The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) sustained the addition made by the Assessing Officer for the failure of the assessee to submit the information regarding the cost involved in furnishing flats.
The assessee is engaged in the business of dealing in shares and securities and renting immovable properties. During the year, the assessee has declared a rental income of ₹.76,01,000/-, dividend of ₹.1,61,600/-, and share of profit from M/s Lalco Services Apartments, LLP Mumbai of ₹.14,98,991/-.
The Assessing Officer observed that the assessee has computed rental income at ₹.45,66,730/- under the head income from house property and business loss at ₹.43,71,875/ which were set off against rental income, thereby determining total income at ₹.1,94,855/- The Assessing Officer observed that the assessee has given on rent its 24 flats owned by it.
The assessee claimed that it has rented out one furnished flat to M/s. Anmol Rice Mills Pvt Ltd. and the rent received from them is ₹.60,000/- per month. Further, the Assessing Officer observed that the assessee gave on rent 23 unfurnished flats at the same location to its related sister concern M/s Lalco Services Apartment LLP at the rate of ₹.25,000/- per month.
The Assessing Officer listed out the rent received from 23 flats, and rent received from M/s.Anmol Rice Mills Pvt. Ltd., @ ₹.60,000/- per month and rent from M/s.Hover India Automotive at ₹.1,50,000/- per month. The rent received from M/s.Anmol Rice Mills Pvt. Ltd., and M/s.Hover India Automotive is claimed to be on furnished flats. He determined the difference of rent of ₹.5,37,5000/- per annum and made the addition to the total income of the assessee at ₹.1,23,62,500/-.
The Authorized Representative submitted that the issue involved in this case is an estimation of rent under Section 23(1a) of the Income Tax Act and in this regard, he submitted that the assessee holds 23 flats in two societies and these flats were given on lease to sister concern LLP. He also submitted that the above LLP was formed by the assessee and other relatives.
The Departmental Representative submitted that the assessee failed to submit the relevant information as called for by the Assessing Officer to determine the actual rent on unfurnished flats based on the information of the value of furniture and fittings in the furnished flats. Since the assessee has failed to submit the relevant information, he relied and supported the findings of the Assessing Officer and subsequently sustained by the Commissioner of Income Tax (Appeal) [CIT(A)].
The Two-member bench comprising of Amit Shukla (Judicial member) and S. Rifaur Rahman (Accountant member) held that there was a huge difference in the rent collected by the assessee from M/s.Hover India Automotive and M/s.Anmol Rice Mills Pvt. Ltd., and both are claimed to be furnished apartments.
It was observed from the record that the assessee has not submitted any information regarding the cost involved in furnishing of above flats to the tax authorities. During the hearing, the bench asked the assessee to submit the balance sheet of the assessee company as well as the sister concern i.e., M/s Lalco Services Apartment LLP but no such information was submitted subsequently and till date. Therefore, the addition made by the Assessing Officer was sustained and the appeal of the assessee was dismissed.
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