The Tax Publishers2020 TaxPub(DT) 3814 (Mad-HC) : (2020) 274 TAXMAN 0475

INCOME TAX ACT, 1961

Section 263

Where Tribunal on its part re-examined the factual position and opined that there was nothing to indicate that land was transferred at guideline value so as to shift the profit to partnership firm and in absence of any material to substantiate the same, there was no ground to interfere with Assessment Order by invoking power under section 263 and in absence of any material to show that assessee had so arranged business, there was no ground for the PCIT to exercise its power under section 263.

Revision under section 263 - Validity - AO while computing quantum eligible for deduction under section 80-IB(10), omitted to examine the vital aspects and parameters - Power of PCIT to invoke revision

Assessee-firm was consisting of five partners and were broadly divided into two groups viz., Dhosi and Chandrasekaran Group. PCIT invoked his power under section 263, who opined that AO while computing the quantum eligible for deduction under section 80-IB(10) claimed by assessee, omitted to examine the vital aspects and parameters. PCIT came to conclusion that project income for the year was Rs. 22.52 crores and net profit stands at Rs. 11.35 crores which was approximately 50% on sales accounted for the year and such huge net profit margins in the business of construction was highly improbable and the same confirms that the net profit margin includes a major portion of gains that relates to the land sold by Chandrasekaran who diverted as share of profit to their children. Therefore, PCIT formed an opinion that assessee firm would be ineligible for deduction under section 80-IB(10) to the extent of 35% of share of profit. Held: AO formed an opinion initially and completed the assessment under section 143(3). PCIT thought fit to invoke his power under section 263 and doubted the value adopted in transaction and that firm was a device made to divert the excess profit to the sons of land owners and this according to PCIT was clearly hit by Section 80 IA(10) and the excessive deduction had to be deleted. Tribunal on its part re-examined the factual position and opined that there was nothing to indicate that the land was transferred at the guideline value so as to shift the profit to Partnership Firm and in the absence of any material to substantiate the same, there was no ground to interfere with the Assessment Order by invoking the power under section 263. In absence of any material to show that assessee had so arranged business and made transaction to produce more than the ordinary profits and the same having not been established by the Revenue, there was no ground for the PCIT to exercise its power under section 263.

Relied:Malabar Industrial Co. Ltd. v. CIT 2000 TaxPub(DT) 1227 (SC) Ramesh Chand Bansal & Ors. v. District Magistrate/Collector Ghaziabad & Ors. AIR 1999 SC 2126 State of Punjab & Ors. v. Mohabir Singh etc. etc. 1996 (1) SCC 609 KP Varghese v. ITO & Anr. (1981) 131 ITR 597 (SC) : 1981 TaxPub(DT) 0972 (SC) CIT v. Gillanders Arbuthnot & Co. (1973) 87 ITR 407 (SC) : 1973 TaxPub(DT) 0342 (SC) CIT v. George Henderson and Co. Ltd. (1967) 66 ITR 622 (SC) : 1967 TaxPub(DT) 0360 (SC) CIT v. M/s. Astoria Leathers (2020) 117 taxmann.com 907 (Madras) : 2020 TaxPub(DT) 2825 (Mad-HC) M/s. Broadway Overseas Ltd. v. CIT (2014) 41 Taxmann.com 75 (P&H) : 2014 TaxPub(DT) 0699 (P&H-HC) Dr. Fareed Jamshid Italia v. Asstt. CIT (2011) 203 Taxman 241 (Madras) : 2012 TaxPub(DT) 0800 (Mad-HC) CIT v. PV Kalyanasundaram (2006) 282 ITR 259 (Mad) : 2006 TaxPub(DT) 1332 (Mad-HC) Thulasimani Ammal v. CIT & Anr. (2000) 158 CTR (Mad) 5 : 2000 TaxPub(DT) 0906 (Mad-HC) M/s. Doshi Estates v. Asstt. CIT [I.T.A. No. 966/Chny/2017, dt. 1-10-2019] : 2019 TaxPub(DT) 6946 (Chen-Trib)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2012-13



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