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TMI Blog2017 (2) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The Id. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in making an addition of ₹ 13,02,000 by determining Annual Value u/s. 23(l)(a) of the Act. 2. The Id. CIT(A) has erred in not appreciating that since the house property was vacant during the year under consideration, the Annual Value is to be computed at nil u/s. 23(l)(c) of the Act. 3. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 4. The Ld. CIT(A) has erred in law and in facts of the case in confirming action of Ld. AO in levying interest u/s 234A/B/C/D of the Act. 5. The Ld. CTT(A) has erred in law and on the facts in confirming the action of ld. AO in initiating penalty u/s 271(l)(c) of the Act. 2. Briefly stated facts as culled out from the records are that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, therefore, section 23(1)(a) of the Act is applicable and the ALV has to be computed as the sum for which the property might reasonably be expected to let from year to year. Accordingly ALV of 16 shops was calculated by applying monthly rent of ₹ 1,50,000/- calculated Annual Lettable Value (ALV) at ₹ 18,60,000/- and after providing standard deduction @ 30% at ₹ 5,58,000/- the remaining amount of ₹ 13,02,000/- was added to the income of the assessee. Apart from this a sum of ₹ 6,761/- was offered as long term capital gain which was shown in the computation for which assessee agreed to pay tax. Accordingly, income was assessed at ₹ 14,01,772/- and business loss allowed to be carried forward at ₹ 9,13,177/-. Against the impugned addition of ₹ 13,02,000/- assessee went in appeal before the first appellate authority but could not succeed as the impugned amount was sustained by ld. CIT(A) by observing as follows :- 2.2 ! have carefully considered the contention of the appellant as well as the reasoning given by the A.O. in his assessment order. I have also perused various case laws relied upon by the appellant as well as by the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , on account of vacancy, the rent received or receivable on a property which has been let out is less than the sum referred to in clause (a). Prior to its amendment, even in such cases it was the sum referred to in clause (a) which was to be taken as the annual value of the property. [Para 10] In order to attract section 23(1 )(c ), the following requirements must be fulfilled .(i) the property, or any part thereof, must be let; and (ii) it should have been vacant during the whole or any part of the previous year; (Hi) owing to such vacancy the actual rent received or receivable by the owner in respect thereof should be less than the sum referred to in clause (a ). It is only if these three conditions are satisfied, clause (c) of section 23(1) would apply in which event the amount received or receivable, in terms of clause (c) of section 23(1), shall be deemed to be the annual value of the property. Clause (c) does not apply to situations where the property has either not been let out at all during the previous year or, even if let out, was not vacant during the whole or any part of the previous year. Under the Explanation to section 23(1), for the purposes of clause (b) or ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 23(1 )(c), the period for which a let out property may remain vacant cannot exceed the period for which the property has been let out. If the property has been let out for a part of the previous year, it can be vacant only for th part of the previous year for which the property was let out snd not beyond. For that part of the previous year during vjhich the property was not let out, but was vacant, clause (c) 'would not apply and it is only clause (a) which would be applicable, subject of course to sub-sections (2) and (3) of section 23. Such a construction does not lead to any hardship, inconvenience, injustice, absurdity or anomaly and, therefore, the rule of ordinary and natural meaning being followed cannot be departed from. Benefit under section 23(1 )(c) cannot be extended to a case where the property was not let out at all. [Para 15] There is no merit in the submission that the words property is let are used in clause (c) to take out those properties which are held by the owner for selfoccupation from the ambit of the said clause. Section 23(2)(a) takes out a selfoccupied residential house, or a part thereof from the ambit of section 23(1). - Likewise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be considered u/s.23(1)(a) of the Act as assessee has not let any part of the property and Assessing Officer opined that primary condition for s.23(1)(c) of the Act is that the property should have been let out during part or whole year and had been lying vacant during part of or whole year. Assessing Officer held that as the assessee had not let it out at all, s.23(1)(a) of the Act is applicable and ALV has to be computed as sum for which property might reasonably be expected to let from year to year, (para 3.3) Assessing Officer took rent declared by the assessee in AY 2010-11 to calculate the ALV at ₹ 13,02,000/- for 16 shops u/s.23(l)(a). Assessing Officer relied on Yatinder Kumar v ITO (2011) 133 ITD 237 (Pune Trib.) which pertains to s.17(3) of the Act and is irrelevant, (para 3.6 i)) AO relied upon Vivekjain v ACIT (2011) 14_Taxman 146(AP) dated 25/01/2011 to make the addition. Ld.CIT quoted Vivek Jain v ACIT (2011) 14 Taxman 146(AP) and confirmed the addition of the Assessing Officer. It is submitted that the assessee had recently for AY 2010-11 let the property to IC1CI Prudential Insurance Ltd. but due to economic slowdown, it was vacated. This shows the intention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders of lower authorities. 7. We have heard the rival contentions and perused the records placed before us and gone through the decision referred by the ld. AR. Solitary grievance in this appeal raised by assessee against the addition of ₹ 13,02,000/- made by ld. Assessing Officer and confirmed by ld. CIT(A) made towards calculated N.P. Annual lettable value u/s 23(1)(a) of the Act, of all the properties which remained vacant throughout the year. From going through the orders the lower authorities and the contentions raised by assessee and ld. AR we find that the assessee is owner of 16 shops bearing No.27 to 42 situated at Amrapali II, Complex, Ahmedabad which remained vacant through out the year and deduction of interest was claimed u/s 24 of the Act at ₹ 10,90,296/-. As per the assessee the impugned property was fetching rental income in the preceding F.Y.2009-10 as it was let out to ICICI Prudential Insurance Ltd. but the property got vacated and in the relevant previous year i.e. 2011-12 necessary efforts were made to let out the impugned shops but was unable to do so due to recession in the economy. On the basis of these reasons assessee claimed that under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... desh High Court in the case of Vivek Jain (.supra). The Assessee ardently contested the action of the AO before CIT'(A) and claimed that in view of S. 23(1 )(c). the annual letting value (ALV) ought lo have been determined at nil having regard to the fact the properly could not be let out and remained vacant for the whole \ear. In support of ibis proposition, decisions of the Tribunal in the case of Premsudha Exports (P) Ltd. vs. Asstt. CIT [2008] 110 ITD I58 |20U7| 17 SOT 293 (Mum.) and Shakiiniala Devi v. Dy. DIT [IT Appeal No. 1524/Bang/20I0. dated 20-12-2011] were relied upon before CIT(A). We notice from the order of the CIT(A) that the property was actually let out in the financial year 2006-07 to M/s. IUBI Home finance Ltd. at an actual rental value of Rs. I2.600/- per month i.e. Rs. I.5I.200/- per annum. During the year relevant lo assessment year 2009-10 in appeal, the assessee could not let out the property and thus remained vacant throughout the year. Therefore, the surrounding circumstances would suggest that the property was always available to be let out, however, could not be actually let out in reality. The intention lo let out the property is thus loud and clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in rebuttal to say that the properly has not remained vacant for the whole year or was selfoccupied in some manner. As noted above, the fact that the assessee had on the previous occasion in the preceding year rented the properly remains untraversed. We are not inclined to agree with the interpretation suggested by the Revenue that property should be actually let out in relevant to previous year. This interpretation does not appear consistent with the phraseology mandated in Section 23(l)(c) which includes a situation where the property can remain vacant during the whole of the relevant previous year. Hence. both situations namely 'properly is let' and remained vacant for the whole year cannot coexist during the financial year. We also note from a reading of another provision i.e. sub-section (3) of section 23 of the Act. where the legislatures in their wisdom have used the word 'house is actually let'. This also shows that the expression 'properly is 'let' cannot mean actual letting out of the property because had it been so, there was no need to use the word 'actually' in sub-section (3) of section 23 of the Act. Applying the purposive interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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