WELKIN DEVELOPERS,MUMBAI vs. ASSTT. COMM OF INCOME TAX, CC 4(3), MUMBAI

ITA 5070/MUM/2025Status: DisposedITAT Mumbai16 March 2026AY 2019-2014 pages
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What did the Tribunal hold?

The Tribunal held that the addition of Rs. 41,14,625/- for the Welkin Star project was made by the AO without rejecting the assessee's books of account and on surmises. The assessee was denied a reasonable opportunity to be heard as no details regarding the basis for computing expenses were furnished. The Tribunal noted that the AO computed the net profit suo motu. The addition of Rs. 20,00,000/- for parking plots was also made without evidence. Ground No. 3 regarding the valuation of closing stock was not pressed by the assessee. Regarding the interest expenditure of Rs. 79,42,978/- for AY 2018-19, the Tribunal, following the ratio in Ashish Land & Property Developers Pvt. Ltd. and Ceebros Hotels Pvt. Ltd., held that the acquisition of land for real estate development is a normal business activity and forms part of inventory. The concept of 'put to use' applies only to capital assets, not inventory. Therefore, the disallowance of interest is not sustainable. For AY 2019-20, the revenue conceded the allowability of interest. Consequently, Ground No. 4 for AY 2018-19 and Ground No. 1 for AY 2019-20 were allowed. The appeals were partly allowed for statistical purposes for AY 2018-19 and allowed for AY 2019-20.

What were the facts?

The assessee, Welkin Developers, filed appeals against the orders of the CIT(A) for assessment years (AY) 2018-19 and 2019-20. These orders upheld the additions made by the Assistant Commissioner of Income Tax (AO). The AO's orders, passed under section 143(3) of the Income Tax Act, 1961, were dated 27.05.2021 for AY 2018-19 and 28.09.2021 for AY 2019-20. The CIT(A)'s orders were dated 05.07.2025. The appeals were consolidated for hearing due to common factual issues, with AY 2018-19 taken as the lead case. The disputed amounts include Rs. 41,14,625/- for under-reported profit of the Welkin Star project, Rs. 20,00,000/- for alleged sales of parking plots, and Rs. 79,42,978/- for interest paid on loans for land acquisition at Ghansoli.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the addition of Rs. 41,14,625/- on account of remaining profit of the Welkin Star project, made on presumptions and surmises, ignoring the assessee's survey statement and without providing details of construction costs and other expenses, is legally sustainable (Section 143(3)). 2. Whether the addition of Rs. 20,00,000/- for alleged sales of four parking plots, without any evidence of sale or receipt, is legally sustainable (Section 143(3)). 3. Whether the method of valuation of closing stock at market rate of Rs. 9000/- per sq.ft. upheld by the CIT(A) is contrary to Section 145A of the Act. 4. Whether the addition of Rs. 79,42,978/- being interest paid to Indiabulls Finance on their loans, treated as capital expenditure, is legally sustainable, especially when no revenue is generated in the Ghansoli Project (Section 36(1)(iii)). Assessee's contentions: The AO made additions on presumptions and surmises, without rejecting books of account or providing evidence. The interest disallowance is not in accordance with law as the land acquisition is a business activity and part of inventory, not a capital asset requiring 'put to use'. The valuation of closing stock is contrary to Section 145A. Revenue's contentions: The revenue authorities relied on their orders and supported the findings therein. For AY 2018-19, the interest expenditure was not allowable as the land was an advance not 'put to use'. For AY 2019-20, the revenue conceded that interest would be allowable as the asset was recorded in the balance sheet.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 250,Section 145A,Section 36(1)(iii)

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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI

Before: SHRI ANIKESH BANERJEE & SHRI JAGADISH

For Appellant: Shri Rajesh Upadhyay, Shri S. Anbuselvan (Sr. AR)
For Respondent: Shri Rajesh Upadhyay, Shri S. Anbuselvan (Sr. AR)

Heard together (2 matters)

ITA No.5069/Mum/2025
ITA No.5070/Mum/2025

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Per Bench :

Both the appeals were preferred by the assessee against the order of the Id. Commissioner of Income Tax appeal 52, Mumbai [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act') for assessment year 2018-19 and 2019-20, date of order 05.07.2025. The impugned order emanated from the order of the Ld. Assistant Commissioner of Income Tax C.C.-4(3) Mumbai (for brevity the “Ld. AO") ord

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