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2020 (11) TMI 133 - AT - Income TaxRevision u/s 263 - ALV of the unsold flats held by the assessee as closing stock of its business as that of a builder and developer was not offered by it for tax under the head house property - HELD THAT - Admittedly the assessee firm which is engaged in the business of a builder and developer was holding unsold flats as part of its inventory of stock-in-trade during the year under consideration. CIT was of the view that the failure on the part of the A.O in not taking cognizance of the fact that the ALV of the unsold flats held by the assessee as closing stock of its business as that of a builder and developer was not offered by it for tax under the head house property had thus rendered his order erroneous insofar it was prejudicial to the interest of the revenue in terms of Explanation 2 to Sec.263. On the basis of his aforesaid observation the Pr. CIT by relying on the judgment in the case of Ansal Housing Finance Leasing Co. Ltd. 2012 (11) TMI 323 - DELHI HIGH COURT had concluded that incidence of charge of ALV of a property was backed by the factum of ownership and the aspect that as to whether the assessee carried on a business or held the property as a landlord would have no bearing on determination of the ALV. A.R had tried to support the order of the A.O on the ground that the view of the A.O that the ALV of the property held by the assessee as stock-in-trade was not liable to be brought to tax under the head house property was supported by certain orders of the coordinate benches of the Tribunal. Claim of the ld. A.R that the A.O while framing the assessment had deliberated upon the aforesaid aspect and had arrived at a possible view is concerned we are afraid that the same does not find favour with us. Perusal of the respective queries that were raised by the A.O vide his letter dated 03.05.2016 and the reply filed by the assessee vide his letter dated 12.09.2016 reveals beyond any scope of doubt that the same pertained to the issue as regards the valuation of opening and closing WIP of the assessee s project and determination of the cost of sale of the same. We are unable to comprehend as to on what basis it is canvassed by the ld. A.R that the A.O while framing the assessment had queried on the issue as to whether or not the ALV of the unsold flats was to be assessed under the head house property . Neither the aforesaid claim of the A.R is discernible from the query letters issued by the A.O or the reply filed by the assessee in the course of the assessment proceedings nor the assessment order inspires any confidence as regards the same. A perusal of the assessment order/records reveals that the A.O had at no stage raised any query on the aspect of assessing the ALV of the unsold flats held by the assessee as part of its inventory of stock-in-trade under the head house property . In the backdrop of the aforesaid facts we are of a strong conviction that as the issue as to whether the ALV of the unsold flats held by the assessee as closing stock of its business as that of a builder and developer was liable to be assessed under the head house property had not been inquired into by the A.O while framing the assessment the same thus would clearly bring the assessment order passed by him u/s 143(3) dated 07.12.2016 within the realm of the Explanation 2(a) to Sub-section (1) of Sec.263 of the Act. CIT had rightly invoked his jurisdiction under Sec. 263 of the Act and set aside the assessment order with a direction to the A.O to pass a fresh order after considering the aforesaid aspect and allowing of an opportunity of being heard to the assessee - Appeal filed by the assessee is dismissed.
Issues Involved:
1. Validity of jurisdiction assumed by the Pr.CIT under Sec. 263 of the Income Tax Act, 1961. 2. Assessment of Annual Lettable Value (ALV) of unsold flats held as closing stock under the head 'house property'. 3. Condonation of delay in filing the appeal. Issue-wise Detailed Analysis: 1. Validity of Jurisdiction Assumed by Pr.CIT under Sec. 263: The assessee challenged the jurisdiction assumed by the Principal Commissioner of Income Tax (Pr.CIT) under Sec. 263 of the Income Tax Act, 1961, arguing that the original assessment order framed by the Assessing Officer (A.O) under Sec. 143(3) was neither erroneous nor prejudicial to the interests of revenue. The Pr.CIT had observed that the A.O failed to consider the ALV of unsold flats held as closing stock, which should have been taxed under the head 'house property'. The Pr.CIT relied on the judgment of the Hon'ble High Court of Delhi in the case of Ansal Housing Finance & Leasing Company Ltd. Vs. CIT, which held that the ALV of vacant flats should be assessed under Sec. 22. The Tribunal upheld the Pr.CIT's jurisdiction, noting that the A.O did not inquire into the ALV of unsold flats, thus making the assessment order erroneous and prejudicial to the revenue. 2. Assessment of ALV of Unsold Flats: The assessee argued that the unsold flats were held as inventory and had not been let out, hence their ALV should not be taxed under 'house property'. The Pr.CIT, however, maintained that ownership of the property necessitated the assessment of its ALV under Sec. 22, regardless of its status as stock-in-trade. The Tribunal noted that the A.O had not raised any queries or deliberated on this issue during the assessment proceedings. Consequently, the Tribunal agreed with the Pr.CIT that the failure to assess the ALV of unsold flats rendered the original assessment order erroneous and prejudicial to the revenue. 3. Condonation of Delay in Filing the Appeal: The assessee's appeal was delayed by 20 days due to the order being sent to an old, locked residential address of one of the partners. The Tribunal, after considering the reasons and the affidavit provided, found the delay to be bona fide and condoned it. The Departmental Representative did not object to this condonation. Conclusion: The Tribunal dismissed the appeal filed by the assessee, upholding the Pr.CIT's order under Sec. 263. The Tribunal found that the A.O had not considered the ALV of unsold flats, making the assessment order erroneous and prejudicial to the revenue. The Pr.CIT's direction to reassess the issue with due opportunity to the assessee was deemed appropriate. The delay in filing the appeal was condoned due to bona fide reasons.
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