TaxTMI 
TaxTMI 
2011 (11) TMI 797
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....A & B Cooperative Housing Societies, Cuff Pared, Mumbai. During the previous years relevant to assessment years 1999-2000 to 2002-03, the said property was let out by the assessee to M/s Credit Suisse First Boston (I) Securities Pvt. Ltd. on a monthly rent of ₹ 23,000/-. The assessee had also received a deposit of ₹ 2.24 crores from the said tenant. The rental income received from the said property was offered by the assessee in the returns of income filed for assessment years 1999-2000 to 2002-03 which was initially accepted by the AO u/s 143(1). Thereafter he reopened the assessment for assessment years 1999-2000 to 2002-03 and in the reassessments completed u/s 143(3)/147, the income of the assessee from house property was determined by him by adopting the ALV of the said property at ₹ 4,80,000/- i.e. ₹ 40,000/- per month for assessment years 1999-2000 to 2002-03. The assessments made by the AO u/s 143(3)/147 for assessment years 1999-2000 to 2002-03 were set aside by the learned CIT, Central-IV vide his orders passed u/s 263 on 28-03-2007 with a direction to the AO to determine the ALV of the assessee's property in accordance with the provisions of secti....
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.... the assessee against the orders passed by the AO u/s 143(3)/147 for assessment years 1999-2000 to 2002-03 in paragraph No. 2.6 to 2.9 as under : "2.6. I have gone through the facts brought on record by the AO and the contentions of the appellant. It is settled law that property income is assessed on a notional basis with reference to the "annual value" which is defined as the amount for which the property might reasonably be expected to let from year to year or the rent actually received or receivable whihever Is higher. It is also settled law that the owner of house property is liable to the taxed on the "annual value" and not the actual income arising there from, whether it has been let out or not. It is in the background of the above settled law that the determination of rental income by the AC is examined below. 2.7 On going through the assessment order, it is seen that the AO has estimated the rental Income to be ₹ 40,000/-. The AC however had available before him, rent fetched by similar flats in the same building together with deposits and, therefore, he should have made a comparison of the rent received with the deposit taken by other parties vis-a-vis the appell....
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....TAT in the case of ITO Vs. Chem Mech Pvt. Ltd. supra, (and on the basis of which the AC has determined the annual letting value at ₹ 2.5 lacs per month in A.Yrs. 1997- 98 & 2003-2004) has been examined in detailed by me in my appeal order for A.Y. 2003-2004. In that case the ITAT, Mumbai had confirmed the action of the AO of taking into account the notional interest in the determination of the ALV on the basis of the fact that the AC had found that interest free deposits was taken In a circuitous manner for purposes of tax planning. In the case of the appellant however, it is on the basis of an arms length agreement with a third party that the deposit was taken and rent received and there is not even a hint in the assessment order that the transactions were for tax planning. Therefore, it has been held by me in my appeal order for A.Y. 2003-2004 that facts being clearly distinguishable, the decision in the case of ITO vs. Chem Mech Pvt. Ltd. (supra) is not applicable i the appellant's case. 2.9 The issue in the present appeals is the ascertainment of the correct annual letting value of the property. The ALV of the property is to deemed amount for which the property might rea....
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....o arrive at the fair rent and section 23(1)(a) does not mandate this. It was held that section 23(1)(a) requires determination of the "fair rent" being "the sum for which the property might reasonable be expected to let from year to year" and the AO has to make enquiry as to what would be the possible rent that the property might fetch. It was held that the AO can ignore the municipal valuation for determining the ALV if he finds that the same is not based on relevant material for determining the "fair rent" in the market and there is sufficient material on record for taking a different valuation. In the present case, although such relevant material in the form of comparable instances of rent in the similar locality was collected by the AO by making the enquiries, he proceeded to adopt the fair rent of assessee's property at ₹ 2,50,000/- per month by taking into consideration mainly the notional interest on the interest free deposit which, in our opinion, was not in accordance with the provisions of section 23(1)(a) as held by the Hon'ble Delhi High Court in the case of Moni Kumar Subba (supra). The learned CIT(Appeals), on the other hand, examined the material gathered by th....