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Income Tax Appellate Tribunal, DELHI BENCH “A” BENCH NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI L.P. SAHU
ITA No. 4478/Del/2014 Assessment Year: 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH “A” BENCH NEW DELHI) BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER In ITA No. 4478/Del/2014 Assessment Year: 2010-11 Ashok Kumar Gupta, Vs. ITO C-51, Phase-1, Ashok Ward 15(3), Vihar, Delhi New Delhi (Applicant) (Respondent) (PAN: AEHPG1092B)
Assessee by: Smt. Rano Jain, C.A. Revenue by: Shri Anup Singh, Sr. DR Date of hearing 17/08/2017 Date of pronouncement 25/08/2017
ORDER PER AMIT SHUKLA, JUDICIAL MEMBER:
The aforesaid appeal has been filed by the assessee against the impugned order dated 27.06.2014, passed by the Ld. CIT (Appeals)- XVIII, New Delhi, for the quantum of assessment passed u/s 143(3) for the A.Y. 2010-11. In the grounds of appeal the assessee has raised following grounds:-
“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT (A)] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the Page 1 of 16
addition of Rs.31,75,800/- made by the AO on account of income from house property in respect of following properties:- (a) C-31, Ashok Vihar, Phase II Rs.2,04,000 (b) Vasundhra Cooperative Society, Rs.1,44,000 Flat No.38, Sector 9, Rohini (c) Shop No.467-468 Khari Bouli Rs.1,78,560 (d) Shop No.2, B Block LSC, Ashok Vihar Phase II Rs.2,23,200 (e) Shop No.3B, Block LSC, Ashok Vihar, Phase II Rs.2,23,200 (f) Shop No.404-407, Katra Medgran, Khari Bouli Rs.3,83,904 (g) B-2/22, Phase II, Ashok Vihar Rs.17,00,136 (h) Khasra 73/10/2, Village Mundka Rs.1,18,800 Total Rs.31,75,800 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts in law in confirming the above addition ignoring the provision of Section 23(1)(a) read with Section 23(4) of the Act. 4(i). That the above said addition has been confirmed ignoring the explanation and evidences submitted by the assessee that ALV worked out is unjustified and against the facts. (ii) Without prejudice to the above and in the alternative, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the annual rental value adopted by the AO is arbitrary and too high. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the learned AO has erred in not allowing deduction of 30% of annual value under Section 24 (a). 6(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition to the extent of Rs.3,28,870/- on account of marriage expenditure invoking the provision of section 69C of the Act.
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(ii) That the above addition has been confirmed adhoc, without there being any evidence and by indulging in conjecture and surmises. 7 (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition to the extent of Rs.4,40,277/- as household expenditure from unexplained sources. 7. (ii) That the above addition has been confirmed indulging in conjecture and surmises without there being any evidence for the same. 8. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law in confirming the disallowance an amount of Rs.2,88,797 on account of interest paid to DLF Commercial Complexes. 9. That the appellant craves leave to add, amend or alter any of the grounds of appeal.”
So far as the issues raised in the ground nos. 2 to 5 are concerned, the brief facts are that the assessee was owner of various properties and some of the properties were either lying vacant or were under construction or were used by the assessee for business or office purposes. The Learned Assessing Officer observed that the assessee had not offered his income correctly under the head ‘income from house property’ on account of all the properties from where assessee was receiving rent or deemed to have been let out during the relevant previous year. The Assessing Officer accordingly proceeded to compute the annual letting value of the properties, except for the property self occupied by the assessee, however has failed to specify the basis on which he has determined the ALV of the properties. The details of the computation of the properties as done by the AO are as under:-
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S. No. Address Nature Status Annual Letting Value 1 C-31, Ashok Vihar Phase-1! Plot Under (1/4th Share) Construction 204000 2 Flat No. 388, Vasundra Flat Vacant Cooperative Society, Sector 9, Rohini 144000 3 Shop No. 467-468, Khari Bouli Shop Vacant (1/3rd Share) 178560 4 B Block, LSC, Ashok Vihar Shop on Rent Phase- 11 223200 5 Shop No. 3, B Block, LSC, Shop Vacant Ashok Vihar Phase-ll 223200 6 Shop No. 404-407, Katla Shop Assessee's Office Medgran, Khari Bouli 383904 7 B2/22 Ashok Vihar Phase-ll Plot Under Construction 1700136 Khasra 73/10/2 Village Plot Vacant 8 Mundka 118800 9 H-144, Ashok Vihar Phase-ll, House Residence New Delhi 0 Total 3175800
The Learned CIT (Appeals) too has confirmed the said computation of income of house property and the determination of the ALV of the properties by the Assessing Officer.
Before us the Ld. Counsel, Mrs. Rano Jain, submitted that firstly, the Assessing Officer has not given any basis for calculating or determining the ALV of the properties; secondly, he has even calculated the ALV of the properties which were either under construction or were used for the assessee’s office. At least, the Assessing Officer should have excluded the properties which were under construction and which were occupied by the assessee for his own business purposes. Regarding the determination of ALV for the vacant properties, she fairly admitted that the same should be
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determined, but it should be in accordance with the municipal ratable value as AO has not given any basis for his determination of ALV and is sans any material or information on record. Thus, the determination of ALV as done by the Assessing Officer cannot be sustained.
The ld. DR submitted that the matter can be restored back to the file of the Assessing Officer to examine the assessee’s explanation and also to provide the basis on which the Assessing Officer has determined the ALV.
We have heard the rival submissions and also perused the relevant finding given in the impugned orders. From plain reading of clauses (a) and (b) of sub-sec. (1) of sec. 23 makes it manifest that the annual value of the property for determining the income from house property is deemed to be the sum for which the property might be expected to let from year to year or where the property is let and the annual rent received or receivable is in excess of the sum, the amount so received or receivable. In the present case, we are concerned with the properties which are lying vacant or were under construction or were let out. To arrive at the annual value of the property, one has to examine as to what would be the rent, which it is expected to receive. If the annual rent actually received is more than that, then the said sum shall be treated as income from house property. On the other hand, if it is lesser than the amount at which the property can reasonably be expected to let from year to year, then the amount determined as per cl. (a) shall be the income from house property. Admittedly clause (c) does not apply to the facts of
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this case as none of the property remained vacant during the whole or any part of the previous year. It is seen that the Assessing Officer has determined the ALV of all the immovable properties other than the property self occupied by the assessee, whether it was under construction or were rented or were lying vacant. He has determined the deemed letting value of the properties in the following manner:- Immovable Property Owned by Assessee C-31, Ashok Vihar Phase II (assessee 300 Sq Yards 1.5 stories ¼ of (400 Sq Feet * Rs. 17/Sq has ¼ share) 25% share Ft*12) = 2,04,000 800 Sq Feet Flat 12,000 *12= 1,44,000 Vasundhara Coop Scoeity Flat no. 388, Sector 9, Rohini 36.75 Sq Yards (1/3 Share) 1/3 of (320 Sq Ft * Rs. 186/Sq Shop 467-468 Khari Bouli Purchased on 17-6-2009 Ft * 9 ) = 1,78,560/- 100 Sq Ft Shop No. 2 Block LSC Ashok Vihar (100 Sq Ft * Rs. 186/Sq Ft * 12 Phase –II = 2.23,200 100 Sq Ft Shop No. 3 B Block LSC, Ashok Vihar (100 Sq Ft* Rs. 186/Sq Ft* 12 = Phase II 2,23,200 172 Sq Ft Shop 404-407, Katra AMedgran, (172 Sq Ft * Rs. 186/Sq Ft * 12) = 3,83,904/- Khari Bouli (90 Sq Yard with FF.SF, therefore, and terrace rights) B-2/22 Ashok Vihar Phase B (800 Sq 4 stories with 948.14 Sq Mt 41.67% of (5,000 Sq Ft* Rs. Yards( Assessee’s Share 41.67%) Covered Area 17/Sq Ft * 4 Floors * 12) = 17,00,136/- '
Khasra 73/1072 Village Mundka 1,08,000 (last year’s rent) + Purchased on 6/10/1986 for Rs. 10% annual increase = 48,000 (Nagloi Godown) 1,18,800/-
Total Rs. 31,75,800/-
However, nowhere the Assessing Officer has given any basis for determination of fair market rent, that is, from which source or information he has arrived at the market rent. He has also not excluded the properties which were; firstly, under construction as Page 6 of 16
mentioned in the earlier table; and secondly, one shop which was used by the assessee for his own office/business purpose. The FMV of the properties under construction and property/shop used by assessee for business purpose admittedly cannot be determined u/s 23(1). The Assessing Officer is thus directed to exclude the ALV of the two properties which were under construction and also the property which was used by the assessee for his own business/profession purposes. Regarding one property which was already on rent, the Assessing Officer should take the actual rent received by the assessee and cannot resort to any determination of ALV on some hypothetical market rate. ALV in such cases has to be taken as per clause (b) of section 23(1). Lastly, with regard to the properties which were vacant, we agree with the contention of the Assessing Officer that ALV should have been shown in the terms of section 23(1)(a). However, if the properties were lying vacant and there is no material brought on record by the Assessing Officer for determining the fair market rent, then AO can take municipal ratable value of lease flats/shops for the purpose of determining the ALV. This principle has been upheld by the Full Bench of Hon'ble Delhi High Court in the case of ACIT vs. Moni Kumar Subba reported in 333 ITR 38. Thus, the ld. Assessing Officer is directed to compute the ALV of the vacant flats/shops as per municipal ratable value in terms of ratio laid down by the Hon'ble Delhi High Court with this direction the appeal treated as partly allowed.
In the ground nos. 6 and 7, the assessee has challenged the addition of Rs. 3,28,870/- on account of marriage expenditure added u/s 69C; and addition of Rs. 4,40,277/- towards household
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expenditure incurred from unexplained sources. The Assessing Officer during the course of assessment proceedings noted that the assessee has shown sum of Rs. 9,58,130/- on account of marriage expenses of his daughter. After calling for the entire details, he find that the assessee had shown payment of cheque of Rs. 9,58,130/- on account of rent for ground/lawn, for banquet hall and tent. He observed that looking to the stature of the assessee who is an industrialist and having ownership of several companies, the marriage expenses shown by the assessee is much less. Accordingly, he estimated the marriage expenses of Rs. 25 lakhs over and above what the assessee has shown.
Before the Learned CIT (Appeals), the assessee had given break-up of the total expenditure incurred and disclosed for the marriage purposes at Rs. 21,71,130/-, the break-up of which was as under:-
Nature of expenses Amount (in Rs.) Rent for ground/lawn: 1,03,298.00 Fooding /Catering: 5,23,932.00 Tent: 3,30,900.00 Other miscellaneous expenses: -by assessee:- 1,00,000.00 - By assessee’s daughter:- 2,70,000.00 Jewellery already owned by the 8,43,000.00 appellant’s daughter (shown in her balance sheet): Total 21,71,130.00
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The Learned CIT (Appeals) after taking a note of the aforesaid fact, confirmed the addition to the extent of Rs. 3,28,870/-, after giving relief the amount of Rs. 21,71,130/- declared by the assessee in the aforesaid manner. The relevant discussion of the Learned CIT (Appeals) in this regard reads as under:-
“I do not find any rational in finding of the Assessing Officer wherein he has made a very casual attempt to make addition on this account. However, appellant has also failed to show the total expenditure on this account. I have gone through the details filed in this regard and has been analyzed by me wherein it has been stated that other family members has also contributed in this regard but specific details has not been filed that what are the expenses. It has been mentioned Miss Vidhi Gupta is assessee’s daughter who has shown jewellery worth of Rs. 8,43,000 in Balance Sheet which was used by her in her wedding. In this connection, it is noticed that no jewellery purchase has been shown on account of marriage. Furthermore, it has been stated that there was drawing of Rs. 3,30,000/- by Miss Vidhi Gupta out of which 2,70,000/- was used in her wedding. Thus taking into consideration that the reply submitted by the appellant total marriage expenditure come to Rs. 13,28,130/- is calculated as under:- 1. Shown by assesse by furnishing details: Rs. 9,58,130 2. Incurred by Vijay Gupta assessee's brother: Rs. 1,00,000 3. Incurred by Vidhi Gupta assessee’s daughter: Rs. 2,70,000
In this regard, during the course of the appellate proceedings Learned Authorized Representative of the appellant has submitted vide letter dated 10.6.2014 vide para no. 2.14 on the same total marriage expenses has been shown at Rs. 21,71,130/- as under: Your honor on the basis of the above discussion it can be said the following expenses were incurred in the wedding of the appellant's daughter: Page 9 of 16
Nature of expenses Amount (in Rs.) Rent for ground/law 1,03,298.00 Fooding/Catering 5,23,932.00 Tent 3,30,900.00 Other miscellaneous expenses 1,00,000.00 -by appellant 2,70,000.00 - By appellant’s daughter Jewellery already owned by 8,43,000.00 the appellant’s daughter (shown in her balance sheet) Total 21,71,130.00
All the details in this regard have been filed and verified by me against the same Assessing Officer has made an addition of Rs. 25 lakhs, thus, as per Assessing Officer’s estimate marriage expenses should have been around Rs. 34,58,130/-. Now, the appellant has been able to show the expenses to the tune of Rs. 21,71,130/-. After considering the expenses of Rs. 21,71,130 I found that the appellant has not shown any jewellery purchases on the occasion of marriage of his daughter which appears to be a very uncommon thing. So, after taking into account all the expenses shown at Rs. 21,71,130/-, I found that Rs. 25 lakhs total expenditure would be very reasonable amount in this regard. Thus, addition of Rs. 25,00,000- 21,71,130=3,28,870/- is confirmed. Thus, appellant gets a relief of Rs. 21,71,130/- on this account. Thus, ground no. 5 is partly allowed.”
Before us, the ld. Counsel submitted that, once the assessee has given entire break-up of expenditure incurred and the persons who have contributed for the marriage expenses including the jewellery which was shown in the balance sheet of the assessee’s daughter, then there cannot be any presumption that the expenditure incurred was Rs. 25 lakhs as done by the Assessing
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Officer and Learned CIT(Appeals). Accordingly, such ad hoc estimate cannot be sustained.
On the other hand, the ld. DR strongly relied upon the order of the Learned CIT(Appeals).
After considering the rival submissions and on perusal of the impugned order as well as the matter referred to before us, we find that the Assessing Officer has simply made an estimate of Rs. 25 lakhs simply on the ground that the assessee comes from affluent family and has big stature. Before the Learned CIT (Appeals) the entire break up and source of expenditure has been given, which has been accepted by him at Rs. 21,71,130/-. Once that is so, then there was no point to presume that marriage expenditure would be Rs. 25 lakhs only and therefore, balance amount should be confirmed. There is no enquiry or material information on record to remotely suggest that marriage expenses shown must have been more. Such a reasoning of lower authorities is devoid of any logic and accordingly, we delete the addition of Rs. 3,28,830/-.
So far as the issue relating to the addition of Rs. 4,40,277/- towards household expenditure, it is seen that the Assessing Officer has made an addition of Rs. 10 lacs on estimate basis mainly on the ground that the family of assessee consists of wife and four children and therefore, the household expenditure should be at Rs. 10 lacs. Before the Learned CIT (Appeals), the assessee submitted that the expenditure of the family members shown were Rs. 7,59,723/- and assessee since was living in joint family set up, therefore,
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contribution by other members should be taken into consideration. The reply of the assessee in this regard reads as under:- “Your honor since all the above members including are the earning hands of the family, they all have duly contributed in the general house household expenses of the family like fooding, clothing, medical, electricity, telephone etc. detail break up which along with affidavit of the above family members have been duly filed by the assessee vide his reply dated 19/02/2013. As per the said detail, following are the expenses incurred by the family jointly during the year under consideration: School Fees: Rs. 194500 Electricity Expenses: Rs. 111243 Telephone Expenses: Rs. 18130 Fooding, clothing, medical etc.: Rs. 435850 Total Rs. 759723
Your honor the assessee also submitted the ITRs and the balance sheet of the above family members vide his reply dated 25/02/2013. The said documents duly substantiate the claim made by the assessee. Your honor the Id. AO has failed to appreciate these documents while making the addition in the hands of the assessee. Further he has nowhere in his order stated why he was not satisfied with the detail/calculation of the drawings submitted by the assessee. It is also important to mention here that he has not even discussed the detail of joint drawings made by the assessee and his family members in the assessment order dated 20/03/2013. He has only mentioned the drawings made by the assessee only on account of school fees and wedding expenses. This clearly shows that he has not given clue consideration to the detail of family drawings furnished by the assessee. White making the addition he has simply stated that the reply of the AR has been duly considered but found to lack merit.”
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The Learned CIT (Appeals), however estimated the household expenditure at Rs. 1 lakh per month and after giving benefit of Rs. 7,59,723/- which was shown by the assessee, confirmed the balance amount at Rs. 4,40,277/-.
After hearing both the parties and on perusal of the relevant findings given in the impugned order, we find that both the authorities have resorted to estimate only. The assessee had stated that he is living in a joint family set up and the entire expenditure shown for the entire joint family was at Rs. 7,59,723/-. However the amount of house hold expenditure declared at Rs. 7,59,723/- appears to be on a lower side looking to the fact that over all family members in a joint family setup would be more. Thus, under the facts and circumstances of the case, addition of Rs. 3 lakhs over and above the sum of Rs. 7,59,723/- as disclosed by the assessee would be sufficient and reasonable. Accordingly, addition of Rs. 3,00,000 is sustained and the assessee gets a part relief on this score.
Lastly, with regard to the addition of Rs. 2,88,797/- the relevant findings of the Assessing Officer in this regard reads as under:- “In respect income from M/s DLF commercial complexes Ltd., it is seen from their letter dated 11.02.2010, being Annexure-A of the assessee’s letter dated. 04.01.2013, that interest of Rs. 29,12,360 was paid to the assessee. However in the assessee's return of income, he has shown the amount of interest from M/s DLF Commercial complexes Ltd., at Rs. 11,67,383 only after setting of claim of payment of commission & brokerage of Rs. 3,18,081. The AR of the assessee vide his reply dated 25.02.2013 had stated the
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investment was made jointly by the assessee and Mr. Vijay Gupta and both were having 50:50 share. Interest income is classified as income from other source and netting of interest received is not permissible u/s 57. Sec. 57 the income chargeable under the head “Income from other sources" shall be computed after making the following deductions, namely:- (iii) any other expenditure (not being in the nature of capital expenditure laid out or expended wholly and exclusively for the purpose of making or earning such income; Accordingly the assessee’s interest income from M/s DLF Commercial Complexes Ltd. is computed at Rs. 14,56,180 (50% share of the assessee). Therefore the difference of Rs. 2,88,797 being added back to the net profit.”
The Learned CIT (Appeals) has confirmed the said action of the Assessing Officer.
After hearing both the parties and on perusal of the impugned order of the Assessing Officer, we find that there is a specific finding by the Assessing Officer that the assessee has failed to demonstrate that expenditure incurred was for the purpose of earning interest income from DLF Commercial Complex. The payment of commission and brokerage is no way can be linked to earning of such interest income.
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Therefore, disallowance as confirmed by the Learned CIT (Appeals) at Rs. 2,88,797/- on account of interest paid to DLF Commercial Complexes is affirmed and consequently, this ground is dismissed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 25.08.2017.
Sd/- Sd/- (L.P. SAHU) (AMIT SHUKLA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) Dated: 25.08.2017 Narender Copy forwarded to: 1) Appellant 2) Respondent 3) CIT 4) CIT (Appeals) 5) DR: ITAT ASSISTANT REGISTRAR Date Draft dictated on 17.08.2017 Draft placed before author 18.08.2017 Draft proposed & placed before the second member Draft discussed/approved by
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Second Member. Approved Draft comes to the 25.8.2017 Sr.PS/PS Kept for pronouncement on 25.8.2017 File sent to the Bench Clerk 25.8.2017 Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order.
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