Modern Construction Co. Pvt. Ltd., Ahmedabad V. The Pr. CIT, Central, Ahmedabad

ITA 775/AHD/2016

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8526 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-04-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 30-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA; L P JAIN
• Keywords: Revision of order
• Section: 143(3); 250; 73; 13; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (VIRTUAL COURT) BEFORE: SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEM BER THE MODERN CONSTRUCTION CO. PVT. LTD. 54, H.K. HOUSE, ASHRAM ROAD, AHMEDABAD-380006 PAN: AAACM5823E (APPELLANT) VS THE PR. CIT, CENTRAL CIRCLE-(1)(1), AAYKAR BHAWAN, AHMEDABAD (RESPONDENT) REVENUE BY: SHRI VIRENDRA OJHA CIT-D.R. & SHRI L.P. JAIN, SR. D.R . ASSESSEE BY: SMT. ARTI N. SHAH, A.R . DATE OF HEARING : 28-10-2020 DATE OF PRONOUNCEMENT : 07-01-202 1 /ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- VIDE ITA NO. 775/AHD/2016 THE INSTANT APPEAL FILED BY ASSESSEE FOR A.Y. 2011-12, ARISES FROM ORDER OF THE PR. CIT(CENT RAL), AHMEDABAD DATED 26-02-2016, IN PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT AND THE OTHER APPEAL VIDE ITA NO . 1000/AHD/2018 TOO FILED BY ASSESSEE FOR A.Y. 2011-12 ARISES FROM ORDE R OF THE CIT(A)-11, AHMEDABAD DATED 20-03-218 IN PROCEEDING U/S. 143(3) R.W.S. 263 THE INCOME TAX ACT, 1961; IN SHORT THE ACT ITA NO. 775/AHD/2016 &1000/AHD/2018 ASSESSMENT YEAR 2011-12 I.T.A NOS. 775/AHD/2016 & 1000/AHD/2018 A.Y. 2011-12 PAGE NO MODERN CONSTRUCTION CO. PVT. LTD. VS. PR. CIT 2 2. THESE TWO APPEALS OF THE ASSESSEE ARE ADJUDICATE D TOGETHER AS SIMILAR ISSUE AND IDENTICAL FACTS ARE INVOLVED IN THESE APP EALS. ITA NO. 775/AHD/2016 3. THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE IS THAT LD. PR. CIT CENTRAL AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY INVOKING PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT, 19 61 THOUGH ORIGINAL ASSESSMENT WAS CARRIED OUT AFTER CARRYING OUT THORO UGH SCRUTINY. 4. THE FACT IN BRIEF IS THAT RETURN OF INCOME OF RS . 8,83,700/- WAS FILED ON 29 TH SEP, 2011. THE CASE WAS SUBJECT TO SCRUTINY AND A SSESSMENT U/S. 143(3) OF THE ACT WAS FINALIZED ON 13 FEB, 2014 ACCEPTING THE RETURN OF INCOME OF RS. 8,83,700/-. SUBSEQUENTLY, ON VERIFICATION OF C ASE RECORD, THE PR. CIT CENTRAL AHMEDABAD NOTICED THAT AS PER POINT NO. 4 O F SCHEDULE 20 (NOTES FORMING PART OF ACCOUNTS) OF AUDITORS REPORT, CIT Y CIVIL COURT AHMEDABAD VIDE ITS ORDER 13 TH APRIL, 2007 HAD DISMISSED THE CIVIL SUIT FILED BY M/S. MUKUT PIPES LTD. AGAINST THE COMPANY AND PASSED DEC REE ORDER FOR RS. 4,53,64,640/- WITH 12% INTEREST. THE ASSESSEE COMP ANY ACCORDING TO THE TERMS OF DECREE HAD RECOGNIZED INTEREST OF RS. 2,40 ,86,640/- ON THE DECRETAL AMOUNT FOR THE PERIOD FROM DATE OF SUIT TILL 31 ST MARCH, 2009, HOWEVER, THE COMPANY HAS NOT SHOWN ANY INTEREST ON DECRETAL AMOU NT FROM F.Y. 2009-10 AND ONWARD. IT WAS ALSO OBSERVED THAT NEITHER THE ASSESSEE HAD SHOWN INTEREST INCOME @ 12% ON RS. 4,53,64,640/- IN THE COMPUTATION INCOME NOR THE ASSESSING OFFICER HAD VERIFIED THE SAID ISSUE A ND DISCUSSED THE SAME IN THE ASSESSMENT ORDER. THEREFORE, A NOTICE U/S. 263 OF THE ACT WAS ISSUED TO I.T.A NOS. 775/AHD/2016 & 1000/AHD/2018 A.Y. 2011-12 PAGE NO MODERN CONSTRUCTION CO. PVT. LTD. VS. PR. CIT 3 THE ASSESSEE ON 11 TH DECEMBER, 2014. IN RESPONSE TO THE NOTICE U/S. 263, THE ASSESSEE HAS FILED ITS REPLY AND THE GIST OF THE SA ME SHOWN AT PARA 4 IN THE ORDER OF THE PR. CIT CENTRAL IS REPRODUCED AS UNDER :- THE CITY CIVIL COURT, AHMEDABAD HAS DISMISSED THE CIVIL SUIT OF M/S MUKUT PIPES LTD AND PASSED ORDER FOR RS.4,53,64,640/- WITH 12% INTEREST. NO IN TEREST HAS BEEN RECOGNIZED ON DECRETAL AMOUNT FOR YEAR UNDER CONSIDERATION ONWARDS. INSPITE OF THE ORDER OF HON'BLC THE ASSESSEE HAS NO T RECEIVED ANYTHING FROM MUKUT PIPES LTD I.E. RS.4,53,64,640/- AS WELL AS INTEREST THEREOF RS.2,4 0,86,760/-. THE ASSESSEE HAS RELIED ON VARIOUS CASES LAWS. THE A.O, HAS PASSED ORDER U/S 143(3) OF I.T. ACT AF TER CONSIDERING THE DETAILS AVAILABLE ON RECORDS AND EVIDENCES FILED BY ASSESSEE. FURTHER, THE TWO C IRCUMSTANCES EXIST TO ENABLE THE CIT TO EXERCISE POWER OF REVISION UNDER THIS SUB-SECTION ( I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT S PREJUDICIAL TO THE INTEREST OF REVENUE. PROVISION OF SECTION 263 CANNOT BE INVOKED TO CORRE CT EACH & EVERY TYPE OF MISTAKE COMMITTED BY A. O. IT WILL ATTRACT WHEN THE ORDER PASSED BY A.O. IS ERRONEOUS AND WHICH RESULTED IN LOSS TO REVENUE. IN THE INSTANT CASE THE ISSUE TAKEN UP BY CIT EITHE R ENQUIRED OR ADJUDICATED BY A.O. THE ORDER PASSED BY IS PROPER AND WELL REASONED. ACTION INFLA TED U/S 263 IS UNWARRANTED AND NEEDS TO BE DROPPED. THE PR. CIT CENTRAL HAS NOT AGREED WITH THE REPLY OF THE ASSESSEE AFTER REFERRING THE AUDIT REPORT AT PARA NO. 4(F)(I) WHER EIN IT WAS MENTIONED THAT AMOUNT RECEIVABLE FROM MUKUT PIPES LTD. WAS RS. 6,9 4,51,399/-, THEREFORE, DECREE AMOUNT WAS NOT DOUBTFUL. THE PR. CIT HAS AL SO REJECTED THE SUBMISSION OF THE ASSESSEE THAT ASSESSING OFFICER H AS ALREADY CONSIDERED THE ISSUE WHILE FRAMING THE ASSESSMENT U/S. 143(3) OF T HE ACT. THE PR. CIT WAS OF THE VIEW THAT THE ASSESSING OFFICER HAD NOT COND UCTED PROPER AND DETAILED INQUIRY AND ASSESSING OFFICER HAD OVERLOOKED THE OB SERVATION MADE BY THE AUDITOR IN THE AUDIT REPORT PARA 4(F)(I) WHEREIN IT WAS SPECIFICALLY MENTIONED THAT A SUM OF RS. 6,94,51,399/- WAS CONSIDERED AS R ECOVERABLE BY THE MANAGEMENT OF THE COMPANY FROM MUKUT PIPES LTD. I N THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES THE LD. PR. CIT OBSER VED THAT ASSESSING OFFICER HAS NOT MADE DETAILED AND SPECIFIC INQUIRIE S WITH RESPECT TO INTEREST I.T.A NOS. 775/AHD/2016 & 1000/AHD/2018 A.Y. 2011-12 PAGE NO MODERN CONSTRUCTION CO. PVT. LTD. VS. PR. CIT 4 INCOME NOT OFFERED TO TAX IN THE LIGHT OF THE FINDI NG OF THE CITY CIVIL COURT AHMEDABAD. AFTER PLACING RELIANCE ON THE DECISION OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (SC) 243 ITR 83, THE LD. CIT CENT RAL HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF REVENUE AND DIRECTED THE ASSESSING OFFICER TO MA KE FRESH ASSESSMENT. ITA NO. 1000/AHD/2018 5. THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE IS FILED AGAINST THE DECISION OF LD. CIT(A) IN CONFIRMING THE ADDITION O F RS. 54,45,757/- MADE BY THE ASSESSING OFFICER IN RESPECT OF SO CALLED ACCRU ED INTEREST ON DECREE AMOUNT FOR THE REASON THAT THE ASSESSEE WAS FOLLOWI NG MERCANTILE SYSTEM OF ACCOUNTING. 6. DURING THE COURSE OF ASSESSMENT U/S. 143(3) R.W. S. 263 OF THE ACT, THE ASSESSING OFFICER HAS ASKED THE ASSESSEE FOR NOT SH OWING INTEREST INCOME ACCRUED IN THE RETURN OF INCOME FOR F.Y. 2009-10 P ERTAINING TO ASSESSMENT YEAR 2010-11 AS PER THE DECREE ORDER PASSED IN FAVO UR OF THE ASSESSEE. THE ASSESSEE REPLIED THAT IT HAS RECOGNIZED INTEREST IN COME OF RS.2,40,86,760/- ON DECRETAL AMOUNT FOR THE PERIOD FROM THE DATE OF SUI T TILL 31 ST MARCH, 2019. THEREAFTER, IT HAS NOT RECEIVED ANYTHING TOWARDS TH E PRINCIPAL OR INTEREST FROM MUKUT PIPE AND THERE WAS NO CERTAINTY OF RECEI VING THE SAME. THE ASSESSEE ALSO SUBMITTED THAT THERE WAS NO HOPE OF R ECOVERY AND FILED COPY OF ACCOUNT OF MUKUT PIPES LTD. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE STATING THAT DURING THE COURSE OF ASSESSMENT, THE ASSESSEE HAS FILED AUDIT REPORT IN FORM NO. 3CD COM PRISING NOTES OF THE AUDITOR REGARDING AMOUNT OF RS. 6,94,51,399.89/- DU E TO THE MUKUT PIPES I.T.A NOS. 775/AHD/2016 & 1000/AHD/2018 A.Y. 2011-12 PAGE NO MODERN CONSTRUCTION CO. PVT. LTD. VS. PR. CIT 5 CONSIDERED AS RECEIVABLE BY THE MANAGEMENT. THEREF ORE, THE ASSESSING OFFICER HAS COMPUTED ACCRUED INTEREST OF RS. 54,43, 757/- BEING 12% OF RS. 4,53,64,640 AND ADDED TO THE TOTAL INCOME OF THE AS SESSEE. 7. THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT (A). THE LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE ASSESSING OF FICER. 8. DURING THE COURSE OF APPELLATE PROCEEDING S BEFORE US, THE LD. COUNSEL HAD FILED PAPER BOOK COMPRISING COPIES OF DOCUMENTS AND DETAILS FILED DURING THE COURSE OF ASSESSMENT AND APPELLATE STAGE BEFORE THE ASSESSING OFFICER AND LD. CIT(A). THE LD. COUNSEL HAS SUBMIT TED THAT DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER HAS CALLED SPE CIFIC DETAILS OF THE AMOUNT DUE FROM MUKUT PIPES LTD. AND ALSO CALLED TH E DETAILS ABOUT THE DECREE ORDER OF THE CITY CIVIL COURT IN FAVOUR OF T HE COMPANY. THE LD. COUNSEL REFERRED PAGE NO. 71 AND 73 OF THE PAPER BOOK WHERE IN THE ASSESSING OFFICER HAS SPECIFICALLY MADE ENQUIRIES FROM THE ASSESSING OFFICER ABOUT THE AFORESAID ISSUES. THE LD. COUNSEL HAS ALSO REFERRE D PAGES NO. 57 & 58 OF THE PAPER BOOK PERTAINING TO THE DETAILS SUBMITTED BY T HE ASSESSEE IN RESPECT OF AMOUNT OF RS. 6,94,51,399/- DUE FROM MUKUT PIPES LT D. AND THE DECREE ORDER PASSED BY THE CITY CIVIL COURT IN FAVOUR OF THE ASS ESSEE. THE LD. CIT(A) COUNSEL HAS ALSO PLACED RELIANCE ON THE JUDICIAL PR ONOUNCEMENTS, COPIES OF WHICH PLACED IN THE PAPER BOOK. ON THE OTHER HAND, THE LD. DEPARTMENTAL R EPRESENTATIVE HAS SUBMITTED THAT THERE IS NO DETAIL ABOUT THE ENQUIRIES MADE BY THE ASSESSING OFFICER. IT IS ALSO CONTENDED THAT THE ASSESSING OFFICER HAS NO T DRAWN CONCLUSION ON THE INQUIRES RAISED ON THE ISSUE OF ACCRUED INTEREST ON DECREE AMOUNT. I.T.A NOS. 775/AHD/2016 & 1000/AHD/2018 A.Y. 2011-12 PAGE NO MODERN CONSTRUCTION CO. PVT. LTD. VS. PR. CIT 6 9. HEARD BOTH THE SIDES AND PERUSED THE MATERIA L ON RECORD. THE ASSESSING OFFICER HAS FINALIZED ASSESSMENT U/S. 143(3) OF THE ACT ON 13.02.2014 ACCEPTING THE RETURN INCOME OF RS. 8,83,700/-. SUB SEQUENTLY, ON VERIFICATION OF THE CASE RECORDS, THE LD. PR. CIT NOTICED THAT A S PER POINT NO. 4 OF SCHEDULE 20 (NOTES FORMING PART OF THE ACCOUNT) OF AUDITOR R EPORT, CITY CIVIL COURT, AHMEDABAD VIDE ORDER DATED 30-04-2007 HAS DISMISSED CIVIL SUIT FILED BY M/S MUKUT PIPES LTD. AGAINST THE COMPANY AND PASSED DECREE ORDER FOR RS. 4,53,64,640/- WITH 12% INTEREST. THE ASSESSEE COMP ANY, IN TERMS OF DECREE RECOGNIZED INTEREST OF RS. 2,40,86,640/- ON THE DEC RETAL AMOUNT FOR THE PERIOD FROM DATE OF SUIT TILL 31.03.2009 HOWEVER TH E COMPANY HAS NOT CHARGED INTEREST ON DECRETAL AMOUNT FROM F.Y. 2009- 10 (A.Y. 2010-11) AND ONWARDS. IN RESPONSE TO NOTICE U/S. 263, THE ASSES SEE HAS EXPLAINED VIDE LETTER DATED 13.01.2015 THAT IN SPITE OF THE ORDER OF THE COURT IT HAS NOT RECEIVED ANYTHING FROM MUKUT PIPES LTD I.E. RS. 4,5 3,64,640/- AS WELL AS INTEREST THEREOF RS. 2,40,86,760/-. IT IS ALSO EXP LAINED THAT THE ASSESSING OFFICER HAD PASSED ORDER U/S. 143(3) OF THE ACT AFT ER CONSIDERING DETAILS AND EVIDENCES FILED BY THE ASSESSEE AND THE ISSUE TAKEN BY THE PR. CIT WERE ENQUIRED AND ADJUDICATED BY THE A.O. THE LD. PR. CI T HAS NOT ACCEPTED THE REPLY OF THE ASSESSEE STATING THAT DECREE AMOUNT WA S NOT DOUBTFUL AS THE AUDITOR HAS CERTIFIED THAT THE AMOUNT WAS RECEIVABL E FROM MUKUT PIPES LTD. THE LD. PR. CIT WAS OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT MADE DETAILS AND CASE SPECIFIC INQUIRIES WITH REGARD TO INTEREST INCOME NOT OFFERED TO TAX. THE LD. PR. CIT AFTER PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (SC) 243 ITR 83 HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. I.T.A NOS. 775/AHD/2016 & 1000/AHD/2018 A.Y. 2011-12 PAGE NO MODERN CONSTRUCTION CO. PVT. LTD. VS. PR. CIT 7 ON PERUSAL OF THE MATERIAL ON RECORD, IT I S OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER HAS ENQUIRED ON THE AFORESAID ISSUE VIDE LETTER DATED 03-02-2014. THE GIST OF THE PARA 2(1) AND 2(II) OF THE SAID LETTER VIDE WHICH THE ASSESSING O FFICER HAS MADE SPECIFIC ENQUIRY ON THE ISSUE IS REPRODUCED AS UNDER:- 2. SINCE SOME DETAILS ARE REQUIRED TO COMPLETE TH E ASSESSMENT, YOU ARE TO SUBMIT THE FOLLOWING FURTHER DETAILS/INFORMATION : (I) ON GOING THROUGH AUDITORS' REPORT, IT IS SEEN T HAT IN PARAGRAPH (F)(I) THE AUDITORS HAVE MENTIONED THAT AN AMOUNT O F RS.6,94,51,399/- DUE FROM MUKAT PIPES LTD. CONSIDERED AS RECOVERABLE BY THE MAN AGEMENT AND AN AMOUNT OF RS,2,67,66,831/- DUE FROM KARNATAKA POWER CORPORATION LTD. INCLUDED IN OTHER CURRENT ASSETS CONSIDERED RECOVERABLE BY SHE MANAGEMENT. (II) SIMILARLY, AS PER SCHEDULE-20(NOTES FORM ING PART OF THE ACCOUNTS) THE AUDITORS HAVE MENTIONED AS UNDER : 4. CITY CIVIL COURT AT AHMEDABAD VIDE ITS ORD ER DATED 30/04/2007 HAS DISMISSED CIVIL SUIT FILED BY M/S. MUKAT PIPES LTD. AGAINST THE COM PANY AND PASSED DECREE ORDER FOR RS.4,53,64,640/- WITH 12% INTEREST AND COST OF THE SUIT IN FAVOUR OF THE COMPANY. BASED ON THE ORDER COMPANY HAS INITIALED ACTIONS FOR RECO VERY OF DECRETAL AMOUNT, IN TERMS OF DECREE THE COMPANY HAS RECOGNISED INTEREST OF RS.2, 40,86,760/ ON THE DECRETAL AMOUNT FOR THE PERIOD FROM DATE OF SUIT TILL 31-03-2009. IT IS NOTICED AS PER LETTER DATED 12-02-2014 PLACED AT PAGE 57 TO 59 OF THE PAPER BOOK THE ASSESSEE HAD SUBMITTED THE DETAILS I N RESPECT OF ISSUE OF NOT SHOWING INTEREST INCOME FROM MUKUT PIPES LTD. THE RELEVANT PART OF THE LETTER ADDRESSED TO THE ASSESSING OFFICER BY THE AS SESSEE IS REPRODUCED AS UNDER:- 1. IN PARA 2 OF YOUR LETTER, IT HAS BEEN STATED BY YOU THAT THE AUDITOR HAS MENTIONED/IN AMOUNT OF RS.6,94,51,399/- DUE FROM MUKUT PIPES LTD . IS CONSIDERED GOOD AND RECOVERABLE BY THE MANAGEMENT AND AN AMOUNT OF RS.2,67,66,831/- DUE F ROM KARNATAKA POWER CORPORATION LTD. IS ALSO CONSIDERED RECOVERABLE BY THE MAN AGEMENT. ACCORDINGLY, YOU HAVE ASKED US TO EXPLAIN WHY INTEREST HAS NOT BEEN CHARGED ON THE AF ORESAID AMOUNT. IN THIS REGARD, WE WOULD LIKE TO CLARIFY THAT AS A RESULT OF CIVIL SUIT FILED BY US AGAINST MUKUT PIPES LTD., THE COURT HAS PASSED DECREE ORDER FOR RS.4,53,64,640/- WITH 12% INTEREST AND ACCORDINGLY WE RECOGNIZED INTEREST INCOME AT RS.2,40,86,760/- ON DECRETAL AMO UNT FOR THE PERIOD FROM THE DATE OF SUIT TILL 31.03.2009. IT IS SUBMITTED THAT INSPITE OF HAVING COURT DECREE, WE HAVE NOT RECEIVED. ANYTHING TOWARDS THE PRINCIPAL OR INTEREST FROM MUKUT PIPES LTD. AND THERE IS NO CERTAINTY OF RECEIVING THE SAME, AND THEREFORE, THE QUESTION OF CHARGING INTER EST THEREON DOES NOT ARISE. SIMILARLY, AMOUNT OF RS.2,67,66,831/- DUE FROM KARNATAKA POW ER CORPORATION LTD., IT IS SUBMITTED THAT THE SAME IS ON ACCOUNT OF ENCASHMENT OF BANK GUARANTEE GIVEN BY THE COMPANY TO KARNATAKA POWER CORPORATION LTD. THE COMPANY HAS FILED A SUIT IN TH E COURT OF RECOVERY OF THIS AMOUNT. THE BANK GUARANTEE GIVEN BY US WAS FOR THE PURPOSE OF OBTAIN ING WORK FROM KARNATAKA POWER CORPORATION LTD. HOWEVER, ON ACCOUNT OF SOME DELAY FOR EXECUTIO N OF WORK, THE SAID CORPORATION HAS ENCASHED I.T.A NOS. 775/AHD/2016 & 1000/AHD/2018 A.Y. 2011-12 PAGE NO MODERN CONSTRUCTION CO. PVT. LTD. VS. PR. CIT 8 THE BANK GUARANTEE. AS THE SUIT HAS BEEN FILED FOR RECOVERY OF THIS AMOUNT, THE QUESTION OF CHARGING ANY INTEREST DOES NOT ARISE. 1.2 IT IS FURTHER SUBMITTED THAT IT IS WELL SET TLED/THAT THERE IS UNCERTAINTY OF REALIZATION OF INCOME, QUESTION OF RECOGNIZING THE SAME IN THE BOO KS OF ACCOUNTS DOES NOT ARISE. AS PER THE PROVISIONS OF INCOME-TAX ACT, 1961, ONLY REAL INCOM E CAN BE BROUGHT TO TAX AND NO NOTIONAL INCOME CAN BE ADDED. THIS CONTENTION IS SUPPORTED B Y FOLLOWING DECISIONS: I) COMMISSIONER OF INCOME-TAX, DELHI-IV V. E ICHER LTD. (2010) 320ITR 410 (DELHI) II) COMMISSIONER OF INCOME-TAX VS. KAILASH AU TO FINANCE LTD. (2010) 320 ITR 394 (ALL) III) COMMISSIONER OF INCOME-TAX V, VASISTH CH AY VYAPAR LTD. (2011) 330 ITR 440 (DELHI) IV) COMMISSIONER OF INCOME-TAX VS. COIMBATO RE LAKSHMI INV. & FINANCE CO. LTD. (2011) 331 ITR 229(MAD) V) COMMISSIONER OF INCOME-TAX V. INDBANK HOUS ING LTD. (2009) 224 CTR 297 (MAD) VI) ANZ GRINDLAYS BANK LTD. V. COMMISSIONER OF INCOME-TAX (2011) 250 ITR 125 (CAL) VII) CIT VS. KICM INVESTMENTS LTD. (2009) 310 I TR (ST) 4 (SC) 2. IN PARA (II) YOU HAVE ASKED US TO EXPLAI N THE NOTE PUT UP BY AUDITOR IN RESPECT OF INVENTORIES OF CONSTRUCTION MATERIAL STATIN G THAT THE SAME INVENTORY OF RS.23,59,96 2/- LYING IN THE POSSESSION OF KARNATAKA POWER CORPORATION. IN F.Y.2006-07, WE OBTAINED THE WORK FROM SAID CORPORATION AND DUE TO DISPUTE, AS M ENTIONED IN PRECEDING PARAGRAPH, THEY UNCALLED THE BANK GUARANTEE AND THEY ALSO TOOK THE POSSESSION OF INVENTORIES LYING AT THE SIT E, WHICH IS BELONGING TO COMPANY, AND THEREFORE, BY WA Y OF DISCLOSURE, THE AUDITOR HAS DISCLOSED THE SAME IN AUDITED ACCOUNTS BY WAY OF NOTE. WE HOPE TH IS WILL CLARIFY THE ISSUE. THE ASSESSE HAS CATEGORICALLY EXPLAINED THAT AS A R ESULT OF DECREE ORDER IT HAS RECOGNIZED INTEREST INCOME AT RS. 2,40,86,760/- ON THE DECRETAL AMOUNT FOR THE PERIOD FROM THE DATE OF SUIT TILL 31.03.2009. BUT IN SPITE OF HAVING COURT DECREE IT HAS NOT RECEIVED ANYTHING TOWARD THE PRIN CIPAL OR INTEREST FROM MUKUT PIPES LTD AND THERE WAS NO CERTAINTY OF RECEI VING THE SAME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS PLACED RELIANCE ON A NUMBER OF JUDICIAL PRONOUNCEMENTS MENTIONED IN PARA 3 OF ITS SUBMISSION POINTING OUT THAT THERE WAS UNCERTAINTY OF REALIZAT ION OF INCOME THEREFORE SAME WAS NOT RECOGNIZED IN THE BOOKS OF ACCOUNTS. IT IS ALSO SUBMITTED ON THIS ISSUE BEFORE THE ASSESSING OFFICER THAT ONLY R EAL INCOME CAN BE BROUGHT TO TAX AND NO NOTIONAL INCOME CAN BE ADDED. THE L D. COUNSEL HAS ALSO PLACED RELIANCE ON THE CASE OF CIT VS. RELIANCE COMMUNICAT ION LTD. (2016) 76 TAXMANN.COM 226 (SC) WHEREIN THE HONBLE SUPREME CO URT SUSTAINED THE FINDING OF THE TRIBUNAL THAT ASSESSING OFFICER HAS MADE DETAILED ENQUIRIES I.T.A NOS. 775/AHD/2016 & 1000/AHD/2018 A.Y. 2011-12 PAGE NO MODERN CONSTRUCTION CO. PVT. LTD. VS. PR. CIT 9 AND MERE FACT THAT HE DID NOT MAKE ANY REFERENCE TO SAID ISSUE IN ASSESSMENT ORDER, COULD NOT MAKE SAID ORDER ERRONEOUS AND PREJ UDICIAL TO INTEREST OF REVENUE. RELIANCE WAS ALSO PLACED IN THE CASE OF C IT VS. ARVIND JEWELLERS (2002) 124 TAXMAN 615 (GUJ) WHEREIN HONBLE HIGH C OURT OF GUJARAT HELD THAT SINCE MATERIAL WAS THERE ON RECORD AND SAID MA TERIAL WAS CONSIDERED BY ITO AND A PARTICULAR VIEW WAS TAKEN MERE FACT THAT DIFFERENT VIEW COULD BE TAKEN, SHOULD NOT HAVE BEEN BASIS FOR AN ACTION UND ER SECTION 263 OF THE ACT. AFTER PERUSAL OF THE MATERIAL ON RECORD AND COPIES OF LETTER ISSUED BY THE ASSESSING OFFICER AND RELIED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 143(3), IT IS EVIDENT THAT THE ASS ESSING OFFICER HAS MADE SPECIFIC INQUIRES WITH RESPECT TO THE ISSUE OF ACCR UAL OF INTEREST INCOME IN PURSUANCE OF ORDER OF THE CIVIL COURT AND THE ASSES SEE HAS GIVEN A DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE WERE PART OF THE RECORD OF THE CASE. THE PR. CIT HAS PLACED RELIANCE ON THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. WE CONSIDER THAT FACTS OF THE CASE OF THE ASSESSEE ARE DISTINGUISHAB LE FROM THE FACTS OF THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (SC) 243 ITR 83. IN THAT CASE, THE ASSESSING OFFICER HAS ACCEPTED THE ENTRY IN THE STA TEMENT OF THE ACCOUNT FILED BY THE ASSESSEE IN THE ABSENCE OF ANY SUPPORTING MA TERIAL AND WITHOUT MAKING INQUIRY. HOWEVER, IN THE CASE OF THE ASSESS EE, THE ASSESSING OFFICER HAS MADE SPECIFIC INQUIRY ON THE ISSUE OF RECOVERY OF DECRETAL AMOUNT VIDE LETTER DATED 03-02-2014 AND THE ASSESSEE HAS SUBMIT TED THE DETAIL OF NOT SHOWING SUCH INTEREST INCOME VIDE LETTER DATED 12.0 2.2014 DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SUCH DETAILS ARE REPROD UCED AND DISCUSSED SUPRA IN THIS ORDER. IT IS DEMONSTRATED FROM ABOVE DISCU SSION THAT IN THE CASE OF THE ASSESSEE, THE ASSESSING OFFICER HAS MADE SPECIFIC I NQUIRY AND THERE WAS I.T.A NOS. 775/AHD/2016 & 1000/AHD/2018 A.Y. 2011-12 PAGE NO MODERN CONSTRUCTION CO. PVT. LTD. VS. PR. CIT 10 MATERIAL ON RECORD BEFORE FRAMING ASSESSMENT ORDER. WE OBSERVE THAT LD. PR. CIT WAS NOT JUSTIFIED IN HOLDING THAT THE ASSES SING OFFICER HAS NOT MADE SPECIFIC ENQUIRIES WITH REGARD TO INTEREST INCOME. IN THE LIGHT OF THE FACTS AND FINDINGS AS ELABORATED SUPRA IN THIS ORDER WE CONSI DER THAT ORDER PASSED UNDER SECTION 263 OF THE ACT IS NOT SUSTAINABLE IN LAW, THEREFORE, ORDER PASSED U/S. 263 IS QUASHED. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. SINCE WE HAVE QUASHED THE PROCEEDINGS MADE U/S. 263 OF THE ACT, THEREFORE, IT IS NOT REQUIRED TO ADJUDICATE THE APPEAL OF THE ASSESSEE ON MERIT. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07-01-2021 SD/- SD/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 07/01/2021 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,