CHRYSILLA BUILDERS & DEVELOPERS PRIVATE LIMITED,NEW DELHI V. PCIT-2, NEW DELHI

ITA 4139/DEL/2019

AI Insights

The case involves Chrysilla Builders & Developers Pvt Ltd, which appealed against the revision order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income-tax Act, 1961. The PCIT had revised the assessment for the assessment year 2014-15, claiming that the original assessment order was erroneous and prejudicial to the interests of the revenue because the Assessing Officer (AO) failed to properly examine a substantial payment made to DLF Commercial Project Corporation. The Tribunal, however, found that the AO had made adequate inquiries during the original assessment, and the transactions were properly taxed in the hands of the respective parties, leading to no loss of revenue.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314329 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Other Referred Cases: Malabar Industrial Company Ltd. Vs CIT, CIT Vs. Ashish Rajpal, CIT Vs. Vikash Polymers, CIT Vs. Sunbeam Auto Ltd., CIT Vs. New Delhi Television Ltd., CIT Vs. Software Consultants, CIT Vs. Hindustan Marketing and Advertising Co. Ltd., CIT Vs. Leisure Wear Export Ltd., PCIT vs Shreeji Paints Private Limited, CIT vs Excel Industries Ltd
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: R.S. SINGHVI
• Keywords: Set aside; Opportunity of being heard; Principle of natural justice; TDS; Revision of order
• Section: 143(3); 142(1); 263

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No. 4139/Del/2019 (Assessment Year: 2014-15) Chrysilla Builders & Developers Pvt Ltd, 14, First Floor, Rani Jhansi Road, New Delhi Vs. Pr. CIT-2, New Delhi (Appellant) (Respondent) PAN: AADCC1178K Assessee by : Shri R. S. Singhvi, CA Shri Satyajeet Goel, Adv Revenue by: Shri Surender Pal, CIT DR Date of Hearing 07/04/2025 Date of pronouncement 07/05/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.4139/Del/2019 for AY 2014-15, arises out of the order of the ld. Pr. Commissioner of Income Tax, New Delhi [hereinafter referred to as „ld. Pr. CIT‟, in short] dated 22.03.2019 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 05.12.2016 by the Assessing Officer, ACIT, Circle-6(1), Delhi (hereinafter referred to as „ld. AO‟). 2. The only effective issue to be decided in this appeal is as to whether the learned PCIT was justified in assuming revision jurisdiction under section 263 of the Act in the facts and circumstances of the instant case. 3. We have heard the rival submissions and perused the materials available on record. The return of income for the assessment year 2014-15 ITA No. 4139/Del/2019 Chrysilla Builders & Developers Pvt Ltd Page | 2 was filed by the Assessee Company on 23-09-2014 declaring total income of Rs. 82,77,980/-. The Assessee Company is engaged in the business of real estate development by acquiring land. During the course of scrutiny assessment proceedings, in response to notice issued under section 142(1) of the Act, the Assessee had submitted all the relevant details from time to time, together with the books of accounts and supporting documents and bills and vouchers. The same were examined by the Learned AO on test check basis and the return of income was accepted in the scrutiny assessment framed under section 143(3) of the Act dated 05-12-2016. This assessment was sought to be revised by the Learned PCIT by invoking revisionary jurisdiction under section 263 of the Act by treating the order of the Learned AO erroneous in as much as it is prejudicial to the interest of the revenue on the following aspects:- “The assessment of the company for the AY 2014-15 was completed u/s 143(3) of the IT Act, 1961 in the month of December, 2016 at an income of Rs. 82,77,980/-. During the year, the assessee sold agricultural land for a consideration of Rs.66,92,00,000/-. Out of total sale consideration, an amount of Rs. 31,58,36,000/- was paid to M/s DLF Commercial Project Corporation. During the assessment proceedings, the company claimed that in terms of the development agreement made with M/s DLF Commercial Project Corporation, consideration of Rs. 31,58,36,000 was payable to it. 2. As per the agreement dated 28-02-2007, the developer (M/s DLF Commercial Project Corporation) was to carry out the development activities. Further, as per clause 2.6 of the agreement, in case, the developer failed to obtain township license within the specified time, it shall have the right to purchase the said land from the assessee company at a fixed rate. If the developer elected not to buy the property, the assessee was to have right to terminate the agreement. Finally, the agricultural land was sold out directly to a third party without any development and without being transferred to the developer. Thus, the company should have declared total receipts of Rs. 66,92,00,000/- in the profit and loss account, the amount at which the agricultural land was sold to the third party since no development activity was carried out by the developer. However, the assessee company has declared receipts of Rs. 34,55,48,000/- only (Rs. 66,92,00,000 (-) Rs. 31,58,36,000) in its P&L account even though the developer had not carried out any development work on the scheduled property. ITA No. 4139/Del/2019 Chrysilla Builders & Developers Pvt Ltd Page | 3 3. In view of the above, the order passed by the AO on 22-02-2016 u/s 143(3) of the Act is erroneous in so far as it is prejudicial to the interest of the revenue, causing revenue loss of Rs. 31,58,36,000/-. 4. For the above purpose, your case is fixed for hearing before the undersigned on 04-2-2019 at 11.30 am. You may appear either in person or through your authorized representative at my office or show cause in writing as to why the assessment order passed u/s 143(3) dated 05.12.2016 should not be set aside u/s 263 of the IT Act, 1961 on the lines indicted above. In case no response to this show cause notice is received by the said date, it will be construed that you have no objection to the proposed action and other u/s 263 of the IT Act, 1961 shall be passed.” 4. The assessee filed a reply dated 12-2-2019 before the Learned PCIT by stating that it is a private limited company incorporated on 10-1-2007 and is engaged in the business of real estate development. The assessee had entered into a development agreement dated 28-2-2007 with a firm in the name and style of M/s DLF Commercial Projects Corporation (hereinafter referred to as DCPC). The agreement dated 28-2-2007 was subsequently modified vide supplementary agreement dated 2-8-2010. Accordingly, in pursuance of its business activities, the assessee had acquired land for the purpose of development in the earlier years at Gurgaon(Haryana). The reply of the assessee filed before the learned PCIT which is reproduced in order of learned PCIT is as under:- “3. At the outset, it is submitted that the transaction referred to in your notice under reference has been examined in detail by the Ld. AO during the assessment proceedings as is evident from the submissions/ documentary evidence placed on record, which would clearly reveal that the AO after thorough application of mind has accepted the transaction entered into by the assessee for the sale of land in question as well as the taxability of the sale amount received, respectively, by the assessee and the Developer i.e. DCPC. 4. it is abundantly clear that:- a. the AO did not make any adverse comments on the evidence filed in the shape of copy of sale deed of the land which identified to stakeholders in the land sale in question: ITA No. 4139/Del/2019 Chrysilla Builders & Developers Pvt Ltd Page | 4 b) the AO has not doubled upon the veracity of the documents. c) has not doubled upon the detailed payment chart in the sale deed reflecting both the parties: d) has not brought on record any evidence that the assessee actually received anything over and above its share of sale consideration i.e. Rs 34,55,48,000/- in any manner, 5 Therefore, on facts of the case, the assumption of jurisdiction by your good selfu/s 263 of the Act proposing to revise the assessment framed is not warranted, as not only the veracify of our claim was examined but the entire computation was thoroughly enquired into and verified by the AO before passing the order of assessment. The AO at the time of framing assessment in the case of the assessee was aware of the fact that the sale proceeds attributable to Developer i.e. DCPC as its share per sale deed has duly been offered to tax by it in its return of income for AY 2014-15. 6. In your notice under reference, you have referred to clause 2.6 of the Agreement and have drawn a conclusion that \" in case, the developer failed to obtain Township License within the specified time, it shall have the right to purchase the said land from the assessee company at a fixed rate. If the developer elected not to buy the property, the assessee was to have right to terminate the agreement. Finally, the agricultural land was sold out directly to a third party without any development and without being transferred to the developer\". It is submitted that clause 2.6 of the Agreement mentioned in your notice under reference stipulates as under:- \"2.6 In case the Developer fails to obtain Township License within the specified time or extended time, if applicable, for reasons not attributable to CBDPL, the Developer, shall have the right but not the obligation, to offer to purchase the schedule Property at the price of Rs. 170 lakhs per Acre. The Developer shall inform CBDPL of its intention to purchase the Scheduled property within 60 days from the date of notice specified in sub-article 2.5 above, in which case, CBDPL shall be under an obligation to sell the scheduled property to the Developer and/or any of its affiliate or nominees.\" 7. The Development Agreement dated 28.02.2007 was amended vide Supplementary Development Agreement dated 02.08.2010. In the Agreement dated 28.02.2007, Article 1 elaborated \"Definitions & Interpretations\" of the certain words or phrase used in the Agreement. Consequently, \"Consideration\" was defined as, \"Means a sum of Rs.170 lakhs per Acre of the Scheduled Property.\" In the supplementary Agreement dated 02.08.2010, the definition \"Consideration\" under Article 1.1 (Agreement dated 28.02.2007) was deleted in its entirety and replaced with \"Consideration means cost of land plus Rs.5 lakhs per Acre\". ITA No. 4139/Del/2019 Chrysilla Builders & Developers Pvt Ltd Page | 5 It may be noted from Clause 2.6 of Article 2 of Agreement dated 28.02.2007 that the Developer had the right to offer to purchase the scheduled property at the price of Rs.170 lakh per Acre and on exercise of such right, the assessee company shall be under an obligation to sell the scheduled property to the Developer and/or any of its affiliates or nominees. Accordingly, the assessee company sold land measuring 20.91250 Acres to the nominee of the Developer. After retaining amount, ie, cost of land plus Rs.5 lakh per Acre, as per the Supplementary Agreement, supra. The balance amount Rs.32,36,52,000/- was paid to the Developer, who after paying Rs.78,16,000/- to the assessee in compliance with Supplementary Agreement, duly offered to taxRs.31,58,36,000/- (i.e. net of Rs.78,16,000/-).This fact is duly recorded in clause 1 and 3 of the Sale Deed. 8. The assessee, in terms of clause 3 of the Supplementary Agreement, has received its share of consideration i.e. cost of the land plus Rs.5 lakhs per Acre, worked out as under:- Particulars Amount (Rs.) Cost of the land sold (Area : 20.91 Acres) 34,29,06,797 Add: Profit @ Rs.5 lakhs Pe Acre 1,04,56,250 Sub-Total 35,33,63,047 Less: Received as per Sale Deed 33,88,56,000 Tax deducted at source 66,92,000 34,55,48,000 Shortfall recovered from DCPC (Disclosed income as \"Compensation Received\" under the head \"Other Income\" - Schedule 12, forming part of the Accounts 78,15,047 (R/o 78,16,000 9. Thus, on facts of the case and in terms of the Development Agreement with DLF Commercial Projects Corporation, the assessee has offered to lax its share of consideration i.e. Rs 35.33.63,047/- (ie Rs.34,55,48,000 in Schedule 11- \"Revenue from operations\" and Rs 78,16.000/- in Schedule 12 as compensation under the head \"Other Income\"). 10. The Developer DCPC has recorded its share of income as Rs.31,58,36,000/- (le. net of Rs 78,16,000/-) by way of a credit note as compensation to the assessee because of shortfall of the agreed amount as per clause 3 of the Supplementary Agreement dated 02.08 2010 11. The scope and extent of revisional power of the Commissioner under Section 263 have been explained by the Hon'ble Supreme Court in its decision in Malabar Industrial Company Ltd. Vs CIT 243 ITR 83, wherein their Lordship have observed- ITA No. 4139/Del/2019 Chrysilla Builders & Developers Pvt Ltd Page | 6 \"A bare reading of this provision makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income Tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the assessing officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the Income Tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the assessing officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not conferred to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income Tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of an order of assessing officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income Tax Officer is unsustainable in law.\" In CIT Vs. Ashish Rajpal 320 ITR, 674 and CIT Vs. Vikash Polymers 194 Taxmann, 57 the jurisdictional Delhi High Court has observed that where the Assessing Officer during the scrutiny assessment proceedings raised a query which was answered by the Assessee to the satisfaction of the Assessing Officer but the same was not reflected in the Assessment Order by him, a conclusion cannot be drawn by the Commissioner that no proper enquiry with respect to the issue was made by the Assessing Officer, and enable him to assume jurisdiction under Section 263 of the Act. Similar view has been subsequently expressed by the jurisdictional High Court of Delhi in the following decisions:- (a) CIT Vs. Sunbeam Auto Ltd. 332 ITR 167; (b) CIT Vs. New Delhi Television Ltd. (2013) 39 Taxmann.com 135; ITA No. 4139/Del/2019 Chrysilla Builders & Developers Pvt Ltd Page | 7 (c) CIT Vs. Software Consultants 341 ITR, 240 (Delhi); (d) CIT Vs. Hindustan Marketing and Advertising Co. Ltd. 341 ITR, 180 (Delhi); and (e) CIT Vs. Leisure Wear Export Ltd. 341 ITR, 166 (Delhi). 12. The decision of the Apex Court on an issue of law, is the law of the land and has to be followed in letter and spirit, especially relating to binding nature of the jurisdictional High Court decision(s). Consequently, the proceedings in question have no alternative but to be dropped under intimation to the assessee company.” 5. We find that the learned PCIT proceeded to invoke his revision jurisdiction u/s 263 of the Act by treating the order of the learned AO erroneous and prejudicial to the interest of the revenue on the ground that the assessment was framed by the learned AO without making necessary enquiries or verification with respect to payment of Rs 31,58,36,000/- made to M/s DLF Commercial Project Corporation out of total amount of Rs 66,92,00,000/-, received on sale of land. According to learned PCIT, DLF Commercial Project Corporation did not carry out any developmental activities and even failed to obtain the township license within the specified time in the agreement and hence the sums were transferred to them for not providing any service by the assessee. The Learned AO failed to examine as to whether this amount was spent wholly and exclusively for the purposes of business carried on by the assessee and was an allowable expenditure. 6. The short point that arises for our consideration here is as to whether the learned AO had made necessary enquiries with regard to the above during the course of scrutiny assessment proceedings or not. In this regard, we find that the Learned AO issued notice u/s 142(1) of the Act dated 27- 06-2016 raised following queries to the assessee during scrutiny assessment proceedings :- ITA No. 4139/Del/2019 Chrysilla Builders & Developers Pvt Ltd Page | 8 Question No. 1 As per direction of Instruction No. 20/2015 [F.No. 225/269/2015-ITA-II] dated 29.12.2015 it is intimated that your case has been selected for “Limited Scrutiny” with the following reasons:- (i) Real estate business with high closing stock (verify whether the assessee has adopted completion method). (ii) Large value sale of consideration of property in ITR is less than sale consideration of property reported in TDS return u/s 194IA. Question No. 8 Details regarding land sold during the financial year 2013-14 in the following proforma: “8. Details regarding land sold during the financial year 2013-14 in the following proforma:- Name & address of buyer PAN of buyer Date of sale Sale consideration Value of land as per circle rate Address of land Area Whether residential/ commercial/ industrial agricultural Total Question No. 9 Copies of sale deeds for land purchased during the year Question No. 10 Copies of sale deeds for land sold during the year ITA No. 4139/Del/2019 Chrysilla Builders & Developers Pvt Ltd Page | 9 Question No. 11 Copies of development agreement as mentioned in note 6 of financial statements 7. The assessee duly replied to the aforesaid questions vide submissions dated 29-11-2016 by furnishing the requisite details with supporting documents. The learned AO on being satisfied with the said reply accepted the claim of the assessee. Hence it cannot be said that the learned AO had not made necessary enquiries with regard to the aforesaid issue. We find that all the supporting documents to address the issue of payment made to DLF Commercial Projects Corporation by the assessee were duly placed on record before the Learned AO itself. The copy of sale date dated 18.2.2014 is enclosed in page 18 of the paper book. Monies were paid directly to DLF Commercial Projects Corporation to the tune of Rs 32,36,52,000/-. In the case of DLF Commercial Projects Corporation, the amounts received from the assessee has been duly taxed in its hands. In this regard, the Learned AO drew our attention to page 42 of the paper book which contains the confirmation from DLF Commercial Projects Corporation confirming the fact that they had duly recognized the amount of Rs 31,58,36,000 as part of their revenue from operations in the audited financial statements and also in the income tax return filed for the year ended 31-3-2014 (Asst Year 2014- 15) and they had also confirmed that the balance of Rs 78,16,000/- was credited to assessee account through credit note dated 31-3-2014. DLF Commercial Projects Corporation had also given their PAN together with the income tax assessment particulars in the said confirmation. Hence, there is absolutely no loss to the exchequer in this regard as the said transaction does not result in prejudice to the interest of the revenue at all. Along with the said confirmation, DLF Commercial Projects Corporation income tax return acknowledgement for the assessment year 2014-15 is ITA No. 4139/Del/2019 Chrysilla Builders & Developers Pvt Ltd Page | 10 also placed on record in page 43 of the paper book together with their audited financial statements which are enclosed in pages 44 to 47 of the paper book. Further, the bank statement of DLF Commercial Projects Corporation duly evidencing the credit of the amounts in their bank account in this regard is also enclosed in page 48 of the paper book. No error could be attributed on the said transaction carried out by the assessee. The entire narrations of facts together with supporting documents were also placed on record by the assessee before the learned PCIT. The learned PCIT nowhere says as to how the order of the learned AO is erroneous except making a bold statement that the learned AO has not made necessary enquiries with regard to the said transaction. But from the perusal of the aforesaid facts, we find that the learned AO indeed had made adequate enquiries and had taken the enquiries to the logical extent. Hence, it is not a case of lack of enquiry or even inadequate enquiry. Accordingly, the deeming fiction provided in Explanation 2 to section 263 of the Act which was heavily relied upon by the learned DR before us would not come to the rescue of the revenue. The Learned DR before us placed reliance on certain decisions in his written submissions. But we find in that all those cases, no enquiries were carried out by the learned AO. But in the instant case, adequate enquiries were indeed carried out by the learned AO in the assessment proceedings itself. Even otherwise, we find that Explanation 2 to section 263 was never sought to be invoked by the learned PCIT in the show cause notice issued under section 263 of the Act dated 28-1-2019 but the same was directly applied in the revision order passed u/s 263 of the Act. This act has been deprecated by the Hon‟ble Gujarat High Court in the case of PCIT vs Shreeji Paints Private Limited reported in 130 taxmann.com 293 (Guj HC) wherein it was held as under:- “5. The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Act, 1961 is made applicable. The ITA No. 4139/Del/2019 Chrysilla Builders & Developers Pvt Ltd Page | 11 Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1061. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law.” It is pertinent to note that Special Leave Petition (SLP) preferred by the revenue against the aforesaid decision of Hon‟ble Gujarat High Court has been dismissed by the Hon‟ble Supreme Court in 130 taxmann.com 294 (SC) dated 27-8-2021. We find that the learned PCIT had not brought anywhere in his order as to what was lacking in the enquiry conducted by the learned AO. The Learned AR placed on record the tabulation of incomes offered in the hands of various parties qua the subject mentioned transaction as under:- S No. Particulars Total amount (In Rs.) PB Page I Total sale consideration as per sale deed:  Chrysilla Builders & Developers P. Ltd. (Assessee) 33,88,56,000  DLF Commercial Projects Corporation 32,36,52,000  TDS deducted: Assessee 34,22,788/- DCPC 32,69,212/- 66,92,000 66,92,00,000 66,92,00,000 18 II Income accounted for and taxed in the hands of Chrysilla Builders & Developers P. Ltd. (Assessee) Cost of land 34,29,06,797 Add: Profit @ Rs. 5 lakh per acre 1,04,56,250 35,33,63,047 As per Profit & Loss a/c  Income from operation 34,55,48,000  Compensation 78,16,000 (as part of other income) 35,33,64,000 35,33,64,000 6 84 & 89 III Income accounted for and taxed in the hands of DLF Commercial Projects Corporation Amount received as per sale deed 32,36,52,000 Less: Compensation paid to assessee 78,16,000 Revenue from operations 31,58,36,000 31,58,36,00 42-48 ITA No. 4139/Del/2019 Chrysilla Builders & Developers Pvt Ltd Page | 12 Hence it goes to prove that there is absolutely no loss to the exchequer qua the subject mentioned transactions as the concerned parties have duly offered to tax in their respective returns with regard to their respective share. Consequentially, there is no prejudice to the interest of the revenue. Revision jurisdiction u/s 263 of the Act could not be invoked for carrying out a revenue neutral exercise. Reliance in this regard is placed on the decision of Hon‟ble Supreme Court in the case of CIT vs Excel Industries Ltd reported in 358 ITR 295(SC). 8. In view of the aforesaid observations, we have no hesitation to hold that the learned PCIT erred in invoking revisionary jurisdiction u/s 263 of the Act in the facts and circumstances of the instant case. Accordingly, the said revision order is quashed. Accordingly, the grounds raised by the assessee are allowed. 9. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 07/05/2025. -Sd/- -Sd/- (SATBEER SINGH GODARA) (M BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 07/05/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "