is acquired and the element of estimation involved in its valuation, there is every probability of the minor differences creeping in the assesses explanation and the valuation by the Department. And a fair and reasonable approach is to be adopted for determining whether the amount remaining unexplained justifies addition to be made in hands of assessees. 15.1. In the facts of the present case, where admittedly the assessee has explained source of more than 99% of the jewellery found during search, the difference is negligible and not material enough so as to treat as being from unexplained sources and added to the income of the assessee. 15.2. In the light of the same, we see no reason to confirm the addition of Rs.4.72 lakhs on account of unexplained jewellery found with the assessee IT(SS)A Nos.67, 68 & 69/Ahd/2024 Ajaykumar Dahyabhai Shridhar & Sharvil Ajaykumar Shridhar vs. DCIT AYs: 2019-20 & 2020-21 12 during the search. The addition is, therefore, to be deleted. As a result, the appeal of the assessee is allowed. 16. In the combined result, all the appeals in IT(SS)A No.67, 68 & 69/Ahd/2024 are allowed. Order pronounced in the Court on 31st January, 2025 at Ahmedabad. Sd/- Sd/- ( KUL BHARAT ) VICE PRESIDENT ( ANNAPURNA GUPTA ) ACCOUNTANT MEMBER Ahmedabad, Dated 31/01/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की \u0018ितिलिप अ\u001cेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u001e / The Appellant 2. \u0018\u001fथ\u001e / The Respondent. 3. संबंिधत आयकर आयु# / Concerned CIT 4. आयकर आयु# ) अपील ( / The CIT(A)-12, Ahmedabad 5. िवभागीय \u0018ितिनिध , आयकर अपीलीय अिधकरण , राजोकट/DR,ITAT, Ahmedabad, 6. गाड( फाईल / Guard file. आदेशानुसार/ BY ORDER, //True Copy//स\u001fािपत \u0018ित // Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation pad attached with the file : 29.1.2025 2. Date on which the typed draft is placed before the Dictating Member. : 29.1.2025 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 31.1.25 7. Date on which the file goes to the Bench Clerk. : 31.1.25 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : "