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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 21.08.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.
The grounds raised by the assessee are asunder: 2. “The learned Commissioner of Income Tax (Appeals)-37 has erred in confirming the addition made by the learned Assessing Officer of Rs. 2,12,4367-u/s 23(l)(a) of the Income Tax Act 1961, while estimating the Gross Annual Value of the second residential house property at fair market value of Rs. 3,03,4807- which is also self occupied by the Assessee.
In the preceding previous year, relevant to the Assessment Year 2009-10, the learned Assessing Officer while passing the Assessment order u/s 143(3) estimated the Gross Annual Value of the same property at fair market value of Rs. 12,000/- & addition was made of Rs. 7,426/- after allowing deduction of Municipal 2 Mr. Suresh Shivlal Bhasin Taxes Paid of Rs. 1,392/- & standard deduction u/s 24(a) of the Income Tax Act, 1961. Hence, there is no reason as to why the Gross Annual Value of the same property should now be estimated at Rs. 3,03,480/-. In light of the above said facts & circumstances of the case, the addition of Rs. 2,12,436/- confirmed by the learned Commissioner of Income Tax (Appeals)- , 37 is ought to be reduced to Rs.7,426/- as estimated by the learned Assessing / Officer in Assessment Year 2009-10 while passing the Assessment order u/s 143(3) of the Income Tax Act, 1961.”
The only issue raised is against the order of CIT(A) upholding the ALV of flat no. 25 , Shree Mahant Krupa CHS Ltd, Manish Nagar, Andheri at Rs. 3,03,480/- which is also claimed to be self occupied thereby confirming the addition of Rs. 2,12,436/-.
The facts in brief are that the assessee has two flats one at Green Acres where the assessee was actually residing with his family and second at Shree Mahant Krupa CHD Ltd., Manish Nagar, Andheri. The assessee has shown Rs. 266/- as deemed income from the second flat. Accordingly, the AO called upon the assessee as to why notional rent should not be brought to tax. The ld AR replied vide written submissions dated 14.11.2014 submitting that the assessee has offered to tax the said flat at Rs. 266/- p.m. as notional rent. The AO ,not finding the reply of the assessee as tenable, came to the conclusion that the second flat at Andheri has to be brought to tax u/s 23(1)(a) of the Act. The AO ascertained the market rent of the flats in the same localities after getting a enquiry conducted at Rs. 45 to Rs. 50/- per sq ft. and estimated the fair rent at Rs.25,290/-p.m. Thus annual FMV of the flat was calculated at Rs.3,03,480/- and after allowing the 30% standard deduction, the net addition was made to the income of the assessee of Rs. 2,12,436/-.
3 Mr. Suresh Shivlal Bhasin 5. In the appellate proceedings, the ld CIT(A) dismissed the appeal of the assessee by holding that the AO is not bound by the ALV at municipal rateable value as per BMC and upheld the order of AO on this point that ALV has to be determined at fair market rent which the flat is expected to reasonably fetch from the market.
The ld AR submitted before the bench that the ALV of the flat at market rent is unfair and against the decisions of the jurisdictional High Court. The ld AR submitted that the issue involved in the assessee’s appeal is squarely covered by the decisions of Bombay High Court in the case of PCIT Vs Harsh Jain of 2016 dated 5.2.2019 and Pr CIT Vs Laxmi Jain ITA No. 1285 of 2015 Dated 16.4.2018. In both the decisions the Hon’ble High Court has followed its earlier decision in the case of Smt. Smitaben N. Ambani Vs Commissioner of Wealth Tax 323 ITR 104 and held that ALV of the flat has to be calculated as per municipal rateable value. The ld AR submitted that since the assessee has already offered to tax the ALV at MRV and also in the earlier year i.e. AY 2009- 10, the AO has estimated the gross annual value at Rs. 12,000/- and net addition was made of Rs. 7,426/- after allowing deduction of municipal taxes and standard deduction.
The ld DR on the other hand relied heavily on the orders of authorities below and submitted that the ALV of the vacant property has to be determined according to the provisions of section 23(1)(a) of the Act and was rightly calculated by the AO. The ld AR prayed hat the order of CIT(A) may be upheld.
4 Mr. Suresh Shivlal Bhasin 8. After hearing both the parties and perusing the materials on records including the decisions of the jurisdictional high court as referred to above, we observe that the case of the assessee is squarely covered by the ratio in decisions of the High Court. The Hon’ble High Court has held that in case of vacant flats/property the ALV has to be fixed on the basis of municipal rateable value and not on the basis of market rent. Therefore, the order of the CIT(A) cannot be sustained and is set aside. The AO is directed to take the ALV at Rs. 12000/- and calculate the addition on the basis which the AO has accepted as ALV in the preceding assessment year 2009-10 in the order passed u/s 143(3) of the Act.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 26.04.2019.