TMI Blog2016 (3) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer was not aware of the expenses claimed by the assessee. The facts narrated by the assessee shows that the assessee has purchased the land from the owners, who had earlier entered into an agreement with two other parties. Hence the possibility of creating hindrances by the concerned persons should have been available and the assessee was constrained to clear all of them, lest assessee’s project should suffer. However, the Ld Principal CIT has taken the assessee has incurred those expenses on humanitarian grounds or gratuitously and hence the same cannot be considered as business expenses. We are of the view that the learned CIT has merely taken a different view of the matter, where as it is seen that the view taken by the assessing officer in allowing the claim was one of the possible views, since the same has been incurred in furtherance of the business objectives. It is well settled proposition that the assessment order would not be rendered prejudicial to the interests of the revenue, if the assessing officer has taken a possible view of the matter. The assessment order cannot be considered to be erroneous, if the assessing officer has allowed the claim of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had to settle the matter by paying compensation. It was further submitted that the assessee was entitled to receive 21 flats as per the development agreement entered with M/s Dimple Realtor Ltd. The assessee claimed that it has made value addition to those flats so that the same could fetch more sale price when they are sold to the public. Accordingly it was submitted that the expenses were incurred by the assessee for perfecting the title of the land and to make value addition to the flats. 4. However, the Ld Principal CIT took the view that the legal responsibility of incurring construction expenses is placed upon the developer as per the development agreement. Further, the assessee has purchased the land free from encumbrances. Hence the compensation paid by the assessee was on humanitarian grounds and the same cannot be considered to have been incurred legally. Accordingly the Principal CIT took the view that such kind of humanitarian or ex-gratia payments are not eligible for deduction as business expenses. Similarly, the Principal CIT took the view that the developer is required to hand over the ready flats with all fittings and further he is required to maintain flats ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of sec. 263 of the Act requires that the Principal CIT should be specific on the points, which he considers to be erroneous and prejudicial to the interests of the revenue. However, the directions given by the Ld Principal CIT requires the assessing officer to redo the assessment on all the issues, which were not subject matter of revision also and further it may extend to other years also. 6. The Ld A.R further submitted that the Explanation 2 inserted by Finance Act, 2015 in sec. 263 merely provides a deeming provision as to when an assessment order shall be deemed to be erroneous in so far as prejudicial to the interests of revenue. He submitted that the Explanation 2 has codified the principles, which have been earlier stated by various Courts and hence the decisions rendered by the Courts shall have application even after the insertion of Explanation 2 to sec. 263 of the Act. He submitted that there is no dispute that the assessment order passed by the AO without making inquiries or verification or allowing relief without inquiring into the claim would render the assessment order erroneous, even before the insertion of Explanation 2 to sec. 263 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrying out necessary examination. He further submitted that the assessee has made value addition to the flats allotted to it by incurring these expenses, which has helped it to fetch more sale price to the flat. Accordingly, the ld A.R submitted that the commercial decision taken by the assessee should not have been taken adversely by the Ld Principal CIT and the same would not render the assessment order erroneous. He further submitted that the decision taken by the AO is one of the possible views and hence the same would not render the assessment order prejudicial to the interests of revenue. 9. On the contrary, the Ld D.R submitted that the Ld Principal CIT has passed a reasoned order demonstrating as to how the assessment order is erroneous and prejudicial to the interests of the revenue. He submitted that various expenses claimed by the assessee appears to have been incurred gratuitously, i.e., without any legal binding and hence the AO has committed an error in allowing those claims without carrying out necessary examination. 10. We have heard rival contentions and perused the record. Before going into the merits of the issue, we would like to discuss about the legal posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282. The principles laid down by the courts are that the Learned CIT cannot invoke his powers of revision under section 263 if the Assessing Officer has conducted enquiries and applied his mind to the issues. If the assessment order has been passed by causing enquiries, then it would not give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. The consideration of the Commissioner as to whether an order is erroneous in so far it is prejudicial to the interests of Revenue must be based on materials on record of the proceedings called for by him. If there are no materials on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, if the assessing officer has taken a possible view of the matter. 12. Similarly, the view taken by the Ld CIT that the expenditure incurred by the assessee on the flats allotted to it as per the development agreement cannot be considered to be non-business expenditure is his own view. Normally a businessman may follow different strategies to earn maximum profit and in the instant case, the assessee appears to have made value addition to the flats allotted to it so that it could fetch high sale price. The said strategy followed by the assessee, on commercial consideration and business strategy, cannot be found fault with merely because the Ld Principal CIT has different view on this matter. 13. We notice that the assessing officer has carried out necessary enquiries with regard to various expenses claimed by the assessee. The notice issued by the AO u/s 142(1) of the Act makes it clear that the assessing officer has examined the claim of the assessee. The assessee has also responded to the AO by furnishing replies to all the queries. Hence, it is seen that the assessing officer has accepted the claim of the assessee after carrying out necessary examination and hence it cann ..... X X X X Extracts X X X X X X X X Extracts X X X X
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