DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 7 PUNE, PUNE V. KOLTE PATIL INTEGRATED TOWNSHIPS LIMITED, PUNE

ITA 2011/PUN/2024

AI Insights

The case involves two appeals by the Revenue against Kolte Patil Integrated Townships Limited concerning the assessment years 2014-15 and 2016-17. The primary issues revolved around the reopening of the assessment and the disallowance of interest expenditure. The Assessing Officer had reopened the assessment under section 147 of the Income Tax Act, citing escapement of income due to uncapitalized interest. However, the Ld. CIT(A) quashed the re-assessment, noting it was based on the same material as the original assessment, constituting a change of opinion. The Tribunal upheld the CIT(A)'s decision, emphasizing that the interest was a period cost and should be allowed in the year incurred, aligning with the principles laid down in the decisions of the Hon'ble Bombay High Court and various other judicial precedents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474218 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Other Referred Cases: Union of India & ors Vs. Ashish Agarwal and others, Hexaware Technologies Vs. ACIT, Circle 15(1)(2), Mumbai and others, Lokhandwala Construction Industries Ltd. Vs. ACIT, Calico Dyeing & Printing Works Vs. CIT, Bajaj Finance Ltd. Vs. PCIT, Sanathnagar Enterprise Ltd. Vs. DCIT, Lodha Developers Ltd. Vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMOL KHAIRNAR; HONBLE HIGH COURT OF BOMBAY. THIS ADDITIONAL GROUND
• Assessee Lawyers: PARTICULARS .. ..; NIKHIL S PATHAK; DELETING ADDITION AMOUNTING
• Keywords: Set aside; Business income; Difference of opinion; Change of opinion; Capital asset; Revenue expenditure; Reassessment proceedings; Period of limitation; Reopening of assessment; Capital expenditure; Search and seizure; Competent authority; Reason to believe; Tangible material
• Section: 147; 148; 143(3); 48; 153A; 43; 13; 153C; 145; 28; 36 (1) (iii); 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA Nos.2023 and 2011/PUN/2024 Assessment years : 2014-15 and 2016-17 DCIT, Circle – 7, Pune Vs. Kolte Patil Integrated Townships Limited S.No.74, Marunji Hinjewadi, Marunji Kasarsai Rao, Wakad BO Man, Pune – 411057 PAN: AABCI5807K (Appellant) (Respondent) Assessee by : Shri Nikhil S Pathak Department by : Shri Amol Khairnar CIT-DR Date of hearing : 06-01-2025 Date of pronouncement : 10-03-2025 O R D E R PER R. K. PANDA, VP : The above two appeals filed by the Revenue are directed against the separate orders dated 02.08.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment years 2014-15 and 2016-17 respectively. Since identical grounds have been raised by the Revenue in both these appeals, therefore, for the sake of convenience, these were heard together and are being disposed of by this common order. 2. First we take up ITA No.2023/PUN/2024 for assessment year 2014-15 as the lead case. Facts of the case, in brief, are that the assessee is a company engaged in real estate business. It filed its return of income on 18.08.2014 declaring total income of Rs.107,78,02,630/-. The assessment was completed u/s 143(3) of the 2 ITA Nos.2023 & 2011/PUN/2024 Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 22.12.2017 determining the total income of the assessee at Rs.1,07,78,02,630/- where the Assessing Officer made addition of Rs.16,24,476/- on account of notional rent from house property. 3. Subsequently, the Assessing Officer reopened the case as per the provisions of section 147 by issuing notice u/s 148A(d) of the Act on 25.07.2022 by recording as under: ―GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 7, PUNE To KOLTE-PATIL INTEGRATED TOWNSHIPS LIMITED SURVEY NO. 74, MARUNJI HINJEWADI MARUNJI, KASARSAI ROAD, TAL MULSHI PUNE PUNE 411057, Maharashtra India PAN: AABCI5807K Assessment Year: 2014-15 Dated: 25/07/2022 DIN & Order No ITBA/COM/F/17/2022- 23/1044045890(1) Sir/Madam/M/s Subject: Proceedings u/s 148A(d) in consequence to Hon'ble SC Order dated 04.05.2022-Order 01. Brief Facts:- The assessee, Mis Kolte Patil Integrated Townships Ltd. (PAN AABCI5807K) is a Company. In this case, a notice u/s 148 for AY 2014-15 was issued on 23/06/2021. On the basis of information in possession of the AO after following the provisions 3 ITA Nos.2023 & 2011/PUN/2024 of Taxation and Other laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (hereinafter referred to as 'TOLA) and as per the CBDT Notification No.20 dated 31-03-2021 and subsequent Notification No. 38 dated 27-04-2021 according to which the time limit for issue of notice u/s 148 was extended to 30- 04-2021 and 30-06-2021 respectively. The above notice was issued after obtaining the prior approval of the competent Authority as per the prevailing provisions of section 151 of the IT Act, 1961. The basis for issue of notice u/s 148 was as under- \"On perusal of the case record, it is seen from Balance sheet, the outstanding long term debt as on 31st March 2014 was at Rs. 197,93,18,564/- which included term loan of Rs.16,50,00,000/-. The assessee has shown work-in-progress of Rs. 396,30,86,527/- as on 31st March 2014 as against Rs. 361,84,35,789/- on 31st March 2013 indicating net increase of WIP (closing stock) of Rs. 34,46,50,738/- Further it is seen that, the assessee had incurred expenditure of Rs. 282,40,87,421/- (i.e. opening WIP of Rs. 361,84,35,789 cost incurred during the year of Rs. 327,42,32,668/- closing WIP of Rs. 396,30,86,527-cenvat credit of Rs. 10,54,94,659) on cost of sales (construction) during the year and it is exclusive of finance cost. 02. Decision of Hon'ble Supreme Court of India: The Hon'ble Supreme Court of India in Civil Appeal No.3005/2022 in the case of Union of India & ors Vs. Ashish Agarwal and others dated 04-05-2022. As per para 10 of the above decision, Hon'ble Apex Court has directed to treat all the notices issued u/s 148 after 1-4-2021 (as per provisions of section 148 prior to 31- 03-2021) as notice u/s 148A(b) and directed to provide the information and material relied upon by the revenue to the assessee for issue of such notice, within 30 days from the date of order passed by Hon'ble Supreme Court of India i.e. 04- 05-2022 and to provide two weeks time to file the reply by the respective assessee to the AO and thereafter to pass the order u/s 148A(d) by the concerned AO to decide whether it is fit case for issue of notice u/s 148 or not. 03. Information and material shared with the assessee:- Following the directions of the Hon'ble Supreme Court of India as mentioned above and considering the CBDT Instruction No.01/2022 dated 11/05/2022 and ITBA step-by step document No 1 dated 12-05-2022 related to implantation of the decision of Hon'ble Supreme Court of India, the information and the material was provided to the assessee on 24/05/2022 and time of two weeks was provided to the assessee for submitting the response/reply. The time was given upto 08/06/2022 for filing the response/reply. 04. Reply of the assessee:- In response to the notice dated 24/05/2022 the assessee filed his reply on 06.06.2022. In its reply the assessee had raised various technical issues and quoted the various case laws regarding proceeding u/s. 148. In this connection it is submitted that in this case notice u/s. 148 was already issued after recording 4 ITA Nos.2023 & 2011/PUN/2024 reasons for reopening. However the current proceeding initiated in view of the decision of Hon'ble Supreme Court in the case of Union of India & Others Vs. Ashish Agrawal in Civil Appeal No. 3005/2022 and the decision of Hon'ble Bombay High Court in the case of Emcure Pharmaceuticals Ltd. Vs. ACIT, Central Circle 2(1), Pune and others in Writ Petition No. 5293 of 2022 and further instruction no. 01/2022, F. No. 279/, Misc./M-51/2022-ITJ dated 11/05/2022 issued by the CBDT. 05. Finding of the AO:- The matter was pointed out by the RAP. It is seen from Balance sheet, the outstanding long term debt as on 31st March 2014 was at Rs. 197,93,18,564/- which included term loan of Rs. 16,50,00,000/-. The assessee has shown work-in- progress of Rs.396,30,86,527/- as on 31st March 2014 as against Rs. 361,84,35,789/- on 31stMarch 2013 indicating net increase of WIP (closing stock) of Rs.34,46,50,738/-. Further it is seen that, the assessee had incurred expenditure of Rs.282,40,87,421/- (i.e. opening WIP of Rs. 361,84,35,789 cost incurred during the year of Rs. 327,42,32,668 closing WIP of Rs. 396,30,86,527 CENVAT credit of Rs. 10,54,94,659) on cost of sales (construction) during the year and it is exclusive of finance cost. Further, It is noticed that the assessee had debited entire interest expenses of Rs. 32,30,50,317 in profit and loss account ie the same was netted against revenue of the year, which is not allowable. It is also pertinent to mention here that since, the entire loan liability was on account of cost of construction and also directly related to Work-in-Progress also, the interest expenditure of Rs.32,30,50,317/- incurred during the year should have been apportioned in the ratio of sale and work-in-progress to arrive at correct profit of the year. Accordingly the interest expenditure of Rs. 15/11,87,548/- i.e, worked out @46.8 per cent (Sale of Rs.450,56,25,041, WIP of Rs 396,30,86 527) being direct cost should have been included in W-I-Pas on 31st n 31st March 2014. In view of the above fact and circumstances, there is escapement of income to the tune of Rs.15.11,87,548/- (in the form of bank deposit) for A.Y. 2014-15. 06. In view of the above facts, the information in my possession as mentioned above suggests that the income chargeable to tax of Rs 15,11,87,548/-, which is more than Rs. 50 lakhs, and represented in the form of asset has escaped assessment. Therefore this is a fit case for issue of notice u/s 148. 07. This order is passed with prior approval of Pr. CCIT, Pune vide letter No.PN/PCCIT/Coord/148/2022-23/2978 dated 22/07/2022.‖ 4. The assessee objected to the issue of such notice during the course of assessment proceedings, which was rejected by the Assessing Officer. The Assessing Officer thereafter proceeded to complete the assessment. During the 5 ITA Nos.2023 & 2011/PUN/2024 course of assessment proceedings it was submitted that in the instant case the funds borrowed were used for the business of the assessee and therefore, u/s 36(1)(iii) the interest paid on the funds borrowed is allowable as deduction. The decision of the Hon’ble Bombay High Court in the case of Lokhandwala Construction Industries Ltd. 260 ITR 579 (Bom) was relied upon. It was submitted that in view of the above decision, borrowed funds, which are utilized for the purpose of business of the assessee, has to be allowed in the year in which the interest expenditure has been incurred. It was further submitted that since the interest is a period cost it is rightly debited as expenditure in the year in which it is incurred. 5. However, the Assessing Officer was not satisfied with the arguments of the assessee. Distinguishing the decision of the Hon’ble Bombay High Court in the case of Lokhandwala Construction Industries Ltd. (supra) and observing that after introduction of ICDS the assessee is required to recognize the revenue, cost and profit from transactions of real estate, he disallowed the interest of Rs.15,11,87,548/- by observing as under: ―The assessee also contended that the income computation and disclosure standard cannot overrule the provision of Act and in case, any conflict between ICDS and the provision of act, the provision of act would prevail. This aspect was also examined in the light of facts of the case. It would be worthwhile to mention that the interest element that would be included in the value of closing stock WIP will automatically be allowed when the revenue from sale of such closing stock would be recognized in the profit and loss account and consequently cost of inventory WIP which include the interest will also be allowed at the same time and hence there is no conflict in the provision of Act and ICDS /AS-16 as such this objection of the assessee company also get rejected. In view of the above the entire interest expenses of Rs.32,30,50,317/- incurred during the year should have been apportioned in the ratio of sale and work in progress. Accordingly the interest expenditure of Rs.15,11,87,548/- worked out @ 46.8% (Sale of Rs.450,56,25,041/- WIP of Rs.396,30,86,527/-being borrowing cost is to be included in WIP as on 6 ITA Nos.2023 & 2011/PUN/2024 31/03/2014) Incurred by the assessee as borrowing cost which is disproportionately claimed is disallowed and added back to total income of assessee. Penalty proceeding under section 271[1][c] of the Income Tax Act 1961 for concealment of income is initiated separately. Disallowance of interest u/s 36 of the I.T. Act of Rs. 15,11,87,548/-” 6. Before the Ld. CIT(A) / NFAC the assessee apart from challenging the addition on merit challenged the validity of reopening of the assessment. The Ld. CIT(A) / NFAC in the detailed order quashed the re-assessment proceedings and also deleted the addition on merit. 7. So far as the order of the Ld. CIT(A) / NFAC in quashing the re-assessment proceedings are concerned, he quashed the same by observing as under: ―6. Ground No: 1 to 3: Challenging of reopening the assessment. 6.1. Upon perusal of the facts on the record, in this case assessment u/s 143(3) of the IT Act was completed on 22.12.2017. The appellant has furnished the copy of the assessment order. In the assessment order only the issue of computation of net annual value on the unsold flats was calculated. The issue of WIP, interest expenditure debited into the Profit and Loss Account, Method of Accounting followed by the appellant etc. were already available from the financials. The appellant in Ground No.1 has rightly presented the case that there was no fresh tangible material was brought on record to reopen the case. As per the appellant it was merely change of opinion. This Ground is valid as there was no fresh material were brought on record by the AO to claim that the income has escaped the assessment. All the issue dealt in the reassessment orders were already before the AO at the time of original assessment. Hence, it is a clear-cut case of change of opinion. Hence this ground is allowed. 6.2. In Ground No.2 the appellant challenged the notice u/s 148 of the IT Act dated 25.07.2022 by claiming that it was issued beyond 6 years from the end of relevant assessment year. This Ground is also valid on the fact that 6 years from the end of relevant assessment year AY 2014-15 ended on 31.03.2021. If so, issue of notice u/s 148 of the IT Act was beyond the time limit. This Ground is valid and it is allowed. 6.3 In Ground No.3 the appellant raised another issue that there was no escapement of income in the form of asset exceeding Rs.50,00,000/- that warrants 7 ITA Nos.2023 & 2011/PUN/2024 reopening of assessment of AY 2014-15. This Ground was also raised as an objection before the AO during the course of assessment. In the present case the assessment was reopened on the main reason that the interest expenditure of Rs.32.30 Cr. was debited into the relevant assessment year whereas it has to be apportioned in the ratio of Sale and WIP. The AO reopened the assessment on this reason and quantified the disallowance of interest expenditure of Rs.15.11 Cr. This was the reason recorded. As rightly pointed out by the appellant this was beyond the scope of provisions u/s 149 of the IT Act. This Ground is also valid and it is allowed. 6.4 Additional Ground: In the Additional Ground of appeal, the appellant contended that notice u/s 148 of the IT Act cannot be issued by the JAO and it has to be issued only by the FAO. It is a legal issue raised by the appellant after the decision of Jurisdictional High Court in the case of Hexaware Technologies Vs. ACIT, Circle 15(1)(2), Mumbai and others [2024] 162 taxmann.com 225. This legal issue has been answered in favour of the appellant by Hon'ble High Court of Bombay. This Additional Ground is also valid and it is allowed.‖ 8. So far as the interest expenditure disallowed by the Assessing Officer is concerned, he deleted the same by relying on the decision of the Hon’ble Bombay High Court in the case of Lokhandwala Construction Industries Ltd. (supra) by observing as under: ―7. Ground No.4 to 8 on merit: 7.1 In these Grounds the appellant claimed that the interest expenditure debited into the P&L Account was a period cost and the same would be incurred by them, even though there is no increase in WIP. It is further contended that the interest expenditure is allowable even though there is no sale in the project. The appellant claimed this expenditure u/s 36(1)(iii) of the IT Act and placed their reliance on the decision of Hon'ble Bombay High Court in the case of Lokhandwala Construction Industries Ltd. (260 ITR 579). 7.2. However, the AO referred provisions of ICDS-IX that was introduced later. The appellant contended that this was introduced from AY 2016-17 and not applicable to AY 2014-15 where the impugned re assessment order was passed in their case. 7.3 These Grounds also valid as the AO cannot reopen the assessment of AY 2014- 15 by following the ICDS-IX introduced in AY 2016-17. Accordingly, these Grounds are also allowed.‖ 8 ITA Nos.2023 & 2011/PUN/2024 9. Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds: 1. Whether on the facts and circumstances of the case and in law, the CIT(A) is justified in holding that the reopening of assessment in the case of the assessee for A.Y. 2014-15 was invalid as there was no fresh material available with the Assessing Officer ? 2. Whether on the facts and circumstances of the case and in law, the CIT(A) is justified in holding that the reopening of assessment in the case of the assessee for A.Y. 2014-15 was barred by limitation of time? 3. Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in holding that the quantification of disallowance of interest expenditure at the time of reopening of assessment was beyond the scope of provisions u/s 149 of the Act? 4. Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in granting relief to the assessee by relying upon the decision of the Hon'ble Bombay High Court in the case of Hexaware Technologies Vs. ACIT, Circle 15(1)(2), Mumbai and others [2024] 162 taxmann.com 225? 5. Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in granting relief to the assessee by deleting addition amounting to Rs.15,11,87,548/- while relying on the judgment of Hon'ble Bombay High Court in the case of Lokhandwala Construction Industries Ltd. (260 ITR 579) by completely disregarding the observations made by the Assessing Officer? 10. Ld. DR heavily relied on the order of the Assessing Officer. He submitted that the Ld. CIT(A) / NFAC is not justified in quashing the re-assessment proceedings holding that no fresh material was available with the Assessing Officer whereas the same is not correct. Referring to the decision of Hon’ble Bombay High Court in the case of Export Credit Guarantee Corporation of India Ltd. vs. Addl. CIT reported in 350 ITR 651, he submitted that even in absence of assessee’s failure to disclose material facts where there is complete failure on part 9 ITA Nos.2023 & 2011/PUN/2024 of Assessing Officer to apply his mind, during original assessment proceedings, to points on which assessment is sought to be reopened, it can be said that there is tangible material and reason to believe that income has escaped assessment. Further, he has also quashed the re-assessment proceedings on account of being barred by limitation which is also not correct. He submitted that the Ld. CIT(A) / NFAC also was not justified in deleting the addition of Rs.15,11,87,548/- by relying on the judgment of the Hon’ble Bombay High Court in the case of Lokhandwala Construction Industries Ltd. (supra) by completely disregarding the observations made by the Assessing Officer. He accordingly submitted that the order of Ld. CIT(A) / NFAC be reversed and that of the Assessing Officer be restored. 11. The Ld. Counsel for the assessee on the other hand heavily relied on the order of the Ld. CIT(A) / NFAC. So far as the issue relating to no fresh tangible material was available with the Assessing Officer as per ground No.1 by the Revenue is concerned, he submitted that the assessee company is engaged in real estate business and is following percentage completion method for determining its income. Referring to the copy of Profit and Loss Account and Balance Sheet for the year ended 31.03.2014 placed at pages 22-40 of the paper book, the Ld. Counsel for the assessee submitted that the entire interest expenditure was debited to the P & L Account. He submitted that the Assessing Officer has reopened the case on the ground that the claim of the assessee of debiting the entire interest expenditure to the Profit and Loss Account is not correct. He submitted that the 10 ITA Nos.2023 & 2011/PUN/2024 Assessing Officer, while reopening the case, has referred to the Balance Sheet and was of the opinion that the assessee has closing work-in-progress as well as sales and accordingly part of the interest expenditure should have been allocated to WIP. 12. He submitted that the original assessment was completed u/s 143(3) on 22.12.2017, copy of which is placed at pages 41 to 43 of the paper book. It is also clear from the Profit and Loss Account itself that the assessee has debited entire interest expenditure. Therefore, on the same set of facts, the Assessing Officer could not have reopened the assessment u/s 148 in absence of any fresh tangible material and therefore, the reopening of the assessment is not justified. Further, it is a change of opinion and on this ground also, the reopening is invalid. 13. Referring to para 6.1 of the order of Ld. CIT(A) / NFAC, the Ld. Counsel for the assessee submitted that the Ld. CIT(A) / NFAC has correctly appreciated the facts and held that the reopening of the assessment is not in accordance with law in absence of any fresh tangible material available with the Assessing Officer and due to the change of opinion of the Assessing Officer. He submitted that the assessee is debiting the entire interest expenditure to the Profit and Loss Account since last several years and the assessments have been completed for assessment years 2013-14 and 2017-18 accepting the claim of the assessee. He accordingly submitted that the reopening of the assessment by the Assessing Officer was not justified and the Ld. CIT(A) / NFAC has correctly quashed the re-assessment proceedings in absence of any fresh tangible material and on account of change of 11 ITA Nos.2023 & 2011/PUN/2024 opinion of the Assessing Officer. For the above proposition, the Ld. Counsel for the assessee relied on the following decisions: i) Siemens Financial Services (P.) Ltd. [2023] 154 taxmann.com 159 (Bombay)] ii) Knight Riders Sports (P.) Ltd. [2023] 155 taxmann.com 11 (Bombay)] iii) MFE Formwork Technology SDN. BHD [2024] 161 taxmann.com 292 (Bombay)] 14. The Ld. Counsel for the assessee further submitted that the notice issued u/s 148 of the Act is invalid since there was no income represented in the form of asset which has escaped from assessment for the year under consideration. He drew the attention of the Bench to the provisions of section 149 which were in force at the time of issue of notice and which read as under: ―149. (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b). (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year‖ 15. Referring to the above, he submitted that no notice u/s 148 can be issued if three years have elapsed from the end of the relevant assessment year unless the case of the assessee falls under clause (b) of sub section (1) of section 149. He submitted that clause (b) provides that the notice can be issued by the Assessing Officer if three years but not more than 10 years have elapsed only if the Assessing 12 ITA Nos.2023 & 2011/PUN/2024 Officer has in his possession books of accounts or other documents or evidence which reveal that the income chargeable to tax in the form of an asset has escaped assessment amounts to or is likely to amount to Rs.50,00,000/- or more for that year. He submitted that as per the relevant provisions prevailing at the time of issue of notice, the notice u/s 148 could not have been issued since the reopening is after a period of 3 years but within 10 years, the assessee has debited the entire expenditure to the Profit and Loss Account and there is no reference of any income in the form of asset exceeding Rs.50,00,000/- which has escaped assessment. He accordingly submitted that since there is no reference to any income represented in the form of asset which has escaped assessment, the notice issued by the Assessing Officer under clause (b) of section 149 is invalid. 16. Further, the Assessing Officer has issued notice on the ground that the entire interest expenditure has been debited to P & L Account which is not justified and the same should have been apportioned on the basis of sales and work in progress. Thus, it is very clear that there is no reference to any income represented in the form of an asset which has escaped assessment and accordingly, the notice issued by the Assessing Officer under clause (b) of section 148 is not valid. He submitted that the Ld. CIT(A) / NFAC at para 6.3 of his order has accepted the argument of the assessee and has held that the Assessing Officer has reopened the assessment for disallowance of interest expenditure. He held that the reopening was beyond the provisions of section 149. He accordingly submitted that the order of the Ld. 13 ITA Nos.2023 & 2011/PUN/2024 CIT(A) / NFAC on this issue also being in accordance with law has to be accepted and the grounds raised by the Revenue on this issue have to be dismissed. 17. The Ld. Counsel for the assessee in his another plank of argument submitted that the original return was filed on 26.11.2014 and the assessment u/s 143(3) of the Act was completed on 22.12.2017. Referring to the notice issued by the Assessing Officer u/s 148A(b) dated 24.05.2022, copy of which is placed at page 44 of the paper book, the Ld. Counsel for the assessee submitted that as per the said notice, the Assessing Officer is referring to the balance sheet and record of the assessee to contend that the assessee has debited entire finance cost to the P & L Account. He has clearly mentioned that from the P & L Account, it is noticed that the assessee has debited entire interest expenditure of Rs.32,20,50,317/- to the P & L Account. Referring to the order passed u/s 148A(d), dated 25.07.2022, copy of which is placed at pages 49-50 of the paper book, he submitted that here also the Assessing Officer is referring to the same facts and held that there is escapement of income. He submitted that in the present case, the reopening is beyond four years from the end of the relevant assessment year and the original assessment was completed u/s 143(3), therefore, in absence of any allegation by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of assessment, such reopening of assessment being not in accordance with law has to be quashed as per the old provisions. 14 ITA Nos.2023 & 2011/PUN/2024 18. The Ld. Counsel for the assessee submitted that as per the first proviso to section 149(1)(b) of the Act, no notice u/s 148 shall be issued at any time in a case for the relevant asst. year beginning on or before 1st of April, 2021 if a notice u/s 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub section (1) of section 149 or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021. 19. The Ld. Counsel for the assessee submitted that in the present case, the assessee has disclosed fully and truly all material facts necessary for completion of the assessment. Thus, the case of the assessee could not have been reopened under the old provisions of section 147. Now, as per the proviso to section 149(1)(b), if the case of the assessee could not have been reopened under the old provisions of section 147, then no notice could be issued under the new regime of section 147. This principle has been accepted by Hon'ble Supreme Court in the case of Rajeev Bansal [167 taxmann.com 70]. In paras 48 to 72, Hon'ble Supreme Court has discussed this issue and has held that the notice under the new provision of section 148 have to be seen considering the proviso to section 149. He accordingly submitted that the notice issued u/s 148 is bad in law since no notice u/s 148 could have been issued under the old provision of section 147, therefore, the notice issued for A.Y. 2014-15 is bad in law. 15 ITA Nos.2023 & 2011/PUN/2024 20. The Ld. Counsel for the assessee in his yet another plank of argument submitted that for both the years, the learned Assessing Officer had initially issued notice u/s 148 in June, 2021. Thereafter, in view of the decision of Hon'ble Supreme Court in the case of Ashish Agarwal reported in (2022) 138 taxmann.com 64 (SC), the Assessing Officer issued notice u/s 148A(b) for both the years. The Ld. Counsel for the assessee filed the following chart: Particulars Α.Υ. 2014-15 Α.Υ. 2016-17 Original notice issued u/s 148 23.06.2021 11.06.2021 Time limit as per TOLA 30.06.2021 30.06.2021 Time limit excluded to be excluded 7 days 20 days Notice issued u/s 148A(b) 24.05.2022 26.05.2022 Reply filed by the assessee 06.06.2022 06.06.2022 Surviving time limit to issue notice u/s 148 13.06.2022 26.06.2022 Actual notice issued u/s 148 25.07.2022 26.07.2022 21. He submitted that the Hon'ble Supreme Court in the case of Rajeev Bansal (supra) at paras 108 to 112 of the order has also held that any notice issued beyond the survival time limit is invalid in law. Hon'ble Supreme Court has held that the effect of the creation of the legal fiction in the case of Ashish Agarwal (supra) is that it stops the clock of limitation w.e.f. date of issuance of notice u/s 148 under the old regime. He drew the attention of the Bench to para 112 of the order where Hon'ble Supreme Court has given an example as under- \"112. Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed shoe care notices will also come into effect from 1 April 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days (days between 1 May 2021. and 30 June 2021] to issue a notice under section 148 of the new 16 ITA Nos.2023 & 2011/PUN/2024 regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under section 148 of the new regime will end on 18 August 2022. 22. He submitted that it is abundantly clear from the above decision that the time between the issue of original notice u/s 148 under the old regime and the time upto 30.06.2021 is the time limit available which needs to be added to the date on which the reply of the assessee was received. Hon'ble Supreme Court has referred to this time limit as the surviving time limit available. Now, applying the same principle, as laid down by Hon'ble Supreme Court in the case of Rajeev Bansal, for A.Y. 2014 15, the Assessing Officer should have issued notice u/s 148 by 13.06.2022 and for A.Y. 2016-17 by 26.06.2022. For both the years, the learned A.O. has issued notice u/s 148 subsequent to those dates i.e. 25.07.2022 and 26.07.2022 respectively and therefore, the notices issued u/s 148 in the new regime for both the years are barred by limitation. 23. So far as the merit of the case is concerned, the Ld. Counsel for the assessee submitted that the assessee company is engaged in real estate business and had undertaken a project named 'Life Republic’. It is following percentage completion method for determining its income. Under this method, the income is recognised towards the years depending upon the percentage of work completed. He submitted that in the instant case the Assessing Officer has disallowed the claim of interest on the ground that the assessee has closing WIP as on 31.03.2014 at 17 ITA Nos.2023 & 2011/PUN/2024 Rs.396.30 Crs. The Assessing Officer has applied the provisions of ICDS and has stated that ICDS IX deals with transactions relating to borrowing cost. Further, according to the Assessing Officer, ICDS IX defines ‘qualifying asset’ which includes inventories that require a period of 12 month or more to bring them to a saleable condition. According to the Assessing Officer, Accounting Standard 16 was introduced whose provisions are similar to the provisions of ICDS IX. The Assessing Officer in the instant case disallowed the claim of interest by applying the provisions of ICDS IX and held that the total interest expenditure of Rs.32,30,50,317/- incurred during the year should be apportioned by the assessee in the ratio of sales and work in progress and accordingly, he worked out an amount of Rs.15,11,87,548/- as an interest expenditure related to the work-in- progress which has been added by him. 24. The Ld. Counsel for the assessee submitted that the provisions of ICDS IX are not applicable to the year under consideration i.e. assessment year 2014-15 since they were introduced w.e.f. assessment year 2016-17. Further, the assessee has debited the entire interest to the Profit & Loss account since it is following percentage completion method for recognizing its revenue. Under this method, the income is recognised on the basis of work completed and offered to tax. Thus, under the percentage completion method, the income is taxed over the years depending upon the work completed. He submitted that interest is a period cost and the same would be incurred by the assessee even though there is no increase in work-in-progress. He submitted that the assessee has to incur interest expenses 18 ITA Nos.2023 & 2011/PUN/2024 even though there is no sale in the project. Therefore, the interest expenditure being a period cost has rightly been debited to Profit & Loss account in the year in which the interest expenditure is incurred. 25. Referring to the provisions of section 36(1)(iii), he submitted that once the borrowed funds are utilized for the purpose of business of the assessee, interest is allowable as deduction. He submitted that in the present case the funds borrowed are used for the business of the assessee and therefore u/s 36(1)(iii), the interest paid on the funds borrowed is allowable as deduction. 26. Referring to the decision of Hon'ble Bombay High Court in the case of Lokhandwala Construction Industries Ltd. [260 ITR 579), he submitted that in that case also, the assessee was engaged in the real estate business and it had purchased a plot for construction of flats. The assessee had borrowed money for purchase of plot and the interest on the said borrowed funds was claimed as deduction. The Hon'ble Bombay High Court held that u/s 36(1)(iii), the interest expenditure is allowable in the year in which it is incurred provided the borrowed funds are used for the purpose of the business of the assessee. The Hon'ble High Court further held that simply because the project was not started on the said plot doesn't mean that the interest expenditure cannot be allowed as deduction. Accordingly, the claim of the assessee was allowed. He submitted that applying the same principle to the facts of the present case, the borrowed funds, which are utilized for the purposes of business of the assessee, should be allowed as deduction in the year in 19 ITA Nos.2023 & 2011/PUN/2024 which the interest expenditure has been incurred. He submitted that since the interest is a period cost it is rightly debited as expenditure in the year in which it is incurred. He accordingly submitted that the claim made by the assessee is justified and the Ld. CIT(A) has rightly deleted the same. 27. He submitted that the Assessing Officer has not followed the decision of Hon'ble Bombay High Court in the case of Lokhandwala Construction Industries Ltd. (supra) on the ground that the ICDS have been introduced subsequent to the decision of Hon'ble Bombay High Court. He submitted that the decision of Hon’ble jurisdictional High Court is binding on the Assessing Officer. Further, the provisions of ICDS are not applicable for the year under consideration as they have been introduced from A.Y. 2016-17. Therefore, disregarding the decision of Hon'ble Bombay High Court on the ground that ICDS - IX is to be followed is totally incorrect and again judicial discipline. He submitted that the Ld. CIT(A) has accepted the claim of the assessee on the ground that the interest expenditure is allowable u/s. 36(1)(iii) of the Act and the provisions of ICDS are introduced w.e.f. A.Y. 2016-17 and therefore, are not applicable to the facts of the assessment year 2014-15. Even on merit also, he has accepted the claim of the assessee. 28. The Ld. Counsel for the assessee submitted that the deduction of interest is u/s. 36(1)(iii) and there is no provision in the said section to apportion the interest cost between the WIP and sales. Since interest expenditure is a period cost, the 20 ITA Nos.2023 & 2011/PUN/2024 same has to be allowed in the year in which it has been incurred. For the above proposition, he relied on the following decisions: a. Lokhandwala Construction Industries Ltd. [260 ITR 579]. b. Lodha Developers Ltd. [143 Taxmann.com 442 (Mum)] c. Sanathnagar Enterprise Ltd. [139 Taxmann.com 557 (Mum)] 29. So far as the reliance on the provisions of ICDS by the Assessing Officer is concerned, the Ld. Counsel for the assessee submitted that first of all, the same were not applicable to assessment year 2014-15 and secondly, when the provisions of ICDS conflict with the provisions of the Act, the provisions of the Act would prevail. For this proposition, he relied on the decision of the Pune Bench of the Tribunal in the case of Bajaj Finance Ltd. [152 Taxmann.com 216]. 30. The Ld. Counsel for the assessee submitted that as per the provisions of ICDS IX, the interest is to be capitalised only in a case where the money borrowed is for a qualifying asset. He drew the attention of the Bench to the definition of term 'qualifying asset' which is as under: \"Qualifying asset\" means: (i) land, building, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets; (iii) inventories that require a period of twelve months or more to bring them to a saleable condition.‖ 31. He submitted that clauses (i) and (ii) of above definition refers to fixed asset which is not the case of the assessee. Clause (iii) refers to inventories that require 21 ITA Nos.2023 & 2011/PUN/2024 a period of 12 months or more to bring them to a saleable condition. Referring to clause 8 of ICDS, he submitted that in case of inventory, the interest is not required to be capitalised when substantially all the activities necessary to prepare such inventory for its intended sale are complete. 32. He submitted that in the instant case, the inventories with the assessee are open land and land on which building development has commenced. Further, inventories also include the units under construction. He submitted that in case of open land, there is no dispute that the lands are held by the assessee for more than 12 months. Further, the lands in question are in a saleable condition. He accordingly submitted that as per the definition of a qualifying asset, it includes only those inventories that require a period of 12 months or more to bring them to a saleable condition. Since in the instant case, the open land owned by the assessee can be sold immediately, therefore, it does not fall within the definition of ‘qualifying asset’. 33. The Ld. Counsel for the assessee submitted that when the development is undertaken, the assessee sells the units. Further, the assessee is following Percentage of Completion Method, according to which, the revenue is accounted in respect of a unit sold depending upon the percentage of work completed. He submitted that once the development plan is obtained, the assessee is entitled to sell any unit in the building under construction. Once the assessee is recognising revenue as per Percentage Completion Method, even though, the possession is 22 ITA Nos.2023 & 2011/PUN/2024 given subsequently, the revenue of the unit to the extent of work completed is accounted for. 34. Referring to clause 8 of ICDS, he submitted that the said clause provides that capitalisation of interest shall cease in case of an inventory when all the activities necessary to prepare such inventory for its intended sale are complete. He submitted that once the development plan is obtained, the assessee is entitled to sell any unit in the building under construction. For example, if there are 20 floors, once the plan is sanctioned, then the flat on a 20th floor can also be sold to the customer even though the building is only 50% completed. Thus, even in case of a unit under construction, since the assessee is following percentage completion method for recognising the revenue, the units do not fall within the definition of qualifying asset at all. Thus, as per clause 8 of ICDS, the borrowing cost is ceased to be capitalised when substantially all the activities necessary to prepare such inventory for its intended sale are complete. Since in the instant case, at the time of passing the plan itself the said activities are complete, therefore, there is no question of capitalisation of interest. He accordingly submitted that even as per ICDS IX, the assessee company was not required to capitalise the interest and therefore, the Assessing Officer is not justified in capitalization of the part of the interest expenditure in WIP. He also relied on the following decisions: i) Bajaj Finance Ltd. vs. PCIT (2023) 152 taxmann.com 216 ii) DCIT vs. Sanathnagar Enterprise Ltd. (2022) 139 taxmann.com 557 (Mumbai – Trib.) 23 ITA Nos.2023 & 2011/PUN/2024 iii) `DCIT vs. Lodha Developers Ltd. (2022) 143 taxmann.com 442 (Mumbai – Trib.) 35. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee company in the instant case is engaged in real estate business and follows percentage completion method. The original assessment was completed u/s 143(3) of the Act on 22.12.2017 determining the total income of the assessee at Rs.107,94,27,110/- as against the returned income of Rs.107,78,02,630/-. We find the Assessing Officer reopened the case by issuing a notice u/s 148 of the Act on 25.07.2022 by recording the reasons which have already been reproduced in the preceding paragraphs. We find the Assessing Officer completed the assessment u/s 147 r.w.s. 144B of the Act on 30.05.2023 determining the total income of the assessee at Rs.122,89,90,178/- wherein he made the addition of Rs.15,11,87,548/- by disallowing a part of the interest u/s 36(1)(iii) by apportioning the same to WIP. While doing so he applied the provisions of ICDS – IX which relates to borrowing cost and held that the total interest expenditure of Rs.32,30,50,317/- incurred during the eyar should be apportioned in the ratio of sales and WIP. We find before the Ld. CIT(A) / NFAC, the assessee challenged the validity of re-assessment proceedings and the addition on merit. We find the Ld. CIT(A) / NFAC quashed the re-assessment proceedings and also decided the issue on merit by deleting the addition, the reasons of which have already been reproduced in the preceding paragraphs. 24 ITA Nos.2023 & 2011/PUN/2024 36. We do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue. We find the assessee company in the instant case has debited the entire interest expenditure incurred by it to the Profit and Loss Account. The audited accounts were filed along with the original return of income and the Assessing Officer while reopening the assessment and while recording the reasons has referred to the Profit and Loss Account and Balance Sheet only. Therefore, there is no fresh tangible material available with the Assessing Officer and the reopening is based on the same set of facts which were available at the time of original assessment. 37. We find the Hon’ble Bombay High Court in the case of Siemens Financial Services (P.) Ltd. [2023] 154 taxmann.com 159 (Bombay)] while quashing the re- assessment proceedings holding that the Assessing Officer has no powers to review his own order for reopening of the assessment at paras 36 to 39 has observed as under: ―36. We would agree with the submissions of Mr. Pardiwalla that if change of opinion concept is given a go by, that would result in giving arbitrary powers to the Assessing Officer to reopen the assessments. It would in effect be giving power to review which he does not possess. The Assessing Officer has only power to reassess not to review. If the concept of change of opinion is removed as contended on behalf of the Revenue, then in the garb of re-opening the assessment, review would take place. The concept of change of opinion is an in-built test to check abuse of power by the Assessing Officer. As held in Dr. Mathew Cherian (supra), whether under old or new regime of reassessment, it is settled position that the issues decided categorically should not be revisited in the guise of reassessment. That would include issues where query have been raised during the assessment and query have been answered and accepted by the Assessing Officer while passing the assessment order. As held in Aroni Commercials Lad (supra) cven if assessment order has not specifically dealt with that issue, once the query is raised it is deemed to have been considered and the explanation accepted by the Assessing officer. It is not necessary that an assessment order should contain 25 ITA Nos.2023 & 2011/PUN/2024 reference and/or discussion to disclose his satisfaction in respect of the query raised. The Division Bench of this court in Aroni Commercials Lid (supra) held it is not necessary that the assessment order should contain reference and/or discussion to disclose its satisfaction in respect of thee query raised Paragraph 14 of Aroni Commercials Ltd. (supra) read as under. \"14. We are of the view that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under section 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee t insist that the assessment order must record all the questions raised and the satisfaction in respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to have considered the objection now raised in the grounds for issuing notice under section 148 of the Act during the original assessment proceedings. There can be no doubt in the present facts as evidence by a letter dated 8 September 2012 the very issue of taxability of sale of shares under the head capital gain or the head profits and gains from business was a subject matter of consideration by the Assessing Officer during the original assessment proceedings leading to an order dated 12 October 2010. It would therefore, follow that the reopening of the assessment by impugned notice dated March 2013 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 12 October 2010. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.‖ 37. The Assessing Officer does not have any power to review his own assessment when during the original assessment petitioner provided all the relevant information which was considered by him before passing the assessment order under section 143(3) of the Act dated 23rd December 2018. Petitioner had debited an amount of Rs.6,41,87,931/- on account of software consumables in the profit and loss account and a detailed break-up of the said expenses were submitted before the Assessing Officer during the course of assessment proceedings vide a letter dated 6th December 2018. It is settled law that proceedings under section 148 cannot be initiated to review the earlier stand adopted by the Assessing Officer. The Assessing Officer cannot initiate reassessment proceedings to have a relook at the documents that were filed and considered by him in the original 26 ITA Nos.2023 & 2011/PUN/2024 assessment proceedings as the power to reassess cannot be exercised to review an assessment. In petitioner's case the Assessing Officer having allowed the amount of software consumables as a revenue expenditure now seeks to treat the same as capital expenditure which is a clear change of opinion. Various judicial precedents have held that reassessment proceedings initiated on the basis of a mere change of opinion are invalid and without jurisdiction. 38. The Apex Court in Kelvinator of India Ltd. (supra) emphasised on the difference between a power to review and the power to reassess. The Apes Court held that the Assessing Officer has no power to review but has only the power to reassess. The concept of 'change of opinion' must be treated as an in-built test to check abuse of power by the Assessing Officer. The relevant extract of the judgement is reproduced as under- ―…..However, one needs to give a schematic interpretation to the words \"reason to believe\" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of \"mere change of opinion\", which cannot beper sereason to reopen. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review, he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of \"change of opinion\" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of \"change of opinion\" as un in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, Assessing Officer has power to reopen, provided there is \"tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words \"reason to believe\" but also inserted the word \"opinion\" in section 147 of the Act. However, on receipt of representations from the Companies against omission of the words \"reason to believe\", Parliament re-introduced the said expression and deleted the word \"opinion\" on the ground that it would vest arbitrary powers in the Assessing Officer........‖ 39. The Delhi High Court in Seema Gupta v. ITO [2022] 140 taxmann.com 463/288 Taxman 519 (Delhi) held that the order under section 148A(d) and notice under section 148 of the Act should be set aside when the reassessment was initiated on a change of opinion where the same was discussed and verified by the Assessing Officer at the time of original assessment proceedings.‖ 38. We find the Hon’ble Bombay High Court in the case of Knight Riders Sports (P.) Ltd. [2023] 155 taxmann.com 11 (Bombay)] at para 16 of the order has 27 ITA Nos.2023 & 2011/PUN/2024 held that the reopening of assessment on the basis of change of opinion from that held earlier during the course of assessment proceedings that led to the passing of the assessment order does not constitute the justification to believe that the income chargeable to tax has escaped assessment. 39. We find the various other decisions relied upon by the Ld. Counsel for the assessee in the case law compilation also supports his case to the proposition that the re-assessment proceedings without any fresh tangible material and on account of change of opinion is not valid when the original assessment was completed u/s 143(3) of the Act and where all the details were available with the Assessing Officer and on the basis of the same material if he wants to reopen the assessment. 40. We further find the assessment year involved in the instant case is assessment year 2014-15 and the original assessment was completed u/s 143(3) of the Act. The notice u/s 148 of the Act was issued on 25.07.2022. Further, a perusal of the reasons recorded in the said notice does not show any allegation by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. Therefore, the Assessing Officer could not have reopened the assessment beyond a period of 4 years from the end of the relevant assessment year where the original assessment was completed u/s 143(3) and there is no allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. 28 ITA Nos.2023 & 2011/PUN/2024 41. Further, the provisions of section 149 which, were in force at the time of issue of notice, read as under: ―149. (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b). (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year‖ 42. We find in the instant case there is no income represented in the form of any asset which has escaped the assessment. Therefore, the condition specified in clause (b) of section 149 is not satisfied and therefore, no notice u/s 148 could have been issued under the new law since in the notice so issued by the Assessing Officer, there is no reference of any income in the form of any asset exceeding Rs.50,00,000/- which has escaped assessment. The Assessing Officer has simply issued the notice on the ground that the entire interest expenditure has been debited to the Profit and Loss Account which is not justified and the same should have been apportioned on the basis of sales and work-in-progress. 43. As mentioned earlier, the original return was filed on 26.11.2014 and the assessment was completed u/s 143(3) on 22.12.2017. The Assessing Officer has reopened the case and the notice u/s 148A(b) in consequence to the Hon'ble Supreme Court order dated 04.05.2022 was issued on 24.05.2022, copy of which is 29 ITA Nos.2023 & 2011/PUN/2024 placed at page 44 of the paper book. As per the said notice, the Assessing Officer is referring to the balance sheet and record of the assessee to contend that the assessee has debited entire finance cost to the P & L Account. He has further mentioned that as per the P & L Account, the assessee has debited the entire interest expenditure of Rs.32,20,50,317/-. Further, in the order passed u/s 148A(d), dated 25.07.2022, copy of which is placed at pages 49-50 of the paper book, the Assessing Officer is referring to the same facts and the Profit and Loss Account to hold that there is escapement of income. In the instant case, absolutely there is no allegation by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of assessment. As per the provisions of section 149(1)(b), no notice u/s 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st of April, 2021 if a notice u/s 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub section (1) of section 149 or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021. As per the old provisions of section 148, the case of the assessee could not have been reopened beyond four years from the end of the relevant assessment year since there was no allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. Similarly as per the new provisions of 149(1)(b), if the case of the assessee could not have been reopened under the old provisions of section 149, then no notice could be issued under the new regime of section 147. 30 ITA Nos.2023 & 2011/PUN/2024 As per the decision of Hon'ble Supreme Court in the case of Rajeev Bansal [167 taxmann.com 70], the notice under the new provision of section 148 have to be seen considering the proviso to section 149. We find in the instant case for both the assessment years the Assessing Officer had initially issued notice u/s 148 in June, 2021. Subsequently, in view of the decision of Hon'ble Supreme Court in the case of Ashish Agarwal (supra), the Assessing Officer issued notice u/s 148A(b) for both the years. The chronology of events has already been summarized in the preceding paragraphs. As per the decision of the Hon'ble Supreme Court in the case of Rajeev Bansal (supra), any notice issued beyond the survival time limit is invalid in law. 44. We find the Hon'ble Supreme Court in the case of Ashish Agarwal (supra) from para 108 to 114 has observed as under: ―108. The Income Tax Act read with TOLA extended the time limit for issuing reassessment notices under Section 148, which fell for completion from 20 March 2020 to 31 March 2021, till 30 June 2021. All the reassessment notices under challenge in the present appeals were issued from 1 April 2021 to 30 June 2021 under the old regime. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this Court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. 163 Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income Tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under Section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021. 109. If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be 31 ITA Nos.2023 & 2011/PUN/2024 issued in pursuance of the deemed notices must also be within the time limit surviving under the Income-tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction. See State of A P v. AP Pensioners Association [2005] 13 SCC 161. [This Court observed that the \"legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequences flowing therefrom.\"] 110. The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149. 111. The clock started ticking for the Revenue only after it received the response of the assesses to the نا Show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (1) consider the reply of the assessee under section 149A(c); (ii) take a decision under section 149A(d) based on the available material and the reply of the assessee, and (ii) issue a notice under section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income-tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under section 148 of the new regime 112. Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under section 148 of the new regime. Thus, in this illustration, the time limif for issuance of a notice under section 148 of the new regime will end on 18 August 2022 113. In Ashish Agarwal (supra), this Court allowed the assesses to avail all the defences, including the defence of expiry of the time limit specified under section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume jurisdiction to issue notices under section 148 with respect to the relevant 32 ITA Nos.2023 & 2011/PUN/2024 assessment years, an assessing officer has to: (1) issue the notices within the period prescribed under section 149(1) of the new regime read with TOLA; and (if) obtain the previous approval of the authority specified under section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income-tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time-barred. G. Conclusions 114. In view of the above discussion, we conclude that: a After 1 April 2021, the Income-tax Act has to be read along with the substituted provisions, b TOLA will continue to apply to the Income-tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income-tax Act falls for completion between 20 March 2020 and 31 March 2021, c. Section 3(1) of TOLA overrides Section 149 of the Income-tax Act only to the extent of relaxing the time limit for issuance of a reassessment notice under section 148; d TOLA will extend the time limit for the grant of sanction by the authority specified under section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under section 151(1) has extended time till 30 June 2021 to grant approval; e. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under section 151(2) has extended time till 31 March 2021 to grant approval; f. The directions in Ashish Agarwal (supra) will extend to all the ninety thousand reassessment notices issued under the old regime during the period 1 April 2021 and 30 June 2021; g. The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra), and the period of two weeks allowed to the assesses to respond to the show cause notices, and 33 ITA Nos.2023 & 2011/PUN/2024 h. The assessing officers were required to issue the reassessment notice under section 148 of the new regime within the time limit surviving under the Income-tax Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside.‖ 45. Therefore, in view of the decision of the Hon'ble Supreme Court in the case of Ashish Agarwal (supra), it is clear that the time between the issue of original notice u/s 148 under the old regime and the time upto 30.06.2021 is the time limit available which needs to be added to the date on which the reply of the assessee was received. The Hon'ble Supreme Court has referred to this time limit as the surviving time limit available. Applying the same principle as laid down by Hon'ble Supreme Court in the case of Rajeev Bansal, for A.Y. 2014-15, the Assessing Officer should have issued notice u/s 148 by 13.06.2022 and for A.Y. 2016-17 by 26.06.2022. However, for both the assessment years, the Assessing Officer has issued notice u/s 148 subsequent to those dates i.e. 25.07.2022 and 26.07.2022 respectively. Therefore, the notices issued u/s 148 in the new regime are barred by limitation for both years. We, therefore, hold that the notice issued u/s 148 of the Act being barred by limitation, such re-assessment proceedings are not in accordance with law and have to be quashed. 46. Even otherwise on merit also, we find the assessee has debited the entire interest expenditure to the Profit and Loss Account and the Assessing Officer has applied the provisions of ICDS IX which have been introduced w.e.f. assessment year 2016-17 and therefore, are not applicable to the assessment year 2014-15. 34 ITA Nos.2023 & 2011/PUN/2024 Since the ICDS provisions are not applicable to assessment year 2014-15, the Assessing Officer was not at all justified in making the disallowance in the hands of the assessee based on the same provisions. 47. We further find the assessee is following the Percentage of completion method for recognizing the revenue. Under this method, the income is recognized on the basis of work completed and offered to tax. The interest is a period cost and the same would be incurred by the assessee even though there is no increase in work-in-progress and the assessee has to incur the interest expenses even when there is no sale in the project. Therefore, such interest expenditure has to be allowed in the year in which such interest expenditure is incurred. 48. We find the provisions of section 36(1)(iii) of the Act which read as under: ―36(1)….. (i)….. (ii)…. (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession : Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction. Explanation.—Recurring subscriptions paid periodically by shareholders, or subscribers in Mutual Benefit Societies which fulfil such conditions as may be prescribed, shall be deemed to be capital borrowed within the meaning of this clause‖ 35 ITA Nos.2023 & 2011/PUN/2024 49. A perusal of the above provisions show that once the borrowed funds are used for the purpose of business of the assessee, interest is allowable as deduction. We find in the present case the funds borrowed were used for the business of the assessee and therefore such interest expenditure cannot be disallowed as deduction. 50. We find the Hon’ble Bombay High Court in the case of Lokhandwala Construction Industries Ltd. 260 ITR 579 (Bom) at para 4 has held that u/s 36(1)(iii), the interest expenditure is allowable in the year in which it is incurred provided the borrowed funds are used for the purpose of the business of the assessee. It has been held that simply because the project was not started on the said plot does not mean that the interest expenditure cannot be allowed as deduction. The relevant observations read as under: ―4. From the facts found by the Tribunal on record, it is clear that assessee undertook two-fold activities. In bought and sold flats. Secondly, the assessee was also engaged in the business of construction of buildings. The profits from both the activities were assessed under section 28 of the Income-tax Act. In this case, we are concerned with the second activity (hereinafter referred to, for the sake of brevity, as \"Kandivali Project\"). According to the Commissioner, loan was raised for securing land/development rights from the Mandal. That, the loan was utilised for purchasing the development rights, which, according to the Commissioner, constituted a capital asset. According to the Commissioner, since the loan was raised for securing capital asset, the interest incurred thereon constituted part of capital expenditure. This finding of the Commissioner was erroneous. In the case of India Cements Ltd. v. CIT [1966] 60 ITR 52, it was held by the Supreme Court that in cases where the act of borrowing was incidental to carrying on of business, the loan obtained was not an asset. That, for the purposes deciding the claim of deduction under section 10(2)(iii) of the Income-tax Act, 1922 [section 36(1)(iii) of the present Income-tax Act), it was irrelevant consider the purpose for which the loan was obtained. In the present case, the assessee was a builder. In the present case, the assessee had undertaken the Project of construction of flats under the Kandivali Project. Therefore, the loan was for obtaining stock-in-trade. That, the Kandivali Project constituted the stock-in-trade of the assessee. That, the Project did not constitute a fixed asset of the assessee. In this case, we are 36 ITA Nos.2023 & 2011/PUN/2024 concerned with deduction under section Since the assessee had received loan for obtaining stock-in-trade (Kandivali 36(1)(iii) Project), the was entitled to deduction under section 36(1)(iii) of the Act. That, while adjudicating the claim for deduction under section 36(1)(iii) of the Act, the nature of the expense whether the expense was on capital account or revenue account was irrelevant as the section itself says that interest paid by the assessee on the capital borrowed by the assessee was an item of deduction. That, the utilization of the capital was irrelevant for the purposes of adjudicating the claim for deduction under section 36(1)(iii) of the Act-Calico Dyeing & Printing Works v. CIT [1958] 34 ITR 265 (Bom). In that judgment, it has been laid down that where an assessee claims deduction of interest paid on capital borrowed, all that the assessee had to show was that the capital which was borrowed was used for business purpose in the relevant year of account and it did not matter whether the capital was borrowed in order to acquire a revenue asset or a capital asset. The said judgment of the Bombay High Court applies to the facts of this case.‖ 51. We find the Assessing Officer in the instant case has not followed the decision of the Hon’ble Bombay High Court in the case of Lokhandwala Construction Industries Ltd. (supra) on the ground that the ICDS have been introduced subsequent to the decision of Hon'ble Bombay High Court. In our opinion, when the provisions of ICDS are not applicable for assessment year 2014- 15, the Assessing Officer is bound by the decision of the Hon’ble jurisdictional High Court. Therefore, the action of the Assessing Officer for assessment year 2014-15 is clearly against the settled principle laid down by the Hon’ble Bombay High Court in the case of Lokhandwala Construction Industries Ltd. (supra). Further, as per the provisions of section 36(1)(iii), there is no provision in the said section to apportion the interest cost between the work-in-progress and the sales. The interest expenditure being a period cost, the same has to be allowed in the year in which it has been incurred. In our opinion, when the provisions of ICDS conflict with the provisions of the Act, the provisions of the Act would prevail. As per the ICDS IX, it is clearly mentioned that in case of conflict between the 37 ITA Nos.2023 & 2011/PUN/2024 provisions of the Income Tax Act, 1961 and the ICDS IX, the provisions of the Act would prevail to that extent. This view of ours is fortified by the decision of Pune Bench of the Tribunal in the case of Bajaj Finance Ltd. [152 Taxmann.com 216]. 52. We find the Mumbai Bench of the Tribunal in the case of DCIT vs. Sanathnagar Enterprises Ltd. (2022) 139 taxmann.com 557 (Mumbai – Trib.) has held as under: ―6. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position. 7. When learned Departmental Representative’s attention was invited to the decisions of the coordinate benches in the cases of Ashish Builders Pvt Ltd Vs ACIT (ITA No 1566/Mum/2011), ACIT Vs Palava Dewellers Pvt Ltd (ITA No 2147/Mum/18), Kotle Patil Developers Ltd Vs DCIT (ITA No 80/Pune/16) wherein on the same set of facts it is held that irrespective of the capitalization of interest, as part of WIP, on account of following percentage of completion method, and even after insertion of proviso to Section 36(1)(iii), the interest has been allowed as a deduction, learned Departmental Representative fairly accepted that the law has been so laid down by the coordinate benches, but then he points out that it will result in a double deduction for deduction of interest as also deduction of WIP at the pint of booking revenue. He submits that the matter should be remitted to the file of the Assessing Officer at least for this factual verification. In any event, he vehemently relies upon the stand of the Assessing Officer and submits that the deduction of interest should not be allowed under section 36(1)(iii) in view of proviso thereto as also in view of the fact that at the point of time of booking related revenues, the WIP, which includes interest charges as well, the deduction is allowed anyway. We are, however, not inclined to approve his this plea in principle for the reason that the coordinate benches have consistently held that in view of the specific provisions under section 36(1)(iii), interest is to be allowed as a deduction irrespective of its capitalization as WIP, but while charging the WIP, corresponding reduction is to be allowed for the interest already claimed as deduction. In any event, the very foundation of disallowance is special bench decision in the case of Wall Street Construction (supra) which stands reversed by Hon’ble jurisdictional High Court in the case of CIT Vs Lokhandwala Construction Industries Limited (260 ITR 579) which holds good even today. The proviso to Section 36(1)(iii) does not come into play in the present case as the residential units are part of the stock in trade, and not the capital assets. Respectfully following the views so expressed by the coordinate benches, we approve the detailed and well-reasoned approach adopted by the CIT(A) and decline to interfere, in principle, in the matter. As regards the learned 38 ITA Nos.2023 & 2011/PUN/2024 Departmental Representative’s apprehension of double deduction, however, we consider it fit and proper to add that once these amounts are allowed as deduction in the year of incurring the expenditure, the same shall not be eligible for being allowed as deduction yet again as a part of the work in progress being debited to the profit and loss account in any subsequent year. The double deduction will thus not be permissible. The conclusions arrived at by the learned CIT(A), subject to this observation, are approved.‖ 53. We find the Mumbai Bench of the Tribunal in the case of DCIT vs. Lodha Developers Ltd. (2022) 143 taxmann.com 442 (Mumbai – Trib.) has held as under: ―11. We have carefully considered the rival contention and perused the orders of the coordinate bench as well as the decision of the ITA T in assessee’s own case for assessment year 2014 – 15 wherein the revenue challenged the deletion of the disallowance of ₹ 891,171,622/– made by the learned assessing officer u/s 36 (1) (iii) of the act on identical facts and circumstances. We find that the grounds of appeal raised by the learned AO are also identical worded. There is no change in the facts and circumstances of the case. The coordinate bench decided this issue as Under:- ―6. We have heard the rival submissions, perused the orders of the authorities below and case laws relied on. This aspect of the matter has been elaborately considered by the Ld.CIT(A) with reference to the averments of the Assessing Officer and considering the submissions of the assessee and also the decision of Hon'ble Jurisdictional High Court in the case of CIT v. Lokandwala Construction Industries Ltd., (supra) and various other decision and allowed the claim of the assessee observing as under: - ―The submissions of the learned counsel have been carefully considered. According to the learned counsel the interest claimed by the assessee is a period cost and has to be allowed under section 36 (1) (iii) of the Act. The assessee has relied upon the judgment of the apex court in the case of the Taparia tools Ltd vs. DCIT (2015) 272 ITR 605 wherein the Supreme Court held that the only aspect which needed examination was as to whether the provisions of section 36 (1) (iii) read with section 43 (2) of the act was satisfied or not. Once these are satisfied there is no question of denying the benefit of deduction in the year in which such an amount was actually paid or incurred. Further, the proviso introduced by the Finance Act 2003 prohibits the allowance of interest cost only if the borrowed funds have been utilized for acquisition of a capital asset even for existing business. In this case the borrowed funds have been utilized for stock in trade which is not a capital asset. The jurisdictional Bombay High Court in the case of Lokhandwala constructions Inds Ltd 260 ITR 579 held as under: 39 ITA Nos.2023 & 2011/PUN/2024 \"in the instant case, it was dear that the assessee undertook two-fold activities. It bought and sold flats. Secondly, the assessee was also engaged in the business of construction of buildings. The profits from both the activities were assessed under section 28. The assessee had undertaken the project of construction of flats. Therefore, the loan was obtained for obtaining stock-in-trade. The project constituted the stock-intrade of the assessee. The project did not constitute a fixed asset of the assessee. Since the assessee had received loan for obtaining stock-in-trade, it was entitled to deduction under section 36(1)(iii). While adjudicating the claim for deduction u/s 36(l)(iii), the nature of expenses, whether the expenses are on capital account or revenue account is irrelevant as the section itself says that interest paid by the assessee on the capita! borrowed by the assessee is an item of deduction. The utilization of the capital is irrelevant for the purpose of adjudicating the claim for deduction u/s 36(l)(iii).\" The SLP filed by the Department against the Bombay High Court judgment has been rejected by the Supreme Court. The Hon'ble ITAT Mumbai in the case of M/S Ashish Builders Private Ltd vs. ACIT ITA number 310/M/2012 held as under: \"A) Interest on unsecured loans and fixed deposits: It is the claim of the assessee that the entire interest expenditure is allowable as it is a time related fixed finance cost on the borrowed capital. The claim of the assessee should be allowed in full in view of the various decisions on this issue. To start with, we perused the order of the Tribunal in the case of Rohan Estates Pvt. Ltd. (supra) which is one of the sister concerns of the assessee. We perused the para 3.2 of the said order of the Tribunal and find it is a self explanatory and the decision of the Tribunal supports the case of the assessee. Under comparable facts of the assessee, interest cost was allowed in favor of the assessee relying on binding jurisdictional High Court judgment in the case of M/s Lokhandwala Construction Industries Ltd. (supra). For the sake of completeness of this order we extract relevant para 3.2 of the order which is reproduced as under: \"3.2 With regard to the interest expenditure,...........The interest cost on the corresponding capital borrowed would nevertheless continue to be incurred, without any corresponding increase in the value of the inventory or the project. Similarly, a project, or part thereof, may be partly sold or even remain unsold for quite some time after its completion. While revenue would stand to be booked only on the part, if any, sold, the interest cost would continue to be incurred on the entire 40 ITA Nos.2023 & 2011/PUN/2024 capital, even as no corresponding gain inures I terms of value addition to the project, which stands in fact completed, so as to increase its cost by loading the said cost thereon. It is for these reasons that interest (financing) cost is normally considered as only a period (fixed) cost, and charged to the operating statement for the year in which the same is incurred. As such, what in our view would prevail is the method of accounting being regularly followed by the assessee, i.e. on a year basis. The same also has the sanction of law inasmuch as sec. 145 clearly provides for determination of the business income on the basis of the method of accounting being regularly followed, with the mandate of sec 36(l)(iii) being also satisfied, and toward which the assessee relies on the decision in the case of CIT vs Lokhandwala Construction Inds. Ltd(supra). The same also clarifies that the interest cost is to allowed u/s 36(l)(iii), irrespective of whether it stands incurred in relation to stock-in- trade or on capital account, as the said section draws no such distinction. The issue, though, we may clarify, is not as to whether the borrowed capital stands utilized toward trading operations or on capital account; the instant case being decidedly of the former, but whether the said cost, having been incurred, is to be capitalized as a part of the project cost and, thus, taken into account for the purpose of valuation of inventory (stock-in-trade) as at the year-end and, consequently, the determination of gross profit for the year. It is only the cost that is incurred and otherwise allowable, which, it may be appreciated, would stand to be considered thus, where it otherwise qualifies for being rekoned as a part of the cost of production/construction, and thus of the inventory or the project cost a sat the year-end. The deducibility of the said cost u/s 36(l)(iii) is thus neither in doubt nor in dispute, Further, it may also be in place to state that section 36(l)(iii) stands since amended by Finance Act, 2003 w.e.f, 01/04/2004, by way of insertion of a proviso thereto, so that any interest cost on capital account is to be necessarily capitalized. Accordingly, it is only the interest cost computing the business income qua the business of which the relevant asset is a or is to constitute a part (also refer Explanation 8 to s.43(l)). The said decision may, thus, in the given facts and circumstances of the case as, well as the amended law, not be of much assistance.\" We have also perused the said binding High Court judgment in the case of M/s Lokhandwala Construction inds. Ltd. (supra) and find the same is relevant for the following conclusion - \"construction project undertaken by the assessee builder constituted its stock in trade and the assessee was entitled to deduction under section 36(l)(iii) of the Act in respect of the interest on the loan obtained for execution of said project.\" Relying on the another judgment of Hon'ble Bombay High Court in the case of Calico Dying and Printing Works 34 ITR 265 Bombay, Hon'ble Bombay High Court concluded that the interest expenditure relating to the borrowed 41 ITA Nos.2023 & 2011/PUN/2024 capital is allowable u/s 36(l)(iii) of the Act. The relevant lines from the para 4 reads as under; \"that, while adjudicating the claim for deduction under section 36(l)(iii) of the Act the nature of expense 0- whether the expenditure was on capital account or revenue account - was irrelevant as the section itself says that interest paid by the assessee on the capital borrowed by the assessee was an item of deduction. That the utilization of capital was the relevant for the purpose of adjudicating the claim of deduction under section 36(l)(iii) of the Act. (referring to the judgment in the case of Calico) It was laid down that where an assessee claims deduction of interest paid on the capital borrowed all that the assessee was to show that the capital which was borrowed was used for business purpose in the relevant year of account and it did not matter whether capital was borrowed in order to acquire the revenue asset or a capital asset.......\" Considering the above settled position in the matter we are of the opinion that the assessee is entitled to claim entire interest deduction relatable to the capital borrowed and utilized for business purposes in the year under consideration. Resultantly, we disapprove the decision of the Assessing Officer/CIT(Appeals) in transferring the interest expenditure to WIP account. Therefore, assessee is justified in debiting the same to the P&L accounts of the respective assessment years. Thus, we order the Assessing Officer to accept the claim as made in the return of income. Accordingly, this part of the ground No. 1 is allowed in favour of the assessee‖ The Hon'ble ITAT in the case of ITO vs Rohan states ITA number 7200/MUM/2010 held as under: ―3.2 With regard to the interest expenditure, though the Accounting Standard -2 (AS-2) on the valuation of inventories issued by the Institute of Chartered Accountant of India (ICAI) would suggest that the interest expenditure ought to be taken into account in the valuation of inventories where and to the extent there is a direct nexus, the said standard is not mandatory under the Act. In fact, even following AS-2 a direct nexus has to be established for the interest cost to form part of the cost of production or construction, as the case may be, and, thus, a part of the valuation of the unsold inventory or work-inprogress as at the year-end. This is as, to cite by way of an example from the civil construction itself, the work on a project may not be underway at all for the whole or a part of the year, or say as its optimum or normative level, on account of various business exigencies. The interest cost on the corresponding capital borrowed would 42 ITA Nos.2023 & 2011/PUN/2024 nevertheless continue to be incurred, without any corresponding increase in the value of the inventory or the project. Similarly, a project, or part thereof, may be partly sold or even remain unsold for quite some time after its completion. While revenue would stand to be booked only on the part, if any, sold, the interest cost would continue to be incurred on the entire capital, even as no corresponding gain inures I terms of value addition to the project, which stands in fact completed, so as to increase its cost by loading the said cost thereon. It is for these reasons that interest (financing) cost is normally considered as only a period (fixed) cost, and charged to the operating statement for the year in which the same is incurred. As such, what in our view would prevail is the method of accounting being regularly followed by the assessee, i.e. on a year basis. The same also has the sanction of law inasmuch as sec. 145 clearly provides for determination of the business income on the basis of the method of accounting being regularly followed, with the mandate of sec 36(l)(iii) being also satisfied, and toward which the assessee relies on the decision in the case of CIT vs Lokhandwala Construction Inds. Ltd(supra). The same also clarifies that the interest cost is to allowed u/s 36(l)(iii), irrespective of whether it stands incurred in relation to stock-in-trade or on capital account, as the said section draws no such distinction. The issue, though, we may clarify, is not as to whether the borrowed capital stands utilized toward trading operations or on capital account; the Instant case being decidedly of the former, but whether the said cost, having been incurred, is to be capitalized as a part of the project cost and, thus, taken into account for the purpose of valuation of inventory (stock-intrade) as at the year-end and, consequently, the determination of gross profit for the year. It is only the cost that is incurred and otherwise allowable, which, it may be appreciated, would stand to be considered thus, where it otherwise qualifies for being rekoned as a part of the cost of production/construction, and thus of the inventory or the project cost a sat the year-end. The deducibility of the said cost u/s 36(l)(iii) is thus neither in doubt nor in dispute. Further, it may also be in place to state that section 36(l)(iii) stands since amended by Finance Act, 2003 w.e.f. 01/04/2004, by way of insertion of a proviso thereto, so that any interest cost on capital account is to be necessarily capitalized. Accordingly, it is only the interest cost computing the business income qua the business of which the relevant asset is a or is to constitute a part (also refer Explanation 8 to s.43(l)). The said decision may, thus, in the given facts and circumstances of the case as, well as the amended law, not be of much assistance. In fact, even going by the Revenue’s stand, another issue would arise and, accordingly, need to be determined apriori. Considering the said cost as includable in the project cost may have a direct bearing on the gross profit rate, and which may therefore stand to decline from the reported and accepted rate of 23%, and cannot be presumed be remain as such, i.e., unchanged.‖ 43 ITA Nos.2023 & 2011/PUN/2024 The Hon'ble ITAT Pune in the case of M/S Kolte Patil Developers Ltd erstwhile Corola reality Ltd merged with Kolte Patil Developers Ltd) also held as under: \"Further, we find the Mumbai Bench of the Tribunal in the case of M/s Ashish Builders Pvt. Ltd. (supra) has decided an identical issue in favour of the assessee. Relevant Paragraphs are being reproduced hereunder for better appreciation of the issue: \"6. Ground No. 1 of the appeal relates to the addition of some of the expenses to the WIP account i.e. interest on unsecured loan/fixed deposit (sic-car loan), advertisement expenses, brokerage expenses and loan processing fees. AO considered the above expenses as relatable to the WIP account and recomputed the WIP account at ₹ 5,33,28,399/-. /Assessee contends that the above said expenditure is fully allowable in the year under consideration. In this regard, assessee relied on various ITA No. 80/PUN/2016 M/s Kolte Patil Developers Ltd., decisions. This issue is relevant for AYs/appeals under consideration. We shall take up expenditure-account wise adjudication in the following paragraphs: \"A) Interest on unsecured loans and fixed deposits: It is the claim of the assessee that the entire interest expenditure is allowable as it is a time related fixed finance cost on the borrowed capital. The claim of the assessee should be allowed In full in view of the various decisions on this issue. To start with, we perused the order of the Tribunal in the case of Rohan Estates Pvt. Ltd. (supra) which is one of the sister concerns of the assessee. We perused the para 3.2 of the said order of the Tribunal and find it Is a self explanatory and the decision of the Tribunal supports the case of the assessee. Under comparable facts of the assessee, interest cost was allowed in favor of the assessee relying on binding jurisdictional High Court judgment in the case of M/s Lokhandwala Construction Industries Ltd. (supra). For the sake of completeness of this order we extract relevant para 3.2 of the order which is reproduced as under: \"3.2 With regard to the interest expenditure............The interest cost on the corresponding capital borrowed would nevertheless continue to be incurred, without any corresponding increase in the value of the inventory or the project. Similarly, a project, or part thereof, may be partly sold or even remain unsold for quite some time after its completion. While revenue would stand to be booked only on the part, if any, sold, the interest cost would continue to be incurred on the entire capital, even as no corresponding gain inures I terms of value addition to the project, which stands in fact completed, so as to increase its cost by loading the said cost thereon. It is for these reasons that interest (financing) cost is normally considered as only a period (fixed) cost, and charged to the operating 44 ITA Nos.2023 & 2011/PUN/2024 statement for the year in which the same is incurred, As such, what in our view would prevail Is the method of accounting being regularly followed by the assessee, i.e. on a year basis, The same also has the sanction nf law Inasmuch as sec. 145 clearly provides for determination of the business income on the basis of the method of accounting being regularly followed, with the mandate of sec 36(l)(iii) being also satisfied, and toward which the assessee relies on the decision in the case of CIT vs Lokhandwala Construction Inds. Ltd(supra). The same also clarifies that the interest cost is to allowed u/s 36(l)(iii), irrespective of whether it stands incurred in relation to stock-in-trade or on capital account, as the said section draws no such distinction. The issue, though, we may clarify, is not as to whether the borrowed capital stands utilized toward trading operations or on capital account; the instant case being decidedly of the former, but whether the said cost, having been incurred, is to be capitalized as a part of the project cost and, thus, taken into account for the purpose of valuation of inventory (stock-in-trade) as at the year-end and, consequently, the determination of gross profit for the year. It is only the cost that is incurred and otherwise allowable, which, it may be appreciated, would stand to be considered thus, where it otherwise qualifies for being reckoned as a part of the cost of production/construction, and thus of the inventory or the project cost a sat the year-end. The deducibility of the said cost u/s 36(l)(iii) is thus nether in doubt nor in dispute. Further, it may also be in place to state that section 36(l)(iii) stands since amended by Finance Act, 2003 w.e.f. 01/04/2004, by way of insertion of a proviso thereto, so that any interest cost on capital account is to be necessarily capitalized. Accordingly, it is only the interest cost computing the business income qua the business of which the relevant asset is a or is to constitute a part (also refer Explanation 8 to s.43(l)). The said decision may, thus, in the given facts and circumstances of the case as, well as the amended law, not be of much assistance.\" We have also perused the said binding High Court judgment in the case of M/s Lokhandwala Construction inds. Ltd. (supra) and find the same is relevant for the following conclusion - \"construction project undertaken by the assessee builder constituted its stock in trade and the assessee was entitled to deduction under section 36(l)(iii) of the Act in respect of the interest on the loan obtained for execution of said project/' Relying on the another judgment of Hon'ble Bombay High Court in the case of Calico Dying and Printing Works 34 ITR 265 Bombay, Hon'ble Bombay High Court concluded that the interest expenditure relating to the borrowed capital is allowable u/s 36(l)(iii) of the Act. The relevant lines from the para 4 reads as under; \"that, while adjudicating the claim for deduction under section 36(l)(iii) of the Act the nature of expense 0- whether the expenditure was on capital account or revenue account was irrelevant as the section itself says that interest paid by the assessee on the capital borrowed by the assessee was an item of deduction. That the utilization of capital was the relevant for 45 ITA Nos.2023 & 2011/PUN/2024 the purpose of adjudicating the claim of deduction under section 36(l)(iii) of the Act. (referring to the judgment in the case of Calico) It was laid down that where an assessee claims deduction of interest paid on the capital borrowed all that the assessee was to show that the capital which was borrowed was used for business purpose in the relevant year of account and it did not matter whether capital was borrowed in order to acquire the revenue asset or a capital asset....../' Considering the above settled position In the matter we are of the opinion that the assessee is entitled to claim entire interest deduction relatable to the capital borrowed and utilized for business purposes in the year under consideration, Resultantly, we disapprove f decision of the Assessing Officer/CIT(Appeals) in transferring the interest expenditure to WIP account. Therefore, assessee is justified in debiting the same to the P&L accounts of the respective assessment years. Thus, we order the Assessing Officer to accept the claim as made in the return of income. Accordingly, this part of the ground No. 1 is allowed in favour of the assessee.\" 14. From the above, it is evident that any amount of the interest paid in respect of capital borrowed for the business purposes constitutes an allowable deduction. The said clause (Hi) of section 36(1) of the Act supports the assessee's claim in the present case. This view is upheld in the case of CIT vs Lokhandwala Construction Industries Ltd. (supra) as well as the decision of the Tribunal in the case of M/s. Ashish Builders Pvt. Ltd. (supra) irrespective of the method of accounting of recognizing the income followed by the assessee. The present case involves the payment of interest of ₹ 8,19,23,638/-, the interest paid to debenture holders, Financial institutions, Unsecured loan etc. It is not the case of the Revenue that the interest claim of ₹ 3,00,57,566/- and related capital borrowed was not utilized by the assessee for business purposes of the assessee.\" However, the case of Wall Street construction is one where the assessee was following project completion method and therefore the ITAT held that the interest cost shall be debited to work in progress and allowed to be claimed as deduction only in the year in which the corresponding income is offered to tax. In the instant case, the assessee is following percentage completion method (POCM) of therefore the judgment of Wall Street construction is not applicable to this case. The assessee is following percentage completion and offers a part of the revenue every year depending upon the percentage of completion. The funds have been borrowed for the purpose of construction and have gone into the projects of the assessee which are stock in trade and not capital asset of the assessee. Therefore, the amendment brought in the Act with effect from 2003 by way of introducing the proviso to section 36 (1) (iii) also does not affect the facts of the case of the assessee. In view of the binding judgment of the jurisdictional High Court in the case of Lokhandwala constructions and 46 ITA Nos.2023 & 2011/PUN/2024 also of the jurisdictional ITAT in the cases of Ashish Builders Private Ltd and Rohan Estate Private Ltd and also the various judicial pronouncements relied upon by the assessee the interest expenditure claimed by the assessee is held to be allowable, It is also to be mentioned here that during the proceedings before the Income Tax Settlement Commission, the AO had raised specific question in relation to claim on interest expenditure made by the appellant and reply was filed by the appellant explaining the same. Wherein the assessee explained that disallowance cannot be made u/s 36(l)(iii) of the Act, in view of the jurisdictional High Court's decision in the case of Lokhandwala Construction (supra). After considering the assessee's submissions, the AO accepted the same and did not raise objection in relation to interest claimed in the report u/s 245D (3) report filed before the ITSC. Further no disallowance/ adjustment was made by ITSC in relation to such interest claimed while passing the order. The addition made by the AO is directed to be deleted. These grounds of appeal are ALLOWED.‖ 7. On a careful perusal of the order of Ld.CIT(A), we do not see any infirmity in allowing the claim of the assessee as the claim of the assessee is in tune with the decision of the Hon'ble Jurisdictional High Court in the case of Lokandwala Construction (supra) wherein it has been held that when the project constructed by the assessee is its stock in trade and not a fixed asset of the assessee the interest paid on loans obtained for stock in trade is an allowable deduction u/s. 36(1)(iii) of the Act. We also find that in the proceedings before the settlement commission the assessee claimed interest expenses and as per the order dated 28.07.2014 of the settlement commission and during verification proceedings u/s. 245D(3) of I.T. Act, the assessee informed the Assessing Officer that interest of ₹.124.02 crores as claimed in the computation of income on ground of interest expenses retained in inventory is deductible under provisions of section 36(1)(iii) of the Act. It was further informed that the said amount of interest paid was in respect of capital borrowed for the purpose of business or profession. It was further submitted that the construction and development having commenced, the business is in operation, therefore, interest is allowable u/s. 36(1)(iii) of the Act. It was also further brought to the notice of the Assessing Officer that in the case of CIT v. Lokandwala constructions Industries Ltd., [131 Taxman 810] the assessee’s claim for deduction of interest, although the revenue was recognized only on project completion basis in subsequent year, was allowed in the year in which the claim of interest was made. Thus, it was contended that the interest expenditure incurred during the year is claimed and allowable as expenses even though the same has been inventorised in the Books of Accounts. These contentions were accepted by the revenue and no objection has been raised by the Assessing Officer and the settlement commission has accepted these contentions of the assessee. This fact was also taken note by the Ld.CIT(A) in allowing the claim of the assessee. Therefore, since the revenue could not controvert the findings of the Ld.CIT(A) that the project constructed by the assessee for which the loans have been taken is not a stock in trade and 47 ITA Nos.2023 & 2011/PUN/2024 also the other findings of the Ld.CIT(A), we do not find any valid reason to interfere with the findings of the Ld.CIT(A) and accordingly we sustain the order of the Ld.CIT(A) on this issue. Grounds raised by the revenue are rejected. 12. We find that the order of the learned CIT – A is also on identical lines. Therefore, respectfully following the decision of the coordinate bench in assessee’s own case, we confirm the order of the learned CIT – A in deleting the disallowance of ₹ 2,241,160,000/–. Accordingly, ground number 1 and 2 of the appeal of the AO is dismissed.‖ 54. Respectfully following the above decisions, we hold that the borrowed funds which are utilized for the purpose of business of the assessee has to be allowed as deduction in the year in which the interest expenditure has been incurred. 55. We find provisions of ICDS – IX read as under: I. Income Computation and Disclosure Standard IX relating to borrowing costs Preamble This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head \"Profits and gains of business or profession\" or \"Income from other sources\" and not for the purpose of maintenance of books of account. In the case of conflict between the provisions of the Income-tax Act, 1961 ('the Act') and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent. Scope 1. (1) This Income Computation and Disclosure Standard deals with treatment of borrowing costs. (2) This Income Computation and Disclosure Standard does not deal with the actual or imputed cost of owners' equity and preference share capital. Definitions 2. (1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified: 48 ITA Nos.2023 & 2011/PUN/2024 (a) \"Borrowing costs\" are interest and other costs incurred by a person in connection with the borrowing of funds and include: (i) commitment charges on borrowings; (ii) amortised amount of discounts or premiums relating to borrowings; (iii) amortised amount of ancillary costs incurred in connection with the arrangement of borrowings; (iv) (b) finance charges in respect of assets acquired under finance leases or under other similar arrangements. \"Qualifying asset\" means: (i) land, building, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets; (iii) inventories that require a period of twelve months or more to bring them to a saleable condition. (2) Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meaning assigned to them in the Act. Recognition 3. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset shall be capitalised as part of the cost of that asset. The amount of borrowing costs eligible for capitalisation shall be determined in accordance with this Income Computation and Disclosure Standard. Other borrowing costs shall be recognised in accordance with the provisions of the Act. 4. For the purposes of this Income Computation and Disclosure Standard, \"capitalisation\" in the context of inventory referred to in item (iii) of clause (b) of sub-paragraph (1) of paragraph 2 means addition of borrowing cost to the cost of inventory. Borrowing Costs Eligible for Capitalisation 5. Subject to paragraph 8, the extent to which funds are borrowed specifically for the purposes of acquisition, construction or production of a qualifying asset, the amount of borrowing costs to be capitalised on that asset shall be the actual borrowing costs incurred during the period on the funds so borrowed. \"6. Subject to Para 8, in respect of borrowing other than those referred to in Para 5, if any, the amount of borrowing costs to be capitalised shall be computed in accordance with the following formula namely :— 49 ITA Nos.2023 & 2011/PUN/2024 B A x---- C Where A = borrowing costs incurred during the previous year except on borrowings referred to in Para 5 above; B = (i) the average of costs of qualifying asset as appearing in the balance sheet of a person on the first day and the last day of the previous year; (ii) in case the qualifying asset does not appear in the balance sheet of a person on the first day, half of the cost of qualifying asset; or (iii) in case the qualifying asset does not appear in the balance sheet of a person on the last day of the previous year, the average of the costs of qualifying asset as appearing in the balance sheet of a person on the first day of the previous year and on the date of put to use or completion, as the case may be, excluding the extent to which the qualifying assets are directly funded out of specific borrowings; C = the average of the amount of total assets as appearing in the balance sheet of a person on the first day and the last day of the previous year, other than assets to the extent they are directly funded out of specific borrowings; Explanation — For the purpose of this paragraph, a qualifying asset shall be such asset that necessarily require a period of twelve months or more for its acquisition, construction or production. Commencement of Capitalisation 7. The capitalisation of borrowing costs shall commence: (a) in a case referred to in paragraph 5, from the date on which funds were borrowed; (b) in a case referred to in paragraph 6, from the date on which funds were utilised. Cessation of Capitalisation 8. Capitalisation of borrowing costs shall cease: (a) in case of a qualifying asset referred to in item (i) and (ii) of clause (b) of sub-paragraph (1) of paragraph 2, when such asset is first put to use; (b) in case of inventory referred to in item (iii) of clause (b) of sub-paragraph (1) of paragraph 2, when substantially all the activities necessary to prepare such inventory for its intended sale are complete. 9. When the construction of a qualifying asset is completed in parts and a completed part is capable of being used while construction continues for the other parts, capitalisation of borrowing costs in relation to a part shall cease:— 50 ITA Nos.2023 & 2011/PUN/2024 (a) in case of part of a qualifying asset referred to in item (i) and (ii) of clause (b) of sub-paragraph (1) of paragraph 2, when such part of a qualifying asset is first put to use; (b) in case of part of inventory referred to in item (iii) of clause (b) of sub- paragraph (1) of paragraph 2, when substantially all the activities necessary to prepare such part of inventory for its intended sale are complete. Transitional Provisions 10. All the borrowing costs incurred on or after 1st day of April, 2016 shall be capitalised for the previous year commencing on or after 1st day of April, 2016 in accordance with the provisions of this standard after taking into account the amount of borrowing costs capitalised, if any, for the same borrowing for any previous year ending on or before 31st day of March,2016. Disclosure 11. The following disclosure shall be made in respect of borrowing costs, namely:— (a) the accounting policy adopted for borrowing costs; and (b) the amount of borrowing costs capitalised during the previous year.‖ 56. A perusal of the definition of the term ‘qualifying asset’ shows that clauses (i) and (ii) are not applicable to the facts of the assessee whereas clause (iii) which the Assessing Officer has presumably inferred refers to the inventory that require a period of 12 months or more to bring them to a saleable condition. In the instant case, the inventory with the assessee is an open land on which the building development has commenced. Further, the inventory also includes the units under construction. Since in case of open land, which is held by the assessee is for more than 12 months and the land is in a saleable condition even without any construction thereon, therefore, in view of the definition of ‘qualifying asset’, the same does not fall within the said definition. The assessee in the instant case can 51 ITA Nos.2023 & 2011/PUN/2024 sell the open land at any time without doing any construction and therefore it does not fall within the definition of ‘qualifying asset’. 57. Further, in the instant case, when the development is undertaken after obtaining necessary approval from the local authorities, the assessee can sell the units. Undisputedly, the assessee is following the percentage of completion method, according to which the revenue is accounted for in respect of units sold depending upon the percentage of work completed. Once the development plan is obtained, the assessee is entitled to sell any unit in the building under construction, even though, the possession is given subsequently and the revenue of the units to the extent of work completed is accounted for. It is not necessary that the flat or unit is complete in every respect to sell the flat / unit. We find as per clause 8 of ICDS, capitalisation of interest shall cease in case of an inventory when all the activities necessary to prepare such inventory for its intended sale are complete. Even in case of units that are under construction, since the assessee is following the percentage completion method for recognizing the revenue, the units do not fall within the definition of ‘qualifying asset’ at all even though these are not complete in every respect. Further, as per clause 8 of ICDS, the borrowing cost is to be ceased to be capitalised when substantially all the activities necessary to prepare such inventory for its intended sale are complete. Since in the instant case at the time of passing the plan itself, the said activities are complete, therefore, there is no question of capitalization of interest. Therefore, we hold that even as per ICDS IX, 52 ITA Nos.2023 & 2011/PUN/2024 the assessee company was not required to capitalize the interest and has rightly debited the same to the Profit and Loss Account. 58. In view of the above discussion and in view of the reasoning given by the Ld. CIT(A) / NFAC on this issue, we do not find any infirmity in the order of the Ld. CIT(A) / NFAC. So far as the grounds raised by the Revenue regarding order of Ld. CIT(A) / NFAC in quashing the re-assessment proceedings by following the decision of Hon’ble Bombay High Court in the case of Hexaware Technologies Vs. ACIT (supra) is concerned, we are not deciding this ground since the Hon’ble Supreme Court is seized with the matter and we have already quashed the re- assessment proceedings on other grounds and have also upheld the order of Ld. CIT(A) / NFAC in deleting the addition on merit. 59. The grounds raised by the Revenue are accordingly dismissed. ITA No.2011/PUN/2024 (A.Y. 2016-17) 60. The grounds raised by the Revenue are as under: 1. Whether on the facts and circumstances of the case and in law, the CIT(A) is justified in holding that the reopening of assessment in the case of the assessee for A.Y. 2016-17 was invalid as there was no fresh material available with the Assessing Officer ? 2. Whether on the facts and circumstances of the case and in law, the CIT(A) is justified in holding that the reopening of assessment in the case of the assessee for A.Y. 2016-17 was barred by limitation of time? 53 ITA Nos.2023 & 2011/PUN/2024 3. Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in holding that the quantification of disallowance of interest expenditure at the time of reopening of assessment was beyond the scope of provisions u/s 149 of the Act? 4. Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in granting relief to the assessee by relying upon the decision of the Hon'ble Bombay High Court in the case of Hexaware Technologies Vs. ACIT, Circle 15(1)(2), Mumbai and others [2024] 162 taxmann.com 225? 5. Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in granting relief to the assessee merely on technical grounds without going into the merits of the case and completely disregarding the observations made by the Assessing Officer? 61. After hearing both sides, we find the grounds raised by the Revenue in ITA No.2011/PUN/2024 are identical to the grounds raised in ITA No.2023/PUN/2024. We have already decided the issue and dismissed the grounds raised by the Revenue. Following similar reasonings, grounds raised by the Revenue in ITA No.2011/PUN/2024 are also dismissed. 62. In the result, both the appeals filed by the Revenue are dismissed. Order pronounced in the open Court on 10th March, 2025. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 10th March, 2025 GCVSR 54 ITA Nos.2023 & 2011/PUN/2024 आदेश की प्रतितिति अग्रेतिि/Copy of2 the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune S.No. Details Date Initials Designation 1 Draft dictated on 04, 05, 06.03.2025 Sr. PS/PS 2 Draft placed before author 07.03.2025 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order "