ITAT: Income from Rent Does Not Come Under Tax without Agreement

The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that the rental income could not be drawn under the tax when the taxpayer does not in any lease agreement with the tenants.

The taxpayer was shown by Ms Urvashi Shodhan and Shri Rakesh Jha represents the revenue.

On the verification of the information in form 26AS, AO sees, Mansha Textile Pvt. Ltd, the assessee had received an amount of ₹ 21,42,504 as the rental income for the year beneath the acknowledgement, but that would not be proposed to tax via the taxpayer company in the income return.

AO again opened the assessment beneath section 147 of the income tax act of 1961. AO sees that different parties would incur the rental payments to the taxpayer company that would be revealed and credited to the taxpayer’s current account company held within the Axis Bank Ltd, but the taxpayer does not show the same bank account in its books of account for the year beneath the acknowledgement and neither the rental receipts were being proposed to the tax via taxpayer in the income tax return.

The taxpayer, AO, and no directors of the company had entered into any rent agreement on the grounds of the company and no money would get deposited in the official bank account of the company for the rental receipts.

The case arrived at the notice of the taxpayer company merely when the TDS certificates were obtained from the enrolled office of the company the taxpayer company has approached the company law board for the same case and would explore the possibility of limiting Deepak Ochhaney group from carrying the rental income from the tenants. AO has denied the taxpayer’s view and summed Rs 2,142,504 as rental income of the taxpayer (after permitting standard deduction@30%) for the year under consideration.

ITAT sees, the taxpayer was never in receipt of the rental income as no taxpayer company would be entered in the lease agreement with the tenants, and no rental income would be obtained via taxpayer company as per the mentioned rental income was not being provided to the tax via the taxpayer in its income return.

A Coram of ITAT bench Smt. Annapurna Gupta, accountant member, and Shri Siddhartha Nautiyal, Judicial Member have set aside the concern to the file of CIT(Appeals) to hear the case in a fresh way on the basis of merits, post providing the chance of hearing to the taxpayer and the petition of the taxpayer was permitted for the statistical purposes.