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Income Tax Appellate Tribunal, ‘’C’’ BENCH, AHMEDABAD
(Applicant) (Respondent) Assessee by : Smt Arti N. Shah, A.R Revenue by : Shri O.P. Sharma, CIT.DR सुनवाई क� तार�ख/Date of Hearing : 06/08/2019 घोषणा क� तार�ख /Date of Pronouncement: 25/10/2019 आदेश/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-2, Ahmedabad [Ld. CIT(A) in short], dated 25/03/2017 arising in the matter of penalty order passed under s. 263 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dated 26/03/2015 relevant to Assessment Year (AY) 2012-13.
The assessee has raised the following grounds of appeal:
The Learned Principal Commissioner of Income Tax-2, Ahmedabad has erred in law and on facts of the case by holding that the assessment order passed by the Assessing Officer, Circle 2(2), Ahmedabad u/s.143(3) on 26.03.2015 for the assessment year under consideration is erroneous and prejudicial to the interest of revenue, without appreciating the submissions made by the Appellant before the Principal Commissioner of Income Tax, and accordingly, has erred in invoking the provision of section 263 and consequently set aside the assessment order passed on 26.03.2015 u/s.143(3) by the Assessing Officer.
Your Appellant prays to reserve the right to add, alter, amend and/or withdraw any of the above grounds of appeal.
2. The only issue raised by the assessee is that the Ld. CIT erred in holding that the order passed by the AO under section 143(3) of the Act is erroneous insofar prejudicial to the interest of Revenue.
The facts in brief as culled out from the order of the authorities below are that the assessee is a partnership firm and engaged in the business of developing of residential and commercial properties/complexes. The assessee is developing several projects including 2 projects namely Parshwanath Metro City(PMC) and Parshwanath Om Residency (POR), eligible for deduction under section 80IB(10) of the Act. The assessee declared its gross total income amounting to Rs. 21,05,15,019/- and claimed deduction of Rs. 20,25,82,362/- under section 80IB(10) of the Act. Thus the assessee declared total income in the income tax return at Rs. 75,36,020.00 only. The assessee in support of his claim filed the necessary documents during the assessment proceedings such as copy of the return, audited financial statements along with form No. 3CB and 3CD. The AO in the assessment proceedings accepted the income declared in the income tax return in the order framed under section 143(3) of the Act.
However, the Ld. CIT under section 263 of the Act observed certain defects in the deduction claimed by the assessee under section 80IB(10) of the Act. The defects as observed by the Ld. CIT stands as under: a. In case of PMC Project The assessee claimed that the project was approved by the AUDA vide dated 30 March 2007 and completed on 20th March, 2012 as evident from the BU permission obtained from AUDA. The permission was granted by AUDA dated 30th March, 2007 for the construction of 396 residential units which was revised for 376 units dated 5th March, 2011. However, on perusal of the BU permission dated 20th March, 2012, it was noticed that the permission was granted only for 349 units. Accordingly the CIT was of the view that the impugned project was not completed till 20th March 2012. As such, as per the provisions of the Act, the impugned project should have been completed on or before 31st March, 2012 for claiming the deduction under section 80IB(10) of the Act.
b. In case of POR Project The assessee filed the application for the permission to develop the project to the office of GUDA dated 28th of March 2007 which was accepted vide letter dated 30th March, 2007 with the condition that the assessee shall file the approved layout plan, key plan, building plan and NA permission with the competent authority. Further the GUDA by order dated 27th October, 2010 granted the permission for the development of the impugned project. As per the Ld. CIT the permission for the development of the project should have been obtained by the assessee before 30th of March 2007. Accordingly he was of the view that the assessee is not eligible for the deduction under section 80IB(10) of the Act. Page 3 of 11
In view of the above the Ld. CIT issued a notice to the assessee under section 263 of the Act proposing to hold the order of the AO as erroneous insofar prejudicial to the interest of revenue for wrongful deduction claimed and allowed to the assessee under section 80IB of the Act in the assessment framed under section 143(3) of the Act.
The assessee in response to such notice submitted as under:
a. In case of PMC Project The assessee claimed that it is eligible for the deduction under section 80IB(10) of the Act with respect to the completed units despite the fact that the entire project was not completed on or before 31st March 2012. The assessee in support of his contention also filed the details of the units sold and unsold till the assessment year 2012-13. The assessee also submitted that it has sold 144 units out of the total units of 349 units for which the BU permission was granted during the assessment year beginning from 2010-11, 2011-12 and 2012-13. Thus the units remained unsold are 204 units only. The assessee also claimed that its deduction is based on the auditor certificate issued in form No. 10CCB of the Act. b. In case of POR Project The assessee claimed that the permission granted vide order dated 27th October, 2010 should relate with the date of the application filed to GUDA i.e. 28-03-2007. The assessee also emphasized that the permission was granted by GUDA vide letter dated 30th March, 2007 with certain conditions which was subsequently complied. The assessee also claimed that the date of Page 4 of 11 application filed for the permission to GUDA is relevant for claiming the deduction under section 80IB(10) of the Act instead of the date of issuance of the certificate.
The assessee besides the above also submitted that all the relevant details were filed during the assessment proceedings regarding the deduction claimed under section 80IB(10) of the Act which was also duly verified by the AO.
5.1 The assessee also submitted that in case of any ambiguity between the finding of the AO and the observation of the Ld. CIT under section 263 of the Act, the view favoring the assessee should be adopted.
5.2 However, the Ld. CIT disagreed with the contention of the assessee by observing that the AO has not conducted proper enquiry and verification at the time of assessment proceedings. As such the PMC project is not eligible for deduction under section 80-IB (10) of the Act as the project was not completed within the prescribed time i.e. 31st March, 2012 to claim the deduction.
5.3 Similarly, the permission for the development was granted with respect to POR project vide order dated 27th October, 2010 for 234 units only. As such the assessee defaulted in obtaining the permission for the development of the project within the prescribed time i.e. 31st March 2007.
In view of the above the Ld. CIT held the order of the AO passed under section 143(3) of the Act is erroneous insofar prejudicial to the interest of the Revenue and accordingly directed the AO to reframe the assessment order under section 143(3) of the Act after making proper inquiries. Page 5 of 11 Being aggrieved by the order of the Ld. CIT, the assessee is in appeal before us.
The Ld. AR before us filed two paper books running from pages 1 to 8 & 1 to 54 and submitted that the AO has framed assessment under section 143(3) of the Act after conducting proper inquiries by issuing notice under section 142(1) of the Act. The Ld. AR in support of her contention referred to the notice issued under section 142(1) of the Act as well as the reply submitted by the assessee to demonstrate that there was proper enquiry conducted by the AO during the assessment proceedings.
6.1 The learned AR also submitted that the deduction under section 80IB(10) of the Act cannot be denied for the entire project (PMC) merely on the ground that the assessee has completed less number of units on or before 31st March, 2012 than the number of units approved in the sanction plan.
6.2 The learned AR similarly submitted that the approval granted by the appropriate authority in respect of POR project dated 27th October, 2010 should relate with the date of application.
On the other hand the learned DR submitted that the project (PMC) was not completed within the time mandated under the provisions of section 80IB(10) of the Act. Similarly, the project (POR) was not approved by the appropriate authority on or before 31st March, 2007.
7.1 The learned DR also claimed that the assessee has not furnished the copies of the notice issued under section 142(1) of the Act. The learned DR vehemently supported the order of the learned CIT.
We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the order of the AO was held as erroneous insofar prejudicial to the interest of revenue for the reasons that the AO has not conducted proper inquiries in the assessment proceedings.
8.1 However, we note that the AO during the assessment proceedings has required the assessee to furnish the details of the deduction claimed under section 80IB(10) of the Act. The relevant extract of the notice issued under section 142(1) of the Act vide dated 11-09-2014 is reproduced as under:
Sub: Furnishing of information u/s.143(1) of the Income-tax ct, 1961 w.r.t. assessment proceedings in your case for A.Y. 2012-13-Reg. Please refer to the above. In connection with the assessment proceedings for AY 2012-13, you are required u/s.142(1) of the Income tax Act, 1961 to produce or cause to be produced the following details, duly numbered:- 1. You have claimed deduction u/s.80IB(10) of the Act, for the year. In this connection kindly furnish all supporting documents and explain that you are eligible for the above deduction. Your submission should clearly mention you compliance as per the relevant clauses/sub-clauses of the above section. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 10. Please explain about various project/scheme under taken/developed by you during F.Y. 2011-12 and submit details as under:- Sr. Name of Total No of Unit Price Total Balance No. Scheme area Units sold per unit consideration unit received
Please furnish copy of development approval and B.U. permission obtained from local authorities.
Please furnish documents evidencing the ownership of land on which the development work has been carried out by you.
8.2 We find that the assessee in response to the above notice has made the submission vide letter dated 7-1-2015 as detailed under:
It is submitted that that the assessee firm is engaged in developing four residential projects namely Metro City – Chandkheda, Om Residency –Adalaj, Metro city Phase-III & Emreraled Housing Project and Commercial project namely infotech- Amiyapur. During the year under consideration the assessee firm has been recognized revenue of residential project namely Metro City – Chandkheda & Om Residency – Adalaj on partial completion and claimed deduction u/s.80IB (10) of the I.T Act as clarified in the report obtained u/s.80IB(10) that as per provision of section 80IB(10) of the Income tax Act, 1961 project is to be completed within five years from the end of financial year in which approval by local authority is granted. In the present case project has been approved on 30th March, 2007 and therefore the same is to be completed before 31st March, 2012. The eligible profit has been calculated on sale of housing units during the year under consideration, after considering proportionate cost' of land and construction attributable to housing units sold during the year, fn other words, deduction u/s.80!B{10) has been claimed on year to year basis as the assessee is showing profit from partial completion of the project is each year. Please find enclosed herewith the copy of Audit Report in Form 10CCB in respect of deduction claimed under section 80IB(10) of the IT Act in respect of residential project namely Metro City - Chandkheda & Om Residency - Adalaj (Page No.l to 24). Further, it is submitted that the expenditure incurred for the residential projects Metro City Phase-llf & Emreraled Housing Project and commercial project Infotech has been shown as work-in-progress under the head Current Assets. It is also to be noted that during the year under consideration no revenue is recognized for such projects. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXX 7. (Point No.10) Please find enclosed herewith the details of various project/scheme developed during the FY 2011-12 in prescribed format (Pge No.111 to 118). 8. (Point No.11) It is submitted that the copy of development approval and B.U Permission obtained from Local authorities of Housing projects (i.e Parshwanath Metro City & Om Residency) are enclosed here-in-above with Audit Report in Form 10CCB in respect of deduction u/s.80IB(10) of he I.T. ct. Please refer Page NO.1 to 10CCB in respect of deduction u/s.80IB(10) of the I.T Act. Please refer Page NO.1 to 24.
8.3 We also note that the assessee has made the disclosure in the tax audit report in form 3CD about the projects and corresponding deduction claimed under section 80IB(10) of the Act and details of the units sold/unsold which is placed on pages 9 to 21 of the PB.
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 the 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 was 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 represented 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 ITO 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 find support and guidance from the order of Hon’ble Gujarat High Court in the case of CIT vs. Arvind Jewellers reported in 124 taxman 615, wherein it was held as under: Page 9 of 11
“It is clear that the provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous, that section will be attracted and incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the instant case, 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 section 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.”
8.6 In this regard, we also draw our support and guidance from the judgment of Delhi High Court in the case of sunbeam auto ltd. reported in189 taxman 436 wherein it was held as under:
“The submission of the revenue was that while passing the assessment order, the Assessing Officer did not consider the aspect specifically whether the expenditure in question was revenue or capital expenditure. That argument predicated on the assessment order, which apparently did not give any reason while allowing the entire expenditure as revenue expenditure. However, that, by itself, would not be indicative of the fact that the Assessing Officer had not applied his mind to the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reasons in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. One has to keep in mind the distinction between 'lack of inquiry' and 'inadequate inquiry'. If there was any inquiry, even inadequate, that would not, by itself, give occasion to the Commissioner to pass orders under section 263 merely because he has different opinion in the matter. It is only in cases of 'lack of inquiry' that such a course of action would be open”
In view of the above and after considering the facts in totality as discussed above, we quash the order passed by the Ld. CIT under section 263 of the Act. Hence the ground of appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 25/10/2019 at Ahmedabad.