Dimple Enterprises Vs DCIT (ITAT Mumbai)
The assessee appealed against the order of the Commissioner of Income-tax (Appeals) for Assessment Year 2016-17 challenging the assessment of ₹63,58,756 as notional income under Section 22 of the Income-tax Act on unsold flats and shops held as stock-in-trade. The assessee also disputed the computation of the Annual Letting Value (ALV) based on the cost of construction and contended that the Municipal Rateable Value ought to have been adopted. The assessee further submitted that income arising from stock-in-trade should be assessed under the head “Profits and Gains of Business or Profession.”
The assessee had filed its return of income declaring total income of ₹35,26,130. During scrutiny assessment, the Assessing Officer sought details of unsold flats and shops shown as stock-in-trade and issued a show cause notice proposing to assess deemed rental income from completed but unsold units under the head “Income from House Property.” The Assessing Officer relied upon the decision of the Delhi High Court in CIT vs. Ansal Housing Finance & Lease Co. Ltd. The assessee submitted that the occupation certificate had been obtained on 24.09.2014, the unsold units were held as inventory, and they were not intended to be let out. The assessee relied upon CIT vs. Neha Builders P. Ltd. in support of its contention that no income from house property could be assessed on such inventory. The Assessing Officer rejected these submissions, held that the amendment to Section 23 was applicable only from 01.04.2018, and computed notional income from house property by applying 8.5% to the cost of construction. The CIT(A) upheld the assessment by following the order passed in the assessee’s own case for Assessment Year 2017-18.
