TMI Blog2015 (12) TMI 1515X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (DR) ORDER PER G. MANJUNATHA, Accountant Member: This appeal filed by the assessee is directed against the order of CIT-1, Visakhapatnam, dated 21/03/2013, for the A.Y. 2008-09. 2. Brief facts of the case, are that the assessee is a partnership firm, which is engaged in the business of real estate development, has filed its return of income for the A.Y. 2008-09 on 29/09/2008. The case was selected for scrutiny under compulsory scrutiny norms in view of the deduction claimed under sec. 80IB(10) of the Act, accordingly statutory notices u/s 143(2)/142(1) of the Act were issued. In response to notices, the assessee s Authorized Representative appeared from time to time and furnished the books of accounts and other information. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed deduction under sec. 80IB(10), for one of its Housing Projects called as Vasanta Vihar, Madhurawada . To ascertain the correctness of the claim made by the assessee, the Assessing Officer issued a show-cause notice and asked to furnish the details with regard to claim of deduction u/s 80IB(10) for the housing project, like details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The CIT proposed to revise the assessment order for the reason that on examination of the assessment record, it was noticed that the Assessing Officer erroneously allowed the deduction claimed under sec. 80IB(10) of the Act, which is otherwise not allowable to the assessee. Therefore, the assessment order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the Revenue in terms of sec. 263 of the Act. The CIT in the show-cause notice observed that the assessee has wrongly claimed the deduction under sec. 80IB(10), as the mandatory requirement of the conditions specified in sec. 80IB(10) has not been fulfilled. The CIT further observed that the land in which the housing project was developed by the assessee was owned by Shri V. Vasanth Babu and eight other persons, therefore, the assessee s contention that the land was transferred to firm books of accounts is not correct. The CIT further observed that the plans sanctioned by the municipal authorities was in the name of the partners, therefore, the assessee s contention with regard to development of housing project by the firm was not tenable as per law. The CIT further was of the opinion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t does not mean that the project was not executed by the partnership firm. The assessee further submitted that the firm has executed the housing project in its own name and sale proceeds including the sale of land was totally accounted in the books of accounts of the firm. 5. The CIT, however, after considering the submissions of the assessee held that the Assessing Officer did not verified the issues with regard to claim of deduction u/s 80IB(10) of the Act at the time of completion the assessment. Therefore, the assessment order dated 20/12/2010 passed u/s 143(3) is erroneous insofar as it is prejudicial to the interest of the Revenue in terms of sec. 263 of the Act. Hence, set aside the assessment order dated 20/12/2010 and directed the Assessing Officer to disallow the claim made by the assessee under sec. 80IB(10) of the Act and also directed to pass consequential order to give effect to the order under sec. 263. Aggrieved by the CIT s order, the assessee is in appeal before us. 6. The Authorized Representative of the assessee submitted that the assessment order is not erroneous insofar as it is not prejudicial to the interest of the Revenue, as during the assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make further enquiry. 7. On the other hand, Departmental Representative strongly supported the order of the CIT. The Departmental Representative further argued that the CIT mainly assumed the jurisdiction for the reason that the ownership of the land was in the name of the partners of the firm and eight others. The CIT in his observations stated that the land in which housing project was developed was owned by one of the partners and eight other people, who had never become partners of the firm. The plan sanction was obtained in the name of individual partners. The assesse did not brought to the notice of CIT, that the land in which housing project was developed was owned by eight other people along with Shri V. Vasanth Babu, was later transferred in the name of Shri V. Vasanth Babu. In case, the assesse had brought this fact to the notice of CIT, then, the CIT would not have proceeded with revision of assessment order. In the absence of required documents to prove the ownership of land, the CIT has revised the assessment order and directed the Assessing Officer to disallow the claim under sec. 80IB(10), therefore, requested to uphold the CIT s order. 8. We have heard bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the CIT in the showcause notice, the assessee submitted that it has obtained sanction plan from the municipal authorities in the name of the two partners, as the tittles of the land were in the names of the partners. Therefore, just because the sanction plan was obtained in the name of partners, it cannot be construed that the housing project was not executed by the partnership firm. We find force in the arguments of the assessee that there is no necessity of having own land for the purpose of development of housing project and claiming deduction under sec. 80IB(10). What is required to be seen is, whether the housing project is developed as per the conditions stipulated under sec. 80IB(10) or not. In the present case in our hand, though the lands were standing in the individual partner s name, same was transferred to firm books by way of capital contribution which was one of the accepted modes of transfer of capital asset under sec. 45(3) of the Act. Once, the land has been transferred to partnership firm, it become the property of the firm, therefore, even if the sanction plans for building is in individual partners name, the benefit of deduction under sec. 80IB(10), cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sec. 263 of the Act. It is not necessary that every order which is erroneous may prejudicial to the interest of the Revenue or vice-versa. Unless the Assessing Officer s order is not erroneous, no action can be taken by the CIT under sec. 263 of the Act, because the twin conditions i.e. the order is erroneous and also the same is prejudicial to the interest of the Revenue are co-exist. In the present case in our hand, the Assessing Officer has conducted a detailed enquiry and also examined the points on which the CIT wants further verification which is evident from para 2 to 2.1 at page No. 2 of the assessment order. The contention of the CIT was that the Assessing Officer has not conducted proper enquiry and also not applied his mind before allowing the deduction. We do not agree with the stand taken by the CIT for the reason that there is a distinction between lack of enquiry and inadequate enquiry. If there is enquiry, which is inadequate that would not itself give occasion to the CIT to assume jurisdiction under sec. 263 of the Act, merely because he has a different opinion in the matter. The CIT can do this when there is a lack of enquiry by the Assessing Officer. In the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation or details to substantiate its claim during the course of assessment proceedings. The Assessing Officer having considered all the issues has allowed deduction under sec. 80IB(10) of the Act. In our considered opinion, the Assessing Officer has made proper and desired enquiries before passing the assessment order. Therefore, the view taken by the CIT cannot be held to be justifiable. 14. Now it is relevant to consider the case-laws relied upon by the assessee. The assessee relied upon the Coordinate Bench decision in the case of Raghava Estate Ltd. Vs. DCIT in I.T.A.No. 248 249/VIZ/2009, wherein the Coordinate Bench of this Tribunal, has considered the issue of allowability of deduction under sec. 80IB(10) of the Act, which was later upheld by the Hon'ble Andhra Pradesh High Court in ITTA No. 296/2013. The relevant portion is reproduced herein under:- 12. We have heard the parties on these two appeals. The scope of revision proceedings has been well explained by Hon'ble Supreme Court in the case of Malabar Industrial Company (2000)(243 ITR 83) in the following lines. A bare reading of this provision makes it clear that the prerequisite to exercise of juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the issue of allowing deduction under section 80IB(10) of the Act in respect of Narayanapuram Housing Colony in the hands of the assessee is a debatable issue on which two views are possible. There cannot be any doubt that the Assessing Officer has taken one of the possible views in the impugned two years, in which case the assessment order cannot be termed as erroneous and prejudicial to the interests of the revenue. In that case, the Learned CIT could not have jurisdiction to initiate revision proceedings under section 263 of the Act in respect of the said issue. Accordingly, we set aside both the impugned orders of Learned CIT. 15. The ITAT, Hyderabad Bench in the case of M/s. Cecon Builders Vs. ITO in I.T.A.No. 550/Hyd/2013, under similar circumstances held the issue in favour of the assessee, which was later upheld by the Hon'ble Andhra Pradesh High Court in ITTA Nos. 600 602/2014. The relevant portion is reproduced hereinunder:- 4. After considering the rival submissions, we are of the opinion that assessee is eligible for deduction to the extent of constructed area of 9763 sq. meters which was originally sanctioned. Therefore, the Revenue ground on allowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrear Constructed, it is for the BBMP to look into the violations if any, in the construction of the housing project. That does however, authorize the A.O. to hold that the assessee has not got approval for the housing project or the conditions laid down in sec. sec.80IB (10) stated violated. 7. Even though principles considered therein do apply to the present facts, what we are unable to decide is whether the same will apply to the assessee. As seen from the permission granted by the GHMC the original sanctioned plan' was for cellar, stilt + 9 floors consisting of 9763.76 sq. meters. The revised plan was also stated to be cellar, stilt + 9 floors + pent house. We are unable to understand whether addition of only pent house will increase 'the space of built up area by 6543.84 sq. meters or there are, any other increase in the area of additional 'buildings constr4ted. Since the plans are not placed on record, we are unable to give any finding on this. Moreover, the BPS scheme was applicable only to the applications made on or before 31-03- 08. The plans were approved only in July 2007. Payments for penalty were made later as can be seen from copy of approval placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut by the Tribunal, the risk element that is involved in the project undertaken by the assessee is more than that of a normal builder, undertaking mere construction. It is seen from the data furnished before the AO that while flats in the 6th floor and 11th floor were sold even as early as 2003, flats in first floor with Nos. 104 and 103 were sold in the year 2009. So too, some of the flats in second floor and third floor were sold in the years 2007, 2006 and 2005. The flat in 12th floor was sold on 15-10- 2063 valid in the 9th floor on 5-11-2003. The flats in the first floor with Nos. 101 and 102 were sold on 17-6-2009. Apart from this, there were still some flats left unsold. [Para 29] In the background of these facts, the risk factors, as projected by the assessee and accepted by the Tribunal, need to be seen. Under clause 4 of the agreement, the assessee was to collect a sum of ₹ 600 per sq.ft. on super built-up area for the sale of undivided share of land transferred to the buyer. The said clause also fixes the ceiling as to the consideration, which would be paid to the owner, namely, at ₹ 11,51,94,000. The clause in the agreement further pointed out that the build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the property. It, however, clearly states that it will not include common area shared with other residential units. Hence, the definition under sec. 80IB(14)(a), could at best, throw some light as to how the built-up area of the residential unit should be computed for the purpose of determining deduction under sec. 80IB(10) of the IT Act. 14. From the reading of the abovesaid provisions, we find that there is no justification in including the car park in the definition of the built-up area of the residential unit for the purpose of determining the maximum built-up area. In such view of the matter, we are inclined to accept the reasoning of the CIT(A) drawing support from the Tamil Nadu Apartments Ownership Act, 1994, which was confirmed by the Tribunal. Accordingly, the second substantial question of law is answered against the Revenue and in favour of the assessee. 18. The Hon'ble Supreme Court of India, in the case of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83, while dealing with the issue of revision under sec. 263 held as under:- A bare reading of provisions of s. 263 makes it clear that the prerequisite to exercise of jurisdiction by the CIT suo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 approved; Venkatakrishna Rice Co. vs. CIT (1987) 62 CTR (Mad) 152. (1987) 163 ITR 129 (Mad) : TC 57R.303 disapproved. (Paras 5 to 7) It appears that the resolution passed by the board of the appellant-company was not placed before the AO. Thus, there was no material to support the claim of the appellant that the amount in question represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts the conclusion that the order of the ITO was erroneous is irresistible. Therefore, the High Court has rightly held that the exercise of the jurisdiction by the CIT under s. 263(1) was justified.-Malabar Industrial Co. Ltd. vs. CIT (1991) 100 CTR (Ker) 27. (1992) 198 ITR 611 (Ker) TC 57R.321 affirmed. (Para 8) 19. An identical issue came up before the Coordinate Bench of this Tribunal, in the case of Shri Sai Contractors vs. ITO Ward-1 in I.T.A.No. 109/VIZ/2012, wherein the Tribunal after consideration the ratio laid down by the Hon'ble Andhra Pradesh High Court in the case of Spectra Shares and Scrips Pvt Ltd vs. CIT, (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l accounts, where the addition was ₹ 66,825/-.The A.O. had called for explanation and the assessee has furnished its explanation. But, the CIT was of the opinion that the assessing officer could have do well to explore the possibility of rejecting the books of accounts and estimate the profit. According to CIT, the assessing officer has conducted enquiry but, in adequate, therefore he wanted further enquiry on the issue on which he assumed jurisdiction. This fact had not been disputed by the revenue. The Commissioner cannot initiate revision proceedings, with a view to conduct fishing and revolving enquiry in the matters which are already examined by the A.O. The Department cannot do fresh assessment in the guise of revision on the matters which are examined and concluded by the A.O. The A.O. being a Quasi Judicial authority, shall have the authority to exercise right judgment and discretion on the basis of information available before him. In the present case on hand, the Assessing Officer after considering vouchers, made an round some addition of ₹ 1,00,000/- which is one of the possible view available for him, which the CIT shall not term it as lack of enquiry or non ..... X X X X Extracts X X X X X X X X Extracts X X X X
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