Case Law Details
Rajesh Dharamvir Gulati Vs PCIT (ITAT Mumbai)
PCIT issued a show-cause notice u/s.263 of the Act on the ground that assessee being a builder has shown closing stock as on 31/03/2017 as ‘stock in trade’ and had not offered rental income from the unsold stock of flats in terms of Section 23(5) of the Act.
Assessee specifically drew the attention of the ld. PCIT that provisions of Section 23(5) of the Act were introduced only from 01/04/2018 and would be applicable only from A.Y.2018-19 onwards. Accordingly, it was pleaded that the said provision cannot be made applicable for the year under consideration.
Apart from this, the assessee also submitted that, even assuming, if section 23(5) of the Act would be applicable in the present case, still no income would be liable to be offered to tax under ‘Income from House Property’ for the A.Y. 2017-18 due to the fact that as per the provisions of section 23(5) of the Act, the Annual value for a period of one year from the end of the financial year in which the certificate of completion of construction of the property was obtained from the competent authority , shall be taken to be Nil.
ITAT find that no evidences were placed on record by the assessee as to whether any enquiries were carried out by the ld. AO in the instant case with regard to the taxability of deemed rental income on unsold stock of flats. To this extent, prima facie, the assumption of jurisdiction u/s 263 of the Act by the ld. PCIT would be correct. But however, from the aforesaid observations on merits, it is found that the ld. PCIT had proceeded to assume his revision jurisdiction by incorrect application of law i.e trying to apply provisions of section 23(5) of the Act, which is not applicable for the year under consideration. Hence on this ground, the assumption of revision jurisdiction u/s 263 of the Act by the ld. PCIT deserves to be quashed. Accordingly, the grounds raised by the assessee are allowed.
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