Income Tax Appellate Tribunal - Bangalore
H.M. Constructions vs Joint Commissioner Of Income-Tax on 29 January, 2001
Equivalent citations: [2003]84ITD429(BANG)
ORDER
G.S. Pannu, Accountant Member
1. These are three appeals filed by the assessee against the common order of the CIT, K-I, Bangalore, under Section 263, No. 1RP/ 263 /24,25 & 26/99-00/CIT I, dated 14-2-2000. The main grounds of appeal preferred by the assessee for all the three years are as under :
i. On the facts and in the circumstances of the case, the conditions precedent being absent, the learned CIT erred in invoking the provisions of Section 263 of the Act and the order passed is without jurisdiction and liable to be quashed.
ii. On the facts, there being no error much less an error prejudicial to the interest of revenue, the learned CIT ought to have refrained from invoking the provisions of Section 263 of the Act.
in. The learned Commissioner ought to have appreciated that the method of accounting is followed as per the standards of Institute of Chartered Accountants of India which is a recognised one.
iv. On the facts and in the circumstances of the case, the learned CIT failed to appreciate that the income is assessable to tax only after completion of a project in all respects.
2. At the time of hearing Smt. Vidya Sharma, Advocate, appeared on behalf of the assessee and Shri P.C. Chadaga, DR, appeared on behalf of the Revenue.Their detailed submissions were heard.
3. Briefly the facts are that the assessee has been carrying on work of development of properties and also construction of apartments. The business activity carried out by the assessee involves various steps being identification of a plot, securing approval of the plans and construction and delivery thereof and simultaneously identifying buyers for the apartments. The undivided right and interest in land is sold by the owner of the land to the prospective buyers directly and after completion of the building hands over the possession of the respective units to the buyers. The assessee has been following the mercantile method of accounting in respect of the projects developed by it as part of its income. The profit on each project was taken by the assessee on the basis of completion of the projects undertaken by the assessee on the basis of the method of mercantile system of accounting which is commonly referred to as completed method of contract of recognising the income of a project. In other words, the assessee recognised the income after completion of the project. The assessments were framed by the Assessing Officer under Section 143(3) accepting the results declared as per the aforesaid method of accounting for the assessment years 1995-96, 1996-97 and 1997-98 on 27-3-1998, 31-3-1998 and 31-3-1998 respectively. The CIT assuming jurisdiction under Section 263 of the Income-tax Act concluded that the orders of assessment referred above were erroneous and prejudicial to the interests of Revenue in so much as that the method of accounting employed to ascertain declared from the projects did not correctly depict the taxable profits. According to the CIT, the orders were erroneous in that the assessee's method of accounting was neither mercantile nor cash and that the assessee offered its income to tax only on the completion of the entire project whereas the actual receipt of the consideration or handing over the properties to the buyer is done much earlier. Based on this reasoning, the CIT in his order dated 14-2-2000 set aside the assessments for the three years and directed the Assessing Officer to assess the total income in accordance with the findings contained in his order. The learned Commissioner also laid down the methodology for assessing the income of the assessee in the following words :
Estimate the reasonable rate of net profit for each year and adopt it for all the years during which a given project is constructed. In the final year of the project: add up the estimated income for all the years, including the income for the last year, compare it with the income from the entire project as per books of account of the assessee if they are complete and correct and the difference should be treated as extra income/loss as the case may be of the last year.
To illustrate :
Project period : 2 years Receipts for the project : Rs. 1,00,00,000 First year : Rs. 60,00,000 Second year : Rs. 40,00,000 Profit @ 8% - first year : Rs. 4,80,000 Second year : Rs. 3,20,000 Total : Rs. 8,00,000 Net profit according to books : Rs. 7,00,000 Difference : Rs. 7,00,000 and Rs. 8,00,000 = (Rs. 1,00,000)
The loss of Rs. 1,00,000 to be allowed in the second year. That is, second year income is Rs. 3,20,000 - Rs. 1,00,000 = Rs. 2,20,000.
The assessing being aggrieved by this direction of the CIT under Section 263 is in appeal before us.
4. At the time of hearing, Smt. Vidya Sharma, Advocate, appearing on behalf of the assessee, at the out set contended that assuming of jurisdiction by the CIT was based on wrong appreciation of facts and was also contrary to the provisions of Section 145 of the Income-tax Act and that the orders of the Assessing Officer do not suffer from any error so as to make it prejudicial to the interests of the Revenue. According to her, as per the operating mechanics of the assessee's business, the obligation of the assessee commences with the signing of the Development agreement with the owner of the land and progresses with subsequent agreement with the prospective buyers and completion of contract in all respects in accordance with the said contract entered into with the customer and delivery of possession thereof to the customer. It is averred by the counsel that the building which is put up by the assessee is held as its own property till all the obligations on the part of the assessee are completed and it belongs to the buyer only on its completion. Therefore, it is submitted that the right of the assessee to receive the monies from the customer and appropriate the same arises only after the completion of the obligations under the contract and effecting delivery of the apartments complete in all respects in terms of the contract. The counsel also illustrated some of the obligations in terms of the contract, such as, securing permanent water and electricity connection, occupancy certificate and the like, bringing the apartment fit into a habitable condition, provision of services like lift, watch & ward and other services. It was argued by the learned counsel that in the absence of the satisfactory discharge of such illustrative obligations on the part of the assessee, the customers have the option to refuse delivery leading to termination of the contract. Our attention has also been drawn to the paper book wherein a list of customers have been enclosed whose monies have been repaid owing to cancellations made by such customers due to the non-completion of the projects in time and other defaults on the part of the assessee. The assessee's counsel attempted to demonstrate that the monies being received by the assessee progressively till the date of completion of the project does not entitle the assessee with the right to appropriate the same unless the obligations under the contract are completed. The assessee's counsel submitted that therefore, the income from those accrues to the assessee only on the completion of the contract and not at any stage earlier.
5. It is also pointed out by the learned counsel that during the currency of the project, the construction thus carried out is shown as work-in-progress in the balance sheet year after year till the completion of the project. According to her the said reflects the right of the assessee to the work-in-progress as its own property and not as a property belonging to the customer since the customer does not become entitled to it till the assessee also gets the corresponding right to appropriate the money paid by the customers as its accrued income. It is pointed out by the learned counsel that according to this method of accounting, the expenditure if it is being incurred on the project is also claimed in the year of appropriation of the income or in other words in accordance with the mercantile system of accounting. According to her, the method of accounting following by the assessee is in tune with the generally accepted accounting policy of matching costs with revenue, i.e., when the revenue is taken into account, the commensurate expenditure is also taken and vice versa She submitted that there are two recognised methods of accounting for recognising the incomes from contracts normally in use. She referred to the Accounting Standard (AS 7) issued by the Institute of Chartered Accountants of India (ICAI) wherein the two methods have been prescribed, namely, completed contract method and the percentage of completion method. According to the learned counsel, the method adopted by the assessee in its return of income being the completed contract method, conforms to the accounting standards issued by the premier accounting body of the country, i.e., ICAI. According to her, the method of accounting adopted by the assessee depicts a true and fair view about the state of affairs since neither the assessee can take the receipts as income nor the expenditure incurred as revenue expense, unless the obligations towards the customers are fulfilled. It is only after the obligations to the customers are fulfilled that the profit or loss on a project is ascertained. Consequently during the period of the construction, the ongoing expenditure incurred on the project is shown as an asset in the shape of work-in-progress and on the other hand, the amounts received from the customers are shown as a liability till the completion of the obligations. According to her, this method was prudent in so much as that income is taken as accrued only after the completion of its obligations.
6. Apart from submitting that it is one of the recognised methods of accounting recommended by the ICAI, our attention was also drawn to the provisions of Section 212(3) of the Companies Act, 1956 wherein the Legislature has made the Accounting Standards issued by the ICAI as mandatory for companies till the Government specifies a different standards. Highlighting the advantages of the completed contract method, our attention was drawn to para 10.1 of the Accounting Standards (AS 7) for Accounting for Construction Contracts issued by the ICAI as extracted below :
10.1. The principal advantage of the completed contract method is that it is based on results as determined when the contract is completed or substantially completed rather than on estimates which may require subsequent adjustment as a result of unforeseen costs and possible losses. The risk of recognising profits that may not have been earned is therefore minimised.
7. The learned counsel also justified the selection of the completed contract method in detail. According to her, it was impossible to quantify the degree of completion of project as the work would be going on from the foundation, first slab, second slab etc. and the nature of working not being uniform. She also highlighted the imponderables and practical difficulties that would arise if any other system of accounting was to be adopted. It was pointed out by the learned counsel by way of an illustration that in terms of the agreement made by the assessee, the customer makes the payment either on the basis of time whether or not the building is complete or on the basis of the completion of each slab and a substantial portion of the receipts are received on the completion of the structure. As against this, according to her, for completion of the structure, the cost incurred would be only about 40 per cent of the project cost whereas the major cost is incurred subsequent to completion of the civil structure. Against the aforesaid facts, it was argued by the learned counsel that if the stand of the Revenue is accepted to tax the income as and when the customer pays, the money, it would lead to absurd results. According to her, in such a scenario, 90 per cent of the receipts would be accounted as income in the year of completion of the structure (which would represent only 40 per cent of the work), whereas the expenditure would have been only 40 per cent and there will be huge profit in the first year and in the subsequent year wherein 10 per cent of the receipts would be accounted for as against the expenditure which will be to the tune of 60 per cent and would ultimately result in a huge loss. The assessee's counsel attempted to demonstrate that such a method of accounting is impracticable and unrealistic and does not satisfy the requirement of Section 145 vis-a-vis the method of accounting should enable computation of correct income.
8. It is also submitted by the learned counsel that the CIT has erred in exercising jurisdiction under Section 263 of the Income-tax Act as the assessment orders are neither erroneous nor prejudicial to the interests of Revenue. According to her, in the instant case, the Assessing Officer has while framing the assessment consciously accepted one regular method of accounting followed by the assessee, namely, completed contract method. According to her, the method adopted by the assessee may result in showing of lower profits for tax in a particular year but that by itself does not become prejudicial to the interests of Revenue unless there is an error shown to have taken place. The mere adoption of one of the accepted method of accounting does not become an error. Reliance was placed by the counsel on the ratio of the decisions of the Bombay High Court in CIT v. Gabrial India Ltd. [1993] 203 ITR 108 : 71 Taxman 585; Madras High Court in CIT v. Seshasayee Paper & Boards Ltd. [2000] 242 ITR 490 : 108 Taxman 464 and the Karnataka High Court in CIT v. T. Narayana Pai [1975] 98 ITR 422. The assessee's counsel has also contended that the decision of the Rajasthan High Court in CIT v. Rajasthan Financial Corporation [1998] 229 ITR 246 : [1996] 88 Taxman 58 is on identical facts and is clearly applicable. The assessee's counsel has also placed reliance on the decision of the jurisdictional High Court in Khoday Distillers Ltd. ITRC No. 1920 and 1921 of 1993, dated 12-9-1995. Further reliance was also placed on a decision of the Bangalore Bench of the Tribunal in Dy. CIT v. Somerset Apartments (P.) Ltd. [IT Appeal No. 145 (Bang.) of 1991, dated 25-6-1997], wherein the completed contract method of accounting is approved.
9. On the other hand, the learned DR has elaborately defended the orders of the CIT (A) mainly on the reasoning contained in the impugned order. According to the learned DR, the method of accounting adopted by the assessee to declare income from contracts on completed contract method is in variance with what is required by Section 145 of the Income-tax Act. According to him, as per Section 5 of the Income-tax Act, an income is liable to be taxed when it is either received or accrued. As per the DR, the assessee's method of accounting does not follow either of the two as the method is neither mercantile nor cash as is required to be followed as per Section 145 of the Act. According to the learned DR, more often than not the project of the assessee takes more than 12 months for completion and due to the method of accounting employed, the income is offered for tax at a later stage. The DR relied upon the decisions which have been referred to in the order of the CIT. With regard to the assessee's plea that the method of accounting of the assessee is in consonance with the accounting principles framed by the ICAI, the learned DR drew the attention of the Bench to the observations of the Apex Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [1997] 227 ITR 172 : 93 Taxman 502. According to him, the issue is to be decided in accordance with the principle of law and not in accordance with the accountancy practice. The DR also referred to the decision of the Bangalore Bench in United Property Developers (P.) Ltd. [IT Appeal No. 546 (Bang.) of 1997 dated 10-9-1999]. He pointed out that the Tribunal in the aforesaid case has held that if part construction is made in a year and payments are received during the previous year, it necessarily follows that the assessee has earned some income as there is an element of earning comprised therein. It was accordingly pleaded by the learned DR that the assessee was not correct in declaring the income in each year and the CIT was right in concluding that the method of accounting followed by the assessee was not acceptable. It was also argued by the DR that merely because the assessee follows a particular method of accounting consistently, it will not prevent the assessing authorities from deviating from the method followed by the assessee in order to arrive at the correct income. Reliance was placed on the Supreme Court decision in CIT v. British Paints India Ltd. [1991] 188 ITR 44 : 54 Taxman 499 in support of his contention. For the above reasons and for those mentioned in the order of the CIT, the learned DR. prayed for dismissal of assessee's appeals.
10. We have heard the rival submissions, perused the material on record as also the case laws cited at Bar by the rival parties very carefully. We proceed to dispose of the issue in the succeeding paragraphs.
11. The short question that has to be decided in the present appeals is as to whether the method of accounting adopted by the assessee to compute its incomes from the projects could be said to be erroneous so as to be prejudicial to the interests of Revenue. We may start with the discussion on the alternative methods of accounting. There are two well accepted methods of accounting in relation to construction contracts. One is the method of completed contract method which the assessee has been following and the other is the percentage of completion of contract method. The two said accounting methods have been enunciated by the premier accounting body in the country, namely, ICAI. The said body which is incorporated under an Act of Parliament issues accounting statements, guidance notes, accounting standards, etc., in the field of accountancy on various complex issues. One such Accounting Standard issued by the ICAI is Accounting for Construction Contracts (AS 7) which deals with accounting for construction contract in the financial statements of enterprises undertaking construction activities. Indeed, the two alternative methods of accounting for construction contracts have been recommended by the ICAI. The selection of a particular method of accounting for construction contracts depends on appropriate considerations. The choice of a method of accounting by an assessee is represented by the accounting policy followed by the assessee. The major considerations governing the selection of accounting policies are prudence, sub-stance over form and materiality. In any given case, the method of accounting followed should stand the tests of the aforesaid three principles of accounting assumptions. Tested against the aforesaid, it can be stated that the assessee's method of accounting followed is prudent in so much as income is accounted for only on the completion of its obligation. The assessee's method of accounting recognises the substance of the business mechanics by recognising profits only on the completion of the project or near completion where the revenue can be measured with certainty after providing for possible liability or losses.
12. We find that although the CIT in his impugned order concludes that the method of accounting followed by the assessee, i.e., project completion method, does not lead to ascertainment of correct profits in relation to the activity while on the other hand what he has proposed as a substitute is not an alternative method suggested by the ICAI, namely, percentage of completion method. In fact, the CIT has directed the Assessing Officer to adopt the income at 8 per cent of contract receipts irrespective of the level of construction reached and allocate the same over the period on the basis of contract receipts. In all fairness, we are unable to persuade ourselves to conclude that the method recommended by the CIT is one of the recognised methods and indeed, it is a crude method and is totally unscientific. If the methodology enunciated by the CIT is followed, it shall lead to absurd results in so much as that in one year there could be receipts and not any activity of construction at all. Therefore, we have no hesitation in forming an opinion that the method of accounting suggested by the CIT in his directions contained in the impugned order under Section 263 are contrary to the well recognised method of accounting principles followed in the field of accountancy.
13. In our view, at this stage, the reliance placed by the DR. on the decision of the Supreme Court in British Paints India Ltd.'s case (supra) needs a discussion. The learned DR relied upon the decision of the Supreme Court to justify the action of the Revenue in disturbing the well accepted principle of accounting adopted by the assessee consistently on the ground that the Revenue is at liberty to deviate from the same. We have perused very carefully the decision in British Paints India Ltd.'s case (supra) and are unable to subscribe to the stand of the Revenue. In this decision, the Apex Court held that the method of evaluating the work-in-progress by not including the over heads was not an accepted method of accounting at all and, therefore, it upheld the discretion of the Revenue, notwithstanding that the said method was being followed for several years in the past. We are conscious of the fact that the Hon'ble Supreme Court did not have an occasion to deal with a situation as to whether if the method of accounting were to be a well accepted recognised one, the Revenue could still be entitled to bypass such an accepted method of accounting under the provisions of Section 145 of the Income-tax Act. Our aforesaid view is fortified by the decision of the Ahmedabad Tribunal in the case of Shri Dinesh Mills Ltd. v. Asstt. CIT [2000] 72 ITD 110, the relevant extracts of which are as under :
...There is nothing in the decision which says that even a recognised method of valuation of stock can be rejected by the Assessing Officer. The true ratio of the Supreme Court decision is that the Assessing Officer is not prevented from rejecting a particular method of valuation of stock merely because it was accepted by the Department in earlier years. The Assessing Officer is fully entitled to and in fact duty bound to reject the method if, in his opinion, the method employed is such that income cannot properly be deduced therefrom. However, what is significant to note is that the Supreme Court has nowhere said that it would be open to the Assessing Officer to reject even a recognised method of valuation. Indeed, the Supreme Court could not have said so for the simple reason that it cannot at all be open to the Assessing Officer to say, in the context of a recognised method of valuation, that it is such that income cannot be properly deduced from its employment. In the case of British Paints India Ltd. (supra) it was not argued by the assessee that the method of valuation of stock adopted by it was a recognised method. In fact, the Assessing Officer in that case held that the method adopted by the assessee (British Paints India Ltd.) though regularly employed was not a recognised method.
14. As has been mentioned by us in the earlier paragraphs, the CIT as also the learned DR have placed reliance on a number of judicial decisions which we deem it necessary to discuss. Firstly, the CIT has relied on the decision of the Delhi High Court in Tirath Ram Ahuja (P.) Ltd. v. CIT [1976] 103 ITR 15, for the proposition that in the case of a completed contract, one need not wait till the contract was completed and it was open to the Revenue to estimate the profits on the basis of receipts in each year of construction although the contract was not completed. The facts in that case were that the assessee had entered into a contract for construction of the bridge and it had spent Rs. 13,43,131 on the said work which had to be abandoned due to outbreak of war between India and Pakistan and it received only Rs. 11,11,100 from the State of Jammu & Kashmir. The Tribunal in the aforesaid case found that the said sum was the income of the assessee as the same was not repayable. Further, the company was not in a position at the end of the accounting period to arrive at the work-in-progress also in view of the peculiar facts. It was in this context that the Hon'ble High Court made the observations authorising the estimation of profits of each year even though the contract was not completed. Whereas in the case before us, the amounts received by the assessee are as advances and are refundable to the plot owners in view of certain circumstances prescribed therein. Further, in the instant case, the assessee is in a position to calculate the work-in-progress under each one of the projects at the end of each accounting year and the same is not disputed. Therefore, although the dicta laid down by the Hon'ble High Court is well respected, but the same does not apply to the facts of the present case.
15. The second decision relied by the CIT is of the Orissa High Court in CIT v. Nandram Hunatram [1976] 103 ITR 433. In the said case, the Assessing Officer rejected the books of account of the assessee and adopted a percentage of receipts as the net profit on the plea that the assessee had the right to receive the said sums towards the amount spent on the rescinded contract. However, in the assessee's case as can be inferred from the detailed submissions made by the counsel that the amounts are received as advances and the right to appropriate it towards the contract receipts arises only upon the delivery of the flats and not earlier and the contracts are not rescinded and neither the accounts of the assessee have been rejected by the lower authority, thus this decision does not help the case of the Revenue.
16. In fact, having regard to the ratio of the decision of the jurisdictional High Court in the case of Khoday Distillers Ltd. (supra), we find ample force in the submissions of the assessee's counsel. The Hon'ble High Court categorically approved and stated that the method of recognising the incomes on completed contract method is one of the recognised methods of computing income. The Hon'ble High Court in this case was answering the following question referred to it:
Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the assessee is following the complete contract method of accounting and in deciding that no part of the profit of Rs. 17,58,737 is assessable in the assessment years 1980-81 and 1981-82 and the whole of such amount is assessable only in the assessment year 1982-83?
The Hon'ble High Court while affirming the order of the Tribunal in favour of the assessee, held as under :
When one of the accounting procedures is to compute the profits only on the completion of the contract and that method is adopted by the assessee throughout, it cannot be said that the view taken by the Tribunal is wrong.
It was also held by the High Court as under :
In fact, the Tribunal placed reliance upon the Accounting Standards issued by the Institute of Chartered Accountants on accounting for construction contracts. It is noticed therein that completed contract method is one of the methods. Same is the position indicated in 'Advanced Accounting by Batliboi, well known text book on Accountancy'. It is no doubt true that even in case where there is a completed contract, for good reasons the concerned authorities may adopt percentage of completion method and spread it over different periods. But, in this case, when the assessee has taken the contract as a whole and maintained accounts on that basis rather than on the estimates which may require subsequent adjustments as a result of unforeseen possible losses, the authorities cannot adopt a different method of accounting. When the assessee had adopted a completed contract method and there was no particular reason as to why that accounting method could not be adopted, we fail to see how the view taken by the Tribunal holding that the completed contract method had to be applied in the case of the assessee would be wrong.
17. Before we part, we may also discuss the reliance placed by the Department on the decision of the Tribunal in the case of United Property Developers (P.) Ltd. (supra). The facts of the case as can be seen from the order is quite different from that of the assessee before us. In United Property Developers (P.) Ltd.'s case (supra), it was an admitted fact that the assessee was receiving payments and billing the same towards contract receipts and it acquired the right to appropriate the same towards its income. In the case of the assessee before us, the assessee has not billed for the amounts received at different intervals but is receiving the same as advances. In this regard, we find that the decision of the Tribunal in Somerset Apartments (P.) Ltd.'s case (supra), for the assessment year 1984-85 is more akin to the facts of the present case. The Hon'ble Tribunal in Somerset Apartments (P.) Ltd. 's case (supra) was dealing with a case of a builder and it upheld the completed contract method of accounting as one of the recognised methods. Further, the Bangalore Bench in the case of Somerset Apartments (P.) Ltd. (supra) relied upon the decision of the High Court of Karnataka in Khoday Distillers Ltd. (supra) to conclude the issue. In fact, after perusing the order of the Tribunal in United Property Developers (P.) Ltd.'s case (supra), we find the reference to the decision of the Jurisdictional High Court in Khoday Distillers Ltd.'s case (supra) missing. Ostensibly, the Bench therein did not have the benefit of having the well considered views of the jurisdictional High Court.
18. Therefore, we find that the method of accounting employed by the assessee in its returns and initially accepted by the Assessing Officer in the course of original assessments was not erroneous so as to be prejudicial to the interests of Revenue. In fact, the decision of the Rajasthan High Court in the case of Rajasthan Financial Corpn. (supra) is an identical facts. The assessee before the Rajasthan High Court was a financial corporation deriving income mainly from interest on monies advanced. It was crediting interest to the profit and loss account except in cases where litigation was initiated, the interest was not credited on the ground that such loans were sticky or doubtful of realisation. It was only on finalisation of the litigation that the interest on such loans was offered for taxation. The Assessing Officer did not include such amounts in the income of the assessee while passing the assessment order. Subsequently, the CIT in exercising his powers of revision under Section 263 of the Act, found that the order of the Assessing Officer was erroneous and prejudicial to the interests of Revenue in so much as that such amount was not included in the assessable income of the assessee. On appeal, the Tribunal set aside the order of the CIT and upheld the contention of the assessee that the assessment order did not suffer from any error so as to be prejudicial to the interests of Revenue. Against the aforesaid factual matrix, the Hon'ble High Court has held that as the assessee had consistently followed the Hybrid system of accountancy which was a recognised one and had not been found lacking in bona fides, the power under Section 263 could not be exercised. It is appropriate to reproduce the relevant observations of the Hon'ble Court as under :
On the basis of the findings which have been recorded, it is found that the assessee was maintaining the hybrid system of accounting in respect of sticky loans and advances. In the preceding assessments, it was never objected to. The action of the assessee cannot be said to be lacking in bona fides. The hybrid system of accounting was also a recognised system of accountancy and therefore, the decision in the case of State Bank of Travancore v. CIT [1986] 158 ITR 102 (SC) and State Bank of Travancore v. CIT [1977] 110 ITR 336 (Ker.) has no application where the decision was given in a case where the assessee was maintaining the mercantile system of accounting...
If the assessee has continued with the system of accountancy which was a recognised one and has consistently been followed and even accepted by the Revenue and has not been found lacking in bona fides, the power under Section 263 cannot be exercised.
19. Therefore, in view of the detailed discussion in the preceding paragraphs, we conclude by holding that the CIT erred by invoking the revisionary powers under Section 263 of the Act and the impugned orders are hereby set aside.
20. In the result, the appeals of the assessee are allowed as above.