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2023 (11) TMI 498 - AT - Income TaxNotional addition towards rent receivable w.e.f. 28.07.2012 as per the order passed by the Court of Home Controller, Patna - assessee is co-owner of of the property which was rented to Krishna Niketan at the market rate for a period from December 2008 to November. 2038 however rental value of the property has increased considerably over a period and the assessee started pressing for the higher rent - HELD THAT - Rent Controller vide order dated 28.07.2012 held that monthly rent would be Rs. 4,44,230/- thus deciding the issue of increase in rent in favour of the assessee. Accordingly,a revised rent agreement was executed between the assessee and the tenant fixing the rent at Rs. 4,44,230/- per month and return of income was filed accordingly. However, according to the AO rent should have been charged as per the order of Rent Controller order from the date of the order. We note that in the case of other co-owner the addition made by the AO on account of notional rent was deleted by the Ld. CIT(A). We observe that the assessee has received rental of Rs. 60,000/- per month from 30.11.2012 which has been accepted by the Ld. CIT(A) in the case of other co-owner and which has not been challenged before the tribunal. Accordingly following the same, we hold that the addition confirmed by the Ld. CIT(A) on account of notional income is not sustainable and accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. The appeal of the assessee is allowed. Rectification of mistake u/s 154 - AO stated that in the assessment order section and sub-section under which the assessment was framed, was wrongly mentioned as section 143(3) r.w.s 147 instead of section 144 r.w.s 147 of the Act - As per CIT(A) assessee has complied to notice u/s 142(1) and it is an admitted fact that no notice u/s 143(2) of the Act has been issued by the AO, hence, the assessment made cannot be said to have been made u/s 144 of the Act not being as per the provision of section 154 - HELD THAT - in the present case the assessment has been framed u/s 143(3) read with Section 147 of the Act after calling for various details from the assessee by issuing notice u/s 142(1) of the Act during the assessment proceedings. We note that notice u/s 142(1) of the Act was duly given to the assessee on 13.11.2019 which was also replied on 27.11.2019. In the said reply, the assessee submitted that capital gain has not been shown in the return of income filed by the assessee as the sale deed has been cancelled as per agreed terms and condition between the assessee and the buyer of the property. In our opinion, the assessment order has rightly been framed u/s 143(3) r.w.s 147 of the Act. In the present case we observe that the AO has resorted to the provisions of section 154 only to correct the anomaly of non issuance of mandatory notice u/s 143(2) - the provisions of Sections 144 of the Act are applicable only when the assessee does cooperate and does not furnish any details/information and then it does not require to issue any notice u/s 143(2) of the Act but the facts in the instant case are different. No infirmity in the order of Ld. CIT(A) and accordingly same is upheld by dismissing the appeal of the revenue. Validity of reassessment proceedings - No notice u/s 143(2) was served to the assessee before completing assessment proceedings - HELD THAT - As no notice has been issued and served on the assessee. In our opinion where no notice u/s 143(2) is issued, the assessment so framed by the AO is null and void in law. The case of the assessee finds support from the decision of Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT wherein the Hon ble Apex Court has held that no assessment can be made without issuing notice u/s 143(2) and this decision has been relied on the First Appellate Authority while allowing the appeal of the assessee. Addition of Capital Gains - As sale proceeds for sale of land has not materialized as the cheque issued by the said party were not honoured and therefore sale deed became invalid and was cancelled and consequently no capital gain was shown in the return of income. Therefore even on merit the revenue has no case and Ld. CIT(A) has rightly allowed the appeal of the assessee. Addition u/s 68 - assessee failed to substantiate the loans before the First Appellate Authority resulting into confirmation of the said addition - HELD THAT - The provisions of Section 68 of the Act are not applicable to the loans/cash credits received in earlier years and only the cash credits which have been credited in the books of account of the assessee during the year are liable to be added u/s 68, in case, the assessee failed to satisfy with three ingredients of the said section. The case of the assessee finds support from the several decisions as discussed hereinafter. In the case of ACIT vs. ATS Promoters Builders (P) Ltd 2014 (11) TMI 323 - ALLAHABAD HIGH COURT has held that the provisions of section 68 are not applicable where the sum is not even credited in the books of account during the year. In the present case these loans were received in FY 2013-14 and therefore the provisions of Section 68 cannot be invoked. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Accordingly the appeal of the assessee is allowed. Deduction u/s 54F and u/s 54EC - HELD THAT - CIT(A) has held that the AO has failed to appreciate that transaction could not happen in Ay 2012-13 due to non-payment of sale consideration. Finally the Ld. CIT(A) allowed the deduction u/s 54F and 54EC by holding that there was no income from long term capital gain as the assessee realized the sale consideration during the year. After perusing the facts on record we find that the Ld. CIT(A) has taken a correct view in the matter and therefore we are inclined to uphold the same by dismissing the ground nos. 1 and 2 of the revenue s appeal. Estimation of profit - HELD THAT - We note that the AO has not brought on record any material or evidence to substantiate that the assessee has earned income these two concerns apart from declared income from M/S kumar Enterprises and therefore, the addition was made on suspicion, surmises and conjecture which is not permissible under the law. The Ld. CIT(A) after rightly appreciating the facts of the case deleted the addition. As decided in Ashok Weaving Works 2015 (9) TMI 183 - ITAT AHMEDABAD wherein it was held that unless defect is pointed out in books of assessee, no addition could be made by the AO on ad-hoc basis.
Issues Involved:
1. Notional Addition of Rent Receivable 2. Rectification of Assessment Order under Section 154 3. Validity of Assessment without Notice under Section 143(2) 4. Addition under Section 68 for Unsecured Loans 5. Deduction under Sections 54F and 54EC for Capital Gains 6. Estimation of Business Income Summary: 1. Notional Addition of Rent Receivable: The assessee contested the confirmation of a notional addition of Rs. 4,68,566/- towards rent receivable from 28.07.2012 as per the Rent Controller's order. The Tribunal found that the assessee had received rent as per a revised agreement effective from 01.12.2012, and since the addition for notional rent was deleted for the co-owner, it was held unsustainable for the assessee as well. The Tribunal directed the AO to delete the addition, allowing the assessee's appeal. 2. Rectification of Assessment Order under Section 154: The revenue challenged the Ld. CIT(A)'s quashing of the AO's rectification order under Section 154, which corrected the assessment section from 143(3) r.w.s 147 to 144 r.w.s 147. The Tribunal upheld the Ld. CIT(A)'s decision, noting that no notice under Section 143(2) was issued, making the rectification invalid. The appeal of the revenue was dismissed. 3. Validity of Assessment without Notice under Section 143(2): The revenue's appeal against the Ld. CIT(A)'s quashing of the assessment due to the absence of a notice under Section 143(2) was dismissed. The Tribunal upheld that the assessment without such notice is invalid, citing several judicial precedents, including the Supreme Court's decision in PCIT vs. Hotel Blue Moon. 4. Addition under Section 68 for Unsecured Loans: The assessee contested the addition of Rs. 34,00,000/- under Section 68 for unsecured loans. The Tribunal found that these loans were carried forward from earlier years and not credited during the current year. Thus, Section 68 was not applicable, and the addition was deleted, allowing the assessee's appeal. 5. Deduction under Sections 54F and 54EC for Capital Gains: The revenue's appeal against the Ld. CIT(A)'s allowance of deductions under Sections 54F and 54EC was dismissed. The Tribunal agreed with the Ld. CIT(A) that the capital gain arose in the relevant assessment year when the sale proceeds were realized, and the deductions were rightly claimed. 6. Estimation of Business Income: The revenue's appeal against the deletion of an estimated addition of Rs. 19,19,300/- to the business income was dismissed. The Tribunal found no evidence that the assessee earned income from dormant businesses, and the addition was based on mere suspicion. The Ld. CIT(A)'s deletion of the addition was upheld. Conclusion: The appeals of the assessee were allowed, the appeals of the revenue were dismissed, and the cross-objections of the assessee were also dismissed. The order was pronounced in the open court on 7th November 2023.
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