ORDER
Bhavnesh Saini, J.M.
1. Both the appeals by the assessee are directed against the different orders of the CIT(A), Jammu, headquarters at Amritsar, dt. 6th Sept., 2001 for the asst. yr. 1998-99 and dt. 13th Sept., 2002 for the asst. yr. 1999-2000.
2. Since common issues are involved in both the appeals, therefore, both were heard together and we dispose of the same by this common order.
3. We have heard the learned representatives of both the parties and have gone through the observations of the authorities below and details submitted in the paper book by the counsel for the assessee.
4. For the sake of convenience, we take up ITA No. 491/Asr/2001 for the purpose of disposal of both the appeals. This appeal is filed by the assessee on the following effective grounds of appeal:
1. That the learned CIT(A), Jammu, Hqrs. Amritsar, erred both in law as well as in respect of the facts of the case, while dismissing the appellant’s appeal and upholding the assessment framed by the AO and the additions made therein.
2. The learned CIT(A) failed to appreciate that the assessment order dt. 5th March, 2001, passed under Section 143(3) by the AO was without jurisdiction, bad in law, null and void, inter alia, wrongly upheld the same.
3. The learned CIT(A) further, erred in not appreciating the contention of the appellant while upholding the unjustified ALV of incomplete and inhabitable flat No. 309, Abhimanyu Apartments, Patparganj, New Delhi, assessed by the AO at Rs. 76,258 as against nil shown by the appellant.
4. The learned CIT(A) was further not justified while rejecting the contention of the appellant that the provisions of Section 22 of the IT Act, 1961, could not be applied, without appreciating the facts of the case judiciously, that the flat in question was inherently incapable of being let out.
5. Without prejudice to the above, the CIT(A) further erred in upholding the ALV of the flat determined at Rs. 76,258 by the AO, which is even otherwise very much excessive, unreasonable and based on a unique method devised by the AO not provided anywhere in the IT Act, 1961, or Rules made thereunder.
6. That all the comments passed by the CIT(A), while dismissing the appellant’s appeal, are based on surmises and conjectures only, without appreciating the facts and circumstances of the case judiciously.
7. The appellant prays for awarding of appropriate cost for the appeal, as per Section 254(2B) of the IT Act, 1961, by the Hon’ble Bench.
5. The facts as taken from the record are that the income of Rs. 4,48,680 was returned on 29th Oct., 1998 in Central Circle, Amritsar. It was processed under Section 143(1)(a) on 30th March, 1999. Thereafter, notice under Section 143(2) was issued. Thereafter the case was transferred to the Special Range, Amritsar. Fresh notices under Sections 143(2) and 142(1) were issued with the questionnaire. The assessee through counsel appeared before the AO and filed requisite details. In the return of income, the assessee claimed exemption in respect of l/9th share of residential house in New Friends Colony, New Delhi. In addition thereto, ‘nil’ income has been disclosed in respect of the residential flat located at 309, Abhimanyu Apartments, Patparganj, New Delhi. The assessee was required to furnish details of this property and to justify why no income was disclosed in respect of second property. The assessee submitted in its reply dt. 9th Jan., 2001 that the exemption is claimed only in respect of property No. 511-B, New Friends Colony, New Delhi. The other property, i.e., flat in Abhimanyu Apartments was completed without any electric or water connection uptil 31st March, 1998, not habitable, inter alia, ALV, thereof was rightly taken at ‘nil’.
6. The thrust of the assessee’s reply is that without electricity or water house was not habitable and, therefore, ALV was taken at nil. The assessee’s counsel referred to the meaning of dwelling house by referring to the book written by Chaturvedi & Pithisaria. The AO did not agree with the contention of the assessee and was of the view that the subject-matter of charge is defined clearly in Section 22 which contemplates “Any building or land”. According to the AO, this is not qualified by conditions of habitability or dwelling. This question of dwelling and habitation is relevant only when seeking exemption under Section 23(2) where the owner claims SOP status for the property. According to the AO, the decisions cited by the counsel for the assessee had been rendered in the context of Section 23(2) as is referred in the assessment order. According to the AO, it does not seek to restrict the scope of the clear definition given in Section 22 of the Act. The AO also did not find any force in the submission of the assessee that the flat is incomplete and as such has ‘nil’ ALV, as according to the AO, the possession of the flat in Delhi is only handed over after obtaining completion certificate by the builder. The AO, therefore, concluded that the flat, in question, qualifies to a building within the meaning of the term as is used in Section 22 of the Act. The AO was of the view that the assessee acquired flat No. 309, Abhimanyu Apartments, Patparganj,. New Delhi, on 16th Sept., 1988 at a cost of Rs. 4,63,650. By applying the cost indexation, the value of this investment was taken at Rs. 9,53,218 and l/10th was taken of the ALV at Rs. 95,322 and by reducing l/5th of the repair amount, addition of Rs. 76,258 was made in the returned income. The assessment order was challenged before the CIT(A) on two of the grounds that the AO (Addl. CIT) was not having jurisdiction to pass the assessment order and that the AO was unjustified in adopting the ALV of incomplete flat No. 309, Abhimanyu Apartments, Patparganj, New Delhi, at Rs. 76,258 as against ‘nil’ income shown in the return of income.
7. The CIT(A) rejected the contention of the assessee as regards lack of jurisdiction on the part of the AO on the following grounds in brief:
(1) The jurisdiction over the case of the assessee was transferred under Section 127 vide order dt. 12th Sept., 2000 by the CIT (Central), Ludhiana, inter aha, assigning the case to Jt. CIT, Special Range, Amritsar, vide Sr. No. 68 of the order and the fact to this effect had also been admitted by the assessee. This order under Section 127 has been rightly passed as the AO at that time was holding charge of Special Range, Amritsar, as Jt. CIT.
(2) Perusal of the Ministry of Finance’s notification dt. 23rd Oct., 2000 shows that vide Sr. No. 219 of the said notification has placed the said Jt. CIT w.e.f. 6th June, 2000 in the Selection Grade (non-functional) and the impugned assessment order was passed by the same incumbent on 5th March, 2001 indicating his designation as Addl. CIT, Special Range. Therefore, by indicating his re-designated rank as Addl. CIT, Special Range, Amritsar, does not vitiate the finalisation of the impugned assessment.
(3) The Department has introduced another rank in between the Jt. CIT and the CIT. The Jt. CIT as well as the Addl. CIT have the same job. A person of the rank of Jt. CIT or the Addl. CIT is competent to hold the same range and there is nothing in the Act which gives additional or special powers to the Addl. CIT. The powers exercised by both these officers are the same.
8. The CIT(A), therefore, rejected the claim of the assessee as regards lack of jurisdiction.
9. On merits also, the CIT(A) dismissed the appeal of the assessee after considering the reply of the assessee that the flat, in question, was incomplete for human dwelling. The assessee relied upon the decision of the Bombay High Court in the matter of Shree Nirmal Commercial Ltd. v. CIT (1992) 193 ITR 694 (Bom). The CIT(A), however, considering the language of Sections 22 and 23 of the IT Act did not place reliance upon the decision of the Bombay High Court referred to above and dismissed the appeal of the assessee.
10. The assessee is in appeal before us on the grounds mentioned above, which raise the following issues :
(1) Whether the AO (Addl. CIT, Special Range, Amritsar) was not having jurisdiction to pass the assessment order ?
(2) Whether the authorities below have rightly charged flat No. 309, Abhimanyu Apartments, Patparganj, New Delhi, to tax according to Sections 22 and 23 of the IT Act by determining ALV as against ‘Nil’ income shown by the assessee ?
11. Issue No. 1 : The learned Counsel for the assessee submitted that Section 2(7A) of the IT Act provides definition of the “AO”, which does not include the Addl. CIT. He has further submitted that jurisdiction in the case of the assessee was with the ITO, Ward-2(2), Amritsar. He has further submitted that the CIT, Central, Ludhiana, passed an order of transfer dt. 12th Sept., 2000 in concurrence by referring to the earlier entries as against the entry at Sr. No. 68 under Section 127(2) of the IT Act. He has further submitted that the Addl. CIT, Special Range, Amritsar, intimated the assessee about the change of the jurisdiction vide separate letter, copy of which is filed at p. 5 of the paper book. He has submitted that the assessee immediately filed objections before the CIT (Central), Ludhiana, and the Addl. CIT, Special Range, Amritsar, vide letter dt. 28th Dec, 2000. He has further submitted that the ITO (Judicial) (Central), Ludhiana, intimated the assessee vide letter dt. 8th Jan., 2001 that the jurisdiction has already transferred due to administrative control of the CIT, Amritsar, therefore, he may contact the CIT, Amritsar, for transfer of the jurisdiction from the Special Range to Ward-2(2), Amritsar. The learned Counsel for the assessee further submitted that the assessee moved objection against transfer of jurisdiction well in time before the AO, which was not considered properly. He has submitted that since the return of income was filed below the amount of Rs. 5 lakhs, therefore, jurisdiction should not have been given to the Addl. CIT, Special Range. He has further submitted that considering the above submissions, the Addl. CIT, Special Range, was not having jurisdiction to pass the assessment order. On the other hand, the learned Departmental Representative submitted that Section 2(28C) of the IT Act provides the definition of “Jt. CIT” which includes. “Addl. CIT” under Sub-section (1) of Section 117.
12. The learned Departmental Representative relied upon the order of the CIT(A) in which the reasons for rejecting the claim of the assessee have been given. He has further submitted that the administrative orders were passed by the CIT (Central), Ludhiana, for transferring jurisdiction in the case of the assessee vide order dt. 12th Sept., 2000 mentioned at Sr. No. 68 and as such the AO, i.e., the Addl. CIT, Special Range, Amritsar, was having jurisdiction to pass the assessment order. The learned Departmental Representative further submitted that the objections of the assessee were having no force and as such the AO proceeded to pass assessment order in accordance with the provisions of law. He has further submitted that as per Section 124(3) and (4), the jurisdiction of the AO cannot be challenged after passing of the assessment order. He has further submitted that even otherwise such objection could have been entertained and determined by the Director General or Chief CIT or CIT as regards jurisdiction of the AO and cannot be called in question before the appellate authority.
13. We have considered the rival submissions and material available on record and the findings given by the CIT(A) in the impugned order. Section 116 of the IT Act provides the IT authorities, which includes Addl. CIT. Section 117 of the IT Act provides the powers of the Central Government to appoint IT authorities referred to in this case Section 120 of the IT Act provides jurisdiction of the IT authorities and provides that the IT authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities. It also provides that the directions of the Board under Sub-section (1) may authorise any other IT authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other IT authorities, who are subordinate to it. It is also provided that the Board or any other IT authority authorised by it may have regard to any one or more of the following criteria giving jurisdiction, namely : .
(a) territorial area;
(b) person or classes of persons;
(c) income or classes of income; and
(d) cases or classes of cases.
It is also provided that the Board may authorise the Director General or Chief CIT or CIT to issue orders in writing the powers and functions conferred on, or, as the case may be, assigned to the AO. Section 2(7A) provides the definition of the “AO”, who is vested with the relevant jurisdiction by virtue of directions or orders issued under Sub-section (1) or Sub-section (2) of Section 120 or any other provision of this Act and the Jt. CIT or Jt. Director. Section 2(28C) provides the definition of the Jt. CIT and includes Addl. CIT.
14. The combined reading of aforesaid provisions of the IT Act would clearly reveal that the IT authorities are having jurisdiction and powers as are assigned to them either by the Board or by the Chief CIT or the CIT. They perform their powers and functions in accordance with such direction and notification. The definition of the AO includes the Jt. CIT and the definition of the Jt. CIT includes Addl. CIT. The CIT(A) in the appellate order has given specific reasons for declining the contention of the learned Counsel for the assessee that the jurisdiction was given by the CIT, Central, Ludhiana, in the case of the assessee to the Jt. CIT, Special Range, Amritsar, vide order dt. 12th Sept., 2000. The Jt. CIT, Special Range, Amritsar, was upgraded to the rank of the Addl. CIT, Amritsar. Such authority has passed the assessment order being the AO of the assessee as was given powers in accordance with the jurisdiction order dt. 12th Sept., 2000. The CIT(A) also correctly mentioned that the rank of Addl. CIT was introduced, who was having same powers as have been given to the Jt. CIT. The learned Counsel for the assessee could not assail the findings of the CIT(A) and the reasons given by him in the appellate order. The order dt. 12th Sept., 2000 of the CIT (Central), Ludhiana, clearly empowered the Jt CIT, Special Range, Amritsar, to become the AO in the case of the assessee as per Sr. No. 68. This order was passed by the CIT (Central), Ludhiana, with concurrence of CIT(A), Amritsar, dt. 6th Sept., 2000 as mentioned in the bottom of the order. The AO conveyed such decision of the transfer of the jurisdiction to the assessee before passing the assessment order. The assessee raised objection but the fact remains that there was valid and effective jurisdiction assigned in favour of the AO, i.e., Addl. CIT, Special Range, Amritsar, to do the assessment in the case of the assessee. The learned Counsel for the assessee also referred to the order of the CIT dt. 11th June, 1993 by which the powers are given to different Wards as against the Jt. CIT, Special Range, Amritsar. It was an earlier order which was superseded by the subsequent order of the CIT (Central), Ludhiana, dt. 12th Sept., 2000. As such the contention of the learned Counsel for the assessee has no force and the same is accordingly rejected.
15. We may also refer to the provisions of Section 124(2), (3) and (4) of the IT Act, which deals the jurisdiction of the AO. The same is reproduced as under:
124(2) Where a question arises under this section as to whether an AO has jurisdiction to assess any person, the question shall be determined by the Director General or the Chief CIT or the CIT, or where the question is one relating to areas within the jurisdiction of different Director Generals or Chief CITs or CITs, by the Directors General or Chief CITs or CITs concerned or, if they are not in agreement, by the Board or by such Director General or Chief CIT or CIT as the Board may, by notification in the Official Gazette, specify.
(3) No person shall be entitled to call in question the jurisdiction of an AO–
(a) where he has made a return under Sub-section (1) of Section 139, after the expiry of one month from the date on which he was served with a notice under Sub-section (1) of Section 142 or Sub-section (2) of Section 143 or after the completion of the assessment, whichever is earlier;
(b) where he has made no such return, after the expiry of the time allowed by the notice under Sub-section (1) of Section 142 or under Section 148 for the making of the return or by the notice under the first proviso to Section 144 to show cause why the assessment should not be completed to the best of the judgment of the AO, whichever is earlier.
(4) Subject to the provisions of Sub-section (3), where an assessee calls in question the jurisdiction of an AO, then the AO shall, if not satisfied with the correctness of the claim, refer the matter for determination under Sub-section (2) before the assessment is made.
16. The Hon’ble Allahabad High Court in the matter of Hindustan Transport Co. v. IAC and Ors. , while considering these provisions contained in Section 124(2), (3) and (4) held as follows :
Being an enactment aimed at collecting revenue, the legislature did not intend collection of revenue to be bogged down on account of technical plea of jurisdiction. It has, therefore, prescribed the limit upto to which the plea of jurisdiction may be raised. As provided in Section 125(5)(a), the right is lost as soon as the assessment has been completed. Even where the right is exercised before the assessment is completed, the question is to be decided by the CIT or by the Board, Courts do not come into the picture.
From the above provisions of the Act, it is apparent that the Act does not treat the allocation of functions to various authorities or officers as one of substance. It treats the matter as one of procedure and a defect of procedure does not invalidate the end action. The answer to the first question, therefore, is that the power is administrative and procedural and is to be exercised in the interest of exigencies of tax collection and the answer to the second question is that, under the Act, a defect arising from allocation of functions is a mere irregularity which does not affect the resultant action.
17. We may mention that the provisions of Section 124(5) as were applicable earlier referred to in this decision are also similar to the provisions contained in Section 124(3) of the IT Act after amendment, which are applicable to this case.
18. Considering the above discussion and the facts available on record, it is clear that the jurisdiction was assigned to the AO (Addl. CIT, Special Range, Amritsar) as he was Jt. CIT, Special Range, Amritsar, because on his upgradation he has mentioned his re-designated office which designation includes in the definition of the Jt. CIT. The objection as regards jurisdiction was rejected virtually by the AO by referring to the earlier order of the jurisdiction conferred upon it by the CIT (Central), Ludhiana. Even otherwise considering the decision of the Hon’ble Allahabad High Court, it was not with the domain of this Tribunal to consider this point at this stage. We accordingly do not find any substance or merit in the contention of the learned Counsel for the assessee. This point is accordingly decided against the assessee.
19. Issue No. 2 : It is stated that the flat, in question, was allotted to the assessee by the Jansevak Co-operative Group Housing Society Ltd., Delhi, under financing scheme. The possession of the property was handed over to the assessee on 9th June, 1995. According to the assessee, it was not habitable because of various inherent defects or deficiencies in the flat. The assessee has pointed out such defects in his letter separately. The photographs of the interior, flooring, bathroom, etc. are also filed to show that the flat was not habitable being incomplete. It was also stated that the society vide letter dt. 17th Aug., 2001 circulated this letter amongst the residence of the members of the society for meeting to be held on 19th Aug., 2001 to discuss the order of the Delhi High Court regarding permanent electric connection to the individual flats and problem of seepage, operation of lift and other development activities. It is also explained that even at the time of handing over the possession of the flat, in question, there was no electricity or water supply provided in the flat. It is also submitted that same facts were reiterated before the AO in the asst. yrs. 1996-97 and 1997-98. Copies of the written submissions are filed in the paper book along with the assessment orders. It is, therefore, submitted before the AO, therefore, on the identical facts do not charge any ALV because the flat was incomplete and was not habitable. It is also submitted that such irregularities were also pointed out at the appellate stage. Architect was also appointed, who has also verified such facts and stated that there is no electricity in the flat and the flat is in a dilapidated condition and there is no sanitary fittings in the bathroom and kitchen, therefore, makes it to be unfit for use. The learned Counsel for the assessee accordingly submitted that since there was no electricity or water and other facilities available in the flat at the time of handing over the possession, therefore, the assessee (has) taken up the matter with the society for providing the same and as such the property was not capable of being let out. Therefore, the conditions of Sections 22 and 23 of the IT Act are not satisfied in the case of the assessee. The learned Counsel for the assessee relied upon the decision of the Bombay High Court in the matter of Shree Nirmal Commercial Ltd. v. CIT (supra).
20. On the other hand, the learned Departmental Representative relied upon the orders of the authorities below and submitted that the certificate of possession shows that the flat was fitted with all amenities and that the authorities below have rightly considered the provisions of Sections 22 and 23 of the IT Act and have rightly charged ALV to income-tax.
21. We have considered the rival submissions and material available on record. The assessee very specifically before the authorities below has pleaded that there was no electricity or water supply fitted in the flat. This fact was not verified by the authorities below and no such attempts have been made on their part. The assessee has made the same submissions before the AO in the earlier asst. yrs. 1996-97 and 1997-98. Copies of the written submissions and the assessment orders are available in the paper book. The AO was satisfied with the explanation of the assessee as regards non-habitability of the flat, in question, because of electricity and water supply not provided in the flat and as such did not charge the ALV of the flat to tax under Sections 22 and 23 of the IT Act. Considering the past history of the assessee and submissions made before the authorities below clearly established that no water or electricity supply was available in the flat, in question, in the relevant assessment year. The assessee also explained that certain flooring, bathroom, etc. were also found incomplete and as such it could not be used for the purpose of dwelling. The Hon’ble Orissa High Court in the matter of CWT v. K.B. Pradhan while considering the definition of the house observed that the word “house” has no statutory definition and, therefore, has to be given the common parlance meaning. The dictionary meaning of the words is “building for dwelling in, a building in general, a dwelling place”. It has also the meaning of “abode, habitation, etc.” It was further observed that where, however, the house is in the process of construction and, on account of the fact that it is not complete, has not reached a habitable stage, the concept of a “house” cannot be extended to cover such an incomplete construction. Section 22 of the IT Act provides the annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him, the profits of which are chargeable to the income-tax, shall be chargeable to income-tax under the head “Income from house property”. Section 23 of the IT Act provides how annual value is to be determined and provides that annual value of the property shall be deemed to be–
(a) the sum for which the property might reasonably be expected to let from year to year, or
(b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in Clause (a), the amount so received or receivable;
22. It is admitted fact that property was not let out to any tenant. The necessary condition for charging the ALV to tax is an annual value of the property which would be a sum for which property might reasonably be expected to let or where the property is let and the annual rent received or receivable. Therefore, the condition of Section 23(1)(a) is to be satisfied in this case upon which the property might reasonably be expected to let from year to year. The letting of the property means creating the interest of the tenant in the property or capable of creating interest of the tenant in the property for use and occupation of tenanted property. According to the assessee, the flat, in question, was not in habitable condition because it was not having electricity or water connection in the financial year, relevant to the assessment year and other things have also to be completed for the purpose of use and occupation of the property by the tenant. In the absence of the material amenities available in the property, it is difficult to believe that the property might reasonably be expected to be let out to the tenant. It is also difficult to believe that the owner would be in a position to create interest of the tenant in the property. The Hon’ble Bombay High Court in the matter of Shree Niimal Commercial Ltd. v. CIT (supra) at p. 712 held :
In our view, unless the property owned by the assessee is of such nature as could be let out, the charge under Section 22 of the Act cannot be attracted. In our view, if the property is of such nature that it is inherently incapable of being let out and the assessee is the owner thereof, then the charge under Section 22 of the Act cannot arise. What is necessary for the charge under Section 22 of the Act to arise is that the property be inherently capable of being let out.
23. The word ‘building’ used in Section 22 of the IT Act should be capable of letting out as stated in Section 23(1 )(a) of the IT Act. The flat, in question, was not in a position of the above infirmity to be let out to any tenant. Therefore, the authorities below have not considered the case of the assessee in proper perspective. The AO rejected the claim of the assessee merely by mentioning that in Delhi, flats are handed over after obtaining completion certificate by the builder. This finding is based upon the presumption only and cannot take place of the proof. At the cost of repetition, we hold that the AO shall accept the claim of the assessee that property was not expected to be let out. Considering the above discussion and the case law referred to above, we set aside the orders of the authorities below. The addition is uncalled for in the matter. The same is accordingly deleted. As a result, the appeal of the assessee is partly allowed.
24. ITA No. 386/Asr/2002–(Assessee’s appeal–Asst. yr. 1999-2000):
This appeal is filed by the assessee on merits. There is no challenge to the jurisdiction of the AO. In this case., the AO estimated the ALV at Rs. 81,451 and the CIT(A) allowed the appeal of the assessee partly restricting the ALV of the property at Rs. 54,000. The facts and the circumstances are identical as are decided in ITA No. 491/Asr/2001. By following our earlier order, we set aside the orders of the authorities below, delete addition and allow the appeal of the assessee.
25. Considering the facts of the case, parties shall bear their own costs.
26. As a result, ITA No. 491/Asr/2001 is partly allowed and ITA No. 386/Asr/2002 is allowed.