Moraj Building Concepts Pvt. Ltd. Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that while computing notional rent, rent should be estimated on the basis of municipal rateable value.
Facts- The original assessment order was passed u/s. 143(3). But, these assessments were unabated and a search and seizure action was undertaken in Gurnani Group and the assessee was also covered in the above search proceedings. In the search proceedings certain unaccounted cash receipts were unearthed and merely observed that assessee has huge unsold flats. However, it was noted that there is no incriminating material found during the search. A notice u/s. 153A were issued and served on the assessee. AO has made various additions relating to notional income from the unsold flats and further, made additions relating to unsecured loans.
By relying on the decision of the Delhi High Court in the case of CIT v. Ansal Housing Finance and Leasing Company Limited, AO estimated the rent on the said flats to the extent of ₹.1,91,814.
CIT(A) sustained the addition. Being aggrieved, the present appeal is filed.
Conclusion- Held that we direct the Assessing Officer to estimate the rent on the basis of municipal ratable value for computing the notional rent. Accordingly, ground raised by the assessee is partly allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
All these appeals are filed by the assessee against different orders of the Learned Commissioner of Income Tax (Appeals)-53, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 28.01.2022, 15.12.2021, 15.12.2021, 21.12.2021 & 21.12.2021 for the A.Ys. 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 respectively.
2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order.
3. At the time of hearing, it is brought to our notice that for the A.Y.2012-13 and 2013-14 assessee has filed return of income on 26.09.20102 and 30.09.2013 respectively and time limit for issue of notice u/s. 143(2) of Income-tax Act, 1961 (in short “Act”) were expired on 30.09.2013 and 30.09.2014 respectively. It is also brought to our notice that original Assessment Order u/s. 143(3) were passed on 11.02.2015 with regard to A.Y. 2012-13 and 28.03.2016 with regard to A.Y. 2013-14. It was submitted that both these Assessment Years are unabated and it was brought to our notice a search and seizure action was undertaken in Gurnani Group on 04.02.2016 and the assessee was also covered in the above search proceedings. Accordingly, a notice u/s. 153A were issued and served on the assessee. It was submitted that notices u/s. 143(2) and 142(1) were issued and served on the assessee. In response assessee has filed the relevant return of income and filed the submissions.
4. It was brought to our notice, notice u/s. 142(1) of the Act which is placed on record at Page No. 31 of the Paper Book. As per the above notice the assessee was issued notices with regard to on-money received during the period 2010-11 to 2015-16. However, while completing the assessment u/s. 143(3) r.w.s. 153A the additions were made merely on the basis of information and various financial statements submitted during the assessment proceedings. It was submitted that there is absolutely no connection with the material found during the search, and the facts of the present case is squarely covered by the Hon’ble Bombay High Court in the case of CIT v. Continental Warehouse Corporation (2015) 374 ITR 645, Murli Agro Products Ltd., [49 taxmann.com 172 (Bom)] and of the Hon’ble Delhi High Court in the cases of Kabul Chawla 380 ITR 573 and Ms. Lata Jain [384 ITR 543].
5. On the other hand, Ld. DR relied on the orders of the lower authorities and supported their findings.
6. Considered the rival submissions and material placed on record, we observe that there is no doubt that the assessment year 2012-13 and 2013-14 are unabated and we gone through the various notices issued by the Assessing Officer to assess the income of the assessee. We noticed that in the search proceedings certain unaccounted cash receipts were unearthed and merely observed that assessee has huge unsold flats. Only during post search enquiries and assessment proceedings the details of flats were collected. However, we observe that there is no incriminating material found during the search, we observe that the incriminating material found during the search has no connection with the additions made in the assessment order. The Assessing Officer has made various additions relating to notional income from the unsold flats and further, made additions relating to unsecured loans.
7. On careful consideration of the facts on record, we observe that in the case of CIT v. Continental Warehouse Corporation (supra) it is held that for assessment u/s. 153A in case of unabated assessment, if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any other issue can be made to the assessment u/s. 153A and 153C of the Act. The relevant extract of the order is reproduced as under:
“On a plain reading of section 153A, it becomes clear that on initiation of the proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under | section 132/4 stand abated and not the assessments / reassessments already finalised for those assessment years covered under section 153A. By a Circular No. 8 of 2003, dated 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment / reassessment shall not abate. It is only because, the finalised assessments / reassessments do not abate, the appeal revision or rectification pending against finalised assessment / reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under section 153A, the assessments / reassessments finalised for the assessment years covered under section 153A stand abated cannot be accepted. Similarly on annulment of assessment made under section 153A(1) what stands revived is the pending assessment / reassessment proceedings which stood abated as per section 153A(1). “Once it is held that the assessment has attained finality, then the Assessing Officer while passing the independent assessment order under section 153A read with section 143(3) could not have disturbed the assessment / reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under section 153A establish that the reliefs granted under the finalised assessment / reassessment were contrary to the facts unearthed during the course of 153A proceedings. If there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, the Assessing Officer while passing order under section 153A read with section 143(3) cannot disturb the assessment order.”
8. Respectfully following the above said decision, we are inclined to set aside the orders passed for these two Assessment Years as there is no incriminating material found during the search.
9. In the result, appeals filed by the assessee for the A.Ys. 2012-13 and 2013-14 are allowed.
ITA.No. 263, 265 & 266/MUM/2022 (A.Ys. 2014-15, 2015-16 & 2016-17)
10. Coming to appeals relating to A.Y. 2014-15, 2015-16 and 2016-17. We are taking the facts in A.Y. 2014-15 as lead case and relevant facts are a search and seizure action was undertaken in the case of Gurnani Group on 04.02.2016 and assessee is also covered in the above search proceedings. Accordingly, notices u/s. 153A dated 09.12.2016 was issued and served on the assessee. In response assessee submitted the relevant information as called for.
11. During the search it was noticed assessee had various flats unsold during the year and assessee was asked to explain why the notional income should not be estimated and also Assessing Officer observed that later assessee has approached Income Tax Settlement Commission and filed the application and subsequently assessee sought permission to file a revise application which the Income Tax Settlement Commission has rejected the same. Apart from certain undisclosed income was found during search and accordingly, to the extent of ₹.93,100/- was added back to the income of the assessee and further, Assessing Officer observed that assessee was holding various flats / shops / offices as closing stock. In the post search proceedings, assessee was asked to furnish year wise details of stock in trade of the fully constructed flats held at the end of the each Financial Year. In response assessee furnished the details of closing stock relevant for the present assessment year as under: –
