2023 (3) TMI 1188

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.....02.2019, 21.02.2019 and dated 27.03.2019 and after perusal of the reply dated by the assessee dated 23.08.2018 (pursuant to notice u/s 143(2) dated 09.08.2018) and reply dated 18.02.2019 and 05.04.2019, the AO had passed the assessment order u/s 143(3) of the Act dated 24.04.2019 wherein he accepted the return of income filed by the assessee. Later, the Ld. PCIT has issued show cause notice (SCN) 21.02.2022 u/s 263 of the Act conveying his proposal to invoke revisional jurisdiction against the action of AO dated 24.04.2019. Pursuant to the same, the assessee replied vide letter dated 01.03.2022 (reproduced by the Ld. PCIT in the impugned revisional order) contesting the exercise of the same. But the Ld PCIT was not satisfied with the reply of assessee and was pleased to set aside the assessment order dated 24.04.2019 holding the assessment order as erroneous as well as prejudicial to the revenue and directing the AO to make fresh assessment by taxing the annual value of the property forming part of the closing stock, under the head "Income from House Property". The Ld. PCIT also directed in his impugned order that the annual value shall be computed as per the provision of section ....

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....erred by S.263; the CIT should not only show that the AO's order is erroneous as a result of any of the situations enumerated above but CIT must also further show that as a result of an erroneous order, some loss is caused to the interest of the revenue. At this juncture, one has to understand what is prejudicial to the interest of revenue. Their Lordship explaining about this in the said judgment (Malabar supra) held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. It was further observed that when the Assessing Officer adopts one of the course permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Ld. CIT does not agree, it cannot be treated as an order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. 5. Keeping the aforesaid judicial precedent in mind, we should examine the facts of the case at hand to see whether the Ld. PCIT could have successfully invoked revisional jurisdiction u/s 263 of the Act. We note that the....

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....ew for not levying notional rent (ALV) on the unsold flats because the sub-section (5) was inserted in Section 23 of the Act vide Finance Act, 2017, w.e.f. 01.04.2018, so it is applicable from AY. 2018-19, which states that where the property consisting of any building or land appurtenant there to is held as stock-in-trade and the property or 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 upto one (1) year from the end of the financial year in which the certificate of completion of constraction of the property is obtained shall be taken to be nil;[and the period of one year has been increased by two years w.e.f. 01.04.2020]. Thus, according to Ld. AR, the law bringing to tax the stock-in-trade of unsold flats/houses as deemed annual value of flats/property came into effect from 01.04.2018 i.e. in AY. 2018-19; and the AO in the instant case has framed the assessment order on 24.04.2019 has taken note of the insertion of sub-section (5) to Section 23 of the Act (supra) and has taken a view rightly not to determine Annual Letting Value (ALV) of the unsold flats, which in a....

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....unsold flats which was held as stock in trade by the assessee. Moreover it is noted that the assessee was not into the business of letting out the property for rent and its business was Real Estate Development as well as re-development. And we also note that the AO had framed the assessment order on 24.04.2019, and so it can be seen that the AO's decision on this issue, not to tax the deemed rent on un-sold flats was after the Parliament has inserted sub-section (5) in Section 23 of the Act vide Finance Act 2017, w.e.f 01.04.2018, ie., from AY. 2018-19. And further we note that the action of AO is in consonance with the CBDT Circular No. 02/2018 (F. No. 370142/15/2017-TPL) wherein the CBDT has given explanatory notes to provisions of Finance Act, 2017 vide order dated 15.02.2018 as item no. 17, the CBDT classifies in respect of notional income for house property as under: - "17.1 Section 23 of the Income-tax Act provides for the manner of determination of annual value of house property. 17.2 Considering the business exigencies in case of real estate developers, the said section has been amended to provide that where the house property consisting of any building an....