2021 (7) TMI 677 - AT - Income Tax

Income from house property - Estimation of notional rent for the flat at Navi Mumbai - HELD THAT - As clear that assessee has duly informed the fact that agreement entered into the by the assessee for the purchase of said flat was cancelled hence there was no question of assessing any deemed notional rent for the flat which was not at all in the possession of the assessee. We set aside the orders of authorities below and direct that addition in this regard should be deleted. Annual letting value of yashodeep flat at a municipal rateable value - assessee s plea that the said flat was not habitable and was in a ruinous condition was very much before the Ld. CIT(A) - HELD THAT - CIT(A) noted the plea that when the concerned house property was not in a position to be let out there cannot be any deemed notional rent for the same. For this proposition he noted the reference by the assessee to several ITAT decisions - CIT(A) chose to display scant regard for judicial discipline. He did not at all refer whatsoever to the ratio emanating from the ITAT decisions. But simply referred to the provision of the concerned section and Hon ble Bombay High Court decision in case of Tiptop typography 2014 (8) TMI 356 - BOMBAY HIGH COURT . The order of Ld. CIT(A) is without any application of mind. There is no discussion whatsoever as to where the act mandates that if a flat is inhabitable and in a ruinous condition notional rent should be computed thereon and imposed upon the assessee. The ITAT decisions referred by the assessee despite being noted has been ignored by the CIT(A). For all the above reasoning including the lack of application of mind by the CIT(A) and the scant regard to the judicial discipline the order of Ld. CIT(A) is set aside and the notional rent addition in this regard is directed to be deleted. Annual letting value of the flats at 6% of the flats - solitary plea of the assessee in this regard is that the notional rent should be restricted to the municipal ratable value - AO has levied 8% of the cost as notional rent and CIT(A) has restricted the same to 6% - HELD THAT - We fail to understand as to why the CIT(A) has chosen again to exhibit his scant regard to the judicial discipline and not follow the Hon ble Bombay High Court decision in the case of Tiptop topography. In the said decision Hon ble Bombay High Court has expounded that municipal ratable value in an accepted norm for considering the rental value unless the AO shows by some material that the rent offered by the assessee is a manipulated figure. We are again anguished and wonder why the Ld. CIT(A) chose to ignore the Hon ble Bombay High Court decision - we direct that following the precedent from Hon ble Bombay High Court as above the rental value should be limited to the municipal ratable value in this regard.

Summary

Issues involved:
1. Reopening of assessment order under section 148 for Assessment Years 2011-12 & 2015-16.
2. Computation of Annual Letting Value (ALV) for flats in Navi Mumbai and Pune.
3. Granting benefit of vacancy allowance under section 23(1)(c) for vacant flats.
4. Confirmation of ALV based on municipal rateable value for flats not fit for occupation.

Issue 1: Reopening of assessment order under section 148:
The Assessee's appeals challenged the reopening of the assessment order under section 148 for Assessment Years 2011-12 & 2015-16. The Assessee contended that all facts were disclosed and submissions were made, but the CIT(A) confirmed the reopening. The Appellate Tribunal consolidated and disposed of the appeals together. The Assessee raised specific grounds related to the validity of the reopening and the computation of ALV for flats in Navi Mumbai and Pune.

Issue 2: Computation of Annual Letting Value (ALV) for flats in Navi Mumbai and Pune:
Regarding the estimation of notional rent for the flat in Navi Mumbai, the Assessing Officer rejected the Assessee's plea of non-possession due to a canceled agreement. However, the Assessee had informed the AO about the canceled agreement, supported by documentary evidence. The Tribunal held that without possession, there was no deemed notional rent, directing the deletion of the addition. Another issue was the ALV of a flat in Pune, where the Assessee argued for restricting ALV to municipal rateable value due to unoccupancy and structural issues. The Tribunal, considering relevant evidence and legal precedents, directed the ALV to be limited to the municipal rateable value.

Issue 3: Granting benefit of vacancy allowance under section 23(1)(c) for vacant flats:
The Assessee sought the benefit of vacancy allowance under section 23(1)(c) for vacant flats. The Tribunal acknowledged the unlettable condition of the flat and the necessity for alterations, supporting the claim for vacancy allowance. The Tribunal emphasized the genuine need for alterations and the lack of judicial discipline in the CIT(A)'s order, directing the allowance of vacancy deduction.

Issue 4: Confirmation of ALV based on municipal rateable value for flats not fit for occupation:
The Assessee contested the confirmation of ALV based on municipal rateable value for a flat deemed unfit for occupation. The Assessee provided evidence of the flat's ruinous condition, supported by certificates and expert opinions. Despite the Assessee's submissions and legal references, the CIT(A) upheld the ALV without proper justification. The Tribunal criticized the CIT(A) for disregarding judicial discipline and set aside the order, directing the deletion of the notional rent addition based on municipal rateable value.

In conclusion, the Appellate Tribunal partially allowed the Assessee's appeals, addressing issues related to the reopening of assessment orders, computation of ALV for flats, granting vacancy allowance, and confirmation of ALV based on municipal rateable value for unoccupiable flats. The Tribunal emphasized the importance of considering factual evidence, legal precedents, and judicial discipline in making such determinations.