Partial appeal success with verification directions for property status and inter-corporate deposits deemed dividend

The appeal was partly allowed with specific directions for verification and re-computation on certain issues, including the property status at Clover Regency and treatment of property at Vora Apartment. The Tribunal upheld the addition of inter-corporate deposits as deemed dividend under Sec. 2(22)(e) and dismissed the violation of principles of natural justice ground. The order was pronounced on 28.08.2019.

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Issues Involved:
1. Verification of property status at Clover Regency, Ghatkopar.
2. Treatment of property at Vora Apartment, Ghatkopar as self-occupied.
3. Assessment of property at Wanworie, Pune based on municipal valuation.
4. Re-computation of unearned income from let out house property at Mahape, Navi Mumbai.
5. Addition of inter-corporate deposits as deemed dividend under Sec. 2(22)(e).
6. Violation of principles of natural justice.

Detailed Analysis:

1. Verification of Property Status at Clover Regency, Ghatkopar:
The assessee claimed that the property at Clover Regency, Ghatkopar was under construction during the assessment year 2009-10 and provided a final possession letter dated 14.01.2011 to support this claim. The CIT(A) directed the AO to verify the authenticity of this document. The Tribunal upheld this direction, stating that the verification was necessary as the possession letter was presented for the first time before the CIT(A). Therefore, the Tribunal found no infirmity in the CIT(A)'s order and dismissed the ground of appeal.

2. Treatment of Property at Vora Apartment, Ghatkopar as Self-Occupied:
The assessee contended that the Vora Apartment, Ghatkopar was self-occupied and thus its ALV should be taken as nil under Sec. 23(2)(a) if the Clover Regency property was confirmed to be under construction. The Tribunal agreed with this contention and directed the AO to verify whether the Clover Regency property was indeed under construction. If confirmed, the AO should treat the Vora Apartment as self-occupied and its ALV as nil, after necessary verification. Grounds of appeal Nos. 2 and 3 were allowed for statistical purposes.

3. Assessment of Property at Wanworie, Pune Based on Municipal Valuation:
The AO estimated the ALV of the Wanworie property at Rs. 3,38,160/- without supporting material, which the assessee contested. The Tribunal found merit in the assessee's claim that the ALV should be based on the municipal rateable value, as supported by the Bombay High Court's judgment in CIT-12 Vs. Tip Top Typography. The Tribunal restored the matter to the AO to re-compute the ALV based on municipal valuation. Ground of appeal No. 5 was allowed for statistical purposes.

4. Re-computation of Unearned Income from Let Out House Property at Mahape, Navi Mumbai:
The AO observed that the rental income for the Mahape property was Rs. 50,000/- per month but only Rs. 4,00,000/- was declared by the assessee. The CIT(A) directed the AO to re-compute the total income based on the facts on record. The Tribunal upheld this direction, noting that the assessee claimed the property was let out for only 8 months. Grounds of appeal Nos. 6 and 7 were dismissed.

5. Addition of Inter-Corporate Deposits as Deemed Dividend under Sec. 2(22)(e):
The AO added Rs. 13,37,681/- as deemed dividend, based on the assessee's shareholding in two companies. The CIT(A) upheld this addition, rejecting additional evidence presented by the assessee. The Tribunal agreed with the lower authorities, stating that the payment was clearly hit by Sec. 2(22)(e) and upheld the addition. Grounds of appeal Nos. 8 to 10 were dismissed.

6. Violation of Principles of Natural Justice:
There was no discernible record regarding this ground, and it was dismissed.

General Grounds:
Ground of appeal No. 12 was dismissed as not pressed.

Conclusion:
The appeal was partly allowed, with specific directions for verification and re-computation on certain issues, while other contentions were dismissed. The order was pronounced in the open court on 28.08.2019.

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