KOHINOOR CTNL INFRASTRUCTURE CO. PRIVATE LIMITED,DADAR WEST vs. DY COMMISSIONER OF INCOME TAX 6(1)(2), CHURCHGATE MUMBAI

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ITA 1962/MUM/2024Status: DisposedITAT Mumbai06 August 2024AY 2018-1912 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the PCIT was justified in invoking Section 263 of the Income Tax Act. It found that the case was not one where two views were possible, but rather a situation where the AO failed to conduct necessary inquiries and verifications to determine the correct income. The Tribunal noted that the assessee's case was selected for scrutiny under CASS precisely on grounds requiring such examination. The failure of the AO to make these inquiries resulted in excess allowance of expenses and under-assessment of income, making the AO's order erroneous and prejudicial to the interest of revenue. The Tribunal relied on the principles laid down by the Hon'ble Supreme Court in cases like "Malabar Industrial Co. Ltd." and "M/s. Paville Projects Pvt. Ltd.", emphasizing that a loss of tax lawfully payable due to an erroneous order is prejudicial to the revenue's interest. The Tribunal found that the PCIT correctly exercised jurisdiction under Section 263. Consequently, the appeal filed by the assessee was dismissed, and the order of the PCIT was upheld.

What were the facts?

The assessee, Kohinoor CTNL Infrastructure Co. Pvt. Ltd., filed its return for AY 2018-19 declaring a loss of Rs.112,39,40,227/-. The assessment order under Section 143(3) dated 16.04.2021 determined the loss to be carried forward at Rs.112,39,40,227/-. The Principal Commissioner (PCIT) initiated proceedings under Section 263, finding that expenses of Rs.44,08,01,407/- under "Finance Cost" and Rs.13,20,13,322/- under "Civil Work" were allowed as revenue expenditure, despite the project being incomplete and no sales receipts offered. The PCIT noted that Rs.24,73,07,991/- was considered Work-in-Progress (WIP), and the remaining Rs.32,55,06,738/- was allowed as revenue expenditure, leading to an under-assessment of income. The PCIT, after considering the assessee's submissions, held the assessment order to be erroneous and prejudicial to the revenue, setting it aside to the Assessing Officer (AO) for fresh examination.

What were the issues?

1. Whether the Principal Commissioner of Income Tax (PCIT) erred in law and facts by invoking Section 263 of the Income Tax Act, 1961, holding the Assessing Officer's (AO) order as erroneous and prejudicial to the interest of revenue? (Question of law and fact, concerning Section 263). Assessee's Contention: The assessee argued that all necessary details were provided to the AO during the assessment proceedings under Section 143(3) and subsequently to the PCIT under Section 263. The assessee followed the 'Percentage Completion Method' for revenue recognition, a method consistently accepted by the department in earlier years. Therefore, the PCIT's action constituted a change of opinion, which is impermissible under Section 263. Revenue's Contention: The revenue, through the PCIT, contended that the AO failed to properly examine and verify the claims related to "Finance Cost" and "Civil Work" expenses. The PCIT found that these expenses, to the extent not treated as WIP, should have been disallowed as revenue expenditure given the project's incomplete status and lack of sales receipts, leading to an under-assessment of income. The PCIT relied on various High Court and Supreme Court decisions.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(1),Section 143(3),Section 142(1),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI

Before: SHRI NARENDER KUMAR CHAOUDHRY & SHRI RATNESH NANDAN SAHAY

For Appellant: Shri Jayesh Dadia, A.R
For Respondent: Shri Biswanath Das- CIT D.R
Hearing: 06.08Pronounced: 23.10.2024

O R D E R Per: Ratnesh Nandan Sahay, Accountant Member: 1. This appeal has been filed by the appellant against the Order of the Ld. CIT (Appeals) passed u/s. 250 of the Income Tax Act [the „Act‟ in short] vide DIN & Order No. ITBA/REV/F/REV5/2023-24/1062397084(1) Dated 11/03/2024 for the Assessment Year 2018-19.

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