TMI Blog1998 (1) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... al income of Rs. 6,62,840 which includes his share of annual rent of Rs. 37,549 from the said property. Subsequently Harish Chander Suri along with the brother co-owners entered into an agreement with Goodwill Foods (P) Ltd., an Indian company incorporated under the Companies Act having registered office at B-8/A, Kailash Colony, New Delhi-48. Goodwill Foods (P) Ltd. is engaged in the business of fast food restaurant. By the agreement, dt.30th June, 1992Goodwill Foods (P) Ltd. agreed to pay a minimum monthly rent of Rs. 1,35,000 or the amount equivalent to 8 per cent of net monthly sales of the company, whichever is higher. The owners of the property agreed to let out the basement consisting of 765 sq. ft. and the ground floor approximately 2,807 sq. ft. along with the right of use of basement passage, staircase, etc. to the company. On the basis of the valuation report dt.30th Sept., 1993, by Surinder Sahni, registered valuer, the gross annual rent of the property No. A-23, Vishal Enclave,New Delhi, has been determined at Rs. 16,96,800. The net annual rent comes to Rs. 11,31,200. 3. On the basis of the above facts, the CIT was of the view that the AO did not make proper enquirie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sq. ft. was let out to Jatinder Suri, proprietor of Suri Sons at a rent of Rs. 1,000 p.m. It was further submitted that the building is earmarked only as residential property and therefore, fetching any rental on commercial rate is ruled out. Litigation is also stated to have been initiated by the Delhi Development Authority. It was, therefore, submitted that there was no case for treating the order of the AO as erroneous or prejudicial to the interest of the Revenue and the proceedings under s. 263 should be dropped. The CIT, however, did not accept the submissions and set aside the order partially observing as follows: "The assessee has not furnished any municipal assessment of the property of recent or past years on the basis of which, the AO could determine the annual value of the property. However, it would not be out of place to mention that figure of assessment for the municipal tax purposes is only a piece of evidence and it cannot override the figure of actual rent, as the basis for determination of annual value, when such figure of actual rent is available to the AO. [CIT vs. H.P. Sharma (1980) 122 ITR 675 (Del)]. If the actual rent received or receivable is in excess o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the annual value of the property and income from house property after giving the assessee reasonable opportunity of being heard. The assessment order, dt.27th Sept., 1993is, therefore, partially set aside only to meet the above direction." 4. Similar view was taken for asst. yr. 1992-93 in the case of Harish Chander Suri. Following the above, the CIT passed similar order under s. 263 of the Act in the case of Har Kishan Suri and Baldev Raj Suri for the asst. yr. 1991-92 and 1992-93. 5. The assessees are aggrieved and have come up in appeal before the Tribunal. C.S. Agarwal, the learned counsel, reiterated the same submissions and at the outset, argued that the assessee was not given proper opportunity. The CIT in this case initiated the proceedings under s. 263 of the Act for asst. yr. 1991-92 by issue of notice, dt.22nd March, 1996. The assessee was required to give reply and produce all the documentary evidence, etc. by25th March, 1996. Since the assessee has got only 3 days to prepare the reply and could not get the assistance of the counsel, the assessee was denied the opportunity required in law. As apparent from the order of the CIT, the issue involves a property which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance was placed on the decision of the Tribunal in the case of D.R. Vadera Sons (HUF) vs. ITO (1993) 203 ITR 15 (Del). 7. C.S. Agarwal further submitted that the rent fixed in 1982 cannot be disturbed in the light of the decision of the Hon ble Supreme Court in the case of Dewan Daulat Rai Kapur vs. NDMC (1980) 122 ITR 700 (SC) and the subsequent decision in the case of Mrs. Shiela Kaushish vs. CIT (1981) 24 CTR (SC) 351 : (1981) 131 ITR 435 (SC). There is no finding by the CIT that the rent received by the assessee is a collusive rent. There is also no finding that the rent received is not the standard rent. Unless there is a finding that it is not the standard rent or the rent received is collusive in nature, it cannot be said that the annual value determined by the AO is erroneous and prejudicial to the interest of the Revenue. C.S. Agarwal further submitted that the reasoning of the CIT in this case is totally wrong and erroneous. The assessee in this case let out the property in 1982. The rent fixed by the assessee is fair and reasonable, keeping in view the nature and location and the market rate of rent of the area. The assessee entered into another agreement after 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no lack of opportunity provided to the assessee. With regard to the claim of the assessee that he was bound by the Delhi Rent Control Act and the rent fixed cannot be revised, it was submitted by P.K. Sahu, the learned Senior Departmental Representative that the contention was without any basis. The Delhi Rent Control Act is not applicable in the case of properties whose rent is in excess of Rs. 3,500 p.m. There is, therefore, no law binding on the assessee to revise the rent received in the earlier years as the property is exempt from the purview of s. 3(c) of the Delhi Rent Control Act. Relying on the decision in the case of CIT vs. H.P. Sharma (1980) 122 ITR 675 (Del), it is submitted by P.K. Sahu, the learned Senior Departmental Representative that municipal rate is not binding and it is the actual rent received which is material for determining the annual value of the property. In that view of the matter, it was necessary for the AO to go into the details and see whether the annual letting value shown by the assessee is fair and reasonable in the light of the recent agreement entered into by the assessee with Goodwill Foods (P) Ltd. Since the assessee in this case made s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also by a written submission. In that view of the matter, we reject the plea of the assessee regarding denial of reasonable opportunity to the assessee. 11. With regard to the merits of the case, we are of the view that there is substantial merit in the claim of the assessee. The assessees are brothers and they have a property in which they are having 1/3rd share each. The property was let out, as per the details given at P. 63 of the paper-book since 1982. From the details, it is seen that Hotel Surya Deluxe was given 5,000 sq. ft. at a rent of Rs. 48,000 till 1988-89 and from 1988-89, it was increased to Rs. 52,800. Similarly, Hotel Surya Deluxe was given a portion measuring 450 sq. ft. since 1983 for a rent of Rs. 5,000 till 1987-88. Similarly Sanjeev Pramod was given portion of the property on rent since 1982 to 1987. The other parts also were given out on rent from time to time. The rent received by the assessee and the co-owners have been accepted as declared from year to year. By agreement, dt.30th June, 1992, Goodwill Foods (P) Ltd. entered into agreement with the assessee for letting out 765 sq. ft. of the basement and 2,807 sq. ft. of the ground floor with the right to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless the tenants are exempted from paying income-tax, we do not see how there would be prejudice caused to the Revenue. Unless the learned CIT makes a prima facie case of error in the order of the AO which is prejudicial to the interest of the Revenue, we are of the view that the provisions of s. 263 cannot be invoked by him for merely making a fishing enquiry to find out if there is any prejudice caused to the Revenue. From the above facts, it is clear that the learned CIT has not made out any prima facie case even for making enquiry. As pointed out earlier, the only provocation on the basis of which the learned CIT considered the order of the AO to be erroneous and prejudicial is on the basis of the agreement entered into by the assessee in 1992 with Goodwill Foods Pvt. Ltd. That agreement is subsequent to the earlier agreements of 1982. Naturally the rent will increase in 1992 as compared to 1982. If the reverse is the case here and the assessee entered into an agreement at a rent which is less than in 1982, then it will be a prima facie case for making proper investigations. In the present case, it is the other way round and there is no provocation for doubting the genuineness ..... X X X X Extracts X X X X X X X X Extracts X X X X
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