RAJ ABHISHEK CORPORATION,SURAT vs. PR. CIT-1, SURAT, SURAT

4) The Appellant craves leave to add, amend, alter, modify, substitute, delete, change or vary all or any of the Ground or Grounds of Appeal

Later, Learned Principal Commissioner of Income Tax-1, Surat (in short “ld. PCIT”], has exercised his jurisdiction under section 263 of the Income Tax Act, 1961. On perusal of records, it was noticed by the Ld.PCIT that assessee- firm had started the construction activity on 09.03.2007 and the same was completed on 26.03.2010, the firm was claiming the deduction under sub section (1) r.w.s. sub-section (10) of section 80-IB of the Act. During the course of assessment, the Assessing Officer has asked to furnish the complete list of persons to whom the flats had been sold since inception of project till 31.03.2017 in MS Excel Sheet with Name, PAN and Address. In response to notice, the firm had submitted before assessing officer, the details of flat sold to whom along with PAN and flat Nos. in excel format. The details of the person to whom, the assessee had sold more than one flat is as under: Flat No. Name of purchaser PAN of purchaser D-19/374 Shilpa Ashok Modi ADHPM 6688 G Ashok Dhnsukhlal Modi AHSPM 2805 L D-19/375 Shilpa Ashok Modi ADHPM 6688 G Ashok Dhnsukhlal Modi AHSPM 2805 L D-19/376 Shilpa Ashok Modi AADHPM 6688 G Ashok Dhnsukhlal Modi AHSPM 2805 L D-19/377 Shilpa Ashok Modi ADHPM 6688 G Ashok Dhnsukhlal Modi AHSPM 2805 L B-07/454 Hemant Ramvilas Jain AALPJ 9974 B D-03/311 Hemant Ramvilas Jain AALPJ 9974 B 002/493 Naresh Jagdi Shchandra Vig ABJPV 9840 R 003/394 Manish Jagdishbhai Barot ABJPV 9840 R B-08/561 Ramchalsingh Rajput AAYPR 5138 A B-09/162 Sureshchandra Chandrashekhar Mishra AAYPR 5138 A B-02/436 Ritaben Anishkumar Shah AGVPM 643 E B-11/270 Santoshkumar Bhushan Khalimuni AGVPM 6433 E

However, Ld. PCIT rejected the contention of the assessee and observed that the assessee stated that while filing submission same PANs has been written for the different persons. However, on going through the details it is noticed that Flat No.C02/493 and C03/394 were sold to Shri Naresh Jagdishchandra and Manish Jagdishchandra, having same father’s name. However, while completing assessment proceedings, the AO has not inquired the issue in the light of the A.Y.17-18 Raj Abhishek Corporation provisions of clause (f) of the section 80-IB(10) of the Act. The is section reproduced as under: “Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. 80-IB. (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. … …. … (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, - … … … (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely;- (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta, (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta.”

We have heard both the parties and noted that the issue under consideration. We note that Assessing Officer during assessment proceedings, issued notice u/s142(1) asking the documents specified in the notice, wherein we note that Assessing Officer has asked the assessee to submit complete list of persons to whom the flats have been sold since inception of project till 31.03.2017 in MS Excel sheet with Name, PAN and address. The notice issued by the Assessing Officer along with Annexure is reproduced below: “To Raj Abhishek Corporation 501, Kohinoor Textiles Market, Ring Road Ting Road, Surat-395002, Gujarat India PAN AAHFR AY:2017-18 Dated”19/11/2019 Notice No: ITBA/.AST/F/142(1)/2019- 6297D 20/1020716041(1) Notice under sub-section (1) of Section 142of the Income Tax Act, 1961 Sir/Madam/M/s, In connection with the assessment for the assessment year 2017-18 you are required to: a) Furnish or cause to be furnished on or before 22/11/2019 at 12.20 PM the accounts and documents b) Furnish and verified in the prescribed manner under Rule 14 of I.T. Rules 1962 the information called for as per annexure and on the points or matters specified therein on or before 22/11/2019 at 12.20 PM c) The above mentioned evidence/information is to be furnished online electronically in ‘E-Proceeding’ facility through your account in ‘e- filing’ website of Income Tax Department. d) Para(s)(a) to (c) are applicable if you have an account in e-filing website of Income Tax Department. Till such an account is created by A.Y.17-18 Raj Abhishek Corporation you, assessment proceedings shall be carried out either through your e-mail account or manually (if e-mail is not available). e) In cases where order has to be passed under section 153A/153C of the Income tax Act, 1961readwith section 143(3), assessment proceedings would be conducted manually. Your faithfully, Sd/- Karam Chand Dhama Circle 1(2),Surat 1. As you are aware that your case for AY 2017-18 has been selected in scrutiny under CASS and notice u/s 143(2) of the I.T. Act,1961 dated 16.08.2018 has been duly served upon you. Please furnish the following further details: 2. Please provide the complete list of persons to whom the flats have been sold since inception of project till 3103.2017 in MS Excel sheet with Name, PAN and address.

Please provide copy of sale deed regarding sale of all commercial space since inception of project to till date.

You are requested to submit the complete details on or before 22.11.2019.

Please note that no further adjournment of whatsoever may be will be granted as the assessment is getting time barred. It may please further be noted hat, if complete details are not furnish within the stipulated date, the assessment will be completed as per the facts and material available on record without further intimation. Sd/- Karam Chand Dhama Circle-1(2), Surat

We note that in response to notice u/s 142(1) of the Act, the assessee claimed that it has submitted its reply dated 07.12.2019 which is placed at paper book Pg- 100. However, we note that the details of cheques received from flat owners in financial year 2007 and 2008 have not been submitted before assessing officer. We note that first time the assessee stated before ld PCIT that in respect of Shilpa Ashok Modi and Hemant Ramvilas, the date of booking falls in financial Year 2007 and 2008 and this issue has not been examined by the assessing officer. That is, for this specific issue neither assessee submitted details before the assessing officer nor assessing officer has examined this issue during the assessment stage. That is, the following details showing cheque number and date

The ld Counsel submitted before us that assessee had submitted copy of agreements of flats allotted to Shilpa Modi and Hemant Ramvilas. However, we

Now, we shall examine the findings of the assessing officer in the assessment order framed by him under section 143(3) of the Act, dated 16.12.2019, which is reproduced below: “2. The assessee Firm is engaged in the business of Developing of Residential project approved u/s 80IB of the Income Tax Act. Requisite details were called from the assessee and required details were filed by his AR of the assessee which are kept on record”

From the above findings of the assessing officer, it is clear that assessing officer called the details and assessee submitted the details, which were kept by A.Y.17-18 Raj Abhishek Corporation him. The assessing officer nowhere stated that he has examined the details filed by the assessee, therefore just to keep (kept by him) the details in assessment records does not serve the purpose, it means the assessing officer has not examined the details and did not apply his mind. Moreover, the assessing officer did not ask the assessee to submit before him Bank statements. The assessing officer took the bank account number and bank names from the assessee ( not the bank statements), therefore, assessing officer never examined the query raised by ld PCIT. Besides, the copy of agreements of flates allotted to Shilpa Modi and Hemant Ramvilas, were not examined by the assessing officer. Therefore, we note that it is clear violation of clause ‘f’ of section 80(IB)(10) of the Act, because the allotment of flats were made to individuals and their family member more than once. Hence, such specific issue raised by ld PCIT in his revision proceedings, has never been examined by the assessing officer.

Let us take the guidance of judicial precedents laid down by the Hon’ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to the interest A.Y.17-18 Raj Abhishek Corporation of the revenue’’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law”.

Taking note of the aforesaid dictum of law laid down by the Hon’ble Apex Court, let us examine the assessee facts under consideration. We note that in respect to Flat No. D19/374 to D19/377 sold to Ms. Shilpa Ashok Modi and Mr. Ashok Dhansukhlal Modi and Flat No.B-07/454 and D-03/311 sold to Shri Hemant Ramvilas Jain. The ld Counsel stated that these flats were already booked before 01.04.2010. In support, ld Counsel has furnished copy of sale deed, which was not examined by the assessing officer. The sale deed in favour of Mr. Ashok Modi and Ms. Shilpa Modi was executed during the Month of June, 2010 and sale deed in favour of Shri Hemant Ramvilas Jain was executed in the Month of July, 2010, these sale deeds were neither called by the assessing officer during the assessment stage nor examined by him. Moreover, the details submitted by the assessee before ld PCIT and bank statements were not examined by the assessing officer. Hence, it is clear violation of clause ‘f’ of section 80(IB)(10) of the Act, which the AO has failed to take note of and failed make inquiry in this regard. Moreover, the assessee has not submitted any explanation regarding violation of clause ‘f’ of section 80IB(10) of the Act, during the assessment stage. Therefore, we note that Assessing Officer has passed the order on incorrect assumption of fact, there is incorrect application of law by assessing officer, the assessment order is passed by the Assessing Officer without application of mind and assessing officer has not investigated the issue before him about clause ‘f’ of section 80IB(10 of the Act. Moreover, there is no two possible views are available before the assessing officer, thus, the view taken by the Assessing

Our view is fortified by the Judgment of Hon`ble Delhi High Court in the case of NAGESH KNITWEARS P. LTD in dated 1st June, 2012 ( 345 ITR 135(Del), wherein it was held as follows:

In the two assessment years, the Assessing Officer had in the order under Section 143(3) accepted the computation made by the assessee under Section 80HHC of the Act. The Assessing Officer treated the premium/profit earned on sale of export quota as covered under Section 28(iiia) to (iiic).

The Commissioner of Income Tax, however, issued notice under Section 263 in exercise of power of revision and held that the Assessing Officer had wrongly included premium of Rs.1,16,62,320/- and Rs.73,49,341/- on the sale of quota rights for the assessment years 2000-01 and 2001-02 as covered by Section 28(iiia) to (iiic) and had computed the deduction. The Commissioner of Income Tax referred to the decision of the Supreme Court in Commissioner of Income-tax Vs. Sterling Foods (1999) 237 ITR 579 and held that under the proviso to Section 80HHC(3), the three categories mentioned in Section 28(iiia), (iiib) and (iiic) have to be included. He held that deduction under Section 80HHC has to be computed by reducing business profit by 90% from the receipts on sale of quota rights. He also observed that the Assessing Officer had not verified facts and no details of export incentives or receipt were taken on record. The Assessing Officer did not examine the provisions of Section 28 (iiia/b/c). The Assessing Officer was directed to make fresh assessment and treat the sale of quota rights as "other receipts" under Explanation (baa) to Section 80HHC. He was also asked to verify the receipts on account of export incentives shown for the purpose of deduction under Section 80HHC offered for taxation and ensure that the receipts not covered under Section 28 (iiia/b/c) were excluded while applying the provisos to Section 80HHC(3).

The Assessing Officer, thereafter recomputed deductions under Section 80HHC and passed assessment orders for the two years. These were made subject matter of challenge by the assessee, who succeeded in the first appeal. It was observed that the Assessing Officer had excluded 90% of the profit on sale of export license while computing deduction under Explanation (baa) to Section 80HHC. It was held that as per the provisos to Section 80HHC(3), the profit has to be computed after increasing the amount which bears to 90% of the same referred to in 28 (iiia) i.e. profit on sale The Commissioner Of Income Tax V vs Nagesh Knitwears P. Ltd. on 1 June, 2012 Indian Kanoon - http://indiankanoon.org/doc/180884801/ 13 of export license, but this had not been allowed and followed by the Assessing Officer. The assessee, therefore, succeeded in the first appeal.

The tribunal by order dated 7th September, 2007 in ITA 2210 & 2211/Del/2005 held that the Commissioner was not justified in invoking his power under Section 263 as the view taken by the Assessing Officer was plausible. They referred and relied upon Malabar Industrial Company Limited Vs. CIT (2000) 243 ITR 83 (SC) and the decision of Delhi High Court in Nabha Investments Pvt. Ltd. Vs. Union of India & Others (2000)246 ITR 41. The tribunal also examined the case on merits and came to the conclusion that the addition was not justified in view of the circular issued by the Board. On correct interpretation of law, the assessee was entitled to include premium or profit on sale of export quota in Section 28 (iiia/b/c). Accordingly, the twin conditions i.e. order of the Assessing Officer should be erroneous and prejudicial to the interest of the Revenue, were not satisfied.

As far as Section 263 is A.Y.17-18 Raj Abhishek Corporation concerned, we have examined the said Section in depth and detail in ITO Vs. D G Housing Projects Ltd. decided on 1st March, 2012, in and observed as under:- "10. 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 CIT 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 interest of the Revenue. The expression „prejudicial to the interest 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.

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 Commissioner in exercise of revisionary power. As an investigator, 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 word „erroneous includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits.

Delhi High Court in Gee Vee Enterprises v. Additional Commission of Income-Tax, Delhi-I, (1975) 99 ITR 375, has observed as under:- "The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct."

In the said judgment, Delhi High Court had referred to earlier decisions of the Supreme Court in Rampyari Devi Sarogiv. CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal v. CIT (1973) 88 ITR 323 (SC), wherein it has been held that where Assessing Officer has accepted a particular contention/issue without any enquiry or evidence whatsoever, the order is erroneous and prejudicial to the interest of the Revenue. After reference to these two decisions, the Delhi High Court observed:- "These two decisions show that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return."

The aforesaid observations have to be understood in the factual background and matrix involved in the said two cases before the Supreme Court. In the said cases, the Assessing Officer had not conducted any enquiry or examined evidence whatsoever. There was total absence of enquiry or verification. These cases have to be distinguished from other cases (i) where there is enquiry but the findings are incorrect/erroneous; and (ii) where there is failure to make proper or full verification or enquiry.

In the case of Commissioner of Income Tax v. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del), Delhi High Court was considering the aspect, when there is no proper or full verification, and it was held as under:- "We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons 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 on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason 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. Learned counsel for the assessee is right in his submission that 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 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113): "... From a rending of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is „erroneous in so far as it is prejudicial to the interests of the Revenue . It is not an arbitrary or unchartered power, it can be exercised only on fulfilment of the requirements laid down in sub- section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. (See Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) at page 10) ... From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income- tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion ... There must be some prima facie

It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase „prejudicial to the interest of Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be A.Y.17-18 Raj Abhishek Corporation treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue."

In the present case, a reading of the order passed by the Commissioner of Income Tax exposits that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of the Revenue. In paragraph 6, 7, 9 and 10 the Commissioner of Income Tax has observed as under:- "6. The assessees submissions are carefully considered. Explanation (baa) of section 80HHC clearly states that any receipts which is not directly related to the export of goods out of India has to be reduced from the „profits and gains of business or profession to arrive at „profit of business for computation of deduction u/s 80HHC. Since sale of quota is only incidental to export and source of the same is the Govt. Scheme and not the export of goods, 90% of the same is to be reduced while computing „profit of business of the assessee. In this regard reliance is placed on the decision of the Hon’ble Supreme Court in the case of Commissioner of Income-tax Vs. Sterling Foods [237 ITR 579] wherein it was held that for the application of words "derived from", a direct nexus between the profits and gains and the industrial undertaking was required. It was also held by the Apex Court that the source of the import entitlements were the scheme of Central Government and not the industrial undertaking and the nexus was not direct but only incidental. In the present case also there was no direct nexus and the source of quota was the Government Scheme. Thus, the sale proceeds of quota rights have to be reduced to arrive at „profit of business as per Explanation (baa) to section 80HHC.

However, following the principle of strict construction for deeming fictions, the same cannot be added back as it does not fall under any of the three categories mentioned in clauses (iiia) (iiib) or (iiic) of section 28 as required by the proviso to sub section (3) of section 80HHC. On this issue, the liberal interpretation of any statute cannot be relied upon in view of the judgment of the Hon’ble Supreme Court in the case of NOVO Pan India [73 ELT 769] wherein it was held that "The principal that in case of ambiguity, a taxing statute should be construed in favour of the assessee assuming that the said principle is good and sound-does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or any exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State. This is for the reason explained in Mangalore Chemicals and other decisions, viz. each such exception/exemption increases the tax burden on other member of the community correspondingly. Once, of course, the provision is found applicable to him, full effect must be given to it. Hence deduction u/s 80HHC has to be computed accordingly by reducing profit of business by 90% of the receipts from sale of quota rights. 8. x x x x x x x 9. Moreover, on perusal of the record, it is seen that the assessment was completed even though there were no details on record of export incentives received by the assessee during the year. The assessee was allowed the claim of deduction under Section 80HHC without even verifying as to whether the receipts on account of export incentive fall within the provisions of section 28(iiia/b/c) of the Act on merit the deduction.

In view of the above discussion, it is clear that the impugned assessment order is erroneous and prejudicial to the interest of Revenue as it failed to apply the provisions relating to the deduction under section 80HHC correctly. Therefore, the said assessment order is hereby cancelled under section 263 of the Income-tax Act, 1961 and the A.O. is directed to make fresh assessment as per the provisions of law. While making the fresh assessment, the A.O. is directed to treat the receipt on sale of quota rights as "Other Receipts" as mentioned in explanation (baa) of the section 80HHC. He is also directed to verify that the receipt on account of export incentives shown for the purpose of deduction under section 80HHC are offered for tax in the Profit & Loss account; and that none of these receipts include any item which is not covered by the provisions of section 28 (iiia/b/c), such as DEPB etc."

Thus, we note that ld PCIT found a specific error in the assessment order stating that the view taken by the Assessing Officer is not sustainable in law, as it is violation clause ‘f’ of section 80IB(10) of the Act, as the assessing officer has failed to verify the conditions mentioned in clause ‘f’ of section 80IB(10) of the Act. 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 Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. The jurisdictional precondition stipulated under section 263 of the Act, is that the PCIT must come to the conclusion that the order is erroneous and is unsustainable in law. We hold that order passed by the assessing officer is unsustainable in law, based on the reasons cited above, which makes the assessment order erroneous as well as prejudicial to the interest of Revenue, hence we confirm the findings of ld PCIT and uphold his order.

In the result, appeal filed by the assessee is dismissed.