9911796707
TMI Blog2025 (5) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year 2014-15 was filed by the Assessee Company on 23-09-2014 declaring total income of Rs. 82,77,980/-. The Assessee Company is engaged in the business of real estate development by acquiring land. During the course of scrutiny assessment proceedings, in response to notice issued under section 142(1) of the Act, the Assessee had submitted all the relevant details from time to time, together with the books of accounts and supporting documents and bills and vouchers. The same were examined by the Learned AO on test check basis and the return of income was accepted in the scrutiny assessment framed under section 143(3) of the Act dated 05-12-2016. This assessment was sought to be revised by the Learned PCIT by invoking revisionary jurisdiction under section 263 of the Act by treating the order of the Learned AO erroneous in as much as it is prejudicial to the interest of the revenue on the following aspects:- "The assessment of the company for the AY 2014-15 was completed u/s 143(3) of the IT Act, 1961 in the month of December, 2016 at an income of Rs. 82,77,980/-. During the year, the assessee sold agricultural land for a consideration of Rs. 66,92,00,000/-. Out of to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into a development agreement dated 28-2-2007 with a firm in the name and style of M/s DLF Commercial Projects Corporation (hereinafter referred to as DCPC). The agreement dated 28-2-2007 was subsequently modified vide supplementary agreement dated 2-8-2010. Accordingly, in pursuance of its business activities, the assessee had acquired land for the purpose of development in the earlier years at Gurgaon(Haryana). The reply of the assessee filed before the learned PCIT which is reproduced in order of learned PCIT is as under:- "3. At the outset, it is submitted that the transaction referred to in your notice under reference has been examined in detail by the Ld. AO during the assessment proceedings as is evident from the submissions/ documentary evidence placed on record, which would clearly reveal that the AO after thorough application of mind has accepted the transaction entered into by the assessee for the sale of land in question as well as the taxability of the sale amount received, respectively, by the assessee and the Developer i.e. DCPC. 4. it is abundantly clear that:- a. the AO did not make any adverse comments on the evidence filed in the shape of copy of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement dated 28.02.2007, Article 1 elaborated "Definitions & Interpretations" of the certain words or phrase used in the Agreement. Consequently, "Consideration" was defined as, "Means a sum of Rs. 170 lakhs per Acre of the Scheduled Property." In the supplementary Agreement dated 02.08.2010, the definition "Consideration" under Article 1.1 (Agreement dated 28.02.2007) was deleted in its entirety and replaced with "Consideration means cost of land plus Rs. 5 lakhs per Acre". It may be noted from Clause 2.6 of Article 2 of Agreement dated 28.02.2007 that the Developer had the right to offer to purchase the scheduled property at the price of Rs. 170 lakh per Acre and on exercise of such right, the assessee company shall be under an obligation to sell the scheduled property to the Developer and/or any of its affiliates or nominees. Accordingly, the assessee company sold land measuring 20.91250 Acres to the nominee of the Developer. After retaining amount, ie, cost of land plus Rs. 5 lakh per Acre, as per the Supplementary Agreement, supra. The balance amount Rs. 32,36,52,000/- was paid to the Developer, who after paying Rs. 78,16,000/- to the assessee in compliance with Supplemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect each and every type of mistake or error committed by the assessing officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not conferred to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income Tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of an order of assessing officer cannot be treated as prejudicial to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the specified time in the agreement and hence the sums were transferred to them for not providing any service by the assessee. The Learned AO failed to examine as to whether this amount was spent wholly and exclusively for the purposes of business carried on by the assessee and was an allowable expenditure. 6. The short point that arises for our consideration here is as to whether the learned AO had made necessary enquiries with regard to the above during the course of scrutiny assessment proceedings or not. In this regard, we find that the Learned AO issued notice u/s 142(1) of the Act dated 27- 06-2016 raised following queries to the assessee during scrutiny assessment proceedings :- Question No. 1 As per direction of Instruction No. 20/2015 [F.No. 225/269/2015-ITA-II] dated 29.12.2015 it is intimated that your case has been selected for "Limited Scrutiny" with the following reasons:- (i) Real estate business with high closing stock (verify whether the assessee has adopted completion method). (ii) Large value sale of consideration of property in ITR is less than sale consideration of property reported in TDS return u/s 194IA. Question No. 8 Details regarding land sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong with the said confirmation, DLF Commercial Projects Corporation income tax return acknowledgement for the assessment year 2014-15 is also placed on record in page 43 of the paper book together with their audited financial statements which are enclosed in pages 44 to 47 of the paper book. Further, the bank statement of DLF Commercial Projects Corporation duly evidencing the credit of the amounts in their bank account in this regard is also enclosed in page 48 of the paper book. No error could be attributed on the said transaction carried out by the assessee. The entire narrations of facts together with supporting documents were also placed on record by the assessee before the learned PCIT. The learned PCIT nowhere says as to how the order of the learned AO is erroneous except making a bold statement that the learned AO has not made necessary enquiries with regard to the said transaction. But from the perusal of the aforesaid facts, we find that the learned AO indeed had made adequate enquiries and had taken the enquiries to the logical extent. Hence, it is not a case of lack of enquiry or even inadequate enquiry. Accordingly, the deeming fiction provided in Explanation 2 to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 18 II Income accounted for and taxed in the hands of Chrysilla Builders & Developers P. Ltd. (Assessee) Cost of land 34,29,06,797 Add: Profit @ Rs. 5 lakh per acre 1,04,56,250 35,33,63,047 As per Profit & Loss a/c * Income from operation 34,55,48,000 * Compensation 78,16,000 (as part of other income) 35,33,64,000 35,33,64,000 684 & 89 III Income accounted for and taxed in the hands of DLF Commercial Projects Corporation Amount received as per sale deed 32,36,52,000 Less: Compensation paid to assessee 78,16,000 Revenue from operations 31,58,36,000 31,58,36,00 42-48 Hence it goes to prove that there is absolutely no loss to the exchequer qua the subject mentioned transactions as the concerned parties have duly offered to tax in their respective returns with regard to their respective share. Consequentially, there is no prejudice to the interest of the revenue. Revision jurisdiction u/s 263 of the Act could not be invoked for carrying out a revenue neutral exercise. R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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