TMI Blog2015 (4) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... ter due application of mind. Ld. CIT has not even disputed that liability is allowable as clearance has been give about liability qua the sale proceeds offered. It has been lost sight of that assessee follows mercantile method, liability is statutory and working of quantum is provided. With all this available on record we hold that the assessment order can neither be called as erroneous or prejudicial to the interest of revenue. Our views are fortified by the catena of judgment in DLF Ltd. [2012 (9) TMI 626 - DELHI HIGH COURT],Max India Ltd. [2007 (11) TMI 12 - Supreme Court of India] and Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME Court], consequently the 263 order is quashed and assessee’s grounds are allowed. - Decided in favour of assessee. - ITA No.291/JP/2014 - - - Dated:- 24-2-2015 - R. P. Tolani, JM And T. R. Meena, AM,JJ. For the Appellant : Shri Vijay Goyal For the Respondent : Smt. Rolee Agarwal (CIT-DR) ORDER Per R P Tolani,JM This is an appeal filed by the assessee against the order of the ld. CIT-1, Jaipur dated 28-03-2014 for the assessment year 2009-10 u/s 263 of the Act wherein the assessee has raised following grounds in its app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses is not an allowable expenses because as per provisions of Income Tax Act the expenses actually incurred are only allowable. The assessee objected to the proceedings u/s 263 vide detailed letter dated 24/03/2014 along with the supporting enclosures, claiming that there was no error committed by AO in allowing this expenditure and there was no prejudice to revenue in this behalf; various other submissions were made and case laws relied, during the course of hearing. Ld. CIT-I, Jaipur rejected assessee s contentions and held Section 143(3) order to be erroneous and prejudicial to the interest of revenue as passed in a casual manner without considering the relevant provisions. Ld. CIT though held that liability of development expenses in respect of plots sold have to be allowed against the sale receipts, the assessment order was set aside for limited purpose directing AO to allow the provisions in respect of sales affected qua which proceeds are offered for tax and whether the development expenses have been estimated in accordance with guidelines issued by JDA by following observations: Para 4 - I have duly considered the submission of the assessee and material available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification of provision for development expenses, which is supported by several case laws. Inquiry did not end here as ld. AO further raised queries. In response thereto assessee further explained the justification of allowability of provision vide letter placed on PB 46 citing case of M/s Salasar Overseas Pvt. Ltd. On further query raised by the AO, the assessee explained total project cost viz a viz sales and profit vide its letter dated 16/11/2011 placed at PB pg 47-48, assessee filed proper breakup of development expenses along with copy of JDA circulars regarding the mandatory development expenses liability in the developers placed ( JDA circulars are placed at 64-85). This copious correspondence and proceedings make it very clear that this issue was examined by the ld AO in detail during the course of assessment proceedings. Consequently the adverse observations of ld CIT that the assessment order was passed in a casual manner without considering the facts of the issue and relevant provisions of the Act is untenable and contrary to the record. It is pleaded that assessee has no control on the manner ld. AO drafts assessment order; generally the issues which are accepted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re on the assessment record : i. Copy of JDA circulars filed alongwith this letter - PB pg 64 to 85. ii. Working for the provision clearly demonstrating that the estimated liability against expenses is ₹ 400/- per sq. yard and actual expenses incurred during this year were ₹ 137.11 per sq yard and ₹ 262.80/- per sq. yard yet to be incurred. The plot area sold during this year was 55567.44. Therefore the provision of ₹ 1,46,08,190.59/- (55567.44 X 262.89) was made against the plot area sold. The sale of the plot area 55567.44 is offered for taxation which is apparent from Scheme Trading Account PB pg 17 and working for project cost and sales filed before AO copy at PB pg 48. Further the copy of JDA circular filed before the AO, the AO has verified that provision is in accordance with the JDA circular PB page 45. The ld CIT has no issue on assessee s following mercantile system of accounting and liability being allowable; set aside the assessment order again to AO for limited purpose to verify that:- (i) provision has been made in respect to the area sold offered for taxation. (ii) Development expenses were estimated in accordance with JDA circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges as business expenditure, ld. CIT has no objection on assessee s following mercantile system of accounting in that eventuality even the accrued liabilities are to be allowed. Assessee has demonstrated that per square yard working of JDA expenses was provided to ld. AO during the assessment proceedings which is part of the record. Once the liability is accrued as per JDA circulars and AO allows the claim based on working provided by assessee; it demonstratively means that AO allowed the claim after due application of mind. Ld. CIT has not even disputed that liability is allowable as clearance has been give about liability qua the sale proceeds offered. It has been lost sight of that assessee follows mercantile method, liability is statutory and working of quantum is provided. With all this available on record we hold that the assessment order can neither be called as erroneous or prejudicial to the interest of revenue. Our views are fortified by the catena of judgments cited above, consequently the 263 order is quashed and assessee s grounds are allowed. 3.0. In the result, the appeal of the assessee is allowed. (Order pronounced in the open court on 24/02/2015) - - Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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