2015 (10) TMI 474 - AT - Income Tax

Revision u/s 263 - since for A. Y. 2010-11 the claim of deduction u/s.80IB(10) was denied, as per the CIT for the impugned assessment year also such claim could not be allowed, project being the very same - According to CIT(A) DVO who carried out the inspection in the presence of the accountant of the assessee had given a clear finding that a number of residential units were having built-up area in excess of 1500 sft. Therefore according to him, assessee was not eligible for the deduction u/s.80IB(10) - Held that - Assessee had at no point of time ever stated that any of the units being built in County-I had built-up area in excess of 1,500 sft. AO had no information on this aspect. This came to his notice only during the course of assessment proceedings for A. Y. 2010-11 when there was a reference to the DVO. But nevertheless as noted by the CIT it is clear from the sale deed entered by Chamundeswari Buildtek P. Ltd, with various buyers, that the vendor was Chamundeswari Buildtek P. Ltd and the buyers were actually buying the plots from them. Agreements entered by such buyers with the assessee for construction of residential units were separate. These aspects have not been looked into by the AO. These were very relevant in deciding whether the assessee was a developer or only a contractor. When the AO does not make the enquiries that is lawfully expected of him and which any prudent man would have done, if placed in similar circumstances, it would definitely render the order erroneous and prejudicial to the interests of Revenue. Not only was there units which had built-up area in excess of 1500 sft, but also the agreements and the power of attorney did have a bearing on the question as to whether assessee was indeed eligible for claim of deduction u/s.80IB(10) of the Act. AO had never considered these aspects nor made enquiries which were required of him. No doubt inadequate enquiry by itself will not render an order erroneous or prejudicial to the interests of Revenue. But an enquiry which by itself is only a farce and does not do justice to the duty cast on a statutory authority would be equivalent to non-enquiry. No error in the order of CIT in considering the order of AO erroneous and prejudicial to the interests of Revenue. CIT had while setting aside the assessment only directed a fresh assessment after giving opportunity to the assessee. Thus assessee would have an opportunity to place the judicial precedence that he wants to rely on when the matter is taken up by the AO afresh. At this juncture we do not find any reason to interfere with the order of CIT. - Decided against assessee.

Issues:
1. Assessment order challenged under section 263 of the Income-tax Act, 1961.
2. Claim of deduction under section 80IB(10) for housing project County-1 disputed.
3. Discrepancy in built-up area of residential units and ownership over the land.
4. Assessee's eligibility as a developer or contractor for claiming deduction.

Analysis:

Issue 1: Assessment order challenged under section 263 of the Income-tax Act, 1961
The appeal filed by the assessee contested the order of the Commissioner of Income Tax (CIT) passed under section 263 of the Income-tax Act, 1961, questioning the assessment order.

Issue 2: Claim of deduction under section 80IB(10) for housing project County-1 disputed
The assessee declared income and claimed a deduction under section 80IB(10) for the housing project County-1. The Assessing Officer (AO) made an addition for excess expenditure on non-80IB projects during the assessment proceedings.

Issue 3: Discrepancy in built-up area of residential units and ownership over the land
The CIT issued a notice under section 263 based on a report by the District Valuation Officer (DVO) regarding adverse inferences on the area of residential units and ownership of the land. The CIT contended that denial of deduction for AY 2010-11 indicated ineligibility for the current assessment year.

Issue 4: Assessee's eligibility as a developer or contractor for claiming deduction
The CIT concluded that the assessee was acting as a contractor, not a developer, based on findings that residential units exceeded 1500 sq.ft and the land belonged to another entity. The assessee argued for eligibility citing legal precedents and ownership rights.

The Tribunal found that the AO failed to consider crucial aspects such as built-up area discrepancies and ownership details, rendering the assessment erroneous and prejudicial to revenue. The CIT's direction for a fresh assessment was upheld, providing the assessee an opportunity to present relevant judicial precedents. The appeal was dismissed, affirming the CIT's decision.

This detailed analysis covers the key issues raised in the legal judgment, emphasizing the dispute over the deduction claim under section 80IB(10) and the eligibility of the assessee as a developer or contractor based on the built-up area and land ownership.

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