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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED
आयकर अपील�य अ�धकरण, राजकोट �यायपीठ, राजकोट । IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And Ms MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No.137/Rjt/2016 (�नधा�रण वष� / Assessment Year :2012-13) I.T.O, बनाम/ M/s Jagjit Builders And Ward-2(1), Developers, Vs. Rajkot. Ankur Apts., Dr. Floor, Aadarsh Society, B/h IOC Bhavan, Race Course Ring Road, Rajkot. �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AADFJ9480A (अपीलाथ� /Appellant) (��यथ� / Respondent) .. अपीलाथ� ओर से / Appellant by : Shri M.N. Maurya, CIT. D.R ��यथ� क� ओर से/Respondent by : Shri M.J. Ranpura, A.R सुनवाई क� तार�ख / Date of Hearing 27/02/2020 घोषणा क� तार�ख /Date of Pronouncement 28/02/2020 आदेश / O R D E R PER BENCH: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)- 2, Rajkot [Ld. CIT(A) in short] dated 25/02/2016, arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 27/02/2015 relevant to Assessment Years (A.Y.) 2012-13.
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The 1st issue raised by the Revenue is that the learned CIT (A) erred in 2. deleting the addition made by the AO for Rs. 10,20,62,695/- on account of unexplained expenditure under section 69C of the Act
The facts in brief are that the assessee in the present case is a partnership firm and engaged in the business of construction of affordable housing under the scheme. There was the survey operation at the business premises of the assessee under section 133A of the Act dated 29/09/2011. The assessee in the year under consideration has shown cost of construction in its balance sheet at Rs. 490/- per square feet whereas the AO was of the view that the construction cost should be at Rs. 1,253/- per square feet. The view of the AO was based on the Jantri rate issued by the superintendent of the stamps Gandhinagar Gujarat which is suggesting the rate at Rs.1,253/- per square feet. Accordingly the AO was of the view that the assessee has shown less cost of construction in its books of accounts by Rs.763/- per square feet (Rs.1253 less 490 per square feet) aggregating to Rs.10,20,62,695/- ( Rs. 763 * total instructed area of the project i.e. Rs.1,33,765.35 per square feet). As such the AO was of the view that such expenses has been incurred by the assessee outside the books of accounts. Thus the AO treated the same as unexplained expenditure under section 69C of the Act and added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A) who deleted the addition made by the AO by observing as under: 4.2 I have perused the assessment order and the written submission. The Id. AR contended that the AO has carried out verification of complete books and supporting documents/evidences/proofs/vouchers etc and not a single adverse inference was drawn to establish that there existed unaccounted expenditure. The Id. AR also emphasized the fact that, survey was carried out and barring certain irregularities in recording transactions, nothing glaring was found by the survey team. In order to cover up these errors and omissions, the appellant had also made disclosure of Rs 75 lacs, which is already incorporated in the books of accounts. I find that the AO in the
ITA No137/RJT/2016 A.Y. 2012-13 - 3 - assessment order specifically mentioned at para 2 that the appellant has furnished all the necessary details and produced books of account from time to time and were test checked. Therefore, there is no basis for resorting to estimation of cost of construction as per the jantri prices. Even if addition/disallowance has to be made, it should be restricted to the discrepancy found during survey viz., Rs 75 lacs. This again, has already been incorporated by the assessee in its books and the audit report filed along with return is embedded with this admission. Therefore, there now remains no discrepancy as per the Revenue itself and hence, there is no basis of relying upon the jantri rates to estimate the cost of construction. 4.2.1 The Id. AR further contends that, the appellant had purchased land of the project admeasuring 13060.55 sq. yards for Rs 27,85,000/- including cost of registration, on 07.04.2005 which again was as per the prevailing jantri rates only. It obtained approval of local body for construction.ct., 133765.35 sq. feet as per approved plan for which permission granted on 28.03.2007. The appellant carried out the construction between FY 2008-09 to 2011-12. As and when the constructions of units were completed, part completion certificates were obtained. These completion certificates were obtained on 27.09.2011 and 15.12.2011 for completion of 73 and 27 units respectively. Thereafter, while applying for completion certificates for plot No. 63 to 68/1 to 10 the appellant vide letter dated 15.03.2012 surrendered balance 24128 sq. feet in plot No. No. 69 to 76/4 to 10 as also for units on plot No. 77 to 84/1 to 10 and accordingly final completion certificate for plot No. 63 to 68/1 to 10 was granted vide No. 1276 dated 22.03.2012. Thus, completion certificates were obtained on three different occasions, but before 31.3.2012. All the copies of completion certificates so produced before the AO are also forming part of the paper book, filed in this office, which have been verified. In short, the appellant had carried out construction on 109637 sq. feet [133765 - 24128]. This fact can not be denied by the AO as the rectification order was passed by the same AO, as documentary evidence proof filed in support of its contention by the appellant's. The Id. AR further contends that, the AO never allowed opportunity to the appellant to explain the cost of construction and its variance from the jantri price. He further contends that, there is no provision in the Income tax Act, 1961 to work out cost of construction based on jantri rates and that, the jantri rates are not universal rates and cannot be applied to any random case without taking into consideration the merits and the nature of property, quality of construction, quantum of material, and other amenities etc. used in the construction. In fact the jantri rates are prescribed for the purpose of collection of stamp duty and are for deemed fair market value on given date and not for any other purpose. Jantri rates are common for a small house as well as for a luxurious bungalow containing various kinds of amenities. Thus, application of jantri rate for determination of cost of construction in any individual case that too meant for lower income group housing project in the present case would be an absurd proposition. I find substantial force in this argument of the AR of the appellant. Also, the jantri schedule so adopted by the AO is as on 18.04.2011 and this rate would be applicable in the cases of transaction which takes place after that date. Again, this does not indicate cost of construction in the hands of the seller but average FMV for the purpose of stamp duty collection. Hence, the finding of the AO is erroneous on this score too because, under the income tax proceedings the jantri rate has limited determining FMV for the provisions of section 50C of the Act. However, in scope of determining FMV for the provisions of section 50C of the Act. However in the case of the appellant, the appellant is a builder who constructed building for sale.
ITA No137/RJT/2016 A.Y. 2012-13 - 4 - 4.2.2 The Id. AR further argued that, even if the jantri rate is to be applied to determine the deemed cost of construction, then undisputed proportionate component of cost of land is to be excluded from the working of the deemed cost of construction, the difference. In this case the land in question was purchased long back in 2005 at the jantri rate, and hence it cannot be compared with the jantri rate of land as on 18.04.2011 and therefore the portion of land is to be excluded from the cost as per books and jantri rate. If the cost of land is excluded, then the cost of construction per sq. feet would be higher than the estimated cost as determined by the AO. Thus, even the jantri rate is applied incorrectly to the existing facts of the case of the appellant. This argument too finds substantial applaud because, the estimation on the basis of jantri rate applied includes land purchased way back in 2005 for which the rate made applicable by the AD was as that specified in the jantri rates made applicable from 2011. What resulted out of this lopsided finding is that, the income of the appellant is estimated at Rs 17.77 crores whereas, the gross turnover of the appellant is only Rs 12.48 crores. This is very unfortunate. It has been held time and again by various judicial authorities that, even if assessment is made on fair judgement basis, it should be scientific, pragmatic and logically acceptable. There cannot be a novice finding with a weak base. Hence, the finding of the AO fails on this score too. 4.2.3 In view of the above finding, I am of the considered view that the AO has grossly erred in estimating the income of the appellant and hence, the entire addition made of Rs 10,20,62,695/- is directed to be deleted. Thus, this ground of appeal is allowed
Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us.
Both the learned DR and the AR before us relied on the order of the authorities below as favourable to them.
We have heard the rival contentions of both the parties and perused the materials available on record before us. The provisions of section 69C of the Act are attracted in a situation where the assessee has incurred an expense without recording the same in the books of accounts. In the present case there is no iota of evidence available before the AO suggesting that the assessee has incurred any expense which were not disclosed in the books of accounts except the value of the Jantri determined by the superintendent of stamps.
ITA No137/RJT/2016 A.Y. 2012-13 - 5 - 6.1 We also note that there was the survey operations carried out under section 133A of the Act and no details was found during the survey operation suggesting that there was the expenses incurred by the assessee outside the books of accounts.
6.2 Thus in the absence of any information, we do not find any infirmity in the order of the learned CIT (A). Hence the ground of appeal of the Revenue is dismissed.
The 2nd issue raised by the revenue is that the learned CIT(A) erred in 7. deleting the addition made by the AO by withdrawing the deduction under section 80IB of the Act for Rs. 6,82,21,445/-.
The AO during the assessment proceedings observed that the assessee has obtained certificates 3 times for partly completion of the project on different dates. Thus the AO was of the view that the project of the assessee has not been completed within the time prescribed i.e. 31 March 2012 under the provisions of section 80IB of the Act. Accordingly the AO disallowed the deduction claimed by the assessee and added to the total income.
Aggrieved assessee preferred an appeal to the learned CIT (A) who allowed the deduction to the assessee under section 80IB(10) of the Act by observing as under:
5.3. I have perused the assessment order and the written submission filed by the Id. AR. The Id. AR contends that, the local authority had given permission for development of housing project on 28.03.2007. The completion certificates were issued on 27.09.2011,25.12.2011 and on 22.03.2012. This is also filed before the AO as also this forms part of the paper book. Hence, there is no dispute on this score. It is also seen that, the appellant had vide letter dated 30.01.2015 furnished letter No. RMCITPl\Nest Zone/Out ward No. 2494 dated 30.01.2015 to the AO in which the RMC has explained that final completion certificate was issued bearing No. 1276
ITA No137/RJT/2016 A.Y. 2012-13 - 6 - dated 22.03.2012 in respect of plot No. 63 to 68/1 to 10. It was further stated that no construction activities now remains and as such project stand completed on completion of construction on plot No. 63 to 68/1 to 10 for which complete [Puma] certificate was issued on 22.03.2012. In order to appreciate the process of completion of project, the events of project completion is as under. Plot No. No. of No. of units No. of units No. of units Total units which for which for which units completion completion completion completed certificate certificate certificate dated date date 27.09.2022 15.12.2011 22.03.2012 issued. issued issued 1 to 4/1 6 5 1 -- 6 to 6 5 to 7/1 4 4 -- -- 4 to 4 8 to 27/1 30 26 4 -- 30 to 30 28 to 31/1 8 -- 8 -- 8 to 8 32 to 36/1 10 -- 10 -- 10 to 10 37 to 46/1 15 14 1 -- 15 to 15 47 to 62/1 27 24 3 -- 27 to 27 63 to 8/1 10 -- -- 10 10 to 10 Total 110 73 27 10 110 5.3.1 In fact, the AO herself vide para 4 of order u/s 154 dated 11.06.2015 has accepted the clarificatory letter dated 30.01.2015 of RMC. As far as the case law relied on by the AO, the facts are totally distinguishable. In the case of Sky Builders and Developers 14 taxmann.com 78(lndore) the facts were that the assessee sold plots to respective customers by registering a sale deed and thereafter assesee constructed building at an agreed price, it had to be concluded that assessee merely acted as building contractor and not as a developer and, therefore, assessee's claim for deduction under section 80-IB(10) could not be allowed. In the case of the appellant it is the developer and the units were sold after getting approval from the Local body as also the completion certificates as stated above. Also, in the case of Fortuna Foundation Engineer & Consultants 25 taxmann.com 471 (lucknow) relied on by AO, it is seen that the assessee-builder constructed a residential housing complex project approval for which was granted before 01.04.2004. It claimed deduction under section 80-1B. Though approval to housing project was granted before 01.04.2004, but in fact it was completed after the stipulated period and, hence, second requisite condition for claiming deduction under section 80-IB(10) i.e., completion of project before 31-3-2008 was not satisfied rendering assessee ineligible for deduction under section 80-IB (10). Whereas in the case of the appellant the approval was granted on 28.03.2007 and as per the conditions laid down in clause (iii) of section 801B(10), the appellant was required to complete the project by 31.03.2012 which had been carried out as per final completion certificate dated 22.03.2012. Thus, both decision relied on by the' AD are totally on different footing and are not distantly applicable to the facts of the case of the appellant. Therefore, the disallowance made by the AP falls to survive and hence the same is deleted. The grounds of appeal are allowed.
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Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us.
Both the learned DR and the AR before us relied on the order of the authorities below as favourable to them.
We have heard the rival contentions of both the parties and perused the materials available on record before us. On perusal of the completion certificate filed by the assessee which are placed on pages 46 to 48 of the paper book, we find that the completion certificate has been issued by the competent authority on the different occasions. First certificate was issued for part completion of the project dated 27 September 2011, the 2nd certificate was issued for part completion of the project dated 15th of December 2011 and the final certificate for the completion of the project was issued dated 22 March 2012. Thus from the final certificate issued by the competent authority for the completion of the entire project, it is established that there was the no violation of the provisions of law as specified under the provisions of section 80IB(10) of the Act. At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). Hence we do not find any reason to interfere in the order of the learned CIT (A). Thus the ground of appeal of the Revenue is dismissed.
The last issue raised by the revenue is that the learned CIT (A) erred in treating the income of Rs. 75 lacs as income from regular business and accordingly holding that the same is eligible for deduction under section 80IB(10) of the Act.
The assessee during the survey proceedings made a disclosure of Rs.75 lakhs of income which was not treated by the AO as income from the
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regular business activity. Accordingly the AO disallowed the deduction claimed by the assessee with respect to such income under the provisions of section 80IB (10) of the Act.
Aggrieved assessee preferred an appeal to the learned CIT (A) who directed the AO to treat the impugned income as regular business income and therefore eligible for deduction under section 80IB(10) of the Act.
Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us.
Both the learned DR and the AR before us relied on the order of the authorities below as favorable to them.
We have heard the rival contentions of both the parties and perused the materials available on record before us. Admittedly, the assessee is not engaged in any activity other than the construction activity as discussed above. Moreover, the revenue has not brought anything on record evidencing that such income disclosed during the survey proceedings is not arising from its construction activity. As such the onus was upon the revenue to disprove the contention of the assessee based on the documentary evidence. But the revenue has failed to do so. Therefore we hold that the disclosure of income made during the survey proceedings does not mean that the income is to be treated as income from other sources. Accordingly, we are of the view that such income in the absence of contrary evidences is arising from the business activities of the assessee. Hence we do not find any infirmity in the order of the learned CIT (A). Hence, the ground of appeal of the Revenue is dismissed.
ITA No137/RJT/2016 A.Y. 2012-13 - 9 - 18. In the result the appeal filed by the revenue is dismissed.
This Order pronounced in Open Court on 28 /02/2020
-Sd- -Sd- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot, Dated 28/02/2020 manish