DCIT CC 6(4), MUMBAI vs. VIRENDRA JAIN, MUMBAI

आदेश / O R D E R PER R.C.SHARMA (A.M):

4. Assessee approached to the CIT(A) and the CIT(A) after considering the various judicial pronouncements and also the decision of the Hon’ble Bombay High court directed the AO to adopt ALV of the house property as per the rateable value fixed by the Municipal Authority at Rs.4,63,651/-. However, the CIT(A) directed for enhancement of such Municipal Rateable Value by 5% which works out to Rs.4,86,834/-. The precise observation of CIT(A) was as under:- 7.4.1 I have considered the submissions of the appellant and perused the materials available on record. The appellant has challenged the action of the Ld. AO in determining the ALV of properties/flats at Rs. 68,36.502/- as against Rs. 3,86,376/- admitted by the appellant in respect of Flats/properties at Central Garden Complex. The appellant's main contentions are that the flats/properties under consideration were vacant and not let out during the year; since the flats/properties under consideration was not let out so the ALV has to be computed on the basis of municipal rateable value; the inspector had not carried out any specific enquiry and the information available on the websites like 99acres.com and magicbricks.com are not reliable. In support of his claims the appellant has placed reliance on various judicial pronouncements, as detailed above. The contentions of the appellant have been considered carefully. It is admitted fact that the flats/properties under considerations at Central Garden Complex were vacant and appellant had offered annual value of the flats as per municipal rateable value at Rs. 3,86,376/-. However, the Ld. AO did not accept the same and determined the ALV at Rs. 68,36,502/- in respect of 3845/Mum/2017 Shri Virendra Jain Central Garden Complex, on the basis of inspector's report/field enquiries and the data available on websites 99acre.com and magicbrick.com. 7.4.2 While completing the assessment the Ld. AO has observed that the correct taxable ALV can be determined after considering actual market and field enquiries conducted and the relevant facts pertaining to the property of the assessee viz. area of flat, cost of flat and its year of acquisition by the assessee etc, should be taken into account in the enquiry to arrive at the correct ALV of the property. During the course of appellate proceedings, the Ld. AO was directed u/s 250(4) of the Act to conduct necessary enquiries to determine ALV in the light of the law laid down by the Hon'ble Bombay High Court in the case of Tip Top Typography. In pursuance of same the Ld. AO has not made any fresh enquiry and submitted that in the present case the IT1 had already made enquiry in A.Y. 2009-10 and has placed reliance on the same. The Ld. AO has submitted that while completing the assessment he/she had also relied upon the data available on internet. However, the Ld. AO has submitted that "no details are found in the rent enquiry folder regarding enquiry from various websites like magicbricks.com and 99acres.com," Finally the Ld. AO has submitted that the facts of the case of Tip Top Typography are completely different from appellant's case as in the said case the assessee had received security deposit and rental income was much lower and in the present case the assessee and not let out the flats and the same were lying vacant and it is on account of such vacancy that ALV has been determined. 7.4.3 From the above, it is evident that inspite of giving opportunities the Ld. AO has chosen not to carry out any further enquiries and has relied upon the enquiry conducted by the ITI earlier. The ITI in his said report dated 23.12.2010 has submitted as under. "As directed I visited the premises af Central Garden Complex, City Survey No. 477B, Village Kurfa III, S.M. Road, Chunabhatti/ (East) Mumbai. ! enquired with the security person about the society's office and he told that there is no society formed here. These tower's flat is used as guest house. Then I enquired Mr. Sekhar P More (OM Sai Estate, Maitry Shopping Centre, V.N. Purov Marg, Sion Chunabhaffi East who is working as an estate consultants in the area about the rent flats. He told that this is a Chawl area, here is not any good building for rent purposes and further added that the rent of alike the same flats similar to the above said tower's flat is Rs, 25000/- per month for I 8HK approximately 600 sq. fts. (55.74 sq. mtrs Carpet area. Accordingly, rate is approximately Rs. 421- per sq.ft/ Rs. 446/- per sq. mfrs. Similar to another building in Chunabhatti." Further the ITI vide his report dated 13.03.2015 has submitted as under:- "As directed for verification of ALV in Chunabhatti area near Central Garden complex I visited the area near Central Garden complex, Swadeshi Mill Road'. I went property broker for renting property. They fold me that it would cost Rs. 28000/- for ; I BHK 3845/Mum/2017 Shri Virendra Jain Flat with area of 450/- sq.ft and Rs. 22,000/- for 380 sq.ft. fiat of MAHADA. For 2 "BHK Fiat with area 680 sq.ft. 3 more property dealer quoted price in the range of Rs.35,000/- to Rs, 37000/-. Further the brokers also fold me that the demand has been reduced in past 2 years in the area as compared with previous years and hence rent has not been increased from 2 years. The report is submitted for your kind perusal and necessary action please." 7.4.4 The appellant has submitted that in his case in A.Y. 2009-10 similar addition was made on account of ALV on the basis of ITl's report and data available on websites magicbricks.com and 99acres.com, and the Ld. CIT[A) had allowed the appeal of the appellant. However, the Hon'ble ITAT Mumbai had set aside the issue to the file of the file of the Ld. AO with a direction to make further enquiry and determine the ALV as per law. The Ld. AO has vide order dated 29.07.2016 u/s 143(3) rws 254 has made similar observations as mentioned above. From the decision dated 12.08.2015 of the Hon'ble ITAT, Mumbai in the appellant's own case for A.Y. 2009-10 in it is observed that the Revenue had challenged the order of the Ld. CIT(A} in holding that in the facts and circumstances of the case the ALV of the house property cannot exceed rateable value as determined by the municipal corporation. The Hon'ble ITAT had set aside the issue to the file of the Ld. AO for de-novo adjudication after holding as under. "We have considered the rival submissions and have perused the material available on record. We find that the decision of the Hon'ble jurisdicticnal High Court in Smita N Ambani /supra) has upheld the municipal ratable value to be the annual lettable value of which the property is expected to be let. The said judgement was given in the context of Wealth Tax Act whereby it has been observed in that Rule J88 has the same expression i.e. "the sum for which the property made be reasonably accepted to lei from year to year" as is found in section 23(1) (a) of the Act is used. It is pertinent to note that in the recent judgement of Hon'ble jurisdictional High Court in CIT v/s Tip Top Typography, 368 ITR 330 which is rendered in context of section 23 of Income Tax Act, 196s, the Hon'ble jurisdictional High Court has held that market rate in the locality is an approved method for determining the fair rental value but it is only when the Assessing Officer is convinced that the case before him is suspicious, determination by the parties is doubtful then he can resort to enquiry about the prevailing rate in the locality. It is held by the Hon'ble jurisdictional High Court that municipal ratable value may not be binding on the assessing officer if the AO on the basis of material has reason to believe that Municipal Ratable Value is not representing the correct FMV. it is definitely a safe guide unless a cogent and reliable material to discard it. In the event, the transaction is influenced by any extraneous circumstances or vitiated by fraud or like with the Assessing Officer can adopt fair rental value based on the details and information obtained from reliable source. In the impugned case, the Assessing Officer has doubted the rateable value of Rs. 34,575/-for flats owned by the assessee and has made the field enquiries through an Inspector who has surveyed the area and gave a report that the rental value of a similar flat in the said tower is approximately Rs. 25,000 per month for 3845/Mum/2017 Shri Virendra Jain 600 sq.ft. area flat. Based upon that the Assessing Officer has determined the ALV of house property consisting of nine flats at Rs. 68,36,052/-. Thus, the AO was having the material and facts to not accept the on Municipal Ratable Value. The learned CIT(A) has relied on the judgement of Hon'ble jurisdictional High Court in the case of Smita N Ambani (supra) while the .Hon'ble jurisdictional High Court in the case of Tip Top Typography (supra) which is the latter judgement of the Hon'ble jurisdictional High Court, held that the market rate in the locality is an approved method for determining the fair rental value but it is only when the Assessing Officer is convinced with the case before him is suspicious then the Assessing Officer can inquire about the prevailing rate in the locality. The assessee re//ed on the decision of the Tribunal in assessee's relative's case in Laxmi Jain, Anand Hain and Rameti Devi (supra,), is misconceived because in the case of the assessee under present appeal there is an enquiry conducted by the Inspector at the direction of the Assessing Officer whereby the Inspector visited the area and ascertained the prevailing rate of rent from the estate agent of the area and the facts brought by Inspector report are still remain uncontroverted as the assessee has not brought on record any contrary evidence except the municipal ratable value. Further, we are guided by the recent judgement of jurisdictional High Court in Tip Top Typography {supra} which we respectfully follow. Since the AO has acted on the Inspector report without conducting further enquiry, therefore, in our view, the best course of justice will be served if the matter is remanded to the file of the Assessing Officer for proper enquiry on this point. Accordingly the matter is restored to the file of AO with direction to conduct complete and proper verification/investigation to arrive at annual lettable value of the property owned by the assessee strictly in accordance with the mandate of sec 23(1)(a) of the Act, i.e "the sum for which the property might reasonably be expected to let from year to year". Needless to say that the assessee be given fair and adequate opportunity to present their case. Accordingly, both the appeals are restored to the file of the Assessing Officer for de novo adjudication in the manner indicated above." 7.4.5 From the above it is observed that the Hon'ble Tribunal in AY 2009-10 has observed that the Hon'ble Bombay High Court in the case of Tip Top Typography has held that market rate in the locality is an approved method for determining the fair rental value but it is only when the AO is convinced that the case before him is suspicious and determination by the parties is doubtful then he can resort to enquiry about the prevailing rate in the locality. The Hon'ble Tribunal further held that in the event the transaction is influenced by any extraneous circumstances or vitiated by fraud or like with the assessing officer can adopt fair rental value based on the details and information obtained from reliable source, "he Hon'ble Tribunal has also held that rateable value is safe guide to determine the ALV unless a cogent and reliable material to discard it. From the said finding of the Hon'ble Tribunal it is evident that the rateable value as per municipal authorities is a safe yardstick to determine ALV u/s 23(1)(a) unless the AO brings cogent and reliable material to discard the same. The Hon'ble ITAT has also held that in the event the transaction is influenced by any extraneous circumstances or vitiated by fraud the AO can adopt fair rental value based on enquiry from reliable source. However, since the Hon'ble ITAT had not found the Ill's reports under consideration, cogent and 3845/Mum/2017 Shri Virendra Jain reliable material enough to discard the rateable value determined by municipal authorities and hence had set aside .the issue to the file of the La. AO with the direction to conduct complete and proper verification/investigation. It is admitted fact, in the present case vide letter of this office dated 17.01.2017 the Ld. AO was directed u/s 250(4) of the Act to carry out necessary enquiries in the light of the above referred decision of the Hon'ble Bombay High Court in the case of Tip Top Typography. However, as discussed above, in spite of giving an opportunity, the Ld. AC has chosen not to carry out any fresh enquiry/investigation and has relied upon the Ill's enquiries conducted earlier and as discussed above, which the Hon'ble Tribunal had not found sufficient cogent and reliable material to discard the rateable value as per municipal authorities. Further, from the copy of order u/s 143(3) rws 254 of the Act dated 29.07.2016 (which was passed in giving effect to above referred decision of ( Hon'ble ITAT), it is observed that no fresh enquiry has been conducted by the Ld. AO as directed by the Hon'ble ITAT and had placed reliance on ITI's reports as conducted during the assessment proceedings for AY 2009-10 and 2012-13 and determined the ALV as in original assessment order. Hence, from the above facts it is evident that the Ld. AO has not brought on record any new facts or material other than the Ill's report, which was already before the Hon'ble Tribunal. 7.4.6 From perusal of said Ill's enquiry reports it is observed that the same is very general in nature and no specific instances of comparable fair rent has been brought on record. There is no reference of comparables like area of flats, year of acquisitions, locality of flats, availability of different amenities in society and public utilities service centers, viz. school, hospitals etc. Further, the Ld. AO has relied upon the data available on www.magicbricks.com and www.99acres.com but in her report the Ld. AO has submitted that no details are found in the rent enquiry folder regarding enquiry from various websites like magicbrick.com, 99acres.com etc. Further the appellant has submitted that the above referred websites issued disclaimer that they are not responsible for the information contained therein and the data available therein is based on asking prices of the properties and the same is not based on actual transactions. In view of facts discussed above, no reliance can be placed on the same. 7.4.7 In her report the Ld. AO has also submitted that the facts adjudicated by the Hon'ble Bombay High Court in the case of Tip Top Typography is completely different from .the facts of the present case, as in the said case of Tip Top Typography the assessee had received security deposits, whereas in the present case the properties under considerations were vacant. The said submission of the Ld. AO is found to be correct. From Para 2 of the said decision of the Hon'ble Bombay High Court it is observed that the properties therein were rented and the assesses had received huge interest free security deposits. While adjudicating the issue therein the Hon'ble Bombay High court held that 'The next question would be as fo whether the annual letting value fixed by the Municipal Authorities under the Delhi Municipal Corporation Act can be the basis of adopting annual letting value for the purposes of section 23 of the Act. This question was answered in affirmative by the Calcutta High Court in C1T v. Satya Co. Ltd. 1997] 3845/Mum/2017 Shri Virendra Jain 140 CTR {Col.) 569 on the ground that the provisions contained in the Delhi Municipal Corporation Act for fixing annual letting value is in pari materia with section 23 of the Act. The Court opined that the fair rent fixed under the Municipal laws, which takes into consideration everything, would form the basis of arriving at annual value to be determined under Section 23(1 ){aj and to be compared with actual rent and notional advantage in the form of notional interest on interest free security deposit could not be taken into consideration, !t is clear from the following discussion therein:" The Hon'ble Bombay High Court further held that "We are not in agreement with Shri Chhotaray that the municipal rateable value cannot be accepted as a bona fide rental value of the property and it must be discarded straightway in all cases. There cannot be a blanket rejection of the same. If that is taken to be a safe ' guide, then, to discard it there must be cogent and reliable material. We are of the opinion that market rate in the locality is an approved method for determining the fair rental value but it is only when the Assessing Officer is convinced that the case before him is suspicious, determination by the parties is doubtful that he can resort to enquire about the prevailing rate in the locality. We ore of the view that municipal rateable value may not be binding on the Assessing Officer but that is only in cases of afore- referred nature. It is definitely a safe guide." From the above it is evident that the Hon'ble Bombay High Court has held that the municipal rateable value is a safe guide to determine ALV and ;o discard the same there must be cogent and reliable material. In the present case the Ld. AO has not pointed out any defect in the rateable value fixed by the Municipal Authorities and no cogent and reliable material has been brought on record by the Ld. AO to discard the same. The Hon'bie Bombay High Court has also held that the market rate in the locality is an approved method for determining AlV but it is only when the AO is convinced, that the case before him is suspicious and determination by the parties is doubtful then he can resort to enquire about the prevailing rate in locality. From the same it is evident that the Hon'ble Bombay High Court has held that the Id. AO can resort to enquiry when the determination by the parties is doubtful i.e the property is rented and the rent is affected by extraneous conditions like suppression in rent due to interest free security deposits, etc. 7,4.8 From perusal of above referred decision of the Hon'ble Tribunal in appellant's own case for AY 2009-10, it is observed that the Hon'ble Tribunal had not followed the decision of Hon'bte Tribunal in appellant's family members namely Laxmi Jain, Anand Jain and Rameti Devi Jain on the ground that in the case before them there is enquiry conducted by the Inspector to ascertain the fair market rent. In this respect, during the course of appellate proceedings, the appellant has also submitted the copy of the decision of Hon'ble ITAT Mumbal in the case of Shri Satyapa! Jain for A.Y. 2008-09 and 2009-10, wherein after considering the decision of the Hon'ble Bombay High Court in the case of Tip Top Typography and Ill's report the Hon'ble Tribunal has allowed the appeal on similar issue. From the perusal of said decision of Hon'ble ITAT, Mumbai in the case of Shri Satyapal Jain 3845/Mum/2017 Shri Virendra Jain for A.Y. 2008-09 and 2009-10 in & 2)20/Mum/2012 it is observed that the Hon'ble Tribunal has held as under. "In both these appeals, the Revenue has challenged the order of the Ld. CIT(A) in determining the ALV of the property as fixed by the Municipal authorities.