STARSHINE LAND DEVELOPERS PRIVATE LIMITED,ANDHERI EAST, MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX, MUMBAI-5, AAYAKAR BHAVAN, MUMBAI

ITA 2148/MUM/2024

AI Insights

The case involves Starshine Land Developers Private Ltd., which appealed against the order of the PCIT under section 263 of the Income Tax Act, 1961. The PCIT had revised the reassessment order passed by the AO, which initially did not make any addition regarding the income from unsold inventories, despite the reassessment being reopened for this purpose. The Tribunal examined the submissions, the reassessment order, and the legal precedents cited by both parties. It was found that the AO's order was cryptic and lacked reasoning for not taxing the unsold inventories, leading to the conclusion that the PCIT was justified in revising the order under section 263.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 32257 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Other Referred Cases: Ansal Housing Finance & Leasing Company Limited vs. CIT, M/s. Emtci Engineering Ltd. Vs. CIT, CIT Vs. Gundecha Builders, CIT Vs. Sane and Doshi Enterprises, DCIT Vs. M/s. Inorbit Malls P. Ltd., Malabar Industrial Company vs. CIT, Max India Limited vs. CIT, Tara Devi Aggarwal Vs. CIT, Sesa Sterlite Ltd. Vs. CIT, Pandit Lashkari, TCE Consulting Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KISHOR DHULE
• Keywords: Reassessment proceedings
• Section: 147; 143(3); 143(2); 263; 10B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “G” Bench, Mumbai. Before Shri Amit Shukla (JM) & Shri Omkareshwar Chidara (AM) I.T.A. No. 2148/Mum/2024 (A.Y. 2015-16) Starshine Land Developers Private Ltd. 77/78, Nilkamal House Road No. 13/14, MIDC Andheri East Mumbai-400 093. PAN : AAKCS7310Q Vs. PCIT Room No. 515 5th Floor Aayakar Bhavan M.K. Road Marine Lines Mumbai-400 020. (Appellant) (Respondent) Assessee by None Department by Dr. Kishor Dhule Date of Hearing 07.11.2024 Date of Pronouncement 30.12.2024 O R D E R Per Omkareshwar Chidara (AM) :- The only ground of appeal in the above cited case is that learned Principal Commissioner of Income Tax (Ld. PCIT for short) erred in invoking provisions of section 263 of the Income Tax Act (the Act for short) on the ground that the learned Assessing Officer (AO for short) has not conducted inquiries/verification which ought to have been made. The appellant pleaded that the relevant inquiries were conducted by the Ld. AO before making assessment and hence the order of Ld. PCIT is erroneous and hence this order u/s. 263 is required to be quashed. 2. In the above cited appeal, in the case of M/s. Starshine Land Developers Pvt. Limited, reassessment proceedings u/s. 147 of the Act were completed by the Ld. AO vide order dated 29.3.2022. The case was reopened by the Ld. AO as the appellant failed to disclose deemed annual letting value under the head “income from house property” attributable to unsold inventories. During the course of reassessment proceedings, the Ld. AO has accepted the contention of the appellant that no income was accrued to the Starshine Land Developers Private Ltd. 2 company on unsold inventories and hence no addition was made. Subsequently, case was revised u/s. 263 of the Act by Ld. PCIT-5, Mumbai vide order dated 18.3.2024. After giving proper opportunity to the appellant, Ld. PCIT held that the appellant has disclosed unsold inventories of Rs. 54.26 crores where the project of the appellant company is 100% complete. As the Ld. AO failed to make sufficient inquiries and without application of mind passed reassessment order relating to the “income from house property” accrued to the appellant company on unsold inventories, Ld. PCIT passed an order u/s. 263 of the Act holding that the order of the Ld. AO is erroneous and prejudicial to the interest of revenue within the ambit of section 263 of the Act. Ld. PCIT held that judicial precedent laid down by Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Company Limited and Ahemedabad ITAT decision in the case of M/s. Emtci Engineering Ltd. Vs. CIT were not considered by the Ld. AO while completing the reassessment proceedings. The Ld. PCIT gave a show-cause notice dated 7.2.2024 stating that the Ld. AO has not made any addition based on the above said decisions relating to unsold inventories which comes to Rs. 4.34 crores and hence the order of the Ld. AO is erroneous and prejudicial to the interest of revenue. The Ld. PCIT has given an opportunity to file submissions. After taking into consideration submissions of the appellant company, Ld. PCIT passed an order u/s. 263 of the Act which is being challenged by the appellant company now before the ITAT. 3. None appeared on behalf of the appellant. But, the appellant filed a detailed paper book which contains correspondence between the appellant and the Ld. AO, notice issued u/s. 143(2) of the Act read with section 147 of the Act, tax audit report, statement of accounts and correspondence made during the proceedings before Ld. PCIT. Case was originally posted for hearing on 22.7.2024, 24.9.2024 and 7.11.2024. Subsequently, when the case was taken up for hearing on 22.7.2024, Ms. Sruti Kalyanikar, Advocate appeared on behalf of the appellant company and the paper book was filed Starshine Land Developers Private Ltd. 3 as mentioned above. Subsequently, when the case was posted for hearing on 24.9.2024 and 7.11.2024, none were present for the appellant. Hence based on the paper book filed by the appellant company and arguments made by the ld. AR of the appellant earlier, this order is passed after taking into consideration the arguments of the Ld. DR. 4. Reassessment order passed by the Ld. AO was perused. The Ld. AO reopened the assessment after forming reasons to believe that the appellant company has not offered house property income on unsold inventories of Rs. 54.26 crores. From the assessment order it is observed that the assessment was reopened for this specific purpose, but no addition was made on this very issue. The order of the Ld. AO is very cryptic and it does not mention any reason as to why addition was not made as mentioned in the reopening notice. The order of the Ld. AO is reproduced as follows :- “Assessee furnished detailed documentary evidences in support of the claim which were duly considered. The assessee raised objections on certain issues against reopening of the case. Rebuttal of the same was duly issued.” Thus there is absolutely no reasoning given by the Ld. AO as to why addition relating to annual letting value of unsold property was not added even though the case was specifically reopened for this purpose. 5. Written submissions/paper book filed by the Ld. AR of the appellant states about the liabilities of the appellant company, sales proceeds, presidential units, project development, cost etc. but nothing was mentioned about the issue relating to not admitting the income from house property/unsold inventories as required by Ld. PCIT in his show-cause notice. Ld. AR of the appellant in his paper book, has stated that the Ld. AO knows everything and all the facts are within the knowledge of the Ld. AO and there is no failure on the part of the Ld. AO. In the paper book filed by the appellant, it was stated that the reassessment order was made after Starshine Land Developers Private Ltd. 4 making proper inquiries and with due application of mind and hence the order passed by Ld. PCIT is correct and revision order passed u/s. 263 of the Act was incorrect and liable to be quashed. It was also mentioned that where two views are possible and if the Income Tax Officer has taken one view, the learned Commissioner of Income Tax cannot treat the order as erroneous prejudicial to the interest of revenue and for that proposition the appellant company relied on the decisions of Malabar Industrial Company and Max India Limited decisions of Hon'ble Supreme Court. 6. The Ld. DR heavily relied on the order of Revision passed by Ld. PCIT u/s. 263 of the Act and argued that both the conditions of “Error” and “prejudicial to the interest of Revenue” were fulfilled and hence the order of Revision should be upheld. He has further placed reliance on the decisions of CIT Vs. Gundecha Builders (Bombay High Court) and Sane and Doshi Enterprises (Bombay High Court) and submitted that the Revision order of Ld. PCIT may be upheld. 7. The order of Ld. PCIT and paper book filed by the appellant company were perused and arguments of Ld. DR were taken into consideration and the case was heard. The decisions of Malabar Industrial Company and Max India Limited are not applicable to the facts of this particular case because the Ld. AO has not applied his mind while passing the reassessment order as mentioned above which was quite cryptic and does not convey any meaning. In such circumstances, Ld. PCIT is empowered to issue a show- cause notice and pass a revision order u/s. 263 of the Act. The case relied on by Ld. AR of the appellant will come into play where there are two views are possible and the Ld. AO has passed an order with application of mind. In the instant case, as mentioned above, the order of the Ld. AO is very cryptic and no inquiries/verification were made even though assessment was reopened for that very specific purpose. The Ld. PCIT has issued a show cause notice with a specific purpose as to leaving tax on unsold inventories of Rs. 54.26 crores when the project was 100% complete. The Bench agrees Starshine Land Developers Private Ltd. 5 with the view of Ld. PCIT who relied on the judicial precedent laid down by Hon'ble Delhi High Court in the case of Ansal Housing Financial and Leasing Company Ltd. and decision of ITAT Ahmedabad decision in the case of Emtci Engineering Ltd., where it was specifically held that the “income from house property” has to be offered for tax purpose on the unsold inventories. We further draw our inference by placing reliance on the decision of Hon'ble Bombay High Court in the case of Gundecha Builders 102 taxman.com 27 and CIT Vs. Sane Doshi Enterprises (58 taxman.com 111) where it was held that the income from unsold inventories of a building should be offered under the head “income from house property”. Similar view was taken by the Coordinate Bench in the case of DCIT Vs. M/s. Inorbit Malls P. Ltd. (ITA No. 2220/Mum/2021, A.Y. 2017-18) in which reliance was placed on the decision of Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Company Ltd. reported as 354 ITR 180, where it was held that the vacant units in the possession of the appellant are liable to be charged as notional rental income under the head income from house property on the basis of their annual letting value. In this decision of the Coordinate Bench, Hon'ble Tribunal has distinguished the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Neha Builders Pvt. Ltd. and other decisions and came to the conclusion that CIT Vs. Ansal Housing Finance and Leasing Company Ltd. has correctly held that the rental income should be offered on notional basis as per the statute. This order of the coordinate Bench was very exhaustive and binding in nature as it dealt with all cases relating to the core issue. 7.1 Reliance is placed on the following cases-law for the proposition that Revision order u/s. 263 can be passed when there is “Error/non-application of mind” of the AO and the order passed causes “Prejudicial to the interest of Revenue”. a) Where the stereotype order is passed, which simply accepts what the assessee has said in return and fails to make enquiries which Starshine Land Developers Private Ltd. 6 are called for and in the circumstances of the case, the Commissioner is justified in holding that the order is erroneous and prejudicial to the interests of revenue. [Tara Devi Aggarwal Vs. CIT (1973) 88 ITR 323 (SC)] b) The Ld. AO accepted entry in statement of account filed by the appellant in the absence of any supporting material without making any enquiry. On these facts, the conclusion that the order of ITO was erroneous was irresistible. – The High Court has rightly held that the jurisdiction exercised by CIT u/s. 263(1) was justified. Malabar Industrial 243/83 (SC). c) Where the Assessing Officer sought information from assessee regarding its claim of deduction under section 10B, however, without considering such information produced by assessee and without application of mind to same, he allowed such claim for deduction, it was a case of inadequate inquiries and therefore exercise of revision jurisdiction by Commissioner under section 263 was justified. [Sesa Sterlite Ltd. Vs. CIT (2021) 123 taxmann.com 217 (Bom)]. d) A cryptic and non-speaking order of the Assessing Officer is an erroneous and prejudicial to the interest of revenue and hence the Revision order u/s. 263 of the Act is liable to be upheld. Pandit Lashkari – 272 ITR 309 (Allahabad) e) The Ld. AO called for material relating section 10B deduction and obtained – but without examining them, assessment completed u/s. 143(3) – 263 valid. 7 ITR (Trib) 718 (Mum) TCE Consulting Ltd. To sum up, the Revisional jurisdiction invoked by PCIT u/s. 263 of the Act is upheld for the following reasons :- a) The Ld. AO committed an “error” of not making the addition of notional annual letting value on vacant units of building, for which the assessment was reopened. This error caused “prejudice to the interest of Revenue” by not taxing the amount as mentioned above. Thus, the twin conditions of “error” and ‘prejudice to the interest of Revenue” were fulfilled in terms of the decisions of Malabar Industrial Co. and Max India Ltd., rendered by Hon'ble Apex Court to invoke Revisional Jurisdiction u/s. 263 of the I.T. Act. b) Similar issue was adjudicated in the case of Ansal Housing Ltd. (supra) by Hon'ble Delhi High Court and this is the only High Court decision categorically on this issue. There is no other High Court Starshine Land Developers Private Ltd. 7 decision contrary to it and hence two views are not possible as contended by Ld. AR of the appellant. c) In the cases of Gundecha Builders (supra) and Sane and Doshi Enterprises (supra), the jurisdictional Bombay High Court laid down the above principle and hence binding on appellant. d) The coordinate Bench (Mumbai Tribunal) decision of Inorbit Mall (supra) on similar issue is of binding nature. e) The appellant relied on the decision of Mumbai ITAT in the case of Pradip Ramalal Sheth and other decisions, but they are distinguishable on facts in the sense that Ld. AO has passed a criptic order like the present in the impugned case and there is non- application of mind. 8. In view of the above discussion and cases-law the order of Ld. PCIT is upheld and the appeal of appellant is dismissed. Order pronounced in the open court on 30th December, 2024. Sd/- Sd/- (Amit Shukla) (Omkareshwar Chidara) Judicial Member Accountant Member Mumbai : 30.12.2024 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai. 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai "