The Pune Bench of the Income Tax Appellate Tribunal (ITAT) recently quashed the retrospective determination of annual letting value of unsold residential units based on prospective amendment by the Assessing Officer.
The assessee Pride Purple Properties was a firm engaged in the business of construction & sale of residential flats, which at the closure of the financial was holding 03 residential units as its ‘stock-in-trade’ which were neither let-out nor occupied for its business and hence no income therefrom offered to tax in the return of income filed under Section 139(1) of the Income Tax Act.
The Assessing Officer, considering the provisions of Section 23(4) of the Income Tax Act determined the annual letting value 03 residential unit @ ₹2,52,000/- after allowing 30% standard deduction under Section 24(a) and added the same to the total income while assessing income under Section 143(3) of the Income Tax Act.
The CIT(A) affirmed the addition. Aggrieved Assessee filed an appeal on ground of inapplicability of provisions of Section 23 of the Income Tax Act.
The Bench, consisting of Judicial Member S.S. Godara and Accountant Member G.D. Padmahshali, observed that in the context of the impugned Assessment Year 2014-15, the Finance Act of 2017 introduced sub-section (5) to Section 23.
This provision states that if a property held as ‘stock in trade’ is not rented out during the year, its annual value after one or two years shall be considered for inclusion under the head ‘Income from House property’.
However, it was observed “this amendment came into effect on April 1, 2018, and does not apply to the impugned Assessment Year 2014-15.”
Therefore, the two-member Bench held that the impugned addition of ₹2,52,000/-, made and sustained in the first appeal, was not justified and should be deleted.
In result, the appeal of the assessee is allowed
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