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2017 (4) TMI 1445

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..... A(3) - HELD THAT:- The assessee has failed to demonstrate that the payments made to the Jaipur Vidhyut Nigam falls under the category of exemption as provided under Rule 6DD of the Income Tax Act Rule 1962. In the absence of the same, we do not see any reason to interfere into the order of the Ld. CIT(A). This ground of assessee s appeal is dismissed. Addition on account of advances shown against flat booking for which sales has been made in subsequent years - AO made addition by treating the advances from Shri Azad Hussain as bogus - HELD THAT:- It is observed by the Assessing Officer that vide letter dated 19/3/2015, the assessee was specifically asked to file the date and mode of receipt of advances of ₹ 28,24,000/- from Shri Azad Hussain but nothing was stated in the reply dated 23/3/2015. The contention of the assessee is that, the amount was not received during the year under appeal. This issue requires fresh consideration by the Assessing Officer. The Assessee is directed to furnish the supporting evidences in respect of its claim that the advances were received in earlier years. The AO would then verify the same by making necessary inquiry. Therefore, this ground i .....

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..... 3. Aggrieved by this, the assessee preferred an appeal before this Hon ble Tribunal. 4. Ground no. 1 is against confirming the addition of ₹ 14,11,556/- as income from the house property. Ld. Counsel for the assessee reiterated the submissions and stated that these written submissions may be considered and this issue we decided. The written submissions of the assessee are as under:- Ground no. 1- Under the facts and circumstance of the case the ld. CIT(A) has erred in confirming the addition by giving part relief out of ₹ 14,11,556/- made by the ld. Assessing Officer as income from house property by calculating ALV on assumption basis. The assessee had constructed a multistory project Rama s Janaki Vihar at Bani Park, Jaipur. Out of the unsold portion some part was let out and the assessee disclosed the rental income under the head income from house property at ₹ 1,85,150/-. On the basis of rent disclosed by the assessee of the portion of building which was let out the ld. Assessing Officer calculated ALV of portion which could not be let out and was vacant and accordingly has made an addition of ₹ 14 .....

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..... is to be considered if the same is less than the amount referred in clause (a). It is submitted that clause(a) is in respect of rent which the property might reasonably be expect to let. It is a sper this clause that the ld. Assessing Officer has worked out the annual letting value of the vacant portion of the house property at ₹ 21,17,433/-. The ld Assessing Officer has not considered the provisions of section 23(1)(c). Had the ld. Assessing Officer considered clause (c) of sub-section 1 of section 23, then the actual rent received and disclosed by the assessee would have been accepted. The provisions very specifically stipulate that in a case where the property or part of the property is let and remains vacant for whole or any part of the year then in such a case actual rent received or receivable shall be deemed to be the annual value of the property. The action of the ld. Assessing Officer violates the provisions of section 23(1)(c). Hence the addition made by the ld. Assessing Officer is bad in law and deserves to be quashed and ld. CIT(A) has considered this aspect on page 10 of order in para 4 that the whole project is not a single property and it is a number of .....

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..... . This will be the case even if the property (or part of the property) was vacant for a part of the year, but the actual rent received or receivable during the year is still higher than the ALV. Where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owning to such vacancy, the actual rent received or receivable is less than the ALV, the sum so received or receivable shall be the annual value. In case the actual rent received or receivable during the year is less than the ALV, but not because of vacancy, it is the ALV which shall be taken to be the annual value. The above para of the circular very clearly state that where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy, the actual rent received or receivable is less than the ALV, the sum so receive or receivable shall be the annual value. The circular issue by the board are of binding nature particular those which given relief to the assessee which is so held by the Hon ble Supreme Court in the following case:- UCO Bank vs. CIT (1999)237 ITR 889 .....

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..... ition confirm by the ld. CIT(A) deserves to be deleted. Ld. Counsel for the assessee submitted that authorities below failed to appreciate the facts that provision of section 23(1)(a) of the Act is not applicable but section 23(1)(c), is applicable. He further contended that the assesee is a builder and he constructed the project as a whole and the projects should be considered as a single property not as individual flats. 4.1 On the contrary, the Ld. Departmental Representatives opposed the submissions and submitted that what the Ld. Counsel for the assessee submitting, is contrary to the law. He submitted that by no stretch of imagination it can be inferred that the entire project where the assessee had constructed various flats should be considered as single property and provisions of section 23(1)(c) should be applied, accordingly. In rejoinder, the Ld. Counsel for the assessee submitted that there is a proposal for not taxing income from house property on the basis of the notional income qua house property held as stock in trade. Therefore, he submitted that the intention of the legislation is clear, where the property is kept as stock in trade; same cannot be .....

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..... evious year (iii) and owning to such vacancy, the actual rent received or receivable is less than the sum referred to in clause(a). (iii) It was further submitted that its property meets the above conditions whereas the AO has applied clause (a) of section 23 of the Act. It was submitted that clause (a) is in respect of rent which the property might reasonably be expected to let an the AO has not considered the provisions of section 23(1)(c). Had the Ao considered clause (c) of sub-section 1 of section 23, then the actual rent received and disclosed by the appellant would have been accepted. The provisions very specifically stipulate that in a case where the property or part of the property is let and remains vacant for whole or any part of the year then in such a case actual rent received or receivable shall be deemed to be the annual value of the property an the action of the AO violates the provisions of section 23(1)(c). Hence the addition made by the AO is bad in law an deserves to be quashed. The appellant has also tried to distinguish the case of Ansal Housing Finance and Leasing Co. Ltd. (supra) as relied upon by the AO by stating that the said deci .....

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..... during the year is less than the ALV, but not because of vacancy, it is the ALV which shall be taken to be the annual value. (vi) Thus, in view of the provisions of section 23 of the Act and the above circular, the clause (a) of section 23 of the Act is clearly applicable to flats/showrooms which were vacant for the whole year under consideration or which were vacant till the date of their sale and thus it is held that the AO has rightly applied caluse (a) to section 23 thereof. It may be mentioned that in the case of CIT vs. Ansal Housing Finance Leasing Company Ltd. (supra), it was by Hon ble high Court of Delhi that: The assessee is engaged in building activities. It argues that flats are held as part of its inventory of stock-in-trade, and ae not let out. The further argument is that unlike in the other instances, where such builders let out flats, here there is no letting out and that deemed income which is the basis for assessment under the ALV method, should not be attributed. The argument, though attractive cannot be accepted. The levy of income tax in the case of one holding houe property is premised not on whether the asesee carrie .....

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..... rse of any for the purpose of business as a builder. Therefore, ALV cannot be assessed as its income. I have duly examined the alternate contention raised by the appellant. It is to be noted that similar contention has also been considered and rejected by the Hon ble Delhi High Court in the above referred case. Therefore, respectfully following the above decision of the Hon ble High Court of Delhi, the alternate contention of the appellant is hereby rejected. (viii) It may be mentioned that in the case of Susham Singla vs. ACIt [2015] 58 taxmann.com 252 (Chandigarh-Trib.), it was held by Hon ble ITAT that: 10. From the above, it becomes clear that it is not necessary that the property has been let out for computing the annual value because what is required u/s 23(1)(a) of the Act is a sum for which property might be let out. In case of let out properties section 23(1)(b) of the Act is applicable which talks of annual rent received or receivable. 11. Now the question is where the property remains vacant for the whole year, in that case, nil value is to be computed or notional value of rent is to be computed. As pointed out by the ld. CIT(A), sectio .....

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..... ly and not for the whole year as taken by the AO. The AO is directed to re-compute the ALV of these showrooms/flats in view of the provisions of section 23 of the Act accordingly. 4.3 We do not see any merit into the contention of the ld. Counsel for the assessee as the provisions are clear even the assessee had sold flats individually and offered income from house property, the flats which was part of the project and had been let out on rent. We find that the Assessing Officer recorded that during the year under consideration assessee has shown income from house property at ₹ 1,85,150/-, on account of rent of ₹ 2,64,500/- received from letting out of part of unsold portion of project Rama s Janak Vihar, Banipark, Jaipur. The Assessing Officer has applied ratio lay down by the Hon ble Delhi High Court in the case of Commissioner of Income Tax vs. M/s Ansal Housing Finance and Leasing Co. Ltd. in ITA No. 18/1999 dated 31/10/2012. We find that the facts are identical as were in the Commissioner of Income Tax vs. Ansal Housing Finance and Leasing Co. Ltd. (supra). In the case in hand some of the flats are admittedly let out by th .....

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..... identity of the recipient and the genuineness of the expenditure is established, the spirit of the provision would stand complied with. The genuineness of the payments has also not been doubted as the payment has been made to JVVNL which is government agency. In view of this it is submitted that under the facts and circumstances of the case no addition was called for. This is supported by the Jurisdictional High Court of Rajasthan in the case of Smt. Harshila Chourdia vs. ITO in 98 ITR 349 wherein it has been held that no disallowance u/s 40A(3) could be made by taking a hyper technical view. 2. Favourable decision of the court- There are a number of decision wherein it has been held that when the identity of the parties have been established and genuineness of payments have not been doubt, no disallowance was required to be made u/s 40A(3)- (i) Attar Singh Gurumukh Singh Vs. Income Tax Officer 97 CTR 251 (Supreme Court) Genuine and bona fide transactions are taken out of the sweep of the section. (ii) Anupam Tele Services vs. Income Tax Officer (2014) 100 DTR 411 (Guj. High Court) Rigours of section 40A(3) are lifted .....

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..... ered the judicial pronouncement relied upon by the appellant and found them to be distinguishable on fact. Further, these judicial pronouncements were pertaining to the period prior to amendment made in Rule 6DD by the IT (Seventh Amendment) Rule 2008 w.e.f. AY 2009-10. The Rule 6DD of the IT rules prescribed the exceptions for making the payments in violation of section which clauses of the Rule 6DD of the IT Rules, its case is covered. The JVVNL may be a government agency but the exception in Rule 6DD is for making the payment to the government and certainly, the JVVNL is not the government. (iii) Therefore, in view of the above discussion, the addition of Rs, 21,967/- made by the AO in violation of provisions of section 40A(3) of the Act is hereby held to be justified and hence sustained. 5.3 We have given our thoughtful consideration to the fact of the case. The assessee has failed to demonstrate that the payments made to the Jaipur Vidhyut Nigam falls under the category of exemption as provided under Rule 6DD of the Income Tax Act Rule 1962. In the absence of the same, we do not see any reason to interfere into the order of the Ld. CIT(A). This gro .....

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..... as such these could not be furnished before the ld. Assessing Officer. Since these papers are at the root of the issue are strong material for deciding the same, therefore these are required to be admitted as additional evidence and considered for the purpose. It is submitted that the ld. Assessing Officer has made the addition of the advance amount received against this flat from Shri Azad Hussain treating the sale as bogus and assessee s on accounted money. The finding of the ld .Assessing Officer is perverse, and against the facts and law. The ld. Assessing Officer himself has quoted at length the sale deed executed by Shir Azad Hussain on 01.05.2012 regarding the sale of this flat to Smt. Rahisha W/o Shri Hamir R/o plot no. 17, Sundamapuri, Nahri Ka Naka, Jaipur for a sum of ₹ 30,00,000/-. In this sale deed he has referred to the power of attorney executed in his favour on 18.02.2009 copy cited supra. The submission of the assessee is that it is only after getting the flat from the assessee on the basis of power of attorney that Shri Azad Hussain could sale it for a sum of ₹ 30,00,000/-. The assessee has shown receipt of advance of ₹ 28,24,000/ .....

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..... um of ₹ 28,24,000/- and which has been duly accounted for in the books of accounts. Since the transaction did not take place during the year under consideration and the amount of ₹ 28,24,000/- was also not received during the year under consideration, there was absolutely no case for any addition in the hands of the assessee during the year under consideration. The amount of ₹ 28,24,000/- was received in Assessment Year 2009-10, relevant copies of accounts are on paper book cited supra. 2. Conclusion:- In view of the aforesaid facts the ld. Assessing Officer erred in giving the finding that the advance deposit in the name of Shir Azad Hussain of ₹ 28,24,000/- was bogus and was assessee s own unaccounted money. The assessee has been able to establish that the amount of ₹ 28,24,000/- was received against sale of flat No. B-104 and the same was received in Assessment year 2009-10. In these circumstances the addition made deserves to be deleted. The ld. CIT(A) has rejected the arguments of the assessee because of the following reasons. (i) That there is a credit entry appearing in the books of accounts in the yea .....

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..... ctra (jaipur) Pvt. Ltd. Vs. IAC 26 ITD 236 If evidence produced by assessee is genuine, reliable and proves assessee s case than assessee should not be denied opportunity of it being produced even if he first time produces same before appellate authority. (ii) Smt. Prabhavati S. Shah vs. CIT 231 ITR 1 (Bom.) Production of additional evidence- assessee taking loans from two creditors-ITO treating loans as income from undisclosed sources as summons could not be served on creditors- Assessee wanting to prove genuineness of loan by relying on fact that amount borrowed and repaid by cheques. Assessee producing Photostat Copies of cheques and certificate from Bank before AAC. AAC refusing to admit additional evidence. AAC should have considered evidence produced by assessee regarding loan. (iii) CIT vs. Gani Bhai Wahab Bhai 232 ITR 900 (MP) There is no prohibition for taking additional evidence at the appellate stage, the only condition being that the Department should not be prejudiced and should be given reasonable opportunity to rebut this additional evidence. In this case no such request was made by the representative of the Depa .....

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