TaxTMI 
TaxTMI 
2015 (1) TMI 866
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....hat the assessment having been framed without application of mind by the AO is against the facts and circumstances of the case. 3. That the Ld. CIT (Central) has failed to appreciate the various replies and submissions with documentary evidences as filed by the assessee during the course of proceedings before him. 4. That the Ld. CIT (Central) having set aside the case to the Assessing Officer for completion of assessment denovo proves beyond any doubt that the he is not of confirmed view and which is contrary to the judgment of Jurisdictional High Court i.e. Punjab & Haryana High Court in the case of M/s Kanda Rice Mill as reported in 178 ITR 446. 5. That the appellant craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed off. 2. Briefly, the facts of the case are that in this case, return of income was filed declaring income of Rs. 1,26,87,760/- and assessment was completed under section 143(3) of the Act vide order dated 29.12.2009 at an income of Rs. 1,36,38,920/- mainly by disallowing the interest of Rs. 8,52,164/- on invest....
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....d it was found that provision made in this year and last year it was very small provision made therefore, a huge provision has been created by debiting to some receipts which is not clear from record. Only actual expenses are allowable and not the provision. Professional charges and transformer expenses were found not available on record and it was considered that these expenses needs to be treated as part of the trading account and proportionate part of such expenses may be added to the closing stock of land of the society. 4. The ld. CIT also noted that assessee received advances from the customers which is to be treated as trading receipts and accordingly explanation of the assessee on these items were called for. 5. The assessee filed detailed reply before ld. CIT dated 25.01.2012 in which the assessee raised various objections which have been discussed in the impugned order. The assessee briefly explained that it has been carrying on business of Developers & Colonizers and is following project completion method of accounting regularly from year to year. The various details and information were submitted in the course of assessment proceedings and assessment has been comp....
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....etails were produced before Assessing Officer. The ld. CIT, however, did not accept the contention of the assessee and was of the view that assessee is following mercantile system of accounting and is required to account for the expenses on accrual basis. Further, the provision for development expenses cannot be allowed deduction/expenditure. The ld. CIT was also of the view that even if consistent method was followed on accounting but there is an under-statement of the income in the year in consideration, therefore, assessment order was erroneous in so far as prejudicial to the interest of the revenue. He was also of the view that these expenditures should be added to the closing stock as the nature of the expenses may not be relevant. 7. The ld. CIT also did not accept contention of assessee with regard to payments of external development charges to PUDA. As regards loan and advances, the ld. CIT noted the submission of the assessee that advances have been made for purchase of land for business purpose only and therefore, interest cannot be disallowed. The ld. CIT, however noted that Assessing Officer has not verified this aspect and has not made any enquiry. With regard to th....
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....of expenses on construction and called for the explanation of the assessee in which the assessee explained that details of expenses debited against sale of plots were filed before Assessing Officer and have been verified. The ld. CIT, however did not accept contention of the assessee as no enquiries have been made by Assessing Officer on this issue. The ld. CIT thereafter noted that various replies have been filed by the assessee before Assessing Officer but there is no reply dated 01.12.2009 and even order-sheet does not show filing of such reply, therefore contention of the assessee is not verifiable. Similarly, ld. CIT noted that in-fact, order-sheet shows filing of the replies on 09.10.1009, 20.11.2009 and 01.12.2009. 9. The ld. CIT also noted that provision for maintenance was created against sale of the school. The assessee submitted that assessee company was under an obligation to maintain roads/parks etc. of the school premises for stipulated period and all these expenses have been examined by the Assessing Officer before passing the assessment order. The ld. CIT, however did not accept contention of the assessee and was of the view that Assessing Officer passed the asse....
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....ore, Section 2(22) (e would not apply. With regard to provision for maintenance deposit, it was created on sale of the plots of lands and was business expenditure. The professional charges and transformer charges have been paid to PSEB for regular and uninterrupted electricity supply. The advances from customers have been received against the proposed sale of the plots. The sale is not complete till the full payment is made and possession is handed over to the proposed buyers. Since, part amounts have been received as advances, therefore, it could not be treated as trading receipts for the assessee. He has filed details of the external development charges in the Paper Book to show that same have been paid as per demand raised by the State Government authorities and similarly, details have been furnished of development expenses. He has relied upon decision of the Hon'ble Supreme Court in the case of Calcutta Company Ltd. Vs CIT 37 ITR 1 in which it was held that on maintaining mercantile system of accounting, expenditure is allowable on estimate of accrued liability to be discharged at the future date. He has referred to decision of the Hon'ble Punjab & Haryana High Court in....
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....re was no basis what-so-ever for the ld. CIT to set aside the assessment order passed by the Assessing Officer. The ld. counsel for the assessee referred to PB-33 which is notice issued by Assessing Officer under section 142(1) on dated 16.06.2009 to the assessee asking the complete production of the books of account, supporting documents, quantitative details and situation of the fixed assets, record of inventories maintained and explanation as per Annexure-A in which the Assessing Officer asked for the explanation of assessee and details on business activity, quantitative details of closing stock and opening stock and also substantiate their values, expenses claimed, details of land/plots purchased and copy of the agreements and Registration Deed of the properties and details of the purchasers, details of the development expenses incurred alongwith nature of external development charges incurred with details, details of the persons to whom plots have been sold, complete details of persons from whom advances against property have been received with their postal addresses, complete details of investments made and interest paid and complete details of loans and advances. He has subm....
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....ted the claim of assessee for development expenses and maintenance charges. He has submitted that assessee maintained mercanti le system of accounting and on sale, the assessee booked the expenses. The expenses have not been doubted by the Assessing Officer and the provisions have not been considered properly by ld. CIT at the proceedings under section 283 of the Act before him. The Assessing Officer conducted proper enquiries into the matter not only in the year under consideration but also in the earlier years and accepted the claim of assessee on all the items. He has referred to PB-60 to 88 which is the reply filed before ld. CIT which has not been properly appreciated by the ld. CIT. The ld. counsel for the assessee relied upon following decisions : i) Decision of Hon'ble Delhi High Court in the case of CIT V Anil Kumar Sharma reported in 335 ITR 83, in which it was held as under : There is a distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the ....
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....ssment years, the very same accounting practice was accepted. (ii) That the dies were components of the machines. They needed constant replacement, as their life was not more than a year. The assessee also explained that since the parts were manufactured for the automobile industry, which had to work on complete accuracy at high speed for a longer period, replacement of the parts at short intervals becomes imperative to retain the accuracy. With the replacement of tools and dies no new asset comes into existence nor was their benefit of enduring nature. They did not even enhance the life of the existing machine of which the tools and dies were only parts. Therefore, the view taken by the Assessing Officer was one of the possible views and the assessment order passed by him could not be held to be prejudicial to the interests of the Revenue. The opinion of the Assessing Officer in treating the expenditure as revenue expenditure was plausible and thus there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. iv) Decision of Hon'ble Punjab & Haryana High Court in the case of CIT....
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....s under section 263 of the Act have not been initiated on audit objections. The ld. DR contended that since no proper enquiries have been conducted at assessment stage, no verification of details have been made and Assessing Officer passed the assessment order in haste making no enquiry on the items, it is a case of loss to the revenue, therefore, assessment order was rightly held to be erroneous in so far as prejudicial to the interests of the revenue. The ld. DR, in support of the above proposition, relied upon the following decisions : i) CIT Vs Assam Tea House 344 ITR 507 (P&H) ii) Addl . CIT Vs Mukur Corporation 111 ITR 312 (Guj) iii) Gee Vee Enterprises V Addl . CIT 99 ITR 375 (Del) iv) Rampyari Devi Saraogi V CIT 67 ITR 84 (S.C) v) Smt. Tara Devi Aggarwal V CIT 88 ITR 323 (S.C) vi) Malabar Industrial Co. Ltd. V CIT 243 ITR 83 (S.C) vii) CIT Vs Jawahar Bhattacharjee 341 ITR 434 (Gau) viii) Regency Soraj Infrastructures V Union of India & Ors. 345 ITR 105 (Del) 14. We have considered the rival submiss....
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....r has accepted claim of assessee of development expenses and external development expenses, the ld. CIT should not substitute the view of the Assessing Officer in the proceedings under section 263 of the Act. 16. The ld. CIT also, on the basis of sales made in percentage proposed that expenditure to that extent could only be allowed as deduction. However, he has not given any basis how said method would be relevant in the case of the assessee. Since, in the last years same accounting standard has been accepted by the Revenue Department, therefore the opening balances could not have been disturbed by the ld. CIT and no addition could be made to the closing stock. The assessee with regard to loan and advances and disallowance under section 36(1) (iii) of the Act explained that land has been purchased for business purposes only, therefore, no disallowance is possible under section 36(1) (iii) of the Act. The ld. CIT, instead of examining the facts and explanation of the assessee, merely stated that Assessing Officer did not make any enquiry of the same, though the Assessing Officer has examined this issue as well at the assessment stage with reference to disallowance of the interes....
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....the explanation of the assessee on the same issues in preceding assessment year 2001-02 and 2002-03 under section 143(3) of the Act. There is no change in facts and circumstances noted by us. The expenses have not been doubted by the ld. CIT. The assessee produced complete books of account and material before Assessing Officer at the assessment stage which have been examined and even on the development and maintenance expenses, the Settlement Commission has accepted claim of assessee for block assessment proceedings. These facts and circumstances clearly support the case of the assessee that Assessing Officer conducted proper enquiry at the assessment stage on all the items and the ld. CIT merely on change of opinion and merely substituting his opinion with the opinion of the Assessing Officer, proceeded with the proceedings under section 263 of the Act. The assessee also filed complete details and replies before ld. CIT which have not been properly appreciated on all the above items. The ld. DR contended that the reply of the assessee dated 01.12.2009 was not found on the record but the ld. CIT at page 17 of the impugned order specifically mentioned that in-fact the order-sheet sh....
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....me-tax Officer on being satisfied with the explanation assessee. This decision of the Income-tax Officer could not be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That was not permissible. The Tribunal was justified in setting aside the order passed by the Commissioner of Income-tax it section 263." 20. The Hon'ble Punjab & Haryana High Court in the case of CIT V Deepak Mittal 324 ITR 411 held as under : "Change of opinion by reappraising the evidence is not within the parameters of revisional jurisdiction of the Commissioner under section 263 of the Income Tax Act,1961.Held, dismissing the appeal that the Tribunal had found that the Assessing Officer had given a categorical finding that the as....