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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-54, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’). Though the case was fixed for hearing on 05.03.2019, 09.04.2019 and 09.05.2019, neither the assessee nor her authorized representative appeared on the above dates before the Tribunal. Therefore, we dispose off this appeal after hearing the Ld. DR and examining the materials available on record.
Briefly stated, the facts are that the assessee filed her return of income for the assessment year (AY) 2010-11 on 27.07.2010 declaring total income of Rs.2,41,370/-. The Assessing Officer (AO), on perusal of the statement of computation of total income of the assessee found that during the year under consideration, she has shown her flats at Green Field, Flat No. B-4/45 & 46 as vacant and has offered annual value of the flats as per the municipal rateable value at Rs.5,856/- each. In response to a query raised by the AO to justify and explain the annual value as taken of the said flat u/s 23, the assessee filed a reply dated 18.10.2012 submitting that where the annual value is fixed by the Municipality or Corporation, it should be acceptable except where the actual rent receipt is higher. However, the AO was not convinced with the above reply of the assessee for the reason that under the municipal laws, the levy of taxation is on the house property whereas under the Income Tax Act, 1961, the levy of taxation is on the income from house property. The AO further observed that the income earning potential of the property is the basis for determining the annual value under the provisions of the Income Tax Act. In this regard, the AO relied on the decision in the case of Bhawan Dass Jain v. UoI 128 ITR 315 (SC). The AO further relied on the decision in Maakrupa Chemicals Pvt. Ltd. (ITA No. 4913/Mum/2005) for AY 2002-03, wherein it was held that the rateable value, if correctly determined under the municipal laws can be taken as annual letting value u/s 23(1) of the Act; however, the rateable value is not binding on the AO.
Rameti Devi Jain Thereafter relying on the assessment order for the AY 2009-10, wherein after inquiry, the AO found that in the same premises, another flat had been let out for an amount of Rs.17,000/- p.m. with interest free deposit of Rs.50,000/-, the AO adopted an average increase of 10% in the rental income and went backwards and accordingly worked out a monthly rent of Rs.15,453/-. For the two flats, the AO adopted a value of Rs.3,70,872/-. During the course of assessment proceedings, the AO asked the authorized representative (AR) of the assessee to explain why the same basis should not adopted for the impugned assessment year. In reply, the AR of the assessee explained that annual increase of 10% may not be necessary in this year since the amount is only an estimated one based on rental yield method and in each and every case, the 10% annual increase is not possible. The AR of the assessee further submitted that without prejudice to his above submission, the amount as adopted in the AY 2009-10 may be adopted in AY 2010-11. Accordingly, the AO adopted the amount of Rs.3,70,872/- being ALV determined by the AO in respect of the impugned house property.
In appeal, the Ld. CIT(A) following the decision in Tip Top Typography (2014) 368 ITR 330 (Bom) held that in the case of a property which is vacant, the ALV should be determined on the basis of rateable value fixed by the municipal authorities. Further the Ld. CIT(A) held as under: “The appellant has admitted ALV of flats/properties under consideration at Rs.13,013/-. The said value of Rs.13,013/- has been arrived by increasing the Rameti Devi Jain Rs.11,712/- (Rs.5,856/- each for two flats) by 1/9th value of same. Since the said rateable value of Rs.11,712/- was fixed in the financial year 2006-07, so the same needs to be enhanced by 20% and thereby works out to be Rs.14,054/-. The said rateable value of Rs.14,054/- needs to be further increased by 1/9th of said value to arrive at the ALV for FY 2009-10 which is relevant to assessment year under consideration. The Ld. AO is directed to substitute the ALV of said flats at Rs.14,054/- (as enhanced by 1/9th of said value) as against Rs.3,70,872/- considered by him in the impugned order. The Ld. AO is directed to re-compute the income form house property as per above directions.”
The Ld. DR relies on the order of the Ld. CIT(A).
We have heard the Ld. DR and perused the relevant materials on record. We find that similar issue arose in the case of Satyapal Jai Kumar Jain (supra). The Tribunal vide order dated 20.06.2018 at para 3 held as under: “3. In the appeal of the assessee (ITA No.3965/Mum/2014), the assessee has challenged the addition of Rs.1,59,206/- increasing the municipal rateable value. The crux of the argument is that such an enhancement is contrary to the provisions of law and non appreciation of facts in proper prospective. We find that Hon’ble jurisdiction High Court in 323 ITR 104 (supra) has thrown light on the issue. The decision in ITO vs Spearhead Properties Pvt. ltd. 46 SOT 208, in Tivoli Investment and Trading Company Pvt. Ltd. vs ACIT 130 ITR 521 and in ITO vs Hansa Motors Works. 46 SOT 160 has also discussed identical issue. The Ld. Commissioner of Income Tax (Appeal), while confirming the addition and enhancing the annual increase of 5% to the rateable value is without any basis. So far as, the observation of the Ld. Commissioner of Income Tax (Appeal) that municipal authorities have not revised the rateable value of the flats cannot be a ground to increase the same Rameti Devi Jain Ld. Commissioner is not expected to step into the shoes of the municipal authorities. Before us, the ld. counsel for the assessee also claimed that still the flats are not let out due to various reasons. The Hon'ble jurisdictional High Court in the case of Tip Top Typography (2014) 368 ITR 330 upheld that the ALV on the vacant flat can be determined at municipal rateable value. Thus, our view has been principally upheld by the Hon'ble High Court. No evidence was brought on record by the ld. Commissioner for making enhancement, thus, even otherwise, such an enhancement on presumptive basis cannot be said to be justified. Admittedly, rateable valuation depends upon so many factors like locality, nearness to park, sea, road, jhuggi cluster, nearness to educational/sports institutions, hospitals, means of transport etc, which has not been considered by the Ld. Commissioner of Income Tax (Appeal), thus, the appeal of the assessee is allowed and the consequent addition made by the Ld. Commissioner of Income Tax (Appeal) is deleted.” 5.1 Facts being identical, we follow the above order of the Co-ordinate Bench and set aside the order of the Ld. CIT(A).