G.B. Lawns Private Limited Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) disposed of two appeals filed by the assessee for Assessment Years 2017-18 and 2018-19 arising from assessment d penalty proceedings under the Income-tax Act.
For AY 2017-18, the assessee, engaged in operating a shopping mall under the name Shalimar ELDEE Plaza, had filed its return declaring rental income as business income. During scrutiny assessment under Section 143(3), the Assessing Officer (AO) made several additions and disallowances, including an addition of ₹70,94,297 towards alleged short receipt of rent, additions of ₹51,97,500 and ₹34,35,700 in respect of advances received from purchasers, an addition of ₹1,06,90,000 under Section 68 relating to an unsecured loan, disallowance of bad debts, repair and maintenance expenses, and certain other business expenses. The Commissioner of Income Tax (Appeals) upheld these additions, following which the assessee appealed before the Tribunal. The assessee did not press the ground challenging the validity of the notice under Section 143(2), and that ground was dismissed.
Regarding the addition of ₹70,94,297 towards alleged notional rental income, the AO had relied upon a Memorandum of Understanding (MOU) dated 03.02.2011 for computing higher rent. The assessee submitted that the earlier MOU had never been acted upon and had been replaced by another MOU dated 24.06.2011. Before the Tribunal, the assessee relied upon the later MOU, a confirmation from the tenant M/s Future Retail Limited (Big Bazaar), monthly rent advices, invoices, bank entries and Form 26AS to demonstrate that rent had been received strictly in accordance with the operative MOU dated 24.06.2011. The Revenue contended that the later MOU was an afterthought because the earlier agreement had originally been furnished before the AO. The Tribunal observed that the tenant, being an independent party, had categorically confirmed payment of rent under the later MOU and that the documentary evidence, including bank entries and Form 26AS, supported the assessee’s claim. It also noted that no dispute had been raised by the Revenue regarding rental income in earlier years based on the later MOU. The Tribunal held that the assessee had correctly declared the rental income and deleted the addition of ₹70,94,297.
