Pegasus Properties Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Summary: These appeals in ITA Nos.350/Mum/2021 to 352/Mum/2021 concerned Assessment Years 2016-17 to 2018-19 and arose from the order of the Commissioner of Income Tax (Appeals)-48, Mumbai dated 29/01/2021, against assessment orders passed under section 153C read with section 143(3) of the Income Tax Act, 1961. Since identical issues were involved, the Mumbai Bench of the Tribunal took A.Y. 2016-17 as the lead year and applied its decision to the other years, subject to differences in figures.
The principal dispute concerned additions on account of deemed rental income in respect of unsold flats/units held by the assessee as stock-in-trade. The assessee was engaged in the business of building, maintaining and operating information technology parks and industrial parks and residential projects. Following search and survey action in the ABIL Group on 21/07/2017, proceedings under section 153C were initiated in the assessee’s case.
The assessee followed a business practice of advertising projects after launch, accepting bookings and recognising income from flats sold on the basis of completion. Sale proceeds were offered as business income. Where flats remained unsold after completion, they continued to be held as stock-in-trade under “Inventories”. As at 31 March 2016, the assessee had 47 unsold flats with a total area of 68,570 sq. ft., comprising 44 flats in Sangria, one in Sparklet and two in Splendor. The assessee submitted that no rental income had been earned from these flats either in the past or subsequently and placed its income computations for A.Ys. 2012-13 to 2018-19 on record.
