2022 (4) TMI 1016 - AT - Income Tax

Income from house property - Rental Income on property let out - rent received is after increment @ 15% and that the original rent as per agreement was reduced on account of surrender of area by the tenant. A copy of surrender lease agreement was filed - HELD THAT - Even then the learned AO/CIT(A) alleged that the assessee did not prove that the surrender of the leased area was agreed to by both the parties. This cannot be accepted. The assessee brought to the notice of the learned AO/CIT(A) that the surrendered area is still in its possession and could not be let out to any other party as the Mall could not get success. The veracity of this assertion could be ascertained but nothing has been done. The assessee has all along declared the rent receipt on the basis of 32634.41 sq. ft. area occupied by the tenant Reliance Mediaworks Ltd. which has been accepted by the predecessor learned AO in the assessment order framed under Section 143(3) for the assessment year 2012-13 The assessee categorically denied receipt of rent over and above what is reflected in its books of accounts. Nothing has been brought on record to contradict the version of the assessee either by the learned AO or by the learned CIT(A). We therefore hold that rental income which has not been received by the assessee cannot be brought to tax. Accordingly we delete the impugned addition made by the learned AO which has been confirmed by the learned CIT(A). - Decided in favour of assessee.

Summary

Issues:
1. Addition of rental income without considering facts of the case.
2. Taxation of rental income not received by the appellant.

Analysis:
1. The appellant, a company earning rental income, faced scrutiny by the Assessing Officer (AO) regarding the declared rental income for the assessment year 2013-14. The AO calculated the Annual Letting Value (ALV) higher than the declared amount, leading to an addition of ?8,82,331 to the appellant's income. The AO rejected the appellant's explanation based on a surrender lease agreement, insisting on the original lease agreement as evidence.

2. The appellant contended that a portion of the property had been surrendered by the tenant, reducing the actual rent received. The appellant provided evidence of surrender through a letter from the tenant and maintained consistent reporting of rental income in previous years. Despite this, the Commissioner of Income-Tax (Appeals) upheld the AO's decision, emphasizing the absence of a formal lease agreement for the surrendered area.

3. On appeal to the ITAT Delhi, the appellant reiterated the surrender of the property area by the tenant, which was accepted in previous assessments. The ITAT analyzed the evidence presented, including the letter of surrender and past assessments, to conclude that the rental income not received by the appellant should not be taxed. Citing legal precedents on consistency and res judicata, the ITAT ruled in favor of the appellant, deleting the addition of ?8,82,331 to the appellant's income.

4. The ITAT's decision highlighted the importance of evidence and consistency in tax assessments, ultimately providing relief to the appellant by allowing the appeal and deleting the disputed addition to the income. The judgment emphasized the significance of factual evidence, legal principles, and past assessments in determining the taxation of rental income, ensuring a fair and just resolution in the case.