2021 (9) TMI 526 - AT - Income Tax

Income from house property - Addition being notional annual lettable value u/s. 22 after allowing 30% standard deduction u/s. 24(a) - whether property in habitable condition? - computation of fair market value of the assessee's property - Assessee before the CIT(A) objected to the comparison between the property of the assessee situated in Sector 18 with a property in Sector-9 and argued that the two were not comparable - HELD THAT - In the facts of the present case in terms of the statutory remit, the ld. CIT(A) while arriving at the conclusion should necessarily have invited a remand report from the Assessing Officer in view of the fact that the power of remand no longer vested with the said authority. To this extent we find that the submissions of the Revenue relying upon Ground No. 2 raised in the present appeal is supported by the statutory provisions, hence, it has to be allowed and the order has to be set aside. As in the facts of the present case, this is a disputed fact and the specific property is not in a remote village and in a dilapidated condition but in Sector 18 in the midst of the City - the said case on the facts as they stand has no application. While so holding, we clarify that facts are in flux as the issue is being remanded back. We specifically required the ld. AR to address whether he is aggrieved by any specific observation in the impugned order which he would want us to address while remanding the issue back to the ld. CIT(A). The ld. AR was unable to address the query. As the relevant provisions of the Act and the evidences on record, we find that in the facts of the present case, it would be appropriate to set aside the issue back to the file of the CIT(A) with the direction to pass a speaking order in accordance with law after taking into consideration the relevant facts - assessee in his own interests is directed to place full facts and submissions before the said authority in order to facilitate a proper conclusion on facts. Said order was pronounced at the time of virtual hearing itself in the presence of the parties via Webex.

Summary

Issues Involved:
1. Legitimacy of CIT(A)'s decision to remit the matter back to the AO.
2. Assessment of deemed rental income under Section 22 of the Income Tax Act, 1961.
3. Comparison of fair market value of properties in different sectors.

Detailed Analysis:

1. Legitimacy of CIT(A)'s Decision to Remit the Matter Back to the AO:
The Revenue contended that the CIT(A) erred in remitting the matter back to the AO, violating the statutory remit of Section 251 of the Income Tax Act, 1961, which states that CIT(A) may confirm, reduce, enhance, or annul the assessment order but does not have the power to set aside the issue. The Tribunal agreed with the Revenue, noting that the CIT(A) should have invited a remand report from the AO rather than remanding the issue back. Consequently, the Tribunal set aside the CIT(A)’s order on this ground.

2. Assessment of Deemed Rental Income under Section 22 of the Income Tax Act, 1961:
The Assessee argued against the addition of ?6,15,440 as notional annual lettable value under Section 22, asserting that the property was in a dilapidated condition and unfit for habitation. The Assessee provided evidence such as the completion certificate from 1959 and the fact that the new buyer demolished the house. However, both the AO and CIT(A) found these arguments unsubstantiated, as no concrete evidence was provided to prove the house was uninhabitable. The Tribunal upheld this view, emphasizing that even dilapidated properties have an annual letting value and that the Assessee failed to provide sufficient evidence to support the claim of uninhabitability.

3. Comparison of Fair Market Value of Properties in Different Sectors:
The Assessee objected to the AO’s comparison of the property in Sector 18 with a property in Sector 9, arguing that Sector 9 is a high-profile area and not comparable to Sector 18. The CIT(A) acknowledged this argument but noted that the AO had not made necessary field inquiries to fetch the fair market value for the relevant period (FY 2015-16). The Tribunal agreed that the AO should have conducted proper inquiries and obtained the annual rental value for the year under consideration. The Tribunal directed the CIT(A) to reassess the fair rental value considering the location and period specifics.

Conclusion:
The Tribunal set aside the CIT(A)’s order due to the improper remand of the issue and directed a reassessment of the fair rental value by the CIT(A) after conducting necessary inquiries. The Assessee’s appeal was dismissed due to the lack of substantial evidence supporting the claim of the property being uninhabitable. The Revenue’s appeal was allowed, emphasizing the need for proper procedural adherence and evidence-based assessment.