2022 (5) TMI 37 - AT - Income Tax

Disallowing House property loss - AO disallowed the loss by holding that the assessee has not produced copy of rent agreement to prove genuineness of rental income - HELD THAT - On absence of rent agreement, the assessee has placed on record confirmation of the tenant, along-with PAN number and also bank statement reflecting receipt of rent through banking channels. The same has not been disputed by the Department and therefore, in our view the assessee has adequately substantiated that the premises have been given on rent. Municipal valuation/standard rent - Department has also not come up with any alternate figure of rent for which the property should have been let out. It has cast the upon the assessee to furnish such alternate figure albeit without disputing the fact that the assessee has received monthly rent of Rs. 30,000/- per month which has also been correctly reflected in the return of income. Section 23 of the Act deals with the method of the determination of the 'annual value' of a house property. Section 23(1)(a) defines the 'annual value' of a house property as 'the sum for which the property might reasonably be expected to let from year to year'. AO has not disputed the receipt of monthly rent of Rs. 30,000/- as having been received by the assessee. Further, the Ld. AO has not brought anything to on record to prove that the value of rent reflected by the assessee did not reflect the 'reasonable' rent for which the property could have been let out or that the value of rent has been undervalued by the assessee. AO has simply denied the entire deduction of interest paid against rental income without bringing on record anything to dispute any of the documents furnished on record by the assessee. - Decided in favour of assessee.

Summary

Issues:
Appeal against disallowance of house property loss.

Analysis:
The appeal was filed against the order of the ld. Commissioner of Income Tax (Appeals)-4, Vadodara concerning the disallowance of house property loss of Rs. 7,69,954 for the assessment year 2013-14. The assessee claimed the property was let out for a rent of Rs. 30,000 per month, with deductions for statutory expenses and housing loan interest, resulting in the loss claimed. However, the Assessing Officer disallowed the loss due to lack of evidence, including a rent agreement and details of property valuation. The CIT(A) upheld the disallowance citing lack of evidence. The assessee contended that the property was rented to a close relative, providing tenant confirmation, bank statements, and loan details. The Tribunal noted that the documents submitted were genuine and not disputed by the Department. The Department's contention of lack of rent agreement was countered by tenant confirmation and bank statements. The Tribunal found no evidence to dispute the rental income's correctness or valuation. Section 23 of the Act defines annual value based on expected rent. As the Department failed to challenge the rental amount or provide alternative valuation figures, the Tribunal allowed the appeal, finding the CIT(A) erred in dismissing the claim and disallowing the loss.

Judgment:
The appeal against the disallowance of house property loss was allowed by the Tribunal, overturning the CIT(A)'s decision. The Tribunal found the assessee's documentation sufficient to prove rental income and interest paid, while the Department failed to challenge the correctness of the rental amount or provide alternative valuation figures. The Tribunal concluded that the CIT(A) erred in dismissing the claim and disallowing the loss, thus ruling in favor of the assessee.