2010 (7) TMI 492 - AT - Income Tax

Deduction under section 80IB - The assessee was doing business of development and construction on land - One of the basic requirements for granting deduction u/s.80-IB was that the development and construction of housing property should commence on or after 1.10.1998 - It is not the first year in which the claim for deduction u/s.80-IB was made - certificate issued by CIDCO on 7.4.1998 was only approval letter for commencing the construction whereas the actual commencement was done only after receiving certificate from District Collector of Thane on 19.5.1999 - As in the instant case the assessment order is not prejudicial to the interest of the Revenue inasmuch as the rightful deduction has been granted u/s. 80-IB(10) when seen in the light of actual date of commencement being after 01.10.1998 - view taken by the learned CIT to revise the order u/s 263 not acceptable decided in favor of assessee.

Summary

Issues:
1. Incorrect allowance of deduction u/s. 80-IB by the Assessing Officer without proper verification.
2. Validity of the Commissioner's order u/s. 263 setting aside the assessment orders as erroneous and prejudicial to the Revenue's interest.
3. Examination of the commencement date of construction activity for deduction u/s. 80-IB.
4. Comparison of CIDCO commencement certificate and District Collector's permission for construction commencement date.
5. Jurisdiction of CIT u/s. 263 based on the assessment being both erroneous and prejudicial to the Revenue's interest.

Analysis:
1. The appeals arose from the Commissioner's order u/s. 263 due to the incorrect allowance of deduction u/s. 80-IB by the Assessing Officer without proper verification. The Commissioner found the assessment orders for the years 2005-2006 and 2006-2007 erroneous and prejudicial to the Revenue's interest as the commencement date of construction did not meet the requirement of starting on or after 1.10.1998.

2. The Tribunal examined the validity of the Commissioner's order u/s. 263. It was highlighted that for jurisdiction under this section, the assessment order must be both erroneous and prejudicial to the Revenue's interest. Citing legal precedents, the Tribunal emphasized that the assessment is prejudicial when the tax assessed is lower than due, impacting government revenue. In this case, the Tribunal assessed whether the incorrect allowance of deduction u/s. 80-IB was detrimental to the Revenue's interest.

3. The Tribunal delved into the examination of the commencement date of construction activity for deduction u/s. 80-IB. While the CIDCO certificate indicated a commencement date of 7.4.1998, the District Collector's permission on 19.5.1999 was crucial for actual commencement. The Tribunal analyzed the sequence of events to determine the correct commencement date and its compliance with the statutory requirements.

4. By comparing the CIDCO commencement certificate and the District Collector's permission, the Tribunal clarified that the actual commencement of construction was after 1.10.1998, aligning with the statutory conditions for deduction u/s. 80-IB. Emphasizing the significance of the District Collector's permission, the Tribunal concluded that the Commissioner's decision to rely solely on the CIDCO certificate was unjustified.

5. Lastly, the Tribunal addressed the jurisdiction of the CIT u/s. 263 based on the assessment being both erroneous and prejudicial to the Revenue's interest. Referring to a relevant case, the Tribunal differentiated situations where the assessment order is both erroneous and prejudicial, unlike the present case where the rightful deduction was allowed despite procedural lapses. Consequently, the Tribunal set aside the Commissioner's order, allowing both appeals in favor of the assessee.