Appeal Details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 1801 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 10 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-05-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2009-2010
Appeal Filed On
18-07-2014
Judgement Text
] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . . , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO.1461/PN/2014 % % / ASSESSMENT YEAR : 2009-10 KUNDAN REAL ESTATE 206, CHADHA MANSION, PIMPRI, PUNE 411018 PAN NO.AAGFK5996F . / APPELLANT V/S CIT-V, PUNE . / RESPONDENT / ASSESSEE BY : SHRI RISHI V. LODHA / REVENUE BY : SHRI S.K. RASTOGI, CIT / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 27-03-2014 PASSED U/S.263 BY THE CIT-V, PUNE RE LATING TO ASSESSMENT YEAR 2009-10. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. IN THE FACTS OF THE CASE AND CIRCUMSTANCES THE LD. CIT-V ERRED IN ISSUING THE NOTICE U/S.263 AND ARRIVING AT THE CONCLU SION THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF THE REVENUE. 2. THE LD.CIT-V ERRED IN TREATING THE STOCK WORK IN PROGRESS DECLARED OVER AND ABOVE THE TENTATIVE PROFIT AND LO SS ACCOUNT PREPARED DURING THE COURSE OF SURVEY AS UNEXPLAINED INVESTMENT I N STOCK WORK IN PROGRESS AND ASSESSED U/S.69B. / DATE OF HEARING :18.05.2016 / DATE OF PRONOUNCEMENT:27.05.2016 2 ITA NO.1461/PN/2014 3. THE LD.CIT-V ERRED IN NOT APPRECIATING THE FACTS THAT THE WITHDRAWAL OF DEDUCTION U/S.80IB WAS AS PER THE FACTS A T THE MOMENT SUBJECT TO RIGHT TO APPEAL AND THEREFORE THE SAME WAS CLAIMED WHILE FILING THE RETURNS. 4. THE LD.CIT-V ERRED IN FACTS AND CIRCUMSTANCES THAT THE APPELLANT HAVE FILED RETURN OF INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME AND THEREFORE IT IS PREJUDICIAL TO THE INTERE ST OF THE REVENUE AS AO FAILED TO INITIATE PROCEEDING U/S.271(1)(C) OF TH E I.T. ACT, 1961. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, OR AMEN D TO THE GROUNDS OF APPEAL, BEFORE OR AT THE TIME OF HEARING. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IN A N INDIVIDUAL AND ENGAGED IN THE BUSINESS OF BUILDER AND DEVELO PER. IT FILED ITS RETURN OF INCOME ON 26-09-2009 DECLARING TOTAL INC OME OF RS.4,71,860/-. DURING THE YEAR UNDER CONSIDERATION THE AS SESSEE HAS UNDERTAKEN HOUSING PROJECT KUNDAN REAL ESTATE AT PIMPLE SAUDAGAR, PUNE. DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE AO NOTED THAT THE ASSESSEE HAS CREDITED SALE OF FLATS AN D HOUSES AT RS.3,06,39,240/- AND HAS ALSO OFFERED AN ADDITIONAL INCOME OF R S.1 CRORES AS A RESULT OF SURVEY U/S.133A OF THE I.T. ACT,19 61 CONDUCTED ON 19-09-2009 ON ACCOUNT OF WORK IN PROGRESS. THE ASS ESSEE IN THE COMPUTATION OF TOTAL INCOME HAS DISCLOSED NET PROFIT OF RS.2,16,46,228/- FROM THE SAID HOUSING PROJECT. HE HAS ALS O DECLARED INTEREST INCOME ON FIXED DEPOSIT AT RS.2,95,863/- AND RENTAL INCOME OF RS.1,76,000/-. THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80IB(10) AT RS.2,16,46,228/-. CONSIDERING TH E VARIOUS SUBMISSIONS MADE FROM TIME TO TIME THE AO DISALLOWE D THE CLAIM OF DEDUCTION U/S.80IB(10) AMOUNTING TO RS.2,16,46,228 AN D DETERMINED THE TOTAL INCOME AT RS. 2,21,18,090/- . THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO VIDE ORDER DATED 03-0 4-2013 ALLOWED THE CLAIM OF DEDUCTION U/S.80IB(10) AMOUNTING TO RS. 2,16,46,228/-. 3 ITA NO.1461/PN/2014 4. SUBSEQUENTLY, THE LD.CIT ISSUED A NOTICE U/S.263 OF TH E I.T. ACT ON 31-01-2014 FOR THE FOLLOWING REASONS : IN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR A.Y. 2009-10, TOTAL INCOME IS DECLARED AT RS.4,71,860/- AFTER CLAIMING DE DUCTION U/S.80IB(10) OF RS.2,16,46,228/-. ON PERUSAL OF THE A SSESSMENT RECORDS AND THE STATEMENT RECORDED U/S.131 OF THE ACT, 1961 O N 19-09-2008, DURING THE COURSE OF SURVEY CONDUCTED U/S.133A OF THE ACT, THE ASSESSEE HAD DISCLOSED AN ADDITIONAL INCOME OF RS.1 CRORE ON AC COUNT OF UNEXPLAINED INVESTMENT IN EXCESS WORK IN PROGRESS (WIP) FOUND AS PER THE TENTATIVE TRADING ACCOUNT DRAWN ON THAT DATE. ON PERUSAL OF THE ASSESSMENT ORDER, IT IS OBSERVED THAT T HE AO HAS FAILED TO ASSESS THE ADDITIONAL INCOME SO DISCLOSED OF RS.1 CRORE AS OTHER INCOME INVOKING PROVISIONS OF SECTION 69 OF THE ACT, BEING UNDISCLOSED INVESTMENT IN WIP. FURTHER ON THIS AMOUNT DEDUCTION U/S.80IB(10) IS ALSO NOT ALLOWABLE AND ALSO WARRANTS INITIATION OF PEN ALTY U/S.271(1)(C) OF THE ACT, WHICH THE AO HAS NOT DONE IN THE ASSESSMENT ORDER. 5. THE ASSESSEE SUBMITTED THAT THE SURVEY TEAM DID NO T FIND ANY INVESTMENT OR INCOME FROM OTHER SOURCES WHICH ARE OTHER THAN THE REGULAR INCOME EARNED BY THE ASSESSEE FIRM. THE DECLARAT ION OF STOCK AS PER THE TENTATIVE TRADING AND PROFIT AND LOSS A CCOUNT WAS VALUED AT THE TIME OF SURVEY AND WAS DECLARED ACCORDINGL Y. IT WAS SUBMITTED THAT THE VALUATION OF WORK-IN-PROGRESS WAS INCR EASED KEEPING IN MIND THE TREND OF INCREASING COST OF CONSTRUCTIO N. IT WAS SUBMITTED THAT THE DECLARATION WAS DONE FOR THE SAKE OF DECLARING INCOME TO THE SURVEY TEAM AND THERE WAS NO ELEMENT OF OTHER INCOME. RELYING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT THE DECLARED INCOME OF RS.1 CRORE WAS VERY WELL INCOME FROM T HE BUSINESS, I.E. WORK-IN-PROGRESS OF FLATS WHICH WERE ELIGIBLE FOR DEDUCTION U/S.80IB(10). 6. HOWEVER, THE CIT WAS NOT CONVINCED WITH THE ARGUMEN TS ADVANCED BY THE ASSESSEE. HE OBSERVED THAT DURING TH E COURSE OF SURVEY PROCEEDINGS THE STATEMENT OF SHRI SUNIL KUMAR CHA DDHA, PARTNER OF THE ASSESSEE FIRM WAS RECORDED ON OATH WHER EIN HE HAD 4 ITA NO.1461/PN/2014 AGREED TO SURRENDER THE CLAIM OF DEDUCTION U/S.80IB(10) MADE IN THE PRECEDING YEAR. IN ADDITION TO THE ABOVE AMOUNT THE PA RTNER HAD ALSO DECLARED ADDITIONAL INCOME OF RS.1 CRORE AS DIFFERENCE IN WORK- IN-PROGRESS. THUS, IT IS CLEAR THAT THE TENTATIVE ACCOUN T WAS NOT PREPARED BY THE ASSESSEE VOLUNTARILY AND THE SAME WAS PREPARED BY THE SURVEY TEAM. THE DIFFERENCE OF RS.1 CRORE WAS DETECT ED IN THE VALUATION SHOWN BY THE ASSESSEE IN ITS BOOKS AND AS PER THE TENTATIVE ACCOUNT PREPARED BY THE SURVEY TEAM. THE P ARTNER OF THE ASSESSEE FIRM COULD NOT EXPLAIN THE SOURCE OF DIFFERENCE (INVE STMENT) IN THE WORK-IN-PROGRESS AND THUS MADE DISCLOSURE OF RS.1 CRORE AS DIFFERENCE IN WORK-IN-PROGRESS. 7. THE LD. CIT FURTHER NOTED THAT UNEXPLAINED INVESTMEN T IN STOCK IS TO BE ASSESSED U/S.69 OF THE I.T. ACT AND MORE PRECISELY U/S.69B OF THE I.T. ACT. HE OBSERVED THAT IT HAS BEEN H ELD IN VARIOUS DECISIONS THAT UNEXPLAINED STOCK FOUND DURING THE COURSE OF SURVEY HAS TO BE ADDED TO THE ASSESSEES INCOME U/S.69, 69A, 6 9B OR 69C AND SUCH UNDISCLOSED UNEXPLAINED AMOUNTS DO NOT FALL UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND THE REFORE NO DEDUCTION IS AVAILABLE TO THE ASSESSEE. SINCE THE ASSESS EE IN THE INSTANT CASE HAS CATEGORICALLY OFFERED THE DIFFERENTIAL AMOUN T IN WORK-IN-PROGRESS AS ADDITIONAL INCOME AND NOWHERE DISCHA RGES ITS BURDEN TO PROVE THAT THIS UNEXPLAINED INVESTMENT WAS OU T OF THE INCOME OF THE BUSINESS OF THE ASSESSEE, THEREFORE, THE AS SESSEE WAS NOT ENTITLED TO DEDUCTION U/S.80IB(10) OF THE I.T. ACT. SIN CE THE AO IN THE INSTANT CASE HAS FAILED TO ASSESS THE UNEXPLAINED IN VESTMENT IN WORK-IN-PROGRESS U/S.69B OF THE ACT THE LD. CIT HELD T HAT THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF THE REVENUE. HE, THEREFORE, SET ASIDE TH E ASSESSMENT 5 ITA NO.1461/PN/2014 COMPLETED U/S.143(3) OF THE ACT AND DIRECTED THE AO REDO THE SAME IN THE LIGHT OF THE DISCUSSIONS MADE BY HIM AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. AGGRIEVED WITH SUCH ORDER OF THE CIT THE ASSESSEE IS IN APPEAL BEFORE US. 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS THE 4 TH YEAR OF CLAIM OF DEDUCTION U/S.80IB(10) BY THE ASSESSEE FIRM ON THE SAME PROJECTS AND FACTS OF THE CASE ARE SAME AS PER LA ST YEAR. HE SUBMITTED THAT BECAUSE OF THE SURVEY ACTION TAKEN BY T HE DEPARTMENT AND BECAUSE OF THE ISSUES RAISED BY THE AO IN THE CASE OF THE ASSESSEE FOR EARLIER YEARS THE ASSESSEE REVISED THE COMPUTATION FOR THE YEAR UNDER CONSIDERATION BY PAYING T HE TAX AFTER WITHDRAWING THE CLAIM MADE U/S.80IB(10). HOWEVER, THIS WAS D ONE WITH THE CLEAR CONDITION OF RIGHT TO APPEAL AT APPROPRIATE STAGE. HE SUBMITTED THAT AFTER THE COMPLETION OF THE ASSESSMENT T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF DEDUCTION VIDE HIS ORDER DATED 03-04-2013. 10. REFERRING TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YRS. 2008-09 AND 2009-10 VIDE ITA NO.1461 & 1462/P N/2013 ORDER DATED 29-04-2015 HE SUBMITTED THAT THE APPEAL FILE D BY THE REVENUE ON THIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESS EE AND THE APPEAL OF THE REVENUE WAS DISMISSED. HE SUBMITTED THAT T HE ASSESSEE IN ITS AUDITED PROFIT AND LOSS ACCOUNT HAS ALREAD Y DECLARED RS.1 CRORE AND THE NET PROFIT WAS CLAIMED AS DEDUCTION U/ S.80IB(10) BEFORE THE ORDER PASSED U/S.263. THE LD.CIT(A) HAS ALSO ALREADY DECIDED THE ISSUE OF CLAIM OF DEDUCTION U/S.80IB(10). FURTHE R, THE VIEW TAKEN BY THE AO WAS A POSSIBLE VIEW AND THE AO HAV ING TAKEN A 6 ITA NO.1461/PN/2014 VIEW WHICH IS IN FAVOUR OF THE ASSESSEE THE CIT SIMPLY CA NNOT ASSUME JURISDICTION U/S.263. HE SUBMITTED THAT FOR ASSUM ING JURISDICTION U/S.263, THE TWIN CONDITIONS NAMELY (A) THE ORDE R IS ERRONEOUS AND (B) THE ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE MUST BE SATISFIED. IN THE INSTANT CASE THE ORDE R MAY BE PREJUDICIAL TO THE INTEREST OF THE REVENUE BUT CANNOT BE SAID TO BE ERRONEOUS. REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHETH DEVELOPERS PVT. LTD. REPORTE D IN 25 TAXMANN.COM 173 HE SUBMITTED THAT THE HONBLE HIGH COUR T IN THE SAID DECISION HAS HELD THAT EXCESS STOCK DETECTED IN THE COURSE OF SURVEY IS A RESULT OF SUPPRESSION OF PROFIT FROM BUSINESS O VER THE YEARS AND THE INVESTMENT IN EXCESS STOCK HAS TO BE AS SESSED AS BUSINESS INCOME AND NOT DEEMED INCOME U/S.69B. CONSEQUE NTLY, THE ASSESSEE WAS ENTITLED FOR HIGHER REMUNERATION TO THE PARTNERS AS PER SECTION 40(B) OF THE ACT. HE SUBMITTED THAT THE STOC K WAS NOT FROM ANY UNDISCLOSED SOURCES BUT WAS VERY WELL FROM THE B USINESS OF THE ASSESSEE AND THEREFORE IT WAS INCOME FROM PROFIT AND GAINS FROM BUSINESS OR PROFESSION. 11. REFERRING TO PAGE 2 OF THE ASSESSMENT ORDER THE LD . COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PA RA 3.1 TO 3.3 OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE AO IN THE BODY OF THE ASSESSMENT ORDER HAS DISCUSSED THE ADDITIONAL INCOME OF R S. 1 CRORE OFFERED BY THE ASSESSEE AS A RESULT OF SURVEY U/S.133A O F THE I.T. ACT. HE HAS ALSO MENTIONED ABOUT THE CLAIM OF DEDUCTION U/S.80I B(10) MADE BY THE ASSESSEE. REFERRING TO THE TRADING PROFIT AN D LOSS ACCOUNT FOR THE YEAR ENDING 31-30-2009 HE DREW THE AT TENTION OF THE BENCH TO THE AMOUNT OF RS. 1 CRORE CREDITED TO THE PRO FIT AND LOSS ACCOUNT UNDER THE HEAD CLOSING WORK-IN-PROGRESS (AS PE R 7 ITA NO.1461/PN/2014 DECLARATION). HE ACCORDINGLY SUBMITTED THAT SINCE THE A SSESSEE HAS DISCLOSED THE AMOUNT OF RS. 1 CRORE AND THE AO AFTER CON SIDERING THE SUBMISSIONS FROM TIME TO TIME HAS TAKEN A POSSIBLE VIEW REG ARDING THE CLAIM OF DEDUCTION U/S.80IB(10), THEREFORE, THE CIT CANN OT INVOKE JURISDICTION U/S.263 MERELY BECAUSE HE DOES NOT A GREE WITH THE VIEW TAKEN BY THE AO. HE SUBMITTED THAT THE ACTION OF THE CIT IS PURELY ON CHANGE OF OPINION. SIMPLY BECAUSE HE DOES NOT AGREE WITH THE VIEW TAKEN BY THE AO, HE CANNOT INVOKE THE POWER U/S.263 OF THE I.T. ACT. 12. IN HIS ALTERNATE ARGUMENT THE LD. COUNSEL FOR THE AS SESSEE REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PAUL BROTHERS REPORTED IN 216 ITR 548 SUBMITTED THAT THE ASSESSMENT ORDER HAD MERGED WITH THE ORDER OF THE CIT (A) AND THEREFORE IN VIEW OF THE DOCTRINE OF MERGER THE CIT HAS NO JURISDICTION TO INVOKE POWERS U/S.263. 13. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT. HE SUBMITTED THAT THE AMOUNT OF RS.1 CRORE DECLARED BY THE ASSESSEE DURING THE COURS E OF SURVEY ON ACCOUNT OF WORK IN PROGRESS SHOULD HAVE BEEN SEPARA TELY ADDED BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE AND NO D EDUCTION U/S.80IB(10) IS ALLOWABLE ON THIS AMOUNT. SINCE THE AO FAILED TO BRING THE ADDITIONAL AMOUNT TO TAX, THEREFORE, THE ORDER O F THE AO HAS BECOME ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERE ST OF THE REVENUE AND THEREFORE THE CIT WAS JUSTIFIED IN INVOKING JU RISDICTION U/S.263 OF THE I.T .ACT. 14. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND THE LD.CIT AND THE PAPER 8 ITA NO.1461/PN/2014 BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CASE IS ENGAGED IN THE BUSINESS OF BUILDER AND DEV ELOPER. A SURVEY U/S.133A OF THE I.T. ACT WAS CONDUCTED IN THE C ASE OF THE ASSESSEE ON 19-09-2009 DURING WHICH THE STATEMENT OF T HE PARTNER WAS RECORDED AND THE PARTNER HAD DISCLOSED ADDITIONAL INC OME OF RS.1 CORE ON ACCOUNT OF CLOSING WORK-IN-PROGRESS. IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAD CREDITED THE ABOVE DECLARED AMOUN T OF RS.1 CRORE ON ACCOUNT OF CLOSING WORK-IN-PROGRESS. WE FIND THE AO IN THE BODY OF THE ASSESSMENT ORDER HAS ALSO DISCUSSED THE ADDITIONAL INCOME OF RS.1 CRORE AT PARA 3.1 TO 3.3 AS UNDER: 3.1 CLAIM OF DEDUCTION U/S.80IB(10) DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS CRE DITED SALES OF FLATS AND ROW HOUSES AT RS.3,06,39,240/-. THE ASSESSEE HAS ALSO OFFERED AN ADDITIONAL INCOME OF RS.1,00,00,000/- AS A RESULT O F SURVEY U/S.133A OF THE INCOME TAX ACT, 1961 CONDUCTED ON 19 TH SEPTEMBER 2009 ON ACCOUNT WORK-IN-PROGRESS. THE PROJECT CONSISTS OF BUILD ING HAVING 126 FLATS AND 13 ROW HOUSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FILED THE DETAILS OF SALE OF FLATS AND ROW HOUSES EFFECTED DURING THE YEAR AS PER CHART FILED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. 3.2 IN THE COMPUTATION OF TOTAL INCOME, THE ASSESSEE HAS DISCLOSED NET PROFIT AT RS.2,16,46,228/- FROM THE HOUSING PROJE CT VIZ KUNDAL REAL ESTATE, INCOME FROM OTHER SOURCES AT RS.1,76,000/- (TOW ER RENT). THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB OF THE INCOME TAX ACT, 1961 AT RS.2,16,46,228/- AGAINST THE HOUSING PROJ ECT. 3.3 IN THE IMMEDIATELY PRECEDING YEAR, THE ASSESSEE FI RM HAS PAID THE TAXES ON THE PROFITS DERIVED FROM HOUSING PROJECT BY WAY OF FILING REVISED RETURN OF INCOME ON 30 TH SEPTEMBER, 2009 AS A RESULT OF SURVEY. ON GOING THROUGH THE SURVEY FOLDER, IT WAS NOTICED T HAT STATEMENT OF SHRI SINISHKUMAR CHEDDHA WAS RECORDED ON OATH. IN RE PLY TO QUESTION NO.18, IT WAS STATED BY HIM THAT I HAVE SEEN THE PROV ISION AND DISCUSSED WITH MY CHARTERED ACCOUNTANT AND JUST TO BUY PEACE OF MIND I AM READY TO PAY THE TAX ON THE DEDUCTION CLAIMED BY ME SUBJECT TO MY RIGHT OF APPEAL. HOWEVER, THE ASSESSEE HAS NOT WITHDRA WN THE CLAIM OF DEDUCTION UNDER SECTION 80IB FOR THE YEAR UNDER CON SIDERATION THOUGH THE FACTS ARE IDENTICAL WITH THAT OF PRECEDING YEAR. IN THIS CONNECTION, THE ASSESSEE HAS CONTENDED THAT THE FIRM HAS NOT WITHDRA WN CLAIM OF DEDUCTION U/S.80IB BUT HAVE PAID TAXES TO BUY PEACE. SINCE THE CLAIM U/S.80IB IS UNDER DISPUTE, AND FIRM IS ALREADY IN APPEA L ON THE SAME ISSUE, THE FIRM HAS PAID TAXES TO AVOID INCONVENIENCE. 9 ITA NO.1461/PN/2014 15. WE FIND AFTER CONSIDERING THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE FROM TIME TO TIME THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S.80IB(10) AMOUNTING TO RS.2,21,18,090/-. WE FIND THE LD.CIT(A) VIDE ORDER DATED 03-04-2013 FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YRS. 2006-07 AND 20 07-08 HAD ALLOWED THE CLAIM OF DEDUCTION U/S.80IB(10) AT RS.2,16,46,228/- . UNDER THESE CIRCUMSTANCES WE HAVE TO SEE WHETHER THE LD.CIT IS JUSTIFIED IN INVOKING JURISDICTION U/S.263 OF THE I.T. ACT. 16. FROM THE ORDER PASSED U/S.263 BY THE LD.CIT, WE FIND IT IS HIS CASE THAT THE ADDITIONAL INCOME OF RS.1 CRORE DISCLOSED BY THE ASSESSEE FALLS UNDER THE HEAD OTHER INCOME U/S.69/69B OF THE I.T. ACT BEING UNDISCLOSED INVESTMENT IN WORK-IN-PROGRESS AND THEREFORE DEDUCTION U/S.80IB(10) IS NOT ALLOWABLE ON THIS AMOUNT. SIN CE THE AO WITHOUT BRINGING THIS AMOUNT TO TAX HAS COMPLETED TH E ASSESSMENT, THEREFORE, THE ORDER HAS BECOME ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR WHICH HE A SSUMED JURISDICTION U/S.263. 17. FROM THE VARIOUS DECISIONS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK, WE FIND THE VARIOUS BENCHES OF THE TRIBUNAL AR E TAKING THE CONSISTENT VIEW THAT WHENEVER ANY DECLARATION IS MAD E ON ACCOUNT OF EXCESS STOCK OR EXCESS WORK-IN-PROGRESS TH E ADDITIONAL AMOUNT PARTAKES THE CHARACTER OF BUSINESS RECEIPT AND NOT ON ACCOUNT OF UNDISCLOSED INVESTMENT UNDER THE PROVISIONS OF SECTION 69B OF THE I.T. ACT. 18. THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF C HOKSHI HIRALAL MAGANLAL VS. DCIT REPORTED IN 141 TTJ 1 HAS HELD TH AT 10 ITA NO.1461/PN/2014 EXCESS STOCK FOUND DURING THE COURSE OF SURVEY IS NOT S EPARATELY AND CLEARLY IDENTIFIABLE BUT IS PART OF MIXED LOTS OF STOCK AT T HE PREMISES WHICH INCLUDED DECLARED STOCK AS PER BOOKS AND ALSO THE EXCESS STOCK AS COMPUTED BY THE SURVEY OFFICERS. THE PROVISIONS OF SECTION 69B CANNOT BE MADE APPLICABLE AS PRIMARY CONDITION FOR I NVOKING THE PROVISIONS OF SECTION 69A AND 69B IS THAT THE ASSET SHOULD BE SEPARATELY IDENTIFIABLE AND IT SHOULD HAVE INDEPENDENT PHYS ICAL EXISTENCE OF ITS OWN. SINCE EXCESS STOCK IS A RESULT OF S UPPRESSION OF PROFIT FROM BUSINESS OVER THE YEARS AND HAS NOT BEEN KE PT IDENTIFIABLE SEPARATELY BUT IS THE PART OF OVERALL PHYSICAL S TOCK FOUND, THE INVESTMENT IN THE EXCESS STOCK HAS TO BE TREATED AS BUSINESS INCOME. ACCORDINGLY, THE TRIBUNAL HELD THAT THE ASSESSEE IS ENTITLED TO HIGHER REMUNERATION TO THE PARTNERS AS PER SECTION 40(B). 19. WE FIND THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN MILLS AND ELECTRICAL STORES REPORTED IN 2 32 ITR 421 HAS UPHELD THE DECISION OF THE TRIBUNAL WHEREIN THE T RIBUNAL HAS UPHELD THE DECISION OF THE CIT(A) DELETING THE ADDITION M ADE U/S.69B ON ACCOUNT OF ADDITION OF EXCESS STOCK FOUND DURIN G THE COURSE OF SEARCH AND SEIZURE DUE TO VALUATION OF THE ST OCK. IN THE INSTANT CASE ALSO THE DECLARATION OF EXCESS WORK IN PROGR ESS WAS MADE ON ACCOUNT OF UNSOLD FLATS, THERE IS NO SEPARATE IDEN TIFIABLE ASSET, THEREFORE, WE FIND FORCE IN THE ARGUMENT OF LD. COUN SEL FOR THE ASSESSEE THAT THE VIEW TAKEN BY THE AO CONSIDERING TH E AMOUNT OF RS.1 CRORE AS BUSINESS INCOME IS A POSSIBLE VIEW. 20. IT IS THE SETTLED POSITION OF LAW THAT FOR ASSUMING JUR ISDICTION U/S.263 THE TWIN CONDITIONS NAMELY (A) THE ORDER IS ERRONE OUS AND (B) THE ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE MUST BE 11 ITA NO.1461/PN/2014 SATISFIED. IN THE INSTANT CASE THE ORDER PASSED BY THE AO MAY BE PREJUDICIAL TO THE INTEREST OF THE REVENUE, HOWEVER, THE S AME CANNOT BE CONSIDERED AS ERRONEOUS SINCE THE AO HAS TAKEN A P OSSIBLE VIEW BY CONSIDERING THE ADDITIONAL INCOME DECLARED DURING THE CO URSE OF SURVEY ON ACCOUNT OF WORK-IN-PROGRESS AS BUSINESS INCOM E. WE THEREFORE HOLD THAT THE CIT WAS NOT CORRECT IN ASSUMIN G JURISDICTION U/S.263 OF THE I.T. ACT. 21. THE ASSESSEE IN THE INSTANT CASE HAS CREDITED THE AMOUNT OF RS.1 CRORE ON ACCOUNT OF EXCESS WORK-IN-PROGRESS IN THE CONSOLIDATED PROFIT AND LOSS ACCOUNT AND HAS DETERMINED THE BUSINESS PROFIT. THE AO HAS DENIED DEDUCTION U/S.80IB(10) BUT THE SAME HAS BE EN ALLOWED BY THE CIT(A) BEFORE THE ORDER U/S.263 OF THE I.T . ACT WAS PASSED. THEREFORE, IN VIEW OF THE DOCTRINE OF MERGER ALSO T HE CIT LACKS JURISDICTION U/S.263 OF THE I.T. ACT. THE VARIOUS DEC ISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE ALSO SUPPOR T THE VIEW OF THE ASSESSEE THAT SUCH INCOME DECLARED DURING THE C OURSE OF SURVEY ON ACCOUNT OF EXCESS STOCK/WORK-IN-PROGRESS CA N BE CONSIDERED AS BUSINESS INCOME AND PROVISIONS OF SECTION 69 , 69A, 69B CANNOT BE INVOKED. SINCE THE AO IN THE INSTANT CASE HAS TAKEN A POSSIBLE VIEW, THEREFORE, MERELY BECAUSE THE CIT DOES NO T AGREE WITH THE VIEW TAKEN BY THE AO CANNOT BE A GROUND FOR ASSUM ING JURISDICTION U/S.263 OF THE I.T. ACT. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE LD.CIT WAS NOT J USTIFIED IN INVOKING JURISDICTION U/S.263 OF THE I.T ACT. WE THEREFORE SET ASIDE THE ORDER PASSED U/S.263. THE GROUND RAISED BY THE AS SESSEE IS ACCORDINGLY ALLOWED. 12 ITA NO.1461/PN/2014 22. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27-05-2016. SD/- SD/- ( SUSHMA CHOWLA ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; DATED : 27 TH MAY , 2016. LRH'K ' (*+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) - THE CIT-V, PUNE 4. ( ++, , , , IQ.KS / DR, ITAT, A PUNE; 5. 0 / GUARD FILE. / BY ORDER , // ( + //TRUE COPY // 23 + , / SR. PRIVATE SECRETARY ,, IQ.KS / ITAT, PUNE
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