Welkin Developers Vs ACIT (ITAT Mumbai)
Survey-Based Additions Partly Deleted – Estimated Profit Unsustainable Interest on Land Allowed as Business Cost
in this case, AO made multiple additions purely based on survey proceedings – alleging under-reported profit of ₹41.14L, presumed sale of parking spaces ₹20L & disallowance of interest ₹79.42L. CIT(A) mechanically confirmed all additions.
ITAT gave a well-reasoned relief:
- Estimated profit ₹41.14L – deleted outright: AO neither rejected books nor brought any cogent material. Addition was solely based on survey statement & assumptions → held arbitrary & unsustainable
- :Parking addition ₹20L – restored AO presumed sale of 4 parking slots without evidence. At the same time, assessee also failed to substantiate that they remained unsold → factual verification required → matter remanded
- Interest ₹79.42L – allowed: Land held by builder is stock-in-trade, not capital asset. Hence interest forms part of business cost/WIP → proviso to Sec 36(1)(iii) not applicable → disallowance deleted
Key takeaway:
Survey statements & presumptions cannot substitute proper assessment. Also, in real estate cases, land = inventory, so interest is allowable.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Both the appeals were preferred by the assessee against the order of the Id. Commissioner of Income Tax appeal 52, Mumbai [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for assessment year 2018-19 and 2019-20, date of order 05.07.2025. The impugned order emanated from the order of the Ld. Assistant Commissioner of Income Tax C.C.-4(3) Mumbai (for brevity the “Ld. AO”) order passed under section 143(3) of the Act date of order 27.05.2021 for A.Y. 2018-19 and 28.09.2021 for A.Y. 2019-20.
