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2017 (2) TMI 595 - ITAT MUMBAI

2017 (2) TMI 595 - ITAT MUMBAI - TMI - Revision u/s 263 - Held that:- Non verification of direct expenses as the project got occupancy certificate on 21.9.2010, the assessee in response to specific query filed necessary details of direct expenses vide Annexure-III filed copies of which are at pages 25 to 28 of the paper book. - As in the show cause notice which is in respect of interest amount of ₹ 12.84 lakhs as direct expenses, we find from the paper book that third last item of exp .....

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the above facts on record it is abundantly clear that the revisionary powers were exercised by the CIT without examining the assessment record was not justified as every issue raised in the show cause notice was examined by the AO. The AO raised specific query and assessee has filed specific reply to each and every point with detailed annexure which are on assessment file. Under this circumstance, we are not in agreement with conclusions drawn by the Commissioner that the assessment order is err .....

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unds of appeal is against the setting aside the assessment order passed under section 143(3) of the Income Tax Act, 1961 dated 9.12.2011 by invoking revisionary jurisdiction u/s 263 of the Act by the CIT. 3. Brief facts of the case are that the return of income was filed by the assessee on 25.9.2009 declaring a total income of ₹ 29,66,020/- and assessment was framed under section 143(3) of the Act vide order dated 9.12.2011 accepting the returned income. Thereafter the said assessment was .....

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dvance received from customers were not examined by the AO The said notice was responded by the assessee vide letter dated 22.10.2013 the relevant extracts of which are reproduced below: We are in the receipt of the show cause notice for A. Y. 2009-10 U/s 263 of the Act by which you have asked why the order passed by the A.O u/s.143(3) of the Act dated 09.12.2011 is not erroneous so far as it isprejudice to the interest of the Revenue on the, points raised in the show cause notice. We hereby say .....

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ng the year. The expenditure incurred on the project is carried over to subsequent year as Work in progress including the essential profit element, till the project gets completed. On completion of project, the profit is determined on salevalue of the project after considering the Work In Progress and expenditure incurred till the date of completion. (2) During assessment proceedings in response to 142 notice, our Authorised Representative have filed details in respect of Profit & Loss Accou .....

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epancies as pointed in your show cause notice as under:- (a) Assessing Officer did not verify the basis of estimating the valuation of work in progress: The Company acquired the land for its Project "Priyanaka Tulip" located at Plot Nos.19 & 19A, Sector-14, Kalamboli, Tal. Panvel, Dist. Raigad, in the financial year 2007-08. After preparing the plans and completion of other formalities, it applied for Commencement Certificate to the Local Authority, M/s. CIDCO Ltd., on 17/03/2008. .....

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Borrowed Capital 12,83,780 7 Discount (49,669) Total Direct Expenses incurred on the project till 31.03.2009 3,47,64,784 On the said expenses, the Assessee has disclosed a Profit at 21 % of the cost as per the working which was given to the Assessing Officer at the time of Assessment proceedings. The same is also enclosed for your perusal with this letter. (Annexure - 2) The A.O. applied his mind to the same at the time of completing the assessment. (b) The Assessee did not verify direct expens .....

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f ₹ 12,83, 780 on such borrowed capital As mentioned in earlier Para 2 of this letter, while calculating the Gross Profit from the Project, we have included the interest under the Direct Expenses. The fact can be verified from the detailed working of Work in Progress, submitted during the course of assessment proceedings, vide letter dated 18/08/2011 in Para 2. (d) The source and genuineness of the claim of the advances received from the customers were not examined "by the A.O. As on .....

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e issues and after considering the necessary details and explanation given by us. These issues include issues which Your Goodself have raised in the present show cause notice. In view of the fact it is submitted that the order passed by the .0. is neither erroneous nor prejudice to the interest of Revenue. As the AO after due examination of the record and explanation has passed an assessment order and there is no error in said order. It is submitted that the provisions of Section 263 cannot be i .....

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assessment proceedings. The Assessing Officer has accepted the percentage completion method for A.Y. 2009-10 as well as for 2010-11. We, therefore, submit that there is no necessity to make any changes in the profit arrived by the Assessing Officer in the percentage completion method as the whole exercise will be tax neutral. (Supreme Court in CIT vs. Realest Builders and Services, 307 ITR 208.) It is, therefore, that the Assessment Order passed by the A.O. is a valid assessment order passed an .....

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accepted policy of law as there must be a point of finality in all legal proceedings. It is further submitted that Bombay High Court in the case of Gabriel India Ltd., 203 ITR Page 108 have held that if the Income Tax Officer is acting in accordance with law and makes a certain assessment, the same cannot be branded as erroneous by commissioner simply because according to him the order should have been more elaborate. The Section 263 does not visualize the case of substitution of the judgment of .....

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ted that the order passed by the A.O. is not erroneous as well as prejudice to the interest of the Revenue. In view of the above legal and factual submission we submit that the notice U/s.263 requires to be dropped. 4. All the details/explanations on the various points as raised by the Commissioner in the show cause notice were furnished in similar manner as submitted before the AO during the course of assessment proceedings and therefore, submitting that the proceedings under section 263 should .....

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cts and merits of the case which is discussed in the following paragraphs. On the legal front, the Hon'ble Supreme Court in the case of M/s Malabar Industrial Co.Ltd 243 ITR 83(SC) has laid down the conditions precedent by which the CIT can invoke the provisions of section 263. The Hon'ble Supreme Court has held that "If the order of the A.O. Is erroneous In so far as it is prejudicial to the interest of the Revenue." It is further held that "an incorrect assumption of fac .....

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order of the ITO, the Revenue is losing tax lawfully payable by a person, It will certainly be prejudicial to the Interest of, the Revenue. Moreover the Hon'ble Kerala High Court in the case of English Indian Clays Ltd. 331 ITR 219 (Ker.) has held that a lack of proper enquiry by the Assessing Officer will render the order erroneous and prejudicial to the Interest of the Revenue. Reliance is also placed on Hon'ble Delhi High Court decision in the case of CIT vs. Goetze (India) Ltd. in I .....

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ded how the order of Assessing Officer was erroneous and prejudicial to interests of revenue. Order of the CIT could be set-aside only if findings accorded by CIT were Incorrect or if order of Assessing Officer was not prejudicial to interest of Revenue. HC observed that CIT could examine the Issue on merits even when the same was examined by Assessing Officer and that principles of 'change of opinion' did not apply. HC noted that Revenue did not have any right to appeal against the orde .....

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that the view taken by the Assessing Officer was not plausible, being legally unsustainable and Incorrect". 4.1.iii.The contention of the assessee that the stand taken In the notice u/s 263 is a mere change of opinion is also not tenable. Reliance In this regard is placed on the Chennai ITAT decision in the case of M/s Coimbatore Cable Net Private Limited Vs ACIT, Coimbatore 2012 TIOL 60 wherein it was held that when the AO believed the nomenclature given In the balance-sheet and simply ac .....

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er of the Assessing Officer Is erroneous and prejudicial to the Interest of the revenue though the Assessing Officer has passed the order after taking a possible view. Reliance In this regard is also placed In the Kerala High Court Judgement in the case of Bhatsons Acquatic Products 329 ITR 67 (Ker). 4.1.iv.It has been held by the Calcutta High Court in the case reported In 31 ITR 872 that if the decision of the Assessing Officer Is not In accordance with the law, the same can be revised by the .....

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revise it. Reliance is also placed on the decision of Honourable ITAT, Indore Bench In the case of Frlgoscandla Winner Food Process System (79 ITD 357). 4.1.v.Hence, the contentions raised by the assessee against the invocation of section 263 are not tenable and the same are rejected. 4.2. The assessee has submitted detail of WIP, direct expenses, Interest cost of ₹ 12.84 lacs and detail of advances received from the customers, vide their letter dated 22.10.2013. Further, detail has. been .....

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of this proportionate land cost is shown at ₹ 98,72,832/-. However, in the detail filed vide dated 22.10.2013 it is claimed that proportionate land cost was 1,05,48,358/- out of total direct expanses of 3,47,64,784/-. Further, it is seen that gross profit has been estimated @ 21 % without giving any base and support for the same. The Assessing Officer has not examined properly the working of WIP, as there is a difference in proportionate land cost as mentioned hereinabove, and estimation .....

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he Invocation of section 263 are not tenable and the same are rejected. 4.2. The assessee has submitted detail of WIP, direct expenses, Interest cost of ₹ 12.84 lacs and detail of advances received from the customers, vide their letter dated 22.10.2013. Further, detail has. been filed vide letter dated 28.10.2013. 4.2.1 I have considered the submission of the assessee. The facts and merits of the case are discussed In following paragraphs:- 4.2.1.i The assessee vide its letter dated 22.10. .....

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,64,784/-. Further, It Is seen that gross profit has been estimated @ 21 % without giving any base and support for the same. The Assessing Officer has not examined properly the working of WIP, as there is a difference In proportionate land cost as mentioned hereinabove, and estimation of profit Is without any base and support. Thus, the Assessing Officer has not applied his mind and has not verified the facts in proper prospective. Therefore, the assessment order dated 09.12.2011 is erroneous an .....

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" vide their letter dated 22.10.2013 claiming that the same was filed before the Assessing Officer. As per this Annexure flats have been sold on the same date and the same floor but there is a vast difference in rate per sq ft. for example:- Sr.No. Name of the Flat Owner Flat No. Date of booking Date of registration Rate per sq.ft 1. Deepak G. Tripathi 201 15.03.2008 17.07.2008 4490.99 2 Deepak G. Tripathi 202 15.03.2008 17.07.2008 3262.43 3 Deepak G. Tripathi 203 15.03.2008 17.07.2008 3231 .....

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stigation and required verification. During the revision proceedings the assessee was asked to give detail in this regard. The same was furnished vide letter dated 28.10.2013 as per "Annexure-z". From this it is seen that the rate per sq. ft has been shown asunder:- Sr.No. Name of the Flat Owner Flat No. Date of booking Date of registration Rate per sq.ft 1. Deepak G. Tripathi 201 15.03.2008 17.07.2008 4491 2 Deepak G. Tripathi 202 15.03.2008 17.07.2008 4439 3 Deepak G. Tripathi 203 15 .....

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erroneous and prejudicial to the interest of the Revenue. 6. In view of the above, it is appropriate to set aside the assessment to be made afresh by the Assessing Officer on the above points following the directions given hereinabove paragraphs. 5. The ld. AR during the course of hearing before us drew our attention the questionnaire attached with notice u/s 142(1) dated 17.6.2011 and pointed out that the AO specifically raised querries on each and every point seeking details and explanation f .....

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ld. Counsel pointed out that in reply on specific queries from the AO in the notice, the assessee vide letter dated 20.6.2011 filed details of all expenses copies of which are at pages 25 to 28 of the paper book. On point No. (c) of the show cause notice u/s 263 of the Act , the ld. counsel , while referring to page 24 of the paper book which contained the details of WIP of Kalamboli Project, pointed out that ₹ 12,83,780/- interest on loan was specifically shown in the details WIP at sr. .....

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ng the year, total amount received and balance receivable which were replied by the assessee by filing the necessary details filed vide para 12 of the written submissions dated 20.6.2011 copies of which are placed in the paper book at page 29-30. The ld. AR submitted before us that the CIT has wrongly exercised the jurisdiction under section 263 of the Act as the conditions as provided in section 263 for invoking the provisions of section 263 were not satisfied as the assessment framed by the AO .....

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notice. The ld. AR finally in defense of his argument relied upon the decision in the case of CIT V/s Fine Jewellery (India) Ltd. [2015] 372 ITR 303 (Bombay) and CIT v. Gera Developments (P.) Ltd. [2016] 387 ITR 691 (Bombay) and prayed that in view of the ratio laid down in the decision (supra) the proceedings under section 263 initiated by the CIT be quashed and assessment order passed by the AO should be upheld. 6. On the contrary, the ld. DR relied heavily on the order of the CIT by submittin .....

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is to invoke the revisionary powers under section 263 of the Act which was rightly exercised by the Commissioner. The ld. DR finally prayed that the order of CIT be confirmed by dismissing the submissions of the assessee. 7. We have heard the rival contentions and perused the material placed before us including the impugned orders and case laws relied upon by the assessee. We find that the CIT has exercised the revisionary powers by issuing show cause notice dated 17.06.2011 under section 263 o .....

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the questionnaire dated 17.6.2011 vide para 23 specifically asked the assessee for the details of WIP qua Kalamboli which were filed by the assessee vide letter dated 20.9.2011 Annexure-2 submitting the details as called for by the AO copy of which is filed at page 24 of the paper book before us. On second issue raised by the CIT qua non verification of direct expenses as the project got occupancy certificate on 21.9.2010, the assessee in response to specific query filed necessary details of di .....

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neness of advances received from the customers, the AO called upon the assessee vide para 12 of the questionnaire dated 17.6.2011 to furnish the details of booking advances in specified format which was replied vide letter dated 20.9.2011 vide para 12 forming part of the assessee s paper book at pages 29 and 30. From the above facts on record it is abundantly clear that the revisionary powers were exercised by the CIT without examining the assessment record was not justified as every issue raise .....

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e Act were raised by the AO and replied by the assessee as stated hereinabove. We find that there are two possible views and the AO has taken one of the possible views which is in favour of the assessee and with which the Commissioner does not agree , the order passed by the AO should not be treated as prejudicial to the revenue unless the view taken by the AO was unsustainable in law. In the case of Fine Jewellery (India) Ltd. (supra) it has been observed and held as under: 8. We find that the .....

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s is capital expenditure. This itself would be indication of application of mind by the Assessing Officer while passing the impugned order. The fact that the assessment order itself does not contain any discussion with regard to the balance amount of expenditure of ₹ 1.76 crores i.e. ₹ 2.94 crores less ₹ 17.98 lakhs claimed as revenue expenditure would not by itself indicate non application of mind to this issue by the Assessing Officer in view of specific queries made during t .....

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r during the assessment proceedings itself indicates that the view that the same were in the realm of revenue expenditure, is a possible view. Therefore, we find no fault in the impugned order having followed the binding decision of the Supreme Court in the case of Max India Ltd. (supra), while allowing the appeal before it. In the case of Gera Developments (P.) Ltd.(supra), it has been observed and held as under : 7. We have considered the rival submissions. With regard to issue (a) i.e. taxabi .....

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as deposit as the same is subject to being refunded in the absence of the environmental clearance. Thus, we find that the Assessing Officer has taken a view/formed an opinion on the facts before him and such a opinion cannot be said to be an erroneous as it does not proceed on the incorrect assumption of facts or law and the view taken is a possible view. Therefore, as held by the Apex Court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 where two views are possible and th .....

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ssment proceedings. This query was responded to by the respondent - assessee justifying the warranty expenses. The Assessing Officer being satisfied with regard to the justification offered, allowed the claim of warranty expenses as made by the respondent - assessee. It is thus clear that the Assessing Officer had considered the issue by raising questions during the assessment proceedings. The mere fact that it does not fall for discussion in the assessment order would not ipso facto lead to the .....

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