2021 (9) TMI 118 - AT - Income Tax

Revision u/s 263 by CIT - Allowability of claim of deduction u/s. 80IB(10) - sufficient OR no enquiry - whether AO's order was erroneous nor prejudicial to the interest of revenue? - HELD THAT - AO examining the completion certificate issued by Bhopal Municipal Corporation dated 06.06.2009 and again a clarification letter dated 29.03.2014 which was directly called by the Ld. AO assert the fact that the housing project was completed within the stipulated time as provided u/s. 80IB(10) and accordingly claim u/s. 80IB(10) was allowed - CIT has not made any independent enquiry even after observing that the Ld. AO has allowed the deduction u/s. 80IB(10) of the Act after obtaining the completion certificate, still held that no enquiries were conducted to examine the genuineness of completion of housing project. Under the provision of section 80IB(10) assessee has to obtain a completion certificate from a competent authority which in this case is the Bhopal Municipal Corporation which is a statutory body working under a separate Act. Once the Bhopal Municipal Corporation has given a certificate that housing project has been completed on a certain dates, Revenue authorities cannot deny the deduction u/s. 80IB(10) of the Act alleging that the housing project is not complete. In case they are not satisfied with the contents of the completion certificate issued by Bhopal Municipal Corporation, they have option to file a writ before the Hon'ble Jurisdictional High Court but certainly they cannot deny the claim of deduction u/s. 80IB(10) of the Act which the assessee has claimed after obtaining all necessary certificate as well as the certificate from the Chartered Accountant and having fulfilled all the requirements of the provisions of section 80IB(10). AO has conducted sufficient enquiry, called for all necessary details and made proper application of mind and thus it can be safely concluded that the order u/s. 143(3) dated 31.03.2014 is neither erroneous nor prejudicial to the interest of revenue. - Decided in favour of assessee.

Summary

Issues Involved:
1. Assumption of jurisdiction under Section 263 of the Income Tax Act, 1961.
2. Examination of the deduction claim under Section 80IB(10) of the Income Tax Act.
3. Validity of the assessment order dated 31.03.2014.
4. Adequacy of the Assessing Officer's (AO) enquiry and application of mind.

Issue-wise Detailed Analysis:

1. Assumption of Jurisdiction under Section 263:
The appellant challenged the assumption of jurisdiction under Section 263 by the Principal Commissioner of Income Tax (Pr. CIT). The Pr. CIT invoked Section 263, holding the assessment order dated 31.03.2014 as erroneous and prejudicial to the interest of revenue, directing the AO to re-examine the case. The tribunal noted that under Section 263, the Pr. CIT has the authority to call for and examine records and, if deemed necessary, pass orders enhancing or modifying the assessment. However, it was emphasized that both conditions—erroneous and prejudicial to the interests of revenue—must be satisfied for invoking Section 263.

2. Examination of the Deduction Claim under Section 80IB(10):
The assessee, a proprietorship firm engaged in civil construction, claimed a deduction under Section 80IB(10) for the assessment year 2007-08. The AO initially rejected the claim, but upon appeal, the CIT(A) allowed it. The tribunal restored the issue to the AO for fresh examination, directing the AO to verify the infrastructure facilities and the completion certificate issued by the Municipal Corporation. In the subsequent proceedings, the AO allowed the deduction after verifying the completion certificate dated 29.03.2014 from the Bhopal Municipal Corporation.

3. Validity of the Assessment Order Dated 31.03.2014:
The tribunal scrutinized whether the assessment order dated 31.03.2014 was erroneous and prejudicial to the interest of revenue. The AO had allowed the deduction after verifying the completion certificate and other relevant documents. The tribunal observed that the AO conducted sufficient enquiry and made a proper application of mind, concluding that the assessment order was neither erroneous nor prejudicial to the interest of revenue.

4. Adequacy of the AO's Enquiry and Application of Mind:
The tribunal examined whether the AO had conducted adequate enquiries and applied his mind while allowing the deduction. It was noted that the AO issued a notice under Section 143(2) and called for various details and documents. The AO verified the completion certificate and a clarification letter from the Bhopal Municipal Corporation, confirming the project's completion within the stipulated period. The tribunal found that the AO's actions were thorough and based on documentary evidence, fulfilling the requirements of Section 80IB(10).

Conclusion:
The tribunal quashed the order of the Pr. CIT framed under Section 263, restoring the assessment order dated 31.03.2014. It was concluded that the AO had conducted sufficient enquiry, applied his mind properly, and the assessment order was neither erroneous nor prejudicial to the interest of revenue. The appeal filed by the assessee was allowed.