Income Tax Appellate Tribunal - Delhi
Dlf Limited, New Delhi vs Principal Commissioner Of Income Tax, ... on 18 September, 2024
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B": NEW DELHI
BEFORE SHRI SAKTIJIT DEY, HON'BLE VICE PRESIDENT
AND
SHRI M. BALAGANESH, ACCOUNTANT MEMBER
ITA No. 2355/Del/2024
(Assessment Year: 2018-19)
DLF Assets Ltd, Vs. PCIT,
1-E, Naaz Cinema CR Building,
Complex, Jhandewalan Delhi
Extension, New Delhi
(Appellant) (Respondent)
PAN: AACCD4923A
ITA No. 2586/Del/2024
(Assessment Year: 2019-20)
DLF Ltd, Vs. PCIT-1,
th
9 Floor, DLF Centre, CR Building,
Sandad Marg, New Delhi Delhi
(Appellant) (Respondent)
PAN:AAACD3494N
Assessee by : Shri R. S. Singhvi, CA
Shri Satyajeet Goel, CA
Revenue by: Ms. Rajinder Kaur, CIT DR
Date of Hearing 01/07/2024
Date of pronouncement 18/09/2024
ORDER
PER M. BALAGANESH, A. M.:
1. The appeal in ITA No.2586/Del/2024 for AY 2019-20, arises out of the order of the Pr. CIT-1, Delhi [hereinafter referred to as „ld. Pr CIT ‟, in short] dated 31.03.2024 against the order of assessment passed u/s 143(3) r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as 1 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd, „the Act‟) dated 30.09.2021 by the Assessing Officer, National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as „ld. AO‟).
2. The assessee has raised the following grounds of appeal:-
"1(1) That on the facts and circumstances of the case, PCIT, Delhi-1 has wrongly assumed jurisdiction u/s. 263 of the Income tax Act, 1961 by treating the assessment order passed by Assessing Officer u/s. 143(3) as erroneous and prejudicial to the interest of revenue without appreciating facts of the case or application of mind.
(ii) That in the absence of any finding that order passed by the AO u/s.
143(3) is erroneous and prejudicial to the interest of revenue, it is not open to set-aside the same for re-verification and as such direction of PCIT, Delhi-1 are highly arbitrary and contrary to purpose, object and scope of sec. 263 of the Act.
2(1) That various issues regarding principles of revenue recognition raised by the PCIT, Delhi-1 in the notice u/s. 263 have already been examined by the Assessing Officer during assessment proceedings u/s. 143(3) and during appellate proceedings by CIT(A)/NFAC and as such there is no case for treating the assessment order as erroneous and prejudicial to the interest of revenue.
(ii) That when appeal of the assessee against the assessment order u/s 143(3) has been decided by CIT(A)/NFAC vide order dated 18.12.2023, there is merger of the assessment order with the appellate order qua the issues considered and decided in the appellate authority and hence, the CIT is not competent to issue directions to revise the order on that point on the ground that a particular aspect of that point was not dealt with by the Assessing Officer.
3(i) That the direction by PCIT to compute the income from the area "Sold out but the Possession Letter (PL) not issued" and "Not Sold" as elaborated and directed at point Nos. 1 to 7 on page 57-58 of order u/s 263 for all the 11 projects in the chart scanned as Annexure A at page 55 of order u/s 263 is contrary to the method of accounting followed by the assessed, i.e. Ind AS 115/CCM.
(ii) That Even if at all, the POCM method is to be followed, it has to be applied based on Ind-AS 18 read with Guidance Note on recognition of revenue by Real Estate Transactions (Ind-AS), which was being consistently followed by the Assessee and hence, the area "Not Sold"
cannot be brought to tax.
(iii) That the direction by PCIT to obtain all necessary documents from assessee and also verify the books of accounts in order to obtain such information and details about receipts is without any valid basis as all the requisite details / documents sought during the assessment proceedings and appellate proceedings were duly provided by the 2 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd, company, hence there is no case for restoring the issue back to the Assessing Officer for re-consideration.
4. That the direction by PCIT to examine and verify the financial expenses which are not in accordance with the commercial expediency and disallow the same is without any valid basis as this issue was duly considered by the Assessing Officer during the assessment proceedings and in the absence of adverse finding about genuineness and justification of the claim, there is no case for restoring the issue back to the Assessing Officer for re-consideration.
5 That the direction by PCIT to verify and examine the claim of depreciation in view of the fact that certain assets which are not in the name of the assessee and ownership is not with assessee as per SEZ Act is contrary to facts and in the absence of claim of depreciation on such assets, there is no valid reason to treat the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue.
6. That the direction by PCIT to verify and examine current liabilities as shown in the balance sheet for their genuineness and correctness, is misconceived without any valid basis, as this issue was duly examined by the Assessing Officer during assessment proceedings, hence the issue being of general nature, there is no valid reason to treat the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue.
7. That order was passed by the Assessing Officer after necessary verification of issues under consideration and assessment order is neither erroneous nor prejudicial to the interest of the revenue.
8. That order passed by the PCIT, Delhi-1 is not justified on facts and same is bad in law.
9. That the appellant craves leave to add, alter, amend or forgo any of the grounds of appeal at the time of hearing."
3. We have heard the rival submissions and perused the material available on record. The return of income for assessment year 2019-20 was filed by the assessee company on 31.10.2019 declaring loss of ₹3405,92,31,501/-. This return was later revised on 31.10.2019 declaring total loss of ₹5533,78,55,356/-. The assessee filed another revised return on 30.09.2020 declaring loss of ₹5533,78,55,356/-. The assessee is a real estate developer engaged in the execution of residential and commercial projects for sale and rental purposes, including SEZ projects. The 3 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd, assessment for the assessment year 2019-20 was completed u/s 143(3) r.w.s. 144B of the Act on 30.09.2021 determining the total loss of the assessee at ₹358,28,30,389/-. In the said assessment, the following additions were made:-
Sr.No. Particulars Amount (Rs.)
Disallowance of adjustment on account of
i. 5049,59,76,000
adoption of Ind AS 115
Delayed Payment of Employees contribution to
ii. 53,74,605
PF
iii. Disallowance u/s14A read with Rule 8D 98,99,04,701
iv. Reclassification of Income from house property 22,33,67,403
V. Aircraft and Helicopter expenses 3,17,34,000
Total 51,74,63,709/-
4. This assessment was subjected to challenge by the assessee before the ld NFAC. The ld NFAC disposed of the appeal on 18.12.2023 giving partial relief to the assessee. It is pertinent to note that the assessee was following Percent of Completion Method (POCM) for recognition of revenue from the business of real estate activities. But during the year, there was a change in the method from percentage of completion to completed contract method (CCM) as per the Accounting Standard-7 (AS-7) issued by Institute Of Chartered Accountants of India (ICAI). The assessee had debited a sum of ₹609185.90 lakhs in the return representing reversal of excess revenues (net of cost) booked in the earlier years in respect of projects under execution as on 01.04.2018 on account of change in the method of accounting from POCM to CCM. In the return of income for the year under consideration, the assessee made a one time claim of ₹609185.90 lakhs in schedule BP in ITR. In the assessment proceedings, the said deduction was subject matter of examination by the ld AO. The assessee filed written submissions vide letters dated 22.09.2021 and 27.09.2021 on this issue before the ld AO. The assessee also pleaded that CCM is also one of the recognized methods under AS-7 issued by ICAI for the assessee engaged in real estate business. The AO disallowed the one time claim of deduction of ₹609185.70 lakhs. However, the ld AO allowed 4 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd, the alternative claim of the assessee as deduction to the tune of Rs. 104226.14 lakhs which was contingent upon and consequent to the outcome of proceedings for AYs 2017-18, 2018-19 and 2019-20. The ld NFAC took cognizance of the fact that the assessee has followed CCM in succeeding assessment years i.e. 2020-21 and 2021-22, for recognition of revenues and it was also accepted by the ld AO while completing the assessment for those two years. The ld CIT(A) found that the AO had indeed accepted the shift in method of accounting from POCM to CCM by the assessee in assessment years 2020-21 and 2021-22 and observed that the AO was not justified in rejecting the same in assessment year 2019-
20. Ld NFAC also took cognizance of the fact that POCM is one of the approved methods and the assessee was indeed entitled to follow the same for recognition of income. Reliance was also placed by the assessee on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Bilahari Investments Pvt Ltd reported in 299 ITR 1 (SC) and the decision of the Hon‟ble Jurisdictional High Court in the case of CIT Vs. Manish Buildwell Private Limited reported in 16 taxmann.com 27 (Del HC) ; decision of Hon‟ble Karnataka High Court in the case of CIT v. Prestige Estate Projects Pvt Ltd reported in 440 ITR 343 (Kar.) ; and decision of Hon‟ble Jurisdictional High Court in the case of Paras Buildtech India Pvt. Ltd reported in 382 ITR 630 (Del). The ld NFAC also gave a categorical finding of reversal of excess revenues, which was booked in earlier years of ₹609185.90 lakhs which was claimed as a one time claim of deduction during the year under consideration due to shift in method of accounting from POCM to CCM was worked out by the assessee on the basis of recognized principles, applicable accounting standards and duly vetted by the auditors. Further, he also observed that the entire exercise of this addition made by the AO in the assessment proceedings is purely academic in nature as it is revenue neutral in view of the fact that the 5 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd, same would have to be allowed as deduction in subsequent years as it is only the effect of timing difference. The ld NFAC took cognizance of the fact that due to the statutory requirement of adoption of Ind AS-115, the assessee had to mandatory change the method of recognizing revenue from POCM to CCM since inception in respect of the projects which are under implementation and are yet to be completed. That being so, the revenue hitherto recognized under POCM followed upto AY 2018-19, the revenue had to be reversed in Assessment Year 2019-20 pursuant to adoption of CCM to avoid the situation of double taxation. Accordingly, the ld NFAC categorically had given observation that if one time claim of deduction of ₹609185.90 lakhs is not allowed to the assessee, then it would result in double taxation of income for the assessee which would in turn impair the real income theory.
5. Now the ld PCIT by invoking his revision jurisdiction u/s 263 of the Act is trying to reconsider the very same issue with regard to recognition of revenue as per POCM instead of CCM adopted by the assessee. In this regard, it is pertinent to note that the ld NFAC had already categorically held that the entire exercise of shifting from PCOM to CCM has been made as per the mandate provided in Ind AS -115 and also the effect of the same is revenue neutral as real income should be recognized in respect of method followed. It is pertinent to note that the order of the assessment got merged with the order of ld NFAC, Delhi and the order of the NFAC was passed prior to the date of passing of revision order u/s 263 of the Act by the ld PCIT. In fact, the order of NFAC dated 18.12.2023 was even brought to the knowledge of the ld PCIT. Despite the fact that the ld PCIT proceeded to pass the revision order u/s 263 of the Act by giving direction to the ld AO to determine the income by following POCM method. First of all, we find that the exercise is revenue neutral and recognition of revenue is only an effect of timing difference. The Hon'ble Supreme Court in the 6 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd, case of CIT Vs. Excel Industries Ltd reported in 358 ITR 295 had held that no addition need to be made by the revenue if the issue is revenue neutral as there is no loss of tax to the exchequer. Hence, the assessment order framed by the ld AO cannot be held to be prejudicial to the interest of revenue. It is trite law that ld PCIT in order to invoke his revision jurisdiction should cumulatively satisfy the twin conditions i.e. (i) that is the order of the AO must be erroneous and (ii) order of the AO must be prejudicial to the interest of revenue. Even if one condition is absent, revision proceedings u/s 263 of the Act cannot be invoked by the ld PCIT. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd reported in 243 ITR 83 (SC). Further, we find that the basis of shift in the method of recognition of revenue from POCM to CCM has already been examined in detail by the NFAC and accepted by the NFAC to be in order. Hence, the order of the assessment got merged with the order of NFAC. This issue has been already decided by NFAC. Hence, in view of clause (C ) of Explanation to Section 263(1) of the Act, the ld PCIT could not have assumed revision jurisdiction at all on this issue. Hence, the revision jurisdiction invoked by the ld PCIT u/s 263 of the Act on this issue is bad in law for more than one reason and accordingly deserves to be quashed and is hereby quashed.
6. The next issue on which the ld PCIT has invoked the revision jurisdiction u/s 263 of the Act was an account of examination of financial expenses claimed by the assessee. We find that the assessee had furnished detailed submissions with regard to eligibility of claim of interest before the ld AO vide its reply dated 02.09.2021 in response to the notice issued by the ld AO dated 26.07.2021. The assessee gave the explanation that the loans were advanced out of commercial expediency and also gave details of availability of own funds in its kitty. The AO having taken 7 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd, cognizance of the same had granted deduction towards interest expenditure claimed by the assessee. This act of the ld AO was sought to be revised by the ld PCIT by invoking revision jurisdiction u/s 263 of the Act without even indicating as to how the order of the ld AO is erroneous which is a pre-requisite before invoking revision jurisdiction u/s 263 of the Act. There is absolutely no discussion of the by the ld PCIT on the issue. Hence, the action of the ld PCIT to revise this issue by giving direction to the ld AO to examine the same is hereby held to be arbitrary and absolutely without any basis. Hence, the assumption of revision jurisdiction on this issue u/s 263 of the Act is quashed.
7. The next issue for which the ld PCIT had invoked revision jurisdiction u/s 263 of the Act was by giving direction to ld AO to examine the claim of depreciation on the ground that certain assets which are not in the name of the assessee and ownership of is not with the assessee as per SEZ Act. The assessee had even clarified before the ld PCIT that with regard to note No. 4 of the balance sheet, the same talks about freehold land on which no depreciation has been claimed. The ld PCIT had not even bothered to understand the financials of the assessee and check whether any depreciation was per se claimed by the assessee. Even without doing preliminary verification he has directed the ld AO to examine the claim of depreciation. We find that nowhere in the order of PCIT u/s 263 of the Act there is any discussion regarding this issue and the ld PCIT had not even bothered to state as to how the order of the ld AO is erroneous on this issue. Hence, the issue of claim of depreciation for which direction has been given by ld PCIT to AO by invoking revision jurisdiction u/s 263 of the Act richly deserves to be quashed and is hereby quashed.
8 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd,8. In the similar way, the ld PCIT had merely directed to AO to verify the examine the current liabilities as shown in the balance sheet for their genuineness and correctness. As stated earlier, the ld PCIT had not even taken basic efforts to find out how the order of the ld AO is erroneous on the aspect of examination of current liabilities shown in the balance sheet. In our considered opinion, the direction of ld PCIT is only to make fishing and roving enquiries which is not permissible by invoking revision jurisdiction u/s 263 of the Act. Further, we find that the assessee had indeed furnished detailed reply with regard to sundry creditors and current liabilities on 23.09.2021 vide reply to the notice dated 17.09.2021 before the ld AO. So even on this account, the ld PCIT could not have assume revision jurisdiction u/s 263 of the Act since the matter had already been examined by the ld. AO.
9. In view of the aforesaid observations, we hold that the revision order passed by the ld PCIT u/s 263 of the Act is bad in the eyes of law and accordingly, quashed.
10. In the result, the appeal of the assessee in ITA No. 2586/Del/2024 is allowed.
ITA No. 2355/Del/2024 - DLF Assets Limited11. The appeal in ITA No.2355/Del/2024 for AY 2018-19, arises out of the order of the Pr. CIT-1, Delhi [hereinafter referred to as „ld. Pr CIT ‟, in short] dated 31.03.2024 against the order of assessment passed u/s 143(3) r.w.s 144C(3) read with section 144B of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 02.11.2021 by the Assessing Officer, National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as „ld. AO‟).
12. The assessee has raised the following grounds of appeal:-
9 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd,"1. That on the facts and circumstances of the case, PCIT, Delhi-1 has wrongly assumed jurisdiction u/s 263 of the Income tax Act, 1961 by treating the assessment order passed by Assessing Officer u/s. 143(3) as erroneous and prejudicial to the interest of revenue without appreciating facts of the case or application of mind.
(ii) That in the absence of any finding that order passed by the AO u/s.
143(3) is erroneous and prejudicial to the interest of revenue, it is not open to set-aside the same for re-verification and as such direction of PCIT, Delhi-1 are highly arbitrary and contrary to purpose, object and scope of sec. 263 of the Act.
2(i) That various issues raised by the PCIT, Delhi-1 in the notice u/s. 263 have already been examined by the Assessing Officer during assessment proceedings u/s. 143(3) and as such there is no case for treating the assessment order as erroneous and prejudicial to the interest of revenue.
(ii) That the observation of the PCIT in respect of claim u/s. 80IAB being pending before the Hon'ble High Court being factually incorrect, the restoration of the matter back to the Assessing Officer is without any valid basis.
(iii) That there has never been any dispute with regard to eligibility of claim of deduction u/s 801AB and the Assessing Officer having accepted the claim of deduction in respect of income under head house property for the year under appeal, is in conformity with the decision of Hon'ble ITAT in appellant's own case for the Assessment Year(s) 2012-13 to 2015-16 and therefore, the direction in the impugned order is vague and without application of mind or verification of basic facts.
(iv) That the Learned AO appreciating the facts of the case and following the binding principal of the order(s) of the Higher Authorities, has accepted the claim of the appellant and thus, the order of the AO on this issue cannot be held to be prejudicial to the interest of the revenue.
(v) That the income of Rs. 34.36 crore (IndAS adjustment) has been rightly reduced under the head "Business Income", being notional in nature and as such the direction of the PCIT treating the order passed by Assessing Officer as erroneous and prejudicial to the interest of revenue is misconceived and contrary to facts of the case.
(vi) That the claim of various expenses to the extent of Rs. 54,53,14,157/- having duly been considered by the Assessing Officer during assessment proceedings and in the absence of any adverse finding about genuineness and justification of the claim, there is no case for restoring the issue back to the Assessing Officer for re- consideration.
10 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd,(vii) That direction by PCIT to look into correctness of increase in assets and taxability of corresponding income on these assets is without any valid basis in the absence of any finding about any income or consequential tax implication, there is no justification for restoring the issue to the Assessing Officer.
(viii) That direction by PCIT to investigate leases and enquire upon the arrangement between the assessee and its associate enterprise regarding the leases and the tax implication is without any reasoning and application of mind, because the year under appeal has been subject matter of examination by the transfer pricing officer u/s 92CA of the Income Tax Act, 1961.
(ix) That direction by PCIT to the AO for examination of commercial expediency of loans and advances to its related parties is without any independent verification of the facts is not justified. Further, the the allowability and correctness of the interest expenses, is without any valid basis and even otherwise direction being of general nature, there is no valid basis to treat the order of the Assessing Officer as erroneous and prejudicial to the interest of revenue.
(x) That direction to consider disallowance u/s. 14A is also contrary to facts and settled legal principles in the absence of any claim of exempt income and as such directions of PCIT, Delhi-1 are unjustified and devoid of merits.
(xi) The general direction regarding claim of expenses related to corporate guarantee is without any factual basis and as such there is no ground or basis to treat order of Assessing Officer as erroneous and prejudicial to the interest of revenue and restoring the same for re- examination.
(xii) That the direction in the context of deemed dividend with respect to loans and advances in the nature of 'loans to subsidiary/associates/joint ventures/partnership firms etc. is also illegal and misconceived as provision of section 2(22)(e) are inapplicable to the appellant in which public are substantially interests land even otherwise direction being of general nature, there is no valid basis to treat the order of the Assessing Officer as erroneous and prejudicial to the interest of revenue.
3. That order was passed by the Assessing Officer after necessary verification of issues under consideration and assessment order is neither erroneous nor prejudicial to the interest of the revenue.
4. That order passed by the PCIT, Delhi-1 is not justified on facts and same is bad in law.
11 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd,5. That the appellant craves leave to add, alter, amend or forgo any of the grounds of appeal at the time of hearing."
13. We have heard the rival submissions and perused the material available on record. The assessee is engaged in the business of leasing of commercial properties under SEZs and operation and maintenance of commercial properties under SEZs. The return of income for the AY 2018- 19 was filed by the assessee on 31.10.2018 declaring total income of Rs. 120,95,41,520/- which was later revised on 29.03.2019 reporting the same income. The main reason for selecting the case for complete scrutiny was to examine the claim of deduction u/s 80IAB of the Act, among others. Specific queries were raised by the ld AO vide notice u/s 142(1) of the Act dated 13.08.2021 to justify the claim of deduction u/s 80IAB of the Act during the course of assessment proceedings. The assessee vide letter dated 09.09.2021 replied in detail justifying its claim of deduction and also stated the past history of the claim by stating that the issue in dispute has already been decided in favour of the assessee by the order of this Tribunal in earlier years. The ld PCIT by invoking his revision jurisdiction in the impugned proceedings had directed the AO to disallow the claim of deduction u/s 80IAB of the Act in respect of rental income shown under the head "income from house property" after observing that this issue is recurring issue and appeal of the department on this issue is pending before the Hon‟ble High Court. This observation was made by ld PCIT at page 13 of his revision order. The Tribunal had already decided this issue in favour of the assessee for the Asst Year 2012-13. Hence, the ld AO had the benefit of this order while framing the assessment. The ld AO in the instant case had followed judicial discipline of following the order of the Tribunal and accepted the claim of the assessee. Whereas the ld PCIT by ignoring the principle of judicial discipline and the law of „binding precedents‟ had resorted to revise the order passed by the ld AO by giving direction to the ld AO to disallow the claim u/s 80IAB of the Act despite 12 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd, the fact that the said issue is covered in favour of the assessee. Further, the ld AR before us stated that eventhough the PCIT had stated in his order that the appeal has been preferred by the revenue against the order of the Tribunal before the Hon‟ble High Court, the assessee had not been served with any notice or the grounds for framing the substantial question of law from the Hon‟ble High Court up to the date of hearing before this tribunal. The ld AR also stated that the time limit for preferring the appeal before the Hon‟ble High Court had already expired and hence, the assessee was justified in entertaining a bona fide belief that no appeal per se has been preferred by the revenue before the Hon‟ble High Court against the order passed by this Tribunal. Either way, the issue is covered in favour of the assessee by the order of this Tribunal. Hence, the ld AO had followed the same by not taking any adverse view thereon. Accordingly, order of the ld AO cannot be termed as erroneous. The ld PCIT is not justified in invoking revision u/s 263 of the Act in view of the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd reported in 243 ITR 83 (SC).
14. The next issue on which the ld PCIT has invoked revision jurisdiction u/s 263 is by way of giving direction to ld AO to consider a sum of Rs. 34.36 crores under house property income. The ld AO gave direction to verify the same and disallow any claim of expenditure in relation to such rental income by the ld PCIT. Further, the ld AO has been issued direction to verify whether the assessee is the owner of the property in the light of the co developer agreement and SEZ Act. At the outset, we find that the very same issue was subjected to detailed examination by the ld AO during the course of assessment proceedings vide notice u/s 142(1) of the Act dated 13.08.2021. The assessee in response to the notice filed detailed submission dated 09.09.2021 in respect of claim of deduction of Rs. 54.53 crores under the head "any 13 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd, other amount allowable as deduction" by the assessee in the computation of income. This sum of Rs 54.43 crores included a sum of Rs 34.36 crores also and also was submitted that the said adjustment was carried out in accordance with Ind AS. This reply was even filed before the ld PCIT in response to the show cause notice. But the ld PCIT had failed to appreciate the same and the direction was erroneously given to the ld AO to tax the notional income under the head property income. We find that the assessee had duly clarified that it is obligated under Ind AS-109 to make the said adjustment and the deduction claimed in the ITR is merely of consequential nature so as to eliminate the effect of notional income recognized the Profit and loss Account. Further the ld PCIT in his revision order had sought to consider the security deposit to be income of the assessee ignoring the fact that the same constitutes liability in the hands of the assessee company. It was submitted that on one hand, the PCIT is directing the ld AO to tax notional income on account of discounting of security deposit under the head house property and on the other hand, the ld PCIT is raising doubts about the ownership of the property. As per co developer agreement, the assessee is the owner of the built structure under SEZ. It is pertinent to note that the said agreement is duly approved by the Board of Approvals (BOA) constituted under SEZ Act. Further, we find that the assessability of rental income from letting out a commercial space in SEZ had already been subject matter of adjudication by this Tribunal in assessee‟s own case and the same has been accepted in favour of the assessee. The ld PCIT‟s direction to the ld AO to clarify that assessee is the owner of house property is general in nature and contrary to the facts of the case. We find that since this aspect has been completely examined by the ld AO during the course of assessment proceedings and the issue is also decided in favour of the assessee by the Tribunal. There cannot be any error in the order of the ld AO. The ld PCIT 14 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd, is only trying to substitute his own view in place of the view already taken by the ld AO. This is impermissible in the revision proceedings u/s 263 of the Act. Reliance in this regard in placed on the decision of the Hon‟ble Bombay High Court in the case of Gabriel India Ltd. reported in 203 ITR 108 (Bom).
15. Similar direction was given by ld PCIT to verify the allowability of amount of Rs. 54.53 crores claimed by the assessee under the head " any other amount allowable as deduction" in the ITR. We find this direction is similar to earlier direction given by the ld PCIT in the earlier issue discussed above. We find that the assessee had given detailed explanation vide submission dated 09.09.2021 before the ld AO giving item wise explanation for various items totaling to Rs. 54.53 crores and the AO was duly convinced with the same and accordingly accepted the claim of the assessee. No error could be attributed in the said order of the ld AO. Hence, revision proceedings u/s 263 of the Act on this issue fails for lack of jurisdiction.
16. Another issue where the ld PCIT had invoked revision jurisdiction is by way of giving direction to the ld AO to inquire into the correctness of increase in assets and taxability of corresponding income of those assets. We find that the said direction of the ld PCIT is very vague and only trying to make fishing and roving enquiries which is impermissible u/s 263 of the Act. Further, the issue of purchase of capital assets during the year was duly examined of the ld AO by raising a specific query in the notice u/s 142(1) of the Act on 13.08.2021 which was duly replied by the assessee on 15.09.2021 by furnishing the complete details of assets purchased during the year on which depreciation has been claimed along with relevant bills and invoices. We find that assessee specifically clarified before the ld AO that utilization of assets acquired falls into two segments 15 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd, i.e. for earning lease rental income and other for carrying out service and maintenance business. It was specifically clarified that the assessee had not claimed depreciation in respect of assets which are used in connection with earning of rental income. The very same details were even produced before the ld PCIT by the assessee. The ld PCIT without finding any infirmity in the said details directly proceeded to give direction to the AO to examine the correctness of the claim of purchase of assets, without any basis. No defects whatsoever were pointed out by the ld PCIT in the details furnished by the assessee either before the ld AO or before him. Absolutely no finding given by the ld PCIT to conclude as to why and on what basis the order of the ld AO could be termed as erroneous. Hence, the revision jurisdiction assumed by the ld PCIT u/s 263 of the Act on this issue fails.
17. The next issue is with regard to direction of the ld PCIT to the ld AO to examine the commercial expediency of the loans and advances given to related parties by the assessee. As stated in the earlier grounds, this direction is also very value vague and the ld. PCIT is only trying to direct the AO to make roving and fishing enquiries which is impermissible u/s 263 of the Act. Factually the assessee had advances loans and advances to related parties @11.5%. The average cost of borrowing for the assessee was @8.6%. The assessee had already submitted that interest free funds were advanced to the related parties with interest at the rate of 11.5% and assessee had earned income thereon and duly offered to tax. When these details were duly furnished before the ld PCIT, no defect whatsoever was found by him. Without any basis, the ld PCIT had simply directed the ld AO to examine the commercial expediency of loans given to related parties. This direction of the ld PCIT in our considered opinion, had invoked his revision jurisdiction u/s 263 of the Act cannot be sustained in the eyes of law and hence quashed.
16 ITA No. 2355/Del/2024 DLF Assets Ltd ITA No. 2586/Del/2024 DLF Ltd,18. Similar directions were given by the ld PCIT to the ld AO to make disallowances u/s 14A of the Act; to examine allowability of expenditure related to corporate guarantee given by the assessee to this holding company; to verify loans and advances given to subsidiary and associated company that examine the applicability and taxability of provisions of deemed dividend u/s 2(22)(e) of the Act. All these directions are very very vague without understanding the basic facts of the case and the submissions of the assessee. These directions are meant only to make roving and fishing enquiries which is not permissible u/s 263 of the Act. Nowhere in the revision order, the ld PCIT had even bothered to take minimum efforts to mention as to why the order of the ld AO is erroneous on the aforesaid issues. Hence, we have no hesitation to hold that the entire revision order passed by the ld PCIT richly deserves to be quashed.
19. In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 18/09/2024.
-Sd/- -Sd/-
(SAKTIJIT DEY) (M. BALAGANESH)
VICE PRESIDENT ACCOUNTANT MEMBER
Dated: 18/09/2024
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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