Tribunal Rules Amendment on Notional Rent Inapplicable for 2017-18; AO's Assessment Deemed Correct, Assessee's Appeal Allowed.

The Tribunal concluded that the amendment concerning notional rent on properties held as stock in trade did not apply to the assessment year 2017-18. Consequently, the AO's assessment was deemed correct and not prejudicial to the revenue. The PCIT's order under section 263 was found unsustainable, resulting in the allowance of the assessee's appeal.

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Issues:
Interpretation of provisions of section 22 and 23 of the Income Tax Act, 1961 regarding notional rent on properties held as stock in trade for Assessment Year 2017-18.

Analysis:
The appeal was filed against the order of the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961. The PCIT found that the assessee, a partnership firm in the real estate business, did not declare income from house property on a notional basis for properties held as stock in trade. The PCIT initiated proceedings under section 263 based on this issue, claiming the assessment under section 143(3) was erroneous prejudicial to the revenue's interest.

The assessee contended that the amendment effective from April 2018, applying to assessment year 2018-19, required notional rent calculations for properties held as stock in trade. As the assessment year in question was 2017-18, the provision did not apply, and the AO had correctly assessed the income without the notional rent calculation.

The Tribunal analyzed the legislative amendment proposed in the Finance Bill 2017, which clarified that the provision for charging tax on notional rent for properties held as stock in trade applied from April 2018 onwards. Since the assessment year in question was 2017-18, the amendment did not apply. The Tribunal emphasized that for invoking section 263 of the Act, the order must be both erroneous and prejudicial to the revenue's interest. As there was no error in the AO's assessment under section 143(3), the Tribunal held that the PCIT's revisional order was unsustainable and quashed it, allowing the assessee's appeal.

In conclusion, the Tribunal held that the amendment regarding notional rent on properties held as stock in trade was not applicable for the assessment year 2017-18. As the AO's assessment was found to be correct and not prejudicial to revenue, the PCIT's order under section 263 was deemed unsustainable, leading to the allowance of the assessee's appeal.

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