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2024 (2) TMI 388 - AT - Income TaxIncome from house property - Determining the ALV of flats disclosed in the stock in trade as per the Accounting standards and policies being fallowed consistently by the assessee - scope of amendment in the finance Act 2017 under section 23(5) - AR contentions are the amendment in finance Act 2017, in respect of provisions u/sec 23 (5) of the Act is applicable to unsold inventory of flats disclosed under stock in trade is effective from A.Y.2018-19 and not to the present A.Y. 2012-13, therefore, there is no provision to assess notional rent/ALV of unsold flats u/sec 22 of the Income Tax Act in the year under consideration HELD THAT - We consider it appropriate to refer to the observations in case of NMS Enterprises 2023 (1) TMI 1345 - ITAT MUMBAI though in the context of revision u/sec. 263 of the Act has dealt on the applicability of provisions of section 23(5) of the Act prospectively and granted relief We considering the facts, circumstances and the amendment, the annual value of unsold flats held as stock in trade has to considered as per the amendment in the finance Act 2017 under section 23(5) of the Act is applicable from A.Y 2018-19 and the present case is A.Y. 2012-13. Accordingly we fallow the judicial precedence and rely on the ratio of the legal decisions and the applicability of amendment u/sec 23(5) of the act and we set aside the order of the CIT(A) and direct the assessing officer to delete the addition of annual let out value ( ALV) of the unsold flats and allow the grounds of appeal in favour of the assessee.
Issues Involved:
1. Confirmation of addition under "Income from Property." 2. Addition of notional income for unsold flats. 3. Application of Delhi High Court decision in a different context. 4. Estimation of Annual Letting Value (ALV) without show cause notice. 5. Basis of ALV estimation for multiple flats. 6. Adoption of Municipal rateable value for notional income. 7. Denial of vacancy allowance for vacant flats. Summary: Issue 1: Confirmation of Addition under "Income from Property" The Commissioner of Income-tax (Appeals) confirmed the addition of Rs. 32,92,135/- (rectified to Rs. 16,67,015/- u/s 154 of the IT Act) made by the Assessing Officer under the head "Income from Property" for the assessment year under appeal. Issue 2: Addition of Notional Income for Unsold Flats The Commissioner of Income-tax (Appeals) confirmed the addition of notional income for 13 flats held partly as stock in trade and partly as fixed assets, holding the appellant liable to notional income under S. 22 of the Income-tax Act 1961. Issue 3: Application of Delhi High Court Decision The Commissioner of Income-tax (Appeals) applied the decision of the Delhi High Court in the case of Ansal Housing Finance Leasing Co. Ltd. to the appellant's case. Issue 4: Estimation of ALV without Show Cause Notice The Commissioner of Income-tax (Appeals) confirmed the estimation of the ALV of the flats on the basis of the proportionate rent received for flat no. 20, made by the Assessing Officer without issuing any show cause notice. Issue 5: Basis of ALV Estimation for Multiple Flats The Commissioner of Income-tax (Appeals) confirmed the addition based on the rent received for flat no. 20 without appreciating that it could not form the basis of the ALV for all other flats in the building. Issue 6: Adoption of Municipal Rateable Value The Commissioner of Income-tax (Appeals) erred in not adopting the Municipal rateable value as the basis of estimating notional income for the 13 flats and confirmed the addition based on the rent received for flat no. 20. Issue 7: Denial of Vacancy Allowance The Commissioner of Income-tax (Appeals) erred in not granting vacancy allowance for the period during which the 13 flats were vacant in the financial year. Tribunal's Decision: The Tribunal found that the CIT(A) erred in confirming the action of the Assessing Officer in computing the ALV of the flats disclosed under stock in trade. The Tribunal referred to the decision in Unique Estates Development Co Ltd vs DCIT, which held that the ALV of unsold flats disclosed under stock in trade is not sustainable. The Tribunal also noted that the amendment in Finance Act 2017, regarding provisions U/sec 23(5) of the Act, is applicable from A.Y. 2018-19 and not to the present A.Y. 2012-13. Therefore, there was no provision to assess notional rent/ALV of unsold flats U/sec 22 of the Income Tax Act for the year under consideration. The Tribunal set aside the order of the CIT(A) and directed the Assessing Officer to delete the addition of ALV of the unsold flats. Both appeals filed by the assessee were allowed. Conclusion: The appeals were allowed, and the additions made by the Assessing Officer were deleted based on the Tribunal's finding that the provisions for notional rent/ALV of unsold flats were not applicable for the assessment year in question.
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