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TMI Blog2025 (4) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... as erroneous and prejudicial to the interest of revenue without appreciating facts of the case or application of mind. (ii) That in the absence of any finding that order passed by the AO u/s. 143(3) is erroneous and prejudicial to the interest of revenue, it is not open to set-aside the same for re-verification and as such direction of PCIT, Delhi-1 are highly arbitrary and contrary to purpose, object and scope of sec. 263 of the Act. 2. That various issues raised by the PCIT, Delhi-1 in the notice u/s. 263 have already been examined by the Assessing Officer during assessment proceedings u/s. 143(3) and as such there is no case for treating the assessment order as erroneous and prejudicial to the interest of revenue. 3(i) That the direction to TPO for recalculating the ALP of interest rate is invalid and without jurisdiction as the order passed by TPO u/s 92CA was not the subject matter of proceedings u/s 263 of the Act and jurisdiction was only vis-à-vis the assessment order. (ii) That in any case, the direction to TPO for recalculating the ALP of interest rate on more robust and correct comparable is unjustified as the issue was considered in detail by the TPO duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue to the Assessing Officer. 8. That the direction by PCIT to examine details of the foreign equity, valuation of the company and taxability of the same on sale of equity to non-resident are unjustified as the Appellant has issued equity to non-resident and has not sold the investment leading to capital gain tax and therefore, the contention of the PCIT is misplaced and therefore, there is no justification for restoring the issue to the Assessing Officer. 9. That the direction by PCIT to investigate the agreement with DLF Home Developers Limited for the grant of right in parcel of land is unjustified as the said transaction does not pertain to the year under consideration and in fact, the same pertains to last AY and therefore, there is no valid basis to treat the order of Assessing Officer as erroneous and prejudicial to the interest of revenue. 10. That the assessment order having been passed by the Assessing Officer after necessary verification of issues under consideration, the assessment order is neither erroneous nor prejudicial to the interest of the revenue. 11. That order passed by the PCIT, Delhi-1 is not justified on facts and same is bad in law. 12. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be rejected without assigning any reason thereon. The ld PCIT observed that the borrowing rate of interest was only 7.25% in India and hence, the order of the ld TPO was sought to be treated as erroneous as the arm's length price of interest was adopted @10.25%. 7. It is pertinent to note that this issue was duly examined by the ld TPO by issuance of various show cause notices during the TP assessment proceedings and infact a transfer pricing adjustment of Rs. 63.85 cr was indeed made by the ld TPO. Hence, it is not a case of no enquiry or even inadequate enquiry by the ld TPO. Merely because, the ld PCIT was of a different opinion that interest @7.25% should have been determined by the TPO to be arm's length price, the same cannot be done by exercising revision jurisdiction u/s 263 of the Act as ld PCIT is merely trying to substitute his view in place of the plausible view that have already been taken by the ld TPO. On perusal of the of the order of the ld PCIT, we find that up to page 36 of his order, he has merely reproduced the various show cause notices issued by him and the replies filed by the assessee and his finding starts only from page 37 for just 10 lines by merely s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld AO to consider the provisions of section 94B of the Act while addressing the said issue. 10. We have heard the rival submissions and perused the material available on record. As stated earlier, the assessee is a joint venture firm started in AY 2016-17 and the year under consideration is the second year of operation. Pursuant to the query raised by the ld AO in the notice u/s 142(1) of the Act dated 12.02.2021, wherein, specific details of fresh issue of share capital together with premium and justification for the share premium together with its genuineness were sought to be examined by the ld AO, the assessee furnished detailed reply dated 18.02.2021 along with complete justification for issuance of shares at premium duly supported by a valuation report in terms of Rule 11UA of the Income Tax Rules. This reply of the assessee is enclosed in pages 263 to 265 of the Paper Book filed before us. Further, we find that the ld PCIT had sought to direct the ld AO to apply provisions of section 94B of the Act for limiting the claim of interest. We find that the said provisions of section 94B of the Act were introduced by the Finance Act 2017 w.e.f. 01.04.2018 and hence, applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue was disclosure of inventories in the sum of Rs. 1820 croes. We find that the ld AO vide notice u/s 142(1) dated 12.02.2021 specifically sought a query on the inventories together with method of accounting adopted by the assessee for valuation of stock and recognition of revenue. This query was duly responded by the assessee vide letter dated 18.02.2021 wherein, it was specifically brought to the knowledge of the ld AO that project activity had not started and hence, there is no scope for recognition or revenue as per POCM during the year. The ld AO having been satisfied with the said reply did not chose to make any addition towards recognition of revenue. Before us, it was also pointed out by the ld AR that assessee is following POCM as per IND-AS 18 which is mandatory, wherein, revenue from a project could be recognized only when a certain threshold of construction work has been completed. The ld AR also drew our attention to page 321 of the Paper Book containing the notes of accounts wherein, clear disclosure for real estate transaction and adoption of AS had been mentioned qua the recognition of revenue. It was also submitted that no revenue has been actually realized by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an issue which is not a issue at all. On merits, the borrowing cost incurred by the assessee arises out of fund raised by the assessee from its joint venture partners vide issuance of CCDs and OCDs. The fact of interest paid by CCDs and OCDs was subject matter of detailed examination by the ld TPO and a sum of Rs. 63.95 crores was even proposed as a transfer pricing adjustment by the ld TPO. Hence, this is not a case where no enquiry has been made by the lower authorities. Further, it is relevant to note that the borrowing cost has been capitalized by the assessee under inventories and the ld AO had already examined the entire inventories in the earlier ground. Hence, it could be safely concluded that the ld PCIT had merely given a vague and general direction without any legal basis and without pointing out any error in the order of assessment of the ld AO. Hence, revision jurisdiction u/s 263 of the Act is hereby quashed qua this issue. 15. The next issue for which the ld PCIT had assumed revision jurisdiction was only by way of giving direction to the ld AO to examine the genuineness of the financial liability of Rs. 187.70 and examine the details of foreign equity, valuation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direction without narrating the facts of the case and only to enable the ld AO to make fishing and roving enquiries on the subject mentioned issue. The transaction of purchase of rights in land parcel pertain to AY 2016-17 and is already disclosed in the balance sheet by way of Note No. 20 in page 320 of the Paper Book. Even this primary basic fact was not looked into by the ld PCIT or sought to be understood from the reply given by the assessee. Either way, it does not pertain to the year under consideration. Further in AY 2016-17, the ld TPO/ AO made upward TP adjustment in respect of the issue of purchase of rights in land parcel which was deleted by this Tribunal in ITA No. 1963/Del/2022 dated 06.09.2024. Hence, the assumption of revision jurisdiction u/s 263 of the Act was purely mechanical with vague direction and without understanding even the primary facts and without even understanding the fact that it does not pertain to the year under consideration. Hence, we have no hesitation to quash the assumption of revision jurisdiction u/s 263 of the Act on this issue. 20. For all the grounds, the ld DR vehemently relied upon the following decisions:- a) Decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s relied upon by the ld CIT DR are factually distinguishable and not applicable to the case before us. The ld DR also relied on Explanation 2 to Section 263 of the Act to support the action of the ld PCIT. On perusal of the Explanation 2 to section 263 of the Act, we find that it is a deeming fiction and applicable only if the assessment order has been passed without making any enquiry or verification by the ld AO. In the instant case, adequate enquiry had already been made in all the issues by the ld AO. 22. In view of the aforesaid observations, we have no hesitation to conclude that the very assumption of revision jurisdiction u/s 263 of the Act of the ld PCIT is completely flawed and deserves to be quashed and void ab initio. Even on merits, there is no mistake committed by the assessee on these impugned issues as assessee had given proper explanation for the acts carried out by it qua those issues. Hence, we hold that the order of the ld AO is neither erroneous nor prejudicial to the interest of the revenue warranting any revision u/s 263 of the Act. Accordingly, grounds raised by the assessee are hereby allowed. 23. In the result, the appeal of the assessee is allowed. Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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