1985 (9) TMI 133 - AT - Income Tax

Summary

Issues Involved:
1. Assessment of income from property.
2. Genuineness of the lease agreement.
3. Applicability of actual rent received versus agreed rent.
4. Reassessment and re-examination of facts.

Issue-wise Detailed Analysis:

1. Assessment of Income from Property:
The primary issue in this case revolves around the assessment of income from the property located at M-25, Greater Kailash. The Income Tax Officer (ITO) assessed the income based on the actual rent received, which was found to be significantly higher than the rent declared by the assessee. The ITO determined the total rent to be Rs. 29,500, while the assessee had declared only Rs. 9,600 as per the lease agreement. The Appellate Assistant Commissioner (AAC) upheld the ITO's action, emphasizing that actual rent must be considered for assessing property income.

2. Genuineness of the Lease Agreement:
The assessee argued that the lease agreement with B. K. Gupta & Co., a partnership firm constituted by his brother and wife, was genuine and should be accepted. The lease agreement, dated June 25, 1968, was registered and supported by various documents, including court cases and municipal corporation records. The Judicial Member, S. P. Kapur, strongly supported the genuineness of the lease agreement, emphasizing that the lease was subsisting and genuine during the relevant assessment year. He cited several documents, such as compromise terms in court cases, lease deeds, and municipal corporation letters, to substantiate the genuineness of the agreement.

3. Applicability of Actual Rent Received versus Agreed Rent:
The ITO's assessment was based on the actual rent received by B. K. Gupta & Co., which was significantly higher than the agreed rent of Rs. 9,600 per annum. The AAC supported this approach, stating that actual rent should be considered for assessing property income. However, the Judicial Member argued that the lease agreement's terms should be honored, and the agreed rent should be accepted. He emphasized that the lease was genuine and subsisting, and the actual rent received by the firm should not be attributed to the assessee.

4. Reassessment and Re-examination of Facts:
The Accountant Member proposed sending the case back to the ITO for a proper determination of facts, including the genuineness of the lease agreement and its renewal. He directed the ITO to bring all relevant materials on record and provide a clear finding regarding the agreement's nature and legal effect. However, the Judicial Member dissented, arguing that the evidence on record was sufficient to establish the genuineness of the lease agreement. He opposed the idea of re-examination, stating that it would place the assessee in a disadvantageous position and delay justice.

Separate Judgments Delivered by Judges:

Accountant Member's Judgment:
The Accountant Member believed that the matter should be sent back to the ITO for a proper determination of facts. He emphasized the need to examine the genuineness of the lease agreement and its renewal. He directed the ITO to bring all relevant materials on record and provide a clear finding regarding the agreement's nature and legal effect. The appeal was treated as allowed for statistical purposes.

Judicial Member's Judgment:
The Judicial Member dissented from the Accountant Member's view. He argued that the evidence on record was sufficient to establish the genuineness of the lease agreement. He cited various documents and court cases to support his view. He opposed the idea of re-examination, stating that it would place the assessee in a disadvantageous position and delay justice. He held that the appeal should be accepted, and the returned income of the assessee should be accepted.

Third Member's Judgment:
The Third Member, G. Krishnamurthy, President, was nominated to resolve the differences between the Accountant Member and the Judicial Member. He reviewed the entire record and considered the arguments presented by both sides. He observed that the matter had already been exhaustively examined in earlier years, and a definite conclusion in favor of the assessee had been reached. He found no new facts or evidence to justify a re-examination. He concluded that the decision reached in earlier years should prevail, and the appeal should be accepted.

Final Order:
The matter was referred back to the regular Bench for disposing of the appeal in accordance with the opinion of the majority. The Third Member's judgment favored the assessee, accepting the returned income and establishing the genuineness of the lease agreement.