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TMI Blog1992 (1) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1/6th for repairs as per section 24 of the IT Act, 1961 (the Act). During the course of assessment proceedings for assessment year 1979-80, the assessing authority held that the assessee was not entitled to grant of 1/6th deduction for repairs in respect of the premises in the occupation of various tenants as such repair expenses were to be borne by the tenants as per tenancy agreements. The assessing authority thereafter issued notices under section 148 on 5-2-1985 for assessment years 1976-77 to 1978-79. It has been observed in the reassessment order that at no point of time during the course of original assessment proceedings it was disclosed by the assessee that as per the tenancy agreement, the cost of repairs was to be met by the tenants. It was a fact within the special and exclusive knowledge of the assessee and it was duty bound to disclose the same before the assessing authority. On account of such omission and failure on the part of the assessee the said proceedings were initiated under section 147(a) of the Act. In the reassessments, the deduction of 1/6th for repairs was not allowed in respect of part of the ALV of the portion occupied by the tenants who had undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation of the tenants in this regard was submitted during the course of assessment proceedings for assessment years 1979-80 and 1980-81 when this issue was raised by the Assessing Officer for the first time. It was submitted that the proceedings under section 147(a) have been initiated merely on account of a change of opinion on the part of the successor Assessing Officer, who had taken a view in the subsequent years that the cost of repairs are not deductible under section 24. The assessee had given the entire material facts and it was under no obligation to suggest to the ITO the possible inference which he should take while making the assessment. Reliance was placed on the decisions in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC), CIT v. Burlop Dealers Ltd. [1971] 79 ITR 609 (SC), Union of India v. Rai Singh Deb Singh Bist [1973] 88 ITR 200 (SC) and Gujarat Ginning Mfg. Co. Ltd. v. CIT [1977] 107 1TR 590 (Guj.). He also relied on some more judgments mentioned at page 6 of the compilation submitted by him. He, therefore, urged that the CIT (Appeals) ought to have quashed the proceedings initiated under section 147(a). 4.1. The learned counsel for the assessee sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained from carrying out the repairs and, therefore, it became necessary for the appellant company to conduct such repairs in order to properly maintain and protect its properties and the original agreement was modified by the subsequent oral agreement. Such facts were totally absent in the case decided by the Hon'ble Delhi High Court. He, therefore, urged that even on merits the assessee deserves to succeed. 4.2. The various other grounds taken in the grounds of appeal were not pressed by the learned counsel for the assessee for these three years under consideration. 5. The learned Sr. D.R. contended that the rent agreements executed with the tenants were not produced before the assessing authority, which ought to have been brought to the notice of the ITO during the course of original assessment proceedings. The case thus clearly falls under section 147(a) as there was an omission and failure on the part of the assessee in truly and fully disclosing the material facts relating to grant of deduction of 1/6th for repairs. He placed reliance on judgments reported in Indo-Aden Salt Mfg. Trading Co. (P.) Ltd. v. CIT [1986] 59 ITR 624 (SC), Aditya Mills Ltd. v. Union of India [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses for repairs to buildings were in fact incurred by the appellant. The ITO, while computing the rental income under the head 'income from property' granted deductions under section 24 in respect of 1/6th for repairs in addition to other deductions granted for land revenue, land rent, education cess, collection charges etc. The Hon'ble Gujarat High Court in the case of Gujarat Ginning Mfg. Co. Ltd. has considered a case relating to reassessment under section 147(a) almost under similar facts and circumstances. In that case the amount of municipal tax recovered from the tenants were mentioned in the profit and loss account. But the assessee prepared and filed a separate statement for computation of income from house property and in that the assessee did not mention or treat as income the amount of municipal tax collected from the tenants and those amounts were not included in the income of the assessee in the assessment orders. Later, the ITO took action under section 147(a) of the Act and included that amount in the total income. The Hon'ble High Court in that case held that the assessee had not suppressed material facts. The primary fact was before the ITO at the time of origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant period and also confirmed the correctness of the affidavit executed by Shri G.P. Patel, the Accountant of the appellant-company. Shri G.P. Patel in the said affidavit has confirmed that various tenants mentioned in their respective affidavits did not implement the condition relating to repair work. He further confirmed that as per the subsequent oral understanding the appellant carried out the repairing work at its own cost in the said rented portions. Similar facts have been confirmed in the affidavit of Shri M.R. Pandya who was manager of the company. Confirmation of tenant M/s. Shah Jagdishkumar Narpatlal Co. was also submitted confirming this fact. The assessing authority, after submission of such affidavits and evidence before him did not conduct any further investigation. He neither examined the Director, the Accountant and Manager of the company nor he examined any of the tenants. The original contract in the form of original tenancy agreements can always be varied or altered by subsequent agreements whether orally or in writing. Section 62 of the Indian Contract Act, 1872 clearly provides that if the parties to a contract agreed to substitute a new contract for it, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overable rent from various tenants was as under : Rent Rs. 54,678 Municipal Tax recoverable from tenants which could not be realised Rs. 26,655. It was submitted that from the point of view of the landlord the entire amount recoverable from the tenants consisting of rent and municipal taxes are part of the rent due by the tenants to the landlord and, therefore, the entire amount fell within the provisions of rule 4 of IT Rules, 1962. Since the ITO has himself allowed deduction in respect of irrecoverable rent of Rs. 54,678 on the same reasoning he should have also allowed deduction in respect of irrecoverable amount of municipal taxes under rule 4 of the IT Rules. 9.1 The learned Sr. D.R. contended that municipal tax is not a deduction which can be allowed under section 24 of IT Act, 1961. The amount of municipal taxes is to be deducted under section 23 for determining the annual value. The amount of municipal tax should be deemed to have been allowed while determining the ALV of the property in question. If the municipal taxes were recoverable from the tenants, the ALV has been determined at a lower figure keeping in mind that such municipal taxes were to be recovered f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as erred in not allowing Rs. 39,786 (for assessment year 1982-83) and Rs. 38,413 (for assessment year 1983-84) being cost of collection charges. The appellant had incurred total expense by way of salaries, miscellaneous expenses and other expenses aggregating to Rs. 57,561 and Rs. 66,851 in these two years. It was submitted before the departmental authorities the majority of the expenses incurred were towards the collection of rent because the employees of the assessee were required to visit the tenants for the purpose of collecting rent. According to the ld. counsel, the deduction granted by the assessing authority only to the extent of Rs. 15,000 each in both these years is inadequate. He, therefore, urged that the total deduction claimed by the assessee should be allowed. In the alternative it was submitted that the disallowance made by the assessing authority and confirmed by the CIT(Appeals) is extremely excessive and the assessee is entitled to a further deduction of a substantial part of the total expenditure incurred in these two years. 11.1 The learned Sr. D.R. contended that the assessing authority has discussed this point at considerable length. The assessee as not fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x payable by it. The assessee placed reliance on the definition of assessed tax given in section 215(5) ofthe Act and also relied upon the judgment of Hon'ble Supreme Court reported in 88 ITR 192. It was submittedt that the amount paid as advance tax without filing any estimate/statement have been adjusted is advance tax while completing the assessments in question. The interest cannot be charged on the gross amount of tax payable without deducting the amount of advance tax so paid within the respective financial years for both these years under consideration. 12.1 The learned Sr. D.R. supported the orders of the departmental authorities and contended that in the absence of estimate or statement of advance tax in the prescribed form, the payments made by the assessee cannot be regarded as advance tax and interest has rightly been charged under sections 217 and 139(8) after ignoring those payments. 12.2 We have carefully considered the rival submissions and have also gone through the relevant provisions of law. It is an undisputed fact that credit for the taxes paid by the assessee aggregating to Rs. 3,15,000 in assessment year 1982-83 and for first two instalments each of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y way of interest thereon under sections 139(8) and 217 does not arise. A useful reference can also be made to section 237 of the Act, which provides that if a taxpayer satisfies the Assessing Officer that the amount of tax paid by him exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess. The credit of prepaid taxes paid within the financial years will also have to be given regardless of the fact that no estimate/statement of advance tax was filed by the assessee. We are, therefore, of the considered view that irrespective of the question whether the tax paid by the assessee in the financial year without furnishing the estimate/statement of advance tax is or is not to be treated as advance tax, it must be taken into account for the purpose of levy of interest under section 217 as well as under section 139(8). The assessing authority is, therefore, directed to calculate the interest chargeable under sections 217 and 139(8), if any, after taking into consideration the entire amount of advance tax paid within the respective financial years. 13. In the result all the appeals are treated as partly allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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