2023 (4) TMI 1345

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....l to the interest of the Revenue. 3. The learned PCIT erred in fact and in law in not dropping the proceedings u/s 263 despite the fact that issue for which revision proceedings were initiated was settled in favour of the Appellant by the decision of the jurisdictional High Court on the date of initiating the revision proceedings and also on the date of passing the order u/s. 263 of the Act. 4. The learned PCIT erred in fact and in law in not dropping the proceedings u/s 263 and observing that the order passed u/s. 143(3) was made without proper verification and inquiry. 5. The learned PCIT erred in fact and in law in setting aside the assessment u/s. 143(3) and directing the Assistant Commissioner of Income Tax, Circle 1(2)(1), Vadodara ("the AO") to frame fresh assessment. Without Prejudice to above 6. The learned PCIT erred in fact and in law in holding that the notional rent from stock-in-trade held for purpose of business was chargeable to tax under the head "Income from House Property". 7. The learned PCIT erred in fact and in law in not appreciating the provisions of Section 22 in proper perspective. - 8. The lea....

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....ed before us at page no. 87) brings out the above reasons, as under: 4. During the proceedings before the ld.Pr.CIT, the assessee pointed out that the AO had rightly not invoked the provisions of section 22 of the Act on the unsold completed units of the assessee, since the units constituted stock-in-trade of the assessee and income if any from the same was assessable to tax under the head "Income from business and professions" and not under the head "Income from house property". He referred to the decision of the Hon'ble jurisdictional High Court in the case of Neha Builders P. Ltd., (2007) 164 taxman 342 (Guj) in support of his contention. Several other decisions were also cited before the ld. Pr. CIT. However, the ld.Pr. CIT was not convinced with the explanation of the assessee and held the assessment order erroneous causing prejudice to the Revenue on account of the issue of the taxation of income from completed units of the assessee under section 22 of the Act being not looked into by the AO, considering various decisions of the Hon'ble High Courts as noted by him. He further distinguished the decision of jurisdictional High Court in the case of Neha Builders P.Ltd. (supra....

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....order. We find that he has miserably failed in this exercise and that even as per his noting of the facts in both the cases and the finding of the Hon'ble High Court in the case of Neha Builders P. Ltd. (supra), the decision was clearly applicable to the facts of the present case ,as rightly applied by the AO. The para 8.4 & 8.5 of the ld.Pr.CIT's order are reproduced hereunder: Stock-in-trade therefore the property would partake the character of the stock and any income derived from the stock cannot be taken to be income from property." 8. At para 8.5 the ld.Pr.CIT has noted the facts in the case of Neha builders (Supra) stating that in that case the assessee was in the business of construction of property and one of the building property was included in the closing stock in the balance sheet drawn for the business and the assessee had earned income on rent from such constructed properties and returned it under the head "income from house property". The Ld.PCIT has noted that the AO in the said case however had held that property being in the nature of stock-in-trade, rental income as earned thereon was to be taxed from "income from business and profession". He further....

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....mpugned year. Copy of the notice was placed before us at PB 67. In reply to the same by the assessee dated 17.12.2019, the assessee had drawn attention of the AO to the decision of jurisdictional High Court in the case of Neha Builders P. Ltd. (supra). The reply of the assessee is placed before at PB Page no.68 to 74. Therefore, since we have held above that the decision of the jurisdictional High Court in the case of Neha Builders(supra) was squarely applicable to the facts of the case, we hold, that there was no error in the order of the AO who had accepted the explanation of the assessee that no income from completed units was assessable under the head "income from house property" following the decision of jurisdictional High Court in the case of Neha Builders P. Ltd. (supra). 11. In view of the above, the order passed by the ld.Pr.CIT under section 263 of the Act is set aside, and the appeal of the assessee is allowed. 12. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 17th April, 2023 at Ahmedabad. ============= Document 1 NOTICE FOR THE HEARING Mis/Mr/Ms Subject: Notice for Hearing in respect of Revision proceedings u/s ....

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....erty". As long as the assessee continued to be owner of the vacant flats, it had to be assessed under the head of "Income from house property"; since there was no letting out, the basis of assessment had to be ALV, which was rational and scientific. The Hon'ble High Court of Delhi in the case CIT v/s Ansal Housing Finance & Leasing Co. Ltd (IT appeal nos. 18 of 1999 and others dated 31.10.2012) held that the assessee was liable to pay income-tax on the Annual Letting Value (ALV) of unsold flats owned by it under the head "Income from house property and application of ALV to determine the tax is regardless of whether actual income is received, it is premised on what constitutes a reasonable letting value, if the property were to be leased out in the market price. The Hon'ble Gujarat High Court, in the case of Municipal Corporation of the City. v/s Oriental Fire & General Insurance, [equivalent citations AIR 1994 Guj 167, (1994) 2 GLR 1498] has referred and consented with ALV of 7 percent of cost of ground floor and 7.25 percent of cost of higher floor as Standard Rent. 4. In view of the above facts and the decisions of the Hon'ble Courts ....

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....tendance or attendance of any other person authorized by you is not required before me and you are requested to submit your written submission/ explanation, if any, electronically on or before 14/03/2022. कोष मलो दण्ड INCOME TAX DEPARTMENT JAYANT KUMAR PCIT, Vadodara-1 (In case the document is digitally signed please refer Digital Signature at the bottom of the page) Document 4 8.4. Now coming to the submissions of the assessee regarding reliance placed on the judicial pronouncements of the other Hon'ble High Courts and not considering the decision of the Hon'ble jurisdictionalGujarat High Court, it is stated that the reliance were placed on judicial pronouncements of the Hon'ble High Courts, considering the facts of the case under consideration. However, it is pertinent to mention that the proceedings under Section 263 of the I.T. Act were not specifically initiated by invoking clause (d) of the Explanation 2 to Section 263(1) of the I.T. Act. It is seen that the decision of the Hon'ble jurisdictional Gujarat High Court in the case of Commissioner of Income-tax Vs. Neha Builde....