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ITAT Ahmadabad pronounced a judgement on 28-09-2022 in the case titled Mansha Textile Pvt. Ltd. Vs ITO observing that the rental income does not come under the tax in the absence of an agreement. The assessee filed 5 appeals five appeals against the order of the ld. Commissioner of Income Tax (Appeals)-2 vide order dated 29/11/2016 & 31.10.2017 passed for the Assessment Years 2008-09 to 2011-12 & 2014-15. The present article discussed the aspects covered in the case.
Table of Contents
Whether Rental Income Not Come Under The Tax In The Absence Of An Agreement?
According to the assessee, the Ld. CIT (A) erred in law due to the following
Reopening the assessment u/s 148 of the Income Tax Act, 1961
The assessee raised an additional ground as the same was legal in nature and can be raised before the ITAT as per the decision of the Hon’ble Supreme Court in the case of National Thermal Power. The additional grounds were
Therefore, the assessee company contended that the assessee company did not receive any income during the year under consideration. Therefore, the same was not taxed as rental income. However, the same was rejected by the AO, and he added a sum of ₹ 2,142,504/- as rental income assessee (after allowing standard deduction@30%) for the year under consideration.
The counsel for the assessee submitted that Ld had passed the order. CIT(Appeals) without granting the assessee an adequate opportunity for a hearing. The assessee had sought an adjournment, which wasn’t granted by Ld. CIT(A), thereby proceeding to dismiss the assessee’s appeal, solely relying upon the order passed by AO even without appreciating the merits of the case. Accordingly, the assessee’s counsel requested to set aside the matter to the Ld. CIT(Appeals’s file for adjudication on merits, after giving the assessee the opportunity to hear. In the interest of justice,
The tribunal observed that the assessee never received the rental income, as the same was siphoned off illegally and fraudulently by the directors of the company.It neither entered into a lease agreement with the tenants nor was the rental income ever received by the company, accordingly the said rental income was not offered to tax by the assessee in its ITR. Secondly, the CIT (A) had passed the order without proving the assessee a chance of being heard hence the order of CIT (A) was set aside by the tribunal
The tribunal directed the CIT (A) to adjudicate the matter afresh and provide an opportunity of being heard by the assessee, thereby upholding its right to be heard as per the principles of natural justice.
Read Our Article: TDS on Rental Income: Section 194I of the Income Tax Act, 1961
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