2016 (3) TMI 452 - AT - Income Tax

Estimation of rental income - determination of annual value of the property - Held that - By the Finance Act, 2001 (14 of 2001), substitution was made in the section for and from A.Y. 2002-03 in place of than existing section 23 for the purposes of determination of annual value of the property. As per section 23(1), for the purposes of section 22, the annual value of any property shall be deemed to be - -The sum for which the property might reasonably be expected to let from year to year (Section 23(1)(a) or -Where the property or any part of the property is let- (a) And the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in section 23(1)(a), the amount so received or receivable (section 23(1)(b) or If the aforesaid provision of the Act is kept in juxtaposition with the facts of the present appeal, undisputedly, the assessee received rent of ₹ 5,89,600/- from M/s West Coast Construction Pvt. Ltd. in respect of property no. 51 and 52, which are of the same size and located in the same building, thus, the receipt of actual rent is not in dispute, therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). - Decided against assessee

Summary

Issues Involved:
Estimation of rental income discrepancy.

Detailed Analysis:
The judgment pertains to an appeal by the assessee against the order of the ld. First Appellate Authority, Mumbai, regarding the estimation of rental income at &8377; 5,89,600/- compared to the actual receipt of &8377; 43,200/-. The main argument raised by the assessee was based on the discrepancy between the rent received and the amount estimated by the Assessing Officer. The assessee contended that the actual rent received was only &8377; 48,000/- for two rooms, while the estimated amount was much higher. On the other hand, the Revenue defended the conclusion that the actual rent received was indeed &8377; 5,89,600/-. The facts revealed that the assessee received rent from M/s West Coast Construction Pvt. Ltd. for two rooms, while also letting out other rooms for a lower fee, indicating a tax avoidance scheme.

The judgment delves into the provisions of section 23 of the Act, which determines the annual value of a property for taxation purposes. It emphasizes that the annual value is based on the sum for which the property might reasonably be expected to let out. The judgment highlights that the actual rent received by the assessee was &8377; 5,89,600/-, as per the assessee's own calculation. Therefore, the conclusion drawn by the ld. Commissioner of Income Tax (Appeals) was deemed reasonable based on factual figures provided by the assessee. The Assessing Officer's decision was upheld as being supported by the available evidence.

Regarding the reliance on legal precedents such as the Akshay Textiles case and the Mayur Recreational case, the judgment distinguishes them from the present appeal. In those cases, the issues were different, and the facts did not align with the current scenario where the assessee had indeed received the rent in question. The judgment dismisses the contention that property income should be considered as a whole, citing relevant legal provisions and precedents to support this stance.

Furthermore, the judgment refers to an amendment in the Finance Act, 2001, which substituted the existing section 23 for determining the annual value of a property. It reiterates that the actual rent received by the assessee was not in dispute, as evidenced by the rent of &8377; 5,89,600/- from M/s West Coast Construction Pvt. Ltd. for specific rooms. Consequently, the conclusion of the ld. Commissioner of Income Tax (Appeals) was upheld, and the appeal of the assessee was dismissed.