2016 (10) TMI 532 - AT - Income Tax

Addition on property income - estimation of ALV - Held that - CIT(A) has passed a detailed order thereby mentioned that the assessee had relied only on the Municipal taxes paid as basis for estimation of rental value and since the payment of Municipal taxes is not a measure to estimate the ALV of the property therefore the CIT(A) has held that it is not on record as to what had been submitted by the assessee to the Municipal authorities for property tax valuation. Since the assessee had not supplied any documentary proof therefore the CIT(A) in the absence of such factual information has held that the ALV estimated by assessing officer cannot be disturbed. No new circumstance has been brought on record before us by the learned DR in order to controvert or rebut the findings recorded by the learned CIT (A) on the basis of the remand report. Moreover, there is no reason for us to deviate from the findings recorded by the learned CIT (A). Therefore, we are of the considered view that the findings recoded by the learned CIT (A) are judicious and are well reasoned. Accordingly, we uphold the same. Resultantly, this ground raised by the assessee stands dismissed. Estimation of income from the guest house - Held that - CIT(A) has passed a detailed order thereby observed that the assessing officer has resorted to the estimation of income from the guest house as the assessee could not provide any evidence such as account books, registers etc or photograph of the guest house. The CIT(A) has rightly held that in the absence of this the AO should have carried out certain local enquiries before arriving at the amount of addition. Therefore after discussing the entire case, the CIT(A) has rightly come to the conclusion by taking occupancy rate at 50% per annum and charges per day per person per room by taking @ ₹ 150 per day and has worked out the amount in question which comes to ₹ 1,57,500 (150 x 6x 175) as detailed above. No new circumstance has been brought on record before us by the learned DR in order to controvert or rebut the findings recorded by the learned CIT (A) on the basis of the remand report. Moreover, there is no reason for us to deviate from the findings recorded by the learned CIT (A). Therefore, we are of the considered view that the findings recorded by the learned CIT (A) are judicious and are well reasoned. Addition us/ 14A - Held that - CIT(A) has passed the detailed order after taking into consideration the arguments raised by the both the parties. Ld. CIT(A) after detail discussion has rightly observed from the computation of total income that the AO has wrongly disallowed the interest claimed by the assessee and also the disallowance made u/s 14A. Therefore ld. CIT(A) made correct claim of the assessee and directed the same to be added to total income of the assessee. No reason to deviate or interfere into the findings recorded by the CIT(A)

Summary

Issues Involved:
1. Addition of ?25,200/- assessed as property income by estimating income of flat at Lonavala at ?36,000/-.
2. Addition of ?1,57,500/- as income from Vijay Guest House.
3. Addition of ?1,56,763/- under Section 14A related to expenses for earning exempt income.

Issue-wise Detailed Analysis:

1. Addition of ?25,200/- as Property Income:
The assessee contested the addition of ?25,200/- assessed as property income by estimating the income of a flat in Lonavala at ?36,000/-. The CIT(A) confirmed the addition, noting that the assessee did not declare any rental income and relied only on municipal taxes paid as a basis for estimation. The CIT(A) held that municipal taxes are not a measure to estimate the Annual Letting Value (ALV) of the property, and in the absence of any other supporting documents or factual information, the ALV estimated by the Assessing Officer (AO) could not be disturbed. The Tribunal upheld the CIT(A)'s findings, stating they were judicious and well-reasoned, and dismissed this ground of appeal.

2. Addition of ?1,57,500/- as Income from Vijay Guest House:
The assessee challenged the addition of ?1,57,500/- as income from Vijay Guest House. The CIT(A) observed that the AO estimated the income based on an occupancy rate of 75% and a rent of ?300/- per day per person, as the assessee did not provide satisfactory evidence. The CIT(A) noted that neither the AO nor the assessee could conclusively prove their stand and that local inquiries should have been carried out. Considering factors like the guest house's location and condition, the CIT(A) revised the occupancy rate to 50% and the rent to ?150/- per day, resulting in an estimated income of ?1,57,500/-. The Tribunal upheld the CIT(A)'s revised estimation as judicious and well-reasoned, dismissing this ground of appeal.

3. Addition under Section 14A of ?1,56,763/-:
The assessee disputed the addition of ?1,56,763/- under Section 14A related to expenses for earning exempt income. The CIT(A) noted that the AO disallowed interest expenses attributable to earning exempt income from a partnership firm, where the assessee received a salary and profit. The CIT(A) found the AO's reasoning correct, as the disallowance pertained to expenses related to exempt income, not double taxation. However, the CIT(A) observed that the AO wrongly disallowed the entire interest claimed and made a correct claim adjustment, allowing ?57,722/- as interest expenditure and adding ?1,56,763/- to the total income. The Tribunal found the CIT(A)'s order judicious and well-reasoned, dismissing this ground of appeal.

Conclusion:
The Tribunal upheld the CIT(A)'s findings on all grounds, finding them judicious and well-reasoned, and dismissed the appeal filed by the assessee. The order was pronounced in the open court on 24th August 2016.