DLF Garden City Indore Private Limited, New Delhi V. Pr.CIT-03, New Delhi

ITA 1497/DEL/2020

AI Insights

The case involves DLF Garden City Indore Limited, a real estate developer, which filed an appeal against the revisional order of the Pr.CIT-03, New Delhi. The revisional order sought to revise the assessment for the Assessment Year 2015-16, which was originally completed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961, without any adjustments. The Pr.CIT's revisional order was based on the claim that the provision made by the assessee for anticipated losses was not an allowable expense under the Act. The ITAT, referencing a similar case for the Assessment Year 2014-15, found that the revisional jurisdiction was improperly assumed and thus set aside the revisional order, restoring the original assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121524 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-05-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 19-08-2020
• Other Referred Cases: CIT vs. Malibu Estate Ltd, ITA No. 3731/Del/2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 263; 143(3); 201; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B” DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.1497/DEL/2020 Assessment Year 2015-16 DLF Garden City Indore Limited, 1-E, Naaz Cinema Complex, Jhandewalan Extension, New Delhi. Vs. Pr.CIT-03, New Delhi TAN/PAN: AAFCA5034N (Appellant) (Respondent) Appellant by: Shri R.S. Singhvi, CA Shri Satyajeet Goel, CA Respondent by: Shri T. James Singson, CIT-DR Date of hearing: 04 05 2023 Date of pronouncement: 12 05 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he ca pti oned a ppeal has been file d at t he i ns tance o f the assessee agains t the re vi si onal or de r of the l d. P r. CI T-III, D elhi (‘Pr. C IT ’ in sho rt ) dat ed 16. 03. 2020 wher ei n or der p assed b y t he Assessi ng Of ficer (AO ) u nder Secti on 143( 3) of t he I nco me Tax Act , 1961 (t he Act ) dat ed 30. 09. 2017 concerni ng A Y 201 5- 16 was hel d t o be err one ous i n s o f ar a s preju dicial to t he i nterest of t he revenue wit hin t he mea ning of Sect ion 263 of the Act . 2. Br ie fl y s ta ted, the assessee is a re al es tat e deve loper and fi led i ts re tu rn of income w hi ch w as revise d later. The case was sele cte d for li mi t ed sc rut in y a nd the income w as asses sed a t the I.T.A. No.1497/Del/2020 2 re tu rned in come w it ho ut an y adj ust ment s for the A ssess ment Y ea r 2015-16 i n ques ti on. 3. T he assess ment c arri ed ou t b y t he A ssessing O fficer w as, how e ver sought t o be re vis ed b y the Pr. CIT . A show ca use not ice dated 23.0 7. 2018 w as issued to t his effec t. “ W h e r e a s I h a v e e x a m i n e d t h e a s s e s s m e n t r e c o rd s o f t h e a b o v e r e f e r r e d a s s e s s e e c o m p a n y ( h e r e - i n - a f t e r r e f e r r e d to a s t h e a s s e s s e e ) f o r A . Y . 2 0 1 5 -1 6 w h e r e i n a s s e s sm e n t w a s co m p l e t e d b y t h e A O a t t h e r e t u r n e d i n c o m e o f R s . 3 , 8 6 , 3 5 , 1 8 0 / - o n 3 0 .0 9 . 2 0 1 7 . I t i s f u r t h e r s e e n t h a t t h e a s s e s s e e h a d m a d e a p rov i s i o n o f R s . 1 , 2 9 ,5 5 , 8 6 2 - o n a c c o u n t o f a n t i c i p a t e d l o s s a n d d e bi t e d t h e s a m e t o t h e p ro f i t a n d l o s s a c c o u n t . T h e a s s e s s e e h a s c o n t en d e d t h a t t h e l o s s o f R s . 1 , 2 9 ,5 5 , 8 6 2 - h a s b e e n c l a i m e d a s a n e x pe n s e d u l y a p p ro v e d b y A c c o u n t i n g S t a n d a r d - 7 i s s u e d b y I n s t i t ut e o f C h a r t e r e d A c c o u n t a n t s o f I n d i a . H o w e v e r , s u c h p r o v i s i o n i s n ot a n a l l o w a b l e e x p e n s e i n v i e w o f p r o v i s i o n s o f S e c t i o n 1 4 5 ( 2 ) o f I T A c t w h i c h p ro v i d e s t h a t a p r o v i s i o n m a d e i n t h e a c c o u n t s f o r a n a c c ru e d o r k n o w n l i a b i l i t y i s a n a d m i s s i b l e d e d u c t i o n w h i l e o th e r p ro v i s i o n d o n o t q u a l i t y f o r d e d u c t i o n u n d e r t h e A c t . E x p e n d i t u re a l l o w a b l e m u s t a c t u a l l y e x i s t a t t h e t i m e o f f i n a n c i a l r e p o r t i n g . M a k i n g p r o v i s i o n f o r e x p e n d i t u r e w h i c h d e p e n d s u p o n a n e v e n t i s n o t a n a l l o w a b l e e x p e n d i t u r e . S i n c e t h e p r o v i s i o n m a d e w a s n o t a n a sc e r t a i n e d l i a b i l i t y , t h e s a m e s h o u l d h a v e b e e n d i s a l l o w e d a n d a d d e d b a c k t o t h e i n c o m e o f t h e a s s e s s e e , w h i c h h a s n o t b e e n d o n e b y t h e AO w h i l e p a s s i n g a s s e s s m e n t o r d e r u s 1 4 3 ( 3 ) o n 3 0 .0 9 . 20 1 7 . H e n c e , t h e o r d e r p a s se d b y t h e a s s e s s i n g o f f i c e r u s 1 4 3 ( 3 ) o f t h e IT A c t , 1 9 6 1 d a t e d 3 0 . 0 9 . 2 0 1 7 i s e r r o n e o u s so f a r i t is p r e j u d i c i a l t o t h e i n t e r e s t o f r e v e n u e f o r t h e A . Y . 2 0 1 5 - 1 6 r e q u ir i n g a r e v i s i t o n t h e e n t i r e i s s u e u n d e r c o n s i d e r a t i o n . Y o u a r e , t h e re f o r e , d i r e c t e d t o s h o w c a u s e a s t o w h y a n o r d e r i n t e r m s o f p r o v i s i o ns o f s e c t i o n 2 6 3 m a y n o t b e p a s s e d f o r A . Y . 2 0 1 5 - 1 6 s e t t i n g a s i d e t he o rd e r p a s s e d u / s . 1 4 3 ( 3 ) d a t e d 3 0 . 0 9 . 2 0 1 7 i n y o u r c a s e . ” 4. T he Pr. C IT ev ent uall y se t aside the assess ment orde r fra me d under Secti on 143 (3) a nd di recte d t he A ssess ing Of fi cer to re do the ass ess ment i n t erms of observat ions ma de in revisi onal order. 5. A gg rieve d by the re visi onal o rde r, t he a ssesse e pre fe rre d appea l before t he IT A T seeking to challenge the revis ional orde r. 6. When the matter w as calle d fo r hearin g, the ld. couns el for the asses see a dvert ed to th e show ca use not ice and s ubmit ted t hat I.T.A. No.1497/Del/2020 3 the show caus e notice b roa dl y a lle ges fa ilure of t he Assessi ng O fficer to e xa mi ne the allow a bi lit y of R s. 1,29, 55, 86 2/ - t ow a rds pro visions in the nature of ant ic ipa te d l oss and a ll egi ng t hat s uc h pro visions is not i n th e nat ure of ascerta ined l iabi lit y. 6. 1 In this re ga rd, the ld. couns el for the assessee submi t te d t hat the as sesse e is e ngage d in const ructi on busi ness a nd the i mp ugne d loss w as clai me d a s expend it ure in te rms of A cc oun ti ng Standar d- 7, issued b y I ns titute of Charte red A ccou nt ant of India (I CA I), based on Percenta ge of Compl et ion Met hod (PO C M) and t he same me thod of ac co unt in g follow ed b y t he assess ee has been acc ep te d by th e t ax authorities on a year t o yea r basis. Besides, POCM me thod of accounting for t ax pur pos e s has be en upheld by H on’ ble D elhi H igh C ourt i n the cas e of C IT vs. Ma li bu Est at e Ltd i n ITA No. 213/2 015 & C M No. 4961/2015. D uring the year, the assess ee has recogniz ed t he foresee ab le l osses a nd c reated provi si on ther eof. T he ld. cou nsel nex t s ubmit ted tha t i n ident ical fact sit ua tio n in the prece di ng A ssessment Yea r 2 014- 15, the C o- ord inate B enc h i n ITA N o. 373 1/De l/2019 o rde r dat ed 07. 09. 2022 has hel d t ha t the Rev is iona l Com mi ssione r w as no t justi fi ed in assu mi ng j uris dic tion u nde r Sectio n 263 towa rds such losses a nd ther ef ore, the i ssue is no longe r res in tegra. 7. We ha ve pe rus ed the revis ional o rder and e xa mi ned t he case reco rds w ith t he as sistance of the res pecti ve si des. We st raig htwa y noti ced that Pr. CIT in pa rag ra ph 4 of t he i mpug ned revis io nal order re fe rre d to the simi la r acti on tak en under Sect ion 26 3 i n A ssess me nt Yea r 2014- 15 als o a nd proc eeded t o revise the assess me nt orde r on the s imila r foo ti ng as ad opted i n A Y 2014- 15. The revisional order pa ssed in AY 2014 -15 has b ee n set asi de a nd canc el led b y the C o-ord inat e B ench a s pointed out on behal f of the I.T.A. No.1497/Del/2020 4 assessee. This being s o, there is no reas on for us t o take a di ffe re nt view in the mat te r. 8. In co ns ona nc e w ith the fa te of the revi sional orde r for AY 2014-15 i n te rms of order of C o-ord inate Be nch, t he a cti on of the Pr. CIT unde r Se ct i on 263 is set asi de and cancelled and the o rder of t he Assess ing O ffic er unde r Sect io n 143(3) is restored. 9. In the res ul t, the appeal of t he asses see is allow e d. Order pronounced in the open Court on 12/05/2023. Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /05/2023 prabhat