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Facts
The assessee, a builder and developer, claimed a substantial deduction under Section 80-IBA for the Assessment Year 2020-21. The Assessing Officer initially accepted the return without detailed verification, leading the PCIT to issue a show cause notice under Section 263, alleging the assessee failed to meet the Floor Area Ratio conditions specified in Section 80-IBA(2)(h)(ii). Consequently, the PCIT set aside the assessment order and directed a fresh assessment.
Held
The Tribunal upheld the PCIT's order, finding no infirmity in it. It observed that the assessee's detailed submissions during the Section 263 proceedings were not available to the AO during the original assessment, thus rendering the AO's order erroneous and prejudicial to the revenue due to lack of inquiry and verification. The Tribunal concluded that the PCIT rightly invoked Explanation 2 to Section 263.
Key Issues
Whether the PCIT was justified in invoking Section 263 to set aside the assessment order for lack of proper verification regarding deduction claimed under Section 80-IBA; and whether the assessee fulfilled the conditions for claiming deduction under Section 80-IBA, specifically the Floor Area Ratio requirement.
Sections Cited
Section 263, Section 80-IBA, Section 80-IBA(2)(h)(ii), Section 143(3), Section 144B, Section 119, Explanation 2 to Section 263
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 17.02.2025 passed u/s 263 of the IT Act by Ld. PCIT, Nashik-1 [‘Ld. PCIT’] for the assessment year 2020-21.
The appellant has raised the following grounds of appeal :-
1. Ld. CIT erred in law and on facts in invoking jurisdiction under Section 263 and setting aside Assessment Order for fresh assessment on the ground that assessment has been framed without proper verification and without applying relevant provisions of the Act.
Ld. CIT erred in law and on facts in nor appreciating that during assessment proceedings, the ld AO has applied his mind after proper enquiries and adopted a course permissible in law.
The Ld CIT erred in law and on facts in observing that the appellant has claimed deduction u/s 80-IBA violating the condition u/s 80-IBA(2)(h)(ii) and ought to have been disallowed by AO.
The Order of the ld CIT being unjustified in law and on facts may kindly be cancelled.
5. The appellant craves leave to add, alter, modify or substitute any ground of appeal
at the time of hearing.”
3. Facts of the case, in brief, are that the assessee is an individual deriving income from business of builder and developers and has furnished his return of income for the year under consideration on 12.01.2021 declaring income of Rs.37,53,701/- after claiming deduction of Rs.2,21,96,205/- u/s 80IB of the IT Act. The case was selected for scrutiny and vide order dated 26.08.2022 assessment order was passed u/s 143(3) r.w.s. 144B of the IT Act by accepting the income returned by the assessee.
4. Subsequently, while examining the case records, Ld. PCIT observed that the Assessing Officer has completed the assessment without making due verification and inquiries which were warranted under the facts and in the circumstances of the case and therefore a show cause notice u/s 263 of the IT Act was issued to the assessee.
After considering the reply and submissions of the assessee, Ld. PCIT set-aside the assessment order dated 26.08.2022 passed by the Assessing Officer and directed him to pass assessment order afresh as per the provisions of law after affording proper opportunity to the assessee by observing as under :- “7. On verification of the assessment records, it is noticed that in Form 10CCB the assessee has also shown the same figure as size of the plot of the land and the Built-up area of the residential unit of the project le 13944 Sq. Mtr and 8266 Sq. Mtr. respectively. As per STANDARDISED DEVELOPMENT CONTROL AND PROMOTION REGULATIONS FOR MUNICIPAL COUNCILS AND NAGAR PANCHAYATS IN MAHARASHTRA, 2013, Normal FSI permissible on net plot area for Row Houses is '1.00. However, the assessee has utilized only 0.6'1 and 0.58 Floor Area Ratio in respect of the housing projects in question. The Floor Area Ratio calculated as per the above detail clears that the assessee has utilized less than 80% of the permissible Floor Area Ratio in respect of the above said two housing projects. However, the provisions of section 80-1BA(2)(h)(i) states that the deduction shall be allowed if the project utilizes not less than eighty per cent of such floor area ratio where such project is located in any place other than the place referred to in sub-clause (r), which assessee has failed to do so. Hence, the assessee has violated the provisions of section BO-IBA(2)(h)(ii) of the IT. Act. Further, on going through the sale/purchase deed document No. 251512019 dated 23.05.2019 submitted by the assessee during the assessment proceedings as well as during the revisionary proceedings, it was also observed that the Gross Area of one row house is 95.08 Sq. Mtr and the Ground Floor Area is 59.88 Sq. Mtr. Although the carpet area of one row house is within the permissible limit of 60 Sq. Mtr., but here again the Floor Area Ratio is 0.63 only, which was less than the permissible limit of 80%. It is pertinent to mention here that each and every proviso of the section 801BA of the Act has been made mandatory for eligibility of deduction under this section. The purpose of the legislature to introduce this section is to incentivise affordable housing sector as a part of larger objective of the government, "Housing for All it will defeat the purpose of the legislature, if any of the conditions laid down under section 80-1BA of the IT. Act remains unfulfilled. Since, the above two housing projects has failed to fulfill the condition laid down in provisions of section 80-18A(2)(h)(ii) of the I.T. Act, the assessee was not eligible to claim deduction u/s 80-IBA of the IT. Act also. 7.1 On going through the submission filed before me during the proceedings u/s 263, it is seen that assessee has elaborately given the details supporting his plea, however, this office cannot step into the shoes of Assessing Officer and verify all the issues in detail at this stage. Considering the overall facts of the case, it is clearly established that the assessee has failed to submit the details at the assessment stage before the A.O., more importantly the details of the issue on which case has been selected for scrutiny. All these details have escaped scrutiny in the hands of A.O. Therefore, it can be inferred safely that AO has, in the absence of submission and evidences has failed to cause proper inquiries and consequential verifications which rendered assessment order erroneous and prejudicial to the interest of revenue. 7.2 After the introduction of Explanation 2 to Sec. 263, of the Act it has been made clear as to what kind of assessment order shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue. The Explanation 2 to Sec. 263 is reproduced below :- Explanation 2-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer for the Transfer Pricing Officer, as the case may be 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 [Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,- (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, direction of instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." 7.3 From the above cited Explanation which has come into effect from 01.06.2015, it is clear that an assessment order, which has not been passed in accordance with a decision which is prejudicial to the assessee will be deemed to be both erroneous and prejudicial to the interest of revenue. Thus, claim of deduction u/s 8018(10)/801BA has been granted without making suitable enquiry. Therefore, assessment order has been passed in violation of sub-clause (a) and sub-clause (b) of Explanation 2 to Section 263 of the 1.T. Act, 1961. 08 In the light of the detailed discussion made hereinabove, I am of the considered opinion that the assessment order passed u/s 143(3) r.w.s. 1448 of the Act for Assessment Year 2020-21 on 26.08.2022 by the then AO, is erroneous in so far as it is prejudicial to the Interests of Revenue, because the assessment has been made not only without proper verification but also without applying the relevant provisions of the Act properly. Therefore, the provisions of section 263 of the I.T. Act, 1961 are hereby invoked and assessment order passed by the AD on the above issue is hereby set aside as mentioned in para 03 above. The AO is directed that the assessment order be framed afresh as per the provisions of law, after considering proper facts and submissions of the assessee on the issue set-aside herein above, after affording proper opportunity to the assessee within the time allowed under the Income-tax Act, 1961,”
It is the above order against which the assessee is in appeal before this Tribunal.
We have heard Ld. counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. From a perusal of order passed by Ld. PCIT, we are of the considered opinion that there is no infirmity in the above order passed by Ld. PCIT since admittedly the assessee has furnished elaborate submissions during the proceedings u/s 263 of the IT Act which were not produced during the course of assessment proceedings. The above fact itself proves that the