TMI Blog2018 (4) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... no material whatsoever The said valuer had clearly mentioned that he has never visited the said property under reference. In such circumstances, by no stretch of imagination, it can be said that the Assessing Officer had any material much less cogent at that to disregard the municipal lettable value. - Decided in favour of assessee Reopening of assessment - disallowance on account of addition to rental income - case was reopened on the basis of information obtained by AO from Shri Santosh Kumar, government registered valuer - Held that:- A reading of the said information clearly shows that the said information cannot at all be said to be a information on the basis of which it can be said that there was escapement of income. The said valuer has clearly stated that this should not be construed as his report or speech. The said valuer has clearly stated that he has neither visited nor inspected the said property. Thus said report can by no stretch of imagination be said to be a cogent material warranting reopening. Earlier assessment has been done u/s. 143(3) and the lettable value returned has been accepted. Now AO is changing his opinion on the basis of that said letter. In o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s letter shall not be construed as a Valuation Report of the Registered Valuer or opinion of the Registered valuer. The undersigned has replied and given information purely based on letter received, oral discussion with the departmental officer and the maps and the stamp duty ready reckoners at his disposal and the undersigned has neither visited nor inspected the property under reference. 4. The Assessing Officer, thereafter, confronted the assessee with the above fact. In reply, the assessee stated that the municipal rateable value should be considered as the value referred to in section 23(1)(a). Relying on the decisions of the Hon'ble Bombay Court in the case of M.V. Sonavala v.CIT (177 ITR 266), the Hon'ble Calcutta High Court in the cases of CIT v. Prabhabati Bansali (141 ITR 419) and CIT v. Satya Co. Ltd. (25 Taxman 193), the assessee contended that since the rent received by it was more than the municipal ratable value, the former should be taken as the ALV. The Assessing Officer did not agree with the contention of the assessee. Relying on the decision of Hon'ble Patna High Court in the case of Kashiprasad Kataruka v.CIT (101 ITR 816) the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional evidence were also submitted for assessment years 2011 - 12 and 2012 - 13. 7. The additional evidences were forwarded to the assessing officer. The ld. Commissioner of Income Tax (Appeals) obtained remand report from the assessing officer and also rejoinder from the assessee. Thereafter, the ld. Commissioner of Income Tax (Appeals) held as under: 4.26 I have considered the facts of the case and the submissions of the appellant. I have also gone through the remand report and reply of the appellant to it. I have also gone through the decisions relied on by the Ld. AR. From the facts of the case and decisions cited above, it is clear that interest free deposit received by the appellant from lessee cannot be considered to be a factor influencing lease rentals. In the current case, the actual rent received by the appellant is higher than the municipal value of the house property. Besides, the stamp duty valuation adopted by the A.O. also suffers on the same grounds on which the A.O. has rejected the municipal valuation. The same also suffers from incorrect assumptions made by Shri Santosh Kumar, such as age of the property considered as 25-30 years instead of 65 years. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing the income from house property under section 23(i)(a) and (b) of the Act. It is also a settled proposition that actual rent received or receivable by the land lord constitutes a reliable evidence to ascertain the properties' capacity to earn rent in open market. The forms should be accepted unless the Assessing Officer has contrary evidence to suggest the deflation of rental income by extraneous consideration. This is also an admitted fact in this case that the rent received is much higher than the municipal rateable value of the property. It is also discouraged and unapproved by various Benches of the Tribunal that when the interest income earned by the assessee on the said security deposits deposited with the banks the same is offered to tax, the inclusion of such interest on the said deposits for the purpose of ALV amounts to double taxation. Considering the factual matrix of the present case, we are of the considered opinion that the issue raised by the assessee has to be decided in favour of the assessee. We order accordingly, Following the decision of the Mumbai Tribunal and having regard to the factual matrix of the case, the rent received by the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative further referred that the decision of the Hon'ble jurisdictional High Court in the case of Tip Top Typography (supra) has been totally wrongly applied by the ld. Commissioner of Income Tax (Appeals). 13. We have carefully considered the submissions of both the counsel. We find that in this case the assessee is the owner of the property at Cuffe Parade, Mumbai, being Flat No. A3 admeasuring 3,100 sq. ft. of carpet area. As per its leave and license agreement with Tata Motors Ltd., it was receiving monthly compensation of ₹ 50,000/- and has received a interest free refundable deposit of ₹ 2.35 crores. The Assessing Officer sought opinion from the government registered valuer, Shri Santosh Kumar. The government valuer informed that the assessee is the owner of the property flat at Cuffe Parade, Mumbai being Flat No. A3 admeasuring 3,100 sq. ft. of carpetarea on the 3rd floor of wing A of building known as Pallonji Mansion Cooperative Housing Society Ltd. situated at Plot No. 43, Prakash Peth Marg, Cuffe Prade, Mumbai-400 005. The value given by the said valuer was stated at ₹ 6,43,29,898/-. The Assessing Officer took the lettable value at 8% o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the parties have concealed the real position. He must not make a guess work or act on conjectures and surmises. There must be definite and positive material to indicate that the parties have suppressed the prevailing rate. Then, the enquiries that the Assessing Officer can make, would be for ascertaining the going rate. He can make a comparative study and make a analysis. In that regard, transactions of identical or similar nature can be ascertained by obtaining the requisite details. However, there also the Assessing Officer must safeguard against adopting the rate stated therein straightway. He must find out as to whether the property which has been let out or given on leave and license basis is of a similar nature, namely, commercial or residential. He should also satisfy himself as to whether the rate obtained by him from the deals and transactions and documents in relation thereto can be applied or whether a departure therefrom can be made, for example, because of the area, the measurement, the location, the use to which the property has been put, the access thereto and the special advantages or benefits. It is possible that in a high rise building because of special advant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... telephonic talk of Dy. CIT(OSD)-2(3) with the undersigned relating to assisting the department in ascertain Stamp Duty Ready Reckoner Market Value Zone, rate and consequently it s market value for the year 2007 and year 2009 as per stamp duty ready reckoner, of the property known as Flat No. A3, on 3rd Floor of A Wing in Pallonji Mansion CHSL situate at Plot No. 43, Prakash Pethe Marg, Cuffe Parade, Mumbai-400 005 situate on plot of land bearing Plot No. 43 of Colaba Division and admeasuring 3,100 sq. ft. Carpet area i.e. 3,720 sq. ft. built-up (Equivalent to 345.72 sq. Mtrs. Built-up). The abovementioned property for the year 2007 was located under Zone No.1/2 of Colaba Division as per stamp duty map. The rate of residential flat in New Building without lieft is prescribed at ₹ 1,68,300 per sq. mtr. Built-up. The age of the building is presumed to be 25 to 30 years in absence of any information. The market value as on year 2007 is as follows: ₹ 1,68,300 x 345.72 sq. mtrs built up x 0.70 (Depreciation factor)=Rs.4,07,29,273/- The abovementioned property for the year 2009 was located under Zone No.1/2 of Colaba Division as per stamp duty map. The rate of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. 1.2 The learned CIT (A) has erred in law and on facts in upholding the initiation of the proceedings under section 147 of the Act based on change of opinion. The learned CIT(A) ought to have appreciated that the order passed under section 147 read with section 144 of the Act based on change of opinion is invalid and bad in law. 20. In this regard, we may gainfully refer to the order of the ld. Commissioner of Income Tax (Appeals) which records the reason regarded, the assessee s submission and the ld. Commissioner of Income Tax (Appeals) s adjudication upheld the assessment. 4. Validity of Reassessment proceedings A.Y.2008-09 2009-10): 4.1 The first issue relates to reassessment proceedings u/s.147 of the Act. During the re-assessment proceedings the A.O. issued notice u/s.148 of the Act. In reply the assessee submitted that the return filed u/s,139(1) of the Act should be considered as return filed in response to the notice u/s 148. The reasons recorded for re-opening is as under:- The assessee is the owner of the property at Cuffe Parade, Murabai being Flat No.-As admeasuring 3,100 sq.ft. of carpet area on the 3rd floor of wing A of building known as Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that it had verbally submitted to the A.O. that most of the details as requested by the A.O. vide the above notices have already been submitted during the regular assessment proceedings and are already on the records. Further, details called for do not have any bearing on the issue under consideration for which reasons have been recorded. Further to above, consequent to order disposing our objection, the appellant made detailed submission vide letter dated 11.03.2014 reiterating its submissions made earlier and requested AO to drop the proceedings in light of facts and submissions made before the AO. The AO has vide order u/s.144 r.w.s.147 of the Act dated 31.03.2014 assessed the ALV of the property @8% of the extrapolated market value of ₹ 6,43,29,898/- i.e.Rs.51,46,392/-. Similarly, for A.Y.2009-10, the AO has vide order u/s.144 r.w.s.147 of the Act dated 07.03.2014 assessed the ALV of the house property @8% of the extrapolated market value of ₹ 7,79,30,523/- i.e.Rs.62,34,442/-. 4.3 In respect of reassessment, the appellant has contested that it had submitted the relevant details regarding income from house property in computation of income, financial sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that income chargeable to tax has escaped assessment/is under assessed within the meaning of section 147. Issue notice under section 148 of the Income Tax Act, 1961. It is, therefore, clear that the case was re-opened to assess the income from house property correctly. It is seen from the assessment order and the details available on record that no specific query regarding the income from house property and the annual letting value (ALV) of the property at Cuffe Parade was called for by the AO submitted by the appellant. The appellant had also not submitted the details in this regard during the assessment proceedings. The AO has elaborately discussed this in his order dated 19.06.2013 while disposing off the objection of the appellant. Hence, the assessment order was passed without examination of the subject issue. Since the issue has not been considered at all by the A.O., the question of re-look or change of opinion does not arise. As there was no opinion, the question of change of opinion will not be there. It is further seen that the reassessment notice was issued within four years from the end of the subject assessment year. In view of the above, it is necessary to ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. The SLP filed against the above decision has been dismissed by the Hon'ble Supreme Court and therefore the issue has attended finality. There is no reason why the ratio of the above decision shall not be applicable to the facts of the instant appeal. I do not agree with the contention of the Ld. AR that disclosure in the statement of income and the return of income amount to full and true disclosures of material facts. There was no specific enquiry by the A.O. during the course of assessment proceedings in respect of income from house property. In view of the above, in the present case, the decisions cited by the Ld. AR are clearly distinguishable on facts. Considering the facts that the assessee failed to make full and true disclosures as envisaged by Explanation 1 to section 147, the action of the A.O. in re-opening the assessment is upheld. 21. Against this order, the assessee is in appeal before us. 22. We have heard both the counsel and perused the record. We find that the original assessment in this case was computed u/s. 143(3) and no disallowance on account of addition to rental income was there. The case was reopened on the basis of information obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act read with rule 8D of the Rules disregarding the decision of the Hon'ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. (328 ITR 81), which requires the AO to establish nexus of expenses having been incurred for earning exempt income before applying provisions of section 14A of the Act read with rule 8D of the Rules. 1.4 The learned CIT(A) has erred in law and on facts in directing the AO to recompute the disallowance under section 14A of the Act disregarding the facts of the case that the AO has failed in examining and rejecting claim of the appellant in light of books of accounts and also failed in establishing the nexus of expenses having been incurred for earning exempt income while disallowing certain expenses under section 14A of the Act applying provisions of rule 8D of the Rules. 1.5 Without prejudice to above, the learned CIT (A) has erred in law and on facts in not excluding the strategic investments for the purpose of making disallowance under section 14AoftheAct. 1.6 Without prejudice to above, the learned AO has erred in law and on facts in considering the professional charges paid to consultants and auditors as Indirect Administr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced reliance upon the decision of the Hon'ble Bombay High Court in the case of Chennai Co. Pvt. Ltd. v. CIT 206 ITR 616 (Bom). 27. Upon careful consideration, we note that this decision has been cited by the ld. Counsel of the assessee is for the proposition that a statutory expenses incurred is allowable expenditure even if no active business is conducted. We fail to understand as to how this decision is relevant here in deciding the expenses which are incurred in respect of the incurring tax free income. We find that no cogent reason has been submitted before us that the consultant charges paid to the auditors are not indirect administrative charges. Hence, we dismiss this ground raised by the assessee. 28. The assessee has also raised following additional ground: 2. On the facts and in the circumstances of the case; Enhancement of Annual Letting Value ( ALV ) in respect of 'Income from House Property: 2.1 the learned Assessing Office {'AO'} has erred in objecting to the order of Hon'ble Commissioner of Income Tax (Appeals) ['CIT(A'], wherein the CIT(A) has correctly held that the rent received by the assessee is appropriate estimation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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