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TMI Blog2016 (11) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interest of revenue. In view of above we do not find any reason to interfere in the order of learned CIT passed under section 263 of the Act. Hence this ground of appeal of the assessee is dismissed. - ITA No. 523/Kol /2016 - - - Dated:- 21-9-2016 - Shri Waseem Ahmed, Accountant Member and Shri K.Narsimha Chary, Judicial Member By Appellant : Shri Pawan Kumar Agarwal, FCA By Respondent : Shri Niraj Kumar, CIT-DR ORDER Per Waseem Ahmed, Accountant Member This appeal has been filed by the assessee relating to Assessment Year (AY) 2012-13 is against the order passed by Pr. Commissioner of Income Tax -3, Kolkata dated 20.01.2016 under the provisions of Sec.263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. The assessee is challenging the validity of revision order passed by Ld. CIT. The grounds raised by the assessee are as under : (1) For that under the facts and circumstances of the case the assessment order passed u/s.143(3) 27-03-2015 by the Assessing Officer was not pre-judicial to the interest of revenue, as such Ld. Pr. Commissioner of Income Tax had erred in invoking Section 263 of The I. T. Act, 1961 in this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee under section 143(2) and 142(1) of the Act. During the assessment proceedings various disallowance of expenditures as claimed by the assessee under different head of profit loss account have been made. In this entire rigmarole of assessment proceedings at the fag-end of the assessment the profit was assessed for ₹ 8,11,75,620/- u/s 143(3) of the Act and for ₹ 72,63,25,956/- u/s 115JB of the Act. The assessment u/s 143(3) of the assessee was completed as on 27/03/2015. 3. The grounds raised by assessee from 1 to 6 have common issue and so we decided to adjudicate them together for the sake of convenience. The common issue raised by the assessee in this appeal is that ld. CIT erred in holding the order of the AO as erroneous and prejudicial to the interest of Revenue under section 263 of the Act. 4. The impugned order passed by ld. CIT u/s 263 of the Act observed that the assessee has claimed future development expenses amounting to ₹ 2,24,85,000/- under the head Other Project Related Cost . As per the ld. CIT the future development expenses were not ascertainable at the time of finalization of balance sheet so these are not allowable expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 Air Conditioner 4361 4361 Sub Total- B 8644 8644 Total 22485 22485 However the ld. CIT rejected the assessee submission by observing that AO failed to verify the expenses claimed by the assessee under the head Future Development Expenses with a view to check whether these have been crystallized or not. The future liability was not ascertained at the time of filing the Income Tax Return. The taxable income of the assessee needs to be worked out as per accounting principles and as per the provisions of Sec. 145 of the Act. Accordingly the ld. CIT held the order erroneous and prejudicial to the interest of revenue. The ld. CIT accordingly directed the AO to make fresh assessment after making proper enquiry and giving opportunity to the assessee as per law. Being aggrieved by the order of the ld. CIT, the assessee is in appeal before us. 5. The ld. AR before us reiterated the submission made before the ld. CIT. (l) The assessee company is engaged in rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to future development expenses for ₹ 2,24,85,000/- is added to assessed income the tax on normal assessment would be less than tax based on book profit under Section 115JB. In view of the same irrespective of the consideration of future development expenses allowable or disallowable tax demanded under book profit provision would remain same. This shows that the assessment order passed by the assessing officer is not prejudicial to the interest of revenue. (5) The twin conditions of the assessment order, that impugned assessment order is erroneous and the assessment order is prejudicial to the interest of revenue, are required to be satisfied simultaneously for invoking Section 263 by Ld. Commissioner of Income Tax. But in this case such two conditions have not been satisfied. Therefore, Ld. Pr. CIT had erred in setting aside the assessment order u/s.263 and therefore the order passed u/s.263 is liable to be set aside. 6. On the other hand the ld. DR submitted that the future expenses claimed by the assessee represent the unascertained cost and the same cannot be disallowed as expenses for the year under consideration as per accounting principles and provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oneous'' in s. 263 emerges out of this context. It is because it is incumbent on the ITO to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous'' in s. 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. The company and the partnership in this case were formed in the same year with many members common in both. The fact that the company purchased the land but handed over construction work to the partnership even though the object of the company was to make such construction should naturally provoke a query as to why this was done. The partnership was required to be in existence as a genuine firm in the previous year before it could be registered under s. 185 of the Act. Such registration gives a substantial advantage to it for the purpose of taxation. In the very first assessment of the company and the firm, the advantage of the registration was given to the firm. The question would naturally arise whether ..... X X X X Extracts X X X X X X X X Extracts X X X X
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