2011 (4) TMI 1418 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are the taxation of notional income from a vacant property under the head "Income from House Property," determination of annual value of a property, and the authority of the Assessing Officer (AO) to entertain claims made by the assessee.

Taxation of Notional Income:
The assessee, a company dealing in shares and securities, acquired a property and let out a portion of it while the remaining portion remained vacant. The assessee declared a notional rental income for the vacant portion in the return of income. The Assessing Officer (AO) did not accept this declaration and treated the income under the head "Income from other sources."

Determination of Annual Value:
The assessee contended that the annual value of the property should be determined based on municipal rateable value or actual rent received, whichever is higher, as per section 23 of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) (CIT(A)) held that the AO should compute the income as per the law irrespective of the assessee's declaration. The CIT(A) considered various factors for determining the annual letting value of the vacant portion and concluded that the AO was correct in accepting the declaration made by the assessee.

Authority of the AO to Entertain Claims:
The Tribunal disagreed with the approach of the CIT(A) and held that the property should be considered as one unit for determining the annual value. The Tribunal directed the AO to accept the actual rent received as the criteria for determining the annual value, as it was higher than the municipal valuation. The Tribunal also stated that the AO can consider claims made by the assessee even without a revised return, citing relevant case law.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the AO to accept the plea of the assessee regarding the determination of annual value based on actual rent received. The Tribunal emphasized that tax liability must be determined in accordance with the law, and technicalities raised by the CIT(A) do not restrict the powers of the Tribunal in considering claims made by the assessee.