PCIT's revision order under section 263 quashed for 80IB(10) deduction on FSI sale following Tribunal precedent

ITAT Mumbai quashed PCIT's revision order u/s 263 regarding assessee's deduction claim u/s 80IB(10) for FSI sale. The Tribunal held that since the same issue was decided in assessee's favour for AY 2013-14 by the Tribunal (superior authority), PCIT was bound to follow this precedent. The assessment order represented a possible view supported by Tribunal's decision, thus not erroneous. Additionally, PCIT failed to provide hearing opportunity on fresh issues and improperly initiated revision based on Addl. CIT's proposal rather than independent examination of records, violating mandatory requirements of section 263.

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Issues Involved:
1. Legality of the Principal Commissioner of Income Tax (PCIT) invoking revisional jurisdiction under section 263 of the Income Tax Act, 1961.
2. Validity of the PCIT's order disregarding the Tribunal's decision in the assessee's own case for a previous assessment year.
3. Procedural fairness in raising new issues without providing an opportunity of hearing to the assessee.
4. Legitimacy of the PCIT initiating revisional proceedings based on a proposal from the Additional Commissioner of Income Tax (Addl. CIT).

Issue-Wise Detailed Analysis:

1. Legality of the PCIT Invoking Revisional Jurisdiction Under Section 263:
The PCIT invoked revisional jurisdiction under section 263 of the Income Tax Act, 1961, on the grounds that the Assessing Officer (AO) erred in allowing the assessee’s claim of deduction under section 80IB(10) concerning the sale of Floor Space Index (FSI) generated from the Mayanagar project. The assessee argued that the AO had taken one of the possible views, which is supported by the Tribunal's order for AY 2013-14. The Tribunal had previously upheld the CIT(A)'s decision allowing the deduction under section 80IB(10) for the same project. The assessee contended that where two views are possible, the assessment order cannot be deemed erroneous merely because the PCIT favors another view. The Tribunal reiterated that the AO's acceptance of the deduction claim was a permissible view, supported by the Tribunal's earlier decision, and thus, the assessment order was not erroneous.

2. Validity of the PCIT's Order Disregarding the Tribunal's Decision:
The Tribunal emphasized that the issue of the assessee’s eligibility for the deduction under section 80IB(10) for the Mayanagar project was already decided in favor of the assessee for AY 2013-14. The Tribunal noted that the PCIT should have followed the Tribunal's earlier order as it was a superior appellate authority. The Tribunal criticized the PCIT for disregarding the Tribunal's decision on the premise that the sole reason for allowing the deduction was the assessment order for AY 2015-16. The Tribunal concluded that the PCIT’s reason for disregarding the Tribunal's decision was misconceived and unsustainable.

3. Procedural Fairness in Raising New Issues:
The Tribunal found that the PCIT raised a new issue regarding the assessee’s transaction with M/s Four Zone Realtors Pvt. Ltd. for the sale of FSI without issuing a show-cause notice or providing an opportunity of hearing to the assessee. The Tribunal cited the Supreme Court's decision in CIT vs. Amitabh Bachchan, which mandates that an opportunity of hearing must be afforded to the assessee under section 263. The Tribunal held that the PCIT's failure to provide such an opportunity rendered the revisional order legally fragile due to the violation of principles of natural justice.

4. Legitimacy of the PCIT Initiating Revisional Proceedings Based on a Proposal from Addl. CIT:
The Tribunal examined the provisions of section 263, which require the PCIT to examine records and consider the assessment order before invoking revisional jurisdiction. The Tribunal noted that the PCIT initiated proceedings based on a proposal from the Addl. CIT, without independently examining the records or considering the assessment order. The Tribunal concluded that the mandatory requirement of section 263 was not satisfied, rendering the PCIT's order legally infirm and unsustainable.

Conclusion:
The Tribunal quashed the PCIT's order, holding it unsustainable on multiple grounds, including the failure to follow judicial discipline, lack of procedural fairness, and improper initiation of revisional proceedings. The Tribunal emphasized that the AO's view was a permissible one, supported by the Tribunal's earlier decision, and thus, the assessment order was not erroneous.

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