M/s Prem Bansal Real Estate (P) Ltd., Zirakpur V. Pr. CIT(C), Ludhiana

ITA 751/CHANDI/2018

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8359 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 21-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJEET SING H
• Keywords: Assessment record
• Section: 32; 6; 263; 63; 143(3); 80IB; 13

Judgement Text

आयकर य कर , य य “ब ”, IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘B’, CHANDIGARH , य य!क "य # $ % & ' ( , ेख "य BEFORE SMT.DIVA SINGH, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No.751/Chd/2018 / Assessment Year : 2013-14 M/s Prem Bansal Real Estate Pvt. Ltd., Swastik Vihar, Patiala Road, Zirakpur. ब म The Pr. CIT, (Central), Ludhiana. ./PAN NO: AADCP4437C /Appellant /Respondent ! /Assessee by : Shri Vibhore Garg, CA " ! / Revenue by : Shri Sanjeet Singh, CIT # $ % /Date of Hearing : 28.10.202 1 &'() % /Date of Pronouncement: 17.11.2021 (Virtual Court) आदेश/ORDER Per Annapurna Gupta, Accountant Member: Th e a b o v e a p p e a l h a s b e e n p r e f e r r e d b y t h e a s s e s s e e a g a i n s t t h e o r d e r o f t h e P r i n c i p a l C o m m i s s i o n e r o f I n c o me Ta x ( C e n t r a l ) , L u d h i a n a ( i n s h o r t t h e ‘ L d . P r . C I T) d at e d 3 0 . 0 3 . 2 0 1 8 r e l a ti n g t o a s se s s m e n t y e a r 2 0 1 3 - 1 4 p a s se d u / s 2 6 3 o f t h e I n c om e Ta x A c t , 1 9 6 1 ( h e r e i n a f te r r e f e r re d t o a s ‘ A c t ’ . ITA No.751/Chd/2018 A.Y. 2013-14 Page 2 of 20 2 2 . Th e a s s e s se e h a s r a i s e d f o l l o w i ng g r o u n d s o f ap p e a l : “1. That the impugned order is bad both on facts and law. 2. That the assessment order has been passed by the AO after making due enquiries in respect of the matters and issues raised in the impugned order after considering the evidence / material and pleadings & explanations on record and Ld Pr CIT has failed to point out as to what enquiries should have been made. 3. That the Ld Pr.CIT has wrongly & illegally assumed that the explanation 2 to section 263, inserted w.e.f. 01.04.2015, is declaratory and clarificatory in nature and thus retrospectively applicable to the assessment proceedings of AY 2013-14.” 3 . A t t h e o u t s e t i t s e l f , t h e L d . C o u n s e l f o r t h e a s se s se e s t a t e d t h a t t h e L d . P r . C I T h a d e x e r c i se d h i s r e v i s i o n a r y ju r i s d i c t i o n o n t h e o r d e r p a s s e d b y t he A O i n t h e p r e s e n t c a se u/ s 1 4 3 ( 3 ) o f t h e A c t , r a i s i n g s e v e n i s s ue s , o u t o f w h i c h he h a d h i m s e l f d r o p p e d t he p r o c e e d i n g s o n t w o i s s u e s a n d o n f o u r is s u e s th e A O i n c o n s e q ue n t i a l p r o c e e d i n g s h a d m a d e n o a d d i t i on a t a l l . H e s t a te d , t he r e f o r e , t h a t o n l y o n e i s s ue r a i se d b y t h e L d . P r . C I T r e m a i n e d r e l e v a n t . A c h a r t b r i n g i n g o u t t h e a b ov e c o n t e n t i o n w a s p l a c e d b e f o re u s w h i c h i s r e p r o d u ce d h e r e u n d e r : Prem Bansaf Real Estate P Ltd . ITA No. 751/2018 Grounds in Show Cause Notice issued u/s 263 PB Pg. No. 1 to 5 Finding/observation in order passed u/s 263 with Appeal Memo Finding /observation in Assessment order passed u/s 143(3) rw 263. PB Pg. NO. 13-17 Issue No.1 Difference in opening stock in current year with the closing Explanations Accepted and no direction is given No issue before AO ITA No.751/Chd/2018 A.Y. 2013-14 Page 3 of 20 3 stock of previous year Issue No.2 Unsecured loans Explanation Accepted and no direction is given No issue before AO Issue No.3 Issue regarding disallow ability of deduction u/s 80IB Pr. CIT directed for inquiry or verification. AO disallowed the deduction u/s 80IB, of Rs. 3200000/-. And made only addition Issue No.4 Director Imprest Account Pr, CIT directed for inquiry or verification. After verification , no addition is made. Issue No.5 Trade receivables/ payables Pr, CIT directed for inquiry or verification. After verification , no addition is made. Issue No.6 Sale of Land Pr. CIT directed for inquiry or verification. After verification, no addition is made Issue No.7 Cash withdrawal from various bank account Pr. CIT directed for inquiry or verification. After verification, no addition is made. 4 . H e c o n te n d e d t ha t v i s - à - v i s t h e i s s u e s o n w h i c h t h e A O h a d m a d e n o a d d i t i o n , t h e o r d e r o f t h e L d . P r . C I T wa s i n f r u c t u o u s a n d i n - c o n s e q u e n t i a l . H e a l s o s t a te d tha t s i n c e th e A O h a d m a d e n o a d d i t i o n v i s - à - v i s t h e s a i d i s s u e , th e r e w a s n o p r e j u d i ce c a u s e d t o t h e Re ve n ue a t a l l . H e t h e r e a f te r s t a te d t h a t t h e o n l y r e m a i n i n g i s s u e r e l a t e d t o t h e c l a i m o f d e d u c t i o n u / s 8 0 I B o f t h e A c t w h i c h a s p e r t h e L d . P r . C I T t h e A O h a d f a i l e d t o e x a m i n e a n d v e r i f y . Th e L d . C o u n s e l f o r t he a s s e s s e e i n t h i s r e g a r d d re w o u r a t t e n t i o n f ir s t t o t h e s h o w c au s e n o t i c e i s s u e d u / s 2 6 3 o f t h e A c t f l a g g i n g t h i s i s s u e a t p oi n t N o . ( i i i ) a s u n d e r : “(iii) It is further noted that the company had claimed deduction of Rs. 32,00,000/- under section 80IB of IT Act, 1961. In response to query regarding claim of deduction, the company had stated that it had sold 8 flats out of remaining stock and has shown total sale of Rs. 236.2 lakh. As per reply and evidences filed in respect of sale of plots, the total turnover comes to be Rs. 22865000/- for sale of 9 plots as under: ITA No.751/Chd/2018 A.Y. 2013-14 Page 4 of 20 4 Sr. No. Name of party to whom flat sold Amount of sale as per sale deed Date of registration 1. Sh. RoshanLal S/o Sh. Balak Ram 2400000/- 19.03.2013 2. Smt. Poonam Singh W/o Sh. Balinder Singh 4300000/- 09.08.2012 3. Sh. Shivdeep Attri S/o Kuldeep Kumar Sharma 3000000/- 31.08.2012 4. Smt. Jaspreet Kaur W/o G.S. Bali 270GOOO/- 03.10.2012 5. Smt. Kusum roop Rai W/o Sh. Sandeep Roop Rai 3500000/- 17.12.2012 6. Smt. Usha Rani W/o Shiv Pal Singh 2950000/- 05.06.2013 7. Smt. Hardarshan Kaur W/o Sh. Jasveer Singh 1970000/- 22.04.2013 8. Sh. Gurdas Singh S/o Sh. Himmat Singh 2800000/- 14.08.2013 9. Sh. Krishan Sangwan S/o Sh. Amar Singh 3600000/- 27.04.2012 TOTAL 2,72,20,000 From the. above chart, it is noticed that sale of flats mentioned at Serial No. 6,7 & 8 relate to A.Y2014-15 and not for A.Y. 2013-14. No deduction on fiats sold as per Sr. No. 6, 7 & 8 pertaining to A.Y 2014-15 is admissible for the A.Y. 2013-14. If amount reflect in above chart as per Sr. No, 6 & 7 reduced from the total it become Rs. 1.95 Crore for 6 flats only as against 2.36 Crore being sale price of flats claimed as eligible under section 80IB as per company letter dated 09.03.2016. Audit Report has been filed by the company twice but form No. 10CCB was not found placed on file whereas the company vide his reply dated nil has stated that Form IOCCB is enclosed with reply. However, the A.O has not examined the issue regarding allowbility of deduction under section 80IB of the Income Tax Act, 1961. The company vide his letter dated 02.03.2016 further stated that regarding the query related to the deduction of Rs. 32 lacs u/s 80IB that there was a opening stock of flats valued Rs. 285 lacs out of the project development and eligible deduction u/s 801B. Out of the opening stock, ITA No.751/Chd/2018 A.Y. 2013-14 Page 5 of 20 5 during the year company sold flats for a sum of Rs. 236.20 Lacs on which the gross margin is computed as 84.20 Lacs. During the year there was another turnover of Rs. 806 lacs on account of sale of incomplete tower structure and resale of duplex. The company had deducted the expenses of Rs. 52.20 Lacs, out of profits and gains of Rs, 84.20 Lacs eligible u/s 80IB. Deduction of the company expenses is very reasonable and justified because it is on the higher side as the company deduct the on pro-rata basis expenses in ration of turnover, then the expenses comes to Rs. 21 lacs only and the claim u/s 80IB then would be more. Calculation of Gross Margin on Sale of Flats is as under: Sale of Flats 2,36,20,000 Add. Closing Stock 1,33,00,000 Total 3,69,20.000 Less; Opening Stock of Flats 2,85,00,000 Gross Margin on flats 84,20,000 However, the AO has failed to examine how the expenses of Rs. 52.20 Lacs are attributable to the project on which deduction u/s 80IB has been claimed. The A.O has failed to examine the correctness and genuineness of the deduction under section 80IB of the LT Act, 1961. No inquiry or verification is made to determine that the deduction claimed is as per provision of Sec.80IB(10) in terms of approvals of prescribed authorities and other eligibility conditions laid down in the relevant clauses.” 5 . H e t h e r e a f t e r s t a t e d t h a t t h e s u b m i s s i o n s w e r e ma d e b e f o r e t h e L d . P r . C I T t o t h e e f f e c t t h a t t h e i s s u e h a d b e e n i n q u i r e d i n t o b y t h e A O d u r i n g a s s e s s m e n t p r o c e e d i ng s , w h o a f t e r c o n s i d e r i n g t h e s a m e d i s m i s s e d t h e c o n te n t i o n o f th e a s s e s se e a n d he ld t h e o r d e r o f t h e A O e r r o n e o u s f o r n o t h a v i n g e x a m i n e d a n d v e r i f i e d t he c l a i m o f d e d u c t i o n u / s 8 0I B o f t h e A c t h o l d i n g a s u n d e r : “On careful consideration of the submission of the Ld. AR and examination of assessment records it is apparent that the claim ITA No.751/Chd/2018 A.Y. 2013-14 Page 6 of 20 6 of deduction u/s 80IB has not been examined and verified and has been erroneously allowed. The assessee's claim of deduction of Rs.32,00,000/- u/s 801B on account of sale of flats at Rs.2,36.00,000/- was allowed without any verification as to how the profits have been computed. It is evident that expenses of Rs.52.20Lacs have been taken on adhoc basis to arrive at eligible profits for claim of deduction u/s 801B. The Assessing Officer has not carried out any inquiry as to how expenses of Rs.52.20Lacs are attributable to the project against the total sale of Rs.2,36,00,000/- on which deduction u/s 801B is claimed. The audit report in Form 10CCB filed in support of the said claim discloses total sales of the undertaking at Rs.10,42,20,000/- against which the profits and gains derived by the undertaking from eligible business is reported at Rs.60,04,333/- against which deduction u/s 80IB is reported at Rs.32,00,000/-. It is quite evident that the deduction is claimed on the alleged eligible profits computed on a completed adhoc basis. Further the AO has not carried out any inquiry or verification to examine whether the deduction is claimed as per provision of section 80IB(10) of the Act laying down the conditions for the said deduction. Perusal of assessment records shows that the assessing Company has split his buildings of housing project into separate buildings to claim the said deduction. The Assessing Officer has failed to carry out ' any examination of the claim except for placing on record the computation relied by the AR in the written submissions. In view of these facts it is evident that the deduction u/s 801B has been erroneously allowed by the AO.” 6 . Th e L d . C o u n s e l f o r t h e a s s e s se e t h e r e a f te r p r o c ee d e d to m a k e h i s a r g u m e n t s a g a i n s t t h e f i n d i n g s o f t h e L d . P r . C I T p o i n t i n g o u t t h e r e f r o m t h a t t h e L d . P r . C I T h a d h e l d t h e a s s e s s m e n t o r d e r e r r o ne o u s s o a s t o c a u s e p re ju d i c e t o t h e R e ve n ue o n t he i s s u e o f c l a i m o f d e d u c t i o n u /s 8 0 I B o f t h e A c t , a m o u n t i n g t o R s . 3 2 l a c s o n t w o c o u n t s o f n o n - v e r i f ic a t i o n ; i ) r e g a r d i n g t h e e l i g i b i l i t y o f c l a i m o f t h e a s s e s se e a n d ; ITA No.751/Chd/2018 A.Y. 2013-14 Page 7 of 20 7 i i ) s e c o n d l y v i s - à - v i s t h e c o m p u t a t i o n o f t h e s a i d c l a i m o f d e d u c t i o n . 7 . Th e L d . C o u n s e l f o r t h e a s se s se e c o n t e n d e d t h a t vi s - à - v i s b o t h t h e i s s u e s d u e i n q u i r i e s h a d b e e n m a d e b y t h e A O b y i s s u i n g a q u e s t i o n n a i r e r a i s i n g t h e s pe c i f i c q ue r y t o w h i c h d u e r e p l y w a s f i l e d by t h e a s s e s s e e . O u r a t t e n t i o n w a s d r a w n t o t h e r e l e v a n t d o c u m e n t s i n t h i s r e g a r d , p l a c e d b e f o r e u s a s u n d e r : 1 ) Q u e s t i o n n a i r e i ss u e d u / s 1 4 2 ( 1 ) , d a t e d 1 7 . 0 6 . 2 0 15 b y t h e A O d u r i n g a s s e s s m e n t p r o c e e d i n g s r a i s i n g th e i s s u e o f c l a i m o f d e d u c t i o n u / s 8 0 I B o f t h e A c t , p l a c e d a t P a p e r B o o k p a g e N o s . 1 8 - 2 2 . 2 ) R e p l y o f t h e a s s e s se e d a te d n i l f i l e d d u r i n g a s s e s s m e n t p r o ce e d i n g s v i s - à - v i s t h e e l i g i b i l i t y o f c l a i m o f d e d u c t i o n u / s 8 0 I B o f t h e A c t , p l a ce d a t P a p e r B o o k p a ge N o s . 3 0 a n d 3 1 . 3 . R e p l y o f t h e a s s e s s e e d a te d 0 9 . 0 3 . 2 0 2 1 f i l e d d u rin g a s s e s s m e n t j u s t i f y i n g t h e c l a i m o f d e d u c t i o n a n d t he c o m p u t a t i o n t h e r e o f u / s 8 0 I B o f t h e A c t p l a c e d a t P a p e r B o o k p a ge N o s . 3 3 . 8 . Th e L d . C o u n s e l f o r t h e a s se s se e , t h e r e f o r e , co n te n d e d t h a t d u e i n q u i r y h a d b e e n d o ne b y t h e A O o n t h e is su e o f c l a i m o f d e d u c t i o n u / s 8 0 I B o f t h e A c t , t o w h i c h r e p l i e s w e r e f i l e d b y t h e a s se s s e e a n d a f t e r c o n s i d e r i ng w h i c h t h e A O h a d f o r m e d a n o p i n i o n a l l o w i n g t h e c l a i m o f t h e a s se s se e . H e st a te d t h a t i t w a s n o t a c a s e o f l a c k o f i n q u i r y a n d r e v i s i o n a r y po w e r s u / s ITA No.751/Chd/2018 A.Y. 2013-14 Page 8 of 20 8 2 6 3 o f t h e A c t co u l d n o t b e i n v ok e d m e re l y f o r t h e r e a s o n t h a t t h e L d . P r . C I T w a s o f t h e vi e w t h a t t h e i n q u i r i e s we r e i n a d e q u a te . I n t h i s r e g a r d h e r e l i e d u p o n t h e f ol l ow i n g c a s e l a w s : “1) ITO Vs. DG Housing Projects Ltd.(2012) 343 ITR 329. 2) DIT BVS. Jyoti Foundation (2013) 357 ITR 388 (Delhi) 3) CIT Vs. International Travel House Ltd. (2012) 344 ITR 554 4) Punjab Wool Syndicate, 148 TTJ 25 (CHD) 5) CIT Vs. Eicher Ltd., 294 ITR 310 (Delhi HC) 6) Abhimanyu Gupta Vs. Pr.CIT Patiala, ITA No.771/Chd/2017 7) Malabar Industrial Co. Ltd. Vs. CIT, 243 ITR 83 (SC) 8) City Beautiful Hotels & Resorts Pvt. Ltd., ITA No.554/CHD/2017.” 9 . Th e L d . C o u n s e l f o r t h e a s se s s e e f u r t h e r p o i n te d ou t t h a t t h e L d . P r . C I T h a d i n v o k e d e x p l a n a t i o n - 2 t o s e c t i o n 2 6 3 o f t h e A c t i n t h e p r e s e n t c a s e w h i c h e x p la n a t i o n h a d b e e n b r o u g h t o n t h e s t a t u te w . e . f . 0 1 . 0 6 . 2 0 1 5 w h i l e t h e a s s e s s m e n t y e a r i n v o l v e d i n t h e p r e s e n t c a s e i s a s s e s s m e n t y e a r 2 0 13 - 1 4 a n d t h e a m e n d m e n t to t h e se c t i o n h a s b e e n h e l d t o b e p ro s p e c t i v e i n n a t u r e b y t h e D e l h i B e n c h o f t h e I TA T i n t h e c a se o f M / s ITA No.751/Chd/2018 A.Y. 2013-14 Page 9 of 20 9 A r u n K u m a r G a r g ( H U F ) v s . P r . C I T, I TA N o . 3 3 9 1 / D e l / 20 1 8 d a t e d 0 8 . 0 1 . 2 0 19 . 1 0 . Th e L d . C I T D R , o n t h e o t he r h a n d , v e h e m e n t l y co u n t e r e d t h e a r g u m e n t s of t h e L d . C o u n s e l f o r t h e a s se s s e e c on te n d i n g t h a t t h e c a se o f t h e L d . P r . C I T f o r i n v o k i n g r e v i s io n a r y j u r i s d i c t i o n w a s n o t o f i n a d e q u a te i n q u i r y b u t i n fa c t o f l a c k o f i n q u i r y . I n t h i s r e g a r d , he r e l i e d u p o n h e a v i l y o n t h e f i n d i n g s o f t h e L d . P r . C I T p o i n t i n g o u t t h a t r e g a r d i n g t h e el i g i b i l i t y o f t h e c l a i m o f a s s e s s e e a n d a l s o t h e q u a n t u m o f c l a i m o f d e d u c t i o n u / s 8 0 I B o f t h e A c t , th e A O h a d m e r e l y a cc e p t e d t h e s u b m i s s i o n s o f t h e a s s e s s e e w i t h o u t m a k i n g a n y i n q ui r i e s w h e n t h e s u b m i s s i o n s i t s e l f c l e a r l y s h o w e d t h a t t h e c l a i m h a d b e e n m a d e o n a n a d h o c b a s i s . H e r e f e r r e d t o t h e r e pl ie s o f t h e a s s e s se e a l s o , f i l e d t o t h e A O a s p o i n t e d o u t b y the L d . C o u n s e l f o r t h e a s se s se e h i m s e l f a n d a l s o t o t h a t f i l e d b e fo r e t he L d . P r . C I T d e m o n s t r a t i n g t h a t t h e a s s e s se e h a d f a i l e d to j u s t i f y t h e q u a n t u m o f e x p e n s e s c l a i m e d a g a i n s t t h e g r o s s m a r g in e a r n e d o n t h e e l i g i b le r e s i de n t i a l u n i t s s o l d d u r i n g t h e ye a r . H e d e m o n s t r a t e d t h e a d h o c m a n n e r i n w h i c h t h e p r o f i t i s e l i g i b l e f o r c l a i m o f d e d u c t i o n u / s 8 0 I B o f t h e A c t h a d b e e n c o m p u t e d b y t h e a s se s se e a n d h a d , t he r e f o r e , n e e d e d f u r t he r ve r i f i c a t i o n b y t h e A O w h i c h h e h a d f a i l e d t o d o , t h u s m a k i n g h is o r d e r ITA No.751/Chd/2018 A.Y. 2013-14 Page 10 of 20 10 e r r o n e o u s s o a s t o c a u s e p r e j u d i c e t o t h e R e ve n ue . H e c o n t e n d e d t h a t me r e a c ce p t a n ce o f t h e s u b m i s s i o n s ma d e b y t h e a s s e s s e e b y t h e A O d i d n o t t a n t a m o u n t t o c o n d uc t i n g i n q u i r y . H e f u r t h e r s t a te d t h a t si n c e t h e L d . P r . C IT h a d m a d e o u t a c a s e o f l a c k o f i n q u i r y , c a s e l a w s r e l i e d u p on b y t h e L d . P r . C I T f o r t h e p r o p o s i t i o n t h a t i n a d e q u a te i n q u i r y w o u l d n o t e n t i t l e t h e L d . P r . C I T t o i n v o k e t h e r e v i s i o n a r y j ur is d i c t i o n u / s 2 6 3 o f t h e A c t , w a s o f n o a s s i s t a nc e o f t h e A c t t h e a s s e s se e . H e f u r t h e r p o i n t e d o u t t h a t t h e H o n ' b l e A p e x C o u r t i n a n u m b e r o f d e c i s i o n s , e ve n b e f o r e t he i n s e r t i on o f E x p l a n a t i o n- 2 t o s e c t io n 2 6 3 o f t h e A c t , h a d h e l d t h a t t h e a b s e n ce o f a d e q u at e i n q u i r i e s f o r t h e f o r m a t i o n o f o p i n i o n b y t h e A O w o u l d t a n t a mo u n t t o t h e o r d e r o f t h e A O b e i n g e r r o n e o u s . H e d r e w o u r a t te n ti o n t o t h e f o l l o w i n g d e c i s i on s o f t h e H o n ' b l e A p e x C o u r t i n thi s r e g a r d a s u n d e r : 1) Deniel Merchants Pvt. Ltd. Vs. ITO, Appeal No.2396/2017, dated 29.11.2017. 2) Malabar Industrial Co.Ltd. Vs. CIT (2000) 109 Taxman 66 (SC)/[2000] 243 ITR 83 (SC)/[2000]159 CTR 1 (SC). 3) Rajmandir Estates (P.) Ltd. Vs. PCIT [70 Taxmann.com 124 (Calcutta)/[2016] 240 Taxman 306 (Calcutta)/[2016] 386 ITR 162 (Calcutta)/[2016] 287 CTR 512] : & Rajmandir Estates (P.Ltd. Vs. PCIT [2017] 77 taxmann.com 285 (SC)/[2017] 245 Taxman 127 (SC) ITA No.751/Chd/2018 A.Y. 2013-14 Page 11 of 20 11 4) Shree Manjunathesware Packing Products & Camphor Works Vs. CIT [1998] 96 Taxman 1 (SC)/[1998] 231 ITR 53 (SC)/[1997] 143 CTR 406 (SC). 5) Surya Jyoti Software Pvt. Ltd. Vs. PCIT (I.T.A. No.2158/DEL/2017) 6) Surya Financial Services Ltd. Vs. PCIT (I.T.A. No.2158/DEL/2017 ITAT Delhi. 1 1 . H e a l s o c o n te n d e d t h a t t h e I TA T M u m b a i B e n c h i n t h e c a s e o f C r o m p t o n G r e a ve s L t d . Vs . D C I T, d a t e d 2 4 . 0 2. 2 0 1 2 h a d c a t e g o r i c a l l y s t a t e d t h a t t h e E xp l a n a t i o n - 2 t o s e c ti o n 2 6 3 o f t h e A c t , w a s d e cl a r a t o r y a n d c l a r i f i c a t o r y i n n a t u re a n d h e n ce r e t r o s p e c t i v e i n a p p l i c a t i o n . 1 2 . W e h a v e he a r d t h e c o n t e n t i o n s o f b o t h t he p a r t ie s a n d h a v e a l s o c o n s i d e re d t h e v a r i ou s d o c u m e n t s a n d c a s e l a w s r e l i e d u p o n b y t h e m . A s t r a n s p i r e s f r o m t h e o r d e r of t h e L d . P r . C I T a n d a s r i g h t l y p o i n t e d o u t b y t h e L d . C o u n s e l f o r t h e a s s e s se e , t h e L d . P r . C I T h a s e x e r c i s e d r e v i s i o n a ry p o w e r s u / s 2 6 3 o f t h e A c t i n t h e p r e s e n t c a s e h o l d i n g t h e o r d er p a s s e d b y t h e A O u / s 1 4 3 ( 3 ) o f t h e A c t , e r r o n e o u s o n f i v e c o un t s a s u n d e r : i) Issue regarding disallow ability of deduction u/s 80IB. ii) Director Imprest Account iii) Trade receivables/ payables iv)) Sale of Land ITA No.751/Chd/2018 A.Y. 2013-14 Page 12 of 20 12 v) Cash withdrawal from various bank account 1 3 . O u t o f t h e s a m e t h e L d . C o u n s e l f o r t h e a s se ss e e h a s c o n t e s te d a n d m a d e h i s a r g u m e n t s u p o n o n l y o n e i s sue i . e . c l a i m o f d e d u c t i o n u / s 8 0 I B o f t h e A c t . Th e r e m a i n in g f o u r i s s u e s w e r e n o t a r g u e d o n m e r i ts b e f o r e u s . Th e o r de r o f th e L d . P r . C I T v i s - à - v i s t h e s a i d i s su e s i s t h e r e f o r e up h e l d . Th e c o n t e n t i o n o f t h e L d . C o u n s e l f o r t h e a s s e s se e th a t s i n c e n o a d d i t i o n h a s b e e n m a d e o n t h e s a i d i s s u e s b y t h e A O i n t h e c o n s e q ue n t i a l p r o c e e d i n g s a n d t h e r e f o r e t h e o r d e r of th e L d . P r . C I T i s i n f r u c t u o u s a n d / o r t h e r e i s n o p r e j u di c e c a u se d t o t h e Re v e n ue , m e r i t s n o c o n s i d e r a t i o n s i n ce t he su b s e q ue n t o r d e r o f t h e A O i s p a s s e d i n t h e c o u r s e o f s e p a r a te i n d e p e n d e n t p r o c e e d i n g s t h o u g h o n t h e d i r e c t i o n s c o n t a i n e d i n t h e o r d e r p a s s e d u / s 2 6 3 o f t h e A c t a n d c a n n o t h a v e a n y b e a r i n g o n t h e or d e r p a s se d i n e x e r c i se o f r e v i s i o na r y p o w e r s b y t h e L d . P r . C I T, w h i c h h a s t o b e t e s t e d i n d e p e nd en t l y o n t h e p a r a m e t e r s l a i d d o w n u / s 2 6 3 o f t h e A c t , o f t he Ld . P r . C I T h a v i n g f o u n d t h e A O ’ s o r d e r e r r o n e o u s c a u s i n g p r e j ud i c e t o t h e R e ve n ue . Th e r e v i s i o n a r y p o w e r s u / s 2 6 3 o f t h e A c t h a v e b e e n e n a c t e d t o e m p o w e r t h e D e p a r tm e n t , w h i c h h a s n o r i gh t o f a p p e a l a g a i n s t o rd e r p a s se d b y a ss e s s i n g o f f i ce r . An d w h e r e o n t h e b a s i s o f m a t e r i a l o n r e c o r d t h e C o m m i s s i o n e r / P r . C o m m i s s i o n e r f i n d s t h a t t h e o r de r p a s s e d b y ITA No.751/Chd/2018 A.Y. 2013-14 Page 13 of 20 13 t h e A O i s e r r o n e o u s , e i t h e r o n a cc o u n t o f i n c o r re ct a s s u m p t i o n o f f a c t , i n c o r r e c t a p p l i c a t i o n o f l a w o r f a i l u r e t o a p p l y m i n d o n t h e f a c t s o n r e c o r d , h e c a n d i r e c t e x a m i n a t i o n o f th e i s s ue s b y t h e A O o r h i m s e l f c o r r e c t t h e o r d e r o f t h e A O . W h e re a f te r g i v i n g h i s f i n d i n g o f e r r o r , t h e C I T/ P r . C I T c o n s i d er s i t f i t t o r e s t o r e t h e m a t t e r t o t h e A O t o c o n s i d e r i t i n t he l i g h t o f h i s f i n d i n g s , o b v i o u s l y t h e f i n d i n g s o f e r r o r b y t h e C IT/ P r . C I T c a n n o t b e c o n c r e te b u t s h o u l d p r i m a f a c i e s u f f i ce an d j u s t i f y t h e e r r o r i n t h e o r d e r o f t he A O c a u s i n g p r e j u d i c e t o t h e R e ve n ue . S u b s e q u e n t e x a m i n a t i o n m a y n o t n e c e s s a r i l y r e s u l t i n a d d i t i o n b e i n g m a d e b u t i t d o e s n o t i m p i n g e u p o n th e s a t i s f a c t i o n o f t h e L d . P r . C I T o f p r e j u d i c e ca u s e d t o t h e R e ve n ue . W h a t i s t o b e s e e n b y t h e L d . P r . C I T a n d to b e s p e c i f i e d w h i l e e xe r c i s i n g h i s r e v i s i o n a r y j u r i s d i ct i o n i s t h a t t h e A O h a d e r r e d i n p a s s i n g t h e o r d e r , r e s u l t i n g i n l o s s t o t h e R e ve n ue . P r i m a f a c i e t he L d . P r . C I T i s t o b r i n g o u t f r o m t h e r e c o r d s t h a t t h e A O ’ s o r d e r w a s i n e r r o r c a u s i n g p re j u d i ce t o t h e R e ve n u e . Th i s a r g u m e n t o f t h e L d . C o u n s e l f o r t he a s se s s e e i s t h e r e f o r e d i s m i s s e d a n d t h e o r d e r o f t h e L d . P C I T o n t h e f o u r i s s u e s a s a b o v e u p h e l d . 1 4 . V i s - à - v i s t h e i s s u e o f c l a i m o f d e d u c t i o n u / s 80 I B ( 1 0 ) o f t h e A c t , w e a re n o t c o n v i n c e d w i t h t h e c o n te n t i o n of t h e ITA No.751/Chd/2018 A.Y. 2013-14 Page 14 of 20 14 L d . C o u n s e l f o r t h e a s se s se e t h a t t h e r e w a s n o f i n d in g o f e r r or b y t h e L d . P r . C I T, t h a t i n q u i r y h a d b e e n c o n d u c t e d b y t h e A O a n d t h a t i t w a s n o t a c a s e o f l a c k o f i n q u i r y b u t in a d e q u a te i n q u i r y w h i c h d i d n o t e m p o w e r e xe r c i s e o f r e v i s i o n ar y j u r i s d i c t i o n u / s 2 6 3 o f t h e A c t . O n t h e c o n t r a r y w e f i n d m e r i t i n t h e c o n te n t i on o f t h e L d . C I T D R t h a t t h e c a s e ma d e o u t b y t h e L d . P r . C I T w a s t h a t o f l a c k o f i n q u i r y a n d n o t i n a d e q u a te i n q u i r y . U n d o u b t e d l y t h e a s s e s se e h a d b e e n a s k e d t o j u s t if y t h e c l a i m o f d e d u c t i o n u / s 8 0 I B o f t h e A c t d u r i ng as s e s s m e n t p r o c e e d i n g s a n d r e p l i e s w e r e f i l e d b y t h e a s s e s se e b u t o n g o i n g t h r o u g h t h e s a m e w e a g r e e w i t h t h e L d . D R t h a t th e re p l i e s d i d n o t j u s t i f y t he q u a n t u m o f d e d u c t i o n c l a i m e d , n o r th e e l i g i b i l i t y o f t h e c l a i m a l s o . W e a g r e e w i t h t h e L d. D R t h a t t h e A O s i m p l y a c c e p t e d w h a te v e r s u b m i s s i o n s w e r e m a d e by t h e a s s e s se e w i t h o u t e v e n n o t i n g t h a t t h e e x p l a n a t i o n di d n o t j u s t i f y t h e c l a i m o f t h e a s s e s se e a n d t h a t i t r e q u ir e d f u r t h e r i n q u i r y a n d i n v e st i g a t i o n o n t h e i s s u e . 1 5 . Th e L d . P r . C I T h a s n o t e d t h a t t h e A O h a d f a i l e d t o v e r i f y t h e c l a i m o f e x p e n se s f o r t he p u r p o s e o f c o m p u t i n g t h e p r o f i t s e l i g i b l e f o r d e d u c t i o n u / s 8 0 I B o f t h e A c t . Th e a s se s se e h a d c l a i m e d e x p e n se s o f R s . 5 2 . 2 0 l a c s a g a i n s t g r o s s p r of i t s o f R s . 8 4 . 2 0 l a c s c l a i m i n g n e t p r o f i t s e l i g i b l e f o r d e du c t i o n ITA No.751/Chd/2018 A.Y. 2013-14 Page 15 of 20 15 a m o u n t i n g t o R s . 3 2 c r o r e s . Th e L d . P r . C I T h a s r e d - fl a g ge d t h e n o n - v e r i f i c a t i o n o f t h e c l a i m o f e x p e n s e s o f R s . 5 2 .2 0 l a c s . H e h a s s t a t e d t h e sa m e t o h a v e b e e n w o r k e d o u t o n a d h oc b a s i s a n d t h e A O h a v i n g f a i l e d t o e x a m i n e t h e s a m e . Th e r e p l y f i l e d b y t h e a s s e s s e e , w h i c h t h e L d . C o u n s e l f o r t h e a s s e ss e e h a s c o n t e n d e d j u s t i f i e d h i s c l a i m , v i d e h i s l e t t e r d a t ed 0 9 . 0 3 . 2 0 1 6 a t p o i n t N o . ( 2 ) a t p a g e 3 3 o f t he P a p e r B o o k a s u nde r : “2. Regarding the query related to the justification of deduction claimed u/s 80IB vis a vis last year it is submitted that the assessee company had sold flats eligible for deduction u/s 80IB as under A/Y 2012- 13 A/Y 2013-14 Sale price of Flats eligible u/s 80IB 145.9 Lacs 236.2 Lacs Gross margin on sale of flats 81. 17 Lacs 133,19 Lacs % of Gross margin/Profit on sale of flats 56% 56% Expenses incurred relating to project flats 64.73 Lacs 103.01 Lacs % of expenses incurred on project flats 44% 44% Deduction claimed u/s 80IB 13.32 Lacs 32 Lacs 1 6 . Th e a b o v e r e p l y o f t h e a s s e s s e e , w e f i n d , n o w h er e j u s t i f i e s t h e q u a n t u m o f c l a i m o f e x p e n s e s o f R s . 5 2 . 2 0 l a c s , o n t h e c o n t r a r y i t f o r t i f i e s t he c o n te n t i on o f t h e L d . P r .C I T t h a t i t w a s c o m p l e t e l y a d h o c c l a i m w h i c h n e e de d f u r t h e r ve r i f i ca t i o n . Th e c a l c u l a t i o n s u b m i t t e d b y t h e a s s e s s e e i n t h e t a b l e a b o v e n o w h e re s h o w s h o w R s . 5 2 . 2 0 l a c s o f e x p e n s e s h a ve b ee n a l l o c a t e d t o t h e e l i g i b l e p r o j e c t s . Th e r e f o r e , i t is c l e a r t h a t t h i s ITA No.751/Chd/2018 A.Y. 2013-14 Page 16 of 20 16 i s s u e o f q u a n t um o f d e d u c t i o n r e m a i n e d u n v e r i f i e d by t h e A O w h o m e r e l y a c c e p t e d t h e s o c a l l e d e x p l a n a t i o n o f t he a s s e s s e e a s s u c h w h e n t h e e x p l a n a t i o n d i d n o t o f f e r a n y j u s ti f i c a t i o n o f t h e c l a i m o f e xp e n s e s o f R s . 5 2. 2 . 0 l a c s a g a i n s t t h e g r o s s m a r g i n e a r n e d b y t h e e l i g i b l e u n it s o l d . Th e e x p l a na t i o n o f t h e a s s e s se e b e f o r e t h e L d . P r . C I T i n t h i s r e g a r d r e p r od u c e d a t p a g e 1 2 o f t h e or d e r a t p a r a 7 a l s o f o r t i f i e s t h e co n t e n t i o n o f t h e L d . P r . C I T t h a t t h e c l a i m w a s t o t a l l y a d h o c . Thi s i s e v i d e n t f r o m t h e r e p l y a s u n d e r w h e r e i n t h e a s se s se e h a s h im s e l f n o t b e e n a b le t o a r r i v e a t t h e f i g u r e o f c l a i m o f e x p e nse s o f R s . 5 2 . 2 0 l a c s a s p e r h i s o w n j u s t i f i c a t i o n a n d s t at e s t h e e l i g i b l e c l a i m o f e x p e n se s t o b e Rs . 2 4 . 5 0 l a c s o n l y: “Issue regarding allowbility of deduction under section 80IB (iii) "Regarding the deduction of Rs 32 lacs claimed u/s 80- lB, that we have already replied to the query raised by the Ld AO vide our reply dated 02.03.2016 and our reply dated 09- 03-2016, We have also submitted form IOCCB during the assessment proceeding, we are enclosing the form 1QCCB for your ready reference. The deduction u/s 80IB is calculated by appropriating the total expenses in ratio of Sales vis a vis indirect expenses. The profit on sale of flats is Rs. 84.20 Lacs. Indirect Expenses totaling Rs. 108.15 are divided in ratio of total Sales. Total Sales is Rs. 1042 Lacs which include sale of Rs. 236 Lacs on A/c of Sale of Flats. If we divide the indirect expenses of Rs. 108.15 Lacs in proportion of sales then indirect expenses on Sales of Fiats comes to Rs. 24.50 Lacs. H 08.15/1042x236=24.50) If expenses of Rs. 24.50 Lacs is reduced from the profit on sale of Flats i.e. Rs. 84.20 Lacs, then the deduction u/s 80IB comes to Rs. 59.70 Lacs (84.20-24.50=59.70). Whereas we have claimed only Rs. 32 Lacs as deduction u/s 80IB. ITA No.751/Chd/2018 A.Y. 2013-14 Page 17 of 20 17 Regarding the enquiry relating to registration of Flats in F/y 2013-14, it is submitted that as possession is handed over the Parties in F/y 2012-13 there for Sale was considered in FY 2012-13 relevant to A/y 2013-14. " 1 7 . Th e r e f o r e , w e h a v e n o d o u b t a n d w e a g r e e w i t h th e L d . P r . C I T t h a t t h e A O h a d f a i l e d t o v e r i f y t h e c l a i m of d e d u c t i o n u / s 8 0 I B ( 1 0 ) o f t h e A c t . 1 8 . V i s - à - v i s t h e e l i g i b i l i t y o f c l a i m a l s o w e f i n d th a t t h e a s s e s se e h a d j u s t i f i e d t h e s a m e v i d e h i s le t te r d a te d n i l , p l a c e d a t P a p e r B o o k p a g e N o . 3 0 a t p o i n t N o . ( i v ) a s u n d e r : “4. Regarding the deduction u/s 80IB, it is submitted that the company had got the approval for the housing project on 02.O9.2O05 and the project was completes by 15.10.2010. The deduction u/s 80IB has already been finalized in the A/Y 2011-12 which was also subject to scrutiny assessment. Copy of assessment order is enclosed. Copy of Form 10CCB is already placed on file. The company has sold 8 flats out of the remaining stock of flats which are eligible for deduction u/s 80IB.” 1 9 . Th e A O w i t h o u t v e r i f y i n g t h e f a c t t h a t t h e a s s ess e e h a d a c t u a l l y s o l d e i g h t f l a t s o u t o f t h e r e m a i n i n g s t o ck o f f l a t s w h i c h w e r e e l i g i b l e f o r d e d u c t i o n h a s a l l o w e d t h e cl a i m o f t h e a s s e s se e a c c e p t i n g h i s s u b m i s s i o n s a s i t i s . Th e L d. P r . C I T, w e f i n d , i n h i s s h o w c a u s e n o t i c e o n t h e i s s u e h a d p o in t e d o u t t h a t t h e a s s e s s e e h a d c l a i m e d d e d u c t i o n o n f l a t s s ol d i n t h e s u c c e e d i n g ye a r a s p e r h i s o w n d e t a i l a t p o i n t N o . (i i i ) o f t h e s h o w c a u s e n o t i c e r e p r o d u c e d a b o v e . B e f o r e t h e L d . Pr . C I T t h e a s s e s se e j u s t i f i e d t h e c l a i m i n t h e i m p u g n e d y e a r me r e l y ITA No.751/Chd/2018 A.Y. 2013-14 Page 18 of 20 18 s t a t i n g t h a t i t w a s c l a i m e d o n t h e b a s i s t h a t p os s es s i o n w a s h a n d e d o ve r i n th e i m p u g n e d ye a r . B u t t h e f a c t r e m ai n s t h a t t h i s i s s u e t h o u g h c o m i n g o u t c l e a r l y f r o m t h e d e t a il s f i l e d b y t h e a s se s s e e t o t h e A O w a s n o t l o o k e d i n t o b y h i m an d e v e n b e f o r e t he L d . P r . C I T m e r e s t a te m e n t w a s m a d e j u s t if y i n g t h e c l a i m w i t h o u t s u b s t a n t i a t i n g t h e s a m e . Th e r e f o r e , th e r e i s n o d o u b t t h a t t h e o r d e r o f t h e A O w a s e r r o n e o u s c a u s i ng p r e j u d i c e t o t h e Re v e n ue o n a c c o u n t o f n on e x a m i n a t i o n o f t he c l a i m o f d e d u c t i o n u / s 8 0 I B o f t h e A c t d ur i n g a s s e s s m e n t p ro c e e d i n g s . 2 0 . E x e r c i s e o f r e v i s i o n a r y j u r i s d i c t i o n b y t h e L d . P r . C I T o n t h e i s s u e o f c l a im o f d e d u c t i o n u / s 8 0 I B ( 1 0 ) o f t h e A c t , i s , t h e r e f o r e , u p he l d . I n e f f e c t , t he o r d e r o f t h e L d . P r . C I T i s u p h e l d . 2 1 . I n t h e r e s u l t , t h e a p p e a l o f t h e a ss e s s e e i s d is m i s s e d . O r d e r p r o n o u n c e d o n 1 7 / 1 1 / 2 0 2 1 . Sd/- Sd/- $ % & ' ( (DIVA SINGH ) (ANNAPURNA GUPTA) ! " /Judicial Member )* " /Accountant Member $ /Dated: 17 th November, 2021 *र ी* ' * + , - , / Copy of the order forwarded to : 1. / The Appellant ITA No.751/Chd/2018 A.Y. 2013-14 Page 19 of 20 19 2. / The Respondent 3. # . / CIT 4. # . ( )/ The CIT(A) 5. , / 0 1 , % 1 , 234 05/ DR, ITAT, CHANDIGARH 6. 0 4 6 $ / Guard File ' * # स / By order, सह ंज / Assistant Registrar ITA No.751/Chd/2018 A.Y. 2013-14 Page 20 of 20 20 Draft dictated 28.10.2021 Sr.PS Draft placed before author .2021 Sr.PS Approved Draft comes to the Sr.PS/PS .2021 Sr.PS Order signed and pronounced on 2021 File sent to the Bench Clerk 2021 Sr.PS Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order.