TaxTMI 
TaxTMI 
2024 (3) TMI 716
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....the impugned assessment year, had called for several details and after looking into the same has passed the assessment order dated 04.02.2021 under section 143(3) of the Act. Thus, mere change of opinion of the Ld. PCIT on the same set of facts won't make the assessment order dated 04.02.2021 erroneous and prejudicial to the interest of revenue. Hence, the order passed under section 263 dated 29.03.2023 is without jurisdiction, bad-in-law and void- ab-initio. 3. The Ld. PCIT failed to appreciate during the course of assessment, the Appellant had furnished detailed explanation with respect to the revenue recognition of each project including the project in question. After considering the same, the Ld. A.O. passed the assessment order dated 04.02.2021. Thus, the assessment order dated 04.02.2021 is neither erroneous nor prejudicial to the interests of the revenue and therefore, the impugned order has been passed merely on the basis of change of opinion. Hence, the order dated 29.03.2023 passed under section 263 of the Act is bad-in-law and the same be quashed. 4. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal. 2. ....
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.... Rs. 17,87,24,620/-. On the basis of details available on record:- 1 It is seen that the assessee is builder/developer and engaged in construction of housing projects. 2. On perusal of Profit & Loss A/c, it is seen that during the year under consideration that assessee is engaged in four projects namely () Project Chaturbhuj, (ii) Project Yashwasin (801B), (iii) Project Yashaskaram and (iv) Project Sumukha. 3 The project-wise Profit & Loss A/c. has been submitted by the assessee, the gist of which are as under: Project Op. Stock & WIP GP Sales Closing stock Chaturbhuj 1,06,86,980 40,19,038 51,55,000 95,51,018 Yashwasin 11,55,964 0 0 11,55,964 Yashaskaram 49,28,46,835 15,97,07,081 - - Sumukh 5,62,41,514 1,15,78,728 4,26,18,510 2,52,01,731 ISSUE NO.1 1. On carefully considering the above facts, it is seen that assessee is builder/developer and engaged in construction of housing projects. 2. During the course of assessment proceedings, vide letter dated 27.01.2021, assessee has submitted with regard to Yashaskaram Project that since many expenses we....
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....g allowed an opportunity of being heard and show-cause as to why an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment within the meaning of section 263 of the Income Tax Act, may not be passed in your case. 8. In this connection, you are required to furnish your explanation on or before 06.03.2023 at 12.30 PM through e-proceeding in e-filing portal/e-mail along with complete details and documentary evidences. In case of non-compliance to this notice, it will be presumed that you have no objection to the proposed revision of the assessment order passed by the Assessing Officer as discussed above" 4. In compliance to the notice, the Ld. AR of the assessee has appeared and has filed the submissions referred at Para 3 of the order as under: "3. In response to show cause notice, assessee filed letter dated 06.03.2023 asking for adjournment of hearing on 09.03.2023. Shri Satish Shanbag, C.A. appeared and made the submission requesting for a further adjournment to argue the case. Shri Satish Shanbag appeared on 23.03.203 and case was discussed. Submission of the assessee is reproduced as under, At the ve....
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....s pertinent to mention that actual occupancy of flats started much later than the date of issue of Occupancy Certificate issued by the CIDCO. Another issue relates to your honor's observation to treat the Project Complete in the F.Y.2016-17 in the light of Occupancy Certificate issued by CIDCO on 20.05.2016 as Certificate of completion of construction of property. May I very humbly point out that in the light of the fact described in the above para, it is apparent that water connection and electricity connection, which were provided by CIDCO and MSEB respectively, were provided after the date of issue of Occupancy Certificate. Therefore, it is crystal clear that Occupancy Certificate cannot be equated with the Certificate of completion of construction of property, as mentioned in section 23(5) of Income Tax Act. In support of our this contention, apart from documents relating to water and electricity connection, we are also enclosing herewith the profit and loss account for A.Y. 2019-20 i.e. next assessment year, in which the assessee has incurred construction expenses of Rs. 4,44,52,157/- and paid commission and brokerage of Rs. 41,56,616/- (please ref Annexu....
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.... 2018-19 159,707,081 Total 26,71,84,586 2019-20 38,68,58,309 123,11,57,349 Total profit/sales of the project 65,40,42,895 123,11,57,349 53.12% Bare perusal of the details of income offered for various assessment years beginning from A.Y. 2014-15 till A.Y. 201920, show that assessee is constantly offering income on some estimated basis, while following the "Project Completion method". It is very important to note that in none of the year, revenue objected to this method of accounting followed by assessee consistently since A.Y. 2014-15 onwards for so many years. Besides, it is also pertinent to mention that when project was actually complete in A.Y. 2019-20, the assessee firm did offer income on "Project Completion method" to the tune of Rs. 38,68,58,309/- in A.Y. 2019-20. Now, let us see the legal position of this case in law vis-a-vis the facts mentioned in the above para's, regarding issue of rule of consistency. In this regard, assessee reply on the Supreme Court judgment in the case of Commissioner of Income Tax Vs. Realest Builders & Services Ltd. 307 IT....
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....s it fruitless (on merits) but also that it may not have added anything much to the public coffers." Ratio-decidendi of the aforementioned judgment of Hon'ble Supreme Court is fully applicable in the light of the fact that assessee has paid the tax on its income of entire project in the next year i.e. A.Y. 2019-20, which is evident from the copy of Return of Income filed with this submission. Similarly, it is not a case where revenue has been deprived of any tax. Needless to mention the rate of tax is same for both the years i.e. in A.Y. 2018-19 and A.Y. 2019-20, rendering entire exercise academic, as is termed by Apex Court's judgment (Supra). It is, therefore, prayed that your honour may kindly consider our above submisations and drop the proceedings initiated under sec. 263 of Income Tax Act." 5. Whereas the Pr.CIT was not satisfied with the explanations and submissions and is of the opinion that the order passed by the AO is erroneous and prejudicial to the interest of the revenue, and accordingly issued directions to the AO observing at Page 7 Para 4 to 8 of the order as under: "During the proceeding u/s263, vide letter dated 23.03.2023, a....
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....unting to Rs. 86,67,24,458/-, but till date assessee has not recognized any sales from this project. These facts have not been examined during the course of assessment procedures. 4.1 Assessee has shown closing stock of Rs. 3,59,08,713/-. The issue for selection for scrutiny is "Real Estate Business With High Closing Stock and assessee has not offered any income under the head 'income from house property' This case is covered-up by provision laid down under section 23(5) wherein it is defined that- As per section 22 the annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner is chargeable to income tax under the head "Income from House Property". Only exception to this is the property which is occupied by the assesse for the purpose of any business or profession carried on by the assessee, the profit of which is chargeable to Income Tax. The building or land appurtenant thereto forming part of closing stock has not been excluded from the taxability of annual value under the head "Income from House Property". a. Annual value for the purpose of section 22as per the section 23(1)(a....
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.... artificial method itself would not mean that levy is impermissible. Parliament has resorted to several other presumptive methods, for the purpose of calculation of income and collection of tax. Furthermore, application of ALV to determine the tax is regardless of whether actual income is received, it is premised on what constitutes a reasonable letting value, if the property were to be leased out in the marketplace. If the assessee's contention were to be accepted, the levy of income tax on unoccupied houses and flats would be impermissible - which is clearly not the case. 14. As far as the alternative argument that the assessee itself is occupier. because it holds the property till it is sold, is concerned, the Court does not find any merit in this submission. While there can be no quarrel with the proposition that "occupation" can be synonymous with physical possession, in law, when Parliament intended a property occupied by one who is carrying on business, to be exempted from the levy of income tax was that such property should be used for the purpose of business. The intention of the lawmakers, in other words, was that occupation of one's own property, in the ....
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.... has offered the income in the subsequent year on total completion of project cost method. Further the Pr.CIT has overlooked the facts that the occupation certificate in respect of Yashaskaram project was received on 20.05.2016 and the assessee is incurring finishing expenses to make the flats ready for sale and the assessee is not liable offer the deemed rental income on such unsold flats as it has complied with the stipulated conditions under section 23(5) of the Act. Therefore the observations of the Pr.CIT is without merits and the AO has applied the mind and taken the view. The Ld. AR has substantiated the submissions with the paper book and judicial decisions and prayed for allowing the assessee appeal. Per Contra, the Ld.DR submitted that the AO has not verified nor conducted inquiry on the facts of applicability of methodology of revenue recognition for the projects and also no rental income from house property was determined on the closing stock of unsold flats in the completed projects and the Ld. DR relied on the order of the Pr.CIT. 8. We heard the rival submissions and perused the material available on record. The Ld.AR envisaged that the order passed by the Pr.CIT ....
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.... case where the assessment order under 143(3) r.w.s 263 r.w.s 144 of the Act dated 15.03.2023 was passed and made addition pertaining to earlier projects. 9. We on perusal of the information and correspondence of the assessee in the assessment proceedings, found that there is no discussion on the provisions of section 23(5) of the Act. Whereas the AO has called for the information with respect to various inventories and the details of flats as referred in the order u/sec. 143(3) of the order but there is no specific query raised or dealt on the applicability of provisions u/sec. 23(5) of the Act in the proceedings. The provisions are applicable from A.Y 2018-19 and the AO should have made enquiries on these facts and in the correspondence of the assessee there is a general information with respect to unsold flats but not on determination of deemed rent on the flats as per the provisions of section 23(5) of the Act. Whereas in the A.Y 2017-18, the A.O has made addition of the notional rent on the projects of Chaturbhuj and Yashvawin aggregating to Rs. 6,63,204/- and passed order u/sec. 143(3) r.w.s 263 r.w.s 144B of the Act and the appeal is pending before the CIT(A). Further the....