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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
1 ITA 1587/Mum/2022
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G”, MUMBAI
BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER)
I.T.A. No. 1587/Mum/2022 (Assessment Year 2014-15)
DCIT 27(1), Mumbai vs M/s Gopuram Developers Room No.408, 4th Floor, Tower No.6 18, Kutch Castle, Derasar Lane Vashi Railway Station Complex, Ghatkopar (East), Mumbai-400 077 Vashi, Navi Mumbai-400 703 PAN : AADFG8946Q APPELLANT RESPONDENT
Assessee represented by Shri Suchek Achalia & Vaishali More Department represented by Shri Manish Ajudia – Sr.AR
Date of hearing 19/10/2022 Date of Pronouncement 31/10/2022
ORDER PER OM PRAKASH KANT (AM): This appeal by the Revenue is directed against order dated 22/04/2022 passed by the Ld. National faceless appeal centre(NFAC), New Delhi [hereinafter shall be referred as Learned first appellate authority or FAA] for assessment year 2014-15.
The grounds raised by the Revenue are reproduced as under:
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Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in deleting the addition of Rs.1,11,03,361/- being profit determined on the project undertaken by the assessee, failing to appreciate that the assessee was following percentage completion method of accounting and the AO had worked out the profits accordingly in para 5 of the assessment order. 2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in deleting the addition of Rs.1,11,03,361/- being profit determined on the project undertaken by the assessee, failing to appreciate that the assessee itself had estimated the profits from the project at Rs.5 crores during the course of survey proceedings. 3. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in deleting the addition on account of income from house property determined on the closing stock of flats held by the assessee. 4. Whether on the facts and circumstances of the case and in law, the Ltd.CIT(A) was right in deleting the addition ofRs.58,97,360/- u/s.43CA of the Act, without giving any opportunity to the AO/Revenue to check the facts that the flats under consideration were sold in F. Ys 2006-07 & 2007- 08.”
Briefly stated facts of the case are that the assessee filed return of income on 29/09/2014 declaring total income at nil. The case of the assessee was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (in short the Act) were issued and complied with. In the assessment completed under section 143(3) of the Act on 22/12/2016, the Assessing Officer made addition firstly of rupees ₹ 1, 11, 03, 361/- under section 28 of the Act; secondly ₹ 62, 74, 437/- as notional rent on flats held as stock in trade and thirdly of ₹ 79, 05, 860/- in terms of section 43CA due to difference in stamp duty value and actual consideration of the property sold. On further appeal, the Ld. CIT(A) allowed relief to the assessee except confirmation of amount of ₹ 20, 08, 500/-against addition
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made under section 43CA of the Act. Aggrieved, the Revenue is in appeal before the Tribunal by way of raising grounds as reproduced above.
We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record.
Regarding the ground No. one and two of the appeal, we find that Ld. CIT(A) has deleted the addition of Rs. 1, 11, 03, 361/-following finding of his predecessor in assessment year 2013-14. The relevant funding of the Ld. CIT(A) in para 3 is reproduced as under:-
“3. In view of the above, in the current previous year relevant to A.Y. 2014-15, the method of revenue recognition followed consistently by the appellant is upheld and the methodology followed by the AO to compute profits of the project is held to be based on erroneous assumptions especially the cost of construction of Rs. 3813/- per sq ft. Also the disallowance of the expenditure incurred during-the year is arbitrary as the OC has not been received for the complete project as has been proved by the submissions of the appellant Therefore, the AO is directed to delete the addition of Rs. 1,11,03.361/- made u/s 28 of the IT Act Accordingly, the ground of appeal 1 is hereby allowed.”
The ITAT in ITA No. 1408/Mum/2022 for assessment year 2013-14 in the case of the assessee, dismissed the appeal of the Revenue observing as under:
“12. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The main basis for making addition by the Assessing Officer is that the assessee has not honored the income of Rs. 5 crore, which the assessee declared during the course of survey action. The Ld. Assessing Officer was of the view that revenue should be recognized when there was reasonable certainty of ultimate collection of revenue. According to him, the project was fully completed and there was no uncertainty of escalation of price and assessee blocked its capital in the stock of flats only for the reason that assessee wanted to make more and more profit by prolonging the sales. The Learned Assessing Officer accordingly determined profit on even unsold flats. The Ld A.O. ignored the percentage completion method of revenue recognition consistently followed by the assessee in assessment years prior to the assessment year under consideration i.e. A.Y. 2009-10 and opined that project of the assessee was completed therefore entire profit should have been declared in the year under consideration. In our opinion, the Ld. FAA after considering the
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submission of the assessee and analyzing facts of the case, correctly upheld the percentage completion method of Revenue recognition following the judicial precedents, and therefore we do not find any error in the order of the Ld.FAA on the issue in dispute, accordingly we uphold the same. The ground No. 1 and 2 of the appeal of the Revenue are accordingly dismissed.” 6. Being issue in dispute in the year under consideration exactly identical to the issue in Assessment Year 2013-14, respectfully following the finding of the Tribunal (supra), we uphold the finding of the Ld. CIT(A) on the issue in dispute in the year under consideration. The ground one and two of the appeal of the Revenue are accordingly dismissed.
The ground number 3 (three) relates to notional income under the head “Income from house property” in respect of closing stock of flats. The Assessing Officer in the year consideration made addition following the decision of the Hon’ble Delhi High Court in the case of CIT versus Ansal Housing and Finance Leasing in ITA No. 18/1999. The Ld. CIT(A) deleted the addition observing as under:
“Findings and Decision 4.4 The grounds of appeal 2 and 3 are against the order u/s 143(3) for A.Y. 2014-5 passed by the ITO Ward 27(1) (5) Mumbai wherein the AO has made addition of notional rent to the tune of Rs.62,74,437/-. However, it is the contention of the appellant that it had not received the Occupation Certificate (O.C.) for the entire project during the year under consideration. The appellant had applied for the amendment in plan and commencement approval on 24.08.2017 thereafter the appellant received the Commencement Certificate on 06.03.2018. It is evident from the records that the project was not fully complete till the end of the previous year relevant to A.Y. 2014-15 and the appellant did not receive the Occupation Certificate (O.C.) for the complete project from the local authorities. Therefore, the Stock in Trade representing the vacant units was not ready for sale/ lease at that time. The notional rent has been added by the A.O. on the basis of assumption only. The A.O. did not appreciate the fact that the O.C. was not received for whole project and only part O.C. was received by the appellant. Therefore letting out of flat by the appellant was practically not possible. Further, vide the Finance Act, 2017 w.e.f 01.04.2018, the legislature had inserted Sec. 23(5) of the Act. As per the
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said statutory provision, where the property consisting of any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for a period up to "one year" ["two years" vide the Finance Act, 2019 i.e w.e.f 01.04.2020] from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil. As the said statutory provision i.e Sec. 23(5) is applicable prospectively i.e w.e.f A.Y 2018- 19, the same, thus, would have no bearing on the year under appeal in the case of the appellant. The appellant has relied upon the following case laws : a) C1T vs. Neha Builders (2008) 296 ITR 661 (Guj). b) C.R. Development Pvt. ltd. Vs. JCIT (OSD) (ITA No. 4277/Mum/2012) c) Runwal Constructions Vs. ACIT (ITA No. 5408/Mum/2016) d) Rajendra Godshalwar Vs. ITO-21(3)(1), Mumbai [ITANo. 7470/Mum/2017. dated 31.01.2019] e) DCIT vs. Bengal Shapoorji Housing Development Pvt. Ltd. (ITA No. 4369/Mum/2019
4.5 The same issue has been dealt by the CIT(A) vide order no. ITBA/NFAC/S/250/2021-22/1042328729(1) dated 31.03.2022 relating to the earlier year i.e. A.Y. 2013-14. The detailed discussion and deliberations on this issue from the appellate order for A.Y. 2013-14 have been reproduced below: The assessment order, contentions of the appellant and the material available on record has been perused thoroughly. It is an undisputed fact that the property in question was held by the appellant as stock in trade of its business of real estate development. The A.O. has given a finding that the assessee is having stock of flats for Rs,10,28,44,296/- and the O.C. has been already received. The finding of the A.O. that the O.C. of the complete project has been received by the appellant is not correct as per the records. The appellant has received only the O.C. for part of the project during the previous year relevant to A.Y. 2013-14. It is evident from the records that the project was not fully complete and the appellant had not received the Occupation Certificate (O.C.) from the local authorities. Hence, the stock-in-trade representing the vacant flats were not ready for sale/lease at the end of the previous year relevant to A.Y. 2013-14. The addition of notional rent of Rs.70,19,910/- has been made by the A.O. on incorrect finding. The A.O. has further relied on the judgement of Hon'ble Delhi High Court in the case of CIT vs Ansal Housing Finance and Leasing Company Ltd (2013) 354 ITR 180 (Del) whereas contrary view has been taken by the Hon'ble Gujarat High Court in the case of CIT vs Neha Builders (2008) 296 ITR 661 (Guj), various orders of Co-ordinate Benches of Hon'ble ITAT Mumbai have also disagreed with the judgement of Hon'ble Delhi High Court in the case of Ansal Housing Finance and Leasing Company Ltd (2013) 354 ITR 180 (Del). 3.4.3 The appellant has relied upon the following case laws to support its contention that notional rent is not chargeable to tax. a) CIT vs. Neha Builders (2008) 296 ITR 661 (Guj) b) C.R. Development Pvt. ltd. Vs. JCIT (OSD) (ITA No. 4277/Mum/2012) c) Runwal Constructions Vs. ACIT (ITA No. 5408/Mum/2016) d) Rajendra Godshalwar Vs. ITO-21(3)(1), Mumbai [ITANo. 7470/Mum/2017, dated 31.01.2019]
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e) DCIT vs. Bengal Shapoorji Housing Development Pvt. Ltd. (ITA No. 4369/Mum/2019, dated 23.03.2021) 3.4.4 The relevant portion of the recent decision of the Hon'ble ITAT Mumbai in the case of DCIT vs. Bengal Shapoorji Housing Development Pvt. Ltd. (ITA No. 4369/Mum/2019 dated 23.03.2021) which has considered the various judicial pronouncements which are contrary in nature is reproduced below:- 1. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them in support of their respective contentions. It is a matter of fact borne from the records that the property in question was held by the assessee as stock-in-trade of its business of construction and development of real estate properties. As observed by us hereinabove, the solitary issue involved in the present appeal is as to whether or not the ALV of the properties held by the assessee as stock-in-trade of its business as that a real estate developer is liable to be brought to tax in its hands under Sec.22 of the Act. As stated by the Id. A.R, and rightly so, the issue herein involved is squarely covered by the order of the ITAT C bench, Mumbai, in the case of M/s Osho Developers Vs. ACIT-32, Mumbai, ITA No 2372 and 1860/Mum/2019. dated 03.11.2020, for AYs. 2014-15 and 2015-16. After deliberating at length on the issue under consideration the Tribunal had in its aforesaid order observed as under:
"7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements that have been pressed into service by them for driving home their respective contentions. Admittedly, it is a matter of fact that the flats in question were held by the assessee firm, a real estate developer, as stock-in-trade of its respective projects viz. (i) Ashwin CHS Projects: and (ii) Infinity Project. As observed by us hereinabove. the A.O had determined and therein brought to tax the ALV of the aforesaid flats under the head house property in the hands of the assessee firm. Our indulgence in the present appeal has been sought by the assessee. to adjudicate, the sustainability of the view taken by the; lower authorities that the ALV of the flats held by the assessee as stock-in-trade was liable to be determined and therein brought to tax under the head house property. As is discernible from the assessment order, the A.O by relying on the order of the Hon'ble High Court of Delhi in the case of CIT Vs. Ansai "'"- Housing Finance and Leasing Company Ltd. (2013) 354 ITR 180 (Del), had determined the ALV of the flats which were held by the assessee as part of the stock-in-trade of its business of a builder and developer, and had brougnt the same to tax under the head house property. On appeal, the CIT(A; naa found favour with the view taken by the A.O by drawing support from the order of the Hon'ble High Court of Bombay in the case of CIT Vs. Gunaecna Builders (2019) 102 CCH 426 (Bom)
On a perusal of the order of the Honble Jurisdictional High Court in the case of Gundecha Builders (supra), we find, that the issue before the High Court was that where an assessee, a real estate developer, was in receipt of rental income from a property held as stock-in-trade of its business as that of a real estate developer, then, whether the said receipts were to be brought to tax under the head house property (as claimed by the assessee) or as business income (as claimed by the revenue). The High Court after relying on its earlier order passed in the case of CIT Vs. Sane & Doshi Enterprises (2015) 377 ITR 165 (Bom), had observed, that in a case where
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a real estate developer is in receipt of rental income in respect of a property held by him as stock-in-trade of its business as that of a real estate developer, the said rental receipts was to be assessed under the head house property. Accordingly, the issue before the High Court in the aforesaid case was as to under which head of income the rental receipts were liable to be assessed. Finding favour with the claim of the assessee, it was observed by the High Court that the rental income received from letting out of the unsold portion of the property constructed by the real estate developer was assessable to tax as its income from house property. Beyond any scope of doubt, the issue before the Honble High Court was as to under which head of income the rental receipts were to be taxed i.e as business income or income from house property. Unlike the facts involved in the case before the High Court, in the case before us, the flats held by the assessee as stock-in-trade of its business of a builder and developer, having not been let out, had thus not yielded any rental income. As the Honble High Court of Bombay in the case of Gundecha Builders (supra) was seized of the issue as to under which head of income the rental income received from the unsold portion of the property constructed by a real estate developer was to be assessed, which is not the issue involved in the present appeal before us, therefore, the same in our considered view being distinguishable on facts would not assist the case of the revenue before us. 2. We shall now advert to the judgment of the Hon'ble High Court of Delhi in the case of CIT Vs. Ansal Housing Finance and Leasing Company Ltd. (2013) 354 ITR 180 (Del) by drawing support from which the A.O had determined and therein brought to tax the ALV of the flats held by the assessee as stock-in-trade of its business as that of a builder and developer. In the aforesaid case, it was the claim of the assessee that unlike the other builders as it was not into letting out of properties, the determination of deemed income which had formed the basis for assessment under the ALV method, was not called for in its case. However, the High Court being of the view that the levy of income tax in the case of an assessee holding house property was premised not on whether the assessee carries on business, as landlord, but on the ownership, thus, turned down the aforesaid claim of the assessee. To sum up, in the backdrop of its conviction that the incidence of charge under the head house property was based on the factum of ownership of property, the High Court was of the view that as the capacity of being an owner was not diminished one whit, because the assessee carried on the business of developing, building and selling flats in housing estates, therefore, the ALV of the flats held as stock-in-trade by the assessee in its business of a builder and developer was liable to be determined and brought to tax under the head house property. But then, we find, that taking a contrary view the Hon'ble High Court of Gujarat had way back in the case of CIT vs. Neha Builders (2008) 296 ITR 661 (Guj), observed, that rental income derived by an assessee from the property which was treated as stock-in-trade is assessable as business income and cannot be assessed under the head "Income from house property". The High Court while concluding as hereinabove, had observed, that admittedly the income derived from property would always be termed as 'income from the property, but if the property is used as 'stock-in-trade, then the said property would become or partake the character of the stock, and any income derived from the stock would be 'income from the business and not income from the property. In the backdrop of the conflict between the decisions of the aforesaid non-
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jurisdictional High Courts, as observed by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), the view which is in favour of the assessee has to be preferred as against that taken against him. Accordingly, following the judgment of the Honble Jurisdictional High Court in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), we respectfully follow the view taken by the Honble High Court of Gujarat in the case of CIT vs. Neha Builders (2008) 296 ITR 661 (Guj). In fact, we find that the issue as to whether the ALV of a property held by an assessee as stock-in-trade of its business as that of a real estate developer had earlier came up before a SMC bench of the IT AT, Mumbai in the case of Shri. Rajendra Godshalwar Vs. ITO-21(3)(1), Mumbai [ITA No. 7470/Mum/2017. dated 31.01.2019]. The Tribunal after considering the judgment of the Honble High Court of Delhi in Ansal Housing Finance & Leasing Co. Ltd. (2013) 354 ITR 180 (Delhi) and that of the Honble High Court of Gujarat in CIT vs. Neha Builders Pvt. Ltd., (2008) 296 ITR 661 (Guj), had concluded, that the ALV of the unsold property held by the assessee as stock-in-trade could not be determined and brought 10 tax under the head house property. The Tribunal while concluding as hereinabove had a/so distinguished the judgment of the :V Honble High Court of Bombay in the case of CIT Vs. Sane & Doshi Enterprises (2015) 377 ITR 165 (Bom), as was relied upon by the revenue. The Tribunal while concluding as hereinabove had observed as under:
We have carefully considered the rival submissions. The short point involved in this appeal is the validity of addition sustained by the CIT(A) on account of notional AL V of the unsold flat, which is held by the assessee as stock-in-trade. Factually speaking, it is not in dispute that the flat in question is not yielding any rental income to the assessee. as it has not been let-out. It is also not in dispute that the project in question has been completed during the year under consideration, and the said flat is shown as stock-in-trade at the end of the year~~ At the time of hearing, the learned representative a/so pointed out that the flat has been ultimately sold on 06.11.2012 We find that our coordinate Bench in the case of C.R. Developments Pvt. Ltd. (supra) dealt with charging of notional income under the head 'Income from House Property' in respect of unsold shops which were shown by assessee therein as part of 'stock- in-trade'. As per the Tribunal "The three flats wnich could not be sold at the end of the year was shown as stock-in- trade. Estimating rental income by the AO for these three flats as income from house property was not justified insofar as these flats were neither given on rent nor the assessee has intention to earn rent by Shri Rajendra Godshalwar letting out the flats. The flats not sold was its stock-in- trade and income arising on its sale is liable to be taxed as business income. Accordingly, we do not find any justification in the order of AO for estimating rental income from these vacant flats u/s 23 which is assessee's stock in trade as af the end of the year. Accordingly, the AO is directed to delete the addition made by estimating letting value of the flats u/s 23 of the I.T. Act." 1. In our view, the aforesaid observation of our coordinate Bench squarely applies to the facts of the present case. In the case of M/s. Runwal Constructions (supra) also, similar issue has been dealt with by our coordinate Bench. In the case of M/s. Runwal Constructions (supra), the Bench noted the judgment of the Hon'ble Gujarat High Court in the case of CIT vs Neha Builders Pvt. Ltd., 296 ITR 661 (Guj.) as also the judgment of the Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd., 354 ITR 180 (Delhi) and finally observed as under :- "10. In the case on hand before us it is an undisputed fact that both assessees have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head 'income from business'. Thus, respectfully following the above said decisions we hold that the unsold flats which
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are stock in trade when they were sold they are assessable under the head 'income from business' when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head 'income from house property'. Thus, we direct the AO to delete the addition made under Section 23 of the Act as income from house property." Following the aforesaid precedents, we find merit in the plea of the assessee, which deserves to be upheld. 1, Insofar as the judgment of the Hon'ble Bombay High Court in the case of Sane & Doshi Enterprises (supra) relied by the CIT(A) is concerned, the same, in our view, does not help the case of the Revenue. Quite clearly, the case before the Hon'ble High Court was relating to actual rental income received on letting out of unsold flats. The dispute pertained to the head of income under which such income was to be taxed - whether as 'Business Income' or as 'Income from House Property'. In the present case, the facts are quite different inasmuch as the unsold flat in question has not yielded any rental income as the flat has not been let-out, and is being held by the assessee purely as stock-in- trade; and, what the Assessing Officer has tried to do is to assess only a notional income thereof. Thus, the ratio of the judgment of the Hon'ble Bombay High Court in the case of Sane & Doshi Enterprises (supra) has been rendered in the - —-- context of qualitatively different facts, and is not applicable in the present case."
Accordingly, preferring the view taken by the Hon’ble High Court of Gujarat in CIT vs. Neha Builders Pvt. Ltd. (2008) 296 ITR 661 (Guj), as per which the ALV of the unsold property held by an assessee as stock-in-trade could not be determined and brought to tax under the head house property, as against that arrived at by the Honble High Court of Delhi holding to the contrary in CIT Vs. Ansal Housing Finance and Leasing Company Ltd. (2013) 354 ITR 180 (Del); and also following the order of IT AT, Mumbai in Shri. Rajendra Godshalwar Vs. ITO-21(3X1), Mumbai [ITA No. 7470/Mum/2017, dated 31.01.2019], we herein conclude that the ALV of flats held by the assessee as part of the stock-in-trade of its business as that of a builder and developer could not have been determined and therein brought to tax under the head house property. 1. Before parting, for the sake of clarity, we may herein observe that vide the Finance Act, 2017 w.e.f 01.04.2018 the legislature had inserted Sec. 23(5) of the Act. As per the said statutory provision, where the property consisting of any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for a period up to "one year" ["two years" vide the Finance Act, 2019 i.e w.e.f 01.04.2020] from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil. As the said statutory provision i.e Sec. 23(5) is applicable prospectively i.e w.e.f A.Y 2018-19, the same, thus, would have no bearing on the year under consideration in the case of the present assessee before us. Our aforesaid view is fortified by the aforesaid order of the IT AT, Mumbai in the case of Shri. Rajendra Godshalwar Vs. ITO-21(3)(1), Mumbai [ITA No. 7470/Mum/2017, dated 31.01.2019], wherein in context of the said aspect it was observed as under:
"9. Apart therefrom, we find that Sec. 23(5) of the Act has been inserted by the Finance Act, 2017 w.e.t. 01.04.2018. In terms of the said section, it is prescribed that "where the property consisting of any building or land appurtenant thereto is held as
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stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to one year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil". Though the said provision is effective from 01.04.2018. yet even if one is to see the present case from the standpoint of Sec.23(5) of the Aci, no addition is permissible in the instant year. It may be relevant to note that the completion certificate is stated to Shn Rajencira Godshalwar have been obtained on 28.11.2011 and going by the provisions - -•-of Sec. 23(5) of the Act. no addition is permissible in the instant assessment year. Be that as it may, we are only trying point out that the assessability of notional income in respect of unsold flat, which is taken as stock-in-trade, is not merited in the instant case. Thus, we set-aside the order of CIT(A) and direct the Assessing Officer to delete the addition." 1. We, thus, in the backdrop of our aforesaid deliberations not being able to concur with the view taken by the lower authorities, therein, set aside the order of the CIT(A) and direct the A.O to delete the addition made by him towards the ALV of the flats held by the assessee as stock-in-trade of its business as that of a builder and developer. The Grounds of appeal Nos. 1 to 4 are allowed in terms of our aforesaid observations. 2. As we have concluded that the assessability of notional income i.e ALV in respect of unsold flats held by the assessee as stock-in-trade of its business as that of a builder and developer is not merited in the instant case, therefore, the grounds of appeal nos. 5 to 7 having been rendered as merely academic are not being adverted to and therein adjudicated upon. The Grounds of appeal nos. 5 to 7 are dismissed as not pressed in terms of our aforesaid observations. • 1 . The appeal of the assessee is allowed in terms of our aforesaid observations. " As the facts and the issue involved in the appeal before us remains the same as were there before the Tribunal in the aforementioned case thus, finding no reason to take a different view, we herein respectfully follow the same. As such, finding no infirmity in the view taken by the CIT(A) we herein concur with him that the A.O was in error in assessing the notional lettable value of the flats held by the assessee as stock-in-trade of its business as that of a real estate developer. 9. Resultantly, the appeal filed by the revenue is dismissed. . 3.4.5 After considering catena of judicial pronouncements the Hon'ble Mumbai IT AT has concluded that the assessability of notional income, i.e. ALV in respect of unsold flats held by the assessee as stock-in-trade of its business as that of a builder and developer is not merited. Jurisdictional IT AT has considered the judgment of the Hon'ble Delhi High Court in the case of CIT Vs. Ansal Housing Finance and Leasing Company Ltd. (2013) 354 ITR 180 (Del) which has been relied upon by the AO and the Hon'ble IT AT has decided the issue in favour of the assessee. Further the Hon'ble IT AT, In para 5 of the above reproduced decision, has held that the newly inserted Section 23(5)vide Finance Act, 2017 w.e.f. 01.04.2018 is applicable prospectively i.e. w.e.f. A.Y. 2018-19, the same, thus, would not have no bearing on the year under consideration. Since the jurisdictional IT AT has decided this issue in favour of the assessee, respectfully following the above mentioned judgement of the Hon'ble Guj HC(supra) and above referred decisions of Hon'ble Mumbai IT AT the addition on account of notional rent of Rs. 70,19,910/- is hereby deleted. Accordingly, the grounds of appeal 3 and 4 are allowed.
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4.5 In view of the above decision for A.Y. 2013-14, the AO is directed to delete the addition of Rs.62,74,437/- made on account of notional rent. Accordingly, the grounds of appeal 2 and 3 are hereby allowed.”
The identical issue of notional rent on flats held as stock in trade raised by the Revenue in assessment year 2013-14 in the case of the assessee has been dismissed by the Tribunal (supra). The relevant funding of the Tribunal (supra) is reproduced as under:
“17. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The issue in dispute is whether, from the flats held by an assessee as a stock in trade, the deemed rental income under the head income from house property should be assessed or not. The Hon’ble Delhi High Court in the case of Ansal housing finance and leasing (supra) has held that stock is to be treated as house property of the assessee and therefore liable for deemed rental income or ALV and same has to be computed under the head ‘income from house property’. Whereas, contrary view has been taken by the Hon’ble High Court of Gujarat in the case of CIT Vs Neha Builders Private Limited (2006) 296 ITR 661 (Guj). The coordinate bench of the Tribunal in the case of Bangal Shapoorji housing development Private Limited (supra) after considering various decisions including the decision of Hon’ble Delhi High Court (supra) and decision of the Hon’ble Gujarat High Court(supra), directed the Ld. Assessing Officer to delete the addition made towards the ALV of the flats held by the assessee as stock in trade of its business as that of a builder and developer. In our opinion, there is no error in the order of the Ld. FAA on the issue in dispute, which has been passed after following binding precedent on the issue in dispute. We accordingly uphold the same. The ground No.3 of the appeal of the Revenue is accordingly dismissed.” 10. Respectfully, following the Tribunal (supra), we uphold the finding of the Ld. CIT(A) on the issue in dispute.
The ground No. 4 (four) relates to deletion of the addition of ₹ 58, 97, 360 under section 43CA of the Act. The grievance of the Revenue is that no opportunity was provided to the Assessing Officer to check the facts that the flats under consideration were sold in assessment year 2006-07 and 2007-08. The relevant funding of the Ld. CIT(A) on the issue in dispute is reproduced as under:
12 ITA 1587/Mum/2022
“5.4 The impugned assessment order and contentions of the appellant have been thoroughly considered. The AO in the assessment order has made the addition on account of difference between the fair market value and the sale consideration of Flats D-607,707,708 and 101. On verification of records it is noticed that the flats D 6076/707 and 708 were sold in the Financial Years 2006-07 and 2007-08. It is pertinent to note here that section 43CA has been inserted by the Finance Act, 2013 with effect from 01.04.2014. Therefore, the provisions of Section 43CA are not applicable for the sale of these flats / amenities. Accordingly, addition of Rs.58,97,360/- made on account of the above mentioned flats / amenities is hereby deleted.” 12. Before us the learned Counsel of the assessee submitted that all the documents in support of sale consideration including registered sale deed of the flats under reference were made available to the Assessing Officer as well as to the Ld. CIT(A). The learned Counsel referred to the relevant documents filed before us. In circumstances the grievance of the Revenue that no such opportunity was provided to the Assessing Officer to go through the registered sale deed in respect of the flats documents becomes infructuous when the very same documents are available before the Assessing Officer. The grievance of the revenue accordingly rejected. The ground of the appeal of the Revenue is is accordingly dismissed.
In the result, the appeal of the revenues dismissed. Order pronounced in the on 31st day of October, 2022 under IT(AT) Rules 34(4).
Sd/- sd/- (SANDEEP SINGH KARHAIL) (OM PRAKASHRI. KANT) �ाियक सद�/JUDICIAL MEMBER लेखा सद�/ACCOUNTANT MEMBER मुंबई/Mumbai, िदनांक/Dated: 31/10/2022 Dragaon Legal / Pavanan, Sr.PS
13 ITA 1587/Mum/2022
�ितिलिप अ�ेिषतCopy of the Order forwarded to : अपीलाथ�/The Appellant , 1. �ितवादी/ The Respondent. 2. आयकर आयु�(अ)/ The CIT(A)- 3. आयकर आयु� CIT 4. िवभागीय �ितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, 5. Mumbai गाड� फाइल/Guard file. 6. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai