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Income Tax Appellate Tribunal, JABALPUR BENCH, JABALPUR
Before: SHRI SANJAY ARORA, HON‟BLE & SHRI MANOMOHAN DAS, HONBLE
Per Manomohan Das, JM: This is an Appeal by the assessee against the revisional order by the Ld. Principal Commissioner of Income Tax ( „Pr. CIT‟, in short), dated 29-03-2021 under section 263(1) of the Income Tax Act, 1961 ( the “Act” hereinafter) for Assessment Year (AY) 2016-17. There was delay of 5 days in filing of the appeal which has been condoned by the Tribunal.
The brief facts of the matter are that the assessee is a partnership firm consisting of seven partners in the business of builders and developers. It filed e-return of income on 01-10-2016 bearing e-filing acknowledgement Number 476273261011016 declaring total income at Rs. (-) 60,767, which was selected for 1 | P a g e
ITA No. 12/JAB/2021 (A.Y. 2016-17) Vallabh Market v. Pr. CIT limited scrutiny through CASS. The issue “whether income from real estate business has been correctly offered for tax” was the issue before the Assessing Officer (AO) for scrutiny. The AO, after considering the documents and explanations of the assessee, accepted the income as returned vide assessment order dated 27-11-2018. This assessment became the subject matter of revision proceedings before the ld. Pr. CIT u/s. 263(1) of the Act. The ld. Pr. CIT vide his order dated 29-03-2021 observed that the assessment order is erroneous and prejudicial to the interests of the Revenue and, accordingly, set aside the said assessment order and directed the AO to pass a suitable order upon making proper investigation and enquiry, applying the correct provisions of the Act, and after giving an adequate opportunity of being heard to the assessee.
Being aggrieved, the assessee preferred the captioned appeal before the Tribunal, raising the following grounds: 1. The order passed by the Ld. PCIT is illegal and bad in law and hence be set aside. 2. The Ld. PCIT has erred in passing the order u/s 263 on the ground that the order passed by the Ld. AO is erroneous and prejudicial to the interest of the revenue. 3. It was proved before the Ld. PCIT that the assessment was framed after due scrutiny of facts and after verification of the details. The Ld. AO issued specific queries after verification and detailed scrutiny, the Ld. AO framed the assessment and as such the same cannot be treated as erroneous and prejudicial and as such actin u/s 263 is bad in law. 4. The order passed by the Ld. PCIT be quashed.
We have heard both the parties, and perused the material on record. 5. The question before us is whether the assessment order dated 27-11-2018 by the AO is erroneous and prejudicial to the interests of the Revenue, as agitated by the assessee, or not. The ld. AR, Shri Rahul Bardia, submits that the revision order
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ITA No. 12/JAB/2021 (A.Y. 2016-17) Vallabh Market v. Pr. CIT by the ld. Pr. CIT is bad in law. His contention is that the AO issued specific queries and after verification and detailed scrutiny the assessment was framed by the AO and, accordingly, the assessment order is not erroneous and prejudicial to the interests of the Revenue. On the other hand, the ld. Sr. DR supported the revision order as passed by the Ld. Pr. CIT. 6. We reproduce the relevant findings per the impugned order being disputed before us: „10. I have carefully considered the reply of the assesse and the documents placed on record. On-going through the reply of the assesse, it is observed that it has been stated w.r.t. mentioning “Not applicable” for furnishing details of statement of TDS at Sl. No. 34b in 3CD Report that vide clause No. 34(a) details of TDS deducted and deposited has been submitted and Annexure II attached to audit report already furnishes details of TDS deducted and deposited. It has been further stated that there is no delay in TDS deposited as reported by the auditor and thus, provision of 40(a)(ia) are not applicable in this case. Further the TDS return and challan deposited details are already available in the Traces site of the Income Tax department. In this regard, it is to state that as far as clause 34(a) is concerned, it gives only the details of TDS deducted and deposited but does not contain the details about the submission of the said TDS within prescribed time limit. Further, Annexure II as stated to have been attached with the Audit Report is also not found placed on record. The should have enquired the aforesaid facts which he failed to do. 10.1 With regard to the provisions of Rs. 17,44,964/- shown in the balance sheet on account of excess amount payable, it has been stated by the assessee that the assessee received advance against booking of flats or shops and revenue was recognized for such advances on percentage of completion method and excess amount, if any, received from prospective buyers was kept as security for maintenance fund created for being transferred to society after handing over of project. The assessee has furnished a chart in which names, amount and remarks of such amount payable has been mentioned. In this regard, it is stated that from the remarks column of the table furnished, it is observed that against four names, it has been mentioned “Adjusted in maintenance charges on 01-04-2018” and in four names, the said column
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ITA No. 12/JAB/2021 (A.Y. 2016-17) Vallabh Market v. Pr. CIT has been left blank. This fact needs to be verified which the AO failed to do during the assessment proceedings. 10.2 With regard to the issue to GP and NP ratio, the assesse furnished a chart of GP and NP ratio and it has been stated by the assesse that NP has improved significantly and hence, the AO accepted it. On-going through the chart furnished by the assessee, it is observed that the assesse has shown Net Profit before Appropriation in the said table, however, as per clause no. 40 of the Audit Report, the amount of NP has been given as Rs. 60,767/- and the NP ratio has been mentioned as 0.09%. Further, the GP ratio has also been reduced from 34.52% in the preceding year to 18.8% during the year under consideration. The AO completely failed to analyse and enquire this issue. 10.3 With respect to the issue of compliance of section 43CA, the assesse has stated that in clause No. 17 of Audit report, the tax auditor has reported NIL violation of sec 43CA and thus, it cannot be said to be blank, however, on- going through the said clause 17, it is observed that it has been left blank without mentioning anything and as claimed by assessee, NIL has not been mentioned there. On 26-03-2021, the assessee uploaded copies of sale deeds which were not furnished earlier at the time of assessment proceedings and hence the same were not verified by the AO. This issue was ignored by the AO and he did not enquire anything about it.
Each of these areas of inquiry pointed out by the ld. Pr. CIT have a direct bearing on the assessee‟s income from it‟s real estate business and, thus, fall within the ambit of the limited scrutiny for which the assessee‟s return was selected for being subject to the verification procedure under the Act. Further, none of these stands examined by the AO in assessment, rendering his order erroneous and prejudicial to the interests of the Revenue, subject to, of course, there being circumstance provoking his inquiry. 8.1. The Pr. CIT has found the assessment as infirm, i.e., as erroneous and prejudicial to the interests of the Revenue, on four counts, as under:- a) Non-deduction of tax at source on interest of Rs. 32,01,278 and, therefore, liable for disallowance u/s. 40(a)(ia). 4 | P a g e
ITA No. 12/JAB/2021 (A.Y. 2016-17) Vallabh Market v. Pr. CIT b) No enquiry by the AO on the provision of Rs. 17,44,964, reflected as „Excess Amount Payable‟ in the balance-sheet as at the year-end (31/03/2016). We examine this aspect of the matter as follows: c) Vast variation between the reported gross profit (GP) and net profit (NP) rates, being at 18.8% and 0.09% respectively. d) Non-reporting in respect of compliance of sec. 43CA in respect of sale of 32 flats and 14 shops for Rs. 6.13 crores during the relevant year, in the Tax Audit Report (TAR).
8.2. We have examined the Tax Audit Report (TAR)(Forms 3CB & 3CD) (at PB pgs.54-83) in this respect, to find as under:- a) TDS: The column of TAR is not 34(b), as the ld. Pr. CIT states in his order, but column 34(a), which refers to Annexure-11 (PB pg.17), clearly reflecting the deduction of tax at source on the interest amount of Rs. 32.01 lacs, as indeed on the contractual payments as well as payment for technical services. b) Provision for Rs. 17.45 lacs: This aspect is not covered by the TAR, nor stands examined by the AO. c) GP and NP: Column 40 of the TAR (PB pg.65) shows a vast decline between the gross profit rates for the current with reference to the immediately preceding year (at 34.52%). It is perhaps this that led to the almost complete absorption of the entire gross profit for the current year, which the ld. Pr. CIT notes with alarm. The AO surely ought to have made proper inquiry in the matter, looking into its various aspects, and which he has completely omitted to. d) Section 43CA: Vide Column 17 of the TAR (PB pg.58), the Auditor clearly reports of non-applicability of section 43CA or s. 50C of the Act. There is nothing to indicate misreporting by the Auditor, to have prompted the AO to make an inquiry in respect of the applicability of s. 43CA qua the receipt of Rs. 6.13 cr.
In view of the foregoing, the observations by the ld. Pr. CIT qua the matters at (b) & (c) above are valid, while that at (a) & (d) above are not. The AO is accordingly directed to restrict his enquiry/adjudication in the set aside proceedings to matters listed at (b) & (c) above, which would include enquiry into the related matters as well, with a view to arrive at a correct decision in the matter. We decide accordingly.
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ITA No. 12/JAB/2021 (A.Y. 2016-17) Vallabh Market v. Pr. CIT 10 In the result, the assessee‟s appeal is partly allowed. Order Pronounced in open Court on July 29, 2022 Sd/- Sd/- (Sanjay Arora) (Manomohan Das) Accountant Member Judicial Member Dated: 29/07/2022 vr/- Copy to: 1. The Appellant: Vallabh Market, New Galla Mandi Road, Rani Laxmi Bai Ward, Gadarwara (MP) 2. The Respondent: Principal CIT-1, Jabalpur. 3. The CIT-D.R., ITAT, Jabalpur. 4. Guard File. By order
(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur.
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