PRIYANKA REGENCY BUILDERS & DEVELOPERS P. LTD,NAVI MUMBAI vs. CIT 10, MUMBAI

5. Thus, an order passed by the Assessing Officer u/s 143(3)dated 09.12.2011 is held to be erroneous and prejudicial to the interest of the Revenue. 4.2.1.ii With regards to interest cost of Rs.12.84 lacs. It is seen that the same debited to direct expenses, however, the same has not been verified by the Assessing Officer. 4.2.l.iii With regards to advances received from the customers the assessee has filed detail of advances as per "Annexure-4" vide their letter dated 22.10.2013 claiming that the same was filed before the Assessing Officer. As per this Annexure flats have been sold on the same date and the same floor but there is a vast difference in rate per sq ft. for example:-

In view of the above, it is appropriate to set aside the assessment to be made afresh by the Assessing Officer on the above points following the directions given hereinabove paragraphs.”

The ld. AR during the course of hearing before us drew our attention the questionnaire attached with notice u/s 142(1) dated 17.6.2011 and pointed out that the AO specifically raised querries on each and every point seeking details and explanation from the assessee vide paras 12,13,14 and 23 of the detailed questionnaire dated 17.6.2011 which were replied vide written submissions dated 20.6.2011. On the query no. 23 by the AO qua WIP of Kalamboli project, the assessee filed the details of WIP of Kalamboli project comprising details of all the expenses and calculation of closing WIP as annexure -1 to the submission dated 20.06.2011 a copy of which is filed at page no 24 of the PB which relate to point a & b of the show cause notice. The ld. Counsel pointed out that in reply on specific queries from the AO in the notice, the assessee vide letter dated 20.6.2011 filed details of all expenses copies of which are at pages 25 to 28 of the paper book. On point No. (c) of the show cause notice u/s 263 of the Act , the ld. counsel , while referring to page 24 of the paper book which contained the details of WIP of Kalamboli Project, pointed out that Rs.12,83,780/- interest on loan was specifically shown in the details WIP at sr. no 6 of annexure 1 supra. On the point no. (d) of the show cause notice, which is regarding the genuineness of the advances received from customers, the ld. AR submitted that vide paras 12&13 of the questionnaire dated 17.6.2011, the AO asked the assessee to furnish details of booking advances as on 31.3.2007 in the specified format calling for various details such as . name of flat owner , date of booking, total area, rate, agreement value, amount received at the beginning and received during the year, total amount received and balance receivable which were replied by the assessee by filing the necessary details filed vide para 12 of the written submissions dated 20.6.2011 copies of which are placed in the paper book at page 29-30. The ld. AR submitted before us that the CIT has wrongly exercised the jurisdiction under section 263 of the Act as the conditions as provided in section 263 for invoking the provisions of section 263 were not satisfied as the assessment framed by the AO was neither erroneous nor prejudicial to the interest of the revenue. Various allegations made by the CIT in the show cause notice for which the CIT resorted to the provisions of section 263 to set aside he assessment order were totally misplaced and wrong and thus the conclusion drawn by the CIT is devoid of any basis and without application of mind to the facts on records as the AO has passed assessment order by taking and examining every aspects which was raised by the CIT in the show cause notice. The ld.

We have heard the rival contentions and perused the material placed before us including the impugned orders and case laws relied upon by the assessee. We find that the CIT has exercised the revisionary powers by issuing show cause notice dated 17.06.2011 under section 263 of the Act setting out various reasons because of which the order of the assessing officer was erroneous and prejudicial to the interest of the revenue as the AO failed to examine all the four issues raised in the said notice. We find from the record that all these four points as mentioned in the show cause notice were specifically raised by the AO in the questionnaire dated 17.6.2011 and replied by the assessee by filing necessary details by way of written submissions dated 20.06.2011. The AO in the questionnaire dated 17.6.2011 vide para 23 specifically asked the assessee for the details of WIP qua Kalamboli which were filed by the assessee vide letter dated 20.9.2011 Annexure-2 submitting the details as called for by the AO copy of which is filed at page 24 of the paper book before us. On second issue raised by the CIT qua non verification of direct expenses as the project got occupancy certificate on 21.9.2010, the assessee in response to specific query filed necessary details of direct expenses vide Annexure-III filed copies of which are at pages 25 to 28 of the paper book. On issue no.3 in the show cause notice which is in respect of interest amount of Rs.12.84 lakhs as direct expenses, we find from the page 24 of the paper book that third last item of expenses is interest on loan of Rs.12,83,780/- which was also very much before the AO in the details of WIP of Kalamboli project as annexure-2. On the last point i.e 4 which is regarding non verification of genuineness of advances received from the customers, the AO called upon the assessee vide para 12 of the questionnaire dated 17.6.2011 to furnish the details of booking advances in specified format which was replied vide letter dated 20.9.2011 vide para 12 forming part of the assessee’s paper book at pages 29 and 30. From the above facts on record it is abundantly clear that the revisionary powers were exercised by the CIT without examining the assessment record was not justified as every issue raised in the show cause notice was examined by the AO. The AO raised specific query and assessee has filed specific reply to each and every point with detailed annexure which are on assessment file. Under this circumstance, we are not in agreement with conclusions drawn by the Commissioner that the assessment order is erroneous and prejudicial to the interest of revenue. The CIT cannot be allowed to exercise the revisionary powers where all the issues as raised in the show cause notice u/s 263 of the Act were raised by the AO and replied by the assessee as stated hereinabove. We find that there are two possible views and the AO has taken one of the possible views which is in favour of the assessee and with which the Commissioner does not agree , the order passed by the AO should not be treated as prejudicial to the revenue unless the view taken by the AO was unsustainable in law.

Moreover, from the nature of expenditure as explained by the petitioner to the Assessing Officer during the assessment proceedings itself indicates that the view that the same were in the realm of revenue expenditure, is a possible view. Therefore, we find no fault in the impugned order having followed the binding decision of the Supreme Court in the case of Max India Ltd. (supra), while allowing the appeal before it.” In the case of Gera Developments (P.) Ltd.(supra), it has been observed and held as under : “7. We have considered the rival submissions. With regard to issue (a) i.e. taxability of the transfer of development right, we find that the impugned order of the ITAT records findings of Assessing Officer in detail from which it is evident that the Assessing Officer applied his mind to the above claim and on the basis of the facts before him, came to the conclusion that an amount of Rs.5.86 Crores out of Rs. 41 Crores received could alone be subjected to the tax as income during the subject assessment year. The balance amount Rs.35.14 Crores has to be treated as deposit as the same is subject to being refunded in the absence of the environmental clearance. Thus, we find that the Assessing Officer has taken a view/formed an opinion on the facts before him and such a opinion cannot be said to be an erroneous as it does not proceed on the incorrect assumption of facts or law and the view taken is a possible view. Therefore, as held by the Apex Court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 where two views are possible and the Income Tax Officer has taken one view with which the Commissioner of the Income Tax does not agree, cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income Tax Officer is itself unsustainable in law. So far as issue (b) i.e. warranty expenses claimed by the respondent - assessee is concerned, we find that the ITAT has recorded the fact that a specific query with regard to the same was made by the Assessing Officer during the assessment proceedings. This query was responded to by the respondent - assessee justifying the warranty expenses. The Assessing Officer being satisfied with regard to the justification offered, allowed the claim of warranty expenses as made by the respondent - assessee. It is thus clear that the Assessing Officer had considered the issue by raising questions during the assessment proceedings. The mere fact that it does not fall for discussion in the assessment order would not ipso facto lead to the conclusion that the Assessing Officer did not apply his mind. It is clear that if the Assessing Officer is satisfied with the response of the assessee on the issue and drops the likely addition, it cannot be said to be non application of mind to the issue arising before the Assessing Officer. In fact this issue was a subject matter of the consideration by this Court in the CIT v. Fine Jewellery (India) Ltd. [2015] 55 taxmann.com 514/230 Taxman 641/372 ITR 303. In the above case, an identical submission made on behalf of the Revenue was negatived in the context of exercising of power under Section 263 of the Act to hold that if a query is raised during the assessment proceedings and responded to by the assessee, the mere fact that it has not been dealt with in the assessment order would not lead to a conclusion that the Assessing Officer has not applied his mind to the issues.

Considering the facts of the case in the light of aforesaid judgments, we find that the case of the assessee is squarely covered in favour of the assessee. In our opinion all the points as raised by the CIT u/s 263 in the show cause notice issued under section 263 of the Act were duly raised by the AO during the assessment proceedings and also replied by the assessee by filing the necessary details and therefore, the order of the AO cannot be termed as erroneous and prejudicial to the interest of revenue. Accordingly, we quash the proceedings u/s 263 and the consequent order of the Commissioner.