M/s. Ridhi Sidhi Home Developers Pvt. Ltd. , Sri Ganganagar V. ITO, Sriganganagar

ITA 384/JODH/2019

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 9978 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 19-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K.C. BADHOK LD.
• Keywords: Revision of order
• Section: 263; 143(3)

Judgement Text

1 ITA NO.384/JODH/2019 M/S. RIDHI SIDHI HOME DEVELOPERS PVT.LTD. ASSESSMENT YEAR: 2015-16 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR , , BEFORE HONBLE SHRI SANDEEP GOSAIN, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) 1. ./ I.T.A. NO.384/JODH/2019 ( / ASSESSMENT YEAR: 2015-16) M/S. RIDHI SIDHI HOME DEVELOPERS PVT.LTD. C/O.RAJENDRA JAIN ADVOCATE 106, AKSHAY DEEP COMPLEX 5 TH B ROAD, SARDARPURA, JODHPUR RAJASTHAN-342 001. / VS. INCOME TAX OFFICER SRI GANGANAGAR RAJASTHAN ./ ./PAN/GIR NO. AADCR-4437-N ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI RAJENDRA JAIN (ADVOCATE)-LD. AR. REVE NUE BY : SHRI K.C. BADHOK- LD. CIT- DR / DATE OF HEARING : 02/11/2020 / DATE OF PRONOUNCEMENT : 21/12/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. BY WAY OF THIS APPEAL, THE ASSESSEE CHALLENGES T HE VALIDITY OF REVISIONAL JURISDICTION U/S 263 AS EXERCISED BY LD. PR. COMMISSIONER OF INCOME-TAX, BIKANER, (PR. CIT), FOR ASSESSMENT Y EAR (AY) 2015- 2 ITA NO.384/JODH/2019 M/S. RIDHI SIDHI HOME DEVELOPERS PVT.LTD. ASSESSMENT YEAR: 2015-16 16 VIDE ORDER DATED 10/10/2019. THE EFFECTIVE GROUN DS TAKEN BY THE ASSESSEE READ AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE ORDER U/S 263 PASSED BY ID CIT, BIKANER IS BAD IN LAW AND BAD IN FACTS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE ID CIT, BIKANER ERRED IN NOT RECORDING OWN SATISFACTION IN RESPECT OF ASSESSMENT ORDER PASSED BY THE ID AO IS ERRONEOUS SO AS IT IS PREJUDICIAL T HE INTEREST OF REVENUE AS PER PROVISION OF SECTION 263 OF THE ACT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE ID CIT, BIKANER GROSSLY ERRED IN SETTING ASIDE THE ASSESSMENT ORDER PASSED BY THE LD. ASSESSING OFFICER U/S 143(3) WITHOUT ANY FINDING AS TO HOW THE ASSESSMENT ORDER PASSED BY THE LD. AO IS ERRONEOUS SO AS IT PR EJUDICIAL THE INTEREST OF REVENUE. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE ID CIT, BIKANER ERRED IN RECORDING VARIOUS FINDING IN THE ORDER ARE CONTRARY TO THE MATERIAL AVAILABLE ON RECORD. 2. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING SUBMISSIONS M ADE BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS AS WELL AS D URING REVISIONAL PROCEEDINGS. THE JUDICIAL PRECEDENTS AS CITED DURING THE COURSE OF HEARING HAVE DULY BEEN DELIBERATED UPON. OUR ADJUDICATION TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 3.1 THE MATERIAL FACTS ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE WAS ASSESSED U/S. 143(3) ON 27/1 2/2017 WHEREIN THE RETURNED INCOME OF RS.53.21 LACS FILED BY THE ASSESSEE WAS ACCEPTED. THE ASSESSMENT ORDER TAKES NOTE OF TH E FACT THAT THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS DUE TO VA RIOUS REASONS WHICH ARE TABULATED IN THE OPENING PART OF THE ASSE SSMENT ORDER. ONE OF THE REASON WAS REAL ESTATE BUSINESS WITH HIGH CLOSING STOCK (VERIFY WHETHER ASSESSEE HAS ADOPTED PERCENTAGE COM PLETION 3 ITA NO.384/JODH/2019 M/S. RIDHI SIDHI HOME DEVELOPERS PVT.LTD. ASSESSMENT YEAR: 2015-16 METHOD). ANOTHER REASON WAS THAT LARGE SQUARED UP LOANS DURING THE YEAR. 3.2 IN THE ASSESSMENT ORDER, A FINDING HAS BEEN REN DERED BY LD. AO THAT LOANS WERE REPAID OUT OF GENUINE SOURCES AN D THROUGH BANKING CHANNELS AND THEREFORE, NO ADDITION WAS TO BE MADE ON THIS ACCOUNT. 3.3 HOWEVER, LD. PR. CIT, UPON PERUSAL OF CASE RECO RDS AND INVOKING THE PROVISIONS OF SEC.263, OPINED THAT THE ORDER WAS PASSED WITHOUT MAKING PROPER INQUIRIES OR VERIFICAT ION AND THEREFORE, THE SAME WOULD REQUIRE EXERCISE OF REVISIONAL JURIS DICTION IN TERMS OF SEC.263. THE SAME STEM FROM THE FACT THAT THE ASSES SEE OBTAINED LOANS OF RS.8.41 CRORES DURING THE YEAR AND REPAID LOANS OF RS.17.64 CRORES. HOWEVER, THE RECEIPTS AS WELL AS R EPAYMENTS WERE NOT VERIFIED BY LD. AO AND NO INQUIRIES WERE M ADE, IN THIS REGARD. THIS WAS IN THE BACKDROP OF THE FACT THAT T HE ASSESSEES CASE WAS SELECTED FOR SCRUTINY ON THE BASIS THAT LA RGE LOANS WERE SQUARED OFF DURING THE YEAR. ANOTHER REASON TO INVOKE JURISDICTION U/S 263 WAS T HE FACT THAT REQUISITE INQUIRIES AS TO INVENTORIES WERE NOT MADE BY LD. AO WHEREAS ONE OF THE REASON FOR SELECTION OF SCRUTINY WAS REAL ESTATE BUSINESS WITH HIGH CLOSING STOCK. 3.4 THE ASSESSEE DEFENDED THE ASSESSMENT ORDER BY S UBMITTING THAT IN VIEW OF NEW AMENDMENT IN THE COMPANIES ACT, THE ASSESSEE COULD NOT OBTAIN UNSECURED LOANS EXCEPT FR OM CERTAIN SPECIFIED CATEGORIES. THEREFORE, THE EXISTING LOANS WERE REPAID WHICH WERE SOURCED FROM FRESH LOANS TAKEN FROM DIRE CTORS, THEIR 4 ITA NO.384/JODH/2019 M/S. RIDHI SIDHI HOME DEVELOPERS PVT.LTD. ASSESSMENT YEAR: 2015-16 RELATIVES & OTHER CORPORATE ENTITIES, AS PERMISSIBL E. THE ATTENTION WAS DRAWN TO THE LOAN CONFIRMATIONS, BANK STATEMENT S AND COPIES OF INCOME TAX RETURNS ETC. AS FILED BY THE ASSESSEE DU RING THE COURSE OF ASSESSMENT PROCEEDINGS TO SUBSTANTIATE THE FRESH LOANS. THE ASSESSEE ALSO PLEADED THAT NECESSARY INQUIRIES REGARDING VALUATION AS WELL AS VERIFICATION OF CLOSING STOCK WERE MADE BY LD. AO AND THE REQUISITE DETAILS WERE DULY SUPPLIED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. THERE WAS NO SALE OF FLATS DURING THE YEAR AND THE COST INCURRED BY ASSESSEE ON THE PROJECTS F ORMED PART OF CLOSING STOCK. THE ASSESSEE ONLY SOLD PLOTS DURING THE YEAR AND THE CLOSING STOCK OF PLOTS OF LAND WAS CORRECTLY VALUED . IN SUPPORT OF THE SAME, THE ATTENTION WAS DRAWN TO THE QUERIES RAISED BY LD. AO DURING ASSESSMENT PROCEEDINGS AND THE ASSESSEES RE PLIES THERETO. ALONG WITH ITS REPLY TO SHOW-CAUSE NOTICE, THE ASSE SSEE FILED TRADING ACCOUNT WITH COMPLETE DETAIL AS WELL AS VALUATION O F CLOSING STOCK OF PLOTS AND FLATS. 4. THE LD. PR.CIT AGREED WITH ASSESSEES SUBMISSION S ON LOANS ASPECT AND THEREFORE, DROPPED THE REVISIONAL JURISD ICTION ON THIS ISSUE. HOWEVER, THE ORDER ON THE POINT OF VALUATION OF CLO SING STOCK WAS HELD TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND LD. AO WAS DIRECTED TO REDO THE ASSESSM ENT, AFTER CONSIDERING THE SAME. IT HAS BEEN OBSERVED BY LD. PR. CIT THAT ASSESSEE C LAIMED UIT EXPENSES OF RS.5.63 LACS AS RS.2.35 LACS, THE PAYME NT OF WHICH WAS NOT VERIFIED. THERE WERE CHANGES IN INVENTORIES OF FINISHED 5 ITA NO.384/JODH/2019 M/S. RIDHI SIDHI HOME DEVELOPERS PVT.LTD. ASSESSMENT YEAR: 2015-16 GOODS, WIP AND STOCK-IN-TRADE FOR RS.118.35 LACS AN D THE CLAIM WAS ACCEPTED ON PROVISIONS BASIS. SINCE THE AFORESA ID POINTS WERE NOT INQUIRED TO BY LD. AO, THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. AGGRIEVED AS AFORESAID, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US CHALLENGING THE VALIDITY OF REVISIONAL JURISDICTION AS EXERCISED BY LD. PR.CIT U/S 263. 5. UPON PERUSAL OF ASSESSMENT ORDER, WE FIND THAT L D. AO WAS WELL AWARE OF THE FACT THAT ONE OF THE REASONS FOR SELECTION OF SCRUTINY WAS THE FACT THAT THE ASSESSEE HAD HUGE CL OSING INVENTORY. ACCORDINGLY, A SPECIFIC QUERY WAS RAISED BY LD. AO DURING ASSESSMENT PROCEEDINGS, WITH RESPECT TO VALUATION O F CLOSING STOCK, VIDE LETTER DATED 16/06/2017 IN THE FOLLOWING MANNE R: - 5. IT HAS BEEN NOTICED THAT YOU DID REAL ESTATE BUS INESS AND THERE IS HIGH CLOSING STOCK. PLEASE FURNISH COMPLETE DETAILS THER EOF AND STATE WHETHER YOU HAVE ADOPTED PERCENTAGE OF COMPLETION METHOD. THE ASSESSEE, VIDE SUBMISSIONS DATED 05/12/2017, PO INTED OUT THAT THE ASSESSEE WAS A REAL ESTATE DEVELOPER AND SELLIN G THE PLOTS ONLY. THE ASSESSEE PURCHASED AGRICULTURAL LAND AND GOT IT REGULARIZED FROM UIT / GOVT. OF RAJASTHAN. AFTER UN DERTAKING REQUISITE DEVELOPMENTS, IT WOULD SELL THE PLOTS IN THE MARKET. NO CONSTRUCTION ACTIVITY WAS STATED TO BE CARRIED OUT BY THE ASSESSEE ON THE PLOTS AND THEREFORE, THERE WOULD BE NO PROJE CT COMPLETION. AT THE END OF EACH FINANCIAL YEAR, THE CLOSING STOCK O F PLOTS IN SQ. FT. WOULD BE WORKED OUT ON COST PRICE BASIS AND THE SAL ES WOULD ALSO BE RECORDED ON THE BASIS OF AREA SOLD. IN OTHER WOR DS, PROFIT WOULD 6 ITA NO.384/JODH/2019 M/S. RIDHI SIDHI HOME DEVELOPERS PVT.LTD. ASSESSMENT YEAR: 2015-16 BE WORKED OUT ON THE BASIS OF PERCENTAGE OF AREA SO LD BY THE ASSESSEE EVERY YEAR. THE DETAILED TRADING ACCOUNT F OR THE YEAR WAS ALSO PLACED BEFORE LD. AO. VIDE EARLIER SUBMISSIONS DATED 26/10/2017, THE DETAIL OF DEVELOPMENT EXPENDITURE I N CASE OF BILLS OF MORE THAN RS.1 LACS WAS ALSO FURNISHED. 6. IN THE BACKGROUND OF AFORESAID FACTS, IT COULD B E GATHERED THAT LD. AO WAS CLICHD WITH THE ISSUE OF VALUATION OF C LOSING STOCK AND RAISED A SPECIFIC QUERY AGAINST THE SAME. APPARENTL Y, THE REQUISITE DETAILS WERE FURNISHED BY THE ASSESSEE DURING THE C OURSE OF ASSESSMENT PROCEEDINGS WHICH WERE DULY TAKEN NOTE O F BY LD. AO AND THEREFORE, HE CHOSE NOT TO MAKE ANY ADDITION, I N THIS RESPECT. THIS WOULD ALSO NEGATE THE OBSERVATIONS OF LD. PR.C IT THAT PROPER INQUIRIES AS WELL AS VERIFICATIONS WERE NOT DONE BY LD. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 7. FURTHER, IN RESPONSE TO SHOW-CAUSE NOTICE, THE A SSESSEE AGAIN FILED THE COMPLETE PLOT-WISE DETAILS AS WELL AS VALUATION THEREOF IN SUPPORT OF STOCK FIGURES, WHICH WAS NOT DULY APPRECIATED BY LD. PR.CIT. THE SAME IS EVIDENT FROM THE FACT TH AT IT HAS BEEN NOTED ON PAGE-6 OF THE IMPUGNED ORDER THAT THE ASSE SSEE INCURRED DEVELOPMENT COST OF RS.8,69,453/- IN THE ACCOUNT OF SALE OF PLOTS (2). THE SAME IS FACTUALLY INCORRECT SINCE THIS IS THE AREA IN SQ. FT. OF PLOTS HELD BY THE ASSESSEE. SIMILARLY THE FIGURES O F OPENING STOCK HAS WRONGLY BEEN NOTED AS 677.48 LAC AS AGAINST COR RECT FIGURES OF RS.739.03 LACS. THE FACT THAT THE CLAIM HAS BEEN AC CEPTED ON PROVISIONS BASIS IS ALSO NOT CORRECT SINCE THE ASSE SSEE MAINTAINED COMPLETE STOCK DETAILS UNDER EACH OF THE HEAD WHICH WAS DULY 7 ITA NO.384/JODH/2019 M/S. RIDHI SIDHI HOME DEVELOPERS PVT.LTD. ASSESSMENT YEAR: 2015-16 VERIFIED AS WELL AS ACCEPTED BY LD. AO DURING ASSES SMENT PROCEEDINGS. 8. THEREFORE, ON THE GIVEN FACTS AND CIRCUMSTANCES, IT COULD BE SAID THAT THERE WAS NO SLIPPAGE ON THE PART OF LD.A O TO MAKE PROPER INQUIRIES AS ALLEGED BY LD. PR.CIT. IN SUCH A CASE, THE REVISIONAL JURISDICTION U/S 263 COULD NOT BE SUSTAINED IN THE EYES OF LAW. BY QUASHING THE REVISIONAL ORDER DATED 10/10/2019, WE ALLOW THE APPEAL. 9. RESULTANTLY, THE APPEAL STANDS ALLOWED. ORDER PRONOUNCED U/R 34(4) OF INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963. SD/- SD/- (SANDEEP GOSAIN) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 21/12/2020 SR.PS:-JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$' / THE RESPONDENT 3. % ( ) / THE CIT(A) 4. % / CIT CONCERNED 5. &'#( ) , ) , / DR, ITAT, JODHPUR 6. '+,- / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, JODHPUR.