2015 (12) TMI 1902 - AT - Income Tax

Validity of Revision u/s 263 - CIT found that the AO has allowed the deduction u/s.80IB(10) without proper verification and without making necessary enquiries - assessee submitted that learned CIT has totally erred in holding that the AO has not made necessary enquiries and examination while allowing the assessee's claim of deduction u/s. 80IB(10) - HELD THAT - Upon careful consideration as regards the merits of assessee's claim u/s.80IB is concerned, we find that in our order of even date in the case of the assessee for the assessment years 2003-04 to 2008-09 which includes the present assessment year, we have upheld the order of learned CIT(Appeals). In the said order CIT(Appeals) held that the assessee fulfils all the conditions laid down u/s. 80IB(10) of the I.T. Act. AO has made the necessary enquiry by issuing questionnaire to the assessee and obtaining the details as he desired necessary. Now the learned CIT was of the opinion that the details obtained by the assessee were not sufficient. In our considered opinion this approach of the learned CIT in invoking the jurisdiction u/s. 263 of the I.T. Act is not sustainable. AO has made the enquiry which he deemed fit. Now the learned CIT is directing to make further enquiry. This, in our considered opinion, is not the mandate of section 263 - CIT has also drawn adverse inference on the issue that capital introduced by the partners were not looked into by the AO in the assessment stage. We find that this alone cannot be a ground for invoking jurisdiction u/s. 263. CIT has noted that the assessee has submitted necessary details before him. Learned CIT has not found any thing adverse in these details. Moreover there are case laws for the proposition that capital introduced by the partners has to be examined in the hands of partners in their individual account. Hence the AO having adopted one of the possible views, it cannot be said that the learned CIT was justified in invoking jurisdiction u/s. 263 of the I.T. Act. Hon'ble Apex Court in the case of Max India Ltd 2007 (11) TMI 12 - SUPREME COURT as expounded that where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as erroneous order prejudicial to the interest of the Revenue unless the view taken by the ITO is unsustainable in law. Thus we hold that learned CIT was not justified in invoking jurisdiction u/s. 263 of the I.T. Act. Accordingly we quash the order passed by learned CIT u/s. 263 of the I.T. Act. Assessee appeal allowed.

Summary

Issues:
Appeal against order u/s. 263 of the I.T. Act for assessment year 2006-07.

Analysis:
The learned Commissioner of Income-tax-I, Nagpur found the AO's order erroneous and prejudicial to the Revenue's interest due to various reasons. These included the failure to verify the eligibility criteria for deduction u/s. 80IB(10), allowing deduction for extra construction work not related to the housing project, lack of verification of shopping area limits, incomplete housing projects, and failure to submit separate audit certificates for each project as required by law. The CIT set aside the assessment and directed the AO to re-examine the issues thoroughly.

The assessee challenged the CIT's decision, arguing that the AO had conducted proper verification and examination before allowing the deduction u/s. 80IB(10). The counsel highlighted that all necessary details were submitted, and the AO had opined that the conditions for the deduction were met. The counsel contended that the CIT erred in setting aside the assessment based on the presumption of potential discrepancies without concrete evidence of falsity.

The Tribunal, after considering the merits of the case, found that the AO's assessment was legally sound and sustainable. It noted that the AO had made necessary inquiries and that the CIT's requirement for further investigation was not justified. The Tribunal referred to relevant case laws to support its conclusion that the CIT lacked prima facie material to deem the AO's order erroneous and prejudicial to revenue. The Tribunal emphasized that the CIT's jurisdiction under section 263 was not appropriately invoked in this case.

In light of the above analysis, the Tribunal allowed the assessee's appeal, quashing the CIT's order under section 263 of the I.T. Act. The Tribunal held that the AO's decision was legally valid and not prejudicial to the Revenue's interest, thereby ruling in favor of the assessee.

This detailed analysis of the legal judgment highlights the issues involved, the arguments presented by both parties, the Tribunal's assessment of the case, and the final decision reached in the appeal against the CIT's order under section 263 of the I.T. Act for the assessment year 2006-07.