M/S. BAFNA JANGDA CONSTRUCTION,PUNE vs. INCOME-TAX OFFICER, PUNE

आयकर अपीलीय अिधकरण “बी” �यायपीठ पुणे म� । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE (Through Virtual Court) BEFORE SHRI INTURI RAMA RAO, AM AND SHRI S. S. VISWANETHRA RAVI, JM आयकर अपील सं. / ITA No.1052/PUN/2011 िनधा�रण वष� / Assessment Year : 2007-08 Bafna Jangda Construction, C- 314, Business Court, Mukund Nagar, Pune-411037. .......अपीलाथ� / Appellant PAN : AAGFB6141B बनाम / V/s. ITO, Ward- 11(4), ……��यथ� / Respondent Pune. Assessee by : Shri S. N. Puranik Revenue by : Shri Sudhendu Das सुनवाई क� तारीख / Date of Hearing : 21.01.2021 घोषणा क� तारीख / Date of Pronouncement : 29.01.2021 आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of the ld. Commissioner of Income Tax (Appeals)- 1, Pune (‘the CIT(A)’ for short) dated 12.01.2011 for the assessment year 2007-08. 2. The appellant raised the following grounds of appeal :- “1. Lower authority has erred both on facts and on law in rejecting Appellant’s claim U/s 80IB(10). Same may please be allowed. 2. Lower authority has erred in excluding the land area of 1,508.49 Sq.mtrs. For road widening. As total size of plot of land of the project is 4,722.45 Sq. mtrs. As such more than one acre. Hence appellant be declared eligible for deduction U/s 80IB(10). 3. a) Assessee firm denies its liability to interest U/s 234B.

2 ITA No.1052/PUN/2011 b) Lower authority has erred in charging interest U/s 234B same may please be deleted. 4. Appellant prays for just and equitable relief. 5. Appellant prays to add, alter, amend, modify, explain and / or withdraw the Ground/s as occasion may demand. 6. Appellant prays for Stay of Demand.” 3. Briefly, the facts of the case are as under :- The appellant is a partnership firm. It is engaged in the business of promoters, developers and builders. The return of income for the assessment year 2007-08 was filed on 20.09.2007 declaring a total income of Rs.Nil after claiming a deduction u/s 80IB(10) of the Income Tax Act, 1961 (‘the Act’ for short). Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-11(4), Pune (‘the Assessing Officer’ for short) vide order dated 20.11.2009 passed u/s 143(3) of the Act at a total income of Rs.4,85,54,596/- disallowing the claim for deduction under clause (10) of section 80IB of the Act, 1961. 4. The relevant facts of the above said disallowance u/s 80IB(10) of the Act are as follows :- During the period under consideration, the appellant firm had developed one residential project, namely, “Padmaja Park” at Survey No.10, Katraj, Pune. The said housing project consists of two blocks namely Building A-1 consisting of 48 flats and Building A-2 consisting of 36 flats with a total area of 3995.86 sq.mts. equivalent to 43,011.07 sq.ft. It is stated that the land in respect of which the development rights were acquired from the following persons for the area mentioned against their names as under :-

3 ITA No.1052/PUN/2011 S.No. Name Date of Area in Agreement Ares 1. Shri Hemachandra A Nitsure and Smt. 25.08.2003 11 Pratibha H Nitsure 2. Shri Nilesh R Wagholikar 12.04.2004 05 3. Shri Dayalal Lalji Bhandari and Shri 11.08.2003 13 Ashok Akheraj Khvanshara 4. Shri Dilip Dayalal Gundecha and Shri Nitin 11.08.2003 11 Hemraj Jain Total Area 40 Ares 5. It appears that original development rights were obtained by one Mr. Ashok Sonraj Oswal. From this person, the development rights acquired by the partner of the firm Shri N. K. Jangda vide certificate No.3218/04 dated 03.12.2004. The construction of A-1 Block consisting of 48 flats were completed by 26.06.2006 and accordingly the completion certificate was also issued by the Pune Municipal Corporation and the construction of 36 flats of A-2 Block were completed by 30.03.2007 and accordingly, the Pune Municipal Corporation issued completion certificate. The Assessing Officer after extracting the provisions of clause (10) of section 80IB of the Act held that the appellant firm was not entitled for deduction u/s 80IB(10) of the Act for the reason that the appellant firm had not satisfied one of the conditions to be eligible for claiming deduction u/s 80IB(10) of the Act i.e. the project should be under the size of plot of land with minimum area of one acre. According to the Assessing Officer, the total area of the land on which the project was undertaken is only 40 ares or 4000 sq.mtrs. which is just less than the one acre of land. Accordingly, the Assessing Officer issued a show cause notice dated 26.10.2009 calling upon the appellant firm to show cause as to why the deduction u/s 80IB(10) of the Act should not be denied, as the size of plot on which the project was undertaken is less than one acre of the land. In response to the show-cause notice, the assessee submitted as under :-

4 ITA No.1052/PUN/2011 (a) The actual area of the land on which the project was undertaken is 4722.45 sq.mtrs. though as per the 7/12 extracts out land area is only 4000 sq.mtrs. It is submitted that the difference in the area between the actual area and as per the title deed is only on account of conversion factor i.e. while converting the land from Guntas into Ares by the Revenue authorities. (b) On actual measurement of land in the presence of the Assessing Officer by the Department Valuation Officer, the actual area was 44876 sq.ft./4170.60 sq.mtrs. (c) The area earmarked for road widening should be also considered as a part of the land as the FSI was received. 6. The assessee also placed reliance on the CBDT Circular No.05 of 2005 which mentions that the area limit of plots were construed with reference to the area of the size on which the housing project was constructed not with reference to the demarcation of the land development authority. 7. On consideration of the above explanation, the Assessing Officer vide para 7.1 of the assessment order held that the area as per 7/12 extracts can only be considered and the area over and above mentioned in 7/12 extracts may be considered as an encroachment or any other means. The Assessing Officer observed that as per sanction plan of Pune Municipal Corporation after deducting in area of 1508.49 sq.mtrs. for road widening, the Pune Municipal Corporation had considered only 4000 sq.mtrs. not the 4722.45 sq.mtrs. as gross area available. Based on these facts, the Assessing Officer had come to the conclusion that the area of land on which the project was

5 ITA No.1052/PUN/2011 undertaken is less than one acre, and consequentially denied the claim for deduction under clause (10) of section 80IB of the Act. 8. Being aggrieved by the above assessment order, an appeal was filed before the ld. CIT(A) who vide his impugned order placing reliance on the decision of the Co-ordinate Bench of the Tribunal in the case of Bunty Builders in ITA No.1808/PN/2006 order dated 16.02.2010 confirmed the action of the Assessing Officer. 9. Being aggrieved by the order of the ld. CIT(A), the appellant is in appeal before us in the present appeal. 10. It is submitted before us that the actual area was measured in the presence of the Assessing Officer at 4722.45 sq.mtrs.. The Pune Municipal Corporation had only considered the 4000 sq.mtrs. which equivalent to 40 Ares i.e. the area available as per the land revenue records of the land in respect of which the development rights were acquired. He further submitted that the Pune Municipal Corporation for the purpose of determining the permissible FSI lower of the area as per the revenue records and actual area alone is considered which does not mean that the actual area is not available nor is it disputed by the Assessing Officer or municipal authorities. He also placed reliance on the following judicial precedents :- (a) Bunty Builders (supra); (b) M/s. Shashwati Constructions vs. ITO (ITA No.2010/PUN/2014 dt. 09.05.2018); (c) M/s. Tulsi Developers vs. DCIT (ITA No.484/PUN/2017) dt. 20.04.2018).

6 ITA No.1052/PUN/2011 11. Without prejudice to the above, it is contended that as per the metric system 4000 sq.mtrs. is equivalent to one acre. Thus, it is contended that even otherwise it satisfies the conditions of the area of one acre or more and therefore, the claim for deduction u/s 80IB(10) cannot be denied. 12. On the other hand, the ld. CIT-DR contended that the appellant is not eligible for deduction u/s 80IB(10) of the Act, as the appellant not satisfied the conditions that the land on which the project was undertaken is on the minimum area of one acre or more. It is further submitted that the eligible criteria for the purpose of exemption should be examined strictly. He also drawn our attention to the approved housing project plan of Municipal Corporation placed at page 85 of the Paper Book wherein the gross area of the project is only considered as 4000 sq.mtrs. which less than the one acre of land. He further submitted that the area left for road widening should not be considered as area available with the project and he placed heavily reliance on the orders of the authorities below to deny the exemption u/s 80IB(10) of the Act. 13. We heard the rival submissions and perused the material on record. The only issue in the present appeal relates to the allowability of deduction under clause (10) of section 80IB of the Act. From the perusal of the assessment order, it is clear that the primary reason for denial of exemption of deduction u/s 80IB(10) of the Act is that the size of the plot of total area of land on which the housing project was undertaken was less than one acre. The total area of the land is 4722.45 sq.mtrs. which is actually available to the appellant. This fact was not disputed by the Assessing Officer which is evident from the observation made by him that the excess area over and

7 ITA No.1052/PUN/2011 above, the area as per 7/12 extract may be on account of encroachment made by the appellant. We shall deal with the proprietoriness on the part of the Assessing Officer in making such wild allegation against the assessee in later part of our order. For the present, it is sufficient to refer to those observations for the limited purpose saying that the actual area is 4722.45 sq.mtrs. which is available with the appellant for the purpose of housing project. It is also part of record that the Pune Municipal Corporation had sanctioned the housing project with reference to the 4722.45 sq.mtrs. before leaving portion of land area for road widening. In support of this, the Architect’s certificate who actually measured the land in the presence of the Assessing Officer is also enclosed vide page no.17 to 25 of the Paper Book. The Assessing Officer placed heavily reliance on the copies of 7/12 extracts. The Municipal Corporation had not come to the conclusion that the area of land on which the residential project was undertaken was less than one acre. It is settled proposition of law that the eligibility conditions of section 80IB(10) of the Act does not prescribe that a developer of the land i.e. need not be the owner of the land. The Hon’ble Gujarat High Court in the case of CIT vs. Radhe Developers, 341 ITR 403 clearly held that for the purpose of claiming deduction u/s 80IB(10) of the Act, it is not necessary that the assessee should be owner of the land. It would suffice if the residential project is undertaken on an area of plot of land of one acre or more. It is neither for the Municipal Corporation nor for the Assessing Authority to look into the title of the property. In any way, if the appellant has constructed the project on the property in respect of which the title of the land ownership of the land is in dispute, he would be doing so at his own risk and peril. There is no material on record to show that the land which is physically available in excess of the area mentioned in 7/12 extracts is claimed by any other third party nor is

8 ITA No.1052/PUN/2011 there any substituting the dispute in this regard. The requirement of the provisions of section 80IB(10) of the Act stands satisfied if the area on which the project was undertaken is one acre or more. It is not open to the Assessing Officer to act as an Arbitrator of land disputes. The concept of ownership of the land is alien to the provisions of section 80IB(10) of the Income Tax Act. Therefore, we do not see any reason for Assessing Officer to go into the issue of ownership at all. It is trite law that it is well settled while interpretating the statute, particularly the taxing statute nothing can be read into the conditions which has not been provided by the Legislature. The conditions which are not made part of section 80IB(10) of the Act, namely that of owing the land which the assessee develops cannot be supplied by any purported legislative intent. There can be hundred one reasons as to why there is a discrepancy between the actual area and the area as per land revenue records of the government. The reasons which are within the exclusive knowledge of the appellant were explained to the AO. The Ao had not controverted these reasons. 14. Further, the Assessing Officer had given finding of fact that the Municipal Authority had sanctioned the permissible area of construction with reference to the area of 4000 sq.mtrs. But the Assessing Officer had failed to take note of the fact that the application for grant of approval of the housing project was made by the appellant with reference to 4722.45 sq.mtrs. It is different matter that the municipal authority had determined the permissible area of the construction with reference to 4000 sq.mtrs. Nowhere, the municipal authorities have mentioned that the land of 4722.45 sq.mtrs. was not available. Even the land earmarked for the purpose of widening of the road forms part of the housing project as held by the Mumbai Bench of the

9 ITA No.1052/PUN/2011 Tribunal in the case of Vidhi Builders vs. ITO in ITA No.1212/Mum/2009 for the assessment year 2005-06 and quoted with approval by the Hon’ble Karnataka High Court in the case of CIT vs. Brigade Enterprises Ltd. 429 ITR 511. The Assessing Officer also lost sight of the settled position of law that any housing project which has been approved by the local authority as a housing project should be considered as appropriate housing project u/s 80IB(10) of the Act as held by the Hon’ble Bombay High Court in the case of Vandana Properties 353 ITR 36 and CIT vs. Voora Properties, 373 317. Further, we observe that either the Assessing Officer or the CIT(A) did not meet the contention of the appellant that 4000 sq.mtrs. with reference to which the permissible of construction area was granted by the municipal authorities is equivalent to one acre in metric system. Thus, there is no material on record to say that the area of land on which the housing project was taken up was less than one acre. The Assessing Officer merely went by the entries made in he 7/12 extracts which are in the nature of mutation entries made in the land records of the State Government. 15. The mutation entries in the records of the State does not confer any title on the property. In this connection we refer to the following judicial precedents extracted by the Hon’ble Himachal Pradesh High Court in the case of Naresh Kumar And Another vs. Nirmala Devi And Others in RSA No.475 of 2004 dated 01.10.2018 wherein it is stated hereunder :- “18. It is settled that mutation entries are only to enable the State to collect revenues from the persons in possession and enjoyment of the property and the right, title and interest as to the property should be established dehors the entries. Entries are only one of the modes of proof of the enjoyment of the property. Mutation entries do not create any title or interest therein. (Refer: Sankalchan Jaychandbhai Patel and others vs. Vithalbhai Jaychandbhai Patel and others (1996) 6 SCC 433). 19. This authority in turn was considered by this Court in Param Dev and others vs. State of Himachal Pradesh and others 2014 (2) Shim.L.C. 928 :

10 ITA No.1052/PUN/2011 Param Dev and others vs. State of H.P. and others 2014 (1) Latest HLJ (HP) 440, wherein it was observed as under: "7. It is well settled law that mutation does not confer any title. The mutation proceedings are summary in nature and are only for fiscal purpose to determine the land revenue and cannot be considered to be evidence about title. The Hon'ble Supreme Court in Sankalchan Jaychandbhai Patel and others vs. Vithalbhai Jaychandbhai Patel and others (1996) 6 SCC 433 held as under:- " Mutation entries are only to enable the State to collect revenues from the persons in possession and enjoyment of the property and the right, title and interest as to the property should be established dehors the entries. Entries are only one of the modes of proof of the enjoyment of the property. Mutation entries do not create any title or interest therein" (Para 7). 8. In Smt. Sawarni vs. Smt. Inder kaur and others AIR 1996 SC 2823, the Hon'ble Supreme Court held as under:- "7. Mutation of a property in the revenue record does not create or extinguish title nor has it any presumptive value on title. It only enables the person in whose favour mutation is r ordered to pay the land revenue in question. The learned Additional District Judge was wholly in error in coming to a conclusion that mutation in favour of Inder Kaur conveys title in her favour. This erroneous conclusion has vitiated the entire judgment." Similar reiteration of law can thereafter be found in Rameshwar Dass (deceased) through his Lrs :Subhash Jain and others vs. Dayawanti (deceased) through her LRS: Manoj Bansal and others, 2016 (5) ILR (HP), 847.” 20. At this stage, it would be apt to take note of judgment of the Hon'ble Supreme Court in Prem Nath Khanna and others vs. Narinder Nath Kapoor (dead) through legal representatives and others (2016) 12 SCC 235, wherein it was observed as under: “20. In addition to the abovementioned reason, the contention advanced by the learned counsel appearing on behalf of the respondents that the appellants failed to get the mutation of entries of the suit land incorporated in record shows that there was no intention on their part to act upon the contents of the two sale deeds, cannot be accepted as mere mutation of. entries does not confer title upon the deceased respondent no. 1 in the immovable property. In the case of Sawarni v. Inder Kaur 1996 6 SCC 223, this Court held as under: (SCC p.227, para 7) "7.......Mutation of a property in the revenue record does not create or extinguish title nor has it any presumptive value on title. It only enables the person in whose favour mutation is ordered to pay the land revenue in question. The learned Additional District Judge was wholly in error in coming to a conclusion that mutation in favour of Inder Kaur conveys title in her favour. This erroneous conclusion has vitiated the r entire judgment......" 21. In Guru Amarjit Singh v. Rattan Chand 1993 4 SCC 349, this Court held that the entries in jamabandi are not proof of title in respect of an immoveable property. In Jattu Ram v. Hakam Singh 1993 4 SCC 403, this Court observed that entries made by patwari in official record are

11 ITA No.1052/PUN/2011 only for the purpose of records and do not by itself prove the correctness of the same nor can statutory presumption be drawn on the same, particularly, in the absence of corroborative evidence. The respondent cannot claim to have acquired title over the suit property by pleading adverse possession only in the absence of the name of the appellants in the revenue records. In tKishan Singh (Dead) v. Arvind Kumar. 1994 6 SCC 591 and P.T Munichikkanna Reddy v. Revamma 2007 6 SCC 59, this Court held that in cases where the possession was initially permissive, the burden lies heavily on that person alleging adverse possession to prove that the possession has become adverse. Mere possession for long time does not convert permissive possession into adverse possession."

12 ITA No.1052/PUN/2011 This kind of approach is highly unbecoming of a quasi-judicial authority, there is no gain saying that by making such derogatory observation against an assessee without any basis and material in utter disregard of the principles of natural justice, violate fundamental rights of the assessee. It is for the CBDT to look into this kind behavior of the some of the assessing officers, Board cannot afford to turn blind eyes and deaf ears to this kind of conduct of the Assessing Officers. The Board should adopt strict approach towards this kind of Assessing Officers in order to promote orderliness in the administration of Income Tax Act. 18. In the result, the appeal of the assessee stands allowed. Order pronounced on this 29th day of January, 2021. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) �याियक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 29th January, 2021. Sujeet आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A)-1, Pune. 4. The CIT-1, Pune. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.