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TMI Blog2018 (12) TMI 1763X X X X Extracts X X X X X X X X Extracts X X X X ..... not for the Assessment Year under consideration. Therefore, the twin condition as prescribed under section 263 are not fulfilled in respect of first issue i.e. taxability of unsold flats under the head Income from House Property . Disallowance of interest u/s 36(1)(iii) in respect of payment made to PRS Developers - AO has taken starting figure of ₹ 739.66 Crore and reduced interest disallowance of ₹ 27.66 Crore, however, in the notice; the opening figure is taken as per assessment order. As per the working of notice the opening CWIP on 01.04.2012 should be ₹ 720.24 Crore, whereas the opening CWIP determined by Assessing Officer is ₹ 711.90 Crore. The Assessing Officer has correctly worked out opening CWIP at ₹ 711.9 Crore and has reduced ₹ 14.27 Crore interest attributable for Assessment Year 2013-14. In our view The Assessing Officer has correctly worked out the CWIP as on 01.04.2012 at ₹ 711.90 Crore (₹ 739.56 Crore - ₹ 27.66 Crore) and has reduced ₹ 14.27 Crore interest attributable for A.Y. 2013-14. Therefore, the order is not erroneous and passed after due verification of fact. Hence, the revision order is pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the fact of unsold flats as on 31/3/2013. As the provisions of Section 23 were not applicable the appellant did not offer the income and the Learned Assessing Officer did not invoked the provisions of Section 23. In view of this the appellant prays that order passed by the Principal Commissioner of Income-tax u/s. 263 with reference to computation of income from house property is not justified and be deleted. 5. On the facts circumstances of the case regarding invoking the provisions of Section 263 in respect the applicability of the provisions of section 36(1) (iii) of Income-tax Act, 1961 in respect of the payments made to PRS Developers, the Learned Assessing Officer the original assessment proceedings applied his mind and has computed the disallowance of ₹ 14.27 crores. The learned Principal Commissioner of Income-tax has wrongly concluded that the Learned Assessing Officer does not inquire into the applicability of the provisions of Section 36(1)(iii). The conclusion reached by the Learned Principal Commissioner of Income-tax is erroneous and contrary to the facts. 6. During the revision proceedings before the Learned Principal Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Finance Leasing Co. Ltd. [2013] 29 taxmann.com 303 : 213 Taxman 143 : 354 ITR 180. And No. (it) The Assessing Officer while working the interest disallowance under section 35(1)(iii) in respect of payment made to PRS Developer has taken the opening value of closing work-in-progress (CWIP) of Kandivali project as on 01.04.2012 at ₹ 739.56 Crore, whereas the closing work of Kandivali Project as on 31.03.2012 stood at ₹ 720.2 Crore. Thus, incorrect adoption of capital work-in-progress has resulted in excess carry forward opening written down value (WDV) of ₹ 19.32 Crore leading to under-statement of income to the same extent of completion of project. Therefore, the ld. PCIT issued show-cause notice. 3. The assessee filed its reply and contested the notice of revision vide its reply dated 28.12.2017. In the reply, on first issue the assessee contended the computation of 'Income from House Property' that the inventory of unsold flat is duly reflected in audited financial statement. The Assessing Officer after considering the fact that no income under the head Income from House Property needs to be taxed in respect of unsold inventory. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losing CWIP as on 31.03.2012 at ₹ 711.90 Crore and furnished the breakup of the ld. PCIT. It was explained that ₹ 27.66 Crore includes interest disallowance for Assessment Year 2012-13 amounting to ₹ 13.2 Crore. Thus, the assessee canvassed that there is no mistake in determining the CWIP as on 31.03.2013. The Assessing Officer has taken starting figure of ₹ 739.66 Crore and reduced interest disallowance of ₹ 27.66 Crore, however, in the notice under section 263, the opening figure is taken as per assessment order. As per the working in show-cause notice the opening CWIP on 01.04.2012 should be ₹ 720.24 Crore, whereas the opening CWIP determined by Assessing Officer is ₹ 711.90 Crore. The Assessing Officer has correctly worked out opening CWIP at ₹ 711.9 Crore and has reduced ₹ 14.27 Crore interest attributable for Assessment Year 2013-14 according to interest attributable for Assessment order passed by Assessing Officer cannot be considered as erroneous or prejudicial to the interest of Revenue. 5. The contention of assessee was not accepted by ld. PCIT. For first issue the ld. PCIT concluded that the assessee shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxman 342 wherein it was held that a property is used as stock-in-trade then said property would become or partake character of stock and any income derived from such stock would be Income from Business and not from Income from House Property . Therefore, the issue is debatable issue and the Assessing Officer has taken one of the possible views. Therefore, the assessment order beyond the purview of revision. 7. On second issue the ld. AR of the assessee submits that that the Assessing Officer has correctly worked out the capital work-in-progress. The details of the same were given to the Assessing Officer. There is no mistake in calculating the capital work-in-progress and that no excess capital work-in-progress forwarded in the subsequent Assessment Years. Thus, the order passed by Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue. 8. The assessee further explained that as per notice that work-in-progress as on 31.03.2012 was ₹ 733.46 crore after disallowing interest of ₹ 13.22 Crore. The closing work-in-progress should have been ₹ 720.24 Crore. According to notice CWIP as on 01.04.2012 should have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Ltd. v. CIT [1982] 9 Taxman 262 : 138 ITR 836 (Cal.) (vii) Sonal Garments v. Jt. CIT [2005] 95 ITD 363 (Mum.) (viii) Remex Constructions v. First ITO [1986] 28 Taxman 323 (Bom.) On issue of non-applicability of section 23 in respect of unsold flats, the ld. AR relied upon the following decisions: (ix) Ansal Housing Construction Ltd. v. Asstt. CIT [2018] 95 taxmann.com 17 : 256 Taxman 294 (SC) (x) Chennai Properties Investments Ltd. v. CIT [2015] 56 taxmann.com 456 : 231 Taxman 336 : 373 ITR 673 (SC) (xi) Neha Builders (P.) Ltd.'s case (supra) (xii) Arihant Estates (P.) Ltd. v. ITO ITA No. 6037/M/2016 (xiii) Runwal Construction v. ACIT ITA. Nos. 5408 5409/Mum/2016, dated 22.02.2018 9. On the other hand the ld. CIT-DR for the revenue supported the order of the ld. PCIT. The ld. DR for the revenue further submits that the ld. PCIT rightly revised the assessment order as the order is erroneous as well as prejudicial to the interest of revenue, which is correctly spelt out by ld. PCIT in the notice under section 263 of the Act. The assessee has not offered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on will be attracted. An incorrect assumption of fact or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principle of natural Justice or without application of mind. The 'phrase prejudicial to the interest of revenue' is not an expression of art and is not defined in the Act. Understood it is ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provision of the Act and this task is entrusted to the revenue. If due to an erroneous order of the ITO, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interest of revenue. The phrase prejudicial to the interest of revenue has to be read in conjunction with an erroneous order passed by the A.O. Every loss of revenue as a consequence of an order of AO, cannot be treated as prejudicial to the interest of revenue, for example, when an ITO, adopted one of the course permissible in law and it has resulted in loss of revenue, or where two views are possible and the ITO has taken one view with which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us but not prejudicial to the interest of the revenue, then the power of suo motu revision cannot be exercised. And every erroneous order cannot be subject matter of revision because the second requirement must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully eligible has not been imposed or that by the application of the relevant statute, on an incorrect or incomplete interpretation, a lesser tax than what was just has been imposed. When exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have material on record to satisfy in that regard. If the action of the authorities challenged before the court, it would be open to the courts to examine whether relevant objective factors were label from the records called for and examined by such authority . 12. We have noted that the ld. PCIT revised the assessment on two issue i.e. (i) The Assessing Officer has not examined the taxability of unsold flat under the head Income from House Property and (it) disallowance as per the provisions of section 36(1)(iii). 13. We have noted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed view that the order for not bringing the unsold flats to tax at notional letting value under the head Income from Other Sources is not erroneous. The assessing officer has taken one of the possible views. Even otherwise, sub-section (5) in section 23 was inserted by Finance Act, 2017 and is applicable only from 01.04.2018 and not for the Assessment Year under consideration. Therefore, the twin condition as prescribed under section 263 are not fulfilled in respect of first issue i.e. taxability of unsold flats under the head Income from House Property . 14. So far as, disallowance of interest under section 36(1)(iii) is concerned in respect of payment made to PRS Developers is concerned, we have noted that this issue was examined by Assessing Officer as refer in para-5 of the assessment order. The Assessing Officer observed that payment made to M/s. PRS Developers also form part of work-in-progress shown by the assessee. The Assessing Officer made corresponding interest disallowance attributable to non-genuine payments in the following manner: SL No. particulars Amount (Rs. in Crores) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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