FAIRLEAF REAL ESTATE PRIVATE LIMITED,DLF PHASE-III GURUGRAM V. PRINCIPAL COMMISSIONER OF INCOME TAX, CR BUILDING, DELHI

ITA 2235/DEL/2024

AI Insights

The case involves Fairleaf Real Estate P. Ltd., which appealed against the order of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961. The PCIT had found the assessment order for the year 2017-18 to be erroneous and prejudicial to the interest of the revenue concerning an 'Interest Expense on security deposit' amounting to Rs.6,81,56,528. The Tribunal examined whether the PCIT's revision of the assessment order was justified. The assessee argued that the amount in question had already been disallowed in the computation of income due to Ind-AS adjustments, and thus, there was no loss to the revenue.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471969 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: CIT vs. Anil Kumar Sharma, Hari Iron Trading Co. vs CIT, CIT vs Eicher Ltd., Sanjeev Kr. Khemka v. Pr. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: R.S. SINGHVI; UNDER A REPLY DATED .. EXPLAINED; UNDER ITS SUBMISSION DATED .. EXPLAINED
• Keywords: Revenue expenditure; Question of law; Salary income; Tax effect; Capital expenditure; TDS; Assessment record; Deemed to accrue or arise in india; Revision of order; Prejudicial to interest
• Section: 147; 143(3); 142(1); 143(2); 119; 263; 43CA; 194A; 28; 44DA; 20

Judgement Text

"1 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER & SH. BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.2235/Del/2024 (Assessment Years:2017-18) Fairleaf Real Estate Private Limited, DLF Phase-III, Gurugram Vs. PCIT C. R. Building, Delhi \u0001थायीलेखासं./जीआइआरसं./PAN/GIR No: AAACY3336L Appellant .. Respondent Appellant by : Sh. R. S. Singhvi, CA Sh. Satyajeet Goel, CA Sh. Rajat Garg, CA Respondent by : Sh. Surender Pal, CIT DR Heard on: 17.12.2024 Pronounced on: 13.03.2025 ORDER PER MADHUMITA ROY, JM The instant appeal filed by the assessee is directed against the order dated 18.03.2024 passed by the Ld PCIT, Delhi-1 under Section 263 of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) for the assessment year 2017-18 whereby and where under the assessment 2 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. order under Section 143(3) read with section 144C(3)/144B dated 26. 10.2021 was found to be erroneous in so far as prejudicial to the interest of the revenue and direction thereupon to the Assessing Officer to verify whether the claim of expense amounting to Rs.6,81,56,528/- in the Profit & Loss account being ‘Interest Expense on security deposit’ has been added back/disallowed while computing taxable income was issued. 2. We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record including the order passed by the Ld. PCIT and the assessment order passed under section 143(3) of the Act. 3. The brief facts leading to the case are that the assessee, engaged in the business of developing, leasing real estate projects and providing facility management services, filed its return of income on 28.11.2017 declaring total loss at rupees (-)24,92,65,859/-. The case of the assessee was selected for complete scrutiny under CASS and notice under Section 143(2) dated 22.09.2019 was issued and duly served upon the assessee. After completion of all the procedural formalities the assessment was finalized under section 143(3)/144C(3)/144B of the Act on 26.10.2021 at a loss of Rs. (-)19,32,14,069/-. 4. Subsequently on 05.03.2024 the Ld. PCIT issued a show cause notice under Section 263 of the Act requiring the assessee to explain as 3 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. to why action under Section 263 of the Act for revision of assessment order dated 26 October 2021 passed under Section 143(3)/144C(3)/144B of the act by the National faceless assessment centre (NFAC) should not be initiated in the case of the assessee as the assessment framed is found to be erroneous in so far as it is prejudicial to the interest of the revenue, the contents thereof is reproduced herein below: “NOTICE FOR THE HEARING Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of the THE INCOME TAX ACT, 1961 - Assessment Year 2017- 18 In this regard, a hearing in the matter is fived on 07/03/2024 at 12:00 PM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your submission from the e-filing portal using the link: incometaxindiafiling.gov.in Sub.: Show Cause Notice u/s 263 of Income Tax Act in the case of M/s Fairleaf Real Estate Pvt. Ltd. (PAN: AAACY3336L) for A.Y. 2017-18-Final Opportunity-reg.- You have filed return of income for the A.Y. 2017-18 on 28.11.2017 at a loss of Rs. 24,92,65,859/-. In your case, the assessment was completed u/s 143(3)/144C(3)/144B vide order dated 26.10.2021 at a loss of Rs. 19,32,14,069/- 4 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. 2. I have called for the assessment records from the AO and examined the same. On perusal of the records, it is noticed that an amount of Rs. 6,81,56,528/- was debited as ‘Interest expense on security deposits' in the P&L accounts under the head ‘Finance Costs'. Also, interest of Rs. 96,93,67,027/- as 'Interest expenses on debts and borrowings' was debited under the head 'Finance Costs' in the P&L account. As per Para 34(a) of the Tax Audit Report, TDS u/s 194A of the I.T. Act was deducted on an amount of Rs. 9.79.58 057/- being 'Interest other than interest on securities’'. However, no TDS u/s 194A of the I. T. Act is deducted on Rs. 6,81,56,528/- debited in the P&L account as 'Interest Expenses on security deposits, which was liable for deduction u/s 194A of the I. T. Act. As per provisions of section 40(a) of the I. T. Act, 30% of any sum payable to a resident on which tax is deductible at source under Chapter XVII-B of the I. T. Act has not been deducted, shall not be allowed as deduction in computing the income chargeable under the head ‘Profit and Gains of Business or Profession'. The interest paid is liable for TDS deduction u/s 194A. However, the same has not been deducted. 3. Therefore, an amount of Rs. 2,04,46,958/- (30% of Rs. 6,81,56,528/-) should have been disallowed while passing the assessment order. The mistake resulted in over assessment of loss of Rs. 2,04,46,958/- resulting in potential tax effect of Rs. 67,60,377/-. 4. Thus, the assessment completed in your case u/s 143(3)/144C(3)/144B of the I.T. Act, for A.Y. 2017-18 on 26.10.2021 appears to be erroneous in so far as it is prejudicial to the interest of revenue under the ambit of the provisions of section 263 of the I.T. Act, 1961. 5 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. 5. You are, therefore, required to show cause as to why an order in terms of provision of section 263 of the I. T. Act may not be passed in your case for A.Y 2017-18. 6. In view of this, you are allowed an opportunity of being heard preferably by filing written submission through ITBA Portal/online on or before 07.03.2024 at 12:00 P.M. giving reasons as to why the assessment order passed by the Assessing Officer in your case on 26.10.2021 for A.Y. 2017-18 be not revised and depending upon the circumstances of the case, an order be not passed including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 7. Please note that in case of non-compliance, it shall be presumed that you have no objection to the proposed action u/s 263 of the I. T. Act, 1961 and the revision of assessment order, as referred above, will be carried out under the provisions of section 263 of the I. T. Act on the basis of submissions/facts available on record. You may submit your reply on official e-mail ID: [e-mail] also. 5. The assessee by and under a reply dated 13.03.2024 explained before the Ld. PCIT that the amount of Rs.6,81,56,528/-, debited in the profit and loss account, was in the nature of Ind-AS adjustment which has been suo moto added back in the computation of income and as such the assessment order is neither erroneous nor prejudicial to the interest of revenue. At the time of hearing of this appeal the learned counsel appearing for the assessee has drawn our attention to page 7 and 8 of the paper book filed before us in order to establish the fact of demonstrating 6 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. the suo moto disallowance of Rs.6,81,56,528/-before the ld PCIT. The contention raised by the assessee before the DCIT in its reply dated 13.03.2024 is as follows: Sub: Response to show-cause notice dated 05.03.2024 (hereinafter referred to as 'the Notice) issued in respect of revision proceedings under section 263 of the Income-tax Act, 1961 (\"the Act\") This is with reference to captioned Notice (copy enclosed as Annexure-1) dated 05 March 2024 issued by your good-self's office whereby your good-self has asked the Assessee to show-cause as to why an action under section 263 of the Act for revision of assessment order (copy enclosed as Annexure-2) dated 26 October 2021 passed under section 143(3) read with section 144C(3) and section 1448 of the Act by the National Faceless Assessment Centre ('NFAC') (hereinafter referred to as the 'Ld. AO') should not be initiated in the case of the Assessee as it has been alleged that the assessment framed is erroneous, in so far as it is prejudicial to the interest of the revenue. In the Notice, it has been observed as under by your goodself:- 2. I have called for the assessment records from the AO and examined the same. On perusal of the records, it is noticed that an amount of Rs. 6,81,56,528/- was debited as 'Interest expense on security deposits' in the P&L accounts under the head 'Finance Costs'. Also, interest of Rs. 96,93,67,027/- as 'Interest expenses on debts and borrowings' was debited under the head 'Finance Costs' in the P&L account. As per Para 34(a) of the Tax Audit Report, TDS u/s 194A of the I. T. Act was deducted on an amount of Rs. 9,79,58,057/- being 'Interest other than interest on securities'. However, no TDS u/s 194A of the I. T. Act is deducted on Rs. 6,81,56,528/- debited in the P&L account as 'Interest Expenses on 7 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. security deposits', which was liable for deduction u/s 194A of the I. T. Act. As per provisions of section 40 (ia) of the I. T. Act, 30% of any sum payable to a resident on which tax is deductible at source under Chapter XVII-B of the I. T. Act has not been deducted, shall not be allowed as deduction in computing the income chargeable under the head 'Profit and Gains of Business or Profession'. The interest paid is liable for TDS deduction u/s 194A. However, the same has not been deducted. 3. Therefore, an amount of Rs. 2,04,46,958/- (30% of Rs. 6,81,56,528/-) should have been disallowed while passing the assessment order. The mistake resulted in over assessment of loss of Rs. 2,04,46,958/-resulting in potential tax effect of Rs. 67,60,377/- Reply: At the outset, it is submitted that during the course of the assessment proceedings. The Ld. AO vide query no 9 of notice dated 15.02.2021 issued u/s 142(1) of the Act (copy enclosed as Annexure-3) has asked the following question:- \"9. Claim of Any Other Amount Allowable as Deduction in Schedule BP Amounting to Rs. 36.28.27,986/-: With respect to Other deduction claimed in Schedule BP of return, kindly provide the following details: i) Please furnish detail of other deduction claimed in schedule BP of the ITR along with documentary evidence in support your claim. ii) Please state if the above item has been shown under any other head of income. In response to the above query, the Assessee vide submission dated 15.03.2021 (acknowledged copy of submission is enclosed as Annexure-4) explained in detail regarding the disallowance made in the computation of income towards Ind AS adjustment including 8 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. underlying amount of Rs. 681,56,528/- towards \"interest expense on security deposit\". The disallowance as well the claim of the Assessee with respect to Ind-AS adjustment were examined (including interest on security deposit of Rs. 6,81.56,528) and disallowance made by the Assessee was accepted by the Ld. AO after careful consideration of all the facts submitted by the Assessee. Therefore, it cannot be said that the Ld. AO has not carried out proper enquiries regarding the issue pointed by your good-self. Facts of the case: It is humbly submitted that the amount of Rs. 6,81,56,528/- with respect to 'interest expense on security deposit' which is debited to Profit and Loss Account under Note 21 - 'Finance Cost' (copy of the financial statements enclosed as Annexure-5) computation of income (‘COI’) (copy of COI is enclosed as Annexure-6) for the year under consideration. 2. Your goodself will appreciate that in the COI, the Assessee has suo-moto disallowed an amount of Rs. 31,62,85,648/- towards Ind- AS adjustment. The said amount of Rs. 31,62,85,648-includes the above amount of Rs. 681,56,528/- towards 'interest expense on security deposit', the break-up of which is as under:- Particulars of Ind-AS adjustments Reference Amount (INR) Interest on CCD-Finance Expense (1) 489,995,923 Interest on CCD-Finance Income (2) (200,371,934) Premium on NCD-Finance Income (4) (66,123,262) Interest on loan (5) (30,477,335) Ancillary Cost on loan (6) (3,060,352) Interest on security deposit (7) 681,56,528 Interest on LRD (8) (11,916,372) Interest expense on reversal (9) (2,274,358) Total (1+2+3+4+5+6+7+8+9) 31,62,85,648 9 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. 3. The amount disallowed by the Assessee in the return of income is Rs. 36,28,27,986/- (which includes the above amount of Rs. 31,62.85,648/-) and the same is reflected at serial number 24 of “Schedule BP\" of income-tax return (copy enclosed as Annexure-7) filed for the year under assessment which also inter- allia includes the above amount of Rs. 681,56,528/-. Relevant extract from the income-tax return is reproduced below for your goodself’s easy reference:- 22 Deemed income under section 43CA 22 0 23 Any other item or items of addition under section 28 to 44DA 23 0 24 Any other income not included in profit and loss account any other expense not allowable (including income from salary, commission, bonus and interest from firm in which company is a partner) 4. It is submitted that during the the subject year, the assessee transitioned its basis of accounting from Previous Generally Accepted Accounting Principles ('GAAP’) to Ind-AS and inter-alia recorded notional expense of aforesaid amount of Rs. 681,56,528/- in the Profit & Loss account in accordance with Ind- AS principles. However, since said expense is not allowed as deduction, the Assessee had disallowed the entire amount in its computation of income for the year under consideration. 5. Thus, the observation made by your goodself in the notice the underlying amount has resulted loss to the revenue is completely incorrect as the Assessee has already disallowed the said amount in the computation of income. Any further disallowance in this regard will lead to double disallowance which is not in accordance with the provisions of the Act and hence, no further adjustment is warranted in this regard. 10 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. Submission of the Assessee: 1. On perusal of section 263 the Act, it would be appreciated that, under section 263 of the Act an order of assessment can be revised only if the same is erroneous and prejudicial to the interests of revenue. The twin conditions, i.e. (a) the order is erroneous; and (b) the order is prejudicial to the interest of Revenue; must be cumulatively satisfied before seeking to exercise revisionary jurisdiction under section 263 of the Act. 2. It is humbly submitted that the assessment order passed by the Ld. AO was neither erroneous nor prejudicial to the interest of revenue and falls foul of the following prepositions of law. No prejudice to the interest of revenue: 3. As explained above, it is humbly submitted that the underlying amount Rs. 681,56,528/- has already been suo-moto disallowed by the Assessee in its computation of income and hence, to said extent, there is no loss to the revenue. Any further disallowance in this regard (30% of disallowance on account of non-deduction of TDS by invoking the provisions of section 40(a) (ia) of the Act) will lead to double disallowance of same amount which is not allowed in accordance with the provisions of the Act and rules set down by the judicial precedents. Issue examined during the course of original assessment: 3. It is well settled position in law that when the Assessee had furnished the requisite information and the Assessing Officer had completed the assessment after considering all the facts, in such a case, the revision of assessment order under section 263 of the Act is not allowed on the ground that the assessing officer had not made proper enquiries. In this regard, the Assessee would like to place its reliance on following case laws:- 11 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. CIT vs. Anil Kumar Sharma: 335 ITR 83 (Delhi HC) The Hon’ble Delhi High Court held that even though the assessment order did not patently indicate that the issue in question had been considered by the assessing officer, the record showed that the assessing officer had applied his mind and once such application of mind was discernible from the record, proceedings under section 263 of the Act would fall into the arena of \"the Commissioner having a different opinion\", which is impermissible in law. Hari Iron Trading Co. vs CIT: 263 ITR 437 (Punjab and Haryana HC) The High Court of Punjab and Haryana in the case of while dealing with the validity of exercise of jurisdiction under section 263 of the Act, clearly held that even though the assessment order was silent with respect to the issues raised in the revisionary order, that by itself did not vest the Commissioner with valid jurisdiction, considering that such issues were considered by the assessing officer and formed part of the assessment record. The relevant observations of this Hon'ble Court are as under: \"7. ……. A bare perusal of the aforesaid provision shows that the Commissioner can exercise powers under sub-section (1) of section 263 of the Act only after examining \"the record of any proceedings under the Act\". The expression 'record' has also been defined in clause (b) of the Explanation so as to include all records relating to any proceedings available at the time of examination by the Commissioner. Thus, it is not only the assessment order but the entire record which has to be examined before arriving at a conclusion as to whether the Assessing Officer had examined any issue or not. The assessee has no control over the way an assessment order is 12 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. drafted. The assessee on its part had produced enough material on record to show that the matter had been discussed in detail by the Assessing Officer. The least that the Tribunal could have done was to refer to the assessment record to verify the contentions of the assessee. Instead of doing that, the Tribunal has merely been swayed by the fact that the Assessing Officer has not mentioned anything in the assessment order. During the course of assessment proceedings, the Assessing Officer examines numerous issues. Generally, the issues which are accepted do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/ disallowances are made……. .” [Emphasis supplied] CIT vs Eicher Ltd. [294 ITR 310] (Delhi HC) The Hon’ble elhi High Court in the case held that while dealing with exercise of jurisdiction under section 147 of the Act, clearly held that where facts are placed on record by the assessee, and upon consideration of the same, the assessing officer chooses not to give any finding on a particular issue allowing the claim of assessee, it cannot lead to the conclusion that the facts were not considered by the assessing officer or or that no view in respect of the same was formed. Further, in the following decisions, too, it has also been held that merely because there is no discussion in the assessment order on any particular issue, it cannot be presumed that the assessing officer did not examine the issue with respect to which there is no discussion. 13 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. CIT v. Gabriel India Limited [1993] 71 Taxman 585 (Bombay HC) CIT v. Goyal Private Family Specific Trust [1987] 35 Taxman 522 (Allahabad) The Full Bench of Delhi High Court in the case of CIT v. Kelvinator of India Ltd. [2002] 123 Taxman 433 (Delhi HC), held that when a regular order of assessment is passed under section 143(3) of the Act, a presumption can be raised that such an order has been passed on application of mind. The said decision of Hon'ble High Court was later affirmed by the Supreme Court in 320 ITR 561 (SC). Applying the ratio laid down by the above judgments, to the facts of the present case, it is submitted that the Ld. AO had duly applied his mind in respect of the concerned issue while framing original assessment and hence, any revision in this regard is outside the jurisdiction of section 263 of the Act and not allowed under law. Not a case of ‘lack of enquiry’ during assessment proceedings: 5. It is humbly submitted that there is distinction between \"lack of enquiry\" and \"inadequate enquiry\". While in the former case, the assessment order may be regarded as \"erroneous\", but that would not be so in the latter case where enquiry had actually been conducted by the assessing officer, even though the commissioner of income-tax may not agree with the nature and manner of conducting enquires. 6. As a necessary corollary, when on a particular issue the assessing officer did conduct certain enquires during the course of assessment proceedings, such order cannot, it is submitted, be regarded as erroneous so as to exercise revisionary jurisdiction 14 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. under section 263 of the Act. In this regard, the Assessee would like to place its reliance on following case laws:- CIT vs. Sunbeam Auto Ltd: 332 ITR 167 (Del HC) Explaining the powers of the Commissioner under section 263 of the Act, Hon'ble Delhi High Court in the case of observed as under: \"12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between \"lack of inquiry\" and \"inadequate inquiry\". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, 15 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. merely because he has different opinion in the matter. It is only in cases of \"lack of inquiry\", that such a course of action would be open.\" [Emphasis Supplied] CIT vs Anil Kumar Sharma: 335 ITR 83 ( Delhi HC) Following the judgement in case of Sunbeam Auto (supra), the Delhi High Court observed that: \"In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing officer, the record showed that the Assessing officer had applied his mind. Once such application of mind is discernable from the record, the proceedings under section 263 would fell into the area of the Commissioner having a different opinion. We are of the view that the findings of facts arrived at by the Tribunal do not warrant interference of this Court. That being the position, the present case would not be one of 'lack of inquiry' and, even if the enquiry was termed as inadequate, following the decision in M/s Sunbeam Auto Ltd. (supra), \"that would not by itself give occasion to the Commissioner to pass orders under section 263 of the said Act, merely because he has a different opinion in the matter.\" No substantial question of law arises for our consideration. Consequently, the appeal is dismissed.\" [Emphasis Supplied] CIT v. Reliance Communication Ltd. [2016] 69 taxmann.com 103 (Bombay HC) In this case, Bombay HC dismissed the appeal of revenue and upheld the order of tribunal which noted that where assessing 16 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. officer had made detailed enquiries and mere fact that he did not make any reference to said issue in assessment order, could not make said order erroneous and prejudicial to interest of revenues and the commissioner does not have jurisdiction under section 263 on such matters. Further, special leave petition of the revenue against the judgement of High Court was also dismissed by the Hon'ble Supreme Court in (2016) 389 ITR (St.) 39. Kolkata Bench of Tribunal in case of Sanjeev Kr. Khemka v. Pr. CIT [1361 (Kol) of 2016 has held as under:- 5.1 In view of the above we find that Ld. CIT has passed impugned order u/s. 263 of the Act by holding the order of AO as erroneous in so far as prejudicial to the interest of revenue on account of inadequate enquiry made by AO while passing order u/s. 143(3) of the Act. However, we find that proper and sufficient enquiries were conducted by the AO at the time of assessment as evident from the order of AO. Therefore it cannot be concluded that no proper enquiry has been conducted by the AO at the time of assessment proceedings. The AO has taken conscious view after considering the facts and circumstances of the case and giving proper opportunity to the assessee. Thus, the view expressed by AO in the form in his assessment order cannot be replaced with the view of Ld. CIT u/s 263 of the Act. [Emphasis Supplied] There is plethora of judgements which upheld the aforesaid principle. Some of them are mentioned below:- CIT v. Hero Auto Ltd. [2013] 33 taxmann.com 547 (Delhi HC) ITO v. DG Housing Projects Ltd [2012] 20 taxmann.com 587 (Delhi HC) 17 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. DIT v. Jyoti Foundation [2013] 38 taxmann.com 180 (Delhi HC) Principal CIT v. Shivshahi Punarvasan Prakalp Ltd. [2023] 155 taxmann.com 408 (Bombay HC) Principal CIT v. Om Rudra Priya Holiday Resort (P.) Ltd. [2019] 109 taxmann.com 63 (Rajasthan HC) CIT v. Chemsworth (P.) Ltd. [2020] 119 taxmann.com 358 (Karnataka) CIT v. Nirav Modi [2017] 77 taxmann.com 15 (SC) MOIL Ltd. v. CIT [2017] 81 taxmann.com 420 (Bombay HC) CIT v. Fine Jewellery (India) Ltd. [2015] 55 taxmann.com 514 (Bombay HC) CIT v. Ratlam Coal Ash Co. [1987] 34 TAXMAN 443 (MP HC) Ashoke Kumar Parasramka v. ACIT [1998] 65 ITD 1 (Cal. Tribunal) CIT v. Mehrotra Brothers [2004] 270 ITR 157 (MP HC) Paul Mathews & Sons v. CIT [2003] 129 Taxman 416 (Kerala HC) Civ. Fine Jewellery (India) Ltd. [2015] 55 faxmann.com 514 (Bombay HC) CIT v. Ratlam Coal Ash Co. [1987] 34 ΤΑΧΜΑΝ 443 (MP HC) Ashoke Kumar Parasramka v. ACIT [1998] 65 ITD 1 (Cal. Tribunal) CIT v. Mehrotra Brothers [2004] 270 ITR 157 (MP HC) Paul Mathews & Sons v. CIT [2003] 129 Taxman 416 (Kerala HC) CIT v. Arvind Jewellers [2002] 124 Taxman 615 (Gujarat HC) 18 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. CIT vs. Ganpat Ram Bishnoi [2006] 152 Taxman 242 (Raj. HC) 7. In the present case, from the above discussion, it is evident that specific enquiries were made by the Ld. AO regarding the issue that is sought to be reagitated in the Notice. It is submitted that in the instant case, there was no \"lack of inquiry\" on the part of the Ld. AO. In light of the above submission, it is humbly requested that no revision proceedings under section 263 of the Act is warranted for the year under consideration and hence, said proceedings should be dropped. It is requested from your good-self that no adverse may kindly be taken against the Assessee without providing sufficient opportunity of being heard in the matter. Trust our request shall be acceded to. Thanking you. For Fairleaf Real Estate Private Limtied. Sd/- Authorized Signatory” 6. In this regard the Ld AR has drawn our attention to the computation of income at page 21 reflecting the said add back of the above Ind-AS adjustment forms part of Rs. 31,62,85,648/- where the figure is appearing against the head ‘finance cost’. 19 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. 7. It is the case of the assessee that during the course of assessment proceeding the Ld AO by and under the enquiry No.9 dated 15.02.2021 issued under section 142(1) of the act asked the following questions: “claim of any other amount allowable as reduction in schedule BP amounting to Rs.36,28,27,986/-: with respect to other deduction claimed in schedule BP of return , kindly provide the following details: i) please furnish detail of other deduction claimed in schedule BP of the ITR along with documentary evidence in support of your claim. ii) please state if the above item has been shown under any other head of income. 8. The assessee by and under its submission dated 15.03.2021 explained in detail regarding the disallowance made in the computation of income towards Ind-AS adjustment including underlying amount of Rs.6,81,56, 528/- towards ‘interest expense on security deposit’. The disallowance as well as the claim of the assessee with regard to Ind-AS adjustment were duly examined including the interest on security deposit of ₹ 6,81,56,528/-and the disallowance made by the assessee was also accepted by the learned AO after careful consideration of all the facts submitted by the assessee and thus the allegation of assessing officer not carrying out proper enquiry regarding the issue is not sustainable as was the main argument advanced by the assessee’s counsel. 20 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. 9. Under these facts and circumstances of the matter the order passed by the learned AO cannot be termed as erroneous nor prejudicial to the interest of revenue; these two conditions envisaged under section 263 of the Act, therefore, cannot be invoked as also the case sought to be made out by the assessee. 10. After careful perusal of the records it appears that the amount disallowed by the assessee in the return of income is Rs.36,28,27,986/- which includes the above amount of Rs.31,62,85,648/-which is reflecting at serial No. 24 of ‘schedule B’ of Income Tax Return for the assessment year under consideration filed by the assessee which inter alia includes the disputed amount of Rs. 6,81,56,528/-. The breakup of Ind-AS adjustment of Rs.31,62,85,608/-) is as follows: Particulars of Ind-AS adjustments Reference Amount (INR) Interest on CCD- Finance Expense (1) 489,995,923 Interest on CCD- Finance Income (2) (200,371,934) Interest on NCD – Finance Expense (3) 72,356,810 21 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. Particulars of Ind-AS adjustments Reference Amount (INR) Interest on CCD-Finance Expense (1) 489,995,923 Interest on CCD-Finance Income (2) (200,371,934) Premium on NCD-Finance Income (4) (66,123,262) Interest on loan (5) (30,477,335) Ancillary Cost on loan (6) (3,060,352) Interest on security deposit (7) 681,56,528 Interest on LRD (8) (11,916,372) Interest expense on reversal (9) (2,274,358) Total (1+2+3+4+5+6+7+8+9) 31,62,85,648 11. It is a settled principle of law that in order to exercise the revisional power under Section 263 of the Act the twin conditions i.e. (i) the order is erroneous and(ii) the same is prejudicial to the interest of revenue must cumulatively be satisfied. However, in the case in hand the amount of Rs.6,81,56,528/-has already been suo-moto disallowed by the assessee in its computation of income and thus to this extent there is no loss to the revenue. Under this present facts and circumstances of the matter the disallowance in this regard i.e. 30% of disallowance on account of non deduction of TDS by invoking the provisions of Section 40(a)(ia) will lead to double disallowance of the same amount as the case made out by the assessee is also found to be acceptable. 12. Thus, having regard to the entire aspect of the matter we find that it is apparent that the Ind-AS adjustment of Rs.6,81,56,528/- being interest expense on security deposit has already been added back by the assessee 22 ITA no. 2235/Del/2024 A.Y. 2017-18 Fairleaf Real Estate P. Ltd. while computing taxable income in the ITR which was duly explained before the Learned Assessing Officer by the assessee in response to the query No. 9 by an order notice dated 15.02.2021 and upon careful examination of the same the assessment was completed, assumption of revisional jurisdiction under Section 263 of the Act and consequential direction issued upon the learned AO is found to be totally baseless, arbitrary, not sustainable in the eyes of law and therefore, liable to be quashed. With the aforesaid observation the order impugned issued under Section 263 of the Act is, thus, quashed. 13. In the result, assessee’s appeal is allowed. Sd/- Sd/- (BRAJESH KUMAR SINGH) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 13.03.2025 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "