M/S KOLKATA WEST INTERNATIONAL CITY PVT. LTD.,HOWRAH vs. DCIT, CIR-11, KOLKATA, KOLKATA

The Assessee is a company. It is engaged in the business of real estate development. For A.Y.2009-10 the assessee filed return of income declaring total income of Rs.1,15,94,328/-. In the course of assessment proceedings the AO noticed that the assessee recognized its revenue from its integrated township project as per AS-9 issued by the Chartered Accountants of India (ICAI). However, the various expenses in the nature of brokerage and commission, travelling, electricity charges, property development expenses, printing & stationery, gifts, communication expenses, legal & professional charges, service & maintenance charges, security charges, MySAP Implementation charges, consultancy charges, miscellaneous expenses etc which are directly connected or are incidental to the work of the project have been debited to the profit and loss account and claimed as revenue expenditure. The AO accordingly was of the view that the assessee should recognize the expenditure also in 2 M/s. Kolkata West International City Pvt. Ltd.. A.Yr.2009-10 the same manner in which the income is recognized. Accordingly he made adhoc disallowance of expenses under the various heads referred to earlier. It can be seen from the list of expenditures set out earlier that one of the items was “security charges”. In the assessment order passed u/s 143(3) of the Act there is no separate discussion nor any disallowance of security charges made by the AO. AO passed an order of assessment on 19.12.2009.

C.I.T. in exercise of his powers u/s 263 of the Act was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interest of the revenue for the following reasons :- On examination of assessment records it was noticed that in the earlier year i.e. A. Y - 2007-08 the assessee company had claimed various expenses out of which the Assessing Officer disallowed 75% for preceding year in 2007-08 and allowed only 25% to the assessee. In the current year the assessee claimed similar expenses amounting to Rs. 73,41,000/-, but in the current year the A.O did not follow the same disallowance. Since the nature of the business was remained the same during the previous year, therefore, the same methodology could have been adopted for the aforesaid expenditure.

In reply to the show cause notice u/s.263 of the Act, the Assessee submitted that the addition made by the A.O. in earlier year was already deleted by Id. CIT(A).

The CIT however held that the assessment has to be set aside to the Asessing Officer with the direction to have a fresh look into the matter. The CIT directed that the assessing officer must ensure for that any disallowance which is required to be made should be based on merit and the disallowance should not be made on ad-hoc basis.

Aggrieved by the order of C.I.T. the assessee has preferred the present appeal for the Tribunal.

The learned counsel for the assessee submitted before us that for A.Y.2007-08 similar disallowance made by the AO was deleted by CIT(A). The revenue has preferred an appeal before the Hon’ble ITAT against the aforesaid order of the C.I.T.(A) for A.Y.2007-08. But nevertheless it cannot be said that the order passed by AO was erroneous and prejudicial to the interest of the revenue. The learned DR relied on the order of C.I.T.

In the result the appeal of the assessee is dismissed. Order pronounced in the court on 15.1.2016.