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TMI Blog2024 (7) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year relevant to assessment year concerned as held by the Ld. AO, still annual value of the property will have to be determined as per the provisions of section 23(1)(c) and the addition made is not justified - AR submitted that the contention of the Ld. AO is that if property is not let out for any part of the current year i.e. if was vacant for the whole year, then provisions of section 23(1)(c) are not attracted. AR argued that this interpretation placed by the Ld. AO is directly contradictory to the clear wordings of section 23(1)(c). If the legislature intended so, it would never have used the words was vacant during the whole or any part of the previous year in section 23(1)(c). Thus, the interpretation adopted by the Ld. AO, shall render the word whole used in section 23(1)(c) as otiose or redundant and hence, such an interpretation which goes against the plain language of the provision may be avoided. We find merit and substance in the above argument of the Ld. AR. Clause (c) of section 23(1) 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the current year and the said fact was substantiated by documentary evidences furnished by the appellant and therefore, the provisions of section 23(1)(c) were applicable on facts of the present case and hence, the addition made by A.O. by applying the provisions of section 23(1)(a) was not justified in law. 4. Without prejudice, if ground no. 2 or 3 is not allowed, then the assessee submits that the assessee always intended to let out the impugned property on rent, however, the said property could not be let out in spite of efforts undertaken by the assessee and therefore, the provisions of section 23(1)(c) were attracted in the present case and hence, the addition made by the A.O. u/s 23(1)(a) may be deleted. 5. Without prejudice to the above grounds, if at all, it is held that the provisions of section 23(1)(a) are attracted to the instant case, then the assessee submits that the A.O. may please be directed to adopt the municipal ratable value of the property as annual value u/s 23(1)(a) and he addition made by A.O. by estimating market value of rent may be deleted. 6. The assessee submits that while computing the annual value u/s 23(1), the A.O. may please be directed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2016-17 and in para 4.1 in AY 2017-18 the Ld. AO stated that in all the earlier years the assessee has given the Mall on rent only after making registered rent agreement with tenant having lock in period. The assessee had also taken advance rent and deposit from the tenants. Now no deposit or advance is taken. No copy of agreement with the tenant is furnished. Similarly, no intimation to Police authority regarding tenant was furnished. The rent is received in cash. The cash rental was said to have been received in FY 2016-17 and accounted as income in FY 2016-17 (AY 2017-18) as income of prior period. The Ld. AO therefore held that the confirmation furnished by the tenant is not reliable. 3.3 The Ld. AO further observed that 12000 Sq. Ft. was let out only for Rs. 60,000/-. Earlier deposit shows that the Mall was given on much higher rent. According to the Ld. AO the certificate from Manager of Dev Arcade Pvt. Ltd. is also not reliable as the rent is received in cash and not accounted on regular basis. He, therefore declined to entertain the assessee's claim that the Mall was given on rent as in his view the assessee could not establish that the property was let out during FY 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty was vacant for part of the year. Accordingly it was claimed that the annual value of the said property has to be worked out as per the provisions of the section 23(1)(c) of the Act and thus, annual value for the period for which the property was vacant ought to be considered at Rs. Nil. 4.1 The assessee further submitted that the entire premise of the Ld. AO in making the impugned addition is that the provisions of section 23(1)(c) are not attracted since the property was not let out during any part of the current year. None-the-less the Ld. AO has accepted that the said property was let out by the assessee to three different tenants during the FYs 2008- 09 to 2014-15. Paras 3.2 and 3.4 in AY 2016-17 and paras 4.1, 4.2, 4.6 and 4.7 in AY 2017-18 of assessment order referred. It was clarified that the impugned property was let out for a period of 15 days each during the AYs 2016-17 and 2017-18 which claim is substantiated by furnishing documentary evidence. However, the assessee submitted that assuming, though not admitting that the property was not let out during any part of the current year(s), still, admittedly the property was let out for a substantial period in earlier yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for a substantial period during this year. This claim was substantiated by filing copies of Newspaper Advertisement published by the assessee for letting out the commercial premises. In view of the above facts, it was claimed that the ALV of the property had to be considered as Rs. Nil as per the provisions of section 23(1)(c) of the Act. However, for the reasons recorded, the Ld. AO held that the assessee was unable to establish that he had actually rented the property during 16.03.2016 to 15.04.2016 and concluded that the property was lying vacant for the entire year and it was not let out during any part of the current year. Thereafter, the Ld. AO held that the mere intention to lease out the property would not be sufficient to avail the benefit of section 23(1)(c) of the Act. Relying on the decision in the case of Vivek Jain (supra) the Ld. AO held that if the property is vacant for the entire year, then the annual value has to be determined as per the deeming provisions of section 23(1)(a) and not as per the provisions of section 23(1)(c) as claimed by the assessee. 6.1 The Ld. AR reiterated the same arguments which were advanced before the Ld. CIT(A). 6.2 The Ld. AR subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 2000 Sq. Ft. to Quick Carrier @ 13.40/- per Sq. Meter in FY 2014-15. 9.1 Before the Ld. AO during the assessment proceedings, the assessee submitted that out of property admeasuring 22622 Sq. Ft. he had given on rent property admeasuring 12000 Sq. Ft. for the period from 16.03.2016 to 15.04.2016 on monthly rent of Rs. 60,000/- to Mr. Himansu B Dave for the purpose of exhibition. The said income has been recorded by the assessee in FY 2016-17 as prior period income of Rs. 30,000/- for the period from 16.03.2016 to 31.03.2016 and rental income of Rs. 30,000/- from 01.04.2016 to 15.04.2016. Copies of ledger extract of rent received during the year along with copy of municipal taxes paid were produced. In para 4 of the assessment order, the Ld. AO admitted that the assessee has submitted confirmation of the tenant and Mall management confirming the fact that the said premises was leased out during 16.03.2016 to 15.04.2016. 9.2 The submission of the assessee was not acceptable to the Ld. AO for the reasons - (i) that in all the earlier years property was given on rent by entering into registered agreement having lock in period and by accepting deposit. However, no deposit or advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was let out in both the AYs presently involved. 10. Now, let us come to the legal provision. Section 23(1)(c) of the Act reads as under : "23. Annual Value how determined - (1) For the purposes of section 22, the annual value of any property shall be deemed to be- (c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable: shall be the annual value of the property." 10.1 A bare reading of the above provision would reveal that in order to attract section 23(1)(c) of the Act, the following conditions precedent must be satisfied; (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; and (iii) owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a). 10.2 It is only if these conditions are satisfied would clause (c) of section 23(1) apply in which event the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by invoking the provisions of section 23(1)(c). He relied upon the decisions referred to by us earlier in para 6.2 of this order. Nothing adverse has been commented by the Ld. DR in this regard. He relied upon the decision of Co-ordinate Bench dated 07.06.2022 in the case of Mr. Arihant Patni in ITA Nos. 2695/PUN/2016 and 1248/PUN/2017 for AYs 2013-14 and 2014-15. In that case the property was never let out during the year or year earlier to that. It was in this factual backdrop that the Tribunal placing reliance on the decision of Hon'ble Andhra Pradesh High Court in the case of Vivek Jain (supra) and the decision of Punjab and Haryana High Court in the case of Susham Singla (supra) held that section 23(1)(c) will not be applicable if the property was vacant throughout the previous year and it was not let out at all. This decision of the Co-ordinate Bench in the case of Mr. Arihant Patni (supra) does not help the Revenue as in the case before us the property was admittedly let out in earlier years and was let out during the relevant previous year(s) as held by us. 14. Heavy reliance has been placed by the Ld. AO/CIT(A) and the Ld. DR on the decision of Hon'ble High Court of Andhr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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