TaxTMI 
TaxTMI 
2017 (10) TMI 1495
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....e case and as per law, the Ld. Commissioner of Income-tax erred in setting aside the order passed by the Assessing Officer and directing to pass the fresh order. 2. The Ld. Commissioner of Income-tax had erred by not considering the details and an explanation submitted by the appellant and has passed the order. 3. Without prejudice the Ld. Commissioner of Income-tax was not justified in considering the assessment order dated 19/12/2011 as erroneous and prejudicial to the interest of the revenue. 5. The assessee is aggrieved by exercise of revisionary powers by the Commissioner under section 263 of the Act in the case of assessee for both the years under consideration. 6. Briefly, in the facts of the case, the assessee had filed the return of income for the year under consideration declaring total income of Rs. 91,85,220/-. The assessment was completed in the hands of assessee under section 143(3) of the Act on book profits under section 115JB of the Act at Rs. 4,68,21,658/-. The Commissioner was of the view that there was excess allowance of deduction under section 80IB(10) of the Act and also incorrect computation of book profits, hence, show cause notice w....
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....xed book profit of Rs. 4.68 crores as offered by the assessee. While computing the said book profit, the assessee had reduced carry forward losses of Rs. 53,28,640/- in assessment year 2009-10 and the same was accepted without their being any carry forward unabsorbed depreciation. The omission to disallow carry forward losses, as per the Commissioner, had resulted in under-assessment of book profit by Rs. 53,28,640/- involving short levy of tax and interest under section 234B of the Act. 7. The Commissioner gave show cause notices to the assessee, who time and again sought adjournments but did not furnish details completely and did not appear before the Commissioner and hence, he proceeded to decide the issue on the basis of documents filed before the Assessing Officer i.e. during the course of assessment proceedings. The first issue which was noted by the Commissioner was that as per the return of income, the assessee had shown net profit of Rs. 5,21,50,298/- which consists of 31% of revenue generated on sale of flats in Phase-I and long term capital gains. The expenditure as per Trading (Construction) Account for the year ending 31.03.2009 was shown at Nil, which proved the fa....
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....der of Commissioner. The Commissioner further observed that where the Assessing Officer had failed to make any enquiries as how the assessee was entitled to claim the deduction under section 80IB(10) of the Act and further failed to note that if actually work of construction of housing project had been undertaken by the assessee, then why the assessee is entitled to the deduction when the assessee had only shown regular administrative expenses amounting to Rs. 54,21,261/- and bank charges of Rs. 5,976/-. In Schedule 'D' of fixed assets, the assessee had shown Rs. 54,27,237/- as addition to work-in-progress which was contrary to the factual position of Trading (Construction) Account showing Nil expenditure during the year under consideration. The Commissioner held that failure to enquire by the Assessing Officer and mis-application of law and non conduct of any enquiries makes the assessment order passed by the Assessing Officer as erroneous in so far as it was prejudicial to the interest of revenue. 8. Similarly, with regard to calculation of book profits of Rs. 4.68 crores, which was declared by the assessee in its computation of income and was accepted as such by the Assessing....
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....velopment. The fees of Architect, Consultants, scrutiny fees for sanctioning of FSI expenses for sanctioning of plans, advertisement cost and cost of providing security had to be borne by the assessee. The development initially had to be done by the assessee and Rajkotia. However, subsequently the said Joint Venture between the assessee and Rajkotia entered into an agreement with Shree Venkatesh to jointly undertake the development and construction of housing project on the said land. The terms of agreement dated 05.10.2004 were agreed upon, under which Joint Venture had introduced the land on which the development had to be undertaken. The Joint Venture had to obtain various sanctions and approvals from the Government Authorities for the development of the said land. Shree Venkatesh under the agreement was assigned the responsibility of carrying on the construction work on the land. The assessee claimed that since it had after introducing the land in housing project had obtained various permissions and approvals over the period of time and the expenditure incurred on getting the approvals had to be incurred and also the necessary risk and responsibilities were assumed by KPJV part....
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....ure was not determinative of the fact whether the assessee was engaged in the activities of development and construction of housing project. Further, the assessee again reiterated that since it had introduced the land, the cost to obtain approvals for permissions, etc. and had also undertaken certain obligations which may result in incurring of expenditure, it cannot be said that the assessee has not incurred any expenditure. The learned Authorized Representative for the assessee in this regard placed reliance on the ratio laid down by the Hon'ble High Court of Karnataka in CIT Vs. Shravanee Constructions (2012) 22 taxmann.com 250 (Kar.). It was also pointed out by the learned Authorized Representative for the assessee that SLP filed by the Revenue has been dismissed in this case. 11. The second aspect which has been stressed by the learned Authorized Representative for the assessee was that there was no merit in the order of the Commissioner in invoking the provisions of section 263 of the Act. He stressed that where the claim made by the assessee was prima facie allowable and was not a claim which was totally unsustainable in law, the provisions of section 263 of the Act....
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.... falls in assessment year 2005-06 and in such case, the assessment order passed for the captioned assessment year cannot be said to be prejudicial to the interest of revenue. 14. The Commissioner had also exercised the revisionary powers on calculation of book profits under section 115JB of the Act. The learned Authorized Representative for the assessee pointed out that where the assessment was taken up only for limited issue and verifying the claim of deduction under section 80IB(10) of the Act, hence, the powers of Assessing Officer in the proceedings were limited and he had no power to verify any other claim. In view thereof, he further stated that the powers of revision under section 263 of the Act could not be invoked where the Assessing Officer himself did not have the power to examine any other issue. In this regard, reliance was placed on the following decisions:- i) Gift Land Handicrafts Vs. CIT (2008) 19 SOT 5 (Delhi) (URO) ii) Sanjeev Kr. Khemka Vs. Pr. CIT in ITA No.1361/Kol/2016, relating to assessment year 2011-12, order dated 02.06.2017 iii) Nayek Paper Converters Vs. ACIT reported in 93 TTJ 574 (Cal) 15. The learned Authorized Repres....
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....on different decisions, the learned Departmental Representative for the Revenue referred to each one of them and pointed out that factually all of them were different. He further stressed that where the Assessing Officer had failed to make enquiries, then the order was erroneous. In this regard, he placed reliance on the following decisions:- i) Rampyari Devi Saraogi Vs. CIT (1968) 67 ITR 84 (SC) ii) Gee Vee Enterprises Vs. Addl. CIT & Others (1975) 99 ITR 375 (Del) iii) Sify Software Ltd. Vs. ACIT (2017) 80 taxmann.com 273 (Chennai - Trib.) iv) Rajmandir Estates (P.) Ltd. Vs. Pr. CIT (2016) 70 taxmann.com 124 (Calcutta), which has been upheld by the Hon'ble Supreme Court in 245 Taxman 127 (SC) 17. He further referred to the order of Commissioner and pointed out that the Commissioner has not given any finding and the order of the Commissioner is not conclusive since the Assessing Officer has to make enquiries and come to a finding in this regard. Where the assessee had claimed the deduction under section 80IB(10) of the Act on sale of land, the same clearly shows that the order of the Assessing Officer is erroneous. 18....
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....recourse cannot be made to section 263(1) of the Act. Further, it has been laid down by the Hon'ble Supreme Court in the said case that the provisions cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted and incorrect assessment of facts or incorrect application of law will satisfy the requirement of order being erroneous. In the same category falls the orders passed without applying the principles of natural justice or without application of mind. It was further held by the Apex Court that the phase prejudicial to the interest of revenue has to be read in conjunction with erroneous order passed by the Assessing Officer. Every loss of revenue as consequent of an order of the Assessing Officer cannot be treated as prejudicial to the interest of revenue, for example, when Income Tax Officer adopted one of the courses permissible in law and it has resulted any loss of revenue or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as erroneous order prejudicial to the inte....
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.... of the land in the name of "Kunver Prabhu Joint Venture‟ (KPJV). This is evident from the clauses (c), (d) and (e) of the Recitals and clause 3 of agreement with Rajkotia which states that both the parties intended development of the said property. It has been specifically agreed that the assessee and Rajkotia are joint responsible for providing finance required for execution and implementation of the project including development of the property and shall jointly make all the efforts to obtain necessary facilities, infrastructure and resources for development. It was also agreed that the fees of architect, consultants, scrutiny fees for sanctioning of FSI, administration charges, expenses for sanctioning of plans, advertisement cost and cost of providing security, infrastructure development, such as internal roads, water supply, SWD electricity charges, sewerage deposits, etc. shall be eventually borne by the appellant. d. In order to develop the property, over the period, the aforesaid Joint Venture had obtained various approvals from Government authorities for use of the land for development, permissions under the Urban Land (Ceiling & Regulations) Act, 1976, dem....
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....d at page 1-5 of the Paper Book. The working of distribution of profit from the project is enclosed at page 3 and 41 of the Paper Book filed by Ld. CIT-DR. It is submitted that the manner in which the consideration is being determined under the agreement with Venkatesh itself shows that the returns from the project were not fixed. It is submitted that since the profit of the assessee was determined on sale value of the project, the profit attributable to the assessee would depend on successful completion of the project. Further, the consideration of the assessee would also depend on several factors and would have been adversely affected in several situations like: (i) Delay in completion of the project or discontinuance of the project. (ii) Delay in sale of flats due to adverse market conditions. (iii) Fall in the property prices in subsequent years resulting into fall in the overall profit of the appellant. i. The above factors would have resulted into loss to the assessee if the assessee was unable to fetch even the value of the land. Thus, the returns to the assessee were also uncertain contrary to what has been argued by Ld. CIT-DR." 24. L....
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....ar under consideration, copy of Trading Construction Account is placed at page 3 of the Paper Book. In the Notes to accounts to the Balance Sheet placed at page 17 of the Paper Book-1 in note Nos.11 to 15, the assessee had declared as under:- "11. The Company has entered into Joint Venture with Rajkotia Securities Ltd. for development of Land as per the agreement dated 26/05/1996. The Company is to receive Rs. 200/- per sq. ft. from Joint Venture as Cost of Land and 50% of balance as share of profit. 12. The Company together with its Co-venturer Rajkotia Securities Ltd. has entered into two agreements with Venkatesh Developers on 05/10/04 for development of Residential Complex for approximately 8 acres of land. Due to difference in opinion between the parties of Venkatesh developers they divided the said property, one for which the agreement was entered into on 05/10/04 was retained by Venkatesh Developers and other for which the agreement was entered into on 10/12/04 was accepted by Sunrise Builders upon the terms and conditions of both the initial agreements. The company has given its consent for the same. The work of development by both the parties is in full s....
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....ee has even filed the copy of questionnaire issued by the Assessing Officer which is placed at pages 20 to 22 of the Paper Book, in which specific query of deduction claimed under section 80IB(10) of the Act was Rs. 3.99 crores along with documentary evidence and detailed computation was asked for. In the assessment order passed under section 143(3) of the Act, dated 19.12.2011, the Assessing Officer mentions that the assessee had entered into various Joint Ventures and has entered into real estate business and claimed deduction under section 80IB(10) of the Act for the project. The assessee was asked to submit all the necessary details in support of his claim of deduction which has been verified and placed on record. The Assessing Officer thereafter, notes the carry forward of losses and determines the total income at Rs. 1.17 crores. The assessee is assessed on the book profits under section 115JB of the Act at Rs. 4.68 crores. 27. The assessee has also filed order sheet entries for assessment year 2010-11 in Paper Book-2 at pages 1 and 2, wherein again questionnaire was issued and submissions were made by the assessee on various dates in the questionnaire issued, the complete....
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....ons of payment of deposit to the Co-venturer i.e. the assessee would not come in the way of claim of deduction under section 80IB(10) of the Act, hence, Rajkotia was entitled to the said deduction. By simile where the Co-venturer of a Joint Venture has been allowed the deduction on identical facts, then similar deduction to the other Co-venturer cannot be denied on any ground. Since the conditions are jointly applicable and are to be fulfilled by both the Co-venturers i.e. the assessee and Rajkotia, then following the same line of reasoning as in the case of Rajkotia, the assessee is entitled to claim the deduction under section 80IB(10) of the Act. In such circumstances, where the Assessing Officer has allowed the deduction to the assessee under section 80IB(10) of the Act, then such an order passed by the Assessing Officer cannot be said to be erroneous and consequently, not prejudicial to the interest of revenue. 29. Now, coming to the order of Commissioner in denying the claim to the assessee on the ground that no construction expenditure has been incurred by the assessee during the impugned year. We need to go into factual aspects once again, under which the assessee had cl....
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.... local authority; (iii) Making the land usable for the purpose of apartment construction by providing proper road and to give an approach to the site; (iv) Jointly supervising the construction of the apartments buildings; (v) Marking the apartments falling to the share of the assessee; (vi) Also undertaking the leveling the road and removal of rocky surface in the said land and made it usable for the purpose of construction of the apartment complexes. 8. In terms of the agreement, which are not in dispute, the assessee not only undertook the aforesaid development activities on the land in question, but in fact, he entered into an agreement of sale with the owners of the land, paid the entire consideration but he did not take a registered sale deed in his name. On the contrary, the procedure adopted is he in turn entered into a joint development agreement with the builder and the owner of the land was made a party to the said proceedings. Thus, the assessee contributed the land, undertook the aforesaid development activities in the said land and thus, complied with all other conditions, which have to be fulfilled before claiming benefit u....
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....y approvals and plan sanctions, retained 24% of built up area. The Tribunal noted that the assessee had contributed the property in lieu of capital contribution for joint development and construction and the second party was required to make investment in joint development and construction and where the assessee was required to make investment in schedule property and also to get the statutory approvals at his cost, the Tribunal in such scenario held that the approval and plan sanction was the first and initial stage which was to be taken by the assessee and for that purpose, the assessee was required to make investments. So, it cannot be said that the assessee did not make any investments in the project under consideration. The Tribunal further held as under:- "12. In the present case, the AO denied the deduction to the assessee by stating that the assessee only contributed the land and had not carried out any construction activities. Now, we have to analyze the provision contained in sec. 80IB(10) of the Act. The said provision read as under : "The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st....
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....ir lordships of Hon'ble Jurisdictional High Court in the case of CIT Vs. M/s Shravanee Construction (cited Supra) at para 8 of the judgment dated 28th Feb, 2012 in ITA No.421 and 422 of 2009 observed as under : "In terms of the agreement, which are not in dispute, the assessee not only undertook the aforesaid development activities on the land in question, but in fact, he entered into an agreement of sale with the owners of the land, paid the entire consideration but he did not take a registered sale deed in his name. On the contrary, the procedure adopted is he in turn entered into a joint development agreement with the builder and the owner of the land was made a party to the said proceedings. Thus, the assessee contributed the land, undertook the aforesaid development activities in the said land and thus, complied with all other conditions, which have to be fulfilled before claiming benefit u/s 80IB(10) of the Act. The builder has invested the money in the construction. It is after completion of the building in terms of the agreement, the assessee was given 22% share of the building area. It is after sale of the built area, in terms of sec. 80IB(10), the assessee is....
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....missible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law." 35. Following the said principle laid down by the Hon'ble Supreme Court and in view of the fact that necessary enquiries were conducted by the Assessing Officer in scrutiny proceedings, which were picked up under CASS for the specific purpose of verifying the claim of deduction under Chapter VI-A, the Assessing Officer after conducting the enquiries have come to a conclusion which is as per the law and hence, the same cannot be disturbed by the Commissioner under the garb of exercise of revisionary powers under section 263 of the Act. In any case, the Commissioner has failed to give a finding and has remitted the matter back to the file of Assessing Officer to verify the claim of assessee, which is also not permissible under section 263 of the Act. 36. Without prejudice to our findings in the paras hereinabove, the order of Commissioner under section 263 of the Act is contrary ....