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TMI Blog2017 (7) TMI 1390X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of assessment proceedings and did not find any anomaly in the details furnished before him and accordingly has not taken any adverse view of the matter. We find that the complete details were examined by the AO during the course of assessment proceedings and now CIT through this revision order want to re-examine this issue, which according to us is not permissible u/s 263. Unsold flats - HELD THAT:- As explained before us that only part of total sale consideration is received in this year i.e. the advance or earnest money for purchase of flat by the prospective buyer and full consideration is received only in subsequent years. And in subsequent years this sale is reflected as revenue by crediting the same to the P L Account. The assessee has filed complete statements and details of sale of various units as on 31-03-2012 in subsequent years and the same has been examined by the AO The assessee before us also filed copies of assessment orders passed u/s 143(3) of the Act for AYs 2013-14 and 2014-15, during which years the assessee has disclosed the sale consideration of these flats when actually these were sold. We find that on merits as well as on the issued at the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of ₹ 2. 18 Cr received from 27 customers as booking advances for proposed sale of flats/shops holding that the project being completed, the revenue in respect of these units should have been disclosed in the year under appeal as income, not appreciating that receipt of booking advances without any sale agreement or handing over possession of the constructed units would not lead to income chargeable to tax in the hands of the appellant and ignoring that except in case of 3 parties all other proposed transactions stood subsequently cancelled. 2. The PCIT on perusal of the assessment records issue show cause notice under section 263 of the Act vide dated 27-10-2015 and notice that the assessment order is erroneous as well as prejudicial to the interest of the Revenue as follows: - i. on perusal of case records, it is observed that assessee had made payment of major purchases after filing of the return of income. For example, assessee had purchased cements from two parties without paying them for the amount of more than ₹ 2.5 crore. The AO had overlooked this issue while assessing the income for the year. ii. It is also observed that assessee had debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ₹ 1 lakh where payments were not made within three months by the assessee with regard to the genuineness and business purpose of such purchases. 4. In regard to the issue of unsold flats despite the fact that the assessee received advances of ₹ 2.18 crore against 27 flats and project was complete but the same was not disclosed as income in the return of income and he directed the AO to make required enquiries and he setting aside by observing in Para 9.1 and 9.2 as under: - 9.1 I have carefully considered the assessment records and assessee's submissions. Assessee has claimed substantial number of unsold flats and taken the same as stock even when assessee has received booking advance of ₹ 2.18 crores against 27 flats. It is not in dispute that the project was completed by the end of this year and therefore, as per accounting standard AS9, the revenue in respect of flats booked should have been disclosed as sale. Assessing Officer did not examine this aspect at all and, therefore, as per the amended provisions of section 263, assessment order passed by the Assessing Officer on this aspect is erroneous and prejudicial to the interest of revenue. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e give details of purchase party in following format. Name of party TIN Amount of purchase Whether name is reflected in Hawala list displayed in website of Sales Tax Department, Maharashtra 6. This questionnaire was replied by assessee and the learned Counsel for the assessee drew our attention to page 19 and 20 of the assessee s paper book wherein letter dated 16-02-2015 of the assessee addressed to the AO whereby the details of sundry creditors, details of cumulative purchase of 10 lakhs or more and details of purchase party with the TIN No. is provided at item No. 10,12 and 19 as under: - 10. Details of sundry creditors of more than ₹ 10 lakh in the prescribed format. 12. Details of cumulative purchases of ₹ 10 lakhs or more. 19. Details of purchase party with TIN No. 7. The learned Counsel for the assessee stated that the complete details of sundry creditors more than ₹ 1 lakh was provided to the AO at pages 21 to 24 which was filed before the AO including the details of purchase party wise. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) No. of floors in each wings/ towers 13 Floor per Towers (v) No. of flats/ units on each floor of each wing/tower 2 Flats (vi) Date of Commencement of construction 07.11.2007 (vii) Date of receipt of O.C/completion certificate of the project 31.03.2012 (viii) No. floor/tower erected as on (13 floor) 31-03-2011 (13 Floor) 31-03-2012 31-03-2013 (ix) Extent of completion of project as on 31/08/2013 Completed (x) Saleable Area in the in sq. ft. with separate details as under Residential Space ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the absence of the customer entering into registered agreement, Revenue was not recognized in regard to concerned unit because the same has not been sold and only advance was received that also part of the sale consideration. It was stated that Revenue is recognized not on completion of construction but on sale of particular unit as and when consideration received by assessee. The assessee also submitted the details on sales of various units, as available in stock as on 31-03-2012 as sold in subsequent assessment years which is includes in assessee s paper book pages 25 to 31 including name and address of the customer, Flats/Shops sold and amount of sale consideration. It was argued that the profit arising at the sale of units is offered to tax in respect of assessment years on sale basis. The assessee also filed copies of assessment order for AY 2013-14 and 2014-15 in assessee s paper book at pages 136 to 145 wherein the subsequent sale, the amount of advance received on account of these 27 flats, is disclosed. The assessee also submitted statement giving details of booking advances as on 31-03-2012 along with ledger account of customers who have cancelled the allotments, book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh banking channels is reflected. As regard to the query of the AO that the assessee has received credits on account of purchased from parties, it was explained that the assessee group including the partners independently is developing various projects in which substantial purchases were made and therefore having good business relations with these parties and due to that is availing credit facility. In view of these facts, the AO examined the aspect in detail in the course of assessment proceedings and did not find any anomaly in the details furnished before him and accordingly has not taken any adverse view of the matter. We find that the complete details were examined by the AO during the course of assessment proceedings and now CIT through this revision order want to re-examine this issue, which according to us is not permissible u/s 263 of the Act. 13. In regard to the second issue of unsold flats it was explained during the course of assessment proceedings that the construction of the entire project was completed during the year 2012-13 i.e. the year under consideration and assessee has recognized the revenue in respect of flats/ shops sold by crediting the sale value to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the possible view, with which CIT does not agree, it cannot be treated as erroneous order so as to prejudicial to the interest of Revenue. Hon ble Supreme Court has also considered the decision of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC) and held as under: 1. In our view at the relevant time two views were possible on the word 'profits' in the proviso to section 80 HHC (3). It is true that vide2005 amendment the law has been clarified with retrospective effect by insertion of the word 'loss' in the new proviso. We express no opinion on the scope of the said amendment of 2005. Suffice it to state that in this particular case when the order of the Commissioner was passed under section 263 of the Income-tax Act two views on the said word 'profits' existed. In our view the matter is squarely covered by the judgment of this Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 as also by the judgment of the Calcutta High Court in the case of Russell Properties (P.) Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229 at 243. 2. At this stage we may clarify that under para 10 of the judgment in the case of Malab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. According to Hon ble High court section 263 of the Act does not visualize substitution of judgment of CIT for that of the AO unless the decision is held to be erroneous. Hon ble High Court held as under: - 13. We, therefore, hold that in order to exercise power under sub-section (1) of section 263 there must be material before the Commissioner to consider that the order passed by the ITO was erroneous insofar as it is prejudicial to the interests of the revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the ITO without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the revenue. An order can be said to be prejudicial to the interests of the revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter that, in our opinion, is not permissible. Further inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the ITO was erroneous and prejudicial to the interests of the revenue. Without doing so, he does not get the power to set aside the assessment. In the instant case, the Commissioner did so and it is for that reason that the Tribunal did not approve his action and set aside his order. We do not find any infirmity in the above conclusion of the Tribunal. 16. Further, the learned Counsel for the assessee has also relied on the decision of the co-ordinate Bench of Mumbai, ITAT in the case of Narayan Tatu Rane vs. ITO (2016) 70 taxmann.com 227 (Mumbai-Trib.), wherein the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in all legal proceedings and the stale issues should not be reactivated 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 reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis- -vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each ..... X X X X Extracts X X X X X X X X Extracts X X X X
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