I.T.A. NO. 1888/LB OF 1987-88, DECIDED ON 25TH SEPTEMBER, 1994. VS I.T.A. NO. 1888/LB OF 1987-88, DECIDED ON 25TH SEPTEMBER, 1994.
1995 P T D (Trib.) 1168
[Income-tax Appellate Tribunal Pakistan]
Before Ch. Irshad Ahmad, Judicial Member and Ahsan Alam, Accountant Member
I.T.A. No. 1888/LB of 1987-88, decided on 25/09/1994.
Income Tax Ordinance (XXXI of 1979)---
----S.19----Income from house property---Annual letting value ---Verification-- Where the tenant verifies the amount of rent paid to the landlord, there should be a very strong indicator to disbelieve the tenant to discard the-rent agreed to between the landlord and tenant as a genuine annual rental value---Tenancy being a contract between the landlord and tenant the terms of the same be accepted by third party including the Income-tax Department.
CIT v. Siemen AG NTR 1991 SC 40 ref.
Javed Athar, D.R. for Appellant.
Ch. Abdul Ghafoor for Respondent.
Date of hearing: 22nd September, 1994.
ORDER
CH. IRSHAD AHMAD (JUDICIAL MEMBER).---The assessee, an individual, derives income from house property. In the return of her income filed under Self-Assessment Scheme for the year 1986-87, she declared net income at Rs.36,857 which had been arrived at as under:--
| Annual letting value of Firdous Market, Jamia Gali, Faisalabad. | Rs.61,600 |
| Less: | |
| 1. Insurance premium or interest | Rs.1,437.00 |
| 2. Property Tax | Rs.7,290.00 |
| 3. Collection Charges | Rs.3,696.00 |
| 4. 1/5th for repair | Rs.12,320.00 |
| Total | Rs.24,743.00 |
| Net income declared | Rs.36,857.00 |
The assessee's case was, however, selected for detailed scrutiny through random ballot as provided iii the scheme. The assessing officer deputed the Circle Inspector to verify if the rents declared by the assessee were correct. The Inspector contacted the tenants most of whom confirmed the rent declared by the assessee but the assessing officer doubted that the rent declared and admitted by the tenants was correct. The assessing officer was of the view that it was a hard fact that the locality in which the building is situated the shops are rented out for a consideration of Pagari or advance rent or the rents are very high. On the above assumption, the assessing officer discarded the declared version and proceeded to estimate the annual value of the property and comparing the rents received by the assessee with the rents of other shops situated in the locality estimated the annual letting value equal to Rs.1,68,000 and after allowing deductions for repairs, property tax and insurance made the assessment at net income of Rs.1,25,673.
On appeal by the assessee, A.A.C. reduced the annual letting value of various shops and also allowed collection charges.
The I.T.O. has objected to the order of the A.A.C. on the ground that the A.A.C. was not justified to reduce the rental income and has requested that the assessment made by him may be restored.
We have heard Mr. Javed Athar, D.R. in support of the appeal and Ch. Abdul Ghafoor, Advocate on behalf of the assessee.
The A.A.C. while reducing the annual letting value had noted that the facts of the case on the basis of which the assessing officer estimated the rent were distinguishable from the assessee's case in respect of locality, size of the property and year of construction. The A.A.C. also noted that the assessee was not confronted by the assessing officer on this issue. The A.A.C. further noted that since ITO has not been able to find out any discrepancy in respect of the declared version, therefore, the I.T.O. was not-justified to estimate rent at the figure he has done. In our view the, A.A.C.'s approach to the matter was unexceptionable. Where the tenants verify the amount of rent paid to the landlord, there should be a very strong indicator to disbelieve the tenant to discard the rent agreed to between the landlord and the tenant as a genuine annual rental value. Tenancy is a contract between the landlord and the tenant the terms of which should ordinarily be accepted by any third party including the Income Tax Department as held out by the Supreme Court of Pakistan in case C.I.T. v. Siemen AG NTR 1991 SC 40. There is no force in the appeal. The same is rejected.
M.B.A./103/T Appeal rejected.