TaxTMI 
TaxTMI 
2025 (11) TMI 745
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....ted for scrutiny and the assessment was completed u/s 143(3) of the Act by determining total income at Rs. 1,25,43,050/-. In the assessment order, the Ld.AO made an addition of Rs. 7,37,275/- under the head "Income from house property"; Rs. 4,07,686/- on account of profit element for capitalization of shop; and also Rs. 3,61,500/- for disallowance of payment to related party. The aggrieved assessee filed an appeal before the CIT(A). The Ld.CIT(A) deleted the addition relating to Rs. 3,61,500/- on account of disallowance of payment to related party. The rest of the additions were upheld. Being aggrieved, the assessee filed an appeal before us by challenging two additions. 3. The Ld.AR argued and filed a legal paper book, which is kept on record. During the argument, Ld.AR stated that the assessee is a promoter and developer and some of the flats were booked in the closing stock during the impugned assessment year. The Ld.AO considered the deemed rent on the closing stock of flats in two projects at Karanjade and Ulwe is valued at Rs. 1,31,65,668/-. The assessee had not offered any deemed rent while computing total income. The Ld.AO, by applying the decision of Hon'ble Delhi High ....
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....mating rental income from these vacant flats u/s 23 which is assessee's stock in trade as at the end of the year. 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." 7. In our view, the aforesaid observation of our coordinate Bench squarely applies to the facts of the present case. In the case of M/s. Runwal Constructions (supra) also, similar issue has been dealt with by our coordinate Bench. In the case of M/s. Runwal Constructions (supra), the Bench noted the judgment of the Hon'ble Gujarat High Court in the case of CIT vs Neha Builders Pvt. Ltd., 296 ITR 661 (Guj.) as also the judgment of the Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd., 354 ITR 180 (Delhi) and finally observed as under :- "10. In the case on hand before us it is an undisputed fact that both assessee's have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head 'income from business'. Thus, respectfully following the above said decisions we hold that the unsold flats which are stock in trade when they were sold....
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....on certificate is stated to have been obtained on 28.11.2011 and going by the provisions of Sec. 23(5) of the Act, no addition is permissible in the instant assessment year. Be that as it may, we are only trying point out that the assess ability of notional income in respect of unsold flat, which is taken as stock-in-trade, is not merited in the instant case. Thus, we set-aside the order of CIT(A) and direct the Assessing Officer to delete the addition. 10. In the result, appeal of the assessee is allowed, as above." 5. The Bench asked to clarify the recent decisions of co-ordinate bench of ITAT Mumbai in the case of DCIT, CC-4(2), Mumbai vs M/s Inorbit Malls Pvt Ltd, ITA No.2220/Mum/2021, A.Y. 2017-18, date of pronouncement 11/10/2022.The relevant paragraphs are extracted below: - "It is trite that the said amendment has to be given effect prospectively from 01.04.2018 as mentioned in the Explanatory Notes to the provisions of the Finance Act, 2017. It is a cardinal principle of the interpretation that the normal presumption which respect to an amendment is that is applicable prospectively unless and until specifically stated otherwise. The logic behind such a....
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....mputing 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. Honourable 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 Tip Top Typography (supra). In our considered opinion nothing stops the assessing officer from obtaining the municipal ratable value from Departmental or government machinery. Hence we direct the assessing officer to compute the valuation of deemed rent in accordance with our observation....
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....erial available on record. Ground No. 1 - Addition on Account of Deemed Rent 1 In respect of the first ground relating to the addition towards deemed rent, we observe that the issue is no longer res integra and stands well settled by several decisions of the Hon'ble ITAT, Mumbai Benches. The assessee has placed reliance on the order of the Co-ordinate Bench in the case of Shri Rajendra Godshalwar (supra), wherein the Tribunal had duly considered the decision of the Hon'ble Delhi High Court in Ansal Housing Finance and noted that the provisions of section 23(5) were inserted by the Finance Act, 2017 with effect from 01.04.2018 to govern the computation of deemed rent in respect of unsold stock of flats held as inventory. On perusal of the latest order of ITAT-Mumbai in Inorbit Malls Pvt. Ltd. (supra), we find that the Tribunal therein had comprehensively considered the judgments of the Hon'ble Gujarat High Court in CIT v. Neha Builders (2008) 296 ITR 661 (Guj), Ansal Housing & Construction Ltd. (supra), and Ansal Housing Finance & Leasing Co. Ltd. (supra), and had ultimately relied upon the decision of the Hon'ble jurisdictional High Court in CIT v. Sane & Doshi En....