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Judgment
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the assessee against the order dated 19.09.2024 of the Ld. National Faceless Appeal Centre, Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in DIN &Order No : ITBA/NFAC/S/250/2024-25/1068854597(1)arising out of the order dated 29.01.2021 u/s 143(3) read with sections 143(3A) & 143(3B) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by National e-Assessment Centre, Delhi for AY: 2018-19.
The assessee’s return was filed declaring income of Rs.12,29,230/- and the case of assessee was taken up for scrutiny on the issue that the assessee has shown nil annual letting value despite having shown more than 1 house property in Schedule HP of the return. The assessee had shown 5 properties and only one property was shown as let out and another was shown as self occupied. Thereafter based on the replies of assesse, about sale of certain properties the ld. AO in regard to property situated at Raheja Mall, Sona Road, Gurgaon considered same as self occupiedand other being Omaxe Plaza, determined the ALV and made addition of Rs. 88,935 under the head deemed income from House Property and the same have been confirmed by the Ld. CIT(A) for which assessee’s is in appeal and following grounds have been raised:
“1.The learned CIT(A) has erred in confirming the addition of Rs. 88,935 as notional income from house property (shop in Omaxe Plaza, Gurgaon) under Section 23(1) of the Income Tax Act, 1961. This addition was made despite clear evidence that the property was vacant throughout the relevant assessment year due to lack of rental demand in the area.
2.The learned CIT(A) and the Assessing Officer failed to appropriately apply Section 23(1)(c), which specifies that when a property is let out and remains vacant during any part of the year, the annual lettable value should be adjusted to NIL if no rent is received. The Assessing Officer disregarded this provision by incorrectly assuming a notional income despite the property's vacancy and the area's oversupply of rental spaces.
3.The Assessing Officer's interpretation, which requires continuous tenancy during the year for Section 23(1)(c) to apply, is a misreading of the law. As established, the property was previously let out and remained vacant during the relevant year due to no willing tenants, satisfying the conditions under Section 23(1)(c) for NIL annual value.
4.The appellant reserves the right to amend, alter, add, or withdraw any grounds of appeal during the proceedings.
The contention of assesse is that if the property is let out in earlier years but lies vacant in the entire relevant year its annual value is to be taken as Nil, as even otherwise the assessee is entitled for vacation allowance and after reducing such vacation allowance there would be no income remained for this property. Reliance for this is placed on the decision in ACIT Versus Dr. PrabhaSanghi ITA no. 2217 order dated 18.09.2021 and Ms. Priyananki Singh Sood versus ACIT 6698/Del/2015 order dated 13/12/2018.
Ld. DR on the contrary relied the impugned orders.
Appreciating the material on record and the submissions we find that the sole issue before us is with respect the ALV of the disputed property as, no income was shown on such property. It is the claim of the assessee that as per section 23(1)(c) of the Act if the property was let out in preceding years and remained vacant during the previous year under appeal, no taxable income could be taken for such property. Factually, the AO at page 13 of the order observe that the assessee has shown rental income of 1,05,000/- in AY 2016-17 and after taking 10% increase in the said rent, the rental income of Rs. 1,15,500/- was computed for AY 2017-18 and likewise after increasing 10% thereof, ALV of 2018-19 is computed at Rs. 1,27,050/-. The AO reproduced the computation of income for AY 2016-17 however, it is not clear from the records whether any income was shown from this property in AY 2017-18. As with regard to the application of section 23(1)(c) of the Act, we find substance that if assessee has let out the property in previous years but due to conditions beyond his control the property remained vacant, then he is entitled to vacancy allowance. However, what is material is that there assessee established that in immediately preceding previous year the property was let out and there after in previous year failed to find a tenant. In the case in hand however, it is not clear from the records whether any income was shown from this property in AY 2017-18. Thus on principle we consider assessee needs to be benefited but subject to establishing offering rental income for AY 017-18. Thus we allow the appeal for statistical purposes and on basis of aforesaid observation, the issue is set aside to the files of ld. AO to call for necessary information and pass an order afresh.