IN THE ITAT DELHI BENCH ‘F’
Assistant Commissioner of Income-tax
Versus
Dr. Prabha Sanghi
IT APPEAL NO. 2217 (DELHI) OF 2010
ASSESSMENT YEAR 2004-05
Date of Pronouncement – 18.09.2012
ORDER
A.D. Jain, Judicial Member
This is an appeal filed by the department for Assessment Year 2004-05 against the order dated 18.02.2012 passed by the CIT(A)-XXX, New Delhi, taking the following grounds:-
“On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in :-
1. applying the provision of Section 23(1)(c) in respect of property at A-6A, Maharani Bagh, New Delhi, whereas this property has never been let out any time during the relevant previous year;
2. ignoring to apply the provision of Sec.23(4)(b) in so far as the assessee is the owner of three immovable properties, land accordingly has to give option for inclusion of income from house property so specified by her;
3. selectively applying the provision of Sec. 23(1)(c) to one vacant property and applying Sec. 23(4)(b) to another;
4. applying the standard rate of MCD in determining the annual letting value, whereas the assessee has previously herself let out the two properties at a much higher rent;
5. relying upon the decision in the case of Kamal Mishra v. ITO [2008] 19 SOT 251 (Delhi), when the facts of the case are distinguished from the assessee’s case.”
2. Vide assessment order dated 19.12.2006, the A.O. made an addition of Rs. 13,83,270/- to the income of the assessee, on account of property income. It was observed that the assessee was owner in possession of a number of properties, whereas she had shown income from house property at Nil. She was asked to explain as to why the rent received in F.Y.s 2001-02 and 2002-03 in respect of properties bearing No.1-A and No. 2, Ring Road and No.A-6 A, Maharani Bagh, be not deemed to attract annual letting value u/s 23(4)(b) of the IT Act, for the year under consideration. In response, the assessee submitted that the property at 2, Ring Road was self occupied and so, it did not have any annual letting value, whereas the other two properties had remained vacant throughout the year, due to which, the rent received was nil, in accordance with the provisions of Section 23(1)(c) of the Act. The A.O., however, opined that the provisions of section 23(4)(b) of the Act were attracted. As such, she (the A.O.) took the rent for the Maharani Bagh property at Rs. 12,76,104/-, the rent qua this property for Assessment Years 2000-01 and 2001-02 having been shown at Rs. 1,06,342/- per mensem. The rent of the property bearing No. 1-A, Ring Road, was taken at Rs. 6,99,996/-, the rent for this property having been shown for assessment years 2001-02 and 2002-03 at Rs. 58,333/- per mensem. The total of both the rents thus arrived at came to Rs. 19,76,100/-. Deducting therefrom repair/renovation @ 30% amounting to Rs. 5,92,830/-, the A.O. arrived at the net property income of Rs. 13,83,270/-, which she added to the assessee’s income.
3. By virtue of the impugned order, the ld. CIT(A) deleted the addition of Rs. 12,76,104/- regarding Maharani Bagh property, taking the ALV in respect thereof to be nil. Apropos the property at A-1, Ring Road, the ALV was taken at Rs. 28,620/-, the figure determined by the MCD and restricted the addition from Rs. 6,99,996/- to the said amount of Rs. 28,620/-.
4. Aggrieved, the Department is in appeal.
5. Challenging the impugned order, the ld. DR has contended that as regards the Maharani Bagh property, the ld. CIT(A) erred in applying the provisions of section 23(1)(c) of the Act, ignoring the fact that this property was never let out during the year; that the ld. CIT(A) erred in not applying the provisions of section 23(4)(b) of the Act, even though the assessee, being owner of three properties, had to give her option for inclusion of income from house property, which was never done; that the ld. CIT(A) erred in applying, selectively, the provisions of section 23(1)(c) to one vacant property and those of section 23(4)(b) to another; that the ld. CIT(A) further erred in applying the standard rate of the MCD in determining the ALV of the 1-A, Ring Road property of the assessee, ignoring the fact that the assessee had herself earlier let out the two properties at a much higher rent; and that the ld. CIT(A) went wrong in relying on Kamal Mishra v. ITO [2008] 19 SOT 251 (Delhi) though the facts of the said case are entirely distinguishable from those in the case at hand.
6. The learned counsel for the assessee, on the other hand, has strongly relied on the impugned order. It has been contended that the ld. CIT(A) has rightly taken the factual as well as legal position into consideration while passing the order under appeal; that the A.O. had not carried out any exercise to establish the rental value sought to be assigned to the properties of the assessee and had merely gone by the rentals received by the assessee in the earlier year, and had wrongly completed the assessment on that basis, even though the properties were never let out during the year; that apropos the Maharani Bagh property, due to expiry of lease with the previous tenant, National Highway Authority of India, the property was vacated on 15.10.2001 and during the year, no rent had been received by the assessee; that the property had been lying vacant and the assessee had also moved an application for fixing of ALV with the MCD w.e.f. 1.4.99; that on inspection of the property, the MCD fixed its rental value at Rs. 34,600/- w.e.f. 16.10.01; that the A.O., however, erroneously fixed the ALV of the property at Rs. 12,76,104, wrongly applying the provisions of section 23(4)(b) of the Act, instead of the provisions of section 23(1)(c) of the Act, which were the correct provisions applicable, though the A.O. stood duly furnished with all the facts as above, pertaining to this property; that the A.O erroneously failed to consider that the provisions of section 23(1)(c) of the Act over-ride those of section 23(4)(b) inasmuch as Section 23(4)(b) leads back to Section 23(1)(c), due to which, the ALV has to be adopted at nil, since the property remained vacant throughout the year; that concerning the 1-A, Ring Road property, the position remained much the same as in the case of the Maharani Bagh property; that the Ring Road property, like the Maharani Bagh property, remained vacant during the entire year, since the lease with the previous tenant had expired and the A.O. was duly informed about these facts, as also of the fact that here too, the MCD had, on the basis of inspection, fixed the rental value at Rs. 28,620/-; that the MCD’s valuation documents with regard to both the properties were duly filed before the A.O on 12.12.06, but the A.O. wrongly ignored them; that though specifically requested to do so, the A.O. did not conduct any inspection of the vacant properties to reassess the rental value thereof and arbitrarily fixed the ALV of the properties at figures much higher than those fixed by the MCD, without bringing on record any evidence to the effect that the assessee had not disclosed the actual rent received, or that whereas the property had been given on rent and was not lying vacant during the year, the assessee had concealed such facts; that rather, there was nothing with the A.O. to disbelieve the factum of the vacancy of these properties during the entire year; that also, there was nothing available with the A.O. to show that the ALV fixed by the MCD was incorrect and that that taken by the A.O. was the correct ALV; that the ld. CIT(A) has not at all erred in following Kamal Mishra (supra), wherein the attending facts were similar to those of the case of the assessee; that the ld. CIT(A) also correctly took note of the fact that Kamal Mishra (supra) was followed in Asstt. CIT v. Mayur Recreational & Development Ltd. [2008] 113 ITD 181 (Delhi) (SB); that therefore, the ld. CIT(A) correctly deleted the addition of Rs. 12,76,104/- made in respect of the Maharani Bagh property and restricted the addition from that of Rs. 6,99,996/- to that of Rs. 28,620/- qua the 1-A, Ring Road property; and that therefore, there being no force therein, the appeal filed by the Department be dismissed.
7. The assessee has also filed a synopsis before us, which we consider it relevant to reproduce (relevant portions) hereunder:-
“1. Admittedly, the facts of the case are that the appellant Dr. Prabha Sanghi owns three house properties as under:-
1. 2, Ring Road, Kilokri, New Delhi.
2. I-A, Ring Road, Kilokri, New Delhi.
3. A-6A Maharani Bagh, New Delhi.
In all the above three properties, the assessee has partial interest.
2. Admittedly, out of the above three properties, the property located at 2, Ring Road, Kilokri, New Delhi, is self occupied and has always been self-occupied and is therefore, not liable to tax u/s 23(2) of the Income Tax Act. There is no dispute with regard to this property.
3. Admittedly, the remaining two properties viz., I-A, Ring Road, Kilokri, New Delhi, and A-6A, Maharani Bagh, New Delhi, had been on rent with public sector undertakings in the earlier years , but have been lying vacant during the previous year relevant to assessment year 2004-05. Admittedly, no rent was received or receivable, nor any other income was derived from the two properties throughout the previous year 2003-04 relevant to assessment year 2004-05.
4. The municipal valuation of the property located at I-A, Kilokri, New Delhi, was at the annual ratable value of Rs. 28,620/- with effect from 1.2.2003 and it was Rs. 34,600/- in respect of the property located at A-6A, Maharani Bagh, New Delhi, with effect from 16.10.2001. These ratable values fixed by the MCD were prevalent during the previous year in question.
5. Based on the above mentioned undisputed admitted facts, the A.O. invoked section 23(4)(b) of the Act and determined the ALV of these two properties as per page 2, para 2, of his order as under:-
“Hence, on the basis of rent received in previous years 2001-02 and 2002-03 in respect of following properties, except one for residential purpose, may be deemed as annual letting value u/s 23(4)(b) of the Income Tax Act. Income from house property is computed as under:-
