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TMI Blog2018 (1) TMI 1354X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Pr.CIT to replace the view of the AO without appreciating the fact that the assessment order was set-aside on the ground that the AO had passed the order without making inquiries or verification, which should have been made? 3. The brief facts of the case are that the assessee is engaged in the business of real estate i.e. purchase and sale of land. During the assessment proceedings it was found that assessee has sold two properties amounting to ₹ 30,00,000/- and ₹ 23,00,000/- on 28/12/2010 total amounting to ₹ 53,00,000/- out of his business stock of ₹ 57,51,720/-. The Assessing Officer during the assessment proceedings accepted the returned income as declared by assessee is and assessed the income of assessee u/s 143(3) of the Income Tax Act, 1961, at ₹ 27,93,750/-. 4. The property was never shown in stock in trade and it was never shown in the capital account. The Assessing Officer passed an order dated 24.03.2014 wherein it has been observed as under:- 2) Assessee is engaged in the business of real estate i.e. purchase and sale of land. Apart from the above assessee has also shown income from job work. 3) During assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e land use conversion from agriculture to residential and paid the necessary fee to the concerned authorities. Since the acquisition of the said land and converting the same into residential was shown in the accounts as stock in trade which is evident from the financial statements available in the paper book as submitted before the AO. Further it is seen that ld. Pr.CIT1 has also observed the fact that as on 1-4-2009 the land was disclosed as opening stock for F.Y. 2009-10 i.e. relevant to AY 2010- 11. The issue before us is for AY 2011-12. Thus in the previous year relevant to the assessment year before us the subject land was business asset of the assessee. The ld. Pr.CIT-1 has also ignored this fact. This issue has been examined by the AO and assessee had made submission during the course of assessment proceedings. These details are available in the paper book. The AO after examining these details and after going through these financial statements proceeded to complete the assessment by accepting the business profit declared by the assessee. The assessee has been able to demonstrate that the land sold during the assessment year was the business asset (stock in trade) in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014) 51 TW 157 2. CIT Vs. M/s Deepak Real Estate Developers P. Ltd. (Raj HC) (2014) 51 TW 186 With the above observations, we are setting aside the revision order passed by the ld. Pr.CIT-1, Jaipur and restore the assessment order passed u/s 143(3) of the Act by AO dated 24-03-2014. Accordingly the appeal of the assessee is allowed. 8. He relied upon the decision of Karnataka High Court in Commissioner of Income Tax vs. Gokuldas Exports, [2011] 333 ITR 214, (KARHC) : wherein it has been held as under:- 28. Further the Delhi High Court in the matter of CIT v. Shri Ram Honda Power Equip : [2007] 289 ITR 475 has taken a contra view after elaborately discussing the judgments of various High Courts and the Supreme Court on the point In the aforesaid case it has been held as under (headnote): The idea of section 80HHC is to ensure that the exporter gets the benefit of the profits derived from export and not to depress the profit further. Therefore, it can only be the net interest which can be included in the profits. If netting were not to be permitted the result would be that the profits of the exporter would be depressed by an item that is expenditure incurred on ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be permitted, in terms of section 37of the Act, to claim as deduction, expenditure laid out for the purposes of earning such business income. (vii) In the second stage, the Assessing Officer will deduct from the profits of the business computed under the head 'Profits and gains of business or profession' the following sums in order to arrive at the 'profits of the business' for the purposes of section 80HHC(3): (a) 90 per cent., of any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28, i.e., export incentives; (b) 90 per cent., of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (c) profits of any branch, office, warehouse or any other establishment of the assessee situate outside India. (viii) The word 'interest' in clause (baa) of the Explanation connotes 'net interest' and not 'gross interest'. Therefore, in deducting such interest, the Assessing Officer will take into account the net interest, i.e., gross interest as reduced by expenditure incurred for earning such interest. (ix) Where, as a result of the computation of profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein the direct question posed in this appeal was under consideration and has been answered as such. The reasoning and interpretation employed therein also appears to be reasonable and plausible. 9. He also relied upon the decision of Punjab and Haryana High Court in Commissioner of Income Tax vs. Nahar Exports Ltd. [2008] 173 Taxman 3 ( PHHC) wherein, it has been held as under:- 9. We find no merit in the contentions raised by the learned Counsel for the appellant. Firstly, it is not in dispute that when the order of the Commissioner was passed there were two views on the word profits in that section and different views existed on the day when the Commissioner passed the above order. Moreover, the mechanics of the section have become so complicated over the years that two views were inherently possible. Therefore, the subsequent amendment in 2005 even though retrospective, will not attract the provisions of Section 263 of the Act, particularly when as stated above we have to take into account the position of law as it stood on the date when the Commissioner passed the order dated 18-2-1998, in purported exercise of powers under Section 263 of the Act. 11. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terests of the revenue under Section 263 has to be read in conjunction with the expression erroneous order passed by the assessing officer. Every loss of revenue as a consequence of an order of the assessing officer cannot be treated as prejudicial to the interests of the revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue ; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue , unless the view taken by the Income Tax Officer is unsustainable in law. According to the learned Additional Solicitor General, on an interpretation of the provision of Section 80HHC(3) as it then stood the view taken by the assessing officer was unsustainable in law and therefore the Commissioner was right in invoking Section 263 of the Income Tax Act. In this connection, he has further submitted that in fact the 2005 amendment which is clarificatory and retrospective in nature itself indicates that the view taken by the assessing officer at the relevant time was unsus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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