2023 (8) TMI 810 - AT - Income Tax

Appellate Tribunal rules in favor of Assessee on TDS and Interest, Unsold Flats taxability

Sukhwani Developers Versus The Pr. CIT (Central), Pune

The Appellate Tribunal ITAT Pune partly allowed the Assessee's appeal, upholding the order under section 263 regarding TDS and Interest on TDS. The ... Revision u/s 263 by CIT - two views on this impugned issue - Annual Letting Value of completed stock of Project Elmwood should have been added to the income of the assessee - AO took a view of not taxing it under the head Income from House property - HELD THAT:- When two views are legally possible and AO adopts one view the Assessment Order cannot be said to be erroneous for the CIT to invoke jurisdiction u/s. 263 of the Act. See Amitabh Bachchan [2016 (5) TMI 493 - SUPREME COURT], Mepco Industries Ltd. [2006 (11) TMI 164 - MADRAS HIGH COURT] and Future Corporate Resources Ltd [2021 (10) TMI 175 - BOMBAY HIGH COURT] In the case under consideration the AO has adopted one of the legally possible view qua Unsold Flats shown as closing stock. Therefore, the Assessment Order is not erroneous qua unsold flats shown as Stock. TDS and Interest on TDS - AR accepted that there was no inquiry by the AO on the issue of TDS and interest on TDS. Accordingly we hold that the Assessment Order is erroneous and prejudicial to the interest of the revenue with reference to the issue of TDS as AO failed to carry out necessary verification and on the issue of Interest on TDS. Accordingly the, order u/s. 263 is upheld qua TDS claim and Interest on TDS. Decided partly in favour of assessee. Issues Involved:The judgment involves the following issues: 1. Validity of the order passed by the Principal Commissioner of Income Tax (Central) under section 263 of the Income Tax Act, 1961. 2. Treatment of TDS and Interest on TDS in the assessment order. 3. Taxability of Annual Letting Value of completed stock of Project Elmwood under the head 'Income from House Property'.Issue 1: Validity of the order under section 263:The Assessee challenged the order passed by the Principal Commissioner of Income Tax (Central) as perverse, unlawful, and not sustainable in law. The Principal Commissioner invoked section 263 on grounds related to TDS, Interest on TDS, and taxability of unsold flats. The Assessee contended that the AO did not consider their detailed submissions in response to the notice under section 263. The Tribunal upheld the order under section 263 concerning the TDS claim and Interest on TDS due to the AO's failure to verify these issues.Issue 2: Treatment of TDS and Interest on TDS:The Assessee, a builder, had claimed TDS of Rs. 10,34,119 without offering the corresponding income for tax, which the AO did not verify. The Tribunal found the Assessment Order erroneous regarding the TDS claim and Interest on TDS due to the lack of necessary verification by the AO. The Assessee's representative accepted the absence of inquiry by the AO on these issues, leading to the Tribunal upholding the order under section 263 concerning TDS and Interest on TDS.Issue 3: Taxability of Annual Letting Value of completed stock:The Principal Commissioner contended that the Annual Letting Value of completed stock should have been added to the Assessee's income based on a decision of the Delhi High Court. The Tribunal noted that during the assessment proceedings, the AO was aware of the closing stock of ready flats but decided not to tax them under 'Income from House Property.' Given the existence of two legally possible views on the taxability of these flats, the Assessment Order was not deemed erroneous on this ground. The Tribunal referred to relevant case law and held that when two legally possible views exist and the AO adopts one, the Assessment Order cannot be considered erroneous. Consequently, the Tribunal partially allowed the Assessee's appeal on this issue.In conclusion, the Appellate Tribunal ITAT Pune partly allowed the Assessee's appeal, upholding the order under section 263 regarding TDS and Interest on TDS, while ruling in favor of the Assessee on the taxability of unsold flats under 'Income from House Property' based on the legally possible view adopted by the Assessing Officer.