2013 (9) TMI 638 - AT - Income Tax

Tribunal rules in favor of taxpayer on jurisdictional grounds, rejecting Commissioner's attempt to revise assessment.

The Tribunal held that the Commissioner of Income-tax (CIT) lacked jurisdiction under Section 263 to revise the assessment order as the issue had already ... Jurisdiction u/s 263 – Jurisdiction of CIT - Doctrine of merger - Deduction u/s 80IB - Held that:- Deduction claimed by the assessee had been restricted by the Assessing Officer to the extent that deduction in respect of a part of profits relating to the income from sale of undivided interest of land - On appeal, this issue had been decided by the Commissioner of Income-tax (Appeals) - Inasmuch as the issue relating to deduction under section 80-IB of the Act the same had been seized by the Commissioner of Income-tax (Appeals) and after deliberation, he decided the issue in favour of the assessee - Thus, there was merger of the order of the Assessing Officer with that of the Commissioner of Income-tax (Appeals) - As rightly contended by the learned authorised representative for the assessee, there was no jurisdiction under section 263 of the Act available to the Commissioner of Income-tax. The Assessing Officer had considered the provisions of section 80-IB(10) in its totality and on the basis of which the Commissioner of Income-tax (Appeals) analysed the issue in depth and negated the stand of the Assessing Officer for the reasons recorded in his order - Thus, we are unable to agree with the Commissioner of Income-tax's perception that the Commissioner of Income-tax can revise u/s 263 on the question of eligibility of deduction under section 80-IB(10) since those were two different views by relying on the Delhi Tribunal's finding in the case of Modi Xerox Ltd. v. Deputy CIT [1998 (4) TMI 162 - ITAT DELHI-C ]. Following Commissioner of Income-Tax Versus Shri Arbuda Mills Ltd. [1996 (1) TMI 11 - SUPREME Court] - once the order of the Assessing Officer got merged with the appellate order of the Commissioner of Income-tax (Appeals) on a particular issue, the Commissioner of Income-tax cannot invoke the provisions of section 263 of the Act on the premise to verify the eligibility of deduction under section 80-IB since those were two different issues - The Assessing Officer had adopted one of the possible views in law, which has not been agreed upon by the Commissioner of Income-tax - the order passed by the Assessing Officer cannot be treated as erroneous order and prejudicial to the interests of the Revenue, thereby the provisions of section 263 of the Act have no role to play. Issues Involved:1. Jurisdiction under Section 263 of the Income-tax Act, 1961.2. Eligibility for deduction under Section 80-IB of the Income-tax Act, 1961.Detailed Analysis:1. Jurisdiction under Section 263 of the Income-tax Act, 1961:The assessee challenged the jurisdiction of the Commissioner of Income-tax (CIT) to invoke Section 263 of the Income-tax Act, 1961, arguing that the Assessing Officer (AO) had already applied her mind and denied a portion of the deduction under Section 80-IB, which was also considered by the Commissioner of Income-tax (Appeals) [CIT(A)]. The assessee contended that the assessment order had merged with the appellate order of the CIT(A), thereby barring the CIT from revising the assessment order under Section 263.The Tribunal agreed with the assessee, citing the Supreme Court's ruling in Shri Arbuda Mills Ltd. [1998] 231 ITR 50 (SC), which held that the powers of the CIT under Section 263 extend only to matters not considered and decided in the appeal. Since the CIT(A) had already deliberated on the issue of deduction under Section 80-IB, the Tribunal concluded that the CIT had no jurisdiction under Section 263 to revise the assessment order.2. Eligibility for Deduction under Section 80-IB of the Income-tax Act, 1961:The CIT had held that the assessee was only a builder and not a developer, and therefore not entitled to the deduction under Section 80-IB. The CIT's findings were based on the facts that the land was owned by the assessee's sister concern, and the development work was also carried out by the sister concern. The CIT argued that the AO had failed to recognize that developing and building housing projects are twin conditions that must be satisfied simultaneously for the deduction.The assessee countered that the AO had already considered these facts and denied deduction for a portion of the profits. The Tribunal noted that the AO had adopted one of the possible views in law, which was not erroneous or prejudicial to the interests of the Revenue. Citing the Supreme Court's decisions in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) and Max India Ltd. [2007] 295 ITR 282 (SC), the Tribunal held that when two views are possible, and the AO has taken one view, the CIT cannot invoke Section 263 merely because he does not agree with the AO's view.The Tribunal also referenced the Gujarat High Court's decision in CIT v. Radhe Developers [2012] 341 ITR 403 (Guj), which held that ownership of land is not a condition precedent for claiming deduction under Section 80-IB. The Tribunal found that the assessee had developed the housing project at its own risk and cost, and the landowners were only entitled to the land price.Conclusion:The Tribunal concluded that the CIT had no jurisdiction under Section 263 to revise the assessment order, as the issue had already been considered by the CIT(A). Additionally, the Tribunal found that the AO's view was one of the possible views in law and was not erroneous or prejudicial to the interests of the Revenue. Therefore, the Tribunal allowed the assessee's appeal on jurisdictional grounds and did not delve into the merits of the issue. The order was pronounced in the open court on September 28, 2012.