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Anand M Gupta Versus Income Tax Officer Tax -21 (3) (3) , Mumbai

2016 (9) TMI 648 - ITAT MUMBAI

Penalty under section 271(1)(c) - disallowance of loss of income from house property - Held that:- The assessee did got the possession from the builder after the completion of building and occupation certificate obtained from Bombay Municipal Corporation (BMC) and had also made the entire payment as agreed in the sale agreement. It is also an admitted fact that, the assessee in the return of income had taken municipal ratable for the purpose of ALV under section 23(1)(a). From such computation, .....

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year and once the assessee was the owner of the house property, then charge is created for the determination of income from house property by way of ALV. The basis of assessing the tax and income from house property is the ownership of the property and not the actual realization of income. The ownership by itself attracts the charge. - The assessee was thus under the law liable to disclose the ALV from the said property. In fact, the assessee had shown the ALV on the municipal ratable value .....

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f the assessee was not only bona fide but also was duly supported under the provisions of law. Thus, we hold that, no penalty for disallowance of loss of income from house property can be made and we direct the AO to delete the penalty - Decided in favour of assessee - ITA No. : 7251/Mum/2011 - Dated:- 4-8-2016 - SHRI B R BASKARAN, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER For The Appellant : Shri Vijay Mehta For The Respondent : Shri A Ramchandaran ORDER PER AMIT SHUKLA, JM: The a .....

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he explanation of the appellant is not bona fide and the AO has rightly imposed penalty under section 271(1)(c) for concealing and furnishing inaccurate particulars of income by claiming wrongful deduction of ₹ 21,25,096/-. Confirming the levy of penalty without properly appreciating the facts and the reasons for the claim under section 24 of the I. Tax Act and the detailed submissions filed by the appellant explaining that there is no concealment nor filing of inaccurate particulars of in .....

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096/- under the head Income from House Property . The assessee has booked a flat in the building known as Evita at Hiranandani Garden in Powai for an aggregate consideration of ₹ 3,47,51,258/-, vide Sale Agreement dated 08.11.2004. For the purchase of the said property, the assessee taken loan from HDFC Bank on which interest of ₹ 21,40,286/- was paid during the previous year. The construction of the said building was completed in financial year 2006-07 and the builder has received o .....

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like, assessee wanted to customize the flat by undertaking civil work and wood work to suit his personal needs and also to finish it in a habitable condition so as to occupy and use the flat for the purpose of residence. The actual possession of flat was deferred and was finally taken on 13.04.2009. In the return of income, the assessee showed the annual letting value (ALV) of the property on municipal valuation rate which was ₹ 1,31,500/- from the said ALV, Municipal taxes of ₹ 1,09 .....

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VALUE 21700 Less: Deduction u/s 24-repaqirs 6510 6510 NET INCOME FROM HOUSE PROPERTY BEFORE INTEREST 15190 Proportionate Income From House Property 15190 Less: Deduction u/s 24 - Share of Interest on Borrowed Capital 2140286 2140286 NET INCOME FROM HOUSE PROPERTY -2125096 3. However, in the course of the assessment proceedings, the Ld. Assessing Officer held that the fair rental value of the flat was in the range of ₹ 100/- per. Sq. ft. in the financial year 2007-08 and required the asses .....

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rdingly, he disallowed the claim of loss of ₹ 2,25,096/-. 4. Now, the penalty has been levied on said disallowance of loss for furnishing wrong particulars and also concealing the taxable income. In response to the show cause notice in the penalty proceedings, the assessee has reiterated its contention, however Ld. Assessing Officer held that the assessee has computed the income from house property with sole intention of claiming loss on account of interest paid on borrowed capital. Accord .....

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as been shown by way of abundant precaution on the municipal ratable value. However, he submitted that such an observation of Ld. CIT(A) is not correct an in support, he drew our attention to letter dated 04.12.2010 filed before the AO during the course of the assessment proceedings. In the said letter, the assessee has duly explained the entire facts which are as under:- The assessee has acquired the subject property vide agreement for sale dated 8th November, 2004, which was duly registered wi .....

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ilder offered the final possession to the assessee vide their letter dated 21st June, 2007 requiring them to pay the maintenance charges and other incidental expenses and agreeing to give physical possession of the fat after 45 days on receipt of payment. The assessee made final payment on August 2, 2007 towards Maintenance charges including BMC tax for the period June 2007 to May 2009, Membership fees and Society formation fees; The assessee received rebate of ₹ 6,72,066/- as per Bi of Re .....

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e of residence without completing the unfinished civil work and fixtures and fittings for bathrooms, kitchen, toilet and other utilities, which were required to be redone post possession. Since assessee was having constraint of finance and not in a hurry to occupy the flat immediately for his residential use or for letting out, the actual physical possession of the flat was deferred and taken from the builder on 13th April, 2009 as per the certificate issued by Lake View Developers dated April 1 .....

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lue as per BMC tax computation as income from deemed let out house property as per sec. 23(1)(a) as assessee has another house property in Colaba, Mumbai, offered as Self Occupied Property by exercising his option u/s 23(4); After the physical possession in April 2009 the assessee took up the interior decoration and balance finishing work like civil work, electrical wiring, furnishing etc. during July/December 2009 and the flat became fit and habitable for residential use and capable for letting .....

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as to why municipal value should be adopted and finally summarized the entire contention in the following manner: 1. Even though the physical possession of the subject flat was not actually received by the assessee, the assessee had suo moto declared deemed let out value as measure of abundant caution as BMC Occupation Certificate was received, Municipal Taxes demanded by the builders for the period under consideration were paid and the assessee was rightful owner of the flat; 2. The actual phy .....

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rovisions of Rent Control Act would apply and therefore in respect of property available for self occupation, he cannot reasonably be expected to let out the same from year to year on rent higher than standard rent; 4. The offering of deemed let out value on presumption of ownership right is rebuttable as an inadvertent mistake and it cannot be capitalized for the purpose of taxation notional income. In view of above we would like to respectfully submit that your proposal for adopting the fair r .....

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he owner of the house, immaterial of the fact whether the owner is in possession or enjoyment of the property. In support, he relied upon the decision of Hon ble Bombay High court in the case of CIT vs Union Land end Society vs CIT reported in [1972] 82 ITR 794. 6. On the other hand, Ld. DR strongly relied upon the order of the CIT(A). 7. We have heard the rival submissions and perused the relevant finding given in the impugned order as well as material placed on record. From the discussion as m .....

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r the said house property. The Ld. AO has disallowed the loss claimed under the head income from house property on the ground that, the assessee himself has admitted that, he has not taken the actual possession in the relevant financial year. Such contention of the Ld. AO cannot be upheld, because it cannot be denied on the present facts that the assessee was the actual owner of the said property during the relevant previous year and once the assessee was the owner of the house property, then ch .....

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onstrued in its ordinary meaning of a legal owner under the general law. The liability to income-tax on property depends on the fact that the assessee is the owner of the property. Section 9 deals with income from property and the income from that source is an artificially defined income. The assessee is made liable to pay the incometax on the value of the property computed in the manner prescribed. That liability does not depend either on the power of the owner to earn the income therefrom or o .....

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