TaxTMI 
TaxTMI 
2025 (3) TMI 1772
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 31.03.2018. The case was selected for complete scrutiny and assessment was completed u/s 143(3) on 23.12.2018 determining the taxable income to Rs. 26,61,51,440/-. After getting the necessary approval from the competent authority, notice u/s 148 of the Act was issued on 27.03.2021. The reason for reopening is that the computation of income as per return, the assessee has offered the income of Rs. 70,27,733/- under the head income from house property. However as per details of investment in immovable property shows that the assessee has shown total 42 units and out of these, rent income derived from 15 units and no such income was shown from 12 units despite the same have not been let out during the A.Y. 2016-17. It is observed that as per Income Tax Act., notional rent is assumed based on the annual value of the property, hence following deemed rent on 12 units after considering the rent of Rs. 70,27,733/- received from 15 units are fair rent was determined as under:- Total Rent offered (Rs. ) No. of units let out Rent income per unit (Rs. ) No. of vacant units Deemed rent 70,27,733/- 15 4,68,516/- 12 56,22,186/- 3. Notice u/s 142(1) of the Act was....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... allowance can be given only when the property is let and vacant for part of the year. No contrary judgment of any other High court or the Hon'ble Apex Court has been brought to our notice. Accordingly, the claim of vacancy allowance in respect of 12 units which remained vacant for the year under consideration was rejected. 6. Aggrieved by the aforesaid order, the assessee preferred the appeal before us on the following grounds:- 1. The Ld. CIT(A), NFAC, has erred in confirming the addition of Rs. 40,57,200/- made by the Ld. AO, NFAC, being deemed rental income under the head "Income from house property". 2. The Ld. CIT(A) erred in not giving vacancy allowance u/s 23(1)(c) of the Act. 3. The Ld. CIT(A), NFAC, has erred in upholding the action of Ld. AO, NeAC, in reopening of the assessment. 4. The reassessment proceeding initiated u/s 147 of the Act and the notice u/s 148 of the Act dated 27.03.2021 are bad in law and without jurisdiction. 5. The Ld. AO has erred in levying interest u/s 234A, 234B and 234C of the Act. 6. The Ld. AO has erred in initiating penalty proceedings u/s 271(1)(c) of the Act. 7. The Appel....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the garb of re-opening the assessment, review would take place. Ld. AR has further relied on the judgment of Hon'ble Apex Court in PCIT vs. Fibres and Fabrics International (P.) Ltd. reported in 288 Taxman 20 (SC) wherein it was held that there is no new tangible material to reopen assessment and existence of fresh tangible material is sine qua non to reopen assessment. Thus, Ld. AR submitted that the reopening of assessment u/s 148 of the Act is bad in law. 9. On the other hand, Ld. DR reiterated the same arguments which were raised before the lower authorities i.e. AO as well as Ld. CIT(A) and justified the reopening of assessment on the ground that in the computation of income as per return, from the details of investment, it is noticed that assessee has shown 42 units and out of these, rent income is shown derived from 15 units and no such income was shown from 12 units as the same have not been let out during the AY 2016-17. Accordingly, the notional rent is assumed based on the annual rented value of the property and the house property income of Rs. 40,57,200/- from 12 units was not offered by the assessee earlier, hence the reassessment was based on tangible material. It....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-1997] wherein the Supreme Court has held as under:- "In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs." 6.1.7 Further, the Hon'ble Jurisdictional High Court of Bombay in the case of Export Credit Guarantee Corporat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the property consisted of 5 floors of which mezzanine floor, first floor and second floor remained vacant throughout the year. The third and fourth floors were occupied by the partnership firm and company for carrying out business. The issue raised is as to whether annual value can be assessed in respect of portion which was vacant throughout the year and whether portion occupied by the company and the partnership firm could be excluded from the purview of computation of income while computing income from house property. The other related issue is method of determination of annual value. The Id. AR has argued that the portion which remained vacant throughout the year has to be excluded from the purview of computation of income of house property under the provisions of section 23(1)(c) However, the claim of the assessee is contrary to judgment of Hon'ble High Court of Andhra Pradesh in the case Vivek Jain(supra) in which it has been held that in case the property is not let out at all during the previous year, no vacancy allowance can be given under section 23(1)(c). In other words, vacancy allowance can be given only when the property is let and vacant for part of the year....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....) v. Empire Capital (P.) Ltd. vs. ACIT - [2020] 114 taxmann.com 180 (Mumbai - Trib.) vi. Saif Ali Khan Pataudi v. ACIT [2018] 172 ITD 345 (Mumbai) c. CIT(A) has placed reliance in para 6.2.4 on the judgment in case of Indra Jain vs. ITO (21 taxmann.com 471). The said judgment is not applicable for the following reasons: i. Firstly, if there are both favourable and adverse views then, it is well settled that view favourable to assessee should be preferred. There are plethora of judgments in favour, as brought out earlier, which should be preferred. ii. Section 23(1)(c) itself visualizes a situation where property can be vacant for whole of part of the previous year. The requirement is that it should have been let out sometime during its lifetime. But in the year under consideration, it may be vacant for whole of the year, then benefit of section 23(1)(c) would be available. iii. In fact, this order simply relies upon the judgment of the Hon'ble Andhra Pradesh High Court in case of Vivek Jain vs. ACIT (202 Taxman 499). However, the said judgment of the High Court itself in para 14 states as under: "14. The contention....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vious 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 : Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation.-For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot realise. 9. A reading of the said provision reveals that where any part of the property is let out and was vacant during the whole or any part of the previous year and due to such vacancy rent received / receivable by the owner is less than the ALV determined under section 23(1)(a) in that case the actual rent received or receivable is to be treated as the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that our indulgence in the present appeal has been sought for adjudicating as to whether the "annual value" of the property owned by the assessee viz. Unit No. 401 & 425 of project Balaji Bhavan, had rightly been determined by the assessee by taking recourse to Sec. 23(1)(c) of the "Act" at Rs. Nil, or the same was liable to be determined u/s 23(1)(a) as held by the lower authorities. We find that it is an admitted fact that though the assessee had vide agreement dated April, 2007 let out the Unit No. 401 & 425 of project Balaji Bhavan to M/s Sterling Construction Pvt. Ltd. for a period of 36 months, and had offered the rental income received therefrom as its "Income from house property" in the preceding years, but after the expiry of the license period of 36 months the licensee had vacated the property and conveyed its intention of not getting the license agreement renewed any further. We further find from a perusal of the records before us that it is not the case of the department that after the property was vacated, the same thereafter had remained under the self occupation of the assessee. In light of the aforesaid factual position in the case of the present assessee, we find o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e out those properties from the ambit of the clause in which properties are held by the owner for self-occupation i.e. self-occupied property (i.e SOP) because even income on account of SOP, excluding one such SOP of which annual value is to be adopted at nil, is also to be computed under this head as per Clause (a) of Section 23(1) if we see the combined reading of Sub-section (2) and (4) of Section 23. One thing is more important because we find that where the legislature have considered that actual letting out is required, they have used the words "house is actually let". This can be seen in Sub-section (3) of same Section 23. But in Clause (c) above, "actually let" words are not used and this also shows that meaning and interpretation of the words "property is let" cannot be "property actually let out". In our opinion, it talks of properties which are held to letting out having intention to let out in the relevant year coupled with efforts made for letting it out. If these conditions are satisfied, it has to be held that property is let and the same will fall within the purview of this clause." We find ourselves to be in agreement with the aforesaid observations of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee in the present case had rightly determined the "ALV" of the property at Rs. Nil by taking recourse to Sec. 23(1)(c) of the "Act". In this regard we are further of the view that the CIT(A) had misconceived the judgment of the Hon'ble High Court of Andhra Pradesh in the case of Vikas Jain (supra), and on a perusal of the said judgment therein find that the Hon'ble High Court in the concluding Para 14 & 15 had though concluded that the benefit of computing the "ALV" u/s 23(1)(c) could not be extended to a case where the property was not let out at all, would however duly encompass and take within its sweep cases where the property had remained let out for two or more years, but had remained vacant for the whole of the previous year. Thus we are of the view that now when in the case of the present assessee the property under consideration had remained let out upto 04.12.2008, and thereafter though could not be let out and had remained vacant during whole of the year under consideration, but also had never remained under the self occupation of the assessee, the computation of the "ALV" u/s 23(1)(c) of the "Act", had rightly been carried out in light of the aforesaid judgment of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ole year under consideration, though subject to the condition that the same is not put under self occupation of the assessee and is held for the purpose of letting out of the same, would continue to be determined u/s 23(1)(c) of the "Act". Thus, in light of the aforesaid order of the coordinate bench of the Tribunal and the reasonings flowing there from, we are of the considered view that the assessee in the present case had rightly determined the "annual value" of the property at Nil by taking recourse to Sec. 23(1)(c) of the "Act". 8. We may further observe that the CIT(A) had misconceived the judgment of the Hon'ble High Court of Andhra Pradesh in the case of Vivek Jain Vs. ACIT (2011) 337 ITR 74 (AP). We find that in the said judgment the Hon'ble High Court in the concluding Para 14 & 15 had observed that though the benefit of computing the "ALV" u/s 23(1)(c) could not be extended to a case where the property was not let out at all, however the same would duly encompass and take within its sweep cases where the property had remained let out for two or more years, but had remained vacant for the whole of the previous year. Thus, we are of the considered view that now wh....