9911796707
TMI Blog2022 (11) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial to the interest of the revenue for the reason of any lack of inquiry that the AO ought to have made in the given facts and circumstances of the case. We accordingly quash the order passed by PCIT u/s 263 of the Act and allow the appeal of the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... enses has accrued in financial year 2016-17 which has reversed in subsequent financial year 2017-18 relevant to assessment year 2018-19. The assessee, thus submitted before ld PCIT that such provision was made with 100% accuracy as per accrual system of accounting. 6. However, ld PCIT rejected the contention of the assessee and held that while finalizing the assessment proceedings, the Assessing Officer has not made further verification, as to how the estimation of provisions of construction expenditures was made and what was the method of recognizing income from the project, adopted by the assessee-firm. The ld PCIT also held that Assessing Officer has not verified the correctness of the provisions of construction expenditures claimed by the assessee and has failed to inquiry properly into the issue of provision for construction expenditure of Rs.45,22,435/- debited in Profit and Loss account. Therefore, ld PCIT held that assessment order passed by the assessing officer is erroneous in so far as it is prejudicial to the interest of Revenue. 7. Aggrieved by the order of Ld. PCIT, the assessee is in appeal before us. 8. Shri P.M Jagasheth, Ld. Counsel for the assessee, pleads tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of revenue, therefore order passed by the Assessing Officer is erroneous as well as prejudicial to the interest of Revenue. This way, ld DR stated that order passed by ld PCIT may be upheld. 11. After giving our thoughtful consideration to the submission of the parties and perusing the judicial decisions relied upon by the Ld. AR, we find that the issue involved in the present appeal is no longer res integra. The solitary issue before us is that whether real provision for construction expenses, made with reliable estimate and as per accrual system of accounting, should be allowed or not? We note that as per accrual system of accounting, the assessee makes various provisions for expenses/incomes at the end of the financial year. In Indian Accounting system, the financial year starts from 1st April and ends on 31st March every year. For example salary expenses accrue on monthly basis which is normally paid in the first week of next Month. Say, March Month salary of Rs.1,00,000/- is paid by the assessee in first week of April Month, which falls in next year. As per accrual system of accounting the said Rs.1,00,000/- salary expenses has accrued in March month and there is definite l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, which is placed at Paper Book pages 12-14, wherein the Assessing Officer has asked the question pertaining to provision for construction expenses, which is reproduced below: "(iii) provision for construction expenses (Flat Sale) of Rs.45,22,435/- and project management service expenses of Rs.36,00,000/-. In this regard, please submit documentary evidence to substantiate your claims and allowability of said expenses for the year under reference." Therefore, we note that by issuing notice u/s 142(1) of the Act, the Assessing Officer conducted enquiry on the issue raised by ld PCIT in his order under section 263 of the Act. 14. In response to the notice u/s 142(1) of the Act, as noted above, the assessee submitted its reply during the assessment proceedings about the work-in-progress (Construction expenses) which is placed at Paper Book pages nos. 15-19 and the same is reproduced below: "3.(iii) Provision for construction expenditures (Flat Sale) of Rs.45,22,435/-; this amount represents the proportionate estimated expenditure apportioned to the units sold, which represents the cost of construction estimated to be incurred after the end of the year under consideration, for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oming next to the second limb, which is required to be examined as to whether the actions of the Assessing Officer can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Ld.PCIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue "unless the view taken by the Assessing Officer is unsustainable in law". 17.Since in the present case, ld PCIT has exercised jurisdiction u/s 263 of the Act on the ground that the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
