2017 (6) TMI 648 - AT - Income Tax

Income from house property - Annual letting value determined by the AO based on previous year income - applicability of municipal rate u/s 23(1)(c) - Held that - As noticed that the assessee has, for the first time, raised a new legal contention before the Tribunal that the ALV of the impugned property is determinable u/s 23(1)(c) of the Act. The tax authorities did not have occasion to examine the above said claim of the assessee. - matter remanded back - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Determination of Annual Letting Value under section 23(1)(a) of the Income Tax Act.
2. Applicability of section 23(1)(c) for properties remaining vacant during the assessment year.

Issue 1: Determination of Annual Letting Value under section 23(1)(a) of the Income Tax Act.
The appellant, owning a commercial property, contested the fair rental value determined by the Assessing Officer (AO) based on the monthly rent declared in the preceding year. The AO assessed the fair rental value at a higher amount than declared by the appellant. The Commissioner of Income Tax (Appeals) upheld the AO's decision, leading to the appellant's appeal. The appellant argued that the property had been let out in the preceding and succeeding years but remained vacant during the assessment year. The appellant claimed that section 23(1)(c) should apply, resulting in a NIL Annual Letting Value. Citing a precedent, the appellant sought a reevaluation of the AO's decision. The Departmental Representative contended that the AO's assessment under section 23(1)(a) was justified, emphasizing that the property was let out in the succeeding year at a lower amount. The Tribunal observed the appellant's new legal contention and directed the AO to reexamine the claim, setting aside the CIT(A)'s order for further assessment.

Issue 2: Applicability of section 23(1)(c) for properties remaining vacant during the assessment year.
The appellant's argument centered on the application of section 23(1)(c) due to the property remaining vacant throughout the assessment year. The appellant's representative relied on a specific case law to support the contention that the Annual Letting Value should be considered as NIL under section 23(1)(c). In response, the Departmental Representative opposed the application of res judicata to income tax proceedings and supported the AO's initial assessment under section 23(1)(a). The Tribunal acknowledged the significance of the appellant's legal argument, noting that it had not been previously examined by the tax authorities. Consequently, the Tribunal instructed the AO to review the appellant's claim in light of section 23(1)(c) and make a decision in accordance with the law. Ultimately, the appeal was treated as allowed for statistical purposes, with the Tribunal's decision issued on 7th June 2017.