Case Law Details
La Kozy Builders LLP Vs ACIT (ITAT Mumbai)
La Kozy Builders LLP appealed against the order of the Commissioner of Income Tax (Appeals) concerning the assessment year 2016-17. The assessee, engaged in land development and building construction, declared its income in the original return filed on October 17, 2016. However, the case was selected for scrutiny due to the nature of its real estate business and high closing stock.
During the assessment, the Assessing Officer determined the gross annual value of 34 unsold flats held as stock in trade and added it to the income under the head “income from house property”. The Assessing Officer relied on market trends and imposed notional rent, resulting in an addition of ₹17,13,600 to the assessee’s income.
The assessee contended that the flats were held as stock in trade, not capital assets, and thus not liable for notional rent. Additionally, the assessee argued that the statutory provision cited by the Assessing Officer, Section 23(5), was applicable prospectively from the assessment year 2018-19 and had no bearing on the current assessment year.
Before the ITAT Mumbai, the assessee submitted additional evidence, categorizing the status of the 34 flats. It revealed that one flat had already been sold, another batch of 10 flats had received advances from buyers, and the remaining 23 flats were held as stock in trade. For these 23 flats, the assessee provided the municipal ratable value to determine the income under the head “income from house property”.
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