TaxTMI 
TaxTMI 
2017 (7) TMI 1390
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....l to the interest of revenue and accordingly the assumption of jurisdiction by the Pr. CIT u/s 263 of the IT Act 1961 was not valid and justified. 2. The learned Pr. CIT erred setting aside to the file of the assessing officer, the issue of verification of certain purchases debited to profit and loss account, holding the assessing officer to have failed in examining and verifying such purchases, not appreciating that the assessing officer had verified the purchases and had accepted the same only after due enquiry and verification of details called for and therefore the order u/s 263 setting aside this issue to the file of the assessing officer was not justified. 3. The learned Pr. CIT erred in setting aside to the file of the assessing officer, the issue of advances of Rs. 2. 18 Cr received from 27 customers as booking advances for proposed sale of flats/shops holding that the project being completed, the revenue in respect of these units should have been disclosed in the year under appeal as income, not appreciating that receipt of booking advances without any sale agreement or handing over possession of the constructed units would not lead to income chargeable t....
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....nded provisions of Section 263 (Explanation 2), if the order is passed without making enquiry or verification which should have been made, the order passed by the Assessing Officer shall be deemed to be erroneous in as far as it is prejudicial to the interest of the revenue. In this case, none of the supplier was examined and verified by the Assessing Officer after obtaining details from the assessee even when the payments to these suppliers were after abnormally long delay. Therefore, in exercise of powers u/s 263, I consider the Assessing Officer's order on the issue of purchase verification erroneous and prejudicial to the interest of revenue and, accordingly, I set aside this issue to the file of Assessing Officer with a direction to examine all the purchases above Rs. 1 lakh where payments were not made within three months by the assessee with regard to the genuineness and business purpose of such purchases." 4. In regard to the issue of unsold flats despite the fact that the assessee received advances of Rs. 2.18 crore against 27 flats and project was complete but the same was not disclosed as income in the return of income and he directed the AO to make required enqui....
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....ged in the business of developing a real estate project Bhagwati heritage at Navi Mumbai. The Ld counsel drew our attention to the AO's questionnaire issued dated 02-12-2014, he particularly referred to question No. 8, 10 and 17 which reads as under: -. "8. Give details of creditors in following format Name & address Opening balance Debit Credit Closing Balance 10. Please give details of parties from whom cumulative purchase of Rs. 10 lakh or more was made in FY under consideration in following format. Name and address Amount of purchase Nature of goods purchased 17. Please give details of purchase party in following format. Name of party TIN Amount of purchase Whether name is reflected in Hawala list displayed in website of Sales Tax Department, Maharashtra 6. This questionnaire was replied by assessee and the learned Counsel for the assessee drew our attention to page 19 and 20 of the assessee's paper book wherein letter dated 16-02-2015 of the assessee addressed to the AO whereby the details of sundry creditors, details of cumulative purchase of 10 lakhs or more and details of purchase p....
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....ss of Plot Bhagwati Heritage, Plot No. 29,30,31,32,47,48,49 & 52 Sector 21, Kamothe, Navi Mumbai-410209 (iii) No. of Wings/ Towers 10 Wings (A to J) (iv) No. of floors in each wings/ towers 13 Floor per Towers (v) No. of flats/ units on each floor of each wing/tower 2 Flats (vi) Date of Commencement of construction 07.11.2007 (vii) Date of receipt of O.C/completion certificate of the project 31.03.2012 (viii) No. floor/tower erected as on (13 floor) 31-03-2011 (13 Floor) 31-03-2012 31-03-2013 (ix) Extent of completion of project as on 31/08/2013 Completed (x) Saleable Area in the in sq. ft. with separate details as under Residential Space 105584 Sq. ft. Commercial Space 6861 Sq. ft. Parking Space 250 Parking Slot 9. He argued that Revenue in respect to Flats or shops which were sold was recognized by crediting the sale value of....
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....s, as available in stock as on 31-03-2012 as sold in subsequent assessment years which is includes in assessee's paper book pages 25 to 31 including name and address of the customer, Flats/Shops sold and amount of sale consideration. It was argued that the profit arising at the sale of units is offered to tax in respect of assessment years on sale basis. The assessee also filed copies of assessment order for AY 2013-14 and 2014-15 in assessee's paper book at pages 136 to 145 wherein the subsequent sale, the amount of advance received on account of these 27 flats, is disclosed. The assessee also submitted statement giving details of booking advances as on 31-03-2012 along with ledger account of customers who have cancelled the allotments, booking cancellation letter and bank statement reflecting the payments returned to these customers through banking channels, which is enclosed at pages 146 to 234 of assessee's paper book. He argued that these complete details were available before the AO and AO on the basis of the fact that the actual sale of these flats in respect to these 27 customers, from who advances of Rs. 2.18 crore is received by assessee, taken a view that this is to be a....
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....n the course of assessment proceedings and did not find any anomaly in the details furnished before him and accordingly has not taken any adverse view of the matter. We find that the complete details were examined by the AO during the course of assessment proceedings and now CIT through this revision order want to re-examine this issue, which according to us is not permissible u/s 263 of the Act. 13. In regard to the second issue of unsold flats it was explained during the course of assessment proceedings that the construction of the entire project was completed during the year 2012-13 i.e. the year under consideration and assessee has recognized the revenue in respect of flats/ shops sold by crediting the sale value to the profit and loss account. We find that as on 31-03-2012 flats and shops totaling to 127 units were remained unsold and details of such unsold flats forming part of closing stock was recorded under schedule G to the audit financial statement of the assessee. We find from the facts of the case that this statement reveals that 1,52,611/- sq. ft of area for flats/ shops in various buildings remain unsold and the value of the same @ Rs. 2,231/- per sq. ft was discl....
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....h retrospective effect by insertion of the word 'loss' in the new proviso. We express no opinion on the scope of the said amendment of 2005. Suffice it to state that in this particular case when the order of the Commissioner was passed under section 263 of the Income-tax Act two views on the said word 'profits' existed. In our view the matter is squarely covered by the judgment of this Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 as also by the judgment of the Calcutta High Court in the case of Russell Properties (P.) Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229 at 243. 2. At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase "prejudicial to the interest of the revenue" under section 263 has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when the Income-tax Officer adopted one of the courses permissible in law and it ....
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....e. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the ITO without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the revenue. An order can be said to be prejudicial to the interests of the revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the Court, it would be open to the Courts to examine whether the relevant objective factors were available from the records call....
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....e. Further inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the ITO was erroneous and prejudicial to the interests of the revenue. Without doing so, he does not get the power to set aside the assessment. In the instant case, the Commissioner did so and it is for that reason that the Tribunal did not approve his action and set aside his order. We do not find any infirmity in the above conclusion of the Tribunal." 16. Further, the learned Counsel for the assessee has also relied on the decision of the co-ordinate Bench of Mumbai, ITAT in the case of Narayan Tatu Rane vs. ITO (2016) 70 taxmann.com 227 (Mumbai-Trib.), wherein the issue of retrospectivity of explanation 2(a) to section 263 of the Act, the newly inserted explanation by the Finance Act, 2015 w.e.f 01.06.2015 is held to be retrospective and also held that the newly inserted explanation does not authorize or give unfettered powers to CIT to revisit each and every order, and if his opinion the same has been passed without making enquiries or verification which should have been made without the holding the same as erroneous so as to cause....
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....provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) s....