VIJAY KUMAR MARWAH,FARIDABAD vs. DCIT, CIRCLE-II, FARIDABAD

The above two appeals filed by the assessee are directed against the common order dated 26th April, 2018 of the CIT(A), Faridabad, relating to assessment years 2013-14 and 2014-15 respectively. Since common grounds have been raised by the assessee in both these appeals, therefore, these were heard together and are being decided by this consolidated order for the sake of convenience.

The grounds raised by the assessee are as under:-

Facts of the case, in brief, are that the assessee is proprietor of M/s Royal Tools (I) which deals in manufacturing of components. He filed his return of income on 30.09.2013 declaring the total income of Rs.75,60,090/- for AY 2013- 14 and for AY 2014-15, the return was filed on 26th September, 2014 declaring the total income at Rs.64,31,760/-. During the course of assessment proceedings for AY 2013-14, the AO asked the assessee to explain as to why the addition should not be made on notional basis as no rent has been shown in respect of the building at Delhi which is situated at Delhi-Haryana border and the WDV of which has been shown at Rs.1.01 crores in schedule of assets. It was explained by the assessee that the building in Delhi was purchased by the assessee for expansion of the existing business. During FY 2012-13, the assessee could not start the business as the land was leasehold. The assessee first had to apply for conversion of land and building from leasehold to freehold and, accordingly, during the FY 2012-13 the assessee took necessary step for its conversion and paid the conversion charges to DDA. All payments totaling to Rs.1,35,17,732/- incurred for conversion have been debited in the building account and nothing has been claimed as revenue. It was accordingly requested that notional rent should not be taken. However, the AO was not satisfied with the explanation given by the assessee. He noted that for AY 2009-10 addition was made on same ground in assessee’s case wherein the ALV was determined at Rs.20,000/-. The CIT(A) decided the appeal by reducing the ALV per month of Rs.40,000/-. Since there is no change in the facts of the present case, the AO, considering the ALV for FY 2009-10 as benchmark and after accounting for rental increase of 10% p.a., determining the ALP to be Rs.46,585/- and rounding off the same to Rs.46,500/- per month, determined the ALV of the property at Rs.3,90,600/- for AY 2013-14.

Similarly, for AY 2014-15, the AO determined such annual letting value at Rs.4,30,080/-.

In appeal, the ld.CIT(A) upheld the action of the AO by observing as under:- “7. I have considered the facts of the case along with the submissions of the appellant. Similar issue has been adjudicated by me in the case of the appellant in Asstt. Year 2009-10. In this year, the AO had determined the ALV of Rs.40,000/- and the same had been adjudicated by me for Rs.35,000/-’ per month. During the present appeal the contention of the appellant has been that the facts in the present appeal are different from the facts for Asstt. Year 2009-10. The contention of the Ld. AR has been that in these years the appellant discovered that there is a legal lacuna due to which the appellant has been unable to let out the property. As per the Ld. AR the legal lacuna is twofold, the first being that the sale deed (dated 2003) is not registered with the DDA and secondly that the property in question is a lease hold property and not a free hold property. As per the Ld. AR the first lacuna referred above came to light when the appellant wanted to convert the property from lease hold to free hold. As per the Ld. AR it is because of these reasons that the property could not be let out and hence ALV should not be invoked. 8. I have considered the submissions of the appellant and also perused the paper book submitted by the appellant. The first contention of the appellant that the property is lease hold and hence not fit for further lease lacks any merit as almost more than 50% of the properties in Delhi have traditionally been lease hold. These leases are for 99 years and are akin to a permanent title to the property and are in no way a hindrance to letting out the property. The second contention of the appellant that the sale deed was not registered with DDA, also lacks any merit. I find that the DDA has itself amended its conversion policy, wherein prior to 24.09.2001 there was no requirement to register such sale deed with DDA and this rule has changed only from 24.09.2001 (the same is evident from DDA letter dated 17.10.2016, annexed by the appellant in the paper book). Thus this is a procedural requirement for converting the property from lease hold to free hold and in no way prejudices the letability of the property in question. The fact that the appellant is the undisputed owner of the property and in physical possession of the property is not in dispute at all. Thus in view of these facts, I see no merits in the argument of the Ld. AR and this ground of the appellant is dismissed with these comments Ground No. 1 of both appeals is dismissed.”

Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal.

The ld. counsel for the assessee submitted that certain additional evidences were filed before the CIT(A). However, the ld.CIT(A) did not accept the additional evidences filed before him. He submitted that since these additional evidences go to the root of the matter for deciding the issue afresh, therefore, the matter should be restored to the file of the CIT(A) with a direction to consider the same and decide the issue as per fact and law.

The ld. DR, on the other hand, heavily relied on the order of the CIT(A).

We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the AO, in the instant case, determined the ALV of the property at Rs.46,500/- for AY 2013-14 and Rs.51,200/- for AY 2014-15 after considering the ALV of Rs.35,000/- per month which was the benchmark value for FY 2009-10 after the order of the CIT(A) and after considering the incremental rise in rent. We find, the ld.CIT(A) upheld the action of the AO, the reasons of which have already been reproduced in the preceding para. It is the submission of the ld. Counsel for the assessee that certain additional evidences have not been considered either by the AO or by the CIT(A) which have subsequently come to light and which have a bearing on the facts of the case. Further, we find there is nothing on record to suggest as to what is the fate of the case after the ld. CIT(A) upheld the issue of annual letting value (ALV) of the property during FY 2009-10 by reducing the same to Rs.35,000/- as against Rs.40,000/- determined by the AO. The finality of such order could not be explained by either side. Further, the fate of the case for AY 2012-13 and prior to that are also not available before us and the ld. Counsel for the assessee could not throw any light on the same. Considering the totality of the facts of the case and in the interest of justice, I deem it proper to restore the issue to the file of the AO with a direction to adjudicate the issue afresh and after giving due opportunity of hearing to the assessee. He shall verify the record for the past years and also the various evidences filed by the assessee which were not considered by the CIT(A) as well as the AO and decide the issues as per fact and law. I hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.