The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that notional rent shall notbe applicable on a flat, which is inhabitable and in a ruinous conditionfollowing the Bombay High Court judgment in the case of Tiptop typography.
The assessee had a flat at Navi Mumbai. The Assessing Officer while concluding the assessment proceedings against the assessee applied municipal ratable value on the annual letting value of the flat. However, the assessee argued that there was material filed to demonstrate that the flat was not fit for occupation and certificates from authorities were filed for evidence of the same.
On first appeal, the Commissioner of Income Tax (Appeals) held that when the concerned house property was not in a position to be let out there cannot be any deemed notional rent for the same. For this proposition, he noted the reference by the assessee to several ITAT decisions.
The bench comprising Judicial Member Pavan Kumar Gadale and Accountant Member Shamim Yahya observed that “it is amply clear that the order of Ld.CIT(A) is without any application of mind. There is no discussion whatsoever as to where the act mandates that if a flat is inhabitable and in a ruinous condition notional rent should be computed thereon and imposed upon the assessee.”
“However, Ld.CIT(A) chose to display scant regard for judicial discipline. He did not at all refer whatsoever to the ratio emanating from the ITAT decisions. But, simply referred to the provision of the concerned section and Hon’ble Bombay High Court decision in case of Tiptop typography. He did not refer at all as to how the Hon’ble Bombay High Court decision empowers him to impose notional rent on a flat, which is inhabitable and in a ruinous condition,” the bench said.
Following the Bombay High Court’s decision, the bench allowed the plea of the assessee and held that ”we fail to understand as to why the Ld.CIT(A) has chosen again to exhibit his scant regard to the judicial discipline and not follow the Hon’ble Bombay High Court decision in the case of Tiptop topography. In the said decision Hon’ble Bombay High Court has expounded that municipal ratable value in an accepted norm for considering the rental value unless the AO shows by some material that the rent offered by the assessee is a manipulated figure. We are again anguished and wonder why the Ld.CIT(A) chose to ignore the Hon’ble Bombay High Court decision. Be as it may, we direct that following the precedent from Hon’ble Bombay High Court as above the rental value should be limited to the municipal ratable value in this regard.”
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