M/S R.K. DEVELOPERS, Indore V. THE CIT-I, Indore

ITA 318/IND/2014

• Counselvise Citation: 31822714 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJEEV VARSHNEY
• Assessee Lawyers: C P RAWKA
• Keywords: Charitable institution; Principle of natural justice; Earning of tax free income; Prejudicial to interest
• Section: 14A; 80IB; 131; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NO. 318/IND/2014 ASSESSMENT YEAR : 2009-10 M/S. R.K. DEVELOPERS, CIT-I, INDORE VS INDORE. APPELLANT RESPONDENT PAN NO.AAIFR7996N APPELLANT BY : SHRI C.P.RAWKA, C.A. RESPONDENT BY : SHRI RAJEEV VARSHNEY, CIT DR DATE OF HEARING : 02 . 09 .2015 . DATE OF PRONOUNCEMENT : 03.11. 2015 M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 2 2 O R D E R PER GARASIA, J.M. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT-I, INDORE, DATED 12.03.2014. 2. THE SHORT FACTS OF THE CASE ARE THAT THE LD. COMMISSIONER OF INCOME TAX HAS VERIFIED THE RECORD OF THE ASSESSEE FOR ASSESSMENT YEAR 2009-10. THE LD. COMMI SSIONER FOUND THAT THE ASSESSEE HAS WRONGLY CLAIMED DEDUCTI ON U/S 80-IB AT RS. 24,39,943/- FOR THE PROJECT RUNNING AT ASHOK VATIKA, PIGDAMBER, A. B. ROAD, INDORE, AND THE SAME WAS ERRONEOUSLY ALLOWED BY THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT. THE ASSESSEE WAS GIVEN SHOW CAUSE NOTIC E AND IN REPLY TO SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT THE ASSESSEE FIRM CARRIED ON THE DEVELOPMENT PROJECT AS REQUIRED U/S 80IB OF THE INCOME-TAX ACT, 1961. ALL THE CONDI TIONS LAID DOWN IN THE SAID SECTION HAVE BEEN COMPLIED WITH BY THE ASSESSEE FIRM IN ALL RESPECTS. THE AO HAS EXAMINED THE ISSUE BY ANALYZING THE ASSESSEES ACCOUNTS AS WELL AS SUB MISSIONS M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 3 3 MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMEN T PROCEEDINGS. NO SHORTCOMINGS WERE NOTICED BY THE AS SESSING OFFICER WHILE GRANTING DEDUCTION U/S 80IB. THE COMM ISSIONER HAS GIVEN SHOW CAUSE NOTICE STATING THAT THE AO EXA MINED THE BOOKS OF ACCOUNT OF THE ASSESSEE, ENQUIRED ALL THE ASPECTS AND CONDITIONS LAID DOWN U/S 80IB, WHEN DEPICTING THE F LAW OF SECTION. THE LD. AUTHORIZED REPRESENTATIVE HAS ALSO RELIED UPON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT I N THE CASE OF CIT VS. TRUSTEES ANUPAM CHARITABLE TRUST, 167 IT R 129 (RAJ), WHEREIN IT IS HELD THAT THE ERROR ENVISAGED BY SECTION 263 WAS NOT ONE WHICH DEPENDED ON POSSIBILITY OR GU ESS WORK, BUT IT SHOULD BE ACTUALLY AN ERROR OF FACTS OR LAW. THE LD. AUTHORIZED REPRESENTATIVE ALSO RELIED UPON THE DECI SION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. TAJ PRINTERS, 178 ITR 384, AND SUBMITTED THAT THE BASIC REQUIREMENT OF EXERCISING JURISDICTION U/S 263 IS T HAT LD. CIT WAS REQUIRED TO SET OUT POINT FOR ENQUIRY AND TO RE CORD ANY REASON OR REFER TO ANY MATERIAL AS TO HOW THE ORDER OF ITO WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. THE M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 4 4 LD. COMMISSIONER IN HIS PARA 4 OF HIS ORDER HAS HEL D THAT THE ASSESSEE HAS SOLD THE PLOTS AND THE 80IB DEDUCTION IS ALLOWED ONLY ON RESIDENTIAL UNITS. THEREFORE, THE LD. COMMI SSIONER WAS OF THE VIEW THAT THE ASSESSEE FIRM DEALS IN PURCHAS E AND SALE OF PLOTS/HOUSES. DURING THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE HAS SHOWN THE INCOME FROM SALE OF PLOTS AN D CLAIMED THE DEDUCTION U/S 80IB FOR THE PROJECT RUNNING AT A SHOK VATIKA. THE ASSESSEE DID NOT FULFILL THE CONDITIONS LAID DOWN U/S 80IB. THE ASSESSEE FIRM HAS NOT CONSTRUCTED DWE LLING HOUSES. THE PROFIT AND LOSS ACCOUNT FOR ASSESSMENT YEAR 2010- 11 DOES NOT CONTAIN ANY EXPENDITURE IN RESPECT OF N ECESSARY GOODS FOR CONSTRUCTION OF HOUSE SUCH AS GITTY, RAIT Y, BRICKS, CEMENT, WOOD, FRAMES, SANITARY WARE ETC. DURING THE ASSESSMENT PROCEEDINGS, STATEMENT U/S 131 WAS RECOR DED AND PURCHASER HAS ACCEPTED THAT THE ASSESSEE IS SELLING ONLY PLOTS IN THE YEAR UNDER CONSIDERATION. THEREFORE, THE LD. COMMISSIONER HAS VERIFIED THE RETURN AND THE LD. CI T WAS OF THE VIEW THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 5 5 U/S 80IB OF THE ACT. THEREFORE, HE HAS DIRECTED THE AO TO REVISE THE ASSESSMENT ORDER. 3. THE LD. AUTHORIZED REPRESENTATIVE HAS FILED THE WRI TTEN SUBMISSION WHICH READS AS UNDER :- THE ASSESSEE HAD FILED THE RETURN OF INCOME DECLAR ING TOTAL INCOME OF RS. 93701-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD. ASSESSING OFFICER MADE EXHAUSTIVE QUERIES INCLUDING A QUERY ON THE QUESTION OF ADMISSIBILITY AND QUANTUM OF DEDUCTION UNDER SECTION S018. DURING THESE PROCEEDINGS, IT WA S NOTICED THAT THE ASSESSEE HAD INADVERTENTLY CLAIMED EXCESS DEDUCTION UNDER SECTION S018 TO THE TUNE OF RS. 4,99,900/-. THUS, IT WAS VOLUNTARILY OFFERED DURING THE COURSE OF ASSESSMENT. THE SUBMISSION MADE BY THE ASSESSEE IN THIS REGARDS WAS AS UNDER: 'THAT THE ASSESSEE FIRM SUBMITTED RETURN OF INCOME DECLARING TAXABLE INCOME OF RS 9370 AFTER CLAIMING RELIEF U/S 80IE RS 2439493 AS ASSESSEE FIRM IS ENGAGED IN M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 6 6 HOUSING PROJECT. HOWEVER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE VOLUNTARILY POINTED OUT THAT AMOUNT FORFEI TED FROM CUSTOMER AT RS 468810 AND INCOME TAX AT RS 3I044 ARE NOT ELIGIBLE FOR RELIEF U/S 80IE ACCORDIN GLY SAME WAS OFFERED FOR TAXATION. THAT THE AMOUNT FORFEITED WAS DULY APPEARING IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE FIRM. THAT THE FACTS AS STATED ABOVE ARE DULY APPEARING T O THE RETURN OF INCOME SUBMITTED AND THERE IS NO CONCEALM ENT OF FACT, NOR FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS THEREFORE SUBMITTED THAT ASSESSEE HAS FURNISHED FULL AND COMPLETE DETAILS AND ALSO EXPLAINED THE RE ASON FOR VARIATION TO INCOME RETURNED AND ASSESSEE, AS S OME OF THE INCOME WAS NOT ELIGIBLE TO RELIEF U/S 80FB AND ACCORDINGLY IT CANNOT BE CALLED, AS CONCEALMENT. ' IT MAY KINDLY BE APPRECIATED FROM THE ABOVE THAT TH E M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 7 7 ASSESSING OFFICER HAS MADE ENQUIRIES WITH REGARDS T O THE DEDUCTION UNDER SECTION 80IB AND THE CLAIM UNDE R SECTION 80IB WAS ALLOWED BY THE ASSESSING OFFICER O N BEING SATISFIED WITH THE SUBMISSION MADE BY THE ASSESSEE. IT IS APPARENT FROM THE BODY OF ASSESSMEN T ORDER IN WHICH THE ASSESSING OFFICER HAS ACCEPTED T HE REVISED COMPUTATION OF INCOME IN WHICH A SUM OF RS. 499900/- WAS VOLUNTARILY WITHDRAWN FROM DEDUCTION CLAIMED UNDER SECTION 80IB. THE RELEVANT PART OF ASSESSMENT ORDER IS REPRODUCED HEREIN BELOW:- FU/KKZJ.K DK;ZOKGH DS NKSJKU YS[KKIQLRDKSA DH TKAP DJUS IJ IK;K X;K FD FU/KKZFJRH US FNUKAD 28-07-2009 DKS IZLRQR DH X; H VK;DJ FOOJ.KH ESA DJ ;KSX; VK; :- 9370 @& IZNFKZR DH X;H FKHA FU/KKZ J.K DK;ZOKGH DS NKSJKU FU/KKZFJRH DS NKS LAX.KUK I=D IZLRQR FD;S X; SA FNUKAD 14@12@2011 DKS IZLRQR LAX.KUK I= ESA DJ ;KSX; VK; : - 9370@& IZNFKZR DH X;H TCFD FNUKAD 16@12@2011 DKS IZLRQR L AX.KUK I=D ESA DJ ;KSX; VK; :- 509272@& IZNFKZR DH X;H GSA VK XS TKAP DJUS IJ IK;K X;K FD :- 499900@& DH VK; FU/KKZFJRH US FNU KAD M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 8 8 28@07@2009 DKS IZLRQR VIUH VK;DJ FOOJ.KH ESA IZNFK ZR UGHA FD;K FKKA VR% :- 499900@& DH JKFK FU/KKZFJRH DH VK; ESA TKSM+H TKRH GS RFKK FU/KKZFJRH DS }KJK VIUH VK;DJ FOOJ.KH ESA VK; DS LGH RF; IZLRQR UGHA DJUS DS DKJ.K VK;DJ VF/KFU;E] 1961 DH /KKJK 27 11LH DS RGR 'KKFLR IZFD;K IZKJEHK DH TKRH GSA ** LATER ON THE LD. COMMISSIONER OF INCOME TAX ISSUED NOTICE UNDER SECTION 263. THE RELEVANT ISSUE COMPRISED IN THE NOTICE UNDER SECTION 263 IS REPRODUCED BELOW. 'IT IS SEEN THAT AS PER AVAILABLE RECORDS, YOUR PARTNERSHIP FIRM HAS WRONGLY CLAIMED DEDUCTION UNDE R SECTION 80IB AT RS. 24,39,943/- FOR THE PROJECT RUN NING AT ASHOKA VATIKA, PIGDAMBER, A.B. ROAD, INDORE AND THE SAME WAS ALSO ERRONEOUSLY ALLOWED BY THE AO WHI LE MAKING THE ASSESSMENT. FURTHER, DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D WAS REQUIRED TO BE MA DE IN THIS CASE, WHICH WAS LEFT WHILE MAKING THE ASSESSMENT. ' M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 9 9 IN RESPONSE TO THE ABOVE NOTICE UNDER SECTION 263, THE ASSESSEE MADE DETAILED SUBMISSION OBJECTING TO PROPOSED ACTION U/S 263 .HOWEVER, LD COMMISSIONER OF INCOME TAX SET ASIDE THE ASSESSMENT UNDER SECTIO N 263 WITHOUT APPRECIATING THE MERITS OF THE CASE AS WELL AS THE SUBMISSION MADE BY THE ASSESSEE .FOR THE SAK E OF CONVENIENCE, THE SUBMISSION MADE BEFORE LD COMMISSIONER OF INCOME TAX IS REPRODUCED HEREIN BELOW: 'KINDLY REFER TO YOUR NOTICE U/S 263 DATED 21/01/2014 AND SUBSEQUENT DISCUSSION ON SUBJECT MATTER, I WAS MADE TO UNDERSTAND THAT THE PROPOSED ACTION U/S 263 IS ON ACCOUNT OF YOUR OPINION THAT THE ASSESSEE HAS WRONGLY CLAIMED, AND ALLOWED DEDUCTION U/S 80IB. 1N THE ABOVE REFERENCE, IT IS SUBMITTED THAT THE ER ROR MUST FLOW FROM THE ORDER PASSED BY ASSESSING OFFICE R AND NOT FROM ANY OTHER SOURCE. THE ASSESSING OFFICE R HAD EXAMINED THE BOOKS OF ACCOUNTS OF THE ASSESSEE, M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 10 10 ENQUIRED ABOUT ALL ASPECTS AND CONDITIONS LAID DOWN UNDER 80 IB WENT THROUGH THE LEDGER DEPICTING FLOW OF SALE. THUS, IT MAY BE APPRECIATED THAT THE ASSESSIN G OFFICER HAD PASSED THE ORDER AFTER VERIFYING ALL TH E FACTS. HENCE THERE IS NO ERROR IN THE ORDER PASSED BY ASSESSING OFFICER. HONORABLE ALLAHABAD HIGH COURT H AS HELD IN CASE OF CIT VS GOYAL PRIVATE FAMILY SPECIFI C TRUST (171 ITR 698) THAT THE ORDER OF INCOME TAX OFFICER MAY BE BRIEF AND CRYPTIC BUT THAT BY ITSELF IS NOT BE SUFFICIENT REASON TO BRAND ASSESSMENT ORDER AS ERRONEOUS. IT HAS BEEN FURTHER HELD BY THE HONORABL E HIGH COURT THAT NO ERROR CAN BE INFERRED FROM THE O RDER OF ASSESSING OFFICER FOR SIMPLE REASON THAT THEY AR E BEREFT OF DETAILS. IN THE CASE OF CIT VS TRUSTEES ANUPAM CHARITABLE TR UST (1 67 1TR 129), HONORABLE RAJASTHAN HIGH COURT HAS HELD THAT THE ERROR ENVISAGED BY SECTION 263 WAS NOT ONE WHICH DEPENDED ON POSSIBILITY OR GUESS WORK, BU T IT SHOULD BE ACTUALLY AN ERROR OF FACTS OR OF LAW. M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 11 11 REFERENCE IS INVITED TO YOUR NOTICE IN WHICH NO REA SON HAS BEEN GIVEN FOR THE OPINION THAT ORDER OF ASSESS ING OFFICER IS ERRONEOUS. IN THIS CONNECTION, ALLAHABAD HIGH COURT HAS HELD IN CASE OF CIT VS TAJ PRINTERS (178 ITR 384-385) THAT THE BASIC REQUIREMENT OF EXERCISING JURISDICTION U/S 263 IS THAT COMMISSIONER OF INCOME TAX WAS REQUIRED TO SET OUT POINT FOR ENQUIRY AND TO RE CORD ANY REASON OR REFER TO ANY MATERIAL AS TO HOW THE O RDER OF INCOME TAX OFFICER WAS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. IT IS PERTINENT TO MENTION THAT THERE IS NOTHING IN ASSESSING OFFICER ORDER TO SHOW THAT AN ERROR HAS B EEN COMMITTED. HONORABLE GUJARAT HIGH COURT HAD OCCASIO N TO DECIDE ISSUE IN THE CASE OF RAYON SILK MILLS SOC IETY (221 ITR PAGE 155,161) THAT 'THE BASIC PREMISE ON WHICH ORDER U/S 263 HAS BEEN MADE DOESN'T EXIT THERE IS NO WHISPER IN THE ORDER HOW ON REACHING ANY FIND ING THAT CREATION & DISBURSEMENT OF GOODWILL ACCOUNT AMONGST THE PARTNERS IN THEIR PROFIT SHARING RATIOS WOULD M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 12 12 BE PREJUDICIAL TO THE INTEREST OF REVENUE. HONORABLE MADRAS HIGH COURT IN CASE OF CIT VS V. SHAKTHI CHARITIS, 160 CTR PAGE 107, 1011, 1012 HAS HELD THAT THE POWER OF REVISION IS NOT MEANS TO EXE RCISE FOR PURPOSE OF HOLDING ANOTHER INVESTIGATION WHEN T HE ORDER OF ASSESSING OFFICER NOT FOUND TO BE ERRONEOU S. IT IS REITERATED THAT THE ASSESSING OFFICER HAD RA ISED SPECIFIC QUERIES ON THE QUESTION OF DEDUCTION U/S 8 0 IB IN THE COURSE OF ASSESSMENT PROCEEDINGS AND ASSESSE E HAS SUBMITTED ITS WRITTEN SUBMISSION ON DIFFERENT D ATES AS PER RECORD. THEREFORE PROCEEDING U/S 263 ARE BAD IN LAW .IN THE LIGHT OF BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS GABRIEL INDIA PVT. LTD. (203 ITR 108 ). IT HAS BEEN HELD BY THE HONORABLE HIGH COURT THAT I F ASSESSING OFFICER, ACTING IN ACCORDANCE WITH LAW, MAKES CERTAIN ORDER , THE SAME CANNOT BE BRANDED AS ERRONEOUS. THUS IT HAS BEEN HELD THAT SEC. 263 DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF JUDGMENT OF M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 13 13 COMMISSIONER OF THAT OF ASSESSING OFFICER. REFERENCE IS FURTHER INVITED TO IN CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT 243 ITR 83,87 IN WHICH THEIR LORDSHIP HAVE HELD THAT SECTION 263 CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE COMMITTED BY ASSESSING OFFICER. AS REGARDS PROPOSED ACTION ON THE PART OF COMMISSIO NER OF INCOME TAX TO MAKE DISALLOWANCE U/S 14A, ATTENTI ON IS INVITED TO PROFIT AND LOSS ACCOUNT AND BALANCE S HEET OF ASSESSEE FIRM. IT MAY BE APPRECIATED THAT NOT A SINGLE PENNY HAS BEEN BORROWED ON INTEREST. ACCORDINGLY, INTEREST EXPENSES ARE NIL IN PROFIT AND LOSS ACCOUN T. THE BASIC PRINCIPLE GOVERNING THE PROVISION OF SECTION 14A ARE DISALLOWANCE OF EXPENSES ATTRIBUTABLE TO THE EA RNING OF EXEMPT INCOME. IN THIS CASE, THE BALANCE SHEET W OULD REVEAL THAT THE LIABILITY SIDE CONSISTS OF CAPITAL ACCOUNT AND INTEREST FREE DEPOSIT ONLY. ON THE OTHER HAND, THOUGH THE INVESTMENT IS VISIBLE, BUT IT HAS FLOWN FROM M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 14 14 CAPITAL OF PARTNERS. THEREFORE THERE IS NO QUESTION OF UTILIZATION OF BORROWED FOND FOR INVESTMENT IN SHAR ES AND SECURITIES. TO SUM UP IT IS TO SUBMIT THAT NO EXPENSES HAVE BEEN INCURRED FOR EARNING DIVIDEND INCOME. THUS THERE IS NO QUESTION OF ANY DISALLOWAN CE. THE FACTUAL POSITION HAS BEEN DULY INVESTIGATED BY ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS. THEREF ORE NO PREJUDICE IS CAUSED TO THE INTEREST OF REVENUE, CONSIDERING ABSENCE OF INTEREST EXPENSES. THEREFORE THE PROPOSED ACTION U/S 263 MAY KINDLY BE DROPPED ON THIS POINT ALSO. ' YOUR HONOR MAY APPRECIATE THAT THE LD COMMISSIONER OF INCOME TAX IN HER ORDER U/S 263 HAS REPRODUCED THE SUBMISSION MADE BY ASSESSEE AD VERBATIM BUT DIDN'T REBUT ANY PART OF THE SAID SUBMISSION IN HER ORDER. IN FACT, THE LD COMMISSIONER OF INCOME TAX, HAS CONCLUDED IN PARA 8 & 8.1 OF THE ORDER THAT 'THERE IS NO DISPUTE REGARDING FACTUAL MATRIX AT HAND' AND ON THIS FINDING ALONE HAS SET ASIDE THE ASSESSMENT M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 15 15 HOLDING THE SAME TO THE ERRONEOUS AND PREJUDICIAL O F REVENUE. OBLIVIOUSLY, THE LEGAL POSITION, BROUGHT OUT BY TH E ASSESSEE BY WAY OF SUBMISSION HAS BEEN IGNORED BY L D COMMISSIONER OF INCOME TAX AS SHE HAD NO MATERIAL T O REBUT THE SAME. IT IS SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX, HAS PASSED ORDER U/S 263, IN ARBITRARY MANNER WITHOUT APPRECIATING THAT THERE WAS NO ERROR IN THE ASSESSMENT FRAMED. THE POWER OF REVISION CAN BE EXERCISED BY COMMISSIONER OF INCOME TAX ONLY IF ON EXAMINATION OF RECORDS OF ANY PROCEEDING UNDER INCOME TAX ACT, HE CONSIDERED THAT THE ORDER PASSED BY ASSESSING OFFICER WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF REVENUE AND THE CONSIDERATION OF THE COMMISSIONER OF INCOME TAX IS REQUIRED TO BE BASED ON MATERIAL ON RECORD OF THE PROCEEDINGS .IF THERE WAS NO MATERIAL OR RECORD ON THE M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 16 16 BASIS OF WHICH IT CAN BE SAID THAT THE COMMISSIONER OF INCOME TAX, ACTING, IN A REASONABLE MANNER, COULD N OT COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEEDING U/S 263 WILL BE ILLEGAL AND WOULD BE WITHOUT JURISDICTION. IN THIS REGARD, REFERENCE IS INVITED TO CASE OF PARSHURAM POTTERY WORKS CO. LTD. VS INCOME TAX OFFICER 1977 AIR 429, 1977 SCR (2) 92. REFERENCE IS FURTHER INVITED TO HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF COMMISSIONER OF INCOM E TAX VS GABRIEL INDIA LTD.,203 ITR 108, PARA 10, 11, 12 OF THE SAID DECISION DEALS WITH THE ISSUE AS UNDER: 10. AS OBSERVED IN SIRPUR PAPER MILLS LTD. V. ITO BY RAGHUVEER J (AS HIS LORDSHIP THEN WAS), THE DEPARTMENT CANNOT BE PERMITTED TO BEGIN FRESH LITIG ATION BECAUSE OF NEW VIEWS THEY ENTERTAIN ON FACTS OR NEW VERSIONS WHICH THEY PRESENT AS TO WHAT SHOULD BE TH E INFERENCE OR PROPER INFERENCE EITHER OF THE FACTS DISCLOSED OR THE WEIGHT OF THE CIRCUMSTANCES. IF TH IS IS M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 17 17 PERMITTED, LITIGATION WOULD HAVE NO END, 'EXCEPT WH EN LEGAL INGENUITY IS EXHAUSTED'. TO DO SO, IS ' ... TO DIVIDE ONE ARGUMENT INTO TWO AND TO MULTIPLY THE LITIGATIO N'. 11. THE POWER OF SUO MOTU REVISION UNDER SUB SECTION (1 ) IS IN THE NATURE OF SUPERVISORY JURISDICTION AND THE S AME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIE D THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENAB LE THE COMMISSIONER TO EXERCISE POWER OF REVISION UNDE R THIS SUB- SECTION, VIZ., (I) THE ORDER IS ERRONEOUS; (II) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE HAS B EEN CAUSED TO THE INTERESTS OF THE REVENUE. IT HAS, THE REFORE, TO BE CONSIDERED FIRSTLY AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. WE FIND THAT THE EXPRESSIONS 'ERRONEOUS', 'ERRONEOUS ASSESSMENT' AND 'ERRONEOUS JUDGMENT' HAVE BEEN DEFINED IN BLACK'S LAW DICTIONA RY. ACCORDING TO THE DEFINITION, 'ERRONEOUS' MEANS 'INV OLVING ERROR; DEVIATING FROM THE LAW'. 'ERRONEOUS ASSESSME NT' REFERS TO AN ASSESSMENT THAT DEVIATES FROM THE LAW AND IS, THEREFORE, INVALID, AND IS A DEFECT THAT IS M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 18 18 JURISDICTIONAL IN ITS NATURE, AND DOES NOT REFER TO THE JUDGMENT OF THE ASSESSING OFFICER IN FIXING THE AMOUNT OF VALUATION OF THE PROPERTY. SIMILARLY, 'ERRONEOUS JUDGMENT' MEANS 'ONE RENDERED ACCORDING TO COURSE AND PRACTICE OF COURT, BUT CONTRARY TO LAW, UPON MISTAKEN VIEW OF LAW; OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES'. 12. FROM THE AFORESAID DEFINITIONS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NO T IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFICER ACTIN G IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY THI S SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION O F THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME -TAX OFFICER, WHO PASSED THE ORDER UNLESS THE DECISION I S HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE THE INCOME-TAX OFFICER WHILE MAKING AN ASSESSMENT M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 19 19 EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOU NTS OR BY MAKING SOME ESTIMATE HIMSELF THE COMMISSIONER , ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION TH AT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HA VE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN THE ON E DETERMINED BY THE INCOME-TAX OFFICER. THAT WOULD NO T VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGH ER FIGURE. IT IS BECAUSE THE INCOME-TAX OFFICER HAS EX ERCISED THE QUASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANC E WITH LAW AND ARRIVED AT CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WI TH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE COMMISSIONER THE ORDER IN QUESTION I S PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BUT TH AT BY M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 20 20 ITSELF WILL NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, VIZ., THAT THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY, IF AN ORDER IS ERRONEOUS BUT NOT PREJUDI CIAL TO THE INTERESTS OF THE REVENUE, THEN ALSO THE POWER O F SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERRONEOUS ORDER CANNOT BE THE SUBJECT-MATTER OF REV ISION BECAUSE THE SECOND REQUIREMENT ALSO MUST BE FULFILL ED. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD T O SHOW THAT TAX WHICH WAS LAWFULLY ELIGIBLE HAS NOT B EEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATIO N A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. IN A RECENT DECISION IN THE CASE OF COMMISSIONER OF INCOME TAX VS. GREEN FIELD COMMERCIAL (P) LTD. 277 CTR 354, HON'BLE J & K HIGH COURT QUASHED ORDER UNDER SECTION 263 WITH THE FOLLOWING OBSERVATION: SECTION 263 CONFERS THE REVISIONAL JURISDICTION ON THE CIT M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 21 21 THE JURISDICTION IS TO BE EXERCISED WHERE THE CIT IS SATISFIED THAT ANY ORDER PASSED BY THE AO IS (I) ERRONEOUS, AND (II) PREJUDICIAL TO INTEREST OF THE REVENUE. IT IS, THEREFORE, INCUMBENT UPON THE CIT TO RECORD HIS SATISFACTION THAT THE ORDER OF THE AO IS 'ERRONEOUS '. TO ARRIVE AT SUCH CONCLUSION, THE CIT OBVIOUSLY, HAS T O SPELL PUT REASONS THAT PROMPT AND PERSUADE HIM TO HOLD SO . IN THE CASE IN HAND, THE CIT DID NOT GIVE ANY REASO N AT ALL TO CONCLUDE THAT ORDER OF THE A 0 WAS 'ERRONEOUS '. IT IS MERELY STATED THAT THE ORDER IS 'ERRONEOUS ONE' WITHOUT ELUCIDATING THE MATTER. THE ONLY REASON THA T WEIGHED WITH THE CIT, TO FIND FAULT WITH THE ORDER OF THE AO, APPEARS TO BE HIS PERCEPTION THAT THE AO DID NO T GIVE 'MANY HEARING' AND A 'THUMB NAIL ORDER' WAS PASSED BY HIM. THIS OBSERVATION WOULD NOT MAKE AN ORDER 'ERRONEOUS '. IT DOES NOT REQUIRE ANY EMPHASIS THAT THE AUTHORITY EXERCISING THE SUPERVISORY OR TH E REVISIONAL JURISDICTION, IS TO GIVE REASONS IN SUPP ORT OF CONCLUSIONS DRAWN. THE SAME IS TRUE EVEN ABOUT ANY M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 22 22 EXECUTIVE ORDER THAT HAS CIVIL CONSEQUENCES FOR A P ERSON AFFECTED BY SUCH ORDER. THE REASONS ARE SAID TO BE LIVE LINKS BETWEEN THE MINDS OF AUTHORITY, MAKING THE OR DER AND THE CONCLUSIONS DRAWN ON THE STRENGTH OF SUCH REASONS, THE CIT, HAVING FAILED TO RECORD WITH SATISFACTION THAT THE ORDER IN RESPECT WHERE OF REV ISIONAL POWERS WERE EXERCISED WAS 'ERRONEOUS ', LACKED JURISDICTION TO EXERCISE SUCH POWERS. THIS BY ITSEL F WAS SUFFICIENT FOR THE TRIBUNAL TO INTERFERE AND SET AS IDE THE ORDER OF THE CIT ASSAILED BEFORE. THE CIT IN HIS OR DER DID NOT DEAL WITH DETAILED REPLY SUPPORTED BY REASONS, SUBMITTED BY THE COMPANY. LEAST THAT WAS EXPECTED O F THE CIT, WAS TO MAKE REASONABLE AND FAIR DISCUSSION , OF THE REPLY AND MATERIAL REFERRED TO IN SUCH REPLY AND GIVE REASONS FOR RECORDING THIS AGREEMENT WITH THE STAND TAKEN IN THE REPLY. OTHERWISE, GRANTING AN OPPORTUN ITY TO THE ASSESSEE AS REQUIRED U/S 263 WOULD BE REDUCED TO AN IDLE FORMALITY. THIS IS WHAT HAS BEEN EXACTLY DONE BY THE CIT. THE MODE AND MANNER IN WHICH THE MATTER M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 23 23 HAS BEEN DEALT WITH IS IN GROSS VIOLATION OF THE MA NDATE OF SEC. 263. THE TRIBUNAL WAS RIGHT IN HOLDING THAT THERE WERE NO COMPELLING REASONS FOR INTERFERENCE FOR THE CIT U/S 263 - MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. CIT (1997) 139 CTR (SC) 555: (1997) 225 ITR 802 (SC) DISTINGUISHED. CONCLUSION: AO HAVING ISSUED NOTICES U/S 143(2)/142(1) ALONG WITH NECESSARY QUESTIONNAIRE TO THE ASSESSEES AND THE ASSESSEES HAVING APPEARED BEFORE THE AO AND PRODUCED THE BOOKS OF ACCOUNT AND OTHER RECORDS BESIDES SUBMITTING REPLIES TO THE QUESTIONNAIRE, IT CANNOT BE SAID THAT THE AD DID NO T GIVE MANY HEARINGS AND THUMB NAIL ORDER WAS PASSED OR THAT THE RECORD OF THE ASSESSEE WAS NOT EXAMINED AT THE TIME OF ASSESSMENT AND, THEREFORE, CIT WAS NOT JUST IFIED IN EXERCISING REVISIONAL POWER U/S 263, WITHOUT ELUCIDATING AS TO HOW THE ASSESSMENT ORDER WAS ERRONEOUS. M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 24 24 CONSIDERING ABOVE IT MAY KINDLY BE APPRECIATED THAT THE PROCEEDINGS UNDER SECTION 263 ARE BAD IN LAW AS THE ASSESSMENT WAS NOT ERRONEOUS FOR THE REASONS DISCUSSED IN THE PROCEEDING PARA AND THE SUBMISSION MADE BEFORE THE LD. COMMISSIONER OF INCOME TAX. IT IS, THEREFORE, PRAYED THAT THE ORDER UNDER SECTI ON 263 DATED 30.03.2014 PASSED BY THE COMMISSIONER OF INCOME TAX APPEAL -1 MAY KINDLY BE QUASHED. 4. THE LD. DR RELIED UPON THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX. THE LD. DR HAS ARGUED THAT THE ASSESSEE IS NOT ENTITLED FOR THE CLAIM OF DEDUCTION U/S 80IB ON SALE OF PLOTS. THE AO HAS ALLOWED THE CLAIM WITHOUT MAKING ANY INQUIRY. THE LD. DR FURTHER RELIED UPON THE FOL LOWING DECISIONS :- (I) RAMPYAI DEVI SARAOGI VS. CIT, (1968) 67 ITR 84 (S.C.) (II) GEE VEE ENTERPRISES VS. ADDL. CIT, (1975) 99 ITR 375 (DEL) M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 25 25 (III) MALABAR INDUSTRIAL CO.LTD. VS. CIT, (2000) 243 ITR 83 (S.C.) 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT UNDER SECTION 263 THE WORD IS USED PRE JUDICIAL TO THE INTERESTS OF THE REVENUE AND ORDER MUST BE ERRO NEOUS. THE PREJUDICE MUST BE JUDICIALLY EXAMINED, WHAT CONSTIT UTED PREJUDICE TO THE REVENUE HAS BEEN SUBJECT MATTER OF JUDICIAL DEBATE. ONE VIEW THAT PREJUDICIAL TO THE INTERESTS OF REVENUE DOES NOT NECESSARILY MEAN LOSS OF REVENUE. THE EXPR ESSION IS NOT CONSTRUCTED IN PETTY FOGGING MANNER, BUT MUST B E GIVEN A DIGNIFIED CONSTRUCTION. INTEREST OF REVENUE IS NOT TO BE EQUATED TO RUPEES OR PAISA MERELY. THERE MUST BE GRIEVOUS E RROR IN THE ORDER PASSED BY THE ASSESSING OFFICER, WHICH MIGHT SET A BAD TREND FOR SIMILAR ASSESSMENT, WHICH ON A BROAD RECK ONING COMMISSIONER MIGHT THINK TO THE PREJUDICIAL TO THE INTERESTS OF REVENUE ADMINISTRATION. UNDER SECTION 263, THE COMM ISSIONER HAS AMPLE JURISDICTION TO ASSESS THE INCOME, WHICH IS LIABLE FOR M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 26 26 INCOME THEREOF. WHEN THE ASSESSMENT IS MADE WITHOUT ANY INQUIRY THEN THE ORDER IS PREJUDICIAL TO THE INTERE STS OF REVENUE AND IT MUST BE HELD TO BE ERRONEOUS. IF THE AO HAS NOT ENQUIRED INTO THE SOURCE OF THE CAPITAL AND THE ORD ER IS BOUND TO BE ERRONEOUS, HENCE PREJUDICIAL TO THE INTERESTS OF REVENUE AS HELD IN 99 ITR 375. SIMILARLY, ALLOWING CERTAIN CLAIM WITHOUT PROPER VERIFICATION. SIMILARLY, ALLOWING CE RTAIN CLAIM WITHOUT PROPER VERIFICATION OR IGNORANCE OF PROVISI ONS OF LAW AND VARIOUS INSTANCES ON THE BASIS OF WHICH THE ORD ER CAN BE CONSIDERED TO BE PREJUDICIAL TO THE INTERESTS OF RE VENUE AND COULD BE SET RIGHT IN REVISIONAL JURISDICTION. WE F OUND THAT FOR INVOKING JURISDICTION U/S 263, THE TWO REQUISITE MU ST BE BEFORE THE CIT, FIRST, THE ORDER PASSED BY THE ITO MUST BE ERRONEOUS AND SECOND THAT THE ERROR MUST BE SUCH THAT THE PRE JUDICIAL TO THE INTERESTS OF REVENUE. AN ERROR, ERRONEOUS ORDER DOES NOT MEAN AN ORDER, WHICH THE COMMISSIONER IS UNABLE TO AGREE AND THE ERROR, ERRONEOUS ORDER WOULD BE ORDER WHICH SUFFERS FROM PATTERN LACK OF JURISDICTION. THE ERROR MUST B E WITH REFERENCE TO JURISDICTION. THE PREJUDICIAL TO THE I NTERESTS OF M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 27 27 REVENUE WOULD MEAN AN ERROR, ERRONEOUS ORDER, WHICH GOES AGAINST INTEREST OF REVENUE COLLECTION. BOTH THE CO NDITIONS MUST PRE-EXIST TO ENABLE CIT TO EXERCISE THE POWER U/S 263. THE FOUNDATION OF EXERCISE BEING POWER BEING FORMAT ION OF AN OPINION OR CONCLUSION, THERE IS NO SCOPE OF VIEW TH AT THE CIT MUST RECORD THE CONCLUSION IN THE MATTER BEFORE SET TING ASIDE AN ORDER OF ASSESSMENT IN EXERCISE OF POWER U/S 263 . WHAT IS NECESSARY IS TO TAKE THE NOTE OF THE FACT THAT THER E HAS BEEN AN OPINION THAT THE ASSESSMENT ORDER HAS BEEN SET-ASID E IN THE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. 6. IN THE INSTANT CASE, WE HAVE GONE THROUGH THE ORDER OF AO AND AO HAS NOT MADE ANY INQUIRY BEFORE GRANTING THE DEDUCTION U/S 80IB(10) OF THE INCOME-TAX ACT, 1961. IN THE ASSESSMENT ORDER, THE AO HAS WRITTEN THAT THE ASSES SEE IS IN THE BUSINESS OF HOUSING PROJECT AND BEFORE ACCEPTIN G THE CLAIM OF THE ASSESSEE, THE AO HAS NOT MADE ANY INQUIRY. D URING THE COURSE OF HEARING, THE LD. AUTHORIZED REPRESENTATIV E HAS NOT PRODUCED ANY MATERIAL BEFORE US TO SHOW THAT THE AO HAS MADE ANY INQUIRY RELATING TO THE HOUSING PROJECT. T HE M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 28 28 COMMISSIONER HAS IN HIS ORDER HAS SPECIFICALLY WRIT TEN THAT THE ASSESSEE HAS SOLD SOME OF THE PLOTS WITHOUT CONSTRU CTING THE DWELLING HOUSE. THEREFORE, NO RESIDENTIAL UNITS WER E CONSTRUCTED. THEREFORE, THE CLAIM OF THE ASSESSEE C ANNOT BE ALLOWED. IN OUR OPINION, THE CIT HAS JUSTIFIED IN H OLDING THAT THE DEDUCTION CLAIMED U/S 80IB IS INADMISSIBLE IN T HE CASE OF THE ASSESSEE. THEREFORE, THE ORDER PASSED BY THE AS SESSING OFFICER IS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WE GET ALSO SUPPORT FROM HON'BLE SU PREME COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY VS. CIT, 243 ITR 83, WHEREIN THE HON'BLE SUPREME COURT HAS HELD AS UNDER :- A BARE READING OF SECTION 263 OF THE INCOME-TAX AC T, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MO TU UNDER IT, IS THAT THE ORDER OF THE ITO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE RE VENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE AO SOUGHT TO M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 29 29 BE REVISED IS ERRONEOUS ; AND (II) IT IS PREJUDICIA L TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NOT PREJUD ICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE O R ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONL Y WHEN AN ORDER IS ERRONEOUS. IN THE SAME CATEGORY FA LL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHE ME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTE D TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE IT O, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 30 30 PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO, CANNOT BE TREATE D AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOU S ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. XX XX XX HELD, DISMISSING THE APPEAL, (I) THAT IN THE INSTAN T CASE, THE COMMISSIONER NOTED THAT THE ITO PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION O F M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 31 31 MIND. INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE ITO FAILED TO APPLY HIS MIND TO THE CASE I N ALL PERSPECTIVE AND THE ORDER PASSED BY HIM WAS ERRONEOUS. THE RESOLUTION PASSED BY THE BOARD OF TH E APPELLANT-COMPANY WAS NOT PLACED BEFORE THE AO. THUS, THERE WAS NO MATERIAL TO SUPPORT THE CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESENTED COMPENSATION FOR LOSS OF AGRICULTURAL INCOME. HE ACCEPTED THE ENTRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ON THESE FACTS, THE CONCLUSION THAT THE ORDER OF TH E ITO WAS ERRONEOUS WAS IRRESISTIBLE. THE HIGH COURT HAD RIGHTLY HELD THAT THE EXERCISE OF JURISDICTION BY THE COMMISSIONER U/S 263(1) WAS JUSTIFIED. 7. RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT, WE FIND THAT IN THE INSTANT CASE, TH E AO HAS ALLOWED THE DEDUCTION U/S 80IB AT RS. 24,39,943/- F OR THE M/S.R.K.DEVELOPERS, INDORE, VS. CIT-I, INDORE, I.T. A.NO. 318/IND/2014 A.Y. 2009-10 32 32 PROJECT RUNNING AT ASHOK VATIKA, INDORE. THE AO HAS ALLOWED THE CLAIM OF THE ASSESSEE ON SALE OF SMALL SIZE OF PLOT. 80IB DEDUCTION IS ALLOWED ONLY ON DWELLING HOUSES AND NO T ON THE PLOTS. THEREFORE, THE ORDER OF THE AO IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF REVENUE. THE COMMIS SIONER IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT CALLED FOR. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 3 RD NOVEMBER, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 3 RD NOVEMBER, 2015. CPU* 1927