Rental income not received by assessee cannot be brought to tax

Surti Chemicals P. Ltd. Vs ACIT (ITAT Delhi)

There is no dispute that the assessee company purchased a property in December 2008 located at 2^nd and 3^rd Floor in Melange The Mall at Meerut comprising of 35,580.75 sq. ft. which was already let out to Rave Entertainment Pvt. Ltd. (tenant) vide lease deed dated 19.02.2008. The said lease deed was assigned in favour of the assessee company vide assignment of lease deed executed on 12.02.2009 effective from 18.12.2008 on the same terms and conditions. The assessee submitted copy of rent chart for the financial years 2009-10 to 2012-13 (page 16 of paper book). Perusal thereof shows that there was transfer of tenancy from Rave Entertainment Pvt. Ltd. to Reliance Mediaworks Ltd. and the area measuring 2946.34 sq. ft. was surrendered w.e.f. 01.07.2009. In support thereof, the tenant Reliance Mediaworks Ltd. addressed a letter dated 4.09.2009 to the assessee whereby it was confirmed that after discussion and multiple meetings the area of 2946.34 sq. ft. has been surrendered out of total area of 35,580.75 sq. ft. The effective area will be 32,634.41 sq. ft., all other terms and conditions of the lease deed will be the same. The Rent ledger clearly shows that w.e.f. 01.07.2009, the rent has been paid by the tenant Reliance Mediaworks Ltd. to the assessee for 32,634.41 sq. ft. area occupied by it. The learned AO has not only discarded book entry but also the evidence brought on record by way of letter from the tenant to the assessee confirming that 2946.34 sq. ft. area has been surrendered. The learned AO/CIT(A) have rejected the letter of surrender by saying that copy of a surrender letter cannot be treated as evidence and that it does not prove that surrender of leased area was agreed by both the parties. We do not agree. In the case of Vikrant Dutt Chaudhary vs. CIT [389 ITR 411 (P&H)], the Court held that copies of documents, in the absence of their original constitute ‘material’ if they are relevant for the purpose of assessment. Moreover, the letter of surrender of 2946.34 sq. ft. area was written by the tenant Reliance Mediaworks Ltd. to the landlord assessee company and was the outcome of discussion and multiple meetings between the two. Even then the learned AO/CIT(A) alleged that the assessee did not prove that the surrender of the leased area was agreed to by both the parties. This cannot be accepted. The assessee brought to the notice of the learned AO/CIT(A) that the surrendered area is still in its possession and could not be let out to any other party as the Mall could not get success. The veracity of this assertion could be ascertained but nothing has been done.

The assessee has all along declared the rent receipt on the basis of 32634.41 sq. ft. area occupied by the tenant Reliance Mediaworks Ltd. which has been accepted by the predecessor learned AO in the assessment order dated 6.01.2015 framed under Section 143(3) of the Act (pages 22-23 of paper book) for the assessment year 2012-13. The facts remain the same in the succeeding assessment year 2013-14, presently under consideration. In Radhasoami Satsang vs. CIT [193 ITR 321 (SC)], the Hon’ble Supreme Court observed that though strictly speaking res judicata does not apply to income-tax proceedings but where a fundamental aspects permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. The principles laid down by the Hon’ble Supreme Court in Radhasoami Satsang vs. CIT (supra) has been applied by the Hon’ble Delhi High Court in Director of Income-tax vs. Lovely Bal Shiksha Parishad [266 ITR 349 (Del)]. Rule of consistency has to be followed as held by the Hon’ble Supreme Court in CIT vs. Narendra Doshi [254 ITR 606 (SC)].

The assessee categorically denied receipt of rent over and above what is reflected in its books of accounts. Nothing has been brought on record to contradict the version of the assessee either by the learned AO or by the learned CIT(A). We, therefore, hold that rental income which has not been received by the assessee cannot be brought to tax.

FULL TEXT OF THE ORDER OF ITAT DELHI

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