2022 (7) TMI 1139 - AT - Income Tax

Addition under the head Income from House Property - AR submitted that annual letting value determined by the Assessing Officer is contrary to the provisions of sections 22 and 23 - HELD THAT - In the present case, it is evident that the lower authorities have determined the annual letting value by applying 8% of capital cost and not considered the provisions of rent control legislation, despite the fact that the aforesaid properties are subjected to the said legislation. Thus, we remand this issue to the file of the Assessing Officer for determination of annual letting value in terms of the applicable rent control legislation. Accordingly, ground no. 2 raised in assessee s appeal is allowed for statistical purpose. Deduction claimed u/s 54F - joint ownership of the assessee - divergent views of the Courts are available as regards the meaning of the term own - HELD THAT - As respectfully following the decisions passed by the Hon ble Madras High Court in Dr. Smt. P.K. Vasanthi Rangarajan ( 2012 (7) TMI 563 - MADRAS HIGH COURT and Kapil Nagpal 2015 (9) TMI 613 - DELHI HIGH COURT which view has also been taken by the coordinate bench of Tribunal in Ashok G. Chauhan ( 2019 (4) TMI 1024 - ITAT MUMBAI we are of the considered view that joint ownership of the assessee, in the present case, in 2 residential Flats, namely, Flat No. A 408 and B 504 on the date of transfer of original capital asset will not disentitled the assessee from claiming relief under section 54F. As the expression a residential house in section 54F, prior to its amendment vide Finance (No. 2) Act, 2014, w.e.f. 01/04/2015, includes more than one residential house purchased/constructed by the assessee, within the prescribed time. In the present case, as the properties were purchased by the assessee pursuant to transfer of long-term capital asset ( original asset ), the same will fall within the category of a residential house (or as referred in the section as new asset ) for the purpose of section 54F of the Act. As the aforesaid properties, fall within the category of new asset , same cannot be considered as residential house for the purpose of proviso to section 54F of the Act, which, as stated earlier, is other than the new asset . The proviso only carves out exceptional situation in which the provisions of section 54F will not be applicable. Therefore, as the aforesaid properties are not in the nature of residential house , for the purpose of proviso, none of the conditions as mentioned in proviso are applicable to the present case. Further, as it is not disputed that the aforesaid properties were purchased by the assessee within the prescribed time, therefore, we are of the considered view that assessee is entitled to claim benefit under section 54F of the Act. Accordingly, ground No. 6 raised in assessee s appeal is allowed. Addition as income from other sources - It is the claim of the assessee as wrongly declared as income under an anticipation of refund of investment in property which was made and cancelled during the year - HELD THAT - As per the assessee, revised return also could not be filed as the time limit for filing the same was expired. Further, as per the assessee, the aforesaid amount was never realised and the investee with whom the investment was made refused to entertain any claim. It is well established that assessment proceedings before the taxing authority is to assess the correct tax liability and therefore no hypothetical income / profit could be brought to tax. In the present case, addition was made by the Assessing Officer and same was upheld vide impugned order without examining the submission of the assessee. Therefore, we deem it appropriate to remand this issue to the file of Assessing Officer for de novo adjudication after consideration of all the aspects. Accordingly, ground no. 7 raised in assessee s appeal is allowed for statistical purpose.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition under the head "Income from House Property."
3. Deduction claimed under section 54F of the Income Tax Act.
4. Addition of Rs. 16,25,000 as income from other sources.
5. Consequential interest charges under sections 234A, 234B, and 234C of the Income Tax Act.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was delayed by 5 days. The assessee submitted an application supported by an affidavit explaining the delay was due to the time taken to seek advice from a Senior Counsel, which could not be availed due to time constraints. The Departmental Representative did not raise any serious objection. The Tribunal condoned the delay, acknowledging sufficient cause for not filing the appeal within the limitation period.

2. Addition under the Head "Income from House Property":
The assessee owned multiple properties, and the Assessing Officer computed the income from house property at Rs. 1,87,793 by adopting an annual value at 8% of the capital cost. The assessee argued that the annual letting value should be determined per rent control legislation applicable in Mumbai. The Tribunal referred to the jurisdictional High Court's decisions, emphasizing that the Assessing Officer must consider rent control legislation while determining the annual letting value. The matter was remanded to the Assessing Officer for re-determination as per the applicable rent control legislation.

3. Deduction Claimed under Section 54F of the Income Tax Act:
The assessee claimed exemption under section 54F for long-term capital gains from the cancellation of flat bookings. The Assessing Officer denied the claim, stating that the gains were from the surrender of rights to acquire property, not from the sale of a residential house. The CIT(A) treated the gains as long-term capital gains but denied the exemption under section 54F, citing the assessee's ownership of multiple residential flats. The Tribunal examined the term "own" and "a residential house," considering various High Court rulings. It concluded that joint ownership does not disqualify the assessee from claiming section 54F benefits. The Tribunal allowed the exemption, noting that the properties purchased fell within the category of "new asset" and did not trigger the proviso's conditions.

4. Addition of Rs. 16,25,000 as Income from Other Sources:
The assessee included Rs. 16,25,000 in the income computation, anticipating a refund from a canceled property investment. The Assessing Officer treated this amount as income from other sources due to the lack of supporting evidence. The CIT(A) upheld this addition. The Tribunal noted that the assessment should reflect the correct tax liability and not hypothetical income. It remanded the issue to the Assessing Officer for de novo adjudication, considering the assessee's claim that the amount was never realized.

5. Consequential Interest Charges under Sections 234A, 234B, and 234C:
The ground regarding interest charges under sections 234A, 234B, and 234C was deemed consequential and allowed for statistical purposes.

Conclusion:
The appeal was partly allowed for statistical purposes, with specific issues remanded for re-evaluation and others decided in favor of the assessee. The Tribunal emphasized the importance of correct tax liability assessment and adherence to relevant legal provisions.

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