2020 (10) TMI 1307 - HC - Income Tax

High Court remands case to Tribunal for lack of reasoning, sets aside order, directs fair reconsideration.

The High Court remanded the case to the Tribunal due to unclear and insufficient reasoning in the Tribunal's decision. The Court found that crucial ... Income from house property - ALV determination - Whether the provisions of Section 23(5) of the Income Tax Act, 1961 inserted by the Finance Act, 2017 with effect from 01.4.2018 could be treated as retrospective in operation for the purpose of computing notional rent for taxation under the head ‘income from house property’? - Whether Tribunal erred in sustaining the computation of annual letting value of the unsold stock of residential flats in Victoria Towers for the purpose of computing notional rent under the ‘income from house property’ in the computation of taxable total income without assigning proper reasons and justification? - HELD THAT:- We have carefully gone through the impugned proceedings and we find that the reasons assigned by the Tribunal are not clear and cogent. Though they were not raised in the same form before the Tribunal, we find that there was an argument to that effect, which has not been dealt with by the Tribunal. Therefore, we are inclined to interfere with the impugned order and remand the matters to the Tribunal for a fresh consideration. That apart, the Revenue was also aggrieved by one portion of the order passed by the Tribunal, which, according to the Revenue, was factually and legally incorrect and therefore, they moved a miscellaneous petition before the Tribunal and it was allowed by order dated 08.10.2018. The Tribunal is to hear the Revenue afresh on that issue. Hence, interest of justice would be met and interest of the Revenue also would be protected if the entire matter is remanded to the Tribunal for a fresh consideration. For the above reasons, the above tax case appeals are allowed. Issues Involved:1. Interpretation of Section 23(5) of the Income Tax Act, 1961 for computing notional rent.2. Correct application of Section 23(5) for unsold stock of flats in Victoria Towers.3. Assessment of notional rent overlooking the memorandum of association.4. Assessment of notional rent for unsold stock of flats despite conflicting decisions.5. Timeliness of appeal dismissal by the Appellate Tribunal.6. Correctness of notional rent assessment at Rs. 500 per sq.ft.Issue 1: Interpretation of Section 23(5) for Notional Rent:The appeal questioned whether Section 23(5) of the Income Tax Act, 1961, inserted by the Finance Act, 2017, could be considered retrospective for computing notional rent. The Tribunal's interpretation was challenged for misapplying the provision, leading to a mis-construction issue.Issue 2: Application of Section 23(5) for Victoria Towers:The Tribunal's application of Section 23(5) for computing notional rent for unsold flats in Victoria Towers was disputed. The appellant argued that the provision should apply after a specific period from the completion of construction, highlighting a misinterpretation by the Tribunal.Issue 3: Assessment Overlooking Memorandum of Association:The assessment of notional rent for unsold flats in Victoria Towers was contested, emphasizing the approved main object in the appellant's memorandum of association. The appellant argued that the assessment should align with the actual rent under the head 'income from business,' citing a Supreme Court decision.Issue 4: Conflicting Decisions on Notional Rent Assessment:The conflict arose from the assessment of notional rent for unsold flats in Victoria Towers under 'income from house property,' despite a decision deleting notional rent for commercial space in Coromandel Plaza. This discrepancy led to conflicting decisions and a misapplication of Section 22 of the Income Tax Act, 1961.Issue 5: Timeliness of Appeal Dismissal:The appeal dismissal by the Appellate Tribunal was challenged as time-barred, with the appellant submitting reasons for the delay. The correctness of the dismissal and the perversity in recording facts were questioned.Issue 6: Correctness of Notional Rent Assessment:The correctness of assessing notional rent at Rs. 500 per sq.ft. under Section 23 of the Income Tax Act, 1961 was disputed. The lack of valid materials and comparable instances for such assessment, along with cryptic findings in the impugned order, raised concerns about the legality of the assessment.In the judgment, the High Court found the Tribunal's reasons unclear and not cogent. The Court noted that the Tribunal failed to consider crucial submissions and grounds raised by the appellant, leading to a lack of proper reasoning in the decision. Consequently, the Court decided to remand the matters to the Tribunal for a fresh consideration to address the issues raised comprehensively. The Court allowed the tax case appeals, set aside the impugned order, and directed both parties to present all factual and legal issues before the Tribunal for a fair reconsideration.