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2004 DIGILAW 2405 (ALL)

Putli Bibi v. Commissioner of Income Tax

2004-12-01

PRAKASH KRISHNA, R.K.AGRAWAL

body2004
R. K. AGRAWAL, J. ( 1 ) THE Tribunal, Allahabad, has referred the following two questions of law under Section 256 (2) of the IT Act, 1961, hereinafter referred to as the Act, for opinion to this Court. "1. Whether, on the facts and in the circumstances of the case, can it be said that there was any material to support the Tribunals finding that the transaction entered into between the assessee and Parmatma Dutt Misra with regard to sub-letting of the disputed properties was an artificial arrangement liable to be ignored in determining the annual letting value thereof ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal should have determined the annual letting value of properties in dispute on the basis of actual income received by the assessee-applicant from those properties and not on the basis of the rental income which had yielded to Parmatma Dutt Misra ?" ( 2 ) BRIEFLY stated, the facts giving rise to the present reference are as follows : the present reference relates to asst. yrs. 1973-74, 1974-75, 1976-77 and 1977-78. The applicant is an individual. She owned properties at 26/2 and 26/27, Patkapur, Kanpur. These properties were reconstructed and were let out on 31st Dec. , 1968. During the assessment years in question, it was claimed by the applicant that since she was an old lady and unable to manage the properties, the entire properties were leased out on a monthly rent of Rs. 2,500 to one parmatma Dutt Misra, a Munim in the firm in which the applicant, her son and other relations were partners. The properties were let out for a period of one year for which a registered lease deed was executed on 28th May, 1969. Prior to the leasing out the property, Parmatma Dutt mishra was getting 20 per cent as remuneration. In the agreement, the municipal tax and water tax were to be paid by the applicant and responsibility for repairs and maintenance of the property was that of Parmatma Dutt Misra. The lease deed was renewed year after year by rent notes dt. 5th Aug. , 1970, 5th Aug. , 1971, 5th Aug. , 1972, 5th Aug. , 1973, 6th Nov. , 1974 and 6th oct. , 1975 but the renewals were only for 11 months each and were not by registered agreements. The rent was also increased from Rs. The lease deed was renewed year after year by rent notes dt. 5th Aug. , 1970, 5th Aug. , 1971, 5th Aug. , 1972, 5th Aug. , 1973, 6th Nov. , 1974 and 6th oct. , 1975 but the renewals were only for 11 months each and were not by registered agreements. The rent was also increased from Rs. 2,500 per month to Rs. 3,000 per month in the year 1974. The ITO held these agreements to be not genuine. He reopened the already completed assessment for 1971-72 determined the annual letting value of the properties on the basis of the actual rent realised by Parmatma Dutt Misra from the tenants and worked out the income from properties accordingly. For the assessment years in question the ITO had held that since the facts of the case were exactly the same as in the past and as discussed in detail in the assessment order for the asst. yr. 1971-72 the annual letting value of the properties shall be taken at the actual rent realized from the various tenants by Parmatma Dutt Misra plus Rs. 2,400 for the portion occupied for his own residence. In this way, the annual letting value of the properties was taken by the ITO at Rs. 51,000 for the asst. yr. 1973-74, Rs. 51,300 for the asst. yr. 1974-75 and the income from properties was worked out accordingly at Rs. 32,277 for the asst. yr. 1973-74 and rs. 38,849 for the asst. yr. 1974-75 which income was repeated for the asst. yrs. 1976-77 and 1977-78. ( 3 ) FEELING aggrieved by the assessments the applicant preferred separate appeals before the cit (A ). The CIT (A) came to the conclusion that the ITO had rightly held that the so-called lease deeds entered into by the applicant with Parmatma Dutt Misra did not represent the real state of affairs and the IT authorities were justified in ignoring the so-called lease deeds for working out the income from the properties. He also considered the municipal valuation of the property which was determined by the Judge, Small Causes Court, Kanpur and the Addl. District Judge, kanpur at Rs. 48,000. Still feeling aggrieved the applicant preferred separate appeals before the tribunal. The Tribunal had upheld the order of the CIT (A ). He also considered the municipal valuation of the property which was determined by the Judge, Small Causes Court, Kanpur and the Addl. District Judge, kanpur at Rs. 48,000. Still feeling aggrieved the applicant preferred separate appeals before the tribunal. The Tribunal had upheld the order of the CIT (A ). ( 4 ) WE have heard Sri Vikram Gulati, learned counsel for the applicant and Sri A. N. Mahajan, learned standing counsel for the Revenue. ( 5 ) LEARNED counsel for the applicant has submitted that the applicant was an old lady and was not in a position to manage and realize the rent from the tenant in respect of the property in question and, therefore, she has decided to lease out the property to Parmatma Dutt Misra on a monthly rent of Rs. 2,500 which was subsequently increased to Rs. 3,000 per month in the year 1974. Thus, the actual rent received by her should be treated as the income from the property and not the amount which was realized by Parmatma Dutt Misra from the sub-tenants. He further submitted that the Tribunal had committed an error in holding that the lease deed was not genuine and the findings are perverse. In support of his aforesaid submission, he has relied upon the following decisions : (i) Addl. CIT v. Mrs. Leela Govindan (1978) 113 ITR 136 (Mad); (ii) Bal Kishan Kapoor v. ITO [1996 ]219 ITR141 (Delhi ). ( 6 ) THE learned standing counsel, however, submitted that the Tribunal has found that the lease entered by the applicant with Parmatma Dutt Misra was not genuine as he was a Munim in the firm in which the applicant was a partner. Moreover, she had earlier entrusted the duty of realizing rent in respect of the property in question to Parmatma Dutt Misra and was paying 20 per cent of the rent as remuneration. He further submitted that if the applicant can be a partner in many firms and can do business and had business income, it cannot be believed that it was difficult for her to realize rent from the tenants. He further submitted that if the applicant can be a partner in many firms and can do business and had business income, it cannot be believed that it was difficult for her to realize rent from the tenants. The lease deed in question was entered into for some oblique purposes and, therefore, the income from house property has rightly been worked out on the basis of the actual rent received by Parmatma Dutt Misra and not on the basis of the rent agreed in the lease deed. ( 7 ) HAVING heard learned counsel for the parties, we find that there is no dispute that Parmatma dutt Misra is an employee in the firm in which the applicant, her son, close relatives and other members of the family are partners and he was earlier realizing rent on behalf of the applicant on certain remuneration. The theory put forward that the applicant was an old lady and finding it difficult to realize rent from the tenant has rightly been disbelieved by the authorities including the Tribunal. The Tribunal has found that one of the agreements executed by the applicant was not the registered document and further it was executed after the expiry of the period. It has been found that the stamp paper was purchased on 26th Nov. , 1973 whereas the recital mentions the date of execution of the agreement as 5th Aug. , 1973 which was not possible. The Tribunal has further found that there was much difference between the rent which these properties were capable of getting and rent fixed in these agreements. Moreover, Parmatma Dutt Misra was an employee and getting a meagre amount as salary and taking into consideration the aforesaid findings, the Tribunal has upheld the finding that the lease deed was not genuine. We do not find any infirmity in the order of the Tribunal and the findings recorded by it are based on appreciation of the evidence and material on record. ( 8 ) IN the case of Mrs. Leela Govindan (supra), the Madras High Court has held that it is not open to the Revenue to ignore the rent actually received by the assessee who could not claim more than that by reason of the lease deed subject to which alone he purchased the property. In the aforesaid case the lease deed was held to be genuine. Leela Govindan (supra), the Madras High Court has held that it is not open to the Revenue to ignore the rent actually received by the assessee who could not claim more than that by reason of the lease deed subject to which alone he purchased the property. In the aforesaid case the lease deed was held to be genuine. ( 9 ) IN the case of Bal Kishan Kapoor (supra), the Delhi High Court has held that the standard rent determinable under the provisions of the Rent Act and not the actual rent received by the landlord from the tenant would constitute the correct measure of the annual value of the building. In the present case there is nothing on record to show that what is the standard rent determinable under the provisions of the Rent Control Act. The lease deed has already been held to be not genuine and, therefore, the Tribunal was justified in upholding the order of the authorities working out the income from property on the basis of the actual rent received by Parmatma Dutt misra. ( 10 ) IN view of the foregoing discussions, we answer the first question referred to us in the affirmative, i. e. , in favour of the Revenue and against the assessee and the second question in the negative, i. e. , in favour of the Revenue and against the assessee. However, there shall be no order as to costs. . .