TaxTMI 
TaxTMI 
2023 (8) TMI 1333
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, 1961 (in short "Act") were expired on 30.09.2013 and 30.09.2014 respectively. It is also brought to our notice that original Assessment Order u/s. 143(3) were passed on 11.02.2015 with regard to A.Y. 2012-13 and 28.03.2016 with regard to A.Y. 2013-14. It was submitted that both these Assessment Years are unabated and it was brought to our notice a search and seizure action was undertaken in Gurnani Group on 04.02.2016 and the assessee was also covered in the above search proceedings. Accordingly, a notice u/s. 153A were issued and served on the assessee. It was submitted that notices u/s. 143(2) and 142(1) were issued and served on the assessee. In response assessee has filed the relevant return of income and filed the submissions. 4. It was brought to our notice, notice u/s. 142(1) of the Act which is placed on record at Page No. 31 of the Paper Book. As per the above notice the assessee was issued notices with regard to on-money received during the period 2010-11 to 2015-16. However, while completing the assessment u/s. 143(3) r.w.s. 153A the additions were made merely on the basis of information and various financial statements submitted during the assessment proceedings. It....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/ reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending against finalised assessment / reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under section 153A, the assessments / reassessments finalised for the assessment years covered under section 153A stand abated cannot be accepted. Similarly on annulment of assessment made under section 153A(1) what stands revived is the pending assessment / reassessment proceedings which stood abated as per section 153A(1). "Once it is held that the assessment has attained finality, then the Assessing Officer while passing the independent assessment order under section 153A read with section 143(3) could not have disturbed the assessment / reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under section 153A establish that the reliefs granted under the finalised assessment / reassessment were contr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vel S4 603 7 Moraj Riverside Park, Panvel S5 102 8 Moraj Riverside Park, Panvel S5 202 9 Moraj Riverside Park, Panvel S5 302 10 Moraj Riverside Park, Panvel S6 102 11 Moraj Riverside Park, Panvel S6 103 12 Moraj Riverside Park, Panvel S6 203 13 Moraj Riverside Park, Panvel S6 304 14 Moraj Riverside Park, Panvel S6 403 12. By relying on the decision of the Hon'ble Delhi High Court in the case of CIT v. Ansal Housing Finance and Leasing Company Limited and the Assessing Officer estimated the rent on the above said flats to the extent of Rs.. 1,91,814 and the relevant conclusion is reproduced below: - Sr. No Name of Project Building Flat No Estimated rent as per property Tax 1 Moraj Riverside Park, Panvel T4 404 13656 2 Moraj Riverside Park, Panvel R1 401 13656 3 Moraj Riverside Park, Panvel S1 102 13656 4 Moraj Riverside Park, Panvel S2 103 13656 5 Moraj Riverside Park, Panvel S3 102 13656 6 Moraj Riverside Park, Panvel S4 603 13656 7 Moraj Riverside Park, Panvel S5 102 13656 8 Moraj Riverside Park, Panvel S5 202 13656 9 Moraj Riverside Park, Panvel S5 302 13656 10 Moraj Riverside Park....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sment and therefore were not the subject matter of the special assessment u/s. 153A. (c) Your appellant prays that the addition of Rs. 1,91,184 be deleted from the total income of the assessee as assessed by the Ld. AO and in the alternative the lower of Standard Rent or Municipal Ratable Value be adopted and such amount be further reduced by the municipal taxes and deductions u/s. 23 and u/s. 24 of the Act. GROUND NO. 2: INVALID APPLICATION OF S. 153A & ADDITIONS MADE BY EXCEEDING THE SCOPE OF S. 153A [Para 4, Page No. 5-7 of CIT(A) Order dt. 15.12.2021 (a) The Ld. CIT(A) erred in law and on facts in confirming the actions of the ld. AO in making additions or in denying exemptions aggregating to Rs. 1,91,184/- in respect of items and issues for which no material was found and/or seized during the course of search u/s. 132 and in making assessment of total income under the special provisions of s.153A to s.153D of the Income Tax Act, 1961. (b) Your appellant strongly submits that no material of whatsoever nature was found and/or seized during the course of search u/s. 132 of the Act in the hands of your appellant and that the additions or denials made in the order were ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iate and instead ignored the evidences produced in assessment and the appellant further submits that all the details and explanations as requested were furnished including those required as per the law and adequate inquiries were not made and the copies of material used was not furnished and examination was not facilitated and the cross examination was not provided. (c) Your appellant pleads that an assessment made in violation of the provisions of natural justice be quashed. GROUND NO. 5: LEVY OF INTEREST U/S. 234A of RS. 23,158, U/S. 234B OF RS. 92.632/-, U/S. 234C OF RS. 2,02,484/- [Para 9, Page No. 19 of CIT(A) Order dt. 15.12.2021] (a) The Ld. CIT(A) erred in law and on facts in confirming the action of the ld. AO in levying interest u/s.234A of Rs. 23.158, u/s, 234B of Rs. 92,632 and u/s. 234C of Rs. 2,02,484/- in the course of assessment and further erred in levying interest in gross violation of the provisions of Income Tax Act without giving any opportunity of hearing and without passing any speaking order for the levy of interest. (b) Your appellant denies any liability of payment of interest and further submits that the tax was paid as per the provisions of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... been canvassed before us that, there are divergent views on this issue, one view proposed by the judgment of Hon'ble Gujarat High Court in the case of CIT Vs. Neha Builders (Supra) which is in the favour of the Assessee, whereas the other view has been proposed in the decision of the Hon'ble Delhi High Court in the case of the CIT Vs. Ansal Housing Financial Leasing Ltd. (Supra) which is in favor of the revenue. Therefore, judgment favorable the Assessee should be followed. 8. We have gone through the judgment in the case of CIT vs. Neha Builders, wherein following question of law was referred to the Hon'ble High Court: -. "Whether, on the facts and in the circumstances of the case the rental income received from any property in the construction business can be claimed under the head of 'Income from property even though they said property was included in the closing stock and expenses on maintenance were debited to the profit and loss account?" The facts in that case was that the Assessee Company was engaged in the business of construction of property and one of the building property was included the closing stock in the balance sheet drawn for the business. The Asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stocks, which may include movable and immovable, would be taken to be "stock-in-trade", and any income derived from such stocks cannot be termed as "income from property". Even otherwise, it is to be seen that there was distinction between the "income from business" and "income from property" on one side, and "any income from other sources" The Tribunal, in our considered opinion, was absolutely unjustified in comparing the rental income with the dividend income on the shares or interest income on the deposits. Even otherwise, this question was not raised before the subordinate Tribunals and, all of sudden, the Tribunal started applying the analogy. From the statement of the assessee, it would clearly appear that it was treating the property as "stock-in-trade". Not only this, it will also be clear from the records that, except for the ground floor, which has been let out by the assessee, all other portions of the property constructed have been sold out. If that be so, the property, right from the beginning was a "stock in-trade". Agreeing with the submissions made by Mr. Naik, learned counsel for the Revenue, we hold that the Tribunal was not correct in granting the appeal o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bay), Hon'ble High Court held that rental income received from unsold portion of the property constructed by the Assessee Real Estate Developer is assessable as income from house property. The Hon'ble Jurisdictional High Court again after analyzing the entire jurisprudence and various judgments of Hon'ble Supreme Court, finally held that rental income received from unsold portion of property constructed by Assessee, Real Estate Developers is assessable as income from house property and not business income. The Hon'ble High Court had further observed that the treatment given in the books of account as stock-in-trade would not therefore, alter the character or nature of the income. 12. In another case of CIT Vs. Gundecha Builders reported in (2019) 102 taxmann.com 27 (Bombay), where the Assessee was engaged in the business of development of "Real Estate Project" rental income received from unsold portion of property constructed by it was assessable tax as income from house property. 13. Thus, in all these cases there was actual receipt rental income from the unsold stock of property and the controversy of whether income is to be assets under the head income from house property ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sold flats to the total income of the assessee. On appeal by the assessee, the CIT(A) however set aside the addition made by the AO. The revenue's appeal to the Tribunal was unsuccessful. 16. Hon'ble Delhi High Court after referring to various judgments of Hon'ble Supreme Court, finally observed as held in under: "In the present case, the assessee is engaged in building activities. It argues that flats are held as part of its inventory of stock-intrade, and are not let out. The further argument is that unlike in the other instances, where such builders let out flats, here there is no letting out and that deemed income which is the basis for assessment under the ALV method, should not be attributed. This Court is of the opinion that the argument, though attractive cannot be accepted. As repeatedly held, in East India, Housing & Land Development Trust's case (supra) Sultan Bros's case (supra) and Karan Pura Development Co. Ltd.'s case (supra) the levy of income tax in the case of one holding house property is premised not on whether the assessee carries on business, as landlord, but on the ownership. The incidence of charge is because of the fact of ownership. U....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue on notional rent from unsold stock. Therefore, it cannot be held that on this issue the judgment of Hon'ble Gujarat High Court is in favor of the Assessee and therefore, the judgment of Delhi High Court in the case of Ansal Housing Finance Leasing Company Ltd (Supra) should not be followed. Thus, in our opinion this Tribunal in the case of Dimple Enterprises vs. DCIT (Supra) as cited and relied upon by the Ld. DR has correctly appreciated this distinction. 18. One very important development took place post these judgments, that an amendment has been brought in the statute in section 23(5) which is applicable from AY 2018-2019 which reads as under: "Where the property consisting of any building or land appurtenant there to is held as stock-in trade and the property of 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 up to one year form the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil." It is trite that the said amendment has to be given effect ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch is unsustainable in view of the decision of Hon'ble Bombay High Court in the case CIT Vs. Tip top Typography reported in 368 ITR 330, wherein, it has been held that rent should be computed at Municipal ratable value. We accordingly direct the AO to ascertain the Municipal ratable value for computing the notional rent. This is also been held by ITAT Mumbai Bench in the case of Dimple Enterprise Vs. DCIT (Supra), in the following manner:- "Now the question is of the rental value. The assessing officer has not levied the deemed rent on municipal ratable value or any nearly similar instance. The reliability of municipal ratable value has been duly upheld in several decisions. The Assessing Officer cannot make any ad hoc computation of deemed rent. Honorable Bombay High Court decision in the case of CIT vs. Tip Top Typography [2014] 48 taxmann.com 191/[2015] 228 Taxman 244 (Mag.)/[2014] 368 ITR 330 duly supports this proposition. Thus assessing officer has made an ad hoc estimate of 8.5% of investment on the plea that assessee has not been able to provide the municipal ratable value. This is not sustainable on the touchstone of Hon'ble Bombay High Court decision in the case of....