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This appeal by assessee is directed against the order of ld. Commissioner (Appeals)- 28, Mumbai, dated 7 June 2018 for Assessment Year 2012-13.
The assessee has raised the following ground of appeal:
1.1 “On the facts and in the circumstances of the case and in law, the ld. Commissioner (Appeals) erred in confirming the addition of Rs. 11,84,390/- made by the assessing officer on account of income from house property in respect of shops and premises at “Shiv Darshan” building at CBD Belapur, Navi Mumbai. 1.2 On the facts and in the circumstances of the case, anti-lock, learned Commissioner appeal erred in not appreciating that deduction under section 23(1)c of the Act ought to have been allowed in respect of office premises, which were vacant during the relevant previous year. 1.3 On the facts and in the circumstances of the case, the learned Commissioner (Appeals) erred in not appreciating that the annual letting value (ALV) of the shops/ offices ought to be computed based on the Municipal rateable value. 1.4 On the facts and the circumstances of the case and law the learned Commissioner (Appeals) erred in not adjudicating the ground regarding drastic error made by the assessing officer in computing ALV. The learned Commissioner (Appeals) erred in holding that the issue did not arise out of the assessment order. Your appellant, therefore, respectfully prayed that: a. The addition of Rs.11,84,390/- confirmed by learned Commissioner (Appeals) be deleted. b. Deduction under section 23(1)c be granted in respect of office premises which were vacant during the relevant previous year. c. Without prejudice, ALV be computed as per Municipal rateable value. d. Without prejudice, the assessing officer be directed to recompute the aggregate cost of the shops while computing the ALV at 8% of the cost.
Brief facts of the case are that assessee an individual, filed his return of income for Assessment Year 2012-13 on 23rd July 2012 declaring total income of Rs. 13,22,734/-. The return of income was selected for scrutiny and assessment was completed under section 143(3) on 31.03.2015.
During the assessment, the assessing officer on perusal of balance sheet and the details furnished by assessee noted that the assessee owned 16 shop and 6 offices in ‘Shiv Darshan’ building at Plot No. 1, Sector 15, CBD, Belapur, Navi Mumbai. The assessee has not shown any income from these shops and the offices. The assessing officer issued show cause notices to why the income from these shops and the offices be computed and taxed under the head income from ‘house property’. The assessee filed its reply. In the reply the assessee stated that all 16 shops, except Short No. 4 were used by Company namely M/s Neha Fabrication Private limited, a company in which assessee and his family members have 100% of the share and that assessee had not charged any rent from the said company. The said company is using these shops for its business.
These shops must be considered to have been used by the assessee for carrying on the business and therefore, their ALV was not taxable under section 22. For shop No. 4 the assessee stated that it was used by assessee herself, the assessee in her without prejudice contention stated that ALV of all the shops is to be determined under section 23, then the assessee should be based on the rateable value fixed by Navi Mumbai Municipal Corporation. For 6 offices the assessee stated that except office No. 201 and 301 which are used by assessee, the other 4 offices were vacant during the relevant previous year list of the assessee stated that ALV should be determined on the basis of rateable value thereof. The assessee furnished the copy of Municipal tax pertaining to the relevant property.
The contention of assessee was not accepted by assessing officer. The assessing officer proceeded to compute the ALV of the shops on the basis of 8% of cost of acquisition of all these house properties. The cost was taken from the copies of agreement for sale furnished by assessee invested in respect of 16 shop. The assessing officer computed the ALV of all the shops and the offices and after granting deduction at the rate of 3 30% net ALV was determined by assessing officer at Rs. 11,84,390/-. On appeal before Commissioner (Appeals) the action of assessing officer was confirmed. Thus, further aggrieved by the order of Commissioner (Appeals), the assessee has filed present appeal before this Tribunal.
We have heard the submissions of the learned authorised representative (AR) of the assessee and the learned departmental representative (DR) for the revenue and perused the material available on record. The ld AR for the assessee submits that the case may be restored to the file of Assessing Officer to recompute the ALV of all the shops and offices by applying the ratio of decision of Hon’ble Bombay High Court in CIT vs. Tip Top Typography [368 ITR 330 (Bom)]. It was further submitted that the assessee may be given the benefit in respect of those shops which are self-occupied by assessee.
On the other hand the ld.s DR for the revenue supported the order of the lower authorities. The ld. DR for the revenue submits that in case of restoring the issue to the file of Assessing Officer, all the issue may be kept open.
We have considered the rival contentions of the ld. representatives for the parties and also gone through the record carefully. We have noted that number of units/shops and offices are not in dispute. The Assessing Officer determined the ALV of all the offices and shops as 8% of the cost thereof and after granting standard deduction @ 30% determined ALV. 4 The Assessing Officer has not considered the municipal rateable value of all the units. The Hon’ble Bombay High Court in case of CIT vs. Tip Top Typography (supra) held that market rate in the locality is an approved method for determining the fair rental value but it is only when the Assessing Officer is convinced that the case before him is suspicious, determination by the parties is doubtful that he can resort to enquire about the prevailing rate in the locality. It was further held that municipal rateable value may not be binding on the Assessing Officer but that is only in cases of afore-referred nature. It is definitely a safe guide.
Considering the decision of Hon’ble jurisdictional High Court, we deem it appropriate to restore the issue to the file of Assessing Officer to determine the ALV of all the units/shops/offices afresh. Needless to say that before passing the order afresh, the Assessing Officer shall provide opportunity of hearing to the assessee. In the result, the ground of appeal raised by assessee is allowed.
In the result the appeal of the assessee is allowed.
Order pronounced in the open court on 20/08/2019.
Sd/- Sd/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 20.08.2019 SK Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4.The concerned CIT 5. DR “H” Bench, ITAT, Mumbai 5