Dosti Realty Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai Nullifies ₹2.06 Crore Expense Disallowance in Dosti Realty Case, Citing Contradictory AO Approach
The Income Tax Appellate Tribunal (ITAT), Mumbai bench, has allowed the appeal of Dosti Realty Limited against the order of the National Faceless Assessment Centre (NFAC), New Delhi, for the Assessment Year (A.Y.) 2014-15. The core of the dispute centered on the validity of jurisdiction invoked under Section 154 of the Income Tax Act, 1961 (the Act), and the merits of disallowing an expense of Rs. 2,06,50,000/- claimed as a provision for expenses by the property developer.
Background and Initial Assessment
Dosti Realty Limited, engaged in property development, filed its return of income on November 22, 2014, declaring a total income of ₹20,27,42,800/-. The case was selected for scrutiny, and the assessment was completed under Section 143(3) of the Act on December 6, 2016. The total income was determined at ₹20,61,11,211/-, after an initial disallowance of ₹33,68,410/- under Section 14A of the Act.
Rectification under Section 154
Post-completion of the initial assessment, the Assessing Officer (A.O.) invoked the jurisdiction under Section 154 of the Act, which allows for the rectification of a “mistake apparent on the face of the record.” The A.O. revisited the schedule of the cost of flats sold and determined that an amount of ₹2,06,50,000/- claimed towards “provision for expenses” (as per note 20(d) of the Audit Report) was an unascertained liability and therefore not allowable as an expense. Consequently, on March 31, 2021, the A.O. passed an order under Section 154, disallowing the said amount.
