ITO, WARD-5(1), NEW DELHI, C R BUILDING V. MS CDR ESTATES PVT. LTD, CHATARPUR

ITA 70/DEL/2024

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314705 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: misc
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Keywords: Set aside; Search and seizure
• Section: 143(3); 132; 153A

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘B’, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER, AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA NO. 70/DEL/2024 A.YR. : 2012-13 ITO, WARD 5(1), ROOM NO. 379, 3RD FLOOR, C.R. BUILDING, I.P. ESTATES, NEW DELHI-2 Vs. M/S CDR ESTATES PVT LTD. 2/1, CHATTARPUR, MEHRAULLI, NEW DELHI – 110 030 (PAN: AABCC8347E) (Appellant) (Respondent) Date of hearing : 01.05.2025 Date of pronouncement : 07.05.2025 ORDER PER SHAMIM YAHYA: AM This appeal filed by the Revenue is directed against the order dated 23.11.2023 passed by the Ld. CIT(A)-31, New Delhi in relation to assessment year 2012-13 on the following grounds:- i) That on the facts and circumstances of the case, the order passed by the Ld. CIT(A) under section 250 of the Act dated 23.11.2023, is bad in law. ii) The Ld. CIT(A) grossly erred in deleting the addition of Rs. 3,94,00,000/- on account of notional rent u/s. 23(1)(a) of the Act. iii) The Ld. CIT(A) grossly erred in assessing income from the house property that was vacant during the whole previous year relevant Assessee by None Department by Shri Rajesh Kumar Dhanesta, Sr. DR 2 to AY 2012-13 in terms of section 23(1)(C) of the Act instead of section 23(1)(c) of the Act. 2. Brief facts of the case are that the assessee company filed its original return on 31.08.2013 for the year under consideration, declaring total loss of Rs. 21,80,246/-. The return of income was processed u/s. 143(1) of the Act on 29.08.2013. A search and seizure operation was conducted by the Investigation Wing of the Department on 11.09.2013 and 17.09.2013 on the AKN Group of cases. The assessee company was also covered u/s. 132 of the Act. Hence, the assessment in this case was completed u/s 153A r.w.s. 143(3) of the Act on 31.03.2016 and assessed at an income of Rs. NIL. Subsequently, on perusal and verification of case records, it was noted that the assessee company had not offered rental income for taxation for the AY 2012-13 as per profit and loss account of the assessee stating therein that property was vacant during the aforesaid year even while offering rental income of Rs. 3.94 crore from the same property from previous FY 2010-11 relevant to AY 2011-12. Moreover, the assessee had also disclosed rental income from the same property during the FY 2012-13 relevant to AY 2013-14. Hence, AO made the addition for notional rent of Rs. 3.94 crore. 3. Upon assessee’s appeal Ld. CIT(A) elaborately noted the facts of the case and gave relief to the assessee by observing as under:- “5.1.8 In this case the facts related to property are as under:- 3 1. The assessee was owning an immovable property namely 1st floor, Block-B, First India Place, Vatika Tower, MG Road, Gurgaon. 2. On 31.03.2010, a Lease Deed in respect of premises had been executed between the assessee and M/s Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd. for a period of 6 months commencing from 01.04.2010 up till 30.09.2010. 3. On 11.10.2010, a Lease Deed in respect of said premises had been executed once again between the same parties (viz. the assessee and M/s Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd.) for a period of 6 months commencing from 01.10.2010 up till 31.03.2011. 4. On 19.01.2011, the said tenant had issued a letter-cum- notice of termination of lease deed dt. 11.10.2010, to the assessee. On 24.02.2011, the said tenant had issued another letter to the assessee, making reference of their last letter dt. 19.01.2011 (through which they had provided notice of termination of lease deed dt. 11.10.2010) and stating that they will be vacating the leased premises at 11.00 AM on 28.02.2011. 5. At the same time the said tenant had requested the assessee to adjust Rs.32,83,813.50 on a/e of rent for the month of February 2011 and refund the remaining security deposited amount of Rs.6038521.50 (Rs.9322335.00 less Rs.3283813.50) to them simultaneous to handing over /taking over vacant physical possession of the premises on 28.02.2011. 6. Despite sincere efforts made by the assessee to lease out the said premises with a view to earn rental income, the said premises could not be leased out during FY 2011-12 and thus remained vacant through out the FY 2011-12. 4 7. After realizing that the prevailing fair rental value was quite lower than the rental charged by it previously from the said tenant, the assessee had to make up its mind to reduce its demand by around 35%. It may be worth mentioning here that after making thorough efforts, the assessee could succeed in finding a new tenant (M/s Experion Developers Pvt Ltd.) in the middle of next financial year i.e. FY 2012-13 on monthly rent of Rs.20,15,640/- only. 5.1.9 Therefore, the premises were let upto 28.02.2011 during AY 2011-12, remained vacant from 01.03.2011 to middle of AY 2013-14. During the period of vacancy, the appellant was on a look out for a tenant but due to inability to find the suitable tenant the premise remained vacant for entire FY 2011-12 i.e. AY 2012-13. 5.1.10 Therefore, in the present case, the premises were let during AY 2011-12, were vacant in AY 2012-13 and were again let some time in AY 2013-14. Therefore, in view of the inability of the appellant to find for a suitable tenant, the premises remained vacant during the year in question. As discussed above. ITAT Delhi in several cases have held that when property in question though remained on rent in the earlier years. but remained vacant during the entire year under assessment for whole or part year and as such no rent was received by the assessee for that period and consequently assessee has not offered any income to tax for that period of vacancy, the provisions of Section 23(1)(c) of the Act are applicable. Therefore, applying Section 23(I)(c) of Income Tax Act the Annual Value of the property would be treated as Nil and this will not result in any income by the House Property. In view of the legal position discussed above and keeping in mind the facts of the case the addition made by the Assessing Officer on account of notional 5 rent u/s 23(1)(a) of the Income Tax Act is not sustainable as the correct section to compute the Annual Value in this case would be Section 23(1)(c) and not 23(1)(a) of Income Tax Act. Accordingly, the addition of Rs. 3,94,00.000/- made by the Assessing Officer on account of notional rent u/s 23(1)(a) of Income Tax Act is deleted.” 4. Against the above order, Revenue has filed the appeal before us. 5. None appeared on behalf of the assessee, despite issue of notice for hearing, hence, we are proceeding exparte qua the assessee. 6. We have heard the Ld. DR and perused the records. Upon careful consideration, we note that Ld. CIT(A) has given a finding that during the impugned period the flat/house property was vacant and despite sincere efforts on the part of the assessee, the said property could not be let out. In these circumstances, Ld. CIT(A) has rightly observed that provisions of section 23(1)(c) would be applicable in the present case. The case law referred by the Ld. CIT(A) in his order is germane in this regard, hence, we are reproducing one of the case laws as cited by the Ld. CIT(A) in his order, as under:- “ In the case of Janak Kumari, TA T te Delhi IT AT held: 8. Crux of the provisions, contained under Sections 23(1)(a) & (c) of the. Act are; when the property remained on rent in the previous years and thereafter remained vacant in the next entire year under consideration and assessee made frantic efforts to let out the same, but failed, in that situation the actual rent received from it has to be considered as zero being less than the amount referred in Section 23(l)(a) of the Act. When Revenue has not brought on 6 record any evidence if property has not remained vacant for the entire year under consideration or was self-occupied in some other manner, the rental value as per Section 23(1)(c) of the Act has to be 'NIL. 9. Ld. CIT (Appeals) in deciding the issue in controversy relied upon the decision rendered by Hon'ble Andhra Pradesh High Court in the case of Vivek Jain Vs. ACIT 337 ITR 74 (A.P.) which is distinct on facts because property involved in said case was let out for some part of the assessment year, so the said decision is not applicable to the facts and circumstances of the case. 10. Identical issue has already been decided by the co-ordinate bench of the Tribunal in the case cited as Vikas KeshevGarud Vs. ITO (in ITA. No. 747/PN/2014) and Mrs. Neelam Sanjay Arya Vs. ITO (in IT. No. 3588/Ahd./2015) in favour of the assessee \"that when the property under consideration remained vacant for the whole year, the ALV of the same has to be assigned nil\" 11. In view of what has been discussed above, we are of the considered view that when property in question though remained on rent in the earlier years, but remained vacant during the entire year under assessment and as such no rent vas received by the assessee and consequently assessee has not offered any income to tax, the provisions contained under Section 23(1)(c) of the Act are applicable to the facts and circumstances of the case. We are further of the considered view that Id. CIT (Appeals) has erred in confirming the addition made by the Assessing Officer by applying the provisions contained under Section 23(l)(a) of the Act, hence impugned order is set aside and rental value of the property in question for the year under assessment ordered to be treated as 'NIL' and addition made by the Assessing Officer and confirmed by the CIT (Appeals) is ordered to be deleted. Resultantly, the appeal filed by the assessee is allowed.\" 7 6.1 In the background of the aforesaid discussions and respectfully following the above-stated precedent, we do not find any infirmity in order of the Ld. CIT(A). Accordingly, we uphold the same. 7. In the result, appeal filed by the revenue stands dismissed. Order pronounced on 07/05/2025. SD/- (SUDHIR PAREEK) SD/- (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER “SRBHATNAGAR” Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "