TaxTMI 
TaxTMI 
2022 (10) TMI 344
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....om which the amendment deeming such notional rent to tax came into force. (2) The view taken by the Principal Commissioner of Income Tax is inconsistent with the decision of the Hon'ble Gujarat High Court in case of Neha Builders Pvt. Ltd. (2007) 164 Taxman 342 (Guj) as also the decision of the Hon'ble Income Tax Appellate Tribunal, Surat in case of Shanti Enterprise ITA No.151/SRT/2018. (III) Miscellaneous: The appellant craves leave to add, alter or vary any of the grounds of appeal." 2. Succinct facts are that assessee firm, M/s Vrundavan Enterprise, had filed its return of income for AY.2017-18, on 10.08.2017, declaring total income of Rs.20,20,070/-. Thereafter, the assessee`s case was selected for scrutiny under CASS and scrutiny assessment under section 143(3) of the Act was finalized on 15.12.2019 by accepting the returned income. 3. Later on, Learned Principal Commissioner of Income Tax -1, Surat [in short "the ld. PCIT"], has exercised his jurisdiction under section 263 of the Income Tax Act 1961. Ongoing through the assessment records, it has been observed by ld PCIT that case of the assessee firm was selected for scrutiny, one of....
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....ed the contention of the assessee and observed that assessee had stated that with amendment to section 23 of the Act and introduction of sub-section (5), is seen as beneficial provision to the assessee and change in law has brought certainty and put controversy to rest. The ld PCIT held that reply of the assessee is not correct, as sub section (5) to section 23 was inserted vide Finance Act 2017 w.e.f 01.04.2018 to provide relief of one year from the end of financial year in which completion certificate was received, Thus, prior to insertion of section 23(5) in the Income Tax Act, notional rent was to be charged under section 23(1) r.w.s section 22 of the Act. It may be stated that insertion of section 23(5) of the Act has strengthened the legal position of taxing unsold finished inventories of real estate developers which always existed even in the absence of section 23(5) of the Act. In view of the above provisions of law, the ld PCIT held that assessment order passed u/s 143(3) of the Act dated 15.12.2019 for AY.2017-18 in the case of above-mentioned assessee, is erroneous and prejudicial to the interest of Revenue therefore ld PCIT set aside the same with a direction to the Ass....
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....gh Court in the case of CIT vs. Neha Builders Pvt. Ltd. (2007) 164 taxman 342 (Gujarat) and rendered the decision in favour of assessee. The findings of the Coordinate Bench in the case of Jayprakash Khanchand Aswani(supra) is reproduced below: "7. We have heard the rival submissions and perused the material on record. It is an undisputed fact the assessee has shown the properties as stock in trade in the books of accounts. The shops and flats sold by the assessee were assessed under head income from business. There were certain unsold flats and shops in stock in trade which the AO treated the property assessable under the head Income from House Property and computed notional annual netting value on such unsold flats placing reliance in the case of Ansal Housing Finance & Leasing Co. Ltd. (supra). The action of the AO was upheld by the learned CIT(A). 8. The Hon'ble Gujarat High Court in the case of Neha Builders Pvt. Ltd. (supra) considered the question whether the rental income received from any property in the construction business can be claimed under the head 'income from property' even though the said property was included in the closing stock. The Hon&#....
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....ction 23 of the Act. While holding so the Coordinate Bench observed as under:- "3. The ld. AR placed the order of Bombay Tribunal in the case of M/s Perfect Scale Company Pvt. Ltd., ITA Nos.3228 to 3234/Mum/2013, order dated 6-9-2013, wherein it was held that in respect of assets held as business, income from the same is not assessable u/s.23(1) of the IT Act. 4. On the other hand, ld. DR relied on the order of Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd., 354 ITR 180 (Delhi) in support of the proposition that even in respect of unsold flats by the developer is liable to be taxed as income from house property. 5. We have considered rival contentions and perused the record. The issue under consideration has been restored by the CIT(A) to the file of AO to compute the annual value. Recently the Hon'ble Supreme Court in the case of M/s Chennai Properties & Investments Ltd. Vs. CIT, reported in (2015) 42 SCD 651, vide judgment dated 9-4-2015 has held that where assessee company engaged in the activity of letting out properties and the rental income received was shown as business income, the action of AO treating the....
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....plicable in the case of the assessee. Accordingly, the AO is directed to delete the addition made by estimating letting value of the flats u/s.23 of the I.T. Act. This grounds of appeal is therefore, allowed." 12. A bare reading of section 263 of the Act 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the PCIT suo moto under it, is that the order of ITO is erroneous, so far as it is prejudicial to the interest of revenue. The PCIT has to be satisfied twin conditions, namely (1), the order of AO sought to be revised is erroneous and (2) it is prejudicial to the interest of revenue. If one of them is absent- if the order of ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263 (1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of fact or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the ....