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2015 (8) TMI 326 - ITAT MUMBAI

2015 (8) TMI 326 - ITAT MUMBAI - TMI - Estimation of rental income - AO arrived at a conclusion that the prevailing rent in the area is ₹ 1,20,000 per month for both the Galas and held that the fair rent value ought to be adopted ₹ 14,40,000 per annum as rental for both the Galas - CIT(A) in restricting the ALV of the property to ₹ 3,12,960/- Held that:- In this case the peculiar factors have been lucidly brought out by the AO. Moreover, a perusal of the impugned orders reveal .....

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air rent rate for comparable properties as submitted by society itself where the assessee flat is situated and hence total rental income to be brought to tax shall be ₹ 312960 as held by FAA. We uphold the findings of FAA. We order accordingly.

Bogus purchases and sales - FAA held that both bogus purchase to the tune of ₹ 915564 and also bogus sales of ₹ 1605440 are to be added to the income of the assessee - FAA held that the sales are being credited in the books of .....

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/s Samundra Polycoats and Supreme Agencies(only these two ledger accounts are submitted before us) reveal that there was an opening balance existing as credit to these parties as on 1-4-2005 which has been mainly squared with the sale of fabric transaction in the month of March 2006, ie at the fag end of financial year(even there is no mention of invoice details). The assessee has made no attempt to substantiate by evidences and cogent material such as delivery challan and proof of movement of g .....

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8377; 1605440 is reduced from sales declared and disclosed by the assessee in the return of income filed with the Revenue otherwise it will be leading to taxing the same amount twice

Unexplained credit u/s 68 - Held that:- It is not clear from the records that the addition of ₹ 9,88,000 is the same addition as held to be bogus sale as referred to in ground no 3 of ground of appeal with respect to sales made to Josh Advertising of ₹ 688000 and M/s G L Investment of ₹ .....

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est u/s 24(b) - Held that:- The assessee has borrowed funds for purchase of 2 Galas bearing number unit 302 admeasuring 710 sq feet and unit 303 having area of 920 sq feet at Navyug Industrial Estate, Sewri , Mumbai. The assessee is liable to pay interest on such borrowings , however, no interest is paid during the impugned assessment year and the loan is stated to have become NPA, but as per therecord liability of interest is accruing on the loan borrowed. As per Section 24(b), the deduction of .....

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spect to which such interest is claimed to have been payable before allowing the claim of the assessee for deduction u/s 24(b) of the Act .

Rejecting the financial results shown in the books of accounts u/s 143(3) and estimating gross profit at 5% of the total turnover - Held that:- The CIT(A) has categorically noted that Assessing Officer has made specific enquiries and treated the relevant purchases and sales as bogus. At the same time the AO also rejected the books of accounts mai .....

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R ORDER Per G S Pannu, A. M.: The captioned cross-appeals filed by the assessee and Revenue pertaining to A.Y. 2006-07 are directed against an order passed by Ld. CIT(A)- 33, Mumbai dated 22/10/2010, which in turn arises out of an order passed by AO under section 143(3) of the Income Tax Act, 1961 (the Act) dated 29/12/2008. The grounds of appeal raised by the assessee read as under: 1. The learned Commissioner of Income Tax (Appeal) ( The Ld CIT(A) ) has legally erred in estimating the rent inc .....

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was earning only Commission. 5. The learned CIT(A) erred in treating ₹ 9,98,000 as unexplained cash credit u/s 68. The assessee has moved an Additional Ground of appeal also which reads as as under : The learned erred in not allowing the interest of ₹ 1,99,302 deductible u/s 24(b). 2. The facts of the case are that the assessee derives income from salary , income from house property and income from his proprietary concern Surya Enterprises. 3. Ground No 1 relates to Rental Income - .....

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company and also undertaking trading transaction with said company. The Assessing Officer while considering that the assessee is shareholder and director of the company to whom the said galas were given on rent held that Galas were given on meager rent of ₹ 9500 per month(Rs.4750 X 2) to an associated/related concern while cost of acquisition was ₹ 80.88 lacs . The assessing officer made enquiries and based on the same arrived at a conclusion that the prevailing rent in the area is & .....

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ct was called from Navyug Industrial Premises Co-op. Society Limited who has furnished information but the same is incomplete and selective. The assessing officer also stated that one party Sh Bharat Raste , in whose case rent was stated by the society at ₹ 9500 per month , is assessed by Revenue at rental income of ₹ 1,10,000 per month . Further, the said assessee Sh Bharat Raste has not challenged the addition in appeal and paid taxes on the same. Hence, The Revenue has rightly ass .....

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0/- 875.75 Sachin Adaicha 301 1310 sq.ft 4750/- 1540.57 Hitesh Vedant 114 565 sq. ft. 4750/- 741.70 3.2 The assessee s counsel also submitted that in case of Sh Bharat Ratne , the appeal is already pending with Tribunal.The FAA after considering the contention of the assessee and material on record held that the rent in the area was fluctuating from ₹ 3.62 per square feet to ₹ 16 per square feet per month. The FAA held that it will be reasonable to hold the rent to be ₹ 16 per .....

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from rent of the two Gala which is ₹ 114000 per annum for both the galas (Rs 4750 X2). The assessee also relied upon the decision of the4 Hon ble Bombay High Court Bombay High Court in the case of CIT vs. Tip Top Typography, 368 ITR 330 (Bom). CIT v. Tip Top Typography. 3.4 In the cross appeal, Revenue is agitated by action of the CIT(A) in restricting the ALV of the property to ₹ 3,12,960/- instead of ₹ 14,40,000/- considered by the AO. Since the said cross ground of the Reven .....

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the Assessing Officer by the Navyug Co-op Society where the Galas of the assessee are situated. We have also observed that the Assessing Officer adopted the rent of ₹ 120000 per month without bringing on record any evidence or cogent material on record . The FAA on the other hand has relied upon cogent material and evidences being information supplied by the society where s Galas are situated to arrive at the figure of fair rent ₹ 16 per square feet per month based on the rent agreem .....

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e is not barred from making investigations and enquiry to bring on record cogent material to ascertain the going rental rates of similar properties. Though the Hon ble Bombay High Court in the case of CIT vs. Tip Top Typography (supra) has upheld the application of Municipal Ratable Value as the Annual Letting Value(ALV), so however, it was also observed that the AO is competent to disregard the Municipal Ratable Value if it is shown by way of cogent material that adoption of the Municipal Ratab .....

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tion of CIT(A) in basing ALV for the property for the purpose of section 23(1) of the Act is quite justified which based on the prevailing rentals in the same building. Thus we hold that income from rent should be charged to tax at ₹ 16 per square feet per month being fair rent rate for comparable properties as submitted by society itself where the assessee flat is situated and hence total rental income to be brought to tax shall be ₹ 312960 as held by FAA. We uphold the findings of .....

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se parties. Thus , the assessee failed to submit the delivery challans, bank statement, IT particulars etc as desired by Assessing Officer to substantiate these sales and purchases. The Assessing Officer , made addition of bogus purchase of ₹ 915564 . The Assessing Officer also held that bogus sales to the tune of ₹ 1605440 to be reduced from total sales in the assessment of the assessee. The assessee carried the matter to the FAA who called for remand report from Assessing Officer a .....

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esentative for the assessee contended that these are genuine purchases and sales are made in normal course of business. The assessee s counsel submitted that ledger accounts and invoices were duly submitted before the authorities below. Our attention was also invited to the various other parties with whom assessee has entered into transaction for purchase/sale and with respect to which no addition is made by Assessing Officer. 7. On the other hand Ld. DR appearing for the Revenue has referred to .....

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ish that these purchase/sale are genuine. The assessee has merely produced invoices and ledger account. The ledger account of M/s Samundra Polycoats and Supreme Agencies(only these two ledger accounts are submitted before us) reveal that there was an opening balance existing as credit to these parties as on 1-4-2005 which has been mainly squared with the sale of fabric transaction in the month of March 2006, ie at the fag end of financial year(even there is no mention of invoice details). The as .....

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t sales to the tune of ₹ 1605440 is income of the assessee chargeable to tax , it will be fair that the said income of ₹ 1605440 is reduced from sales declared and disclosed by the assessee in the return of income filed with the Revenue otherwise it will be leading to taxing the same amount twice. We order accordingly. 9. Ground No 5 relates to holding by CIT(A) that there is unexplained credit u/s 68 of the Act of ₹ 9,88,000.00 which is shown as advance received on account of .....

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is not clear from the records that the addition of ₹ 9,88,000 is the same addition as held to be bogus sale as referred to in ground no 3 of ground of appeal with respect to sales made to Josh Advertising of ₹ 688000 and M/s G L Investment of ₹ 3,00,000 aggregating to ₹ 9,88,000 .We set aside the addition and restore the matter to the file of Assessing Officer to verify that the addition of ₹ 9,88,000 is same as is held to be bogus sale to Josh Advertising of ₹ .....

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admitted. The Assessing Officer has observed that the assessee has raised loan from M/s Abhudaya Co-operative Bank Limited for purchase of 2 Galas bearing number unit 302 admeasuring 710 sq feet and unit 303 having area of 920 sq feet at Navyug Industrial Estate, Sewri , Mumbai . The Assessing Officer has observed that the loan has become Non Performing Asset (NPA) and the assessee has not paid any interest during the year and only made provision for the interest. The Assessing Officer held that .....

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gued that despite the loan becoming NPA , the interest liability accrues on the loan payable by the assessee. The assessee will be liable to pay to the bank the liability of upto date interest at the time of making payment to bank . As per Section 24(b) of the Act , it is the interest payable which is allowed as deduction and even if the interest is not paid, the deduction is to be allowed u/s 24(b) in order to compute income from house property. 14. The Ld DR supported the order of Assessing Of .....

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terest is accruing on the loan borrowed. As per Section 24(b), the deduction of interest is allowed on the interest payable on borrowing for purchase, construction , repair etc of house property . However, from the records,it is not clear about the quantum of interest payable and also about the property on which the assessee is intending to claim deduction u/s 24(b) of the Act vide additional ground raised before us. We restore this issue to the file of assessing officer to verify the claim of t .....

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