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Before: Shri Bhavnesh Saini & Shri L.P. Sahu
ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the assessee against the order of ld. CIT(A)-XX, Delhi dated 15.01.2015 for the assessment year 2011-12 on the following grounds : 1. That on the facts and circumstances of the case, CIT(A) was not justified in sustaining addition of Rs. 2,10,000/- under the head income from property even though the property under reference was used for the purpose of business and there was no receipt of any rent.
2. That even otherwise, the estimation of rental income at Rs. 25,000/- per month is highly arbitrary and excessive and not based on ALV as per the provisions of sec. 23(l)(a) of the Income Tax Act, 1961.
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That in the absence of any rental income, the Assessing Officer is required to allow the vacancy allowance in terms of provisions of sec. 23(l)(c) of the Income Tax Act, 1961.
4. That lower authorities have not properly considered the provisions of sec. 23 and relevant legal principles and considered the rental value on illegal and arbitrary basis.
5. That orders of the lower authorities are not justified on facts and same are bad in law.
The brief facts of the case are that the assessee filed return of income on 26.09.2011 declaring income of Rs.87,27,300/-. The case was selected for scrutiny and statutory notices were issued to the assessee. The assessee is engaged in the business of product design, marketing and business promotion of woodworking products like Decorative laminates & Veneers in India and International market. The Assessing Officer made addition only under the head ‘income from house property. In the statement of affairs filed by the assessee, it was noticed by the Assessing Officer that the assessee is the owner of more than one house property. The assessee was asked to explain why the properties declared by the assessee may be treated as self occupied and it is deemed let out. In this regard, the assessee submitted reply dated 19.01.2013 as under :
“Through his reply dated 19-12-2013 assessee has claimed “A flat at Mumbai (No. 602, Wimbledon Co operative Housing Society, P-10, Bungalow Andheri West, Mumbai-58) is also being indirectly used for business purpose as and when any shipment has to reach Mumbai or leave form Mumbai and also the same is being used for pre shipment checking process and also for holding conference etc for the client and hence this also cannot be accounted for the income deemed to be let out from this property”. When the authorized representative of the assessee was confronted on the fact that the said premise was never ever declared by the assessee for the purpose of running the business of assessee. Hence, why this residential flat may not 2177/Del/2015 3 be treated as deemed let out. Assessee through the submissions dated 30-12- 2013 submitted that “Copy of bill raised by Wimbledon Co-op. Housing society for payment of Municipal Tax & other fund and according to receipts of House Tax paid comes to Rs. 3,480/- P.A. As per the existing norms, Municipal Valuation should be around Rs 35,000/- P.A". Hence agreed that the said property may be treated as deemed let out. However to evaluate the annual lettable value notice u/s 133(6) was issued to The Manager, Wimbledon Co-operative Housing Society Ltd. Plot No. 10, Four Bungalow Road, Andheri (West), Mumbai-400058. In response through the reply dated 15-01-2014 follow reply was received. ua). When Mr. Ranjan Dhamija was alive, he used to stay for few days in a month. Otherwise most of the period, the flat used to be vacant and was never put on rent. b). At present, the approximate market rent rate in our Society is in the range of Rs. 25,000 to Rs. 30,000/- p.m. depending upon the interior furnishing in the flat.
3. The assessee submitted that the said premises was being used indirectly for the purpose of business. The Assessing Officer did not accept the submissions of the assessee applied the provisions of section 23(1a) and he considered the fair market rent at Rs.25000/- per month of the aforesaid property and after giving statutory deduction, he made addition of Rs.2,10,000/- as income from house property. Aggrieved by the order of the Assessing Officer, the assessee appealed before the ld. CIT(A) who after considering the submissions of the assessee and the order of the Assessing Officer upheld the action of the Assessing Officer.
The ld. AR submitted that the said property was being used indirectly for the purpose of business and that during the course of Mumbai visit, the assessee stayed in the aforesaid building and nominal traveling expenses have been booked in the profit and loss account and the Manager of the Society has also certified that it is being used for the residential purpose and municipal tax, water charges and electricity bills have been paid at normal rates. He
2177/Del/2015 4 further stated that the municipal value of the property is Rs.30,000/- per year instead of fair market value of Rs.3,00,000/- per year taken by the Assessing Officer without making any enquiry and the vacancy allowance has also not been granted by the Assessing Officer. He has relied on the order of ITAT, SMC Delhi Bench in Patilputra Credit & Securities Ltd. (ITA No. 1683/Del/2015) dated 11.05.2018 .
The ld. DR relied on the order of the Assessing Officer and submitted that the orders of the lower authorities are quite justified because the assessee is unable to produce any credible evidence regarding running of any business in the said premises and the premises was used for the purpose of business. Therefore, the authorities below are justified in computing income under the head income from house property.
After hearing both the sides and perusing the entire material available on record and the orders of the authorities below, we find that the said premises were being used for the purpose of business as per the ld. AR, but he was unable to produce any credible evidence to prove the above fact. The Bench put a query to the ld. AR whether there is any credible evidence to prove that the said premises was being used for the purpose of business, he could not produce any such evidence to support the stand taken by the assessee. Therefore, the contention of the assessee is not acceptable. However, we observe from the order of the Assessing Officer that he has taken fair market rent at Rs.25000/- per month without any basis which is not acceptable whereas the assessee has also submitted municipal valuation @ 35000/- per year, which too is not supported by any evidence on record. This matter is, therefore, sent back to the Assessing Officer for determination of 2177/Del/2015 5 annual value of the property as per section 22 of the IT Act as per municipal valuation and guidelines there under. Needless to say that the assessee shall be given reasonable opportunity of being heard.
In the result, the appeal is partly allowed for statistical purposes.