M/S SASI ENTERPRISES,CHENNAI vs. ACIT, CHENNAI

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

This appeal of the assessee is directed against the order of

the Commissioner of Income Tax (Appeals) – I, Chennai, dated

10.04.2008 and pertains to assessment year 2000-01.

assessee, submitted that the first issue arises for consideration is

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addition of `2,29,500/- with regard to income from house property at

Raja Nagar, Neelankarai. According to the Ld. representative, the house property was let out during assessment year 1996-97 for `3,30,000/-. The Assessing Officer presumed that there would be

enhancement of 20% in the annual letting value and the estimated the income at `3,96,000/-. In fact, the assessee let out the property for `90,000/- and after reducing 1/3rd standard deduction provided under the Income-tax Act, declared a sum of `67,500/-. The Ld.

representative further submitted that for assessment year 1997-98, the property was not let out and the same was vacant. Similarly, for assessment years 1998-99 and 1999-2000, the property was vacant. For assessment year 2000-01, it was let out for `90,000/-.

For the assessment year 2001-02, the Assessing Officer himself accepted the rental income declared by the assessee. When the income returned for assessment year 2000-01 was similar as that of assessment year 2001-02, and the Assessing Officer himself accepted the same while completing the assessment under Section 143(3) of the Income-tax Act, 1961 (in short 'the Act'), according to the Ld. representative, there cannot be any further addition for assessment year 2000-01 which is under consideration.

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Counsel, submitted that the assessee declared rental income in respect of the house property at Raja Nagar, Neelankarai, at `90,000/-. The Assessing Officer found that during the assessment

year 1996-97, the very same property was let out for `3,30,000/-.

When the property fetched `3,30,000/- for assessment year 1996-

97, it is not known how the property would fetch `90,000/- after four

years. According to the Sr. Standing Counsel, under Section 23 of

the Act, the rental value of the property shall be the sum for which the property would reasonably be expected to let from year to year or where the property or part of the properties let out, the actual

amount received or receivable by the landlord.

attachment and nobody was willing to take the same on rent. According to the Ld. Sr. Standing Counsel, attachment of property cannot be an impediment for letting out of the property. If any

person claims that attachment is an impediment for letting out of property, then the provisions of Income-tax Act cannot be implemented. According to the Ld. Sr. Standing Counsel, the

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Assessing Officer was expected to estimate the rent receivable if it

was not let out and if it is let out, the Assessing Officer was expected to estimate the reasonable rent from year to year. In this case, the Assessing Officer on the basis of rental value declared by

the assessee for 1996-97, estimated the same by taking an increase of 20%. Therefore, according to the Ld. Sr. Standing Counsel, the CIT(Appeals) has rightly confirmed the order of the

Assessing Officer. The Ld. Sr. Standing Counsel placed his reliance on the judgment of Madras High Court in N. Nataraj v. DCIT (2004) 266 ITR 277.

under consideration. The Assessing Officer found that for the assessment year 1996-97, the assessee has returned rental income of `3,30,000/- for the very same property, therefore, `90,000/-

declared by the assessee was very low. Accordingly, the Assessing

Officer estimated 20% increase of annual rental value and determined the same at `3,96,000/-. After giving 1/3rd allowance for

repair and maintenance, he estimated the same at `2,97,000/-.

5 I.T.A. No.1287/Mds/08

After reducing the income admitted by the assessee to the extent of `67,500/-, the Assessing Officer added a sum of `2,29,500/-. The

assessee now claims that the property was not let out for

assessment year 1997-98 and it was vacant. The same property was also vacant for 1998-99 and 1999-2000. The assessee claims before this Tribunal that the property was attached and it could not

be let out at market rate. The fact that the property was attached is not in dispute. For the assessment year 1997-98, the assessee has not declared the income from house property on the ground that it

was vacant and the same was accepted by the Assessing Officer. For the assessment year 2001-02, the assessee itself declared an income of `2,49,000/- for the very same house property which was

accepted. If the contention of the Assessing Officer that the property was let out for assessment year 1996-97 for `3,30,000/-

and there would be an increase in the subsequent year, then it is not known why the Assessing Officer accepted the income declared by the assessee at `2,99,000/- which was admittedly lower than

`3,30,000/- declared by the assessee for assessment year 1996-97.

Therefore, admittedly, there is a reduction in the rental value in

respect of the property at Raja Nagar, Neelankarai.

6 I.T.A. No.1287/Mds/08

Assessing Officer has no material to suggest that the assessee has let out the property for more than `90,000/-. On presumption that

the property would have fetched more than `90,000/- since the assessee has let out the same for `3,30,000/- during assessment

year 1996-97, the Assessing Officer estimated value at `3,96,000/-

for the year under consideration. As observed earlier, if the contention of the Assessing Officer that the rent receivable would be `3,96,000/- for the assessment year 2000-01, then it is not known

how the very same Assessing Officer accepted the rental value at `2,49,000/- for the assessment year 2001-02. Therefore, it is

obvious that the rental value is not constant at Raja Nagar,

Neelankarai.

property was under attachment, this Tribunal is of the considered opinion that there was legal impediment in letting out the property. Therefore, naturally the attachment has to be taken into

consideration while estimating the annual value of the property. We

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have carefully gone through the provisions of Section 23 of the Act.

Section 23 of the Act in categorical term says that the annual value

of the property shall be the sum for which the property might

reasonably be expected to let from year to year. In this case, the

property was actually attached, therefore, the Assessing Officer is

expected to estimate reasonable rental value from year to year. In

fact, the Assessing Officer ignored the attachment while estimating

the rent at 20% more than the rent for the assessment year 1996-

97.

when the property was let out, the actual rent received or receivable

by the assessee has to be taken into consideration. In the case before us, the assessee has declared actual rent of `90,000/- as

income. After reducing the standard deduction provided under the

provisions of Income-tax Act, the assessee admittedly disclosed `67,500/-. Therefore, this Tribunal is of the considered opinion that

when the assessee actually disclosed the rent received, the

Assessing Officer cannot estimate the same on the ground that the

rent would be more than the rent declared for the assessment year

1996-97, especially, when the Assessing Officer himself accepted

for lower rent during the assessment year 2001-02.

8 I.T.A. No.1287/Mds/08

High Court in N. Nataraj (supra). In the case before Madras High

Court, the building belonging to the assessee-HUF was leased out

to a partnership firm. The firm in turn entered into several lease

agreements with different tenants for letting out the property. The

rent received by the firm from its tenants was three times more than

the rent stipulated in the lease agreements between the assessee

and the firm. The Revenue contended before the authorities that

the amount received by the firm from its tenants was the amount

reasonably expected to receive from letting out of the property. The

High Court found that the rent realized by the firm from the tenants

was the figure which could be adopted by the Assessing Officer as

sum, which the property could reasonably be expected to be let

from year to year. In the case before us, it is nobody’s case that the

property was leased out to other party and the other party has let

out the property to several tenants. The property remained vacant

for several years and the assessee let out the property by itself directly and received a sum of `90,000/-. Moreover, if the

attachment of the house property was taken into consideration, it

cannot be said that the property would be let out for more than

9 I.T.A. No.1287/Mds/08

`90,000/-. Therefore, this Tribunal is of the considered opinion that

the judgment of Madras High Court in N. Nataraj (supra) is not

applicable to the facts of the case. In those factual circumstances,

the addition made by the Assessing Officer to the extent of `2,29,500/- is not justified. Accordingly, the orders of both the

authorities below are set aside and the addition made by the Assessing Officer to the extent of `2,29,500/- is deleted.

from property at No.14, Gems Court, Khader Nawaz Khan Road.

assessee, submitted that the assessee owned shop at No.8 and 9

at Gems Court, No.14, Khader Nawaz Khan Road. The assessee has disclosed `1,32,000/- as rental income from this property.

However, the Assessing Officer found that the assessee has not

admitted the rental income, therefore, he made addition. According

to the Ld. representative, the Assessing Officer has taken

advantage of the door number and shop number which was

disclosed by the assessee. The assessee disclosed rental income

from shop No.8 and 9 at Gems Court. The Gems Court is situated

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at door No.14, Khader Nawaz Khan Road. The Assessing Officer

presumed that the assessee occupied shop no.14 at Gems Court.

Corporation, the Ld. representative for the assessee, submitted that `29,040/- was deducted from rental income in respect of letting out

shop no.8 and 9 at No.14, Khader Nawaz Khan Road. The

CIT(Appeals), according to the Ld. representative, went one step

further and found that in the confirmation letter issued by M/s Allied

Ceramics Corporation, at the bottom of the letter, the door number

was mentioned as 25, Khader Nawaz Khan Road, Nungambakkam,

Chennai-6. The fact that the assessee received a sum of `1,32,000/- as rental income from M/s Allied Ceremics Corporation

is not in dispute. The Assessing Officer and the CIT(Appeals) are

confused themselves with regard to door number mentioned in the

letter of the tenant. According to the Ld. representative, the

assessee is the owner of shop no.8 and 9 at Gems Court, door

No.14, Khader Nawaz Khan Road, Chennai-6. The tenant has

confirmed the payment of rent for shop no.8 and 9 at Gems Court.

Probably, the tenant may be having another premises at door

No.25, Khader Nawaz Khan Road. According to the Ld.

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representative, it is for the Revenue to conduct for the enquiry. On

mere assumption or presumption, the claim made by the assessee

cannot be doubted especially when the tax was deducted by M/s

Allied Ceramics Corporation. Therefore, the addition made by the Assessing Officer to the extent of `1,32,000/- is not justified.

Standing Counsel for the Revenue, submitted that the assessee

claimed that door No.14, Khader Nawaz Khan Road was let out and

received rental income. No doubt, TDS certificate was issued by

M/s Allied Ceramics Corporation. On the basis of TDS certificate,

the CIT(Appeals) found that the assessee let out shop No.14 at

Germs Court to the tenant. The address indicated in the TDS

certificate shows that what was let out by the assessee was shop

No.14 and not shop no.8 and 9. The income from shop no.14 was

not disclosed at all. In the confirmation letter issued by M/s Allied

Ceramics Corporation, at the bottom of the letter head, the address

mentioned is No.25, Khader Nawaz Khan Road, Nungambakkam,

Chennai-6. But, the assessee claims that M/s Allied Ceramics

Corporation was carrying on business at door no.14, Khader Nawaz

12 I.T.A. No.1287/Mds/08

Khan Road. In view of this, the CIT(Appeals) has rightly confirmed

the order of the Assessing Officer.

perused the relevant material available on record. The assessee

claims that it is the owner of shop no.8 and 9, Gems Court at Door

No.14, Khader Nawaz Khan Road, Chennai-6. A perusal of TDS

certificate available at page 11 of the paper-book shows that M/s

Allied Ceramics Corporation issued the TDS certificate for deduction

of tax. By taking advantage of the number given as 14, Gems

Court, the Revenue now claims that shop No.14 was let out by the

assessee and income from the said shop no.14 was not disclosed.

This Tribunal is of the considered opinion that these are all small

matters which could have easily verified by the Assessing Officer.

The assessee claims that it is the owner of shop nos.8 and 9 and

not 14. It is also not in dispute that Gems Court is at No.14, Khader

Nawaz Khan Road, Chennai-6. When Gems Court is admittedly

situated at Door no.14, Khader Nawaz Khan Road, Chennai-6, it is

not known how the Assessing Officer and the CIT(Appeals)

presumed that shop No.14 was let out by the assessee. The lower

13 I.T.A. No.1287/Mds/08

authorities have not taken any pain to find out where shop No.14

was located.

property was identified with door number allotted by local body,

namely, Corporation of Chennai. Therefore, this Tribunal is of the

considered opinion that the door number allotted by Corporation of

Chennai has to be given primary importance while locating the

property. After going through the material available on record, we

find that Gems Court is located at door No.14, Khader Nawaz Khan

Road, Chennai-6. The property owned by the assessee is at shop

no.8 and 9, Gems Court, Door No.14, Khader Nawaz Khan Road.

This was confirmed by the tenant, namely, M/s Allied Ceramics

Corporation. The Revenue, by placing reliance on the address

given in the bottom of the letter of M/s Allied Ceramics Corporation

as 25, Khader Nawaz Khan Road, Chennai-6, claims that shop

no.14 was not disclosed. This Tribunal is of the considered opinion

that when the assessee specifically claims that Gems Court is

situated at door no.14 and Form 16A issued by M/s Allied Ceramics

Corporation refers to Khader Nawaz Khan Road, Chennai-6, there

cannot be any confusion at all. The confirmation letter given by M/s

14 I.T.A. No.1287/Mds/08

Allied Ceramics Corporation confirms further that what was let out by the assessee is only shop no.8 and 9 at door No.14, Khader Nawaz Khan Road, Chennai-6. Therefore, it cannot be said that the assessee has not disclosed income from shop no.14. Shop no.14 does not belong to the assessee and what is belonging to the assessee is only shop no.8 and 9. Therefore, this Tribunal do not find any justification in making addition to the extent of `1,32,000/-.

Accordingly, the orders of the authorities below are set aside and the addition of `1,32,000/- is deleted.

the year under consideration. The Assessing Officer disallowed the claim of the assessee on the ground that the assessee has not produced any documentary evidence for payment of interest. Referring to the earlier order of the Assessing Officer, the Ld. representative submitted that for earlier four assessment years, the

15 I.T.A. No.1287/Mds/08

Assessing Officer allowed the claim of the assessee. According to

the Ld. representative, this being the fifth year, the Assessing Officer cannot take different stand. When the assessee paid interest on the borrowed funds for construction of the property, the Assessing Officer cannot say that for the 5th year there was no documentary evidence. Therefore, according to the Ld. representative, the addition of `50,789/- made by the Assessing

Officer is not justified.

Counsel for the Revenue, submitted that the assessee has not produced any material for payment of interest. In the absence of any evidence, the CIT(Appeals) has rightly confirmed the addition

made by the Assessing Officer.

the earlier four assessment years, the Assessing Officer accepted the claim of the assessee and allowed the interest relating to pre- construction period. Therefore, as rightly submitted by the Ld.

representative for the assessee, the Assessing Officer had no reason to depart from earlier years’ finding. Since the borrowal of

16 I.T.A. No.1287/Mds/08

loan for earlier four assessment years is accepted by the Assessing Officer, the CIT(Appeals) is not justified in doubting the borrowal of loan. Therefore, the addition made by the Assessing Officer to the extent of `50,789/- is not justified. Accordingly, the orders of the authorities below are set aside and the addition of `50,789/- is deleted.

Order pronounced on 9th September, 2016 at Chennai.

sd/- sd/- (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) (A. Mohan Alankamony) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member

चे�नई/Chennai, �दनांक/Dated, the 9th September, 2016.

Kri.

आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A)-I, Chennai 4. आयकर आयु�त/CIT, Central-II, Chennai 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.