AI Drafter 
TaxTMI 
TaxTMI 
2024 (3) TMI 378
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....assessee filed its return of income under section 139(1) of the Act on 30.11.2018 declaring total income at Rs. 1432,82,52,530/-. The case of the assessee was selected for scrutiny under CASS and the assessment was ultimately framed under section 143(3) of the Act vide order dated 22.03.2021 with an assessed income of Rs. 1470,93,38,584/-. Thereafter the ld. PCIT issued notice under section 263 of the Act dated 30.11.2022 to the assessee to explain as to why the assessment framed under section 143(3) of the Act dated 22.03.2021 should not be revised/set aside on account of being erroneous in so far as prejudicial to the interest of revenue citing five issues, which are as under:- (i) Applicability of section 56(2)(x) on acquisition of leasehold land & building; (ii) Disallowance of expenditure on scientific research u/s 35(1)(i) of the Act; (iii)Disallowance of claim u/s 43B in relation to reversal or write back of provision for liabilities; (iv) Disallowance of deduction claimed u/s 80JJAA; (v) Disallowance of prior period expenses. 4. The assessee replied to the show-cause notice vide written submissions dated 13.01.2023, 13.02.2023....
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....section 263 of the Act. The ld. A.R., therefore prayed that the conditions precedent laid down in Explanation 2 to Section 263 of the Act to validly initiate the revisionary proceedings was never met and, therefore, the jurisdiction invoked by the ld. PCIT is wrong and invalid. The ld. A.R. argued that the ld. PCIT never examined the case records himself and did not form his own independent opinion as to whether the assessment order was erroneous and prejudicial to the interests of the revenue. The ld. A.R. also submitted that the ld. PCIT forwarded the objections to the ld. Assessing Officer and called for his comments vide letter dated 03.02.2023. The ld. A.R. submitted that the ld. PCIT had only sent the issues raised at Clauses II, IV & V to the ld. Assessing Officer. The first reply furnished by the assessee dated 13.01.2023 contained the detailed objections on the said issues and the ld. Assessing Officer vide report dated 02.03.2023 informed the ld. PCIT that the explanation given by the assessee regarding these issues were found to be acceptable. The ld. A.R. therefore, submitted that the ld. PCIT again acted at the instance of ld. Assessing Officer and dropped the issues r....
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....t pages no. 132 to 178 of the paper book. The ld. A.R. stated that during F.Y. 2017-18, the assessee had executed the final deed of conveyance , which was registered with the stamp valuation authority, who valued the leasehold land and building at Rs. 211,63,11,850/- (for leasehold land) and Rs. 147,57,26,950/- (for leasehold in building) aggregating to Rs. 364,80,38,000/-. The ld. A.R. also submitted that apart from the above, the assessee had also acquired an undulated land parcel on freehold basis for an agreed consideration of Rs. 13,56,79,600/- vide an Agreement to Sell dated 06.09.2017. The ld. A.R. stated that due to the peculiarities of the subject property, the assessee had obtained a valuation report from a registered valuer, M/s. Vestian Global Workplace Services Pvt. Limited, who objectively assessed the true and fair market value of the subject freehold land at Rs. 12,75,00,000/-. The said property was executed by the Deed of Conveyance dated 29.09.2017 where the value assessed by the stamp valuation authorities was Rs. 30,00,33,000/-. The ld. A.R. submitted that the said acquisition, however, was not subjected to actual levy of stamp duty due to exemption available to....
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....the provisions of section 56(2)(x) of the Act are not applicable to leasehold rights held in land and building at Ranjangaon, which were acquired in F.Y. 2016-17 relevant to A.Y. 2017-18, when the provisions was not existing in the Statute Book and, therefore, the ld. PCIT was not justified in directing the ld. Assessing Officer to examine the same in the light of provisions of section 56(2)(x) of the Act. c) The ld. A.R. stated that the assessee had already pointed out through various replies letter dated 13.03.2023 and 23.03.2023 that the Agreement to Sell for acquisition of leasehold rights in land and building at Ranjangaon, was executed on 31.12.2016, i.e. F.Y. 2016-17, viz. Prior to the insertion of section 56(2)(x) of the Act by Finance Act, 2017 with prospective effect from 01.04.2017. The ld. A.R. contended that assignment of lease which took place on 31.12.2016 was merely registered vide deed of agreement dated 27.03.2018, which happened in the relevant year i.e. F.Y. 2017-18 (A.Y. 2018-19) and thus, if at all a cause of action existed on this issue, the same existed in the preceding F.Y. 2016-17, i.e. the year of acquisition and not the relevant A.Y. 2018-19. Th....
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....e issued to the assessee, copy of which is placed at pages no. 309 & 310 of the paper book. Ld. A.R. further submitted that the entire cost incurred by the assessee towards acquisition of leasehold, building and freehold land has been subsidized/incentivized by the Government. Therefore, there is no justification for invoking the provisions of section 56(2)(x) of the Act as there is no rationale for the assessee to acquire the impugned properties at prices lower than their corresponding Stamp Duty Valuations for leasehold/freehold land & building. Even if it is presumed that the assessee had entered into the deed of agreement to sell for a higher amount and executed the same for higher amount, the same would have been made good and reimbursed by the Government under the Maharashtra Package Scheme of Incentives-2013 and the assessee would not have paid any extra penny over and above that amount. Thus there is no question of the order being erroneous and prejudicial to the interest of the revenue. Therefore, the plea of the ld. PCIT for restoring the issue to the file of ld. Assessing Officer is wholly unjustified and may be quashed. The ld. A.R. finally argued that section 56(2)(x) ....
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....ansactions entered into by the assessee. In support of his argument, ld. Counsel relied on the decision of the Hon'ble Calcutta High Court in the case of CIT -vs.- Morrison & Co. Limited reported in 366 ITR 593, wherein the Hon'ble Court has held that where the assessee's claim is allowed by the ld. Assessing Officer after conducting necessary enquiry and application of mind, then the order of assessment cannot be considered and held to be erroneous and prejudicial to the interest of revenue under section 263 of the Act on the ground of lack of enquiry or non-enquiry. The ld. A.R. also relied on the decision of the Hon'ble jurisdictional ITAT, Kolkata in the case of Peerless General Finance & Investment Company Limited -vs.- CIT (132 taxmann.com 80), in which the similar issue has been decided in favour of the assessee. The ld. A.R. also contended that the jurisdiction u/s 263 of the Act is not available to the ld. PCIT for simply restoring the issue for examination and verification to the ld. Assessing Officer, where the ld. PCIT himself has not recorded any objective satisfaction and arrived at a conclusion as to how the order passed by the ld. Assessing Officer is erroneous and ....
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....allowed under section 43B of the Act, copy of which placed at pages no. 30 to 59 of the paper book. The ld. A.R. stated that these were never claimed as a deduction as an expense in earlier years. The ld. A.R., therefore, submitted that the assessee has rightly claimed unpaid provisions of Rs. 14,47,32,736/-, which were disallowed under section 43B in the respective years in which they were created/debited. The ld AR submitted that the same was rightly claimed as deduction under section 43B in the year in which such provisions were written back and reversed/credited to the profit & loss Account. The ld. A.R. in defence of his argument relied on the following decisions:- (i) Pr. CIT vs Eveready Industries India Ltd (ITAT No.96/Kol/2017) [Calcutta HC] [Pages 158-162 of Judicial PB]; (ii) CIT vs Samudra Shoe Overseas Ltd (TCA No. 349 of 2016) [Madras HC] [Pages 163-170 of Judicial PB]; (iii) Dy.CIT vs K.S. Diesels Ltd (132 taxmann.com 74) [ITAT Mumbai] [Pages 171 -176 of Judicial PB]. 9. Ld. A.R. also referred to the reconciliation of the details of reversals during the year vis-a-vis the provisions made in earlier years alongwith details of disallowances....
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....y order which is simultaneously erroneous and prejudicial to the interest of revenue. The Pr. CIT has to rely on inputs provided to him by his subordinate officers to act upon such a case. The input may originate by way of a revenue audit objection or on a reference made by his subordinate officer that an erroneous order has been passed inadvertently which cannot be remedied by the AO by taking recourse to either 154 or 147 of the Act. In the present day working, even an AO is working with inputs in the form of Assessee Information System(AIS) or inputs from other external agencies. That does not mean that he is passing an order without application of mind. Now tax computations are made on systems, but does that mean that the AO is acting on behest of the computer and is not applying his own mind? Similarly, when a glaring instance is brought to the notice of the Pr.CIT, he is acting on the primary input and after due application of mind, he is passing a revision order on the facts of the case. This is in no way acting on the behest of the AO. In fact, all officers of the department are duty bound, if at any point of time, there is detection of revenue loss or there is any informat....
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....ed valuer submitted by the assessee along with his claim/objection under Section 50-C(2) of the Act. If he does not accept the report, he has to record the reason for referring the matter to the DVO. The reasons in either case must have nexus with the objection/claim made by the assessee and the objection, which may be raised by the department against the valuation determined in the report of the approved valuer." The order of the AO is silent on the issue of acceptance of valuation report furnished by the assessee and is an erroneous order in view of the above judgment of Allahabad High Court. Also, since the provisions of section 56(2)(x) were not invoked, it was rightly held by the Pr.CIT that there was prejudice caused to the revenue. 12. We have heard the rival contentions and perused the material available on record including the written submissions filed by the parties before us. The undisputed facts are that the revisionary jurisdiction was invoked by ld. PCIT under section 263 of the Act by issuing notice under section 263 to revise the assessment on five issues:- (i) Applicability of section 56(2)(x) on acquisition of leasehold land & building; ....
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....see finds support from the decisions of the Hon'ble Calcutta High Court in the case of PCIT -vs.- Sinhotia Metals & Minerals Pvt. Ltd. (IA No. GA/1/2019) (Calcutta High Court, wherein the Hon'ble Calcutta High Court has held as under:- "We have gone through the order passed by the Tribunal, wherein we find that the Tribunal has noted the decision of the coordinate Bench of the Tribunal in the case of M/s. Rapayan Udyog in ITA No. 1073/Kol/2012, dated 28th October, 2018. After noting the said decision the Tribunal points out that the appellant department has not controverted the contents of the letter of the Joint Commissioner of Income Tax dated 18th August, 2016 and has recorded that the said letter clearly brings out that the PCIT has called for proposal from the JCIT/Assessing Officer to exercise jurisdiction under Section 263 of the Act. Therefore, the Tribunal concluded that the PCIT has not exercised jurisdiction under Section 263 of the Act himself, but he exercised jurisdiction at the instance of the Assessing Officer/JCIT, which is against the provisions of law. The argument made by the learned Standing Counsel is that it is the PCIT who has exercised jur....
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....ngs, the assessee was asked to explain the books of accounts, bills and vouchers and the authorised representative of the assessee filed the relevant documents in detail with many explanations which were examined by the assessing officer and verified with the books of accounts and the heard copies of the ITR and audited accounts and thereafter, the assessment was completed. From the notice issued under Section 142(1) of the Act dated 16.08.2017, it is seen that as many as 21 particulars/documents were called upon to be produced by the assessee of which the document/observations in item No. 20-21 are relevant for the purpose of this case, they being (i) large increase in investment in unlisted equities during the year and (ii) low income in comparison to very high investment. It is seen that first issue on which the information was called for by the assessing officer has not been taken as a ground by the PCIT while assuming jurisdiction under Section 263 of the Act. Thus it has to be seen as to whether assessee had furnished the requisite information with regard to the second issue namely low income in comparison to very high investments. The assessee had placed before the ....
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....distinguishing the decision cannot be countenanced. Thus in absence of any satisfaction recorded by the PCIT that the order of assessment was both erroneous and prejudicial to the interest of revenue, the Tribunal ought to have granted relief to the assessee and faltered the PCIT for having exercised its jurisdiction. For the above reason, the appeal filed by the assessee is allowed and the order passed by the Tribunal as well as the PCIT is set aside and the assessment order stands restored and the substantial questions of law are answered in favour of the appellant/assessee. 13.2. The same issue has been adjudicated by the Coordinate Bench of Kolkata in the case of Manish Chirania -vs.- PCIT (ITA No. 1161/KOL/2019), wherein the Coordinate Bench has held as under:- "9. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that ld Principal Commissioner of Income Tax (ld. PCIT) has exercised his revision jurisdiction under section 263 ....
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....der passed by the ld. PCIT under section 263 of the Act is not sustainable in law. So considering the facts of the case and the ratios laid down above, we are of the considered view that the order of the ld. PCIT passed under section 263 of the Act is bad in law and cannot be sustained. 14. We also note that the jurisdiction has been invoked by the ld. PCIT for two issues, namely that i)the provisions of section 56(2)(x) of the Act were applicable to the acquisition of leasehold/freehold land and building from 'BDMC' on leasehold/freehold basis at Ranjangaon pursuant to an Agreement to Sell dated 31.12.2016, whereas the registration with the local authorities was done in the instant financial year relevant to assessment year 2018-19. The second issue regarding allowing the deduction of provisions created u/s 43B of the Act upon bring written back in relation to reversal or write back of provision for liabilities. 15. We observe from the facts before us that so far as the first issue is concerned, the facts are that the assessee acquired leasehold/freehold land and building from the BDMC. The said freehold land and building situated at Ranjangaon, Maharashtra was acquired for ....
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....uired by the assessee was not fully developed and has uneven surfaces etc. We also note that the fact qua the acquisition of properties as well as valuation of properties as such was fully placed before the NFAC. We also observe from the facts, which were disclosed in the Notes to Tax Audit Report and the Notes to computation of income filed alongwith the return of income, filed before the ld. Assessing Officer at the time of scrutiny assessment, copy of which is available at pages no. 93 to 95 which is extracted below for the sake of ready reference:- 16. We also note that the assessee has also furnished the valuation reports before NFAC meaning thereby that all the facts were before the JAO and the NFAC after taking into account all the facts of the case has taken a plausible view and did not refer the matter to the DVO for valuation by not invoking the provision of section 56(2)(x) of the Act. Therefore, in our opinion, the ld. PCIT is not justified in exercising the revisionary jurisdiction under section 263 of the Act setting aside the assessment to the ld. Assessing Officer for fresh examination into these issues. The case of the assessee finds support from the decision of....
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....ttention to the letter dated 23-12-2016 (copy placed at page 18 of the paper book), wherein the following explanation was offered by the assessee in this regard:- "4. In the computation of the short-term capital gain on the sale of the flat at 5, Lala Lajpat Rai Sarani. the sale proceed of the flat has been taken at Rs. 8,02,01,600/- as per sale deed (copy enclosed) as against the stamp duty valuation of Rs. 8,81,25,600/-. The stamp duty valuation has not been taken into account in computing the short-term capital gain as the assessee, before the sale of this property, got it valued by a registered valuer. A copy of valuation report as on 14.04.13 showing its market value at Rs. 5,84,00,000/- is enclosed. From the report of the valuer it may kindly be seen that the flat had no car parking space or a garage without which the high value buyers were not interested in acquiring the flat. There was also no scope of getting a high voltage electric connection. Because of such defects, the assessee could not realize full market value of the sale of this flat. The assessee therefore submits that its fair market value was much less compared to the stamp duty valuation. If your Honou....
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.... of the decision of the Hon'ble Gujarat High Court in the case of R.K. Construction Co. [supra), we find that there was no error in the order of the Assessing Officer on this issue as alleged by the Id. Pr. CIT and the impugned order passed by the Id. Pr. CIT revising the order of the Assessing Officer on this issue is not sustainable. We accordingly set aside the impugned order passed by the Id. Pr. CIT under section 263 on this issue and restore that of the Assessing Officer. Ground No. 4 of the assessee's appeal is accordingly allowed". 17. We further note that in this case ld. PCIT has simply restored the matter to the file of ld. Assessing Officer for fresh examination without recording any objective finding as to how the non-application of section 56(2)(x) has rendered the assessment to be erroneous and prejudicial to the interest of revenue. In our opinion, the jurisdiction under section 263 of the Act is not available to the ld. PCIT merely for restoring the issue to the file of ld. Assessing Officer where he has not recorded any clear-cut finding as to how the assessment is erroneous. The case of the assessee finds support from the decision of Hon'ble Delhi High....
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....owed while computing the income to the extent not paid in the respective assessment years. Therefore, the ld. PCIT has not given any objective finding on the basis of the reconciliation of the total provisions written back during the year amounting to Rs. 14,47,32,736/- which is not correct and the jurisdiction is not available u/s 263 of the Act. The case of the assessee finds support from the decision of the Hon'ble High Courts as well as Coordinate Bench of this Tribunal in the case of (i) PCIT -vs.- Eveready Industries India Limited (supra); (ii) CIT -vs.- Samundra Shoes Overseas Limited (supra) and (iii) DCIT -vs.- K.S. Diesels Limited (supra), wherein it has been held that statutory liabilities, which were earlier disallowed under section 43B of the Act are to be excluded and allowed as deduction in the year of reversal/write back. 20. We have also examined the facts of the case qua claim of written back provisions along with supporting documents, which are available on pages no. 325 to 374 of the paper book and are of the view that the assessee has been rightly allowed the deduction in respect of reversed provisions created in the earlier assessment years while computing ....