Notice u/s 142(1) query
This query is : Resolved
13 August 2014
my company engaged in real estate activity during AY 2012-13. my company have a building which is shown as a stock in trade in final accounts for AY 2012-13 and rental income received from the said building is shown as income from house property in ITR for AY 2012-13.Proceeding of company for AY 2012-13 is in process u/s 142(1). income tax department raise the same issue by serving another notice u/s 142(1).
Please provide me suggestion
Please provide me suggestion
13 August 2014
pls tell the department for earlier proceeding for the same year is running.
13 August 2014
then u reply the fact to dept.................
13 August 2014
Also please check if notice is being issued for the purpose of filing the return or for some other purpose.
13 August 2014
dear rupesh this notice is for the earlier proceeding
13 August 2014
Are these notices belong to two different assessment year ?
14 August 2014
both notice are part of same proceeding u/s 142(1) of same assessment year
04 August 2024
In your case, it appears that the Income Tax Department has raised a query about the classification of income from a building that your company holds as stock-in-trade but has shown rental income from it under "Income from House Property" in the ITR for AY 2012-13. Here’s how you can address this issue:
### **Understanding the Issue:**
1. **Income Classification:**
- **Stock-in-Trade:** If the building is held as stock-in-trade, then rental income should generally be classified as "Business Income" rather than "Income from House Property."
- **Income from House Property:** This classification typically applies to properties held as investments, where rental income is derived from letting out the property.
2. **Nature of Notices:**
- **First Notice:** The first notice under Section 142(1) likely seeks information or clarification regarding this discrepancy.
- **Second Notice:** If the department has issued a second notice on the same issue, it may be due to the need for further clarification or the initial response being inadequate.
### **Steps to Address the Query:**
1. **Review Both Notices:**
- **Details:** Carefully review the content of both notices to understand the specific queries raised and the additional information requested.
2. **Prepare Your Response:**
- **Correct Classification:** Explain why the rental income is shown as "Income from House Property" despite the property being classified as stock-in-trade. Provide a clear rationale supported by documentation and accounting practices.
- **Documentation:** Submit any relevant documents that substantiate your classification. This may include:
- Financial statements and schedules showing the property as stock-in-trade.
- Details of rental income receipts.
- Explanation of how the income was classified and why.
3. **Respond Promptly:**
- **Timely Response:** Ensure that you respond to the notices within the stipulated time frame. Address each point raised in the notices comprehensively.
4. **Consult a Tax Professional:**
- **Seek Expert Advice:** Given the complexity of the issue, consider consulting a tax advisor or legal professional who specializes in real estate and taxation. They can help ensure that your response is accurate and complies with tax regulations.
### **Additional Considerations:**
1. **Consistency in Accounting:**
- **Review Accounting Policies:** Ensure that your accounting policies are consistent with the classification of income and that they align with the applicable tax laws and accounting standards.
2. **Clarification from the Department:**
- **Seek Clarification:** If the notices are unclear or if you need more guidance on how to respond, consider reaching out to the assessing officer or the tax department for clarification.
### **Summary:**
To address the issue raised in the notices under Section 142(1):
- Provide a clear explanation of the classification of rental income and the nature of the property as stock-in-trade.
- Submit relevant documents and ensure your response is timely.
- Consult with a tax professional for detailed guidance and to ensure compliance.
Handling these notices promptly and accurately is crucial to avoid any potential issues with your assessment.
### **Understanding the Issue:**
1. **Income Classification:**
- **Stock-in-Trade:** If the building is held as stock-in-trade, then rental income should generally be classified as "Business Income" rather than "Income from House Property."
- **Income from House Property:** This classification typically applies to properties held as investments, where rental income is derived from letting out the property.
2. **Nature of Notices:**
- **First Notice:** The first notice under Section 142(1) likely seeks information or clarification regarding this discrepancy.
- **Second Notice:** If the department has issued a second notice on the same issue, it may be due to the need for further clarification or the initial response being inadequate.
### **Steps to Address the Query:**
1. **Review Both Notices:**
- **Details:** Carefully review the content of both notices to understand the specific queries raised and the additional information requested.
2. **Prepare Your Response:**
- **Correct Classification:** Explain why the rental income is shown as "Income from House Property" despite the property being classified as stock-in-trade. Provide a clear rationale supported by documentation and accounting practices.
- **Documentation:** Submit any relevant documents that substantiate your classification. This may include:
- Financial statements and schedules showing the property as stock-in-trade.
- Details of rental income receipts.
- Explanation of how the income was classified and why.
3. **Respond Promptly:**
- **Timely Response:** Ensure that you respond to the notices within the stipulated time frame. Address each point raised in the notices comprehensively.
4. **Consult a Tax Professional:**
- **Seek Expert Advice:** Given the complexity of the issue, consider consulting a tax advisor or legal professional who specializes in real estate and taxation. They can help ensure that your response is accurate and complies with tax regulations.
### **Additional Considerations:**
1. **Consistency in Accounting:**
- **Review Accounting Policies:** Ensure that your accounting policies are consistent with the classification of income and that they align with the applicable tax laws and accounting standards.
2. **Clarification from the Department:**
- **Seek Clarification:** If the notices are unclear or if you need more guidance on how to respond, consider reaching out to the assessing officer or the tax department for clarification.
### **Summary:**
To address the issue raised in the notices under Section 142(1):
- Provide a clear explanation of the classification of rental income and the nature of the property as stock-in-trade.
- Submit relevant documents and ensure your response is timely.
- Consult with a tax professional for detailed guidance and to ensure compliance.
Handling these notices promptly and accurately is crucial to avoid any potential issues with your assessment.
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