DLF Info City Developers (Chennai) Ltd., Gurgaon V. ACIT, Gurgaon

ITA 2637/DEL/2012

• Counselvise Citation: 263720114 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 18-03-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 31-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SUDHA KUMARI
• Keywords: Capital asset; Business income; Revision of order; Opportunity of being heard; Competent authority; Assessment record; Prejudicial to interest
• Section: 143(3); 2(14); 142(1); 80HHC; 80IB; 27; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI R. P. TOLANI : JUDICIAL MEMBER AND SHRI T.S. KAPOOR : ACCOUNTANT MEMBER ITA NO. 2637 /DEL/ 2012 ASSTT. YR. 2007-08 DLF INFO CITY DEVELOPERS VS. ASSTT. COMMISSIONER OF (CHENNAI) LTD., INCOME-TAX, GURGAON 3 RD FLOOR, SHOPPING MALL COMPLEX, ARJUN MARG, DLF CITY, PHASE-I, GURGAON-122001. PAN: AACCD 1488Q (APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI R.S. SINGHVI CA RESPONDENT BY : DR. SUDHA KUMARI CIT (DR) ORDER PER R. P. TOLANI, J.M: THIS IS ASSESSEES APPEAL AGAINST ORDER DATED 29-03 -2012 PASSED BY THE COMMISSIONER OF INCOME-TAX, FARIDABAD U/S 263 OF TH E INCOME-TAX ACT, 1961, SETTING ASIDE THE ASSESSMENT DUE TO ALLOWANCE OF ASSESSEES U/S 80- IAB BY THE ASSESSING OFFICER, IN RELATION TO A.Y. 2007-08; HOLDING IT TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 2. THE ASSESSEE HAS TAKEN VARIOUS GROUNDS IN THIS B EHALF, FOLLOWING IS THE BRIEF SUMMARY THEREOF: (I) THE ORDER OF ACIT GURGAON CIRCLE, GURGAON IS NEITHE R ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 2 (II) CIT ERRED IN MISINTERPRETING THE OBSERVATIONS OF B OARD OF APPROVAL (BOA) WHILE GRANTING APPROVAL UNDER THE SEZ ACT AND HOLDING THE ASSESSEES ACTIVITY OF TRANSFER OF BARE SHELL BUILDING AS AN UNAUTHORIZED OPERATION UNDER THE SEZ ACT. (III) CIT FAILED TO APPRECIATE THAT ADMITTEDLY CHENNAI SE Z WAS APPROVED BY THE BOA AND WAS DULY NOTIFIED IN THE GA ZETTE OF INDIA. (IV) WHILE EXERCISING REVISIONARY POWER, CIT CANNOT SIT OVER THE JUDGMENT OF THE COMPETENT AUTHORITY I.E. BOA DISREG ARDING ITS APPROVAL AND ORDERING THE RE-EXAMINATION THEREOF. (V) CIT FAILED TO APPRECIATE THAT HIS OBJECTIONS RELATE D TO LEASE OF LAND ONLY AND IS NOT RELATED TO ANY OTHER UNAUTHORIZED O PERATION INCLUDING HANDING OVER AND TRANSFER OF BARE SHELL BUILDINGS. THE LAND HAS NOT BEEN TRANSFERRED BY THE APPELLANT. (VI) CIT ERRED IN HOLDING THAT ASSESSING OFFICER GRANTED DEDUCTION U/S 80-IAB WITHOUT PROPER EXAMINATION OF THE BOA APPROV AL IN THE CO-DEVELOPER AGREEMENT BETWEEN THE ASSESSEE AND THE CO- DEVELOPER. (VII) CIT ERRED IN LAW IN HOLDING THAT THE ASSESSMENT ORD ER PASSED U/S 143(3) BY ASSESSING OFFICER WAS ERRONEOUS AS ASSESS ING OFFICER ALLOWED THE CLAIM U/S 80-IAB WITHOUT ANY EXAMINATIO N. (VIII) CIT ERRED IN LAW IN PASSING 263 ORDER WITHOUT WAITI NG FOR A REMAND REPORT FROM WHICH WAS CALLED BY HIM FROM ASSESSING OFFICER DURING THE COURSE OF HEARING ON 6-3-2012. (IX) CIT ERRED IN LAW IN PASSING THE ORDER WITHOUT CONSI DERING THE MATERIAL, APPLYING HIS MIND AND PASSING 263 ORDER B Y ADMITTING THAT HE WAS SHORT OF TIME. ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 3 (X) SETTING ASIDE THE ASSESSMENT TO AO BY HOLDING THAT ISSUE REQUIRED CAREFUL AND DETAILED EXAMINATION WHICH WAS NOT POSS IBLE IN FEW DAYS AVAILABLE BETWEEN SUBMISSIONS RECEIVED FROM TH E ASSESSEE ON 28-3-2012 AND CLOSE OF THE F.Y. ON 31-3-2012. THE C ORRECT FACT IS THAT ASSESSEE HAS FILED INFORMATION WELL IN TIME WH ICH IS ON THE RECORD. CIT CANNOT SET ASIDE THE ASSESSMENT MERELY BECAUSE HE DOES NOT HAVE TIME TO EXAMINE THE EXPLANATION OF TH E ASSESSEE. THUS THE 263 ACTION IS LIABLE TO BE QUASHED. (XI) 263 JURISDICTION CANNOT BE INVOKED AND EXERCISED BY CIT MERELY BECAUSE ON A TENTATIVE INFORMATION HE HOLDS A DIFFE RENT OPINION THAN AO ON THE ISSUE AND THEN WITHOUT CONSIDERING T HE EXPLANATIONS TO SHOW CAUSE NOTICE SETTING ASIDE THE ASSESSMENT. 3. BRIEF FACTS ARE: FOR INFRASTRUCTURAL DEVELOPMENT OF THE COUNTRY, GOVT. OF INDIA AMONG VARIOUS OTHER MEASURES AND LEGISLATI ONS, ENACTED SEZ ACT 2005, OFFERING SLEW OF BENEFITS TO DEVELOPERS OF VA RIOUS SEZS IN INDIA. THE LEGISLATION HAS OVERRIDING EFFECT OVER ALL OTHER LE GISLATIONS OR INSTRUMENTS, BY VIRTUE OF SPECIFIC PROVISIONS OF SEC. 51(1) OF SEZ ACT WHICH READS AS UNDER: 51. (1)THE PROVISIONS OF THIS ACT SHALL HAVE EFFE CTG NOTWITHSTANDING ANYTHING INCONSISTENT CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FORCE OR IN ANY INSTRUMEN T HAVING EFFECT BY VIRTUE OF ANY LAW OTHER THAN THIS ACT. 3.1. THE SEZ ACT IS A COMPREHENSIVE LEGISLATION, BY SEC 8(1) A REGULATORY BODY CALLED AS BOARD OF APPROVAL ( FOR SHORT BOA) IS CREATED CONFERRING WIDE POWERS ON IT WHICH ARE ENSHRINED IN SEZ ACT PL ACED ON RECORD. ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 4 3.2. PROVISIONS OF SEC 8(9) FURTHER EMPOWER THE BOA AND READS AS UNDER: 9. (1) SUBJECT TO THE PROVISIONS OF THIS ACT, THE B OARD SHALL HAVE THE DUTY TO PROMOTE AND ENSURE ORDERLY DEVELOPMENT OF THE SPECIAL ECONOMIC ZONES. DUTIES, POWERS AND FUNCTIONS OF BOARD. (2) WITHOUT PREJUDICE TO THE GENERALITY OF THE PROV ISIONS CONTAINED IN SUB-SECTION (1), THE POWERS AND FUNCTI ONS OF THE BOARD SHALL INCLUDE (A) GRANTING OF APPROVAL OR REJECTING PROPOSAL OR 11 MODIFYING SUCH PROPOSALS FOR ESTABLISHMENT OF THE SPECIAL ECO NOMIC ZONES; (B) GRANTING APPROVAL OF AUTHORISED OPERATIONS TO BE CARRIED OUT IN THE SPECIAL ECONOMIC ZONES BY THE DEVELOPER; (C) GRANTING OF APPROVAL TO THE DEVELOPERS OR UNIT S (OTHER THAN THE DEVELOPERS OR THE UNITS WHICH ARE EXEMPT FROM O BTAINING APPROVAL UNDER ANY LAW OR BY THE CENTRAL GOVERNMENT ) FOR FOREIGN COLLABORATIONS AND FOREIGN DIRECT INVESTMEN TS, (INCLUDING INVESTMENTS BY A PERSON RESIDENT OUTSIDE INDIA), IN THE SPECIAL ECONOMIC ZONE FOR IT S DEVELOPMENT, OPERATION AND MAINTENANCE; (D) GRANTING OF APPROVAL OR REJECTING OF PROPOSAL F OR PROVIDING INFRASTRUCTURE FACILITIES IN A SPECIAL ECONOMIC ZON E OR MODIFYING SUCH PROPOSALS; (E) GRANTING, NOTWITHSTANDING ANYTHING CONTAINED I N THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951, A LICENCE TO AN INDUSTRIAL UNDERTAKING REFERRED TO IN CLAUSE (D) OF SECTION 3 OF THAT ACT, IF SUCH UNDERTAKING IS ESTABLISHED, AS A WHOLE OR PART THEREOF, OR PROPOSED TO BE ESTABLISHED, IN A S PECIAL ECONOMIC ZONE; (F) SUSPENSION OF THE LETTER OF APPROVAL GRANTED T O A DEVELOPER AND APPOINTMENT OF AN ADMINISTRATOR UNDER SUBSECTIO N (1) OF SECTION 10; (G) DISPOSING OF APPEALS PREFERRED UNDER SUB-SECTI ON(4) OF SECTION 15; (H) DISPOSING OF APPEALS PREFERRED UNDER SUB-SECTI ON (4) OF SECTION 16; (I) PERFORMING SUCH OTHER FUNCTIONS AS MAY BE ASSI GNED TO IT BY THE CENTRAL GOVERNMENT. ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 5 3.3. ASSESSEE SUBMITTED A PROPOSAL FOR DEVELOPMENT OF AN SEZ AT VILLAGES- MANAPAKKAM AND MYLIVAKKAM IN SRIPERUMBUR TALUKA, KA NCHEEPURAM; TAMIL NADU (CALLED CHENNAI PROJECT) ON 13-06-2005. THE APPROVAL WAS GRANTED BY BOA MENTIONING VARIOUS GENERAL CONDITION S. THEREAFTER ASSESSEE BY LETTER DATED. 12-07-2006 SOUGHT APPROVAL OF AUTH ORIZED ACTIVITIES. BOA VIDE LETTER DTD 29-08-2006 LISTED OUT THE SAME. 3.4. THEREAFTER ASSESSEE AS PER THE SEZ ACT ENTERED INTO CO DEVELOPERS AGREEMENT WHICH WAS APPROVED BY BOA. CONSEQUENT TO THE APPROVAL THE BARE SHELL BUILDING CONSTRUCTED BY ASSESSEE IN THIS SEZ WERE TRANSFERRED ON LONG TERM LEASE TO AN ASSOCIATE CONCERN DLF ASSETS LTD. THIS EXERCISE WAS DISCREETLY CARRIED OUT AS PER THE SCHEME, POLICY, P ROCEDURE AND APPROVALS OF MCI & BOA WHICH APPROVED THE CO DEVELOPER AGREEMENT AND TRANSFER TO BE AUTHORIZED ACTIVITIES. BY SEZ ACT SEC 80IAB WAS INT RODUCED IN I T ACT PRESCRIBING THAT THE PROFITS DERIVED FROM AUTHORIZE D ACTIVITIES AT APPROVED SEZ WERE ELIGIBLE FOR DEDUCTION U/S 80IAB. ASSESSEE FILED ITS RETURN OF INCOME ACCORDINGLY CLAIMING THE DEDUCTION OF INCOME FROM SUCH TRANSFER I.E. RS. 3,80,99,45,760/- U/S 80IAB. 3.5. THE ASSESSEES ASSESSMENT FOR A.Y. 2007-08 WAS COMPLETED U/S 143(3) ON 31-12-2009 BY AO, ALLOWING ITS CLAIM U/S 80IAB AMOUNTING TO RS. BY FOLLOWING OBSERVATIONS. 1) THE ASSESSEE E-FILED ITS RETURN OF INCOME IN WA RD-1, GURGAON ON 31-10-2007 SHOWING NIL INCOME. NOTICE UN DER SECTION 143(2) WAS ISSUED TO THE ASSESSEE ON 17-11- 2008 ASKING THE ASSESSEE TO APPEAR ON 28-11-2008. THE CASE WAS SUBSEQUENTLY TRANSFERRED TO THIS CIRCLE. THE CASE W AS REPRESENTED BY SH. A.K. SRIVASTAVA. ON 19-11-2009, 1-12-2009, ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 6 10-12-2009, 14-12-2009, 18-12-2009, 24-12-2009 AND 29-12- 2009, HEARINGS WERE ATTENDED AND SUBMISSIONS WERE M ADE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE BO OKS OF ACCOUNTS WERE PRODUCED AND TEST CHECKED. THE CASE W AS DISCUSSED. 2) THE ASSESSEE IS IN THE BUSINESS OF REAL ESTATE D EVELOPMENT AND LEASING OF CONSTRUCTED PROPERTIES. 3) THE ASSESSEE IS AN SEZ CLAIMING ELIGIBILITY U/S 80IAB WHICH HAS BEEN VERIFIED. THE COMPANY HAS GOT APPROV AL FROM THE MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT O F COMMERCE (EPZ SECTION) VIDE LETTER DATED 22-06-2006 BEARING NO. F2/124/2005-EPZ FOR DEVELOPMENT, OPERATION OF S ECTOR SPECIFIC ECONOMIC ZONE FOR IT/ITES AT CHENNAI, BEIN G DEVELOPED BY THE COMPANY IN TERMS OF SPECIAL ECONOM IC ZONE ACT, 2005 AND SPECIAL ECONOMIC ZONE RULES, 2006. VI DE ANOTHER NOTIFICATION ISSUED BY THE MINISTRY OF COMM ERCE AND INDUSTRY DATED 16-11-2006, AN ADDITIONAL AREA OF 34 ,384 HECTORS WAS NOTIFIED AND INCLUDED AS A PART OF SPEC IAL ECONOMIC ZONE. 4) AFTER GOING THROUGH ALL THE PARTICULARS OF THE C ASE, THE INCOME AS RETURNED BY THE ASSESSEE IS ACCEPTED. INTEREST U/S 234A, B,C & D IS BEING CHARGED IN THE ITNS WHICH IS PART OF THIS ASSESSMENT ORDER. CREDIT FOR PREPAI D TAXES IF ANY IS BEING ALLOWED. REQUISITE DOCUMENTS ARE BEING ISS UED. 3.6. THEREAFTER, THE CIT ISSUED A NOTICE U/S 263 DA TED 17-6-2011 PROPOSING THAT IN HIS VIEW THIS ASSESSMENT ORDER PASSED BY AC IT GURGAON WAS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTE RESTS OF THE REVENUE, THE SAME IS PLACED ON PB 56-57. CIT PROPOSED THE ASSESS MENT ORDER SUFFERS FROM FOLLOWING ERRORS: ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 7 (I) THE ASSESSEE HAS WRONGLY CLAIMED DEDUCTION U/S 80IAB ON SALE OF BARE SHELL BUILDINGS AS SUCH SALES CANNOT BE EQU ATED WITH THE ACTIVITY OF DEVELOPING AND MAINTAINING THE SEZ. (II) SALE OF BARE SHELL BUILDING IS NOT AN AUTHORIZ ED OPERATION. (III) WHILE APPROVING THE CO DEVELOPERS AGREEMENT THE REVENUES REPRESENTATIVE HAD POINTED OUT THAT SUCH TRANSFER W AS AGAINST THE SPIRIT OF SEZ ACT. THE BOA APPROVAL WAS MADE SUBJECT TO RI GHT OF AO TO EXAMINE THE TAXABILITY OF SUCH AMOUNTS UNDER I T AC T. (IV) THE SALE OF BARE SHELL BUILDINGS TO CO DEVELOP ER IS NOTHING BUT SALE OF CAPITAL ASSETS BECAUSE BY SUCH AGREEMENT AS SESSEE HAD RELINQUISHED ALL RIGHTS OVER THE BUILDING. ACCORDIN GLY THE INCOME FROM SALE OF BARE SHELL BUILDINGS WAS CAPITAL GAINS ON S ALE OF BUILDINGS. 3.7. IT WAS PROPOSED THAT AOS ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, THEREFORE, WHY IT SHOULD NOT B E ACCORDINGLY REVISED U/S 263. 3.8. ASSESSEE ATTENDED THE 263 PROCEEDINGS, FILED D ETAILED WRITTEN SUBMISSION, CORRESPONDENCE WITH MCI & BOA, COPIES O F AGREEMENTS, NOTIFICATIONS. DETAILS OF COMPLIANCE DURING THE COU RSE OF ASSESSMENT PROCEEDINGS INCLUDING THE PROCEEDING SHEET OF ASSES SMENTS. IT WAS CLAIMED THAT THEIR WAS NEITHER ERROR IN THE ORDER OF AO NOR IT WAS PREJUDICIAL TO THE INTEREST OF REVENUE, THEREFORE, IT WAS NOT JUSTIFIA BLE TO REVISE SUCH AN ORDER WHICH WAS PASSED AFTER CONSIDERING THE COMPLETE MAT ERIAL ON RECORD, CONDUCTING OF APPROPRIATE ENQUIRIES, APPLICATION OF PROPER MIND AND LEGAL PROVISIONS. THE WRITTEN SUBMISSIONS, COMPLIANCE AND CLARIFICATIONS ARE PART OF THE PAPER BOOK FILED ON THE RECORD. ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 8 3.9. THE CIT HOWEVER PASSED ORDER U/S 263 DATED 29 -3-2012 HOLDING THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL T O THE INTERESTS OF REVENUE, BY FOLLOWING OBSERVATIONS: 3. A CAREFUL PERUSAL OF ASSESSMENT RECORDS REVEALS THAT THIS CLAIM FOR DEDUCTION U/S 80-IAB WAS IN RESPECT OF RE CEIPTS ON ACCOUNT OF ALE OF BARE SHELL BUILDINGS, CONSTRUCTED ON SEZ LAND TO M/S DLF ASSETS LTD., A GROUP COMPANY, WITH WHOM THE ASSESSEE HAD ENTERED INTO A CO-DEVELOPER AGREEMENT. 4. WHEN THE AID CO-DEVELOPER AGREEMENT BETWEEN THE ASSESSEE AND ITS GROUP COMPANY, NAMELY, M/S DLF ASS ETS PVT. LTD. HAD COME UP FOR CONSIDERATION BY THE SEZ BOARD OF APPROVAL (BOA), THE REPRESENTATIVE OF THE DEPARTMEN T OF REVENUE (DOR) HAD POINTED OUT THAT THE CO-DEVELOPE R AGREEMENT REFERS TO TRANSFER AND HAND OVER (OF) THE DEEDS WHICH STATES THAT CO-DEVELOPER SHALL BE THE OWNER OF THE SEZ BUILDING ON PAYMENT OF DEVELOPMENT CONSIDERATION, WHICH IS A GAINST THE SPIRIT OF SEZ ACT AND RULES. TAKING THIS INTO CONS IDERATION, THE BOA APPROVAL WAS MADE SUBJECT TO RIGHT OF THE ASSES SING OFFICER TO EXAMINE THE TAXABILITY OF THESE AMOUNTS UNDER THE INCOME TAX ACT, 1961, THE RELEVANT PORTION OF APPRO VAL OF THE BOA CONVEYED THROUGH LETTER DATED 01-06-2009 OF THE DIRECTOR (SEZ SECTION), DEPARTMENT OF COMMERCE, MINISTRY OF COMMERCE AND INDUSTRY (PARA XVII) IS AS FOLLOWS: APPROVAL GIVEN BY BOA FOR CO-DEVELOPERS FOR PARTICULAR TERMS AND CONDITIONS OF LESE AGREEMENT WILL NOT HAVE ANY BEARING ON THE TREATMENT OF THE INCOME BY WAY OF LEASE RENTAL/ DOWN PAYMENT/ PREMIUM ETC. FOR PURPOSES OF ASSESSMENT UNDER THE PREVALENT INCOME TAX ACT AND RULES. THE ASSESSING OFFICER WILL HAVE THE RIGHT TO EXAMINE THE TAXABILI TY OF THESE AMOUNTS UNDER THE INCOME TAX. 5. WHILE SECTION 80-IAB PROVIDES FOR DEDUCTION IN R ESPECT OF PROFITS AND GAINS FROM ACTIVITIES OF DEVELOPING, OP ERATING AND MAINTAINING SEZS, THE ASSESSEE HAD CLAIMED DEDUCTIO N UNDER ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 9 THE SAID SECTION ON THE RECEIPT OF SALE PROCEEDS OF BARE SHELL BUILDINGS AND SUCH SALE CANNOT BE EQUATED WITH THE ACTIVITY OF DEVELOPING, OPERATING AND MAINTAINING THE SEZ. AS A MATTER OF FACT, IN TERMS OF NOTIFICATION DATED 27-10-2006 ISS UED BY THE MINISTRY OF COMMERCE AND INDUSTRY, GOVT. OF INDIA, SALE OF BUILDINGS, INCLUDING BARE SHELLS, WAS NOT AN AUTHOR IZED OPERATION OF THE SEZ. 6. IT IS ALSO SEEN THAT T HE ABOVE OBSERVATIONS OF THE BOA WERE OMITTED TO BE RECKONED BY THE ASSESSEE IN AS SERTING ITS CLAIM FOR DEDUCTION UNDER SECTION 80 IAB OF THE INC OME TAX ACT, 1961, BEFORE THE ASSESSING OFFICER (PARA 8 OF NOTE ON CLAIM, ALONG WITH LETTER DATED 29-12-2009). THE COMPANY BEING AN ELIGIBLE DEVELOPER OF NOTIFIED SEZ, HAS DELIVERED INCOME FROM BUSINESS OF DEVELOPMENT OF THE SEZ AS DESCRIBED IN SECTION 80 IAB ABOVE. THE COMPANY HAS OPTED TO CLAIM THE DEDUCTION UNDER SECTION 80 IAB IN AY 2007-08.IT SATISFIES ALL THE CONDITIONS PRESCRIBED IN THE ACT AND THE RULES. IN THE RETURN OF INCOME FILED BY THE COMPANY, DEDUCTION I RESPECT OF INCOME DERIVED FROM THE SEZ HAS BEEN CLAIMED., A CERTIFICATE DATED 31-10-2007 IN FORM NO. 10CCB, AS REQUIRED IN TERMS OF STATUTORY PROVISION WAS OBTAINED FROM AN ACCOUNTANT M/S WALKER CHANDIOK & CO. CHARTERED ACCOUNTANTS. A COPY OF THE SAME HAS BEEN FILED AND IS ON RECORD. FOR SAKE OF CONVENIENCE ANOTHER COPY IS FILED HEREIN ANNEXURE IV 7. AS EVIDENT FROM THE ASSESSMENT ORDER (PARA 3, REPRODUCED ABOVE) IN MY CONSIDERED VIEW, THE ABOVE SAID ASSESSMENT UNDER SECTION 143(3) DATED 31.12.2010 WAS ERRONEOUS BECAUSE THE CLAIM FOR DEDUCTION UNDER SECTION 80LAB OF THE IT ACT, TP61 WAS ALLOWED WITHOUT ANY EXAMINATION OF THIS CLAIM, AS STIPULATED IN THE BOA APPROVAL OF THE CO-DEVELOPER AGREEMENT BETWEEN THE ASSESSEE AND ITS GROUP COMPANY, FURTHER , BECAUSE OF WRONG ALLOWANCE OF DEDUCTION OF RS 3,80,99,45,760/- UNDER SECTION 80LAB OF THE IT ACT, 1961, THE SAID ASSESSM ENT ORDER WAS PREJUDICIAL TO REVENUE. ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 10 8. ACCORDINGLY, A SHOW CAUSE UNDER SECTION 263 OF T HE IT ACT, 1961 WAS ISSUED ON 17.06.11 AND TILE ASSESSEE WAS R EQUIRED TO REPRESENT ITS CASE ON 15.07.2011. THERE WAS NO RESP ONSE ON THE SAID DATE, BUT ON 25.07.11, SH VK CHOUDHARY, SENIOR VP, TAXATION AND SH SANDEEP DINODLA, CA APPEARED AND MA DE WRITTEN SUBMISSIONS-DATED 25-07-2011 AND AFTER DISC USSIONS AND- AS DESIRED BY THE ASSESSEE, THE HEARING WAS RE -SCHEDULED FOR 24.08.11. THERE WAS NO RESPONSE ON THIS DATE, B UT ON 24.10.11 A REQUEST WAS RECEIVED FROM THE ASSESSEE T O RE- SCHEDULE THE HEARING, AND AS AGREED BY THE ASSESSEE, THE HEARING WAS FIXED FOR 21.11.11. YET AGAIN, WHILE THERE WAS NO RESPONSE ON 24.10.11, ON 10.01.12 THE ASSESSEE MADE A REQUEST FOR ANOTHER ADJOURNMENT AND THE HEARING WAS SCHEDULED F OR 02.02.12. 9. EVENTUALLY, ON 06.03-12 THE REPRESENTATIVES OF T HE ASSESSEE APPEARED AND MADE WRITTEN SUBMISSIONS DATED 06.03.1 2, AND THE HEARING WAS ADJOURNED 13.03.2012, AFTER SEEKING SOME MORE DETAILS. THE REPR ESENTATIVES OF THE ASSESSEE APPEARED AND MADE PARTIAL SUBMISSIONS. ACCORDINGLY, THE HEARING WAS ADJOURNED TO 20.03.12, ON WHICH DATE THE ASSESSEE M ADE FURTHER SUBMISSIONS. ONCE AGAIN, FRESH SUBMISSIONS DATED 28 .03.1.2 WERE RECEIVED 011 28.03.12, AND THESE INCLUDED AN O PINION FROM JUSTICE VN KHARE (FORMER CJI, INDIA), APPARENT LY SUPPORTING CLAIM OF THE ASSESSEE.' ' 10. IN SHORT, AFTER THE INITIAL SUBMISSIONS-DATED 25.07.11 THERE WAS A LONG HIATUS IN THE PROCEEDINGS DUE TO SEVERAL ADJOURNMENTS SOUGHT BY THE ASSESSEE FROM TIME TO TI ME. ONLY IN RECENT WEEKS THE ASSESSEE APPEARED AND MADE DETAILE D WRITTEN SUBMISSIONS ON SEVERAL OCCASIONS, INCLUDING THE LAS T SUBMISSION-DATED28.03.12,-RECEIVED ON THE SAME DAY. AS THESE PROCEEDINGS ARE GETTING TIME BARRED -BV3IOII2~THERE IS LITTLE TIME TO SEEK OPINION OF THE ASSESSING OFFICER AND TAKE A CONSIDERED VIEW IN THE MATTER. 11. AT THE SAME TIME, I AM SATISFIED THAT THE ASSES SMENT ORDER DATED 31.12.2009 FOR ASSTT. YEAR 2007-08 IS ERRONEO US BECAUSE THE CLAIM FOR DEDUCTION UNDER SECTION 80 IAB OF THE INCOME TAX ACT, 1961 WAS ALLOWED WITHOUT ANY EXAMINATION OF ITS ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 11 ELIGIBILITY AS ENVISAGED IN THE APPROVAL OF THE BOA RD OF APPROVAL (OOA), AND THIS ASSESSMENT ORDER IS PREJUD ICIAL TO REVENUE BECAUSE THE INCORRECT CLAIM OF RS. 380,99,4 5,760/- HAS BEEN ALLOWED. FURTHER, THE CLAIM OF THE ASS ESSEE REQUIRES CAREFUL AND DETAILED EXAMINATION, WHICH IS NOT POSS IBLE IN THE FEW DAYS AVAILABLE BETWEEN LAST SUBMISSION RECEIVED FROM THE ASSESSEE ON 28-03-2012 AND CLOSE OF THE FINANCIAL Y EAR ON 31- 03-2012. 12. IN GIVEN CIRCUMSTANCES, THE ABOVE SAID ASSESSME NT ORDER DATED 31-12-2009 IS CANCELLED AND THE ASSESSING OFF ICER IS DIRECTED TO MAKE A FRESH ASSESSMENT AFTER CAREFUL A ND COMPREHENSIVE EXAMINATION OF THE CLAIM OF THE ASSES SEE FOR DEDUCTION UNDER SECTION 80IAB OF THE INCOME TAX ACT , 1961. AGGRIEVED THE ASSESSEE IS BEFORE US CHALLENGING THE IMPUGNED 263 ORDER ON VARIOUS COUNTS. 4. WRONG ALLEGATION BY CIT THAT ASSESSEE DELAYED TH E 263PROCEEDINGS 4.1. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET VEH EMENTLY CONTENDS THAT THE OBSERVATIONS OF THE CIT GIVEN IN PARAS 8 & 9 OF HIS ORDER ATTRIBUTING DELAY/HIATUS OF HEARING OF 263 PROCEEDINGS TO ASSES SEE ARE BASED ON APPRECIATION OF FACTS. THE INITIAL SHOW CAUSE NOTIC E U/S 263 WAS ISSUED ON 17-6-2011. THE ASSESSEE APPEARED ON 25-7-2011 ALONG WITH HIS REPRESENTATIVE AND SR. V.P. (TAXATION) AND FILED A 64 PAGES DETAILED WRITTEN SUBMISSION DATED 25-7-2011 WHICH IS ADMITTED BY CIT IN HIS ORDER AND IS PLACED ON PB PAGES 58 TO 122. THE WRITTEN SUBMISSIO NS ARE COMPREHENSIVE, SELF EXPLANATORY AND DEAL WITH EACH AND EVERY ASPEC T OF THE FACTS INCLUDING CASE LAWS. LD. CIT WANTED TO GO THROUGH THE SAME AN D ADJOURNED THE HEARING TO 24-8-2011. ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 12 4.1.1. THEREAFTER THE ASSESSEE APPEARED FROM TIME T O TIME BEFORE THE CIT BETWEEN 25-7-2011 TO 6-3-2012. NO FURTHER QUERY ON SUBMISSIONS WERE ASKED OR COMMUNICATED BY CIT. ON SOME OCCASION IT W AS INFORMED THAT CIT HAS NOT BEEN ABLE TO GO THROUGH THE ASSESSEES WRIT TEN SUBMISSIONS AND HEARINGS WERE ADJOURNED, FEW OF THEM ARE AT ASSESSE ES REQUEST ALSO, HOWEVER, WHILE SEEKING ADJOURNMENT NO QUERIES WERE ASKED TO BE SUPPLIED ON NEXT HEARING. . IN THESE CIRCUMSTANCES THE DELA Y CANNOT BE SOLELY ATTRIBUTED TO THE ASSESSEE IN THIS BEHALF. HAVING F ILED COMPREHENSIVE SUBMISSIONS WITH ALL THE ENCLOSURES THERE WAS NOTHI NG LEFT FOR ASSESSEE TO DO UNLESS CIT DESIRED MORE INFORMATION OR RAISED SPECI FIC QUERIES. THEREAFTER THE CIT FIXED THE DATE OF HEARING ON 6-3-2012 AND A SKED THE ASSESSEE TO FILE A GIST OF WRITTEN SUBMISSIONS AND CALLED THE CONCERNE D ASSESSING OFFICER SHRI D.S. KALYAN ALSO FOR HEARING. 4.2. ON 6-3-2012 THE ASSESSEES REPRESENTATIVE AND SR. V.P. TAXATION APPEARED BEFORE THE CIT AND FILED THE REQUIRED GIST OF SUBMISSIONS. THE ASSESSING OFFICER SHRI D.S. KALYAN ACIT (OSD) RANGE -I, GURGAON WAS ALSO PRESENT. CIT ASKED HIM TO FILE A REPORT ON THE SUBM ISSIONS OF THE ASSESSEE. THE ASSESSEE WAS ASKED TO GIVE FOLLOWING DOCUMENTS: (I) MINUTES OF BOARD MEETING, APPROVING THE SALE OF BAR E SHELL BUILDINGS; (II) THE TECHNO FINANCIAL BASIS FOR CALCULATION OF SALE PRICE. HEARING WAS THEN FIXED FOR 13-3-2012 AS THE NEXT DA TE OF HEARING. 4.3. ON 13-3-2012 THE ASSESSEES REPRESENTATIVE FIL ED SUBMISSIONS AS DESIRED VIDE LETTER DATED 13-3-2012. ONLY THE MINUT ES OF THE BOARD MEETING ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 13 COULD NOT BE PRODUCED. THE ASSESSEE WAS AGAIN ASKED TO MAKE FURTHER SUBMISSIONS, IF ANY, BY THE CIT AND THE CASE WAS FI XED ON 20-3-2012. 4.4. ON 20-3-2012 THE ASSESSEES REPRESENTATIVE APP EARED AND FILED WRITTEN SUBMISSIONS. THE CASE WAS AGAIN ADJOURNED TO 26-3-2 012 ON CITS INSTANCE. 4.5. ON 26-3-2012 ALSO THE ASSESSEE ATTENDED. THE CIT ON HIS OWN DIRECTED TO APPEAR ON THE NEXT DAY I.E. 27-3-2012. 4.6. ON 27-3-2012 AGAIN ASSESSEE ATTENDED AND CIT D IRECTED TO COME ON 28-3-2012. 4.7. ON 28-3-2012 ASSESSEE ATTENDED AND AGAIN FILED A GIST OF WRITTEN SUBMISSIONS. 4.8. ON 29-3-2012 THE ORDER U/S 263 WAS PASSED ALLE GING THAT THERE WAS NO TIME LEFT TO CALL FOR ASSESSING OFFICERS REPORT AN D CONSIDERATION OF SUBMISSIONS FILED BY ASSESSEE. IT WAS ARBITRARILY H ELD THAT THE ASSESSEE WAS RESPONSIBLE FOR HIATUS IN THE HEARING OF PROCEEDING S. THUS, THE ASSESSMENT WAS SET ASIDE. 4.9. LD. COUNSEL CONTENDS THAT THE CIT HAS NOT APPR ECIATED THE FACTS PROPERLY. IT IS WRONG TO SAY THAT HE COULD NOT GO T HROUGH THE SUBMISSIONS BECAUSE OF THE HIATUS CREATED BY THE ASSESSEE AND T HERE WAS NO TIME TO SEEK OPINION OF THE ASSESSING OFFICER AND TAKE A CONSIDE RED VIEW IN THE MATTER. THUS, THE CITS OBSERVATIONS IN THIS BEHALF ARE UNT ENABLE ON FOLLOWING GROUNDS: ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 14 (I) THERE WAS NO FAULT ON THE PART OF THE ASSESSEE FOR ALLEGED HIATUS. THE DETAILED SUBMISSIONS WERE FILED WAY BACK ON 25- 7-2011 I.E. 8 MONTHS PRIOR TO PROCEEDINGS GETTING THE TIME BARRED . (II) THE ADJOURNMENTS, IF ANY, MOSTLY WERE AT THE INSTAN CE OF THE CIT AS HE COULD NOT GO THROUGH THE SUBMISSIONS. (III) THE ASSESSING OFFICER SHRI D.S. KALYAN WHO IS SUBOR DINATE OFFICER WAS CALLED BY THE CIT ON HIS OWN ACCORD ON 6-3-2012 AND ASKED TO FILE HIS REPORT ON ASSESSEES SUBMISSIONS. THE LATE CALLING OF THE OFFICER IS NOT ATTRIBUTABLE TO ASSESSEE. THE CIT CO ULD HAVE GIVEN TIME BOUND ORDER TO AO TO SUBMIT HIS REPORT IN TIME , WHICH WAS NOT DONE. CONSEQUENTLY, ASSESSEE HAS NO ROLE TO PLAY IN THE ALLEGED HIATUS. (IV) CITS NON CONSIDERATION OF ASSESSING OFFICERS REPO RT WHICH WAS CALLED BY HIM ON HIS OWN MOTION AND WISDOM IS A SER IOUS ABERRATION AND NON FILING IS WRONGLY ATTRIBUTED TO ASSESSEE. EXERCISE OF 263 POWERS CANNOT BE TAKEN SO CASUALLY AND ROUTINELY BY THE LD. COMMISSIONER AS IT IS A GUARDED STATUTOR Y EXERCISE SUBJECT TO JUDICIAL REVIEW. IT REFLECTS THE PREDETE RMINED MIND OF THE CIT TO REVISE THE ORDER WITHOUT APPLYING MIND AND E VEN WAITING FOR THE ASSESSING OFFICERS REPORT. (V) THERE IS NO JUSTIFICATION FOR THE CIT TO HOLD THAT THERE IS LITTLE TIME TO SEEK OPINION OF THE ASSESSING OFFICER AND TAKE A CONSIDERED VIEW IN THE MATTER. SECTION 263 CASTS A STATUTORY OBLIGA TION ON THE PART OF CIT TO TAKE A CONSIDERED VIEW IN THE MATTER. SECTIO N 263 DOES NOT POSTULATES THAT CIT CAN TAKE A VIEW THAT THE ORDER PASSED BY ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF REVENUE, WITHOUT CONSIDERING ASSESSEES REPLIES IN RESPONSE TO HIS ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 15 SHOW CAUSE NOTICE. THIS ACTION OF THE CIT WHILE EXE RCISING POWER U/S 263 AMOUNTS TO VIOLATION OF THE STATUTORY PROVI SIONS OF REVISIONARY POWER AND ON THIS COUNT THE CITS 263 ORDER DESERVES TO BE QUASHED. (VI) ALL THE RECORD WAS AVAILABLE WITH THE CIT AND THERE IS NO JUSTIFICATION IN GIVING A SPECIOUS PLEA THAT THE AS SESSEES CLAIM REQUIRED CAREFUL AND DETAILED EXAMINATION WHICH IS NOT POSSIBLE IN FEW DAYS AVAILABLE BETWEEN LAST SUBMISSIONS RECEIVE D FROM THE ASSESSEE ON 28-3-2012. THE PLEA IS AN EYE WASH, ASS ESSEE EXPEDITIOUSLY SUBMITTED ALL DETAILS WHICH IS EVIDE NT FROM THE LETTER DATED 28-3-2012 ITSELF. THE SAME REFERS TO EARLIER SUBMISSIONS DATED 25-7-2011, 6-3-2012, 13-3-2012 AND 28-3-2012. THEREFORE, THE CIT HAS CLEVERLY TAKEN THE FINAL GIST FILED BY THE ASSESSEE TO BE THE ONLY SUBMISSION FILED BEFORE HIM IN ORDER TO WR ONGLY JUSTIFY HIS UNTENABLE ACTION U/S 263 AND SET ASIDE THE ASSESSM ENT. (VII) LD. COUNSEL CONTENDS THAT THE ORDER U/S 263 IS ADMI TTEDLY PASSED WITHOUT CONSIDERING THE REPORT OF THE ASSESSING OFF ICER, WITHOUT CONSIDERING THE DETAILED EXPLANATIONS AND GOVT. APP ROVALS. UNDER THESE CIRCUMSTANCES, THE ORDER PASSED BY THE LD. CI T BECOMES UNTENABLE BASED ON MISREPRESENTATION OF FACTS AND R UNS CONTRARY TO THE LETTER AND SPIRIT OF THE PROVISIONS OF SECTION 263. CONSEQUENTLY THE PURPORTED ORDER DESERVES TO BE QUASHED ON THESE COUNTS ALSO. 5. THE PROVISIONS, SIGNIFICANCE AND OVERRIDING EFFECT OF SEZ ACT 2005: 5.1. LD. COUNSEL PLEADS THAT SEZ ACT WAS ENACTED AS AN UMBRELLA LEGISLATION TO BOOST THE INFRASTRUCTURAL DEVELOPMEN T OF INDIA AND VARIOUS SEZS WERE SANCTIONED IN THE DEFERENT PARTS OF THE COUNTRY. THE ACT COMES ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 16 UNDER THE AEGIS OF MINISTRY OF COMMERCE AND INDUSTR Y (MCI) AND THE IMPLEMENTATION OF THE ACT, RULES AND OTHER ASPECTS ARE ENTRUSTED BY THE SEZ ACT TO A POWERFUL BODY KNOWN AS BOARD OF APPROVALS (BOA). SEC 80IAB OF WAS NOT INTRODUCED BY INCOME TAX ACT BUT BY SEZ ACT 2005. IT ALSO AMENDED VARIOUS OTHER LAWS, RELEVANT INCOME TAX REL ATED AMENDMENTS ARE PROVIDED IN SEC 27 OF SEZ ACT WHICH READS AS UNDER: SEC. 27. THE PROVISIONS OF THE INCOME-TAX ACT, 1961 , AS IN FORCE FOR THE TIME BEING, SHALL APPLY TO, OR IN RELATION TO, THE DEVELOPER ENTREPRENEUR FOR CARRYING ON THE AUTHORIS ED OPERATIONS IN A SPECIAL ECONOMIC ZONE OR UNIT SUBJE CT TO THE MODIFICATIONS SPECIFIED IN THE SECOND SCHEDULE. 5.2. THE SECOND SCHEDULE IN CLAUSE 13 AMENDS A HOST OF LAWS WHO HAVE BEARING ON THE DEVELOPMENT OF SEZS IN INDIA. IT AL SO INCORPORATES INSERTION OF SEC. 80IAB IN THE I T ACT (WITHOUT AMENDING THE FINANCE ACT) AS UNDER : THE SECOND SCHEDULE (13) NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO ANY SPECIAL ECONOMIC ZONES NOTIFIED ON OR AFTER THE 1ST DAY OF APRIL, 2005 IN ACCORDANCE WITH THE SCHEME REFERRED TO IN SUB CL AUSE (III) OF CLAUSE (C) OF SUB-SECTION (4). (F) AFTER SECTION 80-IA, THE FOLLOWING SECTION SHAL L BE INSERTED, NAMELY:- DEDUCTIONS IN 80-I AB. (1) WHERE THE GROSS TOTAL I NCOME OF AN ASSESSEE, (13) NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO ANY SPECIAL ECONOMIC ZONES NOTIFIED ON OR AFTER THE 1ST DAY OF APRIL, 2005 IN ACCORDANCE WITH THE SCHEME REFERRED TO IN SUB CLAUSE (III) OF CLAUSE (C) OF SUB-SECTION (4). (F) AFTER SECTION 80-IA, THE FOLLOWING SECTION SHAL L BE INSERTED, NAMELY:- DEDUCTIONS IN 80-I AB. (1) WHERE THE GROSS TOTAL I NCOME OF AN ASSESSEE, BEING A DEVELOPER, INCLUDES ANY PROFITS A ND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS OF DEVELOPING A SPECIAL ECONOMIC ZONE, NOTIFIED ON OR AFTER THE ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 17 1 ST DAY OF APRIL, 2005 UNDER THE SPECIAL ECONOMIC ZON E ACT, 2005, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT T O THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTIN G THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQ UAL TO ONE HUNDRED PER CENT, OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. (2) THE DEDUCTION SPECIFIED IN SUB-SECTION (1) MAY, AT THE OPTION OF THE ASSESSEE, BE CLAIMED BY HIM FOR ANY TEN CONS ECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FRO M THE YEAR IN WHICH A SPECIAL ECONOMIC ZONE HAS BEEN NOTIFIED BY THE CENTRAL GOVERNMENT: PROVIDED THAT WHERE IN COMPUTING THE TOTAL INCOME O F ANY UNDERTAKING, BEING A DEVELOPER FOR ANY ASSESSMENT Y EAR, ITS PROFITS AND GAINS HAD NOT BEEN INCLUDED BY APPLICAT ION OF THE PROVISIONS OF SUB-SECTION (13) OF SECTION 80-1A, TH E UNDERTAKING BEING THE DEVELOPER SHALL BE ENTITLED TO DEDUCTION REFERRED TO IN THIS SECTION ONLY FOR THE UNEXPIRED PERIOD OF TEN C ONSECUTIVE ASSESSMENT YEARS AND THEREAFTER IT SHALL BE ELIGIBL E FOR DEDUCTION FROM INCOME AS PROVIDED IN SUB-SECTION (1 ) OR SUB- SECTION (2) AS THE CASE MAY BE: PROVIDED FURTHER THAT IN A CASE WHERE AN UNDERTAKI NG, BEING A DEVELOPER WHO DEVELOPS A SPECIAL ECONOMIC Z ONE ON OR AFTER THE 1ST DAY OF APRIL, 2005 AND TRANSFERS T HE OPERATION AND MAINTENANCE OF SUCH SPECIAL ECONOMIC ZONE TO AN OTHER DEVELOPER (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE DEVELOPER), THE DEDUCTION UNDER SUB-SECTION (1) SHA LL BE ALLOWED TO SUCH TRANSFEREE DEVELOPER FOR THE REMAIN ING PERIOD IN THE TEN CONSECUTIVE ASSESSMENT YEARS AS IF THE O PERATION AND MAINTENANCE WERE NOT SO TRANSFERRED TO THE TRANSFER EE DEVELOPER. 5.3. THE SEZ ACT 2005, AS WELL AS, INCOME TAX ACT, 1961 HAVE PLACED DEVELOPER AND THE CO-DEVELOPER AT THE SAME LEVEL I.E. FOR DEVELOPMENT (CREATING INFRASTRUCTURE FACILITIES), MAINTENANCE A ND OPERATIONS. IT WAS IN THIS CONTEXT THAT SEZ BOA, UNDER THE AEGIS OF MINISTRY O F COMMERCE, APPROVED ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 18 CONVERSION OF BARE SHELL INTO WARM SHELL BY THE CO-DEVELOPER AS AUTHORISED OPERATIONS, THE SEZ BOA IS THE ONLY COMPETENT AUTHORITY (TO THE EXCLUSION OF OTHER AUTHORITIES) CONFERRED W ITH NECESSARY POWERS TO DETERMINE WHETHER AN OPERATION CONSTITUTES AUTHORI SED OPERATIONS OR NOT WITHIN THE MEANING OF SECTION 2 (C ) OF THE SEZ A CT. THE DECISION OF COMPETENT AUTHORITY IS BINDING ON THE OTHER AUTHORI TY INCLUDING INCOME-TAX AUTHORITIES. DUTIES, POWERS AND FUNCTIONS OF BOARD OF APPROVAL: 5.4. SECTION 9 OF THE SEZ ACT, 2005 DEALS WITH THEM, CLAUSE (B) OF SUB- SECTION 2 OF SECTION 9 READS, GRANTING APPROVAL OF AUTHORIZED OPERATIONS TO BE CARRIED OUT IN THE SPECIAL ECONOMIC ZONE BY THE DEVELOPER. IN OTHER WORDS, NO OTHER AUTHORITY CAN SIT IN JUDGMENT OVER POWER OF BOA TO PRESCRIBE WHAT ARE AUTHORIZED OPERATION FOR THE P URPOSE OF SEZ ACT. THUS BY LEGISLATIVE SCHEME, SEZ ACT EMPOWERS ONLY BOA AS COMPETENT AUTHORITY AND NO OTHER CORRELATED AGENCY PROVIDING ANY BENEFI T, INCLUDING INCOME TAX DEPARTMENT, TO HAVE ANY POWER TO DETERMINE WHAT IS AUTHORIZED OPERATION OR REVIEW THE DETERMINATION OF BOA IN THIS BEHALF. THE ROLE OF INCOME TAX AUTHORITIES / DEPARTMENT IS LIMITED TO PROVIDE BENE FIT PRESCRIBED BY SEC 80IAB TO ELIGIBLE ASSESSES ON OPERATIONS AUTHORIZED BY THE BOA. THE CIT BY 263 ORDER ENDEAVORS TO REDEFINE AND REVIEW THE O PERATIONS HELD AS AUTHORIZED BY BOA. THUS IN THE GARB OF 263 ORDER A NEW PROCESS OF FUTILE ROVING AND FISHING ENQUIRIES IS ATTEMPTED TO BE LEG ITIMIZED. 5.5. SUB RULE (5) OF RULE 11 OF SEZ RULES READS T HE LAND OR BUILT UP SPACE IN THE PROCESSING AREA OR FREE TRADE AND WAREHOUSIN G ZONE SHALL BE GIVEN ON ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 19 LEASE ONLY TO THE ENTREPRENEUR HOLDING A VALID LETT ER OF APPROVAL ISSUED UNDER RULE 19 AND THIS IMPLIES THAT THE SEZ ACT BARS TRANSFER OF BUILT UP SPACE TO THE ULTIMATE USER TO WHOM ONLY LEASE OF SUCH SPACE IS PERMITTED. ON THE OTHER HAND, THE SEZ ACT, BY ALLOWING THE CO- DEVELOPER TO ENTER INTO A PROJECT, RECOGNIZES AND TREAT THE CO-DEVELOPER AT PAR WITH DEVELOPER FOR ALL INTENT AND PURPOSE. IF THIS BE THE CASE, I.E., THE DEVELOPER AND CO- DEVELOPER ARE AT PAR AND HAVE SAME STATUS IN SEZ AC T AND INCOME TAX ACT, THEN ANY TRANSACTION, OF ANY NATURE, BETWEEN THE TW O WOULD BE AN AUTHORIZED OPERATION. THIS CONTENTION IS FURTHER STRENGTHENED FROM THE FACT THAT THE SUB-RULE (5) OF RULE 11 OF SEZ RULES 2006 ONLY IMPOSES A BAR ON TRANSFER /SALE OF BUILT UP SPACE TO A APPROVED E NTREPRENEUR BUT NO SUCH STIPULATION HAS BEEN STIPULATED IN REGARD TO DEVELO PER AND CO-DEVELOPER. IT AUTOMATICALLY FOLLOWS THAT THE FRAMERS OF THE SEZ A CT REALIZED AND ENVISAGED THAT THE DEVELOPER AND THE CO-DEVELOPER MAY UNDERTA KE JOINT OPERATIONS FOR DEVELOPMENT OF INFRASTRUCTURAL FACILITIES. IT IS I N THIS CONTEXT THAT THE ASSESSEE, DEVELOPER, AND (DAPL), CO-DEVELOPER, DECI DED TO JOINTLY FACILITATE EARLY AND EXPEDITIOUS DEVELOPMENT OF OFFICE SPACE B Y SHARING RESPONSIBILITIES I.E. ONE BUILDING BARE SHELL AND OTHER CONVERTING I T INTO WARM SHELL AND THE CO-DEVELOPER AGREEING TO PAY DEVELOPMENT CHARGES FO R BARE SHELL TO THE DEVELOPER. ROLE OF DEVELOPERS AND CO DEVELOPERS IN SEZ ACT 5.6. IT IS RELEVANT TO EXAMINE WHAT IS THE ROLE OF THE DEVELOPER IN THE SEZ AS ENVISAGED UNDER THE SEZ ACT, 2005. THE DEV ELOPER IS THE FOCAL AND INTEGRAL PART OF SEZ AND HIS ROLE, RESPONSIBILITY A ND INVOLVEMENT IS CONTINUOUS, I.E. ONGOING AS LONG AS THE SEZ EXISTS AND IS IN OPERATION. HE IS PRIMARILY RESPONSIBLE FOR DEVELOPMENT OF INFRASTRUC TURAL FACILITIES AND, ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 20 THEREAFTER, MAINTENANCE AND OPERATION OF THE SAME. IN THE PRESENT CASE, IT NEEDS TO BE APPRECIATED THAT THE DEVELOPER, THE ASSESSEE, DID NOT WALK AWAY AFTER THE CONSTRUCTION OF BARE SHELL (OFFICE S PACE) BUT ALSO CREATED OTHER INFRASTRUCTURAL FACILITIES LIKE INTERNAL ROADS, SEC URITY POST, COMPOUND WALL, DIESEL STORAGE AREA, SEWERAGE TREATMENT PLANT, ELEC TRICITY POLES, WATER TREATMENT PLANT, IF ANY, HORTICULTURE, LANDSCAPING, SECURITY ETC, WHICH ARE BEING REGULARLY OPERATED AND MAINTAINED BY THE DEVE LOPER 5.7. IN PARA (5 ) OF THE 263 SHOW CAUSE NOTICE SEZ BOA APPROVAL DATED 1 ST JUNE, 2009 VIS--VIS CLAUSE (XVII) OF THE GENERAL C ONDITIONS HAS BEEN HELD TO BE CONTRAVENED AND NOT INQUIRED BY AO PROPERLY. THE PROPOSITION IS WRONG IN AS MUCH AS 5.8. FIRSTLY, THE SAID CLAUSE WOULD BE APPLICABLE, FOR THE A.Y.2010-11 AND NOT FOR ANY EARLIER A.Y. LIKE 2008-09 AND THAT TOO IN THE CASE OF CO- DEVELOPER AND NOT DEVELOPER I.E. ASSESSEE. 5.9. SECONDLY, IT DOES NOT ANY WAY ADVERSELY IMPACT S THE CASE AS THE ASSESSEE HAS CONDUCTED ONLY AUTHORIZED OPERATIONS AS APPROVED BY SEZ BOA. 5.10. THIRDLY, THE SAID STIPULATION, CLAUSE (XVII), ONLY RELATES TO LEASE AGREEMENTS. 5.11. FOURTHLY, THE DEVELOPMENT CONSIDERATIONS RECE IVED ON TRANSFER OF BARE SHELL BUILDINGS WOULD BE PART OF THE BUSINESS OF DE VELOPMENT OF SEZ AND WOULD THEREFORE CONSTITUTE BUSINESS INCOME, ON WHIC H DEDUCTION UNDER SECTION 80IAB OF THE ACT WOULD BE ADMISSIBLE. 5.12. FIFTHLY THE RECORD OF ASSESSMENT, PROCEEDING SHEET, COMPLIANCE, QUESTIONNAIRE AND ORAL ARGUMENTS BEFORE AO DEMONSTR ATES THAT AO INQUIRED THE SAME AND RECORDED HIS SATISFACTION IN THE ASSES SMENT ORDER. A CLEAR ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 21 FINDING ABOUT CONSIDERING THE MATERIAL AND ELIGIBIL ITY OF DEDUCTION U/S 80IAB HAS BEEN RECORDED. CLARIFICATIONS BY BOARD OF APPROVAL 5.13. AFTER A PROLONGED ASSESSMENT PROCEEDINGS AND ORDER U/S 143(3), THE ASSESSEE WAS SHOCKED TO RECEIVE A NOTICE U/S 263 PR OPOSING THE ALLOWABILITY OF CLAIM TO BE ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF REVENUE. CONSEQUENTLY ASSESSEE REVERTED BACK TO THE BOARD OF APPROVAL UNDER SEZ ACT AND SOUGHT SPECIFIC CLARIFICATIONS IN THIS BEHA LF. 5.14. BY LETTER DATED 10.01.2011 AND 18.01.2011 ASS ESSEE SOUGHT THESE REGARDING LONG TERM LEASE OF LAND BY DEVELOPER TO C O-DEVELOPER; TRANSFER AND HANDOVER OF BARE SHELL/COLD SHELL BUILDINGS TO CO-DEVELOPER FOR CONVERTING THE SAME INTO WARM SHELL; LEASING OF WAR M SHELLS TO APPROVED UNITS BY CO-DEVELOPER ETC TO BE AUTHORIZED ACTIVITI ES ARE NOT? 5.15. ASSESSEE RECEIVED CLARIFICATION FROM BOA/GOV ERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF CO MMERCE (SEZ SECTION), UDYOG BHAWAN, NEW DELHI DATED 18.01.2011& 20.01.2011 BOA IN EXERCISE OF ITS STATUTORY POWERS APPROVED BUSINE SS MODEL OF THE ASSESSEE CLARIFIED THAT UNDER RULE 11(9) SALE OF LAND IS N OT PERMISSIBLE IN A SEZ. HOWEVER CO-DEVELOPER CAN TAKE LAND ON LEASE FROM DE VELOPER FOR DEFINITE PERIOD. FURTHER SEZ BUILDINGS I.E. BARE SHELL/COLD SHELL CAN BE TRANSFERRED AND HANDED OVER TO THE CO-DEVELOPER ON PAYMENT OF CONSI DERATION TO DEVELOPER, THIS TRANSFER IS PERMISSIBLE AND AUTHORIZED AS PER SEZ ACT AND RULES. THE CORRESPONDENCE WITH THE SEZ AUTHORITIES ON THIS ISS UE IS PLACED ON THE P.B. AT PAGES 122 TO 130 AND ITS CONTENTS ARE REFERRED T O BY THE LD. COUNSEL. THUS AS PER SPECIFIC CLARIFICATIONS BY BOA THE TRANSFER OF BARE SHELL BUILDING ON LONG TERM LEASE TO APPROVED CO DEVELOPER ARE AUTHOR IZED ACTIVITIES UNDER ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 22 SEZ ACT & RULES. THUS THESE CLARIFICATIONS ALSO DIS PEL THE FINDINGS OF CIT REVISING THE ASSESSMENT ORDER AND SETTING ASIDE THE SAME. 263 ORDER AND FINDINGS THEREIN BEING CONTRARY TO LEGAL PROVISIONS IS LIABLE TO BE QUASHED. THE ASSESSMENT ORDER BEING IN CONFORMITY WITH SEZ A CT, RULES AND PROVISIONS OF SEC 80IAB CAN NEITHER BE TERMED AS ER RONEOUS OR PREJUDICIAL TO THE INTEREST OR REVENUE. 5.16. ASSESSEE CLAIMED THE EXEMPTION IN RESPECT OF INCOME FROM THIS AUTHORIZED ACTIVITY U/S 80-IAB AS PER LAW IN ITS R ETURN OF INCOME FOR A.Y. 2007-08. . 5.17. ACCORDING TO THE ASSESSEE DURING THE COURSE O F ASSESSMENT THE REQUISITE RECORD, AGREEMENTS, BOA APPROVALS ETC. WE RE FILED BEFORE AO DURING THE COURSE OF ASSESSMENT U/S 143(3) WHO CONS IDERED THE MATERIAL AVAILABLE ON ASSESSMENT RECORD AND ON BEING SATISFI ED, ALLOWED THE CLAIM U/S 80IAB BY GIVING CLEAR FINDINGS IN THIS BEHALF RECOR DING THE PERUSAL OF RECORD, AGREEMENT AND SATISFACTION ABOUT ALLOWABILITY OF ASSESSES CLAIM U/S 80IB. 5.18. THIS IS EVIDENT FROM PARA 3 OF THE ASSESSMENT ORDER, WHERE THE ASSESSING OFFICER REFERS TO THE SEZ APPROVAL LETTER S, SEZ ACT, 2005, SEZ RULES 2006 AND NOTIFICATIONS ISSUED BY THE MINISTRY OF COMMERCE AND INDUSTRY DATED 16-11-2006 NOTIFYING ADDITIONAL AREA OF 34384 HECTARES AS A PART OF SEZ. THUS, ASSESSING OFFICER ON THE BASIS O F BOA ORDERS ACCEPTED THE CLAIM OF THE ASSESSEE U/S 80IAB AS IN LAW. 5.19. LD CIT ALLEGED FOLLOWING ERRORS IN THE ORDER OF ASSESSING OFFICER, WHICH ARE PREJUDICIAL TO THE INTERESTS OF REVENUE: (I) SECTION 80-IAB PROVIDES FOR DEDUCTION IN RESPECTS O F PROFITS AND GAINS FROM ACTIVITIES OF DEVELOPING, OPERATING AND MAINTAINING SEZ WHEREAS THE ASSESSEE HAS CLAIMED DEDUCTION ON SALE PROCEEDS OF ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 23 BARE SHELL BUILDINGS. SUCH SALE CANNOT BE EQUATED W ITH THE ACTIVITY OF DEVELOPING, OPERATING AND MAINTAINING OF SEZ. TH E NOTIFICATION DATED 27-10-2006 ISSUED BY THE MINISTRY OF COMMERCE & INDUSTRIES, GOVT. OF INDIA CONTEMPLATES THAT THIS I S NOT AN AUTHORIZED OPERATION OF THE SEZ. (II) BOA APPROVAL DATED 1-6-2009 WAS CONDITIONAL IN FOLL OWING TERMS: APPROVAL GIVEN BY BOA FOR CO-DEVELOPERS FOR PARTIC ULAR TERMS AND CONDITIONS OF LESE AGREEMENT WILL NOT HAVE ANY BEARING ON THE TREATMENT OF THE INCOME BY WAY OF LEASE RENTAL/ DOW N PAYMENT/ PREMIUM ETC. FOR PURPOSES OF ASSESSMENT UNDER THE P REVALENT INCOME TAX ACT AND RULES. THE ASSESSING OFFICER WIL L HAVE THE RIGHT TO EXAMINE THE TAXABILITY OF THESE AMOUNTS UNDER TH E INCOME TAX. THE ASSESSING OFFICER HAS ALLOWED THE CLAIM U/S 80- IAB WITHOUT ANY EXAMINATION THEREOF AS STIPULATED IN BOA APPROVAL A ND THE CO- DEVELOPER AGREEMENT. (III) ADVERSE INFERENCE HAS BEEN DRAWN ON THE ALLEGED HIA TUS PROCEEDINGS WHICH IS NOT ATTRIBUTABLE TO THE ASSE SSEE IN ACTUAL TERMS. 5.20. ON THESE POINTS THE ASSESSMENT ORDER HAS BEE N VAGUELY HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E AND AS THE CIT COULD NOT APPLY HIS MIND THE ASSESSMENT HAS BEEN SET ASIDE FO R DETAILED ENQUIRY. 6. LD. COUNSEL FOR THE ASSESSEE ADVERTED TO COPY OF THE AOS ASSESSMENT PROCEEDINGS SHEETS WHICH IS PLACED ON PB 18 TO 22. A PERUSAL THEREOF CLEARLY DEMONSTRATES THAT THE HEARING TOOK PLACE ON SEVERAL OCCASIONS AND ASSESSING OFFICER ASKED QUESTION ON EACH AND EVERY ASPECT OF THE ASSESSMENT INCLUDING THE ELIGIBILITY OF CLAIM U/S 80-IAB. PARTICULARLY B Y ENTRY DATED 24-12-2009, ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 24 ASSESSING OFFICER REQUIRED THE ASSESSEE TO PROVIDE THE JUSTIFICATION IN LAW FOR ALLOW ABILITY OF CLAIM U/S 80-IAB. BESIDES, OTHER Q UERIES WERE ALSO RAISED VIDE QUESTIONNAIRE DATED 1-12-2009 ISSUED U/S 142(1 ). BY POINT NO. 14 THEREOF THE ASSESSEE WAS ASKED TO SUBMIT ALL DOCUME NTS IN SUPPORT OF DEDUCTION U/S 80-IAB. BY POINT NO. 20 THE PURPOSE O F DEBTS OUTSTANDING AGAINST CO-DEVELOPER DLF ASSETS WAS ALSO ASKED. A SSESSEE FILED DETAILED REPLY TO QUESTIONNAIRE BY LETTER DATED 29-12-2009 I N WHICH A DETAILED NOTE ABOUT ALLOW ABILITY OF CLAIM U/S 80-IAB WAS ENCLOSE D WHICH IS AVAILABLE AT PAGES 28 TO 31 OF THE PB ALONG WITH VARIOUS DOCUMEN TS. THE ASSESSEE IN ALL HAS FURNISHED FOLLOWING DOCUMENTS BEFORE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. (I) COPY OF LETTER DATED 22ND JUNE, 2006 ISSUED BY GOVT. OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY DEPARTMENT OF COM MERCE (EPZ SECTION) UDYOG BHAWAN, NEW DELHI BEING THE APPROVAL FOR SETTING UP A SECTOR SPECIFIC SPECIAL ECONOMIC ZONE FOR IT/ITES S ECTOR AT RAMAPURAM, CHENNAI. (COPY ENCLOSED AT PAPER BOOK PA GES 1-47. (II) COPY OF LETTER DATED 29TH AUG, 2006 ISSUED B Y GOVT. OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY DEPARTMENT OF COM MERCE (SEZ SECTION) UDYOG BHAWAN, NEW DELHI BEING THE APPROVAL OF AUTHORIZED OPERATIONS OF THE DEVELOPER. (COPY ENCLOSED AT PAPE R BOOK PAGES 5-8) (III) COPY OF NOTIFICATION DATED 16TH NOV, 2006 AN D 19TH MAR, 2007 ISSUED BY MINISTRY OF COMMERCE AND INDUSTRY DEPARTM ENT OF COMMERCE ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 25 NOTIFYING THE LAND FOR DEVELOPMENT OF SEZ AT RAMAPU RAM, CHENNAI. (COPY ENCLOSED AT PAPER BOOK PAGES 9-12) (IV) COPY OF MEMORANDUM OF UNDERSTANDING WITH THE CO-DEVELOPER M/S DLF ASSETS PVT. LTD. DATED 29TH NOV, 2006. (COP Y ENCLOSED AT PAPER BOOK PAGES 21-48) (V) COPY OF LETTER DATED 14TH FEB, 2007 ISSUED BY G OVT. OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY DEPARTMENT OF COM MERCE (SEZ SECTION) UDYOG BHAWAN, NEW DELHI TO M/S DLF ASSETS PVT. LTD., AS A CO-DEVELOPER APPROVING THE MOU. (COPY ENCLOSED AT P APER BOOK PAGES 54-57) (VI) COPY OF LETTER DATED 19TH JUNE, 2007 ISSUED BY GOVT. OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY DEPARTMENT OF COM MERCE (SEZ SECTION) UDYOG BHAWAN, NEW DELHI BEING THE APPROVA L OF AUTHORIZED OPERATIONS OF THE CO-DEVELOPER. (COPY ENCLOSED AT P APER BOOK PAGES 58-59) (VII) COPY OF DEFINITIVE CO-DEVELOPER AGREEMENT DA TED 20TH MAR, 2008. (COPY ENCLOSED AT PAPER BOOK PAGES 60-117) (VIII) COPY OF LETTER DATED 1ST JUNE, 2009 ISSUED B Y GOVT. OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY DEPARTMENT OF COM MERCE (SEZ SECTION) UDYOG BHAWAN, NEW DELHI BEING THE APPROVAL TO THE CO- DEVELOPER AGREEMENT. (COPY ENCLOSED AT PAPER BOOK P AGES 118-121) 6.1. THESE DOCUMENTS CONTAIN FOLLOWING AGREEMENTS P LACED BEFORE THE BOARD OF APPROVAL WHILE CONSIDERING & APPROVING THE OPERATIONS OF ASSESSEE:- A) CO-DEVELOPER AGREEMENT BOTH MEMORANDUM FOR CO-DE VELOPER AGREEMENT WITH M/S DLF ASSETS PVT. LTD. AS WELL AS THE FINAL CO- DEVELOPER AGREEMENT INCORPORATING ALL MODIFICATIONS WHICH CONTAINED ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 26 THE DETAILS FOR TRANSFER OF COLD/BARE SHELL BY THE ASSESSEE TO THE NOTIFIED CO-DEVELOPER; B) AGREEMENT FOR LEASE OF LAND TO THE CO-DEVELOPER, AND C) FORMAT FOR TRANSFER AND HANDING OVER OF DEEDS. 6.2. THE CONDITIONALTIES ARE WITH RESPECT TO THE LE ASE AGREEMENT ONLY BY WHICH THE LAND WAS LEASED OUT BY THE ASSESSEE TO TH E CO-DEVELOPER AND NO SUCH CONDITIONS WERE IMPOSED UPON THE ASSESSEE ON TRANSF ER OF COLD/BARE SHELL BY THE ASSESSEE TO THE NOTIFIED CO-DEVELOPER. 6.3. THE SEZ ACT BEING AN OVERRIDING BENEFICIAL LEG ISLATION, IT OVER-RIDES ALL OTHER LAWS FOR THE TIME BEING IN FORCE IN INDIA. S ECTION 51 OF THE SEZ ACT ACTUALLY STATES SO. IT READS AS UNDER:- 51. THE PROVISIONS OF THIS ACT SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING INCONSISTENT THEREWITH CON TAINED IN ANY OTHER LAW FOR THE TIME BEING IN FORCE OR IN ANY INSTRUMENT HAVING EFFECT BY VIRTUE OF ANY LAW OTHER THAN THIS ACT. 6.4. IT IS, THEREFORE, MANIFEST THAT NO CONDITIONAL ITY CAN BE READ INTO THE OPERATION OF THE SEZ ACT AND THE BOARD OF APPROVAL CONSTITUTED UNDER IT AND AS FAR AS THE LEASE OF COLD/BARE SHELL BY THE ASSES SEE TO THE CO-DEVELOPER IS CONCERNED, THERE WAS NO CONDITIONALITY IMPOSED BY T HE BOARD OF APPROVAL OF THE GOVERNMENT OF INDIA UNDER THE SEZ ACT. 6.5. THE ASSESSING OFFICER, DURING THE COURSE OF AS SESSMENT PROCEEDINGS HAS DULY CONSIDERED THE ACCOUNTING POLICY ADOPTED B Y THE ASSESSEE FOR THE REVENUE RECOGNITION AND AFTER DUE EXAMINATION & VER IFICATION REACHED AT A CONCLUSION THAT THE DEVELOPMENT INCOME I.E. THE INC OME DERIVED FROM SEZ ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 27 PROJECT WAS IN THE NATURE OF PROFITS AND GAINS OF B USINESS AS THE SAME HAS BEEN DERIVED DURING THE NORMAL COURSE OF CONDUCT OF APPROVED BUSINESS OF THE ASSESSEE. AS SUCH, THERE IS NO ERROR IN THE OR DER PASSED BY THE ASSESSING OFFICER IN TREATING THE SAME AS BUSINESS INCOME. 6.6. LD CIT IN HIS SHOW CAUSE NOTICE U/S 263 PROPOS ED THAT THE TRANSACTIONS BETWEEN ASSESSEE AND CO-DEVELOPERS IS TAXABLE AS CA PITAL GAINS. THE PROPOSITION IS FUNDAMENTALLY ERRONEOUS, AS THE ASSE SSEE UNDOUBTEDLY HOLDS THE BARE SHELL BUILDINGS AS STOCK IN TRADE, INCOME FROM ITS TRANSFER CANNOT BE TREATED UNDER THE HEAD CAPITAL GAINS ONLY ON A VAGU E PLEA THAT RIGHTS ARE TO BE RELINQUISHED BY ASSESSEE. RIGHTS ARE TO BE RELIN QUISHED WHETHER IT IS A SALE OF STOCK IN TRADE OR IT IS TRANSFER OF A CAPIT AL ASSET, CRITERION OF RELINQUISHMENT OF RIGHTS IS NOT DECISIVE TO CONVER T THE NATURE OF TRANSFER OF BUSINESS STOCK IN TRADE INTO CAPITAL GAINS. RELIANC E IS PLACED ON FOLLOWING JUDGMENTS: - CIT NAGPUR VS. SUTLEJ COTTON MILLS SUPPLY AGENCY LTD. 100 ITR 706 (SC); - RAJA BAHADUR VISHESHWAR SINGH (DECEASED ) & OTHE RS VS. CIT, BIHAR & ORISSA 41 ITR 685 (SC) - DALHOUSIE INVESTMENT TRUST CO. LTD. VS CIT(CENTRA L) CALCUTTA 68 ITR 486 (SC) - FIDELITY ADVISOR SERIES VIII, IN RE 271 ITR 1 ARA 6.7. REFERENCE IS ALSO INVITED TO CIRCULAR NO. 4/20 07 DATED 15.06.2007, IN WHICH THE CBDT HAS ISSUED INSTRUCTIONS TO THE ASSES SING OFFICERS TO FOLLOW THE GUIDELINE FOR DETERMINING THE HEAD OF INCOME AF TER CONSIDERING THE FOLLOWING SUPREME COURT JUDGMENTS:- - CIT (CENTRAL), CALCUTTA VS. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. (P.) LTD. (1971) 82 ITR 586 (SC) - CIT (BOMBAY) VS. HOLCK LARSEN (1986) 160 ITR 67 ( SC) - (AAR) 288 ITR 641 ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 28 6.8. REFERENCE IS INVITED TO FOLLOWING PROVISIONS: (I) BUSINESS U/S 2(13) OF THE INCOME TAX ACT WHIC H READS AS UNDER:- 2(13) BUSINESS INCLUDES ANY TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATU RE OF TRADE, COMMERCE OR MANUFACTURE; (II) SIMILARLY, SECTION 28(I) OF THE ACT COMPUTES B USINESS INCOME AS DEFINED UNDER PROFITS AND GAINS OF BUSINESS AS DE FINED UNDER SECTION 2(13) OF THE ACT FURTHER CLARIFIES THIS ISSUE. IN CONTRADISTINCTION, SECTION 2(14) OF THE ACT SPECIFICALLY EXCLUDES STOCK-IN-TRA DE. ADMITTEDLY, THE ASSESSEES BUSINESS OF DEVELOPMENT OF SEZ HAS BEEN DECLARED AND ACCEPTED IN THE PROCEEDINGS UNDER REVIEW AS STOCK-I N-TRADE. THEREFORE, IT CANNOT BE SAID TO BE A CAPITAL ASSET EVEN UNDER THE FIRST PRINCIPLE AND DEFINITIONS CONTAINED IN THE INCOME TAX ACT. THE TWO ESSENTIAL GUIDING PRINCIPLES WHETHER THE ACTIVITY IS BUSINES S OR NOT ARE - THAT IT MUST BE CONTINUOUS ACTIVITY AND IT MUST BE CARRIED ON WITH A PROFIT MOTIVE. THE ANSWER TO BOTH THESE PRINCIPLES IS SEL F-EVIDENT. AS ALREADY SUBMITTED, AS PER THE FACTS ON RECORD, THE ASSESSEE IS CONDUCTING ITS BUSINESS ON A CONTINUING BASIS YEAR AFTER YEAR AND IS GUIDED BY PROFIT MOTIVE AND NOT BY ANY CHARITABLE OBJECT. THE COMPAN Y MAKES PROFIT AND IS ENGAGED IN THE BUSINESS OF MAKING PROFIT FOR ITS STAKEHOLDERS. 6.9. LD. COUNSEL CONTENDS THAT LD CITS PROPOSITION TO TAX IT AS CAPITAL GAINS IS AGAINST THE BASIC PRINCIPLE OF TAXATION AS LARGE SCALE REAL ESTATE BUSINESS ACTIVITIES CONTINUOUSLY CARRIED ON BY ASSESSEE AN D BARE SHELL BUILDINGS DECLARED AS STOCK-IN-TRADE IN ITS BOOKS OF ACCOUNTS , AS PER ITS OBJECTS CLAUSE IN ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 29 ITS MEMORANDUM AND ARTICLES OF ASSOCIATION CAN BE T AXED ONLY UNDER THE HEAD BUSINESS INCOME. 6.10. THUS ASSESSEES BUSINESS AND ELIGIBILITY OF I TS CLAIM QUA BARE SHELL BUILDING INCOME U/S 80-IAB HAS BEEN PROPERLY EXAMIN ED AND AFTER BEING SATISFIED WITH THE ASSESSEE ELIGIBILITY, DEDUCTION HAS BEEN ALLOWED U/S 80-IAB BY ASSESSING OFFICER. THE ASSESSMENT U/S 143(3) HAS BEEN FRAMED BY CONDUCTING ADEQUATE AND PROPER INQUIRIES ABOUT THE CLAIM AND PROVISIONS OF LAW. THE VIEW TAKEN BY AO IS CORRECT IN VIEW OF THE SEZ AND INCOME TAX ACT. IT CANNOT BE TERMED AS FRAMED BY INADEQUATE IN QUIRY OR TAKING AN IMPLAUSIBLE OR ILLEGAL VIEW BY THE ASSESSING OFFICE R. ON THE SCALE OF ADEQUACY OF INQUIRIES LD. CIT MAY HAVE DIFFERENT OPINION, I T CANNOT MAKE THE ASSESSMENT ORDER ERRONEOUS. SIMILARLY HOLDING DIFFE RENT VIEW ON THE ELIGIBILITY OF CLAIM U/S 80IAB THAN THE ASSESSING O FFICER ALSO DOES NOT MAKE ORDER ERRONEOUS AS LONG AS A POSSIBLE VIEW IS TAKEN BY HIM. THEREFORE, THE IMPUGNED ASSESSMENT ORDER CAN NEITHER BE HELD AS E RRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF REVENUE. IF VIEW TAKEN BY AO IS A POSSIBLE VIEW THE SAME CAN NOT BE REVISED U/S 263 MERELY BECAUSE CIT MAY HOLD ANOTHER POSSIBLE VI EW: 6.11. LD. COUNSEL CONTENDS THAT IN LAW AND ON FACTS , THE IMPUGNED ASSESSMENT ORDER IS VALID AND TENABLE AS PER CANONS OF LAW IN SO FAR AS IT ALLOWS DEDUCTION UNDER SECTION 80 IAB AFTER DUE VER IFICATION THEREOF. THE VIEW TAKEN BY AO ON ADMISSIBILITY OF DEDUCTION U/S 80IAB IS A POSSIBLE AND PLAUSIBLE VIEW. IN ANY EVENT, THE ISSUE OF ADMISSIB ILITY OF CLAIM OF DEDUCTION UNDER SECTION 80IAB OF THE ACT ASSUMING THE WORST, CAN AT BEST BE REGARDED AS DEBATABLE ONE AS CIT HOLDS ANOTHER POSSIBLE VIEW . THE ASSESSING OFFICER, ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 30 HAVING TAKEN A POSSIBLE AND PLAUSIBLE VIEW, JURISDI CTION UNDER SECTION 263 OF THE ACT IS OUSTED AND THE ORDER WOULD NEITHER BE CA LLED AS ERRONEOUS NOR PREJUDICIAL TO INTEREST OF REVENUE; THIS PROPOSITIO N HAS BEEN LAID IN SETTLED WAY THE COURTS BY A CATENA OF JUDGMENTS. (I) THE HONBLE SUPREME COURT HAS SPECIFICALLY HELD IN THE CASE OF MALABAR INDUSTRIAL COMPANY LTD VS. CIT (243) ITR 83 AND ALSO IN THE CASE OF CIT VS. MAX INDIA LTD. (295) ITR 282 THAT WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HA S ADOPTED ONE OF THE POSSIBLE VIEWS THEN NO RECOURSE CAN BE TAKEN BY THE INCOME TAX DEPARTMENT TO EXERCISE POWER OF REVISION UNDER SECTION 263 OF THE IT ACT. (II) IN CIT VS ARVIND JWELLERS (2003) 259 ITR 502 (GUJARAT) THEIR LORDSHIPS WHILE REFERRING TO SUPREME COURT DE CISION IN MALABAR INDUSTRIAL COMPANY LTD VS. CIT (243) ITR 83 HAVE OBSERVED: COMING TO THE FACTS OF THE PRESENT CASE, IT IS TH E FINDING OF FACT GIVEN BY THE TRIBUNAL THAT THE ASSESSEE HAS PRODUCE D RELEVANT MATERIAL AND OFFERED EXPLANATION IN PURSUANCE OF TH E NOTICIES ISSUED UNDER SECTION 142(1) AS WELL AS SECTION 132( 2) AND AFTER CONSIDERING THOSE MATERIAL AND EXPLANATIONS, THE IT O HAS COME TO A DEFINITE CONCLUSION. THE COMMISSIONER DID NOT AGREE WITH THE CONCLUSION BY THE ITO. SECTION 263 DOES NOT EM POWER HIM TO TAKE ACTION ON THESE FACTS TO ARRIVE AT THE CONCLUS ION THAT THE ORDER PASSED BY THE ITO IS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF THE REVENUE. SINCE THE MATERIAL WAS TH ERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERED BY THE ITO AND A PARTICULAR VIEW WAS TAKEN, THE MERE FACT THAT DIFFERENT VIEW C AN BE TAKEN, SHOULD NOT BE THE BASIS FOR AN ACTION UNDER SECTION 263 AND IT CANNOT BE HELD TO BE JUSTIFIED.. IN VIEW OF THIS AND FOLLOWING THE PRINCIPLES LAD DO WN BY THE SUPREME COURT IN MALABAR INDUSTRIAL CO LTDS CASE ( SUPRA), WE ARE OF THE VIEW THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 31 OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE THE ORDER PASSED BY THE COMMISSIONER UNDER SECTION 263. WE, THEREFORE, ANSWERS BOTH THE QUESTIONS IN THE AFFIRMATIVE, I.E. , IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE THE SPECIAL LEAVE PETITION FILED BY THE DEPARTMENT AGAINST THE SAID ORDER WAS DISMISSED BY THE HONBLE SUPREME COURT ON 28.4.2003 IN SLP (C). (III) IN THE CASE OF CIT VS. DLF POWER LTD. 329 IT R 289, IT WAS HELD BY HONBLE HIGH COURT OF DELHI THAT WHERE THE AO HA S TAKEN A PLAUSIBLE VIEW, THE ORDER COULD NOT BE SET ASIDE U/ S 263 EVEN IF ANOTHER VIEW WAS POSSIBLE ON THE ISSUE. CONFLICTING OBSERVATIONS AND FINDINGS IN CITS NOTI CE AND ORDER U/S 263 6.12. LD. COUNSEL COUNTERS THE CONFLICTING FINDING OF LD. CIT SOME TIME HOLDING THAT NO INQUIRY SOMETIMES HOLDING PROPER EN QUIRIES HAVE NOT BEEN CONDUCTED BY ASSESSING OFFICER ABOUT THE CLAIM OF A LLOW ABILITY U/S 80-IAB. IN THE NOTICE IT IS PROPOSED THAT TRANSFER IS LIABL E TO BE CAPITAL GAINS AND NOT AS BUSINESS INCOME THOUGH THIS ISSUE IS ABANDONED B Y HIM WHILE PASSING THE ORDER. ISSUE ABOUT LACK OF ENQUIRY AND INADEQUATE INQUIRY: 6.13. IT IS PLEADED BY LD COUNSEL THAT THE ASSESSM ENT RECORD, NOTICE U/S 143(2), 142(1), QUESTIONNAIRE, PLEADINGS, SUBMISSIO NS AND ASSESSMENT ORDER ALL TOGETHER CLEARLY DEMONSTRATE THAT REQUISITE ENQ UIRIES WERE CONDUCTED BY ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 32 AO WHILE ALLOWING THE ASSESSEES CLAIM U/S 80IAB. A SSUMING BUT NOT ADMITTING IN WORST SCENARIO CIT MAY ASSUME THAT INA DEQUATE INQUIRIES WERE CONDUCTED. ON THIS COUNT ALSO HONBLE DELHI HIGH CO URT HAS REPEATEDLY HELD THAT REVISIONARY POWERS U/S 263 CANNOT BE EXERCISED IF CIT IS OF THE VIEW INQUIRIES MADE BY AO WERE INADEQUATE. RELIANCE IS P LACED ON (I) CIT VS. SUNBEAM AUTO LTD. 332 ITR 167 (DEL.) IN THE CASE OF CIT VS. SUNBEAM AUTO LTD., IT WAS HE LD BY HONBLE HIGH COURT OF DELHI THAT WHERE THE A.O. HAD MADE AN ENQUIRY BEFORE COMPLETION OF ASSESSMENT, THE SAME C OULD NOT BE SET ASIDE FOR REASON OF INADEQUATE ENQUIRY. THE A O HAD CALLED FOR REASONS/ EXPLANATION AND HAD DECIDED AFTER CONS IDERING THE EXPLANATION FILED. THERE WAS NO LACK OF ENQUIRY. TH E ORDER OF CIT UNDER SECTION 263 WAS INVALID, SINCE AO HAD TAK EN A POSSIBLE VIEW. ( II) CIT VS. HONDA SIEL POWER PRODUCTS LTD. 235 CTR 336 (DEL.) IN THE CASE OF CIT VS. HONDA SIEL POWER PRODUCTS LT D., IT WAS HELD BY HONBLE HIGH COURT OF DELHI THAT THERE IS N O MATERIAL TO INDICATE THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND TO THE PROVISIONS OF SECTION 80IB(13) READ WITH SECTIO N 80IA(9). THE PRESUMPTION THAT THE ASSESSMENT ORDERS PASSED U NDER SECTION 143(3) PASSED BY THE ASSESSING OFFICER HAD BEEN PASSED UPON AN APPLICATION OF MIND, HAS NOT BEEN REBUTTED BY THE REVENUE. NO ADDITIONAL FACTS WERE NECESSARY BEFORE THE ASSESSING OFFICER FOR THE PURPOSE OF CONSTRUING THE PROVISIONS OF SECTION 80IB(13) READ WITH SECTION 80IA(9). IT W AS ONLY A LEGAL CONSIDERATION AS TO WHETHER THE DEDUCTION UND ER SECTION 80HHC WAS TO BE COMPUTED AFTER REDUCING THE AMOUNT OF DEDUCTION UNDER SECTION 80IB FROM THE PROFITS AND G AINS. THERE IS NO DOUBT THAT THE ASSESSING OFFICER HAD ALLOWED THE DEDUCTION UNDER SECTION 80HHC WITHOUT REDUCING THE AMOUNT OF DEDUCTION ALLOWED UNDER SECTION 80IB FROM THE PR OFITS AND ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 33 GAINS. HE DID NOT SAY SO IN SO MANY WORDS, BUT THAT WAS THE END RESULT OF HIS ASSESSMENT ORDER. SINCE HE WAS HOLDIN G IN FAVOUR OF THE ASSESSEE, AS HAS BEEN OBSERVED IN HARI IRON TRADING COMPANY (SUPRA) AND EICHER LIMITED (SUPRA), GENERAL LY, THE ISSUES WHICH ARE ACCEPTED BY THE ASSESSING OFFICER, DO NOT FIND MENTION IN THE ASSESSMENT ORDER, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND. IT CANN OT ALSO BE SAID THAT THE ASSESSING OFFICER HAD FAILED TO MAKE ANY ENQUIRY BECAUSE NO FURTHER ENQUIRY WAS NECESSARY AND ALL TH E FACTS WERE BEFORE THE ASSESSING OFFICER. (III) CIT V. ANIL KUMAR SHARMA (2011) 3 35 ITR 1 IN THIS CASE THE HONORABLE HIGH COURT WAS SEIZED WI TH THE ISSUE ON CONDITIONS PRECEDENT FOR THE REVISION OF ORDER AND DIFFERENTIATED BETWEEN THE LACK OF INQUIRY AND THE INADEQUATE INQU IRY BY THE ASSESSING OFFICER IT IS HELD THAT THE FINDING BY TH E TRIBUNAL THAT THE ASSESSING OFFICER HAD MADE INQUIRY AND THAT COMMISS IONER WAS NOT ABLE TO POINT OUT IN HIS ORDER, THE ORDER OF REVISI ON NOT VALID. (IV) VODAFONE ESSAR SOUTH LTD. VS. C I T 2011 TIOL 417 ITAT DEL. IN THIS CASE THE HONBLE BENCH HELD THAT WHERE THE RE IS DUE ENQUIRY BY THE ASSESSING OFFICER ,THOUGH IT HAS BE EN CONSIDERED TO BE INADEQUATE BY THE CIT, RECOURSE U/S 263 CANNO T BE MADE. ACCORDINGLY, IT IS SUBMITTED THAT THE INITIATION OF REVISION PROCEEDINGS UNDER SECTION 263 OF THE IT ACT BEING TO TAKE ANOTH ER POSSIBLE VIEW ABOUT ALLOWABILITY OF DEDUCTION AND ADEQUACY OF ENQ UIRIES IS UNSUSTAINABLE AND CONTRARY TO AUTHORITY OF LAW AND THE SAME IS DIRECTLY CONTRARY TO THE LAW LAID DOWN BY THE SAID TWO HONB LE SUPREME COURT JUDGMENTS IN THE CASE OF MALABAR INDUSTRIAL COMPANY LTD. VS. CIT, CIT ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 34 VS. MAX INDIA LTD AND OTHER DELHI HIGH COURT JUDGME NTS ON THESE ISSUES (SUPRA). 6.14. THE ENTIRE TRANSACTION I.E. ACTIVITY OF TRANS FER OF BARE SHELL BUILDINGS BY DEVELOPER TO CO DEVELOPER INCLUDING THE DOCUMENTATI ON OF THE SAME HAS BEEN APPROVED BY BOA UNDER SEZ ACT. IN SUCH CIRCUMSTANCE S THERE IS NO SCOPE FOR PRESUMING THAT SUCH ACTIVITY IS NOT AN AUTHORIZ ED ACTIVITY. CONSEQUENTLY, THE INTEREST OF REVENUE AS EXPRESSED BY BOA WHILE A PPROVING THE CO DEVELOPERS AGREEMENT HAS BEEN TAKEN CARE OF BY ASSE SSING OFFICER BY EXAMINING THE ALLOW ABILITY OF DEDUCTION U/S 80IAB OF THE INCOME-TAX ACT. IT IS NOT OPEN TO THE CIT UNDER SECTION 263, TO SIT IN JUDGMENT ON THE VALID VIEW AS TO WHETHER THE TRANSFER OF BARE SHELL BUILDING I N SEZ FOR A DEVELOPMENT CONSIDERATION IS AN AUTHORIZED OPERATION OR NOT AS LONG AS IT IS APPROVED BY THE BOA AND DULY ENQUIRED BY AO. SUCH POWERS ARE V ESTED EXCLUSIVELY, LAWFULLY AND SOLELY WITH THE BOARD OF APPROVALS (BO A) UNDER SEZ ACT. A PERUSAL OF THE RECORD IN OUR CASE SHOWS THAT THE BO A HAS EXPRESSLY AND CONSCIOUSLY EXERCISED SUCH POWER VESTED IN IT AND A PPROVED THE TRANSFER OF BARE SHELL FROM DEVELOPER TO CO-DEVELOPER TO BE AN AUTHORIZED OPERATION. THIS UNDERSTANDING IS ONCE AGAIN CONFIRMED IN CLARI FICATIONS OF MINISTRY OF COMMERCE DATED 18 TH OF JANUARY 2011 AND 20 TH JANUARY 2011, COPIES OF WHICH ARE CONTAINED IN THE PAPER BOOK PART OF ANNEX URE TO THIS SUBMISSION. THESE CLARIFICATIONS WERE OBTAINED BY ASSESSEE WHEN CIT RAISED THESE ISSUES. IN THIS BEHALF BOA UNEQUIVOCALLY CLARIFIED THAT THE CO-DEVELOPERS AGREEMENT WAS AN AUTHORIZED AGREEMENT AND THE TRANSFER OF BAR E SHELL BUILDINGS TO CO- DEVELOPERS WAS ALSO AN AUTHORIZED ACTIVITY. 6.15. THUS, IT IS PLEADED THAT THE LD. ASSESSING OF FICER CARRIED OUT PROPER INQUIRIES; ASSESSEE SUBMITTED PROPER EXPLANATION TH EREON, A NOTE WHEREOF IS ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 35 RECORDED IN THE PROCEEDINGS SHEETS. THE REQUISITE F INDING HAS BEEN RECORDED IN THE ASSESSMENT ORDER. THE ORDER OF ASSESSING OFF ICER MAY BE SHORT BUT IT CONTAINS ALL THE RELEVANT FINDINGS ABOUT HIS INQUIR Y AND SATISFACTION. ASSESSING OFFICER IS A QUASI JUDICIAL AUTHORITY AND HIS FINDINGS AND OBSERVATIONS GIVEN IN CLEAR TERMS BY HIM IN THE ORD ER ARE CONCLUSIVE. THERE IS NO PROFARMA ABOUT THE FORMAT OF ASSESSMENT ORDER AND LENGTH OF ASSESSMENT ORDER IN THE INCOME-TAX ACT. THE ORDER S HOULD BE BASED ON RECORD OF PROCEEDINGS AND MATERIAL ON THE FILES AND ALL THIS SHOULD REFLECT THE INQUIRIES MADE BY ASSESSING OFFICER AND THE CONCLUS ION ARRIVED THEREON. THE RECORD IN THE ASSESSEES CASE STANDS TESTIMONY THAT A FULL AND PROPER EXERCISE OF HEARING DURING THE COURSE OF ASSESSMENT WAS CARR IED OUT AND THE ASSESSMENT ORDER WAS PASSED GIVING CRYSTAL CLEAR FI NDINGS ALLOWING THE 80IAB CLAIM OF THE ASSESSEE. 6.16. THE LETTER OF APPROVAL IS ISSUED BY THE BOARD BY A STATUTORY PROCESS OF LAW AND ONCE IT HAS BEEN ISSUED BY THE EXCLUSIVE SANCTIONING AUTHORITY, THE CONSEQUENTIAL BENEFITS THAT ARE AVAILABLE TO A DEVE LOPER CANNOT BE DENIED. THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME -TAX EXERCISING THE POWER OF REVISION UNDER THE ACT CANNOT HAVE ANY JUR ISDICTION TO QUESTION THE VALIDITY OR THE LEGALITY OF THE AUTHORIZED OPERATIO NS WHICH HAVE BEEN APPROVED BY THE REGULATORY BODY OF THE CENTRAL GOVE RNMENT I.E. BOA AND ATTEMPT TO DISPUTE THE SAME IS CONTRARY TO THE STAT UTORY PROVISIONS OF THE SEZ ACT. ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 36 6.17. THE ASSESSEE HAS NOT SOLD THE LAND IN FAVOUR OF THE CO-DEVELOPER AS WRONGLY ALLEGED BY CIT. AS THE RECORD DEMONSTRATES ASSESSEE ONLY LEASED OUT THE BARE SHELL BUILDINGS IN FAVOUR OF CO-DEVELO PER. THE TRANSFER OR THE LEASING OF BARE SHELL BUILDINGS COMES WITHIN THE PU RVIEW OF AUTHORIZED ACTIVITIES AND THE CO-DEVELOPER AGREEMENT HAVING BE EN APPROVED BY THE BOA, THE INCOME TAX AUTHORITIES HAVE TO ALLOW THE D EDUCTION U/S 80-IAB. AS PER THE SETTLED PROPOSITIONS OF LAW IN CASE BOA AR E APPOINTED BY THE CENTRAL GOVERNMENT IN VARIOUS FIELDS OF GIVING BENE FITS LIKE SEZ, CUSTOMS AND VARIOUS OTHER FISCAL LEGISLATION, THE INCOME-TA X AUTHORITIES CANNOT SIT OVER THE JUDGMENT OF THE BOA. BY CATENA OF JUDGMENTS THE COURTS HAVE HELD THAT THE APPROVALS ACCORDED BY SUCH REGULATORY BOARDS IN DEVELOPMENT SCHEMES CANNOT BE QUESTIONED BY TAX AUTHORITIES. RELIANCE I N THIS BEHALF IS PLACED ON: - APOLLO TYRES VS. CIT (2002) 9 SCC 1 (SC); - MALAYALA MANORAMA CO. LTD. VS. CIT (2008) 12 SCC 61 2 (SC) - CIT V. HCL COMMET SYSTEM & SERVICES LTD. 305 ITR 40 9 (SC); - MARMO CLASSIC VS. COMMISSIONER OF CUSTOMS [2002(143 ) ELT 153 (TRIB. MUMBAI)] AFFIRMED BY HONBLE SUPREME COURT IN [2003(152) ELT A85 (SC)]; - LOKASH CHEMICAL WORKS VS. M.S. MEHTA 1981 (8) ELT 2 35; - TITAL MEDICAL SYSTEMS PVT. LTD. VS. COLLECTOR 2003 (151) ELT 254 (SC) ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 37 - CESTAT JUDGMENT IN HICO ENTERPRISES VS. COMMISSIONE R 2005 (189) ELT 135 (TRIB. LB) APPROVED BY HONBLE SUPREME COURT IN 2008 (228) ELT 161 (SC); - ATUL COMMODITIES PVT. LTD. VS. COMMISSIONER OF CUST OMS COCHIN 2009 (235) ELT 385 (SC); - M.J. EXPORTS LTD. VS. CEGAT 1992 (60) ELT 161 (SC); 6.18. ASSESSEE HAS SUCCESSFULLY DISPELLED THE UNFOU NDED ALLEGATION OF THE CIT THAT THE CLAIM U/S 80IAB WAS NOT ENQUIRED BY AS SESSING OFFICER AND IT WAS AN ERROR WHICH WAS PREJUDICIAL TO REVENUE. UNDE R THESE CIRCUMSTANCES THE ORDER OF ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF REVENUE. 6.19. ALL THESE CASES, WHICH PERTAIN TO REGULATORY AUTHORITIES UNDER CUSTOMS, DGFT, STATE GOVT. DEVELOPMENT BOARDS, IMPO RT LICENSE ETC., IT HAS BEEN HELD THAT CERTIFICATE ISSUED BY COMPETENT AUTHORITIES CANNOT BE REVIEWED BY THE LOWER AUTHORITIES LIKE CUSTOM OFFIC ERS, INCOME-TAX OFFICERS ETC. WHY THE ORDER OF CIT U/S 263 IF INVALID AND UNSUSTA INABLE IN LAW 6.20. THUS, TAKING INTO CONSIDERATION ALL THE ABOVE CIRCUMSTANCES, ALLEGATIONS ABOUT ASSESSING OFFICERS ORDER BEING E RRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE BY THE CIT IN 263 SHOW CA USE NOTICE AND 263 ORDER HAVE NO SUBSTANCE. THUS THE 263 ORDER OF THE CIT IS NOT TENABLE ON FOLLOWING COUNTS: ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 38 (I) LD. CIT FAILED TO APPLY HIS MIND AND TO CONSIDER EX PLANATION AND MATERIAL FILED BY THE ASSESSEE INCLUDING THE VERIFI CATIONS FROM BOA CONFIRMING THE ASSESSEES STAND. LD. CIT HAS BEEN C ANDID ENOUGH TO ADMIT THAT HE HAS NOT ENOUGH TIME TO CONSIDER TH ESE SUBMISSIONS AND THE REPORT OF ASSESSING OFFICER WHICH WAS CALL ED BY LD. CIT ONLY. ADMITTEDLY THE ORDER HAS BEEN PASSED WITHOUT CONSIDERING THE MATERIAL AVAILABLE ON RECORD AND CROSS VERIFYING OF THE ASPECTS WITH THE CASE RECORD. IN THESE CIRCUMSTANCES, THE 263 OR DER IS VITIATED BY LACK OF APPLICATION OF MIND AND PROPER CONSIDERATIO N OF THE MATERIAL, THUS THE ORDER U/S 263 IS BAD IN LAW. (II) THE ASSESSEES AGREEMENT WITH CO-DEVELOPER IS APPRO VED BY THE BOA. THE ACTIVITY OF TRANSFERRING BARE SHELL BUILDI NGS IS ONLY AN AUTHORIZED ACTIVITY AS CERTIFIED BY THE BOA ITSELF AND THE ANNEXURE ATTACHED TO THE NOTIFICATION. (III) THE ASSESSEE HAS NOT SOLD ANY LAND BUT ONLY TRANSFE RRED THE BARE SHELL BUILDINGS ON LEASE. THEREFORE, THERE IS NO ER ROR AS POINTED OUT BY LD. CIT. (IV) THE ASSESSING OFFICER HAS CONDUCTED PROPER INQUIRIE S WHICH IS EVIDENT FROM PROCEEDINGS SHEETS; LETTERS; QUESTIONN AIRE; ASSESSEES RESPONSE AND DETAILED NOTES SUBMITTED ON ELIGIBILIT Y U/S 80-IAB. THUS ASSESSING OFFICERS ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF REVENUE. 6.21. IN VIEW OF THESE FACTS AND CIRCUMSTANCES IT I S PLEADED BY LD COUNSEL THAT THE IMPUGNED 263 ORDER PASSED BY THE CIT MAY B E QUASHED. 7. LD. CIT (DR), ON THE OTHER HAND, SUPPORTED THE O RDER OF CIT U/S 263 AND CONTENDS AS UNDER: ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 39 (I) THE ASSESSING OFFICERS ORDER IS VERY SHORT AND DOE S NOT SPELL OUT ANY REASON FOR ALLOWING RELIEF TO THE ASSESSEE. (II) THE RECORD DOES NOT REFLECT THAT PROPER INQUIRIES W ERE CONDUCTED, EXCEPT A CASUAL REFERENCE TO HIS BEING SATISFIED AB OUT THE ASSESSEES ELIGIBILITY TO CLAIM U/S 80-IAB. (III) THE CLARIFICATIONS ISSUED BY BOA SUBSEQUENT TO THE ASSESSMENT PROCEEDINGS WERE NOT PART OF THE RECORD AND WERE N OT BEFORE THE ASSESSING OFFICER AND HAVE NO RELEVANT. (IV) THEREFORE THERE IS NO ERROR IN DIRECTION GIVEN BY T HE CIT TO ASSESSING OFFICER TO VERIFY THE SAME AND CARRY OUT PROPER INQUIRIES. REVISION PROCEEDINGS ARE VALID AND DESERVE TO BE UP HELD. 7.1. LD. DR THEN RELIED ON FOLLOWING JUDGMENTS: - CIT VS. NAGESH KNITWARS P. LTD. (2012) 345 ITR 13 5 (DEL.) - CIT VS. DLF POWER LTD. (2012) 345 ITR 446 (DEL.) - CIT VS. HARSH J. PUNJABI (2012) 345 ITR 451 (DEL. ) 7.2. IT IS PLEADED THAT RATIO OF THESE JUDGMENTS IS APPLICABLE TO THE FACTS OF THE ASSESSEES CASE AND CONSIDERING THEM THE 263 AC TION EXERCISED BY THE CIT, HOLDING THAT THE ORDER IS ERRONEOUS AND PREJUD ICIAL TO THE INTERESTS OF REVENUE IS JUSTIFIED. 8. LD. COUNSEL FOR THE ASSESSEE IN REPLY REFERS TO THE HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS. VIKAS POLYME RS 236 CTR 476 (DEL.), WHEREIN IT HAS BEEN HELD THAT THE PROVISION S OF SECTION 263 OF THE ACT, WHEN READ AS A COMPOSITE WHOLE MAKE IT INCUMBENT UP ON THE COMMISSIONER BEFORE EXERCISING REVISIONAL POWERS TO: (I) CALL FO R AND EXAMINE THE RECORD, ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 40 AND (II) GIVE THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND THEREAFTER TO MAKE OR CAUSE TO BE MADE SUCH ENQUIRY AS HE DEEMS N ECESSARY. IT IS ONLY ON FULFILLMENT OF THESE TWIN CONDITIONS THAT THE COMMI SSIONER MAY PASS AN ORDER EXERCISING HIS POWER OF REVISION. MINUTELY EX AMINED, THE PROVISIONS OF THE SECTION ENVISAGE THAT THE COMMISSIONER MAY CALL FOR THE RECORDS AND IF HE PRIMA FACIE CONSIDERS THAT ANY ORDER PASSED THER EIN BY THE ASSESSING OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL T O THE INTEREST OF THE REVENUE, HE MAY AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH ENQUIRY AS HE DEE MS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY. THE TWIN REQUIREMENT OF THE SECTION IS MANIFESTLY FOR A PURP OSE. MERELY BECAUSE THE COMMISSIONER CONSIDERS ON EXAMINATION OF THE RECORD THAT THE ORDER HAVE BEEN ERRONEOUSLY PASSED SO AS TO PREJUDICE THE INTE REST OF THE REVENUE WILL NOT SUFFICE. THE ASSESSEE MUST BE CALLED, HIS EXPLA NATION SOUGHT FOR AND EXAMINED BY THE COMMISSIONER, AND THEREAFTER IF THE COMMISSIONER STILL FEELS THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE, THE COMMISSIONER MAY PASS REVISIONAL ORDERS. IF, ON THE OTHER HAND, THE COMMISSIONER IS SATISFIED, AFTER HEARING THE ASSESS EE, THAT THE ORDERS ARE NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE, HE MAY CHOOSE NOT TO EXERCISE HIS POWER OF REVISION. 8.1. THE JUDGMENT MANDATES THAT THE ASSESSEE MUST BE CALLED, HIS EXPLANATION SOUGHT FOR AND EXAMINED BY THE COMMISSI ONER AND IF, ON THE OTHER HAND, THE COMMISSIONER IS SATISFIED, AFTER HE ARING THE ASSESSEE, THAT THE ORDER IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF THE REVENUE, HE HAS AN OPTION NOT TO EXERCISE HIS POWER OF REVISION. IN TH IS CASE THE BOA CLARIFIED THE TRANSFER AND CO-DEVELOPER AGREEMENT TO BE AN A UTHORIZED ACTIVITY, ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 41 REFERRING TO THE DOCUMENTS ALREADY FILED WITH ASSES SING OFFICER. THESE CLARIFICATIONS ARE RELEVANT. IN VIEW OF HONBLE DEL HI HIGH COURT JUDGMENT IN THE CASE OF VIKAS POLYMERS, CIT OUGHT TO HAVE CONS IDERED THEM ALONG WITH WRITTEN SUBMISSIONS, ASSESSING OFFICERS REPORT AND RECORD. AFTER DUE CONSIDERATION THEREOF AND APPLICATION OF MIND, POWE R U/S 263 SHOULD HAVE BEEN EXERCISED. 8.2. THIS IS FOR THE REASON THAT IF A QUERY IS RAIS ED DURING THE COURSE OF SCRUTINY BY THE ASSESSING OFFICER, WHICH WAS ANSWER ED TO THE SATISFACTION OF THE ASSESSING OFFICER, BUT NEITHER THE QUERY NOR TH E ANSWER WERE REFLECTED IN THE ASSESSMENT ORDER, THIS WOULD NOT BY ITSELF LEAD TO THE CONCLUSION THAT THE ORDER OF THE ASSESSING OFFICER CALLED FOR INTERFERE NCE AND REVISION. 8.3. IN THE INSTANT CASE, FOR EXAMPLE, THE COMMISS IONER HAS OBSERVED IN THE ORDER PASSED BY HIM THAT THE ASSESSEE HAS NOT F ILED CERTAIN DOCUMENTS ON THE RECORD AT THE TIME OF ASSESSMENT. ASSUMING IT T O BE SO, IN OUR OPINION, THIS DOES NOT JUSTIFY THE CONCLUSION ARRIVED AT BY THE COMMISSIONER THAT THE ASSESSING OFFICER HAD SHIRKED HIS RESPONSIBILITY OF EXAMINING AND INVESTIGATING THE CASE. MORE SO, IN VIEW OF THE FAC T THAT THE ASSESSEE EXPLAINED THAT THE CAPITAL INVESTMENT MADE BY THE P ARTNERS, WHICH HAD BEEN CALLED INTO QUESTION BY THE COMMISSIONER, WAS DULY REFLECTED IN THE RESPECTIVE ASSESSMENTS OF THE PARTNERS WHO WERE INC OME-TAX ASSESSEES AND THE UNSECURED LOAN TAKEN FROM M/S. STUTEE CHIT AND FINANCE (P) LTD. WAS DULY REFLECTED IN THE ASSESSMENT ORDER OF THE SAID CHIT FUND WHICH WAS ALSO AN ASSESSEE. ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 42 8.4. IN THIS CASE THE ASSESSEE HAS PRODUCED EVERYTH ING BEFORE THE CIT WHO FAILED TO CONSIDER NOT ONLY THE RECORD FILED BEFORE THE ASSESSING OFFICER BUT EVEN THE SUBSEQUENT CLARIFICATIONS . THEREFORE, THERE IS NO MERIT IN THE ARGUMENT OF LD. CIT(DR). 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS AND ARGUMENTS HAVE BEEN DESCRIBED IN DETAIL ABOVE. APROPOS THE ISSUE THAT NO INQUIRIES WERE CONDUCTED BY ASSESSING OFFICER, WE ARE UNABLE TO AGREE WITH THE LD. CIT (DR) INASMUCH ASSESSING OFFICER ASKED FOR JUSTIFICATION OF 80-IAB CLAIM, WHICH IS DULY RE SPONDED BY ASSESSEE. THE ASSESSMENT RECORD MEANS THE PROCEEDINGS SHEETS, MAT ERIAL AVAILABLE ON RECORD AND THE REPLIES OF THE ASSESSEE. CONSIDERIN G THESE ASPECTS IT EMERGES THAT ALL THE REQUIRED DOCUMENTS WERE FILED AND CONS IDERED BY ASSESSING OFFICER AND ON BEING SATISFIED, DEDUCTION U/S 80-I AB WAS ALLOWED WHICH IS MENTIONED IN THE ASSESSMENT ORDER. THUS, THE CASE BEFORE US IS NOT OF LACK OF INQUIRY AND THE CONDITION MENTIONED IN NOTIFICATION DATED 27-10-2006 GIVING TO ASSESSING OFFICER THE RIGHT TO EXAMINE THE TAXAB ILITY OF ISSUE OF 80-IAB IN THE SPIRIT OF SEZ PROVISION STANDS VINDICATED. BESI DES, WE MAY HASTEN TO ADD THAT APPARENTLY THIS RIDER APPEAR TO BE MADE WHILE APPROVING THE CO- DEVELOPER AGREEMENT. THIS IS POSSIBLY APPLICABLE TO CO-DEVELOPER AND NOT THE ASSESSEE AS THE CONDITION WAS PUT DURING THE COURSE OF APPROVAL OF THE AGREEMENT BETWEEN ASSESSEE AND THE CO-DEVELOPER. BE THAT AS IT MAY, IN ANY CASE, THE ASSESSING OFFICER HAVING CONSIDERED ALL T HESE PLEADING AND SUBMISSIONS, IT CANNOT BE HELD THAT HE DID NOT EXAM INE THE ALLOWABILITY OF THE CLAIM BY PROPER INQUIRY. THEREFORE, WE DO NOT FIND ANY SUBSTANCE IN THIS FINDING. THUS, IN OUR CONSIDERED VIEW THE ASSESSMEN T NEITHER SUFFERS FROM THE LACK OF INQUIRY NOR ANY ERROR ON THIS COUNT. ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 43 9.1. THE HONBLE DELHI HIGH COURT IN THE CASE OF AN IL KUMAR SHARMA (SUPRA), MAKES A DIFFERENCE BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IN ANY CASE THIS IS NOT A CASE OF LACK OF INQUIRY. THE ORDER DOES NOT BECOME ERRONEOUS ONLY BECAUSE THE CIT IN HIS VIEW HOLDS TH AT INADEQUATE INQUIRIES, WERE CONDUCTED. MORE PARTICULARLY, IN THIS CASE, WH ERE THE CIT HIMSELF ADMITS THAT HE IS NOT ABLE TO CONSIDER THE MATERIAL AVAILABLE ON RECORD DUE TO LACK OF TIME. 9.2. APROPOS LACK OF TIME, IT IS OBSERVED THAT WE F IND NO FAULT ATTRIBUTABLE TO ASSESSEE FOR CAUSING HIATUS TO THE PROCEEDINGS. ASSESSEES DETAILED REPLY COVERING ALL THE ASPECTS WAS FILED AS BACK AS 25-7- 2011 I.E. 8 MONTHS PRIOR TO THE PROCEEDINGS. THE CIT HIMSELF CALLED THE ASSESSI NG OFFICER IN HEARING AND ASKED HIM TO SUBMIT A REPORT AND ENSURE THAT THE RE PORT IS FILED. NON-SEEKING OF ASSESSING OFFICERS REMAND REPORT ALSO IS NOT AT TRIBUTABLE TO ASSESSEE. 9.3. COMING TO THE CASE LAWS CITED BY THE LD. CIT ( DR) (I) CIT VS. NAGESH KNITWARS P. LTD. (2012) 345 ITR 135 (DEL.): THIS CASE PERTAINS TO DEDUCTION U/S 80-HHC ON THE ISSUE OF PREMIUM ON SALE OF EXPORT QUOTA BEING NOT COVERED BY SECTIONS 28(IIIA), (IIIC), WHICH SHOULD NOT HAVE BEEN TAKEN INTO CONSIDERATION WHILE COMPUTING THE DEDUCTION. THE ASSESSING OFFICERS AC TION WAS FOUND TO BE NOT IN CONFORMITY WITH THE RATIO OF DECISIONS IN THE CASES OF ACG ASSOCIATED CAPSULES (2012) 343 ITR 89 (SC); CIT VS. KALPATARU COLOURS AND CHEMICALS (2010) 328 ITR 451 (BOM.); AND TOPMAN EXPORTS VS. CIT (2012) 342 ITR 49 (SC) AND T HE INTERPRETATION OF CBDT CIRCULAR IN THIS BEHALF. THE 263 ACTION WAS UPHELD ACCORDINGLY. THE FACTS OF THIS CASE WILL NOT BE APPLICABLE TO ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 44 ASSESSEES CASE. IN CASE BEFORE US THE ISSUE PERTAI NS TO A SIMPLE QUESTION WHETHER THE ASSESSEES CLAIM U/S 80-IAB WA S INQUIRED INTO BY THE ASSESSING OFFICER OR NOT, WHICH IS FOUN D TO BE CORRECT. THUS, THERE IS NEITHER THE QUESTION OF APPLICABILIT Y OF ANY RELEVANT SUPREME COURT JUDGMENT NOR INTERPRETATION OF A CBDT CIRCULAR. THEREFORE, THIS JUDGMENT CANNOT BE APPLIED TO ASSES SEES CASE. (II) CIT VS. DLF POWER LTD. (2012) 345 ITR 446 (DEL.): I N THIS CASE THE CIT U/S 263 HELD THAT THERE WAS LACK OF INQUIRY ON THE PART OF THE ASSESSING OFFICER. BESIDES, THE ITAT WENT INTO THE BIFURCATION OF INTEREST EXPENSES SUBMITTED BY THE ASSESSEE AT A PPELLATE STAGE AFTER 263 ACTION IN RESPECT OF TWO UNITS ONE ENGA GED IN POWER GENERATION AND ANOTHER ENERGY SYSTEM UNIT ABOUT TH E CLAIM OF DEDUCTION U/S 80-IA. THE MATTER WAS PARTLY SET ASID E BACK TO THE CIT TO CONSIDER WHETHER THE ISSUE IN QUESTION WAS R AISED BEFORE ASSESSING OFFICER AND PROPERLY CONSIDERED. THE ORDE R FURTHER STIPULATES A CONDITION THAT IF THAT IS CORRECT THEN THE CITS JURISDICTION WOULD BE ASCRIBED TO THE LIMITED EXTE NT OF DECIDING WHETHER THE FINDING WAS ERRONEOUS. BESIDES, IN THIS CASE THE ITAT AT APPELLATE STAGE ON 263 ACTION ITSELF WENT INTO T HE BIFURCATION OF FIGURES OF INTEREST. THIS JUDGMENT REFERS TO A DIFF ERENT SET OF FACTS AND PARTLY SETS ASIDE THE REVISION TO CIT WITH FUR THER CONDITIONS AND AS THE ITATS CONSIDERATION OF BIFURCATION AT APPELLATE LEVEL WAS FOUND TO BE NOT APPROPRIATE. IN CONTRADISTINCTION, IN THE CASE BEFORE US THERE A RE NO SUCH COMPLEX ISSUES. THE ISSUE IS LIMITED I.E. WHETHER 80-IAB CLAIM WAS CONSIDERED BY THE ASSESSING OFFICER OR NOT. WE HAVE ALREADY HELD THAT IT CLEARLY EMERGES FROM ASSESSMENT RECORD THAT RELEVANT ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 45 QUERIES WERE RAISED BY ASSESSING OFFICER, DETAILED SUBMISSIONS, DEVELOPERS AND CO-DEVELOPERS AGREEMENTS WERE FILED, JUSTIFICATION OF 80-IAB CLAIM AS PROVIDED BY THE ASSESSEE AND TH E NATURE OF DEBTS OWED BY DLF ASSETS CONSEQUENT TO SUCH TRANSF ER WAS ALSO ASKED FOR BY ASSESSING OFFICER. IN OUR CONSIDERED V IEW, THE RATIO OF THIS JUDGMENT ALSO DOES NOT APPLY TO ASSESSEES CAS E. (III) CIT VS. HARSH J. PUNJABI (2012) 345 ITR 451 (DEL.) IN THIS CASE THE ISSUE PERTAINS TO INQUIRY INTO THE ALLOWABILITY OF COMMISSION OF RS. 3.33 CRORRES DEBITED TO THE P&L A/C. NO BIFURCA TION OF COMMISSION ABOUT CHENNAI AND GURGAON UNIT BY ASSESS EE, THOUGH THE COMMISSION WAS PAID TO THE SAME PARTIES. BOTH T HE UNITS WERE ELIGIBLE FOR 10A DEDUCTION SEPARATELY. SINCE THE BI FURCATION OF EXPENDITURE RELATABLE TO RESPECTIVE UNITS WAS NOT M ADE, IT WAS HELD THAT ASSESSING OFFICERS ORDER WAS ERRONEOUS AND PR EJUDICIAL TO THE INTERESTS OF REVENUE. THIS CASE ALSO WILL NOT BE APPLICABLE TO ASSESSEES CASE INASMUCH AS THE ISSUE OF ANY BIFURCATION OF COMMISS ION TO DIFFERENT UNITS IS NOT INVOLVED AND RELATES ONLY TO A QUESTIO N OF INQUIRY AND SATISFACTION BY ASSESSING OFFICER ABOUT ASSESSEES CLAIM U/S 80-IAB. IN OUR CONSIDERED VIEW, THE ISSUE HAS BEEN INQUIRE D, THE RELEVANT MATERIAL, AGREEMENT IS ON RECORD, PROCEEDINGS SHEE TS AND THE ORDER OF ASSESSING OFFICER. THEREFORE, THIS CASE DOES NO T HELP THE CASE OF THE REVENUE. 9.4. IT CLEARLY EMERGES THAT BY THE END OF THE 263 HEARING THE CIT BRUSHED ASIDE THE CONSIDERATION OF ISSUE BY HOLDING THAT H E HAS NO SUFFICIENT TIME TO GO INTO THE MATERIAL, THEREFORE, THE ASSESSMENT IS SET ASIDE TO THE ASSESSING OFFICER WHO WILL CARRY OUT DETAILED INQUIRY. IN OUR CONSIDERED VIEW, CIT ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 46 FAILED TO DISCHARGE HIS STATUTORY DUTY AND INSTEAD OF TAKING A CLEAR CALL AND DEMONSTRATING ERRORS MADE BY ASSESSING OFFICER AND PREJUDICE CAUSED TO THE REVENUE, THE BUCK HAS BEEN PASSED ON TO ASSESSING O FFICER BY SETTING ASIDE ASSESSMENT ORDER, WHICH IS AGAINST THE LETTER AND S PIRIT OF PROVISIONS OF SEC. 263. WHERE THE AUTHORITY FAILS TO CARRY OUT ITS STA TUTORY OBLIGATION, THE ORDER CANNOT BE HELD AS TENABLE AND IS LIABLE TO BE QUASH ED. 9.5. APROPOS THE ISSUE OF SALE OF BARE SHELL BUILDI NGS BEING AUTHORIZED ACTIVITY, IT IS AMPLY CLEAR THAT THE SEZ ACT AUTHOR IZES ACTIVITIES INCLUDE CONSTRUCTION OF BARE SHELL/ COLD SHELL/ WARM SHALL BUILDINGS AND TRANSFER THEREOF. BOA HAS APPROVED IT AND CLARIFIED THE SAME . THERE IS ENOUGH MATERIAL ON THE RECORD TO HOLD THAT THE TRANSFER OF BARE SHELL BUILDINGS TO CO- DEVELOPERS CONSTITUTE AUTHORIZED ACTIVITY. THUS, WE SEE NO ERROR ON ANY COUNT AS HELD BY CIT IN THE ORDER OF ASSESSING OFFICER AL LOWING DEDUCTION U/S 80- IAB. 9.6. EVEN IF THE WORST IS ASSUMED AGAINST ASSESSING OFFICER, HIS ALLOWABILITY OF CLAIM U/S 80-IAB TO ASSESSEE MAY BE HELD TO BE A POSSIBLE AND PLAUSIBLE VIEW. IN SUCH EVENTUALITY ALSO, MERELY BECAUSE CIT IN HIS PERCEPTION HELD ANOTHER POSSIBLE VIEW ABOUT CLAIM U/S 80-IAB, THE A SSESSMENT ORDER DOES NEITHER BECOME ERRONEOUS NOR PREJUDICIAL TO THE INT ERESTS OF REVENUE AS HELD BY HONBLE SUPREME COURT IN THE HOST OF CASES INCLU DING MALABAR INDUSTRIAL COMPANY LTD. (SUPRA) AND MAX INDIA LTD. (SUPRA). RE SPECTFULLY FOLLOWING THE HONBLE SUPREME COURT JUDGMENTS ON THIS COUNT A LSO WE HOLD THAT THE ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICI AL TO THE INTERESTS OF REVENUE. THEREFORE, THE CITS IMPUGNED ORDER U/S 26 3 DESERVES TO BE QUASHED. ITA 2637/DEL/2012 DLF INFOCITY DEVELOPERS VS. ACIT 47 9.7. OUR VIEWS ON ALL OTHER OBSERVATIONS ARE ALSO FORTIFIED BY THE CASE LAWS MENTIONED ABOVE, WHICH WE RESPECTFULLY FOLLOW. 9.8. IN VIEW OF THE CIRCUMSTANCES MENTIONED ABOVE, WE QUASH 263 ORDER PASSED BY THE CIT AND ALLOW THE ASSESSEES APPEAL. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 02 /08/ 2013. SD/- SD/- (T.S. KAPOOR ) (R.P. TOLNI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 02-08- 2013 *MP* COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT (ITAT), NEW DELHI.