Bhagwati Abhilsha Conventure Vs PCIT (ITAT Mumbai)
Summary: The appeal was filed by Bhagwati Abhilsha Conventure, a partnership firm engaged in land development and real estate construction activity, against the order of the PCIT, Mumbai-41 dated 29.03.2023 passed under Section 263 of the Income-tax Act, 1961 for AY 2018-19. The assessee had filed its return on 19.10.2018 declaring NIL income, with a loss of Rs. 6,98,087/-. The return was selected for scrutiny under CASS and assessed at the returned income under Sections 143(3), 143(3A) and 143(3B) by order dated 24.02.2021.
The PCIT noticed that the assessee had shown closing stock of Rs. 6,50,54,600/- in its Balance Sheet but had not declared deemed rental income under Section 23(5) on that amount, while the Assessing Officer had accepted the return without making an addition on that count. The PCIT therefore regarded the assessment order as erroneous insofar as it was prejudicial to the interests of the Revenue and invoked Section 263.
During the assessment proceedings, the Assessing Officer had issued a notice under Section 142(1) dated 28.01.2020. The notice sought, among other things, details of the assessee’s business premises and project-wise details of stock-in-trade as on 31.03.2018, together with rent or annual lettable value for determining income from house property. The Tribunal recorded that the assessee had properly replied to point No. 6, but, according to the record referred to in the order, no specific reply had been furnished to point No. 17 except furnishing a break-up of closing stock with details and amounts. The order also records that the assessee had confirmed that an addition on account of deemed rental income under Sections 22 read with 23(5) had been made in AY 2017-18, with no material on record confirming that the addition had been challenged before appellate forums.
