SHRI VASUMAL JETHANI vs. COMMISSIONER OF INCOME TAX JAI

PDF · subscribers
ITA/74/2006HC RajasthanRJHC02030883200631 January 20173 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the matter required remittance back to the Tribunal. The Tribunal, in its order, observed that there was no agreement between the assessee and Shri Tanvir for letting out the guesthouse on a fixed rent. It noted that in the previous assessment year, the rent was estimated at Rs.16,500/- per month by the CIT(A) and accepted by the assessee, as no further appeal was filed. Consequently, the Tribunal found no infirmity with the AO's order, which had made the addition by following the earlier CIT(A) order. The Tribunal set aside the CIT(A)'s order and restored the AO's order, sustaining the addition of Rs.1,08,000/- in favour of the Department. The High Court, acknowledging the need for further consideration, decided to remit the matter back to the Tribunal for disposal within three months. The specific issue of the deduction under Section 24(1) was not definitively decided by the High Court but was to be reconsidered by the Tribunal.

What were the facts?

The assessee, Shri Vasumal Jethani, a property dealer, is appealing a judgment of the Income Tax Appellate Tribunal (Tribunal). The assessment year(s) are not explicitly stated for the main dispute, but a previous year (A.Y. 1997-98) is referenced. The appeal challenges the Tribunal's order which partly allowed the department's appeal and reversed the order of the Commissioner of Income Tax (Appeals) [CIT(A)]. A survey was conducted on 06.02.1997, leading to additions based on gathered material. The CIT(A) had restricted/deleted some additions. The core dispute revolves around the rent of a guesthouse. The CIT(A) had estimated income from the guesthouse, allowed a deduction under Section 24(1), and restricted an addition. The Tribunal, however, reversed the CIT(A)'s order, restoring the Assessing Officer's (AO) addition.

What were the issues?

1. Whether the Income Tax Appellate Tribunal was justified in not allowing the deduction under Section 24(1) of the Income Tax Act, 1961, while adding Rs.1,08,000/- towards rent of the guesthouse? (Question of law) Assessee's Contention: The assessee, through his counsel, argued that the Tribunal reversed the CIT(A)'s findings without providing cogent reasons. The CIT(A) had accepted the income from the guesthouse as income from house property, estimated the net monthly income at Rs.16,500/-, calculated the total income at Rs.1,98,000/-, and allowed a deduction of 25% under Section 24(1), restricting the addition to Rs.58,500/-. Revenue's Contention: The revenue, through its counsel, supported the order of the Tribunal and contended that no interference was called for. The Tribunal's reasoning was that there was no written agreement for letting out the guesthouse at a fixed rent, and since the assessee had accepted the previous year's estimated rent of Rs.16,500/- per month, the AO's addition following the earlier CIT(A) order was justified.

Which sections of the Income-tax Act were involved?

Section 24(1)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 74 / 2006 Shri Vasumal Jethani ----Appellant Versus Commissioner Of Income Tax Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. P.K. Kasliwal For Respondent(s) : Ms. Parinitoo Jain _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VINIT KUMAR MATHUR

Judgment 31/01/2017

1.

By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby Tribunal has partly allowed the appeal of the department and reversed the order of CIT(A).

2.

This court while admitting the appeal on 17.9.2007 had framed following substantial question of law:- “Whether the Income Tax Appellate Tribunal was justified in not allowing the deduction under Section 24(1) of the Income Tax Act, 1961 while adding the income of Rs.1,08,000/- towards rent of guest house?”

3.

The facts of the case are that the assessee is an aged person and is a property dealer since long. He has two sons, namely, Shri Jai Kishan and Shri Ashok, who are having the brokerage income from the property dealing. No regular books of account were maintained. Returns were filed on estimate basis. A survey was conducted on06.02.1997 at his business and residential premises. Statements of the assessee, his son Shri Jai Kishan and one Shri

(2 of 3) [ITA-74/2006] Tanvir were recorded. On the basis of the material gathered at the time of survey, various additions were made, which were partly restricted/deleted by the CIT(A) in appeal.

4.

Counsel for the appellant Mr. Kasliwal has taken us to the order of the CIT(A) wherein it has been held as under:- “The contention/ details in respect of this ground of appeal, were carefully considered. My predecessor in A.Y. 1997-98 had not accepted the claim of the guesthouse having been let out Shri Tanvir “in absence of any written agreement and other collateral evidence. However, from the aforementioned details, it emerges that the income from the guesthouse is to be assessed under the income from house property, particularly as the ownership remained with the appellant. The then CIT(A), Ajmer, had estimated an occupancy rate of 70% of the ten double bed room, one single bad room and two dormitories bed rooms and estimated that the net income per month should be round Rs.16,500/-. In absence of documentary evidence about the receipts of the appellant being Rs.10,000/- only per month, it appears that the estimate of Rs.16,500/- per month was not unjust or excessive. A such, the income from guesthouse comes to Rs.1,98,000/- (Rs. 16,500/- x 12) which after deduction u/s 24(1) @ 25%) comes to Rs. 1,48,500/-. The income declared is Rs. 90,000/-. Therefore, the addition is restricted to Rs. 58,500/- and relief of Rs. 49,500/- is allowed in respect of this ground.”

5.

However, he further contended that while reversing the findings of CIT(A), no cogent reasons are given by the Tribunal.

6.

Counsel for the respondent Ms. Parinitoo Jain has supported the order of the Tribunal and contended that no interference is called for.

7.

We have heard counsel for the parties.

8.

The Tribunal has considered the finding of CIT(A) in para no.7 and observed as under:- “By considering the totality of the facts and circumstances of the case, it appears that there is no agreement between the assessee and Shri Tanvir for letting out the guest house on the fixed rent, as claimed by the assessee. In the previous assessment year, the rent was estimated by the CIT(A) at (3 of 3) [ITA-74/2006] Rs.16,500/- per month and the same was accepted by the assessee as no further appeal was filed by him. When it is so, then we find no infirmity with the order of the AO, who has made the addition by following earlier order of the CIT(A). Therefore, we set aside the order of the CIT(A) and restore the order of the AO for the assessment year under consideration. The addition of Rs.1,08,000/- is hereby sustained by allowing this ground in favour of the Department.”

9.

In that view of the matter, the matter is required to be remitted back to the tribunal.

10.

Accordingly, the appeal stands disposed of.

11.

Both the parties will appear before the Tribunal on or before 6.3.2017. The Tribunal will dispose of the same within three months. (VINIT KUMAR MATHUR)J. (K.S. JHAVERI)J. Brijesh 73.

More judgments on Section 24(1)

All 76 judgments and leading authorities on Section 24(1) →

Recent GST High Court judgments

Search GST case law →