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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
Instant appeal by the assessee is directed against the order dated 11th July 2014, passed by the learned Commissioner (Appeals)– 27, Mumbai, for the assessment year 2004–05.
The assessee has raised following grounds:–
“1.1 On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of learned Assessing Officer in treating the Gross Rent Income as Rs.8,52,500/- as against actual rent received of Rs.7,81,653/-.
2 Shri Rajkumar Shah
1.2 The learned CIT(A) failed to appreciate that the amount of rent that owner cannot realize should not be included in the annual value of property as per the provisions of section 23 of the Income Tax Act, 1961. 1.3 The learned CIT(A) erred in concluding that the burden of proof that the additional rent of Rs.70,347/- has never been received by the Appellant has not been discharged 2. Rejecting the Admission of Additional Evidence 2.1 The learned CIT(A) erred in denying to admit the additional evidence produced during the course of appellate proceedings without appreciating that no sufficient opportunity was given to the Appellant to adduce the evidence during the course of set aside proceedings. 2.2 The learned CIT(A) failed to understand that the other co- owner Mr. Ratankumar Shah has earned identical rent income as the Appellant which is evidenced by his return of income accepted u/s. 143(1).”
At the outset, assessee did not press groundsno.1.1 and 1.2. Hence, these grounds are dismissed as “not pressed”.
In ground no.1.3, assessee has challenged the addition of an amount of ` 70,347 towards additional rent received by the assessee.
Brief facts are, the assessee an individual filed his return of income for the impugned assessment year on 31st October 2004, declaring total income of ` 20,57,505. The assessment in assessee’s case was originally completed under section 143(3) vide order dated 30th October 2006, determining the total income at ` 21,37,390. While doing so, the Assessing Officer took the rental income received by the assessee at ` 1.50 lakh per month for the entire year as against
3 Shri Rajkumar Shah assessee’s claim that monthly rent was reduced to ` 1.25 lakh from June 2003. Being aggrieved of such order, assessee preferred appeal before the learned Commissioner (Appeals) and thereafter in the Tribunal. The Tribunal, vide order dated 27th August 2010, in ITA no.5731/Mum./2009, restored the matter back to the file of the Assessing Officer to re–examine the issue. In pursuance to the direction of the Tribunal the Assessing Officer initiated assessment proceedings again by calling upon the assessee to produce evidence to justify its claim that monthly rental income was reduced to ` 1.25 lakh from June 2003. However, as alleged by the Assessing Officer, the assessee did not furnish the required details including the revised rent agreement, hence, the Assessing Officer proceeded to complete the assessment by assessing the rental income @ 1.50 lakh per month for the entire year. Being aggrieved of the assessment order, assessee preferred appeal before the learned Commissioner (Appeals) who also confirmed the assessment by observing that the assessee has failed to justify its claim through proper documentary evidence. While doing so, the learned Commissioner (Appeals) also refused to accept certain documentary evidence sought to be produced by the assessee as additional evidence.
Learned Authorised Representative submitted before us, the assessee has originally entered into an agreement with the tenant on 4 Shri Rajkumar Shah 16th January 2003, for leasing out the property for a period of 12 months at the monthly rent of ` 1.50 lakh. However, in May 2003, the tenant requested to reduce the monthly rent from ` 1.50 lakh and as per mutual agreement between the parties orally it was decided to reduce the monthly rent from ` 1.50 lakh to ` 1.25 lakh. It was submitted, the oral agreement was ultimately reduced to writing through registered leave and licence agreement dated 19th June 2003. He submitted, in terms with the agreement the assessee received reduced monthly rent of ` 1.25 lakh from June 2003. He submitted, accordingly, the licensee also deducted tax at source on such rent and issued TDS certificate in form no.16A. Learned Authorised Representative submitted, in case of other co–owner also the rent was paid at ` 1.25 lakh and the Department has accepted such payment at the hands of the co–owner. He, therefore, submitted as the documentary evidences produced on record clearly show that the assessee received rent at the reduced rate of ` 1.25 lakh per month the Assessing Officer was not justified in assessing the rental income of ` 1.50 lakh for the entire year. He submitted, allegation of the Departmental Authorities that the confirmation letter from the licensee is after completion of the assessment and in the year 2006 is not correct as the assessee has sent a fax message in relation to reduction of rent from ` 1.50 lakh to ` 1.25 lakh in May 2003. In this context, he
5 Shri Rajkumar Shah referred to fax messages at Page–37 and 38 of the paper book. He submitted, the confirmation issued by licensee on 10th November 2006, is only in confirming of earlier fax message. Thus, it was submitted that the addition made on account of additional rent should be deleted.
The learned Departmental Representative on the other hand relied upon the observations of the Assessing Officer and the learned Commissioner (Appeals).
We have considered the submissions of the parties and perused the material available on record. As could be seen, the dispute between the assessee and the Department is confined to the issue whether reduction of monthly rent from ` 1.50 lakh to 1.25 lakh is applicable from June 2003, as claimed by the assessee or from December 2003, in terms of revised agreement. Undisputedly, the original leave and licence agreement entered into by the assessee and his brother as co–owners with the licensee Shri Bhaichand Maoluk Consultancy Services Pvt. Ltd. was to remain in force for a period of 11 months and 15 days as per the terms of the agreement and would have terminated on 6th December 2003. It is also a fact that as per the terms of this agreement, the owners of the property were to receive monthly rent of ` 1.50 lakh. It is the claim of the assessee that on 2nd
6 Shri Rajkumar Shah May 2003, the assessee and the co–owner on mutual agreement with the licensee reduced the monthly rentals to ` 1.25 lakh. To prove such fact, the assessee has relied upon certain documentary evidences like TDS certificate issued by the licensee showing payment of rent of ` 1.25 lakh per month and deduction of tax at source on that amount. He has also stated that in the case of the other co–owner, the Department has accepted the revised monthly rent of ` 1.25 lakh from June 2003. However, the Department has refused to accept the claim of the assessee primarily for the reason, as per the original agreement which was supposed to remain in force till 6th December 2003, the co– owners were supposed to get ` 1.50 lakh rental income per month. Though, assessee submitted documentary evidence such as TDS certificates, confirmation letter, etc. to prove reduction of rent, but the learned Commissioner (Appeals) refused to take cognizance of documentary evidences on the reason that they were not in terms of rule 46A. However, on a perusal of the registered leave and licence agreement executed on 19th June 2003, by the assessee and his brother with the licensee, it is observed, though, as per clause (1) of the agreement, the licensee was permitted to continue using and occupying the property from 7th December 2003, but that is only for the purpose that the original agreement was supposed to remain in force till 6th December 2003. However, in clause (3) of the agreement,
7 Shri Rajkumar Shah it has been specifically mentioned that the licensee would pay monthly rent of ` 1.25 lakh. Thus, on conspectus of facts on record, it can be logically concluded that the parties to the agreement intended to apply the revised monthly rent of ` 1.25 lakh from June 2003, otherwise there was no necessity for them to enter into the leave and licence agreement on 19th June 2003, when the earlier agreement was valid till 6th December 2003. The very fact of execution of fresh agreement in June 2003, demonstrates that the owners of the property as well as licensee mutually decided to revise the monthly rent from ` 1.50 lakh to ` 1.25 lakh from the date of execution of fresh agreement itself. This fact is further corroborated from the fax message exchanged between the assessee and the licensee on 2nd May 2003, copy of which is at Page–37–38 of the paper book. Therefore, allegation of the Department that the confirmation was obtained from the licensee only after completion of assessment is not correct. The confirmation dated 10th November 2006, from Bhaichand Amuluk Consultancy Pvt. Ltd., on the other hand, corroborate the fact stated in the fax message. Moreover, the assessee has brought on record the TDS certificate issued in Form no.16A by the licensee which indicate that from part of June 2003, revised rent of ` 1.25 lakh per month was received from the licensee. That besides, it is a fact on record that the other co– owner has filed his return of income showing the revised rent of ` 1.25
8 Shri Rajkumar Shah lakh from June 2003, and the Department has failed to bring to our notice any material to show that such income declared by the co– owner was not accepted. In our view, when the assessee has brought material on record, whether by way of additional evidence or otherwise before the learned Commissioner (Appeals), which have a crucial bearing on the dispute, learned Commissioner (Appeals) should have examined them instead of rejecting them on technical reason. The bank statement of the assessee also demonstrates that the amount mentioned as per TDS certificate was received through cheque from the licensee and credited to the bank account. On the face of such documentary evidences brought on record, assessee’s claim that he received revised rent of ` 1.25 lakh per month from June 2003, cannot be ignored / brushed aside. Thus, on over all consideration of facts and material on record, it is evident that the assessee has received revised monthly rent from part of June 2003 and onwards. Accordingly we direct the Assessing Officer to accept the rental income offered by the assessee. The addition of ` 70,347 is, therefore, deleted.
In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 20.05.2016