1986 (12) TMI 77 - AT - Income Tax

Rectification of Income Calculation: Tribunal Upholds Assessee's Objections

The judgment addressed issues of rectification under section 154 for including capital gains in computing income from self-occupied property. The Income ... - Issues:1. Rectification under section 154 regarding inclusion of capital gains in the computation of income from self-occupied property.2. Ex parte disposal of appeal by the Commissioner(A) due to non-compliance.3. Interpretation of the definition of 'income' under section 2(24)(iv) to include capital gains.4. Assessment of income from self-occupied property under section 23(2) and the correctness of the order under section 154.Detailed Analysis:1. The judgment deals with the rectification under section 154 concerning the inclusion of capital gains in the computation of income from self-occupied property. The Income Tax Officer (ITO) issued a notice under section 154 to rectify the original assessment, considering that income from capital gains should also be included for determining the limit of 10 percent under section 23(2). The assessee objected, arguing that capital gains were deemed income and no mistake existed in the original order. However, the ITO proceeded with the rectification, leading to a recomputation of the income from self-occupied property based on the inclusion of capital gains.2. Another issue addressed in the judgment is the ex parte disposal of the appeal by the Commissioner(A) due to non-compliance by the assessee. Despite multiple adjournments and opportunities provided for submission of a written note, the appeal was disposed of ex parte by the Commissioner(A) as the assessee failed to attend the hearings, leading to a lack of representation.3. The interpretation of the definition of 'income' under section 2(24)(iv) to include capital gains was a crucial aspect of the judgment. The Commissioner(A) agreed with the ITO that capital gains fell within the definition of 'income' as per the said provision. This interpretation was significant in justifying the inclusion of capital gains in the computation of income from self-occupied property, despite the assessee's contention that capital gains were merely deemed income and not relevant for this purpose.4. The assessment of income from self-occupied property under section 23(2) was also analyzed in the judgment. The Tribunal acknowledged that capital gains had to be considered in the computation under section 23(2) as per section 2(24)(vi). However, it was noted that the ITO failed to determine the annual value of the self-occupied property as if it were let out, as required by law. Therefore, the Tribunal set aside the order under section 154, directing the ITO to follow the principles established by the Supreme Court in a relevant case for determining the annual value of the property and considering permissible deductions under section 24. The Tribunal also emphasized the necessity of hearing the assessee in this matter, ultimately deeming the appeal partially allowed for statistical purposes.