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TMI Blog2018 (12) TMI 1666X X X X Extracts X X X X X X X X Extracts X X X X ..... registered valuer which is in consonance with the amount of investment recorded in books of accounts. 3. The assessee craves to amend, alter and modify any of the grounds of appeal. 4. The appropriate cost be awarded to the assessee." 2. The assessee is a company and engaged in the business of running of hotel at Sawai Madhopur. The assessee filed its return of income on 28th September, 2013 declaring Nil income. The AO completed the scrutiny assessment under section 143(3) on 14.03.2016 at Nil income by accepting the income declared by the assessee in the return of income. Subsequently, on examination of assessment record, the ld. Principal CIT considered that the assessment order was erroneous in so far as it was prejudicial to the interest of the revenue on the issue of investment in the fixed assets under the head Income from Business and Profession which was declared and accepted at Rs. 2,20,03,275/- whereas the value of the same was shown in the bank's survey at Rs. 3.52 crores. The ld. Principal CIT has also made a reference to the Surveyor-cum-Valuer's Certificate dated 2nd October, 2012 which was with the bank for obtaining the loan for construction of the hotel bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as plant and machinery estimated at Rs. 2.33 crores. The bank sanctioned the loan of Rs. 2.00 crore based on the report of estimated cost of the resort at Rs. 2.33 crores. The AO after considering the material available on record and the fact that work completion and loan utilization certificate dated 2nd October, 2012 was also furnished by the bank has accepted the cost of construction as recorded in the books of account at Rs. 1,81,49,000/-. The ld. A/R has further submitted that the assessee also furnished a valuation report of registered valuer who has estimated the cost of construction of the hotel building at Rs. 1,57,76,000/-, therefore, the cost of construction recorded by the assessee in the books of account cannot be faulted with. Since the AO has made specific investigation and enquiry on the issue and about the cost of construction of the hotel building, the ld. Principal CIT cannot assume jurisdiction under section 263 merely because the acceptance of the cost of construction by the AO was not agreed to by the ld. Principal CIT. Further, the whole basis of invoking the provisions of section 263 is the project report filed with the bank at the time of taking the loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the ld. D/R has submitted that once the AO has failed to conduct a proper enquiry on the issue, then it renders the order passed by the AO erroneous in so far as it is prejudicial to the interest of the revenue. The ld. Principal CIT was justified in invoking the provisions of section 263 when there is a tangible material showing that the assessee understated the cost of construction in the books of accounts. 5. We have considered the rival submissions as well as the relevant material on record. Since the assessee has constructed the resort in question and has not shown any income during the year under consideration, therefore, the limited scrutiny during the assessment proceedings was only with respect to the cost of construction/investment made in the fixed assets by the assessee. The AO during the course of assessment proceedings had issued a query letter dated 3rd March, 2015 wherein various queries were raised including the details of additions of Rs. 2,20,03,275/- as per the schedule of fixed assets of the Audit Report and copy of the supporting books and vouchers for acquisition of the fixed assets was also called from the assessee. The AO has also asked the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having inflated value and another was produced before the AO for the purpose of income-tax. The assessee took the plea in the said case that the Balance Sheet produced before the bank for taking the loan does not reflect true financial position of the assessee and, therefore, not relevant. However, the Hon'ble High Court while dismissing the appeal of the assessee confirmed the order of the Tribunal by holding that the assessee cannot be permitted to take the benefit of the financial statements produced before the bank showing an attractive financial position for taking the loan and then prepare a different Balance Sheet and financial statement for the purpose of income tax. In the case in hand, it is not the case of two sets of financial statements prepared by the assessee, one for taking the loan and another for the purpose of income tax and other accounting purposes. Therefore, in our opinion, the decision relied upon by the ld. CIT D/R is not applicable in the facts of the present case where only the project cost of construction of the building was produced before the bank for the purpose of taking the loan for construction of the hotel building. The building was constructed su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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