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Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
Before: Sh. C. M. GargDr. B. R. R. Kumar
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by assessee against the order of ld. PCIT, Ghaziabad dated 30.03.2019.
2. Following grounds have been raised by the assessee:
“1. That the Principal Commissioner Of Income Tax has erred in law as well as on facts of the case, in invoking provisions of section 263 of the Income Tax Act, 1961 and the order u/s 263 as passed is arbitrary, unjust and illegal in as much as it is based only on alleged discrepancies/ errors noticed by her in the order of the AO as against any allegation of it being erroneous and prejudicial to the interests of the revenue, besides also overlooking the following:- (i) The Ld. Assessing Officer has duly applied his mind to all the issues, raised in the notice U/S 263 and after having been satisfied on the same, took a possible view based on the facts Jupiter International Import Export India Ltd. of the case and law governing the issue and thereby, passed the impugned assessment order. (ii) The Ld. PCIT has failed to earmark and substantiate how the assessment order dated 04-01-2016 passed u/s 143(3) by the Ld. Assessing Officer is erroneous and prejudicial to the interests of the revenue. (iii) The Ld. PCIT has on the one hand acquiesced in para 6 page 15 of her order that the AO did raised a query and accept the version of the assessee but she believes it to be a case of inadequate inquiry and has thus went on to pass the impugned order treating the inadequacy as erroneous. Observations made, inferences drawn and findings recorded by the Principal Commissioner of Income Tax in her order passed U/S 263 are incorrect, unreasonable and are untenable in law.
The Principal Commissioner Of Income Tax has taken an incorrect view on the issue that "Sale price of flats declared by assessee in ITR is less as compared to purchase price declared by the buyer and thereby, setting aside the issue to the AO for fresh adjudication holding the action of the AO, as failure to examine the case properly although, he has duly raised queries, applied his mind and thereafter, arrived at a possible view on the issues at hand, and hence, it could not be held to be erroneous and prejudicial to the interests of the revenue as the view of the AO has not been pointed out to be unsustainable in law.
The Principal Commissioner Of Income Tax has failed to point out as to how the view of the AO in accepting the assessee's stand of making payments of less than Rs. 50,00,000 being beyond the purview of section 194IA is incorrect and thereby erroneous.
The Principal Commissioner Of Income Tax has been unable to point out the alleged "mismatch is amount paid to related persons US 40A(2)(b)" of the Income Tax Act, 1961 as reported in audit report and ITR. On this ground alone, she cannot hold the entire Jupiter International Import Export India Ltd. assessment order to be erroneous and prejudicial to the interests of the revenue.
The Principal Commissioner Of Income Tax has taken an incorrect view on the issue of "investment made by assessee in the shares of M/s Viraj Automobiles (P) Ltd and the applicability of provisions of section 56(vii)(a) read with rule 11UA of the IT Rules as the value thereof was submitted before her also to be in sync with the legal provisions and therefore, setting aside this issue to the AO for fresh adjudication holding the action of the AO, as failure to examine the case properly could not be held to be erroneous and prejudicial to the interests of the revenue.
6. The Principal Commissioner Of Income Tax has taken an incorrect view on the issue that "company borrowed huge funds and claimed huge interest on such borrowings which was allowed by the AO without examining the fact as to whether utilization of interest bearing funds were for business or not?" and thereby, setting aside the issue to the AO for fresh adjudication holding the action of the AO, as failure to examine the case properly although, he has duly raised queries, applied his mind and thereafter, arrived at a plausible view on the issues at hand, and which has not being held in the order U/S 263 to be unsustainable in law and hence holding the entire order to be erroneous and prejudicial to the interests of the revenue is arbitrary and illegal.
7. The impugned order U/S 263 of the Principal Commissioner of Income Tax being illegal deserves to be cancelled/ annulled.”
3. The assessee is a private limited company and engaged in the business of trading of flats. The assessment u/s 143(3) of the Income Tax Act, 1961 has been passed by the ACIT, Circle- 3(1), Bulandshahr on 28.12.2016 making disallowance of Rs.4,00,000/- on account of various expenses. The ld. PCIT has passed an order u/s 263 of the Act holding that the order of the Jupiter International Import Export India Ltd. Assessing Officer is erroneous as well as prejudicial to the interest of the revenue.
4. Aggrieved, the assessee filed appeal before us.
5. Heard the arguments of both the parties and perused the material available on record.
Sale Value of Flats:
Before the AO, in response to the query raised, the assessee submitted that the entire sale was made on circle rate without any violation to Section 43CA of the Income Tax Act, 1961. The ld. PCIT held that the AO neither gathered nor examined the reason for difference in the sale price declared by the assessee as compared to the purchase price declared by the buyer. The ld. PCIT held that the difference between purchase price as declared by the buyer and the sale price as declared by the assessee are required to be added to the income of the assessee.
Having heard the arguments of both the parties, we find that the company deals in trading of flats which has all along been treated as stock in trade. The company purchases/ books the flats at the time of soft launch of the project or in mid way i.e. prior to possession or completion of flat. Thus, the assessee firstly books the Flats and then transfers its rights in the flats so booked, to its customers even before the construction of flat or handing over the possession of flat by the builder to the assessee company is complete.
Jupiter International Import Export India Ltd.
That the first ever query letter of the AO dated 02.11.2016 reveals that the AO has raised three queries related to the impugned issues in items no. 6, 12 and 13 of the said query letter which clearly shows that the AO has called for explanation on the issue. The assessee submitted reply on 09.11.2016. After a specific requirement from the AO, on 23.11.2016, assessee submitted copy of ledger Account of sale of Flats along with the copy of Agreement to sell and the copy of cheques along with ID. Later on, the AO has again issued a query letter on 23.11.2016, wherein many queries were raised. Amongst them, query no.1 revolved around the impugned issue. The assessee submitted reply to this query on 30.11.2016. Later, the AO has asked for the agreement to sell, which the assessee submitted in its fourth reply. The assessee has submitted herewith at annex 13-16 Form 26AS before the ld. PCIT which was available before the AO at the time of assessment.
The assessee has drawn up a chart before the ld. PCIT at annex 17 wherein the figures of amount received on account of transfers of rights in the flats so booked vis-à-vis TCS deducted by the purchasers is mentioned. Perusal thereof reveals that there is no variation in the amounts shown by the assessee and the one on which TCS has been collected.
Thus, the ld. PCIT observation that there has been difference between the sales declared by the assessee and purchases declared by the buyer and the TCS found to be reconciled and in order. Hence, the order of the ld. PCIT cannot be held to be valid on this ground. Hence, the order u/s 263 fails on this ground.
Jupiter International Import Export India Ltd. Interest on Loans:
The ld. PCIT held that the company borrowed huge funds and claimed huge interest on such borrowings which was allowed by the AO without examining the fact as to whether utilization of interest bearing funds were for business purposes or not. If borrowed funds were not utilized for investments etc., or for non-business purposes, the said interest was not allowable. The ld. PCIT held that the AO did not touch this issue and failed to examine the genuineness in respect of claim of interest of Rs.65,54,249/- paid on funds borrowed by it. Before the ld. PCIT, it was submitted that against loans of Rs.7.62 cr., the assessee has claimed interest of Rs.65.54 lacs only. As against this, the inventories of the trade are to the tune of Rs.17.64 corres and income yielding investments are at Rs.8.5 cr. Thus, there is no occasion to assume that the borrowings have been invested for non-business purpose as the balance sheet does not reflect any such investment. The balance sheet of the assessee which is a part of the record before the ld. PCIT reveals that the reserves & surplus was to the tune of Rs.24.16 Cr. and the total loans & advances given were to the tune of Rs.11 Cr. The assessee has earned interest of Rs.25.45 lacs. Since, the assessee has got at their disposal their own funds which are far more than the funds deployed as loans no disallowance on account of interest is called for. The ld. PCIT ignored the facts on record before resorting to revision of the Assessment Order u/s 263. Hence, the order u/s 263 fails on this ground.
Since, the Assessment Order passed in consequence to the order u/s 263 has not made any additions on the other issues which Jupiter International Import Export India Ltd. are part of the order u/s 263, the ld. AR choose not to argue on those issues. Hence, no adjudication is required.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 31/07/2023.