TaxTMI 
TaxTMI 
1997 (12) TMI 148
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....consideration of Rs. 8 lakhs. The amount of consideration was paid through cheques at various stages. 2.3 All the three companies who were the co-owners of the property executed a perpetual lease agreement with Shri Vinay Rai, Shri Jaswant Rai and Shri Kulwant Rai. The lease deed stipulated monthly payment of rent of Rs. 600, Rs. 825 and Rs. 825 respectively. All the rights and privileges attached to the land were given to the lessees. The property was continuously and exclusively used for the residential purposes of Shri Kulwant Rai and his family members. The occupants of the property had carried out renovation and improvement consequent upon taking possession of the same. 2.4 In the assessment year 1988-89, Assessing Officer examined the veracity of the lease agreement. Taking into consideration the totality of facts Assessing Officer concluded that all the transactions by the assessee-companies with the members of the family of Shri Kulwant Rai were collusive in nature. It was found that the benefit which flowed from the ownership of the property was exclusively utilised by the persons who had substantial interest in the affairs of the companies. It was noticed that the r....
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....st go back to the Income-tax Officer. We therefore set aside the order of the authorities below and restore the matter to the Income-tax Officer for making a fresh assessment in accordance with law, after considering the various points mentioned above and after giving an opportunity to the assessee to substantiate its case." 3.2 In consonance with the directions rendered by the Tribunal in the aforesaid order, Assessing Officer completed the assessment and passed a very cryptic order. It is reproduced here as under: - "Original assessment in this case was made on25-7-70which was later on set-aside by the Tribunal. Return of income was filed on25-6-74declaring loss of Rs. 7,276. In response to notice under section 143(2) Sh.Bansal,C.A.appeared with whom the case was discussed. The assessee-company is a co-owner in the propertyNo. 12-Aurangzeb Lane,New Delhi, with two other co-owners having 1/3rd share. The assessee-company derives property income. After discussion total income/loss is computed as under: - ---------------------------------------------------- Property Income: Rental income &....
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....rely on the basis of surmises. There was no cogent evidence to support this finding. The onus probandi rests on the Department. It was not discharged. It is sine qua non on the part of Department to prove the factum of collusiveness beyond the shadow of doubt. If Department fails to prove the fact of collusiveness, the basis for determination of the ALV cannot be altered. The actual rent received must be the basis for determining the ALV. Reliance was placed on the decision of Addl CIT v. Mrs. Leela Govindan [1978] 113 ITR 136 (Mad.). It was also submitted that even if the rent agreed was lower, it is the amount received under the deeds of lease which is to be adopted as the ALV. Learned counsel relied on CIT v. H.P. Sharma [1980] 122 ITR 675 (Delhi). 4.2 It was further contended that the expression "reasonably* occurring in section 23(1)(a) of the Act, connotes, what the owner might reasonably expect to get from hypothetical tenant if the building is let from year to year and though the word "reasonably" may not be capable of precise definition, but it signifies "in accordance with reasons". It was submitted that the annual rent payable by tenant to the landlord would in the no....
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....ceed to the figure of Rs. 80,000, as the property was purchased for Rs. 8 lakhs only. Our attention was invited on the provisions of Delhi Municipal Corporation Act. Learned counsel also invited our attention on some cases in order to demonstrate that assessee charged the rent as per the prevailing rates. 4.6 Learned counsel submitted that proceedings before the N.D.M.C. has got no nexus with the present case. Department should not be allowed to use the material connected with the said proceedings as because these documents were not made the basis of assessment. Therefore these cannot be regarded as evidence which can be admitted and examined. Learned counsel relied on a good number of precedents to support the various arguments raised in this appeal. 5. Shri P.K. Sahu, learned Senior Departmental Representative appeared before us. Relevant documents and papers were filed. Our attention was invited on the order of the Tribunal in the case of Allied Finance (P.) Ltd for the assessment year 1974-75. Tribunal observed: "there is no dispute that the shareholders in all the three companies are the same persons." Shri Sahu stated that the shareholding position at the time of purcha....
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....t on fair rent by the owner companies to the Rai family. There is absolutely no evidence in regard to letting out of the property to the foreigner. The claim of the assessee is mere ipse dixit. 5.2 It was further stated that the list of shareholders of these three companies is almost identical with the persons, who were actually residing in the house. Hence the relationship of the landlord and tenant did not exist and would not have been claimed, but for the fact that it was advantageous to do so in respect of tax liability on individual wealth. At that point of time it could not have been foreseen that the situation regarding provision of wealth-tax will change one day. In fact it was with a view to plug such tax evasion only that the provisions were enacted in section 40 of the Finance Act, 1983. 5.3 It was argued that since true rent is not reflected in the deed it is open for the Assessing Officer to take the amount of rent in consideration which the property might fetch from year to year. Considering the locality in which the property situated and other surrounding circumstances, Assessing Officer was correct in ascertaining the value of the property at Rs. 7 lakhs per m....
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....e the Revenue authorities took a particular view of the statutory provisions in the income-tax assessment, and later on realised that it was a mistaken view, they cannot be estopped from taking a correct view of the statutory provisions later on. Reference was made to the decision of CWT v. Mattles (P.) Ltd. [1985] 156 ITR 569 (Delhi). Learned Departmental Representative took us through the various precedents to show that the doctrine of res judicata cannot be applied in the facts and circumstances of the present case. 5.7 On the backdrop of the facts narrated hereinbefore it was argued that the question of fixation of standard rent will not arise in this case as the property was never genuinely let out. Only a charge of letting out had been created so that the ownership of the property remained with the assessee-companies. The market value of the property was artificially reduced by alleged fixed amount of rent for which the property was claimed to be let out. It is, therefore, essential to penetrate the veil and find out the real purpose for which the companies were incorporated. ALV of the property cannot be worked out on the basis of rent shown. Because of the collusive natu....
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....uthorities including the Appellate Tribunal are not courts; and secondly, that the purpose and the subject-matter of the proceedings in a subsequent year are not the same as those in a previous year. 6.3 There are catena of cases in the same stream wherein it is laid down that as a general rule the principle of res judicata is not applicable to the decisions of Income-tax authorities, an assessment for a particular year is final and conclusive between the parties only in relation to that year. Decisions given in an assessment for an earlier year are not binding either on the assessee or on the Department in a subsequent year. 6.4 The rule of res judicatah subject to some limitations. There should be finality and certainty in all litigations including litigation arising out of Income-tax Act. An earlier decision of the same question cannot be reopened if that decision is not arbitrary or perverse, and it had been arrived at after due enquiry, and no fresh facts are placed before the Income-tax authority in the later decision and the Income-tax authority in the earlier decision has taken into consideration all material evidence. This view was taken in the case of CIT v. Dalmia ....
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....lso not regularly paid. It was said to be only credited in the books of assessee-companies by means of book entries. That too was also not on regular basis. Lessee invested substantial amount on the renovation and construction. This in conjunction with other facts discussed hereinbefore indicate that the tenant-landlord relationship did not exist. It was only an arrangement to get some tax advantage. It was a scheme of tax avoidance which consisted of a series of transactions each of which was individually genuine, but the result of all was avoidance of tax. 7.2 There is no evidence on record to show that the property in question as alleged by the assessee was let out to a foreigner on a monthly rent of Rs. 2,000 per month. In the absence of evidence the claim of the assessee in regard to the same cannot be examined. 8. Section 23(1)(a) of the Act provides that for the purposes of section 22 the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year. The word used is "might" and not "can" or "is". It is thus a notional income. 8.1 Prior to the 1975 amendment, i.e., up to assessment year 1975-7....
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....e agreed rent which is legally recoverable and not tainted by fraud, relationship or any other consideration must be taken to be the standard rent and hence the actual rent received by the assessee was rightly taken as the annual value of the warehouse." 9. Good many precedents were relied upon to stress the point that actual rent or standard rent should be the basis for determining the ALV. But the precedents relied upon do not match with the facts of the present case. Each case depends on its own facts, and a close similarity between one case and another is not enough, because even a simple significant detail may alter the entire aspect. In deciding such cases, one should avoid temptation as said by Cordozo by matching the colour of one case against the colour of another. Heraclitus said: "You never go down the same river twice". What the great philosopher said about time and flux can relate to law as well. Hon'ble Supreme Court in the case of Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai AIR 1976 SC 1455, has held that a ruling of a superior Court is not of scriptural sanctity but is of ratio-wise luminosity within the edifice of facts where the judicial-lamp plays the legal-....