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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER
The above appeal has been filed by the assessee against order passed by the Ld.Commissioner of Income-Tax(Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “ld.CIT(A)] dated 27/11/2024 under section 250 of the Income Tax Act, 1961 ("the Act" for short) dismissing the appeal of the assessee against the order of the Assessing Officer (AO) passed under section 143(3) of the Act pertaining to Assessment Year 2022-23.
The grounds raised by the assessee in the appeal read as under:
2 1. The learned AO as well as CIT(A) erred in facts and in law in treating the amount of Rs.17,08,908 being recovery towards Common Area maintenance Charges as rental income and taxing the same under the head income from house property.
2. The learned AO as well as CIT(A) erred in facts and in law in taxing the amount of Rs.17,08,908 towards Common Area Maintenance charges despite the fact that such recovery is not in nature of income and not liable to tax under provisions of the Act. It be so held now.
3. The learned AO as well as CIT(A) erred in facts and in law in not allowing the deduction of Rs.17,08,908 out of total amount paid of Rs.34,29,816 towards Common Area Maintenance charges from the recovery of amount of Rs.17,08,908 from tenant.
4. The learned Assessing Officer has erred in facts and in law initiating penalty under section 270A of the Act. It be so held now.
As is evident from the perusal of the grounds raised before us, the solitary issue in the present appeal relates to treating an amount of Rs.17,08,908/-as assessee’s income from house property as opposed to the assessee’s contention that they were merely recovery of common area maintenance charges (“CAMC” for short) paid by the assessee.
The facts of the case, as noted in the orders of the authorities below reveal that the AO had made an addition of Rs.17,08,908/- to the income returned by the assessee from house property on account of shortfall in the rental income shown as per the schedule TDS and the receipt from the house property shown in the income tax return. During assessment proceedings, the assessee had submitted that the said shortfall pertained to recovery of Common Area Maintenance Charges(“CAM”) from the lessee . The assessee had contended that it had received a total amount of Rs.1,54,72,908/- from M/s Sleek Electrics Pvt. Ltd. (“SEPL” for short) on which TDS under section 194- I has been deducted by the payer. The aforementioned amount was stated to be inclusive of “CAM” Charges of Rs.17,08,908/-,the
3 recovery of which was agreed between the assessee and “SEPL”. The assessee had clarified that during the impugned year, it had incurred total amount of Rs.34,29,816/- towards “CAM” charges, out of which 50% i.e. Rs.17,08,908/- had been recovered/reimbursed by “SEPL”, since the assessee had rented out 50% of total space to “SEPL”.That accordingly, the assessee had netted off the “CAM” charges paid against that recovered from SEPL and debited the balance amount of Rs.17,08,908/-in its books of accounts, which in turn had been disallowed while computing the income under the head “income from House Property”. However, the assesses contention did not find favour with the AO since he found that no evidence in the form of invoice raised by “SEPL” was furnished by the assessee relating to the “CAM” charges claimed by the assessee of Rs.34,29,816/-. Accordingly he made addition of Rs.17,08,908/- to the income of the assessee. The findings of the AO in this regard are contained at para 4.6(i) of his order as under:
4.6(i) Conclusion drawn:- On the first point of taxable receipts from house property shown in Schedule TDS2 is higher than the receipts from house property shown in ITR, as discussed in the foregoing paragraph, for the CAM charges claimed by the assessee of Rs.34,29,816/-, no evidence in the form of invoice raised by M/s.Sleek Electrical Pvt.Ltd. is found and therefore the assessee's claim cannot be accepted and therefore the shortfall in rental income shown of Rs.17,08,908/- is added to the total income of the assessee being undisclosed income of the assessee.
The ld.CIT(A) confirmed the order of the AO reiterating his finding that evidence in the form of invoice raised by the “SEPL” on “CAM” charges claimed by the assessee of Rs.34,29,816/- was not presented by the assessee. His findings in this regard are contained at page no.2 of his order as under:
Before us, the ld.counsel for the assessee contended that both the authorities below have completely failed to appreciate the facts of the case. She pointed out that the assessee’s explanation on difference in the rent income returned by the assessee and that reflected in the TDS return of Rs.17,08,908/- pertained to recovery of “CAM ” charges by the assessee from one of its tenants, M/s. “SEPL”, and against which the assessee had paid “CAM” charges of Rs.34,29,816/-, was rejected for the reason that the assessee had not furnished any evidence of payment of “CAM” charges of Rs.34,29,816/- to “SEPL”. She contended that the both the authorities had incorrectly appreciated the facts presented to them since the case of the assessee always was that CAM charges of Rs.34,29,816/- was paid by the assessee to the original owner of the property and from SEPL the assessee had recovered portion of the CAM charges , to the extent the property was sub leased by the assessee to it. She contended that it was never the case made out to the authorities below that CAM charges of Rs. 34,29,816/- was paid by the assessee to SEPL. And therefore the rejection of assesses explanation for the difference in rental income , on account of non
5 furnishing of invoice of SEPL for CAM charges paid of Rs.34, 29,816/- was grossly unjustified. She pointed out that before the ld.CIT(A) the assessee had contended that the AO had made addition on the basis of no evidence being furnished by the assessee of “CAM” charges paid without confronting or asking the assessee to furnish such evidence. She pointed out that before the ld.CIT(A) the assessee furnished complete evidences of the “CAMC” paid of Rs.34,29,816/-, as also, the “CAMC” recovered from the “SEPL” of Rs.17,08,908/-. She drew our attention to the documents filed at PB Page no.101 to 112 being the invoices raised on the assessee relating to the “CAMC” charges required to be paid. Drawing our attention to the same, she pointed out that the said invoices were raised by the Star Line Leasings Limited, which had charged an amount of Rs.3,37,265/- per month for “CAMC” for the space occupied by the assessee. Thereafter, she drew our attention to the invoice raised by the assessee on “SEPL” for recovery of “CAMC” (PB Page No.89 to 100). Drawing our attention to the same, she pointed out that per month an amount of Rs.1,42,409/- was recovered separately from the rental income collected from the “SEPL” as recovery of “CAMC” for the space occupied by the “SEPL”. The ld.counsel for the assessee, therefore, contended that the assessee having furnished all evidences, supporting its contention that difference in rental income in the TDS return of the assessee, and that in the ITR of the assessee was on account of the “CAMC” recovered by the assessee from the “SEPL”, which was reimbursed at 50% of the amount paid by the assessee towards “CAMC” and which was duly evidenced with documentary evidences, there was no case at all with the Revenue authorities for having rejected the assessee’s explanation
6 for lack of evidence. She, therefore, contended that the addition made to the income of Rs.17,08,908/- by accordingly deleted.
The ld.DR, though, vehemently supported the orders of the authorities below, was unable to controvert the factual contention of the assessee that the assessee’s explanation regarding the difference in the rental income furnished in the TDS return, and that disclosed in the ITR of the assessee was duly evidenced with documentary evidences.
Having heard contentions of both the sides, we find merit in the contentions of the ld.counsel for the assessee that the basis with the ld.CIT(A) for confirming the addition of Rs.17,08,908/-, on account of shortfall in rental income, as per the TDS return and that disclosed in the ITR of the assessee, is completely flawed.
As noted above, the addition was confirmed by the ld.CIT(A) rejecting assesses explanation of the shortfall pertaining to CAM charges recovered against that paid by the assessee, noting that the assessee had failed to furnish evidences of having paid “CAM” charges of Rs.34,29,816/- , against which Rs.17,08,908/- was recovered from the “SEPL”, and which amount was included in the TDS return. The ld.counsel for the assessee has fairly demonstrated before us that all documentary evidences with regard to the “CAM” charges paid by the assessee, and with regard to the “CAM” charges recovered from “SEPL” was furnished to the ld.CIT(A). Therefore, we hold, there was no reason to confirm the addition for non-furnishing of evidences relating to the explanation of the assessee.
7 9. Even otherwise, we agree with the Ld.Counsel that the basis for confirming the addition, on account of non-furnishing of evidence of payment of CAM charges to SEPL of Rs.34,29,816/- is completely flawed on facts since the assessee had not paid any amount to SEPL but on the contrary had recovered CAM charges from SEPL , evidences of which were duly filed. Moreover the amount of Rs. 34,29,816/- paid by the assessee towards CAM charges was paid to another entity, i.e Star Lines Leasing Limited, evidences with regard to which were also duly filed. Therefore, we hold, that the basis with the ld.CIT(A) for confirming the addition is without any merit.
We have considered the explanation of the assessee also on merit, and we have noted that the assessee to have explained the short fall in the rental income to be on account of “CAM” charges recovered by the assessee from its tenant, “SEPL”. The assesse had explained that this recovery of “CAM” charges of Rs.17,08,908/- was against the “CAM” charges paid by the assessee of Rs.34,29,816/-, and the assessee had netted off the amount recovered against the amount paid, and the balance had been debited to the profit & loss account of the assessee. The assessee had further explained that the balance amount debited to the P&L account had not been claimed as deduction against the income from house property, under which, the rental income was returned by the assessee.
The CIT(A) has not found any infirmity in the explanation of the assessee. And as noted above all documentary evidences with regard to the explanation of the assessee was also furnished to the ld.CIT(A). Therefore, it is evidently clear that the assessee had sufficiently explained the difference in the rental income as per the TDS certificate and that disclosed in the return income, duly supported with 8 evidences and there was no case for making any addition to the income of the assessee on this count. The addition, therefore, made of Rs.17,08,908/- is directed to be deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 3rd July, 2025 at Ahmedabad.