TaxTMI 
TaxTMI 
2023 (1) TMI 1345
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....closing stock as per the provision of section 23(1)(a) of the IT Act 1961, not appreciating that annual value in respect of vacant unsold units held as stock in trade, was not liable to tax in the year under appeal. 3. The appellant craves leave to add, alter, amend and/or vary the grounds of appeal at any time before the decision of the appeal. 2. The brief facts of the case that the assessee is a partnership firm engaged in the business as builders and developers. The assessee has filed the return of income on 13.10.2017 for the A.Y 2017-18 disclosing a total income of Rs. 58,83,100/-, subsequently the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act are issued through ITBA portal. In compliance to the notice, the assessee has made submissions online and the AO accepted the returned income and passed the order u/s 143(3) of the Act dated 09.05.2019. 3. Subsequently, the Pr. CIT on perusal of the facts and the assessment record found that the AO has not made any enquiry and verification of facts while passing the assessment order and Pr. CIT has issued show cause notice u/sec 263 of the Act as under: "On perusal of the record, it i....
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....f the revenue for the following reasons "That perusal of assessment records of AY 2017-18 reveals that our firm has shown closing stock of unsold constructed property at Rs. 86.90 crores as on 31.03.2017. However, we have not computed deemed rental income u/s. 23(1)(a) of the IT Act, 1961. Your honour has relied upon the decision of Bipin Vadilal Family Trust vs. CIT (208 ITR 105) and has computed the deemed rent at 8% of the cost of property which comes to Rs. 6,95,23,301/-and after standard deduction u/s. 24(a) of the IT Act, 1961 at Rs. 4,86,66,310/-." In lieu of the above, it is mentioned in the show cause notice that the assessment order is deficient and erroneous and therefore the asst. order is apparently erroneous as well as prejudicial to the interest of revenue. 3. It is also pointed out that by Finance Act, 2017, subsection (5) has been inserted in section 23 of the I. T. Act 1961, whereby it is provided that if any property is held as stock in trade and not actually let out, then the annual value of such property or part thereof for a period of one year from the end of the financial year in which certificate of completion of construction is ob....
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....We, therefore, overturn the impugned order on this score and delete the addition of Rs. 1.47 crore sustained in the first appeal." This matter has also been decided in favour of the assessee by the jurisdictional Mumbai Tribunal in the under mentioned cases. (i) M/s. C.R. Development Pvt. Ltd.-vs-JCIT, ITA No. 4277/M/2012 order dt. 13.05.2015 (ii) M/s Runwal Constructions -vs- ACIT ITA No. 5408/Mum/2016, order dt. 22.02.2018, Hon. Members, "G" Bench of the Mumbai Tribunal. (iii) Progressive Homes-Vs-ACIT ITA No. 5082/Mum/2016 dated 16.05.2018, Hon. Members, "G" Bench, ITAT Mumbai. (iv) ACIT-vs-Haware Construction Private Limited ITA No. 3321/Mum/2016 and 3172/Mum/2016 dated 31.08.18, Hon. Members, "C" Bench, ITAT Mumbai. (v) Haware Engineers and Builders Pvt. Ltd. -vs- DCIT ITA No. 7155/Mum/2016 dated 10.10.2018, Hon. Members, "H" Bench, 1TAT Mumbai. Accordingly, till amendment to section 23 by insertion of sub-clause (5) by Finance Act, 2017 applicable w.e.f. A.Y. 2018-19, no such estimation of ALV in respect of unsold constructed premises held as stock-in-trade is justified. We accordingly state that no such ALV....
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....in Black's Law Dictionary. According to the definition/erroneous', means 'involving error, deviating from the law'. 'Erroneous assessment' refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, y erroneous judgment' means 'one rendered according to course and practice of Court, but contrary to law upon mistaken view of law, or upon erroneous application of legal principles' 11. From the aforesaid definitions it is clear erroneous unless it is not in accordance with law. If an ITO acting in accordance with nice with law. If an ITO acting in accordance was law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, not be br according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous. Cases may be visualised wh....
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....s discussed on the Provisions of Sec. 22 r.w.s 23(1)(a) of the Act and is of the opinion that the assessee was owner of flats which constitute property within the meaning of Sec. 22 of the Act and therefore the annual value of the flats owned by the assessee is form part of the closing stock and is taxable under the head income from house property in the A.Y 2017-18 and the AO has not considered these facts and excluded and Pr. CIT has relied on the decision of the Hon'ble Delhi HC in the case of CIT Vs. Ansal Housing Finance and Leasing Company Ltd (354 ITR 180). Finally the Pr. CIT has dealt on the provisions of Sec. 263 and explanation (2) and issued the directions to the AO as under: 6. As while making the assessment u/s 143(3) for the Assessment Year 2017-18 (Assessment order dated 09.05.2019) the AO has failed to tax the annual value of the property forming part of the closing stock, under the head "Income from House Property". therefore, it is held that the Assessment Order passed by the AO u/s 143(3) on 09.05.2019 is erroneous in so far as it is prejudicial to the interest of the revenue. Hence, the assessment order dated 09.05.2019 passed by the AO is set aside to....
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....val submissions and perused the material on record. The Ld. AR contentions are that the order passed by the AO does not satisfy the twin conditions being erroneous and prejudicial to the interest of the revenue. The Ld. AR also submitted that the Pr. CIT is of the opinion that AO has not conducted enquiry in respect of charging of annual value of closing stock of flats under the head income from house property and the AO has also overlooked the facts with respect to the additions. Whereas the assessee has filed the explanations in respect of notice issued u/s 142(1) of the Act and referred to the submissions at page 15 to 26 of the paper book. Further, the contentions of the Ld. AR that when the charging of income under income from house property applying the deemed provisions is applicable from A.Y.2018-19 is a debatable and therefore revision proceedings shall not sustained. The Ld. AR substantiated the submissions relying on the judicial decisions: (i) M/s. C.R. Development Pvt. Ltd.-vs-JCIT, ITA No. 4277/M/2012 order dt. 13.05.2015 (ii) M/s Runwal Constructions -vs- ACIT ITA No. 5408/Mum/2016, order dt. 22.02.2018, Hon. Members, "G" Bench of the Mumbai Tribuna....