SEBCO PROPERTY PRIVATE LIMITED,TRICHY V. THE PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL - 2, CHENNAI, CHENNAI

ITA 1592/CHNY/2024

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The case involves M/s SEBCO Property Private Limited, which appealed against the revisionary order passed by the Principal Commissioner of Income Tax (Central), Chennai-2 under section 263 of the Income-tax Act, 1961. The revision was based on the assessment framed by the AO under sections 153A and 143(3) following a search action. The main contention was regarding the valuation of closing stock, where the assessee admitted a lower value in the return compared to what was noted from seized materials. The Tribunal examined the proceedings, the explanations provided by the assessee, and the subsequent assessments for related assessment years, ultimately deciding in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472371 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Other Referred Cases: Malabar Industrial Co. Ltd. vs. CIT, CIT vs. Max India Ltd., Grasim Industries Ltd. vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILAY BARAN SOM LD
• Assessee Lawyers: R. VENKATA RAMAN LD; APPLYING
• Keywords: Business income; Revision of order
• Section: 143(3); 142(1); 263; 153A

Judgement Text

" आयकर अपीलीय अिधकरण “ए” ा यपीठ चे\u0012ई म\u0015। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, CHENNAI मा ननीय \u0018ी एबी टी. वक , ा ियक सद एवं मा ननीय \u0018ी मनोज क ुमा र अ$वा ल ,लेखा सद क े सम&। BEFORE HON’BLE SHRI ABY T. VARKEY, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं ./ ITA No.1592/Chny/2024 (िनधा 'रणवष' / Assessment Year: 2016-17) M/s SEBCO Property Private Limited 24D, Mahalakshmi Nagar, K.K. Nagar, Trichy-620 021. बनाम/ Vs. PCIT (Central) Chennai-2. \u0002थायीलेखासं./जीआइआरसं./PAN/GIR No. AAOCS-0810-R (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ कीओरसे/ Appellant by : Shri R. Venkata Raman (CA) - Ld.AR थ कीओरसे/Respondent by : Shri Nilay Baran Som (CIT) - Ld. DR सुनवाईकीतारीख/Date of Hearing : 23-01-2025 घोषणाकीतारीख /Date of Pronouncement : 25-03-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee assails invocation of revisionary jurisdiction u/s 263 by Ld. Pr. Commissioner of Income Tax (Central), Chennai-2 (Pr.CIT) for Assessment Year (AY) 2016-17 vide impugned order dated 25-03-2024 in the matter of an assessment framed by Ld. AO u/s.153A r.w.s. 143(3) of the Act on 31-03-2022. The grounds taken by the assessee are as under: - 1. That the revision order dated 25.03.2024 passed by the Learned Principal Commissioner of Income Tax, Central - 2, Chennai [\"Ld. PCIT\"] u/s. 263 of the Income-tax Act, 1961 [\"Act\"] is without jurisdiction, bad in law and barred by limitation. 2. That the Assessment Order dated 31.03.2022 passed by the Assessing Officer u/s.143(3) r.w.s 153A of the Act was neither erroneous nor prejudicial to the interests of the revenue, thus the Ld. PCIT erred in initiating revisionary proceedings u/s.263 of the Act. 2 3. That the Ld. PCIT failed to appreciate that the Ld. CIT(A)- 19 vide order dated 18.03.2024 passed for the Assessment Year 2017-18 has held that the value of opening stock of Rs.36,42,36,999/- adopted by the Assessing officer in completing the assessment for the AY 2017-18 has no basis and accordingly held that the value of Rs.25,46,72,181/- returned by the appellant is correct. 4. That the Ld. PCIT erred in initiating revisionary proceedings in respect of an issue which has already been decided in favour of the appellant by the Ld. CIT(A) 5. That the Ld. PCIT erred in holding that there is undervaluation of closing stock to the extent of Rs.10,95,64,818/-. 6. That the Ld. PCIT ought to have appreciated that there is no incriminating material to corroborate the value of closing stock at Rs.36,42,36,999/-, consequently there is no error in the assessment order passed by the Assessing Officer. 2. The Ld. AR advanced arguments and referred to the order of Tribunal for subsequent years on the impugned issue. The Ld. CIT- DR also advanced arguments and submitted that Ld. AO failed to make requisite enquiries. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. The assessee being resident corporate assessee is stated to be engaged in real estate business. Revisionary Proceedings before lower authorities 3.1 From the facts, it emerges that the assessee’s return of income was subjected to proceedings u/s 153A pursuant to search action on assessee on 22-03-2021. The Ld. AO accepted the returned income vide order dated 31-03-2022. The assessment was framed on best judgment basis as is evident from corrigendum issued by Ld. AO on 24-05-2022. Subsequently, upon perusal of case records, Ld. Pr. CIT noted that the assessee admitted closing stock of Rs.25.46 Crores in its return of income. However, in AY 2017-18, Ld. AO adopted opening stock of Rs.36.42 Crores instead of Rs.25.46 Crores as admitted by the assessee in the return of income. Having 3 adopted value of Rs.36.42 Crores for AY 2017-18, Ld. AO should have adopted same value in AY 2016-17. In such a situation the assessment so framed would be prejudicial to the interest of the revenue. Therefore, the assessment was proposed to be revised and the assessee was show-caused. 3.2 The assessee stated that proposal to revise the order based on completion of assessment for subsequent AY 2017-18 could not be cured by revisionary order for AY 2016-17. It was further stated that the adoption of opening stock for Rs.36.42 Crores was already addressed in appeal proceedings for AY 2017-18. 3.3 However, Ld. Pr. CIT held that pendency of appeal for subsequent years could not prevent revision of order for this year. The assessee, in response to notice u/s 142(1) during the course of assessment proceedings, explained that the entire land of Morais City was not owned by the assessee company and as such other land owners were there. The sheet containing stock value was prepared projecting the probable area of plot / land available with the approximate value to solicit customers to invest in land or purchased the land from assessee-company. The Ld. Pr. CIT observed that the assessee did not corroborate the said statement with necessary evidences. The Ld. AO accepted the returned income without causing necessary enquiries on prima facie undervaluation of stock to the extent of Rs.10.95 Crores while framing the assessment. Moreover, the claim of the assessee deviating from the value of closing stock unearthed during the course of search proceedings in 4 the return of income as the correct one is not maintainable. The return for this year was invalid and the same was not e-verified. Accordingly, the assessment order was held to be erroneous and prejudicial to the interest of the revenue and Ld. AO was directed to modify the same by examining the issue of undervaluation of stock. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 4. From the facts, it emerges that the assessee’s return of income for this year was scrutinized u/s 143(3) r.w.s. 153A on 31-03-2022 pursuant to search action on the assessee on 22-03-2021. The regular return of income was already filed by the assessee on 11-03- 2017 which was processed u/s 143(1). In response to notice u/s 153A, the assessee e-filed return of income on 27-11-2021 admitting same income of Rs.132.08 Lacs. During the course of assessment proceedings, notices u/s 142(1) with detailed questionnaire was issued to the assessee on 09-02-2022 directing him to address various issues arising out of search proceedings. The assessee filed the requisite details vide its reply dated 04-03-2022. After due consideration of the same, Ld. AO chose to accept the returned income of the assessee. In notice u/s 142(1) (as placed on Page Nos.9 to 12 of the paper book), the assessee was inter-alia, required to file the financial statements and address various issues arising from search proceedings. By query no. (viii), the assessee was confronted with the fact that it had shown stock as on 31-03-2016 for Rs.25.46 Crores in the return of income. The assessee was directed 5 to furnish the complete break-up thereof in terms of survey numbers and extent of lands as per closing stock mentioned in the return of income filed in response to notice u/s 153A. The Ld. AO also referred to seized material “STOCK 15-16.xlsx” containing details of development cost incurred during FY 2015-16, sales made in that year and closing stock as on 31-03-2016. The scanned image of this sheet was also confronted to the assessee. A specific observation was made that the closing stock arrived on the basis of above seized material was Rs.36.42 Crores whereas the assessee admitted stock of Rs.25.46 Crores in return of income filed u/s 153A. There was huge difference of Rs.10.95 Crores in closing stock and accordingly, the assessee was required to explain the difference with suitable / necessary evidences. 5. The assessee, in its reply, dated 02-03-2022 (as placed on Page Nos.13 to 16 of the paper book), submitted that the actual closing stock of Rs.25.46 Crores as on 31-03-2016 was determined based on opening value as on 31-03-2015, purchases made during the year, development expenditure incurred during the year, sales of plots made during the year. The complete computation thereof was submitted as Annexure-F. Not only this, the assessee furnished explanatory note for alleged closing stock of Rs.36.42 Crores as per seized material. It was stated that the contents of the seized material were not correct. The same was prepared taking into account the plots / lands belonging to the assessee company and also other land owners. The assessee plotted the land and sold them to customers. 6 The seized sheet was prepared by taking into account such other landowners’ land / plot. The closing value was arrived at approximate market value or selling value. The sheet was prepared projecting the probable area of land / plot available with the approximate value to solicit the customers to invest in land or purchase the plots from the assessee company. It was stated that the closing stock arrived as per loose sheet could not be considered as the closing stock of the assessee company as on 31-03-2016. No reliance could be placed on estimated closing stock value. The assessee valued the stock by taking into account the actual land owned by the assessee company and at cost price as applicable. 6. After having satisfied with aforesaid explanation as furnished by the assessee, Ld. AO chose to accept the returned income of the assessee and did not tinker with the closing stock valuation as reflected by the assessee in the return of income. It could thus be seen that Ld. AO had raised a specific query on closing stock valuation and after considering the detailed reply of the assessee, accepted the claim of the assessee with due application of mind and chose not to disturb the returned income of the assessee. Thus, it is a case of acceptance of one of the plausible views which was more on facts and the said view could not be said to be opposed to any law or statutory provisions. The Ld. AO, in our opinion, had taken one of the plausible views in the matter and therefore, Ld. Pr. CIT could not be said to be justified in substituting the view of Ld. AO with that of his own view. Simply because some further verification 7 was required or simply because the verification was not done in a particular manner, the same could not justify revision of the order unless it was shown that the view of Ld. AO was erroneous or opposed to any law. 7. It could also be seen that the assessment for AY 2017-18 has been framed by same AO on same date. In this order, Ld. AO re- casted the Profit & Loss Account for the assessee on the basis of seized material. The Ld. AO valued opening stock as on 01-04-2016 at Rs.36.42 Crores and added the additional profit of Rs.48.97 Crores to the income of the assessee. Upon further appeal, Ld. CIT(A) estimated the business income of the assessee by applying net profit rate. Upon further appeal, Tribunal, in ITA Nos.1428/Chny/2024 & ors. common order dated 15-01-2025 for AYs 2017-18 to 2021-22, dismissed cross-appeals. In para-5 of the order, the bench observed that valuation of stock on the basis of excel sheet was rightly discarded by Ld. CIT(A). The valuation as reflected therein had no basis and therefore, the same was to be ignored completely. Considering various other factors, the action of Ld. CIT(A) in rejecting the books of accounts was upheld. Thus, the issue of valuation to stock was held in assessee’s favor for subsequent years and therefore, this issue in AY 2016-17 could not be said to be prejudicial to the interest of the revenue. 8. The Hon’ble Supreme Court in Malabar Industrial Co. Ltd. vs. CIT (supra) has held that the phrase 'prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order 8 passed by the Assessing Officer. Every loss of revenue as consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest 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 interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. The said principal has been reiterated by Hon’ble Court in its subsequent judgment titled as CIT V/s Max India Ltd. (295 ITR 282). Similar principal has been followed in Grasim Industries Ltd. V/s CIT (321 ITR 92). The ratio of all these decisions is that where two views are possible and AO has preferred one view against another view, order could not be said to be erroneous or prejudicial to the interest of the revenue. 9. Therefore, on the given facts, the impugned revision of assessment order could not be sustained in law. We order so. The assessment as framed by Ld. AO stand restored back. 10. The appeal stands allowed in terms of our above order. Order pronounced on 25th March, 2025 Sd/- Sd/- (ABY T. VARKEY) (MANOJ KUMAR AGGARWAL) ा ियक सद /JUDICIAL MEMBER लेखा सद / ACCOUNTANT MEMBER चे3ई Chennai; िदनांक Dated : 25-03-2025 DS 9 आदेश की Fितिलिप अ$ेिषत / Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. थ /Respondent 3. आयकरआयु