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Income Tax Appellate Tribunal, “E ” BENCH, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAMIT KOCHAR
आदेश / O R D E R
PER C.N. PRASAD, JM:
These two appeals are filed by the assessee against the orders of the Ld. CIT(A)-23, Mumbai dated 01.01.2013 pertaining to assessment years 2007-08 & 2008-09.
Inspite of issue of notice to the assessee, none appeared on behalf of the assessee, therefore we heard the Ld. Departmental Representative and disposed off these appeals ex- parte on merits.
The revenue has raised the following common grounds in these two appeals except for the variation in the addition:
“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 4,11,35,086/- being the deemed rental income from income from House Property.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that assessee has suppressed Income from House property by not offering true and correct rental income from all the tenants in the return of income filed for the Assessment Year 2007-08.
3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting an amount of Rs. 4,11,35,086/- by relying on the decision of the assessee’s own case for the Assessment Year 203-04 which is still pending before the Hon’ble Tribunal.”
3. We find from the records that similar issue has been decided by the Co-ordinate Bench in assessee’s own case in of 2011 for Assessment Year 2003-04 and ITA Nos. 1190 to 1192 of 2013 for the Assessment Years 2004-05 to 2006-07 by order dated 4.3.2015 wherein the Co-ordinate Bench upheld the order of the Ld. CIT(A) in holding that rental income should be taxed in the year of receipt and rent should be standard rent determined under the Rent Control Act, as there was dispute between the landlord and the tenants and the matter was pending before the Rent Control Tribunal and High Court. On a query from the Bench as to why the order of the Tribunal should not be followed for these Assessment Years also, the Ld. Departmental Representative has no serious objection.
The Co-ordinate Bench of the Tribunal has decided the issue in appeal for the Assessment Years 2003-04 to 2006-07 observing as under: Since identical grounds are raised in all the appeals, these can be disposed off by a common and consolidated order for the sake of brevity. The fact, in brief, are that the assessee is owner of shops in Cannaught Place, New Delhi and declared Rs.33,19,541/- as rental income from the shops, whereas the ld. Assessing Officer calculated the income at Rs. 31,56,251/-. The assessee claimed it a typographical error/calculation mistake. However, the matter travelled to the Hon’ble High Court, wherein, the rent was determined at the rate of Rs.1,42,200/- per month, payable by bank of Punjab. However, the assessee claimed Rs.7,331/- per month, as rent received. The Assessing Officer calculated the deemed rental income from these properties and thus the market value was adopted at Rs.15,64,201/- for determining the rental income in respect of other units apart from L-40. Fact remains that the entire amount was received in A. Y. 2007-08 and 2008-09 for the period commencing from August, 2003, the rent for prior period of four months, i.e. April 2003, May 2003, June 2003 and July 2003 was determined at the rate of Rs.1,42,200/- only. Accordingly, the Assessing Officer worked out rental income of Hemkunt IBOP as under:
Details of As per assessee As per Hon’ble Deemed value per office/shops rent (Rs) per High Court per month (in Rs.) month month (Rs.) for F.Y. 2003-04 Rental income 23,769 733 = 1,56,420 50,72,233 of balance (Excluding-733) properties (Rs. 24,502- Rs. 733) Rental income 6,08,66,796/- for the year (Rs. (50,72,233X12)
In view of the above, Assessing Officer worked out the deemed rental income at Rs.6,08,66,796/-. After allowing deduction u/s.24(a) @ 30% total income was assessed at Rs.4,26,06,757/-. We note that, as obsorbed by the ld. Commissioner of Income tax (Appeals) also that the Assessing Officer wrongly proceeded on the premise that Hon'ble Delhi High Court has retrospectively determined and fixed Rs.1,42,000/ - as monthly rent for the premises occupied by M/s. Bank of Punjab, and the said order operated as a formula to retrospectively enhance the rents being paid by all the 39 Protected Tenants of Appellant by 19000% i.e. from Rs. 23,769/- per month to Rs.50,72,233/- per month, i.e. (Rs.6,08,66, 796/ - p.a.). The rest of the building (other than premises on 1st Floor occupied by Bank of Punjab) is occupied by statutory tenants and they were paying statutory rent for the last 25 years. It is also noted that the Assessing Officer unjustifiably enhanced the rental income of the assessee without any documentary evidence/presumptive basis as the presumptive rent was never received/receivable by 4 M/s Seth Properties. the assessee. There is uncontroverted finding in the impugned order that the Additional Rent Control Tribunal directed Punjab National Bank to deposit the amount of Rs.1,42,000/- (as mesne profit/occupation charges/damages) in the Court and not Hon’ble Delhi High Court, which bank of Punjab was paying to M/s. Hemkunt Chemicals vide its order dated 05/07/2003. The Hon’ble Delhi Court in its Order dated 29/07/2003 did not mention any amount, or fix/determine any enhanced rent for M/s. Bank of Punjab or the assessee's 39 other tenants as erroneously assumed by the Assessing Officer. The Special Bench of the ITAT in the case of Narang Overseas(P)Ltd. v. ACIT 111 ITD 1, held that the amount was received against wrongful possession of the property and therefore the mesne profit received by the assessee under the consent decree awarded by the Apex Court at the rate of Rs. 10 lakhs was on account of damages for deprivation of use and occupation for the property and, therefore, the sum so received was capital in nature and not chargeable to tax was not considered by the Assessing Officer in proper prospective and he deliberately chose to ignore that the assessee's 39 protected tenants were not a party to the proceeding between the assessee and Bank of Punjab/Hem Kunt Chemicals at any stage, thus, the orders therein had no, and could not have any application upon them. The annual value to be assessed in the hands of the landlord/owner is a statutory rent amount only and not the enhanced amount received by the tenant from the sub-tenants/ occupant. The Assessing Officer had committed an error in considering the amount of money deposited, in court, by Bank of Punjab in the subsequent assessment years as rent due to the assessee instead of compensation/occupation charges, which is directed by the court to be paid by party (in this case Bank of Punjab) against whom eviction order had been passed, which is in direct contradiction of the Assessing Officer's own finding in Page-2 of the Assessment Order, wherein the Assessing Officer has admitted that in July,2003, Bank of Punjab was directed to pay compensation of Rs.1,42,000/- per month by Delhi High Court. This amount (deposited by Bank of Punjab) which the Assessing Officer treats as rental income is in reality compensation for wrongful possession which was deposited only in the subsequent assessment years by Bank of Punjab, and was received by the assessee only in A.Y.2007-2008, and A.Y.2008-09. There is wrong presumption by the Assessing Officer that Bank of Punjab and not Hem Kunt Chemicals was the assessee’s tenant without appreciating that as per Sec. 16(a) and (b) of the Delhi Rent Act no tenant without the previous consent in writing of the land lord has the right to sublet or assign the premises occupied by him. Once eviction orders are passed the relationship of land lord/tenant comes to an end. Thereafter, the land lord can be awarded only compensation by the Court till possession is handed back to the land lord by the tenant. Thus, there was a gross error in the assessment order in increasing the rents of all the Appellant's remaining 39 protected tenants (being Rs.23,769/- per Month paid to the Appellant by its lawful/ protected tenants) by 19000% i.e. to Rs.50, 72,233/ - Per Month because these lawful tenants are ,protected tenants who enjoy protection under the Delhi Rent Control Act,1958. Sec 6A of the Delhi Rent Act 1958 has restricted the power of land lords (i.e. 6 M/s Seth Properties. the appellant herein) to increase rents beyond 10% and that too only after every 3 years.
2.2. Section 105 and 107 of the transfer of Transfer of Property Act does not confer any right on any Civil Court to fix the rent of any premises, which is a matter between the Lessor and the Lessee subject to provisions of the Rent Act. The Appellant is expressly barred from receiving any consideration for creation of a sub-tenant or the tenants as per see 16(4) of the Delhi Rent Act. Similar issue with identical facts in assessee's own case was decided by the ld. Commissioner of Income tax (Appeals) for A. Y. 2003- 04, wherein, CIT(A) vide order No.CIT(A)- 23/ITO-12(1 )(4)/IT-448/201 0-11 dated 08/07/2011 held as under:
"The Assessing Officer has computed income from house property in respect of all the tenanted premises, including L-40, 1st Floor premises in respect of which there was a dispute before the Tribunal! Court, and in respect of which the appellant has been allowed to withdraw moneys deposited under Court order. The Assessing Officer on the basis of the amount determined by the High Court in respect of L-40 which was in dispute, has treated the same as rental for the balance properties as receivable and the difference amount (i. e., difference between rental income as per High Court order and as declared by the appellant) has been brought to tax. For the properties other than L-40, deemed value of rental of Rs.34,61 ,623 per month has been taken. With regard to L-40 on similar basis (after allowing for cost inflation @ 20%), amount of Rs.1, 13,600/- per month has been taken as the deemed rental value. It is found, firstly that the order of Delhi High Court was only specific to L-40 premises, which were let out to Hemkunt Chemicals further sublet to 8ank of Punjab. The properties were under the Delhi Rent Control Act. The ITAT Mumbai in A.Y.2002-03 in Shri Deepak Vaswani v ITO Ward 12(2)(40 Mumbai has laid down principles on how the determination of ALV is to be made. It has been held that in case the property is covered by the Rent Control Act, the annual value u/s 23(1) (a) cannot exceed the standard rent determined under the Rent Control Act because of the restriction on the value of rent as held by the Supreme Court in the case of Sheela Kaushik (113 ITR 435). Thus without any specific order in respect of other properties, the Assessing Officer could not have extrapolated the rent using the basis of the Court decision in respect of the L-40 property. The Assessing Officer is thus directed to restrict the rental income in respect of properties other than L-40 to the standard rent determined under the Rent Control Act.
As regards the L-40 property (under dispute), provisions of section 25AA and 25B have to be taken into consideration. Section 25AA of the Act provides that where the assessee cannot realize rent from a property let out to a tenant, and subsequently any amount in respect of such rent is realized, such receipt shall be deemed to be chargeable under the head 'income from house property' as income of the previous year in which it is received. Section 25B of the Act makes a special provision for arrears of rent received, and states that where an assessee has received an amount by way of arrears of rent from such property, which is not charged to tax in any previous year, the amount so received shall be deemed to be chargeable under the head 'income from house property' as income of the previous year in which it is received, whether the assessee continues to remain the owner of such property in the previous year in which arrears are received or not. (deduction of 30% would also be allowable against such receipt). In the present case since the appellant has not received any amount either by way of unrealized rent or by way of arrears in AY 2003-04, which is evident from the court orders (the amount is stated to have been received after directions of the Court dated 29/07/2007) and amounts were released to the appellant from 28/07/2006. In point of fact even the order of Court directing deposit of monthly amount of Rs. 1,42,000/-- is dated 29/07/2003, which is after the end of the previous year relevant to AY 7003-04. Thus in view of the provisions of sections 25AA and 25B, the income (receipt) is to be taxed in the year of receipt and cannot be subjected to tax in AY 2003-04. The rental income for AY 2003-04 would be restricted to the standard rent determined under the Rent Control Act. The addition made by the Assessing Officer is thus deleted. " 2.3. Before us, no contrary decision was brought on record by either side reversing the aforesaid order, thus, on the Rule of consistency also the assessee is having a good case, thus, the stand of the CIT(A) deserves to be upheld. The Assessment Year 2003-04 is the lead year, wherein, we have upheld the stand of the ld. Commissioner of Income tax (Appeals), whereas, the remaining Assessment Years, on identical fact, the ground raised by the Revenue is that the case of Assessment Year 2003-04 is pending before the Tribunal. However, we have upheld the order of the ld. Commissioner of Income tax (Appeals) for Assessment Year 2003-04, therefore, the identical issue for the later assessment years is automatically disposed of in favour of the assessee.
3. So far as, ground no.1a (ITA No.6701/Mum/2011) is concerned no submissions were made by ld. DR and ground no. 3 with respect to additional evidence and violation of Rule 46A is not germane out of the impugned order, therefore, both these grounds are dismissed”.
Respectfully following the said decision, we direct the Assessing Officer to pass consequential order in line with the decision of the Co-ordinate Bench for the Assessment Years 2003-04 to 2006-07 and recompute the rental income for the Assessment Years under appeal accordingly.
In the result, both the appeals filed by the revenue are dismissed. Order pronounced in the open court on 7th September, 2016.