Builder Liable to Pay Income Tax on Rental Income on Notional Basis of Municipal Ratable Value on Vacant Unsold Flats: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai bench has directed the income tax department to compute income tax on the rental income on the basis of municipal ratable value for computing the notional rent towards the vacant unsold flats kept by the assessee, Builder.

The assessee, M/s Moraj Building Concepts Pvt Ltdhas filed return of income and the assessments were completed. However, theseassessmentswere unabated and a search and seizure action was undertaken in Gurnani Group on 04.02.2016 and the assessee was also covered in the above search proceedings. During the search proceedings certain unaccounted cash receipts were unearthed and merely observed that assessee has huge unsold flats.Accordingly, a notice u/s. 153A were issued and served on the assessee.

The Assessing Officer has made various additions relating to notional income from the unsold flats and further, made additions relating to unsecured loans.

Relying on the decision of the Delhi High Court in the case of CIT v. Ansal Housing Finance and Leasing Company Limited, the Assessing Officer estimated the rent on the above said flats to the extent of ₹.1,91,814.

The ITAT bench of Shri Amit Shukla, Judicial Member and Shri S. Rifaur Rahman, Accountant Member held that the assessee had unsold closing stock which was kept vacant during the current Assessment Year. The Assessing Officer has estimated the notional income by relying on the decision of the CIT v. Ansal Housing Finance and Leasing Company Limited by adopting the rent based on property tax.

In the light of judicial decisions and the decision in the case of CIT v. Ansal Housing Finance and Leasing Company Limited, the ITAT held that “Respectfully following the above said decision, we direct the Assessing Officer to estimate the rent on the basis of municipal ratable value for computing the notional rent. Accordingly, ground raised by the assessee is partly allowed.”

The assessee was represented by Shri Jayant Bhatt & Ms. Jitali Gandhi Department was represented byShri Rakesh Garg.

To Read the full text of the Order CLICK HERE

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