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TMI Blog2017 (9) TMI 1022X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier allocated the estimated expenses between the two streams of income, viz., (a) TDR receipts and (b) Commercial space in Airport. After cancellation of airport contract, it had allocated actual expenses against TDR receipts. It is quite common in the case of construction contracts that the income and expenses are disclosed on estimated basis in the initial years. When the whole scenario changed, the Tribunal found merit in the plea of the assessee that the allocation of expenses on the basis of then prevailing conditions should be changed. We have already expressed the view that the claim of the assessee as well as acceptance of the same by the AO cannot be said to be unsustainable in law, if one considers the principle of taxing the real income. Hence we agree with the contentions of the assessee that the view taken by the AO is a possible view, in which case, the impugned revision orders cannot be sustained. Accordingly we set aside the impugned revision orders passed by Ld Pr. CIT. - Decided in favour of assessee. - I.T.A. No. 2780/Mum/2017, I.T.A. No. 2781/Mum/2017 And I.T.A. No. 2782/Mum/2017 - - - Dated:- 1-9-2017 - Shri B.R. Baskaran (AM) And Shri Ravish Sood (JM) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee will get 65 acres of Airport land to develop non-aeronautical services as part of development of airport area (referred to as Commercial space in Airport) (+) TDR generated in this process. 5. Consequent to the agreement, the assessee purchased 1900 acres of land and conveyed the same to the Slum Rehabilitation Authority as per SRA Scheme. Since the assessee put the claim that its activities also form part of Airport development, which is an infrastructure facility, and hence it is eligible to claim deduction u/s 80IA(4) in respect of profits related to TDR receipts less cost related thereto in the form of purchase of land, construction of flats etc. The AO rejected the claim for deduction u/s 80IA(4) and the assessee challenged the same by filing appeal before Ld CIT(A). The assessing officer also made various other additions. Before Ld CIT(A), the assessee did not get favourable orders and hence it filed appeals before the Tribunal for AY 2009-10 and 2010-11. 6. The impugned revision orders for assessment years 2009-10 and 2010-11 has been passed against the orders passed by the AO in order to give effect to the orders passed by the Tribunal. The proceedings that took ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al expenses. By that time, the actual cost incurred by the assessee in connection with this project (airport project) was available. Since the assessee brought new evidences and also put forth new plea, the Tribunal restored the matter back to the file of the AO for consideration of the claim of the assessee, after finding merit in the plea of the assessee. The relevant observations made by the Tribunal are extracted below:- 41. At this stage, we would like to appreciation Ld Counsel for the assessee, Dr. K. Shivram for bringing to the notice of this Bench the facts which have arisen after the conclusion of the first appellate proceedings. By this factual submission by Ld Counsel, miscarriage of justice would be prevented. The facts as they are before us today leave us no choice but to restore this issue back to the files of the AO for framing the assessment denovo. Since the very basis of the claim of deduction u/s 80IA(4) of the Act do not exist, the claim of deduction u/s 80IA(4) cannot be entertained and therefore rejected subject to the outcome of the arbitration proceedings and the profit arising out of the sale of TDR has to be recomputed in line with the revised c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was further submitted that the assessee had furnished all the relevant details before the AO in the impugned proceedings and the orders have been passed by the AO by duly considering all of them. It was also submitted that the assessee has not made any new claim as presumed by the Ld Pr. CIT. The expenses already incurred and which were accounted for in the books of accounts and only the basis of allocation has been changed, i.e., in the original return of income, the assessee had claimed expenses on estimated basis and allocated the same against two streams of income, whereas, it has been claimed now on actual basis and allocated to only one stream of income. Accordingly it was contended that the impugned orders passed by the AO cannot be considered to be erroneous and prejudicial to the interests of revenue. 13. The Ld Pr. CIT took the view that the revised expenses claimed by the assessee are not audited and not certified by any independent auditor. He also took the view that the assessee has also not furnished payment details relating to additional claim made nor was it shown that these expenses accrued during the year. The Ld Pr. CIT took the view that the AO has also fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a debt in present or in future till the contingency happens and a contingency that may arise in future is not expenditure as the cancellation of contract was disputed by the assessee and pending before arbitration proceedings. 15. The assessee is aggrieved by the revision orders passed by Ld Pr. CIT in all the three years under consideration. 16. Before us, the Ld A.R placed reliance on the decision rendered by the coordinate bench in the case of Shri Narayan Tatu Rane (ITA No.2690 2691/Mum/2016 dated 06-05-2016) to reiterate certain legal propositions. We prefer to extract the legal propositions considered in the above said order, as the same would also guide us in the present cases:- 12. We have heard rival contentions and perused the record. Before going into the merits of the issue, we would like to discuss about the legal position with regard to the power of Learned CIT to invoke revision proceedings under section 263 of the Act. The scope of revision proceedings initiated under section 263 of the Act was considered by Hon'ble Bombay High Court, in the case of Grasim Industries Ltd. V CIT (321 ITR 92) by taking into account the law laid down by the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282. ................... 16. We have noticed earlier that the Ld Pr. CIT can revised the order only if it is shown that the assessment order is erroneous in so far as prejudicial to the interests of the revenue. The question as to when an order can be termed as erroneous was explained by Hon ble Bombay High Court in the case of Gabriel India Ltd (supra) as under:- From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an income tax officer acting in accordance with the 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 more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and explained the scope of the provisions of sec. 263 of the Act and the same has been extracted by the Delhi High court in the case of CIT Vs. Goetze (India) Ltd (361 ITR 505) as under:- Thus, in cases of wrong opinion or finding on merits, the Commissioner of Income tax has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order is not sustainable in law and the said finding must be recorded. The Commissioner of Income tax cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner of Income tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income tax and he is able to establish and show the error or mistake made by the Assessing officer, making the order unsustainable in law. In some cases possibly though rarely, the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order to establish that the assessment order is not sustainable in law and order for revision. He can also force the AO to conduct the enquiries in the manner preferred by Ld Pr. CIT, thus prejudicing the independent application of mind of the AO. Definitely, that could not be the intention of the legislature in inserting Explanation 2 to sec. 263 of the Act, since it would lead to unending litigations and there would not be any point of finality in the legal proceedings. The Hon ble Supreme Court has held in the case of Parashuram Pottery Works Co. Ltd Vs. ITO (1977)(106 ITR 1) that there must be a point of finality in all legal proceedings and the stale issues should not be reactivitated beyond a particular stage and the 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. 20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that time the actual figures were available with the assessee. He submitted that the Ld Pr CIT was not justified in observing that the AO has not properly examined the claim of the assessee. He submitted that the assessing officer, during the course of assessment proceedings, called for relevant details and has duly examined all of them. The Ld A.R submitted that the assessee has furnished copies of letter issued by MIAL terminating the contract. The assessee has furnished detailed replies through letters dated 14- 02-2014, 16-05-2014, 22-05-2014, and 06-06-2014 filed before the assessing officer, wherein it has duly explained the basis of revised claim. The copies of above said letters have been placed in the paper book. The assessee has furnished revised computation of income, the original computation for allocation of costs, revised computation for allocation of expenses etc., before the AO. He submitted that the cost pertaining to TDR has increased, since the income from Airport authority was considered as NIL after termination of contract. He submitted that the assessee has sought revision of book profits u/s 115JB of the Act also, but the same was rejected by the AO. He submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld Pr. CIT has expressed the view in AY 2012-13 that the assessing officer has not examined the evidences. He submitted that the issue under consideration was not relating to evidences, but it related to only allocation of expenses. 23. The Ld D.R, on the contrary, submitted that the assessee has made additional claim for expenses before the Tribunal for the first time. He submitted that the said additional claim has resulted in determining the total income lower than that returned by the assessee. He submitted that he has obtained a remand report from the assessing officer and furnished a copy of the same to the bench, wherein the AO has concurred with the view taken by Ld Pr. CIT. The ld D.R submitted that the assessing officer, in the impugned proceedings, has allowed the claim of the assessee without making proper enquiries and accordingly submitted that the Ld Pr. CIT was justified in passing the impugned revision orders. 24. In the rejoinder, the Ld A.R strongly objected to the remand report obtained from the assessing officer. He submitted that the assessee is challenging the revision orders passed by Ld Pr. CIT and hence the report of the AO should not be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also observed that by the factual submissions made by Ld Counsel, miscarriage of justice would be prevented. Accordingly the Tribunal found merit in the plea of the assessee and accordingly restored the matter to the file of the AO for examining the same. The details of actual expenses and their allocation are given in page 55 of the paper book. A perusal of the same would show that even the constructed area has also undergone a change and the quantum of various expenses has also undergone change. As stated by Ld A.R, the necessity of revising the expenses relating to TDR sales arose mainly because of cancellation of airport contract. The plea of the assessee was to allocate actual expenses, which plea can be considered as one of the possible views only. 27. From the letters furnished by the assessee before the AO, we notice that the assessing officer has been appraised of the necessity of making additional claim and the details of additional claim were also furnished to him. We notice that the assessee has also sought revision of book profit, but the same has been rejected by the assessing officer. This fact, as contended by Ld A.R, would show that the assessing officer has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing officer was not sustainable in law. On the contrary, the assessee has demonstrated that it was constrained to make additional claim in view of the cancellation of the airport contract and further the said additional claim was not in the form of any additional expenses as presumed by Ld pr. CIT, but in the form of allocation of actual expenses. We have noticed that the assessee had earlier allocated the estimated expenses between the two streams of income, viz., (a) TDR receipts and (b) Commercial space in Airport. After cancellation of airport contract, it had allocated actual expenses against TDR receipts. It is quite common in the case of construction contracts that the income and expenses are disclosed on estimated basis in the initial years. When the whole scenario changed, the Tribunal found merit in the plea of the assessee that the allocation of expenses on the basis of then prevailing conditions should be changed. We have already expressed the view that the claim of the assessee as well as acceptance of the same by the AO cannot be said to be unsustainable in law, if one considers the principle of taxing the real income. Hence we agree with the contentions of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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