2017 (10) TMI 169 - AT - Income Tax

Income tax leviable on a notional basis on ALV - Held that - A perusal of the assessment orders dated 7.5.2013 and 27.5.2013 further shows that the AO also has not examined the issue in detail but has simply recomputed the assessee s income in terms of the earlier assessment orders passed u/s 143(3) of the IT Act, 1961. Therefore, it is our considered opinion that it is a fit case to be restored to the file of the AO for re-examining the entire issue in light of the judgment in the case of Ansal Housing Finance & Leasing Co. Ltd. (2012 (11) TMI 323 - DELHI HIGH COURT) and also after taking into account the submissions of the assessee in this regard. Needless to say that the AO will allow due opportunity to the assessee of being heard.

Summary

Issues:
- Taxability of notional ALV of unsold properties as income from house property.
- Assessment based on legal plea vs. quantum of ALV and assessability of property.
- Deletion of addition on notional ALV in various properties.
- Department's contentions against deletion of additions.
- Relief granted by CIT(A) and its basis.
- High Court judgment on taxability of ALV.
- Decision of the ITAT and restoration of the case to AO for re-examination.

Taxability of Notional ALV:
The case involved appeals by the department against the CIT(A)'s order regarding the taxability of notional Annual Letting Value (ALV) of unsold properties as income from house property for Assessment Years 1988-89 to 1995-96. The Assessing Officer had included ALV of unsold properties as income, which the CIT(A) and ITAT initially deleted based on the legal plea that notional ALV of unsold properties cannot be assessed as income from house property. However, the Hon'ble Delhi High Court reversed this decision, holding that ALV of unsold flats is taxable. The ITAT noted this and allowed the department's appeals for statistical purposes.

Assessment and Deletion of Additions:
The department contested the deletion of additions on notional ALV in various properties, including car parking spaces, basement areas, and unsold spaces in different buildings. The CIT(A) had deleted these additions based on different grounds, such as the purpose of the space and reports from Valuation Officers. However, the ITAT found that the CIT(A) did not consider the High Court judgment properly and restored the case to the AO for re-examination.

Relief Granted and High Court Judgment:
The CIT(A) had granted relief to the assessee in some instances, considering factors like the purpose of the space and absence of occupancy certificates. The High Court's judgment emphasized that ALV of unsold properties is taxable, irrespective of actual income received, based on reasonable letting value. The ITAT acknowledged the CIT(A)'s findings but highlighted the need for a reassessment in light of the High Court's ruling.

Conclusion:
Ultimately, the ITAT allowed the department's appeals for statistical purposes, directing a re-examination by the AO considering the High Court judgment and the submissions made by the assessee. The case highlighted the taxability of notional ALV of unsold properties and the importance of legal precedents in determining tax liabilities.