Case Law Details
Time City Real Estates (India) Limited Vs PCIT (ITAT Lucknow)
In the present case, ITAT noted that the Assessing Officer had carried out sufficient enquiries and this is not even a case of lack of enquiry. Further the Hon’ble Supreme Court in the case of Malabar Industrial Co. has held that for assumption of jurisdiction u/s 263 of the Act, the order of the Assessing Officer has to be erroneous as well as prejudicial to the interest of Revenue. The Hon’ble Court held that the Commissioner has to satisfy of these twin conditions and if one of them is absent, then recourse is not available u/s 263 of the Act.
The assessee is engaged in the business of real estate development. During the year under consideration, the assessee purchased certain lands for development and incurred certain expenditure on it in the form of stamp duty and land development expenses. We find that assessee debited a total amount of Rs.4,07,28,170/- in its ledger account of land under the head ‘purchase’. The copy of ledger account submitted to the Assessing Officer during original assessment proceedings is placed at page 25 of the paper book. The break-up of this amount, represented by sale deeds of pieces of land along with the stamp duty expenses and development expenses, as submitted to the Assessing Officer, is placed at page 26 of the paper book. The break-up of sale deeds, as reproduced by learned Pr. CIT in his order at page 1, tallies with the registry amount of land, as placed at page 26 of the paper book. The learned Pr. CIT, after noting down the amount of sale deeds, has arrived at a conclusion that the assessee had not filed sale deeds for an amount of Rs.1,15,48,625/-. While holding so he has overlooked the fact that there were development expenses to the tune of Rs.91,46,325/- and other expenses amounting to Rs.8,02,300/-. The break-up of such amount was submitted to learned Pr. CIT and was also submitted to the Assessing Officer during original assessment proceedings as is apparent from the reply of the assessee vide letter dated 01/09/2017, placed at pages 23 & 24 of the paper book. In this letter, the assessee, vide reply No. 3, had submitted to the Assessing Officer that details of purchase of land, as desired in the format, is enclosed and such format, submitted to the Assessing Officer, is placed at page 26 of the paper book. The details at page 26 are complete details regarding purchase of various pieces of land, their registry amount, the development expenses incurred thereon and other expenses incurred thereon and if we make a total of these amounts, the total comes out at Rs.99,48,625/- which should be the difference noted by learned Pr. CIT instead of amount wrongly noted by him at Rs.1,15,48,625/-. In the order of learned Pr. CIT there is a calculation mistake of Rs.16 lacs. However, there are no more sale deeds, the copies of which were not filed by the assessee during the original assessment proceedings. The observation made by learned Pr. CIT is totally wrong as he has not looked into this aspect that besides an amount of sale deed, the assessee had incurred certain development expenses and other expenses also, the details of which were submitted to him as well as were submitted to the Assessing Officer during assessment proceedings. As regards the expenses incurred on these pieces of land, the Assessing Officer, during assessment proceedings, required the assessee to produce bills/vouchers of such expenses and the assessee, vide letter dated 07/12/2017, placed at pages 33 & 34 of the paper book, vide reply No. 2, had produced for verification the vouchers of site development and land development etc. The copy of order sheet entry dated 01/12/2017 also supports this fact wherein the Assessing Officer required the assessee to produce bills/vouchers of site development expenses and the order sheet entry dated 07/12/2017 states that the assessee has filed bills/vouchers of expenses, including lease rent, commission and land development expenses. All these details suggest that the Assessing Officer has passed the order after taking into account and after examination of all the evidences with respect to amount debited in the purchase account of land. Therefore, there is no justification of initiating and passing order u/s 263 by learned Pr. CIT.
FULL TEXT OF THE ORDER OF ITAT LUCKNOW
This is an appeal filed by the assessee against the order of learned Principal Commissioner of Income Tax, Lucknow passed u/s 263 of the I.T. Act. In this appeal the assessee has raised the following grounds:
“1. The Ld. PCIT-1, Lucknow, erred on facts and in law in set aside the assessment order passed u/s 143(3) of I.T. Act as denovo without appreciating that the Assessee has filed appeal before Ld. C.I.T.(A) against the additions made on number of issues in the assessment order which is pending for adjudication before Ld. C.I.T.(A).
The Ld. PCIT-I, Lucknow erred on facts and in law in not appreciating that in the show cause notice issued u/s 263 of I.T. Act dated 06.12.2019, there is no charge framed w. r. t. the directions passed in the order on the issue of “TDS and the Wages Expenses/ Development Expenses /Lease Rent etc.” as stated in the body of Order, hence the order passed u/s 263 on this issue is invalid.
2.1 That Ld. PCIT-1, failed to appreciate that during assessment proceeding, in compliance to notice u/s 142(1) dated 10.08.2017, the assessee submitted detailed replies and produced supporting documents regarding payment of wages, Development Expenses and Lease Rent to the satisfaction of AO, hence it is neither erroneous nor prejudicial to the Interest of Revenue.
3. The Ld. PCIT-I, Lucknow erred on facts and in law in passing order u/s 263 on the issue of purchase of land without appreciating that during the course of assessment proceeding that in compliance to notice u/s 142(1) dated 10.08.2017, all the required details regarding purchase of land has been submitted / produced and the same has already been examined in the assessment proceeding.
3.1 That the Registry for purchase of land along with name and address of the seller who were agriculturist has been produced during assessment proceeding and after detailed examination of the exceptional circumstances for payment of cash to Agriculturist had accepted the same, hence this issue is neither erroneous nor prejudicial to the Interest of Revenue, hence the Order passed on this issue u/s 263 is invalid.
4. The Ld. PCIT-1, Lucknow fails to appreciate that the assessment order has been passed after examine all the facts as stated in the notice u/s 263 of I. T. Act and Ld. A. 0. had also made additions under the different heads which were under the appea l before First Appellate Authority, hence present order passed u/s 263 is contrary to the provisions of Law. ”
2. At the outset, Learned A. R. invited our attention to the fact that the appeal filed by the assessee is delayed by 92 days and our attention was also invited to copy of application dated 18/08/2021 duly supported by sworn in affidavit for condonation of delay wherein the reason for delay in filing the appeal has been mentioned. It was submitted that the order of learned CIT(A) was received on 19/03/2021 and the appeal was to be filed by 18/05/2021 but which was actually filed on 18/08/2021 and thus there has occurred a delay of 92 days. Learned A. R. explained that the appeal could not be filed within the time for the reason that the Government had declared a lockdown owing to spread of pandemic COVID-19 and the office of the counsel was closed. After COVID lockdown, the consel of the assessee fell ill and suffered from severe prostrate problem and remained under medical treatment and therefore, counsel of the assessee could not prepare the appeal. It was submitted that the assessee was prevented by reasonable and sufficient cause in not filing the appeal within the prescribed period of time therefore, it was prayed that the delay may be condoned and the appeal may be heard on merits. Learned D. R. had no objection to the condonation of delay. Finding the reason plausible for delay in filing the appeal, the delay was condoned and both parties were heard.
3. Learned counsel for the assessee, at the outset, submitted that the case of the assessee was selected for scrutiny and in the assessment proceedings the Assessing Officer had made certain additions and against which the assessee had filed appeal before learned CIT(A) and when the appeal of the assessee was pending before learned CIT(A), the learned Pr. CIT has passed the order u/s 263 of the Act and has set aside the whole assessment order for making fresh assessment de novo. Learned counsel for the assessee submitted that Clause (c) to Explanation 1 of section 263 provides that when an appeal is pending before the CIT(A), the exercise of jurisdiction u/s 263 of the Act by CIT is not permitted. Thus it was argued that in the present case the Pr. CIT wrongly exercised jurisdiction u/s 263 by remitting back the matter to the assessing authority on 25/03/2013 while the appeal was decided by the learned CIT(A) on 05/06/2013 and thus it was argued that the order passed by learned Pr. CIT is void ab initio and be cancelled. Learned counsel for the assessee was questioned as to whether the appeal filed by the assessee before the learned CIT(A) related to the same issues on which learned Pr. CIT has passed the order u/s 263, the Learned counsel for the assessee replied in negative. In view of the negative reply by Learned counsel for the assessee, the Bench arrived at the conclusion that then in that case Clause ‘C’ to Explanation 1 of section 263 will not be applicable in the facts and circumstances of the present case as learned Pr. CIT has passed the order on those issues on which there was no appeal pending before learned CIT(A) and therefore, ground No. 1, taken by the assessee, was rejected and Learned counsel for the assessee was asked to proceed on merits on other grounds.
3.1 Learned counsel for the assessee submitted that learned Pr. CIT had passed the order for fresh assessment by observing five issues and in this respect our attention was invited to the copy of notice u/s 263 of the Act which is part of order passed u/s 263. Learned counsel for the assessee in this respect filed a chart wherein the issues raised by the learned Pr. CIT have been narrated. Learned counsel for the assessee submitted that as regards the first issue of cash payments, the Assessing Officer in the assessment order passed u/s 143(3)/263 did not make any addition and similarly on the issue of non deduction of TDS, the Assessing Officer in proceedings u/s 143(3)/263 did not make any addition and similarly on the issue of lease rent, no addition was made by the Assessing Officer during proceedings u/s 143(3)/263 of the Act. Therefore, he submitted that he will not be arguing on these issues though the complete reply on these issues was also filed before the Assessing Officer. The Learned counsel for the assessee submitted that he will argue only on these issues for which Assessing Officer during course of consequent proceedings has made the addition. Explaining the first issue, Learned counsel for the assessee stated that learned Pr. CIT wrongly observed that copies of sale deeds worth Rs.1,15,48,625/- representing purchases made by assessee were neither provided by assessee nor were examined by the Assessing Officer. Learned counsel for the assessee submitted that in response to the notice issued by learned Pr. CIT u/s 263 on this issue, the assessee had filed complete reply and our attention was invited to the copy of reply filed by the assessee which has been made part of the order passed u/s 263 of the Act. Learned counsel for the assessee submitted that the Pr. CIT, instead of considering the reply in its right perspective, set aside the order of the Assessing Officer and passed order u/s 263 and directed the Assessing Officer to pass a fresh assessment order. Learned counsel for the assessee submitted that regarding issue of purchase of land, the Assessing Officer, during the assessment proceedings, vide notice dated 10/08/2017, had required the assessee to provide details of purchase of land in a format and in response to the said query, the assessee, vide reply dated 01/09/2017, submitted the details of purchase of land in the format as required by the Assessing Officer and in this respect our attention was invited to pages 21 to 24 of the paper book where the copy of notice dated 10/08/2017 and copy of reply dated 01/09/2017, were placed. Our specific attention was invited to page 22 of the paper book where, vide question No. 3, the Assessing Officer had required the assessee to furnish complete details of purchase of land and the assessee, vide reply, placed at page 23, had submitted the complete details of purchase of land in the format as required by the Assessing Officer. Our attention was invited to page 26 of the paper book where detail of land purchased for financial year 2014-15 was placed and wherein date-wise purchase of different lands along with the stamp duty paid thereon and expenses incurred thereon was placed. Learned counsel for the assessee submitted that the total amount of these lands purchased at two projects Royal Awadh and Gomti Vihar were taken into the ledger account, a copy of which was placed at page 25 of the paper book. Learned counsel for the assessee submitted that in the ledger account the total amount of land purchased is Rs.4,07,28,170/- which is the same amount as in the chart. It was submitted that learned Pr. CIT, while observing the difference, has overlooked the fact that besides the amount of land purchases, there were expenses of stamp duty, development expenses & other expenses also and if the total of these expenses is included in the amount of sale deeds, it will tally with the amount debited in the ledger account and hence there will be left no other sale deeds to be examined by the Assessing Officer. It was submitted that vouchers for expenses of stamp duty, development expenses and other expenses were all examined by Assessing Officer. It was submitted that Assessing Officer vide query dated 01/12/2017 wanted the assessee to produce vouchers/bills for expenses and assessee vide reply dated 07/12/2017 submitted all these vouchers. In this respect our attention was invited to pages 33 and 34 of the paper book where a copy of letter dated 07/12/2017 was placed. Our attention was also invited to copy of order sheets dated 01/12/2017 and 07/12/2017 where Assessing Officer had noted all these queries and replies by assessee. It was submitted that Pr.CIT, in the show cause notice, had only considered the basic cost of land purchased i.e. registry amount and had not considered other charges being registry charges, court fees and land development charges. It was submitted that detailed breakup of expenses was filed in the course of assessment proceedings and accordingly the Pr. CIT has wrongly considered that the assessee did not furnish the details of purchase of land of Rs.99,48,625/-, wrongly taken by learned Pr. CIT at Rs.1,15,43,625/-. Learned counsel for the assessee submitted that learned Pr. CIT has wrongly held that details of purchase of land were not provided to the Assessing Officer whereas the fact remains that complete details of land purchased, development charges and other expenses were filed with the Assessing Officer. It was submitted that learned Pr. CIT wrongly held the expenses incurred on purchase of land to be amount spent on another piece of land for which he held that no sale deed was provided. Therefore, in view of the above facts and circumstances, it was submitted that the Assessing Officer, after satisfying himself, had correctly accepted the explanation of the assessee and therefore, the order of learned Pr. CIT on this ground is not sustainable.
3.2 Regarding another issue of site, wage and development expenses, Learned counsel for the assessee submitted that vide notice dated 10/08/2017, the Assessing Officer vide question at Sr.No. 6, required the assessee to explain the expenses and assessee, vide reply dated 07/03/2017, a copy of which was referred to pages 23 and 24 of the paper book, replied to the above queries and furnished the entire information and it was stated that copies of various ledger accounts has already been submitted vide letter dated 07/03/2017 and our attention was invited to paper book pages 37 and 38 where copy of such letter was placed. Our attention was further invited to the same order sheet where the Assessing Officer, vide order sheet entry dated 07/12/2017 has noted down that the assessee had filed bills and vouchers of land and land development etc. Learned counsel for the assessee submitted that out of expenses of Rs.67,58,935/-, Rs.65,112/- represented the lease rent expenses and the rest was on account of other expenses, the details of which were also furnished to the Assessing Officer vide reply dated 07/03/2017. In view of the above facts and circumstances, it was submitted that the Assessing Officer had already enquired by way of notice regarding site, wage, and development expenses and lease rent expenses which was responded to by the assessee along with the documentary evidences and also bill & vouchers of expenses were submitted and after being satisfied with the explanation of the assessee, the Assessing Officer had framed the assessment order. It was submitted that against the show cause notice of the learned Pr. CIT, the assessee explained that the issue of site development was enquired by the Assessing Officer and was duly responded by the assessee vide reply dated 01/09/2017. However, learned Pr. CIT has not considered this reply and had invalidly and improperly exercised jurisdiction u/s 263 of the Act ignoring the fact that the issue was raised, enquired and examined by the Assessing Officer and merely because there is no mention and no discussion in the assessment order, cannot lead to an assumption that the Assessing Officer did not apply his mind or he has not made enquiry and therefore, it was prayed that the proceedings u/s 263 by learned Pr. CIT are not valid as the order is neither erroneous nor prejudicial to the interest of Revenue. Reliance in this respect was placed on the following case laws:
(1) Judgment of Hon’ble Allahabad High Court in the case of Sunil Kumar Rastogi vs. CIT and Another, 406 ITR 306 (All)
(2) Judgment of Hon’ble Allahabad High Court in the case of CIT vs. Krishna Capbox (P.) Ltd. [2015] 372 ITR 310 (All)
(3) IT.A.T. Delhi Bench order in the case of MAXPAK Investment Limited vs. ACIT 104 TTJ 881 (Del)
4. We have heard the rival parties and have gone through the material placed on record. The assessee is engaged in the business of real estate development. During the year under consideration, the assessee purchased certain lands for development and incurred certain expenditure on it in the form of stamp duty and land development expenses. We find that assessee debited a total amount of Rs.4,07,28,170/- in its ledger account of land under the head ‘purchase’. The copy of ledger account submitted to the Assessing Officer during original assessment proceedings is placed at page 25 of the paper book. The break-up of this amount, represented by sale deeds of pieces of land along with the stamp duty expenses and development expenses, as submitted to the Assessing Officer, is placed at page 26 of the paper book. The break-up of sale deeds, as reproduced by learned Pr. CIT in his order at page 1, tallies with the registry amount of land, as placed at page 26 of the paper book. The learned Pr. CIT, after noting down the amount of sale deeds, has arrived at a conclusion that the assessee had not filed sale deeds for an amount of Rs.1,15,48,625/-. While holding so he has overlooked the fact that there were development expenses to the tune of Rs.91,46,325/- and other expenses amounting to Rs.8,02,300/-. The break-up of such amount was submitted to learned Pr. CIT and was also submitted to the Assessing Officer during original assessment proceedings as is apparent from the reply of the assessee vide letter dated 01/09/2017, placed at pages 23 & 24 of the paper book. In this letter, the assessee, vide reply No. 3, had submitted to the Assessing Officer that details of purchase of land, as desired in the format, is enclosed and such format, submitted to the Assessing Officer, is placed at page 26 of the paper book. The details at page 26 are complete details regarding purchase of various pieces of land, their registry amount, the development expenses incurred thereon and other expenses incurred thereon and if we make a total of these amounts, the total comes out at Rs.99,48,625/- which should be the difference noted by learned Pr. CIT instead of amount wrongly noted by him at Rs.1,15,48,625/-. In the order of learned Pr. CIT there is a calculation mistake of Rs.16 lacs. However, there are no more sale deeds, the copies of which were not filed by the assessee during the original assessment proceedings. The observation made by learned Pr. CIT is totally wrong as he has not looked into this aspect that besides an amount of sale deed, the assessee had incurred certain development expenses and other expenses also, the details of which were submitted to him as well as were submitted to the Assessing Officer during assessment proceedings. As regards the expenses incurred on these pieces of land, the Assessing Officer, during assessment proceedings, required the assessee to produce bills/vouchers of such expenses and the assessee, vide letter dated 07/12/2017, placed at pages 33 & 34 of the paper book, vide reply No. 2, had produced for verification the vouchers of site development and land development etc. The copy of order sheet entry dated 01/12/2017 also supports this fact wherein the Assessing Officer required the assessee to produce bills/vouchers of site development expenses and the order sheet entry dated 07/12/2017 states that the assessee has filed bills/vouchers of expenses, including lease rent, commission and land development expenses. All these details suggest that the Assessing Officer has passed the order after taking into account and after examination of all the evidences with respect to amount debited in the purchase account of land. Therefore, there is no justification of initiating and passing order u/s 263 by learned Pr. CIT.
4.1 Now coming to the other issue of site wages and other expenses amounting to Rs.67,58,935/-. In this respect, we find that vide notice dated 10/08/2017, a copy of which is placed at pages 22 & 22 of the paper book, the Assessing Officer, vide query No. 5 & 6, required the assessee to furnish proof of lease rent expenses as well as ledger account of site wages expenses and development expenses. The assessee, vide letter dated 01/09/2017, a copy of which is placed at pages 23 & 24, filed reply to the Assessing Officer on this query, which for the sake of completeness is reproduced below:
“4. Lease rent expenses have been paid to the parties whom the sold area has been allotted but possession has not been given as the development work is partly pending. Lease rent has been paid to such persons and TDS has been deducted thereon as per applicable provisions. The details of monthwise expenses incurred in this respect is enclosed.
5. Copy of ledger account of site wages/development expenses has been submitted vide reply dated 07/03/2017. ”
4.2 From the above reply we find that assessee had already filed copy of ledger account of such wages/development expenses vide reply dated 07/03/2017, a copy of reply dated 07/03/2017 is placed at pages 37 & 38 of the paper book wherein the assessee, in view of notice dated 16/01/2017, had submitted the copy of account of expenses including site wages expenses/development expenses. We further note from the order sheet dated 07/12/2017 that Assessing Officer has noted that details of expenses relating to business promotion, lease rent, commission, petrol, travelling etc. were filed by the assessee and which were checked. Therefore, in view of these facts and circumstances, we find that the Assessing Officer had carried out sufficient examination of the expenses relating to site & wages and therefore, passing of order u/s 263 on this account is also not justified.
4.3 Hon’ble Allahabad High Court in the case of CIT vs. Krishna Capbox (P.) Ltd. [2015] 372 ITR 310 (All) has held that where the Assessing Officer made certain queries which were replied to by the assessee and after enquiry being satisfied in respect of queries replied by the assessee, Assessing Officer accepted declared income and passed assessment order, CIT on the ground that the Assessing Officer had not made enquiry on certain aspects and accepted version of the assessee without making any enquiry of satisfaction, is not valid. Hon’ble High Court held that Tribunal has rightly held that once enquiry is made, a mere non discussion or non mention thereof in assessment order could not lead to assumption that the Assessing Officer did not apply his mind or that he had not made enquiry on subject. Hon’ble Supreme Court in the case of CIT vs. Sunbeam Auto Limited 332 ITR 167 has held that if there was an enquiry, even if inadequate, that would not by itself give occasion to the Commissioner to pass order u/s 263 of the I.T. Act merely because he has a different opinion in the matter and it is only in case of lack of enquiry that such course of action would be open to Commissioner. In the present case, we have already noted that the Assessing Officer had carried out sufficient enquiries and this is not even a case of lack of enquiry. Further the Hon’ble Supreme Court in the case of Malabar Industrial Co. has held that for assumption of jurisdiction u/s 263 of the Act, the order of the Assessing Officer has to be erroneous as well as prejudicial to the interest of Revenue. The Hon’ble Court held that the Commissioner has to satisfy of these twin conditions and if one of them is absent, then recourse is not available u/s 263 of the Act.
4.4 In the present case, the order passed by Assessing Officer on these two issues is neither erroneous nor prejudicial to the interest of Revenue therefore, we cancel the order passed by Pr. CIT on these two issues.
4.5 In respect of other objections of learned Pr. CIT, the Learned counsel for the assessee did not advance any argument therefore, we have not adjudicated on those issues. Therefore, the action of learned Pr. CIT on those issues, not argued by Learned counsel for the assessee, is upheld.
5. In the result, the appeal of the assessee stands partly allowed.
(Order pronounced in the open court on 30/08/2022)
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