TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 595
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.... 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 as prescribed by Institute of chartered Accountants of....
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....he 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 can be verified from the detailed working of Work in Progress, submitted during the course of assessment proceedings, vide le....
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.... 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 by the A.O. after due examination of the facts for A.Y. 2009-10 and 2010-11 and as the Assessee has disclosed the entire profit in A. Y. 2011-12 any ch....
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....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 principles of 'change of opinion' did not apply. HC noted that Revenue did not have any right to appeal against the order of Assessing Officer and the....
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....rest 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. 3,47,64,784/-. Out of this proportionate land cost is shown at Rs. 98,72,832/-. However, in the detail filed vide dated 22.10.2013 it is claimed that proportionate land....
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....ssed 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 302 15.03.2008 25.07.2008 4429.22 5 Natrajan Sriram 303 15.03.2008 25.07.2008 4365.38 6 Natrajan Sriram 304 15.03.2008 25.07.2008 4490.99 Similarly, there a is rate difference in the flats sold on th....
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.... 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 the beginning and received during the year, total amount received and balance receivable which were replied by the assessee by filing the necessary details filed vide para 12 of the written submissions dated 20.6.2011 copies of which are placed in the paper book at page 29-30. The ld. AR submitted before us that the CIT ha....
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.... 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 pages 25 to 28 of the paper book. On issue no.3 in the show cause notice which is in respect of interest amount of Rs. 12.84 lakhs as direct expenses, we find from the page 24 of the paper book that third last item of expenses is interest on loan of Rs. 12,83,780/- which was also very much before the AO in the details of WIP of ....
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....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 followed the binding decision of the Supreme Court in the case of Max India Ltd. (supra), while allowing the appeal before it." In the case of Gera Developments (P.) Ltd.(supra), it has been observed and held as under : "7. We have considered the rival submissions. With regard to issue (a) i.e. taxability of the transfer of developme....