Tata Housing Development Company Ltd vs Pr. CIT
The PCIT following the decision of Hon’ble Delhi High Court in CIT vs. Ansal Housing
Finance & Leasing Co. Ltd., held that notional rental income on vacant flats should have been added to the total income of the assessee by the Assessing Officer. Therefore, the assessment order is erroneous as well as prejudicial to the interest of revenue. Aggrieved by the order passed, the assessee is in appeal before the Tribunal.
The assessee/appellant is a real estate developer and had declared income from the business of real estate development as ‘Business Income’. The AO in scrutiny assessment proceedings made disallowance under section 36(1)(iii) and 14A of the Act and determined the taxable income of the assessee. Thereafter, the PCIT invoked revisional jurisdiction under section 263.
The AO has never made addition on account of notional rental value of completed flats held as stock. The Delhi High Court in Ansal Housing Finance & Leasing Co. Ltd. has held that notional annual lettable value of unsold flats should be assessed as ‘Income from House Property’.
The provisions of section 263 of the Act can be invoked if, the twin conditions mandated under the section are satisfied, i.e:
(i) the order of the Assessing Officer sought to be revised is erroneous; and
(ii) it is prejudicial to the interests of the revenue.
If any one of these two conditions is absent, the Commissioner of Income Tax cannot take recourse to section 263. Merely for the reason that PCIT does not agree with one of the possible view taken by the Assessing Officer, would not make the assessment order erroneous.
Under similar situation, the Mumbai Tribunal in S D Corporation (P) Ltd. vs. Pr.CIT has held that invoking of provisions of section 263 of the Act is bad in law.
Consequently, the impugned order is quashed and the appeal of assessee is allowed.