2022 (9) TMI 597 - AT - Income Tax

Addition in lieu of rent received - rental income in the nature of interest on deposits received by the assessee from its tenant - notional interest on interest free deposits for the purpose of computing assessee s rental income - HELD THAT - It has come on record that this tribunals co-ordinate bench s order in assessee s case 2018 (12) TMI 1958 - ITAT PUNE itself has examined the very issue on merits while deciding the same against the department (supra). That being the case, we find no merit in the Revenue s vehement arguments seeking to revive the impugned addition representing the notional interest on interest free deposits for the purpose of computing assessee s rental income. CIT(A) findings under challenge stand upheld therefore.

Summary

Issues:
1. Reversal of assessment findings regarding rental income in the nature of interest on deposits received by the assessee.

Analysis:
The judgment pertains to a Revenue appeal for the assessment year 2010-11 against the CIT(A)-1, Nashik's order. The primary issue raised by the Revenue was the addition of rental income as interest on deposits received by the assessee. The lower appellate discussion highlighted the invocation of Section 263 of the Income Tax Act, emphasizing the need for the Commissioner to be satisfied of twin conditions: (i) the order of the Assessing Officer is erroneous, and (ii) it is prejudicial to the interests of the Revenue. The tribunal noted that the power of suo motu revision under Section 263(1) is supervisory in nature and can only be exercised under specific circumstances. It was observed that the initiation of proceedings based on audit objections was not valid, and the tribunal referred to relevant case laws to support the decision.

The tribunal further analyzed the merits of considering interest-free deposits for determining Annual Letting Value (ALV) and cited precedents where notional rent on security deposits was not taken into account for ALV calculation. It was noted that no addition had been made by the Assessing Officer in previous assessment orders for the same issue. The tribunal concluded that the Commissioner was not justified in resorting to revisionary powers under Section 263 of the Act, and the order was set aside in favor of the assessee. The tribunal upheld the CIT(A) findings, ultimately dismissing the Revenue's appeal.

In summary, the judgment delved into the interpretation of Section 263 of the Income Tax Act, the treatment of interest-free deposits for ALV determination, and the validity of initiating proceedings based on audit objections. The tribunal's decision was based on a thorough analysis of legal provisions, precedents, and the specific facts of the case, ultimately leading to the dismissal of the Revenue's appeal.

Judges:
- Shri S. S. Godara, Judicial Member
- Shri G. D. Padmahshali, Accountant Member