Income Tax Appellate Tribunal - Mumbai
Shree Krishna Developers, Mumbai vs Dcit 22(2), Navi Mumbai on 13 December, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "E" MUMBAI
BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND
SHRI N.K. PRADHAN (ACCOUNTANT MEMBER)
ITA No. 1684/MUM/2015
Assessment Year: 2010-11
Shree Krishan Developers CIT-27, I.T. Offices,
149, Piri Majestic, Sindhi Vashi Railway Station
Society Chembur, Mumbai- Vs. Complex Navi
400071. Mumbai-400703
PAN No. ABGFS4570C
Appellant Respondent
Assessee by : Mr. M. Subramaniyam, AR
Revenue by : Mr. R. Manjunatha Swamy, CIT DR
Date of Hearing : 27/09/2018
Date of pronouncement : 13/12/2018
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2010-11. The appeal is directed against the order u/s 263 of the Income Tax Act 1961, (the 'Act') passed by the Pr. Commissioner of Income Tax-27 [in short 'Pr. CIT'], Mumbai.
2. The grounds of appeal filed by the assessee read as under:
1. On the facts and in the circumstances of the case and in law, the order passed U/s.263 of the I.T Act, 1961 is invalid and bad in law.
Shree Krishna Developers 2 ITA No. 1684/Mum/2015
2. On the facts and in the circumstances of the case and in law, learned CIT erred in passing an order u/s. 263 of the I.T. Act, 1961and that too without giving full and proper opportunity of being heard in the matter.
3. On the facts and in the circumstances of the case and in law, learned C.I.T. erred in passing an order U/s263 of the I.T. Act, 1961 and that too without appreciating fully and properly the facts of the case.
4. On the facts and in the circumstances of the case and in law, the learned C.I.T. erred in holding that the order passed by the A.O. is erroneous and prejudicial to the interest of revenue although the same was neither erroneous nor prejudicial to the interest of revenue.
5. On the facts and in the circumstances of the case and in law, the Ld. CIT erred in setting aside the order passed u/s 143(3) of the I.T. Act on 04.03.2013 for AY 2010-11 on the points raised in the show cause notice dated 03.12.2014, although the assessment order was neither erroneous nor prejudicial to the interest of revenue.
3. Briefly stated, the facts of the case are that the assessee filed its return of income for the assessment year (AY) 2010-11 on 28.09.2010 declaring total income at Rs.97,09,160/-. During the course of assessment proceedings, the Assessing Officer (AO) noticed that the assessee has debited short term capital loss of Rs.1,08,378/- in its profit and loss account. In response to a query raised by the AO, the assessee revised the computation of total income by disallowing addition of Rs.1,08,378/- (wrongly claimed as loss on sale of asset) and making a correct claim of depreciation i.e. Rs.75,253/- (instead of Rs.2,99,947/- originally claimed). The AO accepted the above revision of income by the assessee after verification. Thus the AO assessed the total income of the assessee at Rs.99,40,620/-.
Shree Krishna Developers 3 ITA No. 1684/Mum/2015 3.1 On verification of the records, the Pr. CIT issued a show cause notice to the assessee stating that:
(i) the assessee-firm had sold flats in Kamal Niwas at lower rates as compared to rates charged in earlier sales, thus, there was an under-
assessment of income of Rs.1,42,01,005/- (Rs.40,00,436/- + Rs.57,99,818/- + Rs.44,00,751/-) leading to short levy of tax of Rs.59,67,830/-.
(ii) the sales consideration of Rs.4,45,70,400/- (Rs.10,612/- X 4200 sq. ft.) received on flat Nos. 101, 201, 301, 401, 601 and 701 of Kamal Niwas Building and Rs. 7,89,06,489/- (Rs. 12,993 X 6073 sq. ft.) received on flat Nos. 1,2,3,4,5,6,7,8,10 and 12 of Balgovind Building was not offered to tax.
Thus income not offered to tax on account of sale consideration of flats at Kamal Niwas and Balgovind Building worked out to Rs.12,34,76,889/- and it has resulted in under-assessment of income to the extent of Rs.13,76,77,894/- (Rs.1,42,01,005/- + Rs.12,34,76,889/-). Therefore, the assessment order passed by the AO u/s 143(3) dated 04.03.2013 is erroneous in so far as it is prejudicial to the interest of the revenue.
4. In response to the above show cause notice, the assessee submitted before the Pr. CIT that the flats in Kamal Niwas Building were sold at rates higher than the market rates declared by the Stamping Authority and mere variations in rates charged to flat buyers cannot per se be inferred as under assessment. The assessee also submitted before Shree Krishna Developers 4 ITA No. 1684/Mum/2015 the Pr. CIT that in respect of Kamal Niwas, being a developer, it entered into development agreement dated 11.05.2007 with the owners/confirming parties. As per the terms of these agreements, original occupants, being owners were to be given flats available for sale. In respect of Balgovind Building, it is stated that the assessee had entered into agreement with the society/members out of which nine flats were to be given to the original occupant members and balance five flats were available for sale. Thus the assessee submitted before the Pr. CIT that this is the prevailing practice in this line of business, especially the re-development projects.
However, the Pr. CIT was not convinced with the above explanation of the assessee because there is no finding in the assessment order, whether the AO has examined the issue in the context of sold flats 602, 102 and 302 in Kamal Niwas at lower rates as compared to rates charged in earlier sales of the flat No. 402. In regard to Balgovind Building, Unit No. 1,2,3,4,5,6,7,10 and 12 was not offered for taxation and the same was not verified by the AO.
As the AO failed to apply his mind on legality and facts of the case, the Pr. CIT set aside the order of the AO and directed him to examine the above issues in detail, after giving proper opportunity to the assessee.
5. Before us, the Ld. counsel of the assessee files a Paper Book (P/B) containing (i) copy of ITR, computation of income, audited statement of accounts with its annexure and Tax Audit Reports, all relevant for the AY 2010-11, (ii) Photo copies of Notices u/s 143(2)(1) & 142(1) for the AY Shree Krishna Developers 5 ITA No. 1684/Mum/2015 2010-11, (iii) Photo copies of letters of reply to notice u/s 142(1), (iv) Photo copy of assessment order u/s 143(3) dated 04.03.2013, (v) Photo copy of show cause notice u/s 263 dated 3rd December 2014, issued by the Commissioner of Income Tax-27, Navi Mumbai and (vi) Written submission vide letter dated 15th January 2015 to Principal Commissioner of Income Tax-27 for pursuant to order u/s 263.
The Ld. counsel relies on the decision in CIT v. Discovery Estates Pvt. Ltd. (2013) 356 ITR 159 (Delhi), MOIL Ltd. v. CIT (2017) 396 ITR 244 (Bom).
In Discovery Estates Pvt. Ltd. (supra), the assessee was engaged in the business of construction of commercial complexes. It constructed a shopping mall. The construction cost including the land cost amounted to Rs.5,456/- per sq. ft. The shops in the complex were sold. The Assessing Officer, in respect of seven shops, noticed that the assessee had booked sales at Rs.6000/- per sq. ft. in the ground floor in the year 2003 whereas in the year 2005, shops in the same floor were booked @ Rs.3,390/- per sq. ft. One of the shops was not sold @ 2300 per sq. ft. which was even less than the land cost of Rs.2,332/- per sq. ft. He also noted that even in respect of the same floor, different rates were charged from different customers. On this basis, he came to the conclusion that the assessee had suppressed the sale price and had booked losses which was not justified. According to him, no person would sale the property at prices below the cost if he wished to remain in business. Therefore, he disallowed the loss of Rs.1,31,60,475/- shown by the assessee on sale of shops. The CIT(A) held that there was no Shree Krishna Developers 6 ITA No. 1684/Mum/2015 justification for disallowing the loss on the sale of shops and directed the AO to allow the loss. The Tribunal upheld the order of the CIT(A). On appeals, the Hon'ble High Court held :
"that the assessee answered the queries raised by the Assessing Officer on noticing the absence of registered sale documents, variations in sale prices of shops in the same floor, sale of shops to sister concern, etc. Neither the Commissioner (Appeals) nor the Tribunal found anything amiss in those replies/submissions. The features noticed by him in the assessees' business certainly constituted a starting point of inquiry and not to be taken as evidence or material showing any suppression or understatement of the sale price. If the Assessing Officer was able to unearth any evidence or material on the basis of which actual suppression of the sale price could be found, the additions made on that basis would be valid. It was not open to him, merely on the basis of what he perceived to be the market conditions, to make additions to the sale price or the profits, without any evidence of understatement. Moreover, there is no other provision in the Act permitting the Assessing Officer to enhance the profits or the sale price except section 50C and section 92BA of the Income-tax Act, 1961 and those sections were not applicable to the assessee."
In MOIL Ltd. (supra), the AO issued notice u/s 142(1) of the Act pertaining to the AY 2009-10 for furnishing the details in respect of 20 items mentioned in the notice served on the assessee. According to item No. 9, the AO asked the assessee to give a detailed note of expenditure for the corporate social responsibility along with the bifurcation of the expenses under different heads. In pursuance of the notice, the assessee had given the bifurcation of the expenses under various heads towards the corporate social responsibility claim. The Assessing Officer allowed Shree Krishna Developers 7 ITA No. 1684/Mum/2015 certain claims without making a specific reference to them in the assessment order and disallowed some claims after giving detailed reasons for the disallowance. The Commissioner invoked the jurisdiction u/s 263 of the Act after holding that the AO had passed the assessment order without making any inquiry regarding the allowability of expenses claimed by the assessee under the head "corporate social responsibility" and hence, the order was erroneous and prejudicial to the interests of the revenue and remanded the matter to the AO to redo the assessment in respect of the claim of the assessee pertaining to the corporate social responsibility. The Tribunal confirmed this. On appeal, the Hon'ble High Court held, allowing the appeal:
"that the Assessing Officer applied his mind to the claims made by the assessee and wherever the claims were disallowable they have been discussed in that assessment order and there was no discussion or reference in respect of the claims that were allowed. It could not be said that merely because the Assessing Officer had not specifically mentioned about the claim in respect of the corporate social responsibility, the Assessing Officer had passed the assessment order without making any enquiry in respect of the allowability of the claim of corporate social responsibility. The query pertaining to corporate social responsibility was exhaustively answered and the assessee had provided the data pertaining to the expenditure under each head of the claim in respect of corporate social responsibility, in detail. The Assessing Officer was not expected to raise more queries, if he was satisfied about the admissibility of claim on the basis of the material and the details supplied. The provisions of section 263 of the Act could not have been invoked by the Commissioner."
Shree Krishna Developers 8 ITA No. 1684/Mum/2015
6. On the other hand, the Ld. DR submits that the Pr. CIT has rightly come to a finding from the details of sale of flats at Kamala Niwas Building and Balgrovind Building that the order passed by the AO u/s 143(3) dated 04.03.2013 is erroneous in so far as it is prejudicial to the interests of the revenue. It is further stated by him that The Pr. CIT, while setting aside the assessment order has only remanded the matter to the AO and the appellant could effectively participate in the proceedings before the AO and put forth all his objections and hence no prejudice, whatsoever would be caused to him. Thus the Ld. DR submits that the order passed by the Pr. CIT be confirmed.
7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decision are given below.
In the instant case, the Pr.CIT has given a show-cause notice dated 03.12.2014 to the assessee. The assessee filed a reply to it on 15.01.2015. The AR of the assessee appeared on 16.01.2015 before the Pr. CIT in the revision proceedings. The impugned order was passed on 19.01.2015. Thus there is no merit in the contentions of the assessee that no proper opportunity of being heard was given.
In the instant case, in response to notice u/s 142(1), the assessee has filed reply along with the details which are placed at page 34 to 50 of the P/B. However, we find that the AO has not made any verification of the said details filed by the assessee.
In the case of Discovery Estates Pvt. Ltd. (supra) relied on by the Ld. counsel, the AO in the assessment disallowed the loss of Shree Krishna Developers 9 ITA No. 1684/Mum/2015 Rs.1,31,60,475/- shown by the assessee on sale of shops. Whereas in the instant case the Pr. CIT has passed an order u/s 263, setting aside the order of the AO on the points raised in the show cause notice and directed the AO to examine the above issue in detail after giving proper opportunity to the assessee. Therefore, the instant case is distinguishable from the decision in Discovery Estates Pvt. Ltd. relied on by the Ld. counsel.
In the case of MOIL Ltd. (supra), relied on by the Ld. counsel, it is held that the Assessing Officer was not expected to raise more queries, if he was satisfied about the admissibility of claim on the basis of the material and details supplied. In the instant case, there is no iota of evidence that the AO was satisfied about the admissibility of claim on the basis of the material and details supplied. In fact, in the instant case the AO has only discussed the claim of the assessee in respect of loss on sale of asset and depreciation as mentioned at para 3 above. Therefore, the instant case is distinguishable from the decision in MOIL Ltd. (supra) relied on by the Ld. counsel.
7.1 In CIT v. Harsh J. Punjabi, (2012) 345 ITR 451 (Del), CIT v. Abad Constructions P. Ltd. (2014) 363 ITR 372 (Ker.), it is held that where there being failure on the part of the Assessing Officer to conduct necessary and required inquiries which made the assessment order erroneous and prejudicial to the interests of revenue, the Commissioner rightly exercised his revisionary power.
Shree Krishna Developers 10 ITA No. 1684/Mum/2015 In CIT v. Deepak Kumar Garg (2008) 299 ITR 435 (MP), it is held that where the CIT directed the AO to observe the rules of natural justice and to provide opportunity of hearing to the assessee before making a fresh assessment order on the merits, this would adequately safeguard the interest of the assessee and would cause not prejudice. And therefore, the order of revision is held valid.
In V. Selladurai v. Chief CIT (2007) 295 ITR 293 (Mad), it is held "the Chief CIT while setting aside the assessment order had only remanded the matter to the AO and the petitioner could effectively participate in the proceedings before the AO and put forth all his objections and hence no prejudice whatsoever would be caused to him. Further, the remedy available to the petitioner by way of an appeal to the Tribunal could not be said to be ineffective or not efficacious. The order of revision held valid".
In the instant case, there has been failure on the part of the Assessing Officer to conduct necessary and required inquiries in respect of sale of flats in Kamal Niwas Building and Balgovind Building. The Pr. CIT, while setting aside the assessment order has only remanded the matter to the AO and the appellant could effectively participate in the proceedings before the AO and put forth all his objections and hence no prejudice, whatsoever would be caused to him.
We are of the considered view that the ratio laid down in the above decisions squarely applies to the instant case. Following the same, we uphold the order of the Pr. CIT passed u/s 263 of the Act.
Shree Krishna Developers 11 ITA No. 1684/Mum/2015
8. In the result, the appeal is dismissed.
Order pronounced in the open Court on 13/12/2018.
Sd/- Sd/-
(MAHAVIR SINGH) (N.K. PRADHAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 13/12/2018
Rahul Sharma, Sr. P.S.
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
(Sr. Private Secretary)
ITAT, Mumbai