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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 above titled cross appeals have been preferred against the order dated 17.09.2017 relevant to assessment years 2013- 14 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)].
(Revenue’s appeal A.Y. 2013-14) 2. The grounds raised by the Revenue are as under: "(i) On the facts and in the circumstances of the case and in Law, the Ld. CIT(A) erred in holding that the ratable value of the properties as determined by the Municipal Authorities is the yardstick while failing to consider that Section 23(l)(a) mandates that the annual value is deemed to be the sum for which the property might be expected to be let from year to year.?
(ii) On the facts and in the circumstances of the case and in Law ,the Ld. CIT(A) erred in ignoring the fact that the Assessing Officer had made local enquiries to determine the sum for which the properties could be expected to be let for the year as per Section 23(l)(a)of the IT Act,1961?
(iii) On the facts and circumstances of the case and in Law, the Ld. CIT(A) erred in ignoring the facts as brought on record by the Assessing Officer regarding the estimated rent for the properties for the purposes of computing income u/s 23(l)(a) of the I T Act,1961?"
The appellant prays that the order of Commissioner of Income Tax (Appeal) on the above ground be set aside and that the AC/DC be restored. The appellant craves leave to amend or alter any grounds or add a new ground, which may be necessary.”
The only common issue raised in all the three grounds of appeal is against the order of Ld. CIT(A) holding that ALV of the property as determined by municipal authority is the yardstick for determining annual value for the purpose of assessing the income from house property as against the ALV computed by the AO at a sum at which the property is expected to let out from year to year.
The facts in brief are that the assessee has derived income from house property 49,37,147/- and other sources Rs. 82,583/-. During the year, the assessee filed the return of income on 29.07.2013 declaring income of Rs.48,94,730/-. The case of the assessee was selected for scrutiny and statutory notices were duly issued and served upon the assessee. During
3 & ITA No.444/M/2018 Shri Satyapal Jaikumar Jain the course of assessment proceedings, the AO noticed that the assessee has calculated the ALV on the basis of municipal rateable value. In para 3.6 of the assessment order, the AO observed that in A.Y. 2009-10 the inspector conducted a field enquiry and filed detailed report dated 23.12.2010 on the basis of which the rental of Rs.42 per sq. ft. was determined by the AO. Also the inspector conducted field enquiry and filed report dated 13.3.2015 as per which the rental rate was determined by the AO at Rs. 45 per square ft. The AO proposed the same basis to be taken in the A.Y. 2013-14 subject to normal increase of 10% in the rental value. The Ld. A.R. of the assessee objected to the increase @ 10% in the rental value on the ground that this is just an estimation of rent and increase may not be possible in every year. However, without prejudice, admitted that the amount adopted in A.Y. 2012-13 may be adopted in A.Y. 2013- 14. The AO also referred to the rental rates as per various websites in the nearby areas for the financial year 2012-13 and calculated the average rate @ Rs.52 during the financial year 2013-14. The AO on the basis of average rate by various websites and inspector’s report calculated the ALV for A.Y. 2013-14 at Rs.49 per sq. ft. thereby determining the prevailing market rent at Rs.1,83,01,836/- as ALV in respect of central garden complex flat. Similarly The ALV in respect of Green Field Flats was calculated by making enquires in the same society. The society produced a leave and license agreement as per which the rent of similar flat was Rs. 17,000/- with interest free deposit of Rs. 50,000/- in AY 2011-12. The AO by taking average annual increase at 10% calculated rent at Rs.14047/- per month in AY 2009-10 for each flat and for four flats at Rs.
4 & ITA No.444/M/2018 Shri Satyapal Jaikumar Jain 6,74,256/- while by framing assessment under section 143(3) dated 20.03.2015. In AY 2012-13 the ALV was calculated at Rs. 741,682/-. The Ld. A.R. of the assessee objected to the increase @ 10% in the rental value on the ground that this is just an estimation of rent and increase may not be possible in every year. However, without prejudice admitted that the amount adopted in A.Y. 2012-13 may be adopted in A.Y. 2013-14.The AO after considering the submissions of the assessee the AO calculated the ALV at Rs. 7,41,682/-.Finally the calculated the addition under the head house property at Rs. 1,76,48,471/-.
In the appellate proceedings, Ld. CIT(A) partly allowed the appeal of the assessee by directing the AO to take ALV at Rs.11,03,300/- as against Rs.1,90,43,518/-.
Now the Revenue is in appeal before us against the order of Ld. CIT(A) reducing the ALV from Rs.1,90,43,518/- by AO and the assessee is in appeal before us challenging the ALV at Rs.11,03,300/- as computed by the Ld. CIT(A).
The Ld. A.R., at the outset, submitted before the Bench that the issue involved in the present case is squarely covered in favour of the assessee and against the Revenue by the various decisions of the co-ordinate benches of the Tribunal in assessee’s own case in AY 2006-07 to 2012-13 and also the jurisdictional High Court in the case of family members having same facts. The Ld. A.R. submitted that where the property is not occupied or rented out, in that case the ALV has to be determined on the basis of ratable value by the municipal
5 & ITA No.444/M/2018 Shri Satyapal Jaikumar Jain authorities and not at the market rent. The Ld. A.R. relied on a couple of Bombay High Court decisions as under: 1. PCIT v. Laxmi Jain in Income Tax Appeal No. 1285 of 2015 Bombay HC) 2. PCIT v. Harsh Jain in ITA No. 1438 of 2016(Bombay HC)
The Ld. A.R. therefore prayed before the Bench that the appeal of the assessee may be allowed and that of the Revenue may be dismissed in view of the ratio laid down by the co- ordinate benches of the Tribunal in assessee’s own case and jurisdictional High Court as stated earlier.
The Ld. D.R., on the other hand, relied on the order of AO by submitting that the ALV of the vacant flats which were not let out during the year have to be calculated on the basis of market rent as determined by the AO on the basis of the comparable rent in the market after making enquiry during the course of assessment. The Ld. D.R. therefore relied heavily on the order of AO.
After taking into account, the facts of the case and the ratio laid down by the decisions as discussed hereinabove, we are of the view that the ALV of the vacant flats have to be determined on the basis of municipal ratable value for the purpose of assessing the income under the head “house property” which has been held by the coordinate benches in assessee’s own case in the earlier years and also by the jurisdictional high court in the case of PCIT v. Laxmi Jain & PCIT v. Harsh Jain (Supra). Accordingly, we are inclined to allow the appeal filed by the assessee and dismiss the appeal of the Revenue.
Order pronounced in the open court on 26.04.2019.