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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K.PRADHAN
The captioned appeal by the assessee is directed against the order dated 16th March 2018 of learned Principal Commissioner of Income Tax (PCIT)–32, Mumbai, passed under section 263 of Income Tax Act (in short “Act”) for the assessment year 2007–08.
2 Shivam Enterprises 2. Briefly the facts are, the assessee hitherto is a partnership firm and is carrying on business of building housing projects. For the assessment under dispute assessee filed its return of income on 28.10.2007 declaring nil income after claiming deduction under section 80IB(10) of the Act for an amount of `. 63,80,690/–. In course of assessment proceedings, the Assessing Officer (AO) while verifying assessee’s claim of deduction under section 80IB of the Act noticed that the housing project was approved by the local authority on 06.09.1991. Subsequently, the date of approval was amended to 03.10.2005. Noticing the above, the Assessing Officer called upon the assessee to justify its claim of deduction, since according to him, only if the housing project is approved and is commenced after 1.10.1998, it will be eligible for deduction under section 80IB(10). In response, it was submitted by the assessee, though, the approval by the CIDCO was vide commencement certificate dated 06.09.1991 however, subsequently, it was revalidated on 03.10.2005. Thus, it was submitted, since, the approval for housing project was granted on or after 01.10.1998, it would be eligible to claim deduction under section 80IB(10). The Assessing Officer, however was not convinced with the submissions of the assessee. Referring to explanation(i) to section 80IB(10) he observed, the date of first approval of the housing project has to be reckoned as the date of approval in respect of housing project where there is more than one approval. Based on the aforesaid 3 Shivam Enterprises reasoning the Assessing Officer ultimately held that since, the housing project was approved by the local authority prior to 01.10.1998, the assessee would not be eligible for claiming deduction under section80IB(10). Accordingly, he completed the assessment disallowing assessee’s claim of deduction under the aforesaid provision. Being aggrieved, assessee preferred appeal before the first appellate authority. After considering the submission of the assessee learned Commissioner (Appeals) allowed assessee’s claim of deduction. Challenging the aforesaid order of learned Commissioner (Appeals), the revenue came in appeal before the Tribunal. While disposing of the appeal filed by the revenue, the Tribunal in ITA.No.4765/Mum/2010, dated 25/03/2015, restored the issue to the Assessing Officer for re–adjudication with certain directions. In pursuance to the directions of the Tribunal, the Assessing Officer took up the assessment proceedings again and ultimately passed the assessment order on 29/12/2016 under section 143(3) r.w.s. 254 of the Act, allowing assessee’s claim of deduction under section 80IB(10) of the Act. After completion of the assessment as aforesaid, ld. PCIT called for and examined the assessment records of the assessee and upon such examination he was of the view that the Assessing Officer has not implemented /carried out the specific directions given by the Tribunal. He observed, the Assessing Officer did not call for the necessary details and documentary evidences from the assessee to 4 Shivam Enterprises prove that the housing project, in respect of which deduction under section 80IB(10) was claimed commenced after 01/10/1998 and completed before 31/03/2005. Thus, he formed a prima facie opinion that the assessment order passed is erroneous and prejudicial to the interest of revenue. Accordingly, he issued a show–cause notice under section 263 of the Act, calling upon the assessee to explain why the assessment order should not be revised. In response to the show– cause notice the assessee appeared and made submissions objecting to the initiation of proceeding under section 263 of the Act and contended that assessment order passed cannot be held to be erroneous and prejudice to the interest of the revenue as the deduction claimed under section 80IB(10) was allowed after due verification by the Assessing Officer. However, learned PCIT did not find merit in the submissions of the assessee. He was of the view that the Assessing Officer without carrying out the directions of the Tribunal and without making proper enquiry on the issue has passed the assessment order allowing assessee’s claim of deduction under section 80IB(10) of the Act. Thus, he held that the assessment order is erroneous and prejudicial to the interest of the revenue. As regards the merits of assessee’s claim of deduction under section 80IB(10) of the Act, he observed that the commencement certificate from the local authority for the housing project was obtained on 06/09/1991 and later on the land owner received further commencement certificate 5 Shivam Enterprises from the local authority on 25.08.1992. He observed, the local authority, while granting amended approval on 03.10.2005 did not issue any separate commencement certificate. Thus, he observed, the housing project having commenced before 01.04.2004, as per the provision of section 80IB(10), the project should have been completed on or before 31.03.2008 to entitle the assessee to claim deduction. Learned PCIT observed, since, the basic conditions of section 80IB(10) were not fulfilled in respect of the housing project, it would not qualify for benefit under section 80IB(10) of the Act. Based on the aforesaid reasoning, learned PCIT proceeded to cancel/set aside the impugned assessment order in exercise of power under section 263 of the Act and directed the Assessing Officer to pass a fresh assessment order after examining in detail the deduction claimed by the assessee under section 80IB(10) of the Act and in the light of facts as well as statutory provision on the issue. Being aggrieved with the aforesaid order of learned PCIT, the assessee is before us challenging the order passed under section 263 of the Act, both on jurisdictional issue as well as on merits.
The Learned Authorized Representative submitted, in the fresh proceedings in pursuance to the directions of the Tribunal, the Assessing Officer had called for all information relating to deduction claimed under section 80IB(10) of the Act and after examining them has completed the assessment allowing assessee’s claim. Taking us 6 Shivam Enterprises through the chronological chain of events the learned Authorised Representative submitted, the assessee came into existence on 15.10.2004 and the fresh approval was obtained from CIDCO vide letter date 03.10.2005. Thereafter, the assessee has commenced construction for four wings of the housing project, namely A,B,C and D wings admeasuring about `,55,357/– sq.ft of FSI. He submitted, till the time of fresh approval given by CIDCO on 03.05.2005 no construction activity had commenced even by the previous owner/builder. In this context he drew our attention to the screen shots of the project as on 28/12/2005,25/10/2006 and 31/03/2009 purportedly obtained from Google earth. He submitted, the fresh approval granted by CIDCO on 03.10.2005 overrides all earlier plans. Hence, it is evident, no construction activity with regarding to the housing project had ever commenced by any of the builders prior to 03.10.2005. The learned Authorised Representative submitted, completion certificates in respect of the project were received between 02.03.2007 to 28/03/2008. Thus, the basic conditions of section 80IB(10) in respect of the housing project were fulfilled. Therefore, the assessee is eligible to claim deduction under section 80IB(10) of the Act. He submitted, the Assessing Officer after examining the facts and material on record being satisfied that the conditions of section 80IB(10) were fulfilled has allowed the deduction. Therefore, he submitted, in such situation the assessment order cannot be held as 7 Shivam Enterprises erroneous and prejudicial to the interest of the revenue to revise it under section 263 of the Act.
The learned Departmental Representative strongly relying upon the observations of learned PCIT in the order passed under section 263 of the Act submitted, in spite of specific direction by the Tribunal, the Assessing Officer did not conduct proper enquiry to verify correctness of assessee’s claim of deduction under section 80IB(10) of the Act. She submitted, the issues which the Assessing Officer was required to examining were purely factual and required proper enquiry by the Assessing Officer to ascertain the correct facts. Drawing our attention to the assessment order she submitted, the Assessing Officer has not even mentioned a single word with regard to assessee’s claim of deduction under section 80IB(10) of the Act. He submitted, the Assessing Officer has passed the assessment order allowing assessee’s claim of deduction mechanically without making any enquiry and without application of mind. Thus, she submitted, the allowance of assessee’s claim of deduction under section 80IB(10) of the Act without verifying whether the basic conditions of the provision were fulfilled or not has made the assessment order erroneous and prejudicial to the interest of the revenue. Therefore, learned PCIT has correctly exercised jurisdiction under section 263 of the Act to revise the assessment order.
8 Shivam Enterprises 5. We have considered rival submissions and perused the material available on record. The factual matrix concerning the issues would reveal that while completing the original assessment the Assessing Officer disallowed assessee’s claim of deduction under section 80IB(10) of the Act primarily on the reasoning that the approval for the housing project was granted by the local authority prior to 01/10/1998. Of course, learned First Appellate Authority while deciding the appeal of the assessee allowed the deduction. However, while disposing of the revenues appeal against the aforesaid order of the learned Commissioner (Appeals), the Tribunal restored back the issue to Assessing Officer for fresh adjudication observing as under: “As per clause a of section 80IB(10), the primary condition of availing the deduction u/s 80-IB(10) is that the undertaking has commenced or commences development and construction of housing project on or after 1.10.1998. Sub-clause (i) to (iii) enumerate the different situations and stipulates the condition for completion of the project as per the respective date of approval by the local authority is relevant only for the time span within which the project has to be completed. If a project is approved by the local authority before 01.04.2004 it has to be completed before 31.03.2008 to avail the deduction u/s u/s 80- IB(10). Similarly, if the project is approved by the local authority on or after 01.04.2004 but not later than 31.03.2005, then in order to avail the deduction under section u/s 80-IB(10), the project has to be completed within the four years from the end of the financial year in which the housing project is approved by the local authority. Thus the approval is relevant to determined the time period within which the project is required to be completed whereas the commencement of the project is a pre condition for the project irrespective of date of approval by the local authority and the condition of completion in accordance with the date of approval. The Explanation to clause (a) of section u/s 80-IB(10) is only in respect of the approval of the housing project and it has nothing to do with the commencement of the housing 9 Shivam Enterprises project. Further only the completion of project will be taken on the date when the completion certificate in respect of the housing project is issued by the local authority. The authorities below have proceeded with the matter on a wrong presumption and incorrect basis. The condition for commencement is a primary condition and if the project is found commenced prior to 1.10.1998, it would not be entitled for deduction under section u/s 80-IB(10), at the threshold without going into the other condition prescribed under the other clauses of section u/s 80- IB(10). We note that there was some dispute at the time of original approval granted by the CIDCO on 6.9.1991 on the point of development charges as well as theatre and shops in the development plan. Accordingly, the original owner of the land in question challenged the action of CIDCO rejecting the modified development proposal vide order dated 18.06.1998 by filing the appeal u/s 47 of the Maharashtra Regional and City Planning Act 1966. The appeal was decided by the appellate authority on 8.9.1999. In pursuant to the order of appellate authority, the amended approval certificate dated 3.10.2005 was issued by the CIDCO. From the perusal of the order dated 8.9.1999, we find that there was some construction in the project prior to the amendment proposal in the development plan put forward by the owner of the land which was rejected by the CIDCO vide order dated 18.06.1998. Therefore, the commencement of the project has to be taken into account as per the actual construction worked started in respect of the project and not by taking into consideration the original sanction and amended sanction of the plan. Since the actual work of construction and development of the project has not been examined by the authorities below, therefore, in the facts and circumstances of the case, we set aside this issue to the record of AO for proper verification and examination of the fact and then decide the issue as per law. The issue of completion of project within the prescribed time limit is kept open.”
On a careful reading of the observations of the Tribunal reproduced above, it becomes clear that what is relevant to examine is the commencement of the housing project and not the date of approval. The Tribunal has observed, if the project has commenced prior to 01/10/1998, it would not be entitled for deduction under 10 Shivam Enterprises section 80IB(10) and in that event there is no need to verify whether other conditions of section 80IB(10) are fulfilled or not. This aspect has been further clarified by the Tribunal while observing that the commencement of the project has to be taken into account as per the actual beginning of construction work of the project and not by taking into consideration the date of original sanction and amended sanction of the plan. Since, the aforesaid aspect relating to the issue was not actually verified either by the Assessing Officer or by the first appellate authority, the Tribunal restored the issue to the Assessing Officer for proper verification. While, doing so the Tribunal also left the issue relating to the fulfillment of condition of completion of project within the prescription time limit open for verification. Though, before us learned Authorised Representative has forcefully submitted that the housing project has not commenced prior to 03/10/2005, however, it is relevant to observe, in the earlier appeal order, the Tribunal has observed that from the appeal order passed under section 47 of the Maharashtra regional and city planning Act,1966, it appeared that there was some construction in the project prior to the amendment proposal in the development plan forwarded by the owner of the land which was rejected by CIDCO vide order dated 18/06/1998. The aforesaid observation of the Tribunal assumes considerable importance as the commencement of the housing project post or prior to 1/10/1998 will have a crucial bearing in deciding the legibility of the 11 Shivam Enterprises assessee in availing deduction under section 80IB(10) of the Act. Further, the actual date of completion of project is also very much relevant for fulfillment of the other condition of section 80IB(10) of the Act. Though, it is the say of the assessee that both the aforesaid conditions have been fulfilled, however, reading of the impugned assessment order does not throw any clarity on the assessee’s claim as the Assessing Officer has not at all recorded any factual finding regarding fulfillment of basic conditions of section 80IB(10) of the Act. The assessment order passed is very cryptic and without any discussion. The Assessing Officer has passed the order in a summary manner allowing assessee’s claim of deduction under section 80IB(10) of the Act. Though, the Assessing Officer has referred to certain submissions made by the assessee on different dates, however, he has not made any discussion about the enquiry/verification conducted by him in compliance to the specific directions of the Tribunal and what is the result of such enquiry/verification qua the issue of deduction claimed under section 80IB(10) of the Act. Though, it may be a fact that in course of assessment proceedings, the assessee might have furnish certain information/details in support of its claim however, the Assessing Officer is required to enquire into and actually verify assessee’s claim to reach a logical conclusion. On the face of specific direction by the Tribunal on the issue, the minimum the Assessing Officer was required to do was to record a factual finding regarding the 12 Shivam Enterprises actual commencement and completion of the housing project. Unfortunately, a reading of the impugned assessment order as well as the other material on record clearly reveal that the Assessing Officer has failed to make proper enquiry in compliance to the directions of the Tribunal before allowing assessee’s claim. That being the case, the assessment order is erroneous and prejudicial to the interest of the revenue. Hence, in our opinion, learned PCIT was well within his jurisdiction in exercising power under section 263 of the Act to revise the assessment order. Therefore, we do not find any reason to interfere with the decision of learned PCIT in exercising power under section 263 of the Act.
However, at this juncture, we must observe that the Assessing Officer must decide the issue relating to assessee’s claim of deduction under section 80IB(10) of the Act independently, in terms with the direction of the Tribunal in order dated 25/03/2015 in ITA.No.4765/Mum/2010, without being influenced by any of the observations of learned PCIT on the merits of the issue relating to assessee’s claim of deduction under section 80IB(10) of the Act. Needless to mention, the assessee must be afforded a reasonable opportunity of being heard in the matter. With the aforesaid observations, grounds raised
are dismissed.
8. In the result, appeal filed by the assessee stands dismissed.