TaxTMI 
TaxTMI 
2013 (1) TMI 676
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....any adverse material relating to the relevant year warranting addition made by the Assessing Officer was found during search. The Ld. Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer as regards initiation of proceedings u/s 153A of the Act considering the facts of the case and the legal position the assessment is liable to be annulled. Ld. Commissioner of Income Tax (Appeals) has erred in rejecting the appellant's ground. (ii) Because since no incriminating material was found during the course of search for warranting additions made by the Assessing Officer, the additions made in the relevant previous year are wrong, illegal and deserves to be deleted. 2. (i) Because the Ld. CIT(A) has wrongly, illegally and arbitrarily confirmed the addition of Rs. 52,174/- made by the Assessing Officer u/s 23(4) of the Act. (ii) Because considering the facts of the case that the property could not be let out and no rent was received or receivable, the notional rent cannot be assessed, the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the addition instead of deleting the same. 3. Because the Ld. Commissioner of Income T....
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....e shown. The ALV of other properties than SOP are liable to be assessed u/s 23(4)(b) of the I.T. Act, 1961. Considering these facts and the judgement of the Hon'ble Allahabad High Court in the case of Radhadevi v. CIT 125 ITR 134, the notional annual letting value in respect of more than one self occupied properties, is to be assessed u/s 23(4) of the I.T. Act and this provisions are clearly applicable in the case of the assessee in respect of properties mentioned above. In the above case, the Hon'ble Allahabad High Court has held that for determining annual letting value, 7% of investment is just and fair. Considering this decision of Allahabad High Court and the details of investment, the notional annual letting value and income from house property of the above properties are works out as given in column No.5 & 6 above respectively. In this manner, the income of Rs. 52,174/- is added to the income of the assessee under the head Income from House property u/s 23(4) of the I.T. Act." 7. The A.O. has also made addition on account of house hold expenses Rs. 44,857/- for A.Y. 2004-05 as under :- (Page no.9) "No books of account or other details to justify the house hold expen....
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.... section 23(4)(b) and since, there is no evidence for calculation of annual letting value of the property, in my considered opinion, the AO has correctly computed the annual letting value at the rate of 7% of investment as per the decision of Hon'ble jurisdictional Allahabad High Court in the case of Smt. Radha Devi Dalmia v. CIT (supra) and hence, addition of Rs. 52,174/- was correctly made by him on account of these house properties. Therefore, both grounds taken by the appellant in respect of this addition i.e. ground no.3 & 4 are dismissed." 9. In respect of household expenses, the CIT(A) partly allowed the assessee's appeal as under :- (Paragraph no.7.3, page nos. 24 & 25) "7.3 I have considered the above arguments of the Ld. AR taken against the estimated addition made by the AO on account of alleged low withdrawal for house hold expenses and also considered the discussion made by the AO in the assessment order. I find that as per the details and various documentary evidence collected during the course of search and seizure operation, looking to the detailed discussion in the assessment order about the expenditure being incurred by the family members of the appellant, t....
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.... 44,857/- 105/Agr/2012 - 2005-06 86,398/- 42,285/- 22,500/- 106/Agr/2012 - 2006-07 86,398/- 66,142/- 107/Agr/2012 - 2007-08 86,398/- 55,571/- 108/Agr/2012 - 2008-09 86,398/- 44,142/- 338/Agr/2012 - 2004-05 67,629/- 44,857/- 109/Agr/2012 - 2005-06 67,629/- 42,285/- 110/Agr/2012 - 2006-07 67,629/- 66,142/- 112/Agr/2012 - 2008-09 67,629/- 44,142/- 99/Agr/2012 - 2003-04 60,809/- 32,643/- 100/Agr/2012 - 2005-06 44,590/- 42,285/- 101/Agr/2012 - 2006-07 44,590/- 66,142/- 102/Agr/2012 - 2007-08 44,590/- 55,571/- 372/Agr/2012 - 2008-09 44,590/- 44,142/- 373/Agr/2012 - 2003-04 1,06,035/- 32,643./- 374/Agr/2012 - 2004-05 1,06,035/- 44,857/- 375/Agr/2012 - 2005-06 1,42,239/- 42,285/- 376/Agr/2012 - 2007-08 1,42,239/- 55,571/- 377/Agr/2012 - 2008-09 1,58,409/- 44,142/- 354/Agr/2012 - 2004-05 88,260/- 44,857/- 355/Agr/2012 - 2005-06 ....
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....purposes of section 22, the annual value of any property shall be deemed to be- (a) the sum for which the property might reasonably be expected to let from year to year; or (b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or (c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable : Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation.-For the purposes of clause (b) or clause (c) of t....
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....ous year. We find that this interpretation is not correct because as per this clause, the property can be vacant during whole of the relevant previous year. Hence, both these situations cannot co-exist that the property is actually let out also in the relevant previous year and the property in the same year is vacant also during whole of the same year. We, therefore, reject this contention of the learned DR of the revenue. 13. The second interpretation suggested by the learned DR is that the property should be actually let out during any time prior to the relevant previous year and than only, it can be said that the property is let and this clause will be applicable. Now, we examine this contention. First of all, we find that the tense of the verb used prior to the word 'let' is present tense and not past tense. It means that the provisions of above clause talk regarding the relevant previous year and not of any earlier period and if that be so, this contention of learned DR is also not acceptable. Secondly, we find that even if this contention of learned DR of the revenue is accepted, the provisions of this clause (c) cannot be made applicable in the first year, when the proper....
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....essary. At this juncture, we examine other sub-sections of section 23 and we find that sub-section (3) of section 23 reads as under:- "(3) The provisions of sub-section (2) shall not apply- (a) the house or part of the house is actually let during the whole or any part of the previous year; or (b) any other benefit therefrom is derived by the owner." 16. From the above, we find that here, the Legislatures in their wisdom have used the words 'house is actually let'. This shows us that the words 'property is let' cannot mean actual letting out of the property because had it been so, there was no need to use the word 'actually' in sub-section (3) of the same section 23. Regarding the scope of referring to actual let out in preceding period, we find no force in the contention of the DR, as the Legislature has used the present tense. Even if we interpret it so, it may lead to undesirable result because in some cases, if the owner has let out a property for one month or for even one day, that property will acquire the status of let out property for the purpose of this clause for the entire life of the property even without any intention to let it out i....
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....ere was no intention to use the same for own business. Even if that is there, in that event also, no income can be assessed under the head "Income from house property" in view of the exclusion in section 22. The other possible use can be to let out. 18. We have carefully examined the material placed on record and we find from the memorandum of association that the assessee is entitled to purchase the property for its let out and to earn rental income. Copies of resolutions of Board of Directors are also placed before us in both the cases where from it is evident that one of the Director was authorized to take necessary steps to let out the property in question. They have also fixed the monthly rent and the security deposits of both the properties. Consequent to the resolutions, the assessee has approached to various Estate and Finance Consultants for letting out the properties and the request was also duly acknowledged by the Estate and Finance Consultants. The series of correspondence are placed before us to demonstrate the efforts made by the assessee for letting out of its properties, but, unfortunately during the year under appeal, assessee could not get the suitable tenant ....
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....by the ld. A.R. before us. 15. Now we come to the issue whether determination of annual value is in accordance with section 23(1)(a) of the Act. Section 23(1)(a) of the Act provides that the sum for which the property might reasonably be expected to let from year to year. There are various consideration which are relevant for determination of Annual value under section 23(1)(a) of the Act, out of which, one of the consideration is annual value as taxed by Municipality or Local Authority for the purpose of municipal or local tax. It is relevant to note that the local authority normally makes a periodical survey of all the buildings within its area for determining annual letting value for the purpose of levy of municipal taxes on those properties. For that purpose the normal procedure is that the surveyor determines the gross rent receivable from the property after taking into account all the relevant circumstances. The method of determination of annual municipal valuation may differ in certain major details in certain municipalities but by and large such annual municipal valuation represents the sum for which the property might reasonably be expected to let from year to year. Hen....
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.... such valuation could be either reduced or enhanced only on the basis of other materials produced on record for the purpose of such rebuttal. The Hon'ble Madras High Court in the case of CIT v. M.R. Alagappan [1987] 164 ITR 690 (Mad.) wherein it has been held that annual letting value fixed by the municipal authorities was held to be a relevant consideration for the purpose of determination of annual letting value of the property for computing the income from house property under section 23 of the Act. The Hon'ble Delhi High Court in the case of CIT v. H.P. Sharma [1980] 122 ITR 675 wherein it has been held that the municipal assessment is made by following a certain procedure under which a periodical survey is made of all buildings and on the basis of such survey the gross rent receivable from the property is determined and thereafter various types of services rendered are taken into account and then a figure for the purpose of annual municipal valuation is arrived at. If such an annual value has been assessed at or about the relevant time and after taking into consideration all the relevant factors and if the figures of actual rent are not available, then the figure of annual val....
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....ther the Revenue authorities nor the assessee has brought on record any material or evidence in support of the determination of annual value of properties, however, the assessee has furnished evidence in respect of annual value determined by municipal/local authority, Agra Nagar Nigam in support of annual value of concerned properties. Such material is relevant and related to the concerned properties as per detailed discussions made in paragraph no.15 of this order. Therefore, we are of the view that the annual valuation taken by the local authority is one of the basis under the peculiar facts and circumstances of these cases for determining the annual value under section 23(1)(a) of the Act. Since additional evidence is admitted by us first time, therefore, the A.O. is directed to verify the annual valuation determined by the local authority/Agra Nagar Nigam and determine the annual value for the purpose of section 23(1)(a) of the Act in accordance with annual value determined by local authorities. 18. Before parting from the matter, it is relevant to state that the annual value determined by the municipal/local authority has been considered in the case under consideration is o....
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.... 68000 SSF 96000 SSF 4 Mahenda Kumar Keshwani 71000 (Narendra Products) 112000 NP 72000 Bank 40000 180000 NP/Rent 44000 (Narendra Products) 46000 Salary Narendra Prod 96000 SSF/Salary 125000 Varsha Tra 5 Narendra Kumar Keshwani 81000 Narendra Prod 39000 Narendra Prod 36000 Narendra Prod 60000 Narendra Prod 60000 Narendra Prod 120000 Narendra Prod 180000 Narendra/Prop 6 Laxman Dass Keshwani 74000 Narendra Prod 65000 Narendra Prod 65000 Narendra Prod 70000 Narendra Prod 55000 Narendra Prod 127000 Narendra Prod 36000 Narendtra Prod 7 Kamal Kumar Keshwani 120000 Kamal Store 34000 KS Trading 120000 K.S. Trading 120000 KS Trading 200000 K.S. Trading 180000 KS Trading 200000 8 Hardevi Keshwani 30000 30000 30000 30000 36000 60000 60000 4,32,000 3,71,500 5,86,000 6,04,000 7,37,000 8,11,000 8,91,000 Estimated by A.O 6,00,000 6,00,000 9,00,000 9,00,000 12,00,000 12,00,000 12,00,000 Estimated by CIT(A) 4,80,000 4,80,000 6,00,000 7,20,000 8,40,000 9,60,000 10,80,0....
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.... No.351/Agr/2012, the issue of determination of annual letting value is remanded to the file of A.O. by admitting additional evidences with identical direction and the addition on account of house hold expenses are deleted in the respective remaining appeals. 25. In the result, all the remaining appeals on both the issues are partly allowed as have been decided in ITA No.351/Agr/2012. 26. In addition to the common grounds of appeal pertaining to annual value and low house hold expenses, the other grounds raised in these appeals are decided as under :- ITA No.347/Agr/2012 - A.Y. 2007-08 - Shri Narendra Kumar Keshwani 27. Ground no.3 is in respect of addition of Rs. 22,840/- made by the A.O. on account of unexplained investment in purchase of Washing Machine. The A.O. made the addition as during the course of search a bill no.1140 dated 10.03.2007 was found. The said bill relates to a Washing Machine for Rs. 22,840/- which was purchased from M/s. IFB Industries Limited, Ghaziabad. The assessee did not explain the source of the said Washing Machine. Therefore, the A.O. made the addition. 28. The CIT(A) confirmed the addition on the ground that during the course of searc....