SUREKHA BUILDERS & DEVELOPERS PVT. LTD.,BHUBANESWAR vs. PRINCIPAL CIT-1, BHUBANESWAR

per percentage completion method but the ld. Pr. CIT has only disputed

the revenue recognition of Surekha Vatika project, leaving aside the

Emerald Project for which the assessee also recognises revenue by

following the same calculation, pattern and methodology. We are unable to

understand the logic behind this pick and choose action of the Ld. Pr. CIT.

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section 263 of the Act, the revisional authority i.e. Pr. CIT is required to

hold the assessment order and reassessment order as erroneous and

prejudicial to the interest of the revenue. In view of facts noted by us in the

earlier part of this order, it is clearly discernible that the assessee has

recognised revenue towards Surekha Vatika Project at much higher side in

comparison to estimate made by Pr. CIT in the impugned order. Therefore,

on this count, the impugned assessment order cannot be held as erroneous

and prejudicial to the interest of the revenue.

make reasonable, sufficient and adequate enquiry of impugned issues

during assessment proceedings and in case of no enquiry or insufficient or

inadequate enquiry, Pr.CIT is empowered to revise the order holding the

same as erroneous and prejudicial to the interest of the revenue. But if this

proposition is evaluated in the facts and circumstances of the present case

then, it is clearly discernible that the AO by way of notice u/s.142(1) dated

26.10.2015 and 30.7.2015 called the documents/information from the

assessee which includes copy of the audited balance sheet, profit and loss

account, Annual report alongwith details of bank accounts maintained

including bank name, branch details and a/c no. supported with bank

statements for the financial year 2012-13 relevant to assessment year

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2013-14. From the above, we also observe that the Assessing Officer also

called the details of party-wise purchase and sales of land/flat, details of

project-wise percentage of construction as on 31.3.2013, estimate cost of

each projects and estimate sales price thereof and closing stock details with

detail valuation and method of valuation, which were submitted by the

assessee and this fact has not been negated or disputed by Pr. CIT in the

impugned order as well as during the arguments before us by Ld. CIT DR.

APB page 43 to 51, we are satisfied that during assessment proceedings,

the AO made proper, sufficient and adequate enquiry on the issues

including issue of revenue recognition of the assessee by following

percentage completion method, project-wise revenue recognition.

Therefore, it is not a case of no enquiry, inadequate enquiry or insufficient

enquiry. Therefore, without holding so, the impugned assessment order

cannot be tagged or alleged as erroneous and prejudicial to the interest of

revenue.

Court has held that once the issue on the merits has been decided against

the revenue then there is no need to take a different view on a technical

reason and revision of assessment order u/s.263 of the Act is not valid.

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Hon’ble Delhi High Court has held as under:

“ In the present case, inquiries are certainly conducted by the AO. It is not a case of no inquiry. Vide order under section 263 itself records that the Director felt that the inquiries are not sufficient and further inquiries or details should have been called. However, in such cases, as observed in the case of DG Housing Project Limited (supra), the inquiry should have been conducted by the Commissioner or Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the AO to conduct the said inquiry.”

Calcutta High Court has held that the Commissioner could exercise his

jurisdiction u/s.263 of the Act only in cases where no enquiry was made by

the Assessing Officer and we have noted above that in the present case the

AO has made adequate and sufficient inquiries on the issue of project wise

revenue recognition by the assessee.

Hon’ble High Court of Gauhati in the case of Jawahar Bhattacharjee (supra).

In this case, the AO allowed exemption u/s.54F of the At to the assessee

without holding any enquiries and without application of mind to the

relevant material. But in the present case, the AO has made an adequate

and sufficient enquires on the assessee of revenue recognition method

adopted by the assessee which is quite correct and proper. As we have

noted above that the revenue recognition by the assessee for Surekha

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Vatika Project is more than the estimate made by the Ld Pr. CIT, therefore,

the benefit of the proposition laid down by the Hon’ble High Court of

Gauhati is not available for the revenue in the present case having distinct

& distinguishable facts and circumstances.

that the Assessing Officer made sufficient and adequate enquiries on the

issue of project-wise revenue recognition by the assessee by calling relevant

audit report and other supporting documents and on logical analysis of facts

emerged from the audit report and project wise revenue recognition by the

assessee, we are unable to see any valid reason to dispute the methodology

adopted by the assessee for recognition of revenue of Surekha Vatika

Project because if the revenue recognised by the assessee and work in

progress shown by the assessee towards Surekha Vatika project is taken

then the revenue recognised by the assessee on this project is much higher

than the estimate made by the Pr. CIT in the impugned revisional order.

the Pr. CIT has not made any inquiries or exercise himself before alleging

the assessment order as erroneous and prejudicial to the interest of the

revenue. As principle rendered by Hon’ble Delhi High Court in the case of

Jyoti Foundation (supra), it is ample clear that the assessment order which

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had been passed after proper inquiry/investigation on the question are per

se clearly treated as erroneous and prejudicial to the interest of revenue

because the revenue authorities failed to show that further

inquiry/investigation was required or further scrutiny should be undertaken.

The methodology adopted by the assessee for revenue recognition was

being consistently followed by the assessee during previous and subsequent

assessment years and same cannot be tinkered or disturbed by placing

new method of revenue recognition wherein work in progress shown by the

assessee has not been taken into consideration. In such type of case,

inquiry should have been conducted by the revisional authority himself to

record the finding that the assessment order was erroneous.

submission/reply of the assessee to before exercising his power u/s.263 of

the Act vide dated 23.3.2018 (APB pages 59 to 68) and relevant part as

reproduced by the ld Pr. CIT in para 4 of the impugned order. He merely

set aside the assessment order and directed the AO to redo the assessment

denovo on the issue, which is not permissible as per principle laid down by

Hon’ble Delhi High Court in the cases of Jyoti Foundation (supra) and DG

Housing (supra).

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case of DG Housing Project (supra) wherein, Their Lordships of Hon’ble

Delhi High Court held thus:

“Thus, in cases of wrong opinion or finding on the merits, the Commissioner of Income-tax has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. The Commissioner of Income-tax cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner of Income-tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income-tax and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in law. In some cases possibly though rarely, the Commissioner of Income-tax can-also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the Commissioner of Income-tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question."

the issuance of notice u/s.263(1) of the Act and impugned revisional order

u/s.263 of the Act is not sustainable and revisionary authority had no valid

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jurisdiction to revise the assessment order. Consequently, the impugned

notice as well as revisional order u/s.263 of the Act are hereby dismissed.

Order pronounced on 17/07/2020. Sd/- sd/-

(Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Cuttack; Dated 17/07/2020 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Surekha Builders & Developers Pvt Ltd., Plot No.47/A, Sahid Nagar, Ground floor, Bhubaneswar

By order

Sr.Pvt.secretary ITAT, Cuttack

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