TaxTMI 
TaxTMI 
2014 (7) TMI 510
X X X X Extracts X X X X
X X X X Extracts X X X X
....Officer. 3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in facts and in law in rejecting the appellant's ground of appeal against the Assessing Officer's action in treating the capital gain on sale of flat as Short Term Capital Gain amounting to Rs. 19,45,004/- as against appellant's claim of Long Term Capital Gain of Rs. 12,92,149/-. Ground No.1: 2. The assessee is owner of two flats, one at Andheri and another at Malabar Hill. These flats are occupied by another group company. For flat at Andheri the assessee is getting rent for Rs. 24,000 and for flat at Malabar Hill the assessee is getting rent of Rs. 60,000/-. The flat at Andheri is of 525 sq.fts area and flat at Malabar Hill is 550 sq.fts. According to AO income shown by the assessee in respect of these flats was on lower side. He, therefore, asked the assessee to explain the justification. In response assessee offered some additional rental income. However, the offer made by the assessee was not accepted by the AO and he estimated fair rent of Rs. 1,80,000/- and Rs. 6.00 lacs in respect of Andheri and Malabar Hill flats respectively. The position has been summarized in the shape of a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pheld the action of AO. The assessee is aggrieved, hence, has raised Ground No.1. 4. It was submitted by Ld. AR that the rental income shown by the assessee in respect of these flats is supported by lease agreements, which were duly submitted to the AO vide letter dated 7/2/2012, copy of which is placed at page 16 to 36 of the paper book. He submitted that copy of lease deed in respect of Malabar Hill flat is placed at pages 22 to 28 of the paper book and copy of lease deed in respect of Andheri flat is placed at pages 29 to 35 of the paper book. He submitted that the lease amount as per lease deed of Malabar Hill flat is a sum of Rs. 5,000/- per month and for Andheri flat it is 2,000/- per month. He submitted that according to these lease deed rental income was shown by the assessee. He submitted that Municipal ratable value of these flats is much below than the actual rent received by the assessee. He submitted that though assessee could not obtain annual ratable value in respect of Andheri Flat but annual ratable value certificate was obtained for Malabar Hill Flat and copy of the same was also furnished to the AO vide letter dated 16/3/2012, copy of which is placed at pages ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se agreement entered into by the assessee with its inter group companies was in any way non-genuine. If it is so, there is no base to make any addition to the rental income shown by the assessee except in the case where such addition is supported by the fact that fair rental value of these flats was in excess of actual rent received by the assessee. This proposition is duly supported by the decision of ITAT Mumbai in the case of ITO vs. Makrupra Chemicals Pvt. Ltd. (supra). The case of the assessee will be governed by section 23(1)(b) of the Act. The annual value of a property is determined as per section 23(1). According to clause (b) of sub-section (1) of section 23, if the property is let and actual rent received or receivable by the owner in respect of that property is in excess of sum referred to in clause (a) then the same will be annual ratable value of the property. In clause (a) of sub-section (1) of section 23 the annual ratable value will be the sum for which the property might reasonably be expected to let from year to year. It has been interpreted in the decision that where a property is let and actual rent received or receivable is in excess of the annual ratable valu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....no tax shall be levied or collected except by authority of law. Acquiescence cannot be take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. These observations are with reference to earlier decision of Hon'ble Bombay High Court in the case of Nirmala L. Mehta vs. A. Balasubramanium, 269 ITR 1(Bom). Accordingly, the offer made by the assessee during the course of assessment proceedings cannot be viewed to be binding on the assessee as the assessability of income according to that offer will be without the authority of law. Ground No.2: 7. This issue is discussed by the AO in para-4 of the assessment order. During the course of assessment proceedings it was found that assessee had advanced interest free loans from interest bearing funds. The assessee was required to explain. Vide letter dated 6/12/2010 the details were furnished. The AO observed that assessee did not establish nexus to the extent of Rs. 79,52,725/- between loans advanced and interest free funds available. He worked out interest disallowable at Rs. 6,30,949/-. Ld. CIT(A) has discussed this issue in para -6 of his order. It was submitted that asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 9. However, on the other hand, Ld. DR relied upon the order passed by AO & Ld. CIT(A). 10. We have heard both the parties and their contentions have carefully been considered. It is the case of AO that assessee could not establish nexus between the interest bearing funds and interest free advances to the extent of Rs. 79,52,725/-. As against this it is the case of the assessee that its own capital is of a sum of Rs. 2,33,09,924/-. Even the return of income filed by the assessee had shown the returned income at Rs. 70,97,190/- and assessee also has interest free loans of Rs. 51,21,860/-. All put together will far exceed the sum of Rs. 79,52,725/- for which the asseseee had not been able to establish the nexus. If these facts are examined in the light of aforementioned decision of Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd.,(supra) wherein it has been held that if there were funds available both interest free and over draft and/or loans taken, then a presumption would arise that investment would be out of interest free funds generated or available with the company, if interest free funds were sufficient to meet the investment. Their Lordship....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... will be long term capital gain. On these submission Ld. CIT(A) has observed that in view of decision of Hon'ble Bombay High Court in the case of Ramesh Chandra & Company vs. CIT, 35 Taxaman 153(Bom), where assessee has made a statement of facts, he could have no grievance if the taxing authority taxes in accordance with that statement. Ld. CIT(A) observed that in the present case there is nothing on record to suggest that assessee was forced or coerced or influenced in filing a letter stating therein that his income of sale of flat be treated as short term capital gain. The assessee had executed the letter of authority in favour of the Chartered Accountant who represented him and who was legally authorized to make explanation/statement/agreement with the AO for certain additions to assessable income so as to bind the assessee and the authorized representative vide his letter dated 6/6/2010 has categorically agreed for treating the receipt on sale of flat under the head "short term capital gain". Therefore, Ld. CIT(A) declined to interfere with the order of AO and upheld the action of AO. Assessee is aggrieved, hence, has filed Ground No.2. 12. Ld. AR submitted that vide letter ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... filed at page 52 of the paper book which also shows calculation of long term capital gain. The details are as under: 12.2 Ld. AR also referred to the sale deed which is dated 10/04/2007 and copy of which is filed at page 53 to 63 of the paper book. Ld. AR also referred to the letter dated 6/6/2010, copy of which is filed at page 11 of the paper book. It was submitted that only during the course of hearing some words were added by Ld. AR of the assessee and it was written as under: "As per discussion with you during the assessment proceedings we give details of working of short term capital gain on sale of Meerabai Co-Operative Society flat (New Delhi), which was shown earlier as long term capital gain . Short term capital gain works out to Rs. 19,45,004/-" He submitted that the said writing cannot be taken as offer by the assessee and even if it is treated as offer, the gain cannot be assessed as short term capital gain as there is no estoppel against law. Reference was made to the decisions which has been discussed above i.e. in the case of Balmukund Acharya vs. DCIT(supra). 13. On the other hand, Ld. DR relied upon the order passed by AO and Ld. CIT(A). He sub....