2019 (9) TMI 207 - AT - Income Tax

Income from house property - ALV determination - self occupied property or not - property under construction - ex-parte order - HELD THAT - as the aforesaid final possession letter was never filed by the assessee before the A.O, therefore, the said verification was indispensably required to be done on his part in order to verify the authenticity of the aforesaid claim of the assessee. Accordingly, finding no infirmity in the order of the CIT(A) in context of the issue under consideration, we uphold his view. Seeking determination of ALV property as Nil as self occupied property - Held that - the A.O while giving effect to our aforesaid directions shall make necessary verification as to whether the aforesaid property viz. Vora Apartment, Ghatkopar, during the year under consideration i.e A.Y. 2009-10 was under the self-occupation of the assessee, or not. Working out the ALV of his property at Wanworie, Pune, on the basis of the municipal valuation - HELD THAT - As is discernible from the orders of the lower authorities, we find, that the A.O without placing on record any supporting material had after estimating the rate of rent in respect of the property under consideration @ ₹ 20/- per sq. ft. worked out the ALV of the same at ₹ 3,38,160/-. We are unable to persuade ourselves to subscribe to the aforesaid methodology of estimation of the ALV by the A.O. In fact, we find substantial force in the claim of the assessee that the ALV of the aforesaid property ought to have been worked out as per its municipal rateable value . Our aforesaid view is fortified by the case of CIT-12 Vs. Tip Top Typography 2014 (8) TMI 356 - BOMBAY HIGH COURT . Accordingly, we restore the matter to the file of the A.O who is directed to work out the ALV of the aforesaid property viz. Wanworie, Pune, after taking cognizance of the aforesaid judgment of the Hon ble High Court of Bombay in the case of Tip Top Typography Unearned income from let out house property - HELD THAT - it is the claim of the assessee that the property under consideration had during the year remained let out only for a period of 8 months, and thus, for the said reason the rent for the remaining 4 months was not accounted for as a part of his income in the return of income. As the CIT(A) had in all fairness directed the A.O to re-compute the total income from the property at Mahape, Navi Mumbai, as per the facts on record, therefore, no infirmity does emerge from the said direction. Deemed dividend u/s 2(22)(e) - having 22.11% shareholding - proportionate amount - an advance or loan to to any concern in which such shareholder is a member or a partner and in which he has substantial interest - HELD THAT - the amount of ₹ 60,50,119/- received by M/s Nishitech System Pvt. ltd. from M/s Sanitech Engineers Pvt. Ltd., as rightly observed by the lower authorities, was clearly hit by the provisions of Sec. 2(22)(e) of the Act. Accordingly, we are of the considered view that the lower authorities had rightly concluded that an amount of ₹ 13,37,681/- i.e the proportionate amount of the accumulated profits (as on 01.04.2008) of the lender company viz. M/s Sanitech Engineers Pvt. Ltd. worked out on a pro-rata basis of the 22.11% shareholding of the assessee with M/s Nishotech Systems Pvt. Ltd. was assessable as deemed dividend u/s 2(22)(e) in the hands of the assessee.

Issues Involved:
1. Verification of property status at Clover Regency, Ghatkopar.
2. Treatment of property at Vora Apartment, Ghatkopar as self-occupied.
3. Assessment of property at Wanworie, Pune based on municipal valuation.
4. Re-computation of unearned income from let out house property at Mahape, Navi Mumbai.
5. Addition of inter-corporate deposits as deemed dividend under Sec. 2(22)(e).
6. Violation of principles of natural justice.

Detailed Analysis:

1. Verification of Property Status at Clover Regency, Ghatkopar:
The assessee claimed that the property at Clover Regency, Ghatkopar was under construction during the assessment year 2009-10 and provided a final possession letter dated 14.01.2011 to support this claim. The CIT(A) directed the AO to verify the authenticity of this document. The Tribunal upheld this direction, stating that the verification was necessary as the possession letter was presented for the first time before the CIT(A). Therefore, the Tribunal found no infirmity in the CIT(A)'s order and dismissed the ground of appeal.

2. Treatment of Property at Vora Apartment, Ghatkopar as Self-Occupied:
The assessee contended that the Vora Apartment, Ghatkopar was self-occupied and thus its ALV should be taken as nil under Sec. 23(2)(a) if the Clover Regency property was confirmed to be under construction. The Tribunal agreed with this contention and directed the AO to verify whether the Clover Regency property was indeed under construction. If confirmed, the AO should treat the Vora Apartment as self-occupied and its ALV as nil, after necessary verification. Grounds of appeal Nos. 2 and 3 were allowed for statistical purposes.

3. Assessment of Property at Wanworie, Pune Based on Municipal Valuation:
The AO estimated the ALV of the Wanworie property at ?3,38,160/- without supporting material, which the assessee contested. The Tribunal found merit in the assessee's claim that the ALV should be based on the municipal rateable value, as supported by the Bombay High Court's judgment in CIT-12 Vs. Tip Top Typography. The Tribunal restored the matter to the AO to re-compute the ALV based on municipal valuation. Ground of appeal No. 5 was allowed for statistical purposes.

4. Re-computation of Unearned Income from Let Out House Property at Mahape, Navi Mumbai:
The AO observed that the rental income for the Mahape property was ?50,000/- per month but only ?4,00,000/- was declared by the assessee. The CIT(A) directed the AO to re-compute the total income based on the facts on record. The Tribunal upheld this direction, noting that the assessee claimed the property was let out for only 8 months. Grounds of appeal Nos. 6 and 7 were dismissed.

5. Addition of Inter-Corporate Deposits as Deemed Dividend under Sec. 2(22)(e):
The AO added ?13,37,681/- as deemed dividend, based on the assessee's shareholding in two companies. The CIT(A) upheld this addition, rejecting additional evidence presented by the assessee. The Tribunal agreed with the lower authorities, stating that the payment was clearly hit by Sec. 2(22)(e) and upheld the addition. Grounds of appeal Nos. 8 to 10 were dismissed.

6. Violation of Principles of Natural Justice:
There was no discernible record regarding this ground, and it was dismissed.

General Grounds:
Ground of appeal No. 12 was dismissed as not pressed.

Conclusion:
The appeal was partly allowed, with specific directions for verification and re-computation on certain issues, while other contentions were dismissed. The order was pronounced in the open court on 28.08.2019.

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