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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: SHRI CHANDRA MOHAN GARG & LAXMI PRASAD SAHU
For revising the assessment order or reassessment order under 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.
It is well settled principle that the Assessing Officer is required to 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
P a g e 14 | 20 07/CTK/201 8 Assessm ent Y ear : 20 13- 14 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.
In view of copies of notices and replies of the assessee available at 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.
In the case of Reita Biscuits Co.(P) Ltd (supra), Hon’ble P&H High 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.
P a g e 15 | 20 07/CTK/201 8 Assessm ent Y ear : 20 13- 14
Further in the case of Jyoti Foundation (supra), Their Lordships of 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.”
Further more in the case of Kessoram Industries Ltd (supra), Hon’ble 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.
The ld. Pr. CIT has placed vehement reliance and the decision of 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
P a g e 16 | 20 07/CTK/201 8 Assessm ent Y ear : 20 13- 14 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.
On the basis of foregoing discussion, we have no hesitation to hold 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.
From a careful reading of the impugned order, we also observe that 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 P a g e 17 | 20 07/CTK/201 8 Assessm ent Y ear : 20 13- 14 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.
In the present case, the Pr. CIT has not made inquiry himself on the 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).
P a g e 18 | 20 07/CTK/201 8 Assessm ent Y ear : 20 13- 14
The ld AR in his submission relied upon the views expressed in the 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."
In view of foregoing discussion, we reach to a logical conclusion that 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
P a g e 19 | 20 07/CTK/201 8 Assessm ent Y ear : 20 13- 14 jurisdiction to revise the assessment order. Consequently, the impugned notice as well as revisional order u/s.263 of the Act are hereby dismissed.
In the result, appeal of the assessee is allowed.