2019 (7) TMI 1753 - AT - Income Tax

Court Upholds Deemed Let Out Property Status, Allows Flexibility in Tax Planning

The court upheld the Assessing Officer's decision to treat two properties as deemed let out, rejecting the appellant's claim that they should be ... Determination of rental income - Income from house property - AO treating two properties as deemed let out and determining on an adhoc basis notional rental income for both the properties - HELD THAT:- As submitted that a decision of ITAT in the case of co-owner Smt. Vidyaben Bhagwan Kotak [2017 (9) TMI 1917 - ITAT MUMBAI] in respect of the same flats in which she had half shareholding in Flat No. 16 & 18 at Kalpana, in which said order has accepted that these flats are duplex flats used by the assessee having common staircase and hence it was held that they can be considered as one house which is adjacent to each other. We find that since there is an ITAT order in the case of co-owner, which has not been set aside by Hon'ble Hon'ble Jurisdictional High Court, we deem it appropriate to remit this issue to the file of the Assessing Officer. The Assessing Officer shall consider this additional evidence and decide accordingly. We further hold that there is no estoppel against the assessee in now offering self occupied property and deemed let out property in a different manner than that offered initially. Assessee is very much entitled to plan its taxation so as to minimize the burden so long as the method is not colourable. Here the approach of the assessee can by no stretch of imagination be said to be a colourable device. Issues involved:1. Treatment of properties as deemed let out and determination of notional rental income.2. Claim of properties as self-occupied or deemed let out.3. Consideration of additional evidence and ITAT order in a co-owner's case.Detailed Analysis:1. The common issue in the appeals was the treatment of two properties as deemed let out by the Assessing Officer, resulting in the determination of notional rental income. The Assessing Officer estimated the rental income adhoc basis for the properties for different assessment years. The appellant challenged the action, arguing that the properties should be considered self-occupied. The Assessing Officer's decision was upheld by the learned CIT(A), leading to the current appeal.2. The appellant contended that the properties should be treated as self-occupied, emphasizing that they constituted one house property despite having multiple residential units, as they were occupied by the appellant and family members. The appellant cited judicial pronouncements to support their claim. However, the learned CIT(A) rejected this argument, upholding the Assessing Officer's decision. The appellant then raised additional grounds, referring to an ITAT order in a co-owner's case involving similar properties. The ITAT decided to remit the issue back to the Assessing Officer for further consideration, noting that the appellant had the right to offer properties as self-occupied or deemed let out in a manner that minimizes tax burden, as long as it is not a colorable device.3. The crucial aspect was the consideration of additional evidence regarding the properties and the ITAT order in the co-owner's case. The ITAT decided to remit the issue to the Assessing Officer for review based on the new evidence presented by the appellant. The ITAT emphasized that the appellant had the right to plan taxation strategies to reduce the tax burden, as long as it was not done in a deceptive manner. The judgment highlighted that the appellant's approach was legitimate and not a colorable device, allowing flexibility in offering properties as self-occupied or deemed let out based on the circumstances.This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the arguments presented, decisions made, and the subsequent course of action directed by the ITAT.