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2011 (3) TMI 1035 - AT - Income TaxRevision u/s 263 - AO had not made addition on account of notional interest on the interest free deposits obtained by the appellant under section 23(1)(a) - CIT directed AO to levy penalty under section 271(1)(c) in his order of revision under section 263 - Held that:- As per the provisions of section 23(1), the ALV has to be determined by taking into account the sum for which the property might reasonably be expected to let from year to year under section 23(1)(a) and then if the property is let out then the AO has to first take into account the actual rent received or reasonably by the owner of the property. Thus, as per the provisions of section 23(1), AO has to first determine the fair rent under section 23(1)(a) and then take into account the actual rent received or receivable by the assessee under section 23(1)(b) only thereafter the AO has to compare the fair rent under section 23(1)(a) with the actual rent received or receivable as per the section 23(1)(b). If the Assessing Officer found that the actual rent is excess of the sum as determined under section 23(1)(a) then the ALV of the property would be actual rent. Since, in the case in hand, AO has not at all shown any exercise for computation of the ALV of the property by adopting the method as provided under section 23(1). The exercise of determination of the ALV as per the section 23(1) includes two steps, first determination of fair rent under section 23(1)(a) and second actual rent received or receivable by the owner. For computation of the sum for which the property might reasonably be expected to let, the AO has to take into account various factors. As it is settled by the various decisions by the Hon'ble Supreme Courts and High Courts that fair rent under section 23(1)(a) may be determined by considering the Municipal Value or standard rent of the property as the case may be. Therefore, on merits requires to be verified and examined properly by taking into account various factors requires for determination of the ALV as prescribed under section 23(1) of the Act. The CIT while passing the revision order u/s 263 has not taken into account all the aspects for computation of the ALV as prescribed under section 23(1). Since the Municipal value/standard rent of the property in question is not available on the record, therefore, the issue on merits cannot be adjudicated. Accordingly set aside the issue to the record of the AO for verification, examination and adjudication on the issue of ALV as per law. The revision order passed by the CIT under section 263 is modified - appeal of the assessee is partly allowed for statistical purposes.
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