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Income Tax Appellate Tribunal, “C” Bench, Mumbai
Before: Shri M. Balaganesh & Shri Ravish SoodShri Chetan Kanubhai Desai
PER RAVISH SOOD, JM
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-32, Mumbai, dated 04.04.2018, which in turn arises from the assessment order passed by the A.O under Sec.143(3) of the Income Tax Act, 1961 (for short „Act‟), dated 28.12.2016. The assessee has assailed the impugned order on the following grounds of appeal before us: “1. The Hon'ble Commissioner of Income Tax (Appeals) [C1T(A)'] has erred in dismissing the appeal without discussing the grounds on merit which is unjustified, illegal, against the provision of the Act and against the principles of natural justice.
2. Without prejudice to ground number 1 above, the Hon'ble CIT(A) has erred in dismissing the appeal filed by the appellant and thereby confirming the annual lettable value ('ALV') of the property at Sonmarg Apartment at Rs.28,08,000/- as against
2 Shri Chetan Kanubhai Desai Vs. ACIT, Range-22(1)
ALV of Rs.5,55,000/-. On the facts and in the circumstance of the case and in law, the ALV of the said property ought to be restricted to Rs.5,55,000/-.
3. Without prejudice to the ground nos. 1 & 2 above, while affirming the above adjustment, the Hon'ble CIT(A) has erred in upholding the ALV at Rs.28.08.000/- (2,34,000 * 12 months) considering total let-out period of 12 months as against actual let-out period of 10 months. On the facts and in the circumstance of the case and in law and without prejudice to ground nos. 1 & 2, the ALV of the said property ought to be restricted at Rs.23.40.000/- (2,34,000 * 10 months).
The appellant craves leave to add, alter, amend and/or rescind any grounds of appeal during the course of the hearing.”
Briefly stated, the assessee had e-filed his return of income for A.Y. 2014-15 on 31.07.2014, declaring a total income of Rs.1,00,50,733/- along with a claim of current year loss of Rs.27,41,864/-. Subsequently, the assessee filed a revised return of income on 31.03.2015, declaring a total income of Rs.47,32,088/- and a current year loss of Rs.27,41,864/-. The case of the assessee was thereafter selected for scrutiny assessment under Sec.143(2) of the Act.
During the course of the assessment proceedings it was observed by the A.O that the assessee was in receipt of rental income from letting out of a Flat No. 3, 3rd Floor, Sonmarg Apartment, Napean Sea Road, Mumbai along with two car parking spaces. On a perusal of the records, it was noticed by the A.O that the assessee had received an interest free security deposit of Rs.2,35,00,000/- in respect of the aforesaid property. It was observed by the A.O that while framing the assessment of the assessee for A.Y. 2012-13 it was noticed that the interest free security received by the assessee was about 40 times the yearly rent of the flat. As the rental value shown by the assessee was found to be much below the market rent, therefore, the A.O while framing the assessment for A.Y. 2012-13 had after making inquiries through his inspector assessed the gross Annual Lettable Value (ALV) of the aforesaid property at Rs.19,44,000/- by taking the monthly rent at Rs.1,62,000/- @ Rs.90 per sq. ft., as against Rs.50,000/- p.m. disclosed by the assessee in his return of income. On the basis of the aforesaid facts, the A.O called upon the assessee to explain as to why the ALV of the aforesaid property on a similar footing may not be re-worked out during the year under consideration. As the reply filed by the assessee did not find favour with the A.O, therefore, he drawing support from the observations arrived at by his predecessor while framing the assessment in the case of the assessee for A.Y. 2012-13, therein adopted the monthly rental income of the property at Rs.2,34,000/- p.m. i.e @ Rs.90 per. sq.ft. per month. Accordingly, the „Fair Rental Value‟ (FRV)
3 Shri Chetan Kanubhai Desai Vs. ACIT, Range-22(1) of the aforesaid property admeasuring 2600 sq.ft was worked out by the A.O at Rs.2,34,000/- per month [2600 sq. ft. X Rs.90 per sq. ft. per month]. Accordingly, by adopting the gross ALV of the property at Rs.28,08,000/- the A.O worked out the income of the assessee under the head „House Property” at Rs.19,55,898/-. On the basis of his aforesaid deliberations the A.O assessed the income of the assessee at Rs.62,70,940/-.
4. Aggrieved, the assessee assailed the assessment order before the CIT(A). However, the CIT(A) dismissed the appeal for the reason that the assessee despite having been afforded sufficient opportunity to attend the appellate proceedings had failed to put up an appearance before him. On the basis of the aforesaid deliberations the CIT(A) confirmed the addition made by the A.O without adverting to the merits of the case.
The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short „A.R‟) for the assessee at the very outset of the hearing submitted that the CIT(A) had gravely erred in law by disposing off the appeal without affording sufficient opportunity of being heard to the assessee. The ld. A.R drawing our attention to the order of the CIT(A) submitted that though the hearing of the appeal was fixed by the CIT(A) for 10.04.2018, however, most surprisingly the appeal was in itself disposed off by him on 04.04.2018. Apart from that, it was averred by the ld. A.R that the CIT(A) had disposed off the appeal without adverting to and adjudicating upon the merits of the case.
Per contra, the ld. Departmental Representative (for short „A.R‟) relied on the orders of the lower authorities. However, the ld. D.R could not rebut the aforesaid contentions advanced by the counsel for the assessee.
We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. On a perusal of the order of the CIT(A), we find that he had summarily dismissed the appeal of the assessee for non- prosecution, and had failed to apply his mind to the issues which did arise from the impugned order and had been assailed by the assessee before him. We are unable to persuade ourselves to accept the manner in which the appeal of the assessee had been disposed off by the CIT(A) without application of mind to the issues which were assailed by the assessee by 4 Shri Chetan Kanubhai Desai Vs. ACIT, Range-22(1)
preferring the appeal before him. In our considered view once an appeal is preferred before the CIT(A), it is obligatory on his part to dispose off the appeal on merits. We are of a strong conviction that it is not open for the CIT(A) to summarily dismiss the appeal on account of non- prosecution of the same by the assessee. Rather, a perusal of Sec.251(1)(a) and (b), as well as the Explanation to Sec. 251(2) reveals that the CIT(A) remains under a statutory obligation to apply his mind to all the issues which arises from the impugned order before him. As per the mandate of law, the CIT(A) is not vested with any power to summarily dismiss the appeal for non-prosecution. Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Prem Kumar Arjundas Luthra (HUF) (2017) 297 CTR 614 (Bom). In the aforementioned case the Hon‟ble jurisdictional High Court had observed as under:
“8. From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the AO to make further inquiry and report the result of the same to him as found in Sec. 250 of the Act. F u r t h e r , Se c . 2 5 0 ( 6 ) o f t h e Ac t o b l i g es th e CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Sec. 251(1)(a) and (h) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-s. (2) of s. 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under s. 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact w.e.f. 1st June, 2001 the power of the CIT(A) to set aside the order of the AO and restore it to the AO for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) are co-terminus with that of the AO i.e. he can do all that A.O could do. Therefore, just as it is not open to the AO to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the s. 251(1)(a) and (b) and Explanation to Sec. 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.
We thus not being persuaded to subscribe to the dismissal of the appeal by the CIT(A) for non-prosecution, therefore, „set aside‟ the same to his file with a direction to dispose off the same on merits. Needless to say, the CIT(A) shall afford a reasonable opportunity of being heard to the assessee in the course of the de novo appellate proceedings. The grounds of appeal raised by the assessee are disposed off in terms of our aforesaid observations.