TMI Blog2015 (9) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... cy project as finally done by the A.O. was without taking into consideration the value of the unsold plots. Moreover, the figure of profit appearing in the relevant working of partners accounts was a net profit for the year under consideration available for distribution to the partners as indicated in the relevant impounded documents and the same ought to have arrived at after taking into consideration all the relevant facts and figures including the value of un-sold plots. It therefore cannot be said that the income of the assessee from Sai Royal Residency project as finally estimated by the A.O. did not take into consideration the value of un-sold plots as alleged by the Ld. CIT. Expenditure on account of land development allegedly allowed by the A.O.- Held that:- As already observed that the income of the assessee from the Sai Royal Residency project was estimated by the A.O. on the basis of the working of partners capital account found recorded in the relevant impounded documents and the working made by the A.O. taking gross profit at ₹ 5,33,38,000 and presuming the balance amount of ₹ 1,34,50,000 being difference between the gross profit and net profit as expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the relevant facts of the case including especially the fact that the consideration as stated in the relevant agreement was ₹ 1.25 crores out of which the assessee had actually received only ₹ 1.10 crores. As rightly contended by the Ld. Counsel for the assessee, a possible view in the matter thus was taken by the A.O. after taking into consideration all the relevant facts of the case while adopting the sale consideration of ₹ 1.25 crores and it is not permissible to the Ld. CIT to substitute his own view in place of the possible view taken by the A.O. under section 263. - Revision orders set aside - Decided in favour of assessee. - ITA.No.784/Hyd/2013 - - - Dated:- 28-8-2015 - SHRI P.M. JAGTAP AND SHRI SAKTIJIT DEY, JJ. For The Assessee : Mr. S. Rama Rao For The Revenue : Mr. D. Srinivas and Mr. Prabhat Kumar Gupta ORDER PER P.M. JAGTAP, A.M. This appeal filed by the assessee is directed against the Order of the Ld. CIT-V, Hyderabad dated 28.03.2013 passed under section 263 of the I.T. Act, 1961. 2. The assessee in the present case is a partnership firm which is engaged in the business of real estate. It purchases lands and after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by him on the basis of papers impounded during the course of survey was not correct. It was claimed by the assessee that it has incurred a lot of expenses and faced legal/social disputes and difficulties in execution of work and that has to be taken into consideration for estimating the profit of the SRR Project. It was also claimed that the assessee has incurred a lot of expenditure on account of bank interest, development charges, registration etc., and since the same are not considered in the relevant working of profit given in the impounded document, the profit shown therein was not the actual profit and it was only a figure of projected/expected profit from the SRR Project. This explanation of the assessee was not found acceptable by the A.O. in the absence of any documentary evidence to support and substantiate the same and accordingly, a sum of ₹ 3,98,88,000 was brought to tax by him in the hands of the assessee as the estimated profit from SRR Project. 3. The other project namely Highway Heights was developed by the assessee on a land of ac.15.06gts which was converted into 176 plots. Out of the said 176 plots, 33 plots were shown to have been sold by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old by the assessee to M/s. ETA Star Properties Development P. Ltd. was taken by the A.O. at ₹ 1.25 crores and after deducting the cost of acquisition of the said land amounting to ₹ 45,35,500, the profit of ₹ 79,62,500 was brought to tax by the A.O. in the hands of the assessee. Accordingly, the total income of the assessee for the year under consideration was determined by the A.O. at ₹ 5,03,00,605 in the assessment completed under section 143(3) vide order dated 31.12.2010. 5. The record of the assessment completed by the A.O. under section 143(3) came to be subsequently examined by the Ld. CIT and on such examination, he was of the view that the order passed by the A.O. under section 143(3) suffered from the following errors which were prejudicial to the interests of the Revenue. a) The Assessing Officer (herein after termed as A.O.) did not take into consideration the value of the unsold plots while estimating the Gross Profit of the assessee at ₹ 5,33,38,000/- in respect of the 'Sai Royal Residency Project'. b) The A.O. allowed the expenditure of Rs.l,34,50,000/- towards land development even though the assessee did not prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was not found acceptable by the Ld. CIT for the following reasons given in paragraph No.6 of his impugned order. 6. I have carefully considered the submissions of the assessee. I am of the opinion that there is no merit in the arguments of the assessee that there is no case for the revision u/s 263 of the IT Act as it is a well settled rule that the Commissioner can regard an order as erroneous and prejudicial to the interest of revenue, on the facts/circumstances of the case, if he is of the opinion that the Assessing Officer has passed the order without applying his mind to any issue regarding claim or contention or the Assessing Officer completed the assessment without carrying out the requisite enquiries. Reliance is placed on the judicial pronouncements in the cases of a) Gee Vee Enterprises Vs Addl. C1T Others 99 ITR 375 (Delhi) b) Thalibai F Jain and others Vs ITO 101 ITR 1 (Karnataka) 1975 and c) Smruti Trading Company Vs ITO (2001) 70 TTJ (Mumbai Tribunal) 114. In the present case, there is nothing on record to show that the Assessing Officer had applied his mind in respect of the issues, detailed in the show ca use notice. Therefore, the provisions of Section 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the course of proceedings under section 263, the relevant payments in cash having been made by the assessee under exceptional circumstances, the disallowance under section 40A(3) even otherwise was not called for. 7.1. As regards the 4th error allegedly pointed out by the Ld. CIT in the order of the A.O. in adopting the sale consideration of land at ₹ 1.25 crores instead of ₹ 3.75 crores, the Ld. Counsel for the assessee invited our attention to the relevant portion of the assessment order at page No.11 to point out that the sale consideration as per the relevant agreement was ₹ 1.25 crores only and after having found that the assessee has received only ₹ 1.10 crores from the purchaser of M/s. ETA Star, the A.O. rightly adopted the sale consideration of ₹ 1.25 crores for the purpose of determining the capital gain. He contended that there was thus no error in the order of the A.O. on this count also as alleged by the Ld. CIT and the A.O. having taken a possible view after applying his mind to all the facts and circumstances, it is not permissible to the Ld. CIT to substitute his own view in the guise of revision under section 263. 8. The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject, the A.O. failed to take into consideration the value of un-sold plots as well as to make disallowance under section 40A(3) and also allowed deduction on account of land development expenditure without verifying any documentary evidence. The contention raised by the Ld. Counsel for the assessee before us is that the income of the assessee from Sai Royal Residency project was determined by the A.O. on estimated basis and therefore, there were no errors in the order of the A.O. as allegedly pointed out by the Ld. CIT. In this regard, he has invited our attention to the relevant portion of the A.O s order as appearing on page No.7, a perusal of which shows that sale consideration of Sai Royal Residency project for the year under consideration was shown by the assessee at ₹ 12.88 crores whereas, the same as per the relevant impounded documents was found to be ₹ 15.33 crores. By adopting the said amount of ₹ 15.33 crores as sale consideration and deducting the purchase cost of land of ₹ 10.03 crores, the balance amount of ₹ 5.30 crores was taken by the A.O. as representing the gross profit of the assessee from the project of Sai Royal Residency. He ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration was determined by the A.O. on estimated basis, the next question that arises for our consideration in the present context is whether there were errors in such determination as allegedly pointed out by the Ld. CIT in his notice issued under section 263 as error no. 1 to 3. In so far as the first error allegedly pointed out by the Ld. CIT that the A.O. did not take into consideration the value of un-sold plots while estimating the gross profit of the assessee at ₹ 5,33,38,000, we have already noted that the income of the assessee from Sai Royal Residency project was estimated by the A.O. on the basis of the figures of profit appearing in the working of partner s accounts found recorded in the relevant impounded materials and the working of the gross profit by the A.O. was just to support the said estimation. The profit as indicated in the said working amounting to ₹ 3,98,88,000 was adopted by the A.O. as net profit of the Sai Royal Residency project rejecting the stand of the assessee that further expenditure on account of litigation, bank interest etc., was incurred by it. In the working of partners account, the said profit was stated to be taken as per P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Mr. M. Sridhar Panicker 7 TTJ 573, it was held by the Coordinate Bench of this Tribunal that when estimations are made, it is not possible to say that specific items of expenditure in cash have gone into computation of those estimations so that such items can be disallowed under section 40A(3). In the case of Indwell Construction vs. CIT 232 ITR 776 (AP), a similar issue arose for consideration before the Hon ble Jurisdictional High Court in the context of section 40A(b) and while dealing with the same, it was observed by the Hon ble High Court that the pattern of assessment under the Income Tax Act is given by Section 29 which states that the income from profits and gains of business shall be computed in accordance with the provisions contained in section 30 to 43D. It was held that when an estimation of income is made, it is in substitution of the income that is to be computed under section 29 and all the deductions which are referred to under section 29 are deemed to have been taken into consideration while making such estimate. It was held that this will also mean that the embargo placed in section 40 is also taken into account while making an estimation and it is not correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money. b) The amount of 3.75 Cr paid to M/s. Purnodaya Industries Ltd appear to have been debited as expenditure by M/s. ETA incurred towards land leveling and development of the land at Aushapur. c) The understanding between M/s. ETA and Purnodaya Industries is that Purnodaya Industries should withdraw the amount and pay to the assessee firm i.e. M/s. Surakshitha Homes. They have paid only some amount as the balance is under attachment. d) This kind of routing of money was attempted by M/s. ETA as the on money was to be paid in cash and M/s. ETA being a company may have no cash to pay. 15. The above probable events then were confronted by the A.O. to the assessee and after considering the submissions made by the assessee thereon, he found that the 5.00 acre of land at Aushapur was sold by the assessee to M/s. ETA Star Property Developers Ltd., for an apparent consideration of ₹ 1.25 crores and although the amount of ₹ 3.75 crores was paid by ETA Star Property Developers Ltd. to M/s. Poornodaya Industries Limited, what the assessee actually received was only ₹ 1.1 crore while the balance amount was lying in the three bank accounts of M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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