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TMI Blog2023 (8) TMI 1333X X X X Extracts X X X X X X X X Extracts X X X X ..... g the notional rent. Accordingly, ground raised by the assessee is partly allowed. - SHRI AMIT SHUKLA, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER For the Appellant : Shri Jayant Bhatt Ms. Jitali Gandhi For the Respondent : Shri Rakesh Garg ORDER PER S. RIFAUR RAHMAN (AM) 1. All these appeals are filed by the assessee against different orders of the Learned Commissioner of Income Tax (Appeals)-53, Mumbai [hereinafter in short Ld.CIT(A) ] dated 28.01.2022, 15.12.2021, 15.12.2021, 21.12.2021 21.12.2021 for the A.Ys. 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 respectively. 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. 3. At the time of hearing, it is brought to our notice that for the A.Y. 2012-13 and 2013-14 assessee has filed return of income on 26.09.20102 and 30.09.2013 respectively and time limit for issue of notice u/s. 143(2) of Income-tax Act, 1961 (in short Act ) were expired on 30.09.2013 and 30.09.2014 respectively. It is also brought to our notice that or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions relating to notional income from the unsold flats and further, made additions relating to unsecured loans. 7. On careful consideration of the facts on record, we observe that in the case of CIT v. Continental Warehouse Corporation (supra) it is held that for assessment u/s. 153A in case of unabated assessment, if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any other issue can be made to the assessment u/s. 153A and 153C of the Act. The relevant extract of the order is reproduced as under: On a plain reading of section 153A, it becomes clear that on initiation of the proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under|section 132/4 stand abated and not the assessments / reassessments already finalised for those assessment years covered under section 153A. By a Circular No. 8 of 2003, dated 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also Assessing Officer observed that later assessee has approached Income Tax Settlement Commission and filed the application and subsequently assessee sought permission to file a revise application which the Income Tax Settlement Commission has rejected the same. Apart from certain undisclosed income was found during search and accordingly, to the extent of ₹. 93,100/- was added back to the income of the assessee and further, Assessing Officer observed that assessee was holding various flats/shops/offices as closing stock. In the post search proceedings, assessee was asked to furnish year wise details of stock in trade of the fully constructed flats held at the end of the each Financial Year. In response assessee furnished the details of closing stock relevant for the present assessment year as under: - Sr. No. Name of Project Building Flat No 1 Moraj Riverside Park, Panvel T4 404 2 Moraj Riverside Park, Panvel R1 401 3 Moraj Rive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk, Panvel S4 603 13656 7 Moraj Riverside Park, Panvel S5 102 13656 8 Moraj Riverside Park, Panvel S5 202 13656 9 Moraj Riverside Park, Panvel S5 302 13656 10 Moraj Riverside Park, Panvel S6 102 13656 11 Moraj Riverside Park, Panvel S6 103 13656 12 Moraj Riverside Park, Panvel S6 203 13656 13 Moraj Riverside Park, Panvel S6 304 13656 14 Moraj Riverside Park, Panvel S6 403 13656 Total 1,91,184 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Ld. AO and in the alternative the lower of Standard Rent or Municipal Ratable Value be adopted and such amount be further reduced by the municipal taxes and deductions u/s. 23 and u/s. 24 of the Act. GROUND NO. 2: INVALID APPLICATION OF S. 153A ADDITIONS MADE BY EXCEEDING THE SCOPE OF S. 153A [Para 4, Page No. 5-7 of CIT(A) Order dt. 15.12.2021 (a) The Ld. CIT(A) erred in law and on facts in confirming the actions of the ld. AO in making additions or in denying exemptions aggregating to Rs. 1,91,184/- in respect of items and issues for which no material was found and/or seized during the course of search u/s. 132 and in making assessment of total income under the special provisions of s.153A to s.153D of the Income Tax Act, 1961. (b) Your appellant strongly submits that no material of whatsoever nature was found and/or seized during the course of search u/s. 132 of the Act in the hands of your appellant and that the additions or denials made in the order were in respect of the items and issues that were settled in the original assessment and therefore were not the subject matter of the special assessment u/s.153A of the Act. (c) Your appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including those required as per the law and adequate inquiries were not made and the copies of material used was not furnished and examination was not facilitated and the cross examination was not provided. (c) Your appellant pleads that an assessment made in violation of the provisions of natural justice be quashed. GROUND NO. 5: LEVY OF INTEREST U/S. 234A of RS. 23,158, U/S. 234B OF RS. 92.632/-, U/S. 234C OF RS. 2,02,484/- [Para 9, Page No. 19 of CIT(A) Order dt. 15.12.2021] (a) The Ld. CIT(A) erred in law and on facts in confirming the action of the ld. AO in levying interest u/s.234A of Rs. 23.158, u/s, 234B of Rs. 92,632 and u/s. 234C of Rs. 2,02,484/- in the course of assessment and further erred in levying interest in gross violation of the provisions of Income Tax Act without giving any opportunity of hearing and without passing any speaking order for the levy of interest. (b) Your appellant denies any liability of payment of interest and further submits that the tax was paid as per the provisions of the law. (c) Your appellant pleads that the interest levied be deleted. GROUND NO. 6: ASSESSMENT OF TOTAL INCOME [Para 10, Page No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Gujarat High Court in the case of CIT Vs. Neha Builders (Supra) which is in the favour of the Assessee, whereas the other view has been proposed in the decision of the Hon ble Delhi High Court in the case of the CIT Vs. Ansal Housing Financial Leasing Ltd . (Supra) which is in favor of the revenue. Therefore, judgment favorable the Assessee should be followed. 8. We have gone through the judgment in the case of CIT vs. Neha Builders, wherein following question of law was referred to the Hon ble High Court: -. Whether, on the facts and in the circumstances of the case the rental income received from any property in the construction business can be claimed under the head of 'Income from property even though they said property was included in the closing stock and expenses on maintenance were debited to the profit and loss account? The facts in that case was that the Assessee Company was engaged in the business of construction of property and one of the building property was included the closing stock in the balance sheet drawn for the business. The Assessee has filed the revised returned submitting that a part of its property was given on rent and the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and any income derived from such stocks cannot be termed as income from property . Even otherwise, it is to be seen that there was distinction between the income from business and income from property on one side, and any income from other sources The Tribunal, in our considered opinion, was absolutely unjustified in comparing the rental income with the dividend income on the shares or interest income on the deposits. Even otherwise, this question was not raised before the subordinate Tribunals and, all of sudden, the Tribunal started applying the analogy. From the statement of the assessee, it would clearly appear that it was treating the property as stock-in-trade . Not only this, it will also be clear from the records that, except for the ground floor, which has been let out by the assessee, all other portions of the property constructed have been sold out. If that be so, the property, right from the beginning was a stock in-trade . Agreeing with the submissions made by Mr. Naik, learned counsel for the Revenue, we hold that the Tribunal was not correct in granting the appeal of the assessee. For the reasons aforesaid, the reference deserves to be ans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsold portion of the property constructed by the Assessee Real Estate Developer is assessable as income from house property. The Hon ble Jurisdictional High Court again after analyzing the entire jurisprudence and various judgments of Hon ble Supreme Court, finally held that rental income received from unsold portion of property constructed by Assessee, Real Estate Developers is assessable as income from house property and not business income. The Hon ble High Court had further observed that the treatment given in the books of account as stock-in-trade would not therefore, alter the character or nature of the income. 12. In another case of CIT Vs. Gundecha Builders reported in (2019) 102 taxmann.com 27 (Bombay), where the Assessee was engaged in the business of development of Real Estate Project rental income received from unsold portion of property constructed by it was assessable tax as income from house property. 13. Thus, in all these cases there was actual receipt rental income from the unsold stock of property and the controversy of whether income is to be assets under the head income from house property or business income. Hon ble Bombay High Court in all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. On appeal by the assessee, the CIT(A) however set aside the addition made by the AO. The revenue's appeal to the Tribunal was unsuccessful. 16. Hon ble Delhi High Court after referring to various judgments of Hon ble Supreme Court, finally observed as held in under: In the present case, the assessee is engaged in building activities. It argues that flats are held as part of its inventory of stock-intrade, and are not let out. The further argument is that unlike in the other instances, where such builders let out flats, here there is no letting out and that deemed income which is the basis for assessment under the ALV method, should not be attributed. This Court is of the opinion that the argument, though attractive cannot be accepted. As repeatedly held, in East India, Housing Land Development Trust's case (supra) Sultan Bros's case (supra) and Karan Pura Development Co. Ltd.'s case (supra) the levy of income tax in the case of one holding house property is premised not on whether the assessee carries on business, as landlord, but on the ownership. The incidence of charge is because of the fact of ownership. Undoubtedly, the decision in Vikram Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock. Therefore, it cannot be held that on this issue the judgment of Hon ble Gujarat High Court is in favor of the Assessee and therefore, the judgment of Delhi High Court in the case of Ansal Housing Finance Leasing Company Ltd (Supra) should not be followed. Thus, in our opinion this Tribunal in the case of Dimple Enterprises vs. DCIT (Supra) as cited and relied upon by the Ld. DR has correctly appreciated this distinction. 18. One very important development took place post these judgments, that an amendment has been brought in the statute in section 23(5) which is applicable from AY 2018-2019 which reads as under: Where the property consisting of any building or land appurtenant there to is held as stock-in trade and the property of any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to one year form the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil. It is trite that the said amendment has to be given effect prospectively from 01.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable in view of the decision of Hon ble Bombay High Court in the case CIT Vs. Tip top Typography reported in 368 ITR 330, wherein, it has been held that rent should be computed at Municipal ratable value. We accordingly direct the AO to ascertain the Municipal ratable value for computing the notional rent. This is also been held by ITAT Mumbai Bench in the case of Dimple Enterprise Vs. DCIT (Supra), in the following manner:- Now the question is of the rental value. The assessing officer has not levied the deemed rent on municipal ratable value or any nearly similar instance. The reliability of municipal ratable value has been duly upheld in several decisions. The Assessing Officer cannot make any ad hoc computation of deemed rent. Honorable Bombay High Court decision in the case of CIT vs. Tip Top Typography [2014] 48 taxmann.com 191/[2015] 228 Taxman 244 (Mag.)/[2014] 368 ITR 330 duly supports this proposition. Thus assessing officer has made an ad hoc estimate of 8.5% of investment on the plea that assessee has not been able to provide the municipal ratable value. This is not sustainable on the touchstone of Hon'ble Bombay High Court decision in the case of Tip Top Ty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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