M/S. SHREE MUKUND & SHREYAS DEVELOPERS,PUNE vs. INCOME-TAX OFFICER,

आदेश / ORDER

PER D. KARUNAKARA RAO, AM :

This is the appeal filed by Assessee against the order of CIT(Appeals)-II, Pune, dated 30.04.2014 for the Assessment year 2009- 10.

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“ On facts and in law,

the business of developing housing project like earlier years. Assessee

filed return of income on 23.10.2009 declaring total income at Nil. At the

end of the assessment, the Assessing Officer quantified the assessed

income at Rs.2,57,22,930/-(rounded off). In the assessment, the

Assessing Officer made addition of Rs.2,57,22,927/- as per discussion

given in Para 3 of the assessment order. This addition arises from the

claim of deduction u/s.80IB (10) of the Income Tax Act, 1961 (hereinafter

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referred to as ‘the Act’). As per the Assessing Officer, assessee failed to

furnish the ‘Completion Certificate’ from Pune Municipal Corporation

(PMC), Pune to evidence the completion of the project by 31st March,

2008. The ‘Completion Certificate’ dated 01.08.2008 filed by the assessee

is consequent to the application dated 16.07.2008 for issuance of

‘Completion Certificate’ by the said Authority. In fact, the Assessing

Officer got the said certificate/information from Authority of PMC (Deputy

Engineer, PMC) vide letter No. ZN/1/J/1694 dated 15.11.2011. Assessee

alleged that the Assessing Officer did not grant proper opportunity to

cross examine the said Deputy Engineer, PMC on the ground of paucity of

time. The request of the assessee to cross examine the Deputy Engineer,

PMC was not considered by the Assessing Officer as there was no

deposition of any statement on oath from him.

before the CIT(A). During First Appellate Proceedings, Assessee raised the

said issue i.e. ‘granting reasonable opportunity to cross examine the

Deputy Engineer, PMC’ along with another issue relating to ‘extent of

commercial area of the project’. As per the assessee, the commercial

area of 2564.20 Sq.ft should have been exceeded as there is no restriction

provided by the statute for the year under consideration. Assessee placed

reliance on the ‘Completion Certificate’ dated 01.08.2008 and decision of

Tribunal in the case of Satish Bora Vs. ACIT, ITA No.713 & 714/PN/2010

for A.Y.2004-05 and A.Y.2005-06 decided on 07.01.2011. The CIT(A)

examined the said issue and also examined the additional evidences

furnished by Assessee before him. The issue of request for cross

examining the Deputy Engineer, PMC was forwarded and called for

remand report (Para 3.1.2). The CIT(A) considered the written submission

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made by the assessee (Para 3.2) and discussed the issue relating to

allowability of claim of deduction u/s. 80IB (10) of the Act ( Para 3.3) and

dismissed the appeal of the assessee. The CIT(A) recorded that the

housing project of the assessee, in question, was approved by Local

Authority before 01.04.2004 and the relevant due date for completion of

the same is on 31.03.2008. That being the law, the date of completion

certificate is 01.08.2008 in consequent to the application dated

16.07.2008 is not in favour of the assessee. The CIT(A) dismissed the

additional grounds in view of non-submission of any details. The contents

of Para 3.4.3 onwards are relevant for the adjudication of this issue.

Operation para of the decision is in Para 3.5 to 3.8 and for the sake of

completeness the same are extracted as under:

“3.5 Thus, the issue involves the date of completion of the project for which section 80IB(10)(a) has prescribed the time limit upto 31.03.2008 when the housing project has been approved on the date on which the building plan of such housing project is first approved by the local authority.

“(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;

(ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority:"

It is thus provided that in a case where the approval in respect of the housing project is obtained more than once, the housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority. Therefore, the completion/occupancy certificate in respect of a housing project has to be issued by the local authority only as envisaged by the provision of section 80IB(10) of the IT Act, 1961.

3.6. Development of every region is regulated the concerned local authority in accordance with DC rules/regulations framed by that local authority. The DC rules/regulations are framed by the local authority depending upon the needs of that region and hence differ from region to region. The expression ‘housing project’ is neither defined under the IT Act nor it is defined under the DC rules/regulations framed by the local authority and, therefore, which project would qualify to be called as a housing project has to be gathered from the rules/regulations framed by the local authority

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and the development of project at Pune are approved as per the Development control rules for Pune Municipal Corporation, Pune 1982 ‘DC Rules Pune’ for short. Thus the legislature and the Courts in its wisdom have recognized the importance of a ‘local authority’ and recognizes the certificate issued with respect to the approval as well as completion/occupancy of a housing project. Once it is hold that the local authority could approve a project to be a housing project and grant completion/occupancy certificate as permitted under the DC rules, then the said project would be eligible for section 80IB(10) deduction irrespective of the fact that some infirmity, if noticed subsequently cannot completely overlook the grant of the certificate issued by the local authority. In the present case the issue is that of the time limit by which the project should had been completed in order to qualify for deduction u/s.80IB(10) of the IT Act, 1961, the appellant had not fulfilled the condition regarding obtaining the occupancy certificate from the local authority but has failed to obtain the same within the time limit prescribed in the aforesaid section of the Act for claiming deduction i.e. before 31.03.2008.

3.7. Since the application itself has been made by the appellant beyond the stipulated time, therefore, the contention raised is not at all applicable vis-à-vis the deduction claimed u/s. 80IB(10) of the IT Act. In the case of the appellant as the application for occupancy certificate for Building “B”, as per material on record has been made on 16.07.2008 to the PMC and the occupancy certificate has been issued subsequently i.e. only on 01.08.2008 which is much beyond the date stipulated as per section 80IB(10) of the IT Act, thereby the appellant has not fulfilled the conditions as per section 80IB(10)(a) r.w. explanation.

3.8. In view of the above facts the claim of deduction u/s.80IB(10) of the IT Act, 1961 for the assessment year under consideration has rightly been disallowed by the AO as the project has not been completed within the time frame stipulated u/s.80IB(10)(a) of the IT Act. Accordingly, grounds No. 1 to 4 raised by the appellant are dismissed.”

us by raising grounds as extracted above.

which ground Nos.1 to 5 relates to the ‘Completion Certificate’ linked

arguments. The ground No. 6 relates to the extent of commercial area as

applicable to the assessee’s project. It also relates to the applicability of

the relevant condition on extent of 2000 sq. ft. of commercial area of the

said project under consideration. It is claim of the assessee that such

restriction does not apply to the assessee’s project which was approved

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prior to 01.04.2005. Ld. Counsel for the assessee narrated the facts of

the issues and submitted that the Assessing Officer erred in not

considering the ‘First Application dated 11.03.2008’ (page 5 of the

paper book) made to PMC for requesting grant of ‘Occupancy Certificate’.

Assessee claims the Completion Certificate dated 01.08.2008 was given in

response to the second application dated 16.07.2008. In fact, assessee

made application first on 11.03.2008 and the project was completed prior

to this date. Further, the Assessing Officer has not granted any

opportunity to cross examine the Deputy Engineer of PMC who issued

completion certificate dated 01.08.2008 (page 46 of the paper book).

Further, Ld. Counsel narrated following events giving important dates:

Sr. Date Description No.

1 30/04/2002 Commencement Certificate granted

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the attachments. 9. 01/08/2008 PMC grants Occupancy Certificate.

6.1 Further, Ld. Counsel brought our attention to the grounds of the

appeal before CIT(A) and submitted CIT(A)’s failure to adjudicate the

issue raised in ground No. 6 of the present appeal. He further submitted

that CIT(A) failed to appreciate the fact that the amendment brought in by

the Finance (No.2) Act, 2004, does not apply as the projects approved

prior to the said date. The project was first approved in this case

originally in April, 2002. In the instant case, the project was undisputedly

approved by the PMC prior to the amendment to section 80IB(10) of the

Act. Further, in this regard, Ld. Counsel relied on the decision of Hon'ble

Jurisdictional High Court in the case of CIT Vs. Brahma Associates, 197

Taxman 459 ( Bombay) in 2011. Ignoring all these important aspects i.e.

developments of the projects, arguments advanced by the Ld. Counsel

and judgment of Hon'ble Jurisdictional High Court, the CIT(A) confirmed

the disallowance which is unsustainable in the eye of law. Ld. Counsel

prayed for remitting the issue back to the file of Assessing Officer for

removing discrepancies occurred in the assessment proceedings and

adjudicating the issue afresh.

orders of Assessing Officer and CIT(A). To start with, Ld. DR submitted

that ‘Completion Certificate No.1’ is not bona-fide one. Bringing our

attention to Page 5 of the Paper book, Ld. DR submitted that the

Completion Certificate No. 1 has not been acknowledged by the Municipal

Authority and the same is evident from the fact that seal and stamp of the

PMC is missing. The contents available on application for Occupancy

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Certificate No. 2, are placed at page 46 of the paper book. Explaining the

manner of such application, Ld. DR submitted that there is a procedure

of entry for submitting such application in Taluka Register of the

concerned Department and no such acknowledgement was evident on

application for ‘Completion Certificate No.1’ filed by the assessee. Further,

bringing our attention to the signature of Architecture, Structural

Engineer, Engineer etc, Ld. DR submitted that signature of Architecture

do not tally. License/Registration number of the signatory is also

exclusively absent on page 5 i.e. Copy of application submitted on

11.03.2008 for grant of Occupancy Certificate. Further, Ld. DR argued to

make out his case that application for Occupancy Certificate No.1 is never

submitted to the PMC. He further submitted that Deputy Engineer, PMC

relying on his records commented that Occupancy Certificate No. 2 is the

final Occupancy Certificate which is relevant for deciding the allowability

of claim of deduction u/s.80IB(10) of the Act. Referring to assessee’s

request for cross examining the Deputy Engineer, Ld. DR submitted that

Deputy Engineer has not given any statement against the assessee and

accordingly, there is no need to cross examine the Deputy Engineer by

the assessee. Thus, Ld. DR submitted that AO/CIT(A) has rightly

adjudicated the issue without granting opportunity to cross examine.

7.1 On the issue of applicability of the Judgement of Hon'ble

Jurisdictional High Court in the case of CIT Vs. Brahma Associates

(supra.), Ld. DR heavily placed reliance on the orders of AO/CIT(A). On

the assessee’s request for remitting the issue back to the file of AO, Ld.

DR submitted that it is clear case of non completion of housing project

before due date and therefore, denial of deduction u/s.80IB(10) by the

Assessing Officer/ CIT(A) is justified.

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raised before us relates to (i) Completion Certificate & providing

opportunity to cross examine the Deputy Engineer, PMC and (ii)

Extent of commercial area of the housing project. We shall deal with

these issues in the following paragraphs:

Completion Certificate & providing opportunity to cross examine the Deputy Engineer, PMC :

Undisputed facts relating to this issue of CC are that the project

was approved prior to 01.04.2004 (Clause-1 (i) of Section 80IB(10)(a) of

the Act) and due date of completion of the housing project is 31st March,

2008. The assessee claims making of an application for completion

certificate first (Page 5 of the Paper book) on 11.03.2008 for completion of

Tower-B with all necessary Annexures. Relying on the same, assessee

considered the same as compliance to meet the provisions of Income Tax

Provisions. Further, the assessee submitted that the second Application

dated 17.07.2008 along with all the Attachments was filed as there was

no response from the PMC. It is not known to us as to why the assessee

filed the said second Application to the PMC for want of Completion

Certificate on 17.07.2008 when he has already filed first application on

11.03.2008. The ‘onus’ is upon the assessee to explain the reasons for

making second application. As such no compliance receipts was filed by

the Ld. Counsel before the Assessing Officer or before us to substantiate

its case.

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11.03.2008 and Second application dated 17.07.2008 and found, the

First application suffers from various discrepancies, questioning the

credibility of the First Application for issuance of CC by the PMC.

Signatories of the applications are different and manner of taking

acknowledgement from PMC Authority are also different. These

discrepancies and differences have left many questions regarding bona

fide of the First Application (Page 5 of the Paper book). When there are

such unanswered questions with respect to the Application Form

logically, Income Tax Authority should have examined the attachments to

the said applications and see if these documents are authentic and

complete in all respect qua the due date of completion of the housing

project. Assessing Officer did not verify the same. Assessing Officer

should have made enquiries with the Drainage Department, Water Meter,

Encroachment Department, License to operate lift, Tax, Fire and Garden

etc to ascertain the completion of the project. No attempt was made in

this regard by the Assessing Officer. Therefore, in our view, there is need

for scrutiny of these facts by the Assessing Officer. Hence, these aspects

are found needed for remanding to the file of Assessing Officer. Assessing

Officer shall grant reasonable opportunity of being heard to the assessee

as per the set principles of natural justice.

Coming to the next issue i.e. request of assessee to cross examine

the Deputy Engineer, PMC, we find, it is a settled legal proposition if there

is any incriminating statement given by witness to the Department

against the assessee then principles of natural justice demand that an

opportunity should necessarily be given to the affected party i.e. assessee

11 ITA No. 1672/PUN/2014 A.Y.2009-10

in this regard. As such, in a case where no such statement is given and

merely a Completion Certificate was issued by the Deputy Engineer in

normal course of his duties as Govt. Servant, in our view, it does not call

for any cross examination to the said Deputy Engineer, PMC who issued

such completion certificate. This cross examination will come into picture

when the Assessing Officer invoked the provisions of section 131 of the

Act and recorded statement and the same is against the assessee. In any

case, Assessing Officer is duty bound to supply copies of the documents

objected before him under various sections of the Act and they are put to

use against the assessee in the assessment. As such, the assessee has

the other remedies before the said Officer/ Engineer under Right to

Information Act & various rules. Therefore, we are of the opinion that the

Engineer merely executed his duties and there is no need for cross

examining him. We order accordingly.

us, we are of the considered opinion, as requested by the Ld. Counsel for

the assessee, this issue needs to be remanded to the file of Assessing

Officer for fresh adjudication of all the aspects of the completion

certificate. Assessing Officer shall grant reasonable opportunity of being

heard to the assessee.

partly allowed for statistical purposes.

Extent of Commercial Area

of built up area of the shops and other commercial establishments

12 ITA No. 1672/PUN/2014 A.Y.2009-10

included in the housing project. These provisions are brought into statute

by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005. The statute provides

for restriction of 2000 sq. ft. As per the assessee, this restriction is

applicable to the housing project approved on or after 01.04.2005 and the

same is not applicable in the case where the project stands approved

before the said date. Assessee placed reliance on the judgment of Hon'ble

Jurisdictional High Court in the case of CIT Vs. Brahma Associates

(supra.).

not adjudicated by the Lower Authorities in proper perspective by giving

speaking order as requested by the Ld. Counsel. Accordingly, we are of

the considered opinion that this issue should be remanded to the file of

Assessing Officer for fresh adjudication after considering the judgment of

Hon'ble Jurisdictional High Court in the case of CIT Vs. Brahma

Associates (supra.) and after giving reasonable opportunity of being heard

to the assessee. Accordingly, this part of ground raised by the

assessee is partly allowed for statistical purposes.

purpose.

Order pronounced on 26th day of September, 2018.

Sd/- Sd/- (�वकास अव�थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

पुणे / Pune; �दनांक / Dated : 26th September, 2018. SB

13 ITA No. 1672/PUN/2014 A.Y.2009-10

आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-II, Pune. 4. The CIT-II, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.