TaxTMI 
TaxTMI 
TaxTMI 
2013 (10) TMI 832
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....r appellant prays for a leave to allow it to add to or modify the Grounds of Appeal. " Assessee-company, engaged in the business of import, export and trading of rough diamonds, furnished its return of income on 28. 9. 2009 disclosing Nil income. Assessing Officer (AO) finalised the assessment, on 28. 11. 2011, under section 143(3) of the Act. 2. During the course of assessment proceedings, AO found that the assessee had credited an amount of Rs. 2, 000/- on account of Rent of a Flat and the same had been declared under the head Income from House Property. He directed the assessee, vide his letter dated 04. 07. 2011, to furnish a copy of the rent agreement. Perusal of the lease agreement, dated 10. 05. 2005, revealed that the assessee had leased its property bearing Flat No. 154/A, Navshakti Nagar Co-op. Hsg. Soc. Ltd. (NNCHS) 98, Nepean Sea Road for a monthly rent of Rs. 6, 000/-, that the area of the said property was 650 sq. ft. , that the property had been given on lease to Mr. Dinesh Rasiklat Shah and Mrs. Aruna Dinesh Shah. He directed the assessee to explain as to whether Mr. Dinesh Rasikial Shah and Mrs. Aruna D. Shah were related to the assessee company or its Directors ....
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....f the said properties at Rs. 4. 62 lacs. During the appellate proceedings, assesee made an offer before the FAA to assess the income of the property@ Rs. 42 per sq. ft. FAA held that wavering stand taken by the assessee could not be accepted, that the assessee had earlier accepted the rental income to be assessed at Rs. 59 per sq. ft. , that same was comparable rent in the same building and in the same society. Referring to the provisions of section 23(1) of the Act and relying upon the judgment of Hon'ble Supreme Court in the case of Corporation of Calcutta Vs. Smt. Padma Devi(AIR1962SC151), Guntoor Muncipal Coun -cil(AIR 1971 SC 353), Dewan Daulat Rai Kapoor (122 ITR 700), Dr. Balbir Singh(152 ITR 388), Mrs. Shiela Kaushish (131 ITR 435) and Kashi Prasad Kataruka (101 ITR 810). He concluded that: i). ALV would be the sum at which the property may be reasonably let out by a willing lesser to a willing lessee uninfluenced by any extraneous circumstances ii). an inflated or deflated rent based on extraneous consideration may take it out of the bounds of reasonableness iii). actual rent received, in normal circumstances, would be a reliable evidence unless the rent is inflated /de....
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....bunal respectively. Departmental Representative (DR) submitted that AO had decided the issue after obtaining informa -tion from the society where the house property was situated, that assessee had itself agreed before the AO that higher rent could be adopted, that there was special relation between the owner and the tenant. 2. 3. We have heard the rival submissions and perused the material before us. Before we proceed further, it would be useful to refer to the provisions of section 23(1)of the Act. Said Section of the Act provides the method for determining the annual value a house property. Sub-section (a) talks of the sum for which the property might reasonably be expected to let from year to year. Courts are of the view that if rent is inflated /deflated by reason of extraneous consideration, then AO can take a reasonable base for calculating House property income. In the case of N. Nataraj (266 ITR 277), Hon'ble Madras High Court has held as under : "What is required to be ascertained for the purpose of determining the annual value as provided in section 23(1)(a) of the Income-tax Act, 1961, is the sum for which the property might "reasonably be expected to be let" from year....
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.... rent. The Assessing Officer, having regard to this provision is expected to make an inquiry as to what would be the possible rent that the property might fetch. Thus, if he finds that the actual rent received is less than the fair/market rent . . . . . . he can undertake necessary exercise in that behalf. " From the above it is clear that AO can adopt a reasonable sum for determining rental income and same could be regarded as the amount which could reasonably be expected to be received by way of rental. In our opinion, while determining the reasonable rent surrounding circumstances can be looked in to by the AO. Generally, for determining the tax liability of an assessee, material available on record is considered, but in certain situations other factors can also be considered. Hon'ble Apex court has, in the cases of Durga Prasad More (82 ITR 540) and of Sumati Dayal (214 ITR 801), held that one of the factors to be considered in special circumstances is human probability. Here, we would like to re-produce the relevant portion of the judgment delivered in the case of Druga Prasad More(Supra): "Now, coming to the question of onus, the law does not prescribe any quantitative test....
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....inion that rent received by the assessee, in the AY under consideration, was abnormally low, as compared to the fair market rent, that it had decided to charge less rent because of some extraneous reasons. 2. 3. b. Now, we would like to discuss the cases relied upon by the AR. We find that decisions given by the Tribunal in the cases of J. P. Investment Pvt. Ltd. and Gagan Trading Company (supra) are based on the order of the Reclamation Reality Pvt. Ltd. (supra). In the case of Reclamation Reality India Pvt. Ltd. effective ground of appeal to be decided was notional interest on advance rent security deposit for determining the ALV. In the case under consideration issue of interest received on advance-rent/security-deposit is not to be decided for arriving at ALV. In our opinion, cases relied upon by the asseesee are of no help to decide the appeal before us. 2. 3. c. We have already discussed the decision of Durga Prasad More and Sumati Dayal (supra), delivered by the Hon'ble Supreme Court. No assessee would agree for higher taxable income till the evidences, going against him, are collected and confronted to him by the AO. We find that in the present case also same thing happen....
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....ct under the head IFHP, that the assessee wanted the rental income to be taxed under the head Business Income to avail much larger deduction than what it would get under the head IFHP. With regard to the expenses related to the property-in-question, he held that the assessee had claimed expenses like Professional Fee, Electricity Expenses, Society Charges, Salary, Miscellane -ous Expenditure while offering income for taxation. As per theAO, records revealed that the assessee was carrying out its business from 535, PCHSL and it also had a branch at Surat. He held that the assessee's property at312, PCHSLwas being exclusively used by the5 parties to whom it was leased, that of the above expenses, electricity charges and society charges were directly related to the property, that it was common business practice that such expenses were borne by the parties who would uses the premises, that electricity bills showed that the bill amount was allocated to various cabins that were rented out in that month. Accordingly the expenses claimed under the heads electri -city and society charges, totalling to Rs. 2, 61, 977/-(1, 50, 024 +1, 11, 953), were disallowed. 3. 1. Assessee preferred an ap....