SHREE AMI ESTATE DEVELOPERS,,AHMEDABAD vs. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-5(2),, AHMEDABAD

With this appeal, the Assessee has challenged the correctness of the order of the ld. Principal Commissioner, Ahmedabad-5 dated 27.03.2017 framed u/s. 263 of the Act.

Assuming the jurisdiction conferred upon him by the provisions of Section 263 of the Act, the ld. Principal Commissioner issued notice to the assessee dated 10.03.2017 and the same reads as under:- Sub.: Show cause notice u/s. 263 of the Income-Tax Act, 1961 A.Y. 2012-13-Regarding..... Please refer to the assessment order u/s. 143(3) dated 25.03.2015 for A.Y. 2012- 13, which was finalized by the ITO, Ward-5(2)(4), Ahmedabad, by accepting the returned income at NIL. The assessee had claimed deduction of Rs.13,31,94,893/- U/s 80 IB (10) of the Act.

From the records it has been noticed that the assessee firm came into existence vide partnership deed dated 14.12.2009. As partnership deed the NA land was considered as stock in trade of the firm with effect from 11/2008. The plan/project for development was approved by authority on 27.11.2008 for residential buildings. It indicates that the approval of local authority was not received on or before 31.3.2008 as required under the provisions of section 80IB. The assessee firm had again submitted revised plan for residential building/project and got approval of local authority on 21.4.2010 as well as got 'development permission' vide letter dated 21.4.2010. Thus the permission by authority was received after prescribed time limit. The partners of the form had again executed a partnership deed on 20.8.2011 which are registered with the sub registrar-3, Memnagar, vide deed number 9590/2011. In the said deed, it was also mentioned that :-...'keeping in mind the use of land for business purpose, the development plan has been submitted to AUDA and get approval on 11.6.2008 (para 3, page 5). It is further stated in the registered partnership deed that 'After approval of development of the land a revised plan has been approved on 27.11.2008'. It indicated that the

Further, it is observed that the project was first approved on 11. 1.2008 and the project was originally approved for residential Bunglows. However as perlayout of the plan/project, the FSI area of ground floor of bunglow was 140.35 sq mtr which was more than 1500 sq. ft. The condition of maximum built up area of 1500 sq. ft. had not been complied as prescribed under section 80IB(10). Hence the project Ab initio was not eligible for deduction. Therefore assessee was required to obtain approval of AUDA again in June 2008 and thereafter in November 2008 four residential flats/apartments. Therefore the project that was approved in January 2008 has not fulfilled the provisions of section 80IB(10). In view of the above fact it cannot be considered that the plan/project was approved before 31.3.2008 by the local authority for project of residential building as required under section 80IB(10) of the Act. Therefore exemption of Rs.13,31,94,893/- claimed by the assessee should not be allowed.

From the above discussions, it appears that the said assessment order dated 25/03/2015 is erroneous and prejudicial to the interest of the Revenue to the extent mentioned above. You are, therefore, requested to show cause to why the total income assessed u/s. 143(3) of the Act should not be enhanced or modified u/s. 263 of the Act.

In case, you have any objection to the action proposed, you are requested to appear before me either personally or through your Authorized Representative on 16.03.2017 at 3.30 PM at my office situated at the above address, along with a written reply to this notice.

After considering the facts explained by the assessee in the light of the assessment order, the ld. Principal Commissioner observed as under:- 4. The reply of the assessee is considered but not found acceptable. It is evident from the record that the said project was first approved on 11.01.2008 and the plan was originally approved for residential Bunglows. As per the lay-out of Plan/project, the FSI area of ground floor of Bunglow was 140.35 Sq. Mt. which was more than 1500 sq.ft.(.1 sq. mt = 10.7639 sq. ft.) Thus, the requirement of maximum built-up area of 1500 sq. ft. had not been complied with as prescribed under cl. (c) to section 80IB(10) of the Act. Thereafter, the assessee has applied

The assessee is aggrieved by this finding of the ld. Principal Commissioner. The ld. Senior Counsel vehemently submitted that the Assessing Officer during the course of the assessment proceedings had made specific queries to which the assessee had filed a detailed reply. The ld. counsel drew our attention to the reply dated 16.03.2015 which is exhibited at pages 3 & 4 of the paper book and pointed out the relevant reply of the assessee. It is the say of the ld. counsel that the only objection of the ld. Principal Commissioner is that the project was approved after 31.03.2008 is based upon wrong appreciation of the facts. The ld. counsel stated that the assessee had filed revised plans which were subsequently approved by the local authority but the same has to be considered

Strongly rebutting to the submissions made by the ld. counsel, the ld. D.R. stated that the A.O. has not made any enquiry whatsoever so far as the revised plans approved subsequently to 31.03.2008 is concerned. It is the say of the ld. D.R. that when the A.O. does not make any enquiry and the ld. Principal Commissioner finds that the assessment order so framed is not only erroneous but prejudicial to the interests of the revenue then the ld. Commissioner has every right to revise the same by invoking the provisions of Section 263 of the Act.

We have given a careful consideration to the rival submissions and have perused the orders of the authorities below.

It is true that the revenue does not have any right to appeal to the First Appellate Authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the ld. Commissioner to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and, secondly, it should be prejudicial to the interests of the Revenue. The expression “prejudicial to the interests of the Revenue” is of wide import and is not confined to merely loss of tax. The term “erroneous” means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law.

It is also true that the Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the ld. Commissioner in exercise of revisionary power. It is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the order becomes “erroneous” which includes failure to make the enquiry.

A thoughtful consideration of the facts on record show that the project was first approved on 11.01.2008. Thereafter, the assessee has applied for revised plan which was finally approved on 27.11.2008. These facts have nowhere being disputed anywhere. On these facts, let us now consider the provisions of Section 80IB(10) read with the explanation:- Section 80IB(10)-The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, [2008] by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,— (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,— (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008;

A perusal of the aforementioned provision would show that the assessee is very much eligible for the claim of deduction u/s. 80IB(10) of the Act which has been rightly allowed by the A.O. The ld. Principal Commissioner has not appreciated the facts of the case in true perspective in the light of the aforementioned explanation appended to Section 80IB(10) of the Act. A perusal of the notice issued by the ld. Commissioner u/s. 263 of the Act which is exhibited elsewhere clearly shows that all the revised plans were very much available on the assessment records which have been considered by the ld. Principal Commissioner while issuing the show cause notice u/s. 263 of the Act. By not appreciating the law on the facts of the case in hand, the ld. Principal Commissioner has made his order erroneous.

At the cost of repetition, we would once again like to reiterate what the Hon’ble Bombay High Court in the case of Gabriel India Ltd. 203 ITR 108 has held “the decision of the ITO cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard….”

The Hon’ble High Court of Gujarat in CIT vs. Nirma Chemical Works Ltd. 309 ITR 67 has observed that if assessment order were to incorporate the reasons for upholding the claim made by an assessee, the result would be an epitome and not an assessment order. In this case, during the assessment proceedings for both the Assessment Years, the Assessing Officer issued a query memo to the assessee, calling upon him to justify the genuineness of the gifts. The Respondent-Assessee responded to the same by giving evidence of

Considering the facts in totality in the light of the judicial decisions discussed hereinabove, in our understanding of the law, the Assessment Order is neither erroneous nor prejudicial to the interest of the revenue. We, therefore, set aside the impugned order passed by the ld. Commissioner u/s. 263 and restore that of the Assessing Officer passed u/s. 143(3) of the Act.