PLATINUM PROPERTIES , MUMBAI V. THE PR. CIT 2, MUMBAI

ITA 3555/MUM/2019

AI Insights

The case revolves around the revision order passed by the PCIT-2, Thane, concerning the assessee, Platinum Properties, for the assessment year 2014-15. The PCIT challenged the original assessment order, claiming it was erroneous and prejudicial to the interests of the revenue as it did not include 'on money' received from the sale of flats in the 'Springs II' project. The assessee argued that the income from this project was recognized under the 'Project Completion Method' and was not assessable in AY 2014-15 as the occupancy certificate was received only on 11.12.2014. The Tribunal, after examining the submissions and the records, concluded that the assessing officer had correctly applied the law and the method of accounting followed by the assessee, leading to the quashing of the revision order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123948 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-02-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 23-05-2019
• Other Referred Cases: Grasim Industries Ltd. V CIT (321 ITR 92), Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, CIT v. Max India Ltd. [2007] 295 ITR 282, Nagesh Knitwears P Ltd (2012)(345 ITR 135), CIT Vs. Goetze (India) Ltd (361 ITR 505), CIT Vs. Amalgamations Ltd (238 ITR 963)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Assessment record
• Section: 263; 143(3); 142(1); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI ‘C’ BENCH, MUMBAI. Before Shri B.R. Baskaran (AM) & Shri Pavan Kumar Gadale (JM) I.T.A. No. 3555/Mum/2019 (A.Y. 2014-15) Platinum Properties Plot No. 15, Sector-20 Road Pali, Kalamboli Navi Mumbai-410 218. PAN : AAJFP4159N V s. PCIT-2 Ashar IT Park B Wingh, 6 th Floor Wagle Industrial Estate, Thane West Maharashtra - 400 604. (Appellant) (Respondent) Assessee by Shri Mani Jain Department by Shri K.C. Selvamani D ate of He a rin g 07.02.2023 D ate of P r on ou nc em ent 21.03.2023 O R D E R Per B.R.Baskaran (AM) :- The assessee has filed this appeal challenging the revision order dated 27.03.2019 passed by learned PCIT-2, Thane and it relates to the assessment year 2014-15. The assessee is challenging the validity of revision order passed by Learned PCIT. 2. The facts relating to the case are stated in brief. The assessment in the hands of the assessee for the year under consideration was completed by the assessing officer under section 143(3) of the Income tax Act, 1961 on 26/12/2016. The learned PCIT, upon examination of the assessment record, took the view that the assessment order is erroneous and prejudicial to the interest of the revenue in not assessing “on money” received by the assessee in the project titled as “Springs II”. The basis on which the learned PCIT took the above said view is discussed hereunder. The revenue carried out survey action under section 133A of the Act in the hands of the assessee on Platinum Properties 2 16/10/2014. During the course of survey operations, it was found that the assessee has received on money of Rs.16.82 crores on sale of flats relating to “Springs I” and “Springs II”. The assessee agreed to surrender the above said amount and accordingly surrendered a sum of ₹ 52.86 crores in assessment year 2013-14, which related to the project “Springs I”. It was submitted that the balance amount Rs.7.19 crores is related to the project “Springs II” and it reminded to be offered by the assessee in the subsequent year. 3. The learned PCIT noticed that the assessee did not offer the above said amount of Rs. 7.96 crores in assessment year 2014-15. The learned PCIT took the view that the assessing officer has also failed to add the above amount to the total income of the assessee in assessment year 2014-15. Accordingly, he held that the assessment order is erroneous and prejudicial to the interests of revenue and accordingly initiated revision proceedings under section 263 of the Act. 4. Before learned PCIT, the assessee submitted that it is following ‘Project completion method’ for offering income. It was submitted that the occupancy certificate for “Spring I” project was received in the year relevant to assessment year 2013-14 and hence the proportionate amount of “on money” relating to the above said project was offered in that year. The remaining amount of ₹ 7.96 crores pertained to the project “Spring II” project and the occupancy certificate (OC) for the same was not received during the financial year relevant to assessment year 2014-15. Hence the above said amount was not offered to tax in AY 2014-15. It was further submitted that above information was given to the assessing officer during the course of assessment proceeding and the copy of Occupancy certificate granted for “Springs II” was also furnished to the AO. The OC for “Springs II” was received 11.12.2014. Hence the assessing officer did not make addition of Rs. 7.96 Crores in assessment year 2014-15. In this regard, the assessee Platinum Properties 3 placed its reliance on the notice issued by assessing officer u/s 142(1) of the Act during the course of assessment proceedings and submitted that the details of “Occupation certificate relating to “Spring II” was duly verified by the assessing officer. Accordingly, the assessee contended that the assessment order cannot be considered to be erroneous and prejudicial to the interest of the revenue. 5. The learned PCIT, however, held that the balance amount should have been assessed to tax in assessment year 2014-15. Accordingly, he held that the failure of the assessing officer to assess the balance amount in AY 2014- 15 has made the assessment order erroneous and prejudicial to the interest of the revenue. Accordingly he set aside the assessment order and directed by the AO to do the assessment de-novo, after affording adequate opportunity of being heard to the assessee. The assessee is aggrieved by the revision order so passed by the learned PCIT. 6. The Ld A.R submitted that the assessee is following “Project Completion method” for offering income and it has been accepted by the assessing officer over the years. Accordingly, the on money component relating to the project “Springs I” has been assessed in AY 2013-14. Referring to the assessment order passed for AY 2013-14, particularly para 7.6, the Ld A.R submitted that the assessing officer has specifically stated that the undisclosed money of Rs.52.86 crores pertaining to Springs I project, which is completed during the year is taxed. The AO has further stated that “As far as taxing the undisclosed receipts pertaining to Springs II project is concerned the same will be taxed in the year in which Springs II project was completed.”. Accordingly, the Ld A.R submitted that the AO is well aware that the difference amount of Rs.7.96 crores is assessable in the year in which the project Springs II shall be completed. Hence he has not stated that the difference amount of on money component shall be taxed in AY 2014-15. He further submitted that the Occupancy Certificate pertaining to Springs II project to which the Platinum Properties 4 difference amount relates to has been granted only on 11-12-2014. Hence the question of assessing the difference amount in AY 2014-15 does not arise. The above fact of granting of occupancy certificate only on 11.12.2014 was very much furnished before the AO during the course of assessment proceedings and hence the AO was aware that the balance consideration of Rs.7.19 crores is not assessable in AY 2014-15. Accordingly, he submitted that the AO has applied his mind on this issue and hence the impugned assessment order could not be considered to be erroneous and prejudicial to the interests of revenue, as presumed by Ld PCIT. Accordingly, he submitted that the impugned revision order is liable to be quashed. 7. The Ld D.R, on the contrary, submitted that the difference amount of Rs.7.19 crores has not been offered to tax in AY 2015-16 also. He submitted that the assessee, having surrendered the on money as its income, should have offered the same. He submitted that there is deficiency in the examination of this aspect during the course of assessment proceedings and hence the Ld PCIT has initiated this revision proceedings. Accordingly, he supported the revision order passed by Ld PCIT. 8. We heard rival contentions and perused the record. The scope of revision proceedings initiated under section 263 of the Act was examined by Hon'ble Bombay High Court, in the case of Grasim Industries Ltd. V CIT (321 ITR 92) by taking into account the law laid down by the Hon'ble Supreme Court. The relevant observations are extracted below: Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be “erroneous in so far as it is prejudicial to the interests of the Revenue”. This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision Platinum Properties 5 “cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer” and “it is only when an order is erroneous that the section will be attracted”. The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The expression “prejudicial to the interests of the Revenue”, the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote) : “The phrase ‘prejudicial to the interests of the Revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted 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 Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law.” The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282.” The principles laid down by the courts are that the Learned CIT cannot invoke his powers of revision under section 263 if the Assessing Officer has conducted enquiries and applied his mind and has taken a possible view of the matter. If there was any enquiry and a possible view is taken, it would not give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. The consideration of the Commissioner as to whether an order is erroneous in so far it is prejudicial to the interests of Revenue must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already concluded. Platinum Properties 6 9. In the case of Nagesh Knitwears P Ltd (2012)(345 ITR 135), the Hon’ble Delhi High Court has elucidated and explained the scope of the provisions of sec. 263 of the Act and the same has been extracted by the Delhi High court in the case of CIT Vs. Goetze (India) Ltd (361 ITR 505) as under:- “Thus, in cases of wrong opinion or finding on merits, the Commissioner of Income tax has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order is not sustainable in law and the said finding must be recorded. The Commissioner of Income tax cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner of Income tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income tax and he is able to establish and show the error or mistake made by the Assessing officer, making the order unstainable in law. In some cases possibly though rarely, the Commissioner of Income tax can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter to the Assessing Officer would imply and mean the Commissioner of Income tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question....” Similar view has been expressed by Hon’ble Madras High Court in the case of CIT Vs. Amalgamations Ltd (238 ITR 963). The law interpreted by the High Courts makes it clear that the Ld Pr. CIT before holding an order to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given by the assessing officer is erroneous, the Ld Pr. CIT should have shown that the view taken by the AO is unsustainable in law. 10. In the instant case, we noticed that the Ld PCIT has reached to the Platinum Properties 7 conclusion that the difference amount is taxable in AY 2014-15 without referring to any material available on record. It is well settled proposition that the conclusion reached by the Ld PCIT should be supported by the material available on record. Before us, the Ld DR submitted that the assessee has not offered the difference amount in AY 2015-16. However, the case before us is related to the revision order passed for AY 2014-15, wherein the Ld PCIT has come to the conclusion that the difference amount is taxable in this year, which is not supported by the material available on record. Hence the question whether it was offered to tax in the succeeding year or not is not relevant to resolve the dispute before us. The point here is that the difference amount is not taxable in AY 2014-15 in accordance with the method of accounting followed by the assessee. It is also not a case where the AO has not applied his mind. From the record we notice that the AO was very much aware that the Project Spring II has not been completed in this year. Accordingly, we agree with the submission of Ld A.R that the Ld PCIT has no material to come to the conclusion that the difference amount is taxable in AY 2014-15. Accordingly, we are of the view that, in the facts and circumstances of the case, the impugned revision order cannot be sustained. Accordingly we quash the same. 11. In the result, the appeal filed by the assessee is allowed. Pronounced in the open court on 21.3.2023. Sd/- Sd/- (PAVAN KUMAR GADALE) (B.R. BASAKARAN) Judicial Member Accountant Member Mumbai; Dated : 21/03/2023 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(Judicial) 4. PCIT 5. DR, ITAT, Mumbai Platinum Properties 8 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai