Deemed annual value u/s 23 can not be estimated for old, dilapidated house not habitable

Deemed Annual value of old dilapidated house not habitable set aside for verification as deemed provision u/s 23 not applicable in such conditions

ABCAUS Case Law Citation:
ABCAUS 3025 (2019) (06) ITAT

The appeal was filed by assessee against the order of CIT(A). One of the issue was with regard to the annual letable value of the house property which the assessee stated to have inherited from his mother on which the AO has calculated the annual letable value invoking sections 22 and 23 of the the Income Tax Act, 1961 (the Act).

According to assessee, the house was in dilapidated condition in a village which was not habitable at all and, therefore, could not be let out to anybody so, therefore, it was pleaded before the AO that by invoking the deeming provision it should not be taxed.

However, the AO did not agree and he estimated the annual letable value at Rs. 1,20,000/- per annum and after having given the standard deduction of 30% on it made an addition of Rs.84,000/-.

On appeal, the CIT(A) confirmed the action of AO.

The Tribunal noted that the said house property was inherited by the assessee in his native village which was duly shown in his Balance Sheet. Since the assessee had another residential house, the Assessing Officer (AO) invoked section 22 and 23 of the Act, estimated the notional annual letable value.

The Tribunal observed that as submitted by the appellant assessee, the house in question was an old house, which was in a dilapidated condition and so it was not habitable. Therefore, according to the assessee, the question of letting out of the property did not arise.

The Tribunal also noted that no inquiry was carried out by the AO before estimating the annual letable value of the house despite the assessee pointed out this fact to the AO that the house in question was an old house, which was in a dilapidated condition and so it was not habitable and therefore, the question of letting out of the property did not arise.

The Tribunal set aside the order of CIT(A) and restored the matter to the file of AO to verify the contention of the assessee that the house in question was in a dilapidated condition and not habitable.

It was instructed that if the AO after making enquiries finds the contention of the assessee to be correct then no deemed provision of sec. 22 read with section 23 should be saddled on the assessee. However, if the contention of the assessee failed and the house was found to be habitable then the AO shall make reasonable annual letting value considering the location and rent which the house could fetch in that locality in accordance to law after hearing the assessee.

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