RESHMA R. MEHTA,MUMBAI vs. ACIT CEN CIR 7, MUMBAI

The only issue raised by the assessee in this appeal is against the confirmation of addition of Rs.4,32,180/- as made by the AO under section 23(4) of the Income Tax Act, 1961 qua office at Plaza Panchsheel and Flat at Surat, Gujarat. Whereas the second issue in respect of addition of Rs.1,26,000/- in respect of residential property u/s 23(4) of the Act is not pressed by the assessee. Without prejudice, the ground raised

3. Facts in brief are that the assessee did not file return of income. The Search and Seizure action was carried out in the case of M/s Lilavati Kirtilal Mehta Medical Trust Group on 11.4.2011. A notice under section 153A was issued to the assessee on 5.9.2013 which was compiled with by the assessee by filing return of income dated 17.10.2013 declaring a total income of Rs.38,410/-. The AO issued notice u/s 143(2) of the Act dated 22.10.2013 and thereafter notice under section 142(1) of the Act along with detailed questionnaire was also issued calling for information from the assessee. During the course of assessment proceedings, the AO on perusal of the balance sheet observed that a property named Plaza Panchasheel was appearing in the balance sheet and accordingly, the AO asked the assessee whether the rent was received from the said property. The assessee neither filed reply nor complied with the said notice. In the 3 and other six appeals. mean time, the AO deputed Income Tax Inspector to identify and to ascertain the prevailing market rent of this property by having field survey at and around Plaza Panchsheel, near Opera House, Mumbai. The Income Tax Inspector submitted his report vide letter dated 11.3.2014 estimating the deemed market rental value of the said property u/s 23(4) of the Income Tax Act. Accordingly, the AO completed the assessment vide order dated 21.3.2014 passed under section 143(3) r.w.s 153A of the Act assessing the total income of the assessee at Rs.5,96,590/- by making an addition of Rs.4,32,180/- in respect of commercial property at Plaza Panchsheel and a residential property at Surat amounting to Rs.1,26,000/- u/s 23(4) of the Act. The matter carried to ld.CIT(A) who also dismissed the appeal of the assessee after considering the submissions as incorporated in the para 4 of the appellate order. Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us.

Heard both the parties, perused the material placed before us including the impugned orders and case law relied upon by the assessee. The main dispute before us is only in respect of commercial space in the Building Plaza Panchsheel, near Opera House in respect of which the addition of Rs.4,32,180/- has been made under section 23(4) of the Income Tax Act which is upheld by the ld.CIT(A).

The ld. AR vehemently submitted before us that the manner in which the income from the property has been ascertained and assessed by 4 and other six appeals. the AO and thereafter confirmed by the ld.CIT(A) was totally wrong and unacceptable as the fair rental value was estimated by the Income Tax Inspector deputed by the AO who assessed the market rental value of the property in the vicinity and went backward to ascertain the fair rental value for the year under consideration. The ld. AR submitted that the market rental value of the property was to be ascertained only on the basis of certain percentages of the cost of the property or on the basis of rental value as prescribed by the Municipal Corporation and not by the officer of the Income tax department deputed by the AO. The ld. AR submitted before the Bench that since there was a litigation going on between the Municipal Corporation, assessee and the other owner of the building and therefore ascertaining the fair market rental value of the property would not be possible by taking the fair rental value as Municipal Corporation and only course left was to estimate the FMRV by applying certain percentages of cost of property. In support of her contention, the ld.AR relied on the following decisions : i) Yasin Sattar V/s ITO in ITA No.2263/Mum/2011 (AY-2007-08) dated 23.5.2012; ii) ACIT V/s Dr.Rajendra N Umbarkar in ITA No.4394/Mum/2013 and another (AY-2008-09) order dated 4.3.2016; iii) Smt.Radha Devi Dalmiya V/s CIT (1980) 125 ITR 134( All) iv) Saipansaheb Wd.Dawoodsaheb V/s Laxman Venkatesh Naik in Civil Revn Application No. 829 of 1953 order dated 21.1.1955 (Bom HC) (AIR 1955 Bom 435)

The ld. DR on the other hand, heavily relied on the orders of authorities below and prayed for upholding the same.

After considering the rival contentions and on perusal of the record and also after going through the various decisions of High Courts and other authorities, we are of the view that Fair Market Rental Value of the property could be ascertained by applying the certain percentage of cost of investment in the said property. However, on the basis of information received the investment in the property is not available with us, therefore, we are of the considered view that this is a fit case to be restored back to the file of AO. Accordingly, we restore the matter back to the file of AO with a direction to assess the fair market rental value of the property by application of 8% of the cost of investment made in the property in dispute. Accordingly, we allow this appeal.

With regard to the remaining appeals, since we have decided the issue by directing the AO to adopt 8% of the cost of investment in the property, same principle will also be applied to remaining assessment years.

In the result, all the appeals of the assessee are allowed.