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TMI Blog2017 (6) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and in the circumstances of the case, the Learned CIT erred in initiating revision proceedings u/s 263 of the Act, on the same issue which was already considered and detailed enquiry made in the course of assessment proceedings u/s 143(3) of the Act. 4. That on the facts and in the circumstances of the case, and without prejudice to the other grounds, the Learned CIT erred in appreciating the fact that complete details in relation to the matters for which proceedings u/s 263 of the Act has been initiated were submitted before the Assessing Officer during the course of assessment proceedings. 5. That on the facts and in the circumstances of the case, and without prejudice to the other grounds, the Learned CIT erred in restoring back the matter to the file of the Assessing Officer. 6. That on the facts and in the circumstances of the case, and without prejudice to the other grounds, the Learned CIT did not give reasonable opportunity of being heard to the appellant. 2. The appellant has challenged validity of the Revision order passed by the Ld CIT's order on the plea that the AO's order u/s 143(3) dated 28.03.2016 was neither erroneous nor prejudicial to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings u/s 263. For better understanding, reasons set out in SCN are extracted below: "On perusal of the Annexure - C under the head particulars of payments made to the persons specified in Section 40A(2)(b) of the Tax Audit report of the assessee for the financial year 2010-11, it is seen that during the year under consideration the assessee company has made payments to its related party as under: i. Hiland Projects Ltd : Share of the Manpower & Office Infrastructure Cost : Rs. 42,48,756/- ii. Hiland Projects Ltd : Reimbursement of Expenses : Rs. 22,71,375/- iii. Bata India Ltd : Reimbursement of taxes and other expenses - Rs. 2,08,24,734/- iv. Bata India Ltd : Communication Charges : Rs. 63,59,366/- v. Riverbank Holdings PvtLtd : Reimbursement of Expenses and Interest on Unsecured Loan of Rs. 7,09,494/- & Rs. 43,93,972/- respectively. It is also seen from the P&L Account of the assessee that the construction expenses was increased from Rs. 17.73 crs to Rs. 168.77 crs. The major expenses under the head 'Construction Expenses' were as under: i. Cost of Land Development : Rs. 28.23 crores (Last year Nil) ii. Cost of acquisition of Land development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, which evidences of no enquiry on this issue. Further the assessee in its written submission furnished details of expenses debited in P&L Account on various head. However, no supporting evidences were produced, which were required to do so. It is worthwhile to note that even after providing opportunity, the assessee company did not furnish the complete details with supporting evidences." 6. At the time of hearing of the appeal, the Ld AR for the appellant assailed the Ld CIT's order on various grounds. He submitted that in Para 1 of the SCN, the Ld CIT enumerated five heads of expenses which were paid to related parties. In the same Para, the Ld CIT also listed six major heads of expenses grouped under the head 'Construction Expenses'. After setting out this information, the Ld CIT alleged that the assessee did not submit copy of the joint venture agreement between the assessee, BIL & CMGL and without going through the terms of the JV Agreement, facts of the case remained unverified. In this regard, our attention was drawn to the scrutiny assessment order passed u/s 143(3) dated 16.12.2010 for the AY 2008-09 wherein the AO had observed as under: "The assessee is engaged in D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entering into a Variation Agreement dated 20.04.2010.Under the Variation Agreement, the original terms between the parties were substantially varied. BIL which was holding 50% equity in the appellant company agreed to divest its equity stake for a consideration in favour of promoters of CMGL..Simultaneously, BIL transferred development rights in Batanagar property in favour of the appellant for a lump sum consideration of Rs. 90 crores by a registered development agreement. The Ld AR submitted that in Note No. 11 of Schedule 17 of the audited accounts, full disclosure of the relevant facts was made and therefore it was inappropriate on the Ld CIT's part to hold that the AO did not gather relevant information prior to passing of the order. The Ld AR further submitted that taking note of Schedule 17 of Annual accounts, in the notice u/s 142(1) dated 19.07.2013, the AO had required the assessee to furnish copy of the Joint Venture Agreement. In response the assessee had furnished copies of the Variation Agreement & Development Agreement before the AO under the cover of its letter dated 20.10.2013. The assessee also furnished its explanation with regard to nature of payments made to BI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the notice u/s 142(1) and the replies filed in response thereto, the Ld AR submitted that in respect of each of the above heads of expense, the assessee had furnished detailed break-up at the time of assessment and furnished copies of the same in the paper-book. The AR further stated that entire construction expense incurred during the relevant year and debited to the Profit & Loss Account of FY 2010-11 was ultimately carried to the WIP A/c at the close of the previous year. Referring to notice u/s 142(1), he pointed out that the AO required the assessee to furnish the working of WIP, as on the close of previous year which was furnished before the AO from which it was evident that the construction expenses incurred during the relevant year were taken into account in arriving at the closing value of WIP. He therefore submitted that the CIT's allegation that the AO did not examine major component of construction expenses was factually wrong. 6.5 Drawing our attention to Para 2 of SCN, the Ld AR submitted that the Ld CIT erroneously observed that the payment of Rs. 90 crores to BIL was not permissible as revenue expenditure since it was capital in nature and in absence of agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleased by HDFC Ltd as furnished before AO. The AR also stated that the details of interest & finance charges paid for the relevant year were furnished vide Annexure 20 of its letter filed before the AO and entire interest paid for the year was considered in the closing value of WIP. The AR therefore submitted that Ld CIT's SCN proceeded on erroneous presumption that no enquiry was conducted by the AO prior to completion of assessment. 6.7 The Ld AR finally submitted that each of the reason for which the Ld CIT considered the AO's order to be erroneous was factually wrong and therefore the assessment could not have been set aside for mere re-examination. The Ld AR submitted that it was brought to Ld CIT's attention that on each issue for which the Ld CIT considered the assessment order to be erroneous, enquiry was conducted by the AO and only after detailed examination of the facts and explanations furnished he had passed the order. Relying on the judgment of the Calcutta High Court in the case of CIT Vs J.L. Morrison (I) Ltd (366 ITR 593), he submitted that once the AO had conducted the enquiry by issuing questionnaire u/s 142(1) and the AO adopted one of the permissible course i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT had merely set aside the AO's order directing him to re-conduct enquiries and reframe the assessment as per law after giving opportunity of hearing and therefore Ld CIT's order did not cause any grievance or prejudice to the assessee. He therefore strongly urged for sustaining the CIT's order of revision u/s 263 of the Act. 8. We have considered the submissions of both the parties. We have also perused the documents furnished before us in the paper book, considered the facts of the case and the judicial decisions relied upon by the parties in their submissions. From the perusal of the SCN and the impugned order, we note that the Ld CIT having set out various reasons in show cause notice, ultimately passed the order for the reasons summed up in Para 3(iii) of the impugned order. We find that in sum and substance the Ld CIT considered the order erroneous on the ground that it was passed without making enquiries or verification of the documents and details which should have been made as the facts & circumstances demanded. We note that in Para 3(iii)the CIT observed that the assessee entered into JV with BIL & CMGL for developing a project and paid Rs. 90 crores to BIL for obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Limited (BIL) have entered into an agreement ('Development Agreement') which replaced the entire understanding between the parties as contained in earlier Joint Venture Agreement, Tripartite Agreement, First Development Agreement and Assignment and Novation Agreement for development of integrated township on land admeasuring 223.80 acres and 25 acres to the Company and RHPL respectively. Under the terms of Development Agreement: - BIL has transferred and assigned development right of above land for total consideration of Rs. 900,000,000 payable in cash and delivery of new employee housing aggregating 3.15 lacssq.ft. (approx.) by 31st March 2011 and Princep Riverfront Homes aggregating 3.25 lacssqft in phases. Out of above, consideration of Rs. 700,000,000 has been paid and bank guarantee has been provided by the Company for the balance consideration of Rs. 200,000,000 which is payable at a later date. - Accordingly, during the current year, the Company has provided for Rs. 200,000,000 and Rs. 282,303,649 towards additional consideration for land development and revised costs of new employee housing respectively. - The Company has also provided to BIL bank guarantee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,687,706,353/-, Sale promotion & advertisement of Rs. 33,910,913/-, Legal and professional charges of Rs. 4,077,049/- and Interest paid of Rs. 161,792,273/-. 13) List of persons from whom advances have been received of Rs. 457,187,007/- containing name and address and PAN. 14) Cost of Registration Fees of Rs. 48,530,398/- and contractor expenses of Rs. 389,829,139/-, salary wages and bonus of Rs. 32,659,917/- & Legal and professional fees of Rs. 19,979,648/-. 15) Details of TDS made and paid into Govt accounts during the year. 16) Details of all transactions in mutual funds during the year under consideration including opening and closing investments in Mutual Funds. 17) Details of investments made during the year explaining the sources thereof. 18) If any part of your Gross Total income includes any income not forming part of your total income (i.e. exempt income), then furnish a computation of expenditure relatable to such exempt income, applying Rule 8D with Section 14A of the I.T. Act, 1961. 19) Any other details and/or documents for the purposes of assessment." 8.3 From the above it is therefore evident that the AO had required the assessee to produce co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the letter dated 21.10.2013, the assessee had clarified that the development rights were acquired for development of the integrated township which was assessee's business activity. We also note that apart from calling upon the assessee to furnish the copy of the agreement, the AO had also required the assessee to furnish complete details of construction expenses of Rs. 168.77 crores incurred during the relevant year and also working of the closing stock along with method of valuation. The payment of Rs. 90 crores made for acquiring development rights formed integral part of Construction Expenses of Rs. 168.77 crores and these expenses were entirely taken into consideration in arriving at the closing value of WIP credited in the P&L A/c. After examining these details and having found that the cost of development rights was included in the closing value of WIP, the AO had passed the order u/s 143(3). For the reasons discussed in the foregoing therefore we do not find merit in the Ld CIT's finding that the AO did not examine the relevant facts and agreements before passing of the assessment order. 8.5 We further find that in the assessment order for the relevant year as also for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d alleged that no details of the following i) Cost of Land Development, ii) Cost of acquisition of Land development rights, iii) Registration Fees, iv) Contractor Expenses, v) Rates & Taxes & vi) Delayed Delivery charges; which were all part of 'Construction Expenses' were furnished by the assessee nor the AO had examined the details of these expenses prior to passing of the assessment order. The Ld CIT had further alleged in the SCN that the payments made to related parties were not examined by the AO in the context of Section 40A(2) of the Act. From the paper book furnished at the time of hearing, we however find that in the questionnaire issued u/s 142(1) of the Act, the AO had particularly required the assessee to furnish particulars of various expenses debited in its P&L A/c which inter alia included expenses clubbed under the head 'Construction Expenses'. From the paper book, we find that in the course of assessment, the assessee had furnished party-wise details of purchases, details of payment of development rights to BIL, details of secured & unsecured loans, details of sales promotion & advertisement expenses, details of registration fees in connection registration of deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished the AO had passed the assessment order and therefore we find that the reasons set out in the Ld CIT's SCN were not supported by or borne out from the facts available in the records. Even in the course of hearing of the appeal, the Ld. CIT DR could not bring to our notice any material which could persuade us to agree with the Ld CIT's contention in the notice that the enquiry into the facts was not conducted. On the contrary the documents filed in the paper book, particularly notice u/s 142(1) of the Act, proved that before passing of the assessment order the AO did call upon the assessee to furnish the information and details with regard to each of the head of expense set out in SCN and after examining the details furnished, the assessment order was passed. 10. On the facts set out in the foregoing therefore, we find that the assessee' case is supportedby the decision of the jurisdictional Calcutta High Court in the case of CIT Vs J.L. Morrison (I) Ltd (366 ITR 593). In this case also the assessment order u/s 143(3) was held by the CIT to be erroneous and prejudicial to the interests of the Revenue. In the SCN, the CIT had set out five specific heads of expense in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnish inter alia included copy of the Joint Venture Agreement, details of secured & unsecured loans, details of interest paid, details of Construction Expenses, sales promotion expenses, advertisement expenses, legal & professional expenses, Contractor's Expenses, registration fees, salaries & wages etc. The assessee was also required to furnish details of inventory of Closing Stock and method of its valuation with detailed working of valuation. From the material placed before us, we find that the details requisition were filed before the AO and only after examination of the documents furnished the assessment was passed on 28.03.2014. On these facts therefore we are unable to accept the Ld CIT's charge in the SCN that the AO had passed the order without obtaining any information or without conducting enquiry with regard to various items of expenses enumerated in the show cause notice. 10.2 We further find that in response to SCN, the Ld AR had furnished before the Ld CIT its explanation contending that the details of various expenses enumerated in SCN were furnished before the AO and the assessee had also furnished such details before the Ld CIT. This fact has been admitted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of errors allegedly pointed out by the ld. CIT in the order passed by the Assessing Officer under section 143(3). Although in the impugned order passed under section 263, the ld. CIT has made a reference to the written submission filed by the assessee, he has neither discussed the same nor given any finding thereon so as to point out as to what exactly are the errors in the order of the Assessing officer, which were prejudicial to the interest of the Revenue. He simply brushed aside the submission made by the assessee and held the order of the Assessing Officer to be erroneous and prejudicial to the interest of the revenue on the ground that proper and sufficient enquiry on the issues raised by him in the notice issued under section 263 was not conducted by the assessee. He even did not point out as to how the enquiry made by the Assessing Officer was not sufficient and proper and even failed to point out as to what further enquiry the Assessing Officer was expected to do on the relevant issues. In the case of Leisure Wear Exports Limited (supra) cited by the ld. counsel for the assessee, there was nothing in the revisional order passed by the ld. CIT under section 263 as to how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and circumstances of the case he comes to a possible conclusion, then it is not open to Commissioner to invoke revisionary jurisdiction just to re-examine or re-verify the issues already examined/verified at the assessment level; otherwise it will tantamount to give a second inning to the Assessing Officer to re-examine and re-adjudicate the concluded issues." In the impugned order, the Commissioner has discussed the issues and facts which according to him led to believe that the order passed by the Assessing Officer was erroneous and prejudicial to interest of revenue. He thus set aside the assessment by directing to re-examine the issues and pass fresh assessment order if found warranted after proper verification/cross verification. From the said observation of Commissioner, it is, apparent that the exercise under section 263 was made merely with a view to give a second inning to the Assessing Officer to re-examine and re-adjudicate the concluded issues. It is however, found that in the course of assessment proceedings the Assessing Officer and the Additional Commissioner had examined and considered all relevant issues and materials. It is opined that the Commissioner's ..... X X X X Extracts X X X X X X X X Extracts X X X X
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