2023 (1) TMI 969 - AT - Income Tax

ITAT upholds PCIT order under Section 263, directing de novo assessment for Section 80IB deduction

Raj Abhishek Corporation Versus Principal Commissioner of Income Tax, Surat-1, Surat

Raj Abhishek Corporation Versus Principal Commissioner of Income Tax, Surat-1, Surat - TMI Issues Involved:1. Assumption of jurisdiction under Section 263 of the Income Tax Act, 1961.2. Setting aside the original assessment and directing a de novo assessment regarding the eligibility of deduction claimed under Section 80IB of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Assumption of Jurisdiction under Section 263 of the Income Tax Act, 1961:The assessee challenged the correctness of the order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961. The PCIT exercised jurisdiction under Section 263, noting that the assessee-firm had sold more than one flat to single individuals, which contravenes sub-clause (f) of sub-section (10) of Section 80IB of the Act. The PCIT observed that the Assessing Officer (AO) had not made any inquiry or disallowance regarding the deduction claimed under Section 80IB during the assessment. This lack of inquiry rendered the AO's order erroneous and prejudicial to the interest of the Revenue. The PCIT initiated proceedings for revision of the order under Section 263 by issuing a show-cause notice to the assessee.In response, the assessee argued that the multiple allotments were due to clerical errors and provided details of the booking dates, claiming that these bookings were made before the amendment of the Act in 2010, which introduced the relevant sub-section. However, the PCIT rejected these contentions, stating that the AO had failed to inquire into the issue of multiple allotments in light of Section 80IB(10)(f). Consequently, the PCIT held that the AO's order was erroneous and prejudicial to the Revenue's interest.2. Setting Aside the Original Assessment and Directing a De Novo Assessment:The PCIT directed the AO to frame a de novo assessment after considering the eligibility of the deduction claimed under Section 80IB. The assessee contended that the AO had already examined the issue during the original assessment and that the order passed by the PCIT was not sustainable. The assessee provided details of cheques received from flat owners as evidence of bookings made before the amendment of the Act, asserting that the AO had considered these details.The Revenue argued that the AO had not made any inquiry into the issue and had allowed the claim without proper adjudication. The ITAT noted that the AO had issued a notice under Section 142(1) asking for details of persons to whom flats were sold but had not verified the specific details regarding multiple allotments. The ITAT observed that the details of cheques and booking dates provided by the assessee were not submitted during the original assessment, indicating that the AO had not examined these details.The ITAT held that the AO's failure to investigate the issue of multiple allotments and the conditions of Section 80IB(10)(f) rendered the assessment order erroneous and prejudicial to the Revenue's interest. The ITAT upheld the PCIT's order, confirming that the AO's order was unsustainable in law and warranted revision under Section 263.Conclusion:The ITAT dismissed the assessee's appeal, upholding the PCIT's order under Section 263. The ITAT concluded that the AO's failure to verify the conditions of Section 80IB(10)(f) and the lack of inquiry into the issue of multiple allotments made the assessment order erroneous and prejudicial to the Revenue's interest. The ITAT confirmed the PCIT's direction for a de novo assessment to properly examine the eligibility of the deduction claimed under Section 80IB.