1997 (3) TMI 135 - AT - Income Tax

Summary

Issues Involved:

1. Assessment of Annual Letting Value (ALV) of the house property.
2. Claim for deduction of disputed rent under section 24(1)(x) of the IT Act.
3. Addition of unexplained deposit of Rs. 8,000.
4. Determination of income from bus plying.

Detailed Analysis:

1. Assessment of Annual Letting Value (ALV) of the House Property:

The primary issue was whether the DCIT (Appeals) erred in upholding the action of the Assessing Officer in assessing the annual letting value (ALV) of the house property at Rs. 87,960, which included the disputed rent of Rs. 38,295. The property was let out to the Food Corporation of India (FCI) at an enhanced rent of Rs. 7,280 per month after the lease expired on 31st July 1984. The assessee contended that the enhanced rent was under litigation and should not be included in the ALV. However, the DCIT (Appeals) and the Assessing Officer determined the ALV based on the enhanced rent, as the Court had upheld the validity of the enhanced rent agreement. The Tribunal agreed with the DCIT (Appeals) that the enhanced rent started accruing immediately after 31-7-1984, and it was reasonable to include this in the ALV as per section 23 of the Income-tax Act, which considers rent receivable as well as rent received.

2. Claim for Deduction of Disputed Rent under Section 24(1)(x) of the IT Act:

The assessee also challenged the non-acceptance of the claim for exclusion/deduction of Rs. 38,295 for determining property income. The DCIT (Appeals) held that such a deduction could not be allowed since the legal proceedings were ultimately decided in favor of the assessee, and the entire arrears of rent were received in the assessment year 1993-94. The Tribunal upheld this view, stating that the conditions prescribed under section 24(1)(x) read with rule 4 were not satisfied, as the disputed rent was not irrecoverable and was eventually received.

3. Addition of Unexplained Deposit of Rs. 8,000:

The Assessing Officer observed an unexplained deposit of Rs. 8,000 in the name of Ram Prasad Mehrotra, who was employed on a part-time basis at a salary of Rs. 200 per month. The Assessing Officer doubted the creditworthiness of Mehrotra and added the amount as unexplained. The DCIT (Appeals) confirmed this addition. The Tribunal agreed, stating that the burden was on the assessee to prove the identity, capacity, and genuineness of the transaction, which was not satisfactorily done. The addition was thus upheld.

4. Determination of Income from Bus Plying:

The Assessing Officer estimated the net income from plying a bus at Rs. 25,791, as against Rs. 1,680 shown by the assessee. The assessee failed to provide detailed accounts or vouchers for expenses claimed. The DCIT (Appeals) found the estimate reasonable and confirmed it. However, the Tribunal found the estimate excessive and directed the Assessing Officer to allow deductions for various expenses, including depreciation, at 80% of the gross receipts, thereby providing some relief to the assessee.

Conclusion:

The Tribunal upheld the DCIT (Appeals) on the assessment of ALV and the non-acceptance of the deduction claim under section 24(1)(x). The addition of the unexplained deposit was also upheld. However, the Tribunal provided partial relief on the income from bus plying by adjusting the allowable deductions. The appeal was thus partly allowed.