TMI Blog2021 (12) TMI 1253X X X X Extracts X X X X X X X X Extracts X X X X ..... cer in disregarding the municipal rateable value for determination of ALV and substitution thereof by some expected rent to be received by the assessee. Since, the assessee in the instant case has declared the deemed income from the ground and first floor on the bases of municipal rateable value and the basement was used for her profession/business activity, therefore, respectfully following the decision of the Mumbai Bench of the Tribunal in the case of Pankaj Wadhwa vs ITO cited (supra), hold that the ld. CIT(A) was not justified in confirming the action of the Assessing Officer - Decided in favour of assessee. - ITA No. 4371/DEL/2019 - - - Dated:- 23-12-2021 - SHRI R.K. PANDA, ACCOUNTANT MEMBER Assessee by : Sh. Ashok Kumar Batra, CA Revenue by : Sh. Om Prakash, Sr. DR ORDER This appeal filed by the assessee is directed against the order dated 08.03.2019 of the learned CIT(A)-10, New Delhi, relating to Assessment Year 2015-16. 2. Facts of the case, in brief, are that the assessee is an individual and filed her return of income on 30.09.2015 declaring total income of ₹ 16,29,440/- which was revised on 30.03.2016 declaring total income at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015-16, there was a loss of ₹ 5,04,910/-, which was ignored to nil and therefore the same was not claimed in the Profit Loss Account. It was submitted that the assessee is paying house tax to MCD on the basis of commercial use of the basement of the property. It was further brought to the notice of the Ld. CIT(A) that the building at E- 30, Greater Kailash-II, New Delhi was not in existence on the day of visit of Inspector on 06.12.2017 since the reconstruction of the building was started in the month of February 2017 as per sanction plan of MCD and certificate dated 27.12.2018 of the contractor. 4.1. However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee and upheld the action of the Assessing Officer by observing as under:- 6.1.1 The appellant has taken three grounds of appeal. Out of these ground No. 1 and 3 were not pressed during the appellate proceedings. Because he informed that the AO has already considered her rectification application u/s 154 of the Act. Accordingly, the order has been rectified by the AO and the grievance against these grounds no longer survived. In view of these facts the ground number 1 and 3 are dismissed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at the surrounding locality. The Inspector on the basis of enquiry in the surrounding locality, talking to residents, property dealers and guards there, for about 3 hours reported prevailing rental value of basement as well as residential floors at ₹ 40.000/- to 60,000/- per month. The AO therefore in view of provisions of section 23(1 )(a) of the Act proceeded to estimate the market rental value of property being median- @₹ 50,000/- per floor per month and arrived at the deemed annual lettable value at ₹ 18,00,000/-. After standard deduction of 30% u/s 24, the income from house property was determined at ₹ 12,60,000/- and added to the income of the assessee against ₹ 67,465/- declared by the assessee in rerevised return. The total income assessed at ₹ 30,62,750/- against the returned income as per rerevised return of ₹ 18,64,162/-. First of all, the claim of the appellant that basement is used for commercial purpose is not tenable. The appellant has not been able to produce any evidence that the basement has been occupied by the appellant for the purposes of any business or profession carried on by her profit of which are chargeabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of the floor of the property. Thus, the total rental value per month has been determined at ₹ 1,50,000/- per month and ₹ 18,00,000/- per annum and after allowing standard deduction u/s 24 @ 30% of ₹ 5,40,000/- the income from house property comes at ₹ 12,60,000/-. 7.1.3. I have considered the factual matrix of the case, written submissions and oral arguments of the AR and the order of the AO. In the judgment of Delhi high Court (full bench) in the case of CIT vs Moni Kumar Subba 333 ITR 38, the Hon ble High Court has held that the annual value fixed by the Municipal Authorities can be a rationale yardstick. It has also been held that if the Assessing Officer can show that rateable value under municipal laws does not represent the correct fair rent, then he may determine the same on the basis of material/evidence placed on record. The relevant paras of the decision of Hon ble High Court is as below: 16. Since the provisions of fixation of annual rent under the Delhi Municipal Corporation Act are pari materia of section 23 of the Act, we are inclined to accept the aforesaid view of the Calcutta High Court in Satya Co. Ltd.'s case (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to point out that the ALV of the Municipal Authority does not represent true market rental value of the property. He had been able to show that the rateable value under Municipal law does not represent the correct fair rent. I am inclined to agree with the method adopted by the AO for arriving at the annual rental value of these floors. In order to arrive at the annual value of the property the Municipal Corporation law has standardized the method for working out the ALV of any of the property situated in Delhi based on Covered area, Unit area value, Age factor, use factor, Structure factor and Occupancy Factor. But ALV of Municipal Corporation cannot be the basis for determination of market value of the property which vary from area to area, location, direction, quality of construction, facilities available in surrounding as well as inside the house etc. Fair market rent is the rent which the property will fetch if it is rented out i.e. its inherent capacity to fetch the rent from the market and it has nothing to do with the use factor or any other factor used for determining ALV by Municipal Corporation. The appellant has contested that if the fair market rent of the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basement as evident from the IT record as well as in the MCD record which showing commercial use of basement. Therefore, there is a violation of natural justice which is bad in law. 4. The ld. CIT (A) has erred in law and on the facts in confirming the action of the A.O. by relying upon the judgment of Delhi High Court (Full Bench) in the case of CIT vs. Moni Kumar Subha 333 ITR 38 without appreciating the facts of the case which are entirely different and distinguishable from the facts though in the case of appellant. The property in that case had let out property and also received security deposit which is covered u/s 23(1)(b). The appellant s property has not been let out is covered u/s 23(4)(b) r.w.23(l)(a). Hence the ratio of this judgment is not applicable in the case of appellant. Therefore, there is a violation of natural justice which is bad in law. 6. The ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A). He submitted that the ld. CIT(A) dismissed the appeal of the assessee on the ground that the assessee was not able to produce any evidence that the basement has been occupied by her for the purpose of business or profession c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other hand heavily relied on the order of the Assessing Officer and the ld. CIT(A). 7. I have considered the rival arguments made by the both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. I find the assessee in the instant case is having two properties i.e. one at Shimla and another one at E-30, Greater Kailash-II, New Delhi. Both these properties are self occupied. In the original return of income, the assessee omitted to include deemed self occupied property income from Greater Kilash-II, property. In the re-revised return, the assessee treated the Shimla property as self occupied and annual value was taken as NIL as per section 23(2) and considered the Greater Kailash- II property as deemed let out as per section 23(4) of the Act. I find the Greater kailash-II property consist of basement, ground floor and first floor. I find the assessee did not declare any notional rent in respect of the basement portion treating the same as used for commercial purposes. However, in the rerevised return, the assessee declared ALV of ground and first flo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 65 of the original paper book, could not be controverted by the Ld. DR. It is also the submission of the ld. Counsel for the assessee that because of loss during the year, the same was ignored. Further, it is held in various decisions that municipal lettable value is recognized basis for determination of the ALV. 10. I find an identical issue had come up before the Mumbai Bench of the Tribunal in the case of Pankaj Wadhwa vs ITO (supra), wherein, the Tribunal held that where the assessee declared annual lettable value from house property having regard to municipal rateable value, in view of the fact that municipal rateable value is recognised for determination of ALV, there was no justification for action of Assessing Officer in disregarding the municipal rateable value for determination of ALV and substitution thereof by some expected rent to be received by the assessee. The relevant observation of the order of the Mumbai Bench of the Tribunal reads as under:- 13. We have carefully considered the rival submissions. It is the case of the assessee that the lower authorities have wrongly computed the ALV of its property (deemed let out property) under section 23(1)(a) of ..... 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