ITAT Confirms Addition since Assessee Received Rent in Cash to avoid Tax Liability [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal, on Wednesday affirmed an addition in a case where the assessee, a landlord, received the rental amount in cash to avoid tax liability and sought for reduction in computing Annual Letting Value (ALV).

Assessee-Company engaged in job work for Auto parts and other items has declared rental income. As per the records submitted by the assessee, the rental income was Rs. 25,000/- per month. The Assessing Officer noted that earlier for the period 1.4.2008 to 30.11.2008, the rental income from the same party from the from the same property was shown at Rs. 2,25,000/- p.m. he, accordingly, computed rental income as per the higher rate of rent earlier shown to be increased by 10% as pr the standard practice for renting of property for increase by 10% every year. He was of the view that the assessee has taken the rent in cash and to avoid the tax liability the rental value has been substantially reduced.

Assessee maintained that subsequently this premise was not used and the rent offered is as per section 23 of the Income Tax Act, 1961 and the AO cannot compare rent for unused premise (vacant premise) with rent for premise in use.

Overruling the contentions raised by the assessee, the Tribunal observed that no reduction is available to the assessee in determining Annual Letting Value of property.

“The assessee has contended that any tenant would like to buy a property at the value taken by the AO than taking it on rent. But the very fact that property was let out @ 30,00,000/- / 2,000/- i.e. 1500 per sqmtrs. and rent was also paid for the period of 01.4.2008 for certain months, the claim is belied. The very receipt of rent justifies ALV to be based on such rent, in absence of anything to the contrary,” the bench said.

The bench further upheld the order of the first appellate authority that the property was again let out on resumption of activity @ 17 lakhs per month, the annual value was taken at that rate, if evidence to that effect is produced.