VAMA PVT LTD(FORMERLY KNOWN AS VAMA DEPARTMENT STORE PVT LTD.),MUMBAI vs. ASST CIT CIRCLE- 5(3), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND MS. KAVITHA RAJAGOPAL, HON’BLE JUDICIAL MEMBER

ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 (A.Y. 2000-01, 2001-02, 2002-03, 2003-04, 2004-05 & 2005-06) M/s. Vama Pvt. Ltd., v. ACIT – Circle – 5(3) (formerly known as Vama Department Store Pvt. Ltd.,) Aayakar Bhavan, M.K. Road Kanchanjunga, 72, Peddar Road Mumbai - 400020 Mumbai - 400026 PAN: AAACV1262E (Appellant) (Respondent) Assessee by : Prakash Jotwani Department by : Uranda U. Matkari

Date of Hearing : 11.08.2022 Date of Pronouncement : 10.10.2022

O R D E R PER S. RIFAUR RAHMAN (AM)

2 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA.No. 952/MUM/2020 for A.Y. 2000-01 as a lead appeal.

3 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., note the Assessing Officer also concluded that a sum of ₹.1,51,04,400/- is also allegedly paid by M/s. Vama Ford Motors Pvt. Ltd. (VML) to the Assessee Company. Accordingly, the Assessing Officer made additions pertaining to impugned unaccounted rent and service charges allegedly received from VAIPL (₹.2,00,20,500/-) and Vama Ford (₹.1,51,04,400/-) as under: - “In VAIPL: Additions were made on account unexplained expenditure u/s. 69C AY. 2000-01 Rs. 2,00,20,500/- 2001-02 Rs. 2,00,20,500/- 2002-03 Rs. 2,00,20,500/- 2003-04 Rs. 2,00,20,500/- In VML: Additions were made on account as UNEXPLAINED EXPENDITURE u/s. 69C AY. 2000-01 Rs. 1,51,04,400/- 2001-02 Rs. 1,51,04,4007- In Appellant Company: Additions were made on account of unexplained income AY. 2000-01 2,00,20,500 + 1,51,04,400 2001-02 2,00,20,500 + 1,51,04,400 2002-03 2,00,20,500 + 1,51,04,400 2003-04 2,00,20,500 + 1,51,04,400 2004-05 2,00,20,500 + 1,51,04,400 2005-6 2,00,20,500 + 1,51,04,400

4 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., 6. At the time of hearing, Ld. AR brought to our notice relevant facts and status of the appeal proceedings in the case of VAIPL and VML as under: - “10. Alleged Rent received from VAIPL - Rs. 2,00,20,500/- Ground 1 (i) The debit note seized by the department from VAIPL was pertaining to AY. 1999-2000. Appeals were filed to ITAT and several Miscellaneous Applications were filed to ITAT by VAIPL. The appeals were originally dismissed by ITAT. In the M.A the orders were recalled and the issue was allowed. The department then filed appeal to High Court against such MA orders. (ii) The Bombay High Court on appeal by the Revenue, after having considered the complexities of the case decided to quash all ITAT Orders (including the MA's) and directed the Assessing Officer of VAIPL to hear the matter afresh after giving the Assessee an opportunity of being heard. (Pg. 233-234) (iii) Under directions of the Bombay HC, the learned AO of VAIPL took cognizance of the fact that the note pertains to AY. 1999-2000 and does not specify whether it was accepted by VAIPL or not and that there was nothing on record or available in the books of accounts which could suggest that Assessee has ever made rental payments other than reflected in the books of account. Both parties are subject to maximum marginal rate and are sister concerns. The chances of tax saving are very remote. (iv) Accordingly, the assessment was completed by making no addition on account of alleged debit note in AY. 1999-2000 and accepted the returned income in the case of VAIPL. (PG. 248-253 of PB). Thus, the A.O in the case of VAIPL accepted that VAIPL had not paid any excessive rent in addition to rent disclosed in the books of accounts. (v) We hereby submit the various Orders wherein the addition has been deleted in the hands of VAIPL AY: 1999-2000: No addition made AY: 2000-01 Asst Order dated 30-12-2011, addition was deleted (Pg. 235) AY: 2001-02 Asst Order dated 30-12-2011, addition was deleted (Pg. 373)

5 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., AY 2001-02 ITAT Order dated 09-03-2011. Penalty was deleted (Pg. 394) AY 2002-03 Asst Order dated 23-12-2011, addition was deleted (Pg. 453) AY: 2004-05: No addition was made on this account (Pg. 460) AY: 2005-06: No addition was made on this account (vi) It is pertinent to note that the addition made in the hands of the Assessee u/s, 143(3) for AY. 2000-01 to 2005-06, is based on the alleged additions made in the hands of VAIPL, as is evident from the observation made by the AO in the Assessment Order vii) Since the addition has been deleted in the hands of VAIPL, no consequent addition can be made in the hands of the Appellant. If no addition is made in the hands of the Payee, then consequentially no addition can be done in the hands of the Payer. The basis of the addition in the hands of VAIPL and VML is the impounded paper only. If the AO has analysed the paper in the hands of VAIPL and made a decision, then no addition can be made in the hands of the Appellant (VPL). 1. Alleged Rent from Vama Ford Motors Ltd. (VML) - Rs.1,51,04,400/- Ground2 i) The learned AO erred in estimating an addition of Rs. 1,51,04.400/- on the allegation that, Vama Ford Motors Pvt. Ltd. (VML) who occupied part of the premises along with VAIPL and I was paying rents in cash to the Appellant. We submit that with regard to VML there is no paper found and the estimate is based upon the impounded paper in the case of VAIPL. (ii) We hereby rely on the following Orders wherein the addition has been deleted in the hands of VML. AY: 2000-01: CIT(A)'s Order dated 18-12-2003 AY: 2001-02: CIT(A)'s Order dated 28-06-2004 AY: 1999-00 to 2002-03: ITAT Order dated 08-09-2006 (iii) Since the addition has been deleted in the hands of VML, no consequent addition can be made in the hands of the Appellant. (iv) The AO failed to take into consideration the abovementioned CIT(A)'s order which is are enclosed in the Paper book. AY: 2000-01: CIT(A)'s Order dated 18-12-2003 (Pg. 463-471)

6 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., Para 2.4 "I have gone through the contentions of the appellant and find the merit in the case. Firstly the AO has not found anything contrary to suggest that there was any similar Debit Note raised by the said Vama Pvt. Itd.. Further it is also true that the AO has also not found any documents to suggest that the appellant company had paid anything in excess of the amount stated in the accounts However without any findings or any documentary evidence to suggest that the appellant company was charged the fair rent no addition could be made merely on the basis of surmises and conjectures. Further any evidence no related to the Appellant company could not be used against it. In the instant case the document relied upon by the Assessing Officer by no way related to the Appellant's case and hence it cannot be used to make an in addition the instant case. It is now well settled that no addition can be made on the basis of surmises and conjecture. Considering the facts of the case and what is discussed earlier. I am not in agreement with the AO's action in this regard and the addition made by the AO is deleted." AY: 2001-02: CIT(A)'s Order dated 18-12-2003 (Pg. 472-481) Para 4: "During the appeal proceeding, the appellant has brought to my notice that the addition made by the AO in line with the findings of preceding previous year has been deleted by this office, vide order dated 18-12-2003 and therefore it is prayed that the same should also be deleted in the year under consideration. I have gone through the contention of the Appellant and find ment in its case. This addition is emanating out of findings of preceding year. However, for detailed reasons recorded in order of this office dated 18-12-2003 the addition made in previous year was deleted. As the fact remaining the same the addition made by the AO in the year under consideration is also deleted." AY: 1999-00 to 2002-03: ITAT Order dated 08-09-2006 The ITAT in Para 9 & 10 of the Order has confirmed the action of the CIT(A) and has given a detailed explanation for confirming the deletion which is reproduced as under. "If we examine this dispute with the other angle also then in A.Y 1999-2000 the stand of A.O is that expenses claimed at Rs. 34,35,000/- towards services charges and rent paid to Vama Pvt. Ltd by assessee is excessive. On the contrary in the next assessment year the A.O has worked out that such service charges ought to have been paid at a rate more than Rs. 1.50 crores. Thus, after going

7 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., through all the records and finding of Id. CIT(A) we find that for making the addition in all the four years the A.O has adopted just a casual approach and without pointing out any specific thing or collecting any material he made hypothetical calculation. We find that right from the first year of business, i.e., accounting year 1996- 97 no rent were charged from the assessee. In accounting year 1997-98 yearly rent of Rs. 1,80,000/- was charged from the assessee. The idea of M/s Vama Pvt. Ltd was not to let out the property but to give it to an associate concern for establishing a new venture. The alleged debt note of Rs. 2,22,20,500/- as services charges in the name of M/s Vama Apparels Pvt. Ltd was raised as a part of a play to convince the franchisee that M/s Vama Apparels Pvt. Ltd is paying the huge rent. Though it is an argument relevant to M/s Vama Apparels Pvt. Ltd in its case but it is a circumstance which should have been considered by the Id. A.O. He has not verified the factual position, rather straight way carried away by the recovery of a debit note i.e. from the third concern. In our opinion while deciding the issue in the assessee's hand he should have not swayed away with the recovery of the debit note and should have considered the independent material. No such material was considered by the A.O. The Id. First appellate authority has rightly deleted the addition and no interference is called for in the order of Id. CIT(A) in all these assessment years."

8 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., company amounting to ₹.2,00,20,500/-. Therefore, an addition of ₹.2,00,20,500/- was made in the case of assessee company on account of rent and service charges received from VAIPL for AY 2001-02 and on the similar lines, addition of ₹.1,51,04,400/- was made by way of unaccounted rent and service charges from M/s Vama Ford Motors Pvt. Ltd. (VML) vide order dated 23/07/2004. On the similar lines, additions were made on account of rent and service charges received from VAIPL and VML for AYs. 2002-03 & 2003-04 vide order dated 23/03/2005 & 24/11/2005 respectively.

9 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., furnish the certain documents in the form of municipal record, permission of the competent authorities, various approval, plans etc, and to reconcile the total area and the area occupied by VAIPL and VML with the various submissions made regarding area from time to time and also with the debit note recovered during the survey. The AO provided a number of opportunities to the appellant through Letter dated 22/12/2005, Letter dated 28/12/2005, Order Sheet noting dated 29/12/2006816/01/06 and Letter dated 20/01/06. However the appellant failed to submit the requisite details before the AO even after seeking time / adjournment time and again vide letter dated 24/01/06, 31/01/06 15/02/06 for submitting the details. Further, during the course of assessment proceedings for AY 2001- 02, on perusal of the various details submitted by the appellant, the AO noticed that the copy of Architect Certificate dated 18/11/2005 furnished by the appellant is silent about the area occupied by VAIPL and VML and further that the letters of Municipal Corporation of Creater Bombay dated 11/11/93,referred to by the assessee are very old one and do not reflect the subsequent developments that have taken place from the year 1998-99 onwards. It was appellant's own submission before the AO that VAIPL has encroached upon and carried on illegitimate alteration and modification so as to convert existing art gallery into a commercial space and wrongfully extended the area only in and around 2002. Therefore, the AO called upon the appellant to make arrangement with a technically qualified person for taking exact measurement of the area presently occupied by VAIPL and VML, on 07/12/2006 or 08/12/2006. However the appellant failed to make any arrangement with a technically qualified person for taking exact measurement of the area even after seeking time / adjournment time and again vide letters dated 05/12/2006, 06/12/2006, 13/12/2006 and 15/12/2006 and thoughthe last date for taking measurements was fixed on 18/12/2006, again another letter was received from the appellant on 18/12/2006 seeking indefinite adjournment 6.3.53 It is also observed that the appellant has not placed any evidence to show as to what was the terms and conditions upon which the area in question was initially given on rent to VAIPL and VML during the relevant previous years. It was open to the appellant to bring on record reliable evidence, documentary or oral, including the evidence of an expert to establish that the area occupied by it was less than what was stated in the aforesaid debit note. However, it failed to do so. The AO has provided more than ample opportunity to the appellant to ensure accurate and scientific determination of

10 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., the correct area by an architect / valuer appointed by it, however the appellant has failed to make any arrangement with a technically qualified person for taking exact measurement of the area presently occupied by VAIPL and VML. Therefore under the given facts and circumstances, the claim of appellant the exact area used for the shopping complex by the assessee is far below the area assumed by the AO on the basis of debit note issued by the assessee to VAIPL recovered during the survey. cannot be accepted. 6.3.54 The appellant also advanced an argument that VML had vacated the premises in AY 2001-02 hence the addition made by the AO on account of service charges received from VML is uncalled for. 6.3.55 In this regard it is observed that the Hon'ble ITAT has passed an order in the case of VML in ITA No. 1831 & 1832/Mum/2004 for AYS 1999-2000 & 2000-01 (Assessee's Appeal) and ITA No. 1429, 1430 & 6157/Mum/2004 and ITA No. 4100/Mum/2005 for AYS 1999- 2000, 2000-01, 2001-02 & 2002-03 (Departmental Appeals) wherein it has been noted that VML is the owner of an Air Conditioned shopping complex measuring 22,000 sq. ft. and out of the total area of 22,000 sq. ft., 12,000 sq. ft. was allotted to VAIPL and 10,000 sq. ft. was given to the assessee VML. These findings are not in dispute. Further, during the course of assessment proceedings for AY 2001- 02, as discussed above, the AO has called upon the appellant to make arrangement with a technically qualified person for taking exact measurement of the area presently occupied by VAIPL and VML, on 07/12/2006 or 08/12/2006. However, the appellant has failed to make arrangement with a technically qualified person for taking exact measurement of the area even after seeking time / adjournment time and again vide letters dated 5/12/2006, 6/12/2006, 13/12/2006 and 15/12/2006 and though the last date for taking measurements was fixed on 18/12/2006, again another letter was filed by the appellant on 18/12/2006 seeking indefinite adjournment Therefore, keeping in view the observations of the Hon'ble ITAT on the area allocated to VAIPL and VML and the failure on part of the appellant to make arrangement with a technically qualified person for taking exact measurement of the area presently occupied by VAIPL and VML, neither the claim of appellant that VML had vacated the premises in AY 2001-02 can be accepted nor any relief can be allowed to the appellant on ground that the said premises was vacated by VML.”

11 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., 10. Aggrieved, assessee is in appeal before us raising following grounds in its appeal: - “Ground No. 1: Rent from Vama Apparels India Pvt. Ltd. (VAIPL) 1. The learned CIT(A) erred in confirming the addition of Rs.2,00,20,500/- being the alleged differential unaccounted rent and service charges purportedly received by the Appellant, on the basis of a debit note found during survey conducted u/s 133A on 25-11- 02, in the premises of its sister concern, Le. VAIPL 2. The learned CIT(A) failed to take into consideration the observation made in the ITAT Order dated 06-04-2016, that the debit note seized pertained to AY 1999-2000 and the result of additions made in that year would be relevant to decide the fate of the current appeals 3. The learned CIT(A) failed to take into consideration that as per the directions of the Hon'ble ITAT Order dated 06-04-2016, the Appellant submitted documents which showed that no addition was made in AY. 1999-2000, whereas the Department expressed its inability to submit any information due to non-availability The CIT(A) erred in holding that irrespective of whether assessment/addition was made or not in AY. 1999-2000 (Impugned Debit Note dated 04- 02-1999), the additions made in the subsequent years are valid. 4. The learned CIT(A) erred in relying on the old ITAT Order dated 26-09-2005, although subsequently the Bombay HC had restored all the ITAT orders and accordingly the Department passed the following orders, wherein the addition on account of alleged debit note, has been deleted in the hands of the tenante i.e., (VAIPL) and therefore no consequent addition can be made in the hands of the Appellant. AY: 2000-01: Asst Order dated 30-12-2011 AY: 2001-02 Asst Order dated 30-12-2011 AY: 2002-03 Asst Order dated 23-12-2011 AY: 2004-05 Asst Order dated 29-12-2008 5. The learned CIT(A) erred in holding that the basis of deletion of addition made in case of VAIPL is on a different footing, although it is evident that the addition in the hands of the tenant and the

12 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., landlord, was on account of impugned debit note fount during the survey proceedings. 6 Without prejudice, the learned CIT(A) erred in confirming the addition as Income from House Property' instead of Business Income Ground No. 2: Rent from Vama Ford Motors Pvt. Ltd. (VML) 1. The learned CIT(A) erred in confirming the estimated addition of Rs. 1,51,04,400/ on the allegation that VML occupied part of the premises along with VAIPL and was paying rents in cash to the Appellant, whereas infact VML had vacated the premises since A.Y. 2001-02 and consequently there was no scope for department's contention that cash was siphoned from its petty Cash account. 2. The learned CIT(A) erred in making an addition on presumptive basis by relying on a chit that was found in the premises of a third party which made no reference to VML. 3. The learned CIT(A) failed to take into consideration the following orders wherein similar additions were made in the hands of VML. and were subsequently deleted by higher authorities and therefore no consequent addition can be made in the hands of the Appellant. AY: 2000-01: CIT(A)'s Order dated 18-12-2003 AY: 2001-02: CIT(A)'s Order dated 28-06-2004 AY: 00-01 & 01-02: ITAT Order dated 08-09-2006, confirming deletion 4. The learned CIT(A) erred in holding that the basis of deletion of addition made in case of VML were on a different footing, although it is evident that the addition in both hands, was on account of impugned debit note found during the survey proceedings in the premises of VAIPL. 5. The CIT(A) erred in holding that irrespective of whether assessment/addition was made or not in AY 1999-2000 (Impugned Debit Note dated 04-02-1999), the additions made in the subsequent years are valid. 7. Without prejudice, the learned CIT(A) erred in confirming the addition as Income from House Property' instead of 'Business Income' although the AO has made the addition as Business Income only. “

13 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., 11. At the time of hearing, Ld. AR brought to our notice various facts as discussed in the earlier paragraphs and submitted that since the addition has been deleted in the hands of VAIPL and VML it can be safely concluded that no addition can be sustained in the hands of the assessee. Further, he submitted as under: - “13. Against the orders passed earlier by the CIT(A) exparte in case of VPL, these appeals travelled to ITAT and the ITAT by its ORDER dated 06-04-2016 directed as under (Page 143 of PB) (1) The Hon'ble ITAT passed a consolidated Order for AY 2000-01 to 2005-06 dated 06-04 2016, wherein Para 5 reads as under: - "5. Under these set of facts, we deem it proper to restore all the issues to the file of the Ld CIT(A) with the direction to ascertain the fate of addition made in the hands of the assessee as well as in the hands of tenant in AY 1999-2000 and then re-adjudicate all the issues afresh in accordance with the law. The assessee is also directed to fully co-operate with the Ld CIT(A) for expeditious disposal of the appeals. We also direct both the assessing officer as well as the assessee to furnish relevant records relating to AY 1999-2000 to the Ld CIT(A), so that he could dispose of the appeals expeditiously.” (ii) Consequently, these appeals came before CIT(A) who directed to file all documents pertaining to AY 1999-2000 and who was only supposed to verify whether any addition was made in A.Y 1999-2000 and decide. (iii) Accordingly, the Assessee has made efforts in gathering documents from its old records (ie., pertaining to a period more than 29 years ago) and has successfully managed to procure the following documents pertaining to the Appellant: - For AY. 1999-2000 (PG. 16A-29A)

14 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., • Computation of Total Income • Audit Report  P&L A/c. and Balance Sheet  Return of Income  Order u/s. 154 + Refund Order (iv) Thus, it can be seen from the above that the Appellant has correctly and duly filed his return of income for AY 1999-2000, which was duly assessed to tax u/s. 143(1) dated 26-03-2002. Thereafter an Order u/s. 154 dated 13-01-2003 was passed and accordingly additional taxes were paid. (v) It is to be noted that No adverse action was taken by the Department for AY 1999-2000 and the income has been duly accepted and no action was taken with respect to the debit note that was found in the premises of VAIPL and no addition was made in the hands of VPL. Also as evident from the Assessment Order of VAIPL for AY. 2000-01 (Pg. 235 of PB), no addition has also been made in the case of VAIPL for 1999-2000, 14. In view of the above since the addition have been deleted in the hands of VAIPL as well VML, there cannot be addition in the hands of the Assessee (VPL). It is erroneous on the part of the CIT(A) in Para 6.3.41. 6.3.38, 6.3.35, 6.3.17, 6.3.18 to state that though additions have been deleted in the hands of VAIPL and VML, they have been deleted on a different basis and those orders cannot be relied upon to delete additions in the case of VPL As evident from the Assessment Order the AO has made additions only because additions were made in VAIPL and VML and since those additions do not survive, then the consequential additions made in VPL also do not survive. If the AO in VAIPL and VML have decided that no excessive rent was paid by the tenants, then the landlord cannot be thrust with these excessive rents. There cannot be two decisions on the same paper, one in the hands of the tenant and another in the hands of the landlord. Thus, relying upon the orders of the AO in VAIPL and appellate authorities in the hands of VML, the additions made in VPL should be directed to be deleted. 15. In the course of the hearing, the learned DR, also accepted the fact that on the basis of the paper, the additions have been deleted in the hands of VAIPL and VML. We thus submit that for the

15 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., reasons mentioned above all the additions made for these 6 years be deleted. 16. On perusal of the CIT(A)'s Order it can be that the CIT(A) has taken an alternate ground by assessee the income of seized paper under House Property consequently estimating the House Property income. (Para 6.3.50) (i) In relation thereto we would like to bring to your notice the nature of the addition that has been made by the Assessing Officer in his Asst Order u/s. 143(3) dated 28-02-2006, wherein the addition of Rs. 2,80,52,400/- has been made as Unaccounted Income. The Assessing Officer does not specify under which head of income the same is to be charged, but from the bare understanding of the provisions of Income tax act, it can be seen that the same would either be taxable as Unaccounted Business income or Income u/s. 68 of the I.Tax Act. (ii) But under no stretch of imagination is the same taxable under the head Income from House Property. This fact is clear since the AO has also not allowed the Assessee any deduction @ 30% u/s. 24, which makes it amply clear that the intention of the Department was not to tax this under the head "Income from House property. (iii) The Assessee is engaged in the business of letting out its premises and therefore any income arising from exploiting its business asset would be chargeable to tax under the head Business Income only. Reliance is placed on Supreme court in Chennai Properties reported in 373 ITR 673 and Supreme Court in Rayala Corporation reported in 386 ITR 500 (iv) Without prejudice, in the event your Honour is of the opinion that the same should be taxed under the head 'Income from House Property', then we submit that the same should be computed at the actual rent received from VAIPL and VML, since it is much higher than the Municipal Ratable Value and the Assessee shall also be entitled to claim deduction of 30% u/s. 24 of the I.Tax Act, 1961 (v) We would like to place reliance on the following decisions: Vidya Education Investment Pvt Ltd. (Pg. 593 of PB. Vol. IV)(Pg 615 of PB)

16 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., Hrithik Roshan (Pg. 625 of PB Vol IV)(Pg 630 of PB) Europa Chemicals Pvt. Ltd. (Pg. 633 of PB Vol IV)(Pg 637, 640 of PB) Ashok Kumar Gupta (Pg. 645 of PB Vol IV) (vi) Further as held in the aforesaid decisions, if the properties have been given to sister concerns and there is no tangible material to display excessive rent, then only on market enquiries, rental income cannot be estimated. The relevant portion of the order is reproduced as under: "The only point raised by the appellant before us is with regard to the estimation of the annual value of the property made by the lower authorities, which is much higher than the actual rent declared by the assessee. At the time of hearing the learned representative for the assessee pointed out that there was no ground for the Assessing Officer to find fault with the actual rent derived by the assessee, which was much more than the rateable value arrived at by the Municipal Corporation. It was pointed out that the Municipal valuation could not be straightway disregarded to arrive at the fair rental value of the property unless it can be shown that there was suspicion or mala fide in the actual rent declared by the assessee. In this context, it has been pointed out that assessee has given part of the property or rent to its subsidiary concern and it would make no difference if it would have been given it for use without any charge. It was pointed out that since assessee and the user of the property. M/s Polson Ltd. Were sister concerns, the actual rent derived by the assessee could not be said to be suspicious. With regard to the instances relied upon by the Assessing Officer, the learned representative pointed out that so far as the rent arrangement of M/s. Galaxy Aviation Pvt. Ltd. Is concerned, the same is made in the year 2012 which is on a much later date than assessee's arrangement, which is from 01.10.2007. Even with regard to the rent payment by Bank of India, the learned representative pointed out that the figures reported by the Assessing

17 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., Officer itself do not show that the bank was paying anything close to Rs.150/- per square feet estimated by the Assessing Officer inasmuch as the bank was paying Rs. 40/- per square feet. That too, is canvassed to be incomparable in the absence of an agreement showing the specific terms and conditions vis-à-vis the rental agreement entered by the assessee with its sister concern. Furthermore, it has been pointed out that in the following decisions - (1) Anudeep Enterprises Pvt Ltd., ITA No. 1215/Mum/2012 dated 03.03.2017; and, (ii) Laxmi Satyapal Jain, ITA Nos. 4726 & 4831/Mum/2014 dated 04.02.2016, it has been held that where the actual rent disclosed is in the excess of the Municipal rateable value, the annual value of the property can be assessed on the basis of the actual rent. In this context, reliance also been placed on the judgement of Hon'ble Bombay High Court in the case of CIT vs. Tip Top Typography, 368 ITR 330(Bom.) to point out that the case Municipal rateable value is to be accepted as a good indicator of the fair rent unless the Assessing Officer is able to establish on the basis of material that the actual rent charged was suspicious. According to the learned representative there is no such case mase out by the Assessing Officer and, therefore, the determination of annual value of the property be restricted to the actual rent declared by the assessee. We have carefully considered the rival submissions. As our aforesaid discussion shows, the short-point for our consideration is as to whether the Assessing Officer was justified in rejecting the value declared by the assessee and instead, determining the annual value of the property for the purposes of Sec. 23 of the Act based on estimation arrived at by him, having regard to the two instances noted in the vicinity of the assessee's property ?" Section. 23 of the Act prescribes the manner in which the annual value of any property is to be arrived at for purpose of assessment under the head 'Income from

18 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., House Property. Sec 23(1)(a) of the Act relates to the determination of annual value of a property for a sum for which the property for a sum for which the property might reasonably be let from year to year. Thus, what is envisaged in Sec 23(1)(a) of the Act is the probable rent which the property is expected to earn. Sec 23(1)(b) of the Act deals with a case 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) to Sec. 23(1), then the amount so received or receivable shall be treated as annual value of the property. In the present case, the actual rent declared by the assessee is Rs. 7,500/- per month, whereas the Municipal valuation is stated to be Rs. 225.38 per month. In this factual background, the claim of the assessee is that the actual rent be taken as the annual value of the property as it exceeds the Municipal rataeble. The Assessing Officer does not accept Rs.7,500/- per month as the value for which the property might reasonably be expected to be let out. In such situation, as held by the Hon'ble Bombay High Court in the case of Tip Top Typography (supra), the Assessing Officer is required to carry out necessary investigations and inquiries. It is further prescribed; the Assessing Officer shall have cogent and satisfactory material in his possession "Which indicate that the parties have concealed the real position". It has been further explained that there must be "definite and positive material to indicate that the parties have suppressed the prevailing rate". If we were to examine the case made out by the Assessing Officer in the instant in the background of the above reasoning laid down by the Hon'ble Bombay High Court, it is found that there is no allegation, much less any positive material with the Assessing Officer, to say that the assessee has suppressed the real position by declaring rent from the sister concern @Rs.7,500/ per month. On the contrary, what we find is that without arriving at such satisfaction, the Assessing Officer has proceeded to ascertain the going rate of the rentals in the vicinity

19 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., of assessee's property. The said approach, in our view, is contrary to the judgment of the Hon'ble Bombay High Court in the case of Tip Top Typography (supra), wherein the following discussion would indicate that ascertaining of the going rate in the market is not the basis to reject the actual rent declared, but rather there has to be a definite and positive material to indicate that the parties have suppressed the prevailing rate and the exercise of ascertaining the going rate would follow his satisfaction of disagreeing with the stated rent on the basis of definite and positive material: He must have cogent and satisfactory material in his possession and which will indicate that the parties have concealed the real position. He must not make a guess work or act on conjectures and surmises. There must be definite and positive material to indicate that the parties have suppressed the prevailing rate. Then, the enquiries that the Assessing Officer can make, would be for ascertaining the going rate. He can make a comparative study and make a analysis. In that regard, transactions of identical or similar nature can be ascertained by obtaining the requisite details. However, there also the Assessing Officer must safeguard against adopting the rate stated therein straightway. He must find out as to whether the property which has been let out or given on leave and license basis is of a similar nature, namely, commercial or residential. He should also satisfy himself as to whether the rate obtained by him from the deals and transactions and documents in relation thereto can be applied or whether a departure therefrom can be made, for example, because of the area, the measurement, the location, the use to which the property has been put, the access thereto and the special advantages or benefits. It is possible that in a high rise building because of special advantages and benefits an office or a block on the upper floor may fetch higher returns or vice versa. Therefore, there is no magic formula and everything depends upon the facts and circumstances in each case. However, we

20 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., emphasize that before the Assessing Officer determines the rate by the above exercise or similar permissible process, he is bound to disclose the material in his possession to the parties. He must not proceed to rely upon the material his possession and disbelieve the parties. The satisfaction of the Assessing Officer that the bargain reveals an inflated or deflated rate based on fraud, emergency, relationship and other considerations makes it unreasonable must precede the undertaking of the above exercise........ Therefore, on the aforesaid reasoning, the action of the Assessing Officer is liable to be set-aside. Apart therefrom, we find that the Assessing Officer has straightaway based his estimation on the rates found on his inquiry without establishing the similarity of the arrangement. As pointed out by the learned representative with regard to the rental arrangement of Galaxy Aviation, the same is incomparable with assessee's arrangement because of timing difference. The arrangement of Galaxy Aviation is of the year 2012 whereas assessee's arrangement is of 2007. Even with regard to the rental arrangement of Bank of India, there are no details brought out by the Assessing Officer to show as to how the same are comparable to the assessee's arrangement. Therefore, on this ground also, the estimation made by the Assessing Officer cannot be straightaway accepted."

21 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., document based on which the additions were made as alleged payment of rent in the hands of VAIPL in A.Y. 1999-2000. Subsequent to the order of Hon'ble Bombay High Court in the revenue appeal, after considering the complexities of the case, it was set aside to the Assessing Officer to hear the matter afresh after giving assessee an opportunity of being heard. Accordingly, Assessing Officer in assessing the assessment of VAIPL took cognizance of the fact that the note pertains to A.Y.1999-2000 and does not specify whether it was accepted by VAIPL or not. Further, there was nothing on record or available in the Books of Accounts which could suggest that assessee has ever made rental payments other than reflected in the Books of Accounts. Further, he observed that both parties i.e., VAIPL and the assessee are subject to maximum marginal rate and they are sister concerns. The chances of tax saving are very remote. It clearly indicates that Assessing Officer in the case of VAIPL accepted the fact that it had not paid any excessive rent in addition to rent disclosed in their Books of Accounts. Taking que from the above order the additions proposed by the Assessing Officer in A.Y. 2000-01 to 2005-06 were deleted.

22 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., 14. Further, we observe that in the case of VML it is fact on record that VML also occupied part of the premises along with VAIPL and was also paying rents to the assessee. It is not the case that some debit note or any other paper found during survey in the case of VML. However, the rent was estimated based on the findings in the case of VAIPL. We observe that the additions made by the Assessing Officer based on the findings in VAIPL was subsequently deleted by the Ld.CIT(A) in Assessment Years 1999-2000 to 2002-03 in various orders and the same was confirmed by the Coordinate Bench in A.Y. 1999-2000 to 20002-03.

23 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., themselves verified and came to the conclusion that the person who is alleged to have made the rental payments to the assessee were found to be incorrect and accordingly, the additions were deleted in their hands. In the same transactions when the addition is deleted in the hands of the payer the additions cannot be made in the hands of the payee i.e., assessee.

24 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., findings of various authorities in the case of VAIPL and VML, in our considered view that assessee has also not received any excessive rent in absence of any cogent material in support of the contention that assessee has actually received the above said rent.

25 ITA NOs. 952, 953, 954, 955, 956 & 957/MUM/2020 M/s. Vama Pvt. Ltd., therefore the decision taken in A.Y. 2000-01 is applicable to these Assessment Years also. Accordingly, these appeals are allowed.

Order pronounced in the open court on 10th October, 2022.

Sd/- Sd/- (KAVITHA RAJAGOPAL) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 10.10.2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER

(Asstt. Registrar) ITAT, Mum