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TMI Blog2010 (9) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... under renovation of co-owned business and residential properties of family, pending family settlement. That the CIT(A) has erred in upholding the arbitrary and illegal order of Assessing Officer taxing the said properties on market rent on misconception that any and every property existing on mother earth is taxable under Income-tax Act. That the CIT(A) has failed to adjudicate on plea of vacancy allowance, application of highly excessive market rates and denial of opportunity to rebut such presumptions." 4. Though the factual aspects are common in all the appeals with regard to abovesaid grounds of appeal, we are making a reference to the factual aspects in the case of Shri Kamal Kant Jain i.e., ITA No. 318/Chd./2010. The brief facts of the case are that search under section 132 of the Act was carried out on in the cases of Nikka Mal Babu Ram & Sons, group of cases on 27-10-2006. The search was conducted at the residential premises of the assessee at House No. 1211, Sector 11, Chandigarh as well as residential premises No. 72, Sector 5, Chandigarh, H.No. 680, Sector 8, Chandigarh, H.No. 116, Kishangarh and business premises of Nikka Mal Babu Ram & Sons, SCF-17, Sector 22-D, Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the said family arrangement. Before the settlement by way of family arrangement on 9-9-2004, the learned AR for the assessee stressed, that the properties being acquired were under renovation and as such there was no merit in the aforesaid addition made on account of ALV of the vacant property. The learned AR for the assessee made submissions regarding the chargeability of tax on the income from house property. The learned DR for the revenue relying on the order of CIT(A) pointed out that in view of the provisions of sections 22 and 23 of the Act, the computation of income from property has been correctly made by the Assessing Officer and confirmed by the CIT(A). 6. We have heard the rival contentions and perused the records. Sections 22 and 23 of the Income-tax Act reads as under:- "22. The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head 'Income from house property'. 23.(1) For the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under clause (a), shall be determined under sub-section (1) as if such house or houses had been let." 7. Under the provisions of section 22 of the Act, the annual value of the property, owned by the assessee, consisting of any building or lands appurtenant thereto other than such portions which are occupied for the purpose of business or profession carried on by the assessee, profits of which are chargeable to tax, shall be charged to Income-tax under the head 'Income from house property'. Section 23 prescribes the formula for determination of the annual value of the property. As envisaged by section 22 of the Act, where the assessee is owner of a property consisting of building or lands appurtenant thereto, the requirement of law is that annual value of such property is to be charged to tax in the hands of the assessee as income from house property. The section provides exemption from the said provisions to such portions of the property or such properties which are being utilized by the assessee owner while carrying on his business or profession, profits of which are chargeable to tax. 8. Sections 22 and 23 of the Act prescribes the scheme of taxation of income from property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the owner is in possession and enjoyment of the property or had let it out on rent to a third person. The basis for assessing tax under the head 'Income from property' is the ownership of the property and not necessarily the actual realization of income. The property must be capable of being let out in order to be charged to tax under the provisions of section 22 of the Act. Where the property is not capable of being let out, even where the assessee is owner of the property, the notional income from such property is not includible in his hands under the provisions of section 22 of the Act. The said ratio has been laid down by the Hon'ble Bombay High Court in Shree Nirmal Commercial Ltd. v. CIT [1992] 193 ITR 694 . 12. The said view of the Hon'ble Bombay High Court in Shree Nirmal Commercial Ltd.'s case (supra) was affirmed by Full Bench of the Bombay High Court in CIT v. Shree Nirmal Commercial Ltd. [1999] 213 ITR 361. 13. The Apex Court in Liquidator of Mahamudabad Properties (P.) Ltd. v. CIT [1980] 124 ITR 31 had laid down the proposition "that the mere fact that the building is in a state of despair does not effect its chargeability to tax". In the facts of the case before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (a) to section 23(1) the annual value shall consists of a sum for which the property might reasonably be expected to be let from year-to-year and under sub-clause (b), the actual rent received or receivables by the owner is to be taken as annual value of the property and under sub-clause (c) where the property let out was vacant during whole or any part of the year and the actual rent received is less then the sum referred to clause (a), the sum so received or receivable. 17. Under section 23(2)(a) of the Act, where the property owned by the assessee being the house or part of the house, is under the self occupation of the owner for the purpose of his/her residence, then the annual value of such property is to be taken at nil. Clause (b) of section 23(2) of the Act further prescribes that where the property cannot be occupied by the owner because of his employment, business or profession being carried out at any other place and he is residing at the other place in a building not belonging to him, in such cases also, the annual value of the said property is to be taken at nil. Under section 23(3), it is provided that where the assessee has actually let a house or part of the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g vacant or there is no intention to let and/or is habitable, but is undergoing repairs/renovation, the option to adopt the annual value at Nil, being in residential use of assessee, is available in respect of one property and annual value of other properties are to be computed and included in the hand of the assessee. (g)As the income from house property is to be charged on notional basis and hence the status of the each property is to be verified independently in each year. (h)Where the property is not capable of being let, the annual value of such property is not includible in the hands of the owner of the property. (i)Where the property has not been let out throughout the year and was lying vacant, whether the assessee is entitled to vacancy allowance or not. (j)The determination of annual letting value of the property in line with the provisions of section 23(1) of the Income-tax Act. 19. The abovesaid parameters, wherever applicable to the facts of the case have to be fulfilled in order to determine the chargeability of income from house property. Tax is leviable on the net annual value of the property after allowing permissible deductions under section 24 of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt which was a gift from a friend in Sweden on the occasion of the birth of first child pretext of failure to procure the donor which was impossible and illegal demand." 22. The assessee during the year under consideration had received the gift of Rs. 33,430 from Shri Pritinder Sandhu living in Sweden, who was a close friend of the assessee. The assessee had received the said gift on encashment of foreign exchange which was encashed through a Foreign Exchange Company. The assessee was requisitioned to produce the donor by the Assessing Officer and in the absence of his production, the said gift was added as income of the assessee. Even before the CIT(A), the assessee failed to prove the creditworthiness of the donor and in the absence of any occasion for making the gift, the genuineness of the transactions as per the CIT(A) was not proved. The order of Assessing Officer was accordingly upheld. The assessee before us has failed to establish the creditworthiness of the donor or the genuineness of the transactions. The basis of the assessee upon the encashment of the foreign cheque through banking channels does not establish the case of the assessee. Though, we find no merit in the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious properties owned by the assessee, which was the common issue raised by assessee and his family members in many appeals, we have remitted the issue back to the file of the Assessing Officer with directions to decide the same in accordance with law and settled legal propositions. In line with our directions in paras hereinabove, the issue in the present appeals i.e., assessment years 2005-06 to 2007-08 are also remitted to the file of the Assessing Officer to decide the same in line with our directions after allowing a reasonable opportunity of hearing to the assessee. 26. In the result, the appeals in ITA Nos. 304 to 310/Chd./2010 are partly allowed. ITA Nos. 311 to 317/Chd./2010 (Smt. Veena Jain) 27. The common issue raised in all the appeals was regarding the assessability of annual value of the properties both business and residential owned by the assessee in various years. In line with our orders in the paras hereinabove the issue is restored back to the file of the Assessing Officer to decide the same as per our directions in the paras hereinabove. A reasonable opportunity of hearing shall be afforded to the assessee. The grounds of appeals raised by the assessee are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gift was given to the brother and not to his daughter. Further, the donor by way of affidavit has also affirmed her income in Canada, out of which the said gift was made. In the totality of facts and circumstances of the case, we set aside the order of the CIT(A) on this aspect and direct the Assessing Officer to delete the addition of Rs. 1,86,083. The ground No. 1 raised by the assessee in ITA No. 319/Chd./2010 is thus allowed. ITA No. 320/Chd./2010 (Shri Kamal Kant Jain) 33. The ground of appeal raised by the assessee is as under:-- 1.That the CIT(A) erred in uphold additions of gifts from friends without authority of law with full documentary evidence in hand to prove the same genuine. 34. During the year under consideration i.e., Financial Year 2002-03, the assessee had received gift of Rs. 1 lakh from Shri Amrit Dilawari and another gift of US $ 11,500 equivalent to Rs. 5,46,575 from Shri Charanjit P. Singh. The statement of the assessee was recorded on 22-12-2008 and the assessee was unable to provide the present/current addresses of both the parties and in respect of occasion of giving the gift it was stated by the assessee that he was in financial crises and the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the said receipt of Rs. 6,46,575 is to be included as income from undisclosed sources. The ground No. 1 raised by the assessee in ITA No. 320/Chd./2010 is thus dismissed. 37. The ground No. 2 raised by the assessee is as under:-- 2.That the said authority has erred in upholding addition of Rs. 43,873 spent on repair of flat out of withdrawals of Rs. 6,80,000 by the couple. 38. During the course of search operations at the residential premises of the assessee two invoices of Erose Industrial Company (P.) Ltd., Nehru Place, New Delhi were seized and are available at pages 7 & 8 of Annexure A-1. The said invoices reflects Rs. 30,831 and Rs. 13,047 payable by the assessee on account of general maintenance charges. The explanation of the assessee was that the said payments pertain to maintenance of the Mukerjee Nagar Flat in October, 2002 but the same were claimed not to have been paid. The Assessing Officer was of the view that since the property was in the occupation of the assessee, the said maintenance charges must have been paid and as the sources of the payments of the same was not explained, it was added as income from undisclosed sources. Before the CIT(A) the submission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 11 lakhs had been surrendered as unaccounted income, on which tax was paid and in addition surrender of Rs. 1.05 crores was made on account of unaccounted stock. The assessee pleaded that the unaccounted sales and cash credits both could not be added as income, in view of the ratio laid down by the Chandigarh Bench of Tribunal in Bansal Rice Mills 245 ITR (AT) 36 (Chd.) (sic). The CIT(A) held the explanation of the assessee in respect of the entries in the seized material to be vague and uncorroborated. The CIT(A) further held as under:-- "As per the provisions of section 132(4A) of the Act, a presumption can be drawn that the articles or things which are found in the possession of the person searched that the contents of these books of account and other documents are true. Though it is a rebuttable presumption but the burden lies on the person searched to prove otherwise the entries made in these seized papers from the possession of the appellant are free from any ambiguity and the appellant has failed to explain the entries therein. In the circumstances, the Assessing Officer has rightly made the addition of Rs. 10 lakhs and the same is upheld." 41. We are in conformity with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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