2018 (4) TMI 1177 - AT - Income Tax

Income from house property - Municipal lettable value disregarded - enhancement made in the annual letting value - valuation was based on the expert opinion of the Government Registered valuer and market trend - rejecting the municipal lettable value by AO - Held that - As referring to the decision of the Tip Top Typography (2014 (8) TMI 356 - BOMBAY HIGH COURT) wherein held that the municipal lettable value cannot be disregarded straight away, for disregarding the same there must be cogent and reliable material. AO must not make guess work or act on conjecture and surmise. It was also expounded that the enquiries that the Assessing Officer can make would be for ascertaining the going rate, he can make a corporative study and make analysis. Transaction of identical nature can be ascertained by obtaining the requisite details. Now we examine as to what was the cogent material available to the Assessing Officer in rejecting the municipal lettable value. We find that except for the surmise, there was no material whatsoever The said valuer had clearly mentioned that he has never visited the said property under reference. In such circumstances, by no stretch of imagination, it can be said that the Assessing Officer had any material much less cogent at that to disregard the municipal lettable value. - Decided in favour of assessee Reopening of assessment - disallowance on account of addition to rental income - case was reopened on the basis of information obtained by AO from Shri Santosh Kumar, government registered valuer - Held that - A reading of the said information clearly shows that the said information cannot at all be said to be a information on the basis of which it can be said that there was escapement of income. The said valuer has clearly stated that this should not be construed as his report or speech. The said valuer has clearly stated that he has neither visited nor inspected the said property. Thus said report can by no stretch of imagination be said to be a cogent material warranting reopening. Earlier assessment has been done u/s. 143(3) and the lettable value returned has been accepted. Now AO is changing his opinion on the basis of that said letter. In our considered opinion, this very much amounts to change of opinion, not permissible under law. Re-assessment in this case is not valid. Disallowance u/s. 14A in the normal provisions of the Act - Held that - No cogent reason has been submitted before us that the consultant charges paid to the auditors are not indirect administrative charges. Hence, we dismiss this ground raised by the assessee.

Issues Involved:
1. Deletion of enhancement made in the annual letting value (ALV) by the Assessing Officer.
2. Validity of reassessment proceedings under section 147 for assessment years 2008-09 and 2009-10.
3. Disallowance under section 14A of the Income Tax Act under normal provisions and under section 115JB (MAT provisions) for assessment years 2010-11, 2011-12, and 2012-13.

Detailed Analysis:

1. Deletion of Enhancement in ALV:
The Revenue appealed against the CIT(A)'s decision to delete the enhancement made in the ALV of the property owned by the assessee. The Assessing Officer had estimated the ALV based on a government valuer's letter, which suggested a higher market value for the property. The valuer, however, clarified that his letter should not be construed as a formal valuation report. The CIT(A) found that the actual rent received by the assessee was higher than the municipal value and that the interest-free deposit did not influence the lease rentals. The CIT(A) also noted discrepancies in the valuation report used by the Assessing Officer. The Tribunal upheld the CIT(A)'s decision, emphasizing that the municipal rateable value is a safe guide unless there is cogent material to suggest otherwise. The Tribunal found no such material and affirmed the CIT(A)'s order, deleting the addition made by the Assessing Officer.

2. Validity of Reassessment Proceedings:
The assessee challenged the reassessment proceedings initiated under section 147 for the assessment years 2008-09 and 2009-10. The Assessing Officer had reopened the assessments based on information from a government valuer, suggesting that the rent received was less than the fair market value. The CIT(A) upheld the reassessment, stating that the issue of ALV was not specifically examined during the original assessment. The Tribunal, however, found that the valuer's letter could not be considered cogent material for reopening the assessment, especially since the valuer had not inspected the property. The Tribunal held that the reopening was based on a change of opinion, which is not permissible under law, and set aside the reassessment orders.

3. Disallowance under Section 14A:
For the assessment years 2010-11, 2011-12, and 2012-13, the assessee contested the disallowance under section 14A related to expenses incurred for earning exempt income. The assessee argued that no expenses were incurred for earning exempt income and that the Assessing Officer had wrongly included professional charges as indirect administrative expenses. The CIT(A) directed the Assessing Officer to recompute the disallowance. The Tribunal dismissed the assessee's contention, noting that no cogent reason was provided to exclude the professional charges from indirect administrative expenses. The Tribunal upheld the disallowance under section 14A.

Disallowance under Section 115JB (MAT Provisions):
For the assessment year 2010-11, the assessee also challenged the adjustment to book profit under section 115JB in respect of disallowance made under section 14A. The Tribunal did not specifically address this issue in the detailed analysis provided, as the primary focus was on the disallowance under normal provisions.

Conclusion:
The Tribunal dismissed the Revenue’s appeals, upheld the CIT(A)'s deletion of the enhancement in ALV, and set aside the reassessment orders for assessment years 2008-09 and 2009-10. For the assessment years 2010-11, 2011-12, and 2012-13, the Tribunal dismissed the assessee's appeals regarding the disallowance under section 14A, except for the specific issue of professional charges, which was also dismissed. The Tribunal's decisions were pronounced in the open court on 20.04.2018.

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