TaxTMI 
TaxTMI 
2023 (12) TMI 1512
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....at the order dated 24.02.2021 passed u/s. 143(3) of the act by the A.O. is erroneous and prejudicial to the interest of revenue although the same was neither erroneous nor prejudicial to the interest of revenue. 4. the Appellant craves leave to add, alter, amends or deletes all or any of the grounds of appeal at any time. 2. The brief facts of the case are that assessee is a partnership firm engaged in the business of land development and real estate construction activity. Assessee filed its return of income on 19.10.2018, declaring income at Rs. NIL (Loss of Rs. 6,98,087/-). Case of the assessee was selected for scrutiny under CASS and assessed at Returned Income u/s. 143(3) r.w.s. 143(3A) and 143(3B) of the Act vide order dated: 24.02.2021. Thereafter, a notice u/s. 263 of the Act was issued by the office of Ld. PCIT, Mumbai-41 vide dated: 24.02.2023, the copy of the notice is reproduced herein below as under: NOTICE FOR THE HEARING M/s/Mr/Ms Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of the THE INCOME TAX ACT, 1961 - Assessment Year 2018-19. In this regard, a hearing in the matter is fixed on 08/03/2023 at 11:....
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.... income. Based on above facts, in the opinion of undersigned, the assessment order dated 24.02.2021 passed by the AO under section 143(3) r.w.s. 143(3A) & 143(3B) of the I.T. Act, 1961 for the A.Y. 2018-19 suffers from this infirmities and is erroneous insofar as to prejudicial to the interest of the revenue within the meaning of Explanation 2 to sub-section 1 of section 263 of the Act. 4. You are therefore, requested to show cause as to why the assessment order passed u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the I.T. Act, 1961 dated 24.02.2021 for the A.Y. 2018- 19 should not be revised or set aside u/s. 263 of the Income-Tax Act, 1961. Hence, with a view to accord a reasonable opportunity to you before arriving at a conclusion in this regard, you are given an opportunity to make written submissions either personally or through an authorized representative on the date of hearing fixed on 08.03.2023 at 11.00 A.M., along with all supporting documents to be relied upon by you. 5. Please note that in the event of non-compliance on your part on the given date of hearing, the case may be decided ex-parte on the basis of material available on record without any further r....
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....d which confirms that this addition was being challenged by assessee before appellate forums. 6. As far as Grounds raised by the assessee is concerned, it pertain to action taken u/s. 263 of the Act, resultantly taxability of deemed rent u/s. 22 r.w.s. 23 of the Act. On this matter assessee relied upon following judicial pronouncements alongwith its submissions as under: i) Malabar Industrial Co. Ltd. V. CIT (2000) 243 ITR 83(SC) ii) CIT V. Nirav Modi (2017) 390 ITR 292(Bom) iii) Moil Ltd. V. CIT (2017) 396 ITR 244 (Bom.) iv) CIT V. Gabriel India Ltd. (1993) 203 ITR 108 (Bom) In all the above cases, it has been held that the pre-requisite for the exercise of jurisdiction u/s. 263, the order of the A.O. should be erroneous in so far as it is prejudicial to the interest of the revenue. It is also held that once the A.O. is satisfied about the claim on the basis of materials before him, he need not make further enquiries in the matter. Apart from above mentioned case laws, kind attention of your good selves is also drawn to the order dated 14/12/2016 passed by the Hon. SC rejecting Special Leave Petition filed by the department ....
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....s no dispute that the assessee had retained the unsold stock of flats as stock-in-trade in the capacity of builder. Hence there is no dispute that the unsold stock of flats was used only for the purpose of business of the assessee." 9. But now there is an exception provided in charging section 22 of the Act seems to be indirectly taxed from A.Y. 2018-19 after providing the moratorium period of two years. Hence, up to A.Y. 2017-18, no addition could be made in respect of deemed rental income on unsold stock of flats lying as stock-in-trade as they are used for the purpose of business of the assessee. 10. Keeping in view the anomaly/divergent views of coordinate benches and Hon'ble High Courts on this subject an amendment has been brought in the statute in section 23(5) where in respect of unsold stock of properties held as 'stock-in-trade' for a period of two years from the date of obtaining completion certificate from the competent authority, the annual value of such property would be determined as 'Nil'. In other words, there would be no addition towards deemed rental income in respect of unsold stock of properties held as 'stock-in-trade' for a p....
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....e case before us projects of the assessee completed before A.Y. 2018-19 as the same have been shown under the head closing stock (representing opening stock for the year). Hence, this benefit of moratorium period cannot be allowed to the assessee before us. 13. In view of above, we found order of the AO as erroneous in so far as prejudicial to the interest of revenue hence, action of the Ld. PCIT u/s. 263 of the Act is confirmed and appeal of the assessee is dismissed. 14. In the result, appeal of the assessee is dismissed. Order pronounced in the open court on 18th day of December, 2023. ============= Document 1 INCOME TAX DEPARTMEJ GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE COMMISSIONER OF INCOME TAX PCIT, MUMBAI - 41 To, BHAGWATI ABHILASHA CONVENTURE A/30 PATIL BHUVAN , N. S. B. ROAD MULUND (WEST) MUMBAI 400080 , Maharashtra India PAN/TAN: AAHFB9198D AY: 2018-19 DIN & Notice No : ITBA/REV/F/REV1/2022- 23/1050117822(1) Dated: 24/02/2023 Document 2 2. In respect of notice u/s. 142(1) dated 10/12/2020, our submissions are as under Compliance Question 1 Details of turnover wit....