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TMI Blog2015 (2) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... oad, Patna, against the additions sustained the learned Commissioner of Income-tax (Appeals). Whereas ground No. 7 in each of the four said assessment years relate to the addition confirmed on account of rental income, i.e., income from house property with regard to the property at Raj Villa, Kanti Factory Road, Patna. Since grounds Nos. 2 to 6 and ground No.7 in each of the said four assessment years are identical except the amounts referred to therein, therefore, we proceed to decide the appeal of the assessee in I. T. A. No. 27(Asr)/2011 for the assessment year 1999-2000 and our decision hereinbelow for the assessment year 1999-2000 shall be identically applicable in other assessment years, i.e., 2000-01, 2001-02 and 2002-03. The difference of amount in grounds Nos. 2 to 6 with respect to the assessment year 2000-01 is Rs. 39,02,457, with respect to the assessment year 2001-02 the difference is Rs. 21,98,066 and for the assessment year 2002- 03, the difference is Rs. 9,73,871. Whereas with regard to ground No. 7, the difference is Rs. 8,18,998, Rs. 14,45,075 and Rs. 13,85,572 for the assessment years 2000-01, 2001-02 and 2002-03 respectively. The assessee has raised grounds Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income-tax (Appeals) has erred in not deleting the addition of Rs. 8,18,998 on account of rental income from house property, located at Raj Villa, Kanti Factory Road, Patna." 2. As regards grounds Nos. 2 to 6 for the assessment year 1999-2000, the brief facts of the case are that a search and seizure operation under section 132 of the Act was conducted on November 5, 2004, at the residential premises of Dr. Rajeshwar Prasad Singh, his family members and associates. Dr. Binoy Kumar Singh, karta of the appellant HUF, is the son of Dr.Rajeshwar Prasad Singh. During the course of original assessment proceedings, the Assessing Officer had referred the matter to the Departmental Valuation Officer (DVO) for estimation of the cost of construction of the building "Raj Villa", Kanti Factory Road, Patna. The Departmental Valuation Officer's report was, however, received after the completion of assessment proceedings and finalisation of the assessment order. The Departmental Valuation Officer estimated the cost of investment in the property Raj Villa at Rs. 30,54,000, while the assessee had shown total investment in the property at Rs. 1,14,54,869. The Commissioner of Income-tax (Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant has not been able to establish with credible evidence the actual investment made in the construction of the property. Further, the report of the registered valuer was also not based, on item wise method, but the valuation was based on estimation, by applying the rates applicable in 1976 when the construction was made after 1995. The authorised representative sought to rely on a CPWD memorandum, dated June 29, 1992 which, while laying down the plinth area rate as on January 1, 1992, indicated that plinth area rate as applicable on October 1, 1976, will continue to be applicable for work-in- progress. However, in the present case, the valuation of the building constructed earlier had been made earlier on the basis of 1976 rates, and the Departmental Valuation Officer adopted the same valuation in the new valuation report also. There was a clear demarcation of the construction already made earlier and the construction made after 1995, which formed the subject matter of the present Departmental Valuation Officer's valuation. The building could not be thus categorised as a work-in-progress for the purpose of the valuation. The authorised representative also claimed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent years, in the same ratio as in the Departmental Valuation Officer's report. The difference between the investment disclosed by the appellant and the investment as per the Departmental Valuation Officer's report in respect of the assessment years relevant to these appeals should be worked out. The addition is sustained to the extent of such difference. The Assessing Officer is directed accordingly." 4. Learned counsel for the assessee argued on the similar lines, as submitted in the written submission/synopsis placed on record during the course of hearing and the learned Departmental representative, on the other hand, relied upon the orders of the authorities below. 5. We have heard the rival contentions and perused the facts of the case. Learned counsel for the assessee submitted that the requirement in search proceedings is not mechanical in nature but has to be based on any cogent material seized during the course of search and seizure proceedings or otherwise. The learned Commissioner of Income-tax (Appeals) has wrongly concluded that the Income-tax Appellate Tribunal has adjudicated the issue under section 142(A) which, in fact, has been adjudicated on the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee having submitted the registered valuer report and in the absence of any evidence of unexplained investment, the registered valuer report, as submitted by the assessee cannot be rejected, in view of the decision of the hon'ble Allahabad High Court in the case of CIT v. Sheikhar Chand and Sons [1990] 186 ITR 269 (All). Learned counsel for the assessee has relied upon the decision of the Income-tax Appellate Tribunal, Patna Bench, which has been affirmed by the Third Member in the case of Shanti Complex v. ITO [1999] 237 ITR (AT) 27 (Patna), where the relevant decision of the Income-tax Appellate Tribunal, Patna Bench, is reproduced, as under (page 45) : "3. Not only this, I feel confronted with another legal dilemma. The report obtained by the assessee from a registered valuer referred to supra as very much before the Assessing Officer. He has not only preferred the report of the Valuation Officer over the report of the registered valuer but has totally ignored the latter report. There is no quarrel that the report of an expert only acts as a opinion before a judicial or qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finally concluded : On this part of the dissent between my two learned brothers, I am, therefore, inclined to agree with the learned Judicial Member that in the peculiar circumstances of this case, there if no cogent or tangible material to come to a conclusion that the assessee spent more than what they claimed for the relevant construction." 6. Accordingly, in the facts and circumstances of the case, the addition so made on the basis of Departmental Valuation Officer' report by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) is against the law and facts of the present case. Accordingly, the addition so confirmed by the learned Commissioner of Income-tax (Appeals) is bad in law and the Assessing Officer is directed to delete the addition so made. 7. On merit also, the valuation report issued by the Departmental Valuation Officer is not reliable as there are several limitations of plinth area rate method, which has been stated to be as under : "-The method of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1976, shall continue to be applicable on these plinth area rates for work-in-progress, etc. Thus, for the entire construction period rate first adopted should continue. Copy of memorandum is being enclosed as annexure to this synopsis. Further, there is no dispute that whole property is a composite complex with the building marked as block A and block B. These blocks are connected to each other page 186 of the paper book (page 187 being typed replica of page 186), which is a report from the Departmental Valuation Officer also mentions about block C, which connects blocks A and B. Thus, the whole apartment is to be considered as one. Building map for the apartment was also furnished to the learned Departmental Valuation Officer and the fact of having furnishing the same has been noted on paper book at page 182 of the paper book (page 183 being typed replica of page 182). During the course of assessment, the Assessing Officer has requisitioned the books of account as well as cash flow and fund. Flow statements vide questionnaire, dated July 30, 2009. Copies of questionnaire, dated July 30, 2009, is being placed on pages 90 to 102 of paper book." 9. It is also a fact on record that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2003-04 the annual rent was Rs. 2,67,360. The Commissioner of Income-tax (Central), Patna, in his order under section 263 considered that even if the rents in other floors of block A were lower than the ground floor's rent, the rental income of block A should be in the vicinity of Rs. 6.5 lakhs. He was also of the view that assuming the monthly rent of one flat in block B at Rs. 3,000, the total rent from 22 flats could be estimated at Rs. 7.9 lakhs per annum. The Assessing Officer estimated the rental income as Rs. 17,00,000 during the four assessment years, relevant to these appeals. This resulted in addition of Rs. 8,18,998 as undisclosed rental income during the assessment years 1999-2000 and 2000-01 and Rs. 15,45,075 and Rs. 13,85,572 during the assessment years 2001-02 and 2002-03 respectively. 13. The learned Commissioner of Income-tax (Appeals) after considering the submissions of the assessee decided the issue as per pages 11, 12 and 13 of the order, which for the sake of convenience is reproduced as under : "I have considered the submissions of the appellant and perused the material br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evidence. However, not even a confirmation from Sh. Sanjiv Kumar, to whom the entire second floor was claimed to have been given for annual rent of Rs. 18,000 only, when the same floor had fetched rent of Rs. 9,45,732 two years earlier, was furnished either during assessment or appellate proceedings. The claim that except for the ground floor of block A, the other flats were used for residential purposes is also contradicted by the statement filed by the authorised representative, which showed that during the assessment year 2003-04, the second floor was rented out to Netware Tech. The appellant filed a chart, in which it was claimed that the first floor and second floor of block A were under construction till the assessment year 2002-03. The entire block B was shown as under construction till the assessment year 2000-01. In the assessment year 2001-02, except for the ground floor, the entire block B is shown as under construction. In the assessment year 2002-03 also, only eight flats are shown as rented out, while the rest of the flats are shown as being under construction. Since no evidence of the dates of completion of respective floors has been adduced by the appellant, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the basis of the amount for which the property may be let from year to year, it is held that the fair rental value would have to be determined, taking as the basis the rental income disclosed during the assessment year, 1999-2000 and the progress of construction of the building. During 1999-2000, when only two floors of one block were let out, the appellant was receiving more than Rs. 11,00,000 as rent. In the absence of any evidence to prove that even though in subsequent years, the rest of the building was completed, and twelve flats in the first and third floors of block A and 22 flats in block B were added, the rental income showed steep decline, the appellant's submissions cannot be accepted. The appel lant's claim is also at variance with the market position regarding rents, which have shown a geometric increase during the last decade. After considering the totality of facts and circumstances, the addition is upheld in respect of the assessment years 2001-02 and 2002-03, when the building was substantially complete as per the registered valuer's report. The Assessing Officer is directed to accept the income from house property as disclosed in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (St.) 21 ) wherein in paragraph 9 it has been stated as under (page 26) : "Hitherto, the annual value of house property chargeable to income tax under the head 'income from house property' was deemed to be the sum for which the property might reasonably be expected to let from year to year. In many cases, however, the actual rent received or receivable in a year exceeds the municipal valuation of the property. Sub-section (1) of section 23 has been amended to provide that where any property is in occupation of a tenant and the annual rent received or receivable by the owner is in excess of the sum for which the property might reasonably be expected to let from year to year, the annual rent received or receivable shall be taken as the annual value of the property." 16. The reliance is placed on the following decisions : (i) Mrs. Sheila Kaushish v. CIT [1981] 131 ITR 435 (SC) ; (ii) CIT v. Prabhabati Bansali [1983] 141 ITR 419 (Cal) ; (iii) M. V. Sonavala v. CIT [1989] 177 ITR 246 (Bom) ; (iv) Smt. Smitaben N. Ambani v. CWT [2010] 323 ITR 104 (Bom) ; and (v) Kashi Prasad K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 1999-2000 in ground No. 7 shall be identically applicable in ground No. 2 for the assessment years 2004-05 and 2005-06. Accordingly ground No. 2 in each of the year, i.e., for the assessment years 2004-05 and 2005-06 of the assessee is allowed. 22. During the assessment year 2004-05, grounds Nos. 1, 5, 6 and 7 are general in nature and do not require any adjudication. Similarly for the assessment year 2005-06, grounds Nos. 1, 4, 5 and 6 are general in nature and therefore, do not require any adjudication. 23. As regards ground No. 3 for the assessment year 2004-05, the brief facts are that huge cash has been deposited in the Punjab National Bank account and details are available in the order of the Assessing Officer for which no clarification in the bank was filed by the assessee. Accordingly, the Assessing Officer made an addition of Rs. 3,51,000 during the assessment year 2004-05 and Rs. 1,21,000 during the assessment year 2005-06, which additions have been confirmed by the learned Commissioner of Income-tax (Appeals) in each of the year. 24. Learned counsel for the assessee made written submissions and argued on the similar lines whereas the learned Departmental r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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