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Income Tax Appellate Tribunal, DEHRADUN CIRCUIT BENCH, DEHRADUN
Before: SHRI SAKTIJIT DEY, VICE- & SHRI M. BALAGANESH
Assessment Year:2014-15 Softel Plaza, C/o Matta Garg & Versus Pr. C.I.T., Co., 15, Astley Hall, Dehradun. Dehradun PAN: ABMFS1993B (Appellant) (Respondent) Assessee by : Sh. S.K. Matta, CA Revenue by : Sh. N.S. Jangpangi, CIT/DR Date of hearing : 19.06.2023 Date of pronouncement: 23.06.2023 ORDER This is an appeal by the Assessee against order dated 09.03.2018 passed under section 263 of the Income-tax Act, 1961 by learned Pr. Commissioner of Income-tax (PCIT) for the assessment year 2014-15.
Briefly, the facts are, the assessee, a partnership firm, is engaged in the business of running a hotel located in the outskirts of Dehradun. For the assessment year under dispute, the assessee filed its return of income on 27.09.2014 declaring nil income after claiming deduction under section 80IC of the Act. Assesee’s case was selected for scrutiny to examine the validity of deduction claimed under section 80IC of the Act. In course of assessment proceedings, the Assessing Officer issued statutory notices u/s. 143(2) and 142(1) of the Act calling for various information in relation to satisfaction of the conditions of section 80IC of the Act. In response to the query raised from time to time, the assessee furnished all the details called for along with supporting evidences. After verifying documentary evidences furnished by the assessee, the Assessing Officer, being satisfied that the assessee is a ecotourism hotel, allowed assessee’s claim of deduction under section 80IC of the Act, while completing the assessment order dated 31.05.2016.
Post completion of assessment, a proposal was sent to learned PCIT by the Assessing Officer for initiating proceedings under section 263 of the Act on the ground that deduction under section 80IC of the Act was erroneously allowed. This was so because, in case of CIT vs. Anchal Hotels Pvt. Ltd., Hon’ble Uttarkhand High court has issued certain directions regarding availability of deduction under section 80IC of the Act in respect of hotels in ecotourism. Based on such proposal, learned PCIT issued a show cause notice, purportedly under section 263 of the Act calling upon the assessee to explain why the assessment order being erroneous and prejudicial to the interest of revenue, should not be revised. Though, the assessee furnished its reply justifying its claim of deduction under section 80IC of the Act and further stating that the assessment order cannot be considered to be erroneous and prejudicial to the interest of revenue, however, learned PCIT was not convinced. He held that assessee’s hotel is within the surrounding area of Dehradun, hence, does not fall within the category of ecotourism under section 80IC of the Act, as held by the Hon’ble High Court. He observed that since, the hotel is surrounded by urban settings, it does not fulfil the criteria of eco friendly. He observed, the assessee is merely running a hotel like any other hotel with similar facilities, such as, wifi internet, central AC, soundproof room, flat screen TV, with international entertainment news, 24 hours hot and cold water, complimentary Tea/coffee maker, bottled water, mini bar shower cubical etc. He observed that the assessee’s hotel may come within the ambit of tourism, but not ecotourism per se. Thus, he concluded that the assessee’s claim of deduction under section 80IC of the Act is not allowable. Accordingly, he set aside the assessment order with a direction to re-examine the issue of admissibility of deduction under section 80IC of the Act in the light of decision of Hon’ble Uttarkhand High court.
Before us, learned counsel appearing for the assessee submitted that the exercise of power under section. 263 of the Act is invalid in the present case as the conditions of section 263 of the Act are not fulfilled. He submitted, the order passed under section 263 of the Act itself reveals that the proceedings under section 263 of the Act has been initiated on a proposal received from the Assessing Officer.
Thus, he submitted, the revisionary authority has not applied his mind independently. Thus, he submitted, the proceeding under section 263 of the Act is vitiated.
Without prejudice to the aforesaid submissions, learned counsel submitted, the term “ecotourism” has not been defined under any of the provisions of the Income-tax Act. He submitted, the only competent authority who can recognize and certify a particular hotel coming within ecotourism ambit is the District Industries Centre (DIC).
He submitted, in case of the assessee, the DIC has certified the assessee as ecotourism hotel vide letter dated 26.06.2018. He submitted, even the Pollution Control Board has issued a certificate recognising the assessee as ecotourism hotel. He submitted, assessee’s case was selected for scrutiny to examine fulfilment of ecotourism criteria. He submitted, the Assessing Officer has conducted detailed and thorough enquiry with regard to assessee’s claim under section 80IC of the Act and after examining all aspects including supporting evidences was convinced that the assessee has satisfied all the conditions, hence, allowed assessee’s claim of deduction. Thus, he submitted, the decision taken by the Assessing Officer cannot be considered to be erroneous.
Strongly relying upon the observations of learned PCIT, learned Departmental Representative submitted, the assessment order passed allowing assessee’s claim of deduction under section 80IC of the Act is clearly erroneous and prejudicial to the interest of Revenue in view of the decision of Hon’ble High Court of Uttarakhand in case of CIT vs. Anchal Hotels Pvt. Ltd. He submitted, the decision of the Hon’ble High Court was delivered after the assessment order was passed. Thus, he submitted keeping in view, the observations of the Hon’ble High Court, learned PCIT has found the assessment order to be erroneous and prejudicial to the interest of revenue. Drawing support from the observations of learned PCIT, learned Departmental Representative submitted, assessee’s hotel cannot be considered to be coming within the ambit of ecotourism as it is not situated in eco friendly environment. He submitted, merely because Pollution Control Board has certified the assessee as ecotourism hotel, the assessee will not be entitled for claiming deduction under section 80IC of the Act. As regards, assessee’s contention regarding lack of independent application of mind by learned PCIT, learned Departmental Representative submitted that though, the proposal was received from the Assessing Officer, however, learned PCIT has examined the issue before invoking powers under section 263 of the Act.
We have considered rival submissions in the light of decisions relied upon and perused the materials on record. As could be seen, the controversy between the assessee and the Revenue is with regard to the claim of deduction under section 80IC of the Act.
Undisputedly, the assessee, claiming itself to be an ecotourism hotel, has claimed deduction under section 80IC of the Act. It is observed, assessee’s case was selected for scrutiny specifically to examine the eligibility of claim of deduction under section 80IC of the Act. This is very much evident from the assessment order. In course of assessment proceedings, the Assessing Officer has called upon the assessee to furnish supporting evidences in support of its claim of deduction under section 80IC of the Act. In response to the queries raised by the Assessing Officer from time to time, the assessee has furnished all relevant and necessary documents in support of its claim. Amongst the documents furnished by the assessee before the Assessing Officer is a no objection certificate issued by Uttarakhand Pollution Control Board recognizing the assessee as a ecotourism hotel. Further, vide letter dated 26.06.2018, the DIC, Dehradun has certified the assessee as an ecotourism hotel for availing concessional industrial package given by the Government of India. It is further observed from the materials on record, the assessee commenced its business in March, 2010 and started claiming deduction under section 80IC of the Act from the assessment year 2010-11, which was the initial assessment year.
In fact, in scrutiny assessments completed under section 143(3) of the Act for the assessment years 2012-13 and 2013-14, the Assessing Officer had allowed assessee’s claim of deduction under section 80IC of the Act. Thus, while completing the assessment for the impugned year, the Assessing Officer not only had before him the decisions taken on identical issue by the Assessing Officer in the past assessment years, but also the supporting evidences which classified the assessee as an ecotourism hotel. It is also a fact that the impugned assessment year is the 5th year of assessee’s business.
Thus, it is quite evident, based on the past assessment history on the issue as well as evidences available on record, the Assessing Officer has allowed assessee’s claim of deduction under section 80IC of the Act. It is not a case where the Assessing Officer has allowed assessee’s claim without making any enquiry.
As rightly submitted by learned counsel for the assessee, ecotourism has not been defined under the Act. Therefore, the Assessing Officer had to fall back upon the certificate issued by other government authorities recognizing the assessee as an ecotourism hotel. In such a scenario, the assessment order cannot be considered to be erroneous, as the Assessing Officer has passed the assessment order not only after conducting necessary enquiry, but duly applying his mind to the facts and materials brought on record as well as past assessment history on the issue. Therefore, in our view, one of the conditions, out of twin conditions of ‘erroneous’ as well as ‘prejudicial to the interest of revenue’, is not fulfilled.
As regards the decision of Hon’ble jurisdictional High Court in case of CIT vs. Anchal Hotels Pvt. Ltd., it is observed, the Hon’ble court was dealing with a regular appeal arising out of the order passed by the Tribunal in continuation to the proceedings arising out of the assessment order. Whereas, in the present appeal, we are faced with the exercise of jurisdiction under section 263 of the Act.
Therefore, validity of the order has to be decided strictly qua the conditions laid down in the said provision. As discussed earlier, the Assessing Officer had available before him various documentary evidences certifying the assessee as ecotourism hotel. He also had the benefit of past assessment history of the assessee on the issue.
Therefore, the view taken by the Assessing Officer, in these circumstances, can be considered to be a possible view, though, it may not be the only view on the issue. In fact, in case of CIT vs. Anchal Hotels Pvt. Ltd., the Hon’ble jurisdictional High Court has observed that only hotels which were set up as ecotourism units would be entitled for deduction under section 80IC of the Act. When the certificate issued by DIC and Pollution Control Board classify the assessee as a ecotourism hotel, the Assessing Officer certainly was entitled to entertain a view that the assessee falls within the category of ecotourism hotel, hence, eligible to claim deduction under section 80IC of the Act. That being the case, in our opinion, the assessment order cannot be considered as erroneous and prejudicial to the interest of revenue. Therefore, learned PCIT was not justified in exercising powers under section 263 of the Act to revise the assessment order.
Having held so, for the sake of completeness, we deem it appropriate to deal with another aspect of the issue relating to validity of the initiation of proceedings under section 263 of the Act. A reading of the opening paragraph of the impugned order of learned PCIT clearly reveals that on a proposal received from Income-tax Officer, ward 2(4), Dehradun to initiate proceedings under section 263 of the Act, learned PCIT has exercised his revisionary jurisdiction. Thus, the trigger point of initiation of proceedings under section 263 of the Act is the proposal received from the Income-tax Officer. Keeping in perspective the aforesaid factual position, if we read section 263 of the Act, it becomes clear that learned PCIT or the Commissioner may call for and examine the record of any proceeding under this Act, and if on such examination, he finds that any order passed in such proceedings by the Assessing Officer is erroneous and prejudicial to the interests of the revenue, he may initiate proceedings under section. 263 of the Act. Thus, the words used in section 263 of the Act clearly indicate that the revisionary authority has to independently apply his mind to the materials on record before coming to a conclusion that the order sought to be revised is erroneous and prejudicial to the interests of revenue. Therefore, the decision making process under section 263(1) of the Act has to be that of the revisionary authority alone and cannot be at the behest of some other subordinate authority.
In the facts of the present appeal, it is abundantly clear that the exercise of powers under section 263 of the Act is not due to any independent application of mind by the revisionary authority, but at the behest of the Income-tax Officer. Had the ITO not sent any proposal for initiating proceedings under section 263 of the Act, it is quite probable, the Revisionary Authority would not have exercised his powers under section 263 of the Act. That being the factual and legal position, in our view, the exercise of powers under section 263 of the Act, in the present case, has to be declared as invalid. In support of our conclusion, we rely upon the following decisions :
(i) Vinay Pratap Thacker (ITA No. 2939/Mum/2011 dated 27.02.2013 (ii) Ashok Kumar Shivpuri (ITA No. 631/Mum/2014 dated 07.11.2014 (iii) Shanti Exim Lt. Vs. CIT (2017) 88 taxmann.com 361(Ahmedabad) 13. Thus, considering the totality of facts and circumstances of the case, we hold that the impugned order passed under section 263 of the Act is unsustainable. Accordingly, the order passed under section 263 of the Act is quashed and the assessment order is restored.
In the result, appeal is allowed.