TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 770
X X X X Extracts X X X X
X X X X Extracts X X X X
.... out by the assessee to one Mrs. Harkesh Kaur. The assessee had received rent amounting to Rs. 6,50,000/- and after claiming expenses, returned income of Rs. 4,09,830/- The Assessing Officer (AO) had accepted that part of the house was let out to the lessee, but treated the fair market rent for the property at Rs. 3,00,000/- Per Month on the basis of report of the Approved Government Valuer, namely M/s Continental Foundations, which was received by him from the DDIT (Inv), Chandigarh alongwith report of the Punjab Vigilance Bureau. The same was duly confronted to the assessee during the course of assessment proceedings. The assessee, in response, stated that the rent received by him was reasonable and submitted copy of lease deed for House No.330, Sector 9-D, Chandigarh where the complete house was leased out @Rs. 80,000/- p.m. and copy of the Certificate & Bank Statement from tenant of House No.114, Sector 8-A, Chandigarh where the complete house was leased out @ Rs. 90,000/- p.m, in support of his contention. The AO rejected the contention of the assessee stating that the Valuation Report had been prepared by a well competent valuer who had taken into account every minute detail ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r market rent because of the abnormally high interest-free security deposit, he can undertake necessary exercise in that behalf In the present case the appellant lessor has accepted Rs,15,00,000/- deposit as advance rent over and above rent paid per month, However, the notional interest on interest free security/deposit cannot be taken as determinative factor to arrive at fair rent Therefore, the AO has relied on the report of the Government Approved Valuer for rent on the specific property which determined rent @Rs. 3,00,000/- per month Appellant has also failed to point out specific defects in the said report with supporting evidence. In the case of Smt Indu S. Jain vs ITO (2012) 21 Taxmann.Com 471 (Mum.), Hon'ble Tribunal has held that - "..........Municipal rateable value if determined correctly could be taken as ALV but the same was snot binding on the AO... IN case AO could show that rateable value under Municipal laws does not represent correct fair rent then, he may determine the same on the basis of material placed on record......." 27.2.2. It is clear that, AO has been vested with the power to determine the ALV u/s 23(1)(a) of the Act. The AO has to determine the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3. That on law, facts and circumstances of the case, the Worthy C1T (A) has erred in confirming the action of Ld. AO wherein Ld. AO had erred in using the report of Valuation firm for valuation of rental income of property even when such report could not have been used for purposes of assessment of rental income u/s 23andtheLd.AOhasthereby erred in making impugned addition of Rs. 14,87,604/- on account of alleged excess rental income receivable from the property. 4. That on law, facts and circumstances of the case, the Worthy CIT (A) has erred in confirming the action of Ld. AO wherein Ld. AO had erred in making addition of Rs. 14,87,604/- by replacing the rental income received having been disclosed by the appellant with estimates of rent receivable from the property by relying blindly on valuation considering inherent weakness, damages and market as were duly provided during assessment proceedings. 5. That on law, facts and circumstances of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO wherein Ld. AO had erred in not allowing Statutory Deduction of 30% u/s 24 out of enhanced rental income even when the! appellant was clearly eligible for the same. 6.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....further stated that the municipal value or standard rent is not binding on the AO but is the guiding factor for determining the reasonable rent expected to be fetched by the property and if the AO finds that the municipal value is not based on relevant material for determining fair rent in the market and there is sufficient material on record for taking different value the AO can determine the fair rent by inflating or deflating the municipal value or standard rent. 11. So far as the above interpretation of the provisions of the relevant sections by the Ld.CIT(A) are concerned, we are in agreement with the same. In fact we find that it is settled law that the annual value of a property cannot exceed its standard rent as under rent control law where applicable, laid down by the apex court in the case of Daulatrai vs New Delhi Municipal Committee 122 ITR 700 (SC) and Sheila Kaushik vs CIT (1981)131 ITR 435(SC). And by virtue of clause (1)(b) to section 23, only if actual rent exceeds fair rent/standard rent, it shall be treated as annual value of property. 12. Therefore there is no dispute with the proposition that for the purposes of determining the annual value of a property in t....