JANTA LAND PROMOTERS PRIVATE LIMITED ,MOHALI V. INCOME TAX OFFICER WARD 6(1) CHANDIGARH , MOHALI

ITA 907/CHANDI/2024

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The case involves M/s Janta Land Promoters Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (CIT) confirming additions made by the AO for the assessment year 2017-18. The additions pertained to employees' contributions to PF & ESI not paid within the statutory due dates and the notional rental value of unsold flats treated as stock-in-trade. The Tribunal found merit in the assessee's arguments regarding the treatment of unsold flats and directed the AO to reassess the issue of delayed payments with respect to the extended grace period.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712763 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: Checkmate Services P. Ltd. & Ors. VS. CIT & Ors., Commissioner of Income Tax vs. Ansal Housing and Construction, CIT vs. Inorbit Malls Pvt. Ltd, Neha Builders (P) Ltd. vs. CIT, CR Developments (P) Ltd. vs. JCIT, Runwal Constructions Runwal & Omkar Esquare vs. ACIT, Central-4(1), Mumbai, Income Tax Officer vs. Arihant Estates Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN
• Assessee Lawyers: PANKAJ BHALLA
• Keywords: Business income; Period of limitation
• Section: 143(3); 28

Judgement Text

" आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ , चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘A’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 907/CHD/2024 Ǔनधा[रण वष[ / Assessment Year : 2017-18 M/s Janta Land Promoters Pvt.Ltd. SCO 39-42, Sector 82, Mohali. बनाम VS The ITO, Ward 6(1), Chandigarh. èथायी लेखा सं./PAN /TAN No: AABCJ3450D अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Ǔनधा[ǐरती कȧ ओर से/Assessee by : Shri Pankaj Bhalla, CA राजèव कȧ ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT, Sr.DR तारȣख/Date of Hearing : 07.05.2025 उदघोषणा कȧ तारȣख/Date of Pronouncement : 30.07.2025 PHYSICAL HEARING आदेश/ORDER PER RAJPAL YADAV, VP The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax [in short ‘the CIT’] dated 31.05.2024 passed for assessment year 2017-18. 2. The Registry has pointed out that appeal is time barred by 25 days. The assessee has filed an application u/s 253(5) of the Printed from counselvise.com ITA 907/CHD/2024 A.Y. 2017-18 2 Income Tax Act. After perusing the application of the assessee running from page 1 to 5, we are satisfied that it was prevented by sufficient reasons for not presenting the appeal within time. Hence, we condone the delay and proceed to decide it on merit. 3. The assessee has taken five grounds of appeal which contain sub-grounds, however, its grievance revolves around two issues, namely, ld. CIT (Appeals) has erred in confirming the addition made with the aid of Section 36(1)(va) of the Act with regard to the, (a) Employees’ contribution not paid before the due date provided under PF & ESI acts, and (b) the ld. CIT (Appeals) has erred in confirming the addition of notional rental inventory of flats. 4. The ld. counsel for the assessee submitted that as far as addition of not depositing employees’ contribution of ESI & EPF is concerned, the assessee delayed the payment to the extent of Rs.31,60,778/-. It does not press the ground of appeal pleaded in Ground No. 3, hence addition to this extent is confirmed. 4.1. The ld. counsel for the assessee further submitted that contribution pertaining to the month of January,2017 and Printed from counselvise.com ITA 907/CHD/2024 A.Y. 2017-18 3 onwards were paid within due date amounting to Rs.4,29,357/- within the grace period. In the written submission filed before the Tribunal, assessee has reproduced the complete details in tabular form at page No. 8 and 9. It has provided that Sr.No. 14 onwards, the payments have been made by the assessee within due date because grace period of 5 days was available with the assessee. In other words, due date was enhanced by five more days, hence this payment is not hit by the judgement of Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. (2022) 448 ITR 518 (SC). 5. On due consideration of this claim, we deem it appropriate that this issue ought to be remitted back to AO for verification. In case it is demonstrated that such payment was made within extended period of limitation provided under PF & ESI Act, then disallowance will not be made. Accordingly, this ground of appeal is partly allowed. 5.1 As far as assessment of notional rent qua inventory of flats unsold, the assessee has filed written submissions. Printed from counselvise.com ITA 907/CHD/2024 A.Y. 2017-18 4 6. The assessee company is engaged in the business of Real Estate as a Colonizer and Developer of Sectors in the State of Punjab, SAS Nagar, Mohali. It has filed its return of income electronically on 07.11.2017 declaring total income of Rs.30,01,45,450/-. The case was selected for scrutiny assessment and an assessment was framed u/s 143(3) on 30.12.2019. The ld. AO has made one of the additions representing alleged notional rental value of the flats which were shown as a stock-in-trade by the assessee. This addition has been made at Rs.13,81,464/-. The addition was confirmed by the CIT (Appeals). 7. The ld. counsel for the assessee while impugning the orders of Revenue Authority took us through the written submission filed by him whose relevant part read as under : “GROUND NO 1 & 2 That The Ld. C.I.T.(A), NFAC, Delhi has wrongly passed the order u/s 250(6) of the Income Tax Act, 1961 against law and facts of the case. That the Ld. C.I.T.(A), NFAC, Delhi was not justified in confirming the addition of Rs. 13,81,464/ made by the Assessing Officer under the head \"Income from Property\" for the assessment year under appeal without appreciating nomenclature of business of assessee and without appreciating that any income from these flats, in the form of rent, can also only be taxed u/s 28 of the Act. Printed from counselvise.com ITA 907/CHD/2024 A.Y. 2017-18 5 2.1. That the Ld. C.LT.(A), NFAC, Delhi was not justified in confirming the addition of notional income in respect of 11 flats held by the appellant as stock in trade holding that the appellant was liable to notional income on the same under the provisions of S. 22 of the Income-tax Act 1961. 2.2. That the Ld. C.I.T.(A), NFAC, Delhi has grossly erred in upholding the addition made by the Ld. AO without appreciating the fact that the amendment in finance Act 2017, in respect of provisions u/s sec 23(5) of the Act is applicable to unsold inventory of flats disclosed under stock in trade is effective from A.Y.2018-19 and not to the present A.Y.2017-18. The Ld. CIT(A) failed to appreciate that there is no provision to assess notional rent/ALV of unsold flats u/sec 22 of the Income Tax Act in the year under consideration. 2.3. That the Ld. C.I.T.(A), NFAC, Delhi has grossly erred in not adopting the Municipal rate rather an arbitrary rate for estimating notional income in respect of the 11 flats and confirming the addition. 2.4.That the Ld. C.I.T.(A), NFAC, Delhi has grossly erred in not granting (deduction) allowance (vacancy allowance) for the period during which the 11 flats were vacant in the financial year. During the course of assessment proceeding, it was gathered by the Assessing Officer that the assessee company had in stock 11 flats in respect to stocks lying at Regency Heights in respect to which completion certificate had been received 10 years back. In view of above Provisions of section 22 and 23 of the Income Tax Act were applied in the case of assessee company relying upon the ratio laid down by the Hon'ble High Court of Delhi in the case of Commissioner of Income Tax vs. Ansal Housing and Construction reported in [20167 72taxmann.com 254. The CIT(A) confirmed the said addition by relying upon the judgement of IT AT Mumbai in CIT vs. Inorbit Malls Pvt. Ltd to hold that Income of unsold inventory of flats is taxable under head \"Income from House property\" In this regard, it is submitted that :- A) Income from unsold inventory of flats is taxable under the head \"Business Income\" u/s 28 Kind attention of your honour is invited towards the ratio laid down by Hon'ble Gujarat High Court in the case of Neha Builders (P) Ltd. in 164 taxmann 342 wherein it has held that considered the question whether the rental income received from any property in the construction business can be claimed under the head 'income from property' even though the said property was included in the closing stock. The Hon'ble Gujarat High Court held that if the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the business and the business stocks, which may include movable and immovable, would be taken to be stock in trade and any income derived from such stocks cannot be termed as income from house property. While holding so the Hon'ble High Court observed as under: - Printed from counselvise.com ITA 907/CHD/2024 A.Y. 2017-18 6 \"8. True it is, that income derived from the property would always be termed as 'income' from the property, but if the property is used as 'stock- in-trade', then the said property would become or partake the character of the stock, and any income derived from the stock, would be 'income' from the business, and not income from the property. If the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the 'business' and the business stocks, which may include movable and immovable, would be taken to be 'stock-intrade', and any income derived from such stocks cannot be termed as 'income from property'. Even otherwise, it is to be seen that there was distinction between the 'income from business' and 'income from property' on one side, and 'any income from other sources'. The Tribunal, in our considered opinion, was absolutely unjustified in comparing the rental income with the dividend income on the shares or interest income on the deposits. Even otherwise, this question was not raised before the subordinate Tribunals and, all of sudden, the Tribunal started applying the analogy. 9. From the statement of the assessee, it would clearly appear that it was treating the property as 'stock-in-trade'. Not only this, it will also be clear from the records that, except for the ground floor, which has been let out by the assessee, all other portions of the property constructed have been sold out. If that be so, the property, right from the beginning was a 'stock-in- trade'. \" Now the position of law laid down by Delhi High Court and Gujarat High Court is different. The Mumbai and Delhi High Court are in favour of the revenue whereas the Gujrat High Court is in favour of the assessee. There is no decision of Hon'ble Jurisdictional High Court. It has been categorically held by the Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. that if more than one interpretation is possible the Court has to adopt the interpretation which favour the assessee. In the following judicial pronouncement after due consideration of the ratio laid down by Hon'ble Gujarat High Court it has been categorically held that where the unsold flats which are stock in trade and when are sold they are assessable under head \"Income from Business\", the Ld. A.O. is not correct in bringing to tax notional annual letting value in respect of these unsold flats under the head Income from House Property :- a) CR Developments (P) Ltd. vs. JCIT reported in ITA No. 4277/Mum/2012 b) Runwal Constructions Runwal & Omkar Esquare vs. ACIT, Central-4(1), Mumbai reported in ITA No. 5408/Mum/2016 c) Income Tax Officer vs. Arihant Estates Pvt. Ltd. reported in ITA No. 6037/Mum/2016. Printed from counselvise.com ITA 907/CHD/2024 A.Y. 2017-18 7 7.1 Apart from above submissions, ld. counsel for the assessee has placed on record a large number of orders which are filed in the Paper Book from page No. 1 to 83. The ITAT Bombay in ITA No. 5408 & 5409/Mum/2016 has also considered identical contention and made following observations : “10. In the case on hand before us it is an undisputed fact that both assessees 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 they are assessable under the head 'income from business' when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head 'income from house property’. Thus, we direct the AO to delete the addition made under Section 23 of the Act as income from house property.” 8. Thus, respectfully following the decision of Hon'ble Gujrat High Court and other orders of ITAT, we are of the view that actual rental income, if any from alleged unsold flats is being earned by the assessee, then it is to be assessed as a business income. There cannot be assumed annual letting value which is to be assessed under the head ‘House Property Income’. Since no rental income has been earned by the assessee out of user of ‘stock-in-trade’, therefore, no addition deserves to be made in Printed from counselvise.com ITA 907/CHD/2024 A.Y. 2017-18 8 the total income of the assessee. Accordingly, this ground of appeal is allowed and addition is deleted. 9. In the result, appeal of the assessee is partly allowed. Order pronounced on 30th July,2025. Sd/- Sd/- (KRINWANT SAHAY) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” आदेश कȧ ĤǓतͧलͪप अĒेͪषत/ Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकर आयुÈत/ CIT 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय आͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[ फाईल/ Guard File सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "