Addition Alleging ‘Under Reporting’ Of Rental Income Citing Info Available On Sulekha.Com Is Unsustainable: ITAT

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the Income Tax addition alleging ‘under reporting’ of rental income citing info available on online portal, Sulekha.Com is unsustainable. The bench of Satbeer Singh Godara (Judicial Member) and Manish Agarwal (Accountant Member) has observed that the addition was wholly untenable as it was based solely on notional rental rates picked up from a third-party online real-estate portal, namely property.sulekha.com, without any independent enquiry or corroborative material. It was held that actual rental income disclosed in accordance with a registered lease agreement cannot be substituted by hypothetical estimates, particularly when no defect is found in the assessee’s books of account. An addition founded merely on online portal data, being conjectural and devoid of evidentiary value, was therefore deleted by the CIT(A) and the same was affirmed by the Tribunal The appeal was filed by the Revenue challenging the CIT(A)’s order dated 28 November 2023, which had set aside additions aggregating over ₹2.23 crore. The principal issue before the Tribunal related to the AO’s estimation of rental income by treating the entire land area of a leased property as covered area and applying rental rates sourced from online property portals. During assessment proceedings, the AO alleged that the assessee had under-reported rental income to the extent of Rs. 2.10 crore by adopting a monthly rent that was, in his view, significantly lower than the prevailing market rates. The AO relied primarily on data gathered from online real estate portals and property brokers to arrive at a notional rental value, applying the rate to the entire land area of approximately 3.85 acres. In appeal, the CIT(A) examined the registered lease deed, sanctioned building plan, and other documentary evidence produced by the assessee. It was noted that while the total land area measured 3.85 acres, the actual covered area of the building was only about 1,566 square metres (approximately 16,860 square feet). The monthly rent of ₹20 lakh charged by the assessee was found to be in accordance with the registered lease agreement and, in fact, higher than the notional rent that would arise if the online portal rate relied upon by the AO was applied only to the covered area. The CIT(A) concluded that the AO had incorrectly equated land area with built-up area and had failed to bring any cogent material on record beyond online listings to justify the enhancement. Accordingly, the addition for alleged under-reporting of rental income was deleted. The Tribunal agreed with this reasoning, observing that the AO’s entire case rested on information sourced from an online portal without corroborative evidence. It noted that the assessee’s books of account were audited, the rental income was duly reflected in the return of income and Form 26AS, and no defects had been pointed out in the accounts. In these circumstances, the Tribunal held that the CIT(A) was justified in deleting the addition and affirmed the finding. The second issue related to the disallowance of internet expenses amounting to Rs. 4.53 lakh. The AO had disallowed the expenditure on the ground that the internet connection was installed at a residential property that had been leased out, and that the assessee failed to establish whether the expense was incurred wholly for business purposes. The assessee explained that the internet facility was necessary for surveillance and security of the premises. Accepting this explanation, the CIT(A) held that the expenditure was incurred for business purposes and deleted the disallowance. The Tribunal concurred, noting that there was no dispute about the installation of the internet facility and that the lower appellate authority had given a reasoned finding on business nexus. It therefore upheld the deletion of the disallowance. The final issue concerned the disallowance of legal and professional charges, including prior-period expenses aggregating to ₹7.42 lakh. The Revenue contended that these expenses were either unsupported by sufficient documentation or related to earlier years. The Tribunal observed that the expenses had crystallised during the relevant financial year and that the assessee was already assessed at the maximum marginal rate, making the issue revenue-neutral. On this reasoning, it rejected the Revenue’s ground and sustained the CIT(A)’s order. The Tribunal dismissed the Revenue’s appeal in its entirety, holding that the additions and disallowances made by the AO were unsustainable in law and on facts. The order reinforces the principle that estimations based solely on online data, without supporting evidence and without appreciating the distinction between land area and covered area, cannot form the basis for additions to income. Case Details Case Title: ACIT Versus Minerals Management Services India Pvt. Ltd. Case No.: ITA No. 338/Del/2024 Date: 02.12.2025 Counsel For Appellant: Sumit Lalchandani, Utkarsa Gupta Counsel For Respondent: Ankush Kalra, Sr. DR Click Here To Read Order Read More: Supreme Court Advises Hybrid Hearings Amid Adverse Weather Conditions

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