TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 969
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellant 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 on 09.03.2007 and the same was completed on 26.03.2010, the firm was claiming ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee 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 AAYPR 5138 A AKJPM 8488 M B-02/436 Ritaben Anishku9mar Shah AGVPM 6433 E ASIPS 2503 E B-11/270 Santoshkumar Bhushan Khali Muni AGVPM 6433 E AGV[, 6433 E It can be seen from the above that the department has mi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 before the 31st day of March, 2008 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if, - ... ... ... (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ATE 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 therefore order of ld PCIT must be quashed. 14. On the other hand, Learned CIT-DR for the Revenue submitted that there is complete non- inquiry in the assessee's case. That is, Assessing Officer has not made any inquiry. The Ld. CIT-DR also submitted that Assessing Officer has not adjudicated the facts in accordance with law and Assessing Officer allowed the claim of assessee without making inquiries. The Ld. CIT-DR also took us through paper book pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 as under: "In all these cases, we find that the Commissioner of Income Tax had passed an order under Section 263 of the Income Tax Act, 1961 with the observations that the Assessing Officer did not make any proper inquiry while making theism and accepting the explanation of the assessee(s) in so far as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l 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 3103.2017 in MS Excel sheet with Name, PAN and address. 3. Please provide copy of sale deed regarding sale of all commercial space since inception of project to till date. 4. Please provide list of all sundry debtors with copy of ledger account of each exceeding Rs.1,00,000/-. Further justify the reason for not charging interest from them. 5. You are requested to submit the complete details on or before 22.11.2019. 6. Please note that no further adjournment of whatsoever may be will be granted as the assessment is getting time barred. It may please further be noted hat, if complete detai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 assessee has submitted details of banks stating their names and account numbers. We have examined the assessment records and noted that bank statements of the above banks were not before the assessing officer. Hence, assessing officer failed to examine the requirement of clause 'f' of section 80(IB)(10) of the Act, which is the specific query raised by ld PCIT in his revision order. This shows that assessing officer allowed the claim of the assessee blindly without application of mind. 19. The ld Counsel submitted before us that assessee had submitted copy of agreements of flats allotted to Shilpa Modi and Hemant Ramvilas. However, we note that assessee has submitted only copy of sale deed of commer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y 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 is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 reads as under: " Whether the Income Tax Appellate Tribunal (ITAT) has erred in setting aside the order passed by the Commissioner of Income Tax under Section 263 of the Income of the Income Tax Act, 1961?" 32. In the two assessment years, the Assessing Officer had in the order under Section 143(3) accepted the computation made by the assessee under Section 80HHC of the Act. The Assessing Officer treated the premium/profit earned on sale of export quota as covered under Section 28(iiia) to (iiic). 33. The Commissioner of Income Tax, however, issued notice under Section 263 in exercise of power of revision and held that the Assessing Officer had wrongly included premium of Rs.1,16,62,320/- and Rs.73,49,341/- on the sale of q....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned 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. 36. As far as Section 263 is concerned, we have examined the said Section in depth and detail in ITO Vs. D G Housing Projects Ltd. decided on 1st March, 2012, in ITA No. 179/2011 and observed as under:- "10. Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression "prejudicial to the interest of the Revenue is of wide import and is not confined to merely loss of tax. The term ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return." 14. The aforesaid observations have to be understood in the factual background and matrix involved in the said two cases before the Supreme Court. In the said cases, the Assessing Officer had not conducted any enquiry or examined evidence whatsoever. There was total absence of enquiry or verification. These cases have to be distinguished from other cases (i) where there is enquiry but the findings are incorrect/erroneous; and (ii) where there is failure to mak....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. (See Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) at page 10) ... From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 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 Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue." 37. In the present case, a reading of the order passed by the Commissioner of Income Tax exposits that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of the Revenue. In paragraph 6, 7, 9 and 10 the Commissioner of Income Tax has observed as under:- "6. The assessees submissions are carefully co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity 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 record, it is seen that the assessment was completed even though there were no details on record of export incentives received by the assessee during the year. The assessee was allowed the claim of deduction under Section 80HHC without even verifying as to whether the receipts on account of export incentive fall within the provisions of section 28(iiia/b/c) of the Act on merit the deduction. 10. In view of the above discussion, it is clear that the impugned assessment order is erroneous and prejudicial to the interest of Revenue as it failed to apply the provisions relating to the deduction under section 80HHC correctly. Therefore, the said assessment order is hereby cancelled under section 263 of the Income-tax Act, 1961 and the A.O. is directed to make fresh assessment as per the provisions of law. While making the fresh assessment, the A.O. is directed to treat the receipt on sal....