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TMI Blog2018 (4) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... pt the fair market value determined by the municipal authorities (GHMS) as the fair rental value and assess the same for income tax purpose. - I.T.A.No.528/Vizag/2017 - - - Dated:- 4-4-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N. Hari, AR For The Respondent : Shri T. Satyanandam, DR ORDER PER D.S. SUNDER SINGH, Accountant Member: This appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals)-10 {CIT(A)}, Hyderabad vide ITA No.0012/CIT(A)-10/2015-16 dated 12.6.2017 for the assessment year 2012-13. 2. All the grounds of appeal are related to the addition of ₹ 13,11,158/- towards the annual rental value as per fair market rate. The assessee owns house building in flat No.242/A in Jubilee Hills, Hyderabad. The assessee admitted rental income of ₹ 1,14,000/- @ ₹ 9,500/- per month from Shri V. Ananda Raju. Since the rent admitted by the assessee appeared to be grossly low, the A.O. conducted the enquiries and found that in the vicinity of Jubilee Hills the similar properties are fetching the rental income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the order of the AO the assessee filed appeal before the CIT(A) and the Ld.CIT(A) confirmed the order of the AO. 4. Aggrieved by the order of the CIT(A), the assessee is in appeal before us. Appearing for the assessee, the Ld. A.R. argued that the assessee is having valuable property in Jubilee Hills at plot No.242/A. The said property was given on rent to his brother Mr. V. Ananda Raju. The assessee is engaged in the various business activities and made the investments in Sify Technologies and Raju Vegesna Investments and he is using the same house both for his business as well as for personal stay during his visits in India. In the process the assessee is using more than 50% of the house for own purpose. As per the details given in explanation out of 6352 sq.ft more than house, 50% of the house i.e. lower ground floor, ground floor, and second floor are under his occupation. Apart from the above, the assessee is also having access to the puja room internal stair cases, which normally interfere with the privacy of the tenant. The assessee has further argued that the house is a valuable one and it cannot be let out to unknown person and if it is let out for higher rate on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket rent of the area and observed that the fair Rental value in the area is ranging from ₹ 10/- to ₹ 47.13ps depending on the nature of tenant and the building. The higher rents were paid by the commercial organizations such as State Bank of India, Bank of Baroda, Amar Immune Diagnostics Pvt. Ltd. whose rental value is more ₹ 15/- to ₹ 47/- per sqft. Initially the AO proposed for adopting the ALV @Rs.190000/- for month on considering the objections raised by the assessee the AO scaled down the ALV @ ₹ 1,45,000/- p.m. The AO rejected the objections raised by the assessee and determined the ALV@ ₹ 1,45,000/- and accordingly completed the assessment on the basis of the information collected by the AO. The AO has collected the information with regard to the market rent in the vicinity and supplied the copies of rental agreements and confirmations to the assessee. The assessee has requested for cross examination of the owners/tenants but the AO brushed aside the request of the assessee to cross examine the owners/tenants stating that the same is not valid since the details of owners/tenants along with the property details were provided to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is the necessary requirement of the process of taking evidence that the examination in chief is followed by cross examination and reexamination, if necessary. The AO has rejected the request of the assessee citing the reason that Pune and Amritsar are not having direct flight. Hence it is clear that statement was recorded behind the back of the assessee and no opportunity was given to cross examine that being basic right of the assessee. No addition can be made on the basis of such statement. The Honourable Delhi High Court in CIT v. Dharam Chand Prem Chand Limited 295 ITR 105 has held that: the Assessing Officer had based his assessment order on the report obtained from the research institute. The correctness of that report itself having been under challenge by the assessee who had not only filed petitions thereto but also sought permission on several occasion to cross examine the analyst even agreeing to pay the necessary expenses, the report could not automatically have been accepted. Since the Assessing Officer did not permit the correctness or otherwise of the report to be tested, there was a clear violation of the principles of natural justice by him in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was under self-occupation and the assessee is using pooja room and stair case which is interfering with the privacy of tenant. In these circumstances, the Ld. A.R. submitted that because of the peculiar circumstances discussed above, no other tenant would come forward to take the house which will cause inconvenience to the tenant. Therefore, there is no case to fetching the market value for letting out the property. Against the annual municipal letting value of ₹ 58,020/-, the assessee had admitted a sum of ₹ 1,14,000/- which is more than annual letting value. Hon ble Bombay High Court in the case of CIT Vs. Tip Top Typography (supra) held as under: 48. We are not in agreement with Shri Chhotaray that the municipal rateable value cannot be accepted as a bonafide rental value of the property and it must be discarded straightway in all cases. There cannot be a blanket rejection of the same. If that is taken to be a safe guide, then, to discard it there must be cogent and reliable material. 50. We are of the opinion that market rate in the locality is an approved method for determining the fair rental value but it is only when the Assessing Officer is convince ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the annual letting value of the building in plot No.215, Jubilee Hills, Hyderabad. The A.O. estimated the annual letting value at ₹ 75,000/- per month for 2 months in June and July, 2011 and brought to tax ₹ 1,50,000/- as income from property. The Ld. D.R. supported the order of the lower authorities. The assessee s A.R. stated during the appeal hearing that this building was sold during the previous year in the month of August, 2011. The assessee further submitted that the building was incomplete, hence not ready for occupation by the end of May, 2011. The A.O. has not brought any evidence to show that the building was ready for occupation. Hence, submitted that the A.O. is not justified in subjecting to tax the annual value of the building @ ₹ 75,000/- per month for the months of June July, 2011. 11. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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