ASTRIX PROPERTIES P.LTD, MUMBAI V. PR CIT CEN -9, MUMBAI

ITA 3681/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0309 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 26-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Keywords: Assessment record
• Section: 143(3); 142(1); 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JM AND SHRI RAJESH KUMAR , AM ./ I.T.A. NO . 3681 /MUM/201 6 ( / ASSESSMENT YEA R : 2 0 11 - 12 ) ASTRIX PROPERTIES P LTD, GALA NO.7 PAPA INDLA ESTATE, 1 ST FLOOR, SUREN ROAD, NEAR CINE MAGIC, CHAKALA ANDHERI(E), MUMBAI - 400093 / VS. PRINCIPAL COMMISSIONER OF INCOME TAX - 9, 612, AAYAKAR BHAVAN, MK ROAD, MUMBAI - 400020 APPELLANT RESPONDENT PAN: AADCA8229K / APPELLANT BY : SHRI VIJAY MEHTA /R ESPONDENT BY : SHRI R P MEENA / DATE OF HEARING : 30.3. 2017 / DATE OF PRONOUNCEMENT : 14. 6 . 2017 / O R D E R PER RAJESH KUMA R , A M : THE AFORESAID APPEAL , AT THE INSTANCE , OF ASSESSEE IS AGAINST THE ORDER DATED 17.03.2016 OF PRINCIPAL COMMISSIONER OF INCOME TAX, MUMBAI , FOR THE ASSESSMENT YEAR 20 11 - 12 . 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE AS UNDER : THE HON'BLE P R. CIT CENTRAL - 9 (HEREIN AFTER REFERRED AS CIT) HAS ERRED IN INVOKING PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT, 2 I.T.A. NO. 3681 / MUM/ 201 6 1961 BY ISSUING THE NOTICE INSPITE OF THE FAC T THAT SCRUTINY ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 HAS BEEN COMPLETED BY TH E DCIT CIRCLE - 9(1)(2), MUMBAI AFTER DULY EXAMINING AND CONSIDERING FACTS WHILE FRAMING THE ASSESSMENT ORDER D/S 143 (3) OF INCOME TAX ACT, 1961. THE HON'BLE CIT HAS ERRED IN RAISING THE ISSUES AND MAKING ROWING ENQUIRIES IN THE PROCEEDINGS D IS 263 OF TH E INCOME TAX ACT, 1961. FURTHER ORDER D/S 263 IS ALSO PASSED WITHOUT ANY CONCLUSION MERELY SETTING ASIDE THE ASSESSMENT TO THE FILE OF THE LEARNED ASSESSING OFFICER WHICH IS UNJUSTIFIED. IT IS THEREFORE SUBMITTED THAT THE ORDER PASSED U/S 263 SHOULD BE CAN CELLED. 2. WITHOUT PREJUDICE TO GROUND NO. I, THE CIT HAS MENTIONED THAT WHILE CONSIDERING THE CAPITAL WORK IN PROGRESS AS NET WORTH THE PENDING LIABILITIES I.E. LOANS RELATABLE TO THE WIP STANDING IN THE BOOKS AT RS.25.75 CRORES HAD NOT BEEN CONSIDERED AND RESULTANTLY, THE NET WORTH WAS OVER ESTIMATED BY RS.25.75 CRORES, THEREFORE THERE IS UNDER ASSESSMENT OF INCOME AND THE LEARNED ASSESSING OFFICER DOES NOT APPEAR TO LOOKED INTO THE SAID MATTER. THE ISSUE RAISED WITH REGARD TO SUCH AMOUNT WAS DULY EXAM INED AND THE SAME CANNOT BE CONSIDERED IN THE ORDER D/S 263 OF THE INCOME TAX ACT, 1961. FURTHER THE DETAILS WITH REGARDS NET WORTH OF THE ASSETS AS ON THE DATE OF SLUMP SALE WERE SUBMITTED TO THE CIT AND FURTHER ALSO SUBMITTED THAT THE LOAN WAS SQUARED U P AND HAD BEEN REDUCED TO NIL BEFORE THE AGREEMENT DATE OF SLUMP SALE. IN CONCLUSION, CIT HAS SET ASIDE THE ORDER WITHOUT EXAMINING THE DOCUMENTS AND EXPLANATION FILED DURING THE 263 PROCEEDINGS AND MERE SET ASIDE OF THE ORDER TO SUCH EXTENT IS UNJUSTI FIED. ACCORDINGLY, THE NECESSARY DIRECTION SHOULD BE GIVEN IN THIS REGARD. 3 . THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.9.2011 DECLARING TOTAL LOSS OF RS.36,70,30,349/ - WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE A CT. THEREAFTER SCRUTINY PROCEEDINGS WERE UNDERTAKEN AFTER ISSUING NOTICES UNDER SECTION S 143(2) AND 142(1) OF THE ACT AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 27.2.2014 BY ACCEPTING THE RETURN ED LOSS . THE SAID LOSS WAS INCURRED ON THE 3 I.T.A. NO. 3681 / MUM/ 201 6 SALE OF WORK IN PROGRESS IN SLUMP SALE. THE LOAN OF RS. 25.75 CR TAKEN IN CONNECTION THE SAID WIP AND WAS DISCHARGED BY THE BUYER M/S PAKM SPRING GREEN CITY DEVELOPERS PVT LTD. DIRECTLY AND NOT ROUTED THROUGH THE ASSESSEE. WITH THE AFTERWARDS T HE PRINCIPAL COMMISSIONER OF INCOME TAX INITIATED PROCEEDINGS UNDER SECTION 263 OF THE ACT EXERCISING THE REVISIONARY POWERS ON THE BASIS OF HIS OBSERVATION FROM THE ASSESSMENT RECORD THAT THE ASSESSEE HAS SOLD OUT CAPITAL WORK IN PROGRESS ON SLUMP SALE BASIS AND THE ASSESSEE HAS COMPUTED THE SHORT TERM CAPITAL LOSS OF RS.32,64,09,870/ - WHICH IS WRONG . IN THE STATEMENT OF TOTAL INCOME, THE SAID LOSS HAS BEEN REFLECTED UNDER THE HEAD CAPITAL GAIN AND OUT OF THE SAID LOSS A SUM OF RS. 3,62,86,952/ - HAS BEE N CLAIMED AS CARRIED FORWARD LOSS IN SUBSEQUENT YEAR. ACCORDING TO THE PCIT WHILE CONSIDERING THE CAPITAL WORK IN PROGRESS AS NET WEALTH , THE OUTSTANDING LIABILIT IES I.E. LOAN RELATED TO WIP OF RS. 25.75 CRORES HAS NOT BEEN CONSIDERED THEREBY RESUL T ING INTO OVERSTATEMENT OF NET WORTH BY RS. CRORES WHICH IN TURN RESULTED IN THE OVERSTATEMENT OF S HORT TERM CAPITAL LOSS BY RS.25.75 CR WHICH WAS ALLOWED TO BE CARRIED FORWARD AND PARTLY SET OFF IN SUBSEQUENT YEAR . ACCORDINGLY, THE PCIT CAME TO THE CONCLUSION THAT THE ASSESSMENT FRAMED BY THE AO VIDE ORDER DATED 27.2.2014 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND HENCE PROPOSED TO INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT BY ISSUING ISSUED NOTICE TO THE ASSESSEE U/S 263 OF 4 I.T.A. NO. 3681 / MUM/ 201 6 THE ACT WHICH WAS REPLIED BY THE ASSESSEE VIDE O R DER DATED 9.3.2016 BY SUBMITTING THAT INITIATION OF REVISIONARY PROCEEDINGS U/S 263 OF THE ACT WAS BAD IN LAW AS THE AO HAS EXAMINED THE ISSUE AT LENGTH AND MERE FACT THAT THE ASSESSMENT ORDER HAS NOT BEEN PASSED ELABORATELY WOULD NOT FORM THE BASIS FOR INITIATING THE REVISIONARY PROCEEDINGS. THE LD. AR VEHEMENTLY SUBMITTED BEFORE US THAT THE REVISIONARY PROCEEDINGS UNDER SECTION 263 OF THE ACT WERE NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERE ST OF REVENUE. THE WHOLE EXERCISE IS TAX NEUTRAL AND HAS NOT CAUSED ANY LOSS TO THE REVENUE. FOR INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT THE PRE - CONDITION S ARE THAT ASSESSMENT ORDER SHOULD BE ERRONEOUS AND ALSO PREJUDICIAL TO THE REVENEUE AND IN CASE OF NON SATISFACTION OR FULFILLMENT OF THE TWO CONDITIONS NO PROCEEDINGS U/S 263 CAN BE INVOKED. IN THE P RESENT CASE, THE ACTION OF THE CIT WAS CONTRARY TO LAW AS REVISIONARY POWER WERE EXERCISED TO CORRECT A MISTAKE WHICH IS TAX NEUTRAL AND NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE. SINCE IN THE PRESENT CASE ONLY ONE CONDITION IS SATISFIED AND NO PREJUDIC E IS CAUSED TO THE REVENUE AND THEREFORE PROCEEDINGS INITIATE D U/S 263 WERE ON WRONG ASSUMPTION OF JURISDICTION AND S HOUL D BE QUASHED . 4 . THE LD. AR FILED BEFORE US THE TWO CALCULATION TABLE ONE SHOWING LONG TERM CAPITAL LOSS BY THE ASSESSEE REDUCING THE LOAN LIABILITIES OF RS. 32.00 CR WORK IN PROGRESS AND THE NET COST OF WORK IN PROGRESS FOR CALCULATING THE 5 I.T.A. NO. 3681 / MUM/ 201 6 CAPITAL LOSS AND SECO ND AS PROPOSED BY THE PCIT WHEREIN WORK IN PROGRESS IS TAKEN AT GROSS COST AND THE LOAN IS TAKEN SEPARATELY. THE LD AR SUBMITTED BEFORE THE BENCH THE IN BOTH THE CALCULATION THE CAPITAL LOSS WAS WORKED OUT TO BE SAME AND THUS THERE WAS NO PREJUDICE OR LOSS TO THE REVENUE. UNDER THESE CIRCUMSTANCES, THE LD.AR FINALLY PRAYED THAT THE PROCEEDINGS UNDER SECTION 263 OF THE ACT SHOULD BE QUASHED AS ONE OF THE CONDITIONS PRECEDENT FOR ISSUE OF NOTICE WAS NOT SATISFIED . 5. THE LD. DR ON THE OTHER HAND, OPPOSED THE ARGUMENTS OF THE LD.AR BY SUBMITTING THAT WHILE CALCULATING THE CAPITAL GAINS/LOSS LOAN LIABILITY RELATING TO WORK IN PROGRESS AS SHOWN BY THE ASSESSEE TO BE RELATING TO WIP WAS NOT CONSIDERED RESULTING INTO OVERSTATEMENT OF SHORT TERM CAPITAL LOSS WHICH WAS ALLOWED TO BE CARRIED FORWARD AND PARTLY SET OFF IN THE SUBSEQUENT YEAR AND THUS, THE AO HAS COMPLETELY FAILED TO EXAMINED THIS ISSUE WHICH WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE AND THEREFORE, EXERCISE OF REVISIONARY P OWERS BY INVOCATION OF THE PROVISIONS OF SECTION 263 OF THE ACT IS JUSTIFIED . IN SUPPORT OF HIS CONTENTION, THE LD.DR RELIED UPON THE CASE LAW AS UNDER : A) GEOSOFT TECHNOLOGIES (TRIVANDRUM) LTD V/S CIT (2014) 41 TAXMANN.COM428 (KERALA) AND B) CIT V/S ABAD CONSTRUCTION (P) LTD (2014) 44 TAXMANN.COM 319(KERALA) 6 I.T.A. NO. 3681 / MUM/ 201 6 FINALLY, THE LD.DR HEAVILY SUPPORTED THE ORDER OF THE PCIT AND REQUESTED THE BENCH TO UPHOLD THE SAME. 6 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDIN G THE ORDERS OF AUTHORITIES BELOW AND CASE LAW RELIED UPON BY THE ASSESSEE AND REVENUE . PRIMA FACIE THE REASON FOR INVOKING THE PROVISIONS OF SECTION 263 IS THAT THE LOAN RELATED TO WIP WAS NOT CONSIDERED WHILE CALCULATING THE SHORT TERM CAPITAL LOSS. IN ORDER TO UNDERSTAND THE ISSUE IN A PROPER MANNER, THE CALCULATION AS GIVEN BY ASSESSEE AND THAT OF PCIT ARE REPRODUCED BELOW: CHART SHOWING WORKING OF CAPITAL GAINS BY THE ASSESSEE :. TABLE - 1 S.NO. PARTICULARS AMOUNT 1 SALE CONSIDERATION RS.4,00,00,000 ADVANCE OF EARLIER DEAL FORFEITED RS. 51,00,000 RS.4,51,00,000 2 LESS:COST BEING NET ASSET RS.37,15,08,970 3 SHORT TERM CAPITAL LOSS RS. 32,64,08,970 WORKING OF CAPITAL GAINS BY THE PCIT :. TABLE - 2 S.NO. PARTICULARS AMOUNT 1 SALE CONSIDERATION PAYMENT TOWARDS LOAN RS.32,00,00,000 SALE CONSIDERATION(BALANCE) RS.4,00,00,000 36,00,00,000 ADVANCE OF EARLIER DEAL FORFEITED RS. 51,00,000 RS .36,51 ,00,000 2 LESS:COST BEING NET ASSET RS. 6 9,15,08,970 3 SHORT TERM CAPITAL LOSS RS.32,64,08,970 7 I.T.A. NO. 3681 / MUM/ 201 6 IF WE EXAMINE THE TWO STATEMENTS , IT CLEAR THAT THE STATEMENT NO 1 THE ASSESSEE HAS TAKEN THE WORK IN PROGRESS AT NET AMOUNT AFTER DEDUCTION OF LOAN AMOUNT OF RS. 32.00 CR. IN OTHER WORDS THE NET CO NSIDERATION FOR SALE AS WELL AS THE COST OF WIP WAS REDUCED BECAUSE THE LIABILITY TOWARDS THE LOAN WAS DISCHARGED BY THE BUYER DIRECTLY TO THE BANK. WHEREAS IN THE STATEKMENT NO 2 AS PROPOSED BY THE PCIT, BOTH THE SALES CONSIDERATION AS WELL AS THE COST OF WIP WERE TAKEN AT GROSS AMOUNT WITHOUT REDUCING THE LOAN AMOUNT. IN BOTH THE CALCULATION BY THE ASSESSEE AND AS PROPOSED BY THE PCIT THE SHORT TERM CAPITAL GAIN IS SAME I.E RS.32,64,08,970 / - . THE SALE CONSIDERATION IN TABLE NO 1 IS TAKEN AT RS.4 CRORES AG AINST THE COST OF NET ASSET (WIP) OF RS.37,15,08,970/ - WHICH WAS CALCULATED AFTER DEDUCTING THE PAYMENTS TOWARDS LOAN OF RS.32 CRORES. WHEREAS IN THE SECOND TABLE - 2 , THE SALE CONSIDERATION WAS TAKEN AT RS.36,00,00,000/ - AGAINST THE COST OF NET ASSET OF RS.69,15,08,970/ - WHICH WAS BEFORE PAYMENT TOWARDS DISCHARGE OF LOAN OF RS.32 CRORES . IN THIS CASE, THE SHORT TERM CAPITAL LOSS WAS WORKED OUT TO RS.32,64,08,970/ - IT IS AMPLY CLEAR FROM THE TWO TABLES HEREINABOVE THA THE WHOLE EXERCISE AS PROPOSE D BY THE COMMISSIONER UNDER PROCEEDINGS U/S 263 OF THE ACT IS TAX NEUTRAL AS NO TAX EVASION IS CAUSED BY THE ASSESSEE RESULTING INTO ANY PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN ONE CASE, THE ASSESSEE HAS NOT CONSIDE RED THE PAYMENT TOWARDS LOAN AN D TAKEN NET CONSIDERATION AND CAPITAL GAIN WAS WORKED OUT BY TAKING THE NET ASSET AFTER 8 I.T.A. NO. 3681 / MUM/ 201 6 REDUCTION OF LOAN. WHEREAS IN THE SECOND CASE AS PROPOSED BY THE CIT IF THE GROSS AMOUNT OF CONSIDERATION IS TAKEN THE CORRESPONDING REDUCTION IS NOT MADE OF THE LO AN FROM THE FIXED ASSETS AND THEREFORE, THE NET RESULT IS SAME AS CALCULATED BY THE ASSESSEE. IN VIEW OF THIS FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE ONE OF THE CONDITION THAT PREJUDICIAL TO THE INTEREST OF REVENUE IS MISSING IN THE PRESENT CASE, AND THEREFORE PROCEEDINGS UNDER SECTION 263 IS QUASHED. 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14TH JUNE , 2017 SD SD ( SAKTIJIT DEY ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 14. 6 . 2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A ) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGI STRAR) , / ITAT, MUMBAI