Rent receivable towards properties inherited from grandparents under will does not represent revenue receipt
In a recent judgment ITAT Cochin has quashed rectification order under section 154 making addition towards rent receivable towards properties inherited by assessee from grandparents under will.
ABCAUS Case Law Citation:
4511 (2025) (04) abcaus.in ITAT
In the instant case, the appellant assessee had challenged the order passed by the CIT(A) NFAC in confirming the addition made by the Assessing Officer (AO) by rectification order under section 154 of the Income Tax Act, 1961 (the Act).
Brief facts of the case are that the appellant WAS an individual engaged in the business of dealing in cement, iron & steel and roofing material in a Proprietorship firm. The assessee filed its return of income for relevant Assessment Year. Against the said return of income, the assessment was completed by the AO after making addition on account of disallowance of expenditure claimed.
Subsequently the AO issued notice under section 154 of the Act proposing to make addition of rent payable found credited to the capital account of the assessee.
In reply to the said notice, the assessee submitted that the said sum represented the rent payable to grandmother of the appellant as the properties were inherited by him and the rent was payable on account of inheritance of properties from grandmother under will and said sum does not represent revenue receipt.
However, the AO disagreeing with the submission, proceeded with passing of the order u/s. 154 of the Act making the impugned addition.
Being aggrieved by the rectification order, appeal was filed before the CIT(A), who vide the impugned order dismissed the appeal by passing a cryptic order without adverting to the ground of appeal and the statement of facts and written submissions of the appellant.
The Tribunal observed that perusal of the impugned order passed by the AO u/s 154 of the Act, it was clear that the AO sought to make addition of rent payable credited to the capital account of the appellant in the proceedings u/s 154 of the Act.
The Tribunal observed that there was no material on record to suggest that the amount of rent payable calls for addition and there was no any mistake apparent from record capable of being rectified u/s 154 of the Act. Therefore, the AO ought not have exercised jurisdiction u/s. 154 of the Act.
Accordingly, the order passed u/s 154 of the Act was quashed.
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