1994-VIL-60-ITAT-DEL

Income Tax Appellate Tribunal DELHI

ITA No. 575/Del/1990

Date: 22.12.1994

SIR SOBHA SINGH & SONS (P) LTD.

Vs

INSPECTING ASSISTANT COMMISSIONER

For the Assessee : Ajay Vohra, Vinay Vaish
For the Revenue : Sadhana Pawadia

BENCH

R. M. Mehta (Accountant Member) And B. S. Saluja (Judicial Member)

JUDGMENT

The assessee and the Department are in cross appeals against the order of CIT(A)-I, New Delhi, dt. 17th Nov., 1987. The appeals are being disposed of by a consolidated order for the sake of convenience as the same involve common grounds.

2. The assessee is in appeal on the ground that the learned CIT(A) erred in confirming addition to the extent of Rs. 51,000 as unaccounted receipt. As against this, the Department is in cross appeal on the ground that the learned CIT(A) has erred in deleting an addition of Rs. 2,25,000 made by the Assessing Officer (AO) allegedly representing the amount received by the assessee-company on account of money received for transferring the tenancy rights.

3. The assessee-company filed the return on 27th June, 1985 showing total income of Rs. 4,48,980. The company owned the property known as Sujan Singh Park in one of the exclusive residential areas of New Delhi and its source of income disclosed was the rent from various residential flats, servants quarters and garages, etc., in the Sujan Singh Park Complex.

3.1 The AO noted that during the relevant accounting period, a number of new tenants for various servants quarters, flats and garages, etc., had come in the said property and he requested the company to produce the said tenants for examination in order to confirm the various terms and conditions on which they had become tenants in the said property. The company vide its letter dt. 28th Nov., 1987 expressed its inability and requested the AO that attendance of the said tenants may be enforced by issuing summons to them. The AO examined Sarva Shri Dalip Kumar, Sukh Darshan Lal, Mohan Lal, P.S. Chopra, Daljit Singh (director in the company), C.K. Govinder, Harnam Singh and Mrs. Parveen Begum. Shri Dalip Kumar and Mrs. Parveen Begum admitted that they had paid "Pagree" of Rs. 22,000 and Rs. 29,000 respectively for becoming tenants in quarter No. 2 and quarter No. L-6 respectively. Shri Sukh Darshan Lal stated that the company had demanded "pagrees" but in his case his brother Satpal had intervened to plead with Shri Daljit Singh to exempt him from "Pagree". On further questioning he stated that Shri Satpal could influence Shri Daljit Singh as Satpal had a spare parts shop which Shri Daljit Singh patronised. Shri Mohan Lal denied as having paid any pagree, but on further questioning he admitted that he had approached Shri Daljit Singh through Satpal (his brother). Shri P.S. Chopra also denied that he had paid any pagree at the time of becoming a tenant. Similarly, Shri C.K. Govinder and Shri Harnam Singh denied having paid any pagree for the garages taken by them on rent. The AO gave an opportunity to the company to cross examine Shri Dalip Kumar and Mrs. Parveen Begum. During cross examination Shri Dalip Kumar maintained that he had paid Rs. 22,000 to Brig. Gurbux Singh, connected with the company. Mrs. Parveen Begum did not attend on the appointed day for cross examination. It was argued by Shri Himmat Singh on behalf of the assessee company, that the occupants of the servants quarters used to themselves transfer the possession of these quarters and money may have changed hands between one tenant and the next occupant but that the company was unconcerned with this practice. The AO after analysing the evidence of the aforesaid persons during examination observed that "it is not necessary to prove all the transactions beyond reasonable doubt. What has to be seen is the preponderance of probabilities. Examined in this light, two of the new tenants for the year admit to having paid pagree. Both of them are from the semi-literate poorer classes and have no other motivation for stating so. In fact they have made a statement like this in the face of possible harassment by their powerful landlord. The story of Sukh Darshan Lal and Mohan Lal about utilising their brother's influence with Shri Daljit Singh is not corroborated by Shri Daljit Singh. He does not know them. With reference to the examination of Shri Dalip Kumar, the AO observed that Shri Dalip Kumar had been greatly grilled by the advocate of the assessee but he stood his ground. He further observed that the figure of Rs. 22,000 showed certain method in it inasmuch as a false witness is more likely to state sums like Rs. 10,000, 20,000, 30,000 and so on. The fact that the company had filed a suit against him did not detract from the truth of his statement. In fact, it re-enforced the truth. With reference to examination of Mrs. Praveen Begum, the AO observed that she withdraw the money from the money sent by her husband from Saudia Arabia to have a roof over her head. Although she failed to attend the office a second time for cross-examination, looking at her type of background, it was very likely that in view of the position of women in the Muslim community, she was prevented from repeated visits to any office or for that matter, any place. In view of the above discussion made by the AO, he held that pagree was paid in all cases of new tenants except in the cases of P.S. Chopra and Smt. Nagima Lal Singh and made an addition of Rs. 2,76,000 in the income of the assessee on this account.

4. On appeal before the CIT(A), the learned counsel for the assessee submitted that neither statement could be relied upon. He submitted that the statement of Shri Dalip Kumar was not true but malicious and intended to cause harm to the assessee company as eviction proceedings were pending against him. With reference to the statement of Smt. Parveen Begum, the learned counsel submitted that it had no evidentiary value in law as she did not come for cross examination and her statement was recorded at the back of the assessee. In this connection he relied on the decision of the Hon'ble Delhi High Court in the case of Sona Electric Co. vs. CIT (1984) 43 CTR (Del) 287: (1985) 152 ITR 507(Del). He further submitted that the AO had drawn adverse inference without there being any material that "pagree" was being paid for transfer of tenancy right. He submitted that the addition has been made merely on conjecture and surmises without bringing any material on record for the same. In this connection he relied on the decision of the Hon'ble Supreme Court in the case of Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288(SC) wherein it had been held that no addition could be made merely on conjecture and surmises. He also filed copies of orders for asst. yrs. 1983-84 and 1984-85 wherein the additions made on account of supposed "pagree" paid had been deleted. After considering the submissions made by the learned counsel, the CIT(A)deleted the additions made on account of pagree except in the cases of Shri Dalip Kumar and Mrs. Parveen Begum. In the case of these two witnesses the CIT(A) did not accept the arguments advanced by the learned counsel to the effect that the parties did not have any corroborative evidence. He observed that in such transactions it was not to be expected that the parties would make payment by cheque or drafts. He further observed that it was understandable that the payers would not like to disclose the source of fund. He, therefore, sustained the addition of Rs. 51,000.

5. The learned counsel for the assessee Shri Ajay Vohra made almost the same submissions before us as he had made before the CIT(A). He also invited our attention to pages 4 and 5 of the paper book, wherein it had been mentioned that Shri Dalip Kumar was a taxi driver by profession and was a man of petty means who could not possibly afford to pay Rs. 22,000. It is also mentioned that the AO did not ask Shri Dalip Kumar to prove the source of payment of the alleged amount of Rs. 22,000. Further it is mentioned that the statement of Shri Dalip Kumar was motivated, malicious and intended to cause harm to the assessee company, as eviction proceedings were pending against him. It has further been mentioned that the evidentiary value of the statement of Shri Delip Kumar had already been looked into by the CIT(A) XVI, New Delhi in appeal against assessment order for asst. yr. 1983-84. The CIT(A), vide order dt. 17th Nov., 1986, in appeal number 827/85-86, deleted similar addition amounting to Rs. 8,40,000. With reference to the statement of Smt. Parveen Bagum, it has been mentioned that her statement is no statement in the eye of law, having been recorded at the back of the assessee and without affording the assessee the opportunity to cross-examine her. It has also been mentioned that the statement of Smt. Parveen Begum further remains unsubstantiated because the AO had not verified the source of payment of Rs. 29,000. It has further been mentioned that the AO had drawn adverse inference from statements of other tenants who had categorically stated that they had paid no pagree. The learned counsel again relied on the decision of the Hon'ble Delhi High Court in the case of Sona Electric Co. (supra) wherein the Hon'ble Delhi High Court had held that the statements recorded at the back of the assessee, without providing any opportunity to the assessee for a cross-examination, had to be excluded from consideration. He also relied on the decision of the Hon'ble Supreme Court of India in the case of Ukhara Estate Zamindaries Pvt. Ltd. vs. CIT (1979) 13 CTR (SC) 179: (1979) 120 ITR 549(SC) for the proposition that receipt on account of Salami is of a capital nature and will not be income in the hands of the company. The learned counsel also referred to the provisions of the Delhi Rent Control Act, 1958 which prohibit any such payments and submitted that in case the company had received any such payment it could have been proceeded against under the relevant provisions of the said Act.

6. The learned Departmental Representative Mrs. Sadhana Pawadia relied heavily on the orders of the AO, and submitted that the CIT(A) has wrongly allowed relief of Rs. 2,25,000 to the assessee.

7. We have carefully considered the submissions made by both the parties on the aforesaid grounds of appeal. We feel that the submissions made by the learned counsel have force. In so far as the statement of Smt. Parveen Begum is concerned, on the basis of which an addition of Rs. 29,000 has been sustained, the statement had been recorded at the back of the assessee without providing an opportunity to it to cross examine Smt. Parveen Begum, the same has to be excluded from considerations in view of the decision of the Hon'ble Delhi High Court in the case of Sona Electric Co. Ltd. vs. CIT (supra). With reference to the addition of Rs. 22,000 made on the basis of the statement of Shri Dalip Kumar, we feel that though the assessee had occasion to cross examine Shri Dalip Kumar and he has withstood his ground regarding payment of pagree, yet the contention of the learned counsel that the lower authorities did not ask Shri Dalip Kumar to prove the source of payment of the alleged amount of Rs. 22,000 and that the statement made by Shri Dalip Kumar was motivated, malicious and intended to cause harm to the assessee company in view of the eviction proceedings pending against him cannot be brushed aside. In the absence of any evidence regarding payment of the alleged amount of Rs. 22,000 and having regard to the earlier orders of the Tribunal in the case of the assessee for the asst. yrs. 1983-84 and 1984-85 in ITA No. 472 (Del) 87 and ITA No. 5386 (Del) 87, we hold that there is no basis for assumption that the amount has been allegedly received by the assessee company. Under these circumstances, we delete the addition of Rs. 51,000 sustained by the CIT(A). With reference to the other additions amounting to Rs. 2,25,000, as deleted by the CIT(A), we hold that the said additions have been rightly deleted by the CIT(A) as the same have been made on mere suspicion and conjectures in the absence of any evidence. In view of the aforesaid deletions of Rs. 2,76,000, we need not go into the question as to whether salami/pagree constituted capital or revenue receipt as claimed by the learned counsel on the basis of the case reported in (1979) 13 CTR (SC) 179: (1979) 120 ITR 549(SC) (supra).

8. In the result, the ground of appeal is allowed in the case of the assessee and the ground of appeal of the Department is rejected.

9. The second ground of appeal by the Department relates to the direction made by the CIT(A) to the AO to allow the assessee's claim for deduction of Rs. 74,372 on account of salaries paid to watchman, sweepers, malies and pump operators and 1/3rd of manager's salary of Rs. 1,880 while computing the income under the head "income from house property".

10. The AO had not mentioned anything in the assessment order with reference to the disallowance of Rs. 74,372 on account of the aforesaid expenses. The assessee had claimed relief with reference to the said expenses in the grounds of appeal filed before the CIT(A). The learned counsel for the assessee submitted before the CIT(A) that while computing the income for the asst. yrs. 1983-84 and 1984-85 the said deductions had been allowed as was evident from the fact that the property income had been taken as declared by the assessee. In this connection he also filed copies of the orders of the Tribunal, Delhi Bench in the case of the assessee for the asst. yrs. 1949-50 and 1950-51 wherein the said issue was considered and the Tribunal had held that "the annual value should be calculated at the gross rents payable by the tenants less the cost of water and electricity for common lighting and upkeep and maintenance of the parks, private roads and the chlorinating plant; and of the establishment consisting of watchmen, malis and sweepers and one third of the salary paid to the manager whose duties include not only maintenance but also supervision of repairs, rent collections, and in a measure, construction". After considering the submissions of the learned counsel, the CIT(A) observed that income from house property had been taken at Rs. 2,50,754 in the asst. yr. 1983-84 and at Rs. 2,54,530 in the asst. yr. 1984-85 as declared by the assessee. In view of the said facts, he directed the AO to allow deduction under the head `income from house property' at Rs. 74,372 on account of salaries paid to watchmen, sweepers, malis and pump operators and 1/3rd of manager's salary of Rs. 1,880. The Department is aggrieved.

11. The learned Departmental Representative submitted that under the current provisions relating to computation of income from house property, no such deductions are allowable. She, therefore, defended the disallowance of the aforesaid expenses of Rs. 74,372. The learned counsel for the assessee invited our attention to the orders of the Tribunal dt. 11th May, 1953 in ITA Nos. 2836 and 2837 of 1952 in the case of the assessee for the asst. yrs. 1949-50 and 1950-51, wherein the Tribunal had observed in para 2 that "the landlord does not carry on any separate business in respect of the services and amenities, which are purely ancillary to the letting out of the buildings. These advantages are not separately vended to and do not ensure to the benefit of either persons who are not tenants or those who visit the letter on business or friendly or social calls. The objective sought to be attained must be reached in a different manner." The Tribunal further made orders in para 4 as to how the annual value should be calculated at the gross rents payable by the tenants less the cost of various services. The said part of the order had already been reproduced in the order of CIT(A), on the basis of which he directed the AO. The learned counsel, therefore, submitted that for the sake of consistency the said expenses should be allowed to be deducted as have been deducted and allowed right upto the year 1991-92. In the alternative he submitted that the aforesaid income may be charged to tax as income from other sources and the aforesaid deductions may be allowed under s. 57(iii).

12. We have carefully considered the submissions made by both the parties on the said ground of appeal. Though we agree with the learned Departmental Representative that under the existing provisions relating to computation of income from house property, the aforesaid deductions are not allowable, yet considering the past history of the assessee and the fact that the said deductions have been allowed to the assessee right upto the asst. yr. 1991-92 and with a view to maintain consistency in the case of the assessee, we decline to interfere with the directions issued by the CIT(A) to the AO, as we feel that the deductions have to be allowed in any case to the assessee for the aforesaid services and amenities which are purely ancillary to the letting out of the buildings.

13. In the result, this ground of appeal by the Department is rejected.

 

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