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2024 (11) TMI 1099
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....figures and quantum of addition. First we take up AY 2013-14 as base year. 4. Aggrieved with the order of ld. CIT (A)-23, New Delhi, assessee is in appeal raising following grounds of appeal :- "1. For that on the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have held the additions made under the head "Income from House Property' the order passed u/s 153A/143(3) for the unabated AY 2013-14 to be bad in law in view of the fact that no incriminating material or document pertaining thereto was either found and / or seized in course of the search. 2. For that on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to correctly appreciate the fact that the property at Goa was being used for the purposes of business and therefore, the Ld. CIT(A)'s action of upholding the assessment of annual lettable value of such property to tax in terms of Section 22 & 23 of the Act, was grossly unjustified. 3. For that on the facts and in the circumstances of the case and in law and without prejudice to the preceding grounds, the Ld. CIT(A) grossly erred in holding that the assessee was not entitled to ....
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....earch operation, the Assessing Officer observed that assessee has acquired various properties at different places. The details are reproduced below :- Sl. No. Name Properties Remarks S.No. Location 9. THE KUMAR FAMILY TRUST 1. SHOP AT LANDMARK, JUHU TARA ROAD, MUMABI (Leased to Ritika @ Rs.550000/- PM) Mr. Suresh Chander Kumar Trustee 2. SHOPS AT MEGA MALL, GURGAON (Leased to Ritika @ Rs.350000/- PM) Mrs. Ritu Kumar Trustee 3. REIS MAGOS, GOA Mr. Ashvin Prakash 5. JARDIM TROPICALE - VILLA NO.1 - SANGOLDA Mr. Amrish Prakash Kumar - Beneficiary 6. VATIKA LANDBASE LTD. (UNIT 708) 7. VATIKA LANDBASE LTD. (UNIT 709) 8. The Assessing Officer observed from the seized records, several emails were recovered wherein it was found that the properties owned by Kumar Family Trust i.e. Reis Magos Villa and Sangolda Villa in Goa were used by Mr. Ashvin Prakash Kumar (one of the beneficiaries) for running the business of hotel/let out property to tourists. The Assessing Officer reproduced the relevant emails in the asses....
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.... Yours faithfully, (ALOKE PERIWAL)" 10. Further assessee was asked to provide explanation/calculation chart with respect to the rent received / notional rent if the property was not rented. In response, assessee has submitted that the property in Goa is a residential property which was used by the assessee for its own use i.e. self-occupied property by relying on section 23 of the Act. After considering the submissions of the assessee, the Assessing Officer found the explanation not acceptable and observed that on perusal of the seized email data, it is seen that assessee has used two properties of the Trust to Mr. Ashvin Prakash Kumar for running his business and for the same, the assessee has not offered any income in the return of income. For the purpose of use of the above two properties in Goa by Ashvin Prakash Kumar, during the course of search operation as well as post-search inquiry proceedings, no agreement was found to be entered by the assessee nor brought on record any agreement in respect to abovesaid query. He observed that it is clear that assessee has focused on tax saving only whether the means are genuine or not. The Assessing Officer observed that a....
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....d as the let out property but as per the definition of let out property, the let out property is that property which is let out on rent, which is not the case in the present situation. Therefore, the assessee has not declared any rent on these properties in the return of income, accordingly rejected the submission of the assessee. In order to determine annual lettable value, an Inspector was deputed to make field enquiries of these properties. As per the report of the Inspector, Assessing Officer observed that the Unit No.703 and 704 in the same Tower was occupied by Rohlig India Pvt. Ltd. in the same Tower and at 6th Floor property, it is occupied by Finelines PJ Management India Pvt. Ltd. and the said properties were occupied for more than 6 years. Therefore, the contention of the assessee that it has clear intention of letting out the property but the same could not be let out, stands futile seeing the other properties adjacent to i.e. Unit No.703 & 704 and on 6th Floor were given on rent. Further he observed that the properties held by the assessee are commercial properties. As the enquiries conducted by the Inspector, it was found that the prevailing rate for letting out the p....
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....riminating material found during the search, the assessment itself is bad in law requires to be set aside. In this regard, assessee has filed a detailed submissions including the abated assessments in AYs 2017-18 to 2019-20 and for the sake of clarity, it is reproduced below :- 2. Ground No.l of AYs 2013-14 to 2016-17 2.1 In these grounds the appellant has contended that the lower authorities were unable to bring any evidence on record which prove that any incriminating material was found in the course of search which can justify the impugned additions of Rs. 12,60,000/-, Rs.25,20,000/-, Rs. 25,20,000/- & Rs. 25,20,000/- in AYs 2013-14, 2014-15, 2015-16 & 2016-17 respectively and in that view of the matter the addition made in these orders deserve to be deleted. 2.2 The appellant submits that the assessments of AYs 2013-14 to 2016- 17 were unabated in terms of Section 153A of the Act. The relevant dates to substantiate the same have been enumerated in the table below: Asst Year Date of filing of original ROI Income returned Date of order u/s 143(1) Last date of notice u/s 143(2) /2013-14 30.09.2013 1,21,57,710/- N.A. 30.09.20....
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.... regarding the properties at Goa. On perusal of the said emails, it is evident that these were regular communications made in the regular course of business activities in as much as it did not contain anything incriminating whatsoever. The entity, M/s. RTA Retreats was a proprietorship firm of Mr. Ashvin Kumar and the income/expenses derived from the business activities conducted at the property in Goa formed part of his regular books of accounts. Accordingly, the information contained in these emails cannot by any stretch of the imagination be construed to be 'incriminating' in nature. It is further submitted that even the AO is unable to correlate or link as to how the contents of these emails led to the unearthing of unexplained income of the appellant. The AO has also not specified as to how this material was 'incriminating' in nature. 2.7 Reference in this regard is made to the decision of the Hon'ble ITAT, Delhi in the case of Lord Krishna Dwellers (P) Ltd Vs ACIT in ITA No.5294/Del/2013 & 2403/Del/2014 dated 17.12.2018, In the decided case, Search u/s 132 was conducted against the assessee and certain sale deeds were impounded by the Investigating authorities which ....
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....incriminating in nature justifying the impugned addition on account of share application money. The Tribunal noted that the deposits and withdrawals within the said bank account statement were duly recorded in the regular books of account of the assessee and therefore the account statements didn't form "incriminating evidence" so as to justify the impugned additions. The Tribunal therefore, in absence of any incriminating material found in the course of search, deleted the additions made in the orders u/s 153A in the unabated assessments for AY 2011-12 & AY 2012-13. 2.9 Attention is further invited to the decision of the Hon'ble ITAT, Delhi in the case of HBN Insurance Agencies Vs ACIT in ITA No. 3783/Del/2014 dated 23.12.2019. In the decided case the AO had made an addition by way of unexplained bank deposits in the assessments framed u/s 153A of the Act. On appeal, the assessee contended that the additions made u/s 68 were not based on any incriminating material found in the course of search whereas the Revenue claimed that the balance sheet, bank statements etc. found and seized in the course of search constituted incriminating material' which justified the impugned add....
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....y the impugned additions made u/s 23 of the Act in the unabated assessments framed u/s 153A for AYs 2013-14 to 2016-17. 2.12 Even with regard to the additions made u/s 23 of the Act in relation to the commercial properties at Gurgaon, it is evident from the face of the assessment order that the AO had made enquiries through ITI / Investigation Wing in the course of the assessment which cannot by any stretch of the imagination be said to be incriminating material unearthed in relation to these properties at Gurgaon in the course of search so as to justify the additions made in the unabated AYs 2013-14 to 2016-17. 2.13 These facts considered cumulatively show that no incriminating material whatsoever was found in the course of search pertaining to the appellant to justify the additions made u/s 23 of the Act in the unabated assessments of the relevant AYs 2013-14 to 2016-17. In the circumstances, the appellant submits that the impugned additions made in the absence of any incriminating material found in the course of search were wholly unsustainable and deserve to be deleted in full. 2.14 Reference in this regard is made to the following judgments of the ju....
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....e builder. It is thus apparent that these commercial properties were not fit for habitation and therefore no annual value could have been legally assessed u/s 23 of the Act. 3.2 Reliance in this regard is placed on the decision of the Hon'ble ITAT, Amritsar in the case of Shyam Sunder Behl Vs Addl. CIT (147 Taxman 1). In the decided case it was held that where the property is not in a 'habitable condition', the annual value cannot be assessed to tax u/s 23 of the Act. In the instant case also, the property in question was held to be not in a habitable condition because it was neither having an electricity nor a water connection and other things such as flooring, sanitation etc. were also to be completed for the purpose of use and occupation of the property by the tenant. In the absence of the basic material amenities in the property, it was held that the owner would not be in a position to create interest of the tenant in the property and hence the annual value was held to be NIL. 3.3 The above decision was again followed by the Hon'ble ITAT, Amritsar in the case of ACIT Vs Dr. Amrit Lai Adlakha (11 SOT 674). In the decided case also the report of the Inspector sh....
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....ssessed at 'NIL'. - Sonu Realtors Pvt Ltd Vs DCIT (173 ITD 82) - ACIT Vs Dr. Prabha Sanghi (139 ITD 504) (ITAT Delhi) - ITO Vs Metaoxide Pvt Ltd (170 ITD 235) (ITAT Mumbai) - S.R. Tendulkar Vs Dy.CIT (172 ITD 266) (ITAT Mumbai) - Premsudha Exports (P.) Ltd. Vs ACIT (110 ITD 158) (Mumbai) 3.7 In view of the above the appellant submits that even in the alternate the annual value of the property has to be assessed at 'NIL' in terms of Section 23(l)(c) of the Act. 4. Ground No. 3 of AYs 2014-15 to 2016-17 and Ground No. 2 of AY 2013-14 6b AYs 2017-18 to 2019-20 (Addition u/s 23 in relation to properties at Goa) 4.1 The appellant is a private discretionary trust settled by Mrs. Ritu Kumar 8b Mr. Shashi Kumar in favour of their sons, Mr. Ashvin Kumar and Mr. Amrish Kumar, who are the principal beneficiaries of the Trust. Clause 8.1 of the Trust Deed states that all the properties owned by the Trust shall be applied only for the benefit of the beneficiaries of the Trust. Copy of the Trust Deed is enclosed at Pages 45 to 52 of the Paper Book. Accordingly, in terms of the Deed of Trust, the Trustees had permitt....
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....alue. On appeal however, the Hon'ble High Court upheld the order of the lower appellate authorities deleting the same, by observing as under: The assessee must be held to be carrying on business, when that business is a business of a partnership firm since the firm, as a partnership firm has no legal entity and, it is a compendious expression for all the partners. In that view of the matter, therefore, the first condition which is prescribed in section 22 for purposes of qualifying for exemption, viz., that the person must be carrying on his business in question was fulfilled. If an assessee partner is in law carrying on business, though the business may be the business of a firm, it is beyond comprehension as well as common sense that he could not be said to be carrying on business in the premises in respect of the income of which the exemption is claimed since he is occupying the same as a partner and not in the capacity of an owner. If, when a partnership carries on a business, each partner thereof, carried on that business, and if the firm is carrying on business on the premises in respect of the income of which the exemption is claimed, it must be held as a n....
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....arnataka and Allahabad High Courts. The answer to the question referred is in the affirmative, in favour of the assessee and against the revenue." 4.6 Similar view has been expressed by the following High Courts as well. - CIT Vs Rabindranath Dhol (79 Taxman 170) (Orissa HC) - CIT Vs Mustafa Khan (145 Taxman 522) (All HC) 4.7 In the present case also the assessee Trust is not a juristic person. The appellant Trust derives its status from the beneficiaries in as much as all the assets/income of the appellant Trust beneficially belongs to the beneficiaries. In that view of the matter, and on the admitted fact that the principal beneficiary of the appellant Trust was using the property for business purposes, it is submitted that the lower authorities had grossly erred in assessing the annual value of the properties at Goa. The appellant submits that these properties qualify in the exception set out in Section 22 of the Act and therefore its annual value is not assessable under the head 'House Property'. 4.8 With regard to the AO's allegation that the non-charging of rent by the appellant trust from its beneficiaries was a tax saving tool, i....
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....ry trust formed for the benefit of individuals has the status of an 'individual' and not 'AOP'. The relevant findings of the Tribunal is as follows: "In the instant case neither the beneficiaries nor the trustees had joined in a common purpose or common action. The object of which was to produce income, profits or gains. In the assessment year in question the assessee in each case derived income from investment, i.e., from dividend and interest. The mere fact that beneficiaries or trustees were more than one could not lead to the conclusion that they constituted an 'AOP'. The necessary element to constitute an AOP as pointed out by the Supreme Court in the case of N.V. Shanmugham v. CIT[1971] 81 ITR 310, was altogether missing in the instant case. So the status of trustees in the instant case could only be that of an individual and not that of an AOP. In the instant case, there were more than one trustees and they were to be assessed as one unit in the status of an individual. It had not been disputed that if the status of the assessee's were to be taken to be that of an individual, they should be entitled to deduction under section 80L. The order of the Commissioner (Appe....
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....d that the word "individual" does not necessarily and invariably always refer to a single natural person. A group of individuals may as well come in for treatment as an individual under the tax laws if the context so requires. Reference may be made in support of this proposition, to the Full Bench decision of the Kerala High Court in Kerala Financial Corporation v. WTO [1971] 82 ITR 477, where the statutory Corporation was held to be assessable as an individual. The said decision drew strength from a number of decisions of the Supreme Court including that in Sodra Devi's case [1957] 32 ITR 615. The other decision is Andhra Pradesh State Road Transport Corporation v. ITO [1964] 52 ITR 524 (SC). We may also refer to the decision in Jogendra Nath Naskar v. CIT [1969] 74 ITR 33, wherein the Supreme Court has observed that there could be no reason why the word "individual" in section 3 of the Indian Income- tax Act, 1922, should be restricted to human being alone and not to juristic entities. ... Having regard to the facts and circumstances of this case, we are of the view that the trustees of the assessee-trust have to be assessed in the status of an "individual".....
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....ses of Section 23(l)(a) of the Income-tax Act, 1961. 6.2 Reliance in this regard is placed on the decision of the jurisdictional Delhi High Court in the case of CIT Vs Moni Kumar Subba (333 ITR 38) wherein it was held as follows: "13. The next question would be as to whether the annual letting value fixed by the Municipal Authorities under the Delhi Municipal Authority Act can he the basis of adopting annual letting value for the purposes of section 23 of the Act. This question was answered in affirmative by the Calcutta High Court in Satua Co. Ltd. 's case (supra) on the ground that the provisions contained in the Delhi Municipal Corporation Act for fixing annual letting value is pari materia with section 23 of the Act. The Court opined that the fair rent fixed under the Municipal laws, which takes into consideration everything, would form the basis of arriving at annual value to be determined under section 23(l)(a) and to be compared with actual rent and notional advantage in the form of notional interest on interest free security deposit could not be taken into consideration. ...... 14. In fact, this is the view taken even by the Supreme C....
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....al values determined by the Municipal Corporation. 6.5 Without prejudice to the above and in the alternate rental yield of immovable properties in metro cities are generally in the range of 2% of the value of investment. This view has been endorsed by the Hon'ble ITAT, Mumbai in the cases of DCIT Vs Rustomjee Evershine Joint Venture in ITA No. 1349/Mum/2022 dated 31.07.2023 and ACIT Vs Chalet Hotels Ltd in ITA No. 2513/Mum/2021 dated 30.08.2023. Following the same, the AO may alternatively be directed to restrict the ALV of the impugned properties to 2% of the cost of investment made by the appellant." 15. On the other hand, ld. DR for the Revenue submitted that various emails found during search are nothing but incriminating material. He further submitted that with regard to properties at Goa, the assessee has not submitted any agreement for usage of the property since the same was used by one of the beneficiaries for running the business. 16. With regard to Gurugram properties, ld. DR submitted that the assessee claims that these properties were not rentable properties, however there are adjacent properties which were already let out. Therefore, the submissions of ....
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.... did not last long because it did not turn up into a profitable venture and accordingly discontinued within a short span. It was submitted that financials of this venture were reflected in the ITR of Ashvin Prakash Kumar for AYs 2015- 16 & 2016-17. 19. From the above discussion, it is clear that assessee has not disclosed details of any of the above properties in its return of income filed during the AYs 2013-14 to 2016-17. These details were found only during the search that assessee has invested in other properties and the emails relating to exploitation of properties owned by the assessee trust. Therefore, the claim of the assessee that there is no incriminating material found during the search is unfounded. We observed that assessee has disclosed rental income of Gurugram and Mumbai properties only and not disclosed any rental income for other assets held by it even though it has disclosed the existence of the property in its Balance Sheet as on 31.03.2013. As per the exchange of emails between family members, it is clear that one of the beneficiaries has taken up the properties in Goa to exploit the same commercially. Accordingly, we noticed that Ashvin Prakash Kumar has de....
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....on are under the trust and the trust has utilised the properties at Goa for commercial exploitation and gave the same to one of the beneficiaries. Therefore, no doubt, one of the beneficiaries carried on the exploitation of the property and declared the commercial rent by the beneficiary in his financial statements. It clearly shows that the property under consideration was utilised by Ashvin Prakash Kumar for commercial purposes. Therefore, it is a fact on record that the commercial exploitation of the abovesaid properties was not favourable to the assessee/ family members. The assessee should have declared the annual lettable value u/s 23 of the Act. Considering the fact that the assessee trust is a separate entity under the Act in case any property belongs to the assessee are given to any of the beneficiary who is also a separate entity under the provisions of the Act and Ashvin Prakash Kumar has declared the rental income of the property in his financial statement even though, on the loss, it is still exploitation of the property owned by the assessee trust. Therefore, assessee should have declared rental income u/s 23 of the Act and it is not necessary that the annual lettable....
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....scussed in the earlier paras, the addition made by the Assessing Officer and facts are similar in all the assessment years under consideration with regard to Goa properties which were commercially exploited by one of the beneficiaries, the issue was already adjudicated in para nos.22 & 23 are applicable mutatis mutandis to grounds no.4 & 5 relating to denial of benefit of one self occupied property, we observed that these properties were commercially exploited by one of the beneficiaries and two Balance Sheets were submitted by the assessee relating to the beneficiary, Ashvin Prakash Kumar and no further details were submitted. From the material available on record and submissions made by the assessee, it shows that the property at Goa were commercially exploited by one of the beneficiaries during AYs 2015-16 and 2016-17 and due to persistent loss, the same was not exploited further. We observed that these properties were belonged to the assessee and also not commercially exploited after AY 2016-17. There is no further material available on record to show that assessee has actually exploited commercially afterwards. However, we observed that based on the emails exchanged between th....
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.... property under his utilisation. In absence of such declaration in the return of income, the assessee cannot claim on presumption basis that one property should be allowed as self-occupied property, it cannot be entertained at this stage. The assessee has relied on several decisions which are distinguishable with the facts of the present case. 27. Coming to the issue of computation of Annual Lettable Value. After considering the detailed submissions of the assessee, we are not inclined to agree with the submissions of the assessee. We observed that the property at Goa is a commercial property allotted to one of the beneficiaries of the trust considering the fact that the property does not give positive income as per the information available on record, the beneficiary also has not declared any income during that period under consideration. Therefore, in our considered view, the assessee should have disclosed annual municipal value as rental income as against the ALV adopted by the Assessing Officer which is determined by the Assessing Officer through commission as per which it was estimated on the information gathered from the properties located in the same vicinity. However, it....