Tribunal directs Assessing Officer to align Annual Letting Value with municipal rateable value

The Tribunal allowed the assessee's appeal, directing the Assessing Officer to determine the Annual Letting Value (ALV) of the property as per the municipal rateable value. If the ALV declared by the assessee aligns with this value, it should be accepted. Consequently, the revenue's appeal was dismissed as the Tribunal upheld the determination of the ALV based on the municipal rateable value.

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Issues Involved:
1. Determination of Annual Letting Value (ALV) of the property owned by the assessee.
2. Legitimacy of the method used by the Assessing Officer (A.O) to determine the ALV.
3. Validity of the CIT(A)'s direction to re-compute the ALV based on municipal rateable value with incremental adjustments.

Detailed Analysis:

Issue 1: Determination of Annual Letting Value (ALV) of the Property
The primary issue revolves around the correct method to determine the ALV of the flats owned by the assessee at Central Garden Complex, Chunabhatti, Mumbai. The assessee had initially declared the ALV based on the municipal rateable value at Rs. 1,39,785/-. The A.O, however, determined the ALV at Rs. 2,51,97,600/- based on a market inquiry which suggested a rental rate of Rs. 42/- per sq. ft. This led to an addition of Rs. 1,76,38,320/- under the head "Income from house property."

Issue 2: Legitimacy of the Method Used by the Assessing Officer (A.O)
The A.O's method of determining the ALV was contested. The A.O had relied on a report from an inspector and market data from websites like www.magicbricks.com and www.99acres.com. The CIT(A) initially sided with the assessee, accepting the municipal rateable value as a yardstick, but the Tribunal had remanded the case back to the A.O for a thorough investigation. In the second round, the A.O reiterated the previous ALV determination, which was again contested by the assessee.

Issue 3: Validity of the CIT(A)'s Direction to Re-compute the ALV
The CIT(A) directed the A.O to compute the ALV based on the municipal rateable value for A.Y. 2010-11, increased by 5% annually plus an additional 1/9th of the value. This method was consistent with the CIT(A)'s approach in previous years (A.Y. 2013-14 and A.Y. 2014-15). However, the Tribunal, in the assessee's case for A.Y. 2010-11, had vacated this approach, directing the ALV to be determined strictly as per the municipal rateable value.

Tribunal's Findings:
The Tribunal noted that the issue was recurring and had been previously addressed in the assessee's favor for A.Y. 2010-11, 2011-12, 2012-13, and 2013-14. The Tribunal reiterated that the ALV should be determined based on the municipal rateable value, and if the ALV declared by the assessee aligns with this value, it should be accepted.

Conclusion for Assessee's Appeal:
The Tribunal allowed the assessee's appeal, directing the A.O to determine the ALV of the property as per the municipal rateable value. If the ALV declared by the assessee is in line with the municipal rateable value, it should be accepted.

Conclusion for Revenue's Appeal:
Given the Tribunal's decision on the assessee's appeal, the revenue's appeal was rendered academic. The Tribunal dismissed the revenue's appeal, upholding the determination of the ALV based on the municipal rateable value.

Final Order:
- The appeal filed by the assessee (ITA No. 1573/Mum/2019) is allowed.
- The appeal filed by the revenue (ITA No. 836/Mum/2019) is dismissed.

Order pronounced in the open court on 03.03.2021.

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