NAHALCHAND LALOOCHAND PVT. LTD,MUMBAI vs. DY.COMM OF INCOME TAX, CIRCLE 5(2) (1), MUMBAI

Assessment Year: 2017-18 paragraph 4 of the Assessment Order and relied upon the judicial precedents on which reliance was placed by the Assessing Officer while rejecting the contention of the Appellant and making addition of INR 1,30,46,556/- and also recent decision of the Tribunal in the case of DCIT Central CIT-4(2) vs. M/s Inorbit Malls Pvt. Ltd. (ITA No. 2220/Mum/2021, dated 11/10/2022).

We have considered the rival submissions and perused the 8. material on record. We note that the CIT(A) has disposed of the ground related to addition of INR 1,30,46,556/-, being deemed income from house property raising from unsold flats held as stock-in-trade by the Appellant, without dealing with the contentions raised by the Appellant. While in paragraph 5.1.1 to 5.1.4 the CIT(A) has summarized the contentions raised by the Appellant, the CIT(A) has failed to consider the same and has disposed of the grounds raised by the Appellant in paragraph 5.1.6 with the directions to the Assessing Officer to carry out verification. We note that the other grounds raised by the Appellant were also disposed by the CIT(A) by issuing similar directions for verification. The relevant extract of the decision of the CIT(A) read as under:

“5.1 Ground No. 1.1 to 1.5 are related to one another and challenge addition of Rs. 1,30,46,556 as deemed income from house property in respect of unsold flats. 5.1.1 In this regard, out of submission of the appellant (reproduced entirely in Para no. 4 supra following points being relevant for adjudication of this Ground are as under: xx xx 5.1.2 All the facts and circumstances of the case related to impugned addition of Rs. 1,30,46,556/- as deemed from 5 Assessment Year: 2017-18 house property in respect of unsold flats are duly considered. It is found that appellant closing stock as on 31.03.2017 included unsold flats. Further, these unsold flats were held as stock-in-trade of the business of the appellant (real estate business) and therefore, any rental income on those unsold flats could be assessed as business income and not as Income from House Property. Furthermore the appellant, did not receive any rental income as these flats were vacant during the year. 5.1.3 It is also noted that the Appellant's such submission was rejected by Ld. A.O. without any cogent reason and that, the Ld. A.O. computed notional Annual Value in respect of those unsold flats, @ 8% of their value. Appellant was allowed standard deduction@ 30% of A.L.V. u/s 24(1) of the Act and the Income from House Property was determined at Rs.1,30,46,556. 5.1.4 Lastly it was submitted that four flats of another project were included in the closing stock of unsold flats. This other project was named as 'Shivalaya' and was eligible for deduction u/s 80 IB (10) of the Act. The aggregate cost of those 4 flats was stated to be Rs 1,49,40,714. 5.1.5 It will be not out of place to mention that with respect to above discussion, there are case laws not only of Hon'ble Delhi High Court but also those of jurisdictional High Court Le. Hon'ble Mumbai High Court where the judicial opinion has been against the appellant company like assessees engaged in construction business and in favour of Revenue in matters where ALV (Annual Lettable/Rental Value) on unsold flats was held to be assessable under the head, 'Income from House Property' and not Business Income as was claimed by the Ld. A/R of the appellant company in this case. As rightly pointed out by the Ld. AO in page no 3 of the impugned Assessment Order dated 22.12.2019; the famous landmark cases that can be referred to, in this regard, are as under: 1. 354 ITR 180 (Delhi) in case of M/s. Ansal Housing Finance & Leasing Co. Ltd. 2. 377 ITR 165 (Bombay) in case of M/s. Sane & Doshi Enterprises 5.1.6 Now in light of entire discussion made supra from sub-para no. 5.1 to 5.1.5, it is clear that this is totally a matter of verification and which the Ld. A.O. is directed to undertake 6 Assessment Year: 2017-18 while giving effect to this order. Ld. A/R is also required to cooperate the Ld. A.O. otherwise the computation of Income from House Property may not be completed correctly to meet the ends of Justice' and 'Fair Play. Thus, Ground No.1.1 to 1.5 are partly allowed. 5.2 Ground No.2 challenges addition of Rs. 11,26,383 on account of difference in computation of Book Profit u/s 115JB of the Act.. It was alleged by Ld. A/R of the appellant company that no detail of any adjustment was given by Ld. A.O. while computing such Book Profit. This cannot be ascertained as alongwith the Asst. Order no computation of 115 JB Income was uploaded. In the impugned Asst. Order also there is no such mention. Later in the written submission dated 19.02.2021[in the 'Statement of Facts' (in 1 page) uploaded as Annexure -1 to the Appeal Memo (Form no 35) nothing was mentioned in this regard], it has been stated that "Deferred Tax Provision" of Rs. 11,26,383 was not reduced while computing the Book Profit u/s 115JB of the Act. Thus, it is clear that this is totally a matter of verification and can be done by only the Ld. A.O. Therefore, he/she is directed to undertake this exercise while giving effect to this order. Ld. A/R is also required to cooperate the Ld. A.O. otherwise the computation of Income u/s 115 JB may not be completed correctly to meet the ends of Justice' and 'Fair Play. Therefore, Ground No 2 is partly allowed. 5.3 Ground No.3 challenges addition of Rs.51,24,262 as disallowance of excess claim of MAT Credit i.e. against claim of Rs.2,62,16,251 credit was given for Rs2,20,91,990 only. It is also clear that this is totally a matter of verification and which the Ld. A.O. may be directed to undertake while giving effect to this order. Ld. A/R is also required to cooperate the Ld, A.O. otherwise the computation of MAT Credit allowable to the appellant Company may not be completed correctly to meet the ends of 'Justice' and 'Fair Play'. Therefore, Ground No 3 is partly allowed. 6.0 In the result, this Appeal is partly allowed, for statistical purposes” Since the CIT(A) has failed to deal with the contentions raised by 9. the Appellant, we deem it appropriate to remand the issue raised in the present appeal back to the file of CIT(A) for adjudication Assessment Year: 2017-18 afresh after giving the Appellant reasonable opportunity of being heard. Since the issue has been remanded to the file of CIT(A) for adjudication afresh, all the rights and contentions of the parties in relation to the merit of the issue involved are left open. In terms of the aforesaid, all the grounds raised by the Appellant stand disposed.

In result, the present appeal treated as being allowed for statistical purposes.

Order pronounced on 13.04.2023.