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TMI Blog2014 (3) TMI 1113X X X X Extracts X X X X X X X X Extracts X X X X ..... from business’ or not has been adjudicated in favour of the assessee by those two High Courts. Hence the view taken by the AO is a possible view. Under the circumstances, the learned CIT cannot substitute the possible view of the Assessing Officer with his own view in an order passed u/s 263 of the Act as held by various High Courts as well as the Hon’ble Supreme Court. Thus, we uphold the contentions of the assessee and cancel the order of the CIT. - Decided in favour of assessee. - ITA No.452/Vizag/2012 - - - Dated:- 6-3-2014 - Shri J.Sudhakar Reddy, AM and Shri Saktijit Dey, JM Appellant by : Shri G.V.N.Hari Respondent by : Shri K.V.N.Charya, CIT O R D E R Per J.Sudhakar Reddy (AM) : This is an appeal filed by the assessee directed against the order of the Commissioner of Income-tax, Vijayawada, u/s 263 of the Act, dated 22.03.2012. 2. Facts in brief are that the assessee is a company engaged in real estate business. It acquires land, develops the same and sells the plots to the customers. In addition to real estate business, the assessee is also engaged in construction activity i.e. construction of residential flats, commercial complexes, civi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se laws:- (i) Jeewanram Choudhary v. CIT (2013) 35 CCH 490 (Del) (Trib.) (ii) ITA No.25/Vizag/2009 in the case of Mookambica Constructions, order dated 13.11.2009. 4.1 On the issue of assessing interest income of the assessee under the head `income from other sources , the learned Counsel submitted that advances received from customers for purchase of property, are invested in fixed deposits for the short period and interest has been earned from it. He submitted that the funds are required for the deployment at short notice and under those circumstances the interest thereon is assessable only under the head `income from business . It was further submitted that for the earlier three years, the assessee has consistently offered interest income under the head `income from business and the same has been accepted by the Revenue and that on the principle of consistency, he submits that the learned CIT should not have revised the order of the Assessing Officer. He further relied on the decision of the Hon ble Bombay High Court in the case of CIT v. LOK Holdings (supra) for the proposition that interest on deposits made out of advances received from intending purchasers should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince the assessee has failed to produce books of account and other relevant documents. The assessee being a reputed company and having a turnover of around 120 crores, the assessee company has failed to set right its state of financial affairs even after S S operation and constantly failing to furnish books of account and other relevant documents before the assessing officers. Under these circumstances the assessing officers had no other go except to resort for estimation of profit. In this case, the estimation of such profit has been consistently happening because the assessee is consistently failing to produce its books of account and other relevant documents during the course of assessment proceedings. Surprisingly, now the A.R. pleads for the principle of consistency by relying on some decisions of the appellate authorities, which are not at all related to the estimation of income. 6.2 Having held so, the learned CIT was of the opinion that the Assessing Officer granted double benefit to the assessee, one in the form of lower percentage of 8% on the total sales receipt and secondly by allowing depreciation benefit there from. He directed the A.O. to estimate the income at 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or canceling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be erroneous in so far as it is prejudicial to the interests of the Revenue . This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CFT [2000] 243 ITR 83, the Supreme Court held that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an . order is erroneous that the section will be attracted . The Supreme Court held that an incorrect assumption of fact or an incorrect application of law will satisfy the requirement of the order being erroneous. An -order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The expression prejudicial to the interests of the Revenue , the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage of profit that has to be applied in the place of the opinion of the Assessing Officer under the garb of revisionary proceedings u/s 263 specifically when the AO has at page 4 and 5 of his order discussed the issue in detail and passed an order after due application of mind. Thus, the assessee succeeds on this ground. 6.5 Coming to the issue whether the interest on deposits made out of funds collected from purchasers / customers is to assess under the head `income from business or under the head `income from other sources , we find that the assessee has consistently disclosing the interest income under the head `income from business for the last three previous years, and the Revenue has been accepting the same as such. Basically, on the principle of consistency, this should not be disturbed unless the facts warrant such action. 6.6. Be that as it may, the Hon ble Bombay High Court in the case of LOK Holdings, has held as follows:- Interest earned by assessee a property developer, by making temporary deposits of surplus money out of advances received by it from intending purchases is business income and cannot be assessed as income from other sources. 6.7 The Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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