ACIT-41(4)(1), MUMBAI, MUMBAI vs. ACE ASSOCIATES, MUMBAI, MAHARASHTRA

ITA 3760/MUM/2025Status: DisposedITAT Mumbai23 September 2026AY 2020-218 pages
AI SummaryDismissed

What were the facts?

The Revenue appealed the CIT(A)'s order dated 24.03.2025, which arose from an assessment order dated 28.09.2022 for Assessment Year 2020-21. The assessee, Ace Associates, a real-estate developer, declared a total income of Rs.88,30,660. The Assessing Officer (AO) added Rs.16,84,200 under 'Income from house property' for unsold commercial units, treating them as stock-in-trade and applying Section 23(5). The AO also added Rs.27,49,50,173 under Section 68, treating the opening stock as an unexplained credit, and proposed an addition of Rs.42,00,000 under Section 69 for an alleged property purchase. The CIT(A) deleted all additions, finding the commercial premises were undergoing reconfiguration, the Rs.42,00,000 was a security deposit, and the opening stock was reconciled with earlier years.

What did the Tribunal hold?

The Tribunal dismissed all grounds of appeal raised by the Revenue. Regarding Ground No.1, concerning the addition under Section 23(5), the Tribunal upheld the CIT(A)'s finding that the commercial unit was incomplete and not capable of being lawfully occupied or let during the relevant previous year due to subsequent re-planning and modifications. The application for completion of revised work was made on 27.01.2023, and the original occupation certificate for the building in its earlier configuration did not establish the completion of the reconfigured unit. The Revenue failed to provide material to dislodge this finding. For Ground No.2, the Tribunal noted that the Rs.42,00,000 was not added to the total income in the assessment order, making the ground academic. Nevertheless, the CIT(A)'s finding that it was a security deposit evidenced by a registered lease deed was upheld, as the Revenue provided no material to the contrary. Concerning Ground No.3, the Tribunal held that opening stock, by its nature, is a debit item brought forward and not a credit received during the year. The CIT(A) had examined reconciliation, financial statements, and bank records, finding the opening stock reconciled with earlier years. The AO's treatment of the opening stock as an unexplained credit was inconsistent with accepted transactions like sale proceeds and rent from the same stock. The omission or incorrect disclosure of closing stock in a preceding year does not convert opening inventory into a fresh cash credit. The Revenue failed to controvert the reconciliation and documentary evidence. Therefore, the deletion of the addition under Section 68 was upheld.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the learned CIT(A) erred in deleting the addition of Rs.16,84,200 made under section 23(5) of the Income-tax Act, 1961, in respect of income from house property for unsold flats, despite the assessee not offering rental income for the vacant unit. - Assessee's contention: The commercial premises were incomplete and not capable of lawful occupation or letting during the relevant previous year due to subsequent re-planning and subdivision, with an application for completion of revised work made only on 27.01.2023. - Revenue's contention: The CIT(A) was not justified in holding Section 23(5) inapplicable as the assessee had not furnished the occupation certificate date, and the project was stated to be completed in FY 2008-09. 2. Whether the learned CIT(A) erred in deleting the addition of Rs.42,00,000 made under section 69 of the Act, considering the assessee's alleged failure to prove the genuineness of the receipt and its nexus. - Assessee's contention: The amount represented a security deposit received from HDFC Bank Ltd., evidenced by a registered lease deed. - Revenue's contention: The assessee failed to discharge the onus regarding the amount. 3. Whether the learned CIT(A) erred in deleting the addition of Rs.27,49,50,173 made under section 68 of the Act, due to the assessee's alleged failure to prove the genuineness of the credit and its nexus. - Assessee's contention: The opening stock was fully reconciled with the closing stock of earlier years and accepted in scrutiny assessments. - Revenue's contention: The assessee had failed to discharge the onus regarding the opening stock.

Which sections of the Income-tax Act were involved?

Section 23,Section 23(5),Section 24(a),Section 68,Section 69,Section 143(3),Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

Before: SMT BEENA PILLAI & SHRI JAGADISH

For Appellant: Shri Harsh Kapadia, CA &, Shri Nitin Khinchi, CA
For Respondent: Shri Manoj Kumar (CIT-DR)
Hearing: 30.06.2026Pronounced: 23.09.2026

Per: SHRI JAGADISH, A.M.:

1.

This appeal by the Revenue is directed against the order dated 24.03.2025 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as ‘the learned CIT(A)’], arising out of the assessment order dated 28.09.2022 passed under section 143(3) read with section 144B of the Income-tax Act, 1961 (‘the Act’) for the assessment year 2020-21. Ace Associates

2.

The Revenue has raised the following grounds of appeal:

“1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in dele"ng the addi"on made towards income from house property in res

The order continues below.

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