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TMI Blog2023 (3) TMI 1188X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act vide Finance Act 2017, w.e.f 01.04.2018, ie., from AY. 2018-19. Since CBDT Circular/Instruction are binding on AO and Income Tax Authorities, the AO can be presumed to have taken note of CBDT classification dated 15.02.2018, while framing assessment order on 24.04.2019. Therefore, AO has rightly followed the CBDT Circular (supra) and did not determine the notional income from unsold flats held by assessee as stock-in-trade. AO has discharged his dual role as an investigator as well as adjudicator. As noted he has examined the relevant facts of unsold flats as well as decision not to determine ALV is in line with the CBDT Circular dated 15.02.2018 and therefore his decision cannot be held to be erroneous as well as prejudicial to the revenue. Therefore, we find the Ld. PCIT has erred in invoking revisional jurisdiction u/s 263 of the Act, only for imposing his view, which is not permissible; and so we are inclined to quash the impugned order of Ld. PCIT. Decided in favour of assessee. - I.T.A. No.997/Mum/2022 - - - Dated:- 3-2-2023 - SHRI ABY T. VARKEY, JM AND SHRI S. RIFAUR RAHMAN, AM For the Assessee : Shri Dharan Gandhi For the Revenue : Shri S. H. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout satisfying the condition precedent as stipulated u/s 263 of the Act. 4. Before examining the challenge raised against the jurisdiction, let us take guidance of judicial precedence laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions should be satisfied before jurisdiction u/s 263 of the Act is exercised by the Ld. CIT/PCIT. The twin conditions which need to be satisfied are that (i) the order of the Assessing Officer must be erroneous and (ii) as a consequence of passing an erroneous order, prejudice is caused to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous i.e. (i) if the Assessing Officer's order was passed on assumption of incorrect facts; or assumption of incorrect law; (ii) Assessing Officer's order is in violation of the principles of natural justice; (iii) if the AO's order is passed by the without application of mind; or (iv) if the AO has not investigated the issue before him. In the circumstances enumerated above only the order passed by the Assessing Officer can be termed as erroneous for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roject have been completed and ready for occupation. Therefore, according to the Ld. PCIT, these flats (unsold) continue to be held by the assessee as stock-in-trade for more than one (1) year and consequently the levy of income tax on the unsold flats is to be determined in the hands of the assessee. According to Ld. PCIT, the Annual Letting Value (ALV) of the unsold flats (held as stock in trade) forming part of the inventories, should have been brought to tax as deemed rent u/s 23(1)(a) of the Act. According to the Ld. PCIT, since the value of unsold flats was to the tune of Rs.12,01,86,187/- according to him 8% thereof i.e. Rs.96,14,895/- need to be considered as deemed rent of unsold flats which was chargeable under the head income from house property . Therefore, according to the Ld. PCIT, the assessment order passed by the AO u/s 143(3) of the Act dated 24.04.2019 was erroneous as well as prejudicial to the revenue. And after hearing the assessee, the Ld. PCIT after citing the decision of the Hon ble Delhi High Court in the case of CIT Vs. Ansal Housing Finance and Leasing Company Ltd. (354 ITR 180) was pleased to hold that the assessment order of the AO to be erroneous as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able view in law. In the light of the contentions, according to Ld AR, the Ld. PCIT ought not to have interfered with the order passed by the Assessing Officer (AO) on this issue. Per-Contra, the Ld CITDR, supported the action of Ld PCIT and contended that the Ld. PCIT has rightly exercised his jurisdiction relying on the decision of the Hon ble Delhi High Court in the case of CIT Vs. Ansal Housing Finance and Leasing Company Ltd (supra); and since proper enquiry was also not made by the AO, the Ld PCIT has enquired and thereafter, directed the AO to make addition of deemed rent of un-sold flats, which action need not be interfered by us. 6. Before us, the Ld. AR brought to our notice that the AO had called for details of the unsold flats (stock) which has been clearly shown in the profit and loss accounts (refer page 24 PB), as well as balance-sheet as on 31.03.2017 wherein the closing stock of unsold flats are shown at Rs.12,01,86,187/-. The Ld. AR also drew our attention to page no. 40 of the PB which is the notice u/s 142(1) of the Act dated 01.12.2019 wherein the AO has mentioned the CASS reason for scrutiny which was mentioned as Real estate Business with high closing sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned from the competent authority, shall be taken to be nil. 17.3 Applicability: This amendment takes effect from 1st April, 2018 and will, accordingly apply from assessment year 2018-19 and subsequent years. 7. Since CBDT Circular/Instruction are binding on AO and Income Tax Authorities, the AO can be presumed to have taken note of CBDT classification dated 15.02.2018, while framing assessment order on 24.04.2019. Therefore, AO has rightly followed the CBDT Circular (supra) and did not determine the notional income from unsold flats held by assessee as stock-in-trade. 8. And in this context, we note that Co-ordinate Bench of this Tribunal in the case of M/s. Tata Housing Development vide order dated 28.09.2020 in (ITA. No. 3492/3493/Mum/2019) has held that sub-section (5) of Section 23 of the Act is prospective in operation (therefore applicable from AY. 2018-19) and observed as under: We may also like to add here that sub-section (5) to Section 23 has been inserted by the Finance Act, 2017 w.e.f. 01-4-2018, whereby notional annual value of property/part of property held has stock-in-trade has been brought to tax subject to conditions specified in the newly insert ..... 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