M/S. PRESTIGE ESTATES PROJECTS LIMITED,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(1), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No. 69/Bang/2022 Assessment Year : 2014-15 M/s. Prestige Estates Projects The Deputy Ltd., Commissioner of Prestige Falcon Tower, Income Tax, No. 19, Brunton Road, Central Circle – 1 Bangalore – North, (1), Bangalore – 560 025. Vs. Bangalore. PAN: AABCP8096K APPELLANT RESPONDENT : Shri Padamchand Khincha, Assessee by CA Revenue by : Shri Pradeep Kumar, CIT DR Date of Hearing : 19-04-2022 Date of Pronouncement : 02-06-2022 ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against order dated 23.11.2021 passed by Ld.CIT(A)-11, Bangalore for A.Y. 2014-15 on the following grounds of appeal: “The grounds mentioned herein below are independent and without prejudice to the other grounds preferred by the Appellant. 1. General Ground 1.1 The learned Deputy Commissioner of Income Tax, Central Circle-1(1), Bengaluru (`AO") has erred in passing the order under section 154 of the Income Tax Act, 1961 (`the Act-) in the manner passed by him and the Commissioner of Income Tax (Appeals)-11, Bangalore

Page 2 of 13 ITA No. 69/Bang/2022 ('CIT(A)') has erred in confirming the said order. The said order to the extent prejudicial to the appellant is bad in law and liable to be quashed. 2. Grounds on validity of the order passed under section 154 2.1. The learned CIT(A) erred in concluding that on the basis of material available on record it could not have been said as to whether the claim of the Appellant, as regards the reduction of Rs. 2 crores, was correct or not. 2.2. The learned CIT(A) has erred in inferring that the action of the AO in passing the order dt. 28.04.2016 u/s. 154 was not correct as such an amendment of the order was beyond the scope of Section-154 of the Act as two different opinions were possible on the same. 2.3. The learned CIT(A) has erred in concluding that the issue of reduction of Rs. 2 crores from the assessed income could have been remedied only by filing of an appeal and the same could not have been rectified by the AO. 2.4. The learned CIT(A) has erred in deducing that the action of the AO vide order dated 19.03.2020 denying the relief given to the Appellant vide order dated 28.04.2016 constituted mistake apparent from record. 2.5. On facts and circumstances of the case and law applicable, the order passed under section 154 dated 19.03.2020 should be quashed. 3. Grounds relatin,, to mistake apparent from record 3.1. The learned AO has erred in making an addition of Rs. 2 crores in the order passed under section 154 dated 19.3.2020 as a mistake apparent from record. There being no mistake apparent from record, the impugned addition of Rs. 2 crores in the order passed under section 154 dated is invalid, bad in law and liable to be quashed. 4. Grounds relating to addition of Rs. 2,00,00,000 4.1. The learned AO has erred in making an addition of Rs. 2.00.00.000/- without appreciating the fact that the same was erroneous to the extent it does not consider the additions made in line with statement recorded during the search proceedings under section 132 of the Act. 4.2. On facts and circumstances of the case the adjustment of Rs. 2,00,00,000/- made on account of the supposed mistake apparent from record is incorrect, bad in law and liable to be quashed.

Page 3 of 13 ITA No. 69/Bang/2022 5. Prayer 5.1. In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the order passed by the learned CIT(A), to the extent prejudicial to the appellant, be quashed or in the alternative, the aforesaid grounds and relief prayed for thereunder be allowed. The appellant prays accordingly.” 2. Brief facts of the case are as under: 2.1 For the year under consideration, the assessee had filed its return of income on 29.11.2014, declaring an income of Rs.4,74,49,90,050/-. An order under Section 143(3) of the Act was passed by the Ld.AO on 28.03.2016, determining the income of the assessee at Rs. 4,81,36,97,170/-. Subsequently, on an application being filed by the assessee, the AO passed an order under Section 154 of the Act on 28.04.2016 and the income of the assessee was determined at Rs.4,79,36,97,170/-. 2.2 Later, the Ld.AO observed that the benefit had wrongly been allowed to the assessee through the rectification order passed on 28.04.2016. So he issued a notice under Section 154 of the Act to the appellant and after hearing it passed an order on 19.3.2020 by restoring the addition of Rs. 2,00,00,000/-. The appeal is directed against this order of the AO. 2.3 Aggrieved by the above order u/s. 154, assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) after considering the various submissions by assessee observed and held as under: “4.4 The submissions of the appellant have duly been considered. The AO has rectified the rectification order passed by the AO on 28.04.2016. In rectification the most important aspect which needs to be looked into is whether the correction proposed to be made would fall within the scope of Section 154 or not. Scope of rectification is limited to correcting error of fact or error of law on the basis of material available on records.

Page 4 of 13 ITA No. 69/Bang/2022 4.5 In the appeal under consideration, a perusal of the order passed under Section 143(3) of the Act shows that a conscious decision, whether right or wrong, had been taken by the AO in making additions on account of compounding fee; illegal payments; disallowance under Section 14A of the Act and project management fee. This is not apparent from the assessment order of the AO as to whether he intended to allow any credit of income of Rs 2 crore declared by the appellant in its return of income or the additions made by him were over and above the declaration of Rs 2 crore. So on the basis of material available on records it could not have been said as to whether the claim of the appellant was correct or not. So the action of the AO in passing the order dt. 28.04.2016 under Section 154 of the Act was not correct, as such an amendment of the order was beyond the scope of Section 154 of the Act as two different opinions were possible on the same. It is not the case of the appellant that in the body of the assessment order the AO had indicated that credit for Rs 2 crore already declared by the appellant in its return of income was being allowed but in the computation of income it had failed to reduce that amount. So such an issue could have been disputed by.the. appellant by filing an appeal against the order under Section 143(3) of the Act only as it could not have been rectified by the AO. 4.6 Vide rectification order dt. 19.03.2020, the AO has corrected this mistake apparent from record in the order dt. 28.04.2016. Since in the earlier order the AO had wrongly given relief to the appellant on a disputable issue, so the same constituted a mistake apparent from record. So, this action of the AO would fall within the scope of Section 154 of the Act and as such no interference is called for in the same.” 2.4 Aggrieved by the order of Ld.CIT(A), assessee has filed the present appeal before this Tribunal. 3. The Ld.AR before us has argued that the Ld.AO passed an order u/s. 154 in an order u/s. 154 dated 28.04.2016. He submitted that in the first order dated 28.04.2016, passed by the Ld.AO u/s. 154, assessee was granted a credit of Rs. 2 crores that was already declared by assessee in its return of income. It is submitted that subsequently by an another order u/s. 154 dated 19.03.2020, the

Page 5 of 13 ITA No. 69/Bang/2022 Ld.AO withdrew the credit by observing that the declaration of Rs.2 crores by assessee was on account of errors, commissions and omissions and other miscellaneous issues which cannot be deleted. 4. He submitted that assessee is in the business of real estate. Pursuant to warrant of authorisation dated 09.10.2013, search was carried out in various premises of assessee at several places and some panchanamas was drawn in respect of each place. The Ld.AR submitted that in the course of search, various queries were raised regarding some seized papers which related to certain discounts having given to certain customers. The Ld.AR submitted that assessee vide its letter dated 07.01.2014 had informed to the revenue that assessee wish to offer an amount of Rs. 25 crores as taxable income for general omissions, commission, errors and miscellaneous issue that might occur either due to ignorance of concerned staff or any other reason. 5. He submitted that the said amount was offered for assessment year 2014-15 and that the above declaration was u/s. 132(4) of the Act. The Ld.AR referring to page 258 of paper book submitted that assessee had declared a total income of Rs. 111,43,42,162/- which includes the amount declared of Rs. 25 crores to coverup all the accounting aspects, errors and omissions etc on behalf of assessee. For sake of convenience we reproduce herewith the submission cum declaration made by the assessee vide letter dated 07.01.2017 as under: “12. In this background, the Company is making this declaration cum submissions for your kind consideration, needful action and necessary appreciation. Taking into account all aspects, and in order to put an end to potential litigation and to take benefit of relaxations given under the

Page 6 of 13 ITA No. 69/Bang/2022 Act for declarations made, we deem it desirable to offer and declare the following amounts in the hands of the company. Particulars Amount a) On account of the change in the Estimated project cost budget 66,43,42,162 on certain projects as per Para 5 b) On account of the profit on land situated in Electronic city proposed to be transferred to 20,00,00,000 the Partnership firm M/s. Prestige Sunrise Investments as per Para 6 c) On account of errors, commissions and omissions 25,00,00,000 and other Miscellaneous issues as per Para 7 Total 111,43,42,162 We wish to reiterate that the above offerings shall be made in the assessment years as has been elaborately dealt with in the respective Paras above.” 6. The Ld.AR thereafter referred to page 273 of paper book wherein assessee submitted as under:

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Page 9 of 13 ITA No. 69/Bang/2022 7. He submitted that for Assessment Year 2014-15 return filed on 29.11.2014 declaring total income of Rs. 474,49,90,050/- included the declared amount of Rs. 88,43,42,162/- for year under consideration as per assessee’s letter dated 14.04.2016 reproduced hereinabove under the head income from other sources. The Ld.AR submitted that, assessee paid tax of Rs.68,83,93,933/- and after considering the credit of tax paid amounting to Rs. 169,74,90,246/- there was a refund amounting to Rs. 90,96,313/-. 8. He submitted that, the Ld.AO while passing the assessment order on 28.03.2016 assessed the total income at Rs.481,36,97,166/- after making addition on account of compounding fee, illegal payments, disallowance u/s. 14A and project management fee amounting to Rs.6,87,07,116/-. The Ld.AO computed tax payable after considering the taxes paid at Rs. 2,31,950/-. The Ld.AR submitted that assessing officer failed to reduce the declaration of Rs. 2 crores already made in relation to the search proceeding towards possible errors, commission and omission for A.Y. 2014-15. The Ld.AR submitted that sum of Rs. 2 crores has already been offered to tax in the income declared of Rs. 479.36 crores and the assessing officer has further made an addition of Rs. 2 crores thereby assessing the total income at Rs.481.36 crores. 9. He submitted that, the rectification order dated 28.04.2016 was rightly passed and the subsequent order dated 19.07.2017 u/s. 154 of the Act, being the impugned order is bad in law, as it sought to rectify identical issue, based on different opinion. He submitted that, section 154 cannot be invoked for a change of

Page 10 of 13 ITA No. 69/Bang/2022 opinion and 154 is available only to rectify any mistake apparent on record. On merits, the Ld.AR vehemently argued that the amount of Rs. 2 crores form part of the total income declared by the assessee for A.Y. under consideration, filed vide return of income dated 29.11.2014. 10. On the contrary, the Ld.DR filed following written submissions dated 19.04.2022 which is reproduced as under: “May it please Your Honours In the present case filed by the assessee, the Grounds of Appeal as raised by the assessee has been broadly categorised into the following headings for A.Y: 2014-15 and D.R.submissions thereon. 1. The Ld.CIT(A) has erred in inferring that the action of the AO in passing the order dt.28.04.2016 u/s 154 was not correct as such an amendment of the order was beyond the scope of section 154 of the Act as two different opinions were possible on the same and further erred in concluding that the issue of reduction of Rs.2 crores from the assessed income could have been remedied only by filing of an appeal and the same could not have been rectified by the AO. Submission: The AO passed an order u/s 154 of the Act on 28.04.2016, on an application being filed by the assessee for rectification of the original order u/s 143 of the IT Act, 1961 dt.28.03.2016. The income of the appellant was determined at Rs.4.79 crores giving a relief of Rs. 2 crores in the 154 order cited above. Subsequently this was noted by the AO that the benefit had wrongly been allowed to the appellant through the rectification order passed on 28.04.2016. So after due procedure, the AO by another order u/s 154 on 19.03.2020, restored back the deduction allowed wrongly of Rs.2 crores u/s 154 order dt. 28.04.2016. The Ld.CIT(A) perused the orders of the AO and heard the arguments of the appellant. The Ld.CIT(A) noted that the scope of rectification is limited to correcting error of fact or error of law on the basis of material available on records. In the appeal under consideration, a perusal of the order passed under Section 143(3) of the Act shows that a conscious decision, whether right or wrong, had been

Page 11 of 13 ITA No. 69/Bang/2022 taken by the AO in making additions on account of compounding fee, illegal payments, disallowance u/s 14A of the Act and project management fee. This is not apparent from the assessment order of the AO as to whether he intended to allow any credit of income of Rs.2 crore declared by the appellant in its return of income or the additions made by him were over and above the declaration of Rs 2 crore. It is not the case of the appellant that in the body of assessment order, the AO had indicated that credit for Rs.2 crore already declared by the appellant in its return of income was being allowed but in the computation of income it had failed to reduce that amount. So such an issue could have been disputed by the appellant by filing an appeal against the order u/s 143(3) of the Act only as it could not have been rectified by the AO. The action of the AO would fall within the scope of Section 154 of the Act and as such no interference is called for in the same. In view of the above, the Ld.CIT(A) dismissed the grounds of appeal of the appellant. I agree with the decision of the Ld.CIT(A) and the same may be upheld. Conclusion : In view of the submissions made above, examination of submissions made by the assessee, the order of the Ld.A.O, Ld.CIT(A), Bangalore are not erroneous and not bad in law. The assessee's appeal may be dismissed. Prayer : In the wake of the above submissions, it is humbly prayed to dismiss the appeal of the assessee/appellant and any other order as may please your honours. Respectfully submitted.” 11. We have perused the submissions advanced by both sides. Section 154 is to be initiated to rectify mistakes apparent on record either by the revenue suomoto, or by the assessee by filing application seeking such rectification. 12. In the present facts of the case, assessee filed application seeking rectification on 14.04.2016, wherein, it was alleged that, the assessee is being doubly taxed by the Ld.AO in respect of Rs. 2 crores that, was declared as a part of return of income filed on

Page 12 of 13 ITA No. 69/Bang/2022 29.11.2014. The Ld.AO passed order dated 28.04.2016 reducing such amount from the total income assessed as per order u/s. 143(3) of the Act. This is evident from page 265 of the paper book wherein, the assessee placed the order passed u/s. 143(3) of the Act by the Ld.AO. We also refer to page 71 of the paper book wherein the copy of return of income is placed by assessee, wherein, the total income under various heads have been computed to be Rs.474,49,90,050/-. Thus we are of the opinion that assessing officer while concluding the assessment proceedings u/s. 143(3) of the Act, has further included the amount that was attributable for the year under consideration as per the bifurcation letter issued by the Ld.AO vide the letter dated 17.11.2014 wherein following is the bifurcation. AY 2012-13 AY 2013-14 AY 2014-15 Total Particulars (Rs) (Rs) (Rs) (Rs) a) On account of the change in the Estimated Project Cost budget on the certain projects viz., Prestige - - 66,43,42,162 66,43,42,162 Bella Vista and Prestige Techpark III

b) On account of the profit on land situated in Electronic City proposed to be transferred to the - - 20,00,00,000 20,00,00,000 partnership firm M/s. Prestige Sunrise Investments

c) On account of errors , commissions and omissions and 8,00,00,000 15,00,00,000 2,00,00,000 25,00,00,000 other Miscellaneous issues

Total 8,00,00,000 15,00,00,000 88,43,42,162 111,43,42,162

Page 13 of 13 ITA No. 69/Bang/2022 13. The subsequent 154 order dated 19.07.2017 therefore in our view, cannot be considered to be passed to rectify any mistake apparent on record and therefore deserves to be quashed. Accordingly, we do not agree with the order passed by the Ld.CIT(A) and the subsequent order dated 19.07.2017 passed by the Ld.AO seeking to rectify order dated 28.04.2016 u/s. 154 of the Act as bad in law. Accordingly, ground nos. 2 to 4 raised by assessee stands allowed. In the result, the appeal filed by assessee stands allowed. Order pronounced in open court on 02nd June, 2022.

Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 02nd June, 2022. /MS / Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order

Assistant Registrar, ITAT, Bangalore