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TMI Blog2016 (1) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings under Section 263 of the Act as the assessment concluded by the Assessing Officer was erroneous and prejudicial to the interest of revenue. An order was passed under Section 263 of the Act on 21.03.2011, setting aside the assessment order and directed the Assessing Officer to adopt the workin- progress at Rs. 3,01,65,044/- instead of Rs. 1,09,29,265/- adopted by the assessee. This order of the CIT was assailed by the assessee before the ITAT. In the meantime, pursuant to the directions of the CIT, (order under Section 263 of the Act), the Assessing Officer took up assessment proceedings for assessment year 2006-07 and passed an order of assessment under Section 143(3) of the Act determining the total income of the assessee at Rs. 2,29,69,433/- as against the income of Rs. 37,34,014/-. Aggrieved by the said order, the assessee preferred an appeal before the CIT (Appeals), which was dismissed against which, assessee preferred an appeal before the ITAT. These two cases were clubbed and heard together before the ITAT. The ITAT after considering the rival submissions made by both the parties, set-aside the order under Section 263 passed by CIT dated 21.03.2011. As far as the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciate the fact that the closing value of work-in-progress has to be worked out based on the development charges during the year and the Assessing Officer, has brought on record that the project developed by the assessee was a single one on a contiguous land area. The assessee has not maintained any separate expenditure for site sold and retained. As such, in the absence of any valid evidence, the action of the Assessing Officer in working out the value of work-in-progress in the assessment order after remand was justifiable. The Tribunal without appreciating the same, set-aside the order passed by the CIT under Section 263 of the Act, allowing the appeals filed by the assessee. 5. The learned counsel placed reliance on the judgment of the Apex Court in the case of Malabar Industrial Co. Ltd. vs Commissioner of Income Tax reported in 2000 (243) ITR 83 in support of his contention that the Assessing Officer passed the order of assessment accepting the work-in-progress statement of the assessee without application of mind to the case in all perspective. The order passed by the Assessing Officer is not only an erroneous order, but, is prejudicial to the interest of the revenue, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted at Rs. 299.41/- by the department for the assessment years 2007-08. The computation, if made considering the figures for the four assessment years relating to the issue of development charges, the same comes to more than Rs. 251.11/- as claimed by the assessee and in any event, there is no loss to the revenue to initiate proceedings under Section 263 of the Act. In such circumstances, the Tribunal setting aside the order passed by the CIT, does not call for interference by this Court. 10. In support of his contention learned counsel placed reliance on the following Judgments: (1) COMMISSIONER OF INCOME_TAX vs SUNBEAM AUTO LTD.([2011] 332 ITR 167 (Delhi)) (2) COMMISSIONER OF INCOME-TAX AND ANOTHER vs D.G.GOPALA GOWDA. ([2013] 354 ITR 501(Karn)) (3) COMMISSIONER OF INCOME-TAX AND ANOTHER vs DIGITAL GLOBAL SOFT LTD.([2013] 354 ITR 489 (Karn)) (4) CIT AND ANOTHER vs Dr.L.NARENDRA PRASAD (ITA No.473/2009 disposed of on 18.08.2015) 11. In the light of the above facts and rival contentions advanced by the learned counsel appearing for the parties, we have considered the questions of law raised by the revenue. 12. The assessee firm is in the business of formation and develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and cost+Developmental Charges 49,26,124+2,52,38,920=Rs.3,01,65,044 14. It is also noticed by us that the ITAT has called for the records of assessment of the relevant assessment year and examined the various details, questionaire (1) called by the Assessing Officer along with notice under Section 142(1) of the Act and additional details vide questionnaire (2) vis-àvis the assessee's reply to the said questionnaire. We have considered carefully the figures shown in the chart furnished by the assessee for the assessment years 2005- 06 to 2008-09. The development charges for these four years works out to be Rs. 9,02,84,410/- (Rs.10342310 + Rs. 41260000 + Rs. 3592700 + Rs. 2755000), deducting closing stock of Rs. 37,73,378/-, the net development charges would be Rs. 8,65,11,032/-. The total land area sold + unsold is 22400 + 361600 = 384000 sq. ft. The total unsold area as per the assessment year 2008-09 is 92403 sq. ft. Deducting the same from 384000 sq.ft., total sold area is 291597 sq. ft. Thus, the development expenses works out to Rs. 296.68/- per sq. ft. (8,65,11,032/2,91,597). 15. The method of computation adopted by the assessee is as follows: Net development exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'lack of inquiry'. In this context, it is held that the opinion of the assessing officer in treating the expenditure as revenue expenditure was plausible and thus, there was no material before the CIT to vary that opinion and ask for fresh inquiry by invoking Section 263 of the Act. The Division Bench of this Court in the case of D G Gopala Gowda (supra) while considering the power of revision conferred under Section 263 of the Act has held that the condition precedent for exercising the revisional power under Section 263 of the Act is that the order under revision should not only be erroneous, but such erroneous order should result in prejudice to the interest of the revenue. Mere error would not confer the jurisdiction to exercise the revisional power under Section 263 of the Act. In the Judgment of this Court in the case of Digital Global Soft Ltd. (supra), considering the judgment of this Court in "Malabar Industrial Co. LTd." (supra) it is categorically held that even if an order of the Assessing Officer is erroneous, unless the said erroneous order is prejudicial to the interest of the revenue, the Commissioner could not have exercised the suo moto revisional power un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the revenue. It is not a case of 'lack of inquiry'. Further inquiry ordered by the CIT would amount to fishing/rowing inquiry in the matter already concluded. 20. Learned counsel placed reliance on the Judgment of this Court in the case of Dr.L.Narendra Prasad (supra) to contend that generally in the business of real estate, the net profit would be 8% as accepted by the Department. In the present case, the profit declared by the assessee works out to More than 8% that is normally adopted and accepted by the Department. However, in the computation of work-in-progress made by the, Appellate Commissioner, the profit margin works out to more than 31.8% which is practicably not acceptable. Accordingly, on this count also, we are not inclined to accept the order passed by the CIT computing the margin at more than 31% which is not normally workable in the business of real estate as pointed out by the learned counsel for the assessee and this view is also supported by the Division Bench Judgment of this Court in Dr.L.Narendra Prasad's case (supra) 21. The ITAT having considered the material placed before it, rightly set-aside the order passed under Section 263 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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