TaxTMI 
TaxTMI 
2025 (4) TMI 863
X X X X Extracts X X X X
X X X X Extracts X X X X
....4,13,780/-. A search and seizure action u/s 132 of the Act was conducted in the case of the assessee on 10.01.2019. In response to the notice issued u/s 153A(a) of the Act on 14.08.2019 the assessee filed its return of income on 04.01.2020 declaring total income of Rs. 3,24,13,780/-. The Assessing Officer completed the assessment u/s 153A of the Act on 22.04.2021 accepting the returned income of Rs. 3,24,13,780/-. 4. Subsequently, the Ld. PCIT on examination of records noted that the Assessing Officer has not inquired into the applicability of the provisions of section 43CA of the Act and addition of interest cost of Rs. 1,52,87,640/- to the cost of land despite the same being capitalized separately. He, therefore, was of the opinion that the order passed by the Assessing Officer has become erroneous and prejudicial to the interest of the Revenue for which he issued a notice u/s 263 of the Act to the assessee to explain as to why the order passed by the Assessing Officer should not be set aside in terms of provisions of Explanation (2) to section 263(1) of the Act. The relevant contents of notice read as under: "02. In the above mentioned case, on verification of case r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the facts and circumstances mentioned above, the assessment order passed u/s 153A r.w.s 143(3) of the Act in the case of M/s Shree Balaji Associates Pune LLP for A.Y. 2018-19 prima facie appears to be erroneous in so far as it is prejudicial to the interest of revenue in terms of the provisions of Explanation-(2)(a) to Section 263(1) of the Income Tax Act. I, therefore, intend to set aside/ modify the assessment order within the meaning of section 263 of the I.T. Act, 1961. An opportunity of being heard is therefore, given to you. You are requested to attend in person or through your authorized representative on 29.01.2024 at 03:00 PM in my office. 07. If you have authorized any representative to attend on your behalf, please ensure that the Power of Attorney with proper court fee stamp is filed on or before the date of hearing. If you do not wish to attend in person or through your authorized representative, you may file written submission along with necessary evidence in support of your contention before the due date of hearing. Further, it may be noted that no adjournment will be provided and in case on non appearance/non submission of reply, order will be passed on m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs the assessment order being erroneous and prejudicial to the interest of revenue. In this connection the following judicial pronouncements are relied upon: * The Hon. Supreme Court in Rampyari Devi Saraogi v CIT 67 ITR 84 while taking note of the fact that the AO had concluded the assessment in "undue hurry" by passing a short, stereotyped assessment order, without making any inquiries, upheld the revision done by the CIT. * In the case of Deniel Merchants Pvt. Ltd. vs ITO dated 29.11.2017, the Hon'ble Supreme Court upheld the law as laid down by the High Courts in Subhlakshmi Vanijya Pvt. Ltd vs. CIT 155 ITD 171 (Kol), Rajmandir Estates 386 ITR 162 (Cal) etc. and held that the CIT is entitled to revise the assessment order u/s 263 on the ground that the AO did not make any proper inquiry while accepting the explanation of the assessee insofar as receipt of share application money is concerned. * In the case of Malabar Industrial Co. Ltd. Vs CIT [2000] 109 Taxman 66 (SC)/[2000] 243 ITR 83 (SC)/[2000] 159 CTR 1 (SC), Hon'ble Supreme Court held that where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ITAT Delhi Bench in the case of Bhushan Steel Ltd., New Delhi vs ACIT dated 30 March, 2015 is relevant to note as it relates to the aspect of lack of inquiry at the end of the AO for valid initiation of proceedings under Section 263 of the Act. * Hon'ble High Court OF Karnataka in the case of CIT vs. Infosys Technologies Ltd. 341 ITR 293 dated 04.01.2012 has held that section 263 is a section which enables the Commissioner to have a look at the orders or proceedings of the lower authorities and to effect a correction, if so needed, particularly if the order or proceeding is erroneous and prejudicial to the interest of the revenue, It is also held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case, ITO should have made further inquiries before accepting the statements made by the assessee in his return. * Hon'ble ITAT Delhi Bench in the case of Ramesh Kumar, ITA No. 1982/Del/2018 for A.Υ. 2014-15 order dated 25.01.2019 has observed as under- * going through the facts, it can be observed that the Assessing Officer has not conducted any enquiry and this is a clear case of lack of enquir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....heard to the assessee." 6. Aggrieved with such order of the PCIT, the assessee is in appeal before the Tribunal. 7. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. PCIT and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that the assessee had sold the land at Survey No.24 for a consideration less than the market value adopted for stamp duty purposes for which the provisions of section 43CA of the Act are squarely applicable. Although there is a difference as per the provisions of section 43CA of the Act of Rs. 38,32,312/-, the assessee had offered only an amount of Rs. 3,05,475/- and the Assessing Officer has not bothered to inquire about the same. Similarly, the issue relating to the addition of interest of Rs. 1,52,87,640/- to the cost of land despite debiting such interest as finance cost in the Profit and Loss Account remained to be examined by the Assessing Officer. Further, a perusal of the assessment order shows that it is a very brief order without touching the two vital issues pointed out by the Ld. PCIT. 8. We find th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 143(3) on 22.04.2021 determining the total income of the assessee at Rs. 1,58,11,895/- by making addition of Rs. 65,415/- u/s 69C r.w.s 115BBE of the Act on account of unexplained expenditure. 13. Subsequently, the Ld. PCIT on examination of the record noted that the assessee has declared net profit of Rs. 2,10,15,755/- during the course of search action conducted u/s 132 of the Act on 10.01.2019. However, in the return of income filed for the year under consideration the assessee had declared net profit of Rs. 1,56,45,352/- only. Further, the total cost incurred for Phase-I has increased from Rs. 81,46,76,053/- as on 10.01.2019 (date of initiation of search) to Rs. 90,12,74,680/- as on 11.02.2019 (date of completion of the project). Thus, the cost of the project increased to the tune of Rs. 8,65,98,627/- during the span of one month and it was submitted by the assessee that the books of accounts of the assessee at the time of the search action were not updated. He observed that neither the assessee had submitted any details / evidence to substantiate the total cost nor the Assessing Officer had raised specific query during the course of assessment proceedings to verify the inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urse of the assessment proceedings. Further, no verification on the aforesaid issue has been done in the assessment proceedings by the AO. As per explanation (2) to section 263(1) of the Act an order without making inquiries or verification which should have been made is deemed to be erroneous in so far as it is prejudicial to the interest of revenue. 04. Considering the above facts of the case it is seen that the AO has not examined and verified the above issues and therefore income has been under assessed. Therefore, assessment order u/s 153A r.w.s 143(3) of the Act dated 22.04.2021 passed by the AO for A.Y. 2019-20 appears to be erroneous in so far as it is prejudicial to the interest of revenue. 05. In view of the facts and circumstances mentioned above, the assessment order passed u/s 153A r.w.s 143(3) of the Act in the case of M/s Shree Balaji Associates Pune LLP for AY. 2019-20 prima facie appears to be erroneous in so far as it is prejudicial to the interest of revenue in terms of the provisions of Explanation-(2)(a) to Section 263(1) of the Income Tax Act. I, therefore, intend to set aside/ modify the assessment order within the meaning of section 263 of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....upon. * The Hon. Supreme Court in Rampyari Devi Saraogi v CIT 67 ITR 84 while taking note of the fact that the AO had concluded the assessment in "undue hurry" by passing a short, stereotyped assessment order, without making any inquiries, upheld the revision done by the CIT. * In the case of Deniel Merchants Pvt. Ltd. vs ITO dated 29.11.2017, the Hon'ble Supreme Court upheld the law as laid down by the High Courts in Subhlakshmi Vanijya Pvt. Ltd vs. CIT 155 ITD 171 (Kol), Rajmandir Estates 386 ITR 162 (Cal) etc. and held that the CIT is entitled to revise the assessment order u/s 263 on the ground that the AO did not make any proper inquiry while accepting the explanation of the assessee insofar as receipt of share application money is concerned. * In the case of Malabar Industrial Co. Ltd. Vs CIT [2000] 109 Taxman 66 (SC)/[2000] 243 ITR 83 (SC)/[2000] 159 CTR 1 (SC), Hon'ble Supreme Court held that where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263 was justified. * In the case of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quiry at the end of the AO for valid initiation of proceedings under Section 263 of the Act. * Hon'ble High Court OF Karnataka in the case of CIT vs. Infosys Technologies Ltd. 341 ITR 293 dated 04.01.2012 has held that section 263 is a section which enables the Commissioner to have a look at the orders or proceedings of the lower authorities and to effect a correction, if so needed, particularly if the order or proceeding is erroneous and prejudicial to the interest of the revenue, It is also held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case, ITO should have made further inquiries before accepting the statements made by the assessee in his return. * Hon'ble ITAT Delhi Bench in the case of Ramesh Kumar, ITA No. 1982/Del/2018 for A.Υ. 2014-15 order dated 25.01.2019 has observed as under- On going through the facts, it can be observed that the Assessing Officer has not conducted any enquiry and this is a clear case of lack of enquiry not a case of inadequate enquiry. Further non application of mind by the Assessing Officer can be easily gauzed from the fact that the information av....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th such order of the Ld. PCIT, the assessee is in appeal before the Tribunal. 16. The Ld. Counsel for the assessee at the outset referring to pages 36 to 39 of the paper book drew the attention of the Bench to the information called for by the Assessing Officer u/s 142(1) of the Act for assessment years 2013-14 to 2019-20. Referring to query No.12 (page 38 of the paper book), he drew the attention of the Bench regarding the disclosure made during the course of search of Rs. 2,10,15,755/- on account of project "New Town". Referring to pages 43 to 48 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the reply dated 11.02.2021 by the assessee to the Assessing Officer giving various details. Referring to pages 71 to 73 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the queries raised by the Assessing Officer in the notice issued u/s 142(1) of the Act wherein at query No.3 he has asked the assessee to furnish the working of profit of Rs. 2,10,15,755/- given during the search action. Referring to pages 74 to 80 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the reply gi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....E PCIT, ITA NOS.637 ΤΟ 641/PUN/2018 (ITAT PUNE) 3. SHRI RAMAMOORTHY VASUDEVAN VS. THE PCIT, ITA NOS 968/PUN/2016 (ITAT PUNE) 4. MEHTAB ALAM SULTAN VILLA, JAJMAU VS, ACIT, KANPUR, ITA NOS 294/LKW/2014 (ITAT LUCKNOW) 5. CIT VS SUNBEAM AUTO LTD, ITA NO. 1399 OF 2006 (DELHI HC) 6. BISMILLAH TRADING CO. VS. INTELLLIGENCE OFFICER, SQUAD NO. II, [2001] 248 ITR 292 (KERALA HC) 7. CIT VS. GABRIEL INDIA LIMITED, ITR 145 OF 1980 (BOMBAY HC) 8. PCIT VS. M/S AMBIT MULTITRADE P. LTD. ITA 1399 OF 2016 (BOMBAY HC) 9. CIT VS. M/S. FINE JEWELLERY (INDIA) LTD, ITA 296 OF 2013, (BOMBAY HC) 10. M/S. ANGRE PORT PRIVATE LTD. VS. PCIT, ITA NO 1025/PUN/2016 (ITAT PUNE) 11. M/S DWARKADHIS BUILDWELL PVT.LTD. VS CIT, ITA NO 3097/DEL/2014 (ITAT DELHI) 12. SANJAY AMRUTRAO SATAV (HUF) VS. ITO, ITA NO.200/PUN/2021 (ITAT PUNE) 13. M/S S.R. TRUST VS. THE PCIT, ITA NO. 213/CHNY/2022 (ITAT CHENNAI) 14. PCIT VS. DELHI AIRPORT METRO EXPRESS PVT. LTD, ITA NO. 705/2017 (DELHI HC) 15. TORRENT PHARMACEUTICALS LTD. VS. DCIT, I.T.A. NO. 164/AHD/2018 (ITAT AHMEDABAD) 16. ZAHURAHMED ABDULRAZ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... action at the office of premises of Annuj Goel Group at Ground floor, 5, San Mahu Complex, Bund Garden Road, Pune. statement of Mrs. Annuj Goel was recorded u/s 132(4) of the Act on 12.01.2019. On being asked about position of Work-in-Progress [WIP) of and method of accounting followed by the concerns of group. Mr. Annuj Goel stated that total WIP of the concerns was Rs 329,22,50.849/- and the concerns of the group is following Percentage Completion Method (PCM) of accounting. During the search, concerns of the group worked out sales to be offered to tax for FY 2018-19 by following PCM of accounting Accordingly, the concerns of the group submitted net profit amounting to Rs. 4.23.00.549/- to be recognized for the concerns of the group for FY 2018-19. Entity-wise workings of net profit of the concerns of the group for FY-2018-19 are as under: Sr. No. Project Name of the entity F.Y. Amount of net profit 1 Fernhill Meenamani Ganga Builder LLP 2018-19 0 2 Florentina Shree Balaji Realty 2018-19 56,37,525/- 3 Amber Shri Siddhivinayak Developers 2018-19 1,56,47,260/- 4 New Town Shree Balaji Associates 2018-19 2,10....
X X X X Extracts X X X X
X X X X Extracts X X X X
....15,28,890/- is allowable expense. (6) How GST rebate is allowable expense and why corresponding income is offered for taxation. (7). Furnish ledger A/C extract of following parties (i)Chetan Sanitory stores (ii) Choice traders (iii) Raj enterprises (8)Furnish details of transporter with respect to each bill for purchase of material from following parties (i)R A Pawar (ii) Shree swami Samarth enterprise (iii) Tawakkal electrical (iv)Chetan Sanitoary stores (v)Choice traders (9). Furnish ledger Account extract of following parties (i) Tukaran construction (ii) Shree Balaji enterprise (iii) Sanjay Bhati (10). Furnish working of profit as per percentage completion method in detailed manner SWAPNE SHARADRIAD PATIL CENTRAL CIRCLE 2(3), PUNE 23. We find the assessee vide reply dated 23.03.2021 has given the working of profit of Rs. 2,10,15,755/- during the search action. We find again the Assessing Officer vide annexure to the notice dated 02.04.2021 issued u/s 142(1) of the Act has raised the following query: "ANNEXURE Dur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....revenue recognition working submitted was based on an earlier estimated cost. However the actual cost incurred on the said real estate project upto 31/03/2019 amounted to Rs. 90,12,74,680/- (including provision of construction expense of Rs. 1 crore). The assessee has incurved expenditure of Rs 1 crores in the subsequent year for which provision was made. A copy of ledger extract of Provision for construction expense for FY 2010-2016 annexed for your honour's reference. (Refer annexure "A") Also the assessee had estimated that it would recognize revenue from sale of units having total area 12,544 sq mtrs. However, the assessee has recognized revenue from sale of units of flats having total area of 12.170 sq mtrs. Your honour will appreciate that the assessee has recognized higher revenue of Rs 34.15 crores in its books of accounts as per ITR as against Rs. 31.60 crores submitted at the time of search action Hence on account of above mentioned reasons there is variance between revenue recognition working submitted at the time of search action and final revenue recognition working based on which return of income is filed Kindly take note of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e order passed by the PCIT u/s 263 of the Act has observed as under: "10. We have heard the rival submissions and perused the material available on record. The only issue that comes up for consideration before us is whether or not the Pr. CIT were justified in exercising the power of revision of the assessment order on the issue of allowability of legal and professional charges of Rs. 10 lakhs incurred in connection with the acquisitions of New Ship Lift System. From the perusal of para 6 at page no.10 of the Paper Book, it is crystal clear that during the course of assessment proceedings, the Assessing Officer had called for the details regarding the true nature of legal and professional expenses of Rs. 10 lakhs and the same was explained by the assessee on being satisfied the Assessing Officer had chosen not to make any addition. The fact that the assessment order does not discuss about this item of the expenditure does not mean that the Assessing Officer had not examined the issue. In the circumstances, it cannot be said that there was no enquiry by the Assessing Officer on this issue of allowability of legal and professional charges of Rs. 10 lakhs. The Hon'ble Jurisdi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessing Officer. It is Assessing Officer's prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various High Courts in this regard. 12.2 Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon'ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 on the ground of inadequate inquiry "12...... There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inqu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ack of inquiry"." 12.3 In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113) "The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well- accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. 12.4 The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acts of this case were that respondent assessee has filed its return of income showing total income of Rs. 62,55,900/- which was assessed under section 143(3) of the Act, 1961 by an assessment order dated 14th March 2016. The respondent company received unsecured loans from M/s. Georgett Tradecom Pvt Ltd and M/s. Purba Agro Food Pvt. Ltd amounting to Rs. 2.49 Crore and the Assessing Officer allowed these unsecured loans. The Principal Commissioner of Income-tax invoked section 263 of the Act, 1961 for revising the assessed income of the respondent assessee. It was noticed by the PCIT that the unsecured loans obtained by the respondent assessee are shown as investment in the name of the assessee in the share application as well as in the balance sheet of the respective companies. The PCIT passed an order under section 263 of the Act directing the Assessing Officer to pass fresh assessment order under section 143(3) of the Act, 1961 on the aspect of unsecured loans shown by the respondent assessee. The Hon"ble Supreme Court made the following observation while deciding in favour of the assessee: "Thus, the Tribunal has considered in detail the aspect of revisional power to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t v. Canara Bank Securities Ltd[2020] 114 taxmann.com 545 (SC), dismissed the Revenue"s SLP holding that 263 proceedings are invalid when AO had made enquiries and taken a plausible view in law, with the following observations: "Having heard learned counsel for the parties and having perused the documents on record, we see no reason to interfere with the view of the Tribunal. The question whether the income should be taxed as business income or as arising from the other source was a debatable issue. The Assessing Officer has taken a plausible view. More importantly, if the Commissioner was of the opinion that on the available facts from record it could be conclusively held that income arose from other sources, he could and ought to have so held in the order of revision. There was simply no necessity to remand the proceedings to the Assessing Officer when no further inquiries were called for or directed" 12.9 The Supreme Court in the case of Principal Commissioner of Income-tax--8 Mumbai v. Sumatichand Tolamal Gouti [2019] 111 taxmann.com 287 (SC) held that where High Court upheld Tribunal's order holding that AO had made detailed enquiries while allowing asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the preceding paragraphs, to which the assessee had also replied. So, in our view, this is not a case where no enquiry has been made by the assessee officer during the course of assessment proceedings. It is also not the case of the Pr. CIT that the Ld. AO failed to apply his mind to the issues on hand or he had omitted to make enquiries altogether or had taken a view which was not legally plausible in the instant facts. As held by various Courts, s 263 of the Act does not visualise a case of substitution of the judgment of the Principal CIT for that of the Assessing Officer, who passed the order unless the decision is held to be wholly erroneous. As noted in various judicial precedents highlighted above, the Principal CIT, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-visit the entire assessment and determine the income himself at a higher figure. Now on the issue that the Ld. AO passed a cryptic order and did not discuss i....