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Facts
The Assessing Officer made additions to the appellant's income, including 8% of unsold inventory as 'Income from House Property' and employee's contribution to Provident Fund. The appellant contested these additions, arguing that the property was not meant for letting out and that there was no delay in Provident Fund contributions. The CIT(A) dismissed the appeal, confirming the additions.
Held
The Tribunal decided to grant the appellant a further opportunity to explain its case before the CIT(A). The CIT(A) was directed to provide two effective opportunities and consider all arguments before passing a fresh order. The appeal was allowed for statistical purposes.
Key Issues
Whether the additions made by the Assessing Officer regarding unsold inventory and Provident Fund contributions are justified, and whether the appellant was denied a proper opportunity of hearing before the lower authorities.
Sections Cited
2(22)(x), 36(1)(va), 43 CA, 24
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Income Tax Appellate Tribunal, Mumbai “G” Bench, Mumbai.
Before: Shri Satbeer Singh Godara (JM) & Shri Omkareshwar Chidara (AM)
Per Omkareshwar Chidara (AM) :-
In the above mentioned appeal, learned Assessing Officer (Ld. AO for short) made an addition of 8% of closing stock as “Income from House Property”. The appellant is in the business of real estate activities and the construction was completed in all respects. The appellant has objected to the addition of 8% of the unsold inventory valued at Rs. 5,95,43,294/- amounting to Rs. 47,63,464/- because of the property is not let out nor is meant to let out. The appellant wants to sell the property and hence house property income cannot be computed in its case. The submissions of the appellant were duly considered by Ld. AO. But Ld. AO placed reliance on the case of Ansal Housing Finance and Leasing Company Limited (Delhi) and rejected the argument of appellant and 8% of unsold inventories were treated
2 Shweta Infrastructure Housing (I) Private Ltd. as deemed house property income and added to the total income of the appellant while completing the assessment.
The Ld. AO has observed that the audit report of the appellant company reveals that the appellant has violated provisions relating to employees contribution to the Provident Fund amounting to Rs. 15,42,629/-. The Ld. AO has mentioned that notice was issued to the appellant in this regard and there was no valid explanation from the appellant in this regard and in view of the same above amount is treated as income u/s. 2(22)(x) of the Income Tax Act (the Act for short) read with section 36(1)(va) of the Act and added to the total income. Thus, the Ld. AO has added 8% of the unsold inventory and employees’ contribution towards Provident Fund while completing assessment.
The appellant filed an appeal before the Ld. CIT(A) raising grounds that both the additions relating to 8% of the unsold inventory and Provident Fund to be deleted.
During the appeal proceedings, it was mentioned that three opportunities were given to the appellant to substantiate their arguments. As there is no compliance to any of these notices, the learned Commissioner of Income Tax (Appeals) [Ld. CIT(A) for short] dismissed the appeal of the appellant and confirmed both the additions made by the Ld. AO.
Aggrieved by the orders of the Ld. AO and the Ld. CIT(A), an appeal was filed before the ITAT with following grounds of appeal :-
1. On the facts and the circumstances of the case in law, lower authorities erred in passing ex-parte order and erred in deciding the only on the basis of material available with them, this action is being violative of principal of natural justice, Your appellant prays for granting opportunity of hearing before lower authorities. Without prejudice to the above grounds appellant intense to raise to following of appeal, following grounds.
3 Shweta Infrastructure Housing (I) Private Ltd.
On the facts and circumstances of the case and in law Learned Assessing Officer erred in making an addition of Rs, 15,42,629 being employee's contribution to EPF on the basis of tax audit report, it is your appellants contention that the due dates reported in Form 3CD are incorrect and as per the due date prescribed in PF Act, there is no delay and entire deduction needs to be allowed, 3. On the facts and circumstances of the and in Law Learned Assessing Officer erred in making an addition of Rs, 22,16,371 by invoking provision of section 43 CA of the IT Act, without appreciating the fact that difference between such values is less than 10% and therefore no addition is warranted further he also erred in not making the reference to DVO and therefore the addition is not justified.
On the facts and circumstances of the case and in law Learned Assessing Officer erred in making an addition of Rs.47,63,464/-, being 8% of unsaid inventory valued at Rs 5,95,43,294/- as deemed House Property income without appreciating the facts of the case, your appellant prays for deletion of entire addition.
Without prejudice to Ground No.-3, on the facts and circumstances of the case and in law, the Learned Assessing Officer ought to have considered the figure of fair market rent instead of adhoc percentage of value of unsold inventory and further erred in not allowing the statutory deduction under section 24 of the IT Act,
On the date of hearing before the Bench Ld. AR of the appellant requested for another opportunity to explain the facts and circumstances before the lower authorities.
Per contra, Ld. DR has opposed the arguments of Ld. AR and pleaded that addition made by Ld. AO may be confirmed because appellant was not cooperative with the Department and filing replies to the queries of Ld. AO and the Ld. CIT(A).
Heard both the parties. As pleaded by the Ld. AR of the appellant, it is decided to give further opportunity to the appellant to explain its case before the Ld. CIT(A). Accordingly the matter is set aside to the file of the Ld. CIT(A). The Ld. CIT(A) is directed to give two effective opportunities and take into consideration all the arguments of Ld. AR and pass an appeal order afresh.
4 Shweta Infrastructure Housing (I) Private Ltd. The appellant is directed to furnish all replies and cooperate with the Department to complete the appeal proceedings.
Appeal of the appellant is allowed for statistical purposes.
Order pronounced in the open court on 26th August, 2024.
Sd/- Sd/- (Satbeer Singh Godara) (Omkareshwar Chidara) Judicial Member Accountant Member