KAMINI KRISHNA KOTAK ,MUMBAI vs. ADDITIONAL / JOINT / DEPUTY / ASSISTANT COMMISSIONER OF INCOME TAX, DELHI

1. The appellant submits that the learned Commissioner of Income-\ntax (Appeals) [“CIT(A)"] erred in confirming levy of penalty of a\nsum of Rs.38,232/- under section 271(1)(c) of the Income tax\nAct, 1961 (hereinafter referred as “the Act”) by the Assessing\nOfficer vide his order dated 02.03.2022 passed under section\n271(1)(c) of the Act.\n2. The appellant submits that the Ld. CIT (A) ought to have deleted\nthe said penalty on a confirmation of notional deemed rent in\nrespect of one property i.e. Flat No. 17B situated at Kalpana,\nNetaji Subhash Road, Marine Drive, Mumbai 400 002 by the\nAssessing Officer considering the order of the ITAT in appellant's\nown case for Assessment Year 2013-14 wherein such notional rent\naddition was deleted by the ITAT.\n3. The Ld. CIT (A) erred in the facts and circumstances of the case in\nconfirming a penalty by relying on the fact that the appellant has\nnot challenged the assessment in quantum appeal. The Ld. CIT\n(A) ought to have appreciated that assessment proceedings and\npenalty proceedings are entirely distinct from each other and the\nmere fact that the quantum addition was not agitated in appeal\ncannot ipso facto conclude that penalty ought to be levied. Further\nin the peculiar facts of the case, it would not have been cost\neffective to prefer an appeal against the said assessment order\nunder section 143(3) r.w.s.254 of the Act.\n4. The Ld. CIT (A) has not considered the fact that Hon'ble ITAT has\nvide its order dated 17.02.2021 accepted all 3 units as a single\nunit in the appellant's own case for Assessment Year 2013-14\nwhere there were no changes in facts. The appellant submits that\nwhile the said order has not been followed in the set aside\nquantum assessment order under section 143(3) r.w.s.254 of the\nAct, yet certainly there can be no ground for levy of penalty under\nsection 271(1) (c) of the Act for the assessment under appeal\nwhere the facts are identical.\n5. The Ld. CIT (A) has erred in facts and circumstances of the case in\nnot considering the settled judicial position that a mere addition\ndoes not mean that there is a concealment of income or furnishing\nany inaccurate particulars.\"\n4. The relevant facts in brief are that as under:\n4.

However, in appeal preferred against above order passed by the\nCIT(A), the Tribunal, vide Common Order dated 01/07/2019 [passed\nin for the Assessment Year 2010-2011, ITA\nNo.7215/Mum/2016 for the Assessment Year 2011-2012 and ITA\nNo.7217/Mum/2016 for the Assessment Year 2012-2013]\ngranted\nrelief to the Assessee holding as under:\n\"8. We have heard both the counsel and perused the records.\nLearned counsel referred to the additional ground and also\nsubmitted that a decision of ITAT in the case of co-owner Smt.\nVidyaben Bhagwan Kotak in respect of the same flats in which\nshe had half shareholding in Flat No. 16 & 18 at Kalpana, in\nwhich the ITAT at paragraph 10 of the said order has accepted\nthat these flats are duplex flats used by the assessee having\ncommon staircase and hence it was held that they can be\nconsidered as one house which is adjacent to each other. This\nwas so held by the ITAT vide order dated 20.9.2017 in ITA No.\n7182 to 7186/Mum/2016.\n9. Now we note that this is an additional evidence which was\nnot placed before the authorities below. Though the Revenue has\nchallenged the additional ground and raised ground that how flat\nNo. 16 & 18 be considered as combined single unit. Further the\nRevenue has also challenged that earlier assessee had claimed\nFlat No. 17B as self occupied property.\n10. Upon careful consideration, we find that since there is an\nITAT order in the case of co-owner, which has not been set aside\nby Hon'ble Jurisdictional High Court, we deem it appropriate to\nremit this issue to the file of the Assessing Officer. The Assessing\nOfficer shall consider this additional evidence and decide\naccordingly. We further hold that there is no estoppel against the\nassessee in now offering self occupied property and deemed let\nout property in a different manner than that offered initially.\nAssessee is very much entitled to plan its taxation so as to\nminimize the burden so long as the method is not colourable.\nHere the approach of the assessee can by no stretch of\nimagination be said to be a colourable device.”\n4.

Pursuant to the above directions issued by the Tribunal, the Assessing\nOfficer passed Assessment Order, dated 27/09/2021, under Section\n143(3) read with Section 254 of the Act making addition of Notional\nRental Income of INR.4,15,598/- (computed as under):\nFlat.\nSq. Mt. pertained\nto the assessee\nSq. Ft. pertained to\nthe assessee\nLettable Value\nper month\nAnnual Lettable\nValue\nFlat 17B\n91.93\n989.52\n49,476\n5,93,712\nFlat 16\nSOP\nSOP\nSOP\nSOP\nFlat 18\nSOP\nSOP\nSOP\nSOP\nTotal\n5,93,712\nLess Standard\nDeduction @30%\n1,78,114\nNotional Rental Income\n4,15,598\nIt is admitted position that the Assessee did not challenge the above\naddition made by the Assessing Officer in appeal before the CIT(A).\n4.

While passing the above Assessment Order, dated 27/09/2021, the\nAssessing Officer also initiated penalty proceedings under Section\n271(1)(c) of the Act which culminated into passing of the Penalty\nOrder, dated 02/03/2022, whereby penalty of INR.38,232/- was\nlevied on the Assessee under Section 271(1)(c) of the Act.\n4.

In appeal preferred by the Assessee challenging the levy of above\npenalty, the CIT(A) decline to grant any relief and dismissed the\nappeal.\n4.

Therefore, the Assessee has preferred the present appeal before the\nTribunal on the grounds reproduced in paragraph 3 above.\n5. We have considered the rival submission from both the sides and\nhave perused the material on record.\n6. The addition on the basis of which penalty has been levied pertains to\naddition of Notional Rental Income made by the Assessing Officer vide\nAssessment Order, dated 27/09/2021. On perusal of the same it is\nevident that the during the relevant previous year Assessee claimed\nto be co-owner of Flat 16 and Flat 18 and complete owner of Flat 17B.\nBefore the Assessing Officer the Assessee had claimed that the three\nflats constituted a single residential house property which was self-\noccupied. The aforesaid submission of Assessee was rejected by the\nAssessing Officer. Flat 16 and Flat 18 were accepted by the Assessing\nOfficer to be constituting a single residential house property which\nwas self occupied by following the decision of the Tribunal in the case\nof other Co-owner of Flat 16 and Flat 18 (i.e., Smt. Vidyaben\nBhagwan Kotak) passed in ITA\nNo.7182/Mum/2016 to ITA\nNo.7186/Mum/2013, for the Assessment Year 2006-2007 to 2010-\n2011, dated 20/03/2017. However, the Assessing Officer concluded\nthat the third flat (i.e. Flat 17B) was a separate house property.\nTherefore, the Notional Rental Income of INR.4,15,598/- was brought\nto tax in the hands of the Assessee.\n7. In appeal preferred by the Assessee before CIT(A) challenging the\nlevy of penalty, it was contended on behalf of the Assessee that while\nadjudicating appeal for the Assessee pertaining to Assessment Year\n2013-2014, the Tribunal had accepted the contention of the Assessee\nthat all the three flats constituted a single unit and had deleted the\nNotional Rental Income added in the hands of the Assessee vide order\ndated 17/02/2021 passed in ITA No.5245/Mum/2019. Therefore, even\nthough the Assessee had not challenged the addition of Notional\nRental Income made by the Assessing Officer for the Assessment Year\n2010-2011, the issue stood decided in the favour of the Assessee on\nmerits and therefore, the Assessing Officer had erred in levying\npenalty under Section 271(1)(c) of the Act. However, the CIT(A)\nnoted that for the Assessment Year 2010-2011, the Tribunal had, vide\ncommon order dated 01/07/2019 [passed in for\nthe Assessment Year 2010-2011, ITA No.7215/Mum/2016 for the\n Assessment Year 2011-2012 and ITA No.7217/Mum/2016 for the\n Assessment Year 2012-2013], set aside the issue back to the file of\nAssessing Officer with the directions to decide the same afresh and\nhad not given any directions to the Assessing Officer to treat all the\nthree flats as single residential unit. Thus, Learned CIT(A) rejected\nthe aforesaid contention of the Assessee and confirmed the penalty\nlevied under Section 271(1)(c) of the Act.\n8. We note that the CIT(A) had placed reliance upon the directions\nissued by the Tribunal vide common order dated 01/07/2019 passed\nin the first round of litigation. In this regard we find that while passing\nthe aforesaid order the Co-ordinate Bench of the Tribunal had noted\nthat the Assessee had placed additional evidence and raised additional\ngrounds contending that Flat No.16 and Flat No.18 should be consider\nas combined single unit. This was opposed by the Revenue on the\nground that Assessee had claimed that Flat No.17B was self-occupied\nproperty. Keeping in view of the aforesaid facts, the issue was\nremitted to the file of Assessing Officer to consider the additional\nevidence and for adjudicating the issue accordingly. The Tribunal had\nspecifically observed that the Assessee was entitled to plan its\ntaxation so as to minimize the burden so long as the method is not\ncolourable. During the assessment proceedings conducted under\nSection 143(3) read with Section 254 of the Act,, vide letter dated\n21/09/2021, the Assessee had made following submissions\n(reproduced in paragraph 6 of the Assessment Order, dated\n27/09/2021, before the Assessing Officer:\n\"6. In response to this notice, the assessee vide letter dated\n21.09.2021 has submitted as under-\n“I am in receipt of a notice under section 142(1) of the\nIncome tax Act, 1961 for Assessment Year 2010-11 as the\nHon'ble ITAT had set aside the matter to the file of\nAssessing Officer vide its order dated 01.07.2019. In\nresponse to above notice, I have to submit as under:\n1. I am the owner of the following immovable\nproperties for the year under consideration\n(a) 100% share in flat No. 178 situated at\nKalpana, 96/B, N. Subhash Road, Marine\nDrive, Mumbai 400 002.\n(b) 50% share in Flat No. 16 situated at\nKalpana, 96/B, N. Subhash Road, Marine\nDrive, Mumbai 400002.\n(c) 1/3rd share in Flat No. 18 situated at\nKalpana, 96/B, N. Subhash Road, Marine\nDrive, Mumbai 400 002.\n2 During the year under consideration, the ITAT in\nthe ITA no. 7215 to 7217/Mum/2016 under a\nconsolidated order had accepted the fact that the 3\nflats are to be considered as one single unit and\ntreated as SOP. However, since there was some\nadditional evidence filed during the course of the\nhearing, the case has been restored to the\nAssessing Officer for verification which is the case\nbefore you.\n2. For the subsequent year 2013-14 in my own case\nwhere there was no additional evidence filed, the\nITAT has decided the same on similar issue in my\nfavour and held that all the aforesaid units are to be\nconsidered as one single unit and to be treated as\nSOP on the ground that the Kalpak Co-op housing\nSociety Ltd.-Kalpana has issued a certificate dated\n25/05/2018 and 06/07/2018 confirming the\nfollowing:\n(a) Flat no. 16 and 18 are duplex flats on the\n5th and 6th floor respectively having a\ncommon staircase inside the flat.\n(b) Flat No. 17B is adjacent to flat no 16 on the\n5th floor and is a single unit.\nAccordingly, all the three flats are a single unit\nand to be treated as SOP.\nSimilar view has been upheld by the ITAT in the case of\nSmt. Vidyaben Bhagwan Kotak in ITA Nos 7182 to\n7156/Mum/2016, co-owner of the flats 16 and 18 that\nthese flats have a common staircase inside the premises\nand to be considered as one house.\nIt is therefore submitted that based on the decision of the\nITAT for the subsequent years in my own case and in the\ncase of the co-owner, all the aforesaid flats be treated as\none single unit and to be considered as a SOP and not\ncompute any notional rental income in my hands.\nIn light of the above please find enclosed the following\ndocuments:\n1. ITAT Order dated 01.07.2019 where in para 10 of\nthe Order, ITAT had set aside the matter to the\nAssessing Officer as per Annexure 1.\n2. ITAT Order dated 17.02.2021 in assessee's own\ncase for Assessment Year 2013-14 where the\nHon'ble ITAT has decided similar ground in\nassessee's favour and directed the Assessing Officer\nto delete disallowance as per Annexure 2.\n3. ITAT Order dated 20.09.2017 in the case of Smt.\nVidyaben Bhagwan Kotak -Co-owner of both\nproperties where in para 10 of the Order, ITAT had\ndirected the Assessing Officer to delete the addition\nmade in respect of one of the Flat No. 18 for the\n Assessment Years from 2006-07 to 2009-10 as per\nAnnexure 3.\n4. Certificate dated 25.05.2018 issued by the Kalpak\nCo-operative housing Society Ltd., Kalpana\ncertifying that Flat No. 16& Flat No. 178 are one\nsingle unit and the same have been recorded in the\nsociety as flat no. 16 as per Annexure 4.\n5. Certificate dated 06.07.2018 issued by the Kalpak\nCo-operative housing Society Ltd., Kalpana\ncertifying That Flat No. 16& 18 situated at 5th and\n6th floors respectively and are used as duplex flats\nhaving a common staircase attached to both floors\ninside the said premises and therefore adjacent to\neach other as per Annexure 5.\"\n9. We have perused the decision of the Tribunal, in the case of the\nAssessee for the Assessment Year 2013-2014 [in ITA\nNo.5245/Mum/2019, dated 17/02/2021], and we find that the Tribunal\nhad accepted the contention of the Assessee that Flat 16, Flat 18 and\nFlat 17B constituted as a single unit. The relevant extract of the\ndecision of the Paragraph read as under:\n\"2 The only issue to be decided in this appeal is with regard to\ndetermination of rental income for flat Nos.16,18 and 17B held\nby the assessee. The interconnected issue involved therein is\nwhether the flat Nos.16 & 17B situated in 5th floor, flat No.18\nsituated in 6th Floor could be considered as a single unit or\nseparate unit.\n3. We have heard rival submissions and perused the materials\navailable on record. We find that assessee is an individual\nearning income from dividend and interest on fixed deposits with\nbanks. The assessee filed her original return of income for the\nΑ.Υ.2013-14 on 25/07/2013 declaring total income at\nRs.75,06,520/-. The assessee is in possession of the following\nproperties:\na) Flat No.17B at Kalpana, 96, Netaji Subhash Road,\nMumbai.\nb)\n1/3 undivided share in Flat No.16 at Kalpana, 96, Netaji\nSubhash Road, Mumbai.\nc) 1/3 undivided share in Flat No.18 at Kalpana, 96, Netaji\nSubhash Road, Mumbai.\n3.

The assessee submitted vide her letter dated 16/12/2015 before\nthe Id. AO that flat Nos.17B, 16 & 18 are to be considered as\none single residential unit and not to be considered separately.\nThe assessee also submitted that property is extremely old and\nnot easily accessible from the main road and accordingly, it\nwould be difficult to provide annual lettable value for this\nproperty. The assessee also pleaded that all the three properties\nshould be considered as one single unit and accordingly, to be\ntreated as self-occupied and hence, no rental income on notional\nbasis could be assessed in respect of the same.\n3.

The Id. AO however, did not consider the contentions of the\nassessee and proceeded to make notional addition of rental\nincome under the head income from house property as under:-\n50% share in flat No. 16 Kalpana\n33.37% in flat No.18 Kalpana\nRs.11,43,096/-\nRs.4,10,292/-\n3.