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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member)
The captioned appeal by assessee for Assessment Year [AY] 2011-12 contest the order of Ld. Commissioner of Income-Tax (Appeals)-28 [CIT(A)], Mumbai, Appeal No.CIT(A)-28/IT-140/Addl.CIT- ITA.No.3130/Mum/2016 Manek Lodge Properties Assessment Year 2011-12 12(2)/2014-15 dated 01/03/2016 by raising the following Grounds of Appeal: - (i) On the facts and in the circumstances of the case, and in law, the learned CIT(Appeals) erred in confirming addition of Gross Annual Value of Rs.96,30,431/- of the property vacant during the year based on mere surmises and conjectures without understanding the fact of the case. (ii) On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred confirming comparable rent as fair rent of the property without considering the notice issued by MCGM for demolition of authorized internal structure. (iii) On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in not considered the Municipal ratable value as annual value of the property. (iv) On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in not considering board circular and various case laws relied upon by your appellant. (v) Your Appellants crave leave to add to, alter or amend the aforesaid grounds of Appeal as they may be advised from time to time The assesse vide letter dated 13/02/2018 has read additional grounds of appeal which read as follows:- (vi) That the Income earned from leasing of property be treated as business income and not as Income from House Property.
Since the same is a legal ground and do not require appreciation of new facts, the same is taken on record. 2.1 Brief facts are that the assessee being resident Association of Person earning Income from House Property has been assessed u/s 143(3) of the Income Tax Act, 1961 for impugned AY by Ld. Additional Commissioner of Income Tax-Circle 17(2), Mumbai [AO] on 24/03/2014 at Rs.171.09 Lacs after certain additions as against returned income of Rs.92.48 Lacs filed by the assessee on 26/07/2011. 2.2 During assessment proceedings, it was noted that the assessee was an Association of Person [AOP] consisting of 18 members who were co-owners of the property known as Manek Lodge situated at 33/85, N.
ITA.No.3130/Mum/2016 Manek Lodge Properties Assessment Year 2011-12 S.Patkar Marg, Mumbai [property] each having undivided share therein as specified in the Agreement of AOP dated 20/08/2004. The assessee earned rental income from the said property which was offered as Income from House Property. The assessee owned 6 floors in the said property out of which Floors Numbers 4 to 6 were let out for whole of the year. Further, the assessee owned 3 units on each of Floor numbers 7 to 9 out of which Unit No. 2 was let out for part of the year whereas Unit Nos. 1 & 2 remained vacant for whole of the year. The assessee, inter- alia, pointed out that the vacant area was used by the assessee itself and further, the said portions were subjected to certain notices by MCGM dated 27/01/2011 and therefore, the assessee could not find suitable tenants for the same during the impugned AY. However, not convinced, Ld. AO opined that the vacant portions were deemed to be let out within the meaning of Section 22, the annual letting value of which was taxable in terms of Section 23(1)(a) and the assessee was not eligible to claim vacancy allowance u/s 23(1)(c) against the same. The total area of this portion i.e. Unit No. 1 & 3 aggregated to 3074.85 Square Feets, the rental value of which has been estimated by Ld. AO @261/- per square feet per month. Accordingly, the same translated into an addition of Rs.96,30,431/- against which statutory standard deduction of 30% has been allowed to the assessee. 2.3 So far as Unit No. 2 on Floor Numbers 7 to 9 is concerned, the Ld. AO, similarly, opined that vacancy allowance was also not available to the assessee against Unit No.2 which was let out only for part of the year. However, we find that upon further appeal, this addition has been ITA.No.3130/Mum/2016 Manek Lodge Properties Assessment Year 2011-12 deleted by Ld. first appellate authority and the same is not the subject matter of this appeal.
Aggrieved aforesaid, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 01/03/2016 where Ld. CIT(A) placing reliance on the decision of this Tribunal rendered in Indira S.Jain [2012 21 Taxmann.com 471] has confirmed the stand of Ld. AO. Aggrieved, the assessee is in further appeal before us.
Since the assessee, vide additional grounds of appeal
, has raised a legal plea that the rental income earned by the assessee was assessable as Business Income in terms of the ratio of judgment rendered by Hon’ble Apex Court in Chennai Properties & Investments Limited Vs. CIT [2015 373 ITR 673] followed by Rayala Corporation Private Limited Vs. ACIT [2016 386 ITR 500], we take up the same first. The Ld. AR has stressed the point the since assessee’s only source of income was rental income and its objective was to earn rental income in business-like manner and therefore, the same was assessable as Business Income considering the ratio of cited judgment. Per contra, Ld. DR vehemently opposed the same on the ground that the only objective of the AOP assessee was to earn rental income from the property which has been accepted over several years by the assessee as well as revenue and therefore, the same was rightly assessed as Income from House Property.
5. After careful consideration, we find that the assessee has been created by Agreement of AOP dated 20/08/2004 with the objective of earning rental income from certain properties. The assessee has, over the past several years, derived rental income from the properties and ITA.No.3130/Mum/2016 Manek Lodge Properties Assessment Year 2011-12 offered the same under the head Income from House Property. This stand is well accepted by the assessee as well as revenue since its inception, which is an admitted fact. Although, we are conscious of the fact that the principles of res-judicata do not apply to Income Tax Proceedings yet there being no change in facts or circumstances, the revenue as well as assessee is precluded from shifting stands without any cogent reasons in view of rule of consistency. This is well supported by the observation of Hon’ble Apex Court rendered in Radhasoami Satsang vs. CIT [193 ITR 321] wherein Hon’ble Court has observed as under:- “Strictly speaking, res judicata does not apply to income-tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.”
Thus, it can be stated that although the principle of res-judicata do not generally apply to Income Tax Proceedings since an assessment for a particular year is final and conclusive between the parties only in relation to the assessment for that year and it is not binding either on the assessee or the Department in a subsequent year. However, if the earlier decision is not arbitrary or perverse or admitted by the respective parties, then the parties are not permitted to deviate from its earlier stand.
So far as the reliance of the Ld. AR on the judgment of Hon’ble court in Chennai Properties & Investments Limited Vs. CIT [supra] is ITA.No.3130/Mum/2016 Manek Lodge Properties Assessment Year 2011-12 concerned, we find that in the cited case the assessee was a corporate entity which was strictly governed by its Memorandum & Articles of Association which contained multiple objects to be pursued by the corporate entity. Upon perusal of para-5 of the cited judgment, we find that the main object of the appellant company was to acquire and hold the properties and to let out those properties as well as make advances upon the security of lands and buildings or other properties or any interest therein which is factually different in the present case. Here, we find that the assessee is nothing but association of co-owners of certain properties whose only objective is to derive income from letting out of property and nothing more. If the contention of Ld. AR is to be accepted, then every assessee exclusively deriving rental income would necessarily be assessed under Business Head as against specific head of Income from House Property. Therefore, on factual matrix, we are unable to convince ourselves with the arguments raised by Ld. AR that the stated income was assessable as Business Income. Therefore, the additional ground raised
by the assessee stands dismissed.
7. So far as the merits of the case are concerned, Ld. AR, drawing our attention to the documents placed in the paper-book, pleaded that the units in question were rented by the assessee in earlier years and the vacancy allowance on these portions was available to the assessee in terms of statutory provisions of Section 23(1)(c). Our attention is further drawn to the application dated 13/02/2018 seeking admission of Additional evidences under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. Per Contra, Ld. DR supported the stand taken by the lower authorities.