M/s. S.R. Corporation, Surat V. The Pr. Commissioner of Income Tax (Central), Surat

ITA 289/SRT/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1623 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 16-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Business income; Revision of order; Document seized; Principle of natural justice; Prejudicial to interest
• Section: 69C; 143(3); 142(1); 153A; 80IB; 13; 263

Judgement Text

S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 1 OF 18 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.289/SRT/2018 [ [ / ASSESSMENT YEAR: 2009-10 M/S.S.R.CORPORATION, C-601/602, DIAMOND WORLD, MINI BAZAR, VARACHHA ROAD, SURAT. [PAN: ABCFS 2854 B] V S . THE PRINCIPAL COMMISSIONER OF INCOME TAX(CENTRAL), SURAT. / APPELLANT /RESPONDENT [ /ASSESSEE BY SHRI RASESH SHAH CA AND SHRI P.M.JAGASHETH - CA /REVENUE BY SHRI SREENIVAS T.BIDARI CIT(DR) / DATE OF HEARING: 11.12.2019 /PRONOUNCEMENT ON: 13.12.2019 /O R D E R PER SANDEEP GOSAIN, JM: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD.PRINCIPAL COMMISSIONER OF INCOME TAX(CENTRAL), SURAT DATED 22.03.2018 FOR THE ASSESSMENT YEAR 2009-10. 2. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF THE INCOME TAX HAS GRIEVOUSLY ERRED IN INITIATING THE PROCEEDINGS U/S.263 OF THE ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF THE INCOME TAX HAS GRIEVOUSLY ERRED IN ASSUMING JURISDICTION U/S.263 OF THE ACT, 1961. S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 2 OF 18 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF THE INCOME TAX HAS ERRED IN VIOLATING THE PRINCIPLES OF NATURAL JUSTICE BY NOT THE MENTIONING THE GROUNDS FOR INITIATING ACTION U/S.263 OF INCOME TAX ACT, 1961 IN THE SHOW CAUSE NOTICE ISSUED. AS SUCH THE ORDER PASSED U/S.263 IS VOID AB-INITIO. THE ACTION OF THE LD. CIT WAS WHOLLY UNREASONABLE, UNCALLED FOR THE BAD IN LAW. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF THE INCOME TAX HAS ERRED IN NOT PASSING A SPEAKING ORDER AGAINST THE SUBMISSIONS OF YOUR APPELLANT. AS SUCH, THE ORDER PASSED U/S.263 IS VOID AB- INITIO. THE ACTION OF THE LD. CIT WAS WHOLLY UNREASONABLE, UNCALLED FOR THE BAD IN LAW. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THAT THE ORDER OF U/S.263 IS MERELY 'CHANGE IN OPINION THE ORDER U/S. 143(3) R.W.S,153A PASSED BY THE LD AO DOES NOT IN ANY WAY REPRESENT ERRONEOUS ORDER. THE ACTION OF THE LD. CIT WAS WHOLLY UNREASONABLE', UNCALLED FOR AND BAD IN LAW. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX HAS GRIEVOUSLY ERRED IN ASSUMING THAT THE ASSESSING OFFICER HAD NOT VERIFIED ITS ALLOWABILITY OR THE SOURCE OF EXPENDITURE CLAIMED IN RESPECT OF PURCHASE OF LAND DURING THE COURSE OF PROCEEDING AND NOT MADE PROPER INQUIRY OR VERIFICATION FINALIZED THE ORDER OF DROPPING THE PROCEEDINGS IMITATED U/S.147 OF THE L.T. ACT IS CONTRARY TO THE FACT OF THE CASE. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE ENTIRE PROCEEDINGS ARE BAD-IN-LAW AND INVALID AS ASSESSMENT ORDER U/S. 143(3) R.W.S.147 OF THE ACT FOR THE SAME YEAR WERE FRAMED, WHEREIN DUE INQUIRY WAS MADE. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX HAS GRIEVOUSLY ERRED IN SETTING ASIDE THE ASSESSMENT ORDER FRAMED U/S. 143 R.W.S.147 OF THE ACT WITHOUT POINTING OUT AS TO HOW THE ORDER IS ERRONEOUS AND PREJUDICIAL TO INTEREST OF REVENUE. 9. IT IS THEREFORE PRAYED THAT THE ABOVE PROPOSED PROCEEDINGS MAY PLEASE BE REVOKED AS LEARNED MEMBERS OF THE TRIBUNAL MAY DEEM IT PROPER. 10. APPELLANT CRAVES LIBERTY TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF THE HEARING OF THE APPEAL. 3. AS PER FACTS OF THE PRESENT CASE THE ASSESSMENT U/S.143(3) R.W.S. 153A OF THE I.T.ACT FOR THE YEAR UNDER CONSIDERATION WAS FINALIZED ON 28.03.2016 DETERMINING TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE IS S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 3 OF 18 IN THE BUSINESS OF BUSINESS OF BUILDERS AND DEVELOPERS AND DEVELOPED THE PROJECT IN THE NAME AND STILE OF RUSHIKESH, VAISHNODEVI TOWNSHIP AND IDEAL HOMES. HOWEVER, THE LD.PR.CIT ON VERIFICATION OF THE CASE, NOTED THAT THE EXPENSES OF RS.18,79,58,511/- INCURRED BY ASSESSEE FOR PURCHASE AND DEVELOPMENT OF LAND HAS NOT BEEN ADEQUATELY ENQUIRED BY THE LD.ASSESSING OFFICER(AO) DURING THE ASSESSMENT PROCEEDINGS, THUS, PASSED THE ORDER U/S.263 OF THE ACT. 4. THE AUTHORISED REPRESENTATIVE (AR) REITERATED THE SAME ARGUMENTS AS RAISED BEFORE THE LD.PR.CIT. IT WAS SUBMITTED THAT LD.PR.CIT HAS ERRED IN PASSING THE ORDER U/S.263 OF THE ACT IS MERELY CHANGE IN OPINION THE ORDER U/S.143(3) R.W.S. 153A PASSED BY THE LD.AO DOES NOT IN ANY WAY REPRESENT ERRONEOUS ORDER. THE AR FURTHER SUBMITTED THAT THE ACTION OF THE LD.CIT WAS WHOLLY UNREASONABLE, UNCALLED FOR AND IN LAW. 5. THE LD.AR SUBMITTED THAT THE DURING COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER ISSUED THE SHOW CAUSE NOTICE U/S. 142(1) DATED 19.02.2016 REQUIRING THE SOURCE OF THE DISCLOSURE MADE IN THE PROJECT RISHIKESH OF RS.2,07,03,663/- AND PROJECT TOWNSHIP OF RS.7 CRORES VIDE POINT NO.1 OF SHOW CAUSE NOTICE . THE ASSESSING OFFICER FURTHER REQUIRED THE ASSESSE TO FURNISH THE SOURCE OF THE FUND OF RS.18,79,58,511/- INVESTED IN LAND AND HOW IT WAS REFLECTED IN THE BOOKS OF ACCOUNTS OF THE FIRM VIDE POINT NO.5 OF SHOW CAUSE NOTICE . THE RELEVANT PORTION OF THE SHOW CAUSE NOTICE IS REPRODUCED AS UNDER: S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 4 OF 18 '5. KINDLY REFER TO THE SAUDA CHITTHI FOUND AND SEIZED DURING THE SEARCH PROCEEDINGS FROM THE RESIDENT PARTNER SHRI RAJESH VAGHANI. YOU FURNISHED PART REPLY AND STATED THAT SAUDA CHITHI WAS CANCELLED BECAUSE THE SELLER PARTY WAS NOT ABLE TO REMOVE UNAUTHORIZED OCCUPANT OF LAND, HENCE THE LAND WAS PURCHASED DIRECTLY FROM THE LAND OWNERS AND FIRM HAS PAID RS. 18,23,19,011/- TOWARDS CONVERSION OF LAND FROM AGRICULTURAL TO NON AGRICULTURAL LAND AND REMOVING THE UNAUTHORIZED OCCUPANTS. FURTHER, YOU STATED THAT EXCEPT RS.56,39,500/- (AMOUNT BY WHICH THE LAND WAS REGISTERED IN THE REGISTRAR OFFICE IN THE NAME OF SHRI POPATBHAI KAKADI) REMAINING FUND WERE ARRANGED BY FIRM. IN THIS REGARD, YOU ARE REQUESTED TO PROVIDE NAME AND ADDRESSES OF THE UNAUTHORIZED OCCUPANT, COPY OF FIR, IF LAUNCHED AGAINST THEM, DATE WISE/ PERSON WISE EXPENDITURE WITH MODE OF PAYMENT IN RESPECT TO EXPENDITURE MADE FOR REMOVING UNAUTHORIZED OCCUPANT FROM THIS LAND AND COPY OF RECEIPT PAID FOR CONVERSION OF LAND. YOU ARE ALSO REQUIRED TO FURNISH THE SOURCE OF LAND OF RS. 18,23,19,011/- ARRANGED BY YOUR FIRM AND HOW IT WAS REFLECTED IN BOOKS OF ACCOUNTS OF THE FIRM. DETAILS OF PERSONS FROM WHOM THESE FUNDS WERE ARRANGED BY FIRM ALSO REQUIRED TO FURNISH BY YOU WITH COMPLETE NAMES, ADDRESSES AND PAN. IF YOU FAILED TO FURNISH SUCH DETAILS PLEASE SHOW CAUSE WHY AMOUNT OF RS. 18,23,19,011/- SHOULD NOT BE TREATED AS UNEXPLAINED EXPENDITURE OF THE FIRM.' 6. IN THE ABOVE SHOW CAUSE NOTICE, ASSESSING OFFICER ALSO QUESTIONED THE SOURCE OF THE RECEIPT OF RS. 2,44,85,900/- VIDE POINT NO. 6 OF THE NOTICE. ASSESSING OFFICER ALSO ASKED THE ASSESSE TO FURNISH THE DETAILS OF THE PERSONS FROM WHOM ASSESSE RECEIVED THE CASH FOR PURCHASING AND REMOVING OF UNAUTHORIZED OCCUPANT OF LAND SITUATED AT VAKALA B. NO. 49A, SURAT AT POINT NO. 7 OF THE SHOW CAUSE NOTICE. THE ASSESSE FILED THE DETAILED REPLY IN THE COURSE OF ASSESSMENT PROCEEDINGS THROUGH VARIOUS LETTERS EXPLAINING THE POINT NO. 1, 5 TO 7 OF SHOW CAUSE NOTICE. IN REGARD TO THE POINT NO. 5 OF SHOW CAUSE NOTICE WHICH IS SUBJECT MATTER OF PROCEEDINGS U/S. 263, ASSESSE FILED THE DETAILED REPLY VIDE LETTER DATED 09.06.2016 STATING THE FOLLOWING: '(D) IN RESPECT OF SOURCE OF PAYMENT OF RS. 18 CR. WE WOULD LIKE TO SUBMIT THAT SHRI POPATBHAI KAKADIA HAD PURCHASED VANKALA LAND FOR RS. 56,39,500/- FROM HIS OWN FUNDS AND MADE EXPENSES FOR NA, DEVELOPMENT AND OTHER EXPENSES. SHRI POPATBHAI KAKADIA HAD INTRODUCED THIS LAND AT BOOK VALUE OF RS. 2,19,34,070/-. THE BALANCE FUND OF RS.16,60,24,441/- HAS BEEN EXPENDED FOR S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 5 OF 18 REMOVING OF UNAUTHORIZED OCCUPANT OF LAND BY ASSESSEE FIRM FROM THE EARNING OF PREVIOUS PROJECT AND BOOKING AMOUNT OF CURRENT PROJECT. 7. REGARDING TO POINT NO. 1 OF SHOW CAUSE NOTICE IT WAS STATED THAT THE DISCLOSURE IS IN REGARD TO THE BUSINESS OF THE ASSESSEE OF CONSTRUCTION AND DEVELOPMENT OF HOUSING PROJECTS. IT IS FURTHER STATED THAT AFTER DISTRIBUTING THE PROFITS TO THE PARTNERS THEY DIDN'T MAINTAIN ANY LEDGERS OR RECORDS AND ONLY THE PROFIT AND LOSS ACCOUNT WAS KEPT IN THE RECORDS. REGARDING THE POINT NO. 6 OF SHOW CAUSE NOTICE, IT WAS STATED THAT THE AMOUNT OF RS. 2,44,85,900/- WAS THE PART OF RECEIPTS OF RS. 66,72,18,402/- MENTIONED IN THE ALLEGED SEIZED PAPER. REGARDING THE POINT NO. 7 OF SHOW CAUSE NOTICE IT WAS STATED BY THE ASSESSE THAT THE INITIAL INVESTORS FROM WHOM ASSESSE TOOK THE FUND FOR PURCHASING AND REMOVING UNAUTHORIZED OCCUPANTS OF THE LAND WERE PAID OUT OF THE BOOKING AMOUNT. 8. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE STRONG RELIANCE WAS PLACED ON SECTION 279C BY TENDERING THE FOLLOWING EXPLANATION: 'HENCE THE QUESTION OF DOUBTING THE VERACITY OF SEIZED MATERIAL DOES NOT ARISE. INCOME TAX IS ON ACTUAL INCOME AND THE PAPER AS SEIZED DEPICTS THE ACTUAL PROFIT EARNED BY THE ASSESSEE. THE CORRECTNESS OF THE DOCUMENT SEIZED CANNOT BE DOUBTED AND MORE SO BY THE DEPARTMENT AS PER SEC.292C WHICH ARMORS THE PRESUMPTION THAT THE SEIZED MATERIAL IS CORRECT AND HENCE CANNOT BE DOUBTED. WHEN THE STATUE ITSELF PROVES A DEEMING PROVISION REGARDING THE VERACITY OF THE SEIZED MATERIAL, THE QUESTION OF DOUBTING OR PROVIDING CORROBORATIVE EVIDENCE DOES NOT ARISE, MORE SO WHEN THE SAME PAPER IS THE BASIS OF DISCLOSURE OF UNACCOUNTED PROFIT IN THE HANDS OF THE ASSESSEE. THE DIFFERENTIAL FIGURE AS MENTIONED ABOVE IS ALREADY OFFERED FOR TAXATION AND HENCE THE QUESTION OF COMPARING INDIVIDUAL EXPENDITURE WITH REGULAR BOOKS IS OF ACADEMIC INTEREST.' 9. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSE PASSED THE ASSESSMENT ORDER ACCEPTING THE DISCLOSURE. S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 6 OF 18 ACCORDINGLY, ASSESSING OFFICER ASSESSED THE INCOME OF RS. 2,01,80,624/- AS AGAINST RETURNED INCOME U/S. 153A OF RS. 1,21,06,200/- DISALLOWING DEDUCTION U/S. 80IB CLAIMED AGAINST THE OTHER DISCLOSURE OF PROJECT RISHIKESH OF RS. 80,74,428/-. IT IS TO BE NOTED THAT ASSESSE HAS NOT CLAIMED THE DEDUCTION U/S. 80IB ON RS. 7 CRORES DECLARED FROM PROJECT TOWNSHIP WHICH INCLUDES RS. 21,00,000/- FOR THIS YEAR. AFTER COMPLETION OF THE ASSESSMENT, THE PCIT TOOK ACTION U/S. 263 BY ISSUING SHOW CAUSE NOTICE ON 05.12.2017. ASSESSEE FILED DETAILED REPLY VIDE LETTER DATED 09.01.2018. THE ID. PCIT WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSE AND HE HELD THAT THE ASSESSMENT ORDER RESPECT OF RS.18,79,58,511/- AS HELD BY HIM AT PARA NO. 5 TO 5.2.2 OF HIS ORDER U/S.263 OF THE ACT. 10. THE LD.AR FURTHER SUBMITTED THAT IT IS WELL SETTLED THAT BOTH THE CONDITIONS VIZ ORDER OF THE ASSESSING OFFICER SHOULD BE ERRONEOUS AND ASSESSMENT ORDER SHOULD BE PREJUDICIAL TO THE INTEREST OF REVENUE SHOULD BE CUMULATIVELY SATISFIED BY THE ID. PCIT.THE RELIANCE IS PLACED ON THE DECISION OF HONOURABLE GUJARAT HIGH COURT IN CASE OF CIT V/S. MINALBEN S. PARIKH - 215 ITR 0081 (GUJ.) AND THE DECISION OF HONOURABLE BOMBAY HIGH COURT IN CASE OF CIT V/S. GABRIEL INDIA LTD. - 203 ITR 108 (BOM.). AND HE FURTHER SUBMITTED THAT FROM THE ABOVE DISCUSSION IT IS CLEAR THAT ASSESSING OFFICER HAS PASSED THE ORDER AFTER INQUIRY WHICH IS SUSTAINABLE IN LAW AND SO THE ASSESSMENT ORDER IS NOT ERRONEOUS. THE ORDER IS ALSO S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 7 OF 18 NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE DEDUCTION FOR THE INVESTMENT OF THE LAND IS CLEARLY ALLOWABLE ON THE BASIS OF THE SAME SEIZED PAPER ON THE BASIS OF WHICH DISCLOSURE OF RS. 7 CRORES WAS MADE. THE REVENUE CANNOT BLOW HOT AND COLD IN SAME BREATH AT THE SAME TIME. WHEN THE PART OF THE SEIZED MATERIAL IS CONSIDERED TO BE TRUE, THE OTHER PART IS ALSO REQUIRED TO BE CONSIDERED AS TRUE. ALL THE FIGURES MENTIONED IN THE PROFIT AND LOSS ACCOUNT FOUND AND SEIZED IN THE COURSE OF SEARCH SHOULD BE CONSIDERED TO BE TRUE AS PER PRESUMPTION CONTAINED U/S. 132(4A) AND S. 292C.THE PRESUMPTION CONTAINED U/S. 132(4A) AND 292C CAN ALSO BE USED FOR THE BENEFIT OF THE ASSESSEE AND NOT ONLY FOR THE BENEFIT OF THE DEPARTMENT, REVENUE CANNOT JUST ADOPT THE PICK AND CHOOSE METHOD. THE RELIANCE IS PLACED ON THE DECISION OF DELHI HIGH COURT IN CASE OF CIT VS. INDEO AIRWAYS PVT/LTD[(2012) 26 TAXMANN.COM 244 (DEL)], VIVEK KATHOTIA VS. DCIT [IT(SS) NO. 1TO7 &10/ KOL/2011 (KOL TRIB )], GEM SUPERSTRUCTURES PVT LTD. VS. DCIT [ITA NO. 15/BANG/2014 (BANG TRIB)].THE PROVISO TO SECTION 69C CANNOT BE APPLIED AS THE DEDUCTION OF EXPENDITURE WAS CLAIMED AGAINST THE RECEIPTS OF CONSTRUCTION PROJECT EVEN PCIT HAS NOT DOUBTED THE SOURCE OF THE DISCLOSURE AND THEREFORE PROVISO TO SECTION 69C IS NOT APPLICABLE. THE RELIANCE IS PLACED ON THE DECISION OF DCIT VS. RADHE DEVELOPERS [(2010) 329 ITR 0001 (GUJ)]. SO IT CAN BE APPRECIATED THAT ASSESSING OFFICER HAS ACCEPTED THE INVESTMENT OF THE LAND OF THE OF RS. 18,79,58,511/- AFTER CONSIDERING THE EXPLANATION FILED BY THE ASSESSEE AND ON THE BASIS OF THE S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 8 OF 18 FINDING OF THE SEIZED MATERIALS IN THE COURSE OF SEARCH PROCEEDINGS. THE ACTION OF THE SEARCH IS THE HIGHEST KIND OF INQUIRY UNDERTAKEN BY THE REVENUE AND ON THE BASIS OF THE EVIDENCE OF THE SEARCH, THE ASSESSMENT WAS MADE. SO IT IS NOT THE CASE OF NO INQUIRY OR LACK OF INQUIRY BY THE ASSESSING OFFICER. EVEN THIS IS NOT THE CASE OF INADEQUATE INQUIRY AS THE ASSESSING OFFICER MADE THE DUE INQUIRY BY CONSIDERING THE SEIZED MATERIALS AND EXPLANATION OF THE ASSESSEE. EVEN THE PR. COMMISSIONER OF INCOME TAX HAS REPRODUCED THE EXPLANATION FILED BY THE ASSESSEE ON 01.03.2016 TO EXPLAIN THE SOURCE OF THE PAYMENT OF RS. 18,00,00,000/- IN HIS ORDER PASSED U/S. 263 BUT HE HAS NOT REBUTTED THE EXPLANATION IN HIS ORDER. THE PR. COMMISSIONER OF INCOME TAX HAS ACCEPTED THE SOURCE OF THE RECEIPTS BEING FROM THE PROJECTS, ALTHOUGH HE DOUBTED THE SOURCE OF THE EXPENDITURE. THE SOURCE OF EXPENDITURE IS APPARENTLY THE BUSINESS RECEIPTS FROM THE PROJECTS. THE RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: I. CIT V/S. AMIT CORPORATION - 81 CCH 0069 (GUJ.) II. PCIT VS. HARMONY YARNS PVT LTD.[TAX APPEAL NO. 282 OF 2016 (GUJ.)] III. CIT VS. FINE JEWELLERY LTD. [372 ITR 303] (BOM.) IV. CIT VS. GANPAT RAM BISHNOI [296 ITR 0292] (RAJ.) V. PCIT VS. SHREE GAYATRI ASSOCIATES [(2019)] 106 TAXMANN.COM 31 (SC)] VI. INDUS BEST HOSPITALITY & REALTORS PVT LTD. VS. PCIT [ITA NO. 3125/MUM/2017 (MUM TRIB)] 11. THE ASSESSING OFFICER HAS MADE THE PROPER INQUIRY WHICH WAS ADEQUATE. IF THERE WAS ANY INQUIRY EVEN INADEQUATE THAT BY ITSELF WOULD S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 9 OF 18 GIVE NO OCCASION TO THE CIT TO PASS ORDERS U/S.263 OF THE ACT, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. EVEN THE PCIT HAS STARTED IN HIS ORDER THAT INQUIRY WAS INADEQUATE. IN SUPPORT, THE RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: I. CIT V/S. SUNBEAM AUTO LTD. - 332 ITR 0167 (DEL.) II. CIT V/S. ANILKUMAR SHARMA - 335 ITR 0083 (DEL.) III. CIT V/S. JAIN CONSTRUCTION CO. - 257 CTR 0336 (RAJ.) IV. CIT VS. VODAFONE ESSAR SOUTH LTD. [(2013) 212 TAXMAN 0184] (DEL.) 12. THE PCIT HAS NOT MADE ANY INQUIRY ON THE ISSUES RAISED BY HIM. RECENTLY, THE DELHI HIGH COURT IN THE CASE OF PCIT V. DELHI AIRPORT METRO EXPRESS PVT. LTD. [ITA NO. 705/2017] HAS CATEGORICALLY HELD THAT FOR THE PURPOSE OF EXERCISING JURISDICTION U/S 263 AND REACHING A CONCLUSION THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, THE ID. PCIT HAS TO UNDERTAKE SOME MINIMAL INQUIRY AND IN FACT WHERE THE ID. PCIT IS OF THE VIEW THAT AO HAD NOT UNDERTAKEN ANY INQUIRY, IT BECOMES INCUMBENT ON THE PCIT TO CONDUCT SUCH ENQUIRY. THE RELIANCE IS ALSO PLACED ON THE DECISION OF ITO VS. DG HOUSING PROJECTS LIMITED [343 ITR 329] (DEL HC)] AND INDUS BEST HOSPITALITY & REALTORS PVT LTD. VS. PCIT [ITA NO. 3125/MUM/2017 (MUM TRIB)]. 13. THE ASSESSING OFFICER HAS TAKEN THE VIEW IN FAVOUR OF THE ASSESSEE AS PER THE LAW AND THE MATERIALS AVAILABLE WITH HIM. EVEN IF IT IS ASSUMED THAT TWO VIEWS ARE POSSIBLE AND ASSESSING OFFICER HAS ADOPTED ONE OF THE VIEWS IN FAVOUR OF THE ASSESSEE, THE ASSESSMENT ORDER CANNOT BE S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 10 OF 18 REVISED U/S. 263 AS HELD BY HONOURABLE SUPREME COURT IN CASE OF MALABAR INDUSTRIAL CO. V/S. CIT - 243 ITR 0083 (SC). THE DECISION OF THE SUPREME COURT WAS FOLLOWED IN THE CASE OF CIT VS. MAX INDIA LTD. - 295 ITR 0282 (SC) AND BY THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ARVIND JEWELLERS - 259 ITR 0502.THE RELIANCE IS ALSO PLACED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT V/S. NIRAV MODI - 390 ITR 0292 (BOM.) WHERE IT WAS HELD THAT 'THE SATISFACTION OF THE ASSESSING OFFICER ON THE BASIS OF THE DOCUMENTS PRODUCED IS NOT SHOWN TO BE ERRONEOUS IN THE ABSENCE OF MAKING A FURTHER ENQUIRY.' FURTHER IT WAS HELD THAT' EVEN IF THIS VIEW, IN THE OPINION OF THE CIT IS NOT CORRECT, IT WOULD NOT PERMIT HIM TO EXERCISE POWER UNDER SECTION 263 OF THE ACT. IN FACT, THE APEX COURT IN CIT V/S. AMITABH BACHCHAN - 384 ITR 200 HAS OBSERVED THAT THERE CAN BE NO DOUBT THAT WHERE THE VIEW TAKEN BY THE ASSESSING OFFICER IS A POSSIBLE VIEW, INTERFERENCE UNDER SECTION 263 OF THE ACT, IS NOT PERMISSIBLE. FURTHER THE RELIANCE IS PLACED ON THE DECISION OF BOMBAY HIGH COURT IN CASE OF CIT VS. FINE JEWELLERY LTD. [372 ITR 303] (BOMBAY HC) AND LAKME LEVER PVT LTD. VS. CIT [ITA NO. 2613/MUM/2015 (MUM TRIB)]. 14. DURING THE COURSE OF SCRUTINY BY THE ASSESSING OFFICER, WHICH WAS ANSWERED TO THE SATISFACTION OF THE ASSESSING OFFICER, BUT NEITHER THE QUERY NOR THE ANSWER WAS REFLECTED IN THE ASSESSMENT ORDER, THIS WOULD NOT BY ITSELF LEAD TO THE CONCLUSION THAT THE ORDER OF THE ASSESSING OFFICER S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 11 OF 18 CALLED FOR INTERFERENCE AND REVISION. THE RELIANCE IS PLACED ON THE DECISION OF DELHI HIGH COURT IN CASE OF CIT VS. VIKAS POLYMERS [341 ITR 537] (DELHI HC). 15. THE LD.PR.CIT HAS NOT INVOKED EXPLANATION 2 TO S. 263 EITHER IN THE SHOW CAUSE NOTICE OR IN THE ORDER PASSED U/S. 263. EVEN OTHERWISE, EXPLANATION 2 IS NOT APPLICABLE AS ASSESSING OFFICER HAS MADE THE INQUIRY AND VERIFICATION WHICH OUGHT TO HAVE BEEN MADE. FURTHER, IT IS SUBMITTED THAT THE COORDINATE BENCH IN THE CASE OF NARAYAN TATU RANE - 70 TAXMANN.COM 227 (MUM.), HELD THAT EXPLANATION CANNOT SAID TO HAVE OVERRIDDEN THE LAW AS INTERPRETED BY THE VARIOUS HIGH COURTS, WHERE THE HIGH COURTS HAVE HELD THAT BEFORE REACHING A CONCLUSION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, THE COMMISSIONER HIMSELF HAS TO UNDERTAKE SOME ENQUIRY TO ESTABLISH THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE . 16. IT WAS SUBMITTED THAT IN VIEW OF THE ABOVE SUBMISSION IT IS CLEAR THAT THE ORDER PASSED BY ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE AND REQUESTED TO DROP PROCEEDINGS INITIATED U/S. 263 OF THE ACT. 17. ON THE OTHER HAND, THE LD.DEPARTMENTAL REPRESENTATIVE(DR) RELIED UPON THE ORDERS OF THE LD.PR.CIT. S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 12 OF 18 18. WE HAVE HEARD THE COUNSELS OF BOTH THE PARTIES AND WE ALSO PERUSED THE MATERIAL PLACED ON RECORD AND ORDERS PASSED BY THE REVENUE AUTHORITY AS WELL AS THE JUDGMENTS CITED BY THE PARTY. AS PER FACTS OF THE PRESENT CASE THE ASSESSMENT U/S.143(3) R.W.S. 153A OF THE I.T.ACT FOR THE YEAR UNDER CONSIDERATION WAS FINALIZED ON 28.03.2016 DETERMINING TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE IS IN THE BUSINESS OF BUSINESS OF BUILDERS AND DEVELOPERS AND DEVELOPED THE PROJECT IN THE NAME AND STILE OF RUSHIKESH, VAISHNODEVI TOWNSHIP AND IDEAL HOMES. THE ASSESSE FILED THE DETAILED REPLY IN THE COURSE OF ASSESSMENT PROCEEDINGS THROUGH VARIOUS LETTERS EXPLAINING THE POINT NO. 1, 5 TO 7 OF SHOW CAUSE NOTICE. IN REGARD TO THE POINT NO. 5 OF SHOW CAUSE NOTICE WHICH IS SUBJECT MATTER OF PROCEEDINGS U/S. 263 OF THE ACT ASSESSEE FILED THE DETAILED EXPLANATION IN THE FORM REPLY VIDE LETTER DATED 09.06.2016. 19. THE LD.PR.CIT TOOK ACTION U/S. 263 BY ISSUING SHOW CAUSE NOTICE ON 05.12.2017. ASSESSEE FILED DETAILED REPLY VIDE LETTER DATED 09.01.2018. THE ID. PCIT WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSE AND HE HELD THAT THE ASSESSMENT ORDER RESPECT OF RS.18,79,58,511/- AS HELD BY HIM. 20. AFTER HAVING HEARD THE COUNSELS OF BOTH PARTIES AT LENGTH AND AFTER PERUSAL OF THE DOCUMENTS PLACED ON RECORD BEFORE US, AS WELL AS THE JUDGMENTS CITED BY BOTH THE PARTIES OF HIGHER COURTS, WE FIND THAT IT IS A S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 13 OF 18 SETTLED LAW THAT BOTH CONDITIONS I.E. THE ORDER OF THE LD.AO SHOULD BE ERRONEOUS AND ASSESSMENT ORDER SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE SHOULD BE CUMULATIVELY SATISFIED BY THE LD.PR.CIT. IN THIS RESPECT, WE RELY UPON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MINALBEN S. PARIKH 215 ITR 0081 (GUJ) AND EVEN FROM THE FACTS WE ALSO NOTICED THAT IT IS A CLEAR CASE WHERE THE AO HAD PASSED ORDERS AFTER ENQUIRY AND SO THE ASSESSMENT ORDER CANNOT BE TERMED AS ERRONEOUS. THUS, ORDER PASSED BY THE LD.AO COULD NOT BE PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE DEDUCTION FOR THE INVESTMENT OF THE LAND IS CLEARLY ALLOWABLE ON THE BASIS OF SAME SEIZED PAPER ON THE BASIS OF WHICH DISCLOSURE OF RS.7 CRORE WAS MADE. WE ARE ALSO OF THE VIEW THAT REVENUE CANNOT BE ALLOWED TO A PROBATE AND REPROBATE IN THE SAME BREATH. ALL THE FIGURES MENTIONED IN THE PROFIT AND LOSS ACCOUNT FOUND AND SEIZED IN THE COURSE OF SEARCH SHOULD BE CONSIDERED TO BE TRUE AS PER PRESUMPTION CONTAINED U/S.132(4A) AND 292C OF THE ACT. THE PRESUMPTION CONTAINED U/S. 132(4A) AND 292C CAN ALSO BE USED FOR THE BENEFIT OF THE ASSESSEE AND NOT ONLY FOR THE BENEFIT OF THE DEPARTMENT, REVENUE CANNOT JUST ADOPT THE PICK AND CHOOSE METHOD. THE RELIANCE IS PLACED ON THE DECISION OF DELHI HIGH COURT IN CASE OF CIT VS. INDEO AIRWAYS PVT/LTD[(2012) 26 TAXMANN.COM 244 (DEL)], VIVEK KATHOTIA VS. DCIT [IT(SS) NO. 1TO7 &10/ KOL/2011 (KOL TRIB )], GEM SUPERSTRUCTURES PVT LTD. VS. DCIT [ITA NO. 15/BANG/2014 (BANG TRIB)].THE PROVISO TO SECTION 69C CANNOT BE APPLIED AS THE DEDUCTION OF EXPENDITURE WAS S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 14 OF 18 CLAIMED AGAINST THE RECEIPTS OF CONSTRUCTION PROJECT EVEN PCIT HAS NOT DOUBTED THE SOURCE OF THE DISCLOSURE AND THEREFORE PROVISO TO SECTION 69C IS NOT APPLICABLE. THE RELIANCE IS PLACED ON THE DECISION OF DCIT VS. RADHE DEVELOPERS [(2010) 329 ITR 0001 (GUJ)]. SO IT CAN BE APPRECIATED THAT ASSESSING OFFICER HAS ACCEPTED THE INVESTMENT OF THE LAND OF THE OF RS. 18,79,58,511/- AFTER CONSIDERING THE EXPLANATION FILED BY THE ASSESSEE AND ON THE BASIS OF THE FINDING OF THE SEIZED MATERIALS IN THE COURSE OF SEARCH PROCEEDINGS. THE ACTION OF THE SEARCH IS THE HIGHEST KIND OF INQUIRY UNDERTAKEN BY THE REVENUE AND ON THE BASIS OF THE EVIDENCE OF THE SEARCH, THE ASSESSMENT WAS MADE. SO IT IS NOT THE CASE OF NO INQUIRY OR LACK OF INQUIRY BY THE ASSESSING OFFICER. EVEN THIS IS NOT THE CASE OF INADEQUATE INQUIRY AS THE ASSESSING OFFICER MADE THE DUE INQUIRY BY CONSIDERING THE SEIZED MATERIALS AND EXPLANATION OF THE ASSESSEE. EVEN THE PR. COMMISSIONER OF INCOME TAX HAS REPRODUCED THE EXPLANATION FILED BY THE ASSESSEE ON 01.03.2016 TO EXPLAIN THE SOURCE OF THE PAYMENT OF RS. 18,00,00,000/- IN HIS ORDER PASSED U/S. 263 BUT HE HAS NOT REBUTTED THE EXPLANATION IN HIS ORDER. THE PR. COMMISSIONER OF INCOME TAX HAS ACCEPTED THE SOURCE OF THE RECEIPTS BEING FROM THE PROJECTS, ALTHOUGH HE DOUBTED THE SOURCE OF THE EXPENDITURE. THE SOURCE OF EXPENDITURE IS APPARENTLY THE BUSINESS RECEIPTS FROM THE PROJECTS. THE RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: VII. CIT V/S. AMIT CORPORATION - 81 CCH 0069 (GUJ.) VIII. PCIT VS. HARMONY YARNS PVT LTD.[TAX APPEAL NO. 282 OF 2016 (GUJ.)] S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 15 OF 18 IX. CIT VS. FINE JEWELLERY LTD. [372 ITR 303] (BOM.) X. CIT VS. GANPAT RAM BISHNOI [296 ITR 0292] (RAJ.) XI. PCIT VS. SHREE GAYATRI ASSOCIATES [(2019)] 106 TAXMANN.COM 31 (SC)] XII. INDUS BEST HOSPITALITY & REALTORS PVT LTD. VS. PCIT [ITA NO. 3125/MUM/2017 (MUM TRIB)] 21. THE ASSESSING OFFICER HAS MADE THE PROPER INQUIRY WHICH WAS ADEQUATE. IF THERE WAS ANY INQUIRY EVEN INADEQUATE THAT BY ITSELF WOULD GIVE NO OCCASION TO THE CIT TO PASS ORDERS U/S.263 OF THE ACT, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. EVEN THE PCIT HAS STARTED IN HIS ORDER THAT INQUIRY WAS INADEQUATE. IN SUPPORT, THE RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: I. CIT V/S. SUNBEAM AUTO LTD. - 332 ITR 0167 (DEL.) II. CIT V/S. ANILKUMAR SHARMA - 335 ITR 0083 (DEL.) III. CIT V/S. JAIN CONSTRUCTION CO. - 257 CTR 0336 (RAJ.) IV. CIT VS. VODAFONE ESSAR SOUTH LTD. [(2013) 212 TAXMAN 0184] (DEL.) THE PCIT HAS NOT MADE ANY INQUIRY ON THE ISSUES RAISED BY HIM. RECENTLY, THE DELHI HIGH COURT IN THE CASE OF PCIT V. DELHI AIRPORT METRO EXPRESS PVT. LTD. [ITA NO. 705/2017] HAS CATEGORICALLY HELD THAT FOR THE PURPOSE OF EXERCISING JURISDICTION U/S 263 AND REACHING A CONCLUSION THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, THE ID. PCIT HAS TO UNDERTAKE SOME MINIMAL INQUIRY AND IN FACT WHERE THE ID. PCIT IS OF THE VIEW THAT AO HAD NOT UNDERTAKEN ANY INQUIRY, IT BECOMES INCUMBENT ON THE PCIT TO CONDUCT SUCH ENQUIRY. THE RELIANCE IS ALSO PLACED ON THE DECISION OF ITO VS. DG HOUSING PROJECTS LIMITED S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 16 OF 18 [343 ITR 329] (DEL HC)] AND INDUS BEST HOSPITALITY & REALTORS PVT LTD. VS. PCIT [ITA NO. 3125/MUM/2017 (MUM TRIB)]. 22. IN THIS CASE QUERIES WAS RAISED DURING THE COURSE OF ASSESSMENT AND THE AO WAS SATISFIED WHICH LEADS TO THE CONCLUSION THAT THE ORDER PASSED BY THE LD.AO DO NOT CALLED FOR ANY INTERFERENCE AND REVISIONS. THE RELIANCE IS PLACED ON THE DECISION OF DELHI HIGH COURT IN CASE OF CIT VS. VIKAS POLYMERS [341 ITR 537] (DELHI HC). 23. THE LD.PR.CIT HAS NOT INVOKED EXPLANATION 2 TO S. 263 EITHER IN THE SHOW CAUSE NOTICE OR IN THE ORDER PASSED U/S. 263. EVEN OTHERWISE, EXPLANATION 2 IS NOT APPLICABLE AS ASSESSING OFFICER HAS MADE THE INQUIRY AND VERIFICATION WHICH OUGHT TO HAVE BEEN MADE. FURTHER, IT IS SUBMITTED THAT THE COORDINATE BENCH IN THE CASE OF NARAYAN TATU RANE - 70 TAXMANN.COM 227 (MUM.), HELD THAT EXPLANATION CANNOT SAID TO HAVE OVERRIDDEN THE LAW AS INTERPRETED BY THE VARIOUS HIGH COURTS, WHERE THE HIGH COURTS HAVE HELD THAT BEFORE REACHING A CONCLUSION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, THE COMMISSIONER HIMSELF HAS TO UNDERTAKE SOME ENQUIRY TO ESTABLISH THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE . AND THE EXPLANATION 2 TO SECTION 263 WAS INSERTED FROM 01.06.2015 AND IT IS NOT APPLICABLE RETROSPECTIVELY AS HELD IN THE CASE OF SANTI KRUPA ESTATE PVT. LTD. VS. ACIT [1252/AHD/2015] OF AHMEDABAD TRIBUNAL. S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 17 OF 18 24. EVEN OTHERWISE, TAKING INTO CONSIDERATION THE CUMULATIVE FACTS OBSERVED BY US IN THE PRESENT CASE AS WELL AS THE LEGAL PROPOSITION LAID DOWN BY THE HIGHER COURTS WE ARE OF THE VIEW THAT IN THE PRESENT CASE THE AO HAD MADE ENQUIRY AND ASSESSEE HAS ALSO PLACED ON RECORD ALL THE DOCUMENTS AS WERE REQUIRED BY THE AO IN RESPECT OF BOTH THE ISSUES AS NOW RAISED BY THE LD.PR.CIT. THUS, THE ORDER PASSED BY THE AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. MERELY JUST BECAUSE THE VIEW TAKEN BY THE AO WAS NOT FOUND ACCEPTABLE DOES NOT MEAN THAT THE AO HAS FAILED TO MAKE REQUISITE ENQUIRIES. THUS, THE VIEW TAKEN BY THE AO WAS PLAUSIBLE VIEW, WHICH CANNOT BE DISTURBED BY THE LD. PR.CIT. THEREFORE, THE LD. PR.CIT WAS NOT CORRECT IN EXERCISE THE JURISDICTION UNDER SECTION 263 OF THE ACT. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE QUASH THE ASSESSMENT PROCEEDINGS INITIATED BY THE LD.PR.CIT IN THE IMPUGNED ORDER PASSED UNDER SECTION 263 OF THE ACT AND ALLOW THE APPEAL OF THE ASSESSEE. 25. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 26. ORDER PRONOUNCED IN THE OPEN COURT ON 13-12-2019. SD/- SD/- (O.P.MEENA) (SANDEEP GOSAIN) ( /ACCOUNTANT MEMBER) ( /JUDICIAL MEMBER) / SURAT, DATED : 13 TH DECEMBER , 2019/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / S.R.CORPORATION VS. PR.CIT(CENTRAL), SURAT /ITA NO.289/SRT/2018 FOR A.Y. 2009-10 PAGE 18 OF 18 ASSISTANT REGISTRAR, SURAT