Appeal Details
Counselvise Citation
[2013] 120 COUNSELVISE.COM (IT) 2000 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 2 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-03-2013
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
06-09-2012
Assessment Year
2007-2008
Appeal Filed On
06-01-2012
Judgement Text
1 ITA NO. 33/PN/ 2012 , GERA DEVELOPMENTS PVT. LTD., PUNE IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 33/PN/2012 (ASSESSMENT YEAR :2007-08) GERA DEVELOPMENTS PVT. LTD., 200, GERA PLAZA, BOAR CLUB ROAD, PUNE VS. CIT-I, PUNE (APPELLANT) (RESPONDENT) PAN NO. AAACG6703F APPELLANT BY: SHRI S.K. TYAGI RESPONDENT BY: SHRI MUKESH VERMA/SUNIL KUMAR MISHRA ORDER PER R.S. PADVEKAR,J.M. : IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT-I, PUNE DT. 31-10-2011 FOR THE A.Y. 2007-08. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS: 1. THE LEARNED CIT ERRED IN PASSING THE ORDER UNDER SEC TION 263 OF THE INCOME-TAX ACT, 1961 (THE ACT), DATED 31.10.2011 FOR THE A.Y. 2007-08, IN THE CASE OF THE APPELLANT. 2. THE LD. CIT ERRED IN PASSING THE IMPUGNED ORDER U NDER SECTION 263, ON THE BASIS OF HIS ERRONEOUS OBSERVATIONS THAT THE FOLLOWING ISSUES HAD REMAINED TO BE CONSIDERED BY THE ASSESSING OFFI CER (A) TRANSFER OF DEVELOPMENT RIGHT INCORRECT TAXATION T HEREOF. (B) WARRANTY EXPENSES OF RS. 68,24,150/- AND (C) SET-OFF OF SHORT-TERM CAPITAL LOSS WITHOUT APPLYING THE PROVISIONS OF SECTION 94(7) OF THE ACT. 3. THE LD. CIT ERRED IN TOTALLY IGNORING THE FACT TH AT ALL THE AFORESAID ISSUES HAD BEEN EXAMINED BY THE ASSESSIN G OFFICER IN DETAIL BEFORE FINALISING THE ASSESSMENT FOR THE A.Y. 2007 -08. 4. THE LD. CIT ERRED IN NOT APPRECIATING THE FACT THA T EVEN ON MERITS, THE CONCLUDING OF THE ASSESSING OFFICER ON THE AFORE SAID ISSUES WAS PERFECTLY IN ORDER AND IN ACCORDANCE WITH LAW. 5. THE LD. CIT ERRED IN IGNORING ALL THE LEGAL PRECEDEN TS CITED BY THE APPELLANT IN SUPPORT OF THE STAND THAT IN THE FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE OF THE APPELLAN T, NO ACTION UNDER SECTION 263 OF THE ACT, WAS CALLED FOR. 2 ITA NO. 33/PN/ 2012 , GERA DEVELOPMENTS PVT. LTD., PUNE 6. THE LD. CIT ERRED IN SETTING ASIDE THE ORIGINAL ASS ESSMENT ORDER FOR THE A.Y. 2007-08 AND DIRECTING THE ASSESSING OFF ICER TO COMPLETE THE ASSESSMENT AFRESH ON THE AFORESAID ISSUES . 2. THE ASSESSEE IS A BUILDERS AND DEVELOPERS ENGAGED IN THE CONSTRUCTION AND DEVELOPMENT OF RESIDENTIAL AND COMMERCIAL PROPERTIES. THERE WAS A SURVEY ACTION AGAINST THE ASSESSEE U/S. 133A OF THE IN COME-TAX ACT ON 24- 01-2007 AND 25-01-2007. THE ASSESSEE FILED THE RETURN OF INCOME FOR A.Y. 2007-08 DECLARING TOTAL INCOME OF RS.19,97,62,184/- ON 10-0 4-2008. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND THE ASS ESSMENT OF THE ASSESSEE HAS BEEN COMPLETED U/S. 143(3) OF ACT BY THE AS SESSING OFFICER VIDE ORDER OF ASSESSMENT DT. 29-12-2009. SUBSEQUENTLY T HE LD. CIT, PUNE INVOKED THE PROVISIONS OF SECTION 263 OF ACT AND ISSUED S HOW CAUSE NOTICE TO THE ASSESSEE ON 01-03-2007 ON THE FOLLOWING POINTS: 1. TRANSFER OF DEVELOPMENT RIGHT-INCORRECT TAXATION THE REOF IT IS SEEN FROM THE RECORDS THAT THE COMPANY HAD ENT ERED INTO AN AGREEMENT WITH THE GROUP COMPANY GERA REALIT Y PVT. LTD. ON 19/08/2006 FOR TRANSFER OF DEVELOPMENT RIGHT FOR WHICH YOU HAD RECEIVED CONSIDERATION OF RS. 41 CRORES. IN THE LEDGER EXTRACT THE AMOUNT RECEIVED IS SHOWN AS UNDER : DATE NARRATION AMOUNT IN RS. 12/12/2006 TRANSFER TO DEPOSIT RECEIVED ACCOUNT (BY CHEQUE NO. 296917) 40,00,00,000 31/01/2007 TRANSFER TO DEPOSIT ACCOUNT (COST OF LAND AT S. NO. 64/1 TO 6 KHARDI) 1,00,00,000 FROM THE ABOVE, IT IS CLEAR THAT THE AGREEMENT IS E XECUTED ON 19/08/2006 AND THE TOTAL AMOUNT OF RS 41 CRORES IS ALSO RECEIVED DURING THE F.Y. 06-07. THE POSSESSION OF T HE LAND WAS ALSO GIVEN DURING F.Y. 06-07 ONLY. THE STAMP DUTY OF RS.5,86,620/- WAS ALSO PAID ON 19.08.2006 BEFORE THE POSSESSION WAS GIVEN. CONSIDERING THE ABOVE FACTS, THE TOTAL CONSIDERATIO N RECEIVED OF RS.41 CRORES SHOULD HAVE BEEN TAXED IN THE AY. 0 7-08 [I.E. IN F.Y.06-07). HOWEVER, ONLY RS 5.86 CRORES HAS BEEN T AXED IN A.Y. 07-08. THUS THE ORDER PASSED FOR THE A.Y.2007-08 IS TH US RENDERED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 2. WARRANTY EXPENSES OF RS.68,24,150: IT IS OBSERVED THAT YOU HAVE DEBITED AN AMOUNT OF RS.68,24,160/- TO THE P & L ACCOUNT AS WARRANTY EXP ENSES, WHICH IS A PROVISION MADE FOR THE EXPENSES. IN ABSENCE OF ANY EVIDENCE OF ACTUAL EXPENDITURE INCURRED, THE AMOUNT SHOULD HA VE BEEN ADDED BACK IN COMPUTATION OF TOTAL INCOME. IT IS ALSO S EEN THAT SUCH 3 ITA NO. 33/PN/ 2012 , GERA DEVELOPMENTS PVT. LTD., PUNE PROVISION WAS NOT MADE IN THE A.Y. 06-07 OR IN EARL IER YEARS. SINCE, THE ASSESSING OFFICER HAS NOT DISALLOWED THE EXPENDI TURE, THE ORDER PASSED FOR A.Y. 07-08 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 3) SET OFF OF SHORT TERM CAPITAL LOSS WITHOUT APPLY ING THE PROVISIONS OF SEC.94(7) OF THE I.T. ACT: IT IS SEEN THAT YOU HAVE COMPUTED SHORT TERM CAPITA L GAIN ON SALE OF ASSETS AND ALSO COMPUTED SHORT TERM CAPI TAL LOSS AND CLAIMED SET OFF AGAINST THE SAID GAIN. THE COMPANY IS N OT ELIGIBLE TO CLAIM SET OFF OF SUCH SHORT TERM LOSS AS PER THE PR OVISION OF SEC. 94(7] OF THE I.T. ACT 1961 BECAUSE THIS LOSS ARISES OUT OF STRIPPING OF DIVIDEND. THUS, ORDER PASSED FOR A.Y. 07-08 IS ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE ORDER PASSED BY THE ASSESSING OFFICER FOR A.Y.200 7-08 ON 29.12.2009 IS THEREFORE, NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE FOR THE REASON MENT IONED ABOVE. IT IS THEREFORE PROPOSED TO REVISE THE ASSESSMENT ORDER P ASSED ON 29.12.2009 U/S OF THE I.T. ACT.' 3. THE ASSESSEE RESISTED THE ACTION OF THE LD. CIT. THE ASSESSEE FILED A DETAILED REPLY TO THE QUESTIONS RAISED BY THE LD. CIT DT . 09-03-2011. THE REPLY WAS PRECISELY ON THE FOLLOWING 3 POINTS: 1. TRANSFER OF DEVELOPMENT RIGHT - INCORRECT TAXATION THERE OF. 2. WARRANTY EXPENSES OF RS. 68,24,150/- 3. SET-OFF OF SHORT-TERM CAPITAL LOSS WITHOUT APPLYING PROVI SIONS OF SECTION 94(7) OF THE ACT. 4. THE LD. CIT WAS NOT IMPRESSED WITH THE REPLY FILED BY THE ASSESSEE TO THE SHOW CAUSE NOTICE ISSUED U/S.263 OF ACT. SO FAR AS FIR ST ISSUE OF TRANSFER OF THE DEVELOPMENT RIGHTS IS CONCERNED, THE LD. CIT REFERS TO THE AGREEMENT FOR ASSIGNMENT OF DEVELOPMENT RIGHTS BETWEEN G ERA DEVELOPMENTS PVT. LTD. AND GERA REALITY INDIA PVT. LTD DT . 09-08-2006 AND OBSERVED THAT THE AMOUNT IN QUESTION IS NOTHING BUT CON SIDERATION IN RESPECT OF TRANSFER OF DEVELOPMENT RIGHTS. HE FURTHER OBS ERVED THAT THE RELEVANT CLAUSE OF AGREEMENT I.E. CLAUSE NO. 5 SUPERSCRIBES THE CONTENTS RELATING TO CONSIDERATION AS PAYMENT OF PURCHASE PRICE/C LOSING. IN THE OPINION OF THE LD. CIT, THE ASSESSEE HAS MERELY CHANGED THE NOMENCLATURE OF THE RECEIPTS AS NON-REFUNDABLE DEPOSITS TO CLAIM A POST PONE OF HIS TAX LIABILITY. IN HIS OPINION, THE WORD NON-REFUNDABLE IN THE AGRE EMENT ITSELF 4 ITA NO. 33/PN/ 2012 , GERA DEVELOPMENTS PVT. LTD., PUNE DESCRIBES THE VERY INTENTION OF THE PARTIES TO THE AGR EEMENT BEFORE THE LD. CIT. THE ASSESSEE PLACED THE RELIANCE ON THE DECLARATIO N-CUM-UNDERTAKING SIGNED BETWEEN THE ASSESSEE AND TRANSFEREE AND ON THE BASIS OF THE SAID AGREEMENT IT WAS CONTENTED THAT THE TRANSACTION OF SALE WAS NOT COMPLETED ON THE DAY ON WHICH THE SALE DEED WAS REGISTERED BECAU SE THE SAID SALE WAS SUBJECT TO PERFORMANCE OF CERTAIN OBLIGATION RELATING TO EN VIRONMENT CLEARANCE BY THE ASSIGNOR IN FAVOUR OF THE ASSIGNEE AND IN CASE THE SAID CLEARANCE WAS NOT COMPLETED THEN THE PROPERTY UNDER S ALE WOULD HAVE DIVERTED BACK TO THE ASSIGNOR. IN THE OPINION OF THE LD. CIT THE PROPERTY UNDER CONSIDERATION HAS ALREADY BEEN TRANSFERRED AND IT CANNOT BE REVERTED BACK TO THE ASSIGNOR AND THE SALE WAS COMPLETED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEARS 2007-08 ONLY AND TH E ASSESSING OFFICER FAILED TO EXAMINE THOSE FACTS AND HAS REACHED ERRONEOUS CONCLUSION WHICH HAS RESULTED IN LOSS OF REVENUE. 5. IN RESPECT OF THE ISSUE OF WARRANTY EXPENSES, THE A SSESSEES CONTENTION IS THAT FOR THE FIRST TIME IN A.Y. 2007-08 THE A SSESSEE ENTERED INTO AGREEMENT WITH HIS CUSTOMERS, OFFERING WARRANTY FOR 5 YEARS. THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTION THAT THE WARRANTY EXPENSES WERE ALLOWABLE: I. CIT VS. HEWLETT PACARD INDIA (P) LTD. 314 ITR (DEL) II. ROTORK CONTROLS INDIA P. LTD VS. CIT 314 ITR 62 III. CIT VS. HINITRON VS. SERVICES P. LTD. 321 ITR 263 6. THE LD. CIT WAS NOT IMPRESSED WITH THE EXPLANATION OF THE ASSESSEE. IN HIS OPINION, IT WAS MERELY A PROVISION AND SAME WAS NO T ALLOWABLE AS AN EXPENDITURE. 7. SO FAR AS THIRD ISSUE OF SET OFF OF SHORT TERM CAPITAL LOS S IN THE OPINION OF THE LD. CIT THE PROVISIONS OF SECTION 94(7) ARE CLEARLY A TTRACTED AS THE ASSESSEE HAS RECEIVED DIVIDEND OF RS.30,92,140/- AND HAS CLAIMED SHORT TERM CAPITAL LOSS OF RS.4,91,176/-. THE LD.CIT THEREFORE C ONCLUDED THAT THE 5 ITA NO. 33/PN/ 2012 , GERA DEVELOPMENTS PVT. LTD., PUNE ASSESSEE IS NOT ELIGIBLE TO CLAIM SET OFF OF SUCH SHORT TERM LOSS AS PER THE PROVISIONS OF SECTION 94(7) OF THE ACT AS THE SAID LOSS ARISE S OUT OF STRIPPING OF DIVIDEND. THE LD.CIT HELD THAT THE ORDER PASSED FOR A .Y. 2007-08 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND HE ACCORDINGLY SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT PROCEEDINGS IN ACCORDANCE WITH THE LAW A S DISCUSSED IN THE ORDER. BEING AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE LD. COUNSEL SUBMITS THAT THE STAND OF THE LD. CIT IS DIFFERE NT IN THE SHOW CAUSE NOTICE AND IN THE FINAL ORDER PASSED U/S .263 OF THE ACT. HE REFERS TO COPY OF SHOW CAUSE NOTICE PLACED AT PAGE NO. 1 OF THE P/B. HE SUBMITS THAT IN RESPECT OF ALL THE POINTS ON WHICH THE LD . CIT HAS RAISED QUERIES WERE CONSIDERED BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS. HE SUBMITS THAT ADMITTEDLY ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE ACT. SO FAR AS ISSUE OF ASSIGNMENT OF D EVELOPMENT RIGHTS, HE SUBMITS THAT IN PARA 6 OF THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS MADE DETAILED DISCUSSION GIVING THE FACTS IN PARA NOS. 6 AN D 7. IN PARA NO. 8, THE ASSESSING OFFICER HAS GIVEN THE FINDING AND AFTER EXA MINING THE ISSUE IN DETAIL HELD THAT THE BALANCE AMOUNT OF RS. 35.14 CRORES IS TAXABLE AS INCOME IN THE A.Y. 2008-09 AS OFFERED BY THE ASSESSEE. 9. IN RESPECT OF THE ISSUE OF WARRANTY PROVISION, THE ASS ESSING OFFICER MADE SPECIFIC QUERY VIDE HIS NOTICE U/S. 142(1) OF THE INCOME -TAX ACT DT. 27-11-2009 (COPY PLACED AT P/B NO. 55 TO 57). HE SUBMITS THAT DETAILED REPLY WAS ALSO FILED ON THE SAID QUERY TO THE ASSESSING OFFICER ON 10-12- 2009 AT PAGE NOS. 100 & 101 OF THE P/B. 10. IN RESPECT OF THE THIRD ISSUE IS CONCERNED HE SUBMIT S THAT IN THE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER SPECIFIC QUERY WAS RAISED BY WAY OF QUERY NO. 22 PAGE NO. 50 OF THE P/B VIDE THE NOT ICE ISSUED BY THE 6 ITA NO. 33/PN/ 2012 , GERA DEVELOPMENTS PVT. LTD., PUNE ASSESSING OFFICER ON 15-07-2009. HE SUBMITS THAT ON ALL THE ISSUES OR POINTS WHICH ARE MADE SUBJECT MATTER OF THE ORDER PASS ED U/S. 263 OF ACT WERE BEFORE THE ASSESSING OFFICER AND ASSESSING OFFICER BY H IS CONSCIOUS MIND CONSIDERED ALL THE ISSUES. HE SUBMITS THAT THOUGH THE LD. CIT HAS DESCRIBED THE ASSESSMENT ORDER AS ERRONEOUS ORDER MERELY BECAUSE THE VIEW EXPRESSED BY THE ASSESSING OFFICER ARE NOT ACCEPTAB LE TO HIM THAT ITSELF CANNOT BE THE REASONS FOR EXERCISING REVISIONAL POWERS U/S. 263. LD. COUNSEL RELIED ON FOLLOWING DECISIONS: 1. CIT VS. GABRIEL INDIA LTD. 203 ITR 108 2. CIT VS. SUNBEAM AUTO 332 ITR 167 DELHI HIGH COURT 3. CIT VS. HERO AUTO LTD. 343 ITR 342 DELHI HIGH COURT 4. MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC) 11. PER CONTRA THE LD. CIT DR VEHEMENTLY SUPPORTED T HE ACTION OF THE LD. CIT FOR EXERCISING THE JURISDICTION U/S. 263 OF ACT. 12. WE FIND FORCE IN THE ARGUMENT OF THE LEARNED COUNSEL IN RESPECT OF ALL THE 3 POINTS AS THE ASSESSING OFFICER HAS MADE THE ENQUIR Y AT THE TIME OF THE ASSESSMENT PROCEEDING ITSELF. SO FAR AS THE FIRST ISS UE REGARDING THE TRANSFER OF DEVELOPMENT RIGHTS, WE FIND THAT THE ASSESSING OFFICER HAS MADE THE DETAILED DISCUSSIONS IN PARA NOS. 6, 7 AND 8 OF THE A SSESSMENT ORDER ON THE SAID POINTS WHICH IS AS UNDER: 6. DURING THE SURVEY ACTION U/S. 133A OF THE ACT, IT WAS OBSERVED THAT THE ASSESSEE COMPANY HAS RECEIVED NON-REFUNDABLE DEP OSIT OF RS. 41 CR IN THE TRANSACTION AND WILL ALSO RECEIVES THE A NOTHER MONEY AS SALE FEES BY PERFORMING THE DUTIES ASSIGNED TO THE GDPL BY VIRTUE OF AGREEMENT DATED 05.09.2006 AS A PROMOTER. AS FAR AS CONSIDERATION OF RS. 41 CR. IS CONCERNED IT IS A SIMPLE SA LE OF TRANSFER OF STOCK-IN-TRADE. IN THIS TRANSACTION THE G DPL HAS TRANSFERRED THE LAND TO CRIPL, THE POSSESSION WAS H ANDED OVER AND THE CONSIDERATION WERE ALSO RECEIVED BY GDPL AND INVESTED IN ORDER TO EARN INCOME, THOUGH IT WAS STATED AS NON-RE FUNDABLE DEPOSIT IT IS INDEED A CONSIDERATION RECEIVED IN TERM OF THE MONEY AND SINCE THE TRANSACTION IS COMPLETED THE INCOME IS REAL IZED ACCORDING TO THE ACCOUNTING STANDARD. 7. WITH REGARD TO THE TRANSACTION OF RS. 41 CR. THE ASSESSEE COMPANY WAS ASKED TO FILE THE DETAILS. ON VERIFICATION THE DETAILS OF TRANSACTION AND THE EVIDENCES FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION IT IS SEEN THAT THE COMPANY HAS RECEIVED A DEPOSIT OF R S. 41 CR. FROM 7 ITA NO. 33/PN/ 2012 , GERA DEVELOPMENTS PVT. LTD., PUNE CPI GERA REALTY PVT. LTD (FORMERLY GERA REALTY PVT. LTD) FOR THE PROPOSED TRANSFER OF DEVELOPMENT RIGHTS IN A PROPERTY AT KHARADI, PUNE. THE ASSESSEE COMPANY HAS OFFERED RS.5,58,72,0 00/- AS FORMING PART OF TAXABLE INCOME THE AMOUNT BEING THE VALUE AS PER THE STAMP VALUATION AUTHORITY FOR TRANSFER OF DEVELOPME NT RIGHTS. IT WAS SPECIFICALLY ASKED TO THE ASSESSEE AS TO WHY THE EN TIRE AMOUNT OF DEPOSIT SHOULD NOT BE TREATED AS INCOME FOR THE AY: 2007-08 IN VIEW OF THE FACT THAT IT WAS A NON-REFUNDABLE DEPOSIT. THE A SSESSEE COMPANY MADE A DETAILED SUBMISSION DATED 14/12/2009 AND 18/ 12/2009 WHERE IN THE RELEVANT AGREEMENTS AND OPINION OF A SE NIOR ADVOCATE MR. S.K. TYAGI WAS ENCLOSED. IT WAS POINTED OUT BY THE ASSESSEE COMPANY THAT IT HAD GIVEN AN UNDERTAKING TO CPI GER A REALTY PVT. LTD THAT IT WILL RETURN THE DEPOSIT OF RS.41 CRORE IN C ASE THE ENVIRONMENTAL CLEARANCE WHICH WAS REQUIRED TO BE OBTAINED AS PER PRESS NOTE (2005) DATED 3 RD MARCH 2005 ISSUED BY MINISTRY OF COMMERCE & INDUSTRY, GOVT. OF INDIA WAS NOT OBTAINED BY THE AS SESSEE WITHIN 12 MONTHS FROM THE EXECUTION OF UNDERTAKING. THE COPI ES OF LAYOUT SANCTION, PLAN SANCTION, CONDITIONAL BUILDING PERMI SSION COMMENCEMENT CERTIFICATE, PRESS NOTE 2 (2005) HAVE BEEN FILED ON RECORD BY THE ASSESSEE. 8. I HAVE GONE THROUGH ALL THE DOCUMENTS PRODUCED. I HAVE ALSO VERIFIED THE FACT THAT THE ENVIRONMENTAL CLEARANCE WAS OBTAINED ONLY ON 11/2/2008 SUBSEQUENT TO WHICH THE ASSESSEE COMPAN Y HAS OFFERED THE BALANCE OF THE DEPOSIT RECEIVED AS TAXABLE INCOME IN A.Y. 2008-09. IT IS A FACT THAT THE DEPOSIT RECEIVED WOULD HAVE TO BE RETURNED IN CASE THE ENVIRONMENTAL CLEARANCE WAS NOT O BTAINED AS CPI GERA REALTY WOULD NOT BE ABLE TO EXECUTE THE PROJE CT AS PER THE CONDITIONAL PLAN SANCTION AND THE STRICT FDI NORMS THAT IT HAD TO COMPLY WITH. IN VIEW OF THE FACT THAT IT WAS A CONDIT IONAL DEPOSIT RECEIVED BY THE ASSESSEE COMPANY, THE SAME IS NOT FOR MING PART OF TOTAL INCOME. THE ASSESSEE HAS RECEIVED RS.5.86 CR. DURING THE YEAR AS PART PAYMENT WHICH IS SHOWN IN THE TOTAL INCOME, A ND THE BALANCE AMOUNT OF RS.35.14 CR WHICH WAS SHOWN AS DEPOSIT REC EIVED FROM CPI GERA REALTY INDIA (P) LTD. ON VERIFICATION IT IS SEEN THAT THIS BALANCE WAS RECEIVED IN THE F.Y. 2007-08 AND OFFERED F OR TAXATION AS INCOME FOR A.Y. 2008-09. 13. IN OUR OPINION SO FAR AS THE FIRST POINTS ISSUE IS CON CERNED MERELY BECAUSE THE VIEW AS TAKEN BY THE ASSESSING OFFICER IS NOT ACCEPTABLE TO THE LD. CIT THAT PER SE CANNOT BE GROUND TO TREAT THE OR DER AS ERRONEOUS ON THAT ISSUE. 14. LET US EXAMINE THE NEXT ISSUE I.E. IN RESPECT OF THE PROVISIONS OF WARRANTY EXPENSES. WE FIND THAT ON MERIT ITSELF THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF ROTORK CONTROLS INDIA PVT. LTD. VS. 314 ITR 62. WE FURTHER FIND THAT ASSESSING OFFICER HAS RAISED THE SPECIFIC QUERY ON THIS ISSU E VIDE NOTICE U/S.142(1) OF THE INCOME-TAX ACT DT. 27-11-2009 (COPY OF N OTICE PLACED AT PAGE NOS. 55 TO 57 OF THE P/B). WE FIND THAT ASSESSING OFFIC ER HAS CALLED FOR 8 ITA NO. 33/PN/ 2012 , GERA DEVELOPMENTS PVT. LTD., PUNE THE DETAILS OF THE WARRANTY EXPENSES WITH JUSTIFICATION NOT E IN NATURE OF THE WARRANTY. IT IS ALSO SEEN THAT ASSESSEE HAS FILED REPLY ON THE SAID ISSUE BEFORE THE ASSESSING OFFICER (PAGE NO. 100 OF THE P/B) JUSTIFYING THE C LAIM. 15. SO FAR AS THE THIRD ISSUE IS CONCERNED WHICH IS ONE O F THE REASON FOR CONSIDERING THE ASSESSMENT ORDER AS ERRONEOUS ONE I.E. A SET-OFF OF THE SHORT TERM CAPITAL LOSS AND APPLICABILITY OF THE PROVISIONS OF SECTION 94 (7) OF THE INCOME-TAX ACT, WE FIND THAT TO THAT EXTENT ORDER OF TH E LD. CIT HAS TO BE SUSTAINED AS THERE IS NO QUERY OR ENQUIRY BY THE ASSES SING OFFICER ON THE SAID ISSUE. THE LD. COUNSEL ALSO CLEARLY ADMITTED THE SAID FACTUAL ASPECTS. WE ARE THEREFORE OF THE OPINION THAT TO THE EXTENT OF FIR ST 2 ISSUES I.E. (I) TRANSFER OF DEVELOPMENT RIGHTS AND (II) WARRANTY EXPENSES T HE ORDER CANNOT BE SAID TO BE ERRONEOUS. THE LAW IS WELL SETTLED BY THE H ON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. (SUPRA) THAT TWO CONDITIONS M UST BE FULFILLED, (I) ORDER SHOULD BE ERRONEOUS AND (II) IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE PRESE NT SITUATION ON THE FIRST TWO ISSUES THE ORDER CANNOT BE TREATED AS ERRONE OUS. THE EXPRESSION ERRONEOUS HAS BEEN EXPLAINED IN THE CASE OF MALABAR IN DUSTRIAL CO. (SUPRA) AS UNDER: THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVE NUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF A N ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOP TED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFI CER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT C ANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS O F THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS U NSUSTAINABLE IN LAW. 16. MOREOVER, AS PER THE FURTHER INTERPRETATION GIVEN TO THE TERM ERRONEOUS MEANS IF THERE IS A LACK OF ENQUIRY AND THE S AID LAW HAS BEEN EXPLAINED BY THE HON'BLE SUPREME COURT IN THE CASE OF SU NBEAM AUTO LTD. (SUPRA). THE HON'BLE HIGH COURT, DELHI HAS EXPLAINED THE DIFFE RENCE BETWEEN THE TWO EXPRESSIONS LACK OF ENQUIRY AND INADE QUATE ENQUIRY. IN OUR OPINION, THE PRESENT CASE CANNOT BE SAID TO BE LACK OF ENQUIRY AT LEAST 9 ITA NO. 33/PN/ 2012 , GERA DEVELOPMENTS PVT. LTD., PUNE ON THE FIRST TWO ISSUES. SO FAR AS THE THIRD ISSUE IS CONC ERNED I.E. THE APPLICABILITY OF SECTION 94(7) THERE IS NO DISCUSSION, OR ANY QU ERY AND CERTAINLY IT IS AN ISSUE FOR WHICH THE ASSESSMENT ORDER C AN BE SAID TO BE ERRONEOUS TO THE EXTENT. WE THEREFORE UPHOLD THE ORDE R OF THE LD.CIT TO THE EXTENT ONLY ON THE ISSUE OF APPLICABILITY OF THE SECTION 94(7 ) OF THE ACT I.E. ON THE THIRD ISSUE AND ACCORDINGLY THE IMPUGNED ORDER IS MO DIFIED AND THE ASSESSEE PARTLY SUCCEEDS IN THIS APPEAL. WE, THEREFORE , HOLD THAT TO THE EXTENT OF THE THIRD ISSUE I.E. SET-OFF OF SHORT TERM CAPITAL LOSS AND APPLICABILITY OF SECTION 94(7) OF THE INCOME-TAX ACT, THE ORDE R IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ASSESSING OFFICER IS DIRECTED TO COMPLETE THE ASSESSMENT AFTER EXAMINING THIS ISSUE AS PER THE PROVISIONS OF LAW. 17. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 8 TH DAY OF MARCH, 2013. SD/- SD/- (G.S. PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER RK/PS PUNE, DATED: 8 TH MARCH, 2013 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT - I, PUNE 4 THE CIT, PUNE 5 TH E DR, ITAT, PUNE. 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE ITA NO.
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