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Income Tax Appellate Tribunal, “SMC” BENCH,
Before: SHRI B. R. BASKARAN, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri Prakash K. Jotwani Department by: Shri N. Hemalatha (DR) Date of Hearing: 25.06.2018 Date of Pronouncement: 07.09.2018 O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the above mentioned appeals against the different order passed by the Commissioner of Income Tax (Appeals)- 10, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year 2008-09 & 2011-12.
The assessee has raised the following grounds: - “
On the facts and in the circumstances of the case and in law:
1. The learned C1T(A) erred in confirming reassessment made u/s 147 when there was no escapement of income nor was there any tangible, material with AO to reopen the case for this year.
389/Mum/2018 A.Y. 2008-09 & 2011-12
2. a| The Learned CTT(A) erred in confirming addition of Rs.3,74,023/- under the head income from House Property when it was a case of sub-letting and not house property. b) The Learned CIT(A) erred in confirming the estimate made by the AO under the head income from house property when the only basis was a magazine report published by 1C1CI and the Inspector report which also relied on hearsay reports. c) The Learned CIT(A) erred in not considering that the rent disclosed by the appellant was in excess of ratable value. d) The Learned C1T(A) erred in not considering the appellant had also received a substantial deposit which was not considered by the AO in considering Annual Rateable value as reasonable and fair.
The appellant craves leave to add, alter or amend the grounds of appeal
at or before the hearing of the appellant.”
3. The brief facts of the case are that the assessee filed its return of income declaring loss to the tune of Rs.1,05,649/- on 26.09.2008 relevant to the A.Y.2007-08. The return was processed u/s 143(1) of the Act on 20.06.2009. Thereafter, the case was reopened by issuance of notice u/s 148 of the Act dated 29.03.2015. In response to the notice, the assessee filed its return of income on 17.08.2015 declaring loss to the tune of Rs.1,05,649/- which the assessee had filed earlier. Thereafter, notices u/s 143(2) of the Act dated 31.07.2014 and 142(1) of the Act dated 10.09.2015 were issued and served upon the assessee. On the request of the assessee, the reasons recorded for the reopening of the case was given to the assessee. AO invoked the provision of Section 27(iii)(b) of the I.T. Act and held that the assessee was deemed owner of the property, therefore, assessed the rental income as income from house property and raised the addition to the tune of A.Y. 2008-09 & 2011-12 Rs.374023/-(annual rented value of the premises 334318- 30%). The total income of the assessee was assessed to the tune of Rs.3,77,990/- .Feeling aggrieved, the assessee filed an appeal before the CIT(A) who confirmed the order of the AO, therefore, the assessee has filed the present appeal before us.
The Ld. Representative of the assessee has argued that the assessee no doubt filed the present appeal delayed for the period of 25 days but the delay is very much explained and unintentional and in this regard the facts have already been filed. The delay is liable to be condoned in the interest of justice On appraisal of the application and affidavit, we noticed that the appeal has been filed delayed on account of change of counsel and on account of appointment of the new CA as well as staff, therefore, in the said circumstances and specifically considered this fact that the delay is not so long, we condoned the delay. ISSUE NO. 1:- 5. Under this issue the assessee has challenged the reopening of the assessment u/s 147 of the Act but at the time of argument did not press this ground, therefore, we decide this issue in favour of the revenue against the assessee being not pressed. ISSUE NO. 2:- A.Y. 2008-09 & 2011-12
Under this issue the assessee has challenged the confirmation of the addition of Rs.3,74,023/- under the head income from house property. It is argued that the case of the assessee is the case of the sub-letting which has duly been covered by the assessee own case in 388 & 390/M/2018 for the A.Ys. 2009-10, 2010-11 & 2012-13 respectively dated 15.06.2018, therefore, in the said circumstances, the ground of the assessee is liable to be allowed interest of justice. However, on the other hand, the Ld. Representative of the Department has refuted the said contention. Before going further, we deemed it necessary to advert the finding of the Hon’ble Tribunal on record: - “11. We have carefully considered the rival submissions. As our aforesaid discussion shows, the short-point for our consideration is as to whether the Assessing Officer was justified in rejecting the value declared by the assessee and instead, determining the annual value of the property for the purposes of Sec. 23 of the Act based on estimation arrived at by him, having regard to the two instances noted in the vicinity of assessee’s property ? 12. Sec. 23 of the Act prescribes the manner in which the annual value of any property is to be arrived at for the purpose of assessment under the head ‘Income from House Property’. Sec. 23(1)(a) of the Act relates to the determination of annual value of a property for a sum for which the property might reasonably be let from year to year. Thus, what is envisaged in Sec. 23(1)(a) of the Act is the probable rent which the property is expected to earn. Sec. 23(1)(b) of the Act deals with a case where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a) to Sec. 23(1), then the amount so received or receivable shall be treated as the annual value of the property. In the present case, the actual rent declared by the assessee is Rs.7,500/- per month, whereas the Municipal valuation is stated to be Rs.225.38 per month. In this factual background, the claim of the assessee is that the actual rent be taken as the 8 Europa Chemicals ITA Nos. 387, 388 & 390/Mum/2018 annual A.Y. 2008-09 & 2011-12 value of the property as it exceeds the Municipal ratable value. The Assessing Officer does not accept Rs.7,500/- per month as the value for which the property might reasonably be expected to be let. In such a situation, as held by the Hon'ble Bombay High Court in the case of Tip Top Typography (supra), the Assessing Officer is required to carry out necessary investigations and inquiries. It is further prescribed that the Assessing Officer shall have cogent and satisfactory material in his possession “which indicate that the parties have concealed the real position”. It has been further explained that there must be “definite and positive material to indicate that the parties have suppressed the prevailing rate”. If we were to examine the case made out by the Assessing Officer in the instant in the background of the above reasoning laid down by the Hon’ble Bombay High Court, it is found that there is no allegation, much less any positive material “47. ............................He must have cogent and satisfactory material in his possession and which will indicate that the parties have concealed the real position. He must not make a guess work or act on conjectures and surmises. There must be definite and positive material to indicate that the parties have suppressed the prevailing rate. Then, the enquiries that the Assessing Officer can make, would be for ascertaining the going rate. He can make a comparative study and make a analysis. In that regard, transactions of identical or similar nature can be ascertained by obtaining the requisite details. However, there also the Assessing Officer must safeguard against adopting the rate stated therein straightway. He must find out as to whether the property which has been let out or given on leave and license basis is of a similar nature, namely, commercial or residential. He should also satisfy himself as to whether the rate obtained by him from the deals and transactions and documents in relation thereto can be applied or whether a departure therefrom can be made, for example, because of the area, the measurement, the location, the use to which the property has been put, the access thereto and the special advantages or benefits. It is possible that in a high rise building because of special advantages and benefits an office or a block on the upper floor may fetch higher returns or vice versa. Therefore, there is no magic formula and everything depends upon the facts and circumstances in each case. However, we emphasize that before the Assessing Officer determines the rate by the above exercise or similar permissible process he is bound to disclose the material in his possession to the parties. He must not proceed to rely upon the material in his possession and disbelieve the parties. The satisfaction of the Assessing Officer that the bargain reveals an inflated or deflated rate based on fraud, emergency, relationship and other A.Y. 2008-09 & 2011-12