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Income Tax Appellate Tribunal, DELHI BENCHES : SMC-2 : NEW DELHI
Before: SHRI RAJPAL YADAV
ORDER
PER RAJPAL YADAV, JM:
The present four appeals are directed at the instance of the assessee against the order of the ld. CIT(A) dated 30th March, 2016 passed for Assessment Years 1988-89, 1994-95, 1996-97 & 1997-98.
The grounds of appeal taken by the assessee are not in consonance with Rule 8 of ITAT Rules. They are descriptive and argumentative in nature.
3. In brief, the grievance of the assessee is that the ld.CIT(A) has erred in confirming the assessment order and further enhancing the income without granting the assessee a fair and proper opportunity.
The brief facts of the case are that Shri Hari Singh (now deceased) was the owner of a commercial property bearing No. 17, Community Centre, Ashok Vihar, Phase-I, New Delhi. This land was allotted to the assessee by the DDA and construction was completed in the year 1983. The assessee let out the first floor of the property to M/s Alliance Bros. (a partnership concern constituted by two persons, i.e., both the sons of the assessee) at Rs.3/- per sq. ft. vide agreement dated 6th April, 1983. The firm M/s Alliance Bros. made some modification in the propelrty and further let out to Oriental Bank of Commerce @ rs.6.25 per sq. ft. The Assessing Officer while passing the assessment order in the original round took the rent of the portion @ 6.25 per sq. ft. and added the difference in the returned income of the assessee.
This addition was agitated in appeal and, ultimately, the dispute travelled upto the Tribunal. The Tribunal has held as under:-
"I have considered the entire material placed on record. In the case of John Tinson & Co. (P) Ltd. (Supra), the Hon'ble jurisdictional High Court has held that the Assessing Officer is bound to take the standard rent when he does not accept the actual rent offered by the assessee. In this case, the Assessing Officer found that actual rent offered by the assessee was much lower than the rent being offered for other adjoining - properties, he, therefore:. taken the ALV at higher value as per the rent prevailing for the similar property. The Hon'ble High Court found that property in question was given on rent long back and the assessee was offering the actual rent received. Under these circumstances, the Hon'ble High Court held that the Assessing Officer should have taken the standard reut. However, the facts in the instant case before us are quite distinguishable, wherein the Assessing Officer has taken the actual rent-received from bank @, Rs. 6.25 per sq. ft. The agreement entered into by the assessee with M/s Alliance Brothers has been held to be shame transaction by the Hon 'ble jurisdictional High Court there is no reason for again examining the genuineness of the agreement when there is no. change in the terms of agreement already entered into by the assessee with M/s Alliance Brothers. As the property has been let our by assessee to M/s Alliance Brothers at Rs.3/- per sq. ft., which has be further let out by M/s. Alliance Brothers to the bank at Rs.6.25 per sq. ft., there is no reason for not Ignoring, the sham transaction entered by the Assessee with M/s Alliance Brothers, and thereby taking the actual rent received by M/s Alliance Brothers from the bank. In all fairness, we direct the Assessing Officer to add the net income from house property as offered by M/s. Alliance Brothers after claiming all its expenses, in the net income from house property offered by the assessee The Assessing Officer is also directed to give due credit of tax being paid by M/s Alliance Brothers. While adding net income from house property of M/s Alliance Brothers in the hands of the assessee. Once the transaction with M/s Alliance 3
Brothers is held to be sham, not only net income of M/s. Alliance Brothers is to be added in the hands of the assessee, but also the tax paid by M/s. Alliance Brothers is also required to be given due credit in the hands of the assessee. We direct accordingly. We may further clarify that all the expenses claimed by M/s Alliance Brothers on account of interest, repair, etc., while computing income from house property, should be allowed and only net income offered by M/s Alliance Brothers is to be added in the hands of the assessee. "
While giving effect to the Tribunal’s order, the ld. Assessing Officer has allowed deduction of lease rent paid by M/s Alliance Bros to the assessee. He computed the income accordingly. The assessee was not satisfied with the computation made by the Assessing Officer, hence, he filed appeal before the CIT(A). The first appellate authority has disposed of all the appeals by the common impugned order dated 30th March, 2016. The ld.CIT(A) was of the view that the Tribunal in a way did not believe the tenancy between the assessee and M/s Alliance Bros and, therefore, upheld the rental value of the propelrty @ 6.25 per sq. ft. The Tribunal has only directed the Assessing Officer to grant deduction of expenditure, i.e., interest expenditure or any other expenditure incurred by M/s Alliance Bros. According to the ld.CIT(A), when it is to be assumed that tenancy between M/s Alliance Bros. and the assessee was a sham transaction, then, lease 4 expenses claimed by M/s Alliance Bros. cannot be an expenditure which is to be allowed. If that be so, then, again, the rent will be lesser in the hands of the assessee because lease rent of Rs.3 per sq. ft. would be allowed in the hands of M/s Alliance Bros. and the remaining amount would be only 3.25 per sq. ft. Under this construction, the ld.CIT(A) has enhanced the annual letting value and, accordingly, enhanced the taxable income of the assessee.
With the assistance of the ld. Representatives, I have gone through the record carefully. I find that the ld. First appellate authority has not given any notice to the assessee for this proposed enhancement. The appeal was of the assessee. He could not be put in more disadvantageous position than the position if he had not filed the appeal. If, in his appeal he has to be put in more disadvantageous position by exercising the co-terminus power of the Assessing Officer by the CIT(A), then, notice ought to have been given to the assessee by the ld.CIT(A). In other words, had the appeals of the assessee were dismissed by the ld. First appellate authority, then, the assessee would not be in a more disadvantageous position than the one by virtue of this impugned order. Considering this aspect, I allow all these appeals 5 for statistical purposes. I restore all these issues to the file of the CIT(A). The ld. First appellate authority shall re-adjudicate the issues after confronting the assessee as to why the deduction of lease expenses claimed by M/s Alliance Bros. should not be disallowed in the hands of the assessee while determining the annual letting value. Apart from this issue, all other issues agitated by the assessee against the assessment order will be reconsidered by the CIT(A). The observations made by me will not impair or injure the case of the Assessing Officer/CIT(A) and will not cause any prejudice to the defence/explanation of the assessee.
In the result, all the appeals of the assessee are allowed for statistical purposes.
The order pronounced in the open court on 6th January, 2017.