M/S MUSTAFA ASSOCIATES, Chandrapur V. C.I.T.-3, Nagpur

ITA 167/NAG/2015

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3551 (ITAT-NAGPUR)
• Duration Of Justice: 6 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 17-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Revision of order; Opportunity of being heard; Audit objection; Principle of natural justice; Period of limitation; Assessment record; Set aside
• Section: 263; 143(3); 142(1); 80IB; 143(1); 143(2); 13

Judgement Text

ITAT-Nagpur Page 1 of 16 आयकर अपीलीय Æयायािधकरण, नागप ु र Æयायपीठ, नागप ु र म¤। IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR (Through Virtual Court at Raipur) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI JAMLAPPA D BATTULL, ACCOUNTANT MEMBER आयकर अपील स ं . / ITA No. 167/NAG/2015 आयकर िनधाªरण वषª / Assessment Year : 2010-2011 M/s Mustafa Associates, Nr Vasant Bhavan, Kasturba Rd. Chandrapur – 442 402(Maharashtra) PAN : AALFM 6727 F . . . . . . . अपीलाथê / Appellant बनाम / V/s. Commissioner of Income Tax-3, Aayakar Bhavan, Nagpur – 440 001 (Mh) . . . . . . . ÿÂयथê / Respondent }kjk / Appearances Assessee by : Shri S. C. Thakar Revenue by : Shri Pradeep Headoo स ु नवाई कì तारीख / Date of conclusive Hearing : 18/02/2022 घोषणा कì तारीख / Date of Pronouncement : 28/04/2022 आदेश / ORDER PER JAMLAPPA D BATTULL, AM; The appellant against the revisionary order of Commissioner of Income Tax-3, Nagpur [for short “CIT”] dt. 07/03/2015 passed u/s 263 of the Income-tax Act, 1961 [for short “the Act”], which in turn dove out of regular order of assessment dt. 27/11/2012 passed u/s 143(3) of the Act by the Income Tax Officer-Ward-2, Chandrapur [for shot “AO”], filed these appeals before Income Tax Appellate Tribunal [for short “the Tribunal”] u/s 253. M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 2 of 16 2. The issue in the present controversy is, as to whether the order passed by the assessing officer u/s 143(3) can be said to be erroneous and prejudicial to the interest of the revenue within the preview of section 263 of the Act. 3. Before we proceed for adjudication, it is necessary to reproduce the ground of appeals here as; “1. The Learned CIT-A erred on the facts and in circumstance of the case by invoking revisionary power u/s 263 of the Act on the basis of audit objection raised by the government auditors. The appellant prays revisionary order passed should be annulled. 2. The Learned CIT-A erred on the facts and in circumstance of the case by treating the order in original passed by learned assessing officer as erroneous and prejudicial to the interest of revenue. The appellant prays revisionary order passed should be annulled. 3. The Learned CIT-A erred on the facts and in circumstance of the case by invoking revisionary powers and setting aside the order in original passed by learned assessing officer. The appellant prays revisionary order passed should be annulled. 4. The Learned CIT-A erred on the facts and in circumstances of the case by directing fresh assessment by the learned assessing officer. The appellant prays revisionary order passed should be annulled. 5. The Learned CIT-A erred on the facts and in circumstances of the case by dis-regarding and not replying on the various documents submitted before him, by the appellant in support for due completion for project with prescribed time as envisaged u/s 80IB(10) of the Act. M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 3 of 16 The appellant prays revisionary order passed should be annulled. 6. The Learned CIT-A erred on the facts and in circumstances of the case by dis-regarding the doctrine of Res-Judicata as previous assessment has been already completed by granting due claim to the appellant. The appellant prays revisionary order passed should be annulled. 7. The Learned CIT-A erred on the facts and in circumstances of the case by holding that the learned assessing officer has passed the order mechanically without making proper enquiries, cross examination and material on record. The appellant prays original order passed by the learned assessing officer should be upheld by annulling the revisionary order. 8. Each of the above ground is independent and without prejudice to the other ground of appeal preferred by the Appellant. 9. The Appellant craves leave to add, alter, vary, omit, amend or delete one or more of the above grounds of appeal at any time before, or at the time of, hearing of the appeal, so as to enable the learned bench of Appellate Tribunal to decide this appeal according to law. (Emphasis Supplied) 4. The facts of the case, succinctly stated as; 4.1 The assessee is a partnership firm engaged in the business of real estate projects including development of housing projects and derives income from sale of real estate units including Flats, Shops & raw houses etc. For the assessment year [for short “AY”] 2010-2011 M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 4 of 16 the assessee e-filed its return of income [for short “ROI/ITR”] on 27/09/2010 declaring total income of ₹2,58,650/-, which was processed summarily u/s 143(1) of the Act. The case of the assessee selected for scrutiny under CASS by issue of statutory notice u/s 143(2) dt. 29/08/2011 and finally the assessment u/s 143(3) were completed accepting the returned income. 4.2 The Ld. PCIT after culmination of the assessment proceedings, called for the assessment records and upon perusal thereof, disagreement with the action of Ld. AO, invoked the revisionary powers vested in him by virtue of section 263(1) and held the orders of assessment as erroneous insofar as it were prejudicial to the interest of the revenue on the ground that, the claim of deduction u/s 80IB(10) allowed in the absence fulfilment of condition of project by within the stipulated period in the form of completion certificate from the local authority. 4.3 In response to SCN issued u/s 263 of the Act, the appellant made representation, however the absence of certificate of completion of housing project, which is one of the basic condition for the entitlement of exemption, the Ld. PCIT set aside the 143(3) order of assessment holding it as erroneous insofar as prejudicial to the interest of the revenue and directed the Ld. AO to pass a fresh order in accordance with the provisions of the Income Tax Act and applicable circulars / judicial decision after making appropriate enquiries. M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 5 of 16 4.4 Pending such direction, the appellant assessee assailed the revisionary action before this Tribunal on the premise that, the subject matter under revision was duly considered while carrying out the regular assessment in the light of prevailing judicial precedents and hence the action of the revisionary authority is alleged contra legem. 5. After hearing to the rival contentions of both the parties; perused material placed on records and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant assessee as well the respondent revenue. 6. prout patet per recordum, that; 6.1 During the course of regular assessment proceedings, the case of the assessee was subjected for scrutiny by issue of statutory notice dt. 29/08/2011 and followed by notice u/s 142(1) the appellant was called upon to make submission in response to questionnaire issued. In reply thereto, appellant assessee through its authorised representative attended the office and made written submission explaining the entitlement of deduction u/c VI-A of the Act. In support of its claim of deduction u/s 80IB(10) the assessee on a specific query raised by the Ld. AO, laid a copy of audit report in the Form No 10CCB, audited financial statements, tax audit report, bank statements and other relevant documents in substantiating its claim. Considering the material placed on records, checks were carried out and after due inquiry into the entitlement the Ld. AO allowed the deduction u/s 80IB(10) accepting the claim of the assessee, holding firmly that; M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 6 of 16 “The assessee derives income from the business receipts (Flat, Shop, & Row House) of development of housing project and Commission & Brokerage. The audit report in Form No 3CB and Form No 10CCB and financial statements are submitted. The assessee submitted copy of bank pass book and bank statement during the course of assessment proceedings and also produced relevant document in respect of claim of deduction u/s 80IB(10) in chapter VI-A, which were verified on test check basis. In view of the above and discussion, the returned income of the assessee is accepted.” (Emphasis Supplied) 6.2 As far as the revisionary proceeding is concern, it transpires from the show cause notice [for short “SCN”] dt 17/12/2014 & 30/12/2014 issued u/s 263 of the Act calling upon the assessee, to show case as to why in the absence of completion certificate from a Local Authority certifying the completion of housing project, the deduction u/s 80IB(10) should not be denied. In response to SCN, the appellant assessee was represented by the authorised representative and filed written submission on 16/01/2015 relying on the decision of Hon’ble Gujarat High Court in the case of “CIT Vs Tarnetor Corporation” reported at 362 ITR 174 (Guj). The bone of the submission of the appellant has been reproduced in para 5.3 of the revisionary order, which read as under; “The fact in assessee case is akin to the above cited case wherein the assessee has applied for the completion to the local authority which is deemed to be accepted as per the application laws thought formal completion certification not granted by the authorities. All the M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 7 of 16 necessary evidence was brought on record which substantiates that the construction is duly completed and authorities are duly collecting the Municipal Property Tax thereon. Hence non-production of completion certificate which is technical in nature cannot be reason for denying deduction u/s 80BI(10) of the Act overlooking the other condition which were duly complied in present case, as every condition of the statute cannot be seen as mandatory. If substantial compliance thereof is established on record, minor deviation thereof would not vitiate the very purpose for which deduction was being made available.” (Emphasis Supplied) 6.3 The Ld. PCIT considering the assessment records inter alia, the audit report submitted in the Form No 10CCB issued for claiming deduction u/s 80IB(10) of the Act and r.w.r. 18BBB of the Income Tax Rules, 1962 drawing divergent conclusion that, in the absence of certificate of completion from a Local Authority, the deduction is claimed on the basis of certificate issued by private architect bearing no date, hence date by which completion of construction of the housing project is not at all ascertainable, in the event the Ld. AO blatantly erred in allowing the deduction u/s 80IB(10) of the Act, consequently set aside the order of assessment passed u/s 143(3) of the Act holding it to be erroneous insofar as it is prejudicial to the interest of revenue and directed the Ld. AO to pass a fresh order in accordance with the provisions of the Income Tax Act and applicable circulars / judicial decision after making appropriate enquiries. M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 8 of 16 7. There are many as eight grounds are raised challenging the validity of revisionary jurisdiction, and during the course of virtual hearing, the learned representative of the assessee [for short “AR”] taking us through preceding and subsequent assessment orders, copy of audit report, Form No 10CCB and information sought under RTI Act 2005, made two fold submission that, (1) the appellant has duly complied with the mandate of provisions of section 80IB(10) so as to entitle for deduction and upon the inquiry into, on satisfaction, the Ld. AO allowed the claim. (2) the revisionary authority erred in invoking the provisions of section 263 merely on the audit objection and on the issue which was duly inquired into during the course of assessment proceedings without rebutting the claim of deduction on technical ground. Per contra, the departmental representative [for short “DR”] placing a strong reliance on the order of revisionary authority contended that, non-compliance of mandate of law cannot be an excuse and mere application to local authority for obtaining completion certificate cannot ispo-fact be taken as compliance of law, hence in the absence of certificate establishing the date by which housing project cannot be inferred, consequently the claim of the assessee. 8. To before shooting the balloon, it will be apt to first reproduce the provision of section 80IB(10) and 263(1) in verbatim as it stood and applicable to the AY under consideration; 7.1 80IB : Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 9 of 16 (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,— ( a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,— (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority. Explanation.—For the purposes of this clause,— (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority; (Emphasis Supplied) 8.2 The bare reading of the section lays down the time restriction within which the housing project is to be completed so as to qualify for M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 10 of 16 deduction, and such date be reckoned from the certificate issued by the local authority being an appropriate authority. In the absence of certificate, the date of completion cannot be authentically be established to prove compliance of mandate of law entitling the deduction. In the instant case, the appellant in compliance of mandate, submitted the audit report in the form of 10CCB r.w.r. 18BBB of the Rules, which invariably certified the date of completion vide clause 23 therein, which indeed considered during the course of assessment proceedings and based thereon the deduction u/s 80IB(10) was allowed. Insofar as the issuance of certificate is concern, it is placed on record that, the appellant has duly completed the process for obtaining the certificate from the local authority within the stipulated time, however through Right To Information [for short “RTI”] it is also placed on records that, for the administrative / technical reasons, the local authority did not issue certificate to anyone during the contemporary period, and in this respect, we are mindful to quote the decision of Hon’ble jurisdictional High Court in the case of “PCIT Vs Dharti Enterprise” where the Lordship have held that; “We find that this issue is now no longer res integra as it stands concluded against the Revenue and in favour of the Respondent by the decision of this Court in CIT v/s. Hindustan Samuh Awas Ltd., 377 ITR 150 . In the above case, it has been held that whether the project is completed within the time framed provided under Section 80IB(10) of the Act, and an application for issuance of completion certificate is filed within time, then delay on account of the competent authority in issuing completion certificate would not deprive the Assessee, the benefit of Section 80IB(10) of the Act.” (Emphasis Supplied) M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 11 of 16 7.2 Now coming to the validity of assumption of revisionary jurisdiction; 263. Revision of orders prejudicial to revenue – (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.] (3) . . . . . . . Explanation.—In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. (Emphasis Supplied) 7.3 A plain reading of this provision makes it clear that, the precondition to exercise revisionary jurisdiction by the PCIT/CIT suo moto under it, is that the order of AO must be erroneous insofar as it is prejudicial to the interests of the revenue is concern. Consequently, the provision mandates the satisfaction of existence of twofold M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 12 of 16 conditions before invocation and these explicitly are; (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 any one of two is absent or unsatisfied, that is where the order of the assessing officer is erroneous but is not prejudicial to the revenue or where order is not erroneous but is prejudicial to the revenue, then the recourse to Section 263(1) of the Act fails. Albeit the foresaid twin satisfaction drawn from the assessment records may trigger the revisionary jurisdiction, yet such shall not automatically empower the revisionary tax authorities to conclude the revision proceedings without obeying additional dual riders such as; (i) making or causing to be made such enquiry as necessary and (ii) according an opportunity of being heard to the assessee following the principle of natural justice. 7.4 In the light of provision of law, it is of paramount importance to note that, an incorrect assumption of facts or an incorrect application of law or passing an order without application of mind or without applying the principle of natural justice, shall discretely be sufficient to hold the order being erroneous. Albeit the term prejudicial to the interests of the revenue is not at all defined in the Act, but is needs to be understood in its ordinary meaning and it is of wide import and is not confined to mere loss to ex-chequer. 7.5 In the light of ration laid down by Hon’ble Supreme Court of India on the subject matter, we have the audacity to summarise the inferential but harmonious analysis of revisionary provision laid in M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 13 of 16 section 263 of the Act, into a five steps “Queen Principle”, falling out of which the assuming revisionary jurisdiction u/s 263 shall be contra legem, and these steps are; (1) There must be an explicit query from the adjudicating tax authority as regards to any claim made including information supplied in the return of income filed or to be filed, and (2) There must be direct, clear and an unreserved submission from the assessee in reply to aforesaid query, and (3) The submission must be followed by detailed inquiry (and not mere enquiry) by the tax authorities into assessee’s eligibility of claim, basis of claim and compliance of pre as well post conditions as may be attached to the claim under scrutiny, and (4) There should be even-handed application of mind by the adjudicating authority in reaching out the allowability or dis-allowability of claim under consideration, (5) And finally, the adjudication must ensure the correct application of law as regards to aforesaid following principle of natural justice. 9. In the instant case, during the course of assessment proceedings, explicit queries on the entitlement of 80IB(10) claim of the appellant assessee in relation to eligible housing project were raised and unreserved submission in the form of audit report issued by the practicing chartered account in Form No 10CCB (r.w.r. 18BBB) along-with other relevant documents were matured before the Ld. AO, consequent to which inquiries into entitlement of claim of deduction u/s 80IB(10) were conducted and thereupon in the light of supportive material and judicial precedents, drawing even-handed conclusions, assessment allowing the deduction u/s 80IB(10) of the was carried out, leaving no air in the M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 14 of 16 assessment. Per contra, the revisionary action and order u/s 263 of the Act, both entirely marshal out of an audit objection communicated by the revenue audit team and in the circumstance of complete material absentia supporting the assumption of revisionary jurisdiction reached the conclusion holding the order of assessment as erroneous insofar as it is prejudicial to the interest of revenue in view of explanation 2 to section 263 of the Act. In this count we shall necessarily refer the ratio drawn by Hon'ble Guwahati High Court while adjudicating on similar issue in “B & A Plantation & Industries Ltd Vs CIT” reported at 290 ITR 395, where Hon’ble Lordship have emphasised the ratio decidendi laid by Hon’ble Apex Court in “Sirpur Paper Mill Ltd. Vs CWT” reported in 77 ITR 6, that while exercising power, the Commissioner must have an unbiased mind and decide the dispute according to the procedure which is consistent with the principles of natural justice and cannot permit his mind to be influenced by the dictation of another authority. The relevant observations from page 7 of the order read as under; “In exercise of the power the Commissioner must bring to bear and unbiased mind, consider impartially the objections raised by the aggrieved party, and decide the dispute according to procedure consistent with the principles of natural justice; he cannot permit his judgment to be influenced by matters not disclosed to the assessee, nor by dictation of another authority." (Emphasis supplied) 10. Considering the facts of the case extenso, we concede with the contention of the Ld. AR that, in support of appellant claim as expounded hereinbefore at para 6, there was indeed unvarying and indistinguishable M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 15 of 16 material placed before both these tax authorities during the course of regular assessment vis-à-vis revisionary proceeding, which in turn demonstrates that, the Ld. AO considering the same submission of the assessee carried out inquiry with respect to eligibility of claim, basis of claim and compliance relating thereto(if any) and then finalized the assessment taking one of the plausible view in the light of settled legal position in allowing the deduction u/s 80IB(10) of the Act, this evidently concludes that the adjudication squarely fell within aforementioned “Queen Principle”. Whereas under revisionary proceedings Ld. PCIT yet again conducted an inquiry into the claim of the appellant based on the like material and sitting on the same fence displaced with the views of Ld. AO and directed for modification of assessment which is ostensibly impermissible under a law following the ration laid in down by Hon’ble Jurisdictional High Court in “CIT Vs Gabriel India Ltd.” reported in 203 ITR 108 (Bom) and the Hon’ble Apex Court in “Malabar Industrial Co Ltd. Vs CIT” reported in 243 ITR 83. Ergo, in the above context, we find the order of Ld PCIT is unsustainable in law, consequently we quash revisionary order passed u/s 263 of the Act and restore the order of assessment passed u/s 143(3). 8. Resultantly, the appeal of the appellant is allowed in term of aforestated observation. M/s Mustafa Associates, AALFM6727F ITA No. : 167/NAG/2015 & AY : 2010-2011 ITAT-Nagpur Page 16 of 16 Order pronounced on this Thursday, 28 th day of April, 2022. -S/d- -S/d- RAVISH SOOD JAMLAPPA D BATTULL JUDICIAL MEMBER ACCOUNTANT MEMBER रायप ु र / RAIPUR ; िदना ं क / Dated : 28 th April, 2022 आदेश कì ÿितिलिप अúेिषत / Copy of the Order forwarded to : 1. अपीलाथê / The Appellant. 2. ÿÂयथê / The Respondent. 3. The CIT, Nagpur (C.G) 4. The Pr. CIT, Nagpur (C.G) 5. िवभागीय ÿितिनिध,आयकर अपीलीय Æयायािधकरण, नागप ु र ब¤च, नागप ु र / DR, ITAT, Nagpur Bench, Nagpur. 6. गाडªफ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // िनजीसिचव / Private Secretary आयकर अपीलीय Æयायािधकरण, नागप ु र ब¤च, नागप ु र / ITAT, Nagpur