PCIT Vs Platinum Properties (Bombay High Court)
The Bombay High Court considered an appeal filed by the Revenue under Section 260A of the Income-tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) dated 21 March 2023, which had allowed the assessee’s appeal and held that the order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 for Assessment Year (AY) 2014-15 was not sustainable. The Revenue raised substantial questions of law regarding whether the ITAT was justified in quashing the Section 263 order despite the Assessing Officer (AO) allegedly failing to enquire into the taxability of on-money receipts of ₹7,96,39,066 and the applicability of Explanation 2 to Section 263.
The assessee, a builder and developer, undertook two projects, “Spring” and “Taloja”, and followed the project completion method of accounting. During AY 2014-15, the “Spring” project was completed while the “Taloja” project remained under construction. The assessee declared a net profit of ₹45,25,572, closing work-in-progress of ₹1,59,11,745 and taxable income of ₹1,14,800. The return was selected for scrutiny, notices under Sections 143(2) and 142(1) were issued, and an assessment under Section 143(3) dated 26 December 2016 assessed the income at ₹1,23,09,324.
Subsequently, the PCIT initiated revision proceedings under Section 263 based on a survey conducted under Section 133A on 16 October 2014. According to the PCIT, on-money receipts aggregating to ₹60,82,34,643 were found relating to the “Spring-I” and “Spring-II” projects. Of this amount, ₹52,85,95,577 had already been offered to tax in AY 2013-14. The PCIT held that the balance on-money of ₹7,96,39,066 relating to the “Spring-II” project and received during Financial Year 2013-14 had not been brought to tax in AY 2014-15 and that the AO had failed to examine the issue. Invoking clause (a) of Explanation 2 to Section 263, the PCIT held that the assessment order was erroneous and prejudicial to the interests of the Revenue and set aside the assessment for fresh adjudication.
