Rental Income Offered for Taxation in One Assessment Year Cannot Taxed Again: ITAT Remits Matter to AO [Read Order]

The Surat bench of Income Tax Appellate Tribunal (ITAT) has held that where a rental income is offered for taxation in one assessment year, the same shall be reduced by the Assessing Officer from the income of another Assessment year. The bench remitted the case to the file of the AO to verify the claim of the assessee.

Read more: Rental Income can’t be brought to Tax When Assessee not entered into any Lease Agreement with Tenants: ITAT 

The assessee filed a revised return of income declaring a total income of ₹1,09,93,760 which was selected for scrutiny under CASS. On perusal of 26AS and details filed by assessee, it was found by the Assessing Officer that there is a mismatch between the receipts as per 26AS and the return of income filed by the assessee. 

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The assessee had shown a rent of ₹9,41,930 but as per 26AS, the rent received from M/s. Ashish Publicity was ₹17,20,000 on which Tax was Deducted at Source (TDS). Hence, the AO added ₹7,78,070 to the total income of the assessee.

Read more: Rental Income earned from Lease of building taxable under the head “Income from Business and Profession”: ITAT

An appeal was filed before the Commissioner of Income Tax (Appeals) [ CIT(A) ]. The assessee submitted before the CIT(A) that the TDS return contained details of rent received from Ashish Publicity for two years at a time and therefore the amount of ₹17,20,000 is reflected in Form 26AS.

It was submitted that this amount includes rent of ₹8,00,000 for AY 2016-17 and ₹9,20,000 for AY 2017-18. The CIT(A) did not accept the contentions of the assessee because it failed to furnish any lease agreement with M/s Ashish Publicity to support its claim and hence the appeal was dismissed. Thus, an appeal was filed before the ITAT.

The authorized representative of the assessee, Ramesh Malpani, submitted that the rent of two years was paid by Ashish Publicity and the same was offered in AY 2016-17 (₹8,00,000) and 2017-18 (₹9,20,000). He submitted that the matter may be remitted to the AO for verification of assessee’s claim. 

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The Senior Departmental Representative for the revenue, Mukesh Jain, relied on the findings of the lower authority.

Read more: Rental Income received from letting out property is taxable under head “Income from House Property”: ITAT allows deduction u/s 24(a) of Income Tax Act

The bench comprising Pawan Singh and Bijaynanda Pruseth set aside the order passed by the Assessing Officer and remitted the matter to the file of the AO to verify the claim of the assessee that whether the rent of ₹8,00,000 was shown by assessee in AY 2016-17.

The bench held that if the amount of ₹8,00,000 was offered for taxation in AY 2016-17, the AO should reduce the said rental income from the income of AY 2017-18. The bench then relied on Rule 37BA(3) of Income Tax Rules, 1962 as per which the credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable. Hence, the AO was directed to withdraw the credit of TDS claimed on total rent of ₹17,20,000 in the current assessment year after verification in respect of the rent offered for taxation for the preceding AY 2016-17.  

The assessee was directed to furnish all the details in support of his claim before the AO. Thus, the appeal was allowed.

To Read the full text of the Order CLICK HERE

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