Income Tax Dept Slapped for Using MagicBricks to Inflate Rent: ITAT Orders Fresh ALV Calculation
The present appeal has been filed by a taxpayer named Asha Burman (Appellant) against ACIT (Respondent) in the Income Tax Appellate Tribunal (ITAT) Delhi Bench “A”, New Delhi, before Shri Challa Nagendra Prasad (Judicial Member) and Shri Avdhesh Kumar Mishra (Accountant Member). The case is related to the assessment years 2012-13 to 2017-18, was heard on September 15, 2025, and was decided on November 04, 2025.
The appeal challenged an order dated December 11, 2023, issued by the CIT(Appeals)-NFAC, New Delhi. The assessee filed her income tax return (ITR) for 2015-16, declaring the total income of Rs. 49.68 lakh. Assessment for this was completed on December 27, 2017, under Section 143(3) of the Act.
While reviewing the tax assessment, the Assessing Officer (AO) noticed that the taxpayer had shown Rs. 10 crores as deposits received from tenants in her balance sheet but had reported only Rs. 3.6 lakh as rental income. The AO therefore estimated that the property’s yearly rental value should actually be Rs. 1.79 crores and taxed that amount, rejecting the taxpayer’s claim that part of the property was used for her own residence (self-occupied) and only part of it was rented out.
When the issue was taken before the CIT(A), it endorsed the addition made by the AO. Assessee dissatisfied with the ruling of CIT(A), thereafter approached the tribunal. The tribunal, through an order dated 14.08.201,9 in ITA No. 3414/Del/2019, remanded the case to the assessing officer (AO) to reconsider the case. The reason was that the assessee claimed she had, by mistake, not clearly mentioned earlier that only part of her building, specifically, the third floor, had been rented out.
The assessee said she was living in part of the property herself (self-occupied) and had only rented out the third floor. The Tribunal directed the AO to physically verify whether this was true. The Tribunal also asked the AO to look again at the Annual Letting Value (ALV) that had been used for calculating tax, as the assessee had also disputed that amount.
Pursuant to the order, AO reopened the assessment, verifying the ALV of the property at Rs. 1.78 Crore. During the hearing, the lawyer of the assessee explained that the AO had taken a statement from the property’s caretaker. In the statement, it was clearly noted that the property was partly rented out and partly used by the assessee for her own residence. This proved that only part of the building was rented and the rest was self-occupied.
The lawyer argued that because of this, the entire Annual Letting Value (ALV) of the building should not be treated as rental income. He also pointed out that although the caretaker’s statement was recorded by the tax department, it was not shared with the assessee or properly considered when the assessment was made, even though the Tribunal had directed a physical verification earlier.
Based on this, the Tribunal concluded that only part of the property was rented out and the rest was self-occupied. Therefore, taxing the entire ALV as income was incorrect.
The Tribunal also noted that the AO had used an artificially high rent rate of Rs. 1,200 per sq. ft. based on data from a real estate website (MagicBricks), without any real or scientific basis. The Tribunal referred to Supreme Court judgements (Sheela Kaushish vs. CIT and Deewan Daulat Rai Kapoor vs. NDMC), which say that when a property is subject to house tax by local authorities, the standard rent fixed by them should be treated as the ALV. The Tribunal therefore set aside the assessment for AY 2015-16 and sent the matter back to the AO to recalculate the ALV only for the portion actually rented out, follow the Supreme Court guidelines, and give the assessee a fair opportunity to present her case.
Since the assessments for AYs 2012-13, 2013-14, 2014-15, and 2016-17 were all reopened based on the 2015-16 assessment, those were also set aside and sent back for fresh assessments. For AY 2012-13, the AO had also treated the rental deposit received from the tenant as a “deemed dividend” under section 2(22)(e). The Tribunal said this issue should also be reconsidered, as the deposit was actually a rental deposit linked to the rented portion. The same directions applied to AY 2017-18, since the issue was identical.
As a result, the appeal filed by the assessee has been partially allowed for statistical purposes.
Citation: Asha Burman Vs ACIT (ITAT Delhi); I.T.A Nos.539 To 544/Del/2024; 04/11/2025; 2012-13 to 2017-18
Refer to the official judgement for complete information.
