ITAT Delhi Remands ALV Addition on Vacant Property; Vacancy Allowance Under Section 23(1)(c) to Be Re-Examined
Court / Authority
Income Tax Tribunal
Update / Judgement Date
29 Aug 2026
Source
WCP News Bulletin
Author
Manas Yadav — WCP Legal Desk
Reading Time
2 min read
View Count
Key Facts and Tribunal Findings
The Income Tax Appellate Tribunal (ITAT), Delhi Bench “B”, has set aside the addition of notional income from house property in the case of Pramod Agarwal for Assessment Year 2018–19, directing fresh examination of the claim for vacancy allowance under Section 23(1)(c) of the Income-tax Act, 1961.
The assessee had declared income from multiple properties, treating one as self-occupied and another commercial property at Omaxe Plaza, Gurgaon as vacant during the relevant year. The Assessing Officer, however, computed annual letting value (ALV) by applying a notional escalation based on rental income shown in earlier years, resulting in an addition of ₹88,935 under the head “Income from House Property.” The addition was upheld by the Commissioner (Appeals).
Before the Tribunal, the assessee contended that the property had been let out in earlier years but remained vacant during the relevant year due to lack of demand, thereby qualifying for nil annual value under Section 23(1)(c). It was argued that vacancy allowance applies even where the property remains vacant for the entire year, provided it was previously let out and no tenant could be found despite reasonable efforts.
The Tribunal accepted the legal proposition that where a property, having been let out in earlier years, remains vacant due to circumstances beyond the assessee’s control, the benefit of vacancy allowance may be available. However, it noted a factual gap in the record, specifically the absence of clarity on whether rental income from the property was offered in the immediately preceding assessment year.
In view of this deficiency, the Tribunal held that the assessee’s claim requires factual verification. Accordingly, it set aside the issue to the Assessing Officer to examine whether the property was indeed let out in the preceding year and to recompute the annual value in accordance with Section 23(1)(c).
The appeal was allowed for statistical purposes.
Full Judgement / Attachment
Full Judgement
Frequently asked questions about Income Tax Tribunal
- What is the Income Tax Appellate Tribunal (ITAT)?
- The ITAT, set up in 1941, is the second appellate authority in direct tax matters and the final fact-finding body. It hears appeals against orders of the Commissioner (Appeals) and certain other authorities, through benches across India.
- What is the time limit to file an appeal before the ITAT?
- An appeal must be filed within two months from the end of the month in which the order is communicated. This rule has applied since 1 October 2024 and continues under the Income-tax Act, 2025. The Tribunal can condone delay for sufficient cause.
- Can the ITAT stay a tax demand?
- Yes. The Tribunal can stay recovery of a disputed demand while an appeal is pending, usually on deposit of a part of the demand or furnishing security. Stays are granted for a limited period, and the appeal is expected to be decided within it.
- Where does an appeal go after the ITAT?
- An appeal against an ITAT order lies to the High Court, but only on a substantial question of law. A further appeal lies to the Supreme Court.
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