TMI Blog2023 (11) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... ad business income and there is no justification in estimating the rental value from those flats and notionally computing annual letting value under section 263 of the Act. Therefore invoking the jurisdiction u/s 263 by Ld. PCIT is not sustainable in the eyes of law, hence impugned order passed under section 263 is ordered to be set aside. Appeal filed by the assessee is allowed. - Shri Kuldip Singh, Judicial Member And Shri S Rifaur Rahman, Accountant Member For the Assessee : Shri Dharan Gandhi, A.R. For the Revenue : Shri Manoj Kumar Sinha, D.R. ORDER PER : KULDIP SINGH, JUDICIAL MEMBER: The appellant, M/s. Coronate Constructions (hereinafter referred to as the assessee ) by filing present appeal sought to set aside the impugned order passed by the Principal Commissioner of Income Tax (for short 'the PCIT') under section 263 of the Income Tax Act, 1961 (for short the Act ) by invoking the revisionary jurisdiction for the assessment order dated 22/12/2019 assessing the total income at Rs. 1,99,14,700/- by the Assessing Officer (AO) under section 143(3) of the Act on the grounds inter-alia that: 1. The Ld. PCIT erred in invoking juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Amount in Rs. Profit and gains from business profession (As per return) 19927198 Gross Total Income 19927198 Deduction u/s Chapter VIA 12500 Total Income 19914698 Rounded Off u/s 288A 19914700 3. However Ld. PCIT by invoking the revisionary jurisdiction prima-facie found the assessment order passed by the AO under section 143(3) of the Act as erroneous in so far as it is prejudicial to the interest of the revenue and thereby set aside the same by way of issuance of notice under section 263 of the Act which is as under: 4. After considering the written submissions and contentions raised by the assessee company the Ld. PCIT reached the conclusion that the AO while making the assessment under section 143(3) of the Act for the year under consideration has failed to tax the annual value of the property forming part of the closing stock under the head income from house property and thereby held the assessment order passed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made and sales, and details of the advance receipt against flat booking. It is further contended by Ld. A.R. for the assessee that the AO was aware of the fact that out of 10 offices which were unsold as on 31/3/2017 the booking advance of 8 offices was received before 31/3/2017 and the remaining two offices were used as place for keeping raw material of the project. It is also contended that the entire details have been shown in the balance sheet under the head advance received against booking and since booking amount is received the same cannot be put to use for earning rent and drew our attention towards audited financials available at page 1 to 26 of the paper book. 10. The Ld. A.R. for the assessee challenging the impugned order further contended that the AO has raised specific query in the notice dated 3/7/2019 issued under section 142(1) of the Act available at page 33 to 37 of the paper book wherein queries interalia were as under: 2. Please furnish detail of unit wise inventory of your stock in trade as on 01.04.2016 and 31.03.2017. 3. Please furnish method of accounting followed for valuation of closing stock along with detailed calculation of the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lued at cost or market value whichever is lower and when unsold stock is sold, sale is booked in said year and profit is declared accordingly. The calculation of valuation of closing stock of Wing B project has been attached in point no. 1(v) above. (10) Reconciliation of opening closing stock along with additions made and sales made has been attached in point no. 1(v) above. ....... ......... (16) Regarding your Honor's query relating to reconciliation of turnover in service tax return ITR, we would like to state as under: a. Under Service Tax Rules, service tax is chargeable even on advances against booking from the purchaser, who has booked office in Project undertaken by the assessee-firm. However, under Income tax Act, income is chargeable to Tax on basis of Method of Accounting followed by assessee-firm. b. As mentioned in point 1 above, the assessee-firm is following Percentage of Work Completed Method (WIP Method) to declare profit from Project. The advance received from customers till the O.C. is received is shown as advances against booking under Current Liabilities in balance sheet and on completion of the project, sales are declare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the form of date of commencement, date of completion, number of units, flat constructed along with supporting proof and also to furnish a statement giving details of units/flats sold wing-wise in the given format. In response to the aforesaid queries assessee filed submissions dated 11/11/2019 by duly explaining the queries as under: 1. The details of project undertaken by assessee-firm along with copy of Commencement Certificate and Occupancy certificate are attached herewith for your Honor's verification. 2. We are herewith attaching the statement reflecting units (office) sold in the format as specified by your Honor. 3. We are herewith attaching the statement reflecting Advances received against office booking in the format as specified by your Honor. 4. The wing wise details of revenue recognition and offering of profit for A.Y. 2014-15 to A.Y. 2017-18 will be submitted in due course 14. The assessee also brought on record copy of OC available at page 81 of the paper book and details of advances received upto 31/03/2017 available at page 84 of the paper book which is as under: B WING ADVANCE RECEIVED UPTO 31.03.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) laid down that twin conditions are required to be satisfied before invoking the jurisdiction under section 263 of the Act which are: 1. That the order of AO must be erroneous and 2. As consequence of passing an erroneous order prejudice is caused to the interest of revenue. 18. It is further held that in the following circumstances the order of AO can be held to be erroneous: (i) if the Assessing Officer's order was passed on assumption of incorrect facts; or assumption of incorrect law; (ii) Assessing Officer's order is in violation of the principles of natural justice; (iii) if the AO's order is passed by the without application of mind; or (iv) if the AO has not investigated the issue before him. 19. Hon'ble Supreme Court in case of The Malabar Industrial Co. Ltd. (supra) further held that the phrase prejudicial to the interest of revenue has to be read in conjuncture with erroneous order passed by the AO. Hon'ble Supreme Court further held that in case AO adopts one of the courses permissible in law and it has resulted in loss to the Revenue and where two views are possible and the AO has taken one view with which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the business exigencies in case of real estate developers, the said section has been amended to provide that where the house property consisting of any building and land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to one year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil. 17.3 Applicability: This amendment takes effect from 1st April, 2018 and will, accordingly apply from assessment year 2018-19 and subsequent years. 23. So the AO, after examining the complete details filed by the assessee, proceeded to decide the issue in question by following the CBDT circular No.2/2018 by framing the assessment by not determining the national income from unsold flats held by the assessee as stock in trade. 24. So far as contention raised by Ld. D.R. for the Revenue that the AO has not passed speaking order by discussing the issue in question is concerned it is settled pri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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