TMI Blog2003 (10) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... rear of rent as income under the head 'House property' which was claimed to be not taxable either under the head 'House property' or under the head 'Income from other sources' and inclusion of Rs. 25,300 has wrongly been sustained. 3. That the appellant reserves its right to add, amend or alter any ground of appeal." 4. Ground No. 1: Facts concerning this matter have been given by the learned CIT(A) in paras 2 and 3 of his order. These facts may be narrated in brief as under: 5. The assessee, a partnership firm, derived income from rents on storage provided by it and interest on deposits. The assessee had let out various properties to District Agricultural Officer and was receiving rent @ Rs. 110 p.m. 6. At the request of the assessee for enhancing the rent the Rent Control Eviction Officer ("RC EO" in short), from 11th July, 1980, enhanced the rent from Rs. 110 to Rs. 2,925 p.m. The District Agricultural Officer filed appeal against the order of RC EO before the Court of District Judge. The learned ADJ vide judgment dt. 14th Feb., 1990, reduced the rent from Rs. 2,925 to Rs. 2,530 p.m. Against the judgment of learned ADJ, both the parties went in appeal before the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to tax under the head property income has escaped assessment to the extent of Rs. 35,100 (2925 x 12) for asst. yr. 1989-90 and Rs. 30,360 for asst. yrs. 1990-91 and 1991-92. As per provision of s. 22 of the IT Act, 1961 the assessee was required to declare income under the head property. Since income under s. 22 was not shown by the assessee, I have reasons to believe that on account of assessee's failure income chargeable to tax at Rs......for the asst. yr. 1989-90 has escaped assessment. issue notice under s. 148. R.K. ITO" 9. Similar reasons have been recorded for other two assessment years. The assessment under s. 143(3)/148 for all the three assessment years, i.e., 1989-90, 1990-91 and 1991-92 were made by the AO on 12th Sept., 1995. The AO has stated the facts for initiating reassessment proceedings in para 3 which are as under: "3. The reasons given by the assessee have been considered. Here it may be mentioned that the assessee has not even declared the rent of Rs. 110 p.m. receivable from the U.P. State Government in the original return. As stated above the assessee was well aware about the rent receivable as per Rent Control and Eviction Officer's order dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f IT Act and issued notice under s. 148 for all the three years involved. The action of the AO is fully in accordance with the provisions of IT Act in this regard. I, therefore, uphold the action of the AO in this regard." 12. Before me, the learned counsel for the assessee Shri Aneja made detailed submissions. He also filed a chart relating to relevant events and placed reliance on the following decisions: (i) Hamilton Co. vs. CIT (1992) 104 CTR (Cal) 95; (ii) CIT vs. Uttar Pradesh Financial Corporation (1991) 98 CTR (All) 301 : (1992) 194 ITR 282 (All); (iii) Jagatar Singh Purewal, In re (1995) 126 CTR (AAR) 341 : (1995) 213 ITR 512 (AAR); and (iv) Hope (India) Ltd. vs. CIT (1999) 155 CTR (Cal) 561 : (1999) 238 ITR 740 (Cal). 13. On the other hand, the learned Departmental Representative placed reliance on the order of AO and that of learned CIT(A). According to him, the assessee was well aware of the enhanced rent but did not disclose the same in the returns filed for the assessment years under consideration. 14. I have gone through the entire material on record and have considered the arguments of the learned counsel for the assessee as well as that of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receivable is taxable in the year to which it pertains. If the rent actually received is lesser than the rent receivable then in view of the provisions contained under s. 23(1)(b), the rent receivable by the owner in respect of such property shall be taken for determining the annual value of the house property. 19. In the instant case, the annual value of the property was to be determined. The RC EO is the competent authority under the U.P. Rent Control Eviction Act to determine the enhanced rent. For this purpose he has to adopt a settled procedure, i.e., after hearing the parties, etc. He has to decide the enhanced rent. The assessee had not challenged the order of the RC EO and thus he accepted the rent determined by the said authority. Later on, the order of the RC EO, enhancing the rent, was confirmed by the ADJ with a minor modification in the figure of enhanced rent, i.e., it was reduced from Rs. 2,925 to Rs. 2,530 p.m. 20. In view of the above facts, it is clear that as per provisions contained under s. 22 r/w s. 23, the ALV of the property was to be determined and since the competent authority after following the statutory procedure determined the rent receivable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years to which they pertain can be brought to charge only in the assessment years relevant to such past years of account. The Hon'ble Court has also observed as under: "The receipt of arrears of rent cannot, by any stretch of imagination, be said to have shed their character as rent from property and to have ceased to be liable to tax as income from house property. The simple case is that the rent of a past year increased retrospectively shall be the annual rent of such past year or years but not the annual rent of the year in which it is received consequent upon subsequent increase. The Explanation to s. 23 clearly shows that 'annual rent' means the rent for 12 months. Clause (a) says that rent is the actual rent received or receivable in respect of the previous year. The all important expression is "in respect of such year". It leaves no uncertainty that rent not relating to a previous year cannot be the actual rent of that previous year and, therefore, any part of rent for a particular previous year cannot be the actual rent of a later previous year. Clause (b) of s. 23 is more explicit; it clearly refers to a period of 12 months and also leaves nobody in doubt that the actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the AO to recompute the income from the house property on the basis of enhanced rent sanctioned and agreed to be paid by the various tenants and to determine the income under the head "income from house property". This question was answered by the Hon'ble High Court in favour of the assessee and against the Revenue. On facts, therefore, this decision is distinguishable. 26. To repeat, the main issue before me is not as to whether the arrears of rent received by the assessee relating to earlier years are to be assessed in the year of receipt or not. Neither the assessee has offered such rental income in the year of receipt nor the Department has assessed such income in the asst. yr. 1992-93. The issue to be decided is as to whether the rental income on account of enhanced rent can be assessed in the assessment years to which such income relates and as to whether the status of such income will be income from house property or income from other sources or whether such rental income cannot be assessed in such assessment years to which such income relates as income from house property. 27. Explanation 1 attached to s. 23 of the IT Act defines only rent. The Board has issued a ci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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