Assessee's Appeal Allowed, Expenses Disallowed Rejected, Notional Income Deemed Nil. CIT(A) Decision Overturned.

The appeal filed by the assessee was allowed. The notional income for the second residential unit was deemed nil, disallowance of expenses amounting to Rs. 3,89,280 was rejected, and the decision of the CIT(A) was overturned in favor of the assessee. The issue regarding assessment of notional rental income for the two units was decided against the assessee as it was not pressed during arguments. The case outcome was in favor of the assessee, with the decision pronounced on 14.07.2017.

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Issues Involved:
1. Disallowance of expenses for residential units under "Income from House Property."
2. Assessment of notional rental income for two residential units.
3. Disallowance of expenses amounting to Rs. 3,89,280.

Issue No.1:
The assessee contended that two residential units should be treated as a single unit, thus no notional rent should be assessed for one of the properties. The Assessing Officer acknowledged that the units were being used as a single unit. Evidence such as photographs, telephone bills, and builder receipts supported this claim. The ITAT Mumbai also ruled similarly in previous cases. Consequently, the notional income for the second flat was deemed nil, and the CIT(A)'s decision was deemed incorrect. The finding was set aside in favor of the assessee.

Issue No.2:
The assessee did not press this ground during the argument, resulting in the issue being decided against the assessee.

Issue No.3:
The assessee challenged the disallowance of expenses amounting to Rs. 3,89,280, arguing that no expenses were claimed in the income computation. The expenses were related to a residential flat reflected in the balance sheet. The ITAT Delhi case of Modern Info Technology P. Ltd. vs. ITO was cited in support. As it was established that the two flats were used as a single unit, disallowance based on notional income was deemed unjustifiable. Since no expenses were claimed, the CIT(A)'s decision was considered unjust, and the expenses were allowed. Therefore, this issue was decided in favor of the assessee against the revenue.

In conclusion, the appeal filed by the assessee was allowed, and the decision was pronounced on 14.07.2017.

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