2012 (9) TMI 1010 - HC - Income Tax

Housing project deduction u/s80-IB(10) and 'commencement' date dispute; s.263 revision struck down as AO took plausible view.

The dominant issue was whether revision under s.263 was valid on the ground that the AO granted deduction under s.80-IB(10) without examining statutory ... Revision u/s 263 - as per CIT-A AO had allowed the deduction u/s 80IB(10) without examining whether all the conditions prescribed by the Section were satisfied - Held that:- The assessee had filed the details and calculations about the built-up area of the residential units. It would be unreasonable to hold that the Assessing Officer ignored those details. Moreover the statutory auditors had clearly mentioned the dates of approval of the lay out plan of the residential colonies. The Assessing Officer was thus made aware of the dates on which the approvals were granted in respect of each of the four housing projects. The determination of the question as to when the undertaking commenced development and construction, in the absence of any statutory prescription, has to be decided in a pragmatic and reasonable way. It would have been an entirely different issue had there been a statutory prescription of what would be the date of commencement of construction or development. It is certainly a debatable issue on which more than one plausible view is reasonably possible and merely because the Assessing Officer has taken one plausible view, it cannot be said that the assessment is erroneous or prejudicial to the interest of the Revenue - Decided against revenue Issues Involved:1. Validity of the CIT's initiation of proceedings under Section 263 of the Income Tax Act.2. Assessment of the deduction claimed under Section 80IB(10) for the assessment years 2000-01 and 2001-02.3. Applicability of Section 14A regarding tax-free dividend income.Detailed Analysis:1. Validity of the CIT's initiation of proceedings under Section 263 of the Income Tax Act:The CIT initiated proceedings under Section 263 on the grounds that the assessment was erroneous and prejudicial to the interest of the Revenue. The CIT contended that the Assessing Officer (AO) allowed deductions under Section 80IB(10) without proper examination and did not verify the completion certificates of the housing projects. The CIT also raised concerns about the AO not examining the applicability of Section 14A regarding tax-free dividend income.2. Assessment of the deduction claimed under Section 80IB(10):For the assessment year 2000-01, the AO initially allowed a deduction of Rs. 2,76,72,148 under Section 80IB(10) after detailed enquiry, but disallowed Rs. 12,34,522 due to non-furnishing of completion certificates. The CIT, however, argued that the AO did not properly verify whether all conditions prescribed by the Section were satisfied. The Tribunal found that the AO had indeed made enquiries about the claim and discussed it in the assessment order, hence it was not a case of lack of enquiry. The Tribunal also noted that the statutory auditors had certified the approval dates of the housing projects and that the AO accepted the calculations of the built-up area in the absence of any statutory definition. The Tribunal held that the amendments made to Section 80IB(10) by the Finance Act, 2004, were substantial and applicable only from the assessment year 2005-06. The Tribunal further opined that even if some flats exceeded 1000 sq.ft., a proportionate deduction could be allowed.For the assessment year 2001-02, the AO completed the assessment on a total income of Rs. 4,94,62,914, adding the notional value of unsold flats. The CIT initiated proceedings under Section 263 on similar grounds as the previous year. The Tribunal upheld that the AO had made proper enquiries and that the assessments were neither erroneous nor prejudicial to the interest of the Revenue.3. Applicability of Section 14A regarding tax-free dividend income:The CIT initiated proceedings under Section 263 because the AO had not examined the applicability of Section 14A concerning tax-free dividend income of Rs. 6,09,904. The Tribunal affirmed the CIT's orders on this issue as the assessee did not make any submissions regarding this disallowance.Conclusion:The Tribunal vacated the CIT's orders passed under Section 263 for both years, holding that the AO had made proper enquiries and that the assessments were not erroneous or prejudicial to the interest of the Revenue. The Tribunal relied on the Supreme Court judgments in Malabar Industries Co. Ltd. v. CIT, CIT v. G.M. Mittal, and CIT v. Max India Ltd., which established that a mere difference of opinion or possibility of multiple reasonable views does not make an assessment erroneous or prejudicial to the Revenue's interest. The High Court upheld the Tribunal's decision, dismissing the Revenue's appeals and affirming that no substantial question of law arose for consideration. The appeal arising from the assessment order passed under Section 143(3) read with Section 263 was also dismissed as it was consequential to the Tribunal's decision.