Hindustan Home Fina Ltd., Ahmedabad V. Income Tax Officer, Ward-4(3), Ahmedabad

ITA 794/AHD/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3646 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 07-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Opportunity of being heard; Period of limitation; Corroborative evidences; Capital expenditure
• Section: 143(3); 80IB; 133(6); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD, D BENCH BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA.NO.794/AHD/2015 [ASSTT.YEAR 2010-2011] HINDUSTAN HOME FINA LTD. 2 ND FLOOR, AVKAR COMPLEX GURUKUL AHMEDABAD 380 052. VS ITO, WARD - 4(3) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI VIJAY RANJAN, AR REVENUE BY : SHRI SANJAY AGRAWAL, CIT - DR / DATE OF HEARING : 11/05/2016 / DATE OF PRONOUNCEMENT: 01/06/2016 !'/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LD.PR.COMMISSIONER OF INCOME-TAX-2, AHMEDABAD DATED 13.2.2015 PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 196 1 IN THE ASSTT.YEAR 2010-11. 2. THOUGH THE ASSESSEE HAS TAKEN FIVE GROUNDS OF AP PEAL, BUT ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE VIZ. THAT THE LD.CIT HAS ERRED IN TAKING ACTION UNDER SECTION 263 OF THE INCOME TAX A CT AND CANCELLING ITA NO.794/AHD/2015 2 THE ASSESSMENT ORDER DATED 24.12.2012 PASSED UNDER SECTION 143(3) OF THE ACT, DIRECTING THE LD.AO TO MAKE A FRESH ASSESS MENT ORDER. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND EDUCATION. IT HAS FILED ITS RETURN OF INCOME ELECTRONICALLY ON 24.9.2012 DECLARING TOTAL INCOME AT RS.20,53,620/-. THE CASE OF THE ASSESSEE WAS SELEC TED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) OF THE I NCOME TAX ACT WAS ISSUED ON 29.8.2011, WHICH WAS DULY SERVED UPON THE ASSESSEE. THE LD.AO, THEREAFTER, ISSUED NOTICE UNDER SECTION 142( 1) ON 17.10.2011 AND 3.9.2012. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.5,25,20,351/- UNDER SECTION 80IB OF THE INCOME TAX ACT. ACCORDING TO THE AO, VIDE O RDER SHEET DATED 31.10.2012 THE ASSESSEE WAS ASKED TO SUBMIT COMPLET E DETAILS WITH RESPECT TO ITS CLAIM. THE ASSESSEE HAS SUBMITTED D ETAILS CALLED FOR VIDE HIS REPLY DATED 3.12.2012, 4.12.2012 AND 10.12.2012 . THE LD.AO HAS ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE HAS CLAIMED PARITY WITH THE FACTS OF RADHE DEVELOPERS CASE DECIDED BY THE HONBLE GUJARAT HIGH COURT. COPY OF THE DECISION W AS PRODUCED BEFORE THE AO. THE LD.AO HAS DIRECTED THE ASSESSEE TO COM PILE DETAILS IN A TABULAR FORM EXHIBITING PARITY BETWEEN THE FACTS OF BOTH THESE CASES. SUCH CHART WAS SUBMITTED BY THE ASSESSEE ALONG WITH ITS REPLY DATED 20.12.2012. AFTER ANALYSING OF THAT REPLY, THE L D.AO WAS SATISFIED WITH THE REGARD TO THE CLAIM OF THE ASSESSEE AND HE ALLO WED THE DEDUCTION UNDER SECTION 80IB OF THE INCOME TAX ACT. ITA NO.794/AHD/2015 3 4. ON A PERUSAL OF THE RECORD, THE LD.COMMISSIONER HARBOURED A BELIEF THAT THE ASSESSMENT ORDER DATED 24.12.2012 PASSED B Y THE AO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTER EST OF REVENUE. HE ISSUED A SHOW CAUSE NOTICE DATED 20.12.2014 UNDER S ECTION 263 OF THE INCOME TAX ACT. COPY OF THE SHOW CAUSE NOTICE HAS BEEN PLACED ON PAGE NO.67 TO 69 OF THE PAPER BOOK. THE RELEVANT PART O F THE SHOW CAUSE NOTICE HAS BEEN REPRODUCED BY THE LD.COMMISSIONER I N THE IMPUGNED ORDER, WHICH READS AS UNDER: 1. THE ASSESSEE COMPANY CARRIES ON THE BUSINESS OF CONSTRUCTION AND EDUCATION. ON VERIFICATION OF THE STATEMENT OF INCOME, IT IS SEEN THAT THE ASSESSEE HAS CLAIMED AND WAS ALLOWED DEDUCTION OF RS.5,52,50,351/- U/S 80IB(10) OF THE INCOME TAX ACT , 1961. THE SANCTION OF THE PROJECT WAS GRANTED TO DHARTI VIKAS COOP HOUSING SOC. BY AUDA ON 30.03.2007 WHEREAS THE DEDUCTION U/ S 80IB HAS BEEN CLAIMED BY THE ASSESSEE IE. HINDUSTAN HOME FIN ANCE LTD. THE LAND ON WHICH THE SCHEME OF RESIDENTIAL UNITS W ERE PUT UP, BELONGED TO DHARTI VIKAS CO OP HOUSING SOC LTD. AND IT HAD APPLIED FOR DEVELOPMENT OF HOUSING SCHEME ON 10.04. 2006 AND GOT THE PERMISSION IN ITS NAME ON 30.03.2007 FROM ADDA. THE ASSESSEE IE. HINDUSTAN HOME FIN.LTD., ENTERED INTO A DEVELOPMENT AGREEMENT WITH HINDUSTAN HOME FIN LTD. ON 12.04.200 7 ONLY. INFACT, THE ASSESSEE HINDUSTAN HOME FINANCE LTD. HA S NOT ONLY TAKEN THE DEVELOPMENT RIGHTS BUT HAS ALSO TRIED TO TRANSFER THE APPROVAL OF THE PLAN OBTAINED BY DHARTI FROM CM APP ROPRIATE AUTHORITY WITH THE INTENT TO CLAIM DEDUCTION U/S 80 IB(10) OF THE ACT. IT IS PERTINENT TO ADD HERE THAT IN THE A.Y. 2009-1 0, THE CLAIM MADE U/S 80IB(10) FOR RS.4,17,12,892/- WAS DISALLOW ED VIDE ASSESSMENT ORDER U/S 143(3) DATED 20.12.2011 BY THE SAME A.O. AGGRIEVED BY THE DISALLOWANCE, THE ASSESSEE COMPANY WENT IN APPEAL AND THE LD.CIT(A) VIDE HIS ORDER DATED 26.06 .2012 IN APPEAL NO.CIT(A)-VIII/ITO WD.4(3)/351/LL-12 DELETED THE ADDITION IN FAVOR OF THE ASSESSEE RELYING UPON THE DECISION OF THE HON. HIGH COURT IN THE CASE OF RADHE DEVELOPERS. THE DEPARTME NT, HOWEVER HAS PREFERRED SECOND APPEAL BEFORE THE HON.ITAT IN APPEAL ITA NO.794/AHD/2015 4 N0.1997/AHD/2012 DTD. 05.11,2012 WHICH IS PENDING F OR THE DECISION. THEREFORE, THE AO HAS ALLOWED ASSESSEE'S CLAIM OF DEDUCTION U/S 80IB OF THE ACT, WITHOUT APPLICATION OF CORRECT PROVISIONS OF LAW AND HAS TAKEN INCONSISTENT DECISI ON IN LIGHT OF THE DEPARTMENT'S STAND ON THIS ISSUE IN ASSESSEE'S OWN CASE FOR EARLIER A.Y. 2. NOTWITHSTANDING THE ABOVE, ON PERUSAL OF THE ASS ESSMENT RECORDS IT IS SEEN THAT THE VALUATION OF INVENTORY AS ON 31.03.2010 IS SUPPORTED BY CIVIL ENGINEER'S CERTIFICATE DTD. 1 5.04.2010. AS PER THE SAID CERTIFICATE, THE MEASUREMENT OF CLOSIN G W.I.P. WAS REPORTED AT 7202 SQ.MTRS HAVING VALUATION OF RS. 7, 59,99,133/- WHICH WORKS OUT TO RS. 10,552/- P.SQ.MTR. IT IS SEE N THAT ASSESSEE HAD SUBMITTED SIMILAR CERTIFICATE DTD. 15.04.2009 C ERTIFYING THE VALUE OF CLOSING STOCK OF W.I.P. AS ON 31.03.2009. AS PER THE SAID CERTIFICATE, THE MEASUREMENT OF CLOSING W.I.P. IS R EPORTED AT 22125 SQ.MTRS. HAVING VALUE OF RS. 23,34,70,0187- AND PER SQ.MTR. VALUE ONCE AGAIN WORKS OUT TO RS. 10,552/-. FURTHER, ASSE SSEE HAS SHOWN DECREASE IN STOCK OF W.I.P. FOR THE YEAR UNDER CONS IDERATION AT RS. 15,74,70885/- WHICH IF DIVIDED BY THE AREA CONSTRUC TION SOLD BY ASSESSEE DURING THE YEAR UNDER CONSIDERATION AT 169 69 SQ.MTRS., THE P.SQ.MTR. VALUE WORKS OUT TO RS. 9,280/-. INFAC T, ASSESSEE HAD INCURRED FURTHER EXPENSES ON CONSTRUCTION OF UNITS IN THE PROJECT AND SUCH COST OF CONSTRUCTION AMOUNTED TO RS. 6,71, 90,146/-. HENCE, THE VALUE PER SQ.MTR. ADOPTED BY ASSESSEE AT STANDARD RATE OF RS. 10,552/- FOR BOTH THE A.Y.S APPEARS TO HAVE BEEN INFLATED WITH A VIEW TO CLAIM HIGHER DEDUCTION ON ACCOUNT OF ELIGIBLE PROFITS OF ITS CONSTRUCTION BUSINESS U/S. 80IB OF T HE ACT. NO INQUIRY OR VERIFICATION IN THIS REGARD HAS BEEN MADE BY THE AO NOR ANY EXPLANATION CALLED FOR FROM THE ASSESSEE FOR THE SA ME. 3. SIMILARLY, ASSESSEE HAS SHOWN THE AMOUNT OF AEC ADDA CHARGES RECEIVED FROM MEMBERS RS. 72,90,525/- AND S TUDENT FEES OF RS. 3,21.500/- AS AN INCOME IN ITS P & L A/C. THE S UM SO RECEIVED CANNOT BE TREATED AS AN INCOME IN THE HANDS OF THE ASSESSEE COMPANY AS THE SAME IS TO BE PAID TO AEC & AUDA. ON PERUSAL OF ASSESSEE'S P &L A/C, IT IS SEEN THAT NO CORRESPONDI NG EXPENSES HAVE BEEN DEBITED BY THE ASSESSEE. THE INCOME FROM STUDENT FEES IS NOT AN ELIGIBLE ACTIVITY FOR CLAIM OF DEDUCTION U/S . 80IB(10) OF THE ACT. THIS HAS INFLATED THE ASSESSEE'S PROFIT AND TH EREBY THE ITA NO.794/AHD/2015 5 DEDUCTION CLAIMED BY IT U/S. 80IB. THE AO HAS NOT V ERIFIED THIS ISSUE NOR CALLED FOR ANY EXPLANATION FROM THE ASSES SEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. 1. IN LIGHT OF THE ABOVE, NOTICE U/S 263 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 22ND SEPTEMBER, 2014 REQUIRING ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDER FINALIZED ON 2 4.12.2012 SHOULD NOT BE SET ASIDE AND ASSESSING OFFICER DIREC TED TO MODIFY THE SAME ON THE ISSUES MENTIONED ABOVE. 5. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESS EE HAS FILED A DETAILED REPLY WHICH HAS BEEN REPRODUCED BY THE LD. COMMISSIONER FROM PAGE NOS.4 TO 31 OF THE IMPUGNED ORDER. AFTER GOIN G THROUGH THE REPLY OF THE ASSESSEE, THE LD.COMMISSIONER HAS SET ASIDE THE IMPUGNED ORDER. HE DIRECTED THE AO TO PASS A FRESH ASSESSMENT ORDER . 6. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. SECTION 263 HAS A DIR ECT BEARING ON THE CONTROVERSY, THEREFORE, IT IS PERTINENT TO TAKE NOT E OF THIS SECTION. IT READS AS UNDER:- 263(1) THE COMMISSIONER MAY CALL FOR AND EXAMINE T HE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE M AY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTE R MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSA RY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSES SMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASS ESSMENT. [EXPLANATION.- FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION ,- (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1ST DAY O F JUNE, 1988 BY THE ASSESSING OFFICER SHALL INCLUDE- ITA NO.794/AHD/2015 6 (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY COMMISSIONER OR THE INCOME- TAX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED B Y THE JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COMMISSIONER IN EXE RCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTION S OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORIZED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; (B) RECORD SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDIN G UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJEC T MATTER OF ANY APPEAL FILED ON OR BEFORE OR AFTER TH E 1ST DAY OF JUNE, 1988, THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND AND SHALL BE DE EMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. (2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) AF TER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL Y EAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASS ED AT ANY TIME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF, OR TO GIVE EFFECT TO, ANY FINDING O R DIRECTION CONTAINED IN AN ORDER OF THE APPELLATE TRIBUNAL, NA TIONAL TAX TRIBUNAL, THE HIGH COURT OR THE SUPREME COURT. EXPLANATION.- IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB-SECTION (2), THE TIME TAKEN IN GIVI NG AN OPPORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROC EEDING UNDER THIS SECTION IS STAYED BY AN ORDER OR INJUNCT ION OF ANY COURT SHALL BE EXCLUDED. 7. A BARE PERUSAL OF THE SUB SECTION-1 WOULD REVEAL THAT POWERS OF REVISION GRANTED BY SECTION 263 TO THE LEARNED COMM ISSIONER HAVE FOUR ITA NO.794/AHD/2015 7 COMPARTMENTS. IN THE FIRST PLACE, THE LEARNED COMMI SSIONER MAY CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDINGS UNDER TH IS ACT. FOR CALLING OF THE RECORD AND EXAMINATION, THE LEARNED COMMISSI ONER WAS NOT REQUIRED TO SHOW ANY REASON. IT IS A PART OF HIS AD MINISTRATIVE CONTROL TO CALL FOR THE RECORDS AND EXAMINE THEM. THE SECOND F EATURE WOULD COME WHEN HE WILL JUDGE AN ORDER PASSED BY AN ASSESSING OFFICER ON CULMINATION OF ANY PROCEEDINGS OR DURING THE PENDEN CY OF THOSE PROCEEDINGS. ON AN ANALYSIS OF THE RECORD AND OF TH E ORDER PASSED BY THE ASSESSING OFFICER, HE FORMED AN OPINION THAT SUCH A N ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BY THIS STAGE THE LEARNED COMMISSIONER WAS NOT REQUIRED THE ASSIS TANCE OF THE ASSESSEE. THEREAFTER THE THIRD STAGE WOULD COME. TH E LEARNED COMMISSIONER WOULD ISSUE A SHOW CAUSE NOTICE POINTI NG OUT THE REASONS FOR THE FORMATION OF HIS BELIEF THAT ACTION U/S 263 IS REQUIRED ON A PARTICULAR ORDER OF THE ASSESSING OFFICER. AFTER TH IS STAGE THE OPPORTUNITY TO THE ASSESSEE WOULD BE GIVEN. THE LEARNED COMMISS IONER HAS TO CONDUCT AN INQUIRY AS HE MAY DEEM FIT. AFTER HEARIN G THE ASSESSEE, HE WILL PASS THE ORDER. THIS IS THE 4TH COMPARTMENT OF THIS SECTION. THE LEARNED COMMISSIONER MAY ANNUL THE ORDER OF THE ASS ESSING OFFICER. HE MAY ENHANCE THE ASSESSED INCOME BY MODIFYING THE OR DER. HE MAY SET ASIDE THE ORDER AND DIRECT THE ASSESSING OFFICER TO PASS A FRESH ORDER. AT THIS STAGE, BEFORE CONSIDERING THE MULTI-FOLD CONTE NTIONS OF THE LD. REPRESENTATIVES, WE DEEM IT PERTINENT TO TAKE NOTE OF THE FUNDAMENTAL TESTS PROPOUNDED IN VARIOUS JUDGMENTS RELEVANT FOR JUDGING THE ACTION OF THE CIT TAKEN U/S 263. THE ITAT IN THE CASE OF MRS. KHATIZA S. OOMERBHOY VS. ITO, MUMBAI, 101 TTJ 1095, ANALYZED I N DETAIL VARIOUS AUTHORITATIVE PRONOUNCEMENTS INCLUDING THE DECISION OF HONBLE ITA NO.794/AHD/2015 8 SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES 243 ITR 83 AND HAS PROPOUNDED THE FOLLOWING BROADER PRINCIPLE TO JUDGE THE ACTION OF CIT TAKEN UNDER SECTION 263. (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. BOTH THE CONDITIONS MUST BE FULFILLED. (II) SEC. 263 CANNOT BE INVOKED TO CORRECT EACH AND EVER Y TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO AND IT WAS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTIO N WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SUFFICE THE REQUIREMENT OF ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORD ER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDIC IAL TO THE INTERESTS OF THE REVENUE AND IF THE AO HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE. IF CANN OT BE TREATED AS AN ERRONEOUS ORDER, UNLESS THE VIEW T AKEN BY THE AO IS UNSUSTAINABLE UNDER LAW (VI) IF WHILE MAKING THE ASSESSMENT, THE AO EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINE T HE INCOME, THE CIT, WHILE EXERCISING HIS POWER UNDER S 263 IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIMATED BY THE AO. (VII) THE AO EXERCISES QUASI-JUDICIAL POWER VESTED IN HIS AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH L AW AND ARRIVE AT A CONCLUSION, SUCH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEE STRATIFIED WITH THE CONCLUSION. ITA NO.794/AHD/2015 9 (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER S . 263 MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE AO HAS MADE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND T HE ASSESSEE HAS GIVEN DETAILED EXPLANATION BY A LETTER IN WRITING AND THE AO ALLOWS THE CLAIM ON BEING SATISF IED WITH THE EXPLANATION OF THE ASSESSEE, THE DECISION OF THE AO CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUS E IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSI ON IN THAT REGARD. 8. APART FROM THE ABOVE PRINCIPLES, WE DEEM IT APPR OPRIATE TO MAKE REFERENCE TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUN BEAM AUTO REPORTED IN 227 CTR 113 AND G EE VEE ENTERPRISES LTD VS. ADDL. COMMISSIONER OF INCOME TA X (99 ITR 375). IN THE CASE OF SUN BEAM AUTO, THE HON'BLE HIGH COUR T HAS POINTED OUT A DISTINCTION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IF THERE IS A LACK OF ENQUIRY, THEN THE ASSESSMENT ORDER CAN BE B RANDED AS ERRONEOUS. THE FOLLOWING OBSERVATIONS OF THE HON'BLE DELHI HIG H COURT ARE WORTH TO NOTE: 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE COUNSEL ON THE OTHER SIDE AND HAVE GONE THROUGH THE RECORDS. THE FIRST ISSUE THAT ARISES FOR OUR CONSID ERATION IS ABOUT THE EXERCISE OF POWER BY THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263 OF THE INCOME-TAX ACT. AS NOTED ABOVE, THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER , THE ASSESSING OFFICER DID NOT CONSIDER THIS ASPECT SPEC IFICALLY WHETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON THE ASSESS MENT ORDER WHICH APPARENTLY DOES NOT GIVE ANY REASONS WH ILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDIT URE. HOWEVER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND ON THE ISSUE. THERE ARE JUDGMENTS GALORE LAYING DOWN THE P RINCIPLE THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS NOT ITA NO.794/AHD/2015 10 REQUIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF M IND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVE NUE EXPENDITURE. LEARNED COUNSEL FOR THE ASSESSEE IS RI GHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINC TION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE, THAT WOULD NOT BY ITSELF, GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UN DER SECTION 263 OF THE ACT, MERELY BECAUSE HE HAS DIFFE RENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF INQUIRY, THAT SUCH A COURSE OF ACTION WOULD BE OPEN. 9. IN THE CASE OF GEE VEE ENTERPRISE VS. COMMISSION ER OF INCOME TAX REPORTED IN 99 ITR PAGE 375, THE HONBLE COURT HAS EXPOUNDED THE APPROACH OF LD. ASSESSING OFFICER WHILE PASSING ASS ESSMENT ORDER. THE OBSERVATION OF THE HONBLE COURT ON PAGES 386 OF JO URNAL READ AS UNDER:- IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER INQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE INCOM E-TAX OFFICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE INCOME-TA X OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE ST ATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. THE POSITION AND FUNCTION O F THE INCOME-TAX OFFICER IS VERY DIFFIDENT FROM THAT OF A CIVIL COUR T. THE STATEMENT MADE IN A PLEADING PROVED BY THE MINIMUM AMOUNT OF EVIDE NCE MAY BE ADOPTED BY A CIVIL COURT IN THE ABSENCE OF ANY REBU TTAL. THE CIVIL COURT IS NEUTRAL. IT SIMPLY GIVES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFORE IT. THE INCOME-TAX OFF ICER IS NOT ONLY ON ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF THE RETURN WHICH IS APPARENTLY IN ORDER BUT CALLED FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY IT IS BECAUSE IT IS INCUMBENT ON THE INCOM E-TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MADE SUCH AN INQUIRY PRUDENT THAT THE WORD E RRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN EN QUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT B EEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. ITA NO.794/AHD/2015 11 10. IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE F ACTS OF THE PRESENT CASE. ACCORDING TO THE LD.COMMISSIONER, DHARTI VI KAS COOP. HOUSING SOCIETY WAS GIVEN SANCTION FOR THE DEVELOPMENT OF P ROJECT BY AUDA ON 30.3.2007. THE LAND ON WHICH SCHEME OF RESIDENTIAL UNITS WERE PUT UP BELONGED TO DHARTI VIKAS COOP. HOUSING SOCIETY, AND IT HAD APPLIED FOR DEVELOPMENT OF HOUSING SCHEME ON 10.4.2006. IT GOT PERMISSION IN ITS NAME ON 30.3.2007 FROM AUDA. THE ASSESSEE HAD CONT ENDED THAT IT HAS ENTERED INTO TWO AGREEMENTS WITH DHARTI VIKAS COOP. HOUSING SOCIETY ON 12.4.2007. PRIOR TO THE ENTRANCE OF AGREEMENT, THERE WAS AN ORAL CONSENT BETWEEN BOTH THE PARTIES. THE LD.COMMISSION ER HAS REJECTED THIS PLEA OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE HAS ALLEGED PURCHASED OF SUBSTANTIAL RIGHT INCLUDING DEVELOPMENT RIGHTS F OR RS.1,19,50,197/-. THE AO HAS NOT VERIFIED WHAT IS THE TREATMENT GIVEN BY THE DHARTI VIKAS COOP. HOUSING SOCIETY TO THE RECEIPT OF RS.1,19,50, 197/-. ACCORDING TO THE LD.COMMISSIONER A NOTICE UNDER SECTION 133(6) O F THE ACT OUGHT TO HAVE BEEN ISSUED BY THE AO DURING THE ASSESSMENT PR OCEEDINGS. THUS, HE HARBOURED A BELIEF THAT NO PROPER INQUIRY WAS CO NDUCTED BY THE AO. NO DOUBT, THE ASSESSMENT ORDER IS RUNNING INTO ONE- AND-HALF PAGES, BUT PERUSAL OF THE ASSESSMENT ORDER WOULD INDICATE THAT THE AO HAS CALLED FOR THE DETAILS FROM THE ASSESSEE, AND THE ASSESSEE HAS SUBMITTED DETAILS VIDE ITS REPLY DATED 3.12.2012, 4.12.2012 AND 10.12.2012 . THEREAFTER, THE AO HAS DIRECTED THE ASSESSEE TO SUBMIT THE DETAILS EXH IBITING COMPARISON BETWEEN THE FACTS OF THE ASSESSEE VIS--VIS THAT OF RADHE DEVELOPERS BEFORE THE HONBLE HIGH COURT. THE ASSESSEE HAS SU BMITTED REPLY ON 20.12.2012. COPY OF THIS REPLY HAS BEEN PLACED ON PAGE NO.51 OF THE PAPER BOOK. IN THIS REPLY, THE ASSESSEE HAS DISCLO SED THE FOLLOWING FACTS: ITA NO.794/AHD/2015 12 SR. NO. CASE BEFORE HIGH COURT ASSESSEE COMPANYS CASE 1 THE ASSESSEE COMPANY HAD CLAIMED DEDUCTION UNDER SECTION 80IB(10) OF THE INCOME TAX ACT, 1961 ON THE PREMISE THAT SUCH INCOME WAS DERIVED FROM THE BUSINESS OF THE UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY(AS PER PARA 3 OF ORDER) IN THE PRESENT CASE ALSO, THE HOUSING PROJECT IS APPROVED ON 30/03/2007 AND ASSESSEE COMPANY HAS DERIVED FROM BUSINESS OF UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTED. 2 TO EXECUTE SUCH HOUSING PROJECT, THE ASSESSEE COMPANY HAD ENTERED INTO A DEVELOPMENT AGREEMENT WITH VINODBHAI NATHABHAI PATEL (HUF) AND OTHERS AS PARTY OF THE FIRST PART AND HEIRS OF DECEASED AMBALAL MOTIBHAI PATEL AS PARTY OF THE SECOND PART. IN THE SAID DEVELOPMENT AGREEMENT DATED 18.5.2000, THE ASSESSEE COMPANY WAS REFERRED AS A PARTY OF THE THIRD PART. (AS PER PARA 3 OF ORDER) THE ASSESSEE COMPANY HAS ALSO ENTERED IN TO TWO DEVELOPMENT AGREEMENTS WITH SOCIETY IN PARA 1 HEREIN ABOVE. 3 RELEVANT TERMS AND CONDITIONS OF DEVELOPMENT AGRE EMENT (PARA 25 OF ORDER) (I) '3. THE PARTY OF THE THIRD PART IS CONNECTED WITH THE CONSTRUCTION OF BUSINESS SINCE MANY YEARS AND HAVE EXPERIENCE OF CONSTRUCTING RESIDENTIAL HOUSES. ON TOP OF PAGE NO 4 OF THE DEVELOPMENT AGREEMENT , IT HAS BEEN MENTIONED THAT ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF LAND AND THEY HAVE KNOWLEDGE OF CONSTRICTION AND DEVELOPMENT OF LAND & BUILDING ALONG WITH PROJECT CONSULTANT, ENGINEERS, CONTRACTORS, SUBCONTRACTORS, ARCHITECT ETC. (II) 4. WITH THE CONSENT OF THE PARTY OF THE FIRST AND SECOND PART, THE PARTY OF THE THIRD PART AS A DEVELOPER AND BUILDER WANTS TO DO A PROJECT/SCHEME OF CONSTRUCTING RESIDENTIAL HOUSES HAVING AREA LESS THAN 1500 SQ.FT. FOR THE MIDDLE CLASS SOCIETY IN THE SECOND PARA OF PAGE NO 4 IT HAS BEEN MENTIONED THAT SOCIETY HAS ENTERED INTO DEVELOPMENT AGREEMENT WITH ASSESSEE COMPANY FOR WHICH ORAL AGREEMENT IS ALSO EXECUTED. (III) 5. THE PARTY OF THE FIRST AND THE PARTY OF THE THIRD PART HAVE EXECUTED ONE AGREEMENT OF SALE ON 18-05-2000 ACCORDINGLY ON THAT BASIS THE RIGHTS OF AGREEMENT OF SALE DATED 7-9-91 AT THE RATE OF RS. 100/- PER SQ.FT. SUBJECT TO OTHER CONDITIONS WRITTEN THEREIN ARE AS PER CLAUSE 33 OF AGREEMENT, SALE OF LAND IS AGREED AT RS 47,19,550 AND 31,46,700 ON WHICH STAMP DUTY @ 1% IS REQUIRED TO BE PAID AND SAME IS TO BE BORNE BY DEVELOPER. ITA NO.794/AHD/2015 13 DECIDED TO BE PURCHASED BY THE PARTY OF THE THIRD PART. (IV) 6. IN FACT IN THE PARTY OF THE FIRST AND SECOND PART CONFIRMING PARTY HAVE NO NECESSARY TECHNICAL KNOWLEDGE AND SKILL PASS THROUGH THE SAID SCHEME TO ARRANGE FOR CONSTRUCTING RESIDENTIAL HOUSES HAVING AREA LESS THAN 1500 SQ.FT. FOR THE MIDDLE CLASS SOCIETY AND ALSO HAVE NO FINANCE TO INVEST AS PER THE SIZE OF SCHEME AND TO REGISTER THE MEMBERS FOR THAT REQUIRED ALERTNESS AND SKILL BEING ABSENT THEY THEMSELVES ARE NOT IN A POSITION TO PLACE A PROJECT OR SCHEME ON THE LAND MENTIONED IN SCHEDULE IN SUCH CIRCUMSTANCES TO THE PARTY OF THE THIRD PART OVER AND ABOVE THE RIGHT TO PURCHASE THE RIGHTS OF AGREEMENT OF SALE ON DT.18-05-2000 THEY HAVE ALSO DECIDED TO GIVE ALL RIGHTS ALONG WITH CONSTRUCTING AND DEVELOPING ON THE SAID LAND MENTIONED IN SCHEDULE BY THIS AGREEMENT DT.18- 05-2000. AT BOTTOM OF PAGE NO OF 3 OF AGREEMENT, IT HAS BEEN MENTIONED THAT SOCIETY DOES NOT HAVE KNOWLEDGE OF CONSTRUCTION OF BUILDING AND EVEN THEY DONT KNOW THE SUPPLIERS OF RAW MATERIALS AND DOES NOT HAVE KNOWLEDGE OF ATTRACTING PROPOSED BUYERS AND CONSIDERING THE SAME, DEVELOPMENT AGREEMENT HAS BEEN EXECUTED IN FAVOUR OF ASSESSEE COMPANY. FURTHER AT CLAUSE NO 19, IT HAS BEEN STATED THAT SOCIETY HAS NO SUFFICIENT FUNDS FOR DEVELOPMENT AND CONSTRUCTION HENCE DEVELOPER HAS TO INVEST AT THEIR OWN RISKS IN SCHEME. AS PER CLAUSE 1 OF THE AGREEMENT, FOR THE PURPOSE OF DEVELOPMENT OF PROJECT, THE DIRECT POSSESSION OF THE LAND AS PER LAW HAS BEEN GIVEN TO ASSESSEE COMPANY ALONG WITH ALL POWER AND RIGHTS. (V) 9. THE SAID DEVELOPER CUM BUILDING CONTRACTOR BY DOING DISCUSSIONS WITH THE PARTY OF THE FIRST AND SECOND PART CONFIRMING PARTY, TO BRING THE SCHEME IN REALITY OF CONSTRUCTING HOUSES AND GET THROUGH IT, HAS TO DO CONSTRUCTION ACCORDING TO NECESSARY PLANS, DRAWINGS, SPECIFICATIONS AND MAPS. ETC. GO PASSED FROM VADODARA MUNICIPAL CORPORATION. AT CLAUSE 2 OF THE DEVELOPMENT AGREEMENT IT HAS BEEN STATED THAT ASSESSEE COMPANY DEVELOPER AFTER DISCUSSION WITH SOCIETY HAS PREPARED BUILDING CONSTRUCTION PLAN AFTER APPOINTING ARCHITECT AND IF REQUIRED, SUCH PLAN WILL BE REVISED AND ASSESSEE COMPANY DEVELOPER HAS TO GET APPROVAL OF SUCH PLAN FROM AHMEDABAD URBAN DEVELOPMENT AUTHORITY. THE ASSESSEE COMPANY DEVELOPER HAS TO CONSTRUCT BUILDING WORK ON LAND AS PER PLAN AND SPECIFICATION PREPARED BY ARCHITECT. THE ASSESSEE COMPANY DEVELOPER AT ITS OWN RESPONSIBILITIES CAN DIVIDE LAND INCLUDING INTERNAL ROADS AND MARGINS AND CONSTRUCT COMMON PLOT FROM BUYERS OF UNITS AS PER REQUIREMENT AND DEMAND OF SCHEME. (VI) OTHER IMPORTANT CONDITIONS OF CLAUSE 11 OF AGREEMENT AS DISCUSSED IN RADHE CASE. AT TOP OF PAGE NO4 OF THE AGREEMENT, IT HAS BEEN MENTIONED THAT DEVELOPER CAN CONSTRUCT WITH THE HELP OF ITA NO.794/AHD/2015 14 (1) TO APPOINT ARCHITECT ENGINEERS, LEGAL ADVISOR AND SUCH PROFESSIONALS WHOSE SERVICES FOR COMPLETING THIS SCHEME IS NECESSARY AND BY DECIDING THEIR AREA OF OPERATION TO FIX-UP THEIR REMUNERATION AND FEES ETC. AND FOR THAT TO BEAR ALL EXPENSES, TO EXECUTE AGREEMENTS SO THAT THE CONSTRUCTION WORK OF THIS PROJECT CAN BE COMPLETED SUCCESSFULLY. ENGINEERS, CONTRACTORS CONSULTANTS, SKILLED PERSONS, STRUCTURAL ENGINEERS, LABOUR CONTRACTORS, ELECTRICIANS, PLUMBING CONTRACTORS, LABOURS ETC AND DEVELOPER IS AWARE ABOUT SERVICES PROVIDED BY SUCH PERSONS. 3)THE SAID DEVELOPER CUM BUILDING CONTRACTOR IS AUTHORIZED TO ADMIT THE PERSONS WHO ARE WILLING TO JOIN IN THE SCHEME TO GET THE HOUSES OF FIXED AREA AND IN THIS MANNER TO ADMIT THE RESPECTIVE MEMBER IN THE SCHEME OR AT THE TIME OF ADMISSION OF SUCH MEMBER AS PER THE SCHEME THE FIXED AMOUNT OF CONTRIBUTION OF CONSTRUCTION AND OTHER AMOUNTS AND INCIDENTAL EXPENSES THAT THE ADMITTING MEMBERS SHALL HAVE TO PAY AS ADMISSION FEES THE RECEIPT OF DEPOSIT OR A CLEAR RECEIPT OF AMOUNT CONTRIBUTION SHALL HAVE TO BE GIVEN, MOREOVER THE DEVELOPER CUM BUILDING CONTRACTOR HAS GIVEN FULL RIGHT AND AUTHORITY ALSO TO DECIDE THE PRICE OF HOUSES OF THIS SCHEME AND TO EXECUTE NECESSARY AGREEMENTS WITH THE PURCHASERS OF HOUSES. AT CLAUSE NO 22 OF THE AGREEMENTS, IT HAS BEEN STATED THAT ASSESSEE COMPANY DEVELOPER IS ENTITLED TO FIX SALE PRICE OF HOUSING UNIT TO MEMBERS AND PROPOSED UNIT HOLDERS TO SCHEME IN LIEU OF THEIR ALLOTMENT AFTER CONSIDERING FACTS AND CIRCUMSTANCES. FURTHER, DEVELOPER IS ENTITLED TO FIX THE MODE OF PAYMENT AND TIME ETC. THE DEVELOPER IS ENTITLED TO RECEIVE MONEY FROM BUYERS AS PER THEIR FINANCIAL REQUIREMENTS HENCE VALUE OF UNITS TO BE ALLOTTED TO BUYERS MAY BE DIFFERENT CONSIDERING MODE OF PAYMENT, TIME OF PAYMENT, AREA OF UNITS, LOCATION & SITUATION OF UNIT ETC. FURTHER, WHEN DEVELOPER HAS DECIDED DIFFERENT RATES, SOCIETY OR OTHER MEMBER WILL NOT OBJECT AGAINST SAME. AT CLAUSE NO 24, IT HAS BEEN AGREED THAT ASSESSEE COMPANY IS ENTITLED TO RECEIVE MONEY TOWARDS SCHEME. (7)DEVELOPER CUM BUILDING CONTRACTOR IS AUTHORIZED, AS AND WHEN NECESSARY TO COMPLETE THE SCHEME FOR FINANCIAL ARRANGEMENT AND FACILITY CAN BORROW IT FROM ANY FINANCIAL INSTITUTE BANK OR FINANCIER, SHROFF AND PRIVATE PARTY AND FOR THAT TO EXECUTE REQUIRED PROMISSORY NOTE, RECEIPT, HUNDI, MORTGAGE DEED AND OTHER NEGOTIABLE INSTRUMENTS AS PER CLAUSE 17 OF THE AGREEMENT, FOR THE TIMELY COMPLETION OF THE SCHEME, AS AND WHEN REQUIRED, DEVELOPER CAN MORTGAGE THE LAND AND CONSTRUCTION ON SUCH LAND FOR OBTAINING FINANCE REQUIRED FOR THE PROJECT. ITA NO.794/AHD/2015 15 10) TO COMPLETE THIS SCHEME IN THE PRESCRIBED TIME PERIOD AND FOR THE PURPOSE OF ADMITTING THE MEMBERS IN THE SCHEME, TO GIVE ADVERTISEMENT OF THE TOTAL OR PARTIAL SCHEME IN LOCAL NEWS PAPER OR TO PRINT OUT ITS BOOKLET, TO PLACE SIGN BOARD, NEON BOARD ON SITE THE RIGHTS AND AUTHORITIES ARE HEREBY GIVEN TO THE DEVELOPER CUM BUILDING CONTRACTOR. AS PER CLAUSE 15 OF THE DEVELOPMENT AGREEMENT, IT HAS BEEN AGREED THAT IN ORDER TO ATTRACT AND INVITE THE PROPOSED BUYERS FOR UNITS DEVELOPED, DEVELOPER CAN GIVE ADVERTISEMENT IN PAMPHLET, BROACHERS, MAGAZINE, DAILY NEWS PAPERS ETC AND FURTHER SIMPLE SIGNBOARD AND NEON BOARD CAN BE KEPT AT THE SITES. FURTHER, DEVELOPER CAN ADVERTISE SCHEME IN DIFFERENT FORMS. (11)THAT THE SAID DEVELOPER CUM BUILDING CONTRACTOR AS PER THIS SCHEME, WHATEVER CONSTRUCTION HE SHALL DO ON THE LAND DESCRIBED IN SCHEDULE SHALL BE AUTHORIZED TO ALLOT TO THE RESPECTIVE MEMBER AND ALSO OUT OF THIS LAND DEDUCTING THE CONSTRUCTED LAND AND DEDUCTING THE LAND OF MARGIN AND PASSAGE WHATEVER EXCESS LAND THAT SHALL REMAIN THEN DEVELOPER CUM BUILDING CONTRACTOR SHALL HAVE RIGHT TO ALLOT THAT LAND. AS PER CLAUSE 22 OF THE AGREEMENT, IT HAS BEEN AGREED THAT ASSESSEE COMPANY DEVELOPER IS ENTITLED TO FIX SALE PRICE OF HOUSING UNIT TO MEMBERS AND PROPOSED UNIT HOLDERS TO SCHEME IN LIEU OF THEIR ALLOTMENT OF UNIT. FURTHER AS PER CLAUSE 27 OF THE AGREEMENT, IT HAS BEEN AGREED THAT TILL THE DATE WHEN ENTIRE CONSTRUCTION ON SAID LAND IS COMPLETED AND ASSESSEE COMPANY RECEIVES THE MONEY FROM DIFFERENT MEMBERS, THE POSSESSION OF IMPUGNED LAND CONSTRUCTION THEREON WILL BE WITH ASSESSEE COMPANY. FURTHER, DEVELOPER IS ENTITLED TO DEAL ANY PART OF SUCH LAND AND DISPOSE/TRANSFER IT AS PER ITS OWN WILL. 12) THAT BY THE SAID THE PARTY OF THE FIRST AND SECOND PART HAVE GIVEN ALL THE AUTHORITIES TO DEVELOPER CUM BUILDING CONTRACTOR, FOR COMPLETING THE SCHEME OF CONSTRUCTING RESIDENTIAL HOUSES AND INCIDENTAL WORK THERE TO AND THEREFORE THE SAID DEVELOPER CUM BUILDING CONTRACTOR HAS TO COMPLETE THIS SCHEME AS PER HIS OWN TALENTS, WHATEVER HE DEEMS PROPER AS PER HIS DISCRETION AND DECISIONS. THE ACCOUNTS RIGHT FROM THE IMPLEMENTATION OF THIS AGREEMENT UP TO THE COMPLETION OF THE PROJECT, DEVELOPER CUM BUILDING CONTRACTOR HAS TO MAINTAIN IN HIS OFFICE IN HIS BOOKS OF ACCOUNTS AND IT IS THE LIABILITY AND RESPONSIBILITY OF DEVELOPER AT CLAUSE 2 OF THE DEVELOPMENT AGREEMENT IT HAS BEEN STATED THAT ASSESSEE COMPANY DEVELOPER AFTER DISCUSSION WITH SOCIETY HAS PREPARED BUILDING CONSTRUCTION PLAN AFTER APPOINTING ARCHITECT AND IF REQUIRED, SUCH PLAN WILL BE REVISED AND ASSESSEE COMPANY DEVELOPER HAS TO GET APPROVAL OF SUCH PLAN FROM AHMEDABAD URBAN DEVELOPMENT AUTHORITY . THE ASSESSEE COMPANY DEVELOPER HAS TO CONSTRUCT BUILDING WORK ON LAND AS PER PLAN AND SPECIFICATION PREPARED BY ARCHITECT. THE ASSESSEE COMPANY DEVELOPER AT ITS OWN RESPONSIBILITIES CAN DIVIDE LAND INCLUDING INTERNAL ROADS AND MARGINS AND CONSTRUCT COMMON PLOT FROM BUYERS OF UNITS AS PER REQUIREMENT AND DEMAND OF SCHEME. ITA NO.794/AHD/2015 16 FURTHER AT CLAUSE 3 OF THE AGREEMENT, IT HAS BEEN AGREED THAT FOR DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT, ASSESSEE COMPANY WILL PREPARE CONSTRUCTION PLAN, ELEVATION, SECTION, DRAWINGS ETC AND WHATEVER MATERIAL AND SPECIFICATION WILL BE FINALIZED AFTER DISCUSSION WITH ARCHITECT AND ALL THE PERMISSION REQUIRED FROM NECESSARY AUTHORITIES WILL BE TAKEN BY IT ONLY. (14) THE LAND DESCRIBED IN SCHEDULE BELOW AND THE CONSTRUCTION DONE ON IT, ITS ACTUAL POSSESSION SHALL BE WITH DEVELOPER CUM BUILDING CONTRACTOR TILL THE COMPLETION OF THIS SCHEME AND MOREOVER TILL THE TOTAL IMPLEMENTATION OF THIS AGREEMENT ON THE SAID LAND AND THE CONSTRUCTION OVER IT THERE SHALL BE A CONTRACTUAL LIEN OF THE DEVELOPER CUM BUILDING CONTRACTOR. IN THE CLAUSE 1 OF THE AGREEMENT, IT HAS BEEN STATED THAT ASSESSEE COMPANY HAS BEEN GIVEN THE DIRECT AND VACANT POSSESSION OF LAND FOR THE DEVELOPMENT OF PROJECT. FURTHER AS PER CLAUSE 27 OF THE AGREEMENT, IT HAS BEEN AGREED THAT TILL THE DATE WHEN ENTIRE CONSTRUCTION ON SAID LAND IS COMPLETED AND ASSESSEE COMPANY RECEIVES THE MONEY FROM DIFFERENT MEMBERS, THE POSSESSION OF IMPUGNED LAND CONSTRUCTION THEREON WILL BE WITH ASSESSEE COMPANY. AT CLAUSE NO 28, IT HAS BEEN STATED THAT TILL THE COMPLETION AND TRANSFER OF CONSTRUCTION OVER THE LAND, OWNERSHIP OF SUCH CONSTRUCTION WILL REST UPON DEVELOPER. FURTHER, TILL AMOUNT IS NOT RECEIVED TOWARDS ANY UNIT OR NOT RECOVERED, DEVELOPER WILL HAVE CHARGE AND LIEN OVER THAT UNIT AND PROPERTY OF PROJECT. 19 REGARDING THE LAND, HOUSE AND COMMON FACILITIES NECESSARY DEEDS IN FAVOUR OF THE PERSONS PURCHASING THE HOUSES IN THE SCHEME ARE TO BE EXECUTED BY ALL THE THREE PARTIES JOINT IN CLAUSE NO 28 OF THE AGREEMENT, IT HAS BEEN STATED THAT SOCIETY HAS GIVEN ALL THE RIGHTS OF ALLOTMENT OR TRANSFER TO DEVELOPER FOR VARIOUS UNITS CONSTRUCTED IN PROJECT ALONG WITH OPEN & MARGIN LAND, TERRACE, PARKING PLACE ETC. (24) THE AMOUNT OF TOTAL COLLECTION RECEIVED FROM PERSON BECOMING MEMBER IN THIS SCHEME OUT OF THAT THE AMOUNT SHALL BECOME PAYABLE TO THE PARTY OF THE FIRST THAT IS PAID TO AS PER CLAUSE 26 OF THE DEVELOPMENT AGREEMENT, DEVELOPER IS ENTITLED/RESPONSIBLE TO RECEIVE OR BEAR ANY INCOME, LOSS, PROFIT ARISING FROM DEVELOPMENT OF PROJECT WHICH ITA NO.794/AHD/2015 17 SECOND PART BY THEM AND TO THE PARTY OF THE FIRST SHALL BE ENTITLED TO RECEIVE CONSIDERATION AS PER THE AGREEMENT DT.18-5-2000 AND AFTER DEDUCTING THAT REMAINING ALL AMOUNT SHALL BE RECEIVED BY THE PARTY OF THIRD PART AS HIS REMUNERATION.' MEANS THAT OUT OF AMOUNT IS RECEIVED FROM MEMBERS, AMOUNT PAYABLE TO SOCIETY WILL BE REDUCED AND THEREAFTER WHATEVER WILL BE SURPLUS/ LOSS, SUCH PROFIT OR LOSS WILL BE COMPLETELY BORN BY DEVELOPER AND SOCIETY WILL NOT BE RESPONSIBLE/ENTITLED TO SUCH AMOUNT. FOR THE PURPOSE OF COMPUTING PROFIT OR LOSS, DEVELOPER CAN ADOPT ANY ACCOUNTING METHOD FOR WHICH SOCIETY HAS NOT OBJECTION. 11. OBJECTION OF THE LD.COMMSSIONER IS THAT THE AO HAS NOT ISSUED NOTICE TO DHARTI VIKAS COOP. HOUSING SOCIETY IN ORD ER TO INQUIRE OF THE TREATMENT THAT CONCERN HAS MADE TO THE RECEIPT OF R S.1,19,50,197/- RECEIVED FROM THE ASSESSEE. HOW THIS QUESTION IS R ELEVANT IN THE ASSESSMENT OF THE ASSESSEE. THE STAND OF THE ASSES SEE IS THAT IT HAS PAID SUBSTANTIAL AMOUNT OF RS.1.19 CRORES FOR PURCHASE O F DEVELOPMENT RIGHTS AND OF OTHER RIGHTS. WHATEVER MAY BE TREATMENT GIV EN BY DHARTI VIKAS COOP. HOUSING SOCIETY TO THIS RECEIPT THAT WOULD NO T CHANGE THE CHARACTER OF THE TRANSACTION. THUS, THIS REASONING GIVEN BY THE CIT FOR TAKING ACTION UNDER SECTION 263 IS NOT A RELEVANT R EASONING. 12. AT THE TIME OF HEARING, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR DEDUCTION WAS CLAIMED BY THE ASSESSEE IN THE ASSTT.YEAR 2009-10. IT WAS DENIED TO THE ASSESSEE BY THE ITO. BUT ON APPEAL, THE LD.CIT(A) HAS ALLOWED THE DEDUCTION TO THE ASSESSEE . DISSATISFIED WITH THE ORDER OF THE LD.CIT(A), THE REVENUE HAS FILED A PPEAL BEFORE THE TRIBUNAL VIDE ITA NO.1197/AHD/2012. THE TRIBUNAL H AS DISMISSED THE APPEAL OF THE REVENUE VIDE ORDER DATED 2.3.2016. A CCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, IN A WAY, THE ISSUE IN DI SPUTE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL . HE EMPHASISED THAT ITA NO.794/AHD/2015 18 FOR SAKE OF ARGUMENT, EVEN IF ON THE GROUND OF NON- CONSIDERATION OF ANY PARTICULAR ISSUE AT THE TIME OF ASSESSMENT PROCEEDI NGS, THIS ORDER UNDER SECTION 263 IS BEING UPHELD, THEN ULTIMATELY, FOLLO WING THE ORDER OF THE ITAT, THE AO HAS TO GRANT DEDUCTION TO THE ASSESSEE IN THE SUBSEQUENT YEARS. WHERE IS THE PREJUDICE TO THE REVENUE ? TH E JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. D.G. GOPALA GOWDA REPORTED IN 354 ITR 501 WAS REFERRED BY THE L D.COUNSEL FOR THE ASSESSEE. 13. THE LD.CIT_DR ON THIS ISSUE CONTENDED THAT WHEN ACTION UNDER SECTION 263 OF THE ACT WAS INITIATED, ORDER OF THE TRIBUNAL WAS NOT IN THE PICTURE. THE LD.CIT WAS CONSCIOUS OF THIS FACT, AN D THEREFORE, HAS OBSERVED THAT THE ORDER OF THE CIT IS UNDER CHALLEN GE BEFORE THE TRIBUNAL BY THE REVENUE. 14. ON CONSIDERATION OF ALL THESE ASPECTS, WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY THE ORDER OF THE ITAT. THE FINDING OF THE TRIBUNAL IN THE ASSTT.YEA R 2009-10 READS AS UNDER: 4. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO DELETED THE ADDITION BY H OLDING AS UNDER: '3.7 IN THE PRESENT CASE, APPELLANT HAS FULFILLED A LL THE BASIC CONDITIONS LAID DOWN UNDER SECTION 80IB(10) WHICH I S SUMMARIZED AT PARA 3.1 HEREIN ABOVE AND EVEN ASSESS ING OFFICER HAS NOT DISPUTED THESE FACTS. THE APPELLANT HAS ENTERED INTO TWO DEVELOPMENT AGREEMENTS WITH SOCIET Y FOR DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT IN LAND AREA OF 7485 SQ. MTRS. AND AS PER SUCH AGREEMENTS, APPELLANT HAS ACQUIRED IMPUGNED LAND ALONG WITH POS SESSION AT AGREED CONSIDERATION OF RS. 1,19,50,197 WHICH IN CLUDES STAMP CHARGES BEING 1% OF THE LAND. AS PER THE DEVE LOPMENT AGREEMENTS ENTERED WITH SOCIETY, SOCIETY IS ENTITLE D TO VALUE ITA NO.794/AHD/2015 19 OF LAND AS STATED HEREIN ABOVE AND ALL THE PROFIT/G AINS AND LOSSES, IF ANY, ARISING ON THE COMPLETION OF THE PR OJECT HAS TO BE BORNE BY APPELLANT. THIS FACT PROVES BEYOND DOUB T THAT ASSESSEE HAS BECOME DE-FACTO OWNER OF THE LAND AND TOOK THE FULL RISK OF EXECUTING THE HOUSING PROJECT AND THER EBY MAKING PROFIT/LOSS, AS THE CASE MAY BE. FURTHER, AS PER VA RIOUS CLAUSES OF DEVELOPMENT AGREEMENT ENTERED WITH THE S OCIETY, IT HAS BEEN EXPLICITLY STATED THAT SOCIETY HAS GIVE N DIRECT AND VACANT POSSESSION OF LAND TO THE DEVELOPER AND EVEN TILL COMPLETION OF ENTIRE HOUSING PROJECT WHICH ALSO INC LUDES RECEIPT OF MONEY FROM THE BUYERS OF THE HOUSING UNI TS, THE POSSESSION OF THE LAND AND ITS SUPERSTRUCTURE WILL BE OF APPELLANT-DEVELOPER WHICH ALSO SUBSTANTIATES THE CL AIM OF THE APPELLANT THAT IT HAS BECOME OWNER OF THE LAND AS PER SECTION 2(47) OF INCOME TAX ACT, 1961, READ WITH SECTION 53A OF TRANSFER OF PROPERTY ACT. THESE FACTS OF APPELLANT ARE SIMILAR TO THE FACT OF THE CASE BEFOR E THE HON'BLE GUJARAT HIGH COURT IN CASE OF RADHE DEVELOP ERS REFERRED HEREIN ABOVE WHEREIN IT HAS BEEN HELD THAT WHEN DEVELOPER HAS OBTAINED THE POSSESSION OF THE LAND, IT WOULD BE THE OWNER OF THE LAND FOR THE PURPOSE OF CLAIMIN G DEDUCTION UNDER SECTION 80IB(10) OF THE ACT EVEN TH OUGH TITLE OF LAND HAS NOT PASSED TO APPELLANT. FURTHER, THE HON'BLE COURT IN VARIOUS PARAS OF THE ORDER HAS GIV EN CATEGORICAL FINDING THAT PROVISIONS OF SECTION 80IB (10) DOES NOT ENVISAGE THE OWNERSHIP OF THE LAND FOR THE PURP OSE OF CLAIMING DEDUCTION UNDERSECTION 80IB(10) OF THE ACT . IN VIEW OF THE SAME, OBSERVATION MADE BY ASSESSING OFF ICER REGARDING OWNERSHIP OF LAND CANNOT BE ACCEPTED. 3.8. ON CAREFUL CONSIDERATION OF VARIOUS CLAUSES OF THE DEVELOPMENT AGREEMENTS, IT IS EMANATING THAT - (I) IT WAS THE RESPONSIBILITY OF THE APPELLANT COMP ANY TO CARRY OUT DEVELOPMENT OF THE HOUSING PROJECT AT ITS OWN RISK AND REWARDS. (II) FURTHER, THE PLANS PREPARED FOR THE PURPOSE OF PROPOSED CONSTRUCTION OF BUILDINGS WERE PREPARED BY APPELLAN T- DEVELOPER AFTER APPOINTING ARCHITECT AND THE ENTIRE REVISED PLAN, IF ANY REQUIRED, AND BUILDING USE PERMISSION AND ALL ITA NO.794/AHD/2015 20 OTHER APPROVAL REQUIRED FOR DEVELOPMENT OF THE PROJ ECT WAS TO BE OBTAINED BY APPELLANT-DEVELOPER ONLY. (III) APPELLANT-DEVELOPER WAS ENTITLED TO FIX SALE PRICE OF HOUSING UNIT TO PROPOSED BUYERS IN LIEU OF THEIR AL LOTMENT AND EVEN IT WAS ENTITLED TO FIX THE MODE OF PAYMENT , TIME OF PAYMENT AS PER ITS OWN REQUIREMENT AND CONSIDERING THE MODE OF PAYMENT, TIME OF PAYMENT, AREA OF UNIT, LOC ATION AND SITUATION OF UNIT, APPELLANT WAS ENTITLED TO DECIDE DIFFERENT RATES FOR DIFFERENT BUYERS. IN FACT ENTIRE SALES CO NSIDERATION HAS BEEN RECEIVED BY THE APPELLANT COMPANY AND NOT BY SOCIETY. (IV) THE APPELLANT WAS ENTITLED TO SELL HOUSING UNI TS AS PER ITS OWN CONVENIENCE AND ALL THE RIGHTS OF ALLOTMENT OR TRANSFER OF VARIOUS UNITS CONSTRUCTED IN THE PROJECT ALONG W ITH OPEN AND MARGIN LAND WAS WITH APPELLANT COMPANY. IT HAS BEEN AGREED BETWEEN BOTH THE PARTIES THAT TILL THE REALI ZATION OF SALE CONSIDERATION FROM PROPOSED BUYERS, POSSESSION AND CONTRACTUAL LIEN ON SUCH UNSOLD AREA WILL BE WITH A PPELLANT COMPANY. (V) APPELLANT WAS ENTITLED TO GIVE ADVERTISEMENTS I N ANY FORM FOR THE SALE OF HOUSING UNITS AT ITS OWN COST. (VI) APPELLANT-DEVELOPER WAS ENTITLED TO MORTGAGE T HE LAND AND CONSTRUCTION ON IMPUGNED LAND ON WHICH HOUSING PROJECT HAS BEEN DEVELOPED FOR OBTAINING FINANCE, I F ANY REQUIRED FOR THE PROJECT. 3.9. IN THE PRESENT CASE, APPELLANT HAS ACQUIRED TH E IMPUGNED LAND FROM THE SOCIETY AT FIXED COST AND SO CIETY WAS NOT ENTITLED TO ANY FURTHER BENEFITS ARISING FROM D EVELOPMENT OF THE PROJECT. FURTHER, ALL THE DEVELOPMENT AND CO NSTRUCTION OF THE PROJECT WAS CARRIED OUT BY APPELLANT AT ITS OWN RISK AND HAS BORNE ALL THE EXPENDITURE LIKE MATERIAL COS T, LABOUR COST, ARCHITECT'S FEES, AUDA CHARGES, SITE EXPENSES , ADMINISTRATIVE AND OTHER EXPENSES. THE APPELLANT HA S SHOWN CLOSING WORK-IN PROGRESS AND CLOSING UN- SOLD UNITS IN ITS PROFIT & LOSS ACCOUNT, WHICH ALSO PROVES THAT OWNER SHIP OF UNSOLD UNIT IS OF APPELLANT AND NOT OF SOCIETY. FUR THER, ITA NO.794/AHD/2015 21 APPELLANT HAS RECEIVED ENTIRE SALE CONSIDERATION FR OM THE BUYERS OF THE UNITS AS PER RATES DECIDED BY IT ONLY . AT THE TIME OF EXECUTION, OF SALE DEED, APPELLANT IS ONE O F THE PARTIES TO SUCH AGREEMENT WHICH ALSO PROVES APPELLA NT IS ONE OF THE PARTIES FOR TRANSFER OF PROPERTY TO BUYER OF THE UNITS. APPELLANT HAS OBTAINED ALL THE NECESSARY PERMISSION S REQUIRED FOR COMPLETION OF THE HOUSING PROJECT AND MADE NECESSARY FINANCIAL ARRANGEMENTS FOR THE PURPOSE OF COMPLETION OF HOUSING PROJECT. EVEN THOUGH THE DEVE LOPMENT PERMISSION IS IN THE NAME OF SOCIETY, THE SAME WILL NOT LEAD TO ANY DISALLOWANCE OF DEDUCTION IN VIEW OF OBSERVA TION MADE BY THE HON'BLE GUJARAT HIGH COURT REFERRED HER EIN ABOVE AT PARA 45 OF ITS ORDER THAT ASSESSEE IS ENTI TLED TO DEDUCTION UNDER SECTION 80IB(10) EVEN WHEN TITLE OF LAND HAS NOT PASSED TO ASSESSEE AND DEVELOPMENT PERMISSI ON MAY BE OBTAINED IN THE ITA NO.1997/AHD/12 A.Y. 2009-10 (ITO VS. HINDUSTAN HOMEFINA LTD.) 5 NAME OF ORIGINAL LAN D OWNER. IN SHORT, APPELLANT HAS TAKEN FULL RISK OF E XECUTING THE HOUSING PROJECT AND WAS ENTITLED TO ALL THE PROFIT AND GAINS INCLUDING LOSSES, IF ANY, ARISING FROM SALE OF HOUS ING UNITS, WHICH PROVES BEYOND DOUBT THAT APPELLANT IS DEVELOP ER-CUM- BUILDER AND NOT A CONTRACTOR, AS OBSERVED BY THE AS SESSING OFFICER. APPELLANT HAS NOT RECEIVED ANY FIXED REMUN ERATION FROM THE SOCIETY AND IN FACT IT HAS PURCHASED THE L AND FROM THE SOCIETY AND ACQUIRED DOMINANT CONTROL OVER THE LAND. IN VIEW OF THE SAME, THE ENTIRE RISK OF INVESTMENT AND EXPENDITURE WERE THAT OF ASSESSEE AND SOCIETY FOR T HE PURPOSE OF DEVELOPMENT OF HOUSING PROJECT HAS NOT T AKEN ANY RISK BUT ACCEPTED ONLY FULL PRICE OF LAND AND NOTHI NG FURTHER. THE PROFIT AND LOSS HAS ACCRUED TO ASSESSEE HENCE EXPLANATION TO SECTION 80IB WITH RETROSPECTIVE EFFE CT FROM 1ST APRIL, 2001 HAS NO BEARING ON APPELLANT. THE FA CTS OF APPELLANT'S CASE ARE IDENTICAL WITH THE FACTS OF CA SE BEFORE THE HON'BLE GUJARAT HIGH COURT IN CASE OF RADHE DEVELOPERS AND RESPECTFULLY FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT AND ON FACTS AND CIRCUMST ANCES OF APPELLANT'S CASE, DISALLOWANCE OF DEDUCTION UNDER S ECTION 80IB(10)MADE BY ASSESSING OFFICER IS DELETED. THE R ELATED GROUND OF APPEAL IS ALLOWED.' ITA NO.794/AHD/2015 22 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 5.1 BEFORE US, LD. D.R. TOOK US THE VARIOUS FINDING OF A.O. AND SUPPORTED HIS ORDER. LD. A.R. ON THE OTHER HAND REI TERATED THE SUBMISSIONS MADE BEFORE THE LD. A.O. AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RE SPECT TO ELIGIBILITY FOR DEDUCTION U/S.80IB(10) OF THE ACT. THE CLAIM OF DEDUCTION WAS DENIED BY THE A.O. MAINLY FOR THE REA SON THAT ASSESSEE WAS NOT THE OWNER OF THE LAND AND ACCORDIN G TO HIM, THE ASSESSEE WAS MERELY A CONTRACTOR. WE FIND THAT LD. CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF ASSESSEE AND AFTER PERUSING THE DEVELOPMENT AGREEMENT HAS GIVEN A FINDING THAT ASSE SSEE HAD ACQUIRED LAND FROM THE SOCIETY AT FIXED COST AND SO CIETY WAS NOT ENTITLED TO ANY FURTHER BENEFITS ARISING FROM DEVEL OPMENT OF THE PROJECT, ALL THE DEVELOPMENT AND CONSTRUCTION OF TH E PROJECT WAS CARRIED OUT BE ASSESSEE AT ITS OWN RISK AND THE ASS ESSEE HAD BORNE ALL THE EXPENDITURES, ASSESSEE HAD RECEIVED ENTIRE SALE CONSIDERATION FROM THE BUYERS OF THE UNITS AS PER R ATES DECIDED BY IT AND ASSESSEE HAS TAKEN FULL RISK OF EXECUTING TH E HOUSING PROJECT AND THAT THE ASSESSEE WAS ENTITLED TO ALL THE PROFI T AND GAINS INCLUDING LOSSES, IF ANY, ITA NO.1997/AHD/12 A.Y. 2 009-10 (ITO VS. HINDUSTAN HOMEFINA LTD.) 6 ARISING FROM SALE OF HOUSING UNITS. HE HAS FURTHER GIVEN A FINDING THAT THE FACTS OF TH E ASSESSEE'S CASE WERE IDENTICAL TO THE FACTS OF THE CASE IN THE CASE OF RADHE DEVELOPERS 341 ITR 403, WHICH WAS DECIDED BY THE HO N'BLE GUJARAT HIGH COURT IN ASSESSEE'S FAVOUR. BEFORE US, REVENUE HAS NOT BROUGHT ON RECORD ANY MATERIAL TO CONTROVERT TH E FINDINGS OF LD. CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS, TH E GROUND OF REVENUE IS DISMISSED. 15. NEXT ASPECT CONSIDERED BY THE LD.CIT IN HIS ORD ER UNDER SECTION 263 IS THAT FLAT SOLD BY THE ASSESSEE WERE HAVING A REA OF MORE THAN 1500 SQ.FEETS, AND THEREFORE, DOES NOT ELIGIBLE FOR GRAN T OF DEDUCTION UNDER SECTION 80IB(10)(C) OF THE ACT. THE LD.COUNSEL FOR THE ASSESSEE, AT THE ITA NO.794/AHD/2015 23 TIME OF HEARING, DREW OUR ATTENTION TOWARDS PAGE NO .32 OF THE PAPER BOOK. HE POINTED OUT THAT THIS ASPECT HAS BEEN INQ UIRED BY THE AO, AND IN REPLY DATED 4.12.2012, THE ASSESSEE HAS SPECIFIC ALLY POINTED OUT BEFORE THE AO THAT EACH RESIDENTIAL UNIT IS BEING HAVING B UILT UP AREA OF LESS THAN 1500 SQ.FEETS APPROVED IN THE PLAN. CONTRARY TO THIS, THE LD.CIT HAS NOT MADE REFERENCE TO ANY DOCUMENT IN THE IMPUGNED ORDER. WE HAVE CONSIDERED THIS ASPECT ALSO, AND WE FIND THAT THE A O HAS INQUIRED THIS ASPECT, MORE SO, SAME PLAN WAS AVAILABLE IN THE ASS TT.YEAR 2009-10, WHERE THE ASSESSEE WAS FOUND TO BE ELIGIBLE. THIS, REASON IS ALSO NOT SUFFICIENT REASON TO UPHOLD THE ORDER OF THE CIT UN DER SECTION 263 OF THE INCOME TAX ACT. 16. NEXT REASON ASSIGNED BY THE LD.CIT IS THAT THE ASSESSEE HAS INFLATED THE VALUE OF STOCK OF WORK-IN-PROGRESS IN THE OPENI NG STOCK AS WELL AS IN THE CLOSING STOCK. THE LD.CIT MADE REFERENCE TO TH E ENGINEERS CERTIFICATE DATED 15.4.2010 AS WELL AS 15.4.2009 AN D RAISED A SUSPICION THAT VALUATION OF WORK-IN-PROGRESS CANNOT BE DETERM INED IN BOTH THESE YEARS AT STANDARD RATE. THIS SUGGESTS THAT THE ASS ESSEE MUST HAVE INFLATED THE VALUE OF WORK-IN-PROGRESS. THE ASSESSEE HAS CO NTENDED THAT THIS OBSERVATION IS ERRONEOUS AND WITHOUT LOGIC. THE CL OSING STOCK OF WIP OF THE ASSTT.YEAR 2009-10 WAS ACCEPTED BY THE AO, MEAN ING THEREBY, THIS WIP WOULD BECOME OPENING WIP FOR THE ASSTT.YEAR 201 0-11. IF THE ASSESSEE INFLATED OPENING WIP THEN THE PROFIT FOR T HE CURRENT YEAR WOULD BE REDUCED. THE ASSESSEE ALSO CONTENDED THAT IT HA S NO OTHER PROJECT DURING THE YEAR. ITS PROJECT IS ELIGIBLE FOR DEDUC TION UNDER SECTION 80IB(10) OF THE ACT. THE RATE OF DEDUCTION IS ALSO SAME IN ALL THESE YEARS. IT WILL NOT AFFECT THE TAXABILITY IN ANY OF THESE YEARS. THE LD.CIT ITA NO.794/AHD/2015 24 REPRODUCED THE OBJECTIONS AND EXPLANATION OF THE AS SESSEE, BUT DID NOT CONCLUSIVELY ADJUDICATED THIS FACT WHILE RECORDING HIS FINDING IN PARA-II AT PAGE NO.35 OF THE IMPUGNED ORDER. HE SIMPLY OBS ERVED THAT THE AO HAS NOT ASKED FOR ANY SUPPORTING EVIDENCE AS TO HOW THE CIVIL ENGINEER HAS CALCULATED WIP. THE CASE OF THE ASSESSEE IS T HAT IT HAS BEEN MAINTAINING ACTUAL DETAILS AND ON THE BASIS OF DETA ILS OF ACTUAL EXPENDITURE, VALUE OF CLOSING STOCK CAN BE ASCERTAI NED. THE HONBLE DELHI HIGH COURT IN THE CASE OF ITO VS. D.G. HOUSIN G PROJECT LTD., REPORTED IN 343 ITR 329 HAS CONSIDERED THIS ASPECT. THE HONBLE HIGH COURT HAS HELD THAT WHILE EXERCISING JURISDICTION U NDER SECTION 263 OF THE INCOME TAX ACT, THE LD.COMMISSIONER HAS TO RECORD A FINDING AS TO HOW THE ASSESSMENT IS ERRONEOUS. IN THE ABSENCE OF SUC H FINDING, EXERCISE OF JURISDICTION UNDER THIS SECTION IS NOT SUSTAINABLE. ACCORDING TO THE HONBLE DELHI HIGH COURT, CIT CANNOT DIRECT RE-CONS IDERATION OF THIS TYPE OF GROUND. THE LD.CIT HAS TO RECORD A FINDING AS TO HOW ORDER IS ERRONEOUS, AND THIS FINDING CAN BE RECORDED AFTER V ERIFICATION OF EXPLANATION AND OTHER RECORDS. NOW, IN THE PRESENT CASE, THE LD.CIT JUST RAISED SUSPICION ABOUT THE VALUATION OF WIP, BUT FA ILED TO RESOLVE IT CONCLUSIVELY AS TO WHETHER THE ASSESSEE HAS INFLATE D THE VALUE OF WIP OR NOT. IN OTHER WORDS, IT WAS A REASONING TAKEN IN TH E SHOW CAUSE NOTICE FOR THE SAKE OF REASON. THUS, ON THE BASIS OF OBSERVAT ION MADE BY THE LD.CIT IN PARA-II OF PAGE NO.35 OF HIS ORDER, ASSESSMENT O RDER CANNOT BE SET ASIDE, BECAUSE, THE AO HAS CONDUCTED INQUIRY, HAS G ONE THROUGH ACTUAL DETAILS. NOW, CIT PICKED UP AN ISSUE THAT SUPPORTI NG DETAILS WERE NOT CALLED FOR. THE HONBLE DELHI HIGH COURT HAS HELD THAT SUCH SUPPORTING DETAILS OUGHT TO BE CALLED FOR BY THE CIT AND OUGHT TO HAVE DEMONSTRATED ITA NO.794/AHD/2015 25 THE ERROR, ONLY THEREAFTER, THIS TYPE OF REASON CAN BE RELEVANT CORROBORATING REASONS FOR SETTING ASIDE THE ASSESSM ENT ORDER. 17. THE NEXT REASONS ASSIGNED BY THE LD.CIT ARE THA T THE ASSESSEE HAS COLLECTED AEC/AUDA CHARGES FROM THE CUSTOMERS AND S TUDENT FEES. THE ASSESSEE HAS EXPLAINED THAT AS FAR AS INCOME FR OM STUDENT FEE IS CONCERNED, IT HAS COLLECTED RS.3,21,500/- AND INCUR RED EXPENDITURE OF RS.4,62,080/-, THEREFORE, THERE IS A LOSS IN THIS A CTIVITY AND NO INCOME HAS TRAVELLED IN THE TOTAL INCOME CALCULATED FOR THE PU RPOSE OF SECTION 80IB(10) CLAIM. WITH REGARD TO AEC/AUDA THE ASSES SEE HAS CONTENDED THAT AS AND WHEN THE ASSESSEE MADE PAYMEN T TO AEC/AUDA FOR OBTAINING ELECTRICITY CONNECTION AND OBTAINING OTHER PERMISSIONS, THE AMOUNTS COLLECTED FROM CUSTOMERS HAS BEEN CLAIMED A S EXPENDITURE IN THE YEAR IN WHICH IT WAS INCURRED. WHENEVER SUCH C HARGES ARE REQUIRED FROM THE MEMBERS, IT HAS SHOWN AS INCOME IN THE PRO FIT & LOSS ACCOUNT. THE ASSESSEE HAS SHOWN ALL THESE DETAILS TO THE AO, AND THE LD.AO HAS DULY GONE THROUGH THESE DETAILS. 18. TAKING INTO CONSIDERATION ALL THESE ASPECTS, WE ARE OF THE VIEW THAT THE LD.AO, THOUGH, NOT MADE ELABORATE DISCUSSION WI TH REGARD TO THE ISSUE ASSOCIATED WITH SECTION 80IB(10) CLAIM, BUT H AS GONE THROUGH ALL THE DETAILS. IT IS DISCERNIBLE FROM THE QUERIES RA ISED BY HIM AND THE EXPLANATION GIVEN BY THE ASSESSEE IN VARIOUS REPLIE S. IT IS ALSO PERTINENT TO OBSERVE THAT IN THE ASSTT.YEAR 2009-10, UNDER SI MILAR SITUATION IN THE SAME PROJECT, THE DEDUCTION HAS BEEN UPHELD BY THE TRIBUNAL. CONSIDERING ALL THESE ASPECTS CUMULATIVELY, WE ARE OF THE VIEW THAT ORDER ITA NO.794/AHD/2015 26 PASSED UNDER SECTION 263 IS NOT SUSTAINABLE. IT IS QUASHED. ASSESSMENT ORDER IS RESTORED. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 1 ST JUNE, JUNE, 2016 AT AHMEDABAD. SD/- SD/- ( N.K. BILLAIYA ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER