THE ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD vs. PLASTENE INFRASTRUCTURE LTD., AHMEDABAD

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ITSSA 402/AHD/2019Status: DisposedITAT Ahmedabad11 December 2023AY 2015-1614 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the deletion of the addition on account of deemed rental income on unsold flats was correct. The assessee is engaged in the business of constructing residential buildings and holds these properties as stock-in-trade for sale. The jurisdictional High Court in the case of Neha Builders Pvt Ltd held that income derived from stock-in-trade would be income from business, not income from house property. The Tribunal emphasized that the decision of the jurisdictional High Court is binding. Furthermore, the amendment to Section 23(5) of the Act, which mandates taxing deemed rental income on unsold units, is applicable from 1st April 2018 (AY 2018-19) and thus not applicable to the assessment year under dispute. Therefore, the addition made by the AO was deleted, confirming the CIT(A)'s order on this issue. Regarding the on-money issue, the judgment states the appeals are "partly allowed" in the combined result, indicating a decision was made on this issue, but the detailed reasoning for the partial allowance is omitted in the provided text. The operative direction for the deemed rental income issue was to delete the addition.

What were the facts?

The Revenue filed appeals against the orders of the CIT(A) concerning assessment years 2015-2016 and 2016-2017. The appeals arose from assessment orders passed under Section 143 read with Section 153A of the Income Tax Act, 1961. The primary dispute involved the deletion of additions made by the Assessing Officer (AO) on account of 'on-money' received by the assessee, Plastene Infrastructure Ltd., on the sale of flats in its 'Aman Heights' project. The assessee admitted to receiving on-money and offered income at 15%, but the AO, based on various inquiries, statements, and documents, determined a higher quantum of on-money and treated the entire amount as income. Another issue concerned the addition of deemed rental income on unsold flats, which the CIT(A) deleted.

What were the issues?

1. Whether the learned CIT(A) erred in deleting the addition of Rs. 8,40,17,850/- made by the AO on account of on-money, instead of confirming the entire addition of Rs. 8,75,17,850/- for AY 2015-16, thereby challenging the deletion of a part of the on-money addition. Assessee's Contention (Implied from CIT(A)'s order): The AO's quantification of on-money based on specific rates derived from an agreement with M/s Ardor International Pvt Ltd and an email from Shri Prakash Parekh was incorrect. The agreement rate was under different circumstances, and the email was vague. The CIT(A) deleted the addition based on these reasons. Revenue's Contention: The learned CIT(A) erred in deleting the addition of Rs. 8,40,17,850/- made by the AO on account of on-money. 2. Whether the learned CIT(A) erred in deleting the deemed rental income on unsold flats for AY 2016-17. Assessee's Contention: Provisions of Section 22 and 23 are not applicable as the flats were held for sale, not letting out. Section 23(5), applicable from AY 2018-19, is not relevant. The Hon'ble Supreme Court has accepted SLP against the Delhi High Court judgment relied upon by the AO. Revenue's Contention (Implied from AO's action): The AO proposed to make an addition on account of deemed rental income on unsold flats based on the judgment in CIT vs. Ansal Housing Finance & Leasing Co. Ltd. (Delhi High Court).

Which sections of the Income-tax Act were involved?

Section 143,Section 153A,Section 132,Section 22,Section 23,Section 23(5)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘’ C’’ BENCH, AHMEDABAD

Before: Ms SUCHITRA KAMBLE & SHRI WASEEM AHMED

Hearing: 14/09/2023Pronounced: 11/12/2023

आदेश/O R D E R

PER WASEEM AHMED, ACCOUNTANT MEMBER:

The captioned two appeals have been filed at the instance of the Revenue against the separate orders of Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad, arising in the matter of assessment order passed under s. 143 r.w.s.

ITA nos.402-403/AHD/2019 A.Ys. 2015-16 & 2016-17 2

153A of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2015-2016 & 2016-17.

First, we take up IT(SS)A No. 402/AHD/2019, an appeal by the revenue for AY 2015-16

2.

The only effective issue raised by the revenue in the captioned appeal is that the learned CIT(A) erred in deleting the addition of Rs. 8,40,17,850/- instead of confirming the entire addition of Rs. 8,75,17,850/- made by the AO on account of on-money.

3.

The necessary facts are that the assessee, a public company, is engaged in the business of real estate construction and deriving income from house property. The assessee company, in July 2012 launched a project of residential apartments namely “Aman Heights” which came to be completed in April 2015 and the BU permission was received in 2015. The assessee company was subject to search proceeding under section 132 of the Act dated 20th September 2016 and consequence to which certain materials were found establishing that the assessee has received on-money on sale of units of “Aman Height”.

3.1 The assessee also admitted that it has received on money of Rs. 7.51 crores out of which the sum of Rs. 7 crores pertain to year under consideration (A.Y. 2015-16) and the remaining amount of Rs. 51 Lakh pertain to AY 2016-17. The assessee accordingly offered income on such on money @ 15% which came at Rs. 1.05 crores for the year under consideration.

3.2 However, the AO during the assessment proceedings observed certain facts which are detailed as under: i. The assessee in the books of account have shown to have sold 17 flats during the A.Y. 2015-16 to A.Y. 2018-19 (A.Y. 2015-16, the year under

ITA nos.402-403/AHD/2019 A.Ys. 2015-16 & 2016-17 3

consideration) at different rates. However, most of the flats were sold at ₹ 35,000/- per square yards or 1.4 crore per flat. ii. There was a discreet field enquiry made by the investigation wing to find out the actual sale price of the flats which pointed out the sale price at Rs. 2.8 crore per flat. iii. During the search, digital data of laptop from the director/manager, Shri Sanjay Salecha was seized which included an email by key person/promoter Shri Prakash Parekh dated 6th of November 2014 wherein direction was given to increase the rate of flats at ₹67,000/- per square. iv. The statement of Shri Sanjay Salecha under section 132(4) of the Act was recorded on 2nd September 2016 in which he admitted that the flats were sold around Rs. 2.08 crores. Likewise, the statement of Shri Prakash Parekh under section 132(4) of the Act as on 17th November 2016 was also recorded in which he agreed to have received on money and based on his admission assessee offered additional income. v. During the search, a notarized agreement between assessee company and M/s Ardor International Pvt Ltd dated 1st August 2014 was found. As per the agreement, the assessee company and its group companies have made purchases from M/s Ardor International Pvt Ltd on credit and an amount of Rs. 6,85,26938/- was still outstanding. Thus, to set off/ clear the payment of outstanding balance, it was agreed to transfer 3 flats bearing flat Nos. 21, 31 and 71. Hence, as per the agreement, the price of a flat comes at Rs. 57,106/- per square yards. However, such agreement was cancelled, and same flats were finally transferred to the directors of the supplier company namely M/s Ardor International Pvt Ltd, at an average sale price of ₹ 35,000 per square yard only. vi. The assessee during the assessment submitted the consolidated profit loss account from inception of project to 31st March 2017. As per the consolidated profit and loss account, the basic cost of the construction

ITA nos.402-403/AHD/2019 A.Ys. 2015-16 & 2016-17 4

(land cost, construction expenses and borrowing cost) was worked out at Rs. 47,098/- per square yard. If 20% margin is taken on the basic cost construction cost, the average sale price works out at ₹ 57,000 per square yard which is matching with the agreement entered between the assessee and M/s Ardor International Pvt Ltd. vii. There were 2 flats sold by the assessee company to the promoters Shri Prakash Parekh and Smt. Madhu Parekh at a price of ₹ 50,000/- per square yard. Since the flats were sold to the promoters, these flats must have been sold without the element of profit. The AO was of the view that the cost per flat to the assessee should be on an average of ₹50,000/- per square yard. viii. There were 2 flats bearing flats nos. 91 and 102 booked as on 11th August 2017 and 9th February 2018 which assessee itself has shown to have sold at a price of Rs. 60000/- per square yards.

3.3 In view of the above facts, the AO believed that the average sale price of the flats which have been booked before 6th November 2014 (date of email referred above) should be ₹57,106/- and flats booked after the email date should be at Rs. 67000 per square yard. However, the AO, with respect to the sale of flats, to the promoters has taken the sale price only ₹ 50,000 for the reason that the assessee would not have charged any on money from its own directors. Likewise, the AO also found that there were 3 flats booked in the year 2011 at the inception of the project, and therefore, the AO opined that some discount should be given in the sale price and accordingly worked out sale price at Rs. 54250/- per square yard being 95% of ₹57,106/-. Based on the above-mentioned rates, the AO determined sales price of all the 17 flats and worked out the element of on money received by the assessee against his projects in different assessment years at ₹ 12,47,17,850/- against the on-money amount admitted by the assessee at ₹ 7.51 crores. The necessary details showing the working of on-money are placed on page 27 of the assessment order.

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3.4 The AO further opined that the assessee has already claimed the expenses in the profit and loss account and therefore the amount of on-money only represents the profit element of the project. In other words, the AO rejected the claim of the assessee that only 15% of the on-money is representing the income. Thus, the AO treated the entire amount of on-money of ₹ 12,47,17,850/- in different years as income of the assessee. The relevant detail of on-money as per AO in different assessment years and amount liable to be added to total income after giving effect of amount already offered as income by the assessee is extracted as under: A.Y Total Less: Net Addition Disclosed in Return 2015-16 9,80,17,850 1,05,00,000 8,75,17,850 2016-17 1,28,00,000 7,65,000 1,20,35,000 2017-18 28,00,00 - 28,00,000 2018-19 1,11,00,000 - 1,11,00,000 Total 2,47,17,850 1,12,65,000 11,34,52,850

4.

On appeal by the assessee, the learned CIT(A) held that assessee undisputedly received on-money on sale of flats, but at the same time on-money quantified by the AO also cannot be accepted. The AO have taken the rate of sale of flats booked before 6th November 2014 at Rs. 57,106/- based on a copy of agreement as discussed above. However, the rate appearing in the agreement entered between the assessee and M/s Ardor International Pvt Ltd cannot be adopted because that rate was decided under different circumstances. The company was to receive the money and the assessee was to make the payment against the purchases. As such the motive of the creditor was to recover the money outstanding from the assessee. Thus, the learned CIT(A) denied making any reference to such rate appearing in the agreement.

5.

Likewise, ld. CIT-A was of the view that the rate of Rs. 67000 per square yard for flats booked after 6th November 2014 based on email cannot be adopted

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as the basis for calculating on money. It is for the reason that the email written by Shri Prakash Parekh is very vouge. As per the learned CIT(A), the proposed rate as directed in email is not proof that assessee realized such price on actual sale. Thus, the learned CIT(A) denied making any reference to the email brought on record by the AO.

6.

Nevertheless, the learned CIT(A) found the rate accepted by the director Shri Sanjay Salecha in the statement furnished 132(4) of the Act is more reliable and effective. As per the statement of the director, the rate was coming ₹ 52,000 per square yard. The learned CIT(A) was also of the view that the 3 flats were booked much earlier i.e. in the year 2011, therefore, the sale price of such flats should be taken at Rs. 42,000/- per square yards after giving approximate discount @ 20% on Rs. 52000/-. Likewise, the two flats booked as on 11th August 2017 and 9th February 2018, the price of such flats sale should be taken at 62000 per square yard (assessee shown rate at Rs. 60000/-) after making an approximate upward adjustment of 20% on the value of Rs. 52,000/-. Accordingly, the learned CIT(A) worked out the on-money for different assessment years at Rs. 8,08,78,650/- only out of which the amount of on-money for the year under consideration was worked out at Rs. 6,69,78,650/-. However, considering the fact that the assessee itself admitted on money for the year under consideration at Rs. 7 crores, therefore the same was taken by the learned CIT(A).

7.

The learned CIT(A) further was of the view that the amount of on money represents the business receipts and therefore the same cannot be added in entirety. Accordingly, the learned CIT(A) found reasonable to adopt the element of profit on such on money at the rate of 20% on estimated basis after making the reference to various case laws propounded by various courts. As such, the learned CIT(A) determined the income of the assessee at Rs. 1.4 crores embedded in the on-money as against the income offered by the assessee at Rs. 1.05 crores. Thus, the learned CIT(A) was pleased to sustain the addition to the extent of Rs. 35 lakh

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only as against the addition made by the AO for Rs. 8,75,17,850/- only. As such, the ld. CIT-A partly allowed the appeal filed by the assessee.

8.

Being aggrieved by the order of the learned CIT(A), the revenue is in appeal before us. 9. The learned DR before us contended that the assessee in the statement furnished under section 132(4) of the Act has admitted having receipt of on money amounting to ₹ 7 crores for its real estate projects. But the assessee has not honoured the same while filing the income tax return. The assessee has just offered the sum of ₹1.05 crores, being 15% of 7 crores which was escalated by the learned CIT-A 20% of the unaccounted receipts. As per the learned DR, the statement furnished under section 132(4) of the Act should not be ignored as the same was not retracted. 10. On the other hand, the learned AR before us filed a paper book running from pages 1 to 109 and submitted that the unaccounted receipt represents the trading receipts and therefore only the element of profit embedded in such receipts should only be brought to tax. Both the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them.

11.

We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, there is no dispute to the fact that the assessee was in receipt of on-money on the sale of flats. But the quantum of the on-money received by the assessee on flats is one of the disputes before us. As per the AO, the on-money received by the assessee in the year under consideration stands at Rs. 9,80,17,850/- (over all Rs. 12,47,17,850/-) whereas as per the learned CIT(A), the same stand at Rs. 7 crores in the year in dispute (over all Rs. 8.39 crores). The basis adopted by the AO was based on the email dated 6th November 2014 where the proposed rate per square yard was quoted at ₹67000/- per square yard and the rate entered into the agreement

ITA nos.402-403/AHD/2019 A.Ys. 2015-16 & 2016-17 8 dated 1st August 2014 between the assessee and M/s Ardor International Pvt Ltd where price was agreed at Rs. 57,106/- per square yard. As regards the basis adopted by the AO, we note that the rate recorded in the email cannot be adopted because it was the rate proposed by the assessee which cannot be treated as the actual sale price. Likewise, the rate entered between the assessee and M/s Ardor International Pvt Ltd at ₹ 57,106/- was not based under the normal business circumstances. As a there was the transaction between the parties for the purchase of goods which was outstanding therefore it agreed to settle against the flats but such agreement was not materialized as the outstanding balance against purchases of goods was paid in cash. Therefore, the rate appearing in the agreement cannot be adopted as the basis for determining the on-money received by the assessee.

11.1 Furthermore, the director of the assessee, Shri Sanjay Salecha in his statement agreed to have received on money. As per the director, the actual sale price stands at Rs. 52,000 per square yard whereas in the books, the same was shown at a lesser value. The statement was also not retracted by the assessee. Likewise, the assessee has also not preferred any appeal against the finding of the learned CIT(A). Accordingly, we are inclined to concur with the view taken by the learned CIT(A) which appears to be reasonable and scientific in the given facts and circumstances.

11.2 Now the next controversy arises whether entire amount of on money is to be treated as income of the assessee or percentage of profit on estimated basis should be adopted for calculating the income embedded in such on money received by the assessee. In this regard, we note that there are numerous judgements of the higher forum wherein it was held that in case of unaccounted business receipt only profit embedded in such receipt be added to the income. As such, there are several cases where the percentage on the income embedded in unaccounted receipt has been estimated around 15% to 25% of such receipts. But

ITA nos.402-403/AHD/2019 A.Ys. 2015-16 & 2016-17 9

in our humble understanding, such findings cannot be adopted in each and every case for determining the element of income received on the on-money of the assessee. In the present case, the assessee, as per the consolidated profit and loss account from the start of the project till 31st March 2017 has claimed basic cost of project at Rs. 47,098/- per square yard whereas shown majority of sale of flats at Rs. 35000/- per square yard. Thus, the assessee has claimed higher expenses than the sale price, which suggests that all the expenses have been duly accounted for in the books of accounts of the assessee. As such, there was no whisper, or any iota of evidence found suggesting that the assessee has incurred expenses in cash against the receipt of on money. In the absence of such information, it appears that the amount of on-money received by the assessee represents only the element of income. However, in the cases where a portion of sale received outside books, the possibility of having expenses incurred against the sale outside the books cannot be ruled out.

11.3 Before parting, we find it pertinent to make the analysis about the rate of profit. In the year under dispute, the assessee has shown gross revenue from operation at Rs. 15,58,21,350/- and after claiming direct and indirect expenses shown net loss at Rs. 99,98,116/- only. If the on money of Rs. 7 crores are added to the revenue from operation then the revised revenue from operation will be at Rs. 22,58,21,350. Further, assuming no expense incurred outside the books and on-money only represents a profit element, the net profit of the assessee shall be Rs. 6,00,01,884/- only. In such a situation, the NP ratio comes at 26.5% of the gross turnover. However, in the real estate development industry, the NP ratio at the rate of 25% is considered unreasonably high. Therefore, we are not inclined to uphold the finding of the AO, that the on-money represents only an element of income. As such, in such facts and circumstances some element of guess work is required to be taken into consideration while estimating the income.

ITA nos.402-403/AHD/2019 A.Ys. 2015-16 & 2016-17 10

11.4 Likewise, if the view taken by the learned CIT(A), is taken into consideration that income of the assessee on the on-money is of Rs. 1.4 crore only, then the net profit of the assessee will be at Rs. 40,01,884/- only. In such a situation, the NP ratio comes at 1.177 % of the gross turnover which is also very low.

11.5 As such in the given facts and circumstances and to render the justice to the Revenue and assessee, we are of the view that the on money received by the assessee for the year under consideration should be subject to the addition at the rate of 40% only against the profit estimated at 20% by the ld. CIT-A. As such, we enhance the addition by Rs. 1.40 crores i.e. Rs. 1.40 crores which needs to be added to the total income of the assessee. According to our understanding, after the further addition of Rs. 1.40 crores, the net profit of the assessee shall improve so as to justify the income of the assessee as a whole. Hence the ground of appeal of the revenue is hereby partly allowed.

11.6 In the result, the appeal filed by the revenue is partly allowed.

Coming to IT(SS)A No. 403/Ahd/2019, an appeal by the Revenue for AY 2016-17

12.

The Revenue has raised following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of \% 1 ,14,40,000/- out of total addition of 1,20,35,000/- made by the AO on account of on-money receipts on sale of flats. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in law and on facts in adopting 20% GP on- money receipts of assessee as undisclosed income of assessee when Shri Prakash Parekh, the key person of assessee company himself had admitted u/s 132(4) that undisclosed income of assessee company on account of on-money was ₹ 7.51 crore. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in computing only 20% of the on money receipts as the assessee's income on the real income theory concept, without appreciating that the theory cannot override the provisions of the Income tax Act, when the assessee could not produce any evidence whatsoever to prove that there were unaccounted expenses incurred by the assessee.

ITA nos.402-403/AHD/2019 A.Ys. 2015-16 & 2016-17 11

4.

In the absence of any corroborative evidence as regards unaccounted expenses, the Ld.CIT(A) has grossly erred in allowing assessee the benefit of 80% expenses and thereby determining undisclosed income of assessee at 20% of on-money, for which there is no basis whatsoever. 5. On facts and in the circumstances of the case, the Ld. CIT(A) ought to have confirmed addition of entire on-money receipts as income of assessee. As assessee could in no way establish or explain as to how, where and how much were the unaccounted expenses made by it nor there were seized evidences to this effect. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not applying the provisions of the Act including Section 37, 4OA * (3) and Section 69C, while allowing deduction of expenditure. 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that unaccounted expenses cannot be allowed as deduction against unaccounted receipts merely because they are not recorded in regular books of account, without reference to the provisions of the Act relating to computation of total income. 8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not applying the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs Hynoup Food & Oil Ind. (P) Ltd. 150 Taxman 194 (Guj), in which it was held that Sec 40A(3) was applicable to unaccounted payments. 9. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing deduction for payments made in cash without satisfying the rigour of the provisions of the Act and therefore giving benefits to the non-complaint assessee, which benefit is not available to tax complaint assessee. 10. On the facts and in the circumstances of the case and in law, the Ld.CIT(A), has erred in deleting the addition of Rs.1,19,77,558/- made on account of deemed rental income. 11. On the facts and in the circumstances of the case and in law, the Ld.CIT(A), ought to have upheld the order of the AO. 12. It is, therefore, prayed that the order of the Ld.CIT(A), be set aside and that of the AO be restored to the above extent. 13. The effective issue raised by the revenue vide ground Nos. 1 to 9 of its appeal is that the learned CIT(A) erred in deleting the addition of Rs. 1,14,40,000/- instead of confirming the entire addition of Rs. 1,20,35,000/- made by the AO on account of on-money.

14.

At the outset, we note that the issues raised by the revenue in its ground appeal for the AY 2016-17 are identical to the issues raised by the revenue in IT(SS)A No. 402/AHD/2019 for the assessment year 2015-16. Therefore, the

ITA nos.402-403/AHD/2019 A.Ys. 2015-16 & 2016-17 12

findings given in IT(SS)A No. 402/AHD/2019 shall also be applicable for the year under consideration i.e. AY 2016-17. The appeal of the revenue for the assessment 2015-16 has been decided by us vide paragraph No. 11 of this order, partly in favor of the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2015-16 shall also be applied for the year under consideration i.e. AY 2016-17. Hence, the ground of appeal filed by the revenue is hereby partly allowed.

15.

The next issue raised by the Revenue vide ground No. 10 of its appeal is that the learned CIT(A) erred in deleting the deemed rental income on unsold flats.

16.

The assessee company has developed/constructed a residential project namely “Aman Heights” consisting of 22 flats. The BU permission/completion certificate for all 22 flats has been received as on 26th May 2015. The AO found that out of 22 flats only 15 flats have sold till the year under consideration. Thus, the AO proposed to make addition on account of deemed rental income on annual lettable value for the remaining 7 flats in view of the judgment of Hon’ble Delhi High Court in the case of CIT vs. Ansal Housing Finance & Leasing Co. Ltd reported in 354 ITR 180.

17.

However, the assessee submitted that the provisions of section 22 and 23 of the Act are not applicable to it as it is engaged in the business of construction of residential flats which were held for the purpose of sale and not for letting out. The newly inserted provision under section 23(5) of the Act, vide Finance Act 2017 is applicable from 1st April 2018 only therefore same cannot be applied to the year under consideration. The assessee also submitted the judgment of Hon’ble Delhi Court in CIT vs. Ansal Housing Finance & Leasing Co. Ltd has been challenged before Hon’ble supreme where SLP has been accepted.

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18.

However, the AO disagreed and held that the assessee failed to demonstrate how its facts are different than the facts in the case of M/s Ansal Housing Finance & Leasing Co. Ltd (supra). Accordingly, the AO estimated the ALV @ 7% of value of the unsold flats shown in balance sheet and after adjusting standard deduction @ 30% made addition of Rs 1,19,77,558/- to the total income.

19.

On appeal by the assessee, the learned CIT(A) was pleased to delete the addition made by the AO after making reference to judgment of Hon’ble Gujarat High Court in the case of Neha Builders Pvt Ltd reported in 296 ITR 661. The relevant finding of the learned CIT(A) is extracted as under: In the said case the precise question before the court was as to whether the rental income from the held by a builder in construction business included in closing stock is assessable under income from house property or income from business. Hon'ble court held that if the property is held as "stock-in- trade", any income derived from such stock would be income from business and not income from house property. It also held that if the business of the assessee is to construct the property and sell it, then that would by the business and the business stocks, which may include movable or immovable, would be taken to be stock-in-trade and any income derived from such stocks cannot be termed as "income from property". In the present case before me, the facts are identical. The appellant holds the properties constructed by it as its stock-in-trade and available for sale rather than letting out. Thus applying the ratio of jurisdictional high court, which is a binding upon all under its jurisdiction, it can be held that income from such properties will be chargeable to tax under the head of business income. I therefore, delete the addition made in respect of notional income brought to tax of Rs.1,19,77,558/- applying the judgment of Neha Builders (supra). This ground of appeal is allowed. 20. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.

21.

Both the learned DR and the learned AR before us vehemently supported the order of the authorities below as favourable to them.

22.

We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the assessee is in the business of construction of residential buildings and there were certain ready to sale/use flats which are unsold. The AO, by placing reliance on the judgment of Hon’ble Delhi High Court, in case of Ansal Housing Finance & Leasing Co. Ltd (supra) worked out the deemed rental income on unsold flats held by the assessee as stock in trade. On the other hand, learned CIT(A) after referring to the judgment of

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Hon’ble Jurisdictional High Court in case of Neha Builders Pvt Ltd (supra) deleted the addition of deemed rental income. It is settled position of law that the decision Jurisdictional High Court is binding upon authorities/tribunal/courts situated in territorial jurisdiction of Gujarat. Even in the case of conflicting view taken by the Non-Jurisdictional High Court, then also the view of the Jurisdictional High Court will prevail and be binding upon the authorities/tribunal/courts. In the case on hand, the learned CIT(A) has deleted the addition made by the AO by following the decision of Jurisdictional High Court. Therefore, considering the binding nature of the decision of Hon’ble Gujarat High Court, we do not find any infirmity in the order of the learned CIT(A).

22.1 Before parting it is pertinent to highlight that there was an amendment brought by Finance Act 2017 in the in the provision of section 23 of the Act by inserting subsection (5) which mandate to tax deemed rental on the unsold unit of residential unit constructed by the builder. However, such an amendment is applicable from 1st April 2018 i.e. A.Y. 2018-19 whereas the year under dispute pertains to A.Y. 2016-17. Thus, such an amendment is not applicable in the case at hand. In view of the above discussion, we hereby confirmed the order of the learned CIT(A) and direct the AO to delete the addition of deemed rental income. Hence, the ground of revenue appeal is hereby dismissed.

22.2 In the result, the appeal of the Revenue is partly allowed.

23.

In the combined results, both the appeals of the Revenue are hereby partly allowed. Order pronounced in the Court on 11/12/2023 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 11/12/2023 Manish

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