2021 (12) TMI 703 - AT - Income Tax

Income from house property - combined two flats construed as one residential house - whether two flats purchased by the assessee could be construed as one house in the event of it having one kitchen, among others ? - Disallowing the benefit u/s 23(2) to the residential house purchased and used as one residential unit for self use and thereby disallowing the loss from income from self occupied house - HELD THAT - Undisputedly in the instant case before us, both the Flat Nos.1502 and 1503 have got only one kitchen and there is only one entrance in the entire house. In view of these undisputed facts and respectfully following the aforesaid decision of the Hon ble Jurisdictional High Court in DEVDAS NAIK 2014 (7) TMI 173 - BOMBAY HIGH COURT , we hold that both flats should be construed as one residential house and annual value of the same should be determined at nil being self-occupied house property. Accordingly, the addition made by the ld. AO is hereby directed to be deleted. The grounds raised by the assessee are allowed.

Issues involved:
1. Disallowance of benefit under section 23(2) of the Income Tax Act for a residential house.
2. Non-attendance of the appellant for appeal hearings.
3. Determination of notional rent by the assessing officer.
4. Whether two purchased flats can be considered as one house.
5. Failure to follow previous court decisions.
6. Allegations of passing an order without giving a final notice for hearing.

Detailed Analysis:
1. The appellant claimed a benefit under section 23(2) of the Income Tax Act for a residential house used as a single unit for self-use. However, the Commissioner of Income Tax (Appeals) disallowed this benefit, resulting in a loss of ?150,000 from income from the self-occupied house. The assessing officer determined the notional rent at ?1,92,000 per annum, which was upheld by the Commissioner. The appellant argued that the combined flats should be considered as one residential house due to various factors, including having one entrance, one kitchen, and being booked together during construction. The Tribunal, after considering the facts and previous court decisions, ruled in favor of the appellant, directing the deletion of the addition made by the assessing officer.

2. The appellant also raised concerns about not attending appeal hearings due to lockdown restrictions and not receiving the hearing notice. However, the Tribunal did not find this argument relevant to the main issue of determining whether the combined flats should be treated as one residential house.

3. The assessing officer's determination of notional rent and disallowance of the benefit under section 23(2) were central to the dispute. The Tribunal's decision to consider the combined flats as one residential house impacted the calculation of notional rent and led to the deletion of the addition made by the assessing officer.

4. The main issue revolved around whether two purchased flats could be construed as one house, with the appellant arguing that various factors indicated the combined flats should be treated as a single residential unit. The Tribunal's decision to follow the previous court decision and treat the flats as one residential house resolved this issue in favor of the appellant.

5. The appellant also argued that the Commissioner of Income Tax (Appeals) failed to follow previous court decisions, including the jurisdictional High Court's ruling in a similar case. The Tribunal, by referencing and applying the principles from the previous court decisions, supported the appellant's claim and ruled in their favor.

6. Lastly, the appellant alleged that the order was passed without giving a final notice for the hearing and providing a sufficient opportunity to defend. While this allegation was made, the Tribunal's decision primarily focused on the substantive issues raised regarding the treatment of the combined flats as one residential house.

In conclusion, the Tribunal's detailed analysis and application of relevant legal principles led to a favorable judgment for the appellant, allowing their appeal and directing the deletion of the addition made by the assessing officer.

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