DEPUTY COMMISSIONER OF INCOME TAX-15(2)(1), MUMBAI V. HAWARE CONSTRUCTIONS PRIVATE LIMITED , MUMBAI

ITA 4539/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8597 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 21-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M RAJAN LD
• Assessee Lawyers: DEVENDRA JAIN LD
• Keywords: Revision of order; Deemed to accrue or arise in india; Competent authority; Set aside
• Section: 143(3); 6; 263

Judgement Text

1 ITA NO.4539/MUM/2017 M/S. HAWARE CONSTRUCTIONS PVT. LTD. ASSESSMENT YEAR-2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4539/MUM/2017 ( / ASSESSMENT YEAR: 2010-11 D CIT - 15(2)(1) ROOM 357, 3 RD FLOOR, AAYKAR BHAVAN M.K. ROAD, MUMBAI-400 020. / VS. M/S. HAWARE CONSTRUCTIONS PVT. LTD. RAMON HOUSE, H.T. PAREKH MARG BACKBAY RECLAMATION MUMBAI-400 020. ! ./ ./PAN/GIR NO. AABCH-3858-F ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : M.RAJAN- LD. DR / RESPONDENT BY : DEVENDRA JAIN- LD.AR / DATE OF HEARING : 05/03/2019 / DATE OF PRONOUNCEMENT : 09/04/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2010-11 CONTEST THE ORDER OF LD. COMMISSIO NER OF INCOME-TAX (APPEALS)-24, MUMBAI, [IN SHORT REFERRED TO AS CIT (A)], APPEAL NO.CIT(A)- 2 ITA NO.4539/MUM/2017 M/S. HAWARE CONSTRUCTIONS PVT. LTD. ASSESSMENT YEAR-2010-11 24/ACIT-15(2)(1)/IT-435/2015-15 DATED 24/03/2016 ON FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN HOLDING THAT NO INCOME UNDER THE HEAD ' IN COME FROM HOUSE PROPERTY' COULD BE CHARGED IN RESPECT OF UNSOLD STOCK OF FLATS, IGNORING THE DECISION OF THE JURISDICTIONAL MUMBAI ITAT IN THE CASE OF M/S. OM PRAKASH & CO (87 TTJ 183) AND M/S. CHEM MECH PVT. LTD ( 83 ITD427). 2. WHETHER ON THE FACTS AND CIRCUMSTANCES IN THE C ASE AND IN LAW, THE CIT(A) ERRED IN RELYING ON ITS DECISION FOR A.Y. 2009-10 AND A.Y . 2011-12 WHILE GIVING RELIEF FOR A.Y. 2010-11, IGNORING THE FACT THAT THE ISSUE IS S TILL NOT DECIDED AS THE DEPARTMENT HAS NOT ACCEPTED THIS DECISION AND GONE IN APPEAL BEFORE HON'BLE ITAT FOR THESE YEARS.' 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE DIRECTIONS BE SET ASIDE AND THAT THE ASSESSING OFFICER BE RESTORED,' 2.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED AS BUILDER AND DEVELOPER WAS SUBJECTED TO AN ASSESSMENT U/S. 143(3) READ WITH SECTION 263 OF THE ACT ON 12/01/2016 BY LD. DEPUTY COMMISSIONER OF INCOME TAX-15(2)(1), MUMBAI [AO] WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED A T RS.22.25 CRORES AFTER CERTAIN ADJUSTMENTS AS AGAINST ASSESSED INCOM E U/S 143(3) ON 11/02/2013 AT RS.36.07 CRORES. 2.2 SUBSEQUENTLY, HONBLE COMMISSIONER OF INCOME TA X, INVOKING REVISIONAL JURISDICTION U/S. 263 VIDE ORDER DATED 0 6/02/2015, SET ASIDE THE ISSUE OF DETERMINATION OF INCOME FROM HOUSE PROPERTY TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. ACCORDING LY, THE MATTER WAS RECONSIDERED BY THE LD. AO IN TERMS OF THE STATED D IRECTION AND MADE CERTAIN ADDITIONS IN THE INCOME OF THE ASSESSEE. HO WEVER, UPON FURTHER APPEAL, LD. FIRST APPELLATE AUTHORITY, HAS DELETED THE SAME AGAINST WHICH 3 ITA NO.4539/MUM/2017 M/S. HAWARE CONSTRUCTIONS PVT. LTD. ASSESSMENT YEAR-2010-11 THE REVENUE IS IN FURTHER APPEAL BEFORE US. IT HAS BEEN SUBMITTED BEFORE US THAT THE ASSESSEE HAS NOT AGITATED THE INVOCATION O F REVISIONAL JURISDICTION U/S 263. 2.3 DURING REVISIONAL ASSESSMENT PROCEEDINGS, IT TR ANSPIRED THAT THE ASSESSEE, FOLLOWING COMPLETED PROJECT METHOD OF ACCOUNTING OFFERED INCOME FROM CONSTRUCTION PROJECTS COMPLETED DURING THE YEAR. AT YEAR-END, THE ASSESSEE HAD CERTAIN INVENTORIES IN COMPLETED P ROJECTS IN THE SHAPE OF UNSOLD FLATS/SHOPS, 488 FLATS AND 22 SHOPS TO BE PR ECISE, THE DETAILS OF WHICH HAVE ALREADY BEEN EXTRACTED AT PARA 5.2 OF THE QUANTUM ASSESSMENT ORDER. 2.4 THE LD. AO, APPLYING THE PROVISIONS OF SECTION 22 OF THE ACT, PROCEEDED TO DETERMINE THE NOTIONAL RENTAL INCOME FROM SUCH PROPERTIES UNDER INCOME FROM HOUSE PROPERTY BY TAKING A VIEW THAT NOTIONAL RENTAL INCOME FROM SUCH PROPERTIES OUGHT TO HAVE BEEN BROU GHT TO TAX IRRESPECTIVE OF THE FACT WHETHER THEY WERE HELD AS INVESTMENT OR AS STOCK- IN-TRADE BY THE ASSESSEE. FINALLY, ESTIMATING THE N OTIONAL RENTAL VALUE OF THESE PROPERTIES @8.9% OF THE COST OF CONSTRUCTION OF RESPECTIVE PROPERTIES, LD. AO WORKED OUT NOTIONAL RENT OF RS.5 22.69 LACS. AFTER PROVIDING FOR STATUTORY DEDUCTION OF 30% U/S 24(B), THE NET ADDITION SO MADE WORKED OUT TO RS.365.88 LACS WHICH WAS ADDED T O THE INCOME OF THE ASSESSEE. THE LD. FIRST APPELLATE AUTHORITY DEL ETED THE SAME BY RELYING UPON THE DECISION OF ITS PREDECESSORS IN ASSESSEES OWN CASE FOR AYS 2009-10 & 2011-12. AGGRIEVED, THE REVENUE IS IN FUR THER APPEAL BEFORE US. 4 ITA NO.4539/MUM/2017 M/S. HAWARE CONSTRUCTIONS PVT. LTD. ASSESSMENT YEAR-2010-11 3. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], AT THE OUTSET, SUBMITTED THAT THE REVENUE AGITATED THE STAND OF FI RST APPELLATE AUTHORITY, FOR AY 2009-10 & 2011-12 BEFORE THIS TRIBUNAL VIDE ITA NOS.3321,3172/MUM/2016 ORDER DATED 31/08/2018 WHERE IN THE ISSUE WAS DECIDED AGAINST THE REVENUE. THE COPY OF THE ORDER HAS BEEN PLACED ON RECORD. ALTHOUGH, LD. DR RELIED UPON THE DECISION O F HONBLE DELHI HIGH COURT RENDERED IN CIT VS. ANSAL HOUSING & CONSTRUCTION [72 TAXMANN.COM 254] BUT FAILED TO CONTROVERT THE FACT THAT THE ISSUE S TOOD SQUARELY COVERED IN ASSESSEES FAVOR BY THE EARLIER ORDER OF THE TRIBUNAL. 4. UPON CAREFUL CONSIDERATION, THE UNDISPUTED FACT THAT EMERGES IS THE FACT THAT THE ASSESSEE IS HAVING BUSINESS INVENTORY IN THE SHAPE OF UNSOLD FLATS / SHOPS IN CERTAIN PROJECTS WHICH HAVE ALREAD Y BEEN COMPLETED. THE LD. AO HAS ESTIMATED THE NOTIONAL RENTAL INCOME AGA INST THE SAME @8.9% OF COST OF CONSTRUCTION. WE FIND THE ISSUE TO BE RE CURRING IN NATURE WHICH HAS ALREADY BEEN DEALT BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2009-10 & 2011-12. FOR EASE OF REFERENCE, THE RELEVANT OBSERVATION AS WELL AS CONCLUSION OF T HE BENCH COULD BE EXTRACTED IN THE FOLLOWING MANNER: - 4. THE 2ND GROUND OF APPEAL RAISED BY THE REVENUE I S THAT THE LD. CIT(A) ERRED IN HOLDING THE UNSOLD FLATS AS STOCK-IN-TRADE USED FOR PURPOSE OF BUSINESS RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F M/S. CHENNAI PROPERTIES AND INVESTMENT LTD. VS. CIT ,231 TAXMAN 336. IT IS STAT ED THAT THE ABOVE DECISION PERTAINS TO ASSESSEES ENGAGED IN THE BUSINESS OF LETTING OUT PROPERTIES. 4.1. AS STATED EARLIER, THE ASSESSEE IS A BUILDER A ND DEVELOPER AND AT THE END OF THE YEAR IT HAD INVENTORY OF STOCK-IN-TRADE WHICH ARE N OT SOLD AND LYING VACANT OF RS.12,10,05,508/-. THE AO RELIED UPON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN CIT VS. ANSAL HSG. FINANCE & LEASING CO. LTD., ( ITA NO.18/1999 DTD. 31/10/2012) 5 ITA NO.4539/MUM/2017 M/S. HAWARE CONSTRUCTIONS PVT. LTD. ASSESSMENT YEAR-2010-11 AND COMPUTED DEEMED INCOME FROM HOUSE PROPERTY BY E STIMATING @8.5% OF COST OF CONSTRUCTION AND AFTER ALLOWING THE DEDUCTIONS OF 3 0%, COMPUTED THE INCOME. 4.2. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A), RELYING ON THE DECISIO N IN SHYAM BURLAP CO. LTD. VS. CIT, 61 TAXMANN.COM 121 (CALCUTTA HIGH COURT), M/S. CHEN NAI PROPERTIES AND INVESTMENT LTD. (SUPRA) AND THE ORDER OF THE TRIBUNAL IN C.R. DEVELOPMENT PVT. LTD. (ITA NO.4277/MUM/2012 DTD. 13/05/2016), DELETED THE ADDI TION AS PER PARA 2.4.60 OF HIS APPELLATE ORDER DTD.01/02/2016. 4.3. THE LD. DR RELIES ON THE DECISION IN ANSAL HSG . FINANCE & LEASING CO. LTD., (SUPRA), AND SUBMITS THAT THE ORDER PASSED BY THE A O MAY BE RESTORED. 4.4. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSE SSEE RELIES ON THE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN CIT VS. NEHA BUILDERS PVT. LTD. 296 ITR 661 (GUJ.) AND THE ORDER OF THE TRIBUNAL IN M/S. RUNWAL CONSTRUCTI ONS VS. ACIT (ITA NO.5408/MUM/2016 DTD.22/02/2018) AND PROGRESSIVE HO MES VS. ACIT (ITA NO.5082/MUM/2016 DTD. 16/05/2018). 4.5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIALS ON RECORD. ON THE ABOVE ISSUE, WE COME ACROSS ONE DECI SION FOR THE ASSESSEE AND ANOTHER DECISION FOR THE REVENUE. THE DECISION IN N EHA BUILDERS PVT.LTD.(SUPRA) IS FOR THE ASSESSEE, WHEREAS THE DECISION IN ANSAL HSG. FI NANCE & LEASING CO. LTD., (SUPRA) IS FOR THE REVENUE. THE HONBLE SUPREME COURT IN TH E CASE OF CIT VS. VEGETABLE PRODUCTS 88 ITR 192 (SC) HAS HELD THAT IF TWO REAS ONABLE CONSTRUCTIONS OF A TAXING PROVISIONS ARE POSSIBLE, THAT CONSTRUCTION WHICH FA VOURS THE TAX PAYER MUST BE ADOPTED. IN VIEW OF THE ABOVE POSITION OF LAW, WE SHALL FOLL OW THE DECISION IN NEHA BUILDERS PVT.LTD.(SUPRA). 4.5.1. WE NOW COME TO THE RELEVANT PROVISIONS IN TH E ACT. THE FOLLOWING SUB-SECTION (5) HAS BEEN INSERTED AFTER SUB-SECTION (4) OF SECTION 23 BY THE FINANCE ACT, 2017, W.E.F. 01.04.2018: (5) WHERE THE PROPERTY CONSISTING 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 F INANCIAL YEAR IN WHICH THE CERTIFICATE OF COMPLETION OF CONSTRUCTION OF THE PROPERTY IS OB TAINED FROM THE COMPETENT AUTHORITY, SHALL BE TAKEN TO NIL. THUS, IN ORDER TO GIVE RELIEF TO REAL ESTATE DEVELO PERS, SECTION 23 HAS BEEN AMENDED W.E.F. AY 2018-19 (FY 2017-18). BY THIS AMENDMENT, IT IS PROVIDED THAT IF THE ASSESSEE IS HOLDING ANY HOUSE PROPERTY AS HIS STOCK-INTRADE WHICH IS NOT LET OUT FOR THE WHOLE OR PART OF THE YEAR, THE ANNUAL VALUE OF SUCH PROPERTY WILL BE CONSIDERED AS NIL FOR A PERIOD UP TO ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH A COMPLETION CERTIFICATE IS OBTAINED FROM THE COMPETENT AUTHORIT Y. IN VIEW OF THE ABOVE AMENDMENT TO SECTION 23, WE AR E NOT ADVERTING TO THE OTHER CASE LAWS RELIED ON BY THE LD. COUNSEL. IN THE INSTANT CASE, THE ASSESSEE IS A BUILDER AND DEVELOPER. THE ISSUE OF TAXABILITY IS WITH REGARD TO UNSOLD FLATS. THE AY IS 2009-10. IN VIEW OF THE INSERTION OF SUB-SECTION 6 ITA NO.4539/MUM/2017 M/S. HAWARE CONSTRUCTIONS PVT. LTD. ASSESSMENT YEAR-2010-11 (5) IN SECTION 23 BY THE FINANCE ACT, 2017, W.E.F. 01.04.2018 NARRATED HEREINBEFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS T HE 2ND GROUND OF APPEAL FILED BY THE REVENUE. NOTHING HAS BEEN BROUGHT ON RECORD TO DEMONSTRATE A NY CHANGE IN MATERIAL FACTS AND CIRCUMSTANCES OR TO ESTABLISH TH AT THE AFORESAID RULING IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. TH EREFORE, WITH A VIEW TO MAINTAIN CONSISTENCY AND RESPECTFULLY FOLLOWING THE BINDING JUDICIAL PRONOUNCEMENT, WE DISMISS THE APPEAL 5. RESULTANTLY, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH APRIL, 2019. SD/- SD/- (SAKTIJIT DEY) (MANO J KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :09/04/2019 SR.PS:- JAISY VARGHESE ! '! / COPY OF THE ORDER FORWARDED TO : 1. !% / THE APPELLANT 2. &'!% / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ( )& * , * , / DR, ITAT, MUMBAI 6. ) ,-. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI