2019 (11) TMI 326 - AT - Income Tax

Revision u/s 263 - deduction u/s 80IB(10) - while completing the original assessment AO disallowed assessee s claim of deduction u/s 80IB(10) primarily on the reasoning that the approval for the housing project was granted by the local authority prior to 01/10/1998 - FAA while deciding the appeal of the assessee allowed the deduction while disposing of the revenues appeal against the aforesaid order of the learned Commissioner (Appeals), the Tribunal restored back the issue to AO for fresh adjudication - HELD THAT - Tribunal has observed that from the appeal order passed under section 47 of the Maharashtra regional and city planning Act,1966, it appeared that there was some construction in the project prior to the amendment proposal in the development plan forwarded by the owner of the land which was rejected by CIDCO vide order dated 18/06/1998. The aforesaid observation of the Tribunal assumes considerable importance as the commencement of the housing project post or prior to 1/10/1998 will have a crucial bearing in deciding the legibility of the assessee in availing deduction under section 80IB(10) Actual date of completion of project is also very much relevant for fulfillment of the other condition of section 80IB(10). Though, it is the say of the assessee that both the aforesaid conditions have been fulfilled, however, reading of the impugned assessment order does not throw any clarity on the assessee s claim as the AO has not at all recorded any factual finding regarding fulfillment of basic conditions of section 80IB(10) of the Act. Assessment order passed is very cryptic and without any discussion. The Assessing Officer has passed the order in a summary manner allowing assessee s claim of deduction under section 80IB(10). Though AO has referred to certain submissions made by the assessee on different dates, however, he has not made any discussion about the enquiry/verification conducted by him in compliance to the specific directions of the Tribunal and what is the result of such enquiry/verification qua the issue of deduction claimed under section 80IB(10). Though, it may be a fact that in course of assessment proceedings, the assessee might have furnish certain information/details in support of its claim however, the Assessing Officer is required to enquire into and actually verify assessee s claim to reach a logical conclusion. On the face of specific direction by the Tribunal on the issue, the minimum the Assessing Officer was required to do was to record a factual finding regarding the actual commencement and completion of the housing project. Unfortunately, a reading of the impugned assessment order as well as the other material on record clearly reveal that the Assessing Officer has failed to make proper enquiry in compliance to the directions of the Tribunal before allowing assessee s claim. That being the case, the assessment order is erroneous and prejudicial to the interest of the revenue. Hence, in our opinion, learned PCIT was well within his jurisdiction in exercising power under section 263 to revise the assessment order. Therefore, we do not find any reason to interfere with the decision of learned PCIT in exercising power under section 263 of the Act. - Decided against assessee.

Summary

Issues Involved:
1. Eligibility of the housing project for deduction under section 80IB(10) of the Income Tax Act.
2. Validity of the Principal Commissioner of Income Tax (PCIT)'s order under section 263 of the Act.
3. Compliance with the Tribunal's directions by the Assessing Officer (AO).

Issue-wise Detailed Analysis:

1. Eligibility of the housing project for deduction under section 80IB(10) of the Income Tax Act:
The primary contention revolves around whether the housing project commenced after 01.10.1998, which is a prerequisite for claiming deduction under section 80IB(10). The AO initially disallowed the deduction, stating that the project's approval by the local authority was before 01.10.1998. However, the Commissioner (Appeals) allowed the deduction, leading to an appeal by the revenue. The Tribunal, in its earlier order, emphasized that the commencement of the project is crucial, not just the approval date. The Tribunal directed the AO to verify the actual commencement date of the project, noting that if it commenced before 01.10.1998, it would not qualify for the deduction.

2. Validity of the Principal Commissioner of Income Tax (PCIT)'s order under section 263 of the Act:
The PCIT invoked section 263, arguing that the AO did not follow the Tribunal's specific directions and failed to conduct a proper enquiry. The PCIT noted that the AO did not gather necessary details and documentary evidence to prove the project's commencement date and its completion before the stipulated deadline. Consequently, the PCIT deemed the assessment order erroneous and prejudicial to the interest of revenue, leading to its revision. The Tribunal upheld the PCIT's order, agreeing that the AO did not adequately verify the facts as directed, making the assessment order flawed.

3. Compliance with the Tribunal's directions by the Assessing Officer (AO):
The Tribunal had explicitly directed the AO to verify the actual commencement of the housing project and its completion within the prescribed time limits. However, the AO's subsequent assessment order lacked detailed findings and did not address the Tribunal's directions adequately. The AO's assessment was found to be summary and without proper enquiry or verification of the project's commencement and completion dates. The Tribunal observed that the AO's failure to follow its directions justified the PCIT's intervention under section 263. The Tribunal emphasized that the AO should have recorded factual findings regarding the project's commencement and completion dates to comply with the Tribunal's earlier order.

Conclusion:
The Tribunal dismissed the assessee's appeal, affirming the PCIT's revision of the assessment order under section 263. The Tribunal highlighted the necessity for the AO to conduct a thorough enquiry and verification as per its directions. The AO must independently decide on the assessee's claim for deduction under section 80IB(10) without being influenced by the PCIT's observations and ensure that the assessee is given a reasonable opportunity to present their case.