TaxTMI 
TaxTMI 
2016 (7) TMI 377
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....income at Rs. 20,53,620/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) of the Income Tax Act was issued on 29.8.2011, which was duly served upon the assessee. The ld.AO, thereafter, issued notice under section 142(1) on 17.10.2011 and 3.9.2012. On scrutiny of the accounts, it revealed to the AO that the assessee had claimed deduction of Rs. 5,25,20,351/- under section 80IB of the Income Tax Act. According to the AO, vide order sheet dated 31.10.2012 the assessee was asked to submit complete details with respect to its claim. The assessee has submitted details called for vide his reply dated 3.12.2012, 4.12.2012 and 10.12.2012. The ld.AO has allowed the claim of the assessee by observing that the assessee has claimed parity with the facts of Radhe Developer's case decided by the Hon'ble Gujarat High Court. Copy of the decision was produced before the AO. The ld.AO has directed the assessee to compile details in a tabular form exhibiting parity between the facts of both these cases. Such chart was submitted by the assessee along with its reply dated 20.12.2012. After analysing of that reply, the ld.AO was satisfied with the regard to ....
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....ct, without application of correct provisions of law and has taken inconsistent decision in light of the Department's stand on this issue in assessee's own case for earlier A.Y. 2. Notwithstanding the above, on perusal of the assessment records it is seen that the valuation of inventory as on 31.03.2010 is supported by Civil Engineer's Certificate dtd. 15.04.2010. As per the said certificate, the measurement of closing W.I.P. was reported at 7202 sq.mtrs having valuation of Rs. 7,59,99,133/- which works out to Rs. 10,552/- p.sq.mtr. it is seen that assessee had submitted similar certificate dtd. 15.04.2009 certifying the value of closing stock of W.I.P. as on 31.03.2009. As per the said certificate, the measurement of closing W.I.P. is reported at 22125 sq.mtrs. having value of Rs. 23,34,70,0187- and per sq.mtr. value once again works out to Rs. 10,552/-. Further, assessee has shown decrease in stock of W.I.P. for the year under consideration at Rs. 15,74,70885/- which if divided by the area construction sold by assessee during the year under consideration at 16969 sq.mtrs., the p.sq.mtr. value works out to Rs. 9,280/-. Infact, assessee had incurred further exp....
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....opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income- tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) "record shall include and shall be deemed always to have included all records relating to any proceeding un....
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....quired on a particular order of the Assessing Officer. After this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the....
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....ry. If there is a lack of enquiry, then the assessment order can be branded as erroneous. The following observations of the Hon'ble Delhi High Court are worth to note: "12. 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....
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....ight of the above, let us examine the facts of the present case. According to the ld.Commissioner, Dharti Vikas Coop. Housing Society was given sanction for the development of project by AUDA on 30.3.2007. The land on which scheme of residential units were put up belonged to Dharti Vikas Coop. Housing Society, and it had applied for development of housing scheme on 10.4.2006. It got permission in its name on 30.3.2007 from AUDA. The assessee had contended that it has entered into two agreements with Dharti Vikas Coop. Housing Society on 12.4.2007. Prior to the entrance of agreement, there was an oral consent between both the parties. The ld.Commissioner has rejected this plea of the assessee by observing that the assessee has alleged purchased of substantial right including development rights for Rs. 1,19,50,197/-. The AO has not verified what is the treatment given by the Dharti Vikas Coop. Housing Society to the receipt of Rs. 1,19,50,197/-. According to the ld.Commissioner a notice under section 133(6) of the Act ought to have been issued by the AO during the assessment proceedings. Thus, he harboured a belief that no proper inquiry was conducted by the AO. No doubt, the assessm....
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....constructing residential houses having area less than 1500 sq.ft. For the middle class society In the second para of page no 4 it has been mentioned that society has entered into development agreement with assessee company for which oral agreement is also executed. (iii) 5. The Party of the First and The Party of the Third Part have executed one Agreement of Sale on 18-05-2000 accordingly on that basis the rights of agreement of Sale dated 7-9-91 at the rate of Rs. 100/- per Sq.ft. Subject to other conditions written therein are decided to be purchased by the Party of the Third Part As per clause 33 of agreement, sale of land is agreed at Rs. 47,19,550 and 31,46,700 on which stamp duty @ 1% is required to be paid and same is to be borne by developer. (iv) 6. In fact in The Party of the First and Second Part confirming party have no necessary technical knowledge and skill pass through the said scheme to arrange for constructing residential houses having area less than 1500 sq.ft. for the middle class society and also have no finance to invest as per the size of scheme and to register the members for that required alertness and skill be....
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....heir remuneration and fees etc. and for that to bear all expenses, to execute agreements so that the construction work of this project can be completed successfully. At top of page no4 of the agreement, it has been mentioned that developer can construct with the help of engineers, contractors consultants, skilled persons, structural engineers, labour contractors, electricians, plumbing contractors, labours etc and developer is aware about services provided by such persons. 3)The said Developer cum Building Contractor is authorized to admit the persons who are willing to join in the scheme to get the houses of fixed area and in this manner to admit the respective member in the scheme or at the time of admission of such member as per the scheme the fixed amount of contribution of construction and other amounts and incidental expenses that the admitting members shall have to pay as admission fees the receipt of deposit or a clear receipt of amount contribution shall have to be given, moreover the Developer cum Building Contractor has given full right and authority also to decide the price of houses of this scheme and to execute necessary agreements with the purchasers ....
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....s land that shall remain then Developer cum Building Contractor shall have right to allot that land. As per clause 22 of the agreement, it has been agreed that assessee company developer is entitled to fix sale price of housing unit to members and proposed unit holders to scheme in lieu of their allotment of unit. Further as per clause 27 of the agreement, it has been agreed that till the date when entire construction on said land is completed and assessee company receives the money from different members, the possession of impugned land construction thereon will be with assessee company. Further, developer is entitled to deal any part of such land and dispose/transfer it as per its own will. 12) That by the said the Party of the First and Second Part have given all the authorities to Developer cum Building Contractor, for completing the scheme of constructing residential houses and incidental work there to and therefore the said Developer cum Building Contractor has to complete this scheme as per his own talents, whatever he deems proper as per his discretion and decisions. The accounts right from the implementation of this Agreement up to the completion of the pro....
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.... in favour of the persons purchasing the houses in the scheme are to be executed by all the three parties joint In clause no 28 of the agreement, it has been stated that society has given all the rights of allotment or transfer to developer for various units constructed in project along with open & margin land, terrace, parking place etc. (24) The amount of total collection received from person becoming member in this scheme out of that the amount shall become payable to The Party of the First that is paid to Second Part by them and to The Party of the First shall be entitled to receive consideration as per the Agreement dt.18-5-2000 and after deducting that remaining all amount shall be received by The Party of Third Part as his remuneration." As per clause 26 of the development agreement, developer is entitled/responsible to receive or bear any income, loss, profit arising from development of project which means that out of amount is received from members, amount payable to society will be reduced and thereafter whatever will be surplus/ loss, such profit or loss will be completely born by developer and society will not be responsible/entitled to such amount. F....
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....ng of the Tribunal in the Asstt.Year 2009-10 reads as under: "4. Aggrieved by the order of A.O., assessee carried the matter before the ld. CIT(A) who deleted the addition by holding as under: "3.7 In the present case, appellant has fulfilled all the basic conditions laid down under Section 80IB(10) which is summarized at para 3.1 herein above and even Assessing Officer has not disputed these facts. The appellant has entered into two development agreements with Society for development and construction of housing project in land area of 7485 Sq. Mtrs. And as per such agreements, appellant has acquired impugned land along with possession at agreed consideration of Rs. 1,19,50,197 which includes stamp charges being 1% of the land. As per the development agreements entered with Society, Society is entitled to value of land as stated herein above and all the profit/gains and losses, if any, arising on the completion of the project has to be borne by appellant. This fact proves beyond doubt that Assessee has become de-facto owner of the land and took the full risk of executing the housing project and thereby making profit/loss, as the case may be. Further, as per variou....
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....Society. (iv) The appellant was entitled to sell housing units as per its own convenience and all the rights of allotment or transfer of various units constructed in the project along with open and margin land was with appellant company. It has been agreed between both the parties that till the realization of sale consideration from proposed buyers, possession and contractual lien on such unsold area will be with appellant company. (v) Appellant was entitled to give advertisements in any form for the sale of housing units at its own cost. (vi) Appellant-developer was entitled to mortgage the land and construction on impugned land on which housing project has been developed for obtaining finance, if any required for the project. 3.9. In the present case, appellant has acquired the impugned land from the society at fixed cost and Society was not entitled to any further benefits arising from development of the project. Further, all the development and construction of the project was carried out by appellant at its own risk and has borne all the expenditure like material cost, labour cost, architect's fees, AUDA charges, site expenses, administra....
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.... Officer is deleted. The related ground of appeal is allowed." 5. Aggrieved by the order of ld. CIT(A), Revenue is now in appeal before us. 5.1 Before us, ld. D.R. took us the various finding of A.O. and supported his order. Ld. A.R. on the other hand reiterated the submissions made before the ld. A.O. and ld. CIT(A) and supported the order of ld. CIT(A). 6. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to eligibility for deduction u/s.80IB(10) of the Act. The claim of deduction was denied by the A.O. mainly for the reason that assessee was not the owner of the land and according to him, the assessee was merely a contractor. We find that ld. CIT(A) while deciding the issue in favour of assessee and after perusing the development agreement has given a finding that assessee had acquired land from the society at fixed cost and society was not entitled to any further benefits arising from development of the project, all the development and construction of the project was carried out be assessee at its own risk and the assessee had borne all the expenditures, assessee had received entire s....
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....sstt.Year 2009-10 was accepted by the AO, meaning thereby, this WIP would become opening WIP for the Asstt.Year 2010-11. If the assessee inflated opening WIP then the profit for the current year would be reduced. The assessee also contended that it has no other project during the year. Its project is eligible for deduction under section 80IB(10) of the Act. The rate of deduction is also same in all these years. It will not affect the taxability in any of these years. The ld.CIT reproduced the objections and explanation of the assessee, but did not conclusively adjudicated this fact while recording his finding in para-II at page no.35 of the impugned order. He simply observed that the AO has not asked for any supporting evidence as to how the Civil Engineer has calculated WIP. The case of the assessee is that it has been maintaining actual details and on the basis of details of actual expenditure, value of closing stock can be ascertained. The Hon'ble Delhi High Court in the case of ITO Vs. D.G. Housing Project Ltd., reported in 343 ITR 329 has considered this aspect. The Hon'ble High Court has held that while exercising jurisdiction under section 263 of the Income Tax Act, the ld.C....