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Income Tax Appellate Tribunal, DELHI BENCHES “B” : DELHI
Before: SHRI SHAMIM YAHYA & MS ASTHA CHANDRA
Date of Hearing : 11.01.2023 Date of Pronouncement : 17.01.2023 ORDER PER SHAMIM YAHYA, A.M.: These are appeals filed by the assessee against the common order of the Ld. CIT(A)-31, New Delhi, dated 18.01.2017 and pertains to A.Y.s 2013-14 & 2014-15.
Since one issue is common in both the appeals, these appeals were consolidated and heard together and are being disposed of together for the sake of convenience.
2 ITA.Nos.2004 & 2005/Del./2017
The common ground is regarding confirmation of addition on account of notional rent.
As per the assessment orders, the ld, AO observed that in view of the provisions of section 23 of the Act, the deemed rental income of the property at Khasra No. 356-357, Sultanpur, M.G. Road, New Delhi, which remained vacant during the year was required to be taxed under the head ‘Income from House Property’. The ld. AO, therefore, confronted the assessee who stated that the property could not be let out due to poor access and for want of regularisation. The ld. AO rejected the said explanation holding that the properties on MG Road are always in demand and on the basis of the fact that the family members of the assessee had rented out even adjacent properties owned by them at the said location. He, however, allowed a grace period of a few months to the assessee. Accordingly, the ld. AO estimated the ALV of the property at Rs.90,00,000/- for the Assessment Year 2013-14 and Rs.1,01,00,000 for the Assessment Year 2014-15 based upon the rent of the adjacent property owned by the son of the assessee. Referring to the provisions of section 23(1)(c), ld. AO held that since the property was not let out at any time during the period, the vacancy allowance was not available to the assessee.
Upon the assessee’s appeal, the ld.CIT(A) rejected the contentions of the assessee that due to circumstances beyond the control, the property could not be put on rent. In this regard, the assessee also furnished an 3 ITA.Nos.2004 & 2005/Del./2017 affidavit which was dismissed as a self serving statement. The ld.CIT(A) proceeded to confirm the order of the AO.
6. Against this order, the assessee is in appeal before us.
7. The ld. Counsel of the assessee contended that on same facts and similar circumstances the ITAT, ‘D’ Bench in the case of Shri Kamal Kumar vs. ACIT, vide order dated 28.04.2022, in has considered the property located in similar locality and, after elaborate discussion, has found that there was reasonable cause for not putting the property on rent. Hence, the ld. Counsel pleaded that since on similar facts in similarly located property, ITAT has found the reasonable cause for not putting the property on rent, it was sufficient to permit the assessee to get away from the rigors of notional rent.
8. Per contra, the ld. DR relied upon the orders of the authorities below.
9. Upon careful consideration, we note that the submissions of the assessee’s counsel is that there was a sealing drive in the locality, so, it was difficult to find tenant and this was the reason the property could not be let out. It is the plea that identical facts were appreciated by the ITAT in the aforesaid order. We find that on similar facts, the ITAT in the aforesaid decision has adjudicated the issue as under:-
4 ITA.Nos.2004 & 2005/Del./2017 “5. Appreciating the matter on record and the contentions of the Ld. AR and ld. DR it can be observed that there is no dispute with regard to two material facts. The first being that the property was commercial in nature and second that the property remained vacant during the relevant financial year 2012-13. The foundation of the case of assessee is an affidavit dated 26.11.2016 which was submitted in the form of additional evidence before the Ld. First Appellate Authority and which after being admitted under Rule 46A of the Income Tax Rules, 1962 was considered by the Ld. First Appellate Authority and a remand report was called. The remand report is on page no. 16 of the paper book and also referred by the ld. First Appellate Authority in para no. 4.3 of its order. It is very apparent from the affidavit tendered in additional evidence that the only ground seeking exemption from Section 23(1)(c) of the Act was that the property was situated at MG Road and same was not regularized so the efforts made to put the property on rent had failed. There was no mention in the affidavit of any ongoing metro work being the cause of this failure to rent the property. However, in the remand report the assessing officer has mentioned of the fact that assessee failed to substantiate his claim with any document to prove that the premises was one of the premises which was impacted with metro work. Thus, there is an apparent factual error in considering the affidavit of assessee in right prospective.
Then next the Assessee had submitted before the Tax Authorities the copy of minutes of a meeting of a delegation of MG Road Building Owners Association with Hon’ble Lieutenant Governor of NCT, Delhi. The same at page no. 3 of the paper book shows that at serial no. 16. there is name of Mr. Ashok Choudhary who is father of present assessee Kamal Kumar. The minutes of meeting dated 28.11.2011 indicate that some of the properties were partly demolished in the area and the issue was that building owners claimed that as per the 1963 Resolution of the Corporation, it was not mandatory to have prior sanction of building plans for constructions done within Lal Dora. It is not disputed that the property of assessee is situated in the Lal Dora and as per affidavit it is part of Khasra no. 356 and 357 Sultanpur, M.G.Road, New Delhi. The father of assessee was also part of the delegation. The minutes dated 28.11.2011 establish that in regard to partly demolished buildings status qua was directed to be maintained. While with regard to the objections raised by building owners, which included the asseessee’s family, Hon’ble Lieutenant Governor observed that Building bye- laws were meant to be followed for all buildings in Delhi, including
5 ITA.Nos.2004 & 2005/Del./2017 those within Lal Doras and Village Abadi areas. It was also observed that there can be no compromise on structural and fire safety norms of any building in the Capital. 6.1 However, the ld. Tax Authorities failed to take into consideration, these minutes which substantially indicated that there was a genuine dispute in the locality where the property of assessee was situated with regard to failure of owners of the property to comply with municipal laws concerning structural and fire safety. The Lower Tax Authorities and specially the Ld. AO while submitting the remand report had fallen in error in observing that as the building of assessee was not one of those buildings which were referred in the minutes as partly demolished therefore, he was not to be benefited due to the minutes of the meeting. The bench is of considered opinion that meeting was not just about partially demolished buildings but the issue discussed and relevant in the meeting was the demolition drive and ceiling of the building by the Government for non compliance of structural and safety norms by the building owners in the said locality. The same deserved due consideration at the end of tax authorities as assessee had put a claim in the affidavit that due to demolition drive and sealing of the building by the Government in the locality he failed to get tenants. 6.2 The Ld. First Appellate Authority considered the affidavit of the assessee to be a self-serving documents and thus refused to rely upon it. The Bench is of considered opinion that an affidavit along with verification appended when stands corroborated with any piece of evidence, like in the present case the copies of minutes of meeting, then the same cannot be said to be a self- serving affidavit of a fact. As these facts are verifiable facts and not merely facts stated on belief. The Tax Authorities had their means to have gone further into the inquiry with regard to facts stated in the affidavit. Rather and strangely the Tax authorities observed that this on oath statement is not substantiated by evidence, so disbelieved the affidavit. At the same time, once the affidavit was admitted by way of additional evidence and the remand report on its factual aspects was called it cannot be brushed aside by calling it a selfserving document unless the same was factually controverted by evidence or on oath statement on the part of revenue. 6.3 Thus, the bench is of the considered opinion that there was sufficient material before the ld. Tax Authorities which established that there was a genuine dispute in the locality where the 6 ITA.Nos.2004 & 2005/Del./2017 commercial building of assessee was situated and that dispute was of such nature that no prudent person could be expected to have taken the disputed building on rent. The fact that this meeting was called on 28.11.2011 where a consensus was reached between the authorities and owners of building indicate that during the relevant financial year the property was actually not available in the hands of assessee to be let out. Admittedly it was let out in next FY.
On the basis of above discussion the Bench is of considered opinion that the reliance of the ld. Tax Authorities on judgment of Andhra Pradesh High Court in Vivek Jain vs. ACIT (supra) is not justified as that was a case where residential flat free of any sort of dispute was available in the hands of assessee to be let out. However, in the case in hand the property of the assessee cannot be said to be one actually available with him to be let out. The claim of assessee is not merely that in spite of his efforts he could not let out a property which was otherwise rentable. His claim rests on the fact that the property was actually not rentable for the reasons of issues with regard to demolition drive and sealing in the area making it not worthy of being taken on rent for any commercial purpose.
This Bench is of considered opinion that the legal disability created by the action of municipal authorities or under course of law, restricting the rights of the property holder to let out the property is a case where provision of Section 23(1)(c) would not be applicable.
In this context, the view is confirmed by looking back to Section 23(1)(c) of the Act, which provides that; “(c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable" 9.1 The word receivable refers to the payment not being realised. The use of word “receivable” in Section 23(1)(c) of the Act, indicates that there should be, not mere possibility of receiving the rent, but rent can become payable in all the probability, as the property is available for being given on rent. Then it can be considered to be “receivable”. Therefore, the correct interpretation is that in case the property is vacant then the 7 ITA.Nos.2004 & 2005/Del./2017
notional rent can be taxed if it can be considered as “receivable” as mentioned in Section 23(1)(a) of the Act. When there is some legal disability or physical impossibility in creating a tenancy and due to which the property is left vacant, in any part or whole of the year, then there is no possibility of rent being realized and so the rent cannot be said to be “receivable” and accordingly on basis of notional rent no tax liability can be created. The tax authorities below have thus fallen in error in taxing the assessee on basis of notional rent. Thus, the bench is inclined to decide the grounds raised in favour of the assessee.”
We find that facts in the present case before us are identical. It is not the case that there is difference in facts. Hence, respectfully following the precedent from ITAT, we set aside the orders of the authorities below and decide the issue in favour of the assessee.
For AY 2014-15, there is one more issue which reads as under:-
“4. On the facts and in the circumstances of the case and in law, the authorities below has erred in confirming addition of Rs.50,70,190/- on account of jewellery found in premises of the assesse which was duly explained. The action of the authorities below is wrong, illegal, misconceived, unjustified and bad at law therefore it should be quashed.”
During the course of search and seizure operations, certain jewellery were found to be belonging to the assessee. The assessee could not give the source of investment. The bills which were shown in support of the purchase did not mention the mode of payment. The AO proceeded to confirm the addition by observing as under:-
“5. During the search & seizure operation jewellary amounting Rs.4,36,16,381/- was found from the premise of the assessee out of which jewellary amounting to Rs.65,70,190/- has been owned up by the assessee and claimed as purchased prior to assessment
8 ITA.Nos.2004 & 2005/Del./2017 year 2008-09. In support of above, the assessee has filed bills prior to F.Y. 2006-07. On perusal of the above bills, it is seen that there is no mention of mode of payment made by the assessee. These bills were not produced during the search operation when asked for the same. Further it is also seen that assessee is a house wife and has not shown any income in preceding years. The assessee has also not filed her wealth tax return in any of the preceding years. Hence the claim of the assessee that all the jewellary was purchased prior to block period has no weight. However, keeping in view that the assessee belongs to a well to do family and is a married lady, jewellary valuing Rs. 15,00,000/- (i.e. approx value of 500 gram jewellary) is being considered as her stridhan/gift from family members. Remaining jewellary of Rs. 50,70,190/- (Rs. 65,17,190/- less Rs. 15,00,000/-) is being added to the total income of the assessee. Since, during the search action, unexplained investment in jewellary was found from the possession of the assessee, I am satisfied that the provisions of section 271AAB of the Act are clearly attracted in this case. Accordingly penalty proceedings u/s 271AAB of the Act are to be initiated on this issue separately.”
Upon assessee’s appeal the ld.CIT(A) confirmed the addition. The ld. CIT(A)’s order in this regard may be gainfully read as follows:-
“6.7 Before me, ld. AR argued that the AO has rejected the bills without any reason. This argument is not correct. The bills have been treated to be unreliable for the reasons cited above, i.e. mode of payment was not explained, sources of investment were not explained, the investment does not appear to be accounted for in the absence of any income earned by the appellant prior to the said investment which is of a significant amount. The fact that no wealth tax returns were filed in the respective years despite there being assessable wealth in those years also go against the appellant. The filing of wealth tax returns after the date of search only appears to be an attempt to give a colour of genuineness to the explanation submitted. In view of the above, I am of the considered opinion that the sources of the jewellery have remained to be explained and accordingly, the ld. AO has rightly taxed it in the Assessment Year 2014-15 Thus, the ground nos. 4 and 7 of the appeal for the Assessment Year 2014-15 are dismissed.”
9 ITA.Nos.2004 & 2005/Del./2017
Against the above order, the assessee is in appeal before us.
We have heard both the parties and perused the record. We find that on a query as to whether there is any evidence of the source of investment and the mode of payment, the ld. Counsel fairly accepted that these cannot be substantiated. In this view of the matter, in our considered opinion, the assessee has been granted reasonable relief by the AO. The addition sustained is appropriate, hence, we do not find any infirmity in the order of the Revenue authorities in this regard.
In the result, assessee’s appeal for AY 2013-14 is allowed and that for AY 2014-15 is partly allowed. Order pronounced in the open court on 17.01.2023.