TaxTMI 
TaxTMI 
2017 (4) TMI 1445
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....tion of Rs. 29,26,000/- on account of advances shown against flat booking for which sales has been made in subsequent years. 4. Under the facts and circumstances of the case the ld. CIT(A) has erred in not considering the additional evidences furnished by the assessee under rule 46A of the Income Tax Act, 1961. 5. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing." 2. Briefly stated the facts are that the case of the assessee was picked up for scrutiny assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) and assessment was framed vide order dated 31.03.2015. While framing the assessment, the AO made disallowance of Rs. 21,967/- while invoking all provision of section 40A(3) of the Act, assessed the income from house property at Rs. 14,11,556/- and made addition on account of advances shown against flat booking of Rs. 29,26,000/- Against this , the assessee preferred an appeal before ld. CIT (A), who after considering the submissions, partly allowed the appeal. Thereby, the Ld. CIT(A) confirmed the addition of Rs. 29,26,000/-, Rs. 2....
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....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 therof is less than the sum referred to in clause (a), the amount of received or receivable: The case of the assessee is fully covered under clause (c) of sub section 1 of section 23 which has the following stipulation:- (I) Where the property or any part of the property is let. (ii) And was vacant during the whole or any part of the previous year. (II) And owing to such vacancy the actual rent received or receivable is less than the sum referred to in clause (a). It is submitted that all the aforesaid stipulation and parameters laid down in section 23(1)(c) are fully applicable to the facts of the case. The property of the assessee meets these conditions. The assessee has disclosed rent from letting out the part of the property namely Ramas Janki Vihar. Such rent has been disclosed at Rs. 2,64,500/-. Copies of rent agreements are available on paper book page no. 39 to 50. This is mentioned in the assessment order itself and it is undisputed fa....
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.... assessee the part of the property was let out and income under the head house property of Rs. 1,85,150/- was disclosed after claiming deduction u/s 24(a) of the Income Tax Act, 1961 the same is also mentioned in the assessment order. In view of this the decision of the Hon'ble High Court of Delhi is of no avail. 3. Board circular is in favour of the assessee The board has issued explanatory notes on the amendments carried out by Finance act, 2001. The provisions of section 23 were amended by the Finance Act 2001. The board has issued the following clarification under Circular No. 014 of 2001 Dt. 22nd November, 2001 which goes in favour of the assessee. Circular No. 014 of 2001 DT. 22nd November, 2001 Subject Finance Act, 2001-Explanatory Notes on provisions relating to Direct Taxes Dated 22/11/2001 "29.2 The substituted section 23 retains the existing concept of annual value as being the sum for which the property might reasonably be expected to let from year to year i.e., annual letting value (ALV). However, in case of let out property, the concept of "annual rent", has been removed. The new section pro....
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.... plea also. The assessee is a builder and developer and the asessee is giving vacant falts for earning of rent on temporary basis, otherwise the main objects of the assessee is to earn profit by sale of flats not by giving flats on rent. So the assessee company has temporarily grabbed the opportunity of earning rent. It is not the regular feature of the assesse e company or business of the assessee company. The assessee company has declared rental income which has been earned by it. The income tax is levy on the income which has been earned by it. The income tax is levy on the income received and not on notional calculations. In other words the levy of income tax is for receipts and nor for notional amounts. We would also like to submit that the rental income of flats cannot be taxed on the basis of ALV because of owner is an occupant and such occupation in the course of and for the purpose of business as a builder. Therefore ALV cannot be assessed as income of the assessee company. The ld. CIT(A) has rejected the claim and explanation of the assessee in the grab of language of section 23(a) of the Income Tax Act. But he did not co....
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.... Rs. 14,11,556/- including income of Rs. 1,85,150/- as declared by the appellant by placing reliance upon the decision of Hon'ble Delhi High Court in the case of Ansal Housing Finance and Leasing Co. Ltd. [2013] 29 taxmann.com 303 (Del.). It would be appropriate here to reproduce the provisions of section 23 of the Act as under: " Annual value how determined. 23. (i) for the 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 receive 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 owning 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." (ii) During the appellate proceedings, it was submitted by the ....
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....s one single property whereas the said project consisted of a umber of independent flats / showromms, some of which wer already sold by the appellant, some were let out and some were lying vacant. Thus, there wa a fallacy in the basic argument of the appellant which cannot be allowed. Hence, it is held that the project Rama's Janki Vihar is not a single property as claimed by the appellant but consisted of a number of independent flats/showrooms and the provisions of section 23 are to be applied to each of these individual flat/showroom and not to be entire project as one unit or property. (v) It may be mentioned that the amendment in section 23 of the Act was explained by circular no. 14/2001 dated 22/11/2001 wherein it was stated that: " The new section provides that where the property or any part of the property is let and the actual rent received or receivable is in excess of the ALV, the amount so received or receivable shall be the annual value. This will be the case even if the property (or part of the property) was vacant for a part of the year, but the actual rent received or receivable during the year is still higher than the ALV. ....
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....ment has restored to several other presumptive methods, for the purpose of calculation of income and collection of tax. Furthermore, application of ALV to determine the tax is regardless of whether actual income is received ; it is premised on what constitutes reasonable letting value, if the property were to be leased out in the market place.[para 13] As far as the alternative argument that the assesee itself is occupier, because it holds the property till it is sold, is concerned, there is no merit in this submission. While there can be no quarrel with the proposition that 'occupation' can be synonymous with physical possession, in law, when Parliament intended a property occupied by one who is carrying on business, to be exempted from the levy of income tax was that such property should be used for the purpose of business. The intention of the lawmakers, in other words, was that occupation of one's own property, in the course of business, and for the purpose of business, i.e. an active use of property, (instead of mere passive possession) qualifies as 'own' occupation for business purposes. This contention is, therefore, rejected. [para 14] Th....
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.... the clause (a) of section 23 of the Act in respect of unsold flats/showrooms lying vacant during the year under consideration subject to modification in the ALV of the showroom on ground floor and B104 in view of the discussion made in the subsequent para. (x) During the appellate proceedings, it was submitted that the AO gas calculated the ALV of the unsold portion of the house property at Rs. 21,17,333/- which includes ALV of the showroom at Rs. 4,80,000/- and of B-404 at Rs. 1,96,574/-. It was submitted that in respect of B-404 at Rs. 1,96,574/-. It was submitted that in respect of B-404 and shops 'B' block, the rent agreemts were furnished before the AO, as per which, the rent received by the appellant from these portions of the house property was only of Rs. 2,64,500/- as these were let out only for part of the year, against which the AO has calculated rent of these properties for the whole year as under at Rs. 6,76,574/-: Showrooms rent @ 40000/-per month Rs. 4,80,000/- B-404 rent @ 11.68 per sqft. Rs. 1,96,574/- Total Rs. 6,76,574/- (xi) In view of the above contention of the appellant, the assessment record was examine....
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....n of bogus and unverifiable expenditure and in this connection it is relevant to got though the relevant part of the speech of the Deputy Prime Minister of Finance delivered on 29th Feb. 1968, while introducing the Finance Bill, 1968, which is found in (1969) 67 ITR (st)p.15: "Tax liability is something artificially reduced by diverting profits to relatives and associates concern in the form of excessive payments for goods and services. Claims are also made for deduction of expenses in large amounts shown to have been paid in cash, often with a view to frustrating investigation as to the identity of the recipients and the genuineness of the claim. To plug these loopholes, I propose to provide that payments made in businesses and professions to relatives or associates concern will have to pass the test of reasonableness in order to qualify for deduction. Further, I propose to provide that payments made in amounts exceeding Rs. 2,500 after a date to be notified later will be allowed as a deduction only if these are made by crossed cheques or by crossed bank drafts." Thus the very purpose of introducing this new section was to have a check over the ....
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....ond doubt. The addition so made may kindly be deleted. The ld. CIT(A) has not considered the circular of the Board which is of the binding nature and the case law cited by the assessee. The ld.CIT(A) has only mentioned that JVVNL is not the Government which is against the latest judicial pronouncement." 5.1 On the contrary, Ld. Departmental Representatives opposed the submissions and supported the order of the ld. CIT(A). 5.2 We have heard the rival contentions, perused the material available on record. Ld. CIT (A) rejected the claim of the assessee in para 3.2.2 by observing as under. "3.2.2 Determination: (i) The brief facts of the case are that during the year under consideration., the appellant has made cash payment of JVVNL for electricity expenses in violation of the provisions of section 40A(3) of the Act and consequently, the AO made addition of Rs. 21,967/- u/s 40A(3) of the Act. During the appellate proceedings, it was submitted by the appellant that JVVNL is a government agency and there is no doubt about the identity of the payee and the genuineness of the transactions is not doubted by ....
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....p; Against the booking/sale of this flat a sum of Rs. 28,24,000/- was received from Shri Azad Hussain. The flat was allotted on 20.02.2009 as per copy of allotment letter copy of which is available on Paper book page no. 1. Apparently the flat was allotted in Assessment Year 2009-10. Simultaneously on 20.02.2009 itself possession of the flat was also handed over to Shri Azad Hussain. A copy of the possession letter dated 20.02.2009 is also available on paper book page no. 2. Both the copy of the allotment letter a well as the possession letter are duly attested by the notary public. Since no sale deed was executed, as a matter of abundant caution a power of attorney was also executed in favour of Shir Azad Hussain on 28.02.2009 itself. This power of attorney was registered with sub-registrar, Jaipur on 20.02.2009 itself. A copy of the power of attorney is available on paper book page no. 3 to 8. Further the assessee though its direction Shir Gauri Shankar Chhipa also executed a will in favour of Azad Hussain in respect of this flat. A copy of the will executed on 20.02.2009 duly attested by the Notary Public is also available on....
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.... i.e. (2824000 from the assessee + 102000 which has been separately added by the ld. Assessing Officer). A copy of the audit report is available on paper book page no. 12 to 36. Since all the documents, the facts of the case established beyond doubt that no amount was received from Azad Hussain during the year under consideration as such no addition could be made. The amount of Rs. 28,24,000/- was received in Financial year 2008-09 relevant to Assessment Year 2009-10 i.e. at the stage of booking/allotment of the flat. It is submitted that due to inadvertence and a mistake on the part of accountant the amount of Rs. 28,24,000/- continued to be carried forward a booking advance in the books of accounts of the assessee from 2009-10 onwards to Assessment Year 2012-13, whereas this should have been transferred to sale account. The mistake has been rectified in Financial Year 2014-15 i.e. in Assessment Year 2015-16 wherein the sale has been booked. The mistake has occurred mainly on account of the fact that no sale deed was executed and only power of attorney was given to Shri Azad Hussain. This was done by Shri Azad Hussain to avoid stamp duty and ....
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....Year 200910 so the entry should be considered in the year 2009-10 or in Assessment year 2015-16 when the assessee has entered the sale transaction in books of accounts and the profit element of the sales should be added considering the over facts and circumstances. Ground no. 4- Under the facts and circumstance of the case the ld. CIT(A) has erred in not considering the additional evidences furnished by the assessee under rule 46A of the Income Tax Act, 1961. During the appellate proceedings it was submitted that the paper at page no. 1 to 11 are relevant and goes to the root of the matter and are strong material for deciding the issue. But the ld. CIT(A) refused to admit these additional evidences by saying that assessee is not falling in any circumstances under rule 46A of the Income Tax Rules, 1962. In this regard our submission is only that the paper submitted in form of copy of allotment letter (paper book page no. 1) copy of possession letter (paper book page no. 2) copy of power of attorney (paper book page no. 3 to 8) and other papers (paper book page no. 9 to 11) are relevant and are in relation to question to be decided a....