2015 (11) TMI 1721 - AT - Income Tax

ALV determination u/s 23(1)(a) - Municipal rataeble value adoption - Held that - Hon ble jurisdictional High Court in the case of Tip Top Typography reported in 2014 (8) TMI 356 - BOMBAY HIGH COUR has upheld that Municipal rateable value can be adopted for determining the ALV u/s 23(1)(a). The Hon ble High Court held that for disturbing the ALV or rent shown by the assessee the AO must have cogent and satisfactory material in his possession indicating that the parties have concealed the real position. He must not make a guess work or act on conjectures and surmises. There must be definite and positive material to indicate that the parties have suppressed the prevailing rate and then only the enquiries can be made for ascertaining the market rate. The Hon ble High Court has also held that if the standard rent is fixed by the Rent Controller or Municipal Rateable value is available then same is to be accepted as an ALV. Here it is not a case that assessee has rented out the property and the rent received or receivable is less but the flat has been lying vacant thus it cannot be held that municipal ratable value cannot be the basis for determination of deemed ALV. Accordingly respectfully following the decisions of the Tribunal and also the principle laid down by the Hon ble jurisdictional High Court we decide this issue in favour of the assessee Undisclosed income in the light of section 69B - cash payment from unaccounted sources have been made - Held that - Similar issue based on similar documents were there in the group concerns of the assessee wherein the Tribunal in all the decisions have decided this issue saying that there was no evidence that any extra cash other than the sale consideration as recorded in the deed had changed hands. No statement of the sellers of the land had been recorded. No other corroborative evidence has been produced on the file by the Revenue Authorities to substantiate their allegation. The addition in this case has been made on the basis of the entries in the loose paper found during the search action which at the most can be considered to have raised a suspicion about the transfer of money other than the sale consideration but the suspicion itself and solely cannot be held to be a justifiable ground for making the additions especially in the absence of any corroborative evidence. Except the loose papers in question no evidence what to say of any direct or corroborative evidence even no circumstantial evidence has been detected or brought on record by the Revenue. Hence the additions solely on the basis of suspicion how strong it may be in our view are not sustainable in the eyes of law. - Decided in favour of the assessee

Summary

Issues Involved:
1. Legality of proceedings initiated under Section 153A.
2. Determination of Annual Letting Value (ALV) of vacant flats.
3. Addition of income under the head 'Income from House Property'.
4. Addition of undisclosed investments under Section 69B.

Detailed Analysis:

1. Legality of Proceedings Initiated Under Section 153A:
The appellant contended that the initiation of proceedings under Section 153A was legally infirm. The original return for AY 2006-07 was filed on 31.07.2006 and assessed on 15.10.2008. A search was conducted on 05.03.2009, and no incriminating material was found. The Tribunal referred to the Bombay High Court decision in CIT vs. All Cargo Global Logistics Ltd., which held that no addition can be made without incriminating material. The Tribunal found no material justifying the initiation of proceedings under Section 153A, making the legal issue academic and not adjudicated further.

2. Determination of Annual Letting Value (ALV) of Vacant Flats:
The appellant argued that the ALV of vacant flats at Greenfields Complex should be taken at Rs. Nil. The Tribunal noted that the AO had determined the ALV based on a leave and license agreement from the same complex, which was not applicable to the assessment year in question. The Tribunal referred to the High Court decision in Tip Top Typography, which upheld that the Municipal ratable value is an acceptable method for determining ALV for vacant premises. The Tribunal concluded that the ALV should be based on the Municipal ratable value and allowed the appellant's contention.

3. Addition of Income Under the Head 'Income from House Property':
The AO assessed the ALV of vacant flats at Rs. 5,06,400/- and added income of Rs. 3,34,480/- under 'Income from House Property'. The Tribunal found that the AO had not provided any material evidence to support the higher ALV. The Tribunal reiterated that the Municipal ratable value is a valid basis for determining ALV, especially for vacant properties. Consequently, the Tribunal allowed the appellant's contention and deleted the addition.

4. Addition of Undisclosed Investments Under Section 69B:
The AO added Rs. 64,60,000/- for AY 2006-07 and Rs. 84,00,000/- for AY 2007-08 under Section 69B, alleging undisclosed investments in Alibaug land. The Tribunal noted that similar additions based on seized documents had been adjudicated in favor of the assessee in related group cases. The Tribunal found no corroborative evidence to support the AO's claim of cash payments for land purchases. The Tribunal emphasized that mere suspicion based on loose papers is insufficient for such additions. Following precedents, the Tribunal deleted the additions under Section 69B for both assessment years.

Conclusion:
The Tribunal ruled in favor of the appellant on all major issues, emphasizing the necessity of concrete evidence for additions under Section 69B and validating the use of Municipal ratable value for determining ALV of vacant properties. The appeals were partly allowed, with the Tribunal deleting the contested additions and dismissing the legal issue as academic.