2021 (3) TMI 923 - AT - Income Tax

Revision u/s 263 by CIT - scope and ambit of the expression erroneous - assessee following percentage of completion method, did not recognize any revenue and not offered income from the project and though it paid interest on borrowed loans and claimed interest expenditure under work-in-progress (WIP) but it did not charge any interest on capital withdrawn by the partners during the year - HELD THAT - AO was clinched with the specific issues of percentage of completion achieved by the assessee during the year as well as clinched with the issue of interest expenditure. The requisite details as well as documentary evidences were furnished by the assessee as called for by Ld. AO during the course of assessment proceedings. Since the submissions/explanations were found to be satisfactory, no further information was called from the assessee which is also evident from the fact that the returned loss has been accepted by taking note of the fact that the project was in preliminary stage and the assessee has not sold any flat during the year under consideration but received mere advances. In view of the foregoing, it could be concluded that the view of Ld. AO, could not be said to be contrary to law, in any manner, on both the issues as alleged by Ld. Pr. CIT. There was proper application of mind by Ld. AO on both the issues. Another pertinent fact to be noted is that notional interest on overdrawn capital for A.Ys. 2014-15 to 2017-18 has already been reduced by the assessee from financial expenses in A.Y. 2017-18 which have ultimately reduced the closing WIP held by the assessee for that year. The case for A.Y. 2017-18 has already been assessed u/s. 143(3) on 29/12/2019 and the assessee's closing WIP has not been disturbed in that year. This being the case, even otherwise there would be no loss to the revenue. As decided in GABRIEL INDIA LIMITED 1993 (4) TMI 55 - BOMBAY HIGH COURT Order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written differently or more elaborately. The Section does not visualize the substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is not in accordance with law. Therefore the revisional jurisdiction could not be held to be valid under law. We allow assessee's appeal.

Summary

Issues Involved:
Challenge to the validity of revisional jurisdiction under section 263 for Assessment Year 2014-15.

Detailed Analysis:

Issue 1: Validity of Revisional Jurisdiction under Section 263
The appellant contested the revisional jurisdiction exercised by the Principal Commissioner of Income Tax-29 under section 263 for the assessment year 2014-15. The primary grounds of challenge were that the order passed by the Assessing Officer under section 143(3) was not erroneous or prejudicial to the revenue's interest. The appellant argued that all necessary details were provided during the assessment proceedings, and the Assessing Officer accepted the submissions after due consideration. The appellant defended its revenue recognition method and interest expenditure treatment, emphasizing that the Assessing Officer's decision was well-founded. However, the Principal Commissioner found deficiencies in the assessment process, leading to the conclusion that the assessment was incomplete and directed a de novo assessment under section 263.

Issue 2: Adequacy of Assessment Proceedings
During the assessment proceedings, the appellant submitted detailed responses to queries raised by the Assessing Officer, providing information on business activities, project progress, interest expenses, and capital balances. The appellant explained the status of the project, lack of sales, and reasons for not charging interest on partners' capital. The Assessing Officer accepted the returned loss based on the project's preliminary stage and absence of flat sales. The appellant's submissions were found satisfactory, and no further information was requested, indicating a thorough consideration by the Assessing Officer.

Issue 3: Compliance with Legal Principles
The Tribunal referred to legal precedents, including the decision in Malabar Industrial Co. Ltd. v. CIT, emphasizing that an order causing revenue loss does not automatically qualify as prejudicial to revenue. The judgment highlighted that differing views between the Assessing Officer and the Commissioner do not make the order erroneous unless it is unsustainable in law. The Tribunal also cited the importance of adherence to legal principles in determining the correctness of an order. Based on these principles, the Tribunal concluded that the revisional jurisdiction exercised under section 263 was not valid in this case.

In conclusion, the Tribunal allowed the appellant's appeal, quashing the order dated 17/01/2019, as the revisional jurisdiction was deemed invalid under the law. The detailed analysis of the assessment proceedings, legal principles, and precedents formed the basis for the Tribunal's decision, emphasizing the importance of proper application of law in assessing the validity of revisional jurisdiction.