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2018 (4) TMI 320 - AT - Income TaxAnnual rental value as per fair market rate - Annual Let out Value - Held that - In this case, it is observed from the assessment order that the municipal assessment was done for this building in the year 2008. Though certain repair works are carried out by the assessee, such as external painting, etc. it is for the assessee to establish that building is not ready for occupation after the municipal assessment was completed. Having done the municipal assessment, we are unable to agree with the contention of the assessee that the building was not ready for occupation. It is for the assessee to bring the evidence to prove that the building was not ready for occupation. With regard to the determination of fair market rent, as per the detailed discussion made in this order with regard to the plot No.242, we hold that the A.O. cannot adopt the fair market value without allowing the cross examination of the owners or tenants by the assessee. The assessee submitted that the building was not let out and not ready for occupation. We direct the A.O. to adopt the fair market value determined by the municipal authorities (GHMS) as the fair rental value and assess the same for income tax purpose.
Issues Involved:
1. Determination of Annual Let Out Value (ALV) for a property in Jubilee Hills, Hyderabad. 2. Right to cross-examine witnesses in tax assessments. 3. Assessment of fair market rent for an incomplete building. Issue-wise Detailed Analysis: 1. Determination of Annual Let Out Value (ALV) for a property in Jubilee Hills, Hyderabad: The primary issue revolves around the addition of ?13,11,158/- towards the annual rental value based on the fair market rate. The assessee admitted a rental income of ?1,14,000/- from a property in Jubilee Hills, Hyderabad, rented to his brother. The Assessing Officer (AO) found this rent to be significantly lower than the market rates and estimated the fair rental value at ?20/- per sq.ft, determining the ALV at ?17,40,000/- for 6352 sq.ft. The assessee argued that he used 50% of the house for personal and official purposes and that the property’s peculiar circumstances (e.g., shared spaces) justified a lower rent. The AO, however, rejected these arguments and assessed the property at the market rate. 2. Right to cross-examine witnesses in tax assessments: The assessee requested cross-examination of the parties from whom the AO had collected rental information. The AO denied this request, stating that the details provided were sufficient. The Tribunal emphasized that cross-examination is a fundamental right and that evidence collected behind the assessee’s back cannot be used against them without allowing cross-examination. The Tribunal cited several precedents, including the ITAT, Amritsar Bench in Apeejay Education Society v. Assistant Commissioner of Income-tax and the Delhi High Court in CIT v. Dharam Chand Prem Chand Limited, underscoring the necessity of cross-examination to uphold natural justice. 3. Assessment of fair market rent for an incomplete building: The second issue involved the annual letting value of another building in Jubilee Hills, which the AO estimated at ?75,000/- per month for two months, totaling ?1,50,000/-. The assessee contended that the building was incomplete and not ready for occupation by May 2011 and was subsequently sold in August 2011. The Tribunal noted that the municipal assessment was completed in 2008, and despite the assessee’s claim of ongoing repairs, the burden of proof lay with the assessee to demonstrate that the building was uninhabitable. The Tribunal directed the AO to adopt the fair market value determined by the municipal authorities (GHMC) as the fair rental value for income tax purposes. Conclusion: The appeal was partly allowed. The Tribunal set aside the orders of the lower authorities on the issue of ALV for the property in Jubilee Hills, Hyderabad, and directed the AO to adopt the municipal rateable value as the annual letting value. The Tribunal also emphasized the importance of cross-examination in tax assessments and directed the AO to follow the principles of natural justice. For the incomplete building, the Tribunal instructed the AO to use the municipal authorities' fair market value for assessment.
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