M/S RADHA MADHAV DEVELOPERS, NAGPUR V. PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL , NAGPUR

ITA 270/NAG/2018

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0196 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-10-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 13-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Value adopted by valuation officer; Revision of order; Search and seizure; Opportunity of being heard; Valuation report; Revised return
• Section: 263; 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR – VIRTUAL COURT BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA Nos.270 to 272/NAG/2018 िनधाᭅरण वषᭅ / Assessment Years : 2011-12 to 2013-14 M/s. Radha Madhav Developers, 125, Abhyankar Road, Sitabuildi, Nagpur. PAN : AAJFR4038G Vs. PCIT (Central), Nagpur. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: These are the appeals filed by the assessee directed against the common order of ld. Pr. Commissioner of Income Tax (Central), Nagpur [‘PCIT’] dated 08.10.2018 for the assessment years 2011-12 to 2013-14 respectively. 2. Since the identical facts and common issues are involved in all the above captioned three appeals of the assessee, we proceed to dispose of the same by this common order. Assessee by : Shri Kapil Hirani Revenue by : Shri Kailash G. Kanojiya Date of hearing : 18.10.2023 Date of pronouncement : 03.11.2023 ITA Nos.270 to 272/NAG/2018 2 3. Briefly, the facts of the case are that the appellant is a partnership firm engaged in the business of real estate. The Returns of Income for the assessment years 2011-12, 2012-13 & 2013-14 was filed on 20.09.2011, 30.07.2012 & 11.09.2014 declaring total income of Rs.4,64,83,340/-, Rs.Nil, & Rs.27,95,90,170/- respectively. Subsequently, the search and seizure operations were conducted in the residential premises of the appellant on 02.12.2014. During the course of such search and seizure operations, certain incriminating documents were stated to have been found and seized. Based on this incriminating material, a notice u/s 153A of the Income Tax Act, 1961 (‘the Act’) was issued on 20.05.2015 calling upon the appellant to file return of income. In response to the said notice u/s 153A, the appellant filed the return of income on 29.07.2016 declaring same income as declared in the original return of income. Against the said return of income, the assessment was completed by the Assessing Officer accepting the returned income vide order dated 30.12.2016 passed u/s 143(3) r.w.s. 153A of the Act. 4. Subsequently, on review of the assessment records, the ld. PCIT found that the Assessing Officer had failed to examine the issue relating to understatement of cost of investments in project, ITA Nos.270 to 272/NAG/2018 3 namely, “Vrindavan”, outer Ring Road, Near VCA Stadium, Jamtha, Nagpur. Further, the ld. PCIT also pointed out that during the course of search proceedings, the total cost of construction of the project was mentioned at Rs.271 crores as against the amount of Rs.153.58 crores shown in the books of accounts. Based on this information, a reference was made u/s 142A before the District Valuation Officer (DVO) to find out the total cost of the project and the expenditure incurred by the assessee for development of the said project. The DVO vide report dated 22.12.2016 had pointed out the difference in the cost of the project, the details of which are as under :- F.Y. A.Y. Cost of investment in the project, declared by assessee (Rs.) Assessed by Valuation Cell (Rs.) Difference in amount (Rs.) 2010-11 2011-12 4,45,86,000 5,25,45,132 79,59,132 2011-12 2012-13 7,75,80,000 9,14,28,953 1,38,48,953 2012-13 2013-14 45,94,90,000 54,15,14,434 8,20,24,434 5. The ld. PCIT was of the opinion that the assessment order was passed by the Assessing Officer without taking into consideration the DVO report and, therefore, formed an opinion that the assessment order is erroneous and prejudicial to the interests of the Revenue. Accordingly, the ld. PCIT issued a show-cause notice to explain the assessee as to why the assessment order should not be ITA Nos.270 to 272/NAG/2018 4 revised. In response to the said show-cause notice, the appellant had filed objections which are extracted by the ld. PCIT at page no.3 of the impugned order. In nutshell, the objections raised by the appellant on proposed revision of order are as under :- (i) The assessment is based on the books of account regularly maintained by the assessee. (ii) The valuation report submitted by the DVO cannot be constituted an incriminating document. (iii) The construction of the project was undertaken by the related company. (iv) The TPO for assessment years 2014-15 and 2015-16 held that the transaction is at arm’s length price. (v) The Valuation report contains several mistakes. 6. The ld. PCIT on due consideration of the objections filed by the assessee proceeded to hold that this valuation report was received subsequent to the completion of the assessment proceedings, therefore, the Assessing Officer had no occasion to consider the valuation report. The argument of the appellant that there was no incriminating material found as result of search and seizure proceedings was rejected by holding that the reference of the ITA Nos.270 to 272/NAG/2018 5 DVO was made based on the incriminating material found as result of search and seizure operations. Further, held that the existence of incriminating material is not sine qua non for the purpose of assessment u/s 153A of the Act placing reliance on the decision of the Hon’ble Delhi High Court in the case of Filatex India Ltd. vs. CIT, 49 taxmann.com 465 (Delhi) and the decision of the Hon’ble Kerala High Court in the case of E.N. Gopakumar vs. CIT, 75 taxmann.com 215 (Kerala). Based on the above reasons, the ld. PCIT held that the assessment order is erroneous and prejudicial to the interests of the Revenue and had set-aside the assessment order to the Assessing Officer to frame de novo assessment order after giving reasonable opportunity of being heard to the assessee. 7. Being aggrieved, the appellant is in appeals before us. 8. The ld. AR contends that in the case of unabated assessments, in the absence of incriminating material suggesting the undisclosed income in the form of investment in the cost of construction of project, the ld. PCIT ought not to have exercised the power of revision placing reliance on the following decisions :- (i) CIT vs. Kabul Chawla, 380 ITR 573 (Delhi). (ii) CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd., 374 ITR 645 (Bom.). ITA Nos.270 to 272/NAG/2018 6 (iii) CIT vs. Gurvindersingh Bawa, 386 ITR 483 (Bom.). 9. It is further contended that without rejecting the books of accounts or pointing out any defect in the books of accounts, reference to DVO is illegal and in this connection, he referred to the following decisions :- (i) Sargam Cinema vs. CIT, 328 ITR 513 (SC). (ii) CIT vs. Chohan Resorts, 359 ITR 394 (P&H) 10. He further submitted that the Assessing Officer having made necessary enquiry reached the plausible conclusion and chosen not to make any addition and, therefore, the ld. PCIT ought not to have exercised the jurisdiction of revision u/s 263 of the Act. 11. On the other hand, ld. CIT-DR submits that the report of the DVO was received subsequent to the completion of assessment proceedings, therefore, there was no occasion to examine the impact of the DVO report. He further submits that for the assessment year 2013-14, it is an unabated assessment, therefore, even in the absence of incriminating material, revision of assessment order can be made. He further submits that during the course of search and seizure proceedings, a query was put to the appellant on cost of project incurred, certain incriminating material was found indicating ITA Nos.270 to 272/NAG/2018 7 the cost of project was Rs.271 crores as against the cost of work shown is only Rs.153.58 crores. This had triggered the Assessing Officer to refer the matter before the DVO. The report of the DVO was made based on the material found during the course of search and seizure proceedings. Therefore, it cannot be said that there was no incriminating material. In the circumstances, the ld. PCIT rightly exercised the jurisdiction u/s 263 of the Act and no interference is called for by this Tribunal. 12. We heard the rival submissions and perused the material on record. The issue in the present appeals relates to the validity of assumption of jurisdiction u/s 263 by the ld. CIT (Exemption). The Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) and in the case of CIT vs. Max India Ltd., 295 ITR 282 (SC). The error in the assessment order should be one that it is not debatable or plausible view. In a case where the Assessing Officer ITA Nos.270 to 272/NAG/2018 8 examined the claim took one of the plausible views, the assessment order cannot be termed as an “erroneous”. 13. Therefore, in the light of the above legal position, we proceed to examine the facts of the present case that as to whether or not the Assessing Officer had caused necessary enquiry. The fact that the valuation report was received subsequent to the completion of the assessment proceedings is not in dispute. It is an admitted position that the assessment proceedings for assessment years 2011-12 and 2012-13 were completed as on date of search proceedings, therefore, in view of settled position of law that in the absence of any material found as result of search and seizure operations, no assessment u/s 153A can be made. But, for the assessment year 2013-14, the revised return of income was filed by the assessee and, therefore, the assessment proceedings are open as on date of search and seizure operations. Therefore, any information which had come into possession of Assessing Officer can be considered for the purpose of framing the assessment order. As regards to the assessment years 2011-12 and 2012-13, the ld. PCIT had observed that during the course of such search and seizure operations certain material was found which indicated that the cost of project was Rs.271 crores as against the cost of project was shown by the ITA Nos.270 to 272/NAG/2018 9 assessee of Rs.153.58 cores. This information was found as result of search and seizure operations and triggered the Assessing Officer to refer the matter to the DVO for the purpose of determining the cost of investment in the project. Therefore, it cannot be said that there was no incriminating material found as result of search and seizure proceedings with regard to understatement of cost of construction of project. Therefore, the contention of the appellant that there was no incriminating material found is devoid of any merits. 14. Then we proceed to examine whether or not the Assessing Officer had examined the issue of understatement of cost of the project. The ld. PCIT was gave a finding that the report of the DVO was received by the Assessing Officer subsequent to the completion of the assessment order. Therefore, there was no occasion for the Assessing Officer to examine the DVO report and its impact on framing of the assessment order. Clause (b) of sub-section (1) to section 263 of the Act defines the term “record” to mean that the information which had come on record subsequent to the completion of assessment proceedings also be considered for the purpose of revision. Therefore, in our considered opinion, the ld. PCIT had rightly exercised the power of revision u/s 263 of the Act. ITA Nos.270 to 272/NAG/2018 10 Accordingly, we uphold the revision order passed u/s 263 setting aside the assessment order to the Assessing Officer for de novo assessment in accordance with law. Thus, we do not find any illegality in the order passed by the ld. PCIT u/s 263 of the Act. Hence, the grounds of appeal filed by the assessee stand dismissed. 15. In the result, all the above captioned three appeals filed by the assessee stands dismissed. Order pronounced on this 03 rd day of November, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 03 rd November, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT (Central), Nagpur. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, नागपुर / DR, ITAT, Nagpur. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.