The annual value of a property for the purpose of income tax, for assessment year prior to Taxation Laws (Amendment) Act, 1975, should be determined by the standard rent under the Rent Act, even if the actual rent received by the landlord is higher.

( 1 ) BY this writ petition the petitioner assessee seeks quashing of the assessment order (Annexure P-4) dated February 28, 1975 passed by Income-tax Officer, PSC VII in respect of assessment year 1972-73 and notice of demand under Section 156 of the Income-tax Act, 1961. (Annexure P-5) of the same date issued pursuant thereto by the same authority asking the petitioner to pay the assessed amount of tax as per Annexure P-4.

( 2 ) THE petitioner claims to be the owner of the ground floor of the property No. 36, Faiz Bazar. Delhi. The construction of the building is said to have started in the year 1947-48 and was completed in or around 1949-50. It appears that on November 22,1951 the Rent Controller at the instance of the tenants fixed the standard rent of different portions of the house property standing on plot No. 35-36, Faiz Bazar, Darya Ganj, Delhi under Section 7 of the Delhi-Ajmer Merwara Rent Control Act, 1947. The petitioner claims that standard rent for his portion of the property came to be Rs. 1331. 00 per month as reflected in the return Annexure P-l filed by him for the assessment year 1972-73. It is not disputed that the actual rent of the property which the petitioner received from the tenants was Rs. 24,089. 00 per month. However, the petitioner claimed that house property was liable to tax on its annual value based on standard rent. Therefore, the petitioner claimed that a sum of Rs. 22,758. 00 [rs. 24,089. 00 (actual rent) - Rs. 1331. 00 (standard rent)] was not taxable. It appears that the Income-tax Officer by the impugned order, Annexures P-4, did not agree with the contention of the petitioner and calculated the annual value of the property on the basis of the actual rent received by the petitioner for the house property. The petitioner has impugned the assessment order, Annexure P-4 as well as notice of demand Annexure P-5 issued under Section 156 of the Income-tax Act, 1961.

( 3 ) LEARNED counsel appearing for the petitioner submitted that the annual value of the house property has to be taken to be the sum for which the property might reasonably be expected to be let from year to year and the computation has not to be made on the basis of actual rent received by the petitioner.

( 4 ) IT is a common ground that income from house property chargeable to tax is computable under Section 22 of the Income-tax Act, 1961 which provides that annual value of property consisting of any buildings or lands appurtenent thereto, of which the assessee is the owner. shall be chargeable to income-tax under the head "income from house property". The mode of determination of annual value as given under sub-section (1) of Section 23. as it existed at the material time. is as follows:-

"for the purpose of section 22, the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year: Provided that where the property is in occupation of a tenant, the taxes levied by any local authority in respect of the property shall, to the extent such taxes are borne by the owner, be deducted in determining the annual value of the property: Provided further that in the case of a building comprising one or more residential units the erection of which is begun and completed after the 1st day of April, 1961, the annual value as determined under this sub-section shall, for a period of three years from the date of completion of the building, be reduced by a sum equal to the aggregate of - (i) in respect of any residential unit whose annual value as so determined, does not exceed six hundred rupees, by the amount of such annual value; (ii) in respect of any residential unit whose annual value as so determined exceeds six hundred rupees, by an amount of six hundred rupees so, however, that the income in respect of any residential unit is in no case a loss. "

( 5 ) LEARNED counsel for the petitioner submitted that the aforesaid Section 23 of the Income-tax Act is