ITAT Partly Allows Appeal: Deletion of Deemed Rent on Vacant Flats, Relief on Self-Occupied Property Option

The present appeal has been filed by a taxpayer named Mohit Vijaykumar Gupta (Appellant) against the DCIT (Respondent) in the Income Tax Appellate Tribunal (ITAT) “A” Bench, Ahmedabad, before Dr Brr Kumar (Vice President) and Shri Siddhartha Nautiyal (Judicial Member). The case is related to the assessment year 2021-22, and was heard before the tribunal on August 06, 2025, and the final decision was announced on November 06, 2025. The appeal challenged an order dated December 14, 2025, passed by the CIT(A), NFAC, Delhi, under Section 250 of the Income Tax Act, 1961, for the assessment year 2021-22.

The assessee filed his income tax return (ITR) for the assessment year 2021-22 on October 02, 2021, declaring the total income of Rs. 106,037,350. Later on, the case was chosen for scrutiny under CASS; large deductions/exemptions were claimed by the assessee under Sections 54, 54B, 54EC, 54EE, 54F, 54G, 54GA and 54GB of the Act. During the assessment proceedings, the AO made additions to the income of the assessee and declared his total income at Rs. 11,026,981. The additions made by AO are as follows:

• (i) Rs. 21,03,258 under the head “Long-term Capital Gain (LTCG)”
• (ii) Rs. 7,43,199 as deemed rent on five flats situated in Mumbai, and;
• (iii) Rs. 13,86,000 as deemed rent on office premises claimed as self-occupied.

Dissatisfied with the additions made by the assessing officer, the assessee approached the CIT(Appeals); however, the authority sustained the additions made by the AO. Thereafter, the assessee filed an appeal before the ITAT Ahmedabad challenging an order passed by the CIT(A), claiming that the authorities had erred in law and on facts in sustaining the additions made by the assessing officer (AO) on account of deemed rent on the five flats situated in Mumbai and on the office premises at Hariom Chambers, Andheri (West), Mumbai. The tribunal carefully examined arguments of both sides and submitted documents, including the assessment order, the order of the Commissioner of Income Tax (Appeals) [CIT(A)], and the case laws cited by the assessee’s lawyer.

Ground No. 1: Deemed Rent on Five Vacant Flats in Mumbai

The assessee owned five flats in Mumbai that were meant to be rented out but remained vacant during the year because of the COVID-19 pandemic. These flats were later sold in the same year. The assessee had already shown deemed rent in earlier years but declared Nil annual value this year under Section 23(1)(c) of the Income Tax Act, claiming that the flats stayed vacant despite genuine efforts to rent them.

The tribunal rejected the claim made by the assessee, saying he did not submit any formal proof, like broker confirmations. The Tribunal disagreed and said Section 23(1)(c) allows “Nil” annual value if the property stays vacant despite honest efforts to rent it.

The rule does not require perfect records or broker confirmations. The assessee’s explanation about the pandemic and the sale of flats made sense. To announce its final decision on the first ground, the tribunal cited a few earlier judgements, including Sachin R. Tendulkar v. DCIT and Premsudha Exports, and concluded that the addition of Rs. 7,43,199 as deemed rent was not justified and ordered it to be deleted. Meaning, Ground No. 1 is allowed.

Ground No. 2: Deemed Rent on Office Premises (Hariom Chambers, Andheri)

The assessee claimed that no notional rent should apply because the office was used to manage his investments. The Tribunal noted that Section 22 exempts property used for business or profession (income taxable under that head). But in this case, the assessee was not running any business or profession, just managing personal investments. So, the office could not be treated as used for business. Meaning, Ground No. 2 is dismissed.

Ground No. 3: Alternative Claim on Self-Occupied Property

The assessee said that if the Andheri office is taxable as “house property”, it should be treated as self-occupied, and his other property (Ruby Villa, Indore) should be treated as deemed let out. CIT(A) earlier rejected this, saying the option had to be chosen while filing the return. The Tribunal, however, referred to Asha Bhonsle v. ITO and Balmukund Acharya v. DCIT, holding that the assessee can change the self-occupied property choice even during assessment. The tax department should not exploit a taxpayer’s lack of legal knowledge. So, the Tribunal allowed the assessee to treat the Andheri office as self-occupied and the Indore property as deemed let out. Meaning, Ground No. 3 is also allowed.

Final Decision

• Ground 1: Allowed (vacant flats)
• Ground 2: Dismissed (office rent claim)
• Ground 3: Allowed (change in self-occupied property choice)

Meaning, the appeal has been partially allowed.