1992 (6) TMI 69 - AT - Income Tax

Annual Value, Applied To, Income From House Property, Income From Property, Income Tax Act, Let Out, Mistake Apparent From Record

Summary

Issues Involved:

1. Whether the rectification orders under section 154 of the Income-tax Act were justified.
2. The applicability of section 23(2) of the Income-tax Act to the computation of income from self-occupied property.
3. The interpretation of "residence" under section 23(2) and its application to part of a house.
4. Whether the issue is debatable and thus not rectifiable under section 154.

Detailed Analysis:

1. Justification of Rectification Orders under Section 154:

The appellant argued that the consistent method of computing income from self-occupied property had been accepted by the Revenue in previous years, and thus, the initiation of rectification proceedings under section 154 was without basis. The appellant contended that the computation method had become final for the assessment year 1984-85 as it was accepted by the CIT (Appeals) and no appeal was filed by the department. However, the Revenue argued that there is no estoppel or res judicata in tax matters, and a mistake should not be allowed to continue. The Tribunal upheld the Revenue's action under section 154, stating that the mistake was apparent and glaring from the face of the record.

2. Applicability of Section 23(2) to Self-Occupied Property:

The appellant computed the notional income from the self-occupied portion of the property at 10% of the property income, which was accepted by the Revenue initially. However, the ITO later discovered that, as per section 23(2), the amount should have been 10% of the other income excluding property income. The Tribunal noted that the provisions of section 23(2) required the annual value of the self-occupied property to be determined first as if it were let out, then reduced by one-half or Rs. 3,600, whichever is less, and any excess over 10% of the total income (excluding property income) should be disregarded. The Tribunal found that the appellant's computation was contrary to these provisions and upheld the rectification.

3. Interpretation of "Residence" and Application to Part of a House:

The appellant argued that the proviso to section 23(2) did not apply to cases where only part of the house was self-occupied. However, the Tribunal rejected this argument, stating that the word "residence" in section 23(2) signifies a place where the owner or his family resides, even if it is part of the house. The Tribunal emphasized that prior to 31-3-1987, there was no concept of "house or part of house" in section 23(2), and the section applied to any dwelling place used by the owner for residence. The Tribunal referred to the Orissa High Court's interpretation of "house" as a dwelling place, which could be part of a house.

4. Debatable Issue and Rectifiability under Section 154:

The appellant contended that the application of the proviso to section 23(2) was a debatable issue and thus could not be rectified under section 154. The Tribunal disagreed, stating that the mistake in the appellant's computation was a mistake of law that was apparent and glaring from the record. The Tribunal held that the provisions of section 154 were rightly invoked by the Revenue as there was no debatable issue regarding the legal position.

Conclusion:

The Tribunal dismissed the appeals, confirming the orders of the CIT (Appeals) and upholding the rectification orders under section 154 of the Income-tax Act. The Tribunal concluded that the appellant's computation method was contrary to the provisions of section 23(2), and the mistake was apparent and rectifiable under section 154. The Tribunal also clarified that the word "residence" in section 23(2) applied to any dwelling place used by the owner, even if it was part of a house.