Municipal valuation to be taken as ALV if no other data exists

IN THE ITAT AGRA BENCH

Laxman Dass Keshwani

Versus

Assistant Commissioner of Income-tax, Central Circle

IT APPEAL NOS. 99 TO 110 & 112, 336, 338, 343 TO 348, 351, 353, 354 TO 358, 370, 372, 373 TO 377 (AGRA) OF 2012

[ASSESSMENT YEARS 2002-03 TO 2008-09]

DECEMBER 28, 2012

ORDER

1. These are appeals filed by seven different assessees against different orders passed by the ld. CIT(A), Agra.

2. Grounds raised in all these appeals are based on identical set of facts, therefore, for the sake of convenience, all these appeals are decided by this common order.

3. The ld. Representatives of the parties submitted that the facts of these appeals lead in case of Laxman Dass Keshwani, ITA No.351/Agr/2012 and accordingly argued by both the sides on the basis of facts noted in that case. For knowing the exact grounds of appeal, we reproduce the grounds of appeal in ITA No.351/Agr/2012 s under :-

“1. (i) Because the proceedings initiated u/s 153A of the Act is wrong and illegal as no paper, document or any adverse material relating to the relevant year warranting addition made by the Assessing Officer was found during search. The Ld. Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer as regards initiation of proceedings u/s 153A of the Act considering the facts of the case and the legal position the assessment is liable to be annulled. Ld. Commissioner of Income Tax (Appeals) has erred in rejecting the appellant’s ground.

(ii) Because since no incriminating material was found during the course of search for warranting additions made by the Assessing Officer, the additions made in the relevant previous year are wrong, illegal and deserves to be deleted.

2. (i) Because the Ld. CIT(A) has wrongly, illegally and arbitrarily confirmed the addition of Rs. 52,174/- made by the Assessing Officer u/s 23(4) of the Act.

(ii) Because considering the facts of the case that the property could not be let out and no rent was received or receivable, the notional rent cannot be assessed, the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the addition instead of deleting the same.

3. Because the Ld. Commissioner of Income Tax (Appeals) has wrongly, illegally and arbitrarily confirmed the addition of Rs. 2000/- out of addition of Rs.44,857/- made by the Assessing Officer for so called low house hold withdrawals.

4. Because the Ld. CIT(A) has erred in law in confirming the Assessing Officer’s action as regards charging of interest u/s 234A, 234B and 234C of the Act.

5. That the appellant craves leave to add, amend, alter, modify or delete any or all of the grounds of appeal before or at the time of hearing.”

4. At the time of hearing the ld Representatives of the parties submitted that ground nos. 1(i) and 4 & 5 are not pressed. He further submitted that the effective common grounds are only two grounds namely calculation of notional rent and addition on account of household expenses. Ground no. 1(ii) is supporting ground to both the main grounds of appeal.

5. The brief facts of the case are that a search under section 132 was carried out on 30.01.2008. During the assessment proceedings the A.O. noticed that the assessee was having several house properties, details of property noted by the A.O. in his order is as under :- (Page nos.2 & 3)

6. The A.O. after considering the assessee’s submission calculated the annual letting value of the properties for Sl.No.2 Rs.15,689/-, Sl. No.3 Rs.34,300/- and Sl. No.6 Rs.2,185/- after allowing deduction under section 24(a) of the Act and made addition of Rs.52,174/- in the year under consideration as under :- (page nos.3 & 4)

“The submission of the assessee has been considered, but in view of specific provisions of section 23(4) the same are not correct, and provisions of section 23(4) are clearly applicable in case of assessee in respect of properties from which no income are shown. The ALV of other properties than SOP are liable to be assessed u/s 23(4)(b) of the I.T. Act, 1961. Considering these facts and the judgement of the Hon’ble Allahabad High Court in the case of Radhadevi v. CIT 125 ITR 134, the notional annual letting value in respect of more than one self occupied properties, is to be assessed u/s 23(4) of the I.T. Act and this provisions are clearly applicable in the case of the assessee in respect of properties mentioned above. In the above case, the Hon’ble Allahabad High Court has held that for determining annual letting value, 7% of investment is just and fair. Considering this decision of Allahabad High Court and the details of investment, the notional annual letting value and income from house property of the above properties are works out as given in column No.5 & 6 above respectively.

In this manner, the income of Rs. 52,174/- is added to the income of the assessee under the head Income from House property u/s 23(4) of the I.T. Act.”

7. The A.O. has also made addition on account of house hold expenses Rs. 44,857/- for A.Y. 2004-05 as under :- (Page no.9)

“No books of account or other details to justify the house hold expenses have been produced. Considering these facts and circumstances of the case, it is crystal clear that withdrawals are not being shown truly and honestly and they are grossly understated. Therefore, expenses for house hold needs to be estimated considering the size of the family, status and standard of living of the assessee and other relevant considerations regarding house hold expenses.

In this connection, it may be pointed out that a search was conducted on 30.01.2008 at the premises of assessee in which unexplained cash of Rs. 58,00,000/-, jewellery of Rs. 1.50 crore and other valuable electronics gadgets were found from residence of assessee and his family members.

Considering these facts, size of family and standard & status of living of the assessee, house hold expenses of assessee’s family are estimated at Rs. 75,000/- p.m. i.e. Rs. 9,00,000/- for the entire year. After giving credit of withdrawals made by the assessee & his family members amounting to Rs. 5,86,000/- the difference comes to Rs. 3,14,000/- which is to be added to the income of the assessee & his sons on account of low withdrawals for house hold expenses met out of income from undisclosed sources.

However, taking a reasonable view, it is presumed that at least every male member of family was contributing towards house hold expenses, addition on account of low withdrawals is spread over and 1/7th of the same is added in each male member of Keshwani family i.e. Shri Laxman Das Keshwani, Kamal Kumar Keshwani, Jagdish Keshwani, Narendra Keshwani, Mahendra Keshwani, Jitendra Keshwani and Shyam Sunder Keshwani. Thus the addition on account of low withdrawals in case of assessee comes to Rs. 44,857/-

Thus the addition on account of low withdrawals for house hold expenses works out to Rs. 44,857/-“

8. The CIT(A) confirmed the order of the A.O. as under :- (Paragraph no.6.8, page nos. 22&23)

“6.8 Considering the facts and circumstances of the case of the appellant and the legal position in respect of determination of annual letting value so far discussed in this para above, I hold that the annual letting value of the properties of the appellant would be determined as per clause (a) of section 23(1) being a sum for which the property might reasonably be expected to let from year to year for the purpose of determining the annual value of these properties under the provisions of section 23(4)(b) and since, there is no evidence for calculation of annual letting value of the property, in my considered opinion, the AO has correctly computed the annual letting value at the rate of 7% of investment as per the decision of Hon’ble jurisdictional Allahabad High Court in the case of Smt. Radha Devi Dalmia v. CIT (supra) and hence, addition of Rs. 52,174/- was correctly made by him on account of these house properties. Therefore, both grounds taken by the appellant in respect of this addition i.e. ground no.3 & 4 are dismissed.”

9. In respect of household expenses, the CIT(A) partly allowed the assessee’s appeal as under :- (Paragraph no.7.3, page nos. 24 & 25)

“7.3 I have considered the above arguments of the Ld. AR taken against the estimated addition made by the AO on account of alleged low withdrawal for house hold expenses and also considered the discussion made by the AO in the assessment order. I find that as per the details and various documentary evidence collected during the course of search and seizure operation, looking to the detailed discussion in the assessment order about the expenditure being incurred by the family members of the appellant, the total withdrawals of Rs. 5,86,000/- declared by all the family members of the appellant for house hold expenditure appears to be at lower side. In view of the details of expenditure collected during the search and other details of expenditure relating to house hold expenses discussed by the AO in the assessment order, I find that even after considering all the three judicial decisions as cited by the Ld. AR, the AO is justified in enhancing the house hold expenses of the appellant. However, on the basis of details discussed in the assessment order, reasonableness of such estimate is also required to be considered. In my opinion estimation made by AO is also at higher side. In my considered opinion after taking into account all the details discussed in the assessment order, the estimated expenditure of Rs. 50,000/- p.m. would be quite reasonable for meeting out all the needs of 7 members of a family and for purchasing of various house hold items as discussed in the assessment order and also meeting out the expenditure on school going children and for the payment of electricity bill and other expenses. Therefore, the AO is directed to estimate the house hold expenditure of entire family of the appellant at Rs. 50,000/- p.m. and accordingly, the total annual expenditure on house hold would come to Rs. 6,00,000/- which is in excess of Rs. 14,000/- from the amount declared by the entire family members of the appellant. This excess amount of Rs. 14,000/- would be divided by 7 for making necessary addition in the income of appellant on account of low house hold withdrawal. After dividing Rs. 14,000/- among seven male members, the amount comes to Rs. 2,000/- and therefore, the addition on account of low house hold withdrawal is restricted to Rs. 2,000/- and hence, the appellant gets a relief of Rs. 42,857/-. Accordingly, ground no. 5 is partly allowed.”

10. A summary chart of disputed amounts in these appeals before us are as under :-

11. We have heard the ld. Representatives of the parties and perused records. The assessee filed additional evidences in support of the contentions regarding annual value of the properties. In the case under consideration, neither the A.O. has examined the case in the light of provisions of section 23 nor any material collected and put on record. Similarly, the assessee also did not produce any evidence before Revenue authorities. These additional evidences are only relevant evidence and material. Therefore, after hearing the ld. Representatives of the parties, the additional evidences filed by the assessee in the form of documents relating to Municipal Valuation are admitted in the interest of justice.

12. The first effective issue is in respect of determination of annual value of properties. The case of the A.O. is that section 23(4) of the Act is applicable in the case of the assessee. The CIT(A) confirmed the view of the A.O. on this issue. The case of the assessee is that according to section 23(1)(c) of the Act, annul value of those properties are nil. The assessee relied upon the decision of I.T.A.T., Mumbai Bench in the case of Premsudha Exports (P.) Ltd. v. Asstt. CIT [2007] 17 SOT 293. The scheme of the Act to levy tax on income from house property is on the basis of annual value. The annual value is required to be determined in accordance with section 23(1)(a), 23(1)(b) & 23(1)(c) of the Act. There is no dispute in the fact that section 23(1)(b) of the Act is not applicable to the facts of the case under consideration. Now the question remains to be examined, whether section 23(1)(c) of the Act is applicable or section 23(1)(a) of the Act. To appreciate the issue, we would like to reproduce section 23 which reads as under:-

“[Annual value how determined.

23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be—

 (a)  the sum for which the property might reasonably be expected to let from year to year; or

 (b)  where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or

 (c)  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 by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable :

Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him.

Explanation.—For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot realise.

(2) Where the property consists of a house or part of a house which—

 (a)  is in the occupation of the owner for the purposes of his own residence; or

 (b)  cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him,

the annual value of such house or part of the house shall be taken to be nil.

(3) The provisions of sub-section (2) shall not apply if—

 (a)  the house or part of the house is actually let during the whole or any part of the previous year; or

 (b)  any other benefit therefrom is derived by the owner.

(4) Where the property referred to in sub-section (2) consists of more than one house—

 (a)  the provisions of that sub-section shall apply only in respect of one of such houses, which the assessee may, at his option, specify in this behalf;

 (b)  the annual value of the house or houses, other than the house in respect of which the assessee has exercised an option under clause (a), shall be determined under sub-section (1) as if such house or houses had been let.]”

13. First we take up the matter whether section 23(1)(c) is applicable to the facts of the case under consideration or not. The Mumbai Bench in the case of Premsudha Exports (P.) Ltd. (supra) had occasion to consider the issue. The relevant discussions and finding of I.T.A.T. Mumbai Bench are as under :-

“11. During the course of hearing, the revenue has raised dispute that this clause (c) can only be invoked in those cases where the property was let out in earlier years or in the present year. Whereas, according to assessee, the intention of letting out of property is to be seen for invoking clause (c) for computing the annual letting value of the property. It is irrelevant whether the property is/was let out.

12. Now the sole dispute is regarding the interpretation of the words ‘property is let’ in the above clause (c). One interpretation suggested by the learned DR is that the property should be actually let out in the relevant previous year. We find that this interpretation is not correct because as per this clause, the property can be vacant during whole of the relevant previous year. Hence, both these situations cannot co-exist that the property is actually let out also in the relevant previous year and the property in the same year is vacant also during whole of the same year. We, therefore, reject this contention of the learned DR of the revenue.

13. The second interpretation suggested by the learned DR is that the property should be actually let out during any time prior to the relevant previous year and than only, it can be said that the property is let and this clause will be applicable. Now, we examine this contention. First of all, we find that the tense of the verb used prior to the word ‘let’ is present tense and not past tense. It means that the provisions of above clause talk regarding the relevant previous year and not of any earlier period and if that be so, this contention of learned DR is also not acceptable. Secondly, we find that even if this contention of learned DR of the revenue is accepted, the provisions of this clause (c) cannot be made applicable in the first year, when the property is acquired and the same remained vacant because it could not be let out for want of tenant. This is so because there is no earlier period in that case prior to the start of the relevant previous year. This cannot be the unsaid intention of the Legislatures that the provisions of this clause are not be applied in the first year if the property remained vacant for whole of the first year in spite of efforts to let it out. Moreover, if this interpretation suggested by the learned DR is accepted, it will lead to disastrous result because in that event, if a property was let out in one year for any period, which can be even 1 month, than after that, such property will enjoy the benefit of this clause (c) for any number of years if the property remains vacant even if the same was not intended to be let out in the subsequent years including the relevant previous year.

14. In view of the above discussion, this interpretation can lead to a situation, where a person having several properties and all being let out for 1 month in any one year as discussed above and thereafter remained vacant with no intention to let out in subsequent years will enjoy the status of let property in all such subsequent years and will become eligible for benefits of this clause in all such subsequent years without any actual let out in those years and even without any intention to let out in those subsequent years. This cannot be the intention of Legislature.

15. We have seen that both the interpretations suggested by the learned DR of the revenue are not workable. Now, we have to see as to what can be the correct and workable interpretation of the words ‘property is let’ in the above clause (c). For this, we have to see and examine as to whether actual letting out is must for a property to fall within the purview of this clause by satisfying the requirement of words ‘property is let’ present in this clause. In this connection, we have noted above that actual let out even for a day in the present year and the property remaining vacant for whole of the present year cannot co-exist. This takes us to the alternative that we should examine as to whether the property was actually let out for some period in past i.e., prior to start of the relevant previous year. In this context, first we examine as to whether to satisfy the words ‘property is let’, actual let out for some period is necessary. At this juncture, we examine other sub-sections of section 23 and we find that sub-section (3) of section 23 reads as under:—

“(3) The provisions of sub-section (2) shall not apply—

 (a)  the house or part of the house is actually let during the whole or any part of the previous year; or

 (b)  any other benefit therefrom is derived by the owner.”

16. From the above, we find that here, the Legislatures in their wisdom have used the words ‘house is actually let’. This shows us that the words ‘property is let’ cannot mean actual letting out of the property because had it been so, there was no need to use the word ‘actually’ in sub-section (3) of the same section 23. Regarding the scope of referring to actual let out in preceding period, we find no force in the contention of the DR, as the Legislature has used the present tense. Even if we interpret it so, it may lead to undesirable result because in some cases, if the owner has let out a property for one month or for even one day, that property will acquire the status of let out property for the purpose of this clause for the entire life of the property even without any intention to let it out in the relevant year. Not only that, even if the property was let out at any point of time even by any previous owner, it can be claimed that the property is let out property because the clause talks about the property and not about the present owner and since the property was let out in past, it is a let out property although, the present owner never intended to let out the same. In our considered opinion, it is not at all relevant as to whether the property was let out in past or not. According to us, these words do not talk of actual let out also but talk about the intention to let out. If the property is held by the owner for letting out and efforts were made to let it out, that property is covered by this clause and this requirement has to be satisfied in each year that the property was being held to let out but remained vacant for whole or part of the year. We feel that the words ‘property is let’ are used in this clause to take out those properties from the ambit of the clause in which property are held by the owner for self-occupation i.e., self-occupied property (i.e. SOP) because even income on account of SOP, excluding one such SOP of which annual value is to be adopted at nil, is also to be computed under this head as per clause (a) of section 23(1) if we see the combined reading of sub-sections (2) and (4) of section 23. One thing is more important because we find that where the Legislatures have considered that actual letting out is required, they have used the words ‘house is actually let’. This can be seen in sub-section (3) of same section 23. But in clause (c) above, ‘actually let’ words are not used and this also shows that meaning and interpretation of the words ‘property is let’ cannot be ‘property actually let out’. In our opinion, it talks of properties, which are held for letting out having intention to let out in the relevant year coupled with efforts made for letting it out. If these conditions are satisfied, it has to be held that the property is let and the same will fall within the purview of this clause.

17. In view of this interpretation of the words ‘property is let’ in the above clause (c), now we examine the facts of the present case. In the present case, the assessee is a company. The company can hold a property either to use it for its own business or to let out. In the present case, there was no business activity and there was no intention to use the same for own business. Even if that is there, in that event also, no income can be assessed under the head “Income from house property” in view of the exclusion in section 22. The other possible use can be to let out.

18. We have carefully examined the material placed on record and we find from the memorandum of association that the assessee is entitled to purchase the property for its let out and to earn rental income. Copies of resolutions of Board of Directors are also placed before us in both the cases where from it is evident that one of the Director was authorized to take necessary steps to let out the property in question. They have also fixed the monthly rent and the security deposits of both the properties. Consequent to the resolutions, the assessee has approached to various Estate and Finance Consultants for letting out the properties and the request was also duly acknowledged by the Estate and Finance Consultants. The series of correspondence are placed before us to demonstrate the efforts made by the assessee for letting out of its properties, but, unfortunately during the year under appeal, assessee could not get the suitable tenant on account of hefty rent and security deposits. The correspondence exchanged between the assessee and the different property consultants are placed on record at page Nos. 31 to 100. From this correspondence, it is, noticed that the assessee has approached various property consultants to let out its properties and during the year, it could not get a suitable tenant. From a careful perusal of these documents, it has become evident that during the whole year, assessee made its continuous efforts to let out the properties and under these circumstances, this property can be called to be let out property in terms of our observations in foregoing paras. Since the property has been held to be let out property, its annual letting value can only be worked out as per sub-clause (c) of section 23(1) of the I.T. Act and according to this clause, the rent received or receivable during the year is NIL and as such the same be taken as the annual value of the property in order to compute the income from house property. We, therefore, order accordingly.

19. In the result, appeals of the assessee are allowed.”

14. As regards the interpretation of the word “property is let”, the issue has been decided by I.T.A.T., Mumbai Bench. Considering principle of consistency, we follow the order of Co-ordinate Bench. We, therefore, in principle follow the ratio laid down by the I.T.A.T., Mumbai Bench in the above case of Premsudha Exports (P.) Ltd. (supra). However, the said order is distinguishable on facts that in that case the assessee has taken necessary efforts to let out the properties but in the case under consideration we notice that the assessee did not take any efforts for letting out those properties. In this regard, the CIT(A) has recorded the finding at page no. 21 of his order that the ld. Authorised Representative did not produce any evidence to show that all the efforts were made by the assessee during the year under consideration to get this property let out in order to the intention of the assessee to let out the property. It was simply stated that these properties have been let out in subsequent year. There is no change in facts in this regard as the assessee has failed to furnish such material or evidence before us also. Thus, the said order of the I.T.A.T., Mumbai Bench is distinguishable on facts and a nil annual value cannot be taken in these cases as claimed by the ld. A.R. before us.

15. Now we come to the issue whether determination of annual value is in accordance with section 23(1)(a) of the Act. Section 23(1)(a) of the Act provides that the sum for which the property might reasonably be expected to let from year to year. There are various consideration which are relevant for determination of Annual value under section 23(1)(a) of the Act, out of which, one of the consideration is annual value as taxed by Municipality or Local Authority for the purpose of municipal or local tax. It is relevant to note that the local authority normally makes a periodical survey of all the buildings within its area for determining annual letting value for the purpose of levy of municipal taxes on those properties. For that purpose the normal procedure is that the surveyor determines the gross rent receivable from the property after taking into account all the relevant circumstances. The method of determination of annual municipal valuation may differ in certain major details in certain municipalities but by and large such annual municipal valuation represents the sum for which the property might reasonably be expected to let from year to year. Hence in cases where there is no other evidence, the municipal annual valuation with such adjustment as may be necessary on the facts of the case would be relevant for determining the annual valuation under section 23 of the Act. In the case of C.J. George v. CIT [1973] 92 ITR 137 (Ker.), the plea of the assessee was that the rent for which the property had been let was higher than the sum of which the property might reasonably be expected to let from year to year and hence the rent received by him should not be regarded as annual value of the property and that the annual value should be determined at a lower figure. The assessee produced a certificate of the local authority showing that annual letting value had been fixed at lower figure by the local authority. The Tribunal rejected the said certificate and adopted the figure of rent actually received for determining the annual value. It was held that the Tribunal had erred in rejecting the certificate particularly when the local authority had taxed the annual letting value after taking into consideration the fact that the property had been let out at higher rent and also the circumstances in which it had been let out at higher rent and it was after considering the entire circumstances that the annual letting value had been fixed at a lower amount. It was observed that the certificate of local authority furnished prima facie evidence to sustain the contention of the assessee that the contractual rent was in excess of the reasonable rent that could be expected from the building and the certificate could be relied on to determine as to what was the rent that the building could reasonably be expected to fetch. Though this decision pertains to old provisions of section 23 but the relevant consideration is that the certificate of the local authority was considered as a prima facie evidence for the purpose of determining annual value under section 23 of the Act. Similar is the view taken by the Hon’ble Bombay High Court in the case of Jamnadas Prabhudas v. CIT [1951] 20 ITR 160 (Bom.) where municipal valuation was taken as basis for determining the annual value. The Hon’ble Patna High Court in the case of Kashiprasad Kataruka v. CIT [1975] 101 ITR 810 (Patna) wherein it was emphasized that there was presumption that municipal valuation affords an indication as to the reasonable annual letting value of a building and such valuation could be either reduced or enhanced only on the basis of other materials produced on record for the purpose of such rebuttal. The Hon’ble Madras High Court in the case of CIT v. M.R. Alagappan [1987] 164 ITR 690 (Mad.) wherein it has been held that annual letting value fixed by the municipal authorities was held to be a relevant consideration for the purpose of determination of annual letting value of the property for computing the income from house property under section 23 of the Act. The Hon’ble Delhi High Court in the case of CIT v. H.P. Sharma [1980] 122 ITR 675 wherein it has been held that the municipal assessment is made by following a certain procedure under which a periodical survey is made of all buildings and on the basis of such survey the gross rent receivable from the property is determined and thereafter various types of services rendered are taken into account and then a figure for the purpose of annual municipal valuation is arrived at. If such an annual value has been assessed at or about the relevant time and after taking into consideration all the relevant factors and if the figures of actual rent are not available, then the figure of annual value determined for municipal purpose can be presumed to be the correct figure of annual value and can be adopted for income tax purposes.

16. As regards the judgement of Hon’ble Allahabad High Court relied upon by the A.O. in the case of Smt. Radha Devi Dalmiya v. CIT [1980] 125 ITR 134, we find that the said judgement is distinguishable on facts. The said judgement has considered the old provisions where section 23(1)(c) of the Act was not in statute. Section 23 of the Act had substantially amended w.e.f. 01.04.1993 by inserting the clause(c) of sub-section (1) of section 23 wherein it has been provided that if the property is let out and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable, this clause was not there. Therefore, the annual value was to be determined in accordance with section 23(1)(a) and in accordance with section 23(1)(b) of the Act. Therefore, the circumstances where the annual value can be nil, as claiming by the assessee, this aspect of the matter has not been considered in the said judgement of the Hon’ble Allahabad High Court in the case of Smt. Radha Devi Dalmia (supra). In addition to the above as stated above that the determination of annual value under section 23 depends upon the facts of the each case, in the case of Smt. Radha Devi Dalmiya (supra), it was found that the letting value determined by the municipal authority was very low. Therefore, the Court has confirmed the determination of annual value by the Revenue authorities. Thus, the A.O. and the CIT(A) both have erred in straight way applying the said judgement in the case of Smt. Radha Devi Dalmiya (Supra) without making enquiries or examinations in respect of determination of annual value. In the case under consideration, neither the Revenue authorities have taken any steps nor has the assessee furnished necessary evidence in respect of determination of annul letting value. Therefore, the said judgement of Hon’ble Allahabad High court in the case of Smt. Radha Devi Dalmiya (supra) is not applicable to the facts of the case under consideration and the same is distinguishable.

17. In the light of the above discussions, if we consider the facts of the case as stated above that neither the Revenue authorities nor the assessee has brought on record any material or evidence in support of the determination of annual value of properties, however, the assessee has furnished evidence in respect of annual value determined by municipal/local authority, Agra Nagar Nigam in support of annual value of concerned properties. Such material is relevant and related to the concerned properties as per detailed discussions made in paragraph no.15 of this order. Therefore, we are of the view that the annual valuation taken by the local authority is one of the basis under the peculiar facts and circumstances of these cases for determining the annual value under section 23(1)(a) of the Act. Since additional evidence is admitted by us first time, therefore, the A.O. is directed to verify the annual valuation determined by the local authority/Agra Nagar Nigam and determine the annual value for the purpose of section 23(1)(a) of the Act in accordance with annual value determined by local authorities.

18. Before parting from the matter, it is relevant to state that the annual value determined by the municipal/local authority has been considered in the case under consideration is one of the basis of determination of annual value for the purpose of section 23(1)(a) of the Act. Under the peculiar facts and circumstances of the case under consideration, as neither the assessee nor the Revenue has brought on record any other material based on which the annual value of these properties can be determined in accordance with section 23(1)(a) of the Act, therefore, the ratio of this order is not applicable to other cases as annual value under section 23 of the Act is to be determined in accordance with facts of each case.

19. In the light of above discussion, we are sending back the matter to the file of A.O. with the direction to verify the additional evidences filed by the assessee in the form of annual value determined by the local authority and recalculate the annual value of these properties under section 23(1)(a) of the Act on such additional evidence after providing reasonable opportunities of hearing to the assessees.

20. The second effective ground is in respect of addition on account of house hold expenses.

21. After hearing the ld. Representatives of the parties, we notice that the A.O. made addition on account of house hold expenses on presumption basis. It is admitted fact that during the course of search no incriminating material was found in respect of house hold expense based on which addition can be made. The CIT(A) also, on the basis of presumption, found that the A.O. has estimated excess house hold expenditure. He, therefore, allowed the part relief. The CIT(A) found that the A.O. has made excess estimation of house hold expenses. The assessee furnished the following chart in support of the contention that reasonable house hold expenses have been shown in all the years :-

Details of House Hold Expenses/Withdrawals

22. On a perusal of the above comparative position of different years’ house hold expenses, we find that the estimation made by the A.O. on account of house hold expenses are arbitrary. The CIT(A) has also sustained the addition on the basis of arbitrary estimation. In A.Y. 2003-04 the assessee has shown house hold expenses of Rs. 3,71,500/-, whereas the CIT(A) has estimated at Rs. 4,80,000/-. The addition of Rs. 8,500/- has been sustained in A.Y. 2003-04. Similarly, in A.Y. 2008-09 the CIT(A) has estimated the house hold expenses at Rs.10,80,000/-against the house hold expenses shown by the assessee at Rs. 8,91,000/-. The addition of Rs. 1,89,000/- has been sustained by the CIT(A). The facts of the case regarding family status and other for A.Y. 2003-04 and 2008-09 are same whereas the addition sustained in A.Y. 2003-04 was Rs. 8,500/- and in A.Y. 2008-09 it was Rs. 1,89,000/- which clearly establishes that the estimation made by the Revenue authorities on account of house hold expenses are arbitrary without any basis particularly under the circumstances where during the course of search no such material was found in this regard. Further, we confirmed the additions in respect of bills related to house hold appliances which were found at the time of search in ITA No. 103/Agr/2012 for A.Y. 2002-03, ITA No. 105/Agr/2012 for A.Y.2005-06, ITA No. 355/Agr/2012 for A.Y. 2005-06 & ITA No.347/Agr/2012 for A.Y. 2007-08 while deciding separate grounds of those appeals in subsequent paras of this order. In the light of the facts, the arbitrary addition made on account of house hold expenses are not sustainable. We, therefore, delete the addition made by the A.O. and sustained by the CIT(A).

23. In the result, appeal of the assessee in ITA No.351/Agr/2012 is partly allowed as indicated above.

24. Now we take up the remaining appeals mentioned above apart from ITA No.351/Agr/2012. In all the appeals, the ld. Authorised Representative similarly did not press other grounds which have not been pressed in ITA No.351/Agr/2012. Therefore, the same are dismissed being not pressed. The other issues left for consideration are determination of annual letting value of the properties in question and estimation of house hold expenses. Both the parties admitted that these issues are same as have been considered and decided in ITA No.351/Agr/2012. Following the order in ITA No.351/Agr/2012, the issue of determination of annual letting value is remanded to the file of A.O. by admitting additional evidences with identical direction and the addition on account of house hold expenses are deleted in the respective remaining appeals.

25. In the result, all the remaining appeals on both the issues are partly allowed as have been decided in ITA No.351/Agr/2012.

26. In addition to the common grounds of appeal pertaining to annual value and low house hold expenses, the other grounds raised in these appeals are decided as under :-

ITA No.347/Agr/2012 – A.Y. 2007-08 – Shri Narendra Kumar Keshwani

27. Ground no.3 is in respect of addition of Rs. 22,840/- made by the A.O. on account of unexplained investment in purchase of Washing Machine. The A.O. made the addition as during the course of search a bill no.1140 dated 10.03.2007 was found. The said bill relates to a Washing Machine for Rs. 22,840/- which was purchased from M/s. IFB Industries Limited, Ghaziabad. The assessee did not explain the source of the said Washing Machine. Therefore, the A.O. made the addition.

28. The CIT(A) confirmed the addition on the ground that during the course of search the bill was found in the name of the assessee and as per section 132(4A) it will be presumed that it is unaccounted investment. Since the assessee did not furnish satisfactory explanation reading source of that investment, the CIT(A) confirmed the addition.

29. We have heard the ld. Representatives of the parties and records perused. We find that the CIT(A) confirmed the addition as the bill was found at the time of search and the assessee did not furnish any explanation. The assessee has failed to explain the source of the said amount except general submission that it has been purchased out of household withdrawals. Since we have deleted the addition on account of low house hold withdrawals which was made by the A.O. on adhoc and estimation basis without any basis and since this addition is supported by the bill which was found at the time of search, in the light of the fact, we do not find any infirmity in the order of CIT(A). Order of the CIT(A) is confirmed on the issue.

ITA No.355/Agr/2012 – A.Y. 2005-06-Shri Mahendra Kumar Keshwani

30. Ground no. 3 is in respect of addition of Rs. 20,000/- made by the A.O. on account of purchase of Air Conditioner. The A.O. made the addition of as during the course of search a Challan dated 26.04.2004 issued by M/s. Maruti Electronics, Agra in the name of the assessee was found. The said Challan was pertaining to one LG Air Conditioner. The A.O. asked the assessee to explain the source of investment but the assessee failed to furnish specific explanation in this regard. The addition made by the A.O. has been confirmed by the CIT(A) on the ground that during the course of search a Challan/Bill was found. In the light of the discussions made in ITA No.347/Agr/2012 for A.Y. 2007-08 in the case of Shri Narendra Kumar Keshwani, we find that the facts of the issue under consideration are identical to the facts of the issue discussed in the above case. In the alight of the fact, order of CIT(A) is confirmed on the issue.

ITA No.105/Agr/2012 – A.Y. 2005-06-Shri Jitendra Kumar Keshwani

31. Ground no.3 is in respect of addition of Rs.22,500/- made by the A.O. on account of purchase of Washing Machine. The A.O. made the addition on the basis of Bill No.887 dated 07.03.2005 found at the time of search. The said bill was issued by M/s. Raj Musico in the name of the assessee. The assessee purchased one LG Washing Machine. The assessee failed to furnish any explanation regarding source of the said Washing Machine. The addition made by the A.O. has been confirmed by the CIT(A) as the A.O. has made the addition on the basis of documents found at the time of search.

32. We have heard the ld. Representatives of the parties and records perused. The addition made by the A.O. has been confirmed by the CIT(A) on the ground that during the course of search a Bill was found. The assessee failed to furnish any explanation in respect of source of the said investment. In the light of the discussions made in ITA No.347/Agr/2012 for A.Y. 2007-08 in the case of Shri Narendra Kumar Keshwani, we find that the facts of the issue under consideration are identical to the facts of the issue discussed in the above case. In the light of the fact, order of CIT(A) is confirmed on the issue.

ITA No.103/Agr/2012 – A.Y. 2002-03 – Shri Jitendra Kumar Keshwani

33. Ground no.3 is in respect of addition of Rs. 22,500/- made by the A.O. on account of purchase of Washing Machine. The A.O. made the addition on the basis of Bill No.183 dated 10.11.2001 found at the time of search. The said bill was issued by M/s. IFB Industries Limited, Ghaziabad in the name of assessee towards purchase of washing machine-5988. The assessee failed to furnish any explanation regarding source of the said Washing Machine. The addition made by the A.O. has been confirmed by the CIT(A) as the A.O. has made the addition on the basis of documents found at the time of search.

34. We have heard the ld. Representatives of the parties and records perused. The addition was made by the A.O. on the basis of documents found at the time of search. The assessee failed to furnish any explanation in respect of source of the said investment. In the light of the discussions made in ITA No.347/Agr/2012 for A.Y. 2007-08 in the case of Shri Narendra Kumar Keshwani, we find that the facts of the issue under consideration are identical to the facts of the issue discussed in the above case. In the light of the fact, order of CIT(A) is confirmed on the issue.

35. In the result, all the appeals filed by the assessee are partly allowed, as directed in the order.