VASWANI TRUST,MUMBAI vs. ITO 17(3)(5), MUMBAI

The assessee owned a commercial premises admeasuring 2775 Sq.ft. It did not declare any rental income there from during the year under consideration. The assessee submitted that the prorate rateable value fixed by Bombay Municipal Corporation is assessable u/s 23(1)(a) of the Act. However the AO noticed that the assessee has declared monthly rent of Rs.4,16,250/- in the immediately preceding year. Accordingly he determined the fair rental value of the property at Rs.69,93,000/- by determining the monthly rental value at Rs.5,82,750/- and accordingly assessed the same. The Ld CIT(A) confirmed the order passed by the AO and hence the assessee has filed this appeal.

The Ld A.R, however, took a new plea before me. He submitted that the AO was not justified in invoking the provisions of sec. 23(1)(a) of the Act in the instant case. He submitted that the impugned property had been let out in the preceding year and also in the succeeding year. It remained vacant only during the year under consideration. Accordingly he submitted that the provisions of sec. 23(1)(c) shall apply to the facts of the present case and hence the Annual letting value should be taken as NIL, as the property has remained vacant during the whole of the year. In this regard he placed reliance on the decision rendered by the co-ordinate bench in the case of M/s Informed Technologies India Ltd Vs. DCIT (2017 (2) TMI 744 – ITAT Mumbai.

On the contrary, the Ld D.R submitted that the assessee has let out the property in the succeeding year at lower amount. Further he submitted that the principles of res judicata shall not apply to the income tax proceedings. Accordingly he submitted that the AO has rightly determined the Annual letting value u/s 23(1)(a) of the Act.

I heard the parties and perused the record. I notice 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 assessee has also placed reliance on a case law referred above. I notice that the tax authorities did not have occasion to examine the above said claim of the assessee. Hence, I am of the view that the above said contention of the assessee requires examination at the end of the AO, since it goes to the root of the matter. Accordingly I set aside the order passed by Ld CIT(A) and restore all the issues to the file of the AO with the direction to examine the claim of the assessee and take appropriate decision in accordance with the law.

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.