The argument to if is a statement to execute, and its exit status is tested. If the exit status is 0 the condition is true and the statements in then are executed.
When $CONDITION isn’t set, the statement is an empty statement, and empty statements always have a zero exit status, meaning success. So the if condition succeeds.
This behavior is explained in the POSIX shell specification:
If there is no command name, but the command contained a command substitution, the command shall complete with the exit status of the last command substitution performed. Otherwise, the command shall complete with a zero exit status.