HBS VIEW PRIVATE LIMITED,MUMBAI V. PR. COMMISSIONER OF INCOME TAX - 8, MUMBAI

ITA 2246/MUM/2024

AI Insights

The case involves HBS View Private Ltd., the appellant, contesting the order of the PCIT-8, Mumbai, which invoked revisional jurisdiction under section 263 of the Income Tax Act for the Assessment Year 2018-19. The primary contention was whether the conditions of 'error' and 'prejudicial to the interest of revenue' were met to justify the revisional jurisdiction. The appellant argued that since the disputed expenses were not claimed in the year under assessment, there was no prejudice to the revenue. However, the PCIT found that the AO had not adequately examined the claims and expenditures, leading to potential revenue loss. The tribunal supported the PCIT's decision, emphasizing the need for thorough examination of all claims and expenditures in the year they are made, regardless of whether they affect the profit and loss account of that year.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33260 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2018-2019
• Other Referred Cases: M/s Jewel of India 325 ITR 92 (Bombay), CIT vs. Manmohan Das 59 ITR 699 (SC), Malabar Industrial Co. (109 ITR 66 (SC), Max India Ltd. of Hon'ble Supreme Court, Sesa Starlite Ltd. Vs. CIT (430 ITR 121) (Bombay), Gee Vee Enterprises vs. ACIT (99 ITR 375) (Del.), Venkatakrishna Rice Co. Vs. CIT (163 ITR 129), Maithan International Ltd. Vs. CIT (375 ITR 123) (Cal), Nagal Garment Industries Pvt Ltd vs. CIT (113 taxman.com 4) (MP), CIT vs. Jawahar Bhattacharjee (342 ITR 74 (Guj.), PT. Lashkari Ram v. CIT (272 ITR 309 (Alld.), PCIT vs. Manju Devi (161 taxman.com 809) (Jharkhand), Anuj Jayendra Shah vs. PCIT (2016 67 taxman.com 38 (Mum. Trib.)
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BISWANATH DAS
• Assessee Lawyers: MANDAR VAIDYA
• Keywords: Depreciation; TDS; Revision of order
• Section: 263

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI SANDEEP SINGH KARHAIL, JM & SHRI OMKARESHWAR CHIDARA, AM I.T.A. No. 2246/Mum/2024 (Assessment Year: 2018-19) HBS View Private Ltd. 505, Ceejay House, Dr. Annie Besant Road, Worli, Mumbai-4000018. PAN : AACCH8458C Vs. PCIT-8 Room No. 611, 6th Floor, Aayakar Bhavan, M.K. Road, Mumbai-400020. Appellant) : Respondent) Appellant /Assessee by : Shri Mandar Vaidya, AR Revenue / Respondent by : Shri Biswanath Das, CIT-DR Date of Hearing : 30.10.2024 Date of Pronouncement : 01.01.2025 O R D E R Per Omkareshwar Chidara, AM: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [for short ' the CIT(A)] for the AY 2018-19. 2. The only issue to be adjudicated in the above cited appeal of appellant is in the given circumstances, whether the revisional jurisdiction exercised by Ld. PCIT under section 263 is correct and whether twin conditions of “error” and prejudicial to the interest of revenue’ were fulfilled or not. 2 ITA No.2246/Mum/2024 HBS View Private Ltd. During the hearing proceedings before the Bench, the ld. AR of the appellant has argued on the following lines: (a) The appellant has not claimed the deduction of expenses under the year in question and hence cannot be said to be prejudicial to the interest of Revenue. (b) As mentioned in the grounds of appeal, the twin conditions of “error” and prejudicial to the interest of Revenue” were not fulfilled and the exercise of jurisdiction by ld. PCIT u/s 263 is incorrect. (c) The AO can examine the deductibility of expenses in the year of claim. (d) The Ld.AR of Appellant relied on the decision of M/s Jewel of India 325 ITR 92 (Bombay). Reliance also placed on the decision of CIT vs. Manmohan Das 59 ITR 699 (SC) for the proposition that the revisional jurisdiction u/s 263 of PCIT, was held to be incorrect and loss suffered due to “vacation” can be carried formed and not of respectively. 3. The Ld. DR strongly relied on the order of ld. PCIT and argued that the order of Ld. PCIT is a very detailed one which mentions that no enquiries were caused and the assessment order of ld. AO is quite cryptic and from the order of PCIT, it is observed that several instances of “Prejudice to the interest of Revenue” were pointed out. Hence, it was submitted that the order of Ld. PCIT is to be upheld and that of AO to be set-aside. 4. After hearing both sides, it is decided that the order of Ld. PCIT is to be upheld for the following purposes: 3 ITA No.2246/Mum/2024 HBS View Private Ltd. (a) The Ld. AO has not verified the genuineness of expenditure claimed to have been incurred in this assessment year and (even though not debited to P&L A/c, but included in the closing WIP). The assessee has furnished details of sales and marketing expenses bifurcation only, but no evidence of payments made, deduction of TDS, whether incurred for the purpose of business etc. were not provided. (b) The appellant company claimed to have spent huge amount of Rs. 6.65 cr. towards displacement compensation to Society Members, consultancy fees of Rs. 44.47 lakhs, paid lease rent of Rs. 1.79 cr. The genuineness of those expenditure, whether TDS was deducted on these payments were not examined by the AO. (c) The appellant company claimed depreciation of Rs. 24.74 lakhs. The assessee was specially requested to provide documentary proof, new assets acquired and purchase invoices. But, the appellant has provided only a depreciation chart and there are no evidences of acquiring assets and “put to use” for the purposes of business to claim depreciation. (d) The assessee has interest bearing funds of Rs. 72.35 Cr. and incurred an interest of Rs. 7.17 cr. But the appellant company has given interest free loans to “related parties” to the extent of Rs. 16.64 cr. In view of the same, the Ld. PCIT observed that an amount of Rs. 1.64 cr. has to be disallowed from the interest claim of Rs. 7.17 cr. The same was neither examined nor disallowed by Ld.AO while completing the assessment order. (e) The appellant claimed a huge work-in-progress of Rs. 145.34 cr. and the same was not verified by ld. AO at any point of time. As the assessee is a 4 ITA No.2246/Mum/2024 HBS View Private Ltd. builder, and he has to follow the “percentage completion method” and start declaring profit when the project is 25% complete. (f) The reply of appellant, constantly for all these queries of ld. PCIT is only one the same was not claimed as expenditure nor debited to P&L A/c during the year in question. Hence, no prejudice is caused to the interest of Revenue. But, what is to be seen is that the claim of expenditure is “Work-in-Progress” crystallized in this year as “WIP” which is being carried forward to set off against the profit in the subsequent years. So, it has the bearing on “profits” and there would be effect in subsequent years, and in subsequent years, the assessee’s claim would be the same does not pertain to the current year. Hence, whenever the claim is made, amounts are reflected in books of account, the genuineness, applicability of Income Tax provisions are to be examined in that year, eg., if TDS is to be done, it cannot be done in subsequent years as claimed by appellant company. It is not disputed that the Ld. AO has not examined the applicability of TDS Provisions, did not conduct any enquiries about the claims of payment like Displacement compensation to the extent of Rs. 6.64 cr., lease rent payment and its genuineness. Similarly, disallowance of interest to the extent of interest free loans given to related parties was also not made by ld. AO. The genuineness of claim of depreciation was also not examined. (g) Finally, the ld. PCIT has given full opportunity to the appellant to explain all these aspects, took their explanation into consideration and categorically held in the para-III of order u/s 263 that Ld. AO failed to examine these issues mentioned in the notice and also in view of Explanation 2 of clause (a) and (b), it is held that twin conditions of 5 ITA No.2246/Mum/2024 HBS View Private Ltd. “error” and “prejudicial to the interest” were satisfied as per the law laid down in the decisions of “Malabar Industrial Co. (109 ITR 66 (SC) and “Max India Ltd.” of Hon’ble Supreme Court. (h) Apart from the above decisions of Hon’ble Supreme Court on this issue, reliance is placed on the following cases also for the proposition that the Revision order passed by Ld. CIT(A) was held to be legal and valid, where enquiries are required to be conducted and the same are not done. In the circumstances, the order of assessing officer is erroneous and causes prejudice to the interest of Revenue. (i) Sesa Starlite Ld. Vs. CIT (430 ITR 121) (Bombay) (ii) Gee Vee Enterprises vs. ACIT (99 ITR 375) (Del.) (iii) Venkatakrishna Rice Co. Vs. CIT (163 ITR 129) (iv) Maithan International Ltd. Vs. CIT (375 ITR 123) (Cal) (v) Nagal Garment Industries Pvt Ltd. vs. CIT (113 taxman.com 4) (MP) (vi) CIT vs. Jawahar Bhattacharjee (342 ITR 74 (Guj.) (vii) PT. Lashkari Ram v. CIT (272 ITR 309 (Alld.) (viii) PCIT vs. Manju Devi (161 taxman.com 809) (Jharkhand) (ix) Anuj Jayendra Shah vs. PCIT (2016 67 taxman.com 38 (Mum. Trib.) (i) The Finance Act, 2015, inserted an explanation -2 to section 263 of IT Act w.e.f. 01.06.2015 and CBDT in Circular No. 19 of 2015 dated 27.11.2015 (2008) 379 ITR (ST) 10, has explained the interpretation of “Erroneous in so far as it is prejudicial to the interest of Revenue”, as if the order was passed by ld. AO without conducting enquiries and making verification which should have been done. 6 ITA No.2246/Mum/2024 HBS View Private Ltd. 5. In view of the above detailed discussion, case-law and statutory provisions, the order of ld. PCIT u/s 263 is upheld and appeal of assessee is dismissed. 6. In result, the appeal of the assessee is dismissed. Order pronounced in the open court on 01 -01-2025. Sd/-Sd/- Sd/-d/- (SANDEEP SINGH KARHAIL) (OMKARESHWAR CHIDARA) Judicial Member Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai "