Income Tax Appellate Tribunal - Delhi
Dlf Garden City Indore Private Limited, ... vs Pr.Cit-03, New Delhi on 12 May, 2023
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B" DELHI
BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
&
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
I.T.A. No.1497/DEL/2020
Assessment Year 2015-16
DLF Garden City Indore Limited, Vs. Pr.CIT-03,
1-E, Naaz Cinema Complex, New Delhi
Jhandewalan Extension,
New Delhi.
TAN/PAN: AAFCA5034N
(Appellant) (Respondent)
Appellant by: Shri R.S. Singhvi, CA
Shri Satyajeet Goel, CA
Respondent by: Shri T. James Singson, CIT-DR
Date of hearing: 04 05 2023
Date of pronouncement: 12 05 2023
ORDER
PER PRADIP KUMAR KEDIA, A.M.:
The captioned appeal has been filed at the instance of the assessee against the revisional order of the ld. Pr.CIT-III, Delhi ('Pr.CIT' in short) dated 16.03.2020 wherein order passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) dated 30.09.2017 concerning AY 2015-16 was held to be erroneous in so far as prejudicial to the interest of the revenue within the meaning of Section 263 of the Act.
2. Briefly stated, the assessee is a real estate developer and filed its return of income which was revised later. The case was selected for limited scrutiny and the income was assessed at the I.T.A. No.1497/Del/2020 2 returned income without any adjustments for the Assessment Year 2015-16 in question.
3. The assessment carried out by the Assessing Officer was, however sought to be revised by the Pr.CIT. A show cause notice dated 23.07.2018 was issued to this effect.
"Wh erea s I ha ve examin ed th e a ssessment reco rd s o f th e abo ve referred a ssessee co mpan y (h ere-in -a fter referred to a s th e a ssessee) fo r A.Y. 2015 -1 6 wh erein assessmen t wa s comp leted b y th e AO a t th e retu rn ed income o f Rs. 3 ,8 6,35,180 /- on 30 .09 .2017 . It is fu rther seen that th e a ssessee ha d mad e a p ro vision o f Rs. 1 ,29 ,55 ,862- o n a cco unt o f a n ticip a ted lo ss an d d eb ited th e sa me to th e p ro fit a nd lo ss accou nt. Th e a ssessee ha s con tend ed tha t th e lo ss o f Rs. 1 ,29 ,55 ,862- ha s b een cla imed a s an exp en se du ly ap p ro ved b y Accoun ting S tanda rd-7 issu ed b y In stitu te o f Cha rtered Accoun tan ts o f In d ia . However, su ch pro vision is n ot a n a llo wab le exp en se in view o f pro visio n s o f S ectio n 14 5(2) o f IT Act wh ich p ro vid es th a t a p ro visio n mad e in th e accoun ts fo r an a ccru ed or kno wn liab ility is a n ad missible dedu ctio n wh ile o ther p ro vision do no t quality fo r d ed u ction und er th e Act. Exp end itu re a llo wa b le must a ctua lly exist a t th e time o f fin an cia l rep ortin g . Ma kin g pro visio n fo r exp en d iture wh ich d ep end s upo n an event is no t a n a llo wab le exp en d itu re. Since th e p ro visio n made was not an a scerta in ed lia b ility, th e sa me shou ld ha ve b een disa llo wed and add ed b a ck to th e in co me of th e a ssessee, wh ich ha s not b een don e b y th e AO wh ile p a ssing assessmen t o rd er u s 143 (3 ) on 3 0 .09 .2017. Hen ce, th e o rder p a ssed b y th e assessin g o fficer us 143(3 ) of the IT Act, 1 961 da ted 30 .09.2 017 is erro n eou s so fa r it is p reju dicial to th e in terest o f reven u e for th e A. Y. 2015-16 requ irin g a revisit on th e en tire issu e und er con sid era tio n . You are, th erefo re, d irected to sho w cau se as to wh y an ord er in terms o f pro visio ns o f sectio n 263 ma y no t be pa ssed fo r A.Y. 2015-16 settin g asid e th e o rd er pa ssed u /s. 1 43 (3 ) dated 30 .09 .2017 in you r ca se."
4. The Pr.CIT eventually set aside the assessment order framed under Section 143(3) and directed the Assessing Officer to redo the assessment in terms of observations made in revisional order.
5. Aggrieved by the revisional order, the assessee preferred appeal before the ITAT seeking to challenge the revisional order.
6. When the matter was called for hearing, the ld. counsel for the assessee adverted to the show cause notice and submitted that I.T.A. No.1497/Del/2020 3 the show cause notice broadly alleges failure of the Assessing Officer to examine the allowability of Rs.1,29,55,862/- towards provisions in the nature of anticipated loss and alleging that such provisions is not in the nature of ascertained liability.
6.1 In this regard, the ld. counsel for the assessee submitted that the assessee is engaged in construction business and the impugned loss was claimed as expenditure in terms of Accounting Standard- 7, issued by Institute of Chartered Accountant of India (ICAI), based on Percentage of Completion Method (POCM) and the same method of accounting followed by the assessee has been accepted by the tax authorities on a year to year basis. Besides, POCM method of accounting for tax purposes has been upheld by Hon'ble Delhi High Court in the case of CIT vs. Malibu Estate Ltd in ITA No.213/2015 & CM No.4961/2015. During the year, the assessee has recognized the foreseeable losses and created provision thereof. The ld. counsel next submitted that in identical fact situation in the preceding Assessment Year 2014-15, the Co- ordinate Bench in ITA No.3731/Del/2019 order dated 07.09.2022 has held that the Revisional Commissioner was not justified in assuming jurisdiction under Section 263 towards such losses and therefore, the issue is no longer res integra.
7. We have perused the revisional order and examined the case records with the assistance of the respective sides. We straightway noticed that Pr.CIT in paragraph 4 of the impugned revisional order referred to the similar action taken under Section 263 in Assessment Year 2014-15 also and proceeded to revise the assessment order on the similar footing as adopted in AY 2014-15. The revisional order passed in AY 2014-15 has been set aside and cancelled by the Co-ordinate Bench as pointed out on behalf of the I.T.A. No.1497/Del/2020 4 assessee. This being so, there is no reason for us to take a different view in the matter.
8. In consonance with the fate of the revisional order for AY 2014-15 in terms of order of Co-ordinate Bench, the action of the Pr.CIT under Section 263 is set aside and cancelled and the order of the Assessing Officer under Section 143(3) is restored.
9. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 12/05/2023.
Sd/- Sd/-
[CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
DATED: /05/2023
prabhat