D.K. Srivastava, A.M. - (1.) THESE are cross appeals filed by both the parties against the order of the learned Commissioner (Appeals) (Shri R.C. Sethi) for the assessment year 1991-92. They are being disposed of by a consolidated order for the sake of convenience. ITA No. 3693/Mum.198: Assessee's appeal.- Assessment year 1991-92
(2.) The assessee has now filed concised/revised grounds of appeal in place of the original grounds of appeal filed along with the Appeal Memo. Ground Nos. 1 & 2 are interlinked and read as under: 1. The learned Commissioner (Appeals) erred in confirming addition of Rs. 39,95,000 on account of receipt of a residential flat by the appellant on surrender of tenancy right. 2. Without prejudice to the above, the learned Commissioner (Appeals) failed to appreciate that even if tenancy was not genuine, value of the flat received could not have been treated as income. Briefly stated, the facts of the case are that the assessee, during the previous year relevant to the assessment year under appeal, had received one flat admeasuring 1,500 sq.ft. in a building known as 'Milton Tower', Khar, Mumbai, from its own sister concern, namely, M/s. Ajay Builders. The value of the said flat was shown at Nil. The assessing officer took the value of the said flat at Rs. 40,00,000 and added the same, after giving statutory deduction under section 10(3) of the Income Tax Act, 1961, to the total income returned by the assessee. It was contended by the assessee before the departmental authorities that the assessee was a tenant of the outhouse standing on the plot of land on which M/s. Ajay Builders (sister concern) had subsequently constructed 'Milton Tower' after demolishing the old building including the outhouse standing on the said plot. It was further submitted that the said flat was given free of cost to the assessee by M/s. Ajay Builders in lieu of the assessee having surrendered its alleged tenancy rights over the said outhouse. The assessing officer asked the assessee to prove its tenancy rights in response to which the assessee submitted a detailed explanation before him.
(3.) THE facts surrounding the controversy are that the assessee had claimed before the assessing officer that it was a tenant of Shri Virendra Madhavlal since November, 1980 in the outhouse (known as 'Janu Kunj') of the property belonging to the said Shri Virendra Madhavlal. A co-operative housing society known as 'Khar Milton Co-operative Housing Society' ('KMCHS') purchased the said plot of land including the outhouse of which the assessee was reported to be a tenant from Shri Virendra Madhavlal and consequently entered into development agreement with M/s. Ajay Builders, a sister concern of the assessee. In order to facilitate the development of the property in question, the assessee-firm reportedly surrendered its tenancy rights in consideration of an alternative permanent accommodation, which it subsequently received in the form of a flat admeasuring 1,500 sq. ft. in the building known as 'Milton Tower' from Ajay Builders. This arrangement was reportedly a part of the consent terms settled between the concerned parties. As stated above, the said flat was disclosed in the balance sheet at Nil value. THE assessing officer estimated the value of the flat at Rs. 40 lakhs and, after giving deduction of Rs. 5,000 under section 10(3) made the impugned addition of Rs. 39,95,000 for the detailed reasons given in the assessment order. THE assessing officer noted in particular the following facts : (a) THE assessee and the builders were sister concerns. (b) Shri Virendra Madhavlal was not produced for examination to establish the genuineness of the tenancy though the assessee had stated to be his tenant. (c) Investigation report of solicitors does not mention about the assessee as a tenant. (a) THE assessee could not produce any independent evidence like telephone bill, electricity bill, water bill or any other oral or documentary evidence to factually substantiate its claim that it was a tenant of Shri Virendra Madhavlal.;