Rohan Projects, Pune V. Income-tax Officer, Ward - 3(5), Pune

ITA 1664/PUN/2018

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5801 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 16-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 147; 148; 13; 22

Judgement Text

आयकर अपीलीय अधधकरण “बी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA No. 1664/PUN/2018 धनधाारण वषा / Assessment Year : 2013-14 Rohan Projects Khandelwal Jain & Associates, Alankar Cinema Building, 1 st Floor, Above United Bank, Pune-411 001 PAN : AAHFR4942H .......अपीलाथी / Appellant बनाम / V/s. The Income Tax Officer, Ward-3(5), Pune ......प्रत्यथी / Respondent Assessee by : Shri Sarvesh Khandelwal Revenue by : Shri Piyush Kumar Singh Yadav सुनवाई की तारीख / Date of Hearing : 22.12.2021 घोषणा की तारीख / Date of Pronouncement : 22.12.2021 आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM: This appeal preferred by the assessee emanates from the order of the Ld. CIT(Appeals)-3, Pune dated 03.08.2018 for the assessment year 2013-14 as per the following grounds of appeal : “1. On facts and circumstances prevailing in the case and as per provisions of the Act it be held that, the provisions of section 147 has been initiated without fulfilling the condition prescribed under the Act and the re-opening is not done in accordance with the provisions of the 2 ITA No. 1664/PUN/2018 A.Y.2013-14 Act. The assessment framed u/s.143(3) r.w.s.147, therefore be treated as invalid, unlawful null and void. 2. Assuming without admitting that the assessment framed u/s.143(3) r.w.s.147 is tenable in eyes of law, it be held that the additions made of Rs.8,86,165/- on account of deemed house property income, is not accordance with the provisions of the act. The additions so made be deleted. 3. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing.” 2. The brief facts in this case are that the assessee is a firm engaged in the business of builder and developer. The assessee filed return of income for assessment year 2013-14 on 29.09.2013 declaring total income of Rs.100/-. Subsequent to this, proceeding u/s.147 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) was initiated by way of issue of notice u/s. 148 of the Act on 05.06.2017 after recording the necessary satisfaction. In response thereof, the assessee vide letter dated 19.06.2017 requested to treat the original return as return filed in response to notice u/s 148 of the Act. It was gathered during the assessment proceedings for the assessment year 2014-15 that the assessee firm had developed a number of projects near Pune International Air Port, Vimannager and the said project have been completed in F.Y. 2011-12 and the occupancy certificates had also been received in respect of all these projects on 31.03.2012. The details of units in such projects and the status of closing stock as on 01.04.2012, as submitted by the assessee revealed that there were 61 residential units which were lying vacant and un-booked during the financial year 2012-13. As such, as per the provisions of section 23(4) of the Act, the annual value of the property, other than the one in respect of which a taxpayer exercises option under clause (a) of section 23(4) shall be determined under 'sub-section (1) as if such property/properties had been let out. Hence as per the provision, the 3 ITA No. 1664/PUN/2018 A.Y.2013-14 assessee firm was held liable to offer deemed rental income from the vacant units/flats in accordance with the decision of the Hon'ble Delhi High Court in case of Ansal Housing Finance & Leasing Co. Ltd (2013) 29 taxmann.com 303 (Delhi). Accordingly, the Assessing Officer added an amount of Rs.8,86,165/- as deemed rental income. 3. The Assessing Officer in the assessment order has held and observed as follows: “3. This case no assessment has been done u/s.143(3)/147 for the Asst. Year under consideration till the date of issue of notice u/s. 148. However it was gathered during the assessment proceedings for the Assst. year 2014- 15 that the assessee firm had developed a number of projects namely Rohan Mithila Plot B, plot C, Plot D and Plot E near Pune International Air Port, Vimannagar and the said project have been completed in F.Y. 2011-12 and the occupancy certificates had also been received in respect of all these projects on 31/03/2012. The details of units in such projects and the status of closing stock as on 1/4/2012, as submitted by the assessee revealed that out of the unsold vacant units, there were 61 such units which were lying vacant and un-booked during the financial year 2012-13. As such, as per the provisions of section 23(4), the annual value of the property, other than the one in respect of which a taxpayer exercises option under clause (a) of section 23(4) shall be determined under sub-section (1) as if such property /properties had been let out. Hence as per the provision, the assessee firm is liable to offer deemed rental income from the vacant units/flats as mentioned above. 4. The AO while recording the reasons u/s. 147 found support in the decision in the case of CIT Vs. Ansal Housing Finance 8s leasing Co. Ltd. (2013] 29 taxmann.com 303 (Delhi) dated 31 October 2012 wherein the Hon'ble Delhi High Court has categorically held that the vacant flats/Units held as stock in trade by a builder are liable to be taxed under the head House Property and deemed rental income on these units are chargeable to tax even if such unit are not actually let out by it. Further the AO also found support in the case of Mangla Homes(P) Ltd. Vs. Income Tax Officer (2009) 325 ITR 281, Where the Hon'ble Bombay High Court has held that the rental Income earned by an assessee from the units held as stock in trade is chargeable under the head Income From House property and not under business head. Thus extending the same, the vacant units held as stock in trade over which no rental income has been offered are liable to be taxed u/s. 23(4) of the IT Act. .............................. 8. The submission of the assessee has been duly considered. however, as the facts of the assessee firm as mentioned in para 3 are same & identical with the facts of cases referred to above para in CIT Vs. Anasal Housing Finance & Leasing Co. Ltd. (2013) 29 taxmann.com 303 (Delhi) 4 ITA No. 1664/PUN/2018 A.Y.2013-14 dated 31.10.2012. & Mangala Homes (P) Ltd Vs. ITO (2009) 325 ITR 281. Hence the same should have been added back to the taxable income of assessee, after allowing the available 30% standard deduction of Rs.3,79,785/-., Accordingly, an amount of Rs.8,86,165/- is hereby added back to the returned income. Penalty proceedings u/s.271(1)(c) are hereby initiated for furnishing inaccurate particulars of income which is evident from the facts discussed above.” 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(Appeals) and had filed detailed written submissions. It is the case of the assessee before the Department that the unsold flats forms part of stock in trade and there is no intention for the assessee to let these residential units out but only intention of the assessee to sell them in the market. The Ld. CIT(Appeals) after considering the submissions of the assessee and the assessment order, affirmed the order of the Assessing Officer making disputed addition to the total income of the assessee. 5. We find Pune Bench of the Tribunal in exactly identical facts and circumstances in ITA No.568/PUN/2018 for the assessment year 2013-14 in the case of Kumar Construction and Properties Private Limited Vs. Deputy Commissioner of Income Tax has held and observed as follows: “3. Brief facts relating to the issue on hand are that the assessee is a private limited company engaged in the business of construction activity of various residential and commercial projects. The assessee filed its return of income declaring a loss of Rs.36,50,78,966/-. The AO on account of deemed rent u/s.23(4) of the Act on unsold flat added an amount of Rs.2,49,200/- to the total income of the assessee. The CIT(A) confirmed the same. 4. Heard both the parties and perused the material available on record. During the course of assessment proceedings, we note that the assessee is holding stock of 6 flats which are completed and the details of which are reflected in Para No. 5 of the assessment order. The AO asked the assessee to explain as to why deemed rent in respect of said 6 flats should not be charged to tax under the provisions of section 22 of the Act. The assessee explained vide its submissions dated 09-03-2016, we note that the main contention of ld. AR is that the unsold flats forms part of stock in trade and there is no intention for the assessee to let out the said unsold flats but only to sell in the market. The AO rejected the 5 ITA No. 1664/PUN/2018 A.Y.2013-14 contention raised by the assessee and calculated the deemed rental income regarding the above said unsold flats by deputing the Inspector for field enquiry ascertaining the monthly fair market rent. The CIT(A) in the impugned order agreed with the view taken by the AO. A similar issue came up before this Tribunal in assessee‟s sister concern in the case of Kumar Properties and Real Estate Private Limited in ITA No. 2977/PUN/2017 for A.Y. 2013-14. The Co-ordinate Bench of Tribunal vide order dated 28-04-2021 discussed the issue in detail from Para Nos. 3 to 13 of the said order and held that an exception has been carried out in section 22 of the Act that any such property or its part, which is occupied by the assessee for the purposes of any business or profession carried, the profits of which are chargeable to income-tax, shall be excluded on satisfying the conditions therein. The Co-ordinate Bench, further discussed the said 4 conditions in Para Nos. 6, 7, 8 and 9. The first condition being that the property or its part should be occupied by the assessee as an owner. There is no material evidence to show before us that the assessee is not occupied the said unsold 6 flats. The second condition is that any business or profession should be carried on by the assessee. We note that the assessee filed return showing income from such business and also engaged in the business of property development. The third condition is that the occupation of the property should be for the purpose of business or profession wherein the assessee before us shown the said 6 unsold flats as stock in trade. The last condition is that profits of such business or profession should be chargeable to income-tax. In the present case that there is no dispute that the profits of the business of construction by the assessee are chargeable to income-tax. Therefore, in our view that the unsold 6 flats are occupied by the assessee are as owner; business of construction is carried on by the assessee; the occupation of the flats is for the purpose of business; and profits of such business are chargeable to Income-tax. Thus, in our opinion, all the four conditions provided in exclusion clause in section 22 of the Act are to be excluded, therefore, we hold that no addition on account of deemed rent on unsold 6 flats can be made in the hands of the assessee. Thus, the order of CIT(A) is not justified and it is set aside. Thus, the grounds raised by the assessee are allowed.” Respectfully following the same parity of reasoning on identical set of facts and circumstances, we allow grounds of appeal raised by the assessee. 6. In the result, appeal of the assessee is allowed. Order pronounced on 22 nd day of December, 2021. Sd/- Sd/- INTURI RAMA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; ददनांक / Dated : 22 nd December, 2021 SB 6 ITA No. 1664/PUN/2018 A.Y.2013-14 आदेश की प्रधतधलधप अग्रेधषत / Copy of the Order forwarded to : 1. अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The CIT(Appeals)-3, Pune. 4. The Pr. CIT-2, Pune. 5. धवभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, “बी” बेंच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गार्ा फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // धनजी सधचव / Private Secretary आयकर अपीलीय अधधकरण, पुणे / ITAT, Pune. 7 ITA No. 1664/PUN/2018 A.Y.2013-14 Date 1 Draft dictated on 22.12.2021 Sr.PS/PS 2 Draft placed before author 22.12.2021 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order