2020 (9) TMI 1128

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....tate developer. The assessee filed its return of income for the assessment year 2014-15 on 29/11/2014 declaring total income of Rs. 4,01,24,090/-. The assessee had declared income from the business of real estate development as 'Business Income'. The Assessing Officer in scrutiny assessment proceedings made disallowance under section 36(1)(iii) and 14A of the Act and determined the taxable income of the assessee as Rs. 23,52,81,848/- vide assessment order dated 29/12/2016. Thereafter, the PCIT invoked revisional jurisdiction under section 263 of the Act and issued show cause notice dated 15/03/2019. The PCIT following the decision of Hon'ble Delhi High Court in the case of CIT vs. Ansal Housing Finance & Leasing Co. Ltd., reported as 354 ITR 180 held that notional rental income on vacant flats should have been added to the total income of the assessee by the Assessing Officer. Since, the Assessing Officer failed to consider this aspect, the assessment order is erroneous as well as prejudicial to the interest of revenue. Aggrieved by the order passed under section 263 of the Act, the assessee is in appeal before the Tribunal. 3. Shri Madhur Agarwal, appearing on behalf of the ....

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.... Ltd., 296 ITR 361 has taken a contrary view holding that any income derived from property held as stock would be business income and not income from house property. 3.1. The ld. Counsel for the assessee asserted that two divergent views from non-jurisdictional High Courts on the issue were available on the date of passing of the assessment order, the Assessing Officer took one of the possible view. The assessment order would not become erroneous if the PCIT does not subscribe to the view of Assessing Officer and prefers the other possible view. The twin conditions for invoking provisions of section 263 of the Act are not satisfied in the present case. The ld. Counsel for the assessee relied on following decisions to contend that notional annual letting value of unsold flats held as stock-in-trade is a debatable issue, therefore, section 263 of the Act could not be invoked:- (1) S D Corporation (P) Ltd. vs. Pr.CIT, 102 taxmann.com 226(Mum) (2) Archie Creation vs. Pr. CIT, ITA NO.4449/M/2019, A.Y. 2014-15 decided on 13/07/2020. The ld. Counsel pointed that in both the aforesaid cases, the PCIT invoked the provisions of section 263 of the Act by placing rel....

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....g divergent view on the taxability of notional rental value of flats held as stock. The Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd. has held that notional annual lettable value of unsold flats should be assessed as 'Income from House Property'. Whereas, the Hon'ble Gujarat High Court in the case of Neha Builders P. Ltd. (supra) has held that any income derived from the property held as inventory is taxable as 'Business Income'. Thus, the issue that has been raised by the PCIT in revisional jurisdiction is debatable. The Assessing Officer has taken one of the possible views. The Hon'ble Supreme Court of India in the case of Malabar Industrial Co. Ltd. v. Commissioner of Income-tax, reported as 243 ITR 83 in an unambiguous manner has explained that where two views are possible and the Assessing Officer has taken one of the possible views to which CIT does not agree, this would not make the assessment order erroneous. The relevant extract of the judgement by the Hon'ble Apex Court is as under: "9. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing O....

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....of the Tribunal reads as under:- "13. We have noted that during the assessment, the assessee vide its reply/letter dated 24.11.2015 furnished the detail of opening and closing stock consisting of flat readily available for sale in respect of Imperil project. In the details of inventory, the assessee clearly bring on record that at the time of opening of written down value of 21 flat, consisting of area of 80000 (may be sq.ft.) total value of Rs. 170,41,088,56/- out of which the assessee has sold 14 flats of total area 48830 (may be sq.ft.) of value of Rs. 104,01,45,443/-. Thereby the assessee remained in possession of total 7 unsold flats consisting area of 31170 (may be sq.ft.) value of which was shown at Rs. 66,39,63,413/-. The assessee has also furnished the complete details of name of parties, flat number and details of the cost of flats sold during the year. Moreover, the ld. CIT(A) in the notice under section 263 has referred that on verification, certain discrepancies were found in the assessment order. The ld. CIT(A) has also referred that the assessee has shown unsold flat valuing of Rs. 66,39,63,413/- in closing stock. Thereby, all the information/detail....