M/s Sukhwani Promotors and Builders, Pune V. Principal Commissioner of Income-Tax, (Central), Pune

ITA 301/PUN/2022

AI Insights

The case involves M/s. Sukhwani Promoters and Builders appealing against the order of the Principal Commissioner of Income Tax (Central), Pune, which was issued under section 263 of the Income Tax Act for the assessment year 2017-18. The appeal contested the re-assessment directions concerning the taxability of unsold flats and TDS issues. The Tribunal examined whether the original assessment order was erroneous and prejudicial to the interests of the revenue, considering the legal provisions and precedents. The Tribunal found that the issues regarding the taxability of unsold flats and the TDS on payments were not erroneous as the Assessing Officer had adopted one of the legally permissible views. However, it agreed with the Principal Commissioner on the issue of interest on TDS, leading to the partial allowance of the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134458 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 15-05-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 04-05-2022
• Other Referred Cases: Malabar Industrial Company Ltd. Vs. CIT, Kumar Properties and Real Estate (P.) Ltd. Vs CIT, CIT Vs. Amitabh Bachchan, CIT v/s Mepco Industries Ltd., CIT Vs. Future Corporate Resources Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Competent authority; TDS
• Section: 263; 143(3); 142(1); 14A; 40(a)(ia)

Judgement Text

आयकर अपीलीय अिधकरण ”बी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “B” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.301/PUN/2022 िनधाᭅरण वषᭅ / Assessment Year : 2017-18 M/s.Sukhwani Promoters and Builders, 208/2A, Near Swaminathan Clinic, Station Road, Pimpri, Pune – 411018. PAN: ABRFS 1253 P Vs The Principal Commissioner of Income Tax, (Central), Pune. Assessee/ Appellant Respondent /Revenue Assessee by Shri Jitendra Jain – AR Revenue by Shri Sardar Singh Meena – DR Date of hearing 16/05/2023 Date of pronouncement 27/06/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal is filed by the assessee against the order of ld.Principal Commissioner of Income Tax(Central), Pune dated 24.03.2022 under section 263 of the Act for A.Y.2017-18. The grounds of appeal raised by the assessee are as under : “1 & 2. PCIT erred in passing the order u/s 263 of the Act which is bad in law, illegal, ultra-virus, in excess of and/or in want of jurisdiction and otherwise void. ITA No.301/PUN/2022 M/s.Sukhwani Promoters and Builders [A] 2 3. PCIT erred in holding that the AO ought to have taxed deemed annual letting value @5% of the value of closing stock of unsold flats u/s 23(l)(a) of the Act. 4. PCIT erred in holding that the Appellant not deducted TDS on advertisement expense aggregating to Rs.3,17,700/- paid to Silk Route Communication and the AO ought to have made disallowance to the extent of Rs.95,310/- u/s 40(a)(ia) of the Act. 5. The PCIT erred in holding that the interest on TDS of Rs.17,385/- is N.A. not an allowable expense and the AO has failed to examine the issue and thereby directed the AO to pass a fresh assessment order u/s 143(3) of the Act.” Submission of Ld.AR : 2. Ld.AR filed paper book. The ld.AR submitted that all the details were filed during the assessment proceedings. The ld.AR took us through the notice under section 142(1) issued by Assessing Officer(AO) and subsequent submission filed by assessee in response to the notices. Ld.AR vehemently argued that AO had verified all these issues and had applied the mind before passing the assessment order. Therefore, ld.AR pleaded that assessment order was not erroneous and prejudicial to the interest of the Revenue. Ld.AR relied on decision of the Hon’ble Supreme Court in the case of Malabar Industrial Company Ltd., Vs. CIT 243 ITR 83. Submission of ld.Departmental Representative(ld.DR) : 3. The ld.DR relied on the order of the ld.Pr.CIT. ITA No.301/PUN/2022 M/s.Sukhwani Promoters and Builders [A] 3 Findings and Analysis : 4. We have heard both the parties and perused the records. 4.1 The assessee had filed copies of Balance Sheet and Profit and Loss Account during the assessment proceedings. The assessee had shown closing stock. Thus, during the assessment proceedings, the Assessing Officer(AO) was aware that there was closing stock of ready flats. However, AO decided not to tax these as Income from House Property. This is A.Y.2017-18. At that point of time, for A.Y.2017-18, there were two views on taxability of these ready flats which have been shown as Stock in trade. The AO took a view of not taxing it under the head Income from House property. When there are two legally possible views and AO adopts one of them, the Assessment order cannot be said to be erroneous on this ground. 5. The ITAT Pune Bench in the case of Kumar Properties and Real Estate (P.) Ltd. Vs CIT 190 ITD 212 vide the order dated 28/04/2021 authored by the Hon’ble Vice President, R.S.Syal has held as under : Quote, “ 11. The authorities below have canvassed a view that the annual letting value of flats/bungalows is income chargeable to tax as 'Income from house property' by relying on Ansal Housing Finance and Leasing Company Ltd. (supra). There is no doubt that the Hon'ble Delhi High Court in the said case has held that Annual ITA No.301/PUN/2022 M/s.Sukhwani Promoters and Builders [A] 4 letting value of unsold flats at the year end is chargeable to tax under the head 'Income from house property'. At the same time, we find that the Hon'ble Gujarat High Court in CIT v. Neha Builders (P.) Ltd . [2007] 164 Taxman 342/[2008] 296 ITR 661 has held that income from the properties held as stock in trade can be treated as Income from business and not as 'Income from house property'. Our attention has been drawn towards certain Tribunal decisions including Cosmopolis Construction v. ITO [IT Appeal No. 230 & 231 (PUN) of 2018, dated 12-9-2018], wherein, after taking note of both the above judgments and finding none of them from the jurisdictional High Court, a view has been canvassed in favour of the assessee by holding that no income from house property can result in respect of unsold flats held by a builder at the year end. Similar view has been reiterated by the Pune Bench of the Tribunal in Mahanagar Construction v. ITO [IT Appeal No. 623 (PUN) of 2018, dated 5-9-2019]. 12. At this juncture, it is relevant to mention that the Finance Act, 2017 has inserted sub-section (5) of section 23 w.e.f. 1-4-2018 reading as under:— 'Where the property consisting of any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to one year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil.' 13. A close scrutiny of the provision inducted by the Finance Act, 2017, transpires that where a property is held as stock-in-trade ITA No.301/PUN/2022 M/s.Sukhwani Promoters and Builders [A] 5 which is not let out during the year, its annual value for a period of one year, which was later enhanced by the Finance Act, 2019 to two years, from the end of the financial year in which the completion certificate is received, shall be taken as Nil.The amendment has been carried out w.e.f. 1-4-2018 and the Memorandum explaining the provisions of the Finance Bill also clearly provides that this amendment will take effect from 1-4-2018 and will, accordingly apply in relation to the assessment year 2018- 19 and subsequent years. Obviously, it is a prospective amendment. The effect of this amendment is that stock-in-trade of buildings etc. shall be considered for computation of annual value under the head 'Income from house property' after one/two years from the end of the financial year in which the certificate of completion of construction of the property is obtained on and from the A.Y. 2018- 19. Instantly, we are concerned with the assessment year 2013-14. As such, the amendment cannot apply to the year under consideration. In the absence of the applicability of such an amendment, no income can be said to have accrued to the assessee from unsold flats available as stock-in-trade. We, therefore, overturn the impugned order on this score and delete the addition of Rs. 1.47 crore sustained in the first appeal.” Unquote 5.1 Thus, there is no doubt that there were two views on this impugned issue. 5.2 The Hon’ble Supreme Court in the case of CIT Vs. Amitabh Bachchan, 384 ITR 200(SC) observed as under : “21. There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be ITA No.301/PUN/2022 M/s.Sukhwani Promoters and Builders [A] 6 interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from.” 5.3 The Hon’ble High Court in the case of CIT v/s Mepco Industries Ltd. 294 ITR 121 (Madras) held as under : Quote, “8. Therefore, on the facts of the case, when two views are possible and it is not the case of the Revenue that the view taken by the Assessing Officer is not permissible in law, the CIT is not justified in invoking the jurisdiction under section 263 of the Act. ” Unquote. 5.4 The Hon’ble Bombay High Court in the case of CIT Vs. Future Corporate Resources Ltd in IT Appeal No.1275 of 2017 vide order dated September 29, 2021 held as under : Quote ,“ 7. In the order of PCIT it is stated "in paragraph 4.3 of the assessment order, the Assessing Officer has recorded that from the details submitted by the assessee and the explanation given by him, it was observed that assessee had regular business connection with the company in which investment had been made and also there was business income to the assessee from the same. Therefore, interest expense debited by the assessee has not been considered for the calculation of disallowance under section 14A because the same has been incurred for the purpose of business." The PCIT therefore agrees that the Assessing Officer has recorded from the details submitted by respondent and the explanation given ITA No.301/PUN/2022 M/s.Sukhwani Promoters and Builders [A] 7 by respondent that the assessee had regular business connection with the company in which investment has been made and also there was a business income to the assessee from the same. He notes that the Assessing Officer, therefore did not consider the calculation of disallowance under section 14A the interest expense debited by the assessee because the same has been incurred for the purpose of business. The PCIT though was unhappy with the view of the Assessing Officer, the PCIT himself does not say why it should have been considered for the calculation of disallowance under section 14A. Even if one assumes that he has, after reading of the order expressed his views, but still the position is two views therefore were possible. Therefore, if one of the two possible views was taken by the Assessing Officer, the PCIT could not have exercised his powers under section 263 of the Act. 8. ” Unquote . 5.5 Thus, the principle of the law emanating from the above decision of the Hon’ble Supreme Court, the Hon’ble Bombay High Court is that when two views are legally possible and Assessing Officer adopts one view the Assessment Order cannot be said to be erroneous for the Ld.CIT to invoke jurisdiction u/s.263 of the Act. 6. In the case under consideration the AO has adopted one of the legally possible views qua Unsold Flats shown as closing stock. Therefore, the Assessment Order is not erroneous qua unsold flats shown as Stock. Accordingly, the Ground Number 3 of the assessee is allowed. ITA No.301/PUN/2022 M/s.Sukhwani Promoters and Builders [A] 8 TDS on payment made to Silk Route Communications : 7. It is observed that the assessee during the assessment proceedings had filed details of TDS deducted on the payments made to Silk Route Communications. (assessee’s paper book page 17-20). We have verified the fact that the assessee had deducted the TDS and the details were filed before the AO during the assessment proceedings. In the facts and circumstances, the assessment order is not erroneous qua TDS on payment made to Silk Route Communications. Therefore, the order u/s.263 qua the issue of TDS on payment made to Silk Route Communications is set aside. Therefore, the Ground Number 4 of the assessee is allowed. Interest on TDS : 8. Regarding the interest on TDS, it is a fact that the AO had not carried out any inquiry. The AO had not called for any details on this issue. Thus, we agree with the Ld.CIT that the AO failed to carry out necessary inquiry. Hence, the assessment order is erroneous and prejudicial to the interest of revenue qua the issue of Interest on TDS. Accordingly, the order u/s 263 is upheld qua the issue of interest on TDS. Accordingly, the Ground Number 5 of the assessee is dismissed. ITA No.301/PUN/2022 M/s.Sukhwani Promoters and Builders [A] 9 9. Ground Number 1 & 2 are general in nature, hence, does not need any adjudication as we have adjudicated each issue on merit. Hence, Ground Number 1 & 2 are dismissed. 10. In the result, appeal of the Assessee is Partly Allowed. Order pronounced in the open Court on 27 th June, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 27 th June, 2023/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “बी” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.