Riverbank Developers pvt. Ltd., Kolkata V. CIT -4, KOLKATA, Kolkata

ITA 1329/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9135 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 01-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 14-06-2016
• Court: TRIBUNAL
• Department Lawyers: ANAND BAIWAR
• Assessee Lawyers: D S DAMLE; AKKAL DUDHWEWALA ACA
• Keywords: Related party transaction; Opportunity of being heard; Earning of tax free income; Cost of acquisition; Corroborative evidences; Revenue expenditure
• Section: 143(3); 142(1); 14A; 263

Judgement Text

1 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI A. T. VARKEY, JM & SHRI WASEEM AHMED, AM] I.TA NO. 1329/KOL/2016 ASSESSMENT YEAR: 2011-12 RIVERBANK DEVELOPERS PVT LTD (PAN: AADCR7997K) VS. COMMISSIONER OF INCOME-TAX , KOLKATA - 4. APPELLANT RESPONDENT DATE OF HEARING 07.02.2017 DATE OF PRONOUNCEMENT 31.03.2017 FOR THE APPELLANT SHRI D.S. DAMLE, FCA & SHRI AKKAL DUDHWEWALA, ACA FOR THE RESPONDENT SHRI ANAND BAIWAR, CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER PASSED BY THE PRINCIPAL COMMISSIONER OF INCOME-TAX-4, KOLKATA U/S 263 OF TH E INCOME-TAX ACT, 1961 DATED 31.03.2016 FOR THE ASSESSMENT YEAR 2011-12. IN THE MEMORANDUM OF APPEAL, THE FOLLOWING GROUNDS HAVE BEEN RAISED. 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT ERRED IN INITIATING THE REVISION PROCEEDINGS UNDER SECTION 263 OF THE ACT, BY HOLDING THAT THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT ERRED IN RESTORING THE MATTER BACK TO THE ASSESSING OFFICER, WITHOUT GIVIN G A CLEAR FINDING ON THE ISSUE ON WHICH THE PROCEEDINGS U/S 263 OF THE ACT, WAS INITIATED. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT ERRED IN INITIATING REVISION PROCEEDINGS U/S 263 OF THE ACT, ON THE SAM E ISSUE WHICH WAS ALREADY CONSIDERED AND DETAILED ENQUIRY MADE IN THE COURSE OF ASSESSMENT P ROCEEDINGS U/S 143(3) OF THE ACT. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, AND WITHOUT PREJUDICE TO THE OTHER GROUNDS, THE LEARNED CIT ERRED IN APPRECIATING THE FACT THAT COMPLETE DETAILS IN RELATION TO 2 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 THE MATTERS FOR WHICH PROCEEDINGS U/S 263 OF THE AC T HAS BEEN INITIATED WERE SUBMITTED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, AND WITHOUT PREJUDICE TO THE OTHER GROUNDS, THE LEARNED CIT ERRED IN RESTORING BACK TH E MATTER TO THE FILE OF THE ASSESSING OFFICER. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, AND WITHOUT PREJUDICE TO THE OTHER GROUNDS, THE LEARNED CIT DID NOT GIVE REASONABLE OP PORTUNITY OF BEING HEARD TO THE APPELLANT. 2. THE APPELLANT HAS CHALLENGED VALIDITY OF TH E REVISION ORDER PASSED BY THE LD CITS ORDER ON THE PLEA THAT THE AOS ORDER U/S 143 (3) DATED 28.03.2016 WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE AND THEREFORE DID NOT WARRANT PASSING OF THE REVISION ORDER U/S 263 OF THE ACT. B EFORE DEALING WITH THE GROUNDS ON MERIT, IT IS RELEVANT TO SET OUT THE FACTS GIVING R ISE TO THE DISPUTE INVOLVED IN THE PRESENT APPEAL. 3. THE APPELLANT IS A PRIVATE LIMITED COMPANY WHICH WAS SET UP AS JOINT VENTURE PROMOTED BY BATA INDIA LTD (BIL) AND CALCUTTA MET ROPOLITAN GROUP LIMITED (CMGL) FOR DEVELOPING A TOWNSHIP PROJECT ON THE L AND BELONGING TO BIL AT BATANAGAR. AS IN THE PAST, DURING THE RELEVANT YEAR THE APPELLANT WAS ENGAGED IN DEVELOPMENT OF LAND, CONSTRUCTION & MANAGEMENT OF P ROPERTIES, BUILDINGS & ASSETS AND THE PRINCIPAL PROJECT UNDERTAKEN DURING THE YEA R WAS CALCUTTA RIVERSIDE TOWNSHIP AT BATANAGAR. FOR THE AY 2011-12 THE APPEL LANT FILED ITS RETURN OF INCOME AND THEREAFTER THE RETURN WAS SELECTED FOR SCRUTIN Y ASSESSMENT. NOTICE U/S 142(1) WAS ISSUED BY THE AO ON 19/07/2013 CALLING UPON THE AS SESSEE TO FURNISH INFORMATION, DETAILS & DOCUMENTS WITH REGARD TO VARIOUS ISSUES S PECIFIED IN THE QUESTIONNAIRE ANNEXED WITH THE NOTICE. AFTER CONSIDERING THE SUBM ISSIONS, INFORMATION AND DOCUMENTS FURNISHED FROM TIME TO TIME, ORDER U/S 14 3(3) WAS PASSED ASSESSING NET LOSS OF RS.7,81,44,753/- AS OPPOSED TO DECLARED LOSS OF RS.7,99,47,129/-. SUBSEQUENTLY PR.CIT-4, KOLKATA ISSUED A SHOW CAUSE NOTICE (SCN HEREIN AFTER) DATED 17.02.2016 REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDER SHOULD NOT BE 3 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 REVISED, SINCE IN HIS OPINION THE ORDER WAS ERRONE OUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN RESPONSE THE LD AR OF T HE ASSESSEE ARGUED THAT THE ORDER U/S 143(3) COULD NOT BE HELD TO BE ERRONEOUS FOR TH E REASONS SET OUT IN SHOW CAUSE NOTICE AND REQUESTED THE LD CIT NOT TO PROCEED WITH REVISION PROCEEDINGS. REJECTING THE EXPLANATIONS AND THE DETAILS FURNISHED, THE LD CIT PASSED THE IMPUGNED ORDER SETTING ASIDE THE ASSESSMENT AND DIRECTING THE AO T O EXAMINE THE CASE PROPERLY AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. BEING AGGRIEVED BY THE LD CITS ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, THE APPELLANT FILED A PA PERBOOK CONTAINING 184 PAGES WHICH CONSISTED OF DOCUMENTS WHICH WERE FILED BEFOR E THE LOWER AUTHORITIES IN THE COURSE OF ASSESSMENT AND REVISION PROCEEDINGS. AT P AGE 1 & 2 OF THE PAPERBOOK WAS THE SCN DATED 17.02.2016, WHICH CONTAINED THE REASO NS FOR INITIATION OF THE PROCEEDINGS U/S 263. FOR BETTER UNDERSTANDING, REAS ONS SET OUT IN SCN ARE EXTRACTED BELOW: ON PERUSAL OF THE ANNEXURE C UNDER THE HEAD PART ICULARS OF PAYMENTS MADE TO THE PERSONS SPECIFIED IN SECTION 40A(2)(B) OF THE TAX AUDIT REP ORT OF THE ASSESSEE FOR THE FINANCIAL YEAR 2010-11, IT IS SEEN THAT DURING THE YEAR UNDER CONSIDERATION TH E ASSESSEE COMPANY HAS MADE PAYMENTS TO ITS RELATED PARTY AS UNDER: I. HILAND PROJECTS LTD : SHARE OF THE MANPOWER & OFFI CE INFRASTRUCTURE COST : RS.42,48,756/- II. HILAND PROJECTS LTD : REIMBURSEMENT OF EXPENSES : RS.22,71,375/- III. BATA INDIA LTD : REIMBURSEMENT OF TAXES AND OTHER E XPENSES RS.2,08,24,734/- IV. BATA INDIA LTD : COMMUNICATION CHARGES : RS.63,59,3 66/- V. RIVERBANK HOLDINGS PVTLTD : REIMBURSEMENT OF EXPENS ES AND INTEREST ON UNSECURED LOAN OF RS.7,09,494/- & RS.43,93,972/- RESPECTIVELY. IT IS ALSO SEEN FROM THE P&L ACCOUNT OF THE ASSESSE E THAT THE CONSTRUCTION EXPENSES WAS INCREASED FROM RS.17.73 CRS TO RS.168.77 CRS. THE MAJOR EXPEN SES UNDER THE HEAD CONSTRUCTION EXPENSES WERE AS UNDER: I. COST OF LAND DEVELOPMENT : RS.28.23 CRORES (LAST YE AR NIL) II. COST OF ACQUISITION OF LAND DEVELOPMENT RIGHTS : RS .90,00,00,000/- (LAST YEAR NIL) III. REGISTRATION FEES : RS.4.85 CRORE (LAST YEAR NIL) IV. CONTRACTOR EXPENSES : RS.38.98 CRORE (LAST YEAR 14 CRORE) V. RATES & TAXES : RS.1.34 CRORE (LAST YEAR NIL) VI. DELAYED DELIVERY CHARGES : RS.63.59 LACS (NIL) 4 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 THE ASSESSEE COMPANY HAS NOT SUBMITTED COPY OF JOIN T VENTURE AGREEMENT BETWEEN THE ASSESSEE COMPANY, BATA INDIA LTD AND CALCUTTA METROPOLITAN G ROUP LIMITED AND WITHOUT GOING THROUGH THE TERMS AND CONDITIONS OF THE JOINT VENTURE AGREEMENT , THE FACTS OF THE CASE REMAINED VERIFIED. THE AO HAD ALSO NOT SUBMITTED THE COPY OF AGREEMENT BETWEE N THE ASSOCIATE/SISTER/GROUP CONCERNS AND WITHOUT THE REQUISITE AGREEMENT, THE RELATED PARTY TRANSACTIONS U/S 40A(2)(B) REMAINED UNVERIFIED. THE MAJOR EXPENSES UNDER THE HEAD CONSTRUCTION EXPENSE S WERE NOT VERIFIED BY THE AO DURING THE ASSESSMENT. (2) THE ASSESSEE COMPANY HAD MADE PAYMENT OF RS.90 CRORE TO BATA INDIA LIMITED ON ACCOUNT OF COST OF ACQUISITION OF LAND DEVELOPMENT RIGHTS AND DEBITED IN ITS P&L A/C UNDER THE HEAD CONSTRUCTION EXPENSES. PRIMA FACIE THE ABOVE EXPE NSES SEEMED TO BE CAPITAL IN NATURE. ALSO THE ASSESSEE COMPANY HAD NOT SUBMITTED ANY COPY OF AGRE EMENT/DOCUMENTS BETWEEN THE ASSESSEE COMPANY&BATA INDIA LIMITED TO VERIFY THE NATURE OF EXPENSES I.E. CAPITAL OR REVENUE. THE NATURE OF THE ABOVE EXPENSES REMAINED UNVERIFIED DURING THE A SSESSMENT. (3) DURING THE YEAR UNDER CONSIDERATION, THE COMPAN Y HAD TAKEN TERM LOAN FROM A BODY CORPORATE OF RS.1,30,00,00,000/- AND UNSECURED LOAN S FROM INTER CORPORATE OF RS.3.6 CRORE (LAST YEAR 16.10 CRORE) AGAINST WHICH INTEREST OF RS.16.17 CRO RE WAS PAID (LAST YEAR 45.23 LAC) BY THE ASSESSEE COMPANY. THE A ABOVE TRANSACTIONS WAS ALSO NOT VERI FIED BY THE A.O. 5. WITH REFERENCE TO THESE REASONS, THE LD CIT ULTI MATELY CONSIDERED THE ASSESSMENT ORDER U/S 143(3) ERRONEOUS FOR THE FOLLO WING REASONS. 3(III) HERE IN THE CASE OF ASSESSEE COMPANY ENTER ED INTO IN JOINT VENTURE AGREEMENT WITH BATA INDIA LTD AND CALCUTTA METROPOLITAN GROUP LTD FOR DEVELOPING PROJECT. FURTHER THE ASSESSEE COMPANY PAID RS.90 CRORES TO BATA INDIA LTD FOR GET TING DEVELOPMENT RIGHT. AO PASSED THE ASSESSMENT ORDER WITHOUT EXAMINING THE DETAILS OF AGREEMENT AN D NATURE OF PAYMENT, WHICH IS THE UTMOST IMPORTANT DOCUMENT. IT IS VERY CLEAR THAT ASSESSMEN T WAS PASSED WITHOUT ASKING COPY OF AGREEMENT AND EXAMINING THE SAME, WHICH EVIDENCES OF NO ENQUI RY ON THIS ISSUE. FURTHER THE ASSESSEE IN ITS WRITTEN SUBMISSION FURNISHED DETAILS OF EXPENSES DE BITED IN P&L ACCOUNT ON VARIOUS HEAD. HOWEVER, NO SUPPORTING EVIDENCES WERE PRODUCED, WHICH WERE R EQUIRED TO DO SO. IT IS WORTHWHILE TO NOTE THAT EVEN AFTER PROVIDING OPPORTUNITY, THE ASSESSEE COMP ANY DID NOT FURNISH THE COMPLETE DETAILS WITH SUPPORTING EVIDENCES. 6. AT THE TIME OF HEARING OF THE APPEAL, THE LD AR FOR THE APPELLANT ASSAILED THE LD CITS ORDER ON VARIOUS GROUNDS. HE SUBMITTED THA T IN PARA 1 OF THE SCN, THE LD CIT ENUMERATED FIVE HEADS OF EXPENSES WHICH WERE PA ID TO RELATED PARTIES. IN THE SAME PARA, THE LD CIT ALSO LISTED SIX MAJOR HEADS OF EXP ENSES GROUPED UNDER THE HEAD CONSTRUCTION EXPENSES. AFTER SETTING OUT THIS INF ORMATION, THE LD CIT ALLEGED THAT THE ASSESSEE DID NOT SUBMIT COPY OF THE JOINT VENTU RE AGREEMENT BETWEEN THE ASSESSEE, 5 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 BIL & CMGL AND WITHOUT GOING THROUGH THE TERMS OF T HE JV AGREEMENT, FACTS OF THE CASE REMAINED UNVERIFIED. IN THIS REGARD, OUR ATTEN TION WAS DRAWN TO THE SCRUTINY ASSESSMENT ORDER PASSED U/S 143(3) DATED 16.12.2010 FOR THE AY 2008-09 WHEREIN THE AO HAD OBSERVED AS UNDER: THE ASSESSEE IS ENGAGED IN DEVELOPMENT OF LAND, CO NSTRUCTION AND MANAGEMENT OF PROPERTIES, BUILDING, LAND & ESTATES. THIS IS THE FIRST YEAR OF BUSINESS OPERATION OF THE ASSESSEE. THE CALCUTTA RIVERSIDE TOWNSHIP IS BEING DEVELOPED BY THE ASSESS EE AS JOINT VENTURE BETWEEN BATA INDIA LIMITED AND CALCUTTA METROPOLITAN GROUP LIMITED. THIS IS AN INTEGRATED TOWNSHIP ON THE BANK OF THE RIVER GANGES CONSISTING OF 237 ACRES AND IS LOCATED AT BA TANAGAR, MAHESHTALA MUNICIPALITY, KOLKATA 700140. THE LAND ON WHICH THE PROJECT IS BEING DEVE LOPED IS FREELY HELD BY BATA INDIA LIMITED, WHICH HAS GIVEN THE DEVELOPMENT RIGHTS TO RIVERBANK DEVEL OPERS PVT LTD. 6.1 THE LD AR POINTED OUT THAT THE ABOVE OBSERVATIO NS WERE VERBATIM COPIED BY THE LD CIT IN PARA 1 OF HIS SCN. HE SUBMITTED THAT THE JV BETWEEN BIL & CMGL DID NOT COME INTO BEING FOR THE FIRST TIME DURING THE Y EAR UNDER CONSIDERATION BUT THE JV PRE-EXISTED SINCE AY 2008-09. REFERRING TO HISTORIC AL FACTS, THE LD AR SUBMITTED THAT IN FY 2005-06 AN AGREEMENT WAS ENTERED INTO BETWEEN BIL & CMGL IN TERMS OF WHICH BOTH THE COMPANIES HAD AGREED TO COLLABORATE WITH EACH OTHER FOR UNDERTAKING DEVELOPMENT OF A TOWNSHIP ON LAND BELONGING TO BIL AT BATANAGAR AFTER OBTAINING PERMISSION FROM THE GOVT OF WEST BENGAL. IN TERMS O F THE ARRANGEMENT AGREED UPON, THE APPELLANT WAS INCORPORATED IN 2007 (25 OCT 2007 ) AS AN SPV, IN WHICH BIL & CMGL HELD EQUITY SHARES EQUALLY. AFTER INCORPORATIO N, THE ASSESSEE ENTERED INTO A DEED OF NOVATION & ASSIGNMENT DATED 08.12.2007 PURS UANT TO WHICH IT RECEIVED THE DEVELOPMENT RIGHTS OVER 237 ACRES OF LAND AT BATANA GAR FROM RIVERBANK HOLDINGS PVT LTD (RHPL) WHICH WAS ORIGINALLY HOLDING THE DEVEL OPMENT RIGHTS OVER THE SAID PROPERTY BY EARLIER DEVELOPMENT AGREEMENT DATED 18. 12.2006 BETWEEN BIL & RHPL. IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2008 -09, THE JV AGREEMENT EVIDENCING THE ARRANGEMENT WAS FURNISHED AND AFTER EXAMINING THE RELEVANT AGREEMENTS IN THE ASSESSMENT ORDER FOR AY 2008-09, THE AO HAD RECORDED FINDINGS WHICH WERE CITED BY THE CIT IN THE SCN DATED 17.02. 2016. THE LD AR THEREFORE SUBMITTED THAT THE LD CIT WAS FACTUALLY WRONG IN CL AIMING THAT THE AO HAD NEVER EXAMINED THE JV AGREEMENT AND THE ASSESSMENT ORDER WAS PASSED WITHOUT 6 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 VERIFICATION. THE LD AR FURTHER SUBMITTED THAT DURI NG THE YEAR UNDER CONSIDERATION BIL & CMGL BEING THE ONLY SHAREHOLDERS OF THE APPEL LANT REVISED TERMS OF THEIR ORIGINAL UNDERSTANDING BY ENTERING INTO A VARIATION AGREEMENT DATED 20.04.2010.UNDER THE VARIATION AGREEMENT, THE ORIGI NAL TERMS BETWEEN THE PARTIES WERE SUBSTANTIALLY VARIED. BIL WHICH WAS HOLDING 50 % EQUITY IN THE APPELLANT COMPANY AGREED TO DIVEST ITS EQUITY STAKE FOR A CON SIDERATION IN FAVOUR OF PROMOTERS OF CMGL..SIMULTANEOUSLY, BIL TRANSFERRED DEVELOPMEN T RIGHTS IN BATANAGAR PROPERTY IN FAVOUR OF THE APPELLANT FOR A LUMP SUM CONSIDERA TION OF RS.90 CRORES BY A REGISTERED DEVELOPMENT AGREEMENT. THE LD AR SUBMITTED THAT IN NOTE NO. 11 OF SCHEDULE 17 OF THE AUDITED ACCOUNTS, FULL DISCLOSURE OF THE RELEVA NT FACTS WAS MADE AND THEREFORE IT WAS INAPPROPRIATE ON THE LD CITS PART TO HOLD THAT THE AO DID NOT GATHER RELEVANT INFORMATION PRIOR TO PASSING OF THE ORDER. THE LD A R FURTHER SUBMITTED THAT TAKING NOTE OF SCHEDULE 17 OF ANNUAL ACCOUNTS, IN THE NOTI CE U/S 142(1) DATED 19.07.2013, THE AO HAD REQUIRED THE ASSESSEE TO FURNISH COPY OF THE JOINT VENTURE AGREEMENT. IN RESPONSE THE ASSESSEE HAD FURNISHED COPIES OF THE V ARIATION AGREEMENT & DEVELOPMENT AGREEMENT BEFORE THE AO UNDER THE COVER OF ITS LETTER DATED 20.10.2013. THE ASSESSEE ALSO FURNISHED ITS EXPLANATION WITH RE GARD TO NATURE OF PAYMENTS MADE TO BIL BY ITS LETTERS BEFORE THE AO. THE LD AR THEREFO RE SUBMITTED THAT THE LD CIT WAS FACTUALLY WRONG IN HOLDING THAT THE AO DID NOT VERI FY THE RELEVANT AGREEMENTS OR THE FACTS. 6.2 THE LD AR SUBMITTED THAT THE APPELLANT HAD PAID EXPENSES TO ITS GROUP AND ASSOCIATE CONCERNS. FULL & PROPER DISCLOSURE OF THE SE PAYMENTS WAS MADE IN THE TAX AUDIT REPORT AS WELL AS IN NOTE NO. 8 OF SCHEDULE 1 7 TO AUDITED ACCOUNTS. IN THE COURSE OF ASSESSMENT THE AO HAD EXAMINED THESE PAYM ENTS. HE FURTHER SUBMITTED THAT SIMILAR PAYMENTS WERE MADE IN THE EARLIER AND SUBSE QUENT YEARS ALSO AND NO ADVERSE INFERENCES WERE DRAWN IN RESPECT OF THESE PAYMENTS IN ANY OF THE ASSESSMENTS. HE FURTHER SUBMITTED THAT THE EXPENSES WERE INCURRED I N RELATION TO DEVELOPMENT AND CONSTRUCTION OF BATANAGAR PROJECT AND EXPENSES INCU RRED FOR THE YEAR WERE INCLUDED IN THE VALUE OF WORK-IN-PROGRESS A/C AT THE END OF THE RELEVANT YEAR. HE SUBMITTED THAT THE PAYMENTS IN MOST OF THE CASES WERE IN THE NATUR E OF REIMBURSEMENT OF ACTUAL 7 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 EXPENSES INCURRED ON COST SHARING BASIS AMONGST GRO UP COMPANIES AND THEREFORE NOT EXCESSIVE OR UNREASONABLE. THE LD CIT ACCORDING TO HIM DID NOT POINT OUT EVEN A SINGLE SPECIFIC INSTANCE WHERE THE PAYMENT WAS FOUN D BY HIM TO BE EXCESSIVE OR UNREASONABLE. THE LD AR FURTHER SUBMITTED THAT THE LD CIT CONSIDERED THE ORDER TO BE ERRONEOUS ONLY BECAUSE THE ASSESSEE DID NOT SUBMIT THE AGREEMENTS WITH THE ASSOCIATE CONCERNS. HE ARGUED THAT THERE WAS NO LEGAL REQUIRE MENT OF HAVING AGREEMENTS BETWEEN THE ASSOCIATE CONCERNS BEFORE DEDUCTION WAS ALLOWED FOR EXPENSES PAID TO RELATED PARTIES. THE LD AR SUBMITTED THAT FOR MERE ABSENCE OF WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND ITS ASSOCIATE CONCERNS, TH E ASSESSMENT ORDER COULD NOT BE CONSIDERED TO BE ERRONEOUS BY THE LD CIT. 6.3 THE LD AR SUBMITTED THAT THE LD CIT ERRONEOUSLY ALLEGED THAT MAJOR EXPENSES UNDER THE HEAD CONSTRUCTION EXPENSES WERE NOT VERIF IED BY THE AO DURING THE ASSESSMENT. DRAWING ATTENTION TO SCN AND THE BREAK- UP OF CONSTRUCTION EXPENSES, THE LD AR SUBMITTED THAT THE EXPENSES INTER ALIA INCLUD ED FOLLOWING MAJOR HEADS: 1) COST OF LAND DEVELOPMENT : RS.28.23 CRORES 2) COST OF ACQUISITION OF LAND DEVELOPMENT RIGHTS : RS .90,00,00,000/- 3) REGISTRATION FEES : RS.4.85 CRORE 4) CONTRACTOR EXPENSES : RS.38.98 CRORE 5) RATES & TAXES : RS.1.34 CRORE 6) DELAYED DELIVERY CHARGES : RS.63.59 LACS 6.4 DRAWING OUR ATTENTION TO THE NOTICE U/S 142(1) AND THE REPLIES FILED IN RESPONSE THERETO, THE LD AR SUBMITTED THAT IN RESPECT OF EAC H OF THE ABOVE HEADS OF EXPENSE, THE ASSESSEE HAD FURNISHED DETAILED BREAK-UP AT THE TIM E OF ASSESSMENT AND FURNISHED COPIES OF THE SAME IN THE PAPER-BOOK. THE AR FURTHE R STATED THAT ENTIRE CONSTRUCTION EXPENSE INCURRED DURING THE RELEVANT YEAR AND DEBIT ED TO THE PROFIT & LOSS ACCOUNT OF FY 2010-11 WAS ULTIMATELY CARRIED TO THE WIP A/C AT THE CLOSE OF THE PREVIOUS YEAR. REFERRING TO NOTICE U/S 142(1), HE POINTED OUT THAT THE AO REQUIRED THE ASSESSEE TO 8 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 FURNISH THE WORKING OF WIP, AS ON THE CLOSE OF PREV IOUS YEAR WHICH WAS FURNISHED BEFORE THE AO FROM WHICH IT WAS EVIDENT THAT THE CO NSTRUCTION EXPENSES INCURRED DURING THE RELEVANT YEAR WERE TAKEN INTO ACCOUNT IN ARRIVING AT THE CLOSING VALUE OF WIP. HE THEREFORE SUBMITTED THAT THE CITS ALLEGATI ON THAT THE AO DID NOT EXAMINE MAJOR COMPONENT OF CONSTRUCTION EXPENSES WAS FACTUA LLY WRONG. 6.5 DRAWING OUR ATTENTION TO PARA 2 OF SCN, THE LD AR SUBMITTED THAT THE LD CIT ERRONEOUSLY OBSERVED THAT THE PAYMENT OF RS.90 CROR ES TO BIL WAS NOT PERMISSIBLE AS REVENUE EXPENDITURE SINCE IT WAS CAPITAL IN NATURE AND IN ABSENCE OF AGREEMENT WITH BIL, THE NATURE OF EXPENDITURE I.E. CAPITAL OR REVE NUE REMAINED UNVERIFIED. THE AR SUBMITTED THAT THE REASON SET OUT IN PARA 2 WAS CON TRARY TO LD CITS OWN OBSERVATIONS IN PARA 1 OF THE SCN. IN THE FIRST PARA, THE LD CIT ADMITTED THAT THE ASSESSEE WAS EXECUTING PROJECT OF DEVELOPING INTEGRATED TOWNSHIP ON THE BANKS OF RIVER GANGES ON LAND ADMEASURING 237 ACRES WHICH WAS OWNED BY BIL A ND DEVELOPMENT RIGHTS THEREOF WERE GIVEN TO THE ASSESSEE. THE AR FURTHER SUBMITTE D THAT IN THE ASSESSMENT ORDER FOR THE YEAR AS ALSO IN THE PRIOR YEARS THE AOS HAD FOU ND THE ASSESSEE TO BE ENGAGED IN DEVELOPING A TOWNSHIP AT BATANAGAR. EXPENSES INCURR ED ON DEVELOPMENT OF THE TOWNSHIP WERE CARRIED THROUGH ASSESSEES P&L A/C FR OM YEAR TO YEAR AND SALE OF CONSTRUCTED SPACES WAS CREDITED IN THE P&L A/C. THE SE FACTS CUMULATIVELY PROVED THAT THE EXPENDITURE INCURRED ON ACQUIRING DEVELOPMENT R IGHTS WAS A REVENUE EXPENDITURE INCURRED IN CONNECTION WITH ASSESSEES REAL ESTATE BUSINESS. THE AR SUBMITTED THAT ASSESSEES BUSINESS OF DEVELOPING BATANAGAR TOWNSHI P COULD NOT HAVE BEEN CARRIED ON BUT FOR ACQUIRING DEVELOPMENT RIGHTS IN LAND FROM B IL AND THEREFORE THE EXPENDITURE WAS REVENUE IN NATURE AND COULD NOT BE CONSIDERED T O BE CAPITAL. HE ALSO POINTED OUT THAT THE VALUE OF CLOSING WIP CREDITED IN THE P&L A /C INCLUDED VALUE OF DEVELOPMENT RIGHTS OF RS.90 CRORES PAID TO BIL AND THEREFORE TH IS FACT ALSO PROVED THAT THE DEDUCTION WAS NOT ALLOWED TO THE ASSESSEE EVEN THOU GH CONSTRUCTION EXPENSES DEBITED INTER ALIA INCLUDED RS.90 CRORES PAID TO BIL. 9 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 6.6 REFERRING TO PARA 3 OF SCN, THE LD AR SUBMITTED THAT THE LD CIT WAS FACTUALLY WRONG IN HOLDING THAT THE AO DID NOT VERIFY THE ASS ESSEES TRANSACTION OF TAKING LOAN OF RS.130 CRORES FROM A BODY CORPORATE, UNSECURED L OANS IN THE FORM OF ICDS AND PAYMENT OF INTEREST. REFERRING TO NOTICE U/S 142(1) , THE AR POINTED OUT THAT THE AO HAD REQUIRED THE ASSESSEE TO PROVIDE DETAILS OF SEC URED AND UNSECURED LOANS AND FURNISH CONFIRMATIONS. IN RESPONSE, THE ASSESSEE BY ITS LETTER DATED 31.08.2013 HAD FURNISHED DETAILS OF SECURED AND UNSECURED LOANS AN D ALSO FURNISHED SUPPORTING DOCUMENTARY EVIDENCES. WITH REGARD TO SECURED LOAN OF RS.130 CRORES, THE AR SUBMITTED THAT IT WAS RECEIVED FROM HDFC LTD FOR BA TANAGAR PROJECT. SANCTION LETTER ISSUED BY HDFC LTD WAS FURNISHED BEFORE THE AO. HE ALSO SUBMITTED THAT DATE-WISE PARTICULARS OF SECURED LOAN RELEASED BY HDFC LTD AS FURNISHED BEFORE AO. THE AR ALSO STATED THAT THE DETAILS OF INTEREST & FINANCE CHARGES PAID FOR THE RELEVANT YEAR WERE FURNISHED VIDE ANNEXURE 20 OF ITS LETTER FILED BEFO RE THE AO AND ENTIRE INTEREST PAID FOR THE YEAR WAS CONSIDERED IN THE CLOSING VALUE OF WIP . THE AR THEREFORE SUBMITTED THAT LD CITS SCN PROCEEDED ON ERRONEOUS PRESUMPTION THA T NO ENQUIRY WAS CONDUCTED BY THE AO PRIOR TO COMPLETION OF ASSESSMENT. 6.7 THE LD AR FINALLY SUBMITTED THAT EACH OF THE RE ASON FOR WHICH THE LD CIT CONSIDERED THE AOS ORDER TO BE ERRONEOUS WAS FACTU ALLY WRONG AND THEREFORE THE ASSESSMENT COULD NOT HAVE BEEN SET ASIDE FOR MERE R E-EXAMINATION. THE LD AR SUBMITTED THAT IT WAS BROUGHT TO LD CITS ATTENTION THAT ON EACH ISSUE FOR WHICH THE LD CIT CONSIDERED THE ASSESSMENT ORDER TO BE ERRONEOU S, ENQUIRY WAS CONDUCTED BY THE AO AND ONLY AFTER DETAILED EXAMINATION OF THE FACTS AND EXPLANATIONS FURNISHED HE HAD PASSED THE ORDER. RELYING ON THE JUDGMENT OF THE CA LCUTTA HIGH COURT IN THE CASE OF CIT VS J.L. MORRISON (I) LTD (366 ITR 593), HE SUBMITTED THAT ONCE THE AO HAD CONDUCTED THE ENQUIRY BY ISSUING QUESTIONNAIRE U/S 142(1) AND THE AO ADOPTED ONE OF THE PERMISSIBLE COURSE IN LAW, THEN IT WAS NOT OPEN FOR THE CIT TO REVISE THE ORDER U/S 263 MERELY BECAUSE HE ENTERTAINED ANOTHER VIEW OR FOR THE REASON THAT ENQUIRY WAS NOT CONDUCTED. THE ASSESSEE HAD ALSO SUBMITTED BEFO RE THE LD CIT, RELEVANT DOCUMENTS AND DETAILS IN SUPPORT OF VARIOUS EXPENSE S ENUMERATED BY THE LD CIT IN THE 10 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 SCN. SAME DOCUMENTS & DETAILS WERE FURNISHED BEFORE THE AO DURING ASSESSMENT PROCEEDINGS WHICH WERE EXAMINED BY HIM PRIOR TO PAS SING OF THE ASSESSMENT ORDER. EVEN THOUGH ALL THE RELEVANT MATERIAL & INFORMATION INCLUDING COPIES OF THE AGREEMENT, SANCTION LETTERS ETC. WERE FILED BEFORE THE LD CIT, HE DID NOT POINT OUT ANY SPECIFIC INFIRMITY IN ANY OF THE DOCUMENTS OR DETAI LS FURNISHED. EVEN AFTER EXAMINING THE RELEVANT INFORMATION, DETAILS AND ASSESSEES E XPLANATION, THE CIT DID NOT ESTABLISH ANY SPECIFIC GROUND ON WHICH HE FOUND THAT THE ASSE SSMENT ORDER WAS ERRONEOUS FOR THE REASON THAT DEDUCTION FOR ANY SPECIFIC EXPENDIT URE WAS WRONGLY ALLOWED. RELYING ON THE JUDGMENTS OF THE DELHI HIGH COURT IN THE CAS E OF DIT VSJYOTI FOUNDATION (357 ITR 388) & ITO VS D.G. HOUSING PROJECTS LTD (343 ITR 329) , THE LD AR SUBMITTED THAT ONCE THE ASSESSEE HAD BROUGHT BEFORE THE CIT, THE RELEVANT MATERIAL, INFORMATION AND DOCUMENTS TO DISPROVE HIS CHARGE IN THE SCN THEN THE CIT COULD NOT MERELY SET ASIDE THE ASSESSMENT FOR CARRYING OUT VE RIFICATION OF THE RELEVANT FACTS WITHOUT HIMSELF RECORDING FACTUAL FINDING THAT THE ASSESSMENT WAS ERRONEOUS AND THEREFORE PREJUDICIAL TO THE REVENUES INTERESTS FO R SPECIFIC REASONS. THE LD AR THEREFORE PRAYED FOR SETTING ASIDE THE IMPUGNED ORD ER PASSED BY LD CIT U/S 263 OF THE ACT. 7. THE LD. CIT DR, ON THE OTHER HAND SUPPORTED THE LD CITS ORDER VEHEMENTLY. HE SUBMITTED THAT BOTH IN SCN AS WELL AS IN THE ORD ER U/S 263, THE LD CIT HAD SPECIFICALLY REFERRED TO RELEVANT DOCUMENTS WHICH S HOULD HAVE BEEN EXAMINED BY THE AO BEFORE HE ALLOWED DEDUCTION FOR EXPENSES SUCH AS ACQUISITION OF DEVELOPMENT RIGHTS, PAYMENT OF INTEREST ON LOANS ETC. HE SUBMIT TED THAT THE LD. CIT HAD SPECIFIED IN THE SCN SPECIFIC ISSUES WITH REFERENCE TO WHICH THE AO SHOULD HAVE CONDUCTED ENQUIRY AND EXAMINATION BUT WHICH HE HAD FAILED TO DO. THE LD CIT IN HIS ORDER HAD REFERRED TO SPECIFIC DOCUMENTS SUCH AS JV AGREEMENT WITH BIL WHICH WERE REQUIRED TO BE EXAMINED IN DETAIL FOR ASCERTAINING TRUE NATU RE AND CHARACTER OF THE EXPENDITURE.. HE ARGUED THAT IN THE PRESENT CASE THE LD CIT HAD M ERELY SET ASIDE THE AOS ORDER DIRECTING HIM TO RE-CONDUCT ENQUIRIES AND REFRAME T HE ASSESSMENT AS PER LAW AFTER GIVING OPPORTUNITY OF HEARING AND THEREFORE LD CIT S ORDER DID NOT CAUSE ANY 11 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 GRIEVANCE OR PREJUDICE TO THE ASSESSEE. HE THEREFOR E STRONGLY URGED FOR SUSTAINING THE CITS ORDER OF REVISION U/S 263 OF THE ACT. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES. WE HAVE ALSO PERUSED THE DOCUMENTS FURNISHED BEFORE US IN THE PAPER BOOK , CONSIDERED THE FACTS OF THE CASE AND THE JUDICIAL DECISIONS RELIED UPON BY THE PARTI ES IN THEIR SUBMISSIONS. FROM THE PERUSAL OF THE SCN AND THE IMPUGNED ORDER, WE NOTE THAT THE LD CIT HAVING SET OUT VARIOUS REASONS IN SHOW CAUSE NOTICE, ULTIMATELY PA SSED THE ORDER FOR THE REASONS SUMMED UP IN PARA 3(III) OF THE IMPUGNED ORDER. WE FIND THAT IN SUM AND SUBSTANCE THE LD CIT CONSIDERED THE ORDER ERRONEOUS ON THE GR OUND THAT IT WAS PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION OF THE DOCUMENTS A ND DETAILS WHICH SHOULD HAVE BEEN MADE AS THE FACTS & CIRCUMSTANCES DEMANDED. WE NOTE THAT IN PARA 3(III)THE CIT OBSERVED THAT THE ASSESSEE ENTERED INTO JV WITH BIL & CMGL FOR DEVELOPING A PROJECT AND PAID RS.90 CRORES TO BIL FOR OBTAINING DEVELOPM ENT RIGHTS. THE AO HOWEVER PASSED THE ASSESSMENT ORDER WITHOUT EXAMINING THE A GREEMENT AND IN ITS ABSENCE THE NATURE OF PAYMENT REMAINED UNVERIFIED. ON PERUSAL O F THE MATERIAL AND DETAILS AVAILABLE ON RECORD, WE HOWEVER FIND THAT LD CITS SAID FINDING CANNOT BE ACCEPTED AT ITS FACE VALUE BECAUSE FACTS ON RECORD SHOW IT OTHE RWISE. WE FIND THAT THE APPELLANT WAS INCORPORATED BY CMGL & BIL AS AN SPV FOR UNDERT AKING DEVELOPMENT OF A TOWNSHIP AT BATANAGAR ON THE LAND BELONGING TO BIL IN PURSUANCE OF AN ARRANGEMENT AGREED UPON BETWEEN THE PARTIES IN 2005-06. BIL AND CMGL HELD 50% EQUITY IN THE ASSESSEE COMPANY, INCORPORATED FOR UNDERTAKING DEVE LOPMENT OF TOWNSHIP AT BATANAGAR. THE BUSINESS OF DEVELOPMENT OF TOWNSHIP COMMENCED ON INCORPORATION OF THE ASSESSEE IN 2007.IN THE ASSESSMENT ORDER OF THE INITIAL YEAR I.E. AY 2008-09, THE AO REFERRED TO THE JOINT VENTURE AGREEMENT BETWEEN BIL & CMGL FOR DEVELOPMENT OF BATANAGAR PROJECT ON THE LAND BELONGING TO BIL. THE SAME PROJECT CONTINUED TO BE EXECUTED BY THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION AND THE LD CITS OBSERVATIONS IN PARA 1 OF SCN WERE FOUND TO BE SUBS TANTIALLY COPIED FROM THE ASSESSMENT ORDER FOR AY 2008-09. WE THEREFORE FIND FORCE IN THE LD ARS SUBMISSIONS THAT THE SET OF CIRCUMSTANCES UNDER WHI CH THE ASSESSEE EXECUTED 12 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 BATANAGAR PROJECT IN THE RELEVANT YEAR WERE SAME A S IN THE EARLIER YEARS AND THESE WERE TAKEN NOTE OF BY THE AO. 8.1 WE NOTE THAT DURING THE RELEVANT YEAR EVEN THOU GH THE ASSESSEE CONTINUED TO EXECUTE BATANAGAR PROJECT ON ITS OWN, PROMOTERS OF THE APPELLANT I.E. BIL & CMGL VARIED TERMS OF THEIR UNDERSTANDING INTER SE WHICH WERE EVIDENCED BY VARIATION AGREEMENT AND THE DEVELOPMENT AGREEMENT BOTH DATED 28/04/2010.UNDER THE REVISED TERMS, BIL DISINVESTED ITS 50% EQUITY IN THE ASSESS EE IN FAVOUR OF CMGL GROUP. SIMULTANEOUSLY BY REGISTERED DEVELOPMENT AGREEMENT DATED 28.04.2010, BIL TRANSFERRED DEVELOPMENT RIGHTS IN BATANAGARLAND IN ASSESSEES FAVOUR FOR A LUMPSUM CONSIDERATION OF RS.90 CRORES WHICH WAS DEBITED IN ASSESSEES P&L A/C UNDER THE ACCOUNTING HEAD CONSTRUCTION EXPENSES. WE NOTE T HAT IN NOTE NO. 11 OF SCHEDULE 17 OF ANNUAL AUDITED ACCOUNTS, THE ASSESSEE MADE TH E FOLLOWING DISCLOSURE OF FACTS WITH REFERENCE TO AGREEMENT DATED 28.04.2010 ON 28 TH APRIL 2010, THE COMPANY, RIVERBANK HOLDINGS PRIVAT E LIMITED (RHPL), CALCUTTA METROPOLITAN GROUP LIMITED AND BATA INDIA LIMITED ( BIL) HAVE ENTERED INTO AN AGREEMENT (DEVELOPMENT AGREEMENT) WHICH REPLACED THE ENTIRE UNDERSTANDING BETWEEN THE PARTIES AS CONTAINED IN EARLIER JOINT VENTURE AGREEMENT, TRIPARTITE AGRE EMENT, FIRST DEVELOPMENT AGREEMENT AND ASSIGNMENT AND NOVATION AGREEMENT FOR DEVELOPMENT O F INTEGRATED TOWNSHIP ON LAND ADMEASURING 223.80 ACRES AND 25 ACRES TO THE COMPANY AND RHPL R ESPECTIVELY. UNDER THE TERMS OF DEVELOPMENT AGREEMENT: - BIL HAS TRANSFERRED AND ASSIGNED DEVELOPMENT RIGHT OF ABOVE LAND FOR TOTAL CONSIDERATION OF RS.900,000,000 PAYABLE IN CASH AND DELIVERY OF NEW EMPLOYEE HOUSING AGGREGATING 3.15 LACSSQ.FT. (APPROX.) BY 31 ST MARCH 2011 AND PRINCEP RIVERFRONT HOMES AGGREGATIN G 3.25 LACSSQFT IN PHASES. OUT OF ABOVE, CONSIDERATION OF RS.700,000,000 HAS BEEN PAID AND BANK GUARANTEE HAS BEEN PROVIDED BY THE COMPANY FOR THE BALANCE CONSIDERATION OF RS.200,000,000 WHICH IS PAYABLE AT A LATER DATE. - ACCORDINGLY, DURING THE CURRENT YEAR, THE COMPANY H AS PROVIDED FOR RS.200,000,000 AND RS.282,303,649 TOWARDS ADDITIONAL CONSIDERATION FOR LAND DEVELOPMENT AND REVISED COSTS OF NEW EMPLOYEE HOUSING RESPECTIVELY. - THE COMPANY HAS ALSO PROVIDED TO BIL BANK GUARANTEE OF RS.240,000,000 TOWARDS BILS BALANCE OBLIGATION UNDER THE TERMS OF ORDER DATED 6 TH APRIL 2006 ISSUED BY GOVERNMENT OF WEST BENGAL, DEPARTMENT OF LAND AND REVENUE. - ON DELIVERY OF NEW EMPLOYEE HOUSE BY THE COMPANY, B IL HAS RELOCATED 90% OF ITS EMPLOYEE FROM THEIR PRESENT ACCOMMODATION WITHIN THE PROJECT AREA TO THE NEW EMPLOYEE HOUSING. 13 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 BALANCE CONSIDERATION OF RS.20 CRORES WAS PAID BY T HE COMPANY TO BIL IN THE MONTH OF APRIL 2011. 8.2 WE THEREFORE FIND THAT THERE WAS DISCLOSURE OF RELEVANT FACTS RELATING TO ACQUISITION OF DEVELOPMENT RIGHTS BY THE ASSESSEE I N THE ANNUAL AUDITED FINAL ACCOUNTS FILED BEFORE THE AO. WE ALSO NOTE THAT DEVELOPMENT RIGHTS IN RESPECT OF BATANAGAR LAND WERE DIRECTLY CONNECTED WITH ASSESSEES REAL ESTATE PROJECT WHICH WAS BEING DEVELOPED BY THE ASSESSEE AS ITS BUSINESS ACTIVITY. IN THE QU ESTIONNAIRE FORMING PART OF NOTICE U/S 142(1) OF THE ACT DATED 19.07.2013, THE AO HAD REQU IRED THE ASSESSEE TO PROVIDE THE FOLLOWING DOCUMENTS / DETAILS: 1) TO PRODUCE BOOKS OF ACCOUNTS AS MAINTAINED INCLUDIN G BILLS, VOUCHERS ETC. AND ALL BANK STATEMENTS. 2) COPY OF JOINT VENTURE AGREEMENT. 3) NAME, PRESENT ADDRESS, PAN AND IT JURISDICTION OF T HE DIRECTORS. 4) DETAILS OF ADDRESSES, PHONE NUMBER OF ALL PREMISES OFFICE, BRANCH, GODOWN, WORKSHOP ETC. 5) DETAILS OF INCREASE OF SHARE CAPITAL (IF ANY) DURIN G THE YEAR ALONG WITH NAMES, ADDRESSES, PAN OF THE APPLICANTS. 6) DETAILS OF LIST OF SHAREHOLDERS INCLUDING SHARE HOL DING BOTH IN A QUANTITATIVE AND PERCENTAGE TERM. ALSO GIVE COPY OF ACCOUNT OF SHAREHOLDERS HAV ING 10% OR MORE SHARES, INCLUDING THEIR PANS AND IT JURISDICTION. 7) INVENTORY OF CLOSING STOCK AND METHOD OF VALUATION, WITH DETAILS OF VALUATION. 8) PARTY-WISE DETAILS OF PURCHASES, SALES (ABOVE RS. 1 LAKH) AS APPEARING IN THE P/L ACCOUNT. SPECIFY THE NAME AND COMPLETE POSTAL ADDRESS (AT PR ESENT) OF THE PARTIES FROM WHOM PURCHASE AND TO WHOM SOLD. 9) PARTY-WISE DETAILS OF SUNDRY CREDITORS AND SUNDRY D EBTORS WITH NAME, AMOUNT AND COMPLETE PRESENT POSTAL ADDRESS OF THE PARTIES INVOLVED. 10) DETAILS OF SECURED, UNSECURED LOANS & ADVANCES MADE AND ACCEPTED WITH LOAN CONFIRMATIONS/STATEMENTS FOR LOANS ACCEPTED AS WELL AS LOANS PAID DURING THE YEAR. 11) DETAILS OF ADDITION OF FIXED ASSETS WITH SUPPORTING EVIDENCE OF ITS ACQUISITION AND PUT TO USE. 12) DETAILS OF EXPENDITURE ON CONSTRUCTION EXPENSES OF RS.1,687,706,353/-, SALE PROMOTION & ADVERTISEMENT OF RS.33,910,913/-, LEGAL AND PROFESS IONAL CHARGES OF RS.4,077,049/- AND INTEREST PAID OF RS.161,792,273/-. 13) LIST OF PERSONS FROM WHOM ADVANCES HAVE BEEN RECEIV ED OF RS.457,187,007/- CONTAINING NAME AND ADDRESS AND PAN. 14) COST OF REGISTRATION FEES OF RS.48,530,398/- AND CO NTRACTOR EXPENSES OF RS.389,829,139/-, SALARY WAGES AND BONUS OF RS.32,659,917/- & LEGAL A ND PROFESSIONAL FEES OF RS.19,979,648/-. 15) DETAILS OF TDS MADE AND PAID INTO GOVT ACCOUNTS DUR ING THE YEAR. 16) DETAILS OF ALL TRANSACTIONS IN MUTUAL FUNDS DURING THE YEAR UNDER CONSIDERATION INCLUDING OPENING AND CLOSING INVESTMENTS IN MUTUAL FUNDS. 14 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 17) DETAILS OF INVESTMENTS MADE DURING THE YEAR EXPLAIN ING THE SOURCES THEREOF. 18) IF ANY PART OF YOUR GROSS TOTAL INCOME INCLUDES ANY INCOME NOT FORMING PART OF YOUR TOTAL INCOME (I.E. EXEMPT INCOME), THEN FURNISH A COMPUTA TION OF EXPENDITURE RELATABLE TO SUCH EXEMPT INCOME, APPLYING RULE 8D WITH SECTION 14A OF THE I.T. ACT, 1961. 19) ANY OTHER DETAILS AND/OR DOCUMENTS FOR THE PURPOSES OF ASSESSMENT. 8.3 FROM THE ABOVE IT IS THEREFORE EVIDENT THAT THE AO HAD REQUIRED THE ASSESSEE TO PRODUCE COPY OF THE JV AGREEMENT. AT PAGE 148 TO 15 0 OF THE PAPER BOOK WE NOTE THAT THE ASSESSEES LETTER DATED NIL ADDRESSED TO ITO FI LED IN CONNECTION WITH ASSESSMENT PROCEEDINGS OF AY 2011-12. VIDE CLAUSE (8)OF THE SA ID LETTER, THE ASSESSEE FURNISHED DETAILS OF COST OF ACQUISITION OF LAND DEVELOPMENT RIGHTS AMOUNTING TO RS.90 CRORES PAID TO BIL AND THESE DETAILS WERE FURNISHED AS ANN EXURE 9 WHICH INTER ALIA INCLUDED THE DETAILS OF PAYMENT. FROM THE VARIATION AGREEMEN T PRODUCED BEFORE THE AO, THE CONSIDERATION OF RS 90 CRORES IS EVIDENT, WHICH IS STATED IN PAGES 52 AND 53 PB. WE FURTHER FIND THAT IN CLAUSE (9) OF ASSESSEES LETTE R DATED 21.10.2013, THE ASSESSEE HAD FURNISHED FOLLOWING EXPLANATION WITH REGARD TO CONS IDERATION OF RS.90 CRORES PAID TO BIL. ON 28 APRIL 2010, RIVERBANK DEVELOPERS PRIVATE LIM ITED (RDPL), RIVERBANK HOLDINGS PRIVATE LIMITED (RHPL), CALCUTTA METROPOLITAN GROUP LIMITED AND BATA INDIA LIMITED (BIL) HAVE ENTERED INTO AN DEVELOPMENT AGREEMENT FOR DEVELOPMENT OF AN INTEGRATED TOWNSHIP. AS PER THE TERMS OF THE DEVELOPMENT AGREEMENT, BIL HAS TRANSFERRED AND ASSI GNED DEVELOPMENT RIGHT OF LAND FOR TOTAL CONSIDERATION OF RS.900,000,000 PAYABLE IN CASH AND DELIVERY OF NEW EMPLOYEE HOUSING AGGREGATING 315,000 LACS SQUARE FEET (APPROXIMATELY) AND PRINCE P RIVERFRONT HOMES AGGREGATING TO 325,000 SQUARE FEET (APPROXIMATELY) IN PHASES. 8.4 WE ALSO NOTE THAT ALONG WITH THE LETTER DATED 2 1.10.2013, THE ASSESSEE ENCLOSED DOCUMENTS EVIDENCING THE PAYMENTS OF RS.90 CRORES A CTUALLY MADE TO BIL. ON VERIFICATION OF THESE DOCUMENTS, WE THEREFORE DO NO T FIND IN THE LD CITS FINDING THAT THE AO DID NOT CONDUCT ANY ENQUIRY WITH REGARD TO R S.90 CRORES PAID TO BIL FOR ACQUIRING DEVELOPMENT RIGHTS. ON THE CONTRARY WE FI ND THAT THE ASSESSEE HAD MADE FULL DISCLOSURE OF RELEVANT FACTS IN NOTE NO. 11 OF SCHE DULE 17 OF THE AUDITED ACCOUNTS. THE SAID NOTE PROVIDED THE INFORMATION WITH REGARD TO AGREEMENTS EXECUTED BY THE ASSESSEE AND OTHER PARTIES IN TERMS OF WHICH THE OR IGINAL TERMS OF THE UNDERSTANDING 15 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 BETWEEN BIL & CMGL WERE VARIED AND PURSUANT TO WHIC H BIL TRANSFERRED DEVELOPMENT RIGHTS IN BATANAGAR LAND IN ASSESSEES FAVOUR FOR RS.90 CRORES. WE FURTHER FIND THAT IN THE NOTICE U/S 142(1), THE AO PARTICUL ARLY REQUIRED THE ASSESSEE TO FURNISH COPY OF THE JV AGREEMENT AND IN RESPONSE THE ASSESS EE HAD FURNISHED NECESSARY DETAILS AND DOCUMENTS. WE ALSO FIND THAT IN THE LETTER DATE D 21.10.2013, THE ASSESSEE HAD CLARIFIED THAT THE DEVELOPMENT RIGHTS WERE ACQUIRED FOR DEVELOPMENT OF THE INTEGRATED TOWNSHIP WHICH WAS ASSESSEES BUSINESS ACTIVITY. WE ALSO NOTE THAT APART FROM CALLING UPON THE ASSESSEE TO FURNISH THE COPY OF THE AGREEM ENT, THE AO HAD ALSO REQUIRED THE ASSESSEE TO FURNISH COMPLETE DETAILS OF CONSTRUCTIO N EXPENSES OF RS.168.77 CRORES INCURRED DURING THE RELEVANT YEAR AND ALSO WORKING OF THE CLOSING STOCK ALONG WITH METHOD OF VALUATION. THE PAYMENT OF RS.90 CRORES MA DE FOR ACQUIRING DEVELOPMENT RIGHTS FORMED INTEGRAL PART OF CONSTRUCTION EXPENSE S OF RS.168.77 CRORES AND THESE EXPENSES WERE ENTIRELY TAKEN INTO CONSIDERATION IN ARRIVING AT THE CLOSING VALUE OF WIP CREDITED IN THE P&L A/C. AFTER EXAMINING THESE DETA ILS AND HAVING FOUND THAT THE COST OF DEVELOPMENT RIGHTS WAS INCLUDED IN THE CLOSING V ALUE OF WIP, THE AO HAD PASSED THE ORDER U/S 143(3). FOR THE REASONS DISCUSSED IN THE FOREGOING THEREFORE WE DO NOT FIND MERIT IN THE LD CITS FINDING THAT THE AO DID NOT EXAMINE THE RELEVANT FACTS AND AGREEMENTS BEFORE PASSING OF THE ASSESSMENT ORDER. 8.5 WE FURTHER FIND THAT IN THE ASSESSMENT ORDER FO R THE RELEVANT YEAR AS ALSO FOR THE EARLIER YEARS, THE AO HAD HELD THAT THE ASSESSEE WA S IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. BATANAGAR PROJECT WAS DEVELOPED AS PAR T OF ASSESSEES REAL ESTATE BUSINESS. THE PROCEEDS REALIZED FROM SALE OF PROPER TIES AT BATANAGAR WAS CREDITED TO P&L A/C AND INCOME DERIVED THERE FROM WAS ASSESSED UNDER THE HEAD BUSINESS. WE THEREFORE FIND FORCE IN THE LD ARS SUBMISSION THAT THE COST INCURRED BY THE ASSESSEE ON ACQUIRING DEVELOPMENT RIGHTS REPRESENTED COST OF ACQUIRING STOCK-IN-TRADE OF ASSESSEES REAL ESTATE BUSINESS. EVEN IN THE IMPUGN ED ORDER, THE LD CIT HIMSELF HAS ADMITTED THAT THE ASSESSEE WAS EXECUTING THE BATANA GAR PROJECT UNDER THE JV. THE LD CIT ALSO ADMITTED THAT THE LAND ON WHICH THE TOWNSH IP PROJECT WAS BEING DEVELOPED BELONGED TO BIL WHO HAD GRANTED DEVELOPMENT RIGHTS TO THE ASSESSEE. ONCE THESE WERE 16 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 THE ADMITTED FACTS, WE DO NOT FIND SUBSTANCE IN THE LD CITS ALLEGATION THAT IN THE ABSENCE OF THE JV AGREEMENT, THE AO WAS NOT IN A PO SITION TO VERIFY WHETHER THE EXPENDITURE WAS CAPITAL OR REVENUE IN NATURE. ON TH E CONTRARY WE FIND THAT THERE EXISTED SUFFICIENT MATERIAL ON RECORD FROM WHICH IT WAS VERY MUCH EVIDENT THAT THE DEVELOPMENT RIGHTS WERE ACQUIRED BY THE APPELLANT I N CONNECTION WITH ITS ONGOING REAL ESTATE BUSINESS, INCOME WHEREFROM WAS ASSESSED UNDE R THE HEAD BUSINESS IN THE ASSESSMENT ORDER AND THEREFORE THE EXPENDITURE ON A CQUIRING DEVELOPMENT RIGHTS WAS RIGHTLY CONSIDERED TO BE REVENUE IN NATURE BY THE A O. FOR THE REASONS DISCUSSED IN THE FOREGOING THEREFORE, WE HOLD THAT THE LD CITS ORDE R ON THIS ISSUE IS UNSUSTAINABLE. 9. IN PARA 3 (III) OF THE IMPUGNED ORDER THE LD CIT OBSERVED THAT THE ASSESSEE IN ITS WRITTEN SUBMISSIONS FURNISHED DETAILS OF EXPENS ES DEBITED IN P&L A/C ON VARIOUS HEADS BUT NO SUPPORTING EVIDENCES WERE PRODUCED WHI CH WERE REQUIRED TO BE DONE. THE LD CIT FURTHER OBSERVED THAT EVEN AFTER PROVIDI NG OPPORTUNITY, THE ASSESSEE DID NOT FURNISH COMPLETE DETAILS WITH SUPPORTING EVIDEN CES. IN OUR CONSIDERED OPINION HOWEVER THE REASONS FOR WHICH THE LD CIT SET ASIDE THE ORDER ARE NOT BORNE FROM THE RECORDS NOR FROM THE REASONS SET OUT IN THE SCN. IN THE FIRST INSTANCE WE FIND THAT NOWHERE IN THE SHOW CAUSE NOTICE, THE ASSESSEE WAS CALLED UPON TO FURNISH THE DETAILS OF EXPENSES AND SUBSTANTIATE IT BY PRODUCING SUPPOR TING DOCUMENTS AND EVIDENCES AT THE STAGE OF HEARING OF REVISION PROCEEDINGS. IN TH E SCN, THE LD CIT HAD ALLEGED THAT NO DETAILS OF THE FOLLOWING I) COST OF LAND DEVELOP MENT, II) COST OF ACQUISITION OF LAND DEVELOPMENT RIGHTS, III) REGISTRATION FEES, IV ) CONTRACTOR EXPENSES, V) RATES & TAXES & VI) DELAYED DELIVERY CHARGES; WHICH WERE AL L PART OF CONSTRUCTION EXPENSES WERE FURNISHED BY THE ASSESSEE NOR THE AO HAD EXAMINED THE DETAILS OF THESE EXPENSES PRIOR TO PASSING OF THE ASSESSMENT O RDER. THE LD CIT HAD FURTHER ALLEGED IN THE SCN THAT THE PAYMENTS MADE TO RELATE D PARTIES WERE NOT EXAMINED BY THE AO IN THE CONTEXT OF SECTION 40A(2) OF THE ACT. FROM THE PAPER BOOK FURNISHED AT THE TIME OF HEARING, WE HOWEVER FIND THAT IN THE QU ESTIONNAIRE ISSUED U/S 142(1) OF THE ACT, THE AO HAD PARTICULARLY REQUIRED THE ASSESSEE TO FURNISH PARTICULARS OF VARIOUS EXPENSES DEBITED IN ITS P&L A/C WHICH INTER ALIA IN CLUDED EXPENSES CLUBBED UNDER THE 17 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 HEAD CONSTRUCTION EXPENSES. FROM THE PAPER BOOK, WE FIND THAT IN THE COURSE OF ASSESSMENT, THE ASSESSEE HAD FURNISHED PARTY-WISE D ETAILS OF PURCHASES, DETAILS OF PAYMENT OF DEVELOPMENT RIGHTS TO BIL, DETAILS OF SE CURED & UNSECURED LOANS, DETAILS OF SALES PROMOTION & ADVERTISEMENT EXPENSES, DETAIL S OF REGISTRATION FEES IN CONNECTION REGISTRATION OF DEVELOPMENT AGREEMENT, DETAILS OF P AYMENTS MADE TO CONTRACTORS, DETAILS OF SALARIES, WAGES & BONUS, DETAILS OF LEGA L & PROFESSIONAL FEES, DETAILS OF INTEREST PAID, DETAILS OF TRAVELLING EXPENSES, AND OTHERS. THEREAFTER BY ANOTHER LETTER THE ASSESSEE ALSO FURNISHED PARTY-WISE DETAILS OF CONST RUCTION EXPENSES & ADMINISTRATIVE EXPENSES, WHEREVER THE EXPENDITURE PAID WAS IN EXCE SS OF RS.1 LAC. WE FURTHER NOTE THAT IN THE QUESTIONNAIRE U/S 142(1), THE AO HAD RE QUIRED THE ASSESSEE TO FURNISH STATEMENT OF CLOSING VALUE OF WORK IN PROGRESS AND THE ASSESSEE HAD FURNISHED SUCH STATEMENT WHICH RECONCILED WITH THE EXPENSES DEBITE D IN P&L A/C. FROM THE STATEMENT OF VALUATION OF OPENING & CLOSING WIP, WE FIND THAT IN ARRIVING AT THE CLOSING VALUE OF WIP OF RS.298.43 CRORES, THE ASSES SEE HAD TAKEN INTO ACCOUNT EXPENSES OF RS.209.54 CRORES INCURRED AND DEBITED I N THE P&L A/C OF THE RELEVANT YEAR. FROM THE STATEMENT OF VALUATION OF WIP, WE FI ND THAT ALL THE EXPENSES, ACCOUNTED AS PART OF CONSTRUCTION EXPENSES WERE TAKEN INTO AC COUNT IN ARRIVING AT CLOSING VALUE OF WIP AS ON 31.03.2011. WE ALSO NOTE THAT WITH REG ARD TO THE EXPENSES PAID TO RELATED PARTIES, THE ASSESSEE HAD MADE FULL DISCLOSURE OF T HE RELEVANT FACTS IN THE NOTE NO. 8 OF SCHEDULE 17 OF THE ANNUAL ACCOUNTS AND IN ANNEXUR E - C OF THE TAX AUDIT REPORT. WE FURTHER NOTE THAT THESE EXPENSES FORMED PART OF THE CONSTRUCTION EXPENSES WHICH WERE EXAMINED BY THE AO IN THE COURSE OF ASSESSMENT AND THEREFORE IT COULD NOT SAID THAT THE DEDUCTION WAS ALLOWED BY THE AO WITHOUT EX AMINING THE ISSUE ABOUT ITS ALLOWABILITY. WE ALSO NOTE THAT IN THE IMPUGNED ORD ER THE LD CIT HIMSELF ADMITTED THAT THE DETAILS OF EXPENSES WERE FURNISHED. NOWHER E IN THE IMPUGNED ORDER HAD THE LD CIT SPELT OUT AS TO WHAT ADDITIONAL DOCUMENTS OR EVIDENCES WHICH HE HAD REQUIRED THE ASSESSEE TO SUBMIT BUT WHICH THE ASSESSEE FAILE D TO DO. ON THE CONTRARY WE FIND THAT IN THE SCN, THE LD CIT HAD CONSIDERED THE ASSESSMEN T TO BE ERRONEOUS FOR THE REASON THAT THE AO DID NOT CALL FOR THE DETAILS NOR CONDUC TED ENQUIRY WITH REGARD TO ALLOWABILITY OF THESE EXPENSES. WE HOWEVER FIND THA T IN THE COURSE OF ASSESSMENT, THE AO INDEED CONDUCTED ENQUIRY BY ISSUING OF NOTICE U/ S 142(1) OF THE ACT. IN RESPONSE 18 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 THE ASSESSEE HAD FURNISHED BEFORE AO DETAILS AS REQ UISITIONED WHICH INTER ALIA INCLUDED EXPENSES ENUMERATED BY THE LD CIT IN HIS SCN. UPON EXAMINATION OF THE DETAILS FURNISHED THE AO HAD PASSED THE ASSESSMENT ORDER AN D THEREFORE WE FIND THAT THE REASONS SET OUT IN THE LD CITS SCN WERE NOT SUPPOR TED BY OR BORNE OUT FROM THE FACTS AVAILABLE IN THE RECORDS. EVEN IN THE COURSE OF HEA RING OF THE APPEAL, THE LD. CIT DR COULD NOT BRING TO OUR NOTICE ANY MATERIAL WHICH CO ULD PERSUADE US TO AGREE WITH THE LD CITS CONTENTION IN THE NOTICE THAT THE ENQUIRY INTO THE FACTS WAS NOT CONDUCTED. ON THE CONTRARY THE DOCUMENTS FILED IN THE PAPER BOOK, PARTICULARLY NOTICE U/S 142(1) OF THE ACT, PROVED THAT BEFORE PASSING OF THE ASSESSME NT ORDER THE AO DID CALL UPON THE ASSESSEE TO FURNISH THE INFORMATION AND DETAILS WIT H REGARD TO EACH OF THE HEAD OF EXPENSE SET OUT IN SCN AND AFTER EXAMINING THE DETA ILS FURNISHED, THE ASSESSMENT ORDER WAS PASSED. 10. ON THE FACTS SET OUT IN THE FOREGOING THEREFORE , WE FIND THAT THE ASSESSEE CASE IS SUPPORTEDBY THE DECISION OF THE JURISDICTIONAL CALC UTTA HIGH COURT IN THE CASE OF CIT VS J.L. MORRISON (I) LTD (366 ITR 593) . IN THIS CASE ALSO THE ASSESSMENT ORDER U/S 143(3) WAS HELD BY THE CIT TO BE ERRONEOUS AND PREJ UDICIAL TO THE INTERESTS OF THE REVENUE. IN THE SCN, THE CIT HAD SET OUT FIVE SPECI FIC HEADS OF EXPENSE IN RESPECT OF WHICH THE CIT CONSIDERED THE AOS ORDER WAS ERRONEO US BECAUSE DEDUCTION WAS NOT PROPERLY ALLOWED. IT WAS THE CITS CONTENTION THAT THE ORDER WAS PASSED BY THE AO WITHOUT CALLING FOR REQUISITE INFORMATION, WITHOUT ADEQUATE ENQUIRY AND THEREBY DEDUCTION OR CLAIMS WERE ERRONEOUSLY ALLOWED. ON AP PEAL THE ITAT HOWEVER FOUND THAT IN THE NOTICE U/S 142(1) THE AO HAD REQUIRED T HE ASSESSEE TO FURNISH THE DETAILS OF VARIOUS EXPENSES INTER ALIA INCLUDING THE ITEMS SPE CIFIED IN THE SCN. THE ORDER SHEET ENTRIES ALSO PROVED THAT THE AO HAD DISCUSSED THE I SSUES COVERED IN THE SCN PRIOR TO FRAMING OF THE ASSESSMENT. THE ITAT THEREFORE HELD THAT IN RESPECT OF ISSUES SET OUT IN THE SCN, THE AO HAD CONDUCTED ENQUIRY BY REQUIRING THE ASSESSEE TO FURNISH THE DETAILS AND AFTER EXAMINING THE RELEVANT DETAILS AN D EXPLANATIONS, THE AO HAD TAKEN ONE OF THE PLAUSIBLE VIEW AND THEREFORE THE CIT WAS NOT JUSTIFIED IN INVOKING REVISIONARY JURISDICTION U/S 263 OF THE ACT. ACCORD INGLY CITS ORDER U/S 263 WAS HELD 19 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 TO BE UNSUSTAINABLE. ON APPEAL U/S 260A, THE HONB LE CALCUTTA HIGH COURT UPHELD THE ITATS ORDER, OBSERVING AS FOLLOWS: THERE IS EVIDENCE TO SHOW THAT THE ASSESSING OFFIC ER HAD REQUIRED THE ASSESSEE TO ANSWER 17 QUESTIONS AND TO FILE DOCUMENTS IN REGARD THERETO. IT IS DIFFICULT TO PROCEED ON THE BASIS THAT THE 17 QUESTIONS RAISED BY HIM DID NOT REQUIRE APPLICATION OF MIND. WITHOUT APPLICATION OF MIND THE QUESTIONS RAISED BY HIM IN THE ANNEXURE TO NOTICE U NDER SECTION 142 (1) COULD NOT HAVE BEEN FORMULATED. THE FACT, THAT ALL REQUISITE PAPERS WERE SUMMONED A ND THEREAFTER THE MATTER WAS HEARD FROM TIME TO TIME COUPLED WITH THE FACT THAT THE VIEW TAKEN BY H IM IS NOT SHOWN BY THE REVENUE TO BE ERRONEOUS AND WAS ALSO CONSIDERED BOTH BY THE TRIBUNAL AS ALSO BY US TO BE A POSSIBLE VIEW, STRENGTHENS THE PRESUMPTION UNDER CLAUSE (E) OF SECTION 114 OF THE EVIDENCE ACT. A PRIMA FACIE EVIDENCE, ON THE BASIS OF THE AFORESAID PRESUMPTION, IS THUS CONVERTED INT O A CONCLUSIVE PROOF OF THE FACT THE ORDER WAS PASSED BY THE ASSESSING OFFICER AFTER DUE APPLICATI ON OF MIND. 10.1 APPLYING THE RATIO LAID DOWN IN THE JUDGMENT O F THE CALCUTTA HIGH COURT, WE NOTE THAT IN THE NOTICE U/S 142(1) DATED 19.07.2013 , THE AO HAD RAISED 19 SPECIFIC QUESTIONS REQUIRING THE ASSESSEE TO FURNISH DETAILS , DOCUMENTS & EXPLANATIONS WITH REFERENCE THERETO. THE DOCUMENTS WHICH THE ASSESSEE WAS CALLED UPON TO FURNISH INTER ALIA INCLUDED COPY OF THE JOINT VENTURE AGREEMENT, DETAILS OF SECURED & UNSECURED LOANS, DETAILS OF INTEREST PAID, DETAILS OF CONSTRU CTION EXPENSES, SALES PROMOTION EXPENSES, ADVERTISEMENT EXPENSES, LEGAL & PROFESSIO NAL EXPENSES, CONTRACTORS EXPENSES, REGISTRATION FEES, SALARIES & WAGES ETC. THE ASSESSEE WAS ALSO REQUIRED TO FURNISH DETAILS OF INVENTORY OF CLOSING STOCK AND M ETHOD OF ITS VALUATION WITH DETAILED WORKING OF VALUATION. FROM THE MATERIAL PLACED BEFO RE US, WE FIND THAT THE DETAILS REQUISITION WERE FILED BEFORE THE AO AND ONLY AFTER EXAMINATION OF THE DOCUMENTS FURNISHED THE ASSESSMENT WAS PASSED ON 28.03.2014. ON THESE FACTS THEREFORE WE ARE UNABLE TO ACCEPT THE LD CITS CHARGE IN THE SCN THA T THE AO HAD PASSED THE ORDER WITHOUT OBTAINING ANY INFORMATION OR WITHOUT CONDUC TING ENQUIRY WITH REGARD TO VARIOUS ITEMS OF EXPENSES ENUMERATED IN THE SHOW CA USE NOTICE. 10.2 WE FURTHER FIND THAT IN RESPONSE TO SCN, THE L D AR HAD FURNISHED BEFORE THE LD CIT ITS EXPLANATION CONTENDING THAT THE DETAILS OF VARIOUS EXPENSES ENUMERATED IN SCN WERE FURNISHED BEFORE THE AO AND THE ASSESSEE H AD ALSO FURNISHED SUCH DETAILS 20 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 BEFORE THE LD CIT. THIS FACT HAS BEEN ADMITTED BY T HE LD CIT IN PARA 3(III) OF THE IMPUGNED ORDER. NOWHERE IN THE SCN NOR IN THE ORDER U/S 263, THE LD CIT POINTED OUT THAT THE ASSESSEE WAS ALSO REQUIRED TO PRODUCE SUPP ORTING DOCUMENTS AND EVIDENCES TO SUBSTANTIATE THE EXPENSES INCURRED. ON THE CONTRARY THE SCN PROCEEDED ON THE PREMISE THAT THE ORDER U/S 143(3) WAS PASSED WITHOUT OBTAIN ING ANY DETAILS. WE HOWEVER FIND THAT DETAILS OF THE EXPENSES INCURRED WERE FURNISHE D BY THE ASSESSEE BOTH BEFORE THE AO AS WELL AS BEFORE THE LD CIT. WITHOUT SPECIFYING WHICH PARTICULAR DOCUMENT OR EVIDENCE THE ASSESSEE WAS EXPECTED TO PRODUCE BUT F AILED TO PRODUCE, THE LD CIT MADE ONLY A GENERAL ASSERTION THAT DESPITE OPPORTUNITY T HE ASSESSEE DID NOT PRODUCE ANY EVIDENCE. WE ARE UNABLE TO APPRECIATE LD CITS SUCH FINDING SINCE NO SPECIFIC INSTANCE OF NON-FURNISHING OF ANY PARTICULAR EVIDEN CE OR DOCUMENT HAS BEEN HIGHLIGHTED IN THE IMPUGNED ORDER. WE FIND THAT THE SCN WAS ISSUED ON THE GROUND THAT NO ENQUIRY WAS CONDUCTED BY THE AO AND IN THE SUBMISSIONS BEFORE THE LD CIT, THE ASSESSEE HAD FURNISHED ITS EXPLANATIONS DISPROV ING THE SAID CHARGE. THEREAFTER NO FRESH SCN WAS ISSUED BY THE LD CIT REQUIRING THE AS SESSEE TO PRODUCE ANY EVIDENCE OR DOCUMENT SUBSTANTIATING THE EXPENSES NOR ANY SCN WAS ISSUED AFTER OBTAINING THE RELEVANT DETAILS AS PER WHICH THE LD CIT COULD PROV E THAT DEDUCTION FOR ANY PARTICULAR EXPENDITURE WAS ERRONEOUSLY ALLOWED. IN OUR OPINION ONCE THE ASSESSEE HAD MET THE LD CITS OBJECTIONS IN THE SCN BY FURNISHING EXPLANATI ON AND DETAILS, THEN THE ONUS WAS ON THE LD CIT TO PROVE WITH COGENT MATERIAL THAT TH E EXPLANATIONS PUT FORTH WERE NOT PROPER AND THE ASSESSMENT WAS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE FOR THE REASONS SET OUT IN THE SCN. IT WAS NOT OPEN FOR THE LD CIT TO THEREAFTER SET ASIDE THE ASSESSMENT DIRECTING THE AO TO RE-FRAME T HE ASSESSMENT AFTER CONDUCTING ENQUIRIES AND AS PER LAW. 10.3 IN THIS REGARD WE FIND SUPPORT IN THE FOLLOWIN G OBSERVATIONS MADE BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF BHAGWATISPONGE PVT LTD VS CIT (ITA NO. 1283/KOL/2013) WHEREIN THE RELEVANT FINDING OF THE TRIBUNAL WAS A S FOLLOWS: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT A SUBMISSION IN WRITING WAS FILED BY THE ASSESSEE IN REPLY TO THE NOTICE ISSUED BY TH E LD. CIT UNDER SECTION 263 OFFERING ITS EXPLANATION IN RESPECT OF ERRORS ALLE GEDLY POINTED OUT BY THE LD. 21 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 CIT IN THE ORDER PASSED BY THE ASSESSING OFFICER UN DER SECTION 143(3) . ALTHOUGH IN THE IMPUGNED ORDER PASSED UNDER SECTION 263 , THE LD. CIT HAS MADE A REFERENCE TO THE WRITTEN S UBMISSION FILED BY THE ASSESSEE, HE HAS NEITHER DISCUSSED THE SAME NOR GIVEN ANY FINDING THEREON SO AS TO POINT OUT AS TO WHAT EXACTLY ARE THE ERRORS IN THE ORDER OF THE ASS ESSING OFFICER, WHICH WERE PREJUDICIAL TO THE INTER EST OF THE REVENUE. HE SIMPLY BRUSHED ASIDE THE SUBMISS ION MADE BY THE ASSESSEE AND HELD THE ORDER OF THE ASSESSING OFFICER TO BE ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF THE REVENUE ON THE GROUND THA T PROPER AND SUFFICIENT ENQUIRY ON THE ISSUES RAISED BY HIM IN THE NOTICE ISSUED UNDER SECTION 263 WAS NOT CONDUCTED BY THE ASSESSEE. HE EVEN DID NOT POIN T OUT AS TO HOW THE ENQUIRY MADE BY THE ASSESSING OFFICER WAS NOT SUFFICIENT AND PROPER AND EVEN FAIL ED TO POINT OUT AS TO WHAT FURTHER ENQUIRY THE ASSESSING OFFICER WAS EXPECTED TO DO ON THE RELEVAN T ISSUES. IN THE CASE OF LEISURE WEAR EXPORTS LIMITED (SUPRA) CITED BY THE LD. COUNSEL FOR THE AS SESSEE, THERE WAS NOTHING IN THE REVISIONAL ORDER PASSED BY THE LD. CIT UNDER SECTION 263 AS TO HOW THE ORDER OF THE ASSESSING OFFICER WAS E RRONEOUS AND FURTHER AS TO HOW IT WAS PREJUDICIAL TO THE INT EREST OF THE REVENUE. THE LD. COMMISSIONER ALSO HAD NOT DOUBTED THE STATEMENT OF FINISHED GOODS IN CLOS ING STOCK FURNISHED BY THE ASSESSEE BUT ONLY REMARKED THAT THE ASSESSING OFFICER SHOULD HAVE MAD E FURTHER ENQUIRY BY CALLING FOR MORE DETAILS. IN THESE FACTS AND CIRCUMSTANCES OF THE SAID CASE, WHI CH ARE SIMILAR TO THE FACTS OF THE PRESENT CASE, TH E HON'BLE DELHI HIGH COURT UPHELD THE ORDER OF THE TR IBUNAL SETTING ASIDE THE ORDER OF THE LD. CIT PASSED UNDER SECTION 263 OBSERVING THAT THE LD. COMMISSIONER HAD NOT TAKEN THE ORDER TO ITS LOGICALLY CONCLUSION, WHICH WAS HIS PRIME DUTY IN ORDER TO JU STIFY EXERCISE OF POWER UNDER SECTION 263 . IN OUR OPINION, THE RATIO OF THIS DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF LEISURE WEAR EXPORTS LIMITED (SUPRA) IS SQUARELY APPLICABLE TO T HE FACTS INVOLVED IN THE PRESENT CASE AND RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THE I MPUGNED ORDER PASSED BY THE LD. CIT UNDER SECTION 263 AND RESTORE THAT THE ASSESSING OFFICER PASSED UNDE R SECTION 143(3) . 10.4 A USEFUL REFERENCE CAN ALSO BE MADE TO ITAT, G UHAWATI IN THE CASE OF ANANDPODDARVS CIT (33 TAXMANN.COM 367) WHEREIN THE FACTS WERE SOMEWHAT SIMILAR TO THE ASSESSEES CASE. IN THE CASE BEFORE THE ITAT, GUHAWATI; THE CIT HELD THE ASSESSMENT ORDER AS ERRONEOUS ON THE GROUND OF LACK OF ENQUIRY AND NON-APPLICATION OF MIND EVEN THOUGH THE FACTS AVAILABLE IN THE ASSESSM ENT RECORD INDICATED THAT THE AO HAD CONDUCTED THE ENQUIRY BEFORE PASSING OF THE ASS ESSMENT BY ISSUING NOTICE U/S 142(1) OF THE ACT. ON APPEAL AGAINST THE CITS ORDE R U/S 263, THE COORDINATE BENCH OF THIS TRIBUNAL OBSERVED AS FOLLOWS: THE POWER ENVISAGED UNDER SECTION 263 IN SETTING A SIDE AN ASSESSMENT IS LARGE AND WIDE, BUT THIS CANNOT BE EXERCISED ON THE BASIS OF SUSPICION AND S URMISE. IT IS ALSO A SETTLED POSITION THAT THE PROCEEDINGS UNDER SECTION 263 CANNOT BE INITIATED B Y COMMISSIONER MERELY IN HIS SUPERVISORY CAPACITY AND TO SUBSTITUTE HIS SUBJECTIVE OPINION F OR THAT OF THE ASSESSING OFFICER. BEFORE INVOKING T HE POWERS UNDER SECTION 263, IT IS NECESSARY FOR COMMI SSIONER TO DEMONSTRATE THAT ASSESSING OFFICER HAD COMMITTED A PATENT ERROR WHICH RESULTED IN PREJUDIC E TO THE REVENUE. ON THE CONTRARY, WHERE THE ASSESSING OFFICER HAS CONDUCTED ENQUIRIES AND AFTER DUE CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE CASE HE COMES TO A POSSIBLE CONCLUSION, THEN IT IS NOT OPEN TO COMMISSIONER TO INVOKE REVISIONARY 22 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 JURISDICTION JUST TO RE-EXAMINE OR RE-VERIFY THE IS SUES ALREADY EXAMINED/VERIFIED AT THE ASSESSMENT LEVEL; OTHERWISE IT WILL TANTAMOUNT TO GIVE A SECON D INNING TO THE ASSESSING OFFICER TO RE-EXAMINE AND RE-ADJUDICATE THE CONCLUDED ISSUES. IN THE IMPUGNED ORDER, THE COMMISSIONER HAS DISCUSS ED THE ISSUES AND FACTS WHICH ACCORDING TO HIM LED TO BELIEVE THAT THE ORDER PASSED BY THE ASSESSI NG OFFICER WAS ERRONEOUS AND PREJUDICIAL TO INTERES T OF REVENUE. HE THUS SET ASIDE THE ASSESSMENT BY DIR ECTING TO RE-EXAMINE THE ISSUES AND PASS FRESH ASSESSMENT ORDER IF FOUND WARRANTED AFTER PROPER VE RIFICATION/CROSS VERIFICATION. FROM THE SAID OBSERVATION OF COMMISSIONER, IT IS, APPARENT THAT T HE EXERCISE UNDER SECTION 263 WAS MADE MERELY WITH A VIEW TO GIVE A SECOND INNING TO THE ASSESSIN G OFFICER TO RE-EXAMINE AND RE-ADJUDICATE THE CONCLUDED ISSUES. IT IS HOWEVER, FOUND THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER AND THE ADDITIONAL COMMISSIONER HAD EXAMINE D AND CONSIDERED ALL RELEVANT ISSUES AND MATERIALS. IT IS OPINED THAT THE COMMISSIONER'S OWN ASSERTION TO PASS FRESH ASSESSMENT ORDER 'IF WARRANTED' AFTER PROPER VERIFICATION/CROSS EXAMINAT ION CLEARLY ESTABLISHES THAT HE HIMSELF DID NOT COME TO EVEN PRIMA FACIE CONCLUSION THAT FOR THE R EASONS DISCUSSED BY HIM IN HIS IMPUGNED ORDER, THE ORDER OF THE ASSESSING OFFICER SHOULD BE HELD AS ER RONEOUS. THE TRIBUNAL IN THE CASE OF PLASTIC CONCERN V. ASSTT. CIT [1998] 61 TTJ 87 (CAL.) HELD THAT MERE POSSIBILITY OF GATHERING MORE MATERIAL TO PROVE THE CLAIM OF THE ASSESSEE WRONG WOULD NOT MAKE THE CONCLUDED ASSESSMENT ERRONEOUS AS LONG AS THE ASSESSING OFFICER HAD ACTED JUDICIOUSLY AND CONDUCTED ENQUIRIES IN THE COURSE OF ORIGINAL ASSESSMENT. 10.5 APPLYING THE RATIO LAID DOWN IN THE FOREGOING DECISIONS WE FIND THAT IN THE PRESENT CASE, THE AO HIMSELF HAD CONDUCTED ENQUIRY BY OBTAINING REQUISITE INFORMATION AND DETAILS WITH REGARD TO EACH OF THE EXPENSE ENUMERATED BY THE LD CIT IN HIS SCN. WE FIND THAT IN RESPONSE TO REQUISITION U/S 142(1), THE ASSESSEE HAD FURNISHED DETAILS & EXPLANATIONS AND THE DOCUMENTS ON RECORD DISPROVED THE LD CITS CHARGE IN THE SCN THAT ENQUIRY WAS NOT CONDUCTED. W E FURTHER FIND THAT EVEN BEFORE THE LD CIT, THE ASSESSEE HAD FURNISHED THE SAME EXP LANATIONS AND DETAILS WHICH HAVE BEEN IGNORED AND/OR BRUSHED ASIDE BY THE LD CIT BY MAKING GENERAL OBSERVATION THAT NO SUPPORTING EVIDENCES WERE FURNISHED DESPITE OPPO RTUNITY. WE HOWEVER FIND THAT NO SPECIFIC DOCUMENT OR EVIDENCE WAS SPECIFIED BY THE LD CIT IN HIS ORDER WHICH HE HAD EXPECTED OR REQUIRED THE ASSESSEE TO PRODUCE BUT WH ICH THE ASSESSEE FAILED TO PRODUCE AT THE STAGE OF REVISION. WE THEREFORE FIND THAT TH E ASSESSMENT HAS BEEN SET ASIDE BY THE LD CIT ONLY WITH A VIEW TO GIVE THE AO ONE MORE OPP ORTUNITY OF CONDUCTING ROVING ENQUIRY WITHOUT ESTABLISHING IN ANY SPECIFIC MANNER AS TO HOW AOS ASSESSMENT ORDER DATED 28.03.2014 WAS ERRONEOUS IN SO FAR AS PREJUDI CIAL TO THE INTEREST OF THE REVENUE. IN OUR CONSIDERED OPINION, BY SETTING ASIDE THE ASS ESSMENT AND DIRECTING THE AO TO 23 ITA NO.1329/KOL/2016 RIVERBANK DEVELOPERS P. LTD. AY 2011-12 PASS FRESH ORDER OF ASSESSMENT, THE LD CIT HAS MERE LY GIVEN THE AO A SECOND INNING WHICH IS NOT THE AIM AND OBJECT OF SECTION 263 OF T HE ACT. FOR THE REASONS DISCUSSED IN THE FOREGOING THEREFORE, WE HOLD THAT THE ORDER U/S 143(3) DATED 28.03.2014 PASSED BY THE ITO, WARD 12(3), KOLKATA WAS NOT ERRONEOUS IN S O FAR AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE FOR THE REASONS SET OUT IN THE CITS ORDER U/S 263 OF THE ACT. ACCORDINGLY THE LD CITS IMPUGNED ORDER PASSED U/S 263 IS CANCELLED AND THE AOS ORDER U/S 143(3) DATED 28.03.2014 IS RESTORED. 11. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 31.03.201 7 SD/- SD/- (WASEEM AHMED) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :31ST MARCH, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT RIVERBANK DEVELOPER PVT. LTD., 225C, A.J.C. BOSE ROAD, KOL-20 2 RESPONDENT CIT, KOLKATA.-4, KOLKATA 3. THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA /TRUE COPY, BY ORDER, ASSTT. REGISTRAR .