TMI Blog2015 (2) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... ition so made. 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 applied. Also the valuation report submitted by the assessee has not been refuted by the Departmental Valuation Officer in spite of many opportunities given to the Departmental Valuation Officer during the course of proceedings under section 263 of the Act. It is also a fact on record that the assessee had submitted year-wise cash flow statement considering the receipts and expenses of the assessee before the Assessing Officer, which are of the accurate amount and the Assessing Officer has not cast upon any doubt in the entries in the cash flow statement and has not pointed out any defect in the same, which in fact, has been considered by the Assessing Officer for making addition to the returned income of the assessee. Thus no addition on this account can be made and so directed to be deleted - Decided in favour of assessee. Non deletion of addition of ₹ 8,18,998 on account of rental income from house property, located at Raj Villa, Kanti Factory Road, Patna by CIT(A) - Held that:- The learned Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided the appeals for the assessment years, i.e., 1999-2000 to 2002-03. During the assessment years 1999-2000 to 2002-03, grounds Nos. 1, 8, 9 and 10 are general in nature and therefore, do not require any adjudication. In each of the four assessment years, i.e., 1999-2000 to 2002-03, grounds Nos. 2 to 6 are related to difference in valuation of immovable property located at Raj Villa, Kanti Factory Road, 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 resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of inadmissible evidence as well as it ignores relevant evidence. As such, the same suffers from per versity and is liable to be set aside as such. 7. That the learned Commissioner of Income-tax (Appeals) has erred in not deleting the addition of ₹ 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 Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001-02 3,51,262 2,54,925 2002-03 4,79,620 3,14,428 3. The learned Commissioner of Income-tax (Appeals) decided the said issue vide pages 9 and 10 of his order, which for the sake of convenience is reproduced as under : After considering the opposing contentions, I find that the 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 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Officer, and (ii) Deduction of 20 per cent. should be allowed on account of difference between CPWD and Bihar PWD rates, and any concessions procurement of material and transportation, as claimed. The cost of construction emerging after the above calculation should be allocated to the different 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , when there is no evidence of unexplained investment then the Departmental Valuation Officer's report cannot be substituted for the assessee's valuer's report. In the present case, in our view, there is no evidence with the Department with regard to any unexplained investment in the property and the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a conclusion with fair hearing to the assessee and proper consideration of material placed and relied on by him, in which he has failed. The learned Member 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 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed 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 the assessee had submitted year-wise cash flow statement considering the receipts and expenses of the assessee before the Assessing Officer, which are of the accurate amount and the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Punjab National Bank, Gandhi Nagar, Patna and during financial year 2003-04 the annual rent was ₹ 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 ₹ 6.5 lakhs. He was also of the view that assuming the monthly rent of one flat in block B at ₹ 3,000, the total rent from 22 flats could be estimated at ₹ 7.9 lakhs per annum. The Assessing Officer estimated the rental income as ₹ 17,00,000 during the four assessment years, relevant to these appeals. This resulted in addition of ₹ 8,18,998 as undisclosed rental income during the assessment years 1999-2000 and 2000-01 and ₹ 15,45,075 and ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... den on the appellant to substantiate the rent actually received with credible 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 ₹ 18,000 only, when the same floor had fetched rent of ₹ 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 evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 001-02. In the light of the above discussion, and the legal position that the actual value is to be determined 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 ₹ 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis and cannot be approved, especially in view of Central Board of Direct Taxes Circular No. 204, dated July 24, 1976 ([1977] 110 ITR (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in ground No. 7 for the assessment year 1999-2000 and our decision hereinabove for the assessment 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 ₹ 3,51,000 during the assessment year 2004-05 and ₹ 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. 27. The learned Commissioner of Income-tax (Appeals) confirmed the action of the Assessing Officer. 28. Learned counsel for the assessee made written submission and argued on the similar lines whereas the learned Departmental representative relied upon the orders of the authorities below. 29. We have heard the rival contentions and perused the facts of the case. On the basis of the explanation given by the assessee dated December 26, 2006, which is placed on paper book pages 174 to 177, we are of the view that the assessee has duly explained the said sum of ₹ 2,995, ₹ 18,969 and ₹ 21,095, which are, in fact, has been disclosed in the cash flow statement approved by us hereinabove and addition so made by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals), is directed to be deleted. Accordingly ground No. 4 of the assessee for the assessment year 2004-05 is allowed. 30. In the facts and circumstances, all the grounds of the assessee for the assessment years 1999-2000 to 2005-06 are allowed. 31. In the result, all the appeals of the assessee in I. T. A. Nos. 27 to 33(Asr)/ 2011 for the assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X
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