RAJENDRA ENTERPRISE,MUMBAI vs. ITO, WARD-19(3)(1), MUMBAI, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH MUMBAI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 4036/Mum/2026 (Assessment Year: 2023-24) Rajendra Enterprise ITO Ward-19(3)(1) 24, Bansi Bhavan, 3rd Piramal Chambers, Dr. Khetwadi Lane, Charni Vs. S. S. Roao Road, Road, Mumbai-400004 Lalbaug, Mumbai – 400 012 PAN/GIR No. AARFR2621K (Applicant) (Respondent) Assessee by Shri Rajkumar Singh (virtually appeared), Ld. AR Revenue by Shree Kumar C., Ld. DR Date of Hearing 16.06.2026 Date of Pronouncement 18.06.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: This appeal filed by the assessee is directed against the order dated 09.02.2026 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as "the learned CIT(A)"] under section 250 of the Income Tax Act, 1961 [hereinafter referred to as "the Act"]

2 ITA No. 4036/Mum/2026 Rajendra Enterprise for Assessment Year 2023-24, arising out of the assessment order dated 21.03.2025 passed under section 143(3) read with section 144B of the Act by the Assessment Unit, NFAC, Delhi[hereinafter referred to as “Assessing Officer”].

3 ITA No. 4036/Mum/2026 Rajendra Enterprise 4. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had disclosed closing stock of finished goods amounting to Rs.11,31,99,124/- as on 31.03.2023. The Assessing Officer observed that such stock had remained unsold for several years and inferred that the construction of the flats had already been completed. Referring to the provisions of sections 22 and 23 of the Act and relying upon the decision of the Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Ltd. reported in 354 ITR 180, the Assessing Officer proposed to assess notional rental income in respect of such unsold flats held as stock-in-trade. 5. In response, the assessee submitted before the Assessing Officer that the amount reflected as closing stock comprised two categories. According to the assessee, an amount of Rs.3,16,25,060/- represented booking amounts paid in respect of ten flats in a redevelopment project of Rashmi Housing Pvt. Ltd. where the project itself never commenced on account of disputes involving the developer, housing society, local authorities and subsequent insolvency proceedings before the National Company Law Tribunal. It was contended that the said flats were not in existence and had been inadvertently reflected as finished stock in the books of account. It was further submitted that the balance amount of Rs.8,15,74,064/- represented flats purchased from various developers, but physical possession thereof had not been handed over to the assessee as substantial consideration remained payable. Accordingly, it was contended that the

4 ITA No. 4036/Mum/2026 Rajendra Enterprise assessee neither possessed nor enjoyed the properties and, therefore, no notional rental income could be assessed thereon. 6. The Assessing Officer was not convinced with the explanation furnished by the assessee. According to the Assessing Officer, the audited financial statements consistently reflected the properties as finished stock-in-trade and the explanation advanced by the assessee was an afterthought. The Assessing Officer accordingly computed notional rent at 8.5% of the value of closing stock amounting to Rs.11,31,99,124/-, worked out annual value at Rs.96,21,925/-, and after allowing statutory deduction under section 24(a), made an addition of Rs.67,35,348/- under the head "Income from House Property". Consequently, the total income was assessed at Rs.67,37,348/- 7. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). The learned CIT(A), after recording that several notices had been issued and that the assessee had failed to effectively prosecute the appeal, proceeded to dispose of the appeal ex parte on the basis of material available on record. On merits also, the learned CIT(A) held that the assessee had failed to furnish documentary evidence in support of its claim that the flats were non-existent, incomplete, or not in its possession. The learned CIT(A), therefore, upheld the addition made by the Assessing Officer and dismissed the appeal of the assessee. 8. During the course of hearing before us, the learned Authorised Representative (AR) submitted that the learned CIT(A)

5 ITA No. 4036/Mum/2026 Rajendra Enterprise had passed the impugned order ex parte without considering the peculiar facts and circumstances which prevented effective representation before the appellate authority. It was submitted that the AR representing the assessee had undergone oral oncology surgery on 22.12.2025 at P.D. Hinduja National Hospital & Medical Research Centre, Mumbai and remained under medical treatment and recuperation thereafter. Copies of the discharge summary and medical records were placed before us. It was submitted that because of the aforesaid medical condition, the hearing notice fixing compliance on 12.01.2026 could not be effectively responded to, resulting in the ex parte disposal of the appeal. 9. The learned AR further pointed out that identical issues had arisen in the assessee's own case for Assessment Year 2022-23 and that detailed written submissions together with paper book and supporting documentary evidences had already been furnished before the NFAC in those proceedings. Attention was also invited to the departmental acknowledgement evidencing electronic filing of the written submissions and supporting documents. It was contended that substantial documentary evidence exists in support of the assessee's stand regarding the non-existent project, insolvency proceedings against the developer, and absence of possession of the flats, which has not been examined by the learned CIT(A). It was accordingly prayed that the matter may be restored to the file of the learned CIT(A) for fresh adjudication.

6 ITA No. 4036/Mum/2026 Rajendra Enterprise 10. Per contra, the learned Departmental Representative (DR) relied upon the orders of the lower authorities. However, the learned DR fairly submitted that if the Bench is inclined to restore the matter, appropriate directions may be issued for fresh examination of the evidences and contentions raised by the assessee. 11. We have considered the rival submissions and perused the material available on record. It is an undisputed fact that the impugned order of the learned CIT(A) has been passed ex parte. The record further reveals that the learned CIT(A) dismissed the appeal primarily on the ground that the assessee had not responded to the notices issued during appellate proceedings and had failed to substantiate its contentions with supporting evidence. 12. We find merit in the contention of the assessee that the non- compliance before the learned CIT(A) was on account of circumstances beyond its control. The medical documents placed before us indicate that the Authorised Representative had undergone major oncology surgery in December 2025 and was under medical treatment during the relevant period. We further note that the assessee has placed before us documentary material indicating that detailed written submissions and supporting evidences concerning similar issues had been filed before the NFAC in the assessee's own case for the immediately preceding assessment year.

7 ITA No. 4036/Mum/2026 Rajendra Enterprise 13. We further find that the controversy involved in the present appeal turns substantially upon factual verification of the assessee's claim that a portion of the closing stock pertains to flats in a project which never commenced and that the balance properties were not in the possession of the assessee. The assessee has also referred to documentary evidences including agreements, payment details, insolvency proceedings before the NCLT and other supporting records. None of these aspects have been examined by the learned CIT(A) in the impugned order. 14. In our considered opinion, the ends of justice would be met if one more effective opportunity is granted to the assessee to substantiate its claim before the first appellate authority. The principles of natural justice require that the assessee be afforded a reasonable opportunity of producing the material on which it seeks to rely, particularly when the appellate order has been passed ex parte and the assessee has furnished a plausible explanation supported by medical records for its non-appearance. 15. Accordingly, without expressing any opinion on the merits of the addition made by the Assessing Officer, we set aside the impugned order dated 09.02.2026 passed by the learned CIT(A) and restore the entire matter to his file for fresh adjudication in accordance with law. The learned CIT(A) shall grant adequate opportunity of hearing to the assessee, examine all documentary evidences that may be placed on record, including documents relating to the alleged non-existent project, insolvency proceedings, agreements, payment details, possession status of

8 ITA No. 4036/Mum/2026 Rajendra Enterprise the flats and all other relevant materials, and thereafter pass a speaking order after considering the submissions of both sides.

Order pronounced in the open court on 18.06.2026.

Sd/- Sd/- (CHALLA NAGENDRA PRASAD) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 18/06/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant प्रत्यथी / The Respondent. 2. 3. संबंधधत आयकर आयुक्त / The CIT(A) आयकर आयुक्त(अपील) / Concerned CIT 4. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai