TaxTMI 
TaxTMI 
2017 (2) TMI 595
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.... the revisionary powers u/s 263 of the Act by issuing show cause notice dated 9.10.2013 wherein the ld.CIT(A) has cited following reasons : "a) the AO did not verify the basis of estimating the valuation of work in progress; b) The AO did not verity the direct expenses as the project got completion certificate on 21.09.2010; c) The interest cost of Rs. 12.84 lacs should have been treated as direct expenses; d) The source and genuineness of claim of advance received from customers were not examined by the AO" The said notice was responded by the assessee vide letter dated 22.10.2013 the relevant extracts of which are reproduced below: We are in the receipt of the show cause notice for A. Y. 2009-10 U/s 263 of the Act by which you have asked why the order passed by the A.O u/s.143(3) of the Act dated 09.12.2011 is not erroneous so far as it isprejudice to the interest of the Revenue on the, points raised in the show cause notice. We hereby say that the said order is not erroneous and prejudice to the interest of the Revenue on the following facts and submissions: (1) At the outset, we say that the company follows the percentage of completion method of accounting ....
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....; Total Direct Expenses incurred on the project till 31.03.2009 3,47,64,784 On the said expenses, the Assessee has disclosed a Profit at 21 % of the cost as per the working which was given to the Assessing Officer at the time of Assessment proceedings. The same is also enclosed for your perusal with this letter. (Annexure - 2) The A.O. applied his mind to the same at the time of completing the assessment. (b) The Assessee did not verify direct expenses as the project got occupation certificate on 21.09.2010: During assessment proceedings, we gave all the details of construction project expenses and the Assessing Officer, after verifying the same, completed the assessment. Copies of details submitted alongwith covering letters is enclosed with this letter. (Annexure-3) (c) The interest cost of Rs. 12.84 lacs should have been treated as direct expenses We had borrowed funds for the Project. During the year, the Assessee paid an interest of Rs. 12,83, 780 on such borrowed capital As mentioned in earlier Para 2 of this letter, while calculating the Gross Profit from the Project, we have included the interest under the Direct Expenses. The fact....
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....is one of the possible view and do require further consideration. (Delhi High Court CIT vs. Sunbeam Auto Ltd., 227 CTR Page 133) It is further submitted that as held by the Supreme Court in Parshuram Pottery Vs. ITO 106 ITR Page 1 the provisions of Section 263 cannot be initiated with a view to starting fishing and roving enquiries in the matters and orders which are already concluded. Such actions would be against a well accepted policy of law as there must be a point of finality in all legal proceedings. It is further submitted that Bombay High Court in the case of Gabriel India Ltd., 203 ITR Page 108 have held that if the Income Tax Officer is acting in accordance with law and makes a certain assessment, the same cannot be branded as erroneous by commissioner simply because according to him the order should have been more elaborate. The Section 263 does not visualize the case of substitution of the judgment of the commissioner for that of the Income Tax Officer who has passed the order. In our case also, the identical facts and parameters exist, detail enquiry was made by the A.O. on the issues raised by Your Goodself, percentage completion method has been accepted b....
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....h Court in the case of English Indian Clays Ltd. 331 ITR 219 (Ker.) has held that a lack of proper enquiry by the Assessing Officer will render the order erroneous and prejudicial to the Interest of the Revenue. Reliance is also placed on Hon'ble Delhi High Court decision in the case of CIT vs. Goetze (India) Ltd. in ITA No. 1179/2010, order dated 09.12.2013, wherein HC observed that CIT had given specific reasons behind treating Assessing Officer's order as prejudicial and erroneous. HC rejected assessee's contention that power u/s 263 could not be Invoked since the Assessing Officer had taken a probable view, which may be debatable and not acceptable to the Revenue. HC remarked that the order of CIT could not be set aside only on the ground that two views were possible or probable, but crr had recorded how the order of Assessing Officer was erroneous and prejudicial to interests of revenue. Order of the CIT could be set-aside only if findings accorded by CIT were Incorrect or if order of Assessing Officer was not prejudicial to interest of Revenue. HC observed that CIT could examine the Issue on merits even when the same was examined by Assessing Officer and that prin....
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....revise It. Reliance is also placed on the incorrect assumption of facts and incorrect application of law the order was erroneous and prejudicial to the interest of revenue and therefore Commissioner was competent to revise it. Reliance is also placed on the decision of Honourable ITAT, Indore Bench In the case of Frlgoscandla Winner Food Process System (79 ITD 357). 4.1.v.Hence, the contentions raised by the assessee against the invocation of section 263 are not tenable and the same are rejected. 4.2. The assessee has submitted detail of WIP, direct expenses, Interest cost of Rs. 12.84 lacs and detail of advances received from the customers, vide their letter dated 22.10.2013. Further, detail has. been filed vide letter dated 28.10.2013. 4.2.1 I have considered the submission of the assessee. The facts and merits of the case are discussed in following paragraphs:- 4.2.1.i The assessee vide its letter dated 22.10.2013 filed the working of WIP of Kalamboll Project(Plot No. 19-19A) as per "Annexure-2" claiming that the same was submitted before the Assessing Officer. As per this Annexure total direct expenses incurred on the project till 31.03.2009 is shown at Rs. 3,47,64,....
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....ed the facts in proper prospective. Therefore, the assessment order dated 09.12.2011 is erroneous and prejudicial to the Interest of Revenue. 5. Thus, an order passed by the Assessing Officer u/s 143(3)dated 09.12.2011 is held to be erroneous and prejudicial to the interest of the Revenue. 4.2.1.ii With regards to interest cost of Rs. 12.84 lacs. It is seen that the same debited to direct expenses, however, the same has not been verified by the Assessing Officer. 4.2.l.iii With regards to advances received from the customers the assessee has filed detail of advances as per "Annexure-4" vide their letter dated 22.10.2013 claiming that the same was filed before the Assessing Officer. As per this Annexure flats have been sold on the same date and the same floor but there is a vast difference in rate per sq ft. for example:- Sr.No. Name of the Flat Owner Flat No. Date of booking Date of registration Rate per sq.ft 1. Deepak G. Tripathi 201 15.03.2008 17.07.2008 4490.99 2 Deepak G. Tripathi 202 15.03.2008 17.07.2008 3262.43 3 Deepak G. Tripathi 203 15.03.2008 17.07.2008 3231.63 4 Natrajan Sriram 30....
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....boli project comprising details of all the expenses and calculation of closing WIP as annexure -1 to the submission dated 20.06.2011 a copy of which is filed at page no 24 of the PB which relate to point a & b of the show cause notice. The ld. Counsel pointed out that in reply on specific queries from the AO in the notice, the assessee vide letter dated 20.6.2011 filed details of all expenses copies of which are at pages 25 to 28 of the paper book. On point No. (c) of the show cause notice u/s 263 of the Act , the ld. counsel , while referring to page 24 of the paper book which contained the details of WIP of Kalamboli Project, pointed out that Rs. 12,83,780/- interest on loan was specifically shown in the details WIP at sr. no 6 of annexure 1 supra. On the point no. (d) of the show cause notice, which is regarding the genuineness of the advances received from customers, the ld. AR submitted that vide paras 12&13 of the questionnaire dated 17.6.2011, the AO asked the assessee to furnish details of booking advances as on 31.3.2007 in the specified format calling for various details such as . name of flat owner , date of booking, total area, rate, agreement value, amount received at ....
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....the assessee. We find that the CIT has exercised the revisionary powers by issuing show cause notice dated 17.06.2011 under section 263 of the Act setting out various reasons because of which the order of the assessing officer was erroneous and prejudicial to the interest of the revenue as the AO failed to examine all the four issues raised in the said notice. We find from the record that all these four points as mentioned in the show cause notice were specifically raised by the AO in the questionnaire dated 17.6.2011 and replied by the assessee by filing necessary details by way of written submissions dated 20.06.2011. The AO in the questionnaire dated 17.6.2011 vide para 23 specifically asked the assessee for the details of WIP qua Kalamboli which were filed by the assessee vide letter dated 20.9.2011 Annexure-2 submitting the details as called for by the AO copy of which is filed at page 24 of the paper book before us. On second issue raised by the CIT qua non verification of direct expenses as the project got occupancy certificate on 21.9.2010, the assessee in response to specific query filed necessary details of direct expenses vide Annexure-III filed copies of which are at pa....
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.... Rs. 2.94 cores is capital expenditure. This itself would be indication of application of mind by the Assessing Officer while passing the impugned order. The fact that the assessment order itself does not contain any discussion with regard to the balance amount of expenditure of Rs. 1.76 crores i.e. Rs. 2.94 crores less Rs. 17.98 lakhs claimed as revenue expenditure would not by itself indicate non application of mind to this issue by the Assessing Officer in view of specific queries made during the assessment proceedings and the Respondent-assessee's response to it. In fact this Court in the case of "Idea Cellular Ltd. v. Dy. CIT [2008] 301 ITR 407" has held that if a query is raised during assessment proceedings and responded to by the Assessee, the mere fact that it is not dealt with in the Assessment Order would not lead to a conclusion that no mind had been applied to it. 9. Moreover, from the nature of expenditure as explained by the petitioner to the Assessing Officer during the assessment proceedings itself indicates that the view that the same were in the realm of revenue expenditure, is a possible view. Therefore, we find no fault in the impugned order having follo....