C.N. Prasad ORDER
Sanjay Arora, Member (A)
1. This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-29, Mumbai ('CIT(A)' for short) dated 13.12.2012, partly allowing the assessees' appeal contesting his assessment for Assessment Year (AY) 2009-10 vide order u/s. 143(3) of the Income Tax Act, 1961 ('the Act') dated 30.12.2011.
2. At the outset, it was observed that the assessee's appeal is delayed by a period of sixty six days. In view of the delay being reasonably explained, we are, after hearing the parties, inclined to condone the delay, and admit the appeal.
3. Opening the arguments for and on behalf of the assessee, it was submitted by his counsel, Sh. Mehta, that he is not pressing the assessee's Ground II as well as the additional ground, making an endorsement to that effect on Form 36. No plea was accordingly advanced toward the admission of the additional ground. The only issue therefore requiring our adjudication is that raised by the assessee per Ground I, i.e., in respect of house property income qua the assessee's residential house property, i.e., A/1-5, Prithvi Apartments, at Mumbai. The assessee has claimed a loss of Rs. 15,32,120 qua the said property on account of interest (on borrowed capital) at Rs. 21,62,120, adjusting it against the rental income of Rs. 9 lakhs. The said rent was, on the basis of a field enquiry by the Assessing Officer (AO), found to be from the assessee's major son, Roman Pathan and major daughter, Neha Pathan, residing thereat along with the assessee's other family members. Nobody would, in the view of the AO, charge rent (for residence) from his own son and daughter, particularly considering that both are unmarried and living together with their family at its' self-owned abode. The arrangement was therefore regarded merely as a tax-reducing device adopted by the assessee, liable to be ignored. Treating the house property as a self-occupied property, the AO restricted the claim of interest u/s. 24(b) to Rs. 1,50,000, and which was confirmed by the ld. CIT(A) in appeal for the same reason/s.
4. Before us, the assessee's claim was that there is nothing to show that the arrangement, which is duly supported by written agreements, furnished in the assessment proceedings, is fake or a make-believe. Rental income cannot be overlooked or disregarded merely because it arises from close family members. Sh. Mehta was, however, not able to, on a query by the Bench, state the status, i.e., self-occupied or rented, of the said premises for the earlier or subsequent years, though would submit that this is the first year of the claim of loss. The rent agreements having not been brought on record by the assessee, he was also unable to tell us of the area let, i.e., out of the total area available, inasmuch as other family members, including the assessee, are also residing in the same premises. The Revenue's case, on the other hand, was of no cognizance being accorded to an arrangement which is against human probabilities, and clearly a device to avoid tax.
5. We have heard the parties, and perused the material on record.
5.1. Surely, the arrangement is highly unusual, particularly considering that the rent is in respect of a self-owned property (i.e., for which no rent is being paid), which constituted the family's residence, with, further, the assessee's son and daughter being unmarried. That, however, to our mind, may not be conclusive of the matter. Being a private arrangement, not involving any third party, not informing the cooperative housing society may also not be of much consequence. The Revenue has rested merely by doubting the genuineness of the arrangement, without probing the facts further. What is the total area, as well as its composition/profile? How many family members, besides the assessee (the owner) and the two tenants, are residing thereat? Has the area let been specified, allowing private space (a separate bedroom each) to son and ........