TMI Blog2005 (7) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... ot taking into cognizance the fact that the Annual Value of the Property declared by the assessee is more than Annual Value as per the Rent Control Act." 2. Briefly stated, the facts of the case are as follows : ( i )The assessee-company owned, amongst others, a flat, namely, Flat [2005] 4 sot 493 (mum.)No. 132, Urvashi Building at 66, Nepean Sea Road, Mumbai ( flat in short) during the previous year relevant to the assessment year under appeal. The flat has carpet area of 2820 sq. ft. and is located on 13th floor of the said building with a view of the sea. ( ii )The flat was let out by the assessee-company to M/s. Global Wool Alliance Ltd. for occupation of its Managing Director (Shri Prem Kumar Mehta) who was also a director in the assessee-company on monthly licence fee of Rs. 9,000 under the agreement for leave and licence dated 1-4-1996. ( iii )Though the assessee filed before the Assessing Officer ( AO in short), vide its letter dated 23-12-1998, a certificate dated 18-12-1998 from the Manager of Malabar Co-operative Housing Society certifying that the municipal rateable value of the said flat was Rs. 850.19 per month as per municipal record, there is nothing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rent shown in the said agreement, the Assessing Officer placed reliance on the decision of the Supreme Court in CIT v. Durga Prasad More [1971] 82 ITR 540 . ( viii )Taking into account the prevailing rent in the area, the location of the flat, its market value as also the self-serving nature of the document, namely, the leave and licence agreement executed between inter-connected companies and family members, the Assessing Officer held that the Annual Letting Value shown by the assessee was low and, hence, adopted the Annual Letting Value of the flat at Rs. 1,00,000 per month. 3. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the learned Commissioner of Income-tax (Appeals). The factual position was explained by the assessee before the learned CIT(A) as under : "During the course of the appellate proceedings, it has been submitted that the appellant-company owns a flat situated at Urvashi, Malabar Co-operative Housing Society Ltd., L. Jagmohandas Marg, Mumbai. The flat is situated in an area to which the provisions of Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 are applicable. The cost of acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in the case Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee [1980] 122 ITR 700 is appropriate. It has been held by the Hon ble Supreme Court that where the Rent Control Act applies, the annual value should be determined on the basis of Standard Rent as determined under that Act. Following the ratio laid down in the above case by the Apex Court, I am of the view that the Standard Rent as determined by the Municipal authorities will be the correct figure. The Assessing Officer is directed to adopt the same accordingly. The Assessing Officer will re-compute the income from the house property accordingly." 6. The learned CIT(A) thus directed the Assessing Officer to take the Standard Rent determined by the Municipal authorities and re-compute the income from house property accordingly without appreciating the provisions of section 23(1)( b ) which required that the actual rent received or receivable should be taken as annual value if the amount so received or receivable was higher than the sum for which the property might reasonably be expected to let from year to year. 7. Aggrieved by the order of the learned CIT(A), the Department is now in appeal befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported by the decision in Durga Prasad More s case ( supra ) in which the Hon ble Supreme Court has held as under : "It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." 12. Section 11 of the Bombay Rent Act provides that the determination of standard rent would depend upon ( i ) the provisions of the Bombay Rent A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correct figure for computing the income from house property. It will, therefore, be useful to have the guidance from the said judgment. In D.R. Kapoor s case ( supra ), the building was located where the rent restriction law was in force. Besides, it was also not in dispute in that case that the property was covered by the rent restriction law in force in that area. In the case before us, the Assessing Officer has not recorded any finding that the flat was covered by the Bombay Rent Act. Though a plea was taken before the learned CIT(A) that the Bombay Rent Act was applicable, the learned CIT(A) has simply restricted his decision by observing that the said Act was applicable to Bombay. The question here is not whether the Bombay Rent Act was applicable to Bombay. The relevant question here is whether the flat in question was covered by the provisions of the said Act. Secondly, in D.R. Kapoor s case ( supra ), no standard rent or fair rent had been determined under the Rent Law. In the case before us also, the Court has not determined, assuming for a while that the flat was covered by the Bombay Rent Act, the standard or fair rent though section 11 of the Bombay Rent Act aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd rent determined by the Municipal authorities as income from the house property. The decision of the learned CIT(A) is, therefore, not in conformity with the decision of the Hon ble Supreme Court in D.R. Kapoor s case ( supra ). His decision suffers from the following infirmities : ( i )The learned CIT(A) did not examine and record a categorical finding that the flat was covered by the provisions of the Bombay Rent Act though a plea to this effect was taken before him. He ought to have considered the factual matrix of the case and then recorded a finding not only about the applicability of the said Act to Bombay but also about its applicability to the flat. This is so because there are many premises in Bombay, which are exempt from the operation of the Bombay Rent Act. ( ii )The learned CIT(A) omitted to give full effect to the decision of the Hon ble Supreme Court in D.R. Kapoor s case ( supra ) which required the Assessing Officer to step into the shoes of the Court, and determine the standard or fair rent in the manner laid down in section 11 of the Bombay Rent Act. In this view of the matter, the learned CIT(A) further erred in not appreciating that the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competent court in terms of section 11 of the Bombay Rent Act and that, in the absence of such determination by the competent Court, the Assessing Officer himself is expected to step into the shoes of the competent Court and determine the standard rent for assessing the annual value of the property under section 23 of the Income-tax Act. Secondly, the learned CIT(A) was well aware that the rent stipulated in the agreement was higher than the rateable value fixed by the Municipal authorities and, hence, it was the actual rent received or receivable that was required to be taken into account for fixing the annual value of the property under section 23 of the Income-tax Act and not the rateable value or, what the learned CIT(A) calls, the "standard rent as determined by the Municipal authorities". 15. On overall consideration of the materials placed before us, we feel that the assessee, instead of establishing its own case on positive materials, has preferred to point out the defects in the assessment order which the learned CIT(A) has accepted without any objective evaluation of the facts brought on record by the Assessing Officer and without having regard to the decision in D.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensure proper compliance of the decision of the Hon ble Supreme Court in D.R. Kapoor s case ( supra ). It was indeed the duty of the learned CIT(A) to ensure that the tax liability is correctly determined on an objective consideration of the relevant facts and the law governing them. For this purpose, he has been conferred the powers which are co-terminus with those of the Assessing Officer. It has been held in V.K. Verma v. Radhey Shyam AIR 1964 SC 1317, 1320 that omission of counsels in making submissions or drawing the attention of the Court to the provisions of law does not absolve the Court from the duty of following the clear provisions of law. It was, therefore, the duty of the learned CIT(A) to dispose of the matter in accordance with law. In our opinion, it was a case which required the learned CIT(A) to carefully consider the provisions of the Bombay Rent Act and the Income-tax Act in the light of the decision of the Hon ble Supreme Court in D.R. Kapoor s case ( supra ) and then to fix the annual value of the flat. 16. In view of the foregoing, the order of the learned CIT(A) is not sustainable in law. His order is, therefore, set aside and the matter is rest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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