assessee is individual. assessment was completed under s. 143(3) on 10th Sept., 1979 following reopening of original ex parte assessment made in proceedings under s. 146. In assessment so completed on 10th Sept., 1979, income from self-occupied property of assessee was taken at Rs. 958 as declared by assessee in statement of income. This was on basis of restricting ALV of property (E-12, Greater Kailash) to 1/10th of partial income excluding capital gains. Subsequently, ITO came to understand that, for working out total income for purpose of s. 23(2), Income from capital gains also had to be included for working out limit of 10 per cent. He, therefore, issued notice under s. 154. assessee objected to such rectification under s. 154 on ground that income from capital gains was deemed income and hence there was no mistake apparent in original order. ITO rejected this contention and recomputed income from self-occupied property. In above recomputation, ITO recorded following: (i) Capital gains assessable this year work out to Rs. 30,958. (ii) house property in question was purchased by assessee during relevant previous year for Rs. 1,65,000. (iii) Working out return on said investment of Rs. 1,65,000 annual letting value would come to Rs. 13,750. On this basis, ALV for this year would come to Rs. 10,312 for 9 months. (iv) On basis of above ALV, income from SOP subject to limit of 10 per cent comes to Rs. 10,312. Allowing deduction of 1/6th for repairs therefrom, what is to be assessed is Rs. 8,593. ITO, therefore, substituted figure of Rs. 958 originally taken by above recomputed figure of Rs. 8,593. assessee appealed. Commissioner(A) records that at hearing fixed on 25th Sept., 1984, Shri M.L. Khanna, Advocate, attended and hearing stood adjourned to 29th Sept., 1984 for submission of written note; that none attended on that date, that case was fixed for rehearing on 15th Nov., 1984, but there was no compliance on that date also. In these circumstances, Commissioner(A) disposed of appeal ex parte. Commissioner(A) took note of assessee's contention that capital gains represented merely deemed income and hence was not relevant here. He, however, agreed with ITO that in light of s. 2(24)(iv) capital gains were also included in definition of 'income' and in this view confirmed ITO's action. assessee is in further appeal. We have heard both Shri M.L. Khanna, ld. counsel for assessee and Shri D.K. Sharma, departmental representative. Though objections were taken to effect that assessee was not given reasonable opportunity of being heard by Commissioner(A), on enquiry it was seen that there was no substance in such objections. We would, therefore, proceed to consider assessee's objection on merits. On this aspect, Shri Khanna submitted that this was not matter for s. 154. He pointed out that in terms of s. 23(2), income from self-occupied property had to be determined first. If it was more than 10 per cent of other income, then only such 10 per cent was to be adopted. ITO not having carried out this exercise, Shri Khanna's contention was that order under s. 154 stood vitiated and should be vacated. departmental representative's case was that authorities below were correct in their orders. In our view, there was certainly mistake apparent from record. In view of s. 2(24)(vi), capital gains had also to be included in computation under s. 23(2). This not having been done, ITO was entitled to reconsider view under s. 154. However, he must first proceed to determine annual value of self-occupied property in same manner as if it had been let. For this purpose, he should keep in view principles laid down by Supreme Court in Sheila Kaushish vs. CIT (1981) 131 ITR 435 (SC). From annual value so determined, 1/2 has to be deducted subject to limit of Rs. 1,800 and, thereafter he should consider deductions permissible under s. 24. For this limited purpose, order of ITO is set aside. assessee shall also be heard in matter. appeal is deemed to be allowed in part for statistical purposes. *** R.K. SAWHNEY v. INCOME TAX OFFICER