2016 (9) TMI 1433 - AT - Income Tax

Tribunal directs reassessment of rental income based on standard rent, rejecting presumptive values

The ACIT 12 (1), Mumbai Versus M/s. Seth Properties

The ACIT 12 (1), Mumbai Versus M/s. Seth Properties - TMI Issues Involved:1. Deletion of addition of deemed rental income.2. Suppression of income from house property.3. Reliance on prior unresolved case for deletion of rental income addition.Issue-wise Detailed Analysis:1. Deletion of Addition of Deemed Rental Income:The revenue contested the deletion of Rs. 4,11,35,086/- as deemed rental income by the Ld. CIT(A). The Tribunal referenced a prior decision in the assessee's own case for Assessment Years 2003-04 to 2006-07, which upheld that rental income should be taxed in the year of receipt and determined based on the standard rent under the Rent Control Act. The Tribunal reiterated that the Assessing Officer had erroneously calculated the deemed rental income by assuming retrospective enhancement of rent for all tenants based on a court order specific to one tenant (Bank of Punjab). The Tribunal noted that the amount deposited by the Bank of Punjab was compensation for wrongful possession, not rental income, and should be taxed in the year it was received.2. Suppression of Income from House Property:The revenue claimed that the assessee suppressed income by not declaring the correct rental income. The Tribunal found that the Assessing Officer unjustifiably enhanced the rental income without documentary evidence, assuming that the High Court’s determination of Rs. 1,42,200/- per month for the Bank of Punjab applied to all tenants. The Tribunal emphasized that the statutory rent under the Rent Control Act should be considered, and the enhanced rent was not applicable to other tenants. The Tribunal upheld the CIT(A)’s direction to restrict rental income to the standard rent determined under the Rent Control Act.3. Reliance on Prior Unresolved Case for Deletion of Rental Income Addition:The revenue argued that the CIT(A) erred by relying on a decision in the assessee's case for Assessment Year 2003-04, which was still pending before the Tribunal. The Tribunal, however, followed the principle of consistency and upheld the CIT(A)’s decision, noting that similar issues in the assessee's case for prior years had been decided in favor of the assessee. The Tribunal directed the Assessing Officer to pass a consequential order in line with the prior decision.Conclusion:The Tribunal dismissed the revenue’s appeals, directing the Assessing Officer to recompute the rental income in accordance with the prior decision for Assessment Years 2003-04 to 2006-07. The Tribunal emphasized the importance of taxing rental income in the year of receipt and based on the standard rent under the Rent Control Act, rather than presumptive or enhanced rents without documentary evidence.