M/s. Harihar Housing Agency, Nagpur V. Commissioner of Income Tax-I, Nagpur

ITA 104/NAG/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1490 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: A C BAWANE
• Keywords: Gift; Revision of order; Opportunity of being heard; Assessment record
• Section: 143(3); 80IB; 6; 263

Judgement Text

1 ITA NO. 104/NAG/2011 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 104/NAG/2011 ASSESSMENT YEAR : 2006 - 07. M/S HARIHAR HOUSING AGENCY, COMMISSIONER OF INCOME - TAX - I, NAGPUR. VS. NAGPUR. PAN AACFH3863Q. APPELLANT. RESPONDENT. APPELLANT BY : SHRI A. C. BAWANE. RESPONDENT BY : SMT. SUMAN MALIK. DATE OF HEARING : 16 - 11 - 2015. DATE OF PRONOUNCEMENT : 28 TH DEC., 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . T HIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME - TAX - I, NAGPUR PASSED U/S 263 OF THE I.T. ACT DATED 29 - 03 - 2011 PERTAINING TO ASSESSMENT YEAR 2006 - 07. 2. IN THIS CASE LEARNED CIT NOTED THAT PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE ORDER OF THE AO WAS ERRONEOUS IN SO FAR AS THE SAME WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR THIS PROPOSITION LEARNED CIT MENTIONED THE FOLLOWING: A) LEARNED CIT NOTED THAT TO BE EL IGIBLE FOR CLAIM OF DEDUCTION U/ S 80IB(10), FIRST CONDITION TO BE SATISFIED W AS THAT THE BUILT UP AREA OF THE RESIDENTIAL UNIT SHOULD NOT EXCEED 1500 SQ.FT. BUILT UP AREA AS DEFINED U/S 80IB(10) OF THE I.T. ACT. LEARNED CIT NOTED THAT THE AO HAS NOT 2 ITA NO. 104/NAG/2011 EXAMINED THIS ASPECT NOR THE ASSESSEE AS WELL AS THE AUDITOR HAS FURNISHED SUCH WO RKING IN RESPECT OF EACH RESIDENTIAL UNIT. B) THAT THE AO HAS ALLOWED THE DEDUCTION U/S 80IB(10) IN RESPECT OF EXTRA CONSTRUCTION WORK RECEIPT OF SHANTI PARK OF RS.2.81 LAKHS. THAT THIS WAS NOT INCOME DERIVED FROM INCOME OF HOUSING PROJECT. C) AS PER THE P ROVISIONS OF SECTION 80IB(10) THE MAXIMUM SHOPPING AREA PERMISSIBLE IN EACH PROJECT WAS 2000 SQ.FT. ASSESSEE HAS NOT FURNISHED WORKING OF SHOPPING AREA IN HIS PROJECT AND THE AO HAS NOT VERIFIED THAT THE SHOPPING AREA WAS WITHIN THE SPECIFIED LIMIT OF 200 0 SQ.FT. OR NOT. D) THE RECORDS INDICATE THAT THE COMPLETION CERTIFICATE PRODUCED DO NOT EVIDENCE THAT THESE HOUSING PROJECTS WERE COMPLETE IN ALL RESPECT BY 31 - 03 - 2008. THE AO HAS NOT VERIFIED THIS ASPECT. AS PER ASSESSMENT RECORDS OF ASSESSMENT YEAR 2 008 - 09 THE ASSESSEE HAS SHOWN WORK IN PROGRESS OF 8.43 CRORES. THIS FACT SUGGESTS THAT THE HOUSING PROJECT WAS NOT COMPLETE BY 31 - 03 - 2011. E) THE RECORDS INDICATE THAT THE PROFIT & LOSS A/C AND BALANCE SHEET FILED IS A COMBINED ONE FOR ALL THE ACTIVITIES C ARRIED ON BY THE ASSESSEE. IN FACT, THE ASSESSEE WAS REQUIRED TO FILE THREE DIFFERENT AUDIT CERTIFICATES IN RESPECT OF THREE PROJECTS FOR WHICH THE DEDUCTION U/S 80IB(10) IS CLAIMED ALONG WITH THE SEPARATE P&L A/C AND BALANCE SHEET OF THE EACH PROJECT. THU S THE EXPRESS CONDITION LAID DOWN U/ S 18BBB(2) IS NOT FULFILLED BY THE ASSESSEE. 3. FROM THE ABOVE DISCUSSION LEARNED CIT FOUND THAT THE AO HAS ALLOWED THE DEDUCTION U/S 80IB(10) WITHOUT PROPER VERIFICATION AND WITHOUT MAKING NECESSARY ENQUIRIES. IN SUPPOR T OF HIS ORDER U/S 263, LEARNED CIT MADE THE FURTHER OBSERVATIONS: 3 ITA NO. 104/NAG/2011 (G) WORK IN PROGRESS AND OTHER DIRECT/INDIRECT EXPENSES. ASSESSEE HAS STATED THAT THESE DETAILS WERE FILED AND EXAMINED BY THE AO. I HAVE VERIFIED THE RECORDS. THE ASSESSEE HAS MERELY F ILED A SUMMARY OF WORK IN PROGRESS WHICH IS APPENDED TO THIS ORDER AS ANNEXURE - 4. THIS SUMMARY DOES NOT INDICATE AS TO HOW THE CLOSING WORK IN PROGRESS IS VALUED. THE AO HAD NEITHER CALLED FOR ANY DETAILS ABOUT THE PURCHASES OF RS.129.07 LACS, DIRECT EXPEN SES OF RS.42.82 LACS AND OTHER INDIRECT EXPENSES OF RS.43.78 LACS NOR THE SAME IS FILED BY THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS PURSUANT TO THE NOTICE ISSUED U/S 143(2). LEDGER COPIES THEREOF ARE FIRST TIME FILED DURING THE COURSE O F THIS PROCEEDINGS U/S 263. THESE FACTS ESTABLISH THA T AO HAD NOT VERIFIED THE CORRECTNESS OF CLOSING WORK IN PROGRESS AND DETAILS OF THE EXPENSES CAPITALISED. THIS ACTION ON THE PART OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. (H) & (I) ADVANCES OF RS.2,74,32,744, SUNDRY CREDITORS OF RS.38,04,725/ - AND ADVANCE FOR PURCHASE OF LAND RS.1,94,739. MY FINDINGS AS ABOVE ARE EQUALLY APPLICABLE HERE. THESE DETAILS HAVE NOT BEEN EXAMINED BY THE AO AT THE ASSESSMENT STAGE. (J) NEW LOAN OF R S.50,000/ - AND CAPITAL INTRODUCED BY THE PARTNE R S. 6. THE ASSESSEE HAS FIRST TIME FILED THE DETAILS DURING THE COURSE OF PRESENT PROCEEDINGS WHICH THE AO DID NOT LOOK INTO AT ASSESSMENT STAGE. THIS ACTION ON THE PART OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE ASSESSEE HAS ALSO OBJE CTED TO THE PRESENT PROCEEDINGS U/S 263 ON THE GROUND THAT THE ASSESSMENT COMPLETED BY THE AO IS PERFECTLY LEGAL AND IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. THIS CONTENTION OF THE ASSESSEE IS LEGALLY TENABLE. AS 4 ITA NO. 104/NAG/2011 DISCUSSED ABOVE, TH E AO HAS NEITHER PROPERLY LOOKED INTO NOR HAS CALLED FOR AND EXAMINED THE REQUISITE DE T AILS BEFORE ALLOWING VARIOUS CLAIMS AS LISTED IN PARA NO. (A) TO (J) ABOVE. THE AO HAS COMMITTED GRAVE ERRORS IN ACCEPTING THE VARIOUS CLAIMS AT ITS FACE VALUE. THUS, THE ASSESSMENT COMPLETED BY THE AO IS PATENTLY FOUND TO BE ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. 4. THEREAFTER THE LEARNED CIT REFERRED SEVERAL CASE LAWS. LEARNED CIT CONCLUDED AS UNDER : FOR THE REASONS ASSIGNED AS ABOVE, THE ASSES SMENT COMPLETED BY THE AO IS HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. I THEREFORE, IN EXERCISE OF POWERS CONFERRED IN ME VIDE SECTION 263 OF I.T. ACT, 1961 SET - ASIDE THE ASSESSMENT COMPLETED BY THE AO VIDE ORDER U/S 143(3) DTD. 29 - 1 2 - 2008 FOR A.Y. 2006 - 07 ON THE VARIOUS ISSUES MENTIONED IN PARA NO. (A) O (J) OF THE SHOW CAUSE NOTICE U/S 263 DTD. 22 - 03 - 2011. THE AO IS DIRECTED TO ADJUDICATE THESE ISSUES AFRESH AND COMPLETE THE ASSESSMENT AFRESH IN ACCORDANCE WITH LAW AND AFTER MAKING DUE ENQUIRIES AS DISCUSSED IN THE PRECEDING PARAGRAPHS. THE AO WILL ALLOW DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE COMPLETION OF THE ASSESSMENT AFRESH. 5. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE CO UNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT LEARNED CIT HAS TOTALLY ERRED IN HOLDING THAT THE AO HAS NOT MADE NECESSARY ENQUIRIES AND EXAMINATION WHILE ALLOWING THE ASSESSEES CLAIM OF DEDUCTION U/S 80IB(10). FOR THIS PROP OSITION LEARNED COUNSEL REFERRED TO THE OBSERVATIONS OF THE AO IN PARA 2 AND 3 OF ASSESSMENT ORDER AS UNDER : 2. THE ASSESSEE FIRM ENGAGED IN THE BUSINESS OF DEVELOPING AND CONSTRUCTING OF HOUSING PROJECTS AND SALE OF PLOTS. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE COUNSEL OF ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNT BANK ACCOUNT, SALE BILLS, PURCHASE BILLS AND VOUCHERS OF 5 ITA NO. 104/NAG/2011 EXPENSES ETC. WHICH WERE TEST CHECKED. THE COUNSEL HAS ALSO FILED DETAILS OF CAPITAL INTRODUCED BY THE PARTNERS AND OTHER DET AILS CALLED FOR WHICH HAVE BEEN VERIFIED AND PLACED ON RECORD. 3. DURING THE YEAR THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB(10) OF THE I.T. ACT 1961 AND DETAILS OF THE SAME HAVE BEEN FILED. SINCE THE ASSESSEE HAS FULFILLED ALL THE CONDITIONS LAID DOWN U/ S 80IB(10) OF THE I.T. ACT , THE DEDUCTION U/S 80IB(10) IS ALLOWED AS PER THE REVISED COMPUTATION OF INCOME. IN THIS REGARD THE COUNSEL OF THE ASSESSEE HAS FILED SEPARATE TRADING ACCOUNT OF SALE OF PLOTS AND BUNGALOW AT BUTIBORI, SALE OF SHOP AT BESA AND SA LE OF BUNGALOWS AT BESA COVERED U/S 80IB(10) OF THE I.T. ACT. 7. REFERRING TO THE ABOVE, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE AO HAD MADE THE ASSESSMENT UNDER SCRUTINY PROCEEDINGS AFTER EXAMINING AND VERIFYING THE NECESSARY DETAILS AND EVID ENCE FILED. THE AO HAD OPINED THAT THE ASSESSEE HAS FULFILLED ALL THE CONDITIONS LAID DOWN IN SECTION 80IB(10) OF THE ACT. HENCE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE AO ADOPTED THE VIEW PERMISSIBLE UNDER LAW. LEARNED COUNSEL REFERS TO SEVERA L CASE LAWS AND SUBMITTED THAT THE AO HAS PASSED THE ORDER AFTER TAKING INTO ACCOUNT ASSESSEES SUBMISSIONS AND DOCUMENTS AND NO MATERIAL IS ON RECORD BROUGHT BY THE LEARNED CIT WHICH SHOWS THAT THERE WAS ANY DISCREPANCY OR FALSITY OF EVIDENCE FURNISHED BY THE ASSESSEE. HE SUBMITTED THAT THE ORDER OF AO CANNOT BE SET ASIDE FOR MAKING DEEP ENQUIRY ONLY ON THE PRESUMPTION THAT SOMETHING NEW MAY COME OUT 8. THEREAFTER LEARNED COUNSEL OF THE ASSESSEE MADE SUBMISSIONS POINT - WISE ON THE MERITS OF THE ISSUE RAIS ED BY THE LEARNED CIT IN HIS ORDER U/S 263. 6 ITA NO. 104/NAG/2011 9. PER CONTRA LEARNED D.R. RELIED UPON THE ORDER OF LEARNED CIT. HE SUBMITTED THAT THE AO HAD NOT MADE PROPER VERIFICATION. HENCE LEARNED CIT HAS RIGHTLY DIRECTED THE AO TO EXAMINE THE ISSUE AFRESH. 10. UPON CAR EFUL CONSIDERATION AS REGARDS THE MERITS OF ASSESSEES CLAIM U/S 80IB IS CONCERNED, WE FIND THAT IN OUR ORDER OF EVEN DATE IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2003 - 04 TO 2008 - 09 WHICH INCLUDES THE PRESENT ASSESSMENT YEAR, WE HAVE UPHELD T HE ORDER OF LEARNED CIT(APPEALS). IN THE SAID ORDER LEARNED CIT(APPEALS) HELD THAT THE ASSESSEE FULFILS ALL THE CONDITIONS LAID DOWN U/S 80IB(10) OF THE I.T. ACT. 11. FURTHER MORE WE NOTE THAT THE AO HAS MADE THE NECESSARY ENQUIRY BY ISSUING QUESTIONNAIRE TO THE ASSESSEE AND OBTAINING THE DETAILS AS HE DESIRED NECESSARY. NOW THE LEARNED CIT WAS OF THE OPINION THAT THE DETAILS OBTAINED BY THE ASSESSEE WERE NOT S UFFICIENT. IN OUR CONSIDERED OPINION THIS APPROACH OF THE LEARNED CIT IN INVOKING THE JURISDICTI ON U/S 263 OF THE I.T. ACT IS NOT SUSTAINABLE. THE AO HAS MADE THE ENQUIRY WHICH HE DEEMED FIT. NOW THE LEARNED CIT IS DIRECTING TO MAKE FURTHER ENQUIRY. THIS , IN OUR CONSIDERED OPINION , IS NOT THE MANDATE OF SECTION 263 OF THE I.T. ACT. FURTHER MORE LEARNED CIT HAS ALSO DRAWN ADVERSE INFERENCE ON THE ISSUE THAT CAPITAL INTRODUCED BY THE PARTNERS WERE NOT LOOKED INTO BY THE AO IN THE ASSESSMENT STAGE. WE FIND THAT THIS ALONE CANNOT BE A G ROUND FOR INVOKING JURISDICTION U/S 263 OF THE I.T. ACT. LEARNED CIT HAS NOTED THAT THE ASSESSEE HAS SUBMITTED NECESSARY DETAILS BEFORE HIM. LEARNED CIT HAS NOT FOUND ANY THING ADVERSE IN THESE DETAILS. MOREOVER THERE ARE CASE LAWS FOR THE PROPOSITION THA T CAPITAL INTRODUCED BY THE PARTNERS HAS TO BE EXAMINED IN THE HANDS OF PARTNERS IN THEIR INDIVIDUAL ACCOUNT. HENCE THE AO HAVING ADOPTED ONE OF THE POSSIBLE VIEWS, IT CANNOT BE SAID THAT THE LEARNED CIT WAS JUSTIFIED IN INVOKING JURISDICTION U/S 263 OF TH E I.T. ACT. 7 ITA NO. 104/NAG/2011 12. IN THIS REGARD WE DRAW SUPPORT FROM THE DECISION OF HONBLE APEX COURT IN THE CASE OF MAX INDIA LTD. 295 ITR 282. IN THIS CASE IT WAS EXPOUNDED THAT WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AG REE, IT CANNOT BE TREATED AS ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. 13. FROM THE ADJUDICATION ON MERITS OF THIS CASE AS MENTIONED IN PARA 10 ABOVE, THE VIEW ADOPTED BY THE AO WAS QUITE SUSTAINABLE IN LAW. HENCE THE JURISDICTION ASSUMED BY THE LEARNED CIT IS NOT LEGAL. 14. FURTHER MORE WE FIND THAT HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GABRIAL INDIA LTD. 203 ITR 108 HAS EXPOUNDED THAT IN ORDER TO EXERCISE JUR ISDICTION U/S 263 COMMISSIONER M UST HAVE MATERIAL TO PRIMA FACIE COME TO THE CONCLUSION THAT THE ORDER OF THE ITO IS ERRONEOUS AS ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. IN THE PRESENT CASE WE FIND THAT THERE IS NO PRIMA FACIE MATERIAL BEFORE THE LEAR NED CIT. HE IS ONLY EXPECTING THAT FURTHER ENQUIRY MAY RESULT IN AN ORDER WHICH MAY IN FAVOUR OF THE REVENUE. HENCE THE MATERIAL BEFORE THE LEARNED CIT DOES NOT WARRANT A VIEW THAT THE ORDER OF THE AO IS ERRONEOUS AS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. 1 5 . AS REGARDS THE DECISIONS RELIED UPON BY THE LEARNED D.R. VIZ. HONBLE APEX COURT DECISION IN THE CASE OF RAMPYARI DEVI SARAOGI VS. CIT 67 ITR 84 FOR THE PROPOSITION MENTIONED IN PARA 6 OF THE SAID ORDER THAT THE ASSESSEE WILL HAVE FULL OPPORTUNITY OF SHOWING TO THE ITO WHETHER HE HAD JURISDICTION OR NOT AND WHETHER THE INCOME ASSESSED IN THE ASSESSMENT ORDERS WHICH ARE ORIGINALLY PASSED WAS CORRECT OR NOT. WE FIND THAT THE ABOVE DECISION WAS RENDERED ON THE FACT OF THE CA SE THAT ENQUIRIES MADE BY CIT HAVE REVEALED THAT ASSESSEE RESIDED NOR CARRIED ON ANY BUSINESS FROM THE ADDRESS DECLARED IN THE RETURNS. ALSO THE CIT NOTED THAT INCOME - TAX OFFICER WAS NOT JUSTIFIED IN ACCEPTING THE 8 ITA NO. 104/NAG/2011 INITIAL CAPITAL, THE GIFT RECEIVED AND SALE OF JEWELLERY, THE INCOME FROM BUSINESS, ETC., WITHOUT ANY ENQUIRY OR EVIDENCE WHATSOEVER. WE FIND THAT THESE FACTS ARE NOT APPLICABLE HERE. 1 6 . ANOTHER DECISION RELIED UPON BY THE REVENUE IS THE HONBLE ALLAHABAD HIGH COURT DECISION IN THE CASE OF SWARUP VEGETABLE PRODUCTS VS. CIT 187 ITR 412. IN THE SAID CASE IT WAS HELD THAT THE COMMISSIONER DOES HAVE THE POWER TO SET ASIDE THE ASSESSMENT ORDER AND SEND THE MATTER FOR A FRESH ASSESSMENT IF HE SATISFIED THAT FURTHER ENQUIRY IS NECESSARY AND THAT TH E ORDER OF THE ITO IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE FIND THAT THE ABOVE DECISION IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE AS WE HAVE ALREADY HELD THAT THE ORDER OF THE ITO WAS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE AND TH E VIEW TAKEN BY THE AO WAS SUSTAINABLE IN LAW. 1 7 . IN THE LIGHT OF THE AFORESAID DISCUSSION, WE HOLD THAT LEARNED CIT WAS NOT JUSTIFIED IN INVOKING JURISDICTION U/S 263 OF THE I.T. ACT. ACCORDINGLY WE QUASH THE ORDER PASSED BY LEARNED CIT U/S 263 OF THE I .T. ACT. 1 8 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF DEC., 2015. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 28 TH DEC., 2015. 9 ITA NO. 104/NAG/2011 COPY FORWARDED TO : 1. M/S HARIHAR HOUSING AGENCY, G - 3, AMAR PALACE, PANCHSHEEL SQUARE, DHANTOLI, NAGPUR. 2. I.T.O., WARD - 1 ( 2 ), NAGPUR. 3 C.I.T. I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR