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TMI Blog2022 (9) TMI 1239X X X X Extracts X X X X X X X X Extracts X X X X ..... was received by the assessee in the period prior to the financial year 2016-17 for which the balance was drawn as on 31.03.2016 wherein the advance received from customers till that date was reported at Rs. 20 lacs in that balance sheet prepared as on 31.03.2016. Lack of such a rudimentary knowledge of accountancy for reading a balance sheet and thereby invoking the revisionary proceedings by holding that Rs. 20 lacs has been understated is not appreciated. Project expenses in the tax audit report - Assessee has accounted for cost of purchases of raw material under an inclusive method but since there has been no sale during the year, the entire project expenses have formed part of the closing stock/work in progress taken on the income side of the profit loss account. Thus the VAT component is on both sides of the P L A/c, on the debit side included in the cost of purchases and on the credit side in the closing stock. Therefore, there is no loss to the revenue on this account. Even if, by adopting the exclusive method of accounting, the VAT component is removed from the cost of purchases then at the same time, it will get removed from the closing stock/work in progress, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us, Shri Manoj Kataruka, Advocate represented the assessee and Shri Sudipta Guha, CIT(DR) represented the department. 4. Brief facts of the case are that assessee is in the business of development of property. It filed its return of income on 29.10.2017 reporting total income as Nil which was assessed u/s 143(3) of the Act at nil income. Subsequent to the said assessment, ld. PCIT invoked the revisionary proceedings after calling for and examining the assessment records by raising the issue relating to advance received from customers reported in the balance sheet for AY 2016-17 at Rs. 20,00,000/- and the amount received from customers as reported in the balance sheet for AY 2017-18 at Rs. 3,72,77,107/-, which according to him should have been reported as Rs. 3,92,77,107/- (Rs. 20,00,000/- + Rs. 3,72,77,107/-). Thus, ld. PCIT observed that amount of Rs. 20,00,000/- was under-reported which has not been considered by the ld. AO in passing the assessment order. The other issue which the ld. PCIT raised is in respect of claim of project expenses of Rs. 1,84,56,488/- which includes purchase/cost of raw material. He noted that in the tax audit report, assessee has reported that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,00,000.00 28,80,620.00 Aditi Babbar 30,10,000.00 Sunil Sharma 5,00,000.00 28,38,360.00 Amitha B Shetty 31,97,000.00 Avinash Ashok Kumar 29,13,983.00 BS Konnur 31,61,475.00 K Sadasivam 29,05,000.00 Lakshmi BV 31,30,215.00 M S Shivaprasad 31,30,215.00 Mithun Kundapoor 5,00,000.00 Vinayak/ Revathi Naik 35,03,000.00 Basant/ Suparva Nayak 32,61,329.00 Kavya H.R. 5,00,000.00 TOTAL 20,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. PCIT for invoking the revisionary proceedings u/s 263 of the Act. Ld. Counsel submitted that despite the detailed explanation, ld. PCIT passed the impugned order directing the ld. AO to verify in depth so as to examine the veracity of the claims made by the assessee. He thus set aside the assessment order for the purpose of in depth enquiry as noted by him in para 6 of the impugned order. 9. Per contra, ld. CIT, DR placed reliance on the order of the ld. PCIT and stated that there should not be any prejudice to the assessee if the matter is examined by the ld. AO in terms of directions given by the ld. PCIT in the impugned order. 10. We have heard the rival contentions and perused the material on record. Admittedly, it is an undisputed fact that assessee has disclosed advances received from customers in its audited balance sheet on the date of 31.03.2016 and 31.03.2017. Further, it is a rudimentary knowledge of accountancy that balance sheet is prepared with the balances in the books of accounts taken at a particular point of time, which is 31.03.2017 in the present case and a statement of assets, liabilities and capital of a business or an organization is prepared depict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng its contentions by various decisions. It is well settled law that for invoking the provisions of section 263 of the Act, both the conditions that the order must be erroneous and prejudicial to the interest of revenue needs to be satisfied. This ratio stands laid down by various Hon'ble Courts. 12. For that, let us take the guidance of judicial precedence laid down by the Hon ble Apex Court in the case of Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83 (SC) wherein their Lordships have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii) Assessing Officer s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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