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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI MANOJ KUMAR AGGARWAL
Date of Hearing – 08.04.2019 Date of Order – 21.06.2019
O R D E R PER SAKTIJIT DEY. J.M.
This is an appeal by the assessee against order dated 22.2.2016 of Ld. Commissioner of Income Tax (Appeal)–28 Mumbai for the assessment year 2011–12.
The dispute in the present appeal is confined to the addition made to house property income on the basis of annual letting value (ALV) of the house properties determined by the Assessing Officer.
Briefly the facts are, for the assessment year under dispute assessee filed its return of income on 18.07.2012 declaring total income of `. 16,46,020/–. During the assessment proceeding the Assessing Officer noticing that the income declared by the assessee comprises of income from house property, called upon the assessee to furnish the details of properties held and rental income shown from each property. After verifying the details furnished by the assessee, the Assessing Officer called upon the assessee to explain why the properties, other than one self occupied property, should not be assessed as deemed let out properties as per section 23(1) of the Act. After considering the submissions of the assessee, the Assessing Officer observed, in respect of some of the properties the assessee has either not offered any rental income or offered rental income lower than the market rate on the reasoning that they are not let out. Thus, he proceeded to determine the ALV of such properties on the basis of market rate. As against the ALV of house properties shown by the assessee at `. 55,16,461/–, the Assessing Officer determined the ALV at `. 1,85,15,677/–. Assessee challenged the aforesaid decision of the assessing officer by filing an appeal before Ld. Commissioner (Appeals). However, Ld. Commissioner (Appeals) only granted partial relief to the assessee.
4. Referring to ground no. 1 Learned Authorised Representative submitted, the dispute with regard to determination of ALV is in respect of five properties. The learned Authorised Representative submitted, in respect of flat no. 10–F, Harbour Heights the assessee has shown the ALV at `. 69,060/– since assessee’s children from the first marriage were staying there and the flat was not rented out. He submitted, Assessing Officer without properly considering the submission of the assessee has determined the ALV at `. 9,54,000/– which was reduced to `. 4,77,000/– by the First Appellate Authority. The Learned Authorised Representative submitted, determination of ALV by the departmental authorities is neither in accordance with the provisions of Bombay Rent Control Act nor as per the rateable value of the properties as determined by the municipal corporation. As regards flat no 11–B, Harbour Heights, the Ld. Learned Authorised Representative submitted, only on the basis of the fact that another flat in the same building was rented out at a higher rent, the Assessing Officer has determined the ALV at that rate. He submitted, while doing so the assessing officer did not properly appreciate the fact that in respect of flat no. 11–B the assessee had received security deposit of `. 70 lac as against security deposit of `. 1 lac against the other flat. In respect of flat at Jolly Market the Learned Authorised Representative submitted, this flat was also not rented out but was used as residence by assessee’s daughter. Therefore, the assessee had shown notional rent of `. 69,060/–. He submitted, the ALV determined by the Assessing Officer is not on the basis of Municipal Corporation rate. As regards the flat at Perin Nariman Street, Fort, the Learned Authorised Representative submitted, the flat was used as staff quarter. Therefore, assessee did not offer any rent. As regards row house at Lonavala, the Learned Authorised Representative submitted, the house remained vacant for a part of the year, hence, the assessee is entitled to avail vacancy allowance under section 23(1)(c) of the Act. In support of his contention that the Assessing Officer cannot determine the ALV on estimate basis but has to determine by applying rateable value of Municipal Corporation, the learned Authorised Representative relied upon the following decisions:–
i) Hightech Realties Pvt. Ltd. v/s ITO, ITA no.2728/Mum./ 2017, dated 31.10.2018 ii) PCIT v/s Laxmi Jain, dated 16.04.2018; iii) Hightech Realties Pvt. Ltd. v/s ITO, ITA no.5354/Mum./ 2017, dated 31.05.2018; iv) ITO v/s Metaoxide Pvt. Ltd., [2018] 92 taxmann.com 302 (Mum.); and v) PCIT v/s Shri Harish Jain, ITA no.1438/2016, dated 05.02.2019.
3. The Ld. Departmental Representative relied upon the observations of learned Commissioner (Appeals).
We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. The dispute in present appeal is with regard to the determination of ALV of some properties owned by the assessee. For better appreciation we reproduce here under in a tabular form the details of the properties along with the ALV as determined by the assessee and the Departmental Authorities:–
Description ALV as per ALV as per As per Assessing Appellant (`.) Commissioner Officer (`.) of Income Tax (A) (`.) 1. Flat no. 10–F Harbour 9,54,000 69.6060 4,77,000 Heights. 2. Flat no. 11–B Harbour 12,88,536 7,33,200 12,88,536 Heights. 3. Flat at Jolly Market 19,20,000 69,060 6,40,000 4. Flat at Perin Nariman 12,0,000 0 12,00,000 Street, Fort 5. Row House Lonaval 2,40,000 24,000 2,40,000 Total 56,22,536 8,95,320 38,45,536
4. As regards the property at sl. no.1 in the table, it is the contention of the assessee that his children are using it as residence, therefore, the assessee has offered the municipal ratable value as house property income. It is to be noted that the Assessing Officer has determined the ALV of the property by adopting the value at which another flat in the same building was let out. When the assessee has not let out the property, in such circumstances the Assessing Officer cannot determine the ALV by applying the market rate but he can do so only on the basis of ratable value assessed by the Municipal Corporation. The decisions relied upon by the learned Authorised Representative, including the decisions of the Hon'ble Jurisdictional High Court, clearly support this view. Therefore, the Assessing Officer is directed to verify whether the ALV shown by the assessee is as per ratable value determined by the Municipal Corporation and if it is not so, the Assessing Officer is directed to determine the ALV on the basis of ratable value of Municipal Corporation.
As regards the property at sl. no.2 of the table, the Assessing Officer determined the ALV on the basis of the rent at which another flat in the same building was let out. Pertinently, it is the contention of the assessee that the reason for showing ALV at a lesser value than the ALV of the other flat is because, while in respect of subject property the assessee has received security deposit of ` 70 lakh, in respect of the other flat it has received security deposit of ` 1 lakh only. In our view, the aforesaid contention of the assessee requires consideration keeping in view the ratio laid down in the decisions cited by the learned Authorised Representative. If the ALV of the property shown by the assessee is more than the ratable value fixed by the Municipal Corporation, then it has to be accepted. Otherwise, ALV has to be determined as per the ratable value fixed by the Municipal Corporation. The Assessing Officer is directed to verify the aforesaid aspect and determine the ALV accordingly.
As regards properties at Sr. no.3, 4 and 5 of the table, on a perusal of the assessment order it is evident that the Assessing Officer has determined the ALV purely on estimate basis without being backed by any material. Therefore, such determination of ALV by the Assessing Officer cannot be accepted in view of the decisions cited before us by the learned Authorised Representative. That being the case, the Assessing Officer is directed to verify the ALV shown by the assessee in respect of properties at sr. no.3 and 5 and if it is found that the ALV shown by the assessee is as per the ratable value of Municipal Corporation or more than that, then it has to be accepted. Otherwise, the Assessing Officer is directed to determine the ALV of these properties as per the ratable value of Municipal Corporation.
As regards property at sr. no.4 of the Table, the ALV has been shown by the assessee as nil. The learned Authorised Representative submitted, since the property was used by the staff of the assessee, the ALV has been shown as nil. We are unable to accept the aforesaid contention of the learned Authorised Representative. Undisputedly, the assessee is the owner of the property. Therefore, the ALV has to be determined under section 23(1)(a) of the Act. Having held so, we must observe, the Assessing Officer has determined the ALV of the property at ` 12 lakh purely on estimate basis. This action of the Assessing Officer cannot be supported in view of the decisions relied upon by the learned Authorised Representative. Therefore, we direct the Assessing Officer to determine the ALV of this property as per the ratable value fixed by the Municipal Corporation. Before parting, we must observe, the Assessing Officer must afford reasonable opportunity of being heard to the assessee before deciding the issue. Ground no.1 and 2 are allowed for statistical purposes.
In ground no.3, the assessee has challenged levy of interest under section 234 of the Act and initiation of penalty proceedings under section 271(1)(c) of the Act.
The issues raised in this ground being consequential do not require adjudication at this stage. Hence, ground no.3, is dismissed.
In the result, assessee’s appeal is partly allowed for statistical purposes. Order pronounced in the open Court on 21.06.2019