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TMI Blog2014 (8) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order passed u/s 143(3) and directing the Assessing Officer to reframe the assessment order on the issues taken in 263 proceedings. 2. The brief facts of the case are that the assessee is a firm engaged in the busienss of real estate development. It has filed its return of income for the assessment year 2007-08 on 13.11.2007 declaring total income at Rs. 82,15,770/-. The case was selected for scrutiny assessment and notices u/s 143(2) and 142(1) were issued and served upon the assessee. The learned Assessing Officer has passed the assessment order u/s 143(3) on 4/12/2009. The learned Commissioner after going through the record arrived at a conclusion that the assessment order for A.Y 2007-08 is erroneous order which has caused pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce primarily, the firm continues to enjoy the usage of club house facilities and the ownership is not transferred to the purchasers of the project. Hence the assessment completed is erroneous and prejudicial in the interest of revenue and the Assessing Officer is directed to modify his assessment order accordingly. Secondly there is nothing on record to show whether the club house was built on the area earmarked for the civic amenities portion in which case the owner of the club house will be the BBMP. Thirdly the proportionate cost of the club house adopted works out to almost 59% of the total cost which appears to be high and unreasonable and hence the basis for adopting the cost of club house needs to be examined. In so far as the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ests of revenue. In view of the powers vested upon me u/s 263 of the Act, I hereby calcel the assessment order and set aside the assessment thus made, for redoing the same. In the assessment proceedings, the basis for adopting the cost of the club house in computng the gross profit based on percetnage completion method of revenue recognition is to be verified. The Assessing Officer shall also verify whether categofical transfer of ownership is mentioned in any of documents conveying the right of the club house to the prospective buyers, and conclude the re-assessment proceedings". 4. The learned Counsel for the assessee while impugning the order of the CIT, contended that, as per the regulations of Bangalore Development Authority, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Gabriel India Ltd. and has propounded the following broader principle to judge the action of CIT taken under section 263. "The fundamental principle which emerge from the above cases may be summarized below" (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussion in that regard. 7. Apart from the above principles, we deem it appropriate to make reference to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sun Beam Auto reported in 227 CTR 113 wherein the Hon'ble High Court has propounded a distinction between lack of inquiry and inadequate inquiry. If there is a lack of enquiry, then the assessment order can be branded as erroneous. The following observations of the Hon'ble Delhi High Court are worth to note: "12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yed by the Assessing Officer. "The reason is obvious. The position and function of the Income Tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may he accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income Tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X
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