AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2023 (1) TMI 969
X X X X Extracts X X X X
X X X X Extracts X X X X
....bility of deduction claimed u/s 80IB of the Act. 3) The appellant prays for granting such other relief as may be deemed just and proper by your Honours considering the factual and legal aspects of the case of the appellant. 4) The Appellant craves leave to add, amend, alter, modify, substitute, delete, change or vary all or any of the Ground or Grounds of Appeal." 3. The facts necessary for disposal of the appeal are stated in brief. The assessee-firm (M/s Raj Abhishek Corporation) is engaged in the business of developing of Residential Projects and filed its return of income for AY. 2017-18 on 30.10.2017 declaring total income of NIL after claiming deduction u/s 80IB of the I.T. Act of Rs.2,71,51,278/-. Thereafter, the case was selected for complete scrutiny through CASS; and scrutiny assessment under section 143(3) of the Act was finalized on 16.12.2019 accepting the returned income. 4. Later, Learned Principal Commissioner of Income Tax-1, Surat (in short "ld. PCIT"], has exercised his jurisdiction under section 263 of the Income Tax Act, 1961. On perusal of records, it was noticed by the Ld.PCIT that assessee- firm had started the construction activity o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... show-cause notice, no any reply has been furnished by the assessee before the assessing officer. 7.Thereafter, one more opportunity was granted to the assessee by ld PCIT, vide notice bearing DIN ITBA/REV/REV1/2021-22/1040196943(1) dated 28.02.2022 issued to the assessee to submit his reply through e-proceedings on or before 04.03.2022. 8.In response to the said notice, the assessee submitted its reply by e-proceeding. The reply of the assessee is reproduced as under: "This has with reference to the above. we would like to submit the following in response to notice issued by you. We were in construction business of residential units during the year under consideration. We have claimed benefit of section 80IB of the Act for our project. Your notice contains various name of persons to whom we have allotted multiple units. The detail is as below: Flat No. C-02/493 Naresh Jagdishchandra Vij ABJPV 9840 R ABJPV 9840 R C-03/394 Manish Jagdishchandra Barot ABJPV 9840 R BMIPB 0629 H B-08/561 Ramchal Singh Rajput AAYPR 5138 A AAYPR 5138 A B-09/162 Sureshchandra Chandrashekhar Mishra ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....However, on going through the details it is noticed that Flat No.C02/493 and C03/394 were sold to Shri Naresh Jagdishchandra and Manish Jagdishchandra, having same father's name. However, while completing assessment proceedings, the AO has not inquired the issue in the light of the provisions of clause (f) of the section 80-IB(10) of the Act. The is section reproduced as under: "Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. 80-IB. (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. ... .... ... (10) the amount of deduction in the case of an undertaking developing and building housing projects approved be....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... PCIT, the assessee is in appeal before us. 13. Learned Counsel for the assessee, argued that some of the flat owners were paid advance amount prior to the commencement of the scheme. Therefore, they are not covered by the issue raised by Ld.PCIT. The Ld. Counsel has submitted the details of the cheques received from the flat owners which are given below: FLAT NO. AMOUNT CH.DATE CH.NO FLAT OWNERS NAME BANK STAT.PAGE D 19-374 1,70,000 31.08.2007 67971 SHILPA ASHOK MODI ASHOK DHNSUKHLAL MODI 73 D 19-375 1,700,000 31.08.2007 D 19-376 1,70,000 31.08.2007 D 19-377 1,70,000 31.08.2007 D 03-311 50,000 06.02.2008 790527 HEMNTA RAMVILAS JAIN 74 B 07-454 50,000 06.02.2008 970528 Thus, Ld. Counsel stated that in the assessment order itself, the Assessing Officer mentioned that he has examined the issue u/s80IB of the Act. Therefore it is not a case of lack of inquiry and Assessing Officer has examined the issue and came to the right conclusion. Therefore, the order passed by Ld.PCIT on the issue which are already examined by the Assessing Officer is not sustainable in the eyes of law and theref....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld by the Hon'ble Apex Court that the provision s 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 and prejudicial to the interest of the Revenue that the section will be attracted. Thus, the Principal CIT has looked into the aspect of the as order in the present case to the extent of erroneous and prejudicial to the interest of Revenue and thus, Section 263 of the Act is attracted in the present case. Section 263 of the Act is not invoked simply for correcting mistake or error committed by the Assessing Officer in the present case. It can be observed that the Pr. CIT has considered all the contentions of the assessee and thereafter rightly came to the conclusion that the Assessing Officer failed to look into the correct applicability of Section 80IA(4) in respect of the assessee's claim which amounts to erroneous and prejudicial to the interest of the revenue./the present case is covered by the decision of the Hon'ble Apex Court in case of Deniel Merchants Private Limited & Anr. Vs. Income Tax Officer (Appeal No.2396/2017 order dated 29.11.2017). The Hon'ble Supreme Court held....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2 the information called for as per annexure and on the points or matters specified therein on or before 22/11/2019 at 12.20 PM c) The above mentioned evidence/information is to be furnished online electronically in 'E-Proceeding' facility through your account in 'e-filing' website of Income Tax Department. d) Para(s)(a) to (c) are applicable if you have an account in e-filing website of Income Tax Department. Till such an account is created by you, assessment proceedings shall be carried out either through your e-mail account or manually (if e-mail is not available). e) In cases where order has to be passed under section 153A/153C of the Income tax Act, 1961readwith section 143(3), assessment proceedings would be conducted manually. Your faithfully, Sd/- Karam Chand Dhama Circle 1(2), Surat 1. As you are aware that your case for AY 2017-18 has been selected in scrutiny under CASS and notice u/s 143(2) of the I.T. Act,1961 dated 16.08.2018 has been duly served upon you. Please furnish the following further details: 2. Please provide the complete list of persons to whom the flats have been sold since inception of project till 310....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 06.02.2008 970528 Hence, we note that above details, were not available before the assessing officer. Even before ld PCIT, the assessee has submitted general statement about flat owners of Shilpa Modi and Hemanta Ramvilas, therefore ld PCIT has also not examined above details. We also note that in front of four figures, consisting Rs. 1,70,000/- only one cheque number 67971 is submitted by the assessee. For each figure there should be separate cheque number. How one cheque number represents/ may include four figures? Vide assessee`s paper book page No.73, the bank statement shows figure at Rs.6,80,000/-. During the revision proceedings, u/s 263 of the Act such details were not filed before ld PCIT, hence these are new/fresh details before the Bench which were not even available before the assessing officer. We have called the assessment records and observed that even bank statement was not submitted during the assessment stage, only bank account numbers were submitted by the assessee (not the bank statement) before the assessing officer. By way of letter dated 30.04.2019, the assessee submitted bank details, which is reproduced below: 18. From the above, it is vivid that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es, the copy of agreements of flates allotted to Shilpa Modi and Hemant Ramvilas, were not examined by the assessing officer. Therefore, we note that it is clear violation of clause 'f' of section 80(IB)(10) of the Act, because the allotment of flats were made to individuals and their family member more than once. Hence, such specific issue raised by ld PCIT in his revision proceedings, has never been examined by the assessing officer. 22. Let us take the guidance of judicial precedents laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not submitted any explanation regarding violation of clause 'f' of section 80IB(10) of the Act, during the assessment stage. Therefore, we note that Assessing Officer has passed the order on incorrect assumption of fact, there is incorrect application of law by assessing officer, the assessment order is passed by the Assessing Officer without application of mind and assessing officer has not investigated the issue before him about clause 'f' of section 80IB(10 of the Act. Moreover, there is no two possible views are available before the assessing officer, thus, the view taken by the Assessing Officer is not sustainable in law, as it is violation clause 'f' of section 80IB(10 of the Act. Hence, based on these facts and applicable legal position on these facts, we are of the view that order passed by the assessing officer is erroneous and prejudicial to the interest of Revenue. 24. Our view is fortified by the Judgment of Hon`ble Delhi High Court in the case of NAGESH KNITWEARS P. LTD in ITA NOS. 591/2008, dated 1st June, 2012 ( 345 ITR 135(Del), wherein it was held as follows: "31. Further on 22nd May, 2012, an additional substantial question of law was framed which re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovisos to Section 80HHC(3), the profit has to be computed after increasing the amount which bears to 90% of the same referred to in 28 (iiia) i.e. profit on sale of export license, but this had not been allowed and followed by the Assessing Officer. The assessee, therefore, succeeded in the first appeal. 35. The tribunal by order dated 7th September, 2007 in ITA 2210 & 2211/Del/2005 held that the Commissioner was not justified in invoking his power under Section 263 as the view taken by the Assessing Officer was plausible. They referred and relied upon Malabar Industrial Company Limited Vs. CIT (2000) 243 ITR 83 (SC) and the decision of Delhi High Court in Nabha Investments Pvt. Ltd. Vs. Union of India & Others (2000)246 ITR 41. The tribunal also examined the case on merits and came to the conclusion that the addition was not justified in view of the circular issued by the Board. On correct interpretation of law, the assessee was entitled to include premium or profit on sale of export quota in Section 28 (iiia/b/c). Accordingly, the twin conditions i.e. order of the Assessing Officer should be erroneous and prejudicial to the interest of the Revenue, were not satisfied. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rtain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." 13. In the said judgment, Delhi High Court had referred to earlier decisions of the Supreme Court in Rampyari Devi Sarogiv. CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal v. CIT (1973) 88 ITR 323 (SC), wherein it has been held that where Assessing Officer has accepted a particular contention/issue without any enquiry or evidence whatsoever, the order is erroneous and prejudicial to the interest of the Revenue. After reference to these two decisions, the Delhi High Court observed:- "These two decisions show that it is not neces....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113): "... From a rending of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is "erroneous in so far as it is prejudicial to the interests of the Revenue . It is not an arbitrary or unchartered power, it can be exercised only on fulfilment of the requirements laid down in sub- section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed ... We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be "erroneous simply because in his order he did not make an elaborate discussion in that regard."" 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT v. Shree Manjunathesware Packing Products, 231 ITR 53 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. 18. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase "prejudicial to the interest of Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(3) of section 80HHC. On this issue, the liberal interpretation of any statute cannot be relied upon in view of the judgment of the Hon'ble Supreme Court in the case of NOVO Pan India [73 ELT 769] wherein it was held that "The principal that in case of ambiguity, a taxing statute should be construed in favour of the assessee assuming that the said principle is good and sound-does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or any exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State. This is for the reason explained in Mangalore Chemicals and other decisions, viz. each such exception/exemption increases the tax burden on other member of the community correspondingly. Once, of course, the provision is found applicable to him, full effect must be given to it. Hence deduction u/s 80HHC has to be computed accordingly by reducing profit of business by 90% of the receipts from sale of quota rights. 8. x x x x x x x 9. Moreover, on perusal of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entioned in clause 'f' of section 80IB(10) of the Act. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. The jurisdictional precondition stipulated under section 263 of the Act, is that the PCIT must come to the conclusion that the order is erroneous and is unsustainable in law. We hold that order passed by the assessing officer is unsustainable in law, based on the reasons cited above, which makes the assessment order erroneous as well as prejudicial to the interest of Revenue, hence we confirm the findings of ld PCIT and uphold his order. 26. In the result, appeal filed by the assessee is dismissed. Order is pronounced on 16/01/2023 by placing record on notice board. ============= Document 1 30/04/2019 To, The Asst. Commissioner of Income tax, Circle 1(2), Surat. Sub PAN AY ....