M/S ODISHA STATE POLICE HOUSING & WELFARE CORPORATION LTD,BHUBANESWAR vs. CIT, BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No. 223/CTK/2014 Assessment Year :2009-2010

Vs. M/s. Orissa State Police ACIT, Circle 2(2), Housing & Welfare Bhubaneswar. Corporation Limited.,Bhoi Nagar, Janapath, Bhubaneswar. PAN/GIR No. AABCT 7853 N (Appellant) .. ( Respondent)

Assessee by : Shri Bhagaban Panda/D.K.Mohanty, AR Revenue by : Shri Kunal Singh, CIT DR

Date of Hearing : 06/06/ 2017 Date of Pronouncement : /06/ 2017

O R D E R Per N.S.Saini, AM This is an appeal filed by the assessee against the order under section

263 of the Act of CIT-Bhubaneswar, dated 29.3.2014, for the assessment

year 2009-2010.

“. 1. For that the notice issued by the learned Commissioner of Income Tax, Bhubaneswar (CIT) under Section 263 of the I.T. Act, 1961 (the 'Act') are bad in law, void ab initio and is liable to be quashed.

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7 and as such the orders U/s. 263 are bad in law, without jurisdiction and/or in excess of jurisdiction and legally untenable.

authorities and materials available on record. The brief facts of the case

are that the assessee is a State Public Sector Undertaking owned by

Government of Orissa. The assessee derives income from construction of

building for residential purposes of the police, vigilance, prison and fire

personnel, etc. The assessee filed its return of income based on provisional

account on 30.9.2009 disclosing income of Rs.9,2048,485/-. The assessee

could not file the revised return u/s.139(5) of the Act after the completion

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of their departmental audit since there was no scope to revise the return

voluntarily as the due date of filing the return was 31.3.2011. The

assessee discharged its burden on the higher income determined on the

basis of its audited account by filing a revised computation during the

course of hearing declaring income of Rs.11,58,48,250/-. Thereafter the

assessment was made u/s.143(3) of the Act by the Assessing Officer

determining the total income at Rs.11,89,65,710/-.

impugned order u/s.263 of the Act to revise the said order of assessment.

The impugned order was passed on three grounds:

(i) profit element embedded in the work-in-progress was to be taken into account as per Accounting Standard on construction (AS-7) was not added to the income by the Assessing; (ii) As per revised computation furnished by the assessee, its total income was Rs.11,58,84,250/-, which was mistakenly taken by the Assessing Officer at Rs.1,58,48,250/- (iii) short levy of interest u/s.234C at Rs.7,89,024/- in place of Rs.11,98,163/-.

assessee, the CIT passed order u/s.263 in the following terms:

“The basis issue in the instant case is the valuation of work-in- progress (WIP) and profit element contained therein. In accordance with the accounting stardard-7, which is mandatory for percentage completion method, the profit in respect of WIP has to be accepted as income. The assessee’s contention is that the same has been done so. This contention of the

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assessee needs further verification and therefore the matter is set-aside and restored to the file of the AO for redoing the assessment after offering proper opportunity to the assessee.”

course of assessment, the Assessing Officer called for details of closing

work-in-progress, which was furnished by the assessee and was also

examined by the Assessing Officer. It is not the case of the ld

Commissioner of Income Tax that the Assessing Officer has not examined

the valuation of closing work in progress. That being so, in our considered

view, the ld Commissioner of Income Tax could have interfered with the

order of the Assessing Officer u/s.263 only when it finds that the conclusion

of the Assessing Officer is either erroneous in fact or erroneous in law.

Without returning a clear finding that the order of the Assessing Officer was

erroneous, the ld Commissioner of Income Tax could not interfere with

such an order u/s.263 for making a fishing or roving enquiry. In this

connection, it is observed that the Hon’ble Delhi High Court in the case of

INCOME TAX OFFICER vs. DG HOUSING PROJECTS LTD(2012) 343 ITR

329 (Del) has held as under:

“20. In the present case, the findings recorded by the Tribunal are correct as the Commissioner of Income-tax has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the Commissioner of Income-tax is that "order passed by the Assessing Officer may be erroneous". The Commissioner of Income-tax had doubts about the valuation and sale consideration received but the Commissioner of Income-tax should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the

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Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The Commissioner of Income-tax in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and, therefore, the assessment order is "erroneous". The said finding will be correct, if the Commissioner of Income-tax had examined and verified the said transaction himself and given a finding on the merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry ; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interests of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interests of the Revenue. In latter cases, the Commissioner of Income-tax has to examine the order of the Assessing Officer on the merits or the decision taken by the Assessing Officer on the merits and then hold and form an opinion on the merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. In the second set of cases, the Commissioner of Income- tax cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not.”

has simply observed that the submission of the assessee needs verification.

As per the provisions of section 263, the ld Commissioner of Income Tax

could have either himself verified the submission of the assessee or could

have got the submission of the assessee verified by other agencies and

thereafter if he would have come to the conclusion that the order passed

by the Assessing Officer in respect of the issue was actually erroneous then

only he could have interfered with the order of the Assessing Officer. In

the circumstances, we find that the order of the ldCommissioner of Income

Tax in respect of this issue is bad in law and untenable. We, therefore, set

aside the order of the Commissioner of Income Tax in respect of this issue.

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us, ld A.R. of the assessee has candidly conceded that there was mistake

in the order of the Assessing Officer. The only submission is that the error

in the assessment order in respect of the said two issues could have been

rectified by the Assessing Officer u/s.154 of the Act and, therefore, exercise

of power u/s.263 of the Act was excessive.

Commissioner of Income Tax can exercise the jurisdiction when he finds

that the order of the Assessing officer is erroneous and prejudicial to the

interests of the revenue. Nowhere, the said section provides that if the

error is apparent then powers conferred u/s.263 upon the Commissioner

of Income Tax cannot be exercised. Hence, we do not find any force in the

above submission of the assessee. Therefore, the order of the

Commissioner of Income Tax in respect of above two issues are confirmed

and the related grounds of appeal of the assessee are dismissed.

Order pronounced in the open court on /06/2017 in the presence of parties.

(Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated /06/2017 B.K.Parida, SPS

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Copy of the Order forwarded to : 1. The Appellant : M/s. Orissa State Police Housing & Welfare Corporation Limited.,Bhoi Nagar, Janapath, Bhubaneswar. 2. The Respondent. ACIT, Circle 2(2), Bhubaneswar 3. The CIT(A) 4. Pr.CIT, Bhubaneswar 5. DR, ITAT, Cuttack BY ORDER, 6. Guard file. //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack