Susham Singla v. The Commissioner Of Income Tax, Patiala

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Case No. : I. T. A. Nos. 371 to 377 of 2015 Reserved On : July 28, 2016 Pronounced On : December 23, 2016 Susham Singla ....Appellantvs.The Commissioner of Income Tax, Patiala ....Respondent CORAM : HON'BLE MR. JUSTICE S. J. VAZIFDAR, CHIEF JUSTICE.HON'BLE MR. JUSTICE DEEPAK SIBAL. * * * Present :Mr. Pankaj Jain, Senior Advocatewith Mr. Sachin Bhardwaj, Advocateand Ms. Divya Suri, Advocatefor the appellant(s). Mr. Rajesh Katoch, Advocatefor the respondent(s). * * * DEEPAK SIBAL, J. : The present is a bunch of seven appeals, being I. T. A. Nos.371 to 377 of 2015, pertaining to the assessment years 2001-02 to 2007-08, respectively, filed at the instance of the appellant-assessee to challengetherein the common order passed by the Income Tax Appellate Tribunal,Chandigarh Bench, Chandigarh (hereinafter referred to as – the Tribunal). At the time of hearing of the appeals, Mr. Pankaj Jain, learned senior counsel appearing on behalf of the appellant-assessee sought to pressMonika2016.12.23 15:11only the following substantial question of law for our consideration, which,I attest to the accuracy andauthenticity of this document according to him, was common and arose to all the present appeals :- “Whether under the facts & circumstancesof the case, pursuant to the explanationthere is no chargeability of rent whichcannot be realized resultingly according toSection 23(1)(c) of the Act, the lessor of theamount expected to be let & as receivableshall be charged whereby not realizable isless resultingly no charge ?” The appeal is admitted on this question of law. The appeal raises an interesting and an important question oflaw invoking the interpretation of Sections 22 and 23 of the Act. Thewording of Section 23 does not admit of an easy answer. The factual matrix of the matter, which is required to be noticedfor adjudicating upon the present appeals is that a search was conductedupon Jagdish Jeweller Group and the appellant-assessee being related to thatGroup, was also subjected to such search, on the basis of which, a noticewas issued to him as to why deemed income by determining annual valueof properties, of which he was found to be the owner, may not be added tohis income. The appellant-assessee filed a reply to the notice, onconsideration of which, the Assessing Officer found the appellant-assesseeto be the owner of the following properties :- 01.Property No. B-7, Preet Vihar, New Delhi. Property No. G-I, Preet Vihar, New Delhi - ½ share. 03. Property Love Dale Apartments Mumbai - ¼ share. 04.House Property at Patiala. In the course of the proceedings which ensued, the property atPatiala was treated as self-occupied but since the appellant-assessee wasfound to own more than one property and in his return, had not shown anydeemed income from them, notional rent was determined and afterproviding the statutory deductions, added to the appellant-assessee'sincome. Such addition at the hands of the Assessing Officer was challengedby the appellant-assessee by preferring seven appeals (one for eachAssessment Year) before the Commissioner of Income Tax (Appeals)-I,Ludhiana (hereinafter referred to as – the Commissioner), which, by acommon order, were dismissed giving a cause to the appellant-assessee toappeal to the Tribunal, which appeals also met the same fate as his appealsbefore the Commissioner. Laying a challenge to the common order of theTribunal, rejecting the appeals of the appellant-assessee, the present appealsunder Section 260-A of the Income Tax Act, 1961 (for short the 'Act') havebeen filed before this Court. Before the Tribunal, it was contended on behalf of theappellant-assessee that since the properties, which had been assessed to tax,had not been let out and had remained vacant in the respective previousyears, no annual value for them could be determined under Section 23(4) ofthe Act and it was urged that as per the provisions of Section 23(1)(c) of theAct, the annual value of such properties had to be taken as `Nil'. It wasMonikafurther submitted that even if the annual value could be determined, the2016.12.23 15:11I attest to the accuracy andauthenticity of this document Assessing Officer had fixed the same on a very high rate without adoptingany reasonable criteria known to law. At the time of hearing of the matter before us, Mr. Jain oninstructions, submitted that he does not press before us the issue with regardto the quantum of annual value of the properties in question having beendetermined by the Assessing Officer, without adopting any reasonablecriteria. It was argued that since the afore-referred three properties – one inMumbai and two at Delhi had not been let out and as a result thereof, hadremained vacant in the respective previous years, after applying Section 23(1)(c) of the Act, their annual value was required to be taken as `Nil'. Sections 22 and 23 of the Act, which are relevant, read as under:- “Income from house property. 22.The annual value of property consisting ofany buildings or lands appurtenant thereto ofwhich the assessee is the owner, other than suchportions of such property as he may occupy forthe purposes of any business or profession carriedon by him the profits of which are chargeable toincome- tax, shall be chargeable to income- taxunder the head" Income from house property".“Annual value how determined. 23. (1)For the purposes of section 22, theannual value of any property shall be deemed to (a)the sum for which the property mightreasonably be expected to let from year toyear; or (b)where the property or any part of theproperty is let and the actual rent receivedor receivableby the owner in respectthereof is in excess of the sum referred to inclause (a), the amount so received orreceivable; or (c)where the property or any part of theproperty is let and was vacant during thewhole or any part of the previous year andowing to such vacancy the actual rentreceived or receivable by the owner inrespect thereof is less than the sum referredto in clause (a), the amount so received orreceivable : Provided that the taxes leviedby any localauthority in respect of the property shall bededucted (irrespective of the previous yearin which the liability to pay such taxes wasincurred by the owner according to themethod of accounting regularly employedby him) in determining the annual value ofthe property of that previous year in whichsuch taxes are actually paid by him. Explanation.—For the purposes ofclause (b) or clause (c) of this sub-section,the amount of actual rent received orreceivable by the owner shall not include,subject to such rulesas may be made in this behalf, the amount of rent which the ownercannot realise . (2)Where the property consists of a house or part of a house which — (a)is in the occupation of the owner forthe purposes of his own residence; or (b)cannot actually be occupied by theowner by reason of the fact that owing tohis employment, business or professioncarried on at any other place, he has toreside at that other place in a building notbelonging to him, the annual value of such house or part ofthe 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 isactually let during the whole or any part ofthe previous year; or (b)any other benefit therefrom is derivedby the owner. (4)Where the property referred to in sub-section (2) consists of more than one house — (2)Where the property consists of a house or part of a house which — (a)is in the occupation of the owner forthe purposes of his own residence; or (b)cannot actually be occupied by theowner by reason of the fact that owing tohis employment, business or professioncarried on at any other place, he has toreside at that other place in a building notbelonging to him, the annual value of such house or part ofthe 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 isactually let during the whole or any part ofthe previous year; or (b)any other benefit therefrom is derivedby the owner. (4)Where the property referred to in sub-section (2) consists of more than one house — (a)the provisions of that sub-sectionshall apply only in respect of one of suchhouses, which the assessee may, at hisoption, specify in this behalf; (b)the annual value of the house orhouses, other than the house in respect ofwhich the assessee has exercised an optionunder clause (a), shall be determined undersub-section (1) as if such house or houseshad been let.” A perusal of the afore-quoted sections show that as per Section 23(1)(a), the annual value of any property shall be deemed to be the sum forwhich the property might reasonably be expected to let from year to year.Section 23(1)(b) provides that where any property or any part of such property is let and the actual rent received or receivableby the owner inrespect thereof is in excess of the sum, which the property might reasonablybe expected to let from year to year, then the annual value of such propertywould be the actual amount so received or receivable. Section 23(1)(c) isto the effect that where any property or part of such property is let butremained vacant during the whole or any part of the previous year andowing to such vacancy, the actual rent received or receivable is less than thesum, which such property might reasonably be expected to yield on beinglet out, then the amount so received or receivable would be the annual valueof the property in question. Section 23(2) is to the effect that where the property consists ofa house or part of a house, which is in the occupation of the owner for thepurposes of his own residence or could not actually be occupied by him forthe reason that on account of his employment, business or profession, heMonikahad to reside at other places in a building, which is not owned by him, in2016.12.23 15:11I attest to the accuracy andauthenticity of this document that situation, the annual value of such house or part of the house is requiredto be taken as `Nil'. According to Section 23(4)(a), where the property referred to inSection 23(2) consists of more than one house, then Section 23(2) is toapply only in respect of one of such houses and Section 23(4)(b) providesthat the annual value of the house or houses, other than the house in respectof which the assessee had exercised an option under Section 23(4)(a) shallbe determined under Section 23(1) as if such house or houses had been let. A harmonious reading of the above provisions indicates that incase the assessee owns more than one house, then the annual value of one ofsuch houses, which is in his occupation as his own residence or which wasnot occupied by him for the reason that on account of his employment,business or profession, he had to reside at other places in a building notowned by him, is to be taken as `Nil'. For the other houses that the assesseemay own which are under his occupation or could not be occupied by himfor the reason that on account of his employment, business or profession hehad to reside at other places in a building not owned by him, their annualvalue is to be determined under Section 23(4) read with Section 23(1). A harmonious reading of the above provisions indicates that incase the assessee owns more than one house, then the annual value of one ofsuch houses, which is in his occupation as his own residence or which wasnot occupied by him for the reason that on account of his employment,business or profession, he had to reside at other places in a building notowned by him, is to be taken as `Nil'. For the other houses that the assesseemay own which are under his occupation or could not be occupied by himfor the reason that on account of his employment, business or profession hehad to reside at other places in a building not owned by him, their annualvalue is to be determined under Section 23(4) read with Section 23(1). Section 23(1) has three sub sections which have been set outearlier. Section 23(1)(b) and (c) would apply only to those properties whichwere actually let out and for which rent was actually received or receivableby the assessee. These provisions deal with the concept of real income andnot notional income. Thus, the annual value of the properties like the ones in the case in hand which are more than one, owned by the assessee and whichadmittedly remained vacant throughout the previous year would not beassessed under Section 23(1)(c) but under Section 23(1)(a). The annualvalue would, therefore, be determined notionally as done in the case in handby the Assessing Officer and concurrently upheld by the Commissioner andthe Tribunal. The question of law is, therefore, answered in favour of theRevenue. In view of what has been held above, all the appeals aredismissed, but with no order as to costs. ( S. J. VAZIFDAR ) CHIEF JUSTICE December 23, 2016 monika ( DEEPAK SIBAL )JUDGE Whether speaking/reasoned ?Yes.Whether reportable ?Yes.