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M/s. Vasantha Vihar, Versus. ITO, Ward-2,

2015 (12) TMI 1515 - ITAT VISAKHAPATNAM

Revision u/s 263 - as per CIT(A) AO 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 - Held that:- Ee are of the opinion that the assessment order passed by the Assessing Officer is not erroneous insofar as it is not prejudicial to the interest of the Revenue. The CIT assumed his jurisdiction to revise the assessment order on the issues, which are considered by the A.O. in the assessment order. Therefore, the order pas .....

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ANJUNATHA, ACCOUNTANT MEMBER Appellant by : G.V.N. Hari - Adv. Respondent by : T.L. Peter - 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 .....

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lled 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 land holding, plan approval, date of commencement and date of completion, flat size and amount invested for construction of housing project. In response to show-cause notice, the assessee submitted the details sought by the Asses .....

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developing and building housing projects in Ac.2.53 of and situated in Madhurawado. For this purpose, the assessee has obtained Building Plan Approval from Greater Visakhapatnam Municipal Corpn. Vide Plan approval in BA.No.141/07/ACP-1 dt.31-3-07 to construct residential apartment building with total plinth area of 19928.15 sq.mts. in 5.No.19/1(P) and 19/2(P) of Madhurawoda, Kommadi village. Therefore, in order to be eligible for deduction u/5.801B of the Act, the project should be completed be .....

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) of Section 80IB of the Act. It is found that the assessee-firm has fulfilled these conditions and is found to be eligible for the deduction claimed. With regard to the condition that the construction should be completed within 5 years from the end of the financial year in which the housing project is approved by the local authority, if the assessee firm violates the condition and fails to furnish completion certificate from the concerned local authorities, the deduction will be withdrawn in ac .....

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s 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 .....

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of a contractor with the two partner and the partners in their individual capacity played a dominant role in executing and completing the project. Therefore, the CIT was of the opinion that the firm s name was used as a front entity or masquerade, while the said project was actually undertaken by Shri V.Vasanth Babu, Shri E. Vallabha Rao and eight others. In fcat, Shri V.Sasanth Babu played the role of the project convener and executor for development and construction of the Madhurawada project. .....

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llabha Rao and which was later transferred to the partnership firm. The assessee further submitted that as on 01/04/2007, the assessee has converted its land into stock in trade by passing necessary supporting entries in the books of accounts of partnership firm, which was later declared as a closing stock as on 31/03/2008. The Authorized Representative of the assessee further submitted that for transfer of any immovable property as a capital contribution into partnership firm by the partners, t .....

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an sanctioned is concerned, the assessee has obtained plan sanction in the name of the two partners for the sake of convenience and quick processing of the approval. Even if the plan approval has not been obtained in the name of the partnership firm, it 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 .....

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e 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 proceedings, the Assessing Officer has made detailed enqu .....

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r sec. 80IB(10) of the Act and after satisfied with the details furnished by the assessee, allowed the deduction. The Authorized Representative of the assessee, further submitted that as regards the merits of the issue is concerned, the CIT revised the assessment order on the sole ground that the land in which the housing project was executed by the assesse was not owned by the partnership firm. The fact is that the land measuring 2.53 acres is in the name of two partners, but, the CIT has faile .....

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ave transferred the land standing in their personal names to partnership firm, by way of transfer referred to in section 45(3) of the Act, no registered deed is executed for transferring the title deeds to firm. Therefore, in absence of necessary registration deed, in the name of the firm, the municipal authorities declined to give sanction plan in the name of partnership firm. Therefore, the assessee has obtained sanction plan in the name of partners of the firm, but the project was executed by .....

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er 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 p .....

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ld the CIT s order. 8. We have heard both the parties, perused the materials available on record and gone through the orders of the revenue authorities. The CIT, assumed the jurisdiction for the reasons that the Assessing Officer did not conduct proper enquiry before passing the assessment order, thereby his order is erroneous insofar as it is prejudicial to the interest of the Revenue. The CIT revised the assessment order on the sole ground that the land in which housing project was developed w .....

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this fact was not considered by the CIT in the revision proceedings. 9. During the course of hearing, the Authorized Representative of the assessee demonstrated with all documentary evidences that the CIT was not correct in coming to the conclusion that the land was not in the name of partnership firm. The Authorized Representative of the assessee submitted a paper book, wherein the documents pertaining to ownership of land was furnished. On perusal of the documents, we noticed that out of 2.53 .....

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is no necessity of any registered document to transfer the title deeds from partners to partnership firm. Sec. 14 of the Indian Partnership Act clearly says that the title and interest in all properties, which are brought into the common stock of the firm, became property of the firm as held by the Hon'ble Rajasthan High Court in the case of CIT vs. Ambargo Corporation (1974) 95 ITR 178. 10. As regards the sanction plan issue raised by the CIT in the showcause notice, the assessee submitted .....

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er 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 fir .....

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g deduction under sec. 80IB(10). On careful consideration of the provisions of sec. 80IB of the Act, we noticed that the land should be owned by person, who executes the housing project. As can be seen from the documents available in this case, the assessee has complied with the conditions stipulated under sec. 80IB(10), therefore, eligible for deduction for development of housing project. 11. The CIT assumed his jurisdiction to revise the assessment order on the ground that there is a lack of e .....

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deduction under sec. 80IB(10) of the Act. Once, the issue is examined and considered by the Assessing Officer, the CIT has no jurisdiction to entertain fresh enquiry on the same issue, because he has a different opinion on the issue. In our opinion, the issue of deduction under sec. 80IB(10) is highly debatable and there is always two views are possible, the Assessing Officer after considering the details, has taken one of the possible view, which cannot be termed as erroneous. There may be loss .....

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cannot assume the jurisdiction under 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 de .....

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ould 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 present case, the assessment order is a detailed one and also the Assessing Officer has passed a remark in the assessment order on the allowability of deduction under sec. 80IB(10), therefore, it cannot be termed as erroneous. According to CIT, the Assessing Officer .....

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sing Officer cannot be held erroneous and also prejudicial to the interest of the Revenue. 13. The Authorized Representative of the assessee argued that the Assessing Officer has examined all the issues which lead to revision of assessment order under sec. 263 of the Act. We have observed that the Assessing Officer vide his questionnaire dated 20/09/2010 made elaborate enquiry into deduction under sec. 80IB(10) of the Act. The Assessing Officer in the said letter raised as many as 19 questions, .....

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In our opinion, the CIT has wrongly assumed the jurisdiction by holding that the Assessing Officer had not properly examined the issue. The order of the Assessing Officer may be brief and cryptic, but, that itself is not a sufficient reason to brand the assessment order as erroneous and prejudicial to the interest of the Revenue. It is well settled proposition of law that writing of an order in detail may be legal requirement, but the order not fulfilling this requirement cannot be said to be er .....

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e 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 he .....

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The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not pre-judicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue recourse cannot be had to section 263(1) of the Act. The pro-vision cannot be invoked to correct each and every type of mist .....

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ood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase prejudicial to the interests of the Revenue' has to be read in conjunction with an er .....

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ts of the Revenue unless the view taken by the Incometax Officer is unsustainable in law." From the discussions made in the appeal filed by the revenue for the assessment year 2006-07 in the preceding paragraphs, it is clear that 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 .....

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s 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 allowing proportionate 80IB deduction does not require any reconsideration as the .....

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the' project, on which there is no dispute. Accordingly, these grounds are not maintainable. 5. Other ground contested in the Revenue's appeal is with reference to the estimation of income which learned CIT(A) did not approve as there is no case for rejecting the books of accounts. With reference to this aspect, we need to discuss the same with assessee's contention about claim of 80IB(10) in the additional constructed area. 6. There is no dispute with reference to the original permi .....

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held as under:- " We are of the view that the learned C1T has rightly placed reliance on the decision of The Hon'ble Apex Court in the cases of Petron Engineering Construction Put. Ltd., reported in 175 1TR 523, Panyam Chemicals Ltd. reported in 262 1TR 278, N.C. Buddhiraja & Co reported in 204 TTR 412, IPCA Laboratories Ltd. case reported in 266 17'R 521, to arrive at the view that the tax incentive by way of deduction under section 801B of the Act is predominantly for the purp .....

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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 + p .....

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en from copy of approval placed on record. Since revised plans were not placed on record we are unable to decide issue only on legal principles. The A.O. is directed to examine the original plans, revised plans and examine whether the deduction tinder 80IB is eligible for revised plan. In case of area of flats have changed, to verify whether the constructed apartments are within the norms prescribed under section 80IB(10). Needless to say that balconies and common areas are not to be considered .....

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crores. Whether assessee has continued to claim 80IB(10) in later year also on the balance of constructed area required to be examined, keeping in mind the method of accounting followed. As A.O. estimated income for non production of books of account, we are of the opinion that these aspects also require examination. For these purposes, we are of the opinion that the issue in assessee's grounds re-examination by AO. Therefore, since the issues are restored to the file of the A.O., he should .....

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ed by a developer, then the assessee was entitled to deduction under sec. 80IB(10) of the Act in respect of profits derived from the housing project. The relevant portion is reproduced hereinunder:- A reading of the various clauses of the agreement clearly points out the role of the assessee, which is not just as that of a builder to put up construction as per the directions of the owner; on the other hand, as rightly pointed out by the Tribunal, the risk element that is involved in the project .....

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e 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 .....

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p area. A reading of the agreement of sale with the purchasers further points out that the builder's agreement was entered on the very same day with the assessee. Thus, seen in the background of the data available as regards the date of sale, the clause in the agreement between the owner of the land and the assessee and the sale agreement with the prospective purchasers, it is evident that what the assessee had undertaken is not a mere construction, but developing and constructing of a proje .....

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ring a deduction. 17. The Hon'ble Madras High Court, in the case of CIT vs. Subba Reddy (HUF) (2015) 121 DTR 115 (Mad.), held that for claiming deduction under sec. 80IB(10), it is not necessary that the assessee is engaged in the business of developing and construction of housing project should be the owner of the land. The relevant portion is reproduced hereinunder:- 13. In the absence of any specific definition for the term buildup area during the relevant period, the reasoning of the CIT .....

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l residential portion 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 o .....

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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 motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the Revenue. The CIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenu .....

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the order being erroneous. In the same category fall orders passed without applying the principles a natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenu .....

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t 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.-Dawjee Dadabhoy & Co, vs. S. P. Jain & Anr. (1957) 31 ITR 872 (Cal) : TC 57R.129, CIT vs. T. Narayana Pai (1975) 98 ITA 422 (Kar) TC 57R.185, CIT vs. Gabriel India Ltd. (1993) 114 CTR (Born) 81 : (1993) 203 ITR 10! .....

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al 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 ident .....

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the CIT cannot assume the jurisdiction on the same issue, which is already considered by the Assessing Officer on the guise of revision by stating that the Assessing Officer has conducted inadequate enquiry or there is a lack of enquiry. The relevant portion reads as under:- 10. To invoke the provisions of section 263 of the Act, the twin conditions must be satisfied i.e. the order of the assessing officer is erroneous and further it must be prejudicial to the interest of the revenue. Unless bo .....

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iry before allowing deduction towards wages and centering expenses and also examined the points on which the CIT wants further verification. The assessing officer after carefully examined the books of accounts and relevant vouchers furnished by the assessee passed the assessment order as indicated in his order, which is clearly evident from the assessment order. The contention of the CIT was that the A.O. has not conducted proper enquiry and also not applied his mind before allowing the deductio .....

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assessment order on two issues, on which the CIT assumed jurisdiction, i.e. disallowance of round some expenditure of ₹ 1,00,000/- under the head wages and centering charges and also partner s capital 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 p .....

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