2023 (1) TMI 820 - AT - Income Tax

Revision u/s 263 by CIT - deemed rent on unsold units - HELD THAT - DR did not dispute the treatment of unsold flats as stock-in- trade by the assessee and also offering as same as business income in the subsequent years. Therefore following the same the assessment year being 2015-16 2022 (1) TMI 1041 - ITAT PUNE we by holding the amendment brought in by Finance Act 2017 w.e.f. 01-04-2018 is not applicable and no addition is maintainable on account of deemed rent on unsold flats which is treated as stock-intrade by the assessee. Thus the order of CIT(A) is not justified and it is set aside. Accordingly ground Nos. 2 3 and 4 raised by the assessee are allowed. Provision made for pending work is not an allowable deduction - It is not the case of PCIT that the AO had not enquired into this issue during the course of scrutiny assessment proceedings and no enquiry was made by the AO. The ld. AR argued that the facts and circumstances of the present case are similar to the facts and circumstances in the case of M/s. Rohan Developers 2021 (1) TMI 990 - ITAT PUNE and vehemently argued that the PCIT had no jurisdiction to exercise power of revision u/s. 263 - DR relied on the order of PCIT. We note that as rightly pointed by the ld. AR that the AO in scrutiny assessment proceedings asked the assessee to submit all the details which is evident from assessment order and it is also not the case of PCIT that the AO did not enquire into the issues relating to the subject of show cause notice to 263 proceedings. On perusal of the impugned order in respect of the issue of provision made for expenses to be incurred in the case of un-finished works which were claimed through profit and loss account is allowable which were made on adhc basis. There was no material placed on record by the PCIT suggesting the provision made for future expenses is disallowable. We find no evidence brought on record by the PCIT that the contingent liability in respect of provision for future expenses is not based on any material. - Decided in favour of assessee.

Summary

Issues:
1. Delay in filing the appeal condonation.
2. Assessment of deemed rent on unsold units.
3. Allowability of provision made for pending work as a deduction.

Analysis:
1. The appeal was filed with a delay of 493 days, which was condoned due to a decision of the Hon'ble Supreme Court during the Covid-19 lockdown. The delay was saved based on this exceptional circumstance.

2. The Principal Commissioner of Income Tax-2 held that the Assessing Officer's order under section 143(3) was erroneous and prejudicial to the revenue's interest. The issue revolved around the treatment of unsold flats as stock-in-trade by the assessee, leading to a disagreement on whether the income from these unsold flats should be considered as income from house property or business income. The Tribunal referred to relevant case laws and amendments to the Income Tax Act to conclude that the income from unsold flats should be taxed as business income and not as income from house property. The order of the Commissioner was set aside, and the grounds raised by the assessee were allowed.

3. The provision made for pending work expenses was challenged by the Principal Commissioner as being adhoc and without scientific basis. The Tribunal, referencing a previous case, emphasized that for an order to be considered erroneous and prejudicial to revenue, specific conditions must be met simultaneously. It was noted that the Principal Commissioner did not provide any material suggesting that the provision for future expenses was disallowable. The Tribunal found no evidence to support the disallowance of the provision, leading to the allowance of the ground raised by the assessee.

In conclusion, the appeal of the assessee was allowed based on the detailed analysis and findings regarding the issues raised in the appeal.