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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI B R BASKARAN & SHRI RAJ KUMAR CHAUHAN
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order of Learned Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] dated 15.03.2024 for A.Y. 2016-17 wherein the assessment order dated 04.01.2022 making addition of Rs. 40,57,200/- on account of deemed rental income was confirmed.
The brief facts of the case are that the assessee filed his return of Income for A.Y 2016-17 on 14.10.2016 declaring total income at Rs. 25,74,65,700/-. Subsequently, the assessee has filed revised return of income of Rs. 26,39,43,100/- on 31.03.2018. The case was selected for complete scrutiny and assessment was completed u/s 143(3) on 23.12.2018 determining the taxable income to Rs. 26,61,51,440/-. After getting the necessary approval from the competent authority, notice u/s 148 of the Act was issued on 27.03.2021. The reason for reopening is that the computation of income as per return, the assessee has offered the income of Rs. 70,27,733/- under the head income from house property. However as per details of investment in immovable property shows that the assessee has shown total 42 units and out of these, rent income derived from 15 units and no such income was shown from 12 units despite the same have not been let out during the A.Y. 2016-17. It is observed that as per Income Tax Act., notional rent is assumed based on the annual value of the property, hence following deemed rent on 12 units after considering the rent of Rs. 70,27,733/- received from 15 units are fair rent was determined as under:-
Total Rent No. of units Rent income per No. of vacant Deemed rent offered (Rs.) let out unit (Rs.) units 56,22,186/- 70,27,733/- 15 4,68,516/- 12
Notice u/s 142(1) of the Act was issued and duly served upon the assessee. In response, the assessee has filed the reply and after considering the reply, AO made addition of Rs. 40,57,200/- observing that the house property income to the tune of Rs. 40,57,200/- from the 12 units which was not offered by the assessee earlier and is added to the total income as income from house property as per the provisions of section 22 and 23 of the Act for the year under consideration. The observation of AO is reproduced as under:-
Determination of deemed rent from 12 units. Particulars Rent amount in Rs. Total rent income 57,96,000/- Less:- Standard deduction @ 30% 17,38,800/- Total house property income from 12 units From the above, the AO has computed the total income of the assessee as under:- Page | 3
Assessed income u/s 143(3) Rs. 26,61,51,440/- Add: Addition of house property income as Rs. 40,57,200/- discussed above Assessed total income (R/o) Rs. 27,02,08,640/-
Aggrieved by the order of AO, assessee preferred the appeal before the Ld. CIT(A). Before the Ld. CIT(A), assessee has assailed that the reopening of assessment is bad in law alleging that the assessment has been reopened merely on change of opinion and no new fact or material is available with the AO at the time of reopening. Secondly, the additions of Rs. 40,57,200/- as deemed rental income has been challenged on the ground that the assessee is eligible for deduction u/s 23(1)(c) of the Act.
Ld. CIT(A) was of the opinion that the annual let out value of the deemed rent at flats was not considered in terms of section 23(1)(c) of the Act and the reopening of assessment u/s 147 of the Act was on sound footing and does not need any interference. Regarding addition of Rs. 40,57,200/- as deemed income under the head income from house property, Ld. CIT(A) further observed that the claim of the assessee that the portion which was vacant throughout the year has been excluded from the purview of computation of income of house property under the provisions of section 23(1)(c) of the Act is not correct and is contrary to Page | 4 judgment of Hon'ble High Court of Andhra Pradesh in the case of Vivek Jain (supra) in which it has been held that in case the property is not let out at all during the previous year, no vacancy allowance can be given under section 23(1)(c). In other words, vacancy allowance can be given only when the property is let and vacant for part of the year. No contrary judgment of any other High court or the Hon'ble Apex Court has been brought to our notice. Accordingly, the claim of vacancy allowance in respect of 12 units which remained vacant for the year under consideration was rejected.
6. Aggrieved by the aforesaid order, the assessee preferred the appeal before us on the following grounds:-
The Ld. CIT(A), NFAC, has erred in confirming the addition of Rs. 40,57,200/- made by the Ld. AO, NFAC, being deemed rental income under the head "Income from house property".
2. The Ld. CIT(A) erred in not giving vacancy allowance u/s 23(1)(c) of the Act.
3. The Ld. CIT(A), NFAC, has erred in upholding the action of Ld. AO, NeAC, in reopening of the assessment. 4. The reassessment proceeding initiated u/s 147 of the Act and the notice u/s 148 of the Act dated 27.03.2021 are bad in law and without jurisdiction. 5. The Ld. AO has erred in levying interest u/s 234A, 234B and 234C of the Act.
6. The Ld. AO has erred in initiating penalty proceedings u/s 271(1)(c) of the Act.
7. The Appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing.
7. In summary of the above grounds, the following points of determination arises:- i) Whether the re-assessment proceedings initiated u/s 147 of the Act and the notice 148 of the Act dated 27.03.2021 are bad in law and without jurisdiction. ii) Whether the NFAC /Ld. CIT(A) has erred in confirming the addition of Rs. 40,57,200/- made by the AO being deemed rental income under the head income from house property or the appellant is entitled to the claim of deduction of vacancy allowance u/s 23(1)(c) of the Act for the period during which the 12 units were vacant?
We have heard Ld. AR on behalf of the assessee and Ld. DR on behalf of the department. With regard to summarized Point no. 1, it was argued by Ld. AR that the reopening of the assessment for taxing the deemed rent of vacant property is simply the change of opinion and no new tangible material was available with the AO because the assessment order was passed u/s 143(3) of the Act without any additions in respect of deemed rental income and the Ld. AR has brought to our notice at page no. 18 and 19 of the paper book. No additions were made under the assessment proceedings u/s 143(3) of the Act. The assessee case is that the said units were remained vacant as the same were not in best conditions and the clients were not ready to rent them as repairs and maintenance had to be done. Thus, despite best efforts, the properties could not be let and hence it is submitted that the deemed rent cannot be taxed in these circumstances. It was further argued that it is a case of change of opinion, as the reasons recorded were already gone into and verified during the course of original assessment proceeding and a specific query on deemed rent was raised, replied to and accepted by the AO in the original assessment proceeding. Therefore based on same facts, the assessment has been reopened which amounts to review of order, which is not permissible in law. Ld. AR has relied on the judgment of the Hon'ble Apex Court in case of CIT vs. Kelvinator of India Ltd. (320 ITR 561) wherein it was held that "reassessment has to be based on fulfilment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. Ld. AR has further relied on the judgment of Hon‟ble Apex Court in PCIT vs. Fibres and Fabrics International (P.) Ltd. reported in 288 Taxman 20 (SC) wherein it was held that there is no new tangible material to reopen assessment and existence of fresh tangible material is sine qua non to reopen assessment. Thus, Ld. AR submitted that the reopening of assessment u/s 148 of the Act is bad in law.
9. On the other hand, Ld. DR reiterated the same arguments which were raised before the lower authorities i.e. AO as well as Ld. CIT(A) and justified the reopening of assessment on the ground that in the computation of income as per return, from the details of investment, it is noticed that assessee has shown 42 units and out of these, rent income is shown derived from 15 units and no such income was shown from 12 units as the same have not been let out during the AY 2016-17. Accordingly, the notional rent is assumed based on the annual rented value of the property and the house property income of Rs. 40,57,200/- from 12 units was not offered by the assessee earlier, hence the reassessment was based on tangible material. It is further submitted that before the reopening of assessment, two conditions need to be satisfied, firstly; there should be income chargeable to tax and secondly; there is to be reason to belief that such income has escaped assessment. Hence, it is argued that reopening of assessment has been done on the same ground without availability of new tangible material /information and has to be considered as „mere change of opinion‟ which cannot be the reason for reopening of the assessment.
We have considered the rival submissions and perused the material placed on record. We find that Ld. CIT(A) has observed and decided this issue in para no. 6.1.4 to 6.1.17 and the same is extracted below:-
“6.1.4 The appellant in his written submission contended that to reopen an assessment once completed two conditions need to be satisfied i.e., (i) income chargeable to tax & (ii) reason to believe such income has escaped assessment. Regarding the second issue i.e., 'reason to believe such income has escaped assessment', the appellant has argued that the AO should have reason to believe that income has escaped assessment and he should not reopen the assessment on suspicion. In support of its contention, the appellant relied on certain case laws wherein the judicial authorities have insisted upon the existence of valid reasons to reopen the assessment proceedings. Further, the appellant has also quoted the following case laws in support of its contention:
(1) CIT Vs. Kelvinator of India Ltd., [2010] 187 Taxmann 312 (SC)
(0) Mrs. Parveen Bharucha Vs. DCIT, Circle 2, Pune [2012] 28 Taxmann.com 274 (Bom.)
(iii) CIT Vs. India Cements Ltd., [2020] 118 taxmann.com 99 (Madras)
(iv) State Bank of India Vs. ACIT [2020] 119 taxmann.com 322 (Bombay)
6.1.5 The submission and the case laws relied upon by the appellant in this regard are perused. It is noticed that the Assessing Officer has reopened the assessment as he has reason to believe that income chargeable to tax has escaped assessment. The reason to believe is on tangible material available from record wherein the issues were not considered while completing assessment u/s 143(3) of the IT Act R 6.1.6 In this regard, reliance is placed on in the case of Raymond Woollen Mills Ltd. v. Income-tax Officer in [1999] 236 ITR 34 (SC)/[1999] 152 CTR 418 (SC)[17-12-1997] wherein the Supreme Court has held as under:-
In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs.
6.1.7 Further, the Hon'ble Jurisdictional High Court of Bombay in the case of Export Credit Guarantee Corporation of India Ltd vs Addl.CIT [2013] 350 ITR 651 (Bombay) wherein it was held that where there is failure on part of Assessing Officer to apply his mind, during original assessment proceedings, to points on which assessment is sought to be reopened, it can be said that there is reason to believe that income has escaped assessment. In view of the above judicial precedents and the fact that the annual lettable value for the vacant flats was not considered during the assessment u/s 143(3) of the It Act, the reopening of assessment u/s 147 of the Act is on sound footing and does not need any interference.”
From the above observation as well as the facts and circumstances of the case, we find that what is important at the time of formation of belief by the AO regarding the escapement or under assessment of income is sufficiency of the reasons for reopening of the assessment and not its accuracy that cannot be questioned at that time. Our above view gets strength from the judgment of Hon'ble Supreme Court in the case of S. T Narayappa Vrs. CIT (1967) 63 ITR 219 (SC). Hence in our view, the order of reopening is valid and needs no interference. Accordingly, Point No. 1 is decided in negative and against the assessee. Hence this ground raised by the assessee is dismissed.
With regard to summarized point no. 2, Ld. CIT(A) has decided this issue in para no. 6.2.3 to 6.2.6 and the same is extracted below:- 6.2.4 The grounds and submissions of the appellant are considered carefully. The facts of the case show that the appellant has not let out 12 units and the annual value must be considered for calculating deemed rental income on these units. The appellant is not entitled for any vacancy allowance as provided in Section 23(1)(c) of the IT Act as the appellant has not let-out these units in any part of the year. In this regard, reliance is placed on the Hon'ble Jurisdictional ITAT in the case of Smt. Indra S. Jain vs. Income Tax Officer, Ward 9(3) (3), Mumbai [2012] 21 taxmann.com 471 (Mumbai) wherein it was held that if a property is not at all let out, no vacancy allowance can be given under section 23(1)(c) of the It Act. The relevant extract of the decision is reproduced as under: "5.... The dispute is regarding computation of annual value of property known as "Varsha" which was owned by the assessee. The only undisputed facts are that the property consisted of 5 floors of which mezzanine floor, first floor and second floor remained vacant throughout the year. The third and fourth floors were occupied by the partnership firm and company for carrying out business. The issue raised is as to whether annual value can be assessed in respect of portion which was vacant throughout the year and whether portion occupied by the company and the partnership firm could be excluded from the purview of computation of income while computing income from house property. The other related issue is method of determination of annual value. The Id. AR has argued that the portion which remained vacant throughout the year has to be excluded from the purview of computation of income of house property under the provisions of section 23(1)(c) However, the claim of the assessee is contrary to judgment of Hon'ble High Court of Andhra Pradesh in the case Vivek Jain(supra) in which it has been held that in case the property is not let out at all during the previous year, no vacancy allowance can be given under section 23(1)(c). In other words, vacancy allowance can be given only when the property is let and vacant for part of the year. No contrary judgment of any other High court or the Hon'ble Apex Court has been brought to our notice. The claim of vacancy allowance in respect of vacant portion is therefore, rejected."
6.2.5 In the instant case too, the appellant has not let-out the property during the financial year and thus the provision of Section 23(1)(c) cannot be applicable to the appellant. In view of the above reasons, the contention of the appellant that vacant allowance u/s 23(1)(c) should be provided cannot be accepted and the addition made by the Ld.AO is sustained.
6.2.6 Accordingly, all the issues raised by the appellant in Ground No. B are treated as dismissed.
It is evident from the above observation that Ld. CIT(A) has passed the order for making addition and did not give the benefit of section 23(1)(c) of the Act to the assessee on the ground that the units were let out during the previous year and the benefit could have been given only if it has been let out for part of the period and has remained vacant for the remaining part of the year under consideration.
During the arguments, Ld. AR has assailed the said findings on the ground that such interpretation of section 23(1)(c) is highly misconceived and submitted his written submission as extracted below:-
3. Ground No. 2. - the Ld. CIT(A) erred in not giving vacancy allowance u/s 23(1)(c) of the Act. a. The company owned 43 units of which 31 units were rented out for which the appellant received warehousing charges and rental/ license fee(excluding service tax). Majority of the vacant units were under repairs and renovation during the financial year, accordingly, the assessee even after putting considerable amounts of efforts could not find any tenant for the 12 units accordingly there was no rental income from these units during the year under consideration. These units were rented out from FY 2016-17. They were also rented out earlier. Details given at page 14 of the PB. b. This issue is squarely covered by the following orders: i. Mack Star Marketing Private Limited v. NFAC & 1812/MUM/2023 order dated 19.04.2024 ii. ITO vs. Metaoxide P. Ltd. 170 ITD 235 (Mum) iii. Sachin R. Tendulkar v. DCIT - 172 ITD 266 (Mumbai) iv. Asfa Technologies & BPO (P.) Ltd. vs. ITO - [2022] 143 taxmann.com 170 (Chennai - Trib.) v. Empire Capital (P.) Ltd. vs. ACIT - [2020] 114 taxmann.com 180 (Mumbai - Trib.) vi. Saif Ali Khan Pataudi v. ACIT [2018] 172 ITD 345 (Mumbai) c. CIT(A) has placed reliance in para 6.2.4 on the judgment in case of Indra Jain vs. ITO (21 taxmann.com 471). The said judgment is not applicable for the following reasons: i. Firstly, if there are both favourable and adverse views then, it is well settled that view favourable to assessee should be preferred. There are plethora of judgments in favour, as brought out earlier, which should be preferred. ii. Section 23(1)(c) itself visualizes a situation where property can be vacant for whole of part of the previous year. The requirement is that it should have been let out sometime during its lifetime. But in the year under consideration, it may be vacant for whole of the year, then benefit of section 23(1)(c) would be available. iii. In fact, this order simply relies upon the judgment of the Hon'ble Andhra Pradesh High Court in case of Vivek Jain vs. ACIT (202 Taxman 499). However, the said judgment of the High Court itself in para 14 states as under:
"14. The contention that, as clause (c) provides for an eventuality where a property can be vacant during the whole of the relevant previous year, both situations, i.e., "property is let" and "property is vacant for the whole of the relevant previous year" cannot co-exist does not merit acceptance. Clause (c) encompasses cases where a property is; let out for more than a year in which event alone would the question of if being vacant during the whole of the previous year arise. A property let out for two or more years can also be vacant for the whole of a previous year bringing it within the ambit of clause (c) of section 23(1) of the Act." d. Thus, the benefit of vacancy allowance u/s 23(1)(c) should be made available, in which event, the entire addition of notional rent has to be deleted.
Ld. AR relied on the judgment of Coordinate Bench of ITAT in the case of Purshotamdas Goenka vs. ACIT (ITA No. 4684/Mum/2019) for AY 2016-17 dated 13.10.2021. In the said case, the Coordinate Bench has relied its own judgment M/s. Metaoxide Pvt. Ltd. vs. ITO in A.Y. 2010-11, which covers the case in hand and the operative part therein is reproduced as under:
“8. We have heard rival submissions and perused material on record. Undisputedly, the flats in respect of which the Assessing Officer has determined the ALV under section 23(1)(a) remained vacant during the relevant previous year. It is evident, the Assessing Officer on the basis of information obtained under section 133(6) with regard to the rental income received in resepct of some other flats in the same area has determined the ALV in terms of section 23(1)(a) of the Act, which provides that the annual value of any property shall be deemed to be the same for which the property might reasonably be expected to let from year to year in other words, the market value of the rent received/receivable. However, the issue which is to be decided is, when the properties were admittedly remained vacant during the relevant previous year, whether the assessee can avail deduction under section 23(1)(c) of the Act of ALV determined under section 23(1)(a) of the Act. For the better clarity, sub-clause (c) of section 23(1) of the Act is reproduced below:-
Annual value how determined. 23. (1) (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 : Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation.— For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to Page | 16 such rules as may be made in this behalf, the amount of rent which the owner cannot realise.
A reading of the said provision reveals that where any part of the property is let out and was vacant during the whole or any part of the previous year and due to such vacancy rent received / receivable by the owner is less than the ALV determined under section 23(1 )(a) in that case the actual rent received or receivable is to be treated as the ALV. Therefore, the issue to be considered is, whether the provisions of section 23(1)(c) is applicable or not. In this regard, the submissions of the learned Departmental Representative is, since the properties in dispute were not let out earlier, the assessee will not be eligible to avail the benefit of section 23(l)(c) of the Act. However, we are M/s. Metaoxide Pvt. Ltd. unable to accept the aforesaid contention of the learned Departmental Representative. The expression—the property or any part of the property is let as used in clause (c) of section 23(1) does not mean that for availing the benefit of the said sub-clause the property must have been let out earlier. The Tribunal, Mumbai Bench, in Premsudha Exports Pvt. Ltd. (supra) has also held that the expression— property is let under clause (c) of section 23(1) does not mean that the property should have been actually let in the relevant previous year or during any time prior to the relevant previous year. But it will mean the property is intended to be let out. Similar view was also expressed in case of Dr. Prabha Singhi. Therefore, applying the ratio laid down in the decisions referred to above, we hold that the learned Commissioner (Appeals) was justified in directing the Assessing Officer to allow the deduction under section 23(1)(c) to the assessee. Thus, grounds raised in all these appeals are dismissed.
Ld. AR further relied the judgment of Hon‟ble Andhra Pradesh High Court in the case of Vivek Jain vs. ACIT (2011) 14 taxmann.com 146 (AP). He also relied the judgment of Coordinate Bench of ITAT in the case of Sony Realtors (Pvt.) Ltd. Vs. DCIT (2018) 97 taxmann.com 534 (Mum-Trib) wherein it was held as under:-
Per contra, the ld. Departmental representative (for short „D.R‟) relied on the orders of the lower authorities. It was submitted by the ld. D.R that as the property under consideration viz. Unit No. 401 & 425 of project Balaji Bhavan had remained vacant during whole of the year under consideration, thus, the lower authorities had rightly concluded that the provisions of Sec. 23(1)(c) would not be applicable and had rightly determined the „annual value‟ by pressing into service Sec. 23(1)(a) of the „Act‟.
We have heard the authorised representatives of both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the present appeal has been sought for adjudicating as to whether the „annual value‟ of the property owned by the assessee viz. Unit No. 401 & 425 of project Balaji Bhavan, had rightly been determined by the assessee by taking recourse to Sec. 23(1)(c) of the „Act‟ at Rs. Nil, or the same was liable to be determined u/s 23(1)(a) as held by the lower authorities. We find that it is an admitted fact that though the assessee had vide agreement dated April, 2007 let out the Unit No. 401 & 425 of project Balaji Bhavan to M/s Sterling Construction Pvt. Ltd. for a period of 36 months, and had offered the rental income received therefrom as its “Income from house property” in the preceding years, but after the expiry of the license period of 36 months the licensee had vacated the property and conveyed its intention of not getting the license agreement renewed any further. We further find from a perusal of the records before us that it is not the case of the department that after the property was vacated, the same thereafter had remained under the self occupation of the assessee. In light of the aforesaid factual position in the case of the present assessee, we find ourselves to be in agreement with the submissions of the Ld. A.R. that the issue raised before us is squarely covered by the orders of the coordinate benches of the Tribunal in the case of viz. (i). Vikas Keshav Garud Vs. ITO, Ward 1(2), Nashik (2016) 160 ITD 7 (Pune) (ii). ACIT, Circle-47(1), New Delhi Vs. Dr. Prabha Sanghi (2012) 139 ITD 504 (Del); (iii). Premsudha Exports (P) Ltd. Vs. ACIT, Central Circle 10, Mumbai (2008)
110 ITD 158 (Mum); and (iv). Informed Technologies India Ltd. Vs. DCIT3(2), Mumbai (2017) 162 ITD 153 (Mum). We find that in the case of Informed technologies India Ltd. (supra) the Tribunal after deliberating at length on the issue as regards the scope and gamut of Sec. 23(1)(c) of the Act, had observed as under : “7.1 We have considered the rival submissions of either side and perused the relevant material on record, including the orders of the authorities below. The issue under consideration for adjudication before us is as to whether the „ALV‟ of the property owned by the assessee in Darshan Aparments, Malabar Hills, Mumbai, had rightly been determined by the assessee by taking recourse to Sec. 23(1)(c) of the „Act‟, or the same was liable to be determined u/s 23(1)(a) as so held by the lower authorities. We find that it is matter of undisputed fact that the property of the assessee remained let out upto 04.12.2008, and thereafter the same remained vacant. We further find from the perusal of the records before us that it is not the case of the department that after the property was vacated as on 04.12.2008, the same thereafter remained under the self occupation of the assessee. That in light of the aforesaid factual position in the case of the present assessee, we find ourselves to be in agreement with the submissions of the Ld. A.R. that the issue raised before us for adjudication is squarely covered by the order of the coordinate bench of the Tribunal in the case of : Premsudha Exports (P) Ltd. Vs. ACIT (2008) 110 ITD 158 (Mum), wherein the Tribunal had therein held : “If the property is held by the owner for letting out and efforts were made to let it out , that property is covered by this clause and this requirement has to be satisfied in each year that the property was being held to let out but remained vacant for whole or part of the year. We feel that the words „property is let‟ are used in this clause to take out those properties from the ambit of the clause in which properties are held by the owner for selfoccupation i.e self occupied property (i.e SOP) because even income on account of SOP, excluding one such SOP of which annual value is to be adopted at nil, is also to be computed under this head as per Clause (a) of Section 23(1) if we see the combined reading of Sub-section (2) and (4) of Section 23. One thing is more important because we find that where the legislature have considered Page | 19 that actual letting out is required, they have used the words „house is actually let‟. This can be seen in Sub-section (3) of same Section 23. But in Clause (c) above, „actually let‟ words are not used and this also shows that meaning and interpretation of the words „property is let‟ cannot be „property actually let out‟. In our opinion, it talks of properties which are held to letting out having intention to let out in the relevant year coupled with efforts made for letting it out. If these conditions are satisfied, it has to be held that property is let and the same will fall within the purview of this clause.” We find ourselves to be in agreement with the aforesaid observations of the coordinate bench of the Tribunal, which analyzing the scope and gamut of Sec. 23(1)(c) of the „Act‟, had therein concluded that in light of the words „Property is let‟ used in clause (c) of Sec. 23(1) of the „Act‟, unlike the term „house is actually let‟ as stands gathered from a conjoint reading of sub-section (2) to (4) of Sec. 23, it can safely and inescapably be gathered that the conscious, purposive and intentional usage of the aforesaid term „Property is let‟ in Sec. 23(1)(c) of the „Act‟, cannot be substituted by the term „house is actually let‟ as used by the legislature in all its wisdom in sub-section (3) of Sec.
23. Thus it can safely be concluded that the requirement „house is actually let‟ during the year is not a prerequisite for bringing the case of an assessee within the sweep of Sec. 23(1)(c) of the „Act‟, as long as the property is let in the earlier period and is found vacant for the whole year under consideration, subject to the condition that such vacancy of the property is not for self occupation of the same by the assessee, who continues to hold the said property for the purpose of letting out. We are in agreement with the aforesaid observations of the coordinate bench that the usage of the term „Property is let‟ in Sec. 23(1)(c) had purposively been used to exclude those properties from the ambit of the clause which are held by the owner for self occupation purposes, because even though the „ALV‟ of one self occupied property so chosen by the assessee is taken at Nil, however the „ALV‟ of all the remaining self occupied properties are to be determined in terms of Sec. 23(1)(a) of the „Act‟. Thus to our understanding the term „Property is let‟ used in Sec. 23(1)(c) is solely with the intent to avoid misuse of determination of the Page | 20 „ALV‟ of self occupied properties by the assesses by taking recourse to Sec. 23(1)(c), however the same cannot be stretched beyond that and the „ALV‟ of a property which is let, but thereafter remains vacant for the whole year under consideration, though subject to the condition that the same is not put under self occupation of the assessee and is held for the purpose of letting out of the same, would continue to be determined u/s 23(1)(c) of the „Act‟. Thus in light of the aforesaid order of the coordinate bench of the Tribunal and the reasonings flowing there from, we are of the considered view that the assessee in the present case had rightly determined the „ALV‟ of the property at Rs. Nil by taking recourse to Sec. 23(1)(c) of the „Act‟. In this regard we are further of the view that the CIT(A) had misconceived the judgment of the Hon‟ble High Court of Andhra Pradesh in the case of Vikas Jain (supra), and on a perusal of the said judgment therein find that the Hon‟ble High Court in the concluding Para 14 & 15 had though concluded that the benefit of computing the „ALV‟ u/s 23(1)(c) could not be extended to a case where the property was not let out at all, would however duly encompass and take within its sweep cases where the property had remained let out for two or more years, but had remained vacant for the whole of the previous year. Thus we are of the view that now when in the case of the present assessee the property under consideration had remained let out upto 04.12.2008, and thereafter though could not be let out and had remained vacant during whole of the year under consideration, but also had never remained under the self occupation of the assessee, the computation of the „ALV‟ u/s 23(1)(c) of the „Act‟, had rightly been carried out in light of the aforesaid judgment of the Hon‟ble High Court. 7.2 That in light of our aforesaid observations the Ground of appeal No. 2 of the assessee is allowed and the addition of Rs. 8,40,000/- made by the A.O and as such sustained by the CIT(A) is herein vacated.” We find ourselves to be in agreement with the aforesaid observations of the coordinate bench of the Tribunal, which we find, had while analyzing the scope and gamut of Sec. 23(1)(c) of the „Act‟, concluded that in light of the words „Property is let‟ used in clause (c) of Sec. 23(1) of the „Act‟, unlike the term „house is actually let‟ as stands gathered Page | 21 from a conjoint reading of sub-section (2) to (4) of Sec. 23, it can safely and rather inescapably be gathered that the conscious, purposive and intentional usage of the aforesaid term „Property is let‟ in Sec. 23(1)(c) of the „Act‟, cannot be substituted by the term „house is actually let‟ as used by the legislature in all its wisdom in sub-section (3) of Sec.
Thus, it can safely be concluded that the requirement that the „house is actually let‟ during the year is not to be taken as a prerequisite for bringing the case of an assessee within the sweep of Sec. 23(1)(c) of the „Act‟, as long as the property is let in the earlier period and is found vacant for the whole year under consideration, subject to the condition that such vacancy of the property is not for self occupation of the same by the assessee who continues to hold the same for the purpose of letting out. We are in agreement with the aforesaid observations of the coordinate bench that the usage of the term „Property is let‟ in Sec. 23(1)(c) had purposively been used to exclude those properties from the ambit of the clause which are held by the owner for self occupation purposes, because even though the „annual value‟ of oneself occupied property so chosen by the assessee is taken at Nil, however the „annual value‟ of all the remaining self occupied properties are to be determined in terms of Sec. 23(1)(a) of the „Act‟. Thus, to our understanding, though the term „Property is let‟ used in Sec. 23(1)(c) is solely with the intent to avoid misuse of determination of the „annual value‟ of self occupied properties by the assesses by taking recourse to Sec. 23(1)(c), however, the same cannot be stretched beyond that and the „annual value‟ of a property which is let, but thereafter remains vacant for the whole year under consideration, though subject to the condition that the same is not put under self occupation of the assessee and is held for the purpose of letting out of the same, would continue to be determined u/s 23(1)(c) of the „Act‟. Thus, in light of the aforesaid order of the coordinate bench of the Tribunal and the reasonings flowing there from, we are of the considered view that the assessee in the present case had rightly determined the „annual value‟ of the property at Nil by taking recourse to Sec. 23(1)(c) of the „Act‟.
8. We may further observe that the CIT(A) had misconceived the judgment of the Hon‟ble High Court of Andhra Pradesh in the case of Vivek Jain Vs. ACIT (2011) 337 ITR 74 (AP). We find that in the said judgment the Hon‟ble High Court in the concluding Para 14 & 15 had observed that though the benefit of computing the „ALV‟ u/s 23(1)(c) could not be Page | 22 extended to a case where the property was not let out at all, however the same would duly encompass and take within its sweep cases where the property had remained let out for two or more years, but had remained vacant for the whole of the previous year. Thus, we are of the considered view that now when in the case of the present assessee the property under consideration had remained let out for a period of 36 months, and thereafter though could not be let out and had remained vacant during whole of the year under consideration, but had never remained under the self occupation of the assessee, thus, no infirmity emerges from the computation of the „annual value‟ of the said property under Sec. 23(1)(c) of the „Act‟ by the assessee.
9. That in light of our aforesaid observations the Ground of appeal
No. 1 and 2 of the assessee are allowed and the determination of the „annual value‟ of the property under consideration viz. Unit No. 401 & 425 of project Balaji Bhavan at Rs. 81,99,360/- by the A.O by taking recourse to Sec. 23(1)(a), which thereafter was sustained by the CIT(A), is vacated. The order of the CIT(A) is set aside in terms of our aforesaid observations.
10. The appeal of the assessee is allowed.
16. Respectfully following the above judicial pronouncements and relied by Ld. AR of the assessee, we are of the considered opinion that the 12 units were vacant for whole of the year under consideration as the same could not be let out due to non availability of tenants as the same needed repairs. The reasons given by lower authorities including Ld. CIT(A) for denying the benefit of section 23(1)(c) of the Act to the assessee are neither convincing not legally sustainable in the eyes of law as the same are contrary to the settled legal precedents referred above. For these reasons, the impugned order is not legally sustainable in the eyes of law Page | 23 and accordingly set aside. Thus, the assessee is entitled to the benefit of section 23(1)(c) of the Act. Therefore, we accordingly direct the AO to delete the additions made on account for denial of said benefit. Accordingly, the summarized point no. 2 is decided in affirmative in favour of the assessee and is hereby allowed in above terms.
In the result, appeal filed by the assessee is partly allowed in above terms.
Order pronounced in the open court on 05.03.2025.