M/s Man Development, Indore V. The CIT, 1, Indore

ITA 25/IND/2011

• Counselvise Citation: 2522714 RSA 2011
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 21-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Assessee Lawyers: P D NAGAR
• Keywords: Retrospective amendment
• Section: 143(3); 80IB; 145; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARMA, A.M. PAN NO. : AALF M 2713 - N I.T.A.NO. 25 / IND /20 11 A.Y. : 2006 - 07 M/S. MAN DEVELOPMENTS , CIT, G - 9, MAN HERITAGE, VS INDORE. SOUTH TUK OGANJ, INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI P. D. NAGAR, C. A. RESPONDENT BY : SHRI KESHAV SAXENA, CIT DR O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF C OMMISSIONER OF INC OME - TAX DATED 30 TH MARCH, 2011, PASSED U/S 263 IN THE MATTER OF ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME - TAX ACT, 1961. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN CO NSTRUCTION AND DEVELOPMENT OF BUILDING ON LAND OWNED BY - : 2 : - 2 HIM AND ALSO OWNED BY OTHER S, AS DEVELOPERS. RETURN OF INCOME WAS SUBMITTED AFTER CLAIMING DEDUCTION U/S 80IB AMOUNTING TO RS. 58,21,363/ - . WHILE FRAMING ASSESSMENT U/S 143(3), THE AO DID NOT DISTURB THE DEDUCTION CLAIMED U/S 80IB, HE FRAMED THE ASSESSMENT AFTER MAKING ADDITION ON ACCOUNT OF INTEREST OF RS. 70,144/ - , THEREBY ASSESSING TOTAL INCOME AT RS. 11.37 LAKHS AS AGAINST RETURNED INCOME OF RS. 10.67 LAKHS. ON VERIFICATION OF AO S RECORDS, THE LD. CIT FOUND THAT THE AO HAS NOT EXAMINED ASSESSEE S CLAIM OF DEDUCTION U/S 80IB(10) WITH REFERENCE TO APPLICABILITY OF EXPLANATION INSERTED BY THE FINANCE ACT, 2009, W.E.F. 1.4.2001. THE CIT FURTHER OBSERVED THAT LAND WAS IN THE NAME OF PARSHWANATH GRAH NI RMAN SAHAKARI SANSTHA MARYADIT AND ASSESSEE WAS NOT THE OWNER. IN OTHER PROJECT I.E. NIPANIA PROJECT, THE ASSESSEE CLAIMED THE DEDUCTION U/S 80IB ON THE PROFITS WHICH WAS WORKED OUT ON THE BASIS OF EXPENSES INCURRED ON CONSTRUCTION WORK, NOT EQUITABLE WITH THE PROFITS DERIVED FROM ELIGIBLE BUSINESS. ON THE BASIS OF THESE FACTUAL DETAILS, A SHOW CAUSE NOTICE U/S 263 OF THE INCOME - TAX ACT, 1961, WAS ISSUED AND ASSESSEE WAS ASKED TO FILE SUBMISSIONS. - : 3 : - 3 3. IN REPLY TO THE CIT S NOTICE U/S 263, THE ASSESSEE SUBMIT TED AS UNDER : - ASSESSEE HAD ENTERED INTO A JOINT DEVELOPMENT AGREEMENT WITH ABOVE SANSTHA WHICH WAS EXECUTED ON 25.11.2002 & ACCORDINGLY CONSTRUCTED RESIDENTIAL UNITS & GOT 75 % SHARE IN THE CONSTRUCTED RESIDENTIAL FLATS WHICH WERE SOLD BY THE ASSESSEE A S DEVELOPER & EXECUTED THE SALE DEEDS IN FAVOUR OF ULTIMATE PURCHASERS. SIMLARLY PARSHWANATH GRAH NIRMAN SAHAKARI SANSTHA HAD ALSO SOLD FLATS RECEIVED IN THE IR SHARE WHICH THEY GOT IN LIEU OF LAND BELONGING TO THEM. YOUR HONOUR HAD POINTED OUT THAT PARSHW ANATH GRAH NIRMAN SAHAKARI SANSTHA IS THE OWNER OF THE LAND & DEVELOPER OF THE PROJECT. THIS FACT IS PARTIALLY CORRECT AS STATED ABOVE. WE HAVE NOT ACTED AS CONTRACTOR FOR CONSTRUCTION OF THE BUILDING AS POINTED OUT BY THE AUDIT PARTY BUT WE HAVE CERTAINLY - : 4 : - 4 DEVELOPED THE ABOVE PROJECT ON THE BASIS OF DEVELOPER AGREEMENT OF OUR OWN B Y INVESTING FUNDS IN CONSTRUCTING BUILDING UNDER THE TERMS OF JOINT DEVELOPMENT AGREEMENT. A CONTRACTOR IS WELL DEFINED IN THE LAW WHO IS THE PERSON WHO CONSTRUCTS THE BUILDING ON THE INSTRUCTION & INVESTMENTS OF THERE PRINCIPALS & HAND OVER THE SAME TO THE PERSONS CONCERNED & GET THEIR PAYMENT FROM THE PRINCIPALS TIME TO TIME. THIS IS NOT THE CASE HERE. WE HAVE NOT GIVEN ANY SUCH SERVICES AS CONTRACTOR TO THE LAND OWNER. HOWEVE R, WE HAVE CONSTRUCTED THE BUILDING BY INVESTING OUR OWN FUNDS UNDER THE TERMS OF THE DEVELOPMENT AGREEMENT AND DIVIDED THE CONSTRUCTED PROPERTY IN THE RATIO OF 25 % AND 75 % BETWEEN LAND OWNER AND DEVELOPER AS AGREED IN DEVELOPMENT AGREEMENT *& SOLD THE P ROPERTY OF OUR SHARE AT OUR OWN DISCRETION & PAID RESPECTIVE TAXES INCLUDING SERVICE TAX AS BUILDER . THIS FACT CAN BE CHECKED FROM COPY OF ILLUSTRATIVE SALE - : 5 : - 5 DEED ENCLOSED HEREWITH IN SUPPORT OF OUR CONTENTION WHERE IN WE HAVE SIGNED THE SALE DEED AS SELLER . EVEN FROM THE BOOKS OF ACCOUNT THIS FACT CAN BE VERIFIED FORM RESIDENTIAL COMPLEX AT 74, A. B. ROAD, INDORE ( ROYAL PREMIUM) CONSTRUCTION SURVEY NO. 410/01, 410/02 & 392/02 GRAM NIRANJANPUR. IN VIEW OF THE ABOVE FACTS YOUR HONOUR WILL AGREE THAT REAS ON FOR REOPENING THE CASE U/S 263 ARE FACTUALLY NOT CORRECT & THE AO HAD RIGHTLY ALLOWED THE CLAIM U/S 80IB TO THE ASSESSEE. 4. IN RESPECT OF N I PANIA PROJECT, THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT WAS AS UNDER : - THE ASSESSEE HAS COMPUTED THE PROFI T FOR THE RELEVANT YEAR ON WORK IN PROGRESS BASIS & REGULARLY FOLLOWED THE METHOD OF ACCOUNTING IN PREVIOUS YEAR AND SUBSEQUENT YEARS. FURTHER AS PER THE AS - 7 CONSTRUCTION CONTRACTS WHEN THE OUT COME OF A CONSTRUCTION CONTRACT CAN BE ESTIMATED RELIABLY, CONTRACT REVENUE & CONTRACT COSTS ASSOCIATED WITH THE CONSTRUCTION CONTRACT SHOULD BE RECOGNIZED AS - : 6 : - 6 REVENUE & EXPENSES RESPECTIVELY BY REFERENCE TO THE STAGE OF COMPLETION OF THE CONTRACT ACTIVITY AT THE REPORTING DATE AS 7 ALLOWS THE ACCOUNT TO BE MAINTAI NED ON THE PERCENTAGE OF COMPLETION METHOD . SECTION 145 OF THE ACT REQUIRES THAT PROFIT & GAIN FROM BUSINESS OR PROFESSION SHOULD BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM REGULARLY EMPLOYED BY THE ASSESSEE, HOWEVER, WHERE THE ACCO UNTING STANDARDS OF THE INSTITUTE ARE FOLLOWED THE ACCOUNTS ARE NOT REJECTABLE BY THE AUDIT PARTY. WITH REGARD TO YOUR HONOUR S QUERY REGARDING THE ACTUAL DEVELOPER & OWNER OF THE PROJECT IT IS SUBMITTED THAT ASSESSEE HAD PURCHASED THE LAND AND HIS NAME I S ENTERED INTO BHU - ADHIKAR * RIN PUSTIKA IN THE FINANCIAL YEAR 2004 - 05 ( COPY ENCLOSED). FURTHER ASSESSEE HAS OBTAINED ALL REQUISITE APPROVALS & PERMISSION FROM TOWN & COUNTRY PLANNING WITH REGARD TO DEVELOPMENT & CONSTRUCTION OF RESIDENTIAL UNITS ON KHASR A NO. 14/1 & 14/2 KHASRA NO. 17 - : 7 : - 7 GRAM NIPANIA DISTT. INDORE. COPY OF APPROVAL LETTER OF TOWN & COUNTRY PLANNING DATED 18.10.2005 IN THE NAME OF ASSESSEE ALONGWITH COPY OF LAY OUT PLAN IS ENCLOSED HEREWITH FOR YOUR HONOUR S READY REFERENCE. THIS FACT ALSO E MERGED FROM PLAIN READING OF OUR CONSTRUCTION ACCOUNT WHERE IN INVESTMENT IN LAND AT NIPANIA IS SHOWN AS EXPENDITURE DURING THE YEAR. FURTHER ASSESSEE HAS OBTAINED THE NECESSARY APPROVAL FOR CONSTRUCTION OF RESIDENTIAL UNITS FROM GRAM PANCHAYAT NIPANIA VI DE LETTER DATED 20.01.2006 ( COPY ENCLOSED) . THUS, THE ABOVE FACTS ITSELF PROVES THAT THE ASSESSEE IS THE ACTUAL DEVELOPER & OWNER OF THE PROJECT AND CARRIED ON CONSTRUCTION ACTIVITIES AT HIS OWN ON LAND BELONGING TO HIM AND RIGHTLY CALCULATED PROFIT ON WO RK IN PROGRESS ACCOUNT AND OFFERED INCOME ACCRUED ON SALE BASIS AND CORRECTLY CLAIMED DEDUCTION U/S 80IB. 5. BEING NOT SATISFIED WITH THE ASSESSEE S REPLY, THE LD. CIT WHILE PASSING ORDER U/S 263 HELD THAT THE ASSESSEE IS A CONTRACTOR OF THE PROJECT AND IN V IEW OF THE RETROSPECTIVE - : 8 : - 8 AMENDMENT TO SECTION 80IB(10) BROUGHT IN BY FINANCE ACT, 2009, W.E.F. 01.04.2001 THE 80IB(10) DEDUCTION WILL NOT BE ALLOWED IN THE CASES OF WORK CONTRACTORS. THIS ISSUE HAS NOT BEEN EXAMINED AT THE TIME OF FRAMING OF THE ASSESSMENT BECAUSE THE ORDER IS DATED 03.11.2008 WHEREAS THE AMENDMENT WAS BROUGHT IN BY THE FINANCE ACT 2009 WITH RETROSPECTIVE EFFECT FROM 01.04.2001. 6. IT WAS FURTHER OBSERVED BY THE CIT THAT THE DEDUCTION IS ELIGIBLE ON CERTAIN PARAMETERS OF THE AREA AND EVEN THIS ISSUE HAVING NOT BEEN PROPERLY VERIFIED BY THE ASSESSING OFFICER BEFORE ACCEPTING THE CLAIM. THIS VERIFICATION WHICH REMAINED TO BE DONE IS NOT ONLY RELATABLE TO TOTAL AREA OF THE PROJECT BUT ALSO THE AREA OF THE INDIVIDUAL RESIDENTIAL UNITS CONSTRUCTED B Y THE ASSESSEE AS A WORK CONTRACTOR. IT IS SETTLED LAW THAT MERE FAILURE TO MAKE ENQUIRIES DOES MAKE AN ORDER ERRONEOUS. IT IS INCUMBENT ON THE OFFICER TO INVESTIGATE THE FACTS STATED IN THE RETURN, WHEN CIRCUMSTANCES WOULD MAKE SUCH AN ENQUIRY PRUDENT AND THE WORD ERRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. - : 9 : - 9 7. WITH RESPECT TO NEPANIA PROJECT, THE OBSERVATION OF CIT WAS AS UNDER : - FOR THE NIPANIA PROJECT THE CLAIM FOR DEDUCTION WAS MADE BY THE ASSESSEE AFTER DETERMINING THE PRO FIT BY CALCULATING IT AN EXPENDITURE BASIS AT THE TIME OF BEGINNING OF THE PROJECT AND THE SAME CAN NOT BE TREATED AS PROFIT DERIVED FROM ELIGIBLE BUSINESS FOR THE PURPOSE OF CLAIM OF DEDUCTION U/S 80IB(10) OF INCOME - TAX ACT . THUS THE ACCEPTANCE OF THE CLA IM BY THE ASSESSING OFFICER WITHOUT VERIFICATION AND IN IGNORANCE OF PROVISION OF LAW COUPLED WITH THE FACTS ABOVE MAKES THE ORDER OF THE AO NOT ONLY ERRONEOUS BUT PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT WILL BE FAIR IF THE SAME IS SET ASIDE TO THE FILE OF THE AO FOR DE NOVO CONSIDERATION VIS - - VIS THE CLAIM OF THE ASSESSEE AFTER APPRAISAL OF ALL THE FACTS AND THE MATERIAL TO BE PRODUCED BY THE ASSESSEE. THUS THE ORDER IS SET ASIDE U/S 263 OF THE INCOME - TAX ACT. - : 10 : - 10 8. AGGRIEVED BY THE ABOVE ORDER, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 9. SHRI P. D. NAGAR, C. A. APPEARED ON BEHALF OF THE ASSESSEE AND CONTENDED THAT THE AO HAD CONSIDERED THE BOOKS OF ACCOUNT, AUDIT REPORT AND REPORT SUBMITTED IN FORM NO.10 CCB WHILE CONSIDERING THE CLAIM OF THE ASSE SSEE. FROM THE DOCUMENTS PRODUCED, IT WAS PROVED BEYOND DOUBT THAT THE ASSESSEE WAS DEVELOPER AND NOT CONTRACTOR HENCE DEDUCTION U/S 80IB OF THE INCOME - TAX ACT, WAS ALLOWED. HE FURTHER SUBMITTED THAT ON THE SIMILAR FACTS IT HAS BEEN HELD THAT A DEVELOPER I S ALLOWED TO CLAIM DEDUCTION U/S 80IB OF THE A CT , IN THE CASE OF (I) RADHE DEVELOPERS VS. ITO, (2008) 113 TTJ 300 (AHD),(II) MUDIT MADANLAL GUPTA VS. ACIT, (2011) 51 DTR 217 (MUMBAI) (III) ACIT VS. FORTUNE BUILDERS, (2010) 14 ITJ 667 (INDORE.) 10. REGARDING P ROJECT AT SUKHLIYA, INDORE, IN RESPECT OF ROYAL BUNGALOWS CITY, SHRI P. D. NAGAR SUBMITTED THAT THE PROJECT WAS COMMENCED IN THE ASSESSMENT YEAR 2005 - 06. LAND OWNED BY M/S. MAHA SHAKTI GRAH NIRMAN SAHAKARI SANSTHAN MARYADIT. DEVELOPERS AGREEMENT WAS EXECU TED ON 3.1.2004 - : 11 : - 11 ACCORDING TO WHICH THE ASSESSEE IS ENTITLED TO HAVE 91 RESIDENTIAL UNITS OUT OF 145 RESIDENTIAL UNITS I.E. ABOUT 63 %. GROSS PROFIT ESTIMATED ON THE BASIS OF PERCENTAGE OF COMPLETION METHOD EQUAL TO 20 % OF CONSTRUCTION COST AT RS. 78,51,79 3/ - . DEDUCTION U/S 80IB CLAIMED AND ALLOWED BY THE ASSESSING OFFICER. NOT OBJECTED BY THE CIT IN PROCEEDINGS U/S 263 OF THE ACT. 11. IN RESPECT OF ROYAL PREMIUM PROJECT AT NIRANJANPUR, INDORE , IT WAS SUBMITTED THAT THE PROJECT WAS COMMENCED IN THE ASSESSMENT YEAR 2005 - 06. LAND OWNED BY M/S. PARSHWANATH GRAH NIRMAN SAHAKARI SANSTHA MYDT. DEVELOPERS AGREEMENT WAS EXECUTED ON 27.11.2002 HAVING 75 % SHARE IN TOTAL BUILT UP AREA OF RESIDENTIAL FLATS. GROSS PROFIT ESTIMATED ON THE BASIS OF PERCENTAGE OF COMPLETION METHOD EQUAL TO 12.5 % OF CONSTRUCTION COST AT RS. 26,89,998/ - . DEDUCTION U/S 80IB CLAIMED AND ALLOWED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2005 - 06 & 2006 - 07. 12. IN RESPECT OF ROYAL BUNGALOWS PROJECT SITUATED AT NIPANIA, INDORE, I T WAS SUBMITTED THAT PROJECT WAS COMMENCED IN THE ASSESSMENT YEAR 2006 - 07. LAND WAS OWNED BY M/S. - : 12 : - 12 MAN DEVELOPMENT I.E. THE ASSESSEE ITSELF. GROSS PROFIT ESTIMATED ON THE BASIS OF PERCENTAGE OF COMPLETION METHOD EQUAL TO 20 % OF CONSTRUCTION COST AT RS. 11,83,289/ - . DEDUCTION U /S 80IB CLAIMED AND ALLOWED BY THE ASSESSING OFFICER. 13. IN RELATION TO PROJECT B , THE CONTENTION OF SHRI NAGAR WAS THAT THE ASSESSEE ENTERED INTO AGREEMENTS WITH PARSHWANATH GRAH NIRMAN SAHAKARI SANSTHA MYDT (THE OWNER OF THE LAND) TO DEVELOP THE ENTIRE L AND BY CONSTRUCTING RESIDENTIAL FLATS WHEREIN DEVELOPERS SHARE WILL BE 75 % IN BUILT UP AREA AND LAND OWNER S SHARE WILL BE 25% OF CONSTRUCTED PORTION OF THE DEVELOPED PROPERTY IN LIEU OF COST OF LAND. ENTIRE EXPENDITURE TOWARDS CONSTRUCTION INCLUDING MUNI CIPAL FEE, PROPERTY TAX, ELECTRIC AND WATER CONNECTION CHARGES , COST OF BUILDING MATERIAL WAS BORNE BY THE ASSESSEE. 14. THE CIT CONSIDERED THAT : - (A) THE OWNER OF THE LAND IS NOT THE ASSESSEE ; (B) THE ASSESSEE IS ONLY CONTRACTOR OF PROJECT EVEN IF GOT 75 % SHARE IN CONSTRUCTED RESIDENTIAL FLAT BECAUSE IN THE SALE AGREEMENT THE NAME OF THE SOCIETY ALSO - : 13 : - 13 APPEARS AS THE FIRST PARTY, BEING THE OWNER OF LAND; AND (C) THE HOUSING PROJECT IS APPROVED IN THE NAME OF SOCIETY AND NOT IN THE NAME OF THE ASSESSEE. 15. REGARDING PROJECT C , THE CONTENTION OF MR. NAGAR WAS THAT THE LD. CIT CONSIDERED PROFIT ESTIMATED ON CONSTRUCTION COST METHOD IS NOT AT PAR WITH THE PROFIT DERIVED FROM ELIGIBLE BUSINESS FOR CLAIMING DEDUCTION U/S 80IB OF THE ACT. IN FACT, INSTITUTE OF CHARTERED ACCOUNTA NTS OF INDIA HAS APPROVED SUCH METHOD OF ACCOUNTING IN CONSTRUCTION CONTRACTS AS PER AS - 7. BY ADOPTING SUCH METHOD OVERALL PROFITABILITY OF THE PROJECT IS NOT EFFECTED IN ANY MANNER. SUCH METHOD IS BEING FOLLOWED CONSISTENTLY YEAR AFTER YEAR AND ON ACCRUAL BASIS, IF ANY, PROFIT IS ACCOUNTED FOR IN THE BOOKS, SUCH PROFIT IS ELIGIBLE FOR DEDUCTION U/S 80IB PROVIDED ALL OTHER CONDITIONS COMPLIED WITH AS HELD IN THE CASE OF B.K. PATEL ENTERPRISES VS. DCIT, (2009) 125 TTJ 974 (PUNE). 16. ON THE OTHER HAND, IT WAS CONTENDED BY THE LD. CIT DR, SHRI KESHAVE SAXENA, THAT THE AO HAS NOT AT ALL DEALT WITH THE ISSUE OF ASSESSEE S CLAIM OF DEDUCTION U/S 80IB WHILE FRAMING - : 14 : - 14 THE ASSESSMENT U/S 143(3). HE INVITED OUR ATTENTION TO THE ORDER OF THE AO DATED 3 RD NOVEMBER, 2008, W HEREIN THERE WAS NO WHISPER ABOUT THE ASSESSEE S CLAIM OF DEDUCTION U/S 80IB. ACCORDING TO THE LD. CIT DR, THE AO HAS NOT APPLIED HIS MIND TO THE ASSESSEE S ELIGIBILITY FOR CLAIM OF DEDUCTION U/S 80IB WITH REGARD TO THE VARIOUS CONDITIONS, WHICH ARE REQUIR ED TO BE FULFILLED BEFORE ALLOWING THE SAID CLAIM. HE CONTENDED THAT NON - APPLICATION OF MIND MADE THE ORDER OF THE AO NOT ONLY ERRONEOUS BUT ALSO GREAT PREJUDICE WAS CAUSED TO THE REVENUE AS FAR AS WRONG DEDUCTION OF RS. 58.21 LAKHS WAS ALLOWED, EVEN WITHO UT DISCUSSING ANYTHING ON THIS ISSUE. 17. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE ASSESSEE WAS IN THE BUSINESS OF CONSTRUCTION OF HOUSING PROJECT AND DURING THE YEAR UNDER CONSIDE RATION , A DEDUCTION OF RS. 58.21 LAKHS WAS CLAIMED IN THE RETURN OF INCOME U/S 80IB (10) . WHILE FRAMING SCRUTINY ASSESSMENT U/S 143(3), THE AO HAS NOWHERE DISCUSSED THE ASSESSEE S ELIGIBILITY FOR SUCH DEDUCTION NOR HE HAS APPLIED HIS MIND TOWARDS FULFILLMEN T OF VARIOUS CONDITIONS SUBJECT TO WHICH DEDUCTION U/S 80IB (10) - : 15 : - 15 CAN BE ALLOWED TO THE ASSESSEE. ALLOWING A LEGAL CLAIM WITHOUT APPLICATION OF MIND AND WITHOUT VERIFYING THE TERMS AND CONDITIONS, WHICH ARE STIPULATED UNDER SUB SECTION (10) OF SECTION 80IB H AS RENDERED THE ORDER OF THE AO NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTERESTS OF REVENUE. HON'BLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES, 99 ITR 375, OBSERVED THAT THE AO IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR AND HE CANNOT REMAIN PASSIVE IN THE RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. IT WAS INCUMBENT UPON THE AO TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT. THE WORDS ERRONEO US U/S 263 OF THE ACT INCLUDES THE FAILURE TO MAKE SUCH INQUIRY AND WHEN THE AO MAKES SOME ASSUMPTION IN HURRY ACCEPTING WHAT THE ASSESSEE HAS STATED IN THE RETURN WITHOUT MAKING ANY INQUIRY, THE LD. CIT WOULD BE JUSTIFIED IN INVOKING POWERS U/S 263. SIMI LAR VIEW HAS BEEN TAKEN BY HON'BLE MADRAS HIGH COURT IN CASE OF K.A.RAMASWAMY CHETTIAR & ANR., - : 16 : - 16 220 ITR 657, AND HON'BLE DELHI HIGH COURT IN THE CASE OF DUGGAL & COMPANY, 220 ITR 456. APPLYING THE PROPOSITION OF LAW LAID DOWN IN THESE CASES, WE ARE IN FULL AGREEMENT WITH THE LD. CIT DR THAT POWERS U/S 263 HAVE BEEN CORRECTLY EXERCISED. 18. NOW WE COME TO THE VARIOUS OBSERVATIONS MADE BY THE LD. CIT IN HIS ORDER U/S 263, WHEREIN HE HAS OBSERVED THAT SINCE THE ASSESSEE WAS NOT OWNING THE LAND AND THE PROJECT WAS NOT APPROVED IN THE NAME OF THE ASSESSEE, THEREFORE, CLAIM OF DEDUCTION U/S 80IB IS NOT ELIGIBLE. IN THIS REGARD, AS PER OUR CONSIDERED VIEW, THIS CONTROVERSY HAS BEEN SETTLED BY THE DECISION OF THE COORDINATE BENCH IN THE CASE OF FORTUNE BUILDERS, 14 ITJ 667, WHEREIN IT WAS HELD THAT DEDUCTION U/S 80IB (10) IS ALLOWABLE EVEN IF THE ASSESSEE IS NOT THE OWNER OF THE LAND. EVEN PROVISIONS OF SECTION 8 0 IB (10) DO NOT PROHIBIT NOR CONFINE A DEDUCTION ONLY TO THE PERSON, WHO IS OWNER OF THE LAND AND IN WHOSE N AME THE PLAN IS APPROVED. PROVISIONS OF SUB SECTION (10) OF SECTION 80IB SIMPLY PROVIDES THAT THE DEDUCTION WILL BE ALLOWED TO AN UNDERTAKING WHO IS ENGAGED IN - : 17 : - 17 DEVELOPING AND BUILDING A HOUSING PROJECT APPROVED BEFORE A SPECIFIED DATE BY A LOCAL AUTHORITIE S. THUS, THERE IS A CONDITION FOR GETTING THE PLAN APPROVED FOR WHICH DEDUCTION IS CLAIMED BY THE ASSESSEE, HOWEVER, THERE IS NO RESTRICTION THAT THE PLAN SHOULD BE APPROVED IN THE NAME OF THE ASSESSEE NOR THE ACT A NY WHERE PROVIDES THAT THE ASSESSEE SHOUL D BE THE OWNER OF THE LAND ON WHICH HE IS GOING TO DEVELOP A HOUSING PROJECT. IN THE INSTANT CASE, T HE LD. CIT HAS RESTORED THE MATTER TO THE AO FOR EXAMINING THIS CONDITION ALSO. 19. IN VIEW OF THE ABOVE DISCUSSION, WE DIRECT THE AO NOT TO DECLINE DEDUCTION U /S 80IB MERELY ON THE PLEA OF PROJECT HAVING NOT BEEN APPROVED IN THE NAME OF THE ASSESSEE OR THE LAND ON WHICH PROJECT IS BEING CONSTRUCT ED IS NOT BEING OWNED BY THE ASSESSEE. 20. THE OTHER OBSERVATION OF THE LD. CIT RELATES TO ASSESSEE BEING NOT A DEVELOPER BUT A MERELY CONTRACTOR, THEREFORE, CLAIM OF DEDUCTION CANNOT BE ALLOWED IN VIEW OF THE AMENDMENT IN SECTION 80IB(10) BROUGHT BY THE FINANCE ACT, 2009, W.E.F. 1.4.2001, WHICH STIPULATES THAT THE DEDUCTION U/S 80IB IS ALLOWED ONLY IN CASE OF ASSESSEE BEING A DEVELOPER AND - : 18 : - 18 NOT TO A CONTRACTOR. HERE WE AGREE WITH THE OBSERVATION OF THE LD. CIT AND DIRECT THE AO TO VERIFY AS TO WHETHER THE ASSESSEE IS MERELY A CONTRACTOR OR DEVELOPER OF THE PROJECT. ONLY IF IT IS FOUND THAT THE ASSESSEE IS A DEVELOPER, THEN TH E DEDUCTION U/S 80IB CAN BE ALLOWED SUBJECT TO FULFILLMENT OF OTHER CONDITIONS. 21. CONDITION WITH REGARD TO TIME PERIOD FOR COMPLETION OF PROJECT BEFORE THE SPECIFIED DATE AND THE SPECIFIED SIZE OF THE HOUSE AS PROVIDED U/S 80IB(10) ARE ALSO REQUIRED TO BE F ULFILLED. THE AO SHOULD EXAMINE THE COMPLIANCE OF THESE CONDITIONS ALSO AS PER LAW. 22. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART IN TERMS INDICATED ABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 6 TH JU LY , 2011. SD/ - SD/ - (JOGI NDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 6 TH JU LY , 2011 . CPU* 567