Appeal details
Counselvise Citation
[2022] 106 COUNSELVISE.COM (IT) 9455 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 4 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-09-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2014-2015
Appeal Filed On
28-04-2019
Judgement Text
1 ITA No. 3731/Del/2019 DLF Garden City Indore, ND IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘B’ NEW DELHI BEFORE SHRI B. R. R. KUMAR, ACCOUNTANT MEMBER AND SH. YOGESH KUMAR U.S., JUDICIAL MEMBER I.T.A. No. 3731/DEL/2019 (A.Y 2014-15) DLF Garden City Indore Pvt. Ltd., 1–E, Naaz Cinema Complex, Jhandewalan Extn., New Delhi – 110 055. PAN No. AAFCA5034N (APPELLANT) Vs. Pr. CIT, New Delhi. (RESPONDENT) ORDER PER YOGESH KUMAR U.S., JM This appeal is filed by the assessee for assessment year 2014-15 against the order of the ld. Pr. Commissioner of Income Tax, Delhi–3, New Delhi, dated 14.03.2019. Appellant by Shri R. S. Singhvi, C. A. & Shri SatyajeetGoel, C. A.; Respondent by Ms. Yagya Saini Kakkar, [CIT] – D. R.; Date of Hearing 05.07.2022 Date of Pronouncement 07.09.2022 2 ITA No. 3731/Del/2019 DLF Garden City Indore, ND 2. Brief facts of the case are that, the assessee Company was engaged in the business of real estate development during the year under consideration. The original return has been filed by the assessee on 29/11/2014, later on 23/06/2015 filed a revised return declaring total income of Rs. 12,52,32,500/-. The case was selected for scrutiny assessment under CASS, notices u/s 143(2) and questionnaire u/s 142(1) of the Act were issued which was duly served upon the assessee. The assessee has participated in the assessment proceedings, the Assessment Order came to be passed on 27/12/2016 u/s 143(3) of the Act by accepting the income of the assessee at Rs. 12,52,32,500/-. 3. Subsequent to the scrutiny assessment order dated 27/12/2016, it came to be surface in the Department that the assessee had made a claim to be surplus through audit trial that assessee had made a provision of Rs. 6,35,58,558/- on account of anticipated loss that was debited to its profit and loss account. A show cause notice has been issued by the Ld. Principal CIT u/s 263 of the Act which has been replied by the assessee. 4. The Ld. PCIT vide order dated 14/03/2019 held that order passed by the Assessing Officer dated 27/12/2016 u/s 143(3) of the Act for the Assessment Year 2014-15 is erroneous and prejudicial to the interest of Revenue on the ground that the Assessing Officer failed to examine the factual aspect ignoring the provisions of Section 145(1) and (2) of the IT Act. The Ld. PCIT further held that the loss to be contingent nature and therefore, disregarded assessee’s recognized income or loss percentage computation method (POCM) as prescribed in the accounting standard-(AS)7. Further, the Ld. PCIT cancelled the order of the Assessing Officer and directed the A.O to pass fresh assessment order. 3 ITA No. 3731/Del/2019 DLF Garden City Indore, ND 5. Aggrieved by the order of Ld. PCIT, the assessee has field the present appeal on following Grounds:- “1. That on facts and circumstances of the case, Ld. CIT was not justified assuming jurisdiction u/s 263 even though the assessment order is neither erroneous nor prejudicial to the interest of revenue as order u/s 143(3) was passed after proper verification of facts and there is no case of lack of enquiry. 2. (i) That the claim of loss of Rs. 6,35,58,5581- was on account of revised estimates of total cost and total revenue as per with established principle based on POCM and same having been duly verified and allowed in assessment order u/s 143(3), there is no case of any error so as to justify the revision u/s 263 of the Act. (ii) That the appellant has been recognizing income or loss as per Percentage completion Method (POCM) as prescribed by AS-7 and same being a recognized method in terms of section 145, the observation of CIT holding the loss to be of contingent nature is misconceived and in total disregard to accounting policy regularly followed by the appellant. 3. That assumption of jurisdiction u/s 263 merely on the basis of audit objection is without any legal basis particularly is without any legal basis particularly when original order was passed after detailed enquiry and verification. 4. That the order passed by CIT u/s 263 is not sustainable on facts and same is bad in law. 5. That the appellant craves leaves to add, alter, amend, forgo any 4 ITA No. 3731/Del/2019 DLF Garden City Indore, ND of the grounds of appeal at the time of hearing.” 6. The Ld. Counsel for the assessee submitted that the Ld. PCIT has not justified assuming the jurisdiction u/s 263 of the Act since assessment order is neither erroneous nor prejudicial to the interest of Revenue. Further, contended that, the Ld. A.O has passed the assessment order after proper verification of facts and it is not a case of lack of enquiry. Ld. Counsel for the assessee further submitted that the loss of Rs. 6,35,58,558/- claimed by the assessee on account of revised estimates of total cost and the Revenue as per established principal based on POCM and the same has been duly verified by the Assessing Officer. There is no case for any error so as to justify the revision u/s 263 of the Act. The Ld. Counsel also contended that the assessee has been recognizing income or loss Percentage Completion Method (POCM) as prescribed in the Accounting Standard -(AS) 7, which being recognized method in terms of Section 145 of the Act. Therefore, the observation of PCIT holding the loss to be contingent nature is misconceived and the total disregard to accounting policy regulatory followed by the assessee is erroneous. Further contended that, the Ld. PCIT has assumed jurisdiction merely on the basis of audit objection without any legal basis when the assessment order has been passed after detailed enquiry and verification. Ld. Counsel has also relied on various judgments of the Hon'ble High Court and Hon'ble Supreme Court. 7. Per contra, the Ld. DR submitted that, the order of the Assessing Officer is cryptic, the Ld. A.O has not discussed any issues which was raised in the questionnaire, since the order of Ld. A.O is non-speaking one, the Ld. PCIT has rightly invoked Section 263 of the Act and remanded the matter with a direction to pass fresh assessment order. Therefore, the Ld. DR submitted that, the order of the Ld.CIT(A) requires no interference and the hands of the Tribunal. 5 ITA No. 3731/Del/2019 DLF Garden City Indore, ND 8. We have heard the parties, perused the material on record and gave our thoughtful consideration. It is emerging from the record that when the case of the assessee was selected for scrutiny under CASS, a notice u/s 143(2) was issued and also issued a questionnaire to the assessee. The same is made available by the assessee at Page No. 53 of the paper book which reads as under:- “1. Detailed note on various streams of business 2. Detailed POCM working project was two previous years and subsequent year also. 3. Details of unmoved sundry/trade creditors. 4. Detailed working of capital WIP and inventory along with basis of valuation 5. Details of forfeiture and miscellaneous income. 6. Note on reversal of Development rights. 7. Justify claim of provision of anticipated loss-6,35,58,588/- 8. Details and purpose of transactioncarried out with related concerns along with reasonability of the same. 9. File item wise reconciliation of AIR Information. 10. Detailed justification of CASS reasons given earlier 11. Details of the share application money/share premium/share capital received, if any, during the year in the following format. S.No. Name/address of Party No of shares issued Amount PAN/Asstt. particulars 12. Details of unsecured loans if any received during the year with confirmation containing complete addresses with PAN. 13. Details of additions to fixed assets and proof of putting the same to use. 6 ITA No. 3731/Del/2019 DLF Garden City Indore, ND 14.Details of expenses/covered u/s 43EB, Reconcile the same with the disallowances as per the audit report and the computation of income 15. Details of dividend received/ income-exempt from tax, if any. Also give details ofexpenses attributable to earning this income. 16. Details of deductions claimed, if any, under chapter VIA of the Income Tax Act, 1961 in the following format: S. N o. Section under which the deduction is claimed Amount of the deduction claimed Before note in support of claim 17. Details of income claimed to be exempt under the Income Tax Act, 1961 in the following format: S.No Section under which the exemption is claimed Amount of the exemption claimed Brief note in support of claim 18 Details of the increase in authorized share capital if any, during the year and also the details of the corresponding fees and paid to the ROC if any, 19. Details of foreign exchange loss/gains incurred/accrued during the year. Also specify whether forex loss is on account of revenue items or capital items. Is there any hedging component and whether the hedging is settled against bills receivables/payable or independently, 20. Details of brought forwarded NAT credit claimed. The case is fixed for hearing on 10.10.2016 at 11:30AM. No adjournment shall be granted.” 7 ITA No. 3731/Del/2019 DLF Garden City Indore, ND 9. In response to the above questionnaire, the assessee has filed response during the original assessment proceedings which is place at Page No. 54-58 of the paper book. Thus the Ld. AO after verifying the materials on record assessed the income of the Assessee for AY 2014-15 at Rs. 12,52,500/-. The Ld. PCIT on going through the records observed that the Assessee has claimed an expenditure of Rs. 6,35,58,558/- towards the anticipated loss charged to P &L account. According to the has Ld. PCIT, the said provision made by the assessee which was not crystallized in the year under consideration, therefore the Ld. PCIT was of the opinion that the order passed by the AO under Section 143(3) of the Act was erroneous and so far as prejudicial to the interest of the Revenue since the AO failed to make proper enquiry at the time of passing the assessment order. 10. It is not in dispute that the assessee was following the percentage completion method from year to year for computing the income of the Assessee and there is no change in the method followed by the Assessee in the year under consideration. It if found that the Assessing officer after examining of the entire facts and circumstances of the case accepted the submission of the Assessee and allowed the claim of the Assessee which is based on the same accounting slandered 7 followed in the earlier years. 11. In the present case as Revenue has accepted the Accounting Method followed by the Assessee for year to year, in the middle of the completion of the project, neither the AO nor the PCIT can not disturb the method of accounting followed by the Assessee, if the accounting method is allowed to be disturb on an assessment year, which will give distort picture of the Assessee’s financial position. Thus the Order passed by the AO cannot set to be erroneous if the same view that of the earlier years has been accepted by the AO in the year under consideration, thus the Ld. A.O. has applied his 8 ITA No. 3731/Del/2019 DLF Garden City Indore, ND mind and came to the correct conclusion. The Ld. PCIT cannot interfere in an issue which has been accepted by the Revenue for number of years. 12. When the facts in the Assessment year are same that of the Earlier Years, then the AO cannot take contrary view to the view taken in the earlier years. As the AO has accepted the accounting method followed by the assessee from year to year, in the relevant Assessment Year, the AO cannot take contrary view. 13. The Courts have repeatedly held that where a fundamental aspect of a transaction is found as having permeated through different assessment years and, this fundamental aspect has stood uncontested then, the revenue cannot be allowed to change its view taken in earlier assessment years unless it is able to demonstrate a change in circumstances in the subsequent assessment year. Department in the instant case has not been able to bring to our notice any such changed circumstances which could have persuaded us to sustain the approach of the PCIT taken in this case. On this aspect of the matter the observations of the Supreme Court in the case of M/s Radhasoami Satsang, Saomi Bagh, Agra vs CIT (1992) 1 SCC 659 at page 661 in paragraphs 16&17 being apposite, are for the sake of convenience extracted herein below: "16. We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way/ 7 1 or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 14. Similarly, the Supreme Court in Bharat Sanchar Nigam Ltd. & Anr. vs UOI & Ors. (2006) 3~SCC 1 while discussing the ambit of the principle of res 9 ITA No. 3731/Del/2019 DLF Garden City Indore, ND judicata made the following observations: "20. The decisions cited have uniformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar Courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The Courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why Courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate bench which, failing the possibility of availing of either of these gateways may yet differ with the view expressed and refer the matter to a bench of superior strength or in some cases to a bench of superior jurisdiction. 15. We find that in the absence of any material change justifying the Revenue to take a different view of the matter-and if there was no change it should be in support of the assesses-we do not think the question should have been reopened and contrary to what had been decided by the A.O in the earlier proceedings. 10 ITA No. 3731/Del/2019 DLF Garden City Indore, ND 16. In view of the above discussion we hold that invoking jurisdiction u/s. 263 of the Act by the Ld. PCIT is bad in law, accordingly we quash the impugned order of the Ld. PCIT passed under section 263 of the Act. 17. In the result the Appeal filed by the Assessee is allowed. Order pronounced in the Open Court on 07 th September, 2022 Sd/- Sd/- (B. R. R. KUMAR) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 07/09/2022. *R.N*Sr PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 11 ITA No. 3731/Del/2019 DLF Garden City Indore, ND
