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2019 (11) TMI 545 - AT - Income TaxAddition on account of notional rental value - annual value of the house property - valuation for determining annual letting value - fair rent in the market - municipal valuation for determining annual letting value - HELD THAT - Referring to ratio laid down by the Hon ble High Court of Calcutta in the case of Satya Co. Ltd. 1993 (8) TMI 293 - CALCUTTA HIGH COURT held the Assessing Officer can ignore the municipal valuation for determining annual letting value if he finds that the same is not based on relevant material for determining the fair rent in the market and there is sufficient material on record for taking a different valuation Assessee relied on the valuation as determined by the Municipal authority way back in 1994 and in our opinion the said valuation is not at all relevant nor is a base to determine the valuation of the property relating to the assessment year under consideration i.e. F.Y 2010-11 (A.Y 2011-12). Accordingly the Assessing Officer did not accept such valuation and proceeded to elicit information from relevant websites and deputing his Inspector basing on which he determines the annual rental value for the said flat at ₹ 7,20,000/-. In our opinion, the Assessing Officer rightly ignored the valuation determined by the municipal authority in the year 1994.
Issues Involved:
1. Justification of CIT(A) in restricting the addition to ?2,13,216 on account of notional rental value. 2. Method of determining the annual rental value of the property. Issue-wise Detailed Analysis: 1. Justification of CIT(A) in Restricting the Addition: The core issue was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in restricting the addition to ?2,13,216 on account of the notional rental value. The Assessing Officer (AO) had determined the annual rental value of the flat in Kolkata at ?7,20,000 based on information from websites and an inspector's report. The CIT(A) did not accept the AO's method, instead adopting a 10% annual appreciation on the value determined by the Kolkata Municipal Corporation in 1994, resulting in a rental value of ?3,30,838 for the year under consideration. After deductions, this resulted in a taxable amount of ?2,13,216. 2. Method of Determining the Annual Rental Value: The AO rejected the municipal valuation from 1994 as outdated and conducted independent inquiries to determine the current rental value. The CIT(A) found the AO’s method flawed due to the lack of confrontation with the assessee and the absence of detailed records from the websites used. However, the CIT(A) also noted that the municipal value from 1994 was too old to be reasonable. The CIT(A) applied a 10% annual appreciation to the 1994 value, resulting in a new annual rental value of ?3,30,838, which was deemed more realistic. Arguments and Findings: The assessee argued that the municipal value should be the basis for the rental value since there was no increase in the property value. The assessee cited several case laws to support this argument, including decisions from the Calcutta High Court and the Mumbai ITAT. The Departmental Representative (DR) opposed this, supporting the AO’s method. The Tribunal agreed with the AO, stating that the municipal valuation from 1994 was not a reasonable yardstick for the assessment year 2011-12. The Tribunal referenced the Delhi High Court’s decision in CIT vs. Moni Kumar Subba, which allowed the AO to ignore outdated municipal valuations if they did not reflect the current fair rent. The Tribunal found that the AO’s method, including inquiries and website data, was justified and more reflective of the current market value. Conclusion: The Tribunal concluded that the CIT(A) was not justified in restricting the addition to ?2,13,216. The AO’s determination of the annual rental value at ?7,20,000 was upheld as it was based on relevant and current market data. The appeal by the assessee was dismissed, and the AO’s order was restored. Order Pronounced: The appeal of the assessee was dismissed, and the order was pronounced in the open court on 01.10.2019.
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