2019 (2) TMI 228 - AT - Income Tax

Determination of house property - Correct annual letting value - Application of the provisions of the section 23(1)(c) - Held that - A perusal of the assessment order clearly shows that the Assessing Officer has not pointed out how the Inspector has determined the fair rent at the rates determined by him. Obviously, when the municipal tax has been paid in respect of the particular property, the annual letting value on the vacant property can be determined only at the municipal retable value. The determination of the annual letting value as done by the AO is found to be erroneous and consequently, the issue is restored to the file of AO for re-adjudication by applying the provisions of the section 23(1)(c) of the Act to determine the correct annual letting value.- Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues:
Delay in filing appeal, Determination of rental income under section 23(1)(a) of the Act.

Delay in filing appeal:
The appeal was delayed by 121 days due to the misplacement of the order by an employee who was subsequently removed. The assessee filed an affidavit for condonation of delay, which was found to be reasonable and beyond the control of the assessee. The delay was condoned in the interest of natural justice, and the appeal was disposed of on merit.

Determination of rental income under section 23(1)(a) of the Act:
The main issue in the appeal was against the action of the CIT(A) upholding the determination of rental income by the Assessing Officer under section 23(1)(a) of the Act. The assessee, engaged in construction and letting out properties, had rented out the second floor of a building and had other floors vacant. The Assessing Officer determined a notional rental income for all floors based on an inspector's report. The assessee argued that the determination was erroneous and should have been done under section 23(1)(c) of the Act, following the principles laid down by the Supreme Court. The Tribunal found the Assessing Officer's determination to be erroneous as it did not explain how the fair rent was determined. The issue was restored to the Assessing Officer for re-adjudication under section 23(1)(c) to determine the correct annual letting value.

In conclusion, the appeal of the assessee was partly allowed for statistical purposes, and the order was pronounced in open court on 24th December 2018 in Chennai.