Padmini Narasimhan, Delhi v. ACIT, New Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SH. R. K. PANDA ACCOUNTANT MEMBER AND. MS. SUCHITRA KAMBLE JUDICIAL MEMBER ITA NO.3636/DEL/2016 ASSESSMENT YEAR: 2011-12 PADMINI NARASIMHAN C-45 GROUND SOUTH EXTENSION-II DELHI PAN NO. AAFPN4103Q VS. ACIT CIRCLE 32 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. RAJIV SINGH CA RESPONDENT BY MS. ASHIMA NEB SR. DR. DATE OF HEARING: 28/08/2019 DATE OF PRONOUNCEMENT: 13/11/2019 ORDER PER R.K PANDA AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 06-04-2016 OF THE CIT(A)-18 NEW DELHI RELATING TO A.Y. 2011-12. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND DERIVES INCOME FROM HOUSE PROPERTY CAPITAL GAINS AND OTHER SOURCES. SHE FILED HER RETURN OF INCOME ON 31.03.2012 DECLARING TOTAL INCOME OF RS.40 73 683/-. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESS EE HAS SHOWN THE FOLLOWING RENTAL INCOME FROM PROPERTY AT C-45 GROUND SOUTH EXTENSION-II NEW DELHI. PAGE | 2 1. T. NARSIMHAN (@ RS.420000/- P.M.) 2. ANIRUDH CHARI (@ RS.33333/- P.M.) HE FURTHER NOTED THAT THE PROPERTY AT C-45 GROUND FLOOR SOUTH EXTENSION-II DELHI CONSISTS OF BASEMENT AND GROUND FLOOR WHERE THE ASSESSEE IS OWNER OF 50% SHARE AND BALANCE 50% SHARE IS OWNED BY THE HUSBAND OF THE ASSESSEE. FURTHER THE ASSESSEE HAS ALSO PURCHASED 50% SHARE OWNED BY HER HUSBAND ON 04 .02.2011. HE THEREFORE ASKED THE ASSESSEE TO JUSTIFY THE RE NT RECEIVED FROM THE ABOVE PERSONS AT DIFFERENT RATES. IT WAS EXPLA INED BY THE ASSESSEE THAT THE PROPERTY AT C-45 SOUTH EXTENSION -II DELHI HAS THREE PARTS NAMELY BASEMENT GROUND FLOOR AND SERVA NT QUARTER. ALL PARTS HAVE SEPARATE ENTRY. THE GROUND FLOOR HA S BEEN LET OUT TO MR. T. NARSHIMHAN WHERE HIS PARENTS AND YOUNGER DEPENDENT SON STAY WITH HIM. HE HAS BEEN GIVEN ALL THE THREE CAR PARKINGS AND THE HOUSE IS FULLY FURNISHED HAVING FOUR BED RO OMS ETC. THE SERVANT QUARTER CONSISTING OF A SINGLE ROOM WITH TO ILET HAS BEEN LET OUT TO MR. ANIRUDH CHARY WHO WAS THEN A BACHELOR. IT WAS EXPLAINED THAT THERE IS HUGE STRUCTURAL AND INTERIO R RELATED DIFFERENCE IN THE GROUND FLOOR AS COMPARED TO THE S ERVANT QUARTER. 3. HOWEVER THE AO WAS NOT SATISFIED WITH THE ARGUM ENTS ADVANCED BY THE ASSESSEE. HE NOTED THAT THE ASSESS EE LIVES WITH HER HUSBAND WITH TWO SONS AT C-45 SOUTH EXTENSION- II NEW DELHI. FURTHER WHILE THE HUSBAND MR. T. NARSHIMHAN IS PAYING RENT @ OF 4 20 000/- PER MONTH HOWEVER HER SON I S GIVING RENT ONLY OF RS.33 333/- PER MONTH WHICH IS NOT COMMENSU RATE WITH THE MARKET RENT. HE THEREFORE ADOPTED THE FAIR M ARKET RENT OF THE PROPERTY LET OUT TO MR. ANIRUDH CHARI @ RS.4 20 000/- PER PAGE | 3 MONTH. HE ACCORDINGLY DETERMINED THE TOTAL INCOME OF THE PROPERTY LET OUT TO MR. ANIRUDH CHARI AT RS. 50 40 000/- FOR 12 MONTHS. AFTER ALLOWING DEDUCTION OF RS. 15 12 000/- U/S. 24 OF THE IT ACT THE AO COMPUTED THE INCOME FROM HOUSE P ROPERTY LET OUT TO MR. ANIRUDH AT RS. 35 28 000/- WHICH HE ADDE D TO THE TOTAL INCOME OF THE ASSESSEE. 4. IN APPEAL THE LD. CIT(A) NOTED THAT THE PROPERTY WAS ORIGINALLY PURCHASED BY THE ASSESSEE JOINTLY WITH H ER HUSBAND EACH HOLDING 50% SHARES. THE HUSBAND OF THE ASSESSE E MR. T. NARASIHMAN SOLD HIS ENTIRE SHARE IN THE PROPERTY TO THE ASSESSEE ON 04.02.2011. THEREFORE HE HELD THAT THE ENTIRE RENTAL INCOME SHOWN FOR THE PERIOD FROM 01.04.2010 TO 03.02.2011 IN THE HANDS OF THE ASSESSEE AS RECEIVED FROM MR. T. NARASIHMAN IS TO BE TREATED AS INCOME FROM OTHER SOURCES FOR THE IMPU GNED ASSESSMENT YEAR AS THERE IS NO EVIDENCE THAT IT WAS RENTED OUT DURING THAT PERIOD. 5. SO FAR AS THE BALANCE PERIOD OF THE YEAR I.E. AF TER THE ASSESSEE BECAME FULL OWNER OF THE PROPERTY IS CONCE RNED HE HELD THAT RENT IN EXCESS OF FAIR RENTAL VALUE WHICH IS T AKEN AT RS. 100 PER SQUARE FT. AS PER THE SUBMISSION OF THE ASSESSE E IS TO BE TREATED AS INCOME FROM OTHER SOURCES SINCE THE CLA IM HAS OSTENSIBLY DONE TO CLAIM HIGHER DEDUCTION TOWARDS M AINTENANCE U/S. 24 ETC. 6. SO FAR AS THE ENHANCEMENT OF RENTAL VALUE LET OU T TO MR. ANIRUDH CHARY IS CONCERNED HE ACCEPTED THE CONTENT ION OF THE ASSESSEE THAT THE RENT FOR 190 SQUARE FT HAS BEEN R ENTED OUT TO MR. ANIRUDH CHARY FOR RS.33 333/- PER MONTH IS HIGH ER THAN THE PAGE | 4 MARKET RENT OF 100 PER SQUARE FT. AND THEREFORE T HERE WAS NO BASIS ON THE PART OF THE AO TO ENHANCE THE RENT. H E HOWEVER HELD THAT THE RENT IN EXCESS RS.100/- PER SFT. IS T O BE CONSIDERED AS INCOME FROM OTHER SOURCES. ACCORDINGLY HE DIRE CTED THE AO TO RE-COMPUTE THAT TOTAL INCOME. 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING S GROUNDS :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS OF TH E CASE IN NOT ADJUDICATING THE GROUND REGARDING OF VIOLATION OF PRINCIPALS OF NATURAL JUSTICE BY THE LD. AO WHILE PASSING THE ASSESSMENT ORDER U/S. 143 (3). 2. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS OF TH E CASE IN TREATING THE RENTAL INCOME AS INCOME FROM OTHER SOU RCES IN RESPECT OF THE PERIOD 01.04.2010 TO 03.02.2011. 3. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE C ASE IN DIRECTING THE ASSESSING OFFICER TO TREAT THE RENT R ECEIVED FROM MR. ANIRUDH CHARI IN EXCESS 100 PER SQ. FT. AS INCOM E FROM OTHER SOURCES. 4. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE C ASE IN DIRECTING THE ASSESSING OFFICER TO REOPEN THE ASSES SMENT FOR A.Y.2010-11 & 2012-13. 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE WAS NOT GIVEN PROPER OPPORTUNITY BY THE AO OR BY TH E CIT(A) AND THE CIT(A) HAS NOT PROPERLY ADJUDICATED THE GROUND RAISED BEFORE HIM REGARDING THE VIOLATION OF PRINCIPLES OF NATURA L JUSTICE BY THE AO WHILE PASSING THE ASSESSMENT ORDER. HE SUBMITTED THAT WHEN THE AMOUNT WAS RECEIVED BY THE ASSESSEE FROM HER HU SBAND AND HER SON AS RENT AND IF THE CIT(A) HOLDS THAT THE FA IR RENTAL VALUE IS PAGE | 5 ONLY RS. 100 PER SQUARE FT. THEN THE BALANCE AMOUN T CANNOT BE TREATED AS INCOME FROM OTHER SOURCES AND THE SAME SHOULD HAVE BEEN CONSIDERED AS GIFT FROM THE HUSBAND AND SON. A LTERNATIVELY HE SUBMITTED THAT EVEN IF SUCH INCOME IS CHARGED TO INCOME AS INCOME FROM OTHER SOURCES THAN DEDUCTION U/S.57 S HOULD HAVE BEEN ALLOWED. FURTHER THE CIT(A) BY DIRECTING THE A O TO REOPEN THE CASE FOR A.Y. 2010-11 AND 2012-13 HAS EXCEEDED HIS POWERS. HE SUBMITTED THAT THE LD. CIT(A) HAS NO POWER TO CH ANGE THE NATURE OF INCOME AND CANNOT SHIFT INCOME FROM ONE H EAD TO ANOTHER. HE ACCORDINGLY SUBMITTED THAT THE ORDER O F THE CIT(A) BE SET ASIDE AND THE GROUNDS RAISED BY THE ASSESSEE BE ALLOWED. 9. THE DR ON THE OTHER HAND HEAVILY RELIED ON THE O RDER OF THE CIT(A). 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSE SSEE IN THE INSTANT CASE HAD PURCHASED HOUSE PROPERTY SITUATED AT C-45 GROUND SOUTH EXTENSION-II NEW DELHI ALONGWITH HER HUSBAND ON 25.02.2009 FOR RS. 2.10 CRORES + STAMP DUTY AND REGISTRATION EXPENSES. THE ASSESSEE AND HER HUSBAND HOLDS 50% E ACH IN THE SAID PROPERTY. WE FIND THE ASSESSEE PURCHASED THE SHARE OF HER HUSBAND ON 04.02.2011 FOR THE CONSIDERATION OF RS. 1.05 CRORES + STAMP DUTY AND REGISTRATION EXPENSES. WE FIND THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAS SHOWN RENTA L INCOME FROM THE SAID PROPERTY AT RS. 50 40 000/- FROM HER HUSBAND AND RS. 4 LACS FROM HER SON FOR THE ENTIRE YEAR. WE FI ND THE AO PAGE | 6 DETERMINED THE RENTAL INCOME FROM MR. ANIRDUH CHARY AT RS. 50 40 000 PER ANNUM AND AFTER ALLOWING THE DEDUCTIO N U/S. 24 MADE ADDITION OF RS. 35 28 000/- TO THE TOTAL INCOM E OF THE ASSESSEE. WE FIND IN APPEAL THE LD. CIT(A) DIRECTE D THE AO TO TREAT THE RENTAL INCOME SHOWN BY THE ASSESSEE FOR T HE PERIOD FROM 01.04.2010 TO 03.02.2011 IN THE HANDS OF THE ASSESS EE RECEIVED FROM MR. T. NARASIHMAN AS INCOME FROM OTHER SOURCES AND CONSIDER THE RENT IN EXCESS OF FRV @ 100 PER SQUARE FT. FOR THE REMAINING PERIOD AS INCOME FROM OTHER SOURCES. S IMILARLY HE ALSO DIRECTED THE AO TO TREAT THE RENT RECEIVED FRO M MR. ANIRUDH CHARY IN EXCESS OF RS.100 PER SQ. FT. AS INCOME FR OM OTHER SOURCES. IT IS THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT RECEIVED FROM HER HUSBAND FOR THE P ERIOD 01.04.2010 TO 03.02.2011 CANNOT BE TREATED AS INCO ME FROM OTHER SOURCES AND CAN BE TREATED AS GIFT. SIMILAR LY THE RENT RECEIVED IN EXCESS OF RS.100 PER SQUARE FT. FROM HE R HUSBAND FOR THE PERIOD FROM 04.02.2011 TO 31.03.2011 AND THE RE NT RECEIVED FROM HER SON FOR THE ENTIRE YEAR CANNOT BE TREATED AS INCOME FROM OTHER SOURCES AND CAN BE TREATED AS GIFT FROM THE HUSBAND AND SON. IT IS ALSO HIS SUBMISSION THAT IN CASE A PART OF THE RENT IS TREATED AS INCOME FROM OTHER SOURCES THE ASSESS EE IS ENTITLED TO DEDUCTION U/S. 57 OF THE IT ACT 1961. WE FIND T HIS TYPE OF ARGUMENT WAS NEITHER TAKEN BEFORE THE AO OR CIT(A) NOR CONSIDERED BY THEM. FURTHER IT IS ALSO ONE OF THE GROUND TAKEN BY THE ASSESSEE THAT SHE WAS NOT GIVEN PROPER OPPORTUN ITY TO SUBSTANTIATE HER CASE AND THE PRINCIPLE OF NATURAL JUSTICE HAVE BEEN VIOLATED. CONSIDERING THE TOTALITY OF THE FACT S OF THE CASE AND PAGE | 7 IN THE INTEREST OF JUSTICE WE DEEM IT PROPER TO RES TORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO GIVE ONE MOR E OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE HER CASE AND DECIDE TH E ISSUE AS PER FACT AND LAW. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS OF APPEAL NO.1 TO 3 BY THE ASSESSEE ARE ACCORDINGLY AL LOWED FOR STATISTICAL PURPOSE. 11. SO FAR AS THE GROUND NO. 4 IS CONCERNED THE SAM E RELATES TO THE ORDER OF THE CIT(A) IN DIRECTING THE AO TO REOP EN THE ASSESSMENT FOR A.Y.2010-11 & 2012-13. A PERUSAL O F THE ORDER OF THE CIT(A) SHOWS THAT HE HAS SIMPLY DIRECTED THE AO THAT HE MAY REOPEN THE CASE IF NECESSARY AFTER EXAMINATION OF THE ISSUE FOR THOSE YEARS. THEREFORE THE ASSESSEE SHOULD NOT HA VE ANY GRIEVANCE ON THIS ISSUE. WE ACCORDINGLY DISMISS THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE. 12. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 13.11.2019. SD/- SD/- (SUCHITRA KAMBLE) (R.K PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA* DATE:- 13.11.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI PAGE | 8 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS 13.11.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 13.11.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 13.11.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 13.11.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.11.2019 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER