2010 (7) TMI 605 - AT - Income Tax

Revision - Valuation report - Deduction u/s.80-IB(10) - Whether the CIT was justified in treating the assessment order as erroneous in so far as it was prejudicial to the interest of the Revenue on two aspects - The order of the Assessing Officer in such as scenario cannot be considered as one passed without application of mind or as a stereo typed one or accepting the claim of the assessee as made by it, or an incorrect assessment done in breach of law or breach of principle of natural justice Regarding completion certificate - whether, for giving the benefit of deduction u/s.80-IB(10), where an assessee is following the percentage completion method, it is necessary to obtain such completion certificate for each year of his claim or is it sufficient that such certificate is obtained on the completion of the housing project as a whole - an assessee can have the benefit of Sec.80-IB(10) only in the year of completion of the project, especially so, for an assessee not following project completion method for accounting its income - there was clear application of mind by the Assessing Officer on the claim of assessee for deduction u/s.80-IB(10) of the Act and he had taken a possible view on such claim and allowed the deduction - As held by the Hon ble Apex Court in the case of CIT Vs. Mox India Ltd. 295 ITR 282 when two views are possible and Assessing Officer had taken one view with which the CIT does not agree it cannot be considered an erroneous order, prejudicial to the interest of the Revenue - Decided in the favour of the assessee

Summary

Issues Involved:
1. Jurisdiction of the CIT for invoking Section 263 of the Income Tax Act.
2. Built-up area exceeding 1,500 sq. ft.
3. Non-furnishing of completion certificate.

Detailed Analysis:

Jurisdiction of the CIT for Invoking Section 263:
The assessee challenged the jurisdiction of the CIT for invoking Section 263 of the Income Tax Act on the assessment made under Section 143(3) for the assessment year 2005-06. The CIT issued a show-cause notice under Section 263, considering the assessment erroneous and prejudicial to the interest of the Revenue due to two reasons: the revised built-up area report and the non-furnishing of the completion certificate.

Built-up Area Exceeding 1,500 sq. ft.:
The CIT cited that the District Valuation Officer (DVO) initially reported the built-up area as less than 1,500 sq. ft., but later revised it to 1521.74 sq. ft. The assessee argued that the revised report was incorrect, relying on a Registered Valuer's report stating the area was less than 1,500 sq. ft. The CIT noted that the Assessing Officer did not consider the revised DVO report while completing the assessment. The Tribunal found that the Assessing Officer had both the original and revised DVO reports and had applied his mind, considering the Registered Valuer's report before granting the deduction under Section 80-IB(10). The Tribunal concluded that the Assessing Officer's decision was a possible view and not erroneous.

Non-furnishing of Completion Certificate:
The CIT also noted that the assessee did not file a completion certificate from the local authority, which was necessary for claiming the deduction under Section 80-IB(10). The assessee contended that it followed the percentage completion method, making the completion certificate for the whole project relevant, not for each year. The Tribunal agreed, stating that the requirement for a completion certificate should be interpreted to mean it is necessary upon the project's completion, not annually. The Tribunal referenced the CBDT's Instruction No. 4/2009, which supports the year-to-year deduction claim under the percentage completion method. The Tribunal also noted a letter from the Corporation of Chennai dated 01.06.05, indicating the project's completion, and concluded that the Assessing Officer's view was lawful.

Conclusion:
The Tribunal found that the Assessing Officer had applied his mind and taken a permissible view on both issues, making the assessment neither erroneous nor prejudicial to the Revenue's interest. Consequently, the Tribunal quashed the CIT's order under Section 263, allowing the assessee's appeal.