2023 (1) TMI 1228 - AT - Income Tax

Revision u/s 263 - no notional rent is offered to tax in respect of unsold flats lying vacant held as closing stock - As submitted Assessing Officer has taken one of the possible view - HELD THAT - We find that in the case of Osho Developers vs. ACIT 2020 (11) TMI 218 - ITAT MUMBAI after considering judgment rendered in the case of CIT vs. Ansal Housing Finance Leasing Company Ltd. 2012 (11) TMI 323 - DELHI HIGH COURT and various other decisions, which inter-alia, includes decision in the case of CIT vs. Gundecha Builders 2019 (1) TMI 112 - BOMBAY HIGH COURT , CIT vs. Sane Doshi Enterprises 2015 (4) TMI 882 - BOMBAY HIGH COURT , CIT vs. Neha Builders 2006 (8) TMI 105 - GUJARAT HIGH COURT and K. Subramanian, ITO Another vs. Siemens India Ltd. 1983 (4) TMI 3 - BOMBAY HIGH COURT concluded that the annual letting value of flats held as stock-in-trade cannot be brought to tax under the head house property . While taking such view the Tribunal distinguished the decision rendered in the case of CIT vs. Ansal Housing Finance Leasing Company Ltd. (supra). Thus, as per the decision rendered in the case of Osho Developers vs. ACIT (supra) no addition could have been made u/s. 23 of the Act in respect of vacant flats held as stock-in-trade and carried forward as closing stock. It is a well settled law that where two views are possible and the Assessing Officer has taken one of the possible view, the PCIT cannot substitute his view in exercise of revisional jurisdiction u/s. 263 of the Act. In the instant case the PCIT has tried to super impose his view in exercise of powers u/s. 263 of the Act over one of the possible view taken by Assessing Officer. This is not in accordance with the settled law. Thus, the PCIT has exceeded his jurisdiction in exercise of revisionary powers. Appeal of the assessee is allowed.

Summary

Issues:

1. Invocation of revisionary powers under section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (Central), Mumbai-3.
2. Treatment of notional rent on unsold vacant flats carried forward as closing stock for the Assessment Year 2017-18.

Issue 1:

The appeal by the assessee was against the order of the Principal Commissioner of Income Tax (Central), Mumbai-3 invoking revisionary powers under section 263 of the Income Tax Act, 1961 for the Assessment Year 2017-18. The assessee argued that the Assessing Officer had taken a possible view supported by the decision of the Tribunal in a similar case. The Authorized Representative for the assessee contended that the PCIT cannot invoke revisionary powers merely because the view taken by the Assessing Officer differed from that of the PCIT. The Authorized Representative emphasized that the Assessing Officer had followed judicial discipline and decided the issue in line with the view taken by the Jurisdictional Tribunal.

Issue 2:

The dispute revolved around the treatment of notional rent on unsold vacant flats carried forward as closing stock for the Assessment Year 2017-18. The assessee, a Developer, had constructed a residential building and could sell only one flat during the relevant financial year. The remaining unsold vacant flats were carried forward as closing stock. The Assessing Officer, after specific inquiry during scrutiny assessment proceedings, did not make any addition on account of notional rent for the unsold flats. The Authorized Representative for the assessee argued that this decision was in line with the Tribunal's decision in a similar case. On the other hand, the Departmental Representative contended that notional rent should have been charged on the vacant flats held as stock-in-trade as per the provisions of section 23 of the Act, citing a specific case to support this argument.

In the final judgment, the Tribunal examined the arguments presented by both sides and reviewed the orders of the authorities below. The Tribunal noted that the decision of the Mumbai Bench of the Tribunal in a similar case had held that no addition could be made under section 23 of the Act for vacant flats held as stock-in-trade and carried forward as closing stock. The Tribunal emphasized the principle that where two views are possible and the Assessing Officer has taken one view, the PCIT cannot substitute his view in the exercise of revisional jurisdiction under section 263 of the Act. The Tribunal concluded that the PCIT had exceeded his jurisdiction in this case by trying to impose his view over that of the Assessing Officer. Consequently, the impugned order was quashed, and the appeal of the assessee was allowed.