Annual rental value dispute under section 23(1) remitted for fresh verification of the portion of property actually let out.

Annual rental value under section 23(1) depended on the factual extent of the property let out, and the revenue's assumption that the entire building was leased was not accepted without verification. The assessee claimed that only the third floor had been let out, while the lease deed was relied on to assess the whole premises. As the claim had not been properly tested through physical inspection or other supporting material, fresh factual inquiry was required. The matter was remitted to the Assessing Officer for re-adjudication after verification of the portion actually let out.

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Issues: Whether the annual rental value of the assessee's property was correctly estimated on the basis that the entire building had been let out, or whether the matter required fresh verification of the assessee's claim that only a part of the building was let out.

Analysis: The dispute turned on the factual extent of the property let out and the correctness of the annual rental value determined under section 23(1) of the Income-tax Act, 1961. The assessee's case was that only the third floor had been leased, while the revenue authorities proceeded on the basis that the entire premises had been let out, relying principally on the lease deed. Since the claim that only a part of the building was let out had not been properly verified by physical inspection or by examining supporting circumstantial material, further factual inquiry was considered necessary.

Conclusion: The issue was remitted to the Assessing Officer for fresh adjudication after physical verification and consideration of other evidence; the addition was not finally sustained at this stage.

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