The Income Tax Appellate Tribunal ( ITAT ), Mumbai, has recently while quashing a revisional order in a writ petition filed before it , held that notional rent will not be applicable to unsold flats of real estate business.
The above said decision was made by the court when a writ petition was filed by the appellant against the order passed by the Commissioner of Income Tax (Appeals)-27, Mumbai, in the opposition to the order of assessment passed u/s.143(3), by the Asst. Commissioner of Income Tax, Circle 28(2), Mumbai.
With the only issues to be decided in the appeal being the questions regarding the justifiability of invoking revisionary jurisdiction u/s.263 by the Principal Commissioner Of Income Tax, (PCIT), as well as the PCIT directing the AO to make a fresh assessment, taxing the notional rent arising from property held as ‘stock in trade’, under the head ‘income from house property’, the court ,while allowing the appeal of the assesse, observed : –
“From the perusal of the order of the ld. AO and from perusal of the replies filed by the assesse before the ld. PCIT, we find that no evidences were placed on record by the assesse 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 assesse are allowed.”
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