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Facts
The assessee's original assessment for AY 2012-13, completed u/s 143(3), was reopened beyond four years u/s 147/148, alleging escapement of income due to non-disclosure of deemed rental income on three properties. This reopening was triggered by the assessee's own admission of similar income for AY 2014-15. An addition of Rs. 15,54,000/- was made as estimated rent for properties which the assessee claimed were non-habitable, leading to an appeal.
Held
The Tribunal upheld the validity of the reopening of assessment, finding that the AO had recorded reasons for believing income had escaped assessment and had followed the GKN Drive Shafts India Ltd. procedure for disposing of objections. However, the Tribunal deleted the addition of deemed rental income under Section 23, ruling that since the properties were not habitable in AY 2012-13, they could not be subjected to tax as deemed rental income.
Key Issues
1. Whether the reopening of assessment beyond four years was valid, specifically regarding the AO's application of mind and adherence to the GKN Drive Shafts procedure. 2. Whether deemed rental income could be added under Section 23 for properties that were proven to be non-habitable during the assessment year.
Sections Cited
Section 143(3), Section 147, Section 148, Section 23, Section 142(1), Section 151, Section 35(1)(i), Section 35(2)(iii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘G’: NEW DELHI
Before: S.RIFAUR RAHMAN & SHRI VIMAL KUMAR
(Assessment Year: 2012-13)
(Assessment Year: 2013-14) Shahnaz Husain, vs. JCIT Special Range-10, W-61, Greater Kailash-I, New Delhi New Delhi - 110048 (PAN : AABPH4011P) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Ashok Malik, Adv. REVENUE BY : Shri Munish Rajani, Sr. DR. Date of Hearing : 14.08.2024 Date of Order : 16.10.2024 O R D E R PER S.RIFAUR RAHMAN, AM:
1. 1. These appeals are filed by the assessee against the separate orders of ld. Commissioner of Income-tax Appeals/NFAC, Delhi (hereinafter referred to ‘Ld. CIT (A)’) both dated 29.02.2024 for AYs 2012-13 & 2013-14.
2. Since the issues are common and appeals are inter-connected, the same are being disposed off by this common order. We are taking ITA No.1965/Del/2024 for Assessment Year 2012-13 as lead case.
& 1966/Del/2024 3. Briefly stated facts in this care are, the assessee filed her return of income for AY 2012-13 on 26.11.2012 declaring income at Rs.10,20,47,940/-. The case was selected for scrutiny assessment and consequently assessment order was passed u/s 143(3) of the Income-tax Act, 1961 (for short ‘the Act’) on 12.08.2014 accepting return income filed by the assessee. The case was reopened on the ground that during the course of assessment proceedings for AY 2015-16, certain issues regarding taxation of deemed rental income came up. The assessee herself had offered Rs.22,20,000/- for taxation as additional income under the head “Income from House Property” during assessment proceedings for AY 2014-15 on 3 properties. AO found that deemed rental income was not offered for taxation in ROI in respect of 3 properties. Accordingly, the case was re-opened after recording the reason for reopening the assessment u/s 147 of the Act that assessee had deemed rental income amounting to Rs.22,20,000/- during the year. Therefore, notice u/s 148 of the Act dated 30.03.2019 was issued upon the assessee. In response to the notice u/s 148, the reasons recorded were also supplied to the assessee. In response, assessee filed her return of income. The assessee filed objections on the issue of reopening of assessment u/s 147 of the Act and the objections were disposed off by AO vide letter dated 24.12.2019. Subsequently, the re-assessment proceedings were & 1966/Del/2024 completed u/s 147 r.w.s. 143(3) of the Act on 28.12.2019 determining total income at Rs.10,36,01,940/- making an addition of Rs.15,54,000/- as estimated rent of house properties. 4. Aggrieved against the aforesaid order, assessee preferred an appeal before the ld. CIT (A). The ld. CIT(A) vide impugned order dated 29.02.2024 upheld the addition made by the AO. 5. Aggrieved with the aforesaid order, assessee has filed an appeal before us raising following grounds of appeal:- “1) The Ld. CIT(A) has erred in law in upholding action of the AO in reopening the completed assessment under section 143(3) of the Income Tax Act, 1961 beyond four years on the arbitrary ground. 2) The ld. CIT(A) has erred in upholding the order passed under section 147/143(3) of the I.T. Act as valid. Even though the AO has not followed the direction given by the Ld. Apex Court in the case of GKN Drive Shafts India Ltd. vs. ITO 259 ITR 19. 3) The ld. CIT(A) has grossly erred in law in upholding addition of Rs.15,54,000/- in the income of the assessee under section 23 of the I.T. Act.”
6. At the time of hearing, ld. AR for the assessee submitted oral submissions and also filed written submission which are reproduced below :-
1. “Ground no 1. In our letters dated 12-01-2021 and 17-11-2023 we had pointed out that wrong facts were written by AO while recording the reasons vide our letters dated 18-03-2020 and 11 -01 -2021 which are as follows: - PARA 3 of letter dated 11.01.2021 “The learned AO had recorded, 1) “that during the relevant year, the assessee had shown income from business of manufacturing Herbal/Ayurvedic/Beauty & 1966/Del/2024 products, dividend income short term and long term capital gain /losses from Mutual funds, which were partially against the facts, from enclosed statement of income you will observe that assessee had declared deeming rental income of Rs 18,94,200/- , from reason recorded your good self will observe it gives an impression that appellant has not declared any deeming rental income. We had also mentioned during course of proceeding u/s 133(6) of 2) the Income Tax Act 1961 vide our letter 19-03-2019 at para 1 that addition made in the assessment year 2015 -16 which was the basis for reopening the case had been reduced by the CIT(A), vide his order dated 27-09-2018 much before the date of issuing the notice under section 133(6) of the Income Tax Act, 1961. Inspite of that A.O. had taken the wrong figure of concealment in the REASON RECORDED and different amount of addition was made than the recorded figures while completing re assessment proceeding which clearly shows that AO was not sure which amount of income has escaped assessment at the time of recording reasons. The Learned CIT (A) while deciding on the ground no 1 in his order did not consider these arguments at all, he had only mentioned “I have carefully considered assessment order and relevant submission of the appellant, it is noticed that appellant herself admitted and offered expected rent of Rs 22,20,000/- on the properties discussed during the assessment year 2014-15. A.O. had found that appellant had not offered the same deemed rent in ROI filed for AY 2012-13 and thus failed to disclose fully and truly all material facts necessary for assessment. The appellant had also pointed out that learned Principal Commissioner of Income Tax, while giving permission as per section 151 of the Income Tax Act,1961 did not apply his mind because he had given the permission on wrong figures of concealment mentioned in the reasons, inspite of the fact that CIT (A) order was on records as it was passed before issuing of notice under section 133(6) and 148 of the Act and this fact was also brought to the notice of CIT(A) but he did not mention anything about these facts. GROUND NO 2 The Appellant’s counsel in his letter dated 16-11-2023 pointed out 1. that the A.O. had not followed the procedure laid down by the Apex Court, in the case of GKN Driveshafts Ltd 259ITR 19 as & 1966/Del/2024 cited above, the objection were filed on 30/04/2019 which were not decided in reasonable time and no speaking order was passed by A.O. even before passing any order on the objection raised notice under section 142(1) was issued and on receipt of this notice the request was again made to pass a speaking order, inspite of the request of a speaking order the AO passed the order without adjudicating on the objections raised by us and he did not issue any fresh notice u/s 142(1) after rejecting the objections raised by us, we again filed objection requesting him to pass a speaking order on our objections raised but he did not pass any order on that. He just passed the reassessment order u/s 147. The learned CIT (A) has mentioned all about this on page 9 &10 of his order but while giving the decision he did not adjudicate on any of our arguments. GROUND NO 3 The Appellant's Counsel in their letter dated 19-03-2019 had filed certain photographs to support her contention that these properties are not habitable, which A.O. himself admitted in his order but did not accept it without assigning any reason except stating that it did not obviate the application of section 22/23 of the Act. Neither he admitted the fact that Dhauj building is used for R & D purpose on which as per records deduction under section 35(1 )(i) has been allowed by the department itself in the assessment years of 1991 -92 &1992-93. The applicant had raised the same issue vide its letter at GROUND No 4 before CIT(A) & the copy of the order of DRP for the assessment year 2016-17 where such additions were deleted was also filed. The CIT(A) did not consider these arguments at all, neither he adjudicated on them, he had only stated that as the appellant had herself offered deeming rent in later years, so she should have shown the deeming rent this year also. FACTUAL AND LEGAL ARGUMENTS AGAINST THESE 2. ADDITIONS. GROUND NO 1, The Learned CIT(A) has erred in law in upholding action of the A.O. in reopening the completed Assessment under section 143(3) of the income Tax Act,1961 beyond four years on arbitrary grounds & 1966/Del/2024 It is an admitted fact that the original assessment for Assessment year 2012-13 was completed under section 143(3) of the Act by A.O. vide order dated 12-08- 2014.and notice under section 148 was issued on 30-03-2019 after taking approval from Principal Commissioner of Income Tax. As per section 148 of the Act, “Where the assessment u/s 143(3) has been made for the relevant Assessment year, no action shall be taken under this section after expiry of four years from the end of relevant assessment year, unless any income chargeable to income tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to make a return or in response to notice u/s 142(1) or section 148 or to disclose fully and truly all materiel facts necessary for his Assessment for that year”. Whereas in case of the Appellant she had been filing her returns regularly from the last more than forty years and had been filing balance sheets with complete details of the assets and liabilities, and for this year also balance sheet of all units including Investment unit was filed with details of Movable properties which were not used for the purpose of business or any other purpose and on that basis she had been showing Deeming rental income year after year. Deeming rent on the properties in question M-84A & M106 Greater Kailash I, New Delhi, which were sealed by the authorities was not shown since 2008-09, as these properties were not in habitable condition, after de-sealing in the year 2008 and the same was accepted as such in all the assessments which were completed under section 143(3) of the Income Tax Act,1961. As stated earlier during assessment proceedings for the assessment year 2012-13 specific query was raised by A.0. regarding deeming rental income to which the appellant reply was filed vide letter dated 22-02-2014 (Copy Enclosed) and after getting satisfied, no additions were made as deeming rental income in the hands of the assessee in that year also. Copies of Balance Sheet, Profit & Loss Accounts of Investment unit is also enclosed for your file reference.
The appellant had also filed the copy of P&L account and Balance Sheet of R&D unit of Dhauj for this year also which clearly showed that Dhauj property was and is being used for R&D purposes since 1991-92 and the A.O. had accepted the same as such on the basis of previous history which is on record that the cost of this property was allowed as deduction u/s35(2)(iii)(3) of the lncomeTaxAct,1961.
& 1966/Del/2024 From the above stated facts your Hon’ours will appreciate that there was not any failure on the part of the Appellant, she had declared all the facts which were duly accepted by the A.O. and these facts were not disputed by the A.O. as well as by CIT(A) in their orders. In our humble submission reopening of completed assessment where there is no failure on the part of the Appellant is not valid and requires to be quashed. We will also like to bring on the notice of Hon’ble Members that all the cases cited by A.O. in the order passed while rejecting the objection against reopening of case dated 24-12-2019 (Copy Enclosed). Raymond Woolen Mills LTD VS ITO 236ITR 34, KAPOOR 1. BROTHERS VS UNION OF INDIA 247ITR 324, (PATNA H.C.) PHOOL CHANDBAJRANG LALVS ITO 203ITR 456(SC-), PARAMOUNT COMMUNICATION (P) LTD. VS PCIT ACIT VS RAJSHJHAVERISTOCK BROKERS (P) LTD 29ITR 500 & CENTRAL PROVISIONCES MANGANESE ORE CO LTD VS ITO 191ITR 662 are not relevant to our case. The facts are altogether different in these cases most cases relates to reopening of case within 4 years, where it was held that “Whether the material would conclusively prove the escapement is not concern at that stage specially Apex court cases relates to escapement of income within four years. The present appeal before the HON’BLE Bench is whether reopening of the case is valid beyond four year, If there is no failure on the part of the appellant and secondly can A.O. changed his opinion in present circumstances after four years on the grounds that he did not apply his mind properly. In our case we strongly rely on the following JUDGEMENTS, because in our humble submission reopening of case beyond four years is different than reopening within four years. The cases beyond four years, can only be reopened if there is any 1. failure on part of the assessee in not disclosing its income whereas the applicant had declared everything and the same was examined and accepted so later on it cannot be reopened after four years, we get supports from the following judgements: - It has been held by Allahabad High Court in the case of KANPUR TEXEL(P) LTD VS DCIT 406 ITR 353, THAT IF THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE & 1966/Del/2024 ALL FACTS NECESSARY FOR ASSESSMENT THAN REOPENING IS BAD IN LAW, SIMILAR VIEW WAS TAKEN BY TERRITORIAL DELHI HIGH COURT IN THE FOLLOWING CASES. WET INTER TRADE (P)LTD VS ITO 308ITR 22 (a) DONALDSON INDIA FILTERS SYSTEM (P) LTD VS DCIT 371 (b) ITR 87 CIT VS MULTIPLEX TRADING INDUSTRIAL CO 378ITR 351. (c) Maruti Suzuki India ltd Vs DCIT 356 ITR 209 (d) GIRIRAJ STEEL LTD VS DCIT 402ITR 204 (e) DCIT VS SANTACK SOLUTION OPVT LTD 409ITR 301, (f) IHHHR HOSPITALITY PVT LTD VS ADD CIT 415 459 (g) REVOLUTIONS FOREVER MARKETING PVT LTD VS ITO 413 (h) ITR 400 (I) CIT VS KELVINATORS INDIA LTD 256ITR 1, DECISION OF D.H.C, CONFIRMED BY APEX COURT 320ITR 561 (J) NORTHEASTERN POWER CORPORATION LTD 416 ITR 205 In our humble submission the reopening of the appellant case where there is no failure on part of the assessee is invalid requires to be quashed. Because learned CIT (A) in-spite of all our submissions made by letters dated 12-01-2021 & 17-11-2023, he did not adjudicate why these decisions are not applicable in our case he did not pass a speaking order at all. The assumptions on jurisdiction u/s 147 must be on the existence of correct material before the authority, during the course of proceeding while giving reply to the observation of the AO that on the basis of completed assessment for 2015-16 which was based on the basis of additions made in the assessment year 2014-15 that income of Rs 19,61,400/- had escaped assessment as deeming income. It was explained by letters dated 19-03-2019 that addition made in assessment year 2015-16 has been reduced to same figure only of 2014-15, in spite of that in the reason recorded the A.O. had stated that income of Rs 17,09,400/- had escaped assessment as deeming rental income but he had made addition of Rs 15,54,000/- only which clearly indicates that there was no application of mind by A.O. So reopening of the case without proper application of mind is invalid, we get support from the following judgements; - & 1966/Del/2024 CIT VS ASHIN NEEDLESS PVT LTD 384 ITR 144 - where their 1. Lordship had held “where there is variance between the amount shown in the notice as income escaping assessment and addition made while passing the order, which means Assessing officer was not sure about the amount of income escaped as he did not apply his mind before issuing the notice u/s 148 of the Act, the reason recorded cannot be rectified so order passed is invalid. CIT VS INSECITICIDES (INDIA)LTD 357 ITR 330 - it was also 2. held in this case that when the basis of concealment of income is not correct the re assessment is invalid, in our case also the basis for concealment of income was assessment year 2015-16 where addition made was reduced by CIT(A) order which was passed before the date of reason recorded and this fact was brought to the notice of AO before his recording of reasons. Principal Commissioner of Income Tax vs N C CABLES LTD 391 3. ITR (DHC) - where it was held where there is no proper application of mind by PCIT reopening is bad in law. in our case the PCIT had given sanction on the concealment of Income of Rs 17,09,400/- when AO was informed that CIT(A) had reduced this addition to Rs 15,54,000/- and order was available in the records, so it clearly indicates no application of mind thus order passed requires to be declared invalid. Besides the above decisions following more decisions are also supports our arguments. CIT VS GOYANKA LINES AND CHEMICALS LTD 273 1. TAXMAN378(SC). UNITED ELECTRICAL COMPANY (P)LTD VS CIT AND 2. OTHERS 258 ITR317. PCIT VS RMG POLYVINYL(l)LTD 391 ITR 5 (DHC).
Where it was held reopening of case on wrong facts and figures makes the assessment NULITITY, in our case the wrong figure of escapement was taken in spite of the fact that correct figure was available with them. From the above stated facts and our arguments HON’BLE Members will accede to our request that the assessment made in our case requires to be declared in valid on the following grounds. 1 . There was no failure on the part of the appellant in declaring her income, as she had filed the complete details of the properties & 1966/Del/2024 which were not used for business purposes and had declared deeming rental income on habitable properties and during the course of assessment proceedings the AO has got himself satisfied on her submission and had completed the assessment on the basis of previous assessments which were all completed under section 143(3) of the Act,1961, so reopening of assessment beyond four year is in valid. The AO has not applied his mind while recording his reason for 2. reopening where he had taken the wrong figures of concealment of income in spite of the fact that during proceeding under section 133(6) correct figures were brought to his notice, on this ground itself reassessment is invalid. The learned PCIT did not apply his mind while giving sanction and 3. gave approval on wrong figures mechanically which is apparent from the evidences produced, on this ground also the notice issued requires to be declared null and void and reassessment done on invalid notice itself is invalid. GROUND NO 2. The Learned CIT(A) has erred in law in upholding the order passed U/S 147/143(3) of The Income Tax Act 1961 as valid even though the AO had not followed the direction given by Learned Apex Court in the case of GKN Drive Shafts India Ltd vs ITO 259 ITR 19. The learned Apex Court has laid down certain procedure to be followed once the notice issued under section 148 is challenged, the A. O. has to follow, whereas in our case the A.O. did not follow that, so order passed is required to be quashed as decided by D.H.C, in the case of PR CIT VS SAMCOR GLASS LTD. The condition laid was as follows, Once the notice is issued u/s 148 than assessee has to file the return, he can ask for the reason recorded for reopening of the case, the A.O. has to supply the reason and if the assessee raised the objection than within reasonable time. A, O, has to pass speaking order before proceeding with the re- assessment. In our case, Objections were filed on 30-04-2019 1. Notice was issued U/S 142(1) ON 10-12-2019 2. Again request was made to pass order on the objection raised on 3. 30-04-2019 vide letter date on 11-12-2019 Response to objection was made on 24-12-19. 4.
& 1966/Del/2024 Again objection was filed vide our letter dated 26/12/2019 to pass speaking order on all the objection raised by us in our letter dated on 30-04-2019 The learned A.O. did not pass any order on this but passed the 5. Order on 29-12- 2019. From the above stated facts your good self will observe that the procedure prescribed by Apex Court was not followed. As notice under section 142(1) was issued before passing the speaking order rejecting the objections which was against the procedure laid down by Apex court and as per the judgement of Delhi High Court as cited above the order passed is not valid on this ground itself and secondly as per decision of D.H.C. in the case of JAY BHARAT MARUTI LTD VSACIT 351 ITR 342 A.O, has to give speaking order on all the objections raised as per APEX COURT order and not following the APEX COURT order, order of assessment made cannot be upheld. We had submitted all the arguments before CIT(A) vide our submission made on 17-11- 2023 which he also admitted in his order on page 9 and 10, but he did not adjudicate on these in his decision which was made on page 15 and 16 where he had only stated that AO had followed the directions as given by APEX COURT totally ignoring the above stated facts. In our humble submission on this ground also following the order of DHC as Cited above order passed by AO should not be upheld. GROUND NO 3. The Learned CIT (A) has grossly erred in law in upholding addition of Rs 15,54,000/- in the income of the assessee under section 23 of the Income Tax Act,1961. It is admitted fact in law that every year is an independent year and decision of one year cannot be made applicable to another year. The appellant had admitted deeming rental income of these inhabitable properties on the basis of opinion given to her by her counsel at that time in the assessment year 2014-15, but in next year 2015-16 which she did not agree where again additions were made in the re assessment proceeding the appellant had stated that these properties were being used for business purposes till these were sealed in 2007 along with other properties however these properties were de sealed in 2008 November but other properties & 1966/Del/2024 were de sealed in F.Y. 2014-15 and these properties were not habitable till repairs were carried out in the financial year 2014 - 15 and from assessmentyear2016-17 the appellant had offered for taxation deeming rental income on these properties besides other properties. During the course of proceeding under section 133(6) some photos were filed to show that these properties were not habitable properties and cannot fetch any rent and also decision of Bombay tribunal in case of SAIF ALI KHAN VS ACIT 53 CCH 486 was cited along with decision of DELHI TRIBUNAL in the case of Sunita Sanjay Kedia Gurgaon vs ITO Ward 4(3), where it was held that no deeming rental income arises in case of not suitable tenant how non habitable property can fetch any rent, It is also an admitted fact that property at Dhauj was being used sincec1991-92 and 1992-93 for R&D purpose and necessary evidences were also filed that deduction of the total cost was given as per section 35 of the Act. We had also filed the judgement of DRP for the assessment year 2016-17 where such addition was deleted, but in spite of this the addition made was & upheld by CIT(A) also. In our humble submission total additions made is required to be deleted, if your Honour does not agree with us with regards to properties in Delhi than deduction with regards to Dhauj property amounting to Rs 2,40,000 minus 72000 =1,68,000/- should be done as per DRP order. We are sure goodself will find our submission in order.”
Considered the rival submissions and material placed on record. We observed that Assessing Officer has reopened the present assessment year under consideration under section 147 of the Act, no doubt, after four years. Assessing Officer has to record as per Second Proviso to Section 147 that reasons of the failure on the part of the assessee to make a return u/s 139 or 142 (1) or 138 or to disclose fully and truly all material facts necessary for assessment of his income. As per the facts brought on record, we observed that assessee has declared deemed rental income in & 1966/Del/2024 AY 2014-15, assessee herself stated in the submission that this was disclosed on the advice of her counsel. Based on the above disclosure, the Assessing Officer has assessed the income for AY 2015-16 by making the addition on the basis of disclosure made in AY 2014-15 with respect to deemed rental income. The Assessing Officer citing above reasons has reopened the current assessment year. Prima facie, we observed that Assessing Officer has proceeded to treat the undisclosed deemed rental income in the current assessment year as reasons for failure on the part of the assessee. After analysing the facts on record, we observed that no doubt on merit, assessee has a very good case, however we have to see the prevailing situation at the time of reopening of the assessment. Prima facie, the material available with the Assessing Officer made him to believe that assessee has not disclosed fully and truly all the material facts to reopen the assessment. Therefore, at the time of reopening of the assessment, what is relevant is prima facie reasons available before the Assessing Officer. Therefore, we do not see any reason to disturb the findings of the ld. CIT (A) with regard to reopening of the assessment.
With regard to ground no.1, we observed that assessee has filed objections for reopening of the assessment before the Assessing Officer and Assessing Officer has disposed off the objections on 24.12.2019.
& 1966/Del/2024 However, assessee filed further objections vide letter dated 26.12.2019. As far as procedure laid down by the Hon’ble Apex Court in GKN Drive Shafts India Ltd. (supra), the Assessing Officer has to dispose off the objections raised by the assessee. In our view, it may or may not satisfy the assessee fully. In this case, the Assessing Officer has disposed off the objections vide letter dated 24.12.2019. Therefore, the Assessing Officer has followed the procedure laid down in GKN Drive Shafts India Ltd. (supra) decision. Hence, we do not see any reason to disturb the findings of ld. CIT(A).
With regard to ground no.3, we observed from the record that assessee has a property at Dhauj where assessee established and carried on R&D unit for its business purposes since 1991-92. As per the record, assessee has claimed deduction u/s 35(2)(iii) of the Act. The abovesaid property was sealed by DMC in the year 2007 along with other properties. However, these properties were de-sealed in November 2008. As per the information submitted before us along with various photographs of the properties which show that the abovesaid property was not habitable and the same was repaired and made habitable in the year 2016-17. The issue is whether deemed rental income should be determined for the inhabitable properties for the purpose of tax or not. The similar issue was raised by the assessee in AY 2016-17 before DRP and ld. DRP held as under :-
& 1966/Del/2024 “8.1 The DRP in AY 2016-17 had decided as follows:- "8.1 We have perused the draft assessment order and considered the submission of the assessee. In view of the fact that deduction under section 35(1)(i) of the Act has been allowed on the same property, it cannot be held that the same property was not used for the business purposes in the relevant A Y. It is also submitted by the assessee that it did not offer any expected rent income with respect to the impugned property for A Y 2014-15. Even if the assessee has offered expected income on any property in any previous assessment year it has to be seen that the status of the same property in the relevant assessment year to disallow certain expenses are to make any notional income on the ground that the same was not put to use for business purposes. In view of the above discussion the proposed addition on account of notional rent is directed to be deleted. Ground of objection is allowed."
As discussed above, during the current assessment year, the Assessing Officer has made the addition of deemed rental income without bringing on record whether assets under consideration is habitable or not. From the facts available on record, we observed that the relevant property was repaired and made habitable only in the subsequent assessment year. However, as per the decision of ld. DRP, the property was not habitable in AY 2016-17 and merely because assessee has disclosed deemed rental income in AY 2014-15, it does not prove or show that the relevant property was habitable in AY 2012-13. Therefore, an inhabitable property cannot be brought to tax applying deemed rental income. Accordingly, the addition made by the Assessing Officer is directed to be deleted and ground no.3 is allowed.
& 1966/Del/2024 11. In the result, the appeal filed by the assessee for AY 2012-13 is partly allowed.
Since, the facts in other AY i.e. 2013-14 are exactly similar, our above findings in AY 2012-13 are applicable mutatis mutandis in AY 2013-14. Accordingly, the appeal being ITA No. 1966/Del/2024 for AY 2013-14 filed by the assessee is partly allowed.
To sum up : both the appeals filed by the assessee are partly allowed. Order pronounced in the open court on this 16th day of October, 2024.
Sd/- sd/- (VIMAL KUMAR) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 16.10.2024 TS