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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI & SHRI PAVAN KUMAR GADALE
O R D E R PER PAVAN KUMAR GADALE JM: These are the appeals filed by the assessee against the separate orders of the Commissioner of Income Tax (Appeals)-18, Mumbai for A.Y.2010-11 passed u/s 143(3) r.w.s 147 of the Income Tax Act and for A.Y.2013-14 U/sec143(3) and 250 of the Act.
Since, the issues involved in these appeals are identical and inter connected, hence are clubbed, heard and consolidated order is passed. & 4826/Mum/2019 Dr. Nirmal Jain, Mumbai. - 2 - For the sake of convenience we shall take up the assessee’s appeal in A.Y 2010-11 as a lead case and the facts narrated therein. The assessee has raised the following grounds of appeal.
1. The Ld. CIT(A) erred in confirming the reopening of assessment u/s 147 of the Act made by the A.O
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in confirming the addition made by the AO of Rs. 6,06,900/- by calculating annual value of the flat, considered as deemed let out based on rent of furnished flats in similar are instead of adopting the Municipal Retable Value as annual value as per the provisions of Sec. 23(1)(a) of the Act.
3. The appellant craves, leave to add, alter or amend any of the above grounds of appeal.
2. The brief facts of the case are that the assessee is engaged in IT Consultancy services and derives income from house property, profession, capital gains and income from other sources. The assessee has filed the return of income for the A.Y 2010-11 on 30-07- 2010 declaring a total income of Rs. 11,96,010/- and the return of income was processed u/s 143(1) of the Act. The assessee has two properties at Oberoi Woods and Oberoi Garden city, Goregaon East Mumbai and claimed as self occupied properties. The scrutiny & 4826/Mum/2019 Dr. Nirmal Jain, Mumbai. - 3 - assessment was completed vide order dated 28.02.2014 for the A.Y 2011-12, where the DCIT, Mumbai has treated the oneself occupied property as deemed let of Rs. 4,02,271/- after allowing standard deduction of 30% Annual Letting Value(ALV)and the CIT(A) has confirmed the addition. In the present case, the A.O. considered the treatment of deemed let out property and is of the opinion that there is an income escaping the assessment in respect of one unit and issued notice u/s 148 of the Act. In compliance to the notice, the assessee has filed the return of income with a total income of Rs. 12,61,236/- on 24.04.2017 and requested for supply of reasons for reopening the assessment and the same were provided to the assessee and the objections were filed.
3. Subsequently, the notice u/s 142(1) of the Act was issued and the Ld.AR has appeared from time to time and submitted the details. The main issue being the assessee has to submit the working of annual let out value of the property or market value of the property based on latest agreement in same area and locality. The AO has referred in the assessment proceedings & 4826/Mum/2019 Dr. Nirmal Jain, Mumbai. - 4 - that the assessee has acquired flats in his name with cost and year of acquisition as under:
Flat No Address Cost of Date/year of acquisition acquisition A/1903 Sold Oberoi Woods CHS Ltd 65,90,620 28.08.2008 on 18.09.2012 off Western Express Highway Goregoan East, Mumbai -63 B/2403 Oberoi Woods CHS Ltd 52,73,920 28.08.2008 Claimed as self off Western Express occupied Highway Goregoan property East, Mumbai -63 B/2404 Oberoi Woods CHS Ltd 52,73,920 28.08.2008 Claimed as self off Western Express occupied Highway Goregoan property East, Mumbai -63 31 Marble Arch Chs Ltd 25,71,176 11.01.2001 Aundh, Pune 32 Marble Arch Chs Ltd 25,71,176 11.01.2001 Aundh, Pune Flat No. 3 date Mantri Avenue-1, CHS 12,00,000 20.06.2009 of Transfer Ltd Pashan Road, 20.06.2009 Pune 01.07.2009 to 31.03.2009
The A.O proposed an addition of Rs. 9,00,900/- as income from house property in respect of one unit of self occupied property at Mumbai and ALV of vaccant flat at Pune and issued show cause notice read as under: & 4826/Mum/2019 Dr. Nirmal Jain, Mumbai. - 5 -
Show cause letter dated 31.10.2017 issued electronically on his email id drjainn@gmail.com which is reproduced as under Sub: Show cause for proposed addition in your case for A.Y 2010-11-reg Sir, In connection with the assessment for the assessment year 2010+-11, it has been observed that you are not offering income from house property correctly. Further, information related to market value of rent in the building oberoi woods, marble arch and martri Avenue1 Chs have been called for from the respective society alongwith copy of rent agreement of flats having the similar area in similar location. Now, it is proposed to assessed the income from house property in respect of all your property during F.Y 2009- 10 at the rate par at market value of rent as under: Flat No Address Market value Income from hosue of rent property (70% of market value of rent) A/1903 Sold Oberoi Woods CHS Ltd 35000*12 Gross Rent 4,20,000 on off Western Express Rs. 4,20,000 Less 1,26,000 18.09.2012 Highway Goregoan Less 30% Income East, Mumbai -63 From HP 2,94,000 B/2403 Oberoi Woods CHS Ltd 35000*12 Gross Rent 4,20,000 Claimed as off Western Express Rs. 4,20,000 Less 1,26,000 self occupied Highway Goregoan Less 30% Income property East, Mumbai -63 From HP 2,94,000 B/2404 Oberoi Woods CHS Ltd SOP SOP Claimed as off Western Express self occupied Highway Goregoan property East, Mumbai -63 31 Marble Arch Chs Ltd 16000*12 Gross Rent 1,92,000 Aundh, Pune 1,92,000 Less 57,600 Income From HP 1,34,400 32 Marble Arch Chs Ltd 16000*12 Gross Rent 1,92,000 Aundh, Pune 1,92,000 Less 57,600 Income & 4826/Mum/2019 Dr. Nirmal Jain, Mumbai. - 6 -
From HP 1,34,400 Flat No. 3 Mantri Avenue-1, CHS 7000*9 Gross Rent 63,000 date of Ltd Pashan Road, 63,000 Less 18,900 Transfer Pune 01.07.2009 to Less 30% Income 20.06.2009 31.03.2009 From HP 44,100 Total income Rs. 9,00,900/-
It is propose to made addition of rs. 9,00,900/- as income from house property from the above mentioned properties for the financial year 2014-15 relevant to A.Y 2010-11
Further, it is requested to submit your submission on above mentioned proposed addition by 17.10.2017
In compliance, the assessee has filed the written submissions on 17.10.2017 and relied on the judicial decisions.The A.O. was not satisfied with submissions and dealt on facts and ALV. Finally the A.O has made an addition of deemed income of the properties and assessed the total income of Rs.21,04,910/- and passed the order U/sec143(3) r.w.s.147 of the Act dated27-11-2017.
Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has considered the grounds of appeal, findings of the assessing officer and submissions of the assessee and confirm the validity of reassessment proceedings and deleted the addition of Rs.2,94,00/-in respect of self occupied house property and confirmed the action of & 4826/Mum/2019 Dr. Nirmal Jain, Mumbai. - 7 - the A.O. considering the basis of rent of furnished flats as ALV and partly allowed the appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the HonbleTribunal.
7. At the time of hearing the Ld. AR submitted that the CIT(A) has erred in considering the ALV based on rental value of furnished flats instead of municipal rate able value determined by the municipal/Local authorities. The Ld.AR supported the submissions with the judicial decisions and paper book and prayed for allowing the appeal. Contra, the Ld. DR relied on the order of the CIT(A).
We heard the rival submissions and perused the material on record. Prima-facie the sole disputed issue envisaged by the Ld.AR is with respect to determination of annual rateable value of the vacant property/flat at Pune, has to be calculated on the municipal rateable value and not on the basis of market rental value of furnished flats in the similar area. The Ld.AR has restricted the arguments on this ground of appeal only and other grounds of appeal are treated as not pressed. We find the CIT(A) has dealt & 4826/Mum/2019 Dr. Nirmal Jain, Mumbai. - 8 - on the issue but no relief was granted. Further the Ld.AR relied on the judicial decisions of jurisdictional Honble High Court and Honble Tribunal supporting the stand that the annual rateable value in respect of properties not let out during the financial year is computed based on the Municipal rateable value. We find the Honble High Court Of Bombay in the Pr.CIT- central -3 Vs Shri Harsh Jain in of 2016 dated 5-02-2019 has dealt on the issue of municipal rateable value at page 3 Para 8 & 9 of the order read as under: “Question (b) relates to the additions made by the A.O by reversing the rateable value of the property owned by the assessee which was vacant. While complying the taxability of deemed rental income in terms of Sec. 22 and 23 of the Act, the AO discarded the rateable value fixed by the Municipal Corporation for assessing the tax on such properties and substituted the same with market rate as prevailing in the area, as estimated by him after collecting data with respect to the same. The Tribunal, however, deleted addition on the ground that the in case of vacant properties, the tax on rental income in terms of Sec. 23 of the Act can be calculated only on the basis of rateable value assessed by the Municipal corporation.
We find that this view of the Tribunal is supported by the decision of this court by order dated 16 the April, 2018 passed in ITA No. 1285 of 2015. The court while dismissing the revenue’s appeal, relied on the decision of this court in the case of Smt. Smitaben N. Akbani Vs. CWT & 4826/Mum/2019 Dr. Nirmal Jain, Mumbai. - 9 - reported in 323 ITR 104. In such decision, this court was considering a similar question in context of valuing the self occupied property, for the purpose of wealth tax of the assessee. The provisions for assessing the value of the property were similar to those applicable in case of assessee’s annual rateable value in terms of Sec. 23 of the Act. This question is, therefore, not entertained.”
9. We find the facts of the present case are identical. We considering the ratio of the Jurisdictional Honble High court decision are of the opinion that the order of the CIT(A) on this disputed issue cannot be sustained and accordingly we direct the Assessing officer to calculate the Annual rateable value of the vacant properties as per the Municipal rateable value assessed by the municipal corporation and allow the ground of appeal in favour of the assessee.
ITA No. 4826/Mum/2019, A.Y 2013-14
The facts of the case are similar to A.Y 2010-11 (expect figures) discussed in above paragraph, therefore, the decision rendered in AY 2010-11 shall equally apply mutatis mutandis for this case also. Accordingly, the Assessing officer is directed to recompute the annual & 4826/Mum/2019 Dr. Nirmal Jain, Mumbai. - 10 - rateable value of vacant property/flat based on the municipal rateable value.
In the result, both the appeals filed by the assessee are allowed.
Order pronounced in the open court on 29.03.2022.