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Facts
The assessee, a builder and developer, declared income and offered Rs. 1,30,808/- as business income. The Assessing Officer treated closing stock as finished goods and made an addition of Rs. 5,02,979/- treating it as notional rent under Section 23(4)(b) of the Income Tax Act, 1961.
Held
The Tribunal held that the closing stock was work-in-progress and not finished goods, as construction was not completed. Therefore, the Assessing Officer erred in invoking Section 23(4)(b) of the Act for notional rent.
Key Issues
Whether notional rent can be charged on closing stock which is in the nature of work-in-progress and not finished goods?
Sections Cited
143(3), 147, 23(4)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
The captioned appeal at the instance of assessee pertaining to A.Y. 2014-15 is directed against the order dated 04.11.2025 framed by National Faceless Appeal Centre, Delhi (NFAC) arising out of Assessment Order dated 25.12.2019 passed u/s. 143(3) r.w.s147 of the Income Tax Act, 1961 (in short ‘the Act’).
When the case called for, none appeared on behalf of the assessee despite due service of notice of hearing. On the previous date of hearing on 05.02.2026, there was no representation from the side of assessee. I therefore proceed to adjudicate the appeal exparte qua assessee with the assistance of ld. Departmental Representative.
The sole grievance of the assessee is that ld.CIT(A) erred in confirming the action of the Assessing Officer making addition of Rs.5,02,979/- treating as house property
2 M/s. Rushikesh Construction
u/s.23(4)(b) of the Act, whereas the receipts of Rs.1,30,808/- disclosed by the assessee are in the nature of casual receipts.
I have heard the ld. DR and perused the record placed before me. I note that the assessee is a partnership firm engaged in the business of Builders and Developer. Income of Rs.15,48,403/- declared in the return of income for A.Y. 2014-15 filed on 18.09.2014. Case selected for scrutiny for re-assessment proceedings u/s.147 of the Act by validly recording the reasons. I observe that the assessee has offered income of Rs.1,30,808/- in the profit and loss account as business income. Ld. Assessing Officer on observing that assessee firm has shown closing stock of Rs.1,29,34,442/- (Rs.43,17,766/- in respect of Sai Vrundavan Part Apartment and Rs.86,16,676/- in respect of Vaishnavi Super Market) drew inference that the assessee is holding stock in trade of the finished goods and accordingly calculated the notional rent for vacant property at Rs.6,33,787/- by calculating rent @7% of Rs.1,29,34,442/- (after giving benefit of standard deduction at 30% and has worked out Annual Lettable Value at Rs.6,33,787/-. Thereafter, after reducing income of Rs.1,30,808/- declared by the assessee has made the impugned addition of Rs.5,02,979/- and assessed income at Rs.20,51,379/-. Though the assessee challenged the said addition before ld.CIT(A) but failed to succeed. Now the assessee has approached the Tribunal being unsuccessful before the First Appellate Authority.
3 M/s. Rushikesh Construction
I have gone through the record and notice that the assessee has pleaded before the lower authorities that the closing stock of Sai Vrundavan Part Apartment and Vaishnavi Super Market is basically work-in-progress and the construction has not been completed and that sum of Rs.1,30,808/- is in the nature of casual receipts disclosed in the books and not in the nature of rent. The fact that the stock in hand referred by the Assessing Officer in the assessment order is closing work-in-progress and not finished goods as the construction has not been completed remains undisputed. Therefore, ld. Assessing Officer erred in invoking section 23(4)(b) of the Act in absence of any evidence before the Revenue authorities controverting the contentions of the assessee in the grounds of appeal. Thus, I am of the considered view that ld.CIT(A) erred in confirming the action of the Assessing Officer. Accordingly, the impugned addition of Rs.5,02,909/- is hereby deleted. Grounds of appeal raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced on this 17th day of April, 2026. (MANISH BORAD) ACCOUNTANT MEMBER पुणे / Pune; दिन ांक / Dated : 17th April, 2026. Satish
4 M/s. Rushikesh Construction
Satish Kumar Madishetty Digitally signed by Satish Kumar Madishetty Date: 2026.04.17 18:36:25 +05'30'
आदेश की प्रतिलिपि अग्रेपिि / Copy of the Order forwarded to : अपील र्थी / The Appellant. 1. प्रत्यर्थी / The Respondent.
The Pr. CIT concerned. विभ गीय प्रतितनधि, आयकर अपीलीय अधिकरण, “SMC” बेंच, 4. पुणे / DR, ITAT, “SMC” Bench, Pune. ग र्ड फ़ इल / Guard File. 5. आिेश नुस र / BY ORDER,
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