TMI Blog2013 (9) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... 961 (herein after referred to as 'the Act') passed by the Commissioner of Income Tax I, Bangalore dt.21.3.2011 for Assessment Year 2006-07. The appeals in ITA No.48/Bang/2013 is directed against the order of the CIT(Appeals) I, Bangalore dt.30.12.2011 for Assessment Year 2006-07, being an appeal against the consequential order of assessment passed pursuant to the order under section 263 of the Act dt.21.3.2011. 2. The facts of the case, in brief, are as under : 2.1 The assessee is a firm engaged in the business of formation and development of residential layouts and sale of sites. For Assessment Year 2006-07, the assessee filed its return of income on 31.10.2006 declaring income of ₹ 37,34,014. The return was processed under section 143(1) of the Act and the case was taken up for scrutiny. Subsequently, the assessee filed a revised return of income on 11.3.2008 declaring total income of ₹ 2,77,39,713. In the said revised return the additional income increased by ₹ 2,40,05,699 on account of disallowance under section 40(a)(ia) of the Act to the extent of ₹ 2,58,70,699 and claim for allowing of expenditure of ₹ 18,65,000 pertaining to A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtained all the relevant facts while accepting the value of the work in progress as declared by the assessee. The relevant assessment order is, therefore, clearly erroneous and prejudicial to the interest of the revenue. It is necessary for the Assessing Officer to examine in detail and ascertain all the relevant facts and verify the submissions made by the assessee in course of the revision proceedings while determining the amount of development charges required to be taken into a consideration as a part of the closing work in progress as on 31.3.2006. In view of the above, the assessment order, which has been held to be erroneous and prejudicial to the interest of the revenue is set aside and the Assessing Officer is directed to make a fresh assessment in the light of my observations above, after giving the assessee a reasonable opportunity of being heard. ITA No.620/Bang/2011 (Assessee's appeal against order under section 263 of the Act dt.21.3.2011 for Assessment Year 2006-07) 3. Aggrieved by the order under section 263 of the Act passed by the CIT-I, Bangalore dt.21.3.2011, the assessee has preferred an appeal before this Tribunal raising the following grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully considered along with the information filed with the return of income for the Assessment Years 2006-07 2007-08. It is a fact that the assessee has not maintained any separate expenditure account for sites sold and sites unsold. The developmental charges claimed have been on estimate basis for the sites sold. In such situation, the claim cannot be relied upon for arriving at the profit. The project taken up by the assessee is a single one and on a continguous land area. The developmental charges whatever incurred needs to be made on the entire project unless the project is developed in a piece meal. If the project is taken as a single unit, the main developmental activities like roads, drainage, electricity etc., needs to be carried out on the entire site. Further, in the line of business of the assessee, the customers will select the plots as per their choice and the plots which are in demand will be sold out first. These plots need not be on any part of the project but will spread across the project. The developmental charges are also mainly for the infrastructural facilities like roads etc and expenditure on individual plots is minimal. Therefore, after duly considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork in progress at ₹ 3,01,65,044 as against the factual work in progress of ₹ 1,09,29,625 returned by the appellant under the facts and circumstances of the appellant case. 4. Without prejudice to the above, the authorities below seriously erred in not considering the claim of the appellant that the Development Charges debited to the Profit Loss Account was largely attributable towards the sites sold during the previous year relevant to the assessment year under appeal and proportionately holding these development charges incurred towards unsold sites also are arbitrary under the facts and circumstances of the appellant case. 5. Without prejudice to the above, the authorities below further failed to appreciate that the Assessing Officer had accepted the contention of the appellant for the assessment year 2007-08 vis- -vis the opening and closing work in progress and also the development charges incurred during which assessments which were completed under section 143(3) subsequent to the impugned assessment year under appeal which returned income was accepted and thus the impugned addition for the assessment year under appeal requires to be deleted in full. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 of the Act is without jurisdiction and application of mind. He contended that the twin conditions required to be fulfilled under section 263 of the Act i.e. that the order of assessment passed must be erroneous and prejudicial to the interests of revenue, having not been satisfied the assumption of jurisdiction itself is not in accordance with law and therefore the impugned order under section 263 of the Act requires to be cancelled. In support of the assessee's contentions, the learned Authorised Representative relied on certain judicial decisions which are as under : i) CIT Vs. Max India Ltd. 295 ITR 282 (SC). ii) Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC). iii) CIT Vs. Gabriel India Ltd. 203 ITR 108 (SC). iv) CIT Vs. Sunbeam Auto Ltd. 332 ITR 167 (Del) v) CIT Another V D.G. Gopala Gowda (ITA No.1422/2006 dt.5.3.2013 unreported decision of the Hon'ble High Court of Karnataka). 9.1.2 The learned Authorised Representative contended that during the assessment proceedings, the assessee had replied to the queries raised by the Assessing Officer and filed a detailed reply which is at pages 7 to 10 of the assessee's paper book compilation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in absurd figures of profit. As per this statement, if the closing work-in-progress is taken at ₹ 3,01,65,044 as adopted by revenue as against closing work-in-progress of ₹ 1,09,29,625 declared by the assessee then the profit would be 31.80% as against the net profit of 8.02% declared by the assessee. The learned Authorised Representative further drew our attention to pages 35 36 of this paper book filed for the appeal in respect of the appeal against the order under section 263 which reflected the workings of work-in-progress for the periods relevant for Assessment Years 2005-06 to 2008-09 which he submitted were all part of the relevant records of assessment. The learned Authorised Representative submitted that in the light of the facts on record as brought out above, the revision of the order of assessment for Assessment Year 2006-07 under section 263 of the Act is bad in law and the action of the CIT in doing so amounts to change of opinion and pleaded for cancellation of the order under section 263 of the Act dt.21.3.2011. 9.2 Per contra, the learned Departmental Representative supported the impugned order under section 263 of the CIT dt.21.3.2011 and submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atements and the copy of the bank statements substantiating the bank charges. 7. Details substantiating expenditure claimed in P L Account. 8. Details substantiating capital account. 9. Details substantiating unsecured loans along with the details justifying the drawings. 10. Details substantiating closing work in progress. (Sd/-) (K. Ramana Babu) Dy. Commissioner of Income Tax, Circle 1(1), Bangalore. 9.3.2 From the details as laid out in para 9.3.1 of this order (supra), it is seen that the Assessing Officer has called for details and explanations in respect of the work-in-progress and the assessee having submitted details / explanations thereto, the Assessing Officer has not disputed the value of closing work-in-progress arrived at by the assessee in its books. In this view of the matter, we are of the opinion that the CIT s finding that the Assessing Officer has not properly applied his mind to the issue of closing work-in-progress is factually incorrect. 9.3.3 From the details on record at pages 33 34 of the assessee's paper book, it is seen that for the next year i.e. Assessment Year 2007-08, the Assessing Officer has accepted the figure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee thereto find place in the records of assessment which include the details / submissions on the issue of closing work-in-progress. In fact the aforesaid observation of the CIT, that the Assessing Officer has not properly applied his mind to the issue and the same requires to be examined in detail, is factually incorrect, as observed by us above. It also goes against the view of the Hon'ble High Court of Bombay in the case of Gabriel India Ltd. (203 ITR 108) wherein it was held that an assessment cannot be set aside to make further enquiry. 9.3.6 The Hon'ble High Court of Karnataka in the case of CIT Vs. D. G. Gopala Gowda (supra) held that . the condition precedent for exercising the revisionary powers 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 revenue. Mere error would not confer jurisdiction to exercise revisional powers under section 263 of the Act .. In the case on hand, it is clear from the facts on record that in the order of assessment passed under section 143(3) of the Act on 30.12.2008 both the conditions precedent required for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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