RAJNI CHAUHAN,AGRA vs. DCIT CENTRE CIRCLE , AGRA

Aforesaid appeal by assessee for Assessment Year (AY) 2019-20 arises out of an order of learned Commissioner of Income Tax (Appeals), Kanpur Delhi [CIT(A)] dated 09-02-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 30-09- 2021. The sole grievance of the assessee is confirmation of addition of Rs.9.90 Lacs under the head ‘income from house property’. The registry has noted delay of 7 days which stand condoned. Having heard rival submissions and upon perusal of case records, the appeal is disposed- off as under.

In the assessment order, at para-5, Ld. AO noted that the assessee owned 4 shops and 4 house properties. However, the assessee did not reflected any income from house property and Ld. AO proceeded to add the notional income as arising there-from. The assessee stated that no property was let out during the year. The assessee also pleaded for vacancy allowance. However, Ld. AO computed Annual Letting Value (ALV) @7% of investment barring one shop which was treated as self- occupied property. After granting statutory deduction of 30%, the income of Rs.13.02 Lacs was added to the income of the assessee.

In the first appeal, the assessee placed reliance on the provisions of Sec. 23(1)(c) and also stated that some of the properties were used for the business of the assessee group. The Ld. AO did not make any enquiry to ascertain the expected rental value of these properties. The decision of Hon’ble High Court of Allahabad High Court in Smt. Radha Devi Dalmia (4 Taxmann.com 183) as relied upon by Ld. AO was misplaced since this decision was in respect of the provisions of Sec.23 as it stood prior to amendment as brought out by Finance Act, 1992 w.e.f. 01-04-1993. The assessee also brought on record computational errors. Partly accepting assessee’s submissions, Ld. CIT(A) reduced the impugned addition to Rs.9.90 Lacs. Aggrieved, the assessee is in further appeal before us.

It could be seen that Ld. AO has adopted 7% of investment as ALV of these properties. However, the said methodology is erroneous and contrary to the provisions of Sec. 23(1)(a) which provide that value of the property shall be deemed to be the sum for which the property might reasonably be expected to be let out from year to year. Thus, the stress is on expected rental value rather than on investment value. No such exercise has been carried out by Ld. AO. The Ld. AO has also not granted vacancy allowance to the assessee. Considering all these facts and with a view to settle the dispute, we restrict impugned addition to lump sum addition of Rs.2 Lacs (net) and delete the remaining addition as sustained in the impugned order. No other deduction would be allowed against estimated addition of Rs.2 Lacs. No other ground has been urged in the appeal.

The appeal stand partly allowed. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.