TMI Blog2003 (5) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... r to be genuine. 5. The CIT(A) erred in confirming the action of the AO in assessing income of Rs. 33,457 from business of trading of GP/GC sheets under the head "Income from other sources". The same is liable to be assessed under the head "Profits and gains from business or profession. 6. The appellant craves leave to add, alter or modify the aforesaid grounds of appeal." ITA No. 5223/Del/1996 for asst. yr. 1992-93 (Department s appeal): "1. On the facts and in the circumstances of the case, learned CIT(A) has erred in treating the income from rental out of flats as income from business. 2. On the facts and in the circumstances of the case the learned CIT(A) erred in restricting the addition of Rs. 25,97,760 to Rs. 4,88,465 made under the head income from house property when during the asst. yr. 1992-93 the CIT(A)-XV confirmed the addition vide order dt.29th Feb., 1996." ITA No. 5203/Del/1996 for asst. yr. 1991-92 (assessee s appeal): 1. The CIT(A) erred estimating the annual letting value of the appellant s commercial flats located at B-II/100, MCIE, Badarpur, New Delhi, at Rs. 4,88,465 as against rent of Rs. 1,94,832 actually received by the appellant. 2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of Rs. 50 lakhs advanced to it by way of short deposit. He, therefore, held that the addition of Rs. 26,97,760 worked out by applying interest rate of 16 per cent on security deposit of Rs. 1,62,36,000 could not be sustained. He added that during the course of appellate proceedings the assessee was asked to give details of the rateable value of the entire property. He further added that it was submitted before him that the Municipal Corporation ofDelhihad determined the rateable value of the entire property at Rs. 8,50,210. On proportionate basis, the rateable value in respect of area of 16,236 sq. ft. which was let out by the assessee would work out to Rs. 4,88,633 declared. He held that keeping in view the facts of the case it would be fair if the annual letting value was taken at Rs. 4,88,465 as against Rs. 2,93,633. He further observed that in the immediately preceding assessment year rental income shown by the assessee was duly accepted by the AO vide the assessment order passed under s. 143(3) of the Act. 4. However, in the appeal for the asst. yr. 1992-93 the learned CIT(A) took a different view. He observed that the rental income shown was too low which fact had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mple scope for taking into account all relevant factors to determine the annual letting value of the property. Sec. 23(1)(a) provides that "for the purpose of s. 22, the annual letting value of any property shall be deemed to be (a) the sum for which the property might reasonably be expected to let from year to year". In the present case, the actual rent was much lower as admitted by the assessee itself. The sum for which the property might reasonably be expected to let from "year to year" had to be determined and for this all relevant factors including the benefit of interest-free security deposit had to be taken into account. He observed that since the details of actual rent of other similar properties were not available, the AO was justified in taking into account notional interest on the interest-free deposits to determine the annual letting value. He, however, directed the AO to adopt interest at 15 per cent instead of 16 per cent. 6. The assessee is aggrieved by the CIT(A) s order in asst. yr. 1992-93. In the asst. yr. 1991-92 both the assessee and the Revenue are aggrieved. In the asst. yr. 1991-92 the assessee is aggrieved on account of CIT(A) adopting the figure of Rs. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the property. It will also amount to discriminatory application of law inasmuch as those who contract at real rent pay high tax and those who contract at extremely low rent get away with meagre tax. Neither law nor any fair judicial administration would allow such thing to happen or to continue in the system. We are of the view that even in cases where Rent Control Act and the aforesaid decisions of the Supreme Court would be applicable, the AO must see whether the standard rent/rateable value which the assessee wants to be adopted as the basis for determining the annual letting value of property was determined by the municipal corporation in accordance with the provisions of the law. Many cases of arbitrarily low and sham fixation of standard rent of high value properties at prime location have come to the notice of the authorities of the corporation/Courts which were not in accordance with the provisions of the relevant law and procedure. If such standard rent/rateable value is routinely allowed to be taken as the basis for determining annual letting value for income-tax purposes then such assessees would be allowed to mislead both the municipal corporation and IT Department. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest on the advance made out of the same amount, the addition to the disclosed rent amounted to adding income doubly be valid and acceptable? No, such specious arguments are meant to confuse the authorities. 11. In the light of the above discussion, we hold that order of the learned CIT(A) in respect of above issue in asst. yr. 1992-93 is proper and correct. Accordingly, ground Nos. 1, 2, 3 of asst. yr. 1992-93 and ground No. 1 of asst. yr. 1991-92 of assessee s appeal are dismissed and ground No. 2 of Revenue s appeal for asst. yrs. 1991-92 is allowed subject to the estimate of interest at 15 per cent as done by the CIT(A) in asst. yr. 1992-93 above. 12. Ground Nos. 4 and 5 of assessee s appeal for asst. yr. 1992-93 are not pressed. Ground No. 6 is of general nature. 13. Ground No. 2 of assessee s appeal for asst. yr. 1992-93 relates to claims of 1/6th repairs. Since CIT(A) failed to give finding in this regard the issue is restored to him to be decided in the light of the facts of the case and provisions of law. Assessee should be given reasonable opportunity for being heard. 14. Ground No. 1 of Revenue s appeal for asst. yr. 1991-92 relates to the CIT(A) s directi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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