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TMI Blog2021 (7) TMI 1186X X X X Extracts X X X X X X X X Extracts X X X X ..... s income from other sources. 3. The assessee has also raised additional ground, which reads as under: 'For that the impugned order dated 18.6.2020 is bad in law and is "liable to be quashed for the same being passed beyond the period fixed under the statute sub-section (2) of Section 263 of the I.T. Act, 1961." 4. At the outset, ld. CIT DR with regard to additional ground raised by the assessee, submitted that in this case proceedings u/s. 263 of the Act for the assessment in question were getting time barred on 31.3.2020. However, the Govt. of India, Gazette Notification dated 31.3.2020 under the Taxation & Other Laws (Relaxation of Certain provisions) Ordinance, 2020 (No. 2 of 2020) extended the time barring date for such matters till 30.6.2020. In view of above Notification of Govt. of India, the order u/s. 263 is passed by Ld. Pr. CIT and, therefore, the additional ground raised by the assessee does not deserve to accept for adjudication, to which, ld. A.R. had no objection. In view of above, we did not accept the additional ground of appeal of the assessee. 5. The assessee before us is engaged in the real estate business, and filed its return of income on 30.9.2015 di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny" as per CBDT's instruction No. 20/2-15 dated 29.12.2015, to ascertain whether non-recognition of revenue by following percentage completion method yield any result which prejudicial to the interests of revenue. The assessee had disclosed Nil income for the year under consideration. But, the A.O. had not inquired/investigated the issue in question from revenue's perspective, which ought to have done by him on the facts of the case discussed above. Such failure on part of the A.O. had made the assessment both erroneous and prejudicial to the interests of revenue. 4. Further, in the P & L. account for the year ending 31.03.2015, you had not recognized any revenue from operation. Only 'other income' i.e. interest received during the year under consideration was credited to P & L account. As such, no expense relating to construction activities should have been debited to the P & L account, but the same could have debited following expenditures incurred towards construction of flats under the head other expenses in the P & L account (Schedule-18) as given hereunder: 1. Construction material ; Rs. 3,06,94,933/- 2. Labour Charges : Rs. 1,09,20,418/- 3. Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no revenue loss to the Department. vi. In Assessment year 2014-15, the A.O. had raised demand and on further appeal, the ld. CIT(A) dropped the demand. Reliance was placed on the following decisions: (i) CIT vs. Hyundai Heavy Industries Co. Ltd., 210 CTR (SC) 178. (ii) CIT vs. Bilahari Investment Pvt. Ltd., 215 CTR (SC) 201. Others income Taxation of other income, which includes interest income is taken care in A.Y. 2016-17 and taxation of the same in A.Y. 2015-16 would amount to double taxation and more tax of Rs. 1,90,282/- has been paid and hence, there is no loss to revenue. 6. None of these submissions impressed the learned Pr. Commissioner of Income Tax. Ld. Pr. CIT observed that in "limited scrutiny", the A.O. is required to restrict the scope of enquiry to the issues identified for the purposes whereas if the escapement of income exceeds Rs. 5 lakhs, the A.O. is required to convert the case to the 'complete scrutiny'. In this case, the case which are not picked for scrutiny, happens to be almost 98% of the returns filed by the assessee. Hence, the matter is required to be subjected to "complete scrutiny". Accordingly, he rejected the contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued and in response thereto, the assessee furnished all details/documents/accounts for verification and same were verified and examined by the A.O. Thereafter, assessment u/s. 143(3) was completed accepting the returned income. He submitted that the assessee company followed the project completion method recognised by Revenue AS-7 since its inception. He submitted that the Pr. CIT has made allegation with respect to Jamuna Residency located at Chandikhole meant for Tata Steel Ltd., residential complex having area 106817 sq.ft. The project Jamuna Residency was completely sold to Tata Steel Ltd., as per agreement dated 18.2.2013 and under this agreement, agreed to purchase all the flats along with its entire area by making payment in a phased manner for sale consideration at Rs. 28,00,00,000/-. However, due to some dispute, no advance was received by the assessee for the assessment year 2015-16. He submitted that after completion of project, the assessee has executed a sale deed in favour of Tata Steel Ltd., on 15.12.2015 for a consideration of Rs. 30,27,79,725/-. The assessee company has disclosed the sale of Jamuna Residency in the return of income filed for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 28.11.2018 against the said order of the Assessing Officer for assessment year 2015-16 and submitted that the addition made by the A.O. after considering the facts and circumstances of the case, of CIT(A), the addition made by the A.O. had been dismissed and deleted by observing that the appellant sale was completed on the revenue from the project was recognised only in A.Y. 2016-17 as the assessee was following the project completion of method of accounting. Ld. counsel further submitted that as per the proposition rendered by Hon'ble Delhi High Court in the case of CIT vs. DLF Universals Ltd. in ITA No. 159 & 326/2010 order dated 21.12.2016, the assessee is doing only project, which was completed in subsequent assessment year 2016-17 and on completion of project, the assessee has offered to tax on the entire income pertaining to the project and has paid all due tax to the exchequer. Ld. counsel also drew our attention to page 106 of APB and submitted that the assessee being a honest tax payer, on the completion of project, the assessee has offered the income to tax etc to the Revenue and no payment is lying against the assessee. 13. Ld. counsel strenuously contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om customers cannot be treated as "business income" and should be treated as "income from other sources" which is completely contrary to the settled position of law inasmuch as the advances due to surplus floating fund in shape of Loan to others have been created out of the advanced money received by the assessee from the prospective buyers i.e. Tata Steel Limited. He submitted that the advances due to surplus floating fund in shape of Loan to others and interest accrued thereon were very only and actually utilized for completion of the projects. The differential amount arising out of interest received and interest paid to loan account has been adjusted in Work-in-progress (WIP), thereby the work in progress constituting of difference amount of interest as loss/profit either reduces or increases the work in progress. He submitted that in this year the work in progress has reduced to the extent of difference in interest. Thus, the interest amount on the advances due to surplus floating fund in shape of loan to other by no stretch of imagination can be taken as "income from other sources" and thus, on this score, the impugned order of Pr. CIT is not sustainable in the eye of law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case. Ld. Counsel placing reliance on the decision of Hon'ble Karnataka High Court in the case of Coffeeday Global Ltd. vs. Addl. Commissioner of Income Tax and others, 433 ITR 321 (Karn) submitted that res judicata does not apply to the tax proceedings but principle of consistency is always respected by the tax authorities, which has not been done by Pr. CIT while passing the impugned order. Ld. counsel has also submitted that the main issue here hinges around the fact that the project completion method followed by the assessee company is proper and correct or not and reply to the said question in favour of the assessee can easily be gathered by the order of Ld. CIT(A) dated 28.11.2018 (supra) for immediately preceding assessment year 2014-15 in the identical facts and circumstances of the case and, therefore, the impugned order cannot be held as sustainable. 19. Ld. counsel submitted that by way of impugned order u/s. 263 of the Act, Ld. Pr. CIT has expressly set aside the assessment order but if the assessment order and first appellate order is taken together then it is clear that Pr. CIT has set aside the order of Ld. CIT(A), for which he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said project and also paid all due taxes etc. thereon. Therefore, we are unable to agree with the allegation of Pr. CIT that the orders of the authorities below are erroneous and prejudicial to the interest of the revenue. In our humble understanding, Ld. Pr. CIT is not empowered to invoke revisionary powers under section 263 of the Act in such a situation, where a view has been taken by Ld. CIT(A) in the similar facts and circumstances of the case, which has been accepted by the department without any further dispute or litigation. It has been held by Hon'ble Karnataka High Court in the case of Coffeeday Global Ltd. (supra) and other various land mark judgments of Hon'ble Supreme Court and Hon'ble High Courts that the principle of res judicata does not applicable to tax proceedings and principle of consistency must be followed by the revenue authorities which is a mandate of tax jurisprudence. This principle supports the case of the assessee challenging the invocation of revisionary powers u/s. 263 of the Act. 23. We may also point out that in the language used by the legislature in sub-section (1) of Section 263 of the Act reads as follows: "263. (1) The Princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed in the year under consideration raising demand of tax and amount of tax would be raised for that period and consequently the tax liability would be decreased due to increase of brought forward work-in-progress by the same amount in the immediately subsequent year raising a refund in favour of the assessee. Therefore, the entire exercise is revenue neutral which is not allowed in the garb of revisionary powers u/s. 263 of the Act. 25. On this issue, we are in agreement with the contention of Ld. CIT DR that the interest income accrued from funds available with the assessee have to be treated as "income from other sources" and this is a well settled proposition of accounting principles and findings of Ld. Pr. CIT in this regard is correct. In this peculiar situation and in the facts and circumstances of the case, the Pr. CIT picked up to revise the assessment order for the assessment year 2015-16 and the project was completed in the subsequent assessment year i.e. 2016-17 and undisputedly, the assessee has offered the entire income accrued to it from the said project and also paid entire tax etc thereon in A.Y. 2016-17. Obviously, when the interest income in A.Y. 2015-16 will be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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