ITAT Delhi Deletes Section 68 Addition on Opening Loan Balance and Quashes Section 271AAC Penalty — G.B. Lawns Private Limited Vs DCIT
Overview of the Case
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, recently adjudicated two appeals preferred by the assessee — G.B. Lawns Private Limited — arising from separate assessment and penalty proceedings for Assessment Years 2017-18 and 2018-19. The appeals were heard together and disposed of through a consolidated order, given that both pertained to the same assessee. The decisions rendered by the Tribunal carry significant implications for the treatment of opening balances under Section 68 of the Income Tax Act, 1961, the conditions governing cessation of liability under Section 41(1), the allowability of bad debts under Section 36(1)(vii), and the sustainability of penalties under Section 271AAC when the underlying assessment itself is under challenge before a High Court.
Case Details
| Particulars | Details |
|---|---|
| Case Name | G.B. Lawns Private Limited Vs DCIT (ITAT Delhi) |
| Appeal Numbers | ITA No.7639/Del/2025 & ITA No.7640/Del/2025 |
| Date of Order | 29/06/2026 |
| Assessment Years | 2017-18 and 2018-19 |
| Forum | Income Tax Appellate Tribunal, Delhi |
Background and Nature of Business
G.B. Lawns Private Limited is engaged in the business of operating a commercial shopping mall known as M/s Shalimar ELDEE Plaza, situated in Indira Nagar, Lucknow. The assessee filed its return of income for Assessment Year 2017-18 on 30.10.2017, declaring a total income of Rs. 85,98,810/-, treating the rental receipts from the mall as income from business and profession.
The case was subjected to scrutiny assessment under Section 143(3) of the Income Tax Act, 1961, following issuance of notice under Section 143(2) on 18.09.2018, accompanied by questionnaires under Section 142(1). The Assessing Officer (AO) made multiple additions and disallowances, raising the assessed income to Rs. 3,59,47,612/-. The Commissioner of Income Tax (Appeals) confirmed these additions, prompting the assessee to approach the Tribunal.
ITA No.7639/Del/2025 — Assessment Year 2017-18
Issue 1: Addition of Rs. 70,94,297 Towards Alleged Notional Rental Income
AO's Position
The AO computed the monthly rent payable by the tenant M/s Future Retail Limited (Big Bazaar) at Rs. 19.04 lakhs per month based on a Memorandum of Understanding dated 03.02.2011, which had been inadvertently furnished by the assessee during the assessment proceedings. Applying this figure, the AO estimated total rental income at Rs. 2,28,48,000/- against actual receipts of Rs. 1,57,53,703/- reflected in Form 26AS, and made an addition of Rs. 70,94,297/- representing the differential.
Assessee's Contentions
Before the Tribunal, the assessee's Authorised Representative submitted that the MOU dated 03.02.2011 was never acted upon by either party and had been superseded by a revised MOU executed on 24.06.2011. The correct operative MOU had been placed before the CIT(A) through a petition filed under Rule 46A of the Income Tax Rules, 1962, which was, however, rejected by the appellate authority on the ground that the production of a new agreement at the appeal stage was an afterthought.
The assessee further drew attention to:
- A confirmation letter dated 08.02.2022 from M/s Future Retail Limited (Big Bazaar), an independent third-party tenant, categorically affirming that rent was paid strictly in accordance with the MOU dated 24.06.2011
- Monthly rent advices and invoices corroborating actual payments made
- Bank account entries of the assessee confirming receipt of amounts matching the later MOU
- Form 26AS entries consistent with the rental income declared
Tribunal's Finding
The ITAT observed that the tenant, being a commercially independent entity with no vested interest in the assessee's tax affairs, had unequivocally confirmed rent payment under the revised MOU. The contemporaneous documentary trail — comprising bank entries, invoices, rent advices, and Form 26AS — fully corroborated the assessee's position. The Tribunal also took note of a critical factual aspect that had been overlooked by both the lower authorities: the Revenue had not raised any objection to the rental income declared by the assessee in the years between 2011 and 2016, during which the MOU dated 24.06.2011 was in operation.
The Tribunal held that the assessee had correctly declared rental income in accordance with the operative MOU dated 24.06.2011, and accordingly deleted the addition of Rs. 70,94,297/- in its entirety.