TMI Blog2021 (7) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... ting letting value of the flats u/s.23. - Decided in favour of assessee. - ITA No.1973/Mum/2019 - - - Dated:- 1-7-2021 - Shri Mahavir Singh, Vice President And Shri M.Balaganesh, Accountant Member For the Assessee : Shri Sanjay Sawant For the Revenue : Ms. Shreekala Pardeshi ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.1973/Mum/2019 for A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-52, Mumbai in appeal No.CIT(A)-52/DC CC-4(1)/IT-396/16-17 dated 06/12/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) by the ld. Deputy Commissioner of Income Tax, Central Circle-4(1), Mumbai (hereinafter referred to as ld. AO). 2. At the outset, we find that the assessee had preferred appeals for both the A.Yrs. 2014-15 and 2015-16 before us with delay of 382 days and 233 days respectively. 3. We find from the affidavit filed by the assessee for the condonation of delay that assessee was not having any clarity on the issue whether the annual letting value of unsold flats in case of builders and the construction companies would be taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7155/Mum/2016 10.10.2018 2012-13 Ferani Hotels Pvt. Ltd. ACIT, Central Circle -4(1), Mumbai. 6332/M/2016 21.12.2018 2012-13 3.2. We also find that the Hon ble Gujarat High Court in the case of CIT vs. Neha Builders Pvt. Ltd., reported in 296 ITR 661 had decided the issue in favour of the assessee. Now, the decision of the Hon ble High Court is in favour of the assessee would constitute sufficient cause for explaining the delay in filing of the appeal by the assessee. In this regard, we find that the Hon ble Andhra Pradesh High Court in the case of Venkataramana Chuduva Muramura Merchant reported in 159 ITR 59 (AP) and Hon ble Calcutta High Court in the case of CIT vs. Sothia Mining Manufacturing Corporation Ltd., reported in 186 ITR 182 (Cal) had held that the subsequent decision of the Hon ble High Court or Hon ble Supreme Court which changed the position, the interpretation or the understanding of law, constituted sufficient cause for condoning the delay. We find that the Coordinate Bench of Kolkata Tribunal in the case of G.G. Super Cement Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iderations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. 6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so. Guidelines laid down by the Hon ble Calcutta High Court in the case of Indian Oil Corporation Limited vs.- CEGAT Others:- 11. Rules of limitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. The law of limitation fixes a life span for such legal remedy for the redress of the legal injury so suffered. Time is precious and wasted time would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Keeping in view all these facts of this case and the guidelines laid down by the Hon ble Supreme court and Hon ble Calcutta and Andhra Pradesh High Courts, we hereby condone the delay of 382 and 233 days for Asst Years 2014-15 and 2015-16 respectively in filing the appeals, in the interest of substantial justice and admit those appeals of the assessee for adjudication. 4. The only identical issue in all these appeals is that whether the ld. CIT(A) was justified in confirming the action of the ld. AO in charging notional income considering annual letting value of unsold flats (closing stock of assessee) under the head income from house property in the facts and circumstances of the instant case. 5. We have heard rival submissions and perused the materials available on record. Both the parties before us agreed that the issue in dispute before us had been decided by this tribunal in favour of the assessee in its own case in ITA No. 5062/Mum/2017 dated 13/03/2019 for Asst Year 2013-14. The relevant operative portion of the said order is reproduced hereunder:- 4. Issue nos. 1 2 are inter-connected, therefore, are being taken up together for adjudication. Under these is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the head of income from house property on account of deemed income from unsold unit/ flat which was closing stock of the appellant as per provisions of Sections 22 and 23 of the Act. At the very outset, the Ld. Representative of the assessee has argued that the assessee is deriving its income from hotel business and construction. The assessee was also deriving income from dividend, share of profit and sale of flats and due to the recession, the assessee failed to sold out all the flats, therefore, some flats remain vacant which was being treated as stock in trade. The AO has wrongly assessed the notional rent and assessed the rent in view of the provision u/s 24 of the Act wrongly which can only be treated under the head of income from business, therefore, the finding of the CIT(A) is wrong against law and facts and is liable to be set aside. It is also argued that the case of the assessee has duly been covered in case of Runwal Construction Vs. ACIT in ITA. No. 5408/M/2016 C.R. Developments Vs. JCIT in ITA. No. 4277/M/2012 dated 13.05.2015. However, on the other hand, the Ld. Representative of the Department has refuted the said contention. On appraisal of the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come from house property. While holding so the Hon'ble High Court observed as under: - 8. True it is, that income derived from the property would always be termed as 'income' from the property, but if the property is used as 'stockin-trade', then the said property would become or partake the character of the stock, and any income derived from the stock, would be 'income' from the business, and not income from the property. If the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the 'business' and the business stocks, which may include movable and immovable, would be taken to be 'stock- in-trade', and any income derived from such stocks cannot be termed as 'income from property'. Even otherwise, it is to be seen that ITA. No.6332/M/2016 A.Y.2012-13 10 there was distinction between the 'income from business' and 'income from property' on one side, and 'any income from other sources'. The Tribunal, in our considered opinion, was absolutely unjustified in comparing the rental income with the dividend income on the shares or interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be sold at the end of the year was shown as stock-in-trade. Estimating rental income by the AO for these three flats as income from house property was not justified insofar as these flats were neither given on rent nor the assessee has intention to earn rent by letting out the flats. The flats not sold was its stock-in-trade and income arising on its sale is liable to be taxed as business income. Accordingly, we do not find any justification in the order of AO for estimating rental income from these vacant flats u/s.23 which is assessee s stock in trade as at the end of the year. Accordingly, the AO is directed to delete the addition made by estimating letting value of the flats u/s.23 of the I.T. Act. 10. In the case on hand before us it is an undisputed fact that both assessees have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head income from business . Thus, respectfully following the above said decisions we hold that the unsold flats which are stock in trade when they were sold they are assessable under the head income from business when they are sold and therefore the AO is not correct in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative of the assessee i.e. M/s. Runwal Constructions Vs. ACIT and M/s. C.R. Developments P. Ltd. Vs. JCIT (supra), we are of the view that the finding of the CIT(A) on this issue is wrong against law and facts whereas the case of the assessee has duly been covered by the law mentioned above, therefore, by honoring the orders mentioned above. We deleted the addition raised by assessee on account of notional income of vacant flats. Accordingly, this issue is decided in favour of the assessee against the revenue. 5. On appraisal of the above mentioned finding, we noticed that the factual position of the present case is quite similar to the factual position of decision of the Hon ble ITAT in the case of Ferani Hotels Pvt. Ltd. (supra). Since the case of the assessee has duly been covered by the decision of the Hon ble ITAT in the case of Ferani Hotels Pvt. Ltd, therefore, in the said circumstances by honoring the said decision, we deleted the addition raised by AO on account of notional income of the vacant flats. Accordingly, these issues are decided in favour of the assessee against the revenue. 6. In the result, the appeal of the assessee is hereby ordered to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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