Sthapthya Buildcon Pvt. Ltd.,, Ahmedabad v. The DCIT, Ward-4(1)(1),, Ahmedabad

ITA 814/AHD/2018 | 2013-2014
Pronouncement Date: 25-11-2019 | Result: Allowed

Appeal Details

RSA Number 81420514 RSA 2018
Assessee PAN AALCS8818G
Bench Ahmedabad
Appeal Number ITA 814/AHD/2018
Duration Of Justice 1 year(s) 7 month(s) 22 day(s)
Appellant Sthapthya Buildcon Pvt. Ltd.,, Ahmedabad
Respondent The DCIT, Ward-4(1)(1),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2019
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 25-11-2019
Last Hearing Date 23-10-2019
First Hearing Date 23-10-2019
Assessment Year 2013-2014
Appeal Filed On 03-04-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD BEFORE SHRI MAHAVIR PRASAD JUDICIAL MEMBER AND SHRI WASEEM AHMED ACCOUNTANT MEMBER ./ ITA NO. 814/AHD/2018 / ASSTT. YEAR: 2013 - 2014 STHAPATHYA BUILDCON PVT LTD. PAVAN PETROLEUM NUTUN MILL COMPUND NEAR CITY GOLD CINEMA SARASPUR AHMEDABAD. PAN : AALCS8818G VS. D.C.I.T CIRCLE - 4(1)(1) AHMEDABAD. (APPLICANT) ( RESPON D ENT ) ASSESSEE BY : SHRI KETAN H. SHAH & SHRI AMAN K. SHAH A.R S REVENUE BY : SHRI O.P. SHARMA C.I.T . D.R / DATE OF HEARING : 23 / 10 / 201 9 / DATE OF PRONOUNCEMENT: 25 / 11 /201 9 / O R D E R PER WASEEM AHMED ACCOUNTANT MEMBER : THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE LEARNED PR. COMMISSIONER OF INCOME TAX - 4 AHMEDABAD DATED 16/03/2018 ( IN SHORT LD.CIT ) ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 263 OF THE INCOME TAX ACT 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') DT. 11 / 03 /2016 RELEVANT TO THE ASSESSMENT YEAR 2013 - 20 14 . ITA NO.814/AHD/2018 ASSTT. YEAR 2013 - 14 2 THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL. 1. THE LEARNED PR.COMMISSIONER OF INCOME TAX - 4 AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY HOLDING THAT THE ASSESSMENT ORDER PASSED U/S.143(3) BY DY.C.I.T. CIRCLE 4(1)(1) AHMEDABAD ON 11.03.2016 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND ACCORDINGLY ER RED IN SETTING ASIDE THE ASSESSMENT ORDER PASSED U/S.143(3) INVOKING THE PROVISIONS OF SECTION 263 OF THE I.T ACT 1961. 2. YOUR APPELLANT PRAYS TO RESERVE THE RIGHT TO ADD ALTER AMEND AND /OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL. 2. THE ONLY ISSU E RAISED BY THE ASSESSEE IS THAT THE LD. PCIT ERRED IN HOLDING THAT THE ORDER FRAMED BY THE AO U/S 143(3) OF THE INCOME TAX ACT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED C OMPANY AND ENGAGED IN THE BUSINESS OF REAL ESTATE. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION FILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 31 56 271.00 ONLY. SUBSEQUENTLY THE CASE OF THE ASSESSEE WAS SCRUTINIZED UNDER SECTION 143(3) OF THE ACT WHEREIN CERTAIN ADDITIONS WERE MADE BY THE AO VIDE ORDER DATED 11 TH MARCH 2016 AS DETAILED UNDER. I - DISALLOWANCE OF INTEREST RS. 1 46 712.00 II - UNSECURED LOAN RS. 35 16 868.00 3.1 THE AO ACCORDINGLY COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT AT A TOTAL INCOME OF RS. 68 19 850.00 UNDER NORMAL COMPUTATION OF INCOME AND THE BOOK PROFIT U/S 115JB OF THE ACT WAS DETERMINED AT RS. 84 74 996.00. 3.2 BEFORE COMING TO THE SPECIFIC ISSUE RAISED UNDER SECTION 263 OF THE ACT IT IS PERTINENT TO NOTE THE BRIEF HISTORY OF THE FACTS OF THE CASE. THE ASSESSEE IN THE EARLIER YEARS WAS A PARTNERSHIP FIRM WHICH WAS SUBSEQUENTLY CONVERTED ITA NO.814/AHD/2018 ASSTT. YEAR 2013 - 14 3 INTO PRIVATE LIMITED COMPANY. THE ERSTWHILE FIRM IN THE EARLIER YEAR HAS PAID A SUM OF RS. 41 05 08 000.00 TO THE OFFICIAL LIQ UIDATOR IN CONNECTION WITH THE PURCHASE OF LAND UNDER AUCTION. BUT SUCH PURCHASE DEAL OF THE ASSESSEE COULD NOT MATERIALIZE DUE TO SOME DISPUTE WHICH TRAVELLED RIGHT UP TO THE HON BLE APEX COURT. AS SUCH THE HON BLE APEX COURT DIRECTED THE OFFICIAL LIQUI DATOR TO RETURN THE AMOUNT TO THE ASSESSEE ALONG WITH THE AMOUNT OF INTEREST. THUS THE ASSESSEE (NOW A PRIVATE LIMITED COMPANY) HAS RECEIVED THE AMOUNT OF INTEREST FOR RS. 15 25 79 596.00 IN THE YEAR UNDER CONSIDERATION IN PURSUANCE TO THE DIRECTION OF THE HON BLE APEX COURT. THE ASSESSEE HAS SHOWN IMPUGNED AMOUNT OF INTEREST AS BUSINESS INCOME AND CLAIMED CERTAIN EXPENSES AGAINST SUCH INTEREST INCOME. THESE EXPENSES ARE AS FOLLOWS: (I) PROJECT DEVELOPMENT EXPENSES RS. 912.69 LACS (II) INTEREST EXPENSES RS. 525.04 LACS (III) OTHER EXPENSES RS. 38.38 LACS 3.3 NOW COMING TO THE ISSUE ON HAND THE LD. PCIT NOTICED THAT THE ORDER FRAMED BY THE AO U/S 143(3) OF THE ACT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE BY OBSERVING THAT THERE WAS NO COMME RCIAL ACTIVITY CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THEREFORE THE EXPENSES CLAIMED AGAINST THE IMPUGNED INTEREST INCOME NEEDS TO BE CAPITALIZED ACCORDING TO THE PROVISION OF SECTION 37 OF THE ACT. AS SUCH THE LEARNED PCIT WAS A LSO OF THE VIEW THAT SUCH EXPENSES CANNOT BE CLAIMED AS DEDUCTION AGAINST THE IMPUGNED INTEREST INCOME AS THERE WAS NO DIRECT NEXUS BETWEEN THE SO - CALLED INTEREST INCOME VIZ A VIZ THE EXPENSES AS DISCUSSED. 3.4 AS PER THE LD. PCIT THE AO WHILE FRAMING TH E ASSESSMENT ORDER U/S 143(3) OF THE ACT DID NOT CONSIDER THE ABOVE ISSUES IN HIS ASSESSMENT ORDER AND ALSO DID NOT CONDUCT THE PROPER ENQUIRIES. THUS THE LD. PCIT ACCORDINGLY ISSUED NOTICE U/S 263 OF THE ACT TO THE ASSESSEE. ITA NO.814/AHD/2018 ASSTT. YEAR 2013 - 14 4 4. THE ASSESSEE IN REPLY TO T HE NOTICE SUBMITS THAT THE AO DURING THE ASSESSMENT PROCEEDINGS HAS MADE PROPER ENQUIRIES IN RESPECT OF ALLOWABILITY OF PRE - PROJECT EXPENSES AMOUNTING TO RS. 9 12 68 955.00. THE BREAK - UP OF PRE - PROJECT EXPENSES AS DETAILED UNDER; INTEREST RS.6 84 59 951/ - LEGAL & PROFESSIONAL FEES RS.1 96 26 775/ - TRAVELLING EXPENSES RS.21 38 161/ - ADMINISTRATIVE EXPENSES RS.10 44 068/ - RS.9 12 68 955/ - 4 .1 THE ASSESSEE ALSO CLAIMED THAT SUCH EXPENSES WERE INCURRED AGAINST THE IMPUGNED INTEREST INCOME AND THIS FACT WAS DULY BROUGHT TO THE NOTICE OF THE AO DURING THE ASSESSMENT PROCEEDINGS. 4 .2 THE ASSESSEE ALSO SUBMITTED THAT THE AMOUNT GIVEN TO THE OFFICIAL LIQUIDATOR WAS OUT OF THE BORROWED FUND ON WHICH THE INTEREST EXPENSE WAS INCURRED AND SHOWN AS THE PRE - OPERA TIVE EXPENDITURE. THEREFORE THE IMPUGNED INTEREST EXPENSES HAVE DIRECT NEXUS AGAINST THE IMPUGNED INTEREST INCOME. 4 .3 AS THE MATTER WAS UNDER THE LITIGATION THEREFORE THE EXPENSES WERE INCURRED ON ACCOUNT OF ADVOCATE FEES TRAVELLING AND OTHER ADMINISTRATIVE EXPENDITURE. 4 .4 IN VIEW OF THE ABOVE THE ASSESSEE CLAIMED THAT ALL THE EXPENSES WERE INCURRED IN CONNECTION WI TH SUCH INTEREST INCOME AND THEREFORE THE SAME IS ELIGIBLE FOR DEDUCTION UNDER SECTION 37 OF THE ACT. ITA NO.814/AHD/2018 ASSTT. YEAR 2013 - 14 5 5 . HOWEVER THE LD. PCIT DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE FACT WHETHER THE IMPUGNED EXPENDITURES WERE INCURRED AGAINST SUC H INTEREST INCOME WAS NOT VERIFIED BY THE AO DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT. ACCORDINGLY THE LD. PCIT AFTER HAVING PLACED RELIANCE ON VARIOUS JUDGMENTS TREATED THE ORDER OF THE AO AS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF REVENUE. THE LD. PCIT ACCORDINGLY INSTRUCTED THE AO TO MAKE FRESH ASSESSMENT. BEING AGGRIEVED BY THE ORDER OF THE LD. PCIT THE ASSESSEE IS IN APPEAL BEFORE US. 6 . THE LD. AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 80 AND MADE SUBMIS SIONS AS DETAILED UNDER: (1) EARLIER THERE IS AN ORDER U/S 143(3) DATED 11 - 03 - 2016 PB PG. 16 TO 19 WHEREIN THE ADDITION IN REFERENCE TO LOANS AND ADVANCES MADE BUT NO INTEREST CHARGED AND THEREFORE NOTIONAL INTEREST DISALLOWED. (2) THEREFORE THERE IS NOTICE U/S 263 DATED 06 - 03 - 2018 WHEREIN IN PARA 2 THERE IS REFERENCE OF LEDGER ACCOUNT FILED AND PROFIT & LOSS ACCOUNT FILED. IN THIS SCN IT SAID THAT THERE IS VARIOUS EXPENDITURE DEBITED WHICH IS SET OFF AGAINST INTEREST INCOM E ARID THEREFORE THE SAME IS NOT ALLOWABLE AND THEREFORE THE EARLIER ORDER PASSED IS SUBJECTED TO ACTION U/S 263. IN A SCN THERE IS NO SUCH ALLEGATION MADE THAT MANNER IN WHICH THE ORDER PASSED BY THE AO U/S 143(3) EARLIER DATED 11 - 032016 IS ERRONEOUS. IN THIS NOTICE IT IS SIMPLY STATED THAT THERE IS 'UNDER ASSESSMENT' AND THEREFORE THE EARLIER ORDER PASSED IS ERRONEOUS. HOW THE ORDER IS ERRONEOUS HAS NOT BEEN BROUGHT TO THE NOTICE. (3) THE ASSESSEE HAS OBJECTED TO CIT VIDE LATER DATED 12 - 03 - 2019 AT PG. 57 - 59 WHEREIN REFERENCE WAS GIVEN TO AO NOTICE U/S 142(1) DATED 14 - 12 - 2015 AT PB - I PG. 5 AN ALSO DATED 17 - 12 - 2015 REPLY AT PB - II PG. 1 - 2. THE REFERENCE WAS ALSO GIVEN TO REPLY DATED 01 - 03 - 2016 AT PB - 1 PG. 8 - 9. THE COPY OF AO LETTER DATED 14 - 09 - 2015 AS PER PB - 1 PG. 1 - 4 AND PARA20 32 AS WELL AS QUERY RAISED BY AO IN LETTER DATED 14 - 12 - 2015 AT PB - I PG. 5 PARA 2(III). THE REPLY OF THE ASSESSEE DATED 22 - 12 - 2015 AT PB - I PG. 6 - 7 IN REFERENCE TO AO SCN DATED 14 - 12 - 2015. 3.1 THE NOTICE DATED 14 - 09 - 2015 RELEV ANT PB PAGE 3 PARA 20 WHEREIN THE ASSESSEE WAS REQUESTED TO SUBMIT 'INTEREST BEARING FUND DIVERTED FOR NON - BEARING PURPOSES AND AGAIN AT PB PAGE 4 PARA 33 SPECIFIC QUERY WAS ITA NO.814/AHD/2018 ASSTT. YEAR 2013 - 14 6 RAISED IN REFERENCE TO THE AUDITOR'S NOTES (PB PAGE 51) REGARDING PAYMENT MA DE AND NATURE OF TRANSACTION. THEREFORE THE INQUIRY HAS BEEN MADE. 3.2 AGAIN NOTICE DATED 14 - 12 - 2015 AT PB PAGE 5 WHEREIN THE SPECIFIC QUERY WAS RAISED IN PARA 2(I) AND ALSO PARA 2(III) WHEREIN THE DETAILS OF PROJECT DEVELOPMENT EXPENDITURE HAS BEEN ASKED FOR. THE REPLY DATED 17 - 12 - 2015 FILED ON 22 - 12 - 2015 IS PLACED ON RECORD AT PB PAGE 6 - 7 WHEREIN ALL THE DETAILS REQUIRED HAS BEEN SUBMITTED FROM PARA 1 TO 4 AND MORE PARTICULARLY PARA 3 AND 4. 3.3 ONE MORE SUBMISSION DATED 01 - 03 - 2016 HAS ALSO BEEN SUBMITTED AS PER PAGE 8 - 9 WHEREIN BASED ON AUDITOR'S NOTES (PB PAGE 51) VARIOUS DETAILS HAS BEEN SUBMITTED AND THEREAFTER THE AO HAS PASSED THE ORDER U/S 143(3) WHICH IS DATED 11 - 03 - 2016 AS ENCLOSED AT PAGE 16 TO 19. ONGOING THROUGH THE SAME ORDER AGAIN THE DISALLOWANCE OF INTEREST EXPENDITURE HAS ALSO BEEN MADE WHICH ITSELF SHOWS THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND TO ALLOW THE REST OF THE INTEREST WHICH IS OBVIOUSLY PERTAINING TO THE BUSINESS OF THE ASSESSEE. (4) THE REFERENCE CAN BE GIVEN TO DISCLOSURE MADE BY STATUTORY AUDITOR AT PB PG. 50 PARA 10 AND ALSO PB PG. 51 NOTES 12(I) AND 12(II). (5) THE DETAILS BIFURCATION OF PROJECT DEVELOPMENT EXPENDITURE WAS ALSO FILED BEFORE AO AS PER PB - I PG. 60 66. ATTENTION IS ALSO DRAWN TO SUBMISSION DATED 17 - 12 - 2015 TO AO AT PB - II PG. 1 - 2 WHEREIN THE NATURE OF PROJECT DEVELOPMENT EXPENDITURE IS AS PER CHART PG. 25 AND SUPPORTING LEDGER ACCOUNT FROM PG. 26 - 36. IN FACT. CIT HAS GIVEN REFERENCE TO THIS LEDGER FILE AND ALSO PROFIT & LOSS ACCOUNT IN HIS SCN DATED 06 - 03 - 2018 AS REPRODUCED BY HIM IN THE ORDER DATED 16 - 03 - 2018 PG. 2 - 3. THEREFORE THE SAME MATERIAL HE WANTS TO USE TO APPLY SECTION 263. (6) REGARDING 'CHANGE OF OPINIO N' AND EARLIER ORDER AFTER APPLICATION OF MIND WE RELIED UPON THE FOLLOWING JUDGMENTS. (A) HITENDRA NANAVATI AHMEDABAD ITAT IN 135 TTJ 17 REGARDING CHANGE OF OPINION VARIOUS DECISIONS INCLUDING GABRIAL INDIA AND OTHERS HAS BEEN REFERRED IN PARA 2.1 AS WELL AS IN PARA 3 AND 4.2. THE DIFFERENCE BETWEEN 'LACK OF INQUIRY' 'INADEQUATE INQUIRY' HAS BEEN DISCUSSED IN PARA 4.3 AND MALABAR INDUSTRIAL HAS BEEN DISCUSSED IN PARA 4.4 ALONG WITH R. K. CONSTRUCTION GUJARAT 313 ITR 65 HAS ALSO BEEN REFERRED IN PA RA 4.6 ARVIND JEWELERS 259 ITR 502 (GUJ.) AT PARA 4.7. THE FINDING IS AS PER PARA 5 OF THE JUDGMENT. (B) RAJESH CHANDRAKANT SHAH HUF PUNE ITAT 102 TAXMANN.COM 428 WHEREIN IT IS HELD THAT THE PROVISION OF SEC. 263 CANNOT BE INVOKED MERELY ON ASKING O F AO OR PROPOSAL INITIATE BY AO TO SUBSTITUTE HIS ORIGINAL OPINION AND SEC. 263 CANNOT BE ALLOWED TO BE MISUSED BY AO TO SUPER IMPOSE THEIR OPINION DIFFERENT FROM ONE TAKEN AT THE TIME OF THE ORIGINAL ASSESSMENT THE ITA NO.814/AHD/2018 ASSTT. YEAR 2013 - 14 7 VARIOUS DECISION CITED IS AS PER PARA 4. 1 AND FINDING IS AS PER PARA 7 AND ONWARDS. (C) CIT V/S. KOHINOOR FOODS LTD. 414 ITR 249 DELHI HIGH COURT AS PER RELEVANT PG. 255 IN WHICH THE DECISION OF DG HOUSING 343 COM 369 ITR 14(DEL) GLOBAS INFO COM 369 ITR 14(DEL) HAS BEEN REFERRED AND FOLLOW ED. (D) NARAYAN TATU RANE MUMBAI ITAT 70 TAXMANN.COM 227 IN REFERENCE TO 'EXPLANATION 2(A}' EVEN AFTER THIS EXPLANATION IT IS HELD THAT NO FISHING OR ROVING INQUIRY IS PERMITTED WHICH IS AS PER PARA 12 OF THE JUDGMENT. (E) GUJARAT HIGH COURT AMIT CORPORATION 21 TAXMANN.COM 64 AO HAS ALREADY CONSIDERED THE ISSUE AT LARGE AFTER RAISING THE QUERY AND THEREFORE IT IS HELD THAT THERE IS NO SCOPE OF APPLYING SEC. 263. (F) SMT. MANITA DELHI ITAT IN ITA NO. 3432/2019 DATED 12 - 07 - 2019 RELEVANT PARA 6 WHEREIN DECISION OF SUNBEAM AUTO LTD. 332 ITR 167 (DEL) AND FURTHER STATED THAT 'EXPLANATION 2' CANNOT BE INVOKED IN REFERENCE TO INADEQUATE INQUIRY AND DECISION OF D. G. HOUSING 343 ITR 329 (DEL) FINDING IS AS PER PARA 6 OF THE JUDGMENT AND AT PAGE 10 OF THE JUDGEMENT IT IS HELD THAT 'EXPLANATION 2' IS NOT APPLICABLE TO THE FACTS OF THE CASE. (G) GUJARAT HIGH COURT IN ARYAN ARCADE 84 TAXMANN.COM 293 THE CONTENTION IS AS PER PARA 4 OF THE JUDGEMENT AND FINDING IS AS PER PARA 10 WHEREIN THE DECISION OF GUJARAT HIGH COURT IN RAYON SILK 221 ITR 155 IT IS HELD THAT MERELY BECAUSE THE ORDER OF THE ASSESSMENT DOES NOT DISCUS THE ISSUE AT LENGTH IT WOULD NOT MEAN THAT NO INQUIRY WAS MADE. FINDING IS AS PER PARA 13 OF THE JUDGMENT. (H) THE DECISION OF TORRENT PHARMACEUTICALS LTD. AHMEDABAD ITAT REPORTED IN 173 ITD 130 HAS ALSO TAKEN SIMILAR VIEW REGARDING CHANGE OF OPINION. THEREFORE THE ACTION TAKEN V/S 263 IS ITSELF BAD IN LAW A ND LIABLE TO BE QUASHED. 6 .1 THE LD. AR IN VIEW OF THE ABOVE SUBMITTED THAT THE ORDER PASSED BY THE AO CANNOT BE HELD AS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF NON - VERIFICATION OF THE FACTS STATED ABOVE. 7 . O N THE OTHER H AND THE LD DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD. PCIT PASSED UNDER SECTION 263 OF THE ACT AFTER PLACING THE RELIANCE ON THE ITA NO.814/AHD/2018 ASSTT. YEAR 2013 - 14 8 JUDGMENT OF HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. NAMDARI SEEDS REPORTED IN 203 TAXMAN 421 . 8 . WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE LD. PCIT HAS HELD THAT THE ORDER OF THE AO AS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF NON - VERIFIC ATION OF EXPENSES CLAIMED AGAINST THE INTEREST INCOME. 8 .1 HOWEVER WE NOTE THAT THE AO DURING THE ASSESSMENT PROCEEDINGS HAS REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF THE EXPENSES CLAIMED AGAINST THE IMPUGNED INTEREST INCOME IN THE NOTICE ISSUED U NDER SECTION 142(1) OF THE ACT. THE RELEVANT EXTRACT OF THE NOTICE ISSUED UNDER SECTION 142(1) OF THE ACT IS REPRODUCED AS UNDER: III) PL.FURNISH THE DETAILS OF FOLLOWING TREATED AS PROJECT DEVELOPMENT EXPENSES. A. INTEREST (FINANCE CHARGES) B. LEGAL & PROFESSIONAL CHARGES ALONGWITH TDS DETAILS C. TRAVELLING EXPENSES. D. ADMINISTRATIVE EXPENSES. IV) PLEASE FURNISH THE DETAILS OF INTEREST AND FINANCE CHARGES OF RS.5 25 04 447/ - AND OTHER EXPENSES OF RS.38 37 556/ - 8 . 2 WE ALSO FIND THAT THE ASSESSEE IN RESPONS E TO THE ABOVE NOTICE HAS MADE THE SUBMISSIONS AS DETAILED UNDER: 4. DETAILS OF INTEREST AND FINANCE CHARGES OF RS.5 25 04 447/ - AND OTHER EXPENSES OF RS.38 37 556/ - IS DULY ENCLOSED FROM PAGE NO.13 TO 27.HENCE DETAILS ASKED VIDE POINT (IV) IS DULY FURNI SHED. REGARDING YOUR QUERY ABOVE ALLOWABILITY OF PRE - PROJECT DEVELOPMENT EXPENDITURE OF RS.9 12 68 955/ - IT IS SUBMITTED THAT THE DETAILS OF SUCH EXPENDITURE ARE GIVEN TO NOTE 12(II) OF AUDITED ACCOUNT WHICH ARE PRODUCED BELOW: INTEREST RS.6 84 59 951/ - LEGAL & PROFESSIONAL FEES RS.1 96 26 775/ - ITA NO.814/AHD/2018 ASSTT. YEAR 2013 - 14 9 TRAVELLING EXPENSES RS.21 38 161/ - ADMINISTRATIVE EXPENSES RS.10 44 068 8 .3 IN VIEW OF THE ABOVE WE HOLD THAT THE ASSESSMENT ORDER WAS FRAMED UNDER SECTION 143(3) OF THE ACT AFTER DUE VERIFICATION BY THE AO. ACCORDINGLY WE ARE OF THE VIEW THAT THE ORDER OF THE AO CANNOT BE HELD AS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF NON - VERIFICATION OF THE FACTS AS STATED ABOVE. 8 . 4 IN HOLDING SO WE DRAW SUPPORT AND GUIDANCE FROM THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO LTD VS. CIT REPORTED IN 109 TAXMAN 66 WHEREIN IT WA S HELD AS UNDER: IN THE INSTANT CASE THE COMMISSIONER NOTED THAT THE ITO PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF MIND. INDEED THE HIGH COURT RECORDED THE FINDING THAT THE ITO FAILED TO APPLY HIS MIND TO THE CASE IN ALL PERSPECTIVE AND THE ORDER PASSED BY HIM WAS ERRONEOUS. IT APPEARED THAT THE RESOLUTION PASSED BY THE BOARD OF THE APPELLANT - COMPANY WAS NOT PLACED BEFORE THE ASSESSING OFFICER. THUS THERE WAS NO MATERIAL TO SUPPORT THE CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESE NTED COMPENSATION FOR LOSS OF AGRICULTURAL INCOME. HE ACCEPTED THE ENTRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ON THESE FACTS THE CONCLUSION THAT THE ORDER OF THE IT O WAS ERRONEOUS WAS IRRESISTIBLE. THEREFORE THE HIGH COURT HAD RIGHTLY HELD THAT THE EXERCISE OF THE JURISDICTION BY THE COMMISSIONER UNDER SECTION 263(1) WAS JUSTIFIED. 8 .5 WE ALSO PLACE OUR RELIANCE ON THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AMIT CORPORATION REPORTED IN 21 TAXMANN.COM 64 WHEREIN IT WAS HELD AS UNDER: 5. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTED NO ERROR. WHEN DURING THE COURSE OF FRAMING OF THE ASSESSMENT THE ASSESSING OFFICER HAD ACCESS TO ALL THE RECORDS OF THE ASSESSEE AFTER PURSUING SUCH RECORD THE ASSESSING OFFICER FRAMED THE ASSESSMENT SUCH ASSESSMENT COULD NOT HAVE BEEN RE - OPENED IN EXERCISE OF REVISION POWER UNDER SECTION 263 OF THE ACT FOR MAKING FURTHER INQUIRIES. IN THE FACTS OF THE CASE IN OUR OPINION TRIBUNAL RIGHTLY INTERFERED WITH SUCH ORDER. NO QUESTION OF LAW ARISES. TAX APPEAL IS THEREFORE DISMISSED. ITA NO.814/AHD/2018 ASSTT. YEAR 2013 - 14 10 8 .6 WE ALSO PLACE OUR RELIANCE ON THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. A RVIND JEWELL ERS REPORTED IN 2 59 ITR 502 WHEREIN IT WAS HELD AS UNDER: IT WAS THE FINDING OF FACT GIVEN BY THE TRIBUNAL THAT THE ASSESSEE HAD PRODUCED RELEVANT MATERIAL AND OFFERED EXPLANATION IN PURSUANCE OF THE NOTICES ISSUED UNDER SECTION 142(1) AS WELL AS SECTIO N 143(2) AND AFTER CONSIDERING THOSE MATERIALS AND EXPLANATION THE ITO HAD COME TO A DEFINITE CONCLUSION. THE COMMISSIONER DID NOT AGREE WITH THE CONCLUSION REACHED BY THE ITO. SECTION 263 DID NOT EMPOWER HIM TO TAKE ACTION ON THESE FACTS TO ARRIVE AT THE CONCLUSION THAT THE ORDER PASSED BY THE ITO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SINCE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERED BY THE ITO AND A PARTICULAR VIEW WAS TAKEN THE MERE FACT THAT DIFFERENT VIEW COULD BE TAKEN SHOULD NOT BE THE BASIS FOR AN ACTION UNDER SECTION 263 AND IT COULD NOT BE HELD TO BE JUSTIFIED. 8 . 7 WE ALSO NOTE THAT THE EXPLANATION 2 TO SECTION 263 OF THE ACT INSERTED BY THE FINANCE ACT 2015 AUTHORIZ ING THE LD. PCIT TO HOLD TH E ORDER OF THE AO AS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTEREST OF REVENUE EVEN ENQUIRIES WERE MADE BY THE AO BUT NOT IN THE MANNER IN WHICH THE SAME SHOULD HAVE BEEN MADE. IN THIS REGARD WE FIND THAT THE CASE BEFORE US PERTAINS TO THE A.Y. 2012 - 13 AND IMPUGNED EXPLANATION TO SECTION 263 OF THE ACT WAS APPLICABLE W.E.F. 01.06.2 015. THEREFORE IN OUR CONSIDERED VIEW THE PROVISION AS SPECIFIED IN EXPLANATION 2 TO SECTION 263 OF THE ACT CANNOT BE APPLIED FOR THE YEAR UNDER CONSIDERATION. IN HOLDING SO WE FIND SUPPORT AND GUIDANCE FROM THE ORDER OF THIS TRIBUNAL IN THE CASE OF TORR ENT PHARMACEUTICAL LTD. VS DCIT REPORTED IN 97 TAXMANN.COM 671 WHEREIN IT WAS OBSERVED AS UNDER: 9. THE PR.CIT HAS DRAWN SUPPORT FROM NEWLY INSERTED EXPLANATION 2 BELOW SECTION 263(1) OF THE ACT INTRODUCED BY FINANCE ACT 2015 W.E.F. 01.06.2015 FOR HIS A CTION. THE EXPLANATION 2 INTER ALIA PROVIDES THAT THE ORDER PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION 'WHICH SHOULD HAVE BEEN MADE' WILL BE DEEMED TO BE ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT IS ON THIS BASIS THE A SSESSMENT ORDER PASSED BY THE AO UNDER SECTION 143(3) OF THE ACT HAS BEEN SET ASIDE WITH A DIRECTION TO THE AO TO PASS A FRESH ASSESSMENT ORDER. IT WILL BE THEREFORE IMPERATIVE TO DWELL UPON THE IMPACT OF EXPLANATION 2 FOR THE PURPOSES OF SECTION 263 OF TH E ACT. 9.1 THE AIM AND OBJECT OF INTRODUCTION OF AFORESAID EXPLANATION BY FINANCE ACT 2015 WAS EXPLAINED IN CBDT CIRCULAR NO. 19/2015 [F.NO.142/14/2015 - TPL] DATED 27 - 11 - 2015 WHICH IS REPRODUCED HEREUNDER: ITA NO.814/AHD/2018 ASSTT. YEAR 2013 - 14 11 '53. REVISION OF ORDER THAT IS ERRONEOUS IN SO FA R AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. 53.1 THE PROVISIONS CONTAINED IN SUB - SECTION (1) OF SECTION 263 OF THE INCOME - TAX ACT BEFORE AMENDMENT BY THE ACT PROVIDED THAT IF THE PRINCIPAL COMMISSIONER OR COMMISSIONER CONSIDERS THAT ANY ORDER PAS SED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE HE MAY AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING AN ENQUIRY PASS AN ORDER MODIFYING THE ASSESSMENT MADE BY THE ASSESSI NG OFFICER OR CANCELLING THE ASSESSMENT AND DIRECTING FRESH ASSESSMENT. 53.2 THE INTERPRETATION OF EXPRESSION 'ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS BEEN A CONTENTIOUS ONE. IN ORDER TO PROVIDE CLARITY ON THE ISSUE S ECTION 263 OF THE INCOME - TAX ACT HAS BEEN AMENDED TO PROVIDE THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE IF IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR C OMMISSIONER. (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER DIRECTI ON OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WITH ANY DECISION PREJUDICIAL TO THE ASSESSEE RENDERED BY THE JURISDICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OTHER PERSON. 53.3 APPLICABILITY: THIS AMENDMENT HAS TAKEN EFFECT FROM 1ST DAY OF JUNE 2015.' 8 . 8 BESIDES THE ABOVE WE ALSO FIND THAT THE IMPUGNED EXPLANATION 2 TO SECTION 263 OF THE ACT CANNOT OVER RULE THE LAW INTERPRETED BY VARIOUS COURTS. THE COURTS AS D ISCUSSED ABOVE HAVE HELD THAT THE INITIATION OF PROCEEDINGS UNDER EXPLANATION 2 TO SECTION 263 OF THE ACT ON THE GROUND OF NON - ENQUIRY IS NOT SUSTAINABLE IN THE EVENT WHEN THE INQUIRY WAS CONDUCTED BY THE AO DURING THE ASSESSMENT PROCEEDINGS THOUGH MAY BE INADEQUATE. IN THIS REGARD WE FIND SUPPORT AND GUIDANCE FROM THE ORDER OF MUMBAI TRIBUNAL IN THE CASE OF NARAYAN TATU RANE VS. ITO REPORTED IN 70 TAXMANN.COM 227 WHEREIN IT WAS HELD AS UNDER: 19. THE LAW INTERPRETED BY THE HIGH COURTS MAKES IT CLEAR THAT THE LD PR. CIT BEFORE HOLDING AN ORDER TO BE ERRONEOUS SHOULD HAVE CONDUCTED NECESSARY ENQUIRIES OR VERIFICATION IN ORDER TO SHOW THAT THE FINDING GIVEN BY THE ASSESSING OFFICER IS ERRONEOUS THE LD PR. CIT SHOULD HAVE SHOWN THAT THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. IN THE INSTANT CASE THE LD PR. CIT HAS FAILED TO DO SO AND HAS SIMPLY EXPRESSED THE VIEW THAT THE ASSESSING OFFICER SHOULD HAVE CONDUCTED ENQUIRY IN A PARTICULAR MANNER AS DESIRED BY HIM. SUCH A COURSE OF ACT ION OF THE LD ITA NO.814/AHD/2018 ASSTT. YEAR 2013 - 14 12 PR. CIT IS NOT IN ACCORDANCE WITH THE MANDATE OF THE PROVISIONS OF SEC. 263 OF THE ACT. THE LD PR. CIT HAS TAKEN SUPPORT OF THE NEWLY INSERTED EXPLANATION 2(A) TO SEC. 263 OF THE ACT. EVEN THOUGH THERE IS A DOUBT AS TO WHETHER THE SAID EXPLAN ATION WHICH WAS INSERTED BY FINANCE ACT 2015 W.E.F. 1.4.2015 WOULD BE APPLICABLE TO THE YEAR UNDER CONSIDERATION YET WE ARE OF THE VIEW THAT THE SAID EXPLANATION CANNOT BE SAID TO HAVE OVER RIDDEN THE LAW INTERPRETED BY HON'BLE DELHI HIGH COURT REFERRE D ABOVE. IF THAT BE THE CASE THEN THE LD PR. CIT CAN FIND FAULT WITH EACH AND EVERY ASSESSMENT ORDER WITHOUT CONDUCTING ANY ENQUIRY OR VERIFICATION IN ORDER TO ESTABLISH THAT THE ASSESSMENT ORDER IS NOT SUSTAINABLE IN LAW AND ORDER FOR REVISION. HE CAN A LSO FORCE THE AO TO CONDUCT THE ENQUIRIES IN THE MANNER PREFERRED BY LD PR. CIT THUS PREJUDICING THE INDEPENDENT APPLICATION OF MIND OF THE AO. DEFINITELY THAT COULD NOT BE THE INTENTION OF THE LEGISLATURE IN INSERTING EXPLANATION 2 TO SEC. 263 OF THE AC T SINCE IT WOULD LEAD TO UNENDING LITIGATIONS AND THERE WOULD NOT BE ANY POINT OF FINALITY IN THE LEGAL PROCEEDINGS. THE HON'BLE SUPREME COURT HAS HELD IN THE CASE OF PARASHURAM POTTERY WORKS CO. LTD. V. ITO [1977] 106 ITR 1 THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS AND THE STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THE LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST J UDICIAL AND QUASI - JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY. 20. FURTHER CLAUSE (A) OF EXPLANATION STATES THAT AN ORDER SHALL BE DEEMED TO BE ERRONEOUS IF IT HAS BEEN PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. IN OUR CONSIDERED VIEW THIS PROVISION SHALL APPLY IF THE ORDER HAS BEEN PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH A REASONABLE AND PRUDENT OFFICER SHALL HAVE CARRIED OUT IN SUCH CASES WHICH MEANS THAT THE OPINION FORMED BY L D PR. CIT CANNOT BE TAKEN AS FINAL ONE WITHOUT SCRUTINISING THE NATURE OF ENQUIRY OR VERIFICATION CARRIED OUT BY THE AO VIS - - VIS ITS REASONABLENESS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. HENCE IN OUR CONSIDERED VIEW WHAT IS RELEVANT FOR CLAUSE (A) OF EXPLANATION 2 TO SEC. 263 IS WHETHER THE AO HAS PASSED THE ORDER AFTER CARRYING OUR ENQUIRIES OR VERIFICATION WHICH A REASONABLE AND PRUDENT OFFICER WOULD HAVE CARRIED OUT OR NOT. IT DOES NOT AUTHORISE OR GIVE UNFETTERED POWERS TO THE LD PR. CIT TO RE VISE EACH AND EVERY ORDER IF IN HIS OPINION THE SAME HAS BEEN PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. IN OUR VIEW IT IS THE RESPONSIBILITY OF THE LD PR. CIT TO SHOW THAT THE ENQUIRIES OR VERIFICATION CONDUCTED BY THE AO WAS NOT IN ACCORDANCE WITH THE ENQURIES OR VERIFICATION THAT WOULD HAVE BEEN CARRIED OUT BY A PRUDENT OFFICER. HENCE IN OUR VIEW THE QUESTION AS TO WHETHER THE AMENDMENT BROUGHT IN BY WAY OF EXPLANATION 2(A) SHALL HAVE RETROSPECTIVE OR PROSPECTIVE AP PLICATION SHALL NOT BE RELEVANT. 8 .9 SIMILARLY WE ALSO NOTE THAT THE CASE LAW REFERRED BY THE LD. DR IN THE CASE OF NAMDARI SEEDS (SUPRA) IS NOT APPLICABLE TO THE PRESENT FACTS OF THE CASE AS IT IS NON - JURISDICTIONAL HIGH COURT WHEREAS THE ISSUE IS COVERED IN FAVOR OF THE ASSESSEE BY THE JURISDICTIONAL HIGH COURT AS DISCUSSED ABOVE. ITA NO.814/AHD/2018 ASSTT. YEAR 2013 - 14 13 9 . AFTER CONSIDERING THE FACTS IN TOTALITY AS DISCUSSED ABOVE WE HOLD THAT THE PROCEEDINGS UNDER SECTION 263 OF THE ACT ARE NOT SUSTAINABLE IN THE CASE ON HAND AND ACCORDINGLY WE QUASH THE ORDER PASSED BY THE LD. PCIT UNDER SECTION 263 OF THE ACT. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 10 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE COURT ON 25 /11 / 2019 AT AHMEDABAD. - SD - - SD - (MAHAVIR PRASAD ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 25 / 11 /2019 MANISH