2012 (5) TMI 479 - AT - Income Tax

Income from house property - Vacancy allowance - Tenant stopped payment rent and stopped using the premises but did not handover the possession back to assessee owner - held that - Since the above flats were not vacant, during the period July 2005 to December 2005 and it is not the case of the assessee that these premises were let out on higher rent, the explanation of the assessee cannot be accepted that these flats were let out for the period 1.1.2006 to 31st March 2006 on decreased rent as suitable tenants were not available. Thus, there is no question of application of the provision of section 23(1)(c) of the Act as pleaded by the Ld. A.R. The A.O thus has rightly applied the provision of section 23(1)(a) of the Act for computing the rent for this period. - Decided against the assessee.

Summary

Issues:
1. Addition of income under the head 'income from house property'.
2. Treatment of confirmation letters as additional evidence during appellate proceedings.

Analysis:
1. Addition of income under the head 'income from house property':
The assessee contested the addition of Rs. 7,74,287 under the head 'income from house property', which was calculated based on notional income for the period from July 2005 to December 2005. The dispute arose from the non-receipt of rent for 4 flats rented to Patni Computer Systems Ltd. The Assessing Officer (AO) computed additional rent receivable despite the tenant's letter discontinuing use from July 2005. The contention was whether the property was vacant or not, affecting the application of sections 23(1)(a) and 23(1)(c) of the Income Tax Act. The Commissioner of Income-tax (Appeals) upheld the AO's decision, leading to the Tribunal dismissing the appeal. The Tribunal found the tenant still in possession till December 2005, rejecting the argument that the flats were vacant and upholding the application of section 23(1)(a) for rent calculation.

2. Treatment of confirmation letters as additional evidence:
The issue regarding the treatment of confirmation letters as additional evidence was raised during the appellate proceedings. The appellant argued that the letters merely confirmed existing facts and should not be considered as new evidence. However, the AO and CIT(A) rejected the letters, stating they had no significance as they were from associate concerns under the same management. The Tribunal concurred with the lower authorities, emphasizing that the letters did not alter the facts on record and, therefore, did not impact the decision. The rejection of the confirmation letters was upheld, and the appeal was dismissed on this ground as well.

In conclusion, the Tribunal upheld the AO's decision on both issues, emphasizing the non-vacancy of the properties and the insignificance of the confirmation letters as additional evidence. The judgment highlights the importance of factual possession in determining income from house property and the limited value of corroborative letters in appellate proceedings.