SALONI JHAVERI,MUMBAI vs. INCOME TAX OFFICER 2(3)(3), MUMBAI

O R D E R

PER RAVISH SOOD, JM

6. (Mumbai) [CIT(A)] erred on facts and in law in confirming the addition made by the Income Tax Officer - 2(3)(3), Mumbai (AO) on account of “Income from house property” of Rs. 5,62,867/- without appreciating that the building at Alibaug was not owned by the appellant but was owned by her husband and hence, no income from the same could be taxed in the hands of the appellant.

P a g e | Mrs. Saloni Jhavery Vs. The Income Tax Officer-2(3)(3) 2. The appellant prays that the addition of Rs. 5,62,867/- as made by the AO on account of “Income from house property” and confirmed by the CIT(A), may be deleted. B) General 3) The above Grounds of Appeal are without prejudice to one another and the appellant craves leave to add, alter, amend, delete or modify any of the above Grounds of Appeal.”

2. Briefly stated, the assessee had e-filed her return of income for A.Y. 2013-14 on 05.12.2013, declaring total income at Rs.13,23,328/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec.143(2).

3. During the course of the assessment proceedings, it was observed by the A.O that a perusal of the bank statements of the assessee revealed that she had made certain payments aggregating to Rs.7,17,760/- during the period 09.04.2012 to 10.11.2012 for “Alibag Residence”. On a perusal of the copy of agreement of “Alibag property”, it was observed by the A.O that the assessee jointly with her husband viz. Mr. Anand Jhaveri had purchased land at Village : Awas (near Alibag) in the year 2006-07, vide an agreement dated 25.09.2006 for a consideration of Rs.80 lac. A perusal of the 7/12 extract dated 11.09.2006 that was furnished by the assessee revealed that the name of Mr/Mrs. Billimoria i.e the seller of the land was therein appearing. On the basis of certain inquiries carried out by the A.O it was gathered by him viz. (i) that, the property was situated at Awas Beach near Alibag; (ii) that, the land was not an agricultural land; (iii) that, the property was a big farm house spread over an area of 1 Acre and 5 Gunthas with fully developed garden alongwith many old trees; (iv) that, the farm house was nicely constructed alongwith a big swimming pool; and (v) that, there was one full time watchman cum caretaker working in the premises of the said property. It was observed by the A.O that the assessee throughout the year under consideration had incurred expenses for upgrading the amenities in respect of the P a g e | Mrs. Saloni Jhavery Vs. The Income Tax Officer-2(3)(3) residential house constructed on the land at Village : Awas. In order to gather further details as regards the aforesaid property the A.O issued summons to the Talathi and Group gram panchayat. As per the details furnished by the aforesaid persons, it was observed by the A.O that the assessee had during the year paid an amount of Rs.37,133/- as house-tax in respect of the aforesaid residential house at Village Awas. Further, it was informed by the Talathi that the agricultural land was converted into non-agricultural land in the month of October, 2008. Apart there from, the A.O was informed by the Group gram panchayat that permission to construct a residential house on the aforesaid land was granted on 29.04.2008. In the backdrop of the aforesaid information so gathered, the A.O recorded the statement of the assessee u/s 131 of the Act on 22.03.2016. It was stated by the assessee that the land at Village: Awas was though jointly owned by her alongwith her husband in equal ½ share each, however, the farm house on part of the said land was constructed by her husband. Further, she furnished the details as regards the investment made towards the purchase of land and construction of building on the same viz. (i) cost of land (jointly owned alongwith her husband in equal ½ share each) :Rs.1.60 crore; and (ii) cost of construction (borne by her husband) : Rs.4 crore. Also, the assessee produced three agreements in respect of the purchase of land at Village : Awas, which were found to be in the joint name of the assessee and her husband viz. Mr. Anand Jhaveri. The A.O in order to verify the investment made in the aforesaid property referred the matter to the District Valuation Officer (for short „DVO‟). However, as per the assesses own statement and the facts discernible from the copies of the agreements, the A.O took the assesses share in the aforesaid building and the land appurtenant thereto at 50% and accordingly worked out her share in investment at Rs.2.80 crores. On the basis of his aforesaid P a g e | Mrs. Saloni Jhavery Vs. The Income Tax Officer-2(3)(3) observations the A.O estimated the „Annual lettable Value‟ (for short „ALV‟) of the aforesaid property at Rs.12 lacs. Accordingly, the A.O assessed 50% of the ALV i.e Rs.6 lacs in the hands of the assessee and after allowing the deduction for the municipal taxes of Rs.37,133/- that was paid by her, therein worked out her share of income at Rs.5,62,867/-. It was observed by the A.O that as the assessee had not claimed the benefit of deduction under Sec.24 of the Act on the deemed rental value, therefore, as per the judgment of the Hon‟ble Supreme Court in the case of Goetz (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC) the same could not be allowed to her.

4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, the CIT(A) not finding favour with the contentions advanced by the assessee upheld the order of the A.O and dismissed the appeal.

5. The assessee being aggrieved with the order passed by the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short „A.R‟) for the assessee submitted, that the lower authorities had erred in assessing the ALV of the residential house that was owned by the husband of the assessee i.e Mr. Anand Jhaveri in the hands of the assessee. The ld. A.R taking us through the facts of the case submitted, that the assessee along with her husband Mr. Anand Jhaveri had purchased 11.12 Acres (approx) of agricultural land at Alibag for a total consideration of Rs.128.96 lac. It was submitted by the ld. A.R that as Mr. Anand Jhaveri wanted to construct a residential house on his portion of land, therefore, he had got the same converted into non-agricultural land and had constructed a residential house on his share of land in the period relevant to A.Y. 2009-10 and A.Y 2010-11. It was submitted by the ld. A.R that the investment towards construction of the residential house P a g e | Mrs. Saloni Jhavery Vs. The Income Tax Officer-2(3)(3) was made by the assesses husband. It was submitted by the ld. A.R that though the assessee was owner of 50% of the land, however, the entire cost of construction of the residential property was borne by her husband. In sum and substance, it was the claim of the ld. A.R that as the husband of the assessee i.e Mr. Anand Jhaveri wanted to construct a farm house on his portion of land, while for the assessee wanted to carry out agricultural activities in her portion of land, therefore, it was decided that the portion of land on which the farm house would be constructed would belong to her husband, and the balance land would belong to the assessee. It was submitted by the ld. A.R that the aforesaid facts were duly stated by the assessee in her reply to Query No. 20 of her statement recorded under Sec. 131 of the Act by the A.O on 22.03.2016. It was further submitted by the ld. A.R, that the fact that the construction was carried out by the husband of the assessee was duly brought on the record of the „Valuation officer‟, vide letter dated 22.08.2016 along with the complete details of expenses and the copy of the bank statement of husband of the assessee out of which the same had been incurred. In order to substantiate his aforesaid contention the ld. A.R drew our attention to the copies of the returns of income and the computations of income of Mr. Anand Jhaveri for the A.Y 2013-14 and A.Y. 2017-18. It was submitted by the ld. A.R that the aforesaid property had remained let out in the period relevant to A.Y 2017-18, and the rental income arising therefrom was shown in the return of income of Mr. Anand Jhaveri i.e the owner of the property. It was the claim of the ld. A.R that as per the Transfer of Property Act, 1882, where the consideration for purchase of an immovable property is paid by two or more persons, then, the same would belong to them in the proportion of their respective investments. Accordingly, it was submitted by the ld. A.R that as the entire cost of construction of the farm house was made by P a g e | Mrs. Saloni Jhavery Vs. The Income Tax Officer-2(3)(3) the husband of the assessee i.e Mr. Anand Jhaveri, therefore, the same as per the mandate of law was to be taken as exclusively owned by him. On the basis of the aforesaid contentions it was submitted by the ld. A.R that the addition of the ALV of the aforesaid property made in the hands of the assessee who was not the owner of the aforesaid residential property could not be sustained and was liable to be vacated .

6. Per contra, the ld. Departmental Representative (for short „D.R‟) relied on the orders of the lower authorities. It was submitted by the ld. D.R that as the property was jointly owned by the assessee along with her husband, therefore, the CIT(A) had rightly concurred with the A.O that 50% of the ALV of the property under consideration was liable to be assessed in the hands of the assessee.