M/S. V.S. JOSHI & ASSOCIATES,KOLHAPUR vs. INCOME TAX OFFICER, KOLHAPUR

आदेश / ORDER आदेश आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This is the appeal filed by the assessee against the order of CIT(A)-2, Kolhapur, dated 27-09-2016 for the Assessment Year 2012- 13.

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referred to the affidavit of the assessee dated 21-06-2018 explaining the

delay. The contents of the said affidavit read as under :

“5. In this appeal before CIT(A) pertaining to A.Y. 2012-13 (subsequent assessment year) the directions were issued to A.O. to deny the deduction as explained above. It is undisputed fact and law that non- consideration of the judgment of Co-ordinate Bench of the Tribunal is the mistake apparent from records. Accordingly the assessee filed application before Ld.CIT(A) under S.154 of the Act dt. 13-10-2016 that is on the same date the appeal order of the Ld.CIT(A) was received. The Ld.CIT(A) did not decide the application u/s.154 one way or the other. The assessee perused the matter at his end but could not get any orders on the said application filed under S.154 of the Act. 6. The filing of application u/s.154 on the basis of appellate order of the Tribunal is also one legal forum and assessee was pursuing the same but was not successful. This is also considered a “reasonable cause” to condone the delay occurred in filing the appeal. 7. There is no intentional delay. The balance of convenience is in favour of the assessee. 8. In view of this it is prayed the delay be condoned and appeal be admitted for adjudication in accordance with the provisions of law.”

parties on this preliminary issue, we find it is a fact that assessee filed

an application u/s.154 of the Act before the CIT(A) on the date of receipt

of the order. It shows the seriousness of the assessee. He also

undertook measures to follow it up with the O/o. the CIT(A) and they

did not yield any result. It is not known why the said application of the

assessee was not adjudicated by the CIT(A). All these efforts of the

assessee are undisputed by the revenue. On verification of the issue

raised in the said application for rectification, we find the issue is linked

to the issue raised in the grounds in this appeal. Assessee expected

that the matter can be settled through the route of section 154 of the

Act. Therefore, assessee waited for the outcome of the proceedings

u/s.154 of the Act, which caused the delay in filing of this appeal with

the delay of 74 days. In our opinion, there is no fault on the assessee

and the cause stated by the assessee constitutes reasonable cause.

The CIT(A) ought to have disposed of the application of the assessee

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u/s.154 of the Act. Therefore, the delay of 74 days in filing the appeal

before us is condonable and, therefore, the appeal is admitted for

adjudication. As such, the delay is only 2 ½ months and not years.

Next, we shall take up the appeal on merits.

“1. On the facts and circumstances of the case and in law the Hon'ble Tribunal "A” Bench Pune, in the case of the assessee (ITA/1709/PN/2014)decided on 29th Jan, 2015) A. Y. 2011-12 held that the amendments brought in S. 80IB(10) clause (e) and (f), inserted from 01-04-2010 it was inconceivable as to how the amendment by finance Act, 2009 would be applied to the earlier concluded transactions? The objection of Revenue was held unsustainable. In the circumstances the Ld. CIT(A) was not justified in directing the A.O. to deny the deduction claimed u/s. 80IB(10) of the Act. The deduction claimed be allowed.

engaged in the business of Civil Construction. Assessee filed the return

of income on 29-09-2012 declaring total income of Rs.4,25,620/-.

During the year, assessee carried on three housing projects namely,

Vishwasagar, Vishwanayan and Vishwa Enclave Apartments. Out of

these projects, Vishwa Enclave Apartment is eligible for deduction

u/s.80IB(10) of the Act. Assessee maintained separate accounts for

this project and claimed deduction u/s.80IB(10) of the Act for the

assessment year under consideration at Rs.1,49,76,143/-. On

verification of the details/records furnished by the assessee and on

perusing the assessment order of the assessee for the earlier A.Y. 2011-

12, the AO denied the claim of deduction made by the assessee.

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5.1 Background facts relating to the denial of the said deduction

u/s.80IB(10) of the Act includes that the AO and CIT(A) denied the

claim of the assessee. As per the AO, the assessee (1) could not comply

with the condition relating to built up area of flats/units not exceeding

1500 sq.ft.; (2) the assessee could not comply with the provisions of the

only flat to one relative and, if fact, a number of flats were sold to a

number of relatives; and (3) assessee could not comply with the

provisions of completion of the project within 5 years from the end of

financial year in which the project was approved. Assessee carried the

matter to the Tribunal. The Tribunal vide ITA No.1709/PN/2014, dated

29-01-2015 for the A.Y. 2011-12 set-aside the order of CIT(A) and partly

allowed the appeal of the assessee. In the assessment proceedings,

assessee relied on the Hon’ble Supreme Court judgment in SLP No.7717

of 1990 in the case of Union of India and others Vs. Kamlakshi Finance

Corporation Ltd. AIR 1992 Supreme Court 711, 712) 55 ELT 433 (S.C).

The Department is in the process of filing appeal before the Hon’ble

High Court, Mumbai u/s.260A of the Act. Eventually, the AO

disallowed the claim of deduction u/s.80IB(10) of the Act by holding as

under :

“10.1 With due respect towards ratios of higher ups discussed as above, very respectfully it is essential to state here that the decision of the H’ble Tribunal (supra) has been just received by the concerned jurisdictional AO and as such the decision is being analyzed in the light of the legal pronouncement and in the process of filing of appeal before the Hon. High Court, Mumbai u/s.260A of the Act. In order to keep the issue alive till it reaches its finality, as well as, to maintain consistency in appeal process; I am unable to allow the claim of assessee preferred u/s.80IB(10) of the Act; hence, the claim of assessee for deduction of Rs.1,49,76,143/- is hereby rejected, simultaneously initiating penal proceedings u/s.271(1)(c) of the Act, separately. 10.2 Endorsing the above issue relevant to deduction u/s.80IB(10) of the Act, further, it may also be stated here that the facts pointed out by my predecessor which led him to reject the claim of assessee firm for deduction made u/s.80IB(10) of the Act remain continued for the year under consideration too. Moreover, with due respect, it may be stated that, as far as, decision of the H’ble Apex Court relied upon by assessee

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is concerned, it is distinguishable on facts, because on different set of facts relevant to the provisions of Central Excise and Customs Act and in the different perspective that matter has been decided by the H’ble Supreme Court.”

submitted that the issue is covered by virtue of the order of Tribunal for

A.Y. 2011-12. On the first objection that some of the flats exceeded the

specified area of 1500 sq.ft., the CIT(A) after considering the contents of

Para Nos. 15 to 17 of the order of Tribunal for the A.Y. 2011-12 (supra)

held as under :

“8. From the above, it is evident that the proportionate profits of only those residential units in the project which comply with the requirement of clause (c) of section 80IB(10) are to be allowed as a deduction. In other words, the disallowance of deduction shall be limited to profits relating to those units which exceed the area of limitation of 1500 sq.ft. It has been submitted before me that during the year no such units were sold and, therefore, there is no question of any proportionate disallowance. Nevertheless, the AO is directed to verify if at all any of the units for which sales have been recognized during the year exceed 1500 sq.ft. of built-up area (as defined u/s.80IB(10)) and if so, deny the benefit of deduction on the profits from those units alone.

6.1 Regarding the second objection that assessee sold more than one

flat to the same buyer/relative of the buyer, the CIT(A) after consider

the contents of Para No.7 and 8 of the order of Tribunal (supra) held as

under :

“9………………. From the details filed before me, I find that there are only two such transactions wherein flats have been sold to near relatives viz. flat no.101 and 102 in ‘A’ wing to Ms. L.H. Shah and Mrs. H.M. Shah (date of sale deed – 30/3/2012) and the second instance being flats No.408 and 409 to Mrs. M.R. Somani and Mrs. R.V. Somani (date of sale agreement – 29/01/2010). Following the decision of the Hon’ble Tribunal, it is apparent that only flats No.101 and 102 in ‘A’ wing are hit by the provisions of clause (f) of section 80IB(10). The AO is therefore, directed to deny the deduction u/s.80IB(10) to the profits from flats No.101 and 102 of the ‘A’ wing.” (Para 9 of the CIT(A).

6.2 Regarding the third objection for denial of deduction that the

project was not complete as on 31-03-2012, the CIT(A) after considering

the contents of Para No.13 of the Tribunal (supra) held as under :

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“ It is evident from the above that the project is complete as on 31/03/2011 and therefore, eligible for a deduction u/s.80IB(10). Based on the discussion above, ground No.1 is partly allowed in view of my specific directions in paragraph 8 directing the assessing officer to verify if any of the flats sold during the year exceed the area limit of 1500 sq.ft. as also my specific direction in paragraph 9 directing the assessing officer to deny deduction under section 80IB to profits from 2 flats, viz 101 and 102 in the ‘A’ wing of the project.” (Para 10 of the CIT(A).

Eventually, the CIT(A) partly allowed the appeal of the assessee. In the

process, the order of Tribunal stands dishonoured in the disguise of

keeping the issue alive as mentioned by the AO in Para No.10.1 of his

order.

in appeal before us with the grounds extracted above.

revenue authorities. On going through the facts, submissions and the

orders of the revenue as well as the order of Pune Bench of the Tribunal

in the assessee’s own case in ITA No.1709/PN/2014, dated 29-01-2015

for the A.Y. 2011-12, we find the Tribunal answered all the objections

raised by the AO in favour of the assessee. Therefore, we find it relevant

to the extract the finding given by the Tribunal and the same reads as

under :

“6. However, assessee submitted that the flats in question were allotted to the spouses of the individual who were already allotted a flat in the said project prior to the insertion of such restriction in section 80-IB(10) of the Act. The claim of the assessee was that it has allotted the said flats in the month of October, 2008 and the sale agreements were duly registered in October, 2008 itself. Notably, the restriction contained in sub-clauses (e) and (f) to section 80-IB(10) of the Act relating to the limit of allotment of not more than one residential unit in the housing project to the related persons specified therein, was inserted by the Finance (No.2) Act, 2009 w.e.f. 01.04.2010. On this basis, the stand of the assessee before the lower authorities as well as before us is that the aforesaid allotment of flats made in October, 2008 is not hit by the said restriction which has come on the statute on a later date.

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October, 2008. However, as per the Assessing Officer, there were certain number of unsold flats shown in Work-in-Progress and there was a possibility that the assessee may even after 01.04.2010 sell flats to the relatives of the persons already holding the flats. The Assessing Officer also disagreed with the assessee that the provisions inserted by the Finance (No.2) Act, 2009 w.e.f. 01.04.2010 were not applicable to the flats which already stood sold by the assessee in October, 2008. The aforesaid stand of the Assessing Officer has also been affirmed by the CIT(A).

“In this connection, it may be reiterated that the assessee himself submitted that there was closing work in progress of the flats of the units bearing numbers 104, 208, 310 and 703 which the assessee pleaded of having less than 1500 sq.fts. in each unit of its built-up area, though in the initial submission such built-up area of each such unit was specified by the assessee for more than 1500 sq.fts.. When there were incomplete units/flats as admitted by the assessee itself, it cannot be said that the project was completed. As far as for getting the benefit of deduction u/s 80-IB(10) of the Act, the project for which the approval was taken for commencement is required to be completed in full. Part completion of the project, even if the certificate of completion has been obtained from the Municipal Authority, when the assessee itself admitted that there were incomplete units left/kept as work- in-progress, it cannot be said that the project was completed and the condition of completion of the project as laid down in section

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80-IB(10) of the Act was fulfilled. As such, the assessee’s contention that the project was completed prior to 31.03.2011 is also not acceptable and hence the same is not accepted.”

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relatable to the units which have a built-up area of upto 1500 sq.ft. be allowed deduction u/s 80-IB(10) of the Act. In other words, the Ld. Representative contended that proportionate relief be allowed u/s 80- IB(10) of the Act qua the profits relating to flats which comply with the requirements of clause (c) to section 80-IB(10) of the Act. The said stand of the assessee is supported by the judgement of the Hon’ble Calcutta High Court in the case of CIT vs. Bengal Ambuja Housing Development Ltd., (IT Appeal No.458 of 2006) dated 05.01.2007. 16. The Ld. Departmental Representative has also not disputed that the Pune Bench of the Tribunal has been consistently allowing proportionate relief in cases where some of the flats do not comply with the requirements of clause (c) to section 80-IB(10) of the Act inasmuch as the profits relatable to the residential units which comply with the requirements of clause (c) to section 80-IB(10) of the Act have been held to be eligible for deduction. 17. In view of the aforesaid precedent, in our view, the lower authorities were not justified in denying the deduction u/s 80-IB(10) of the Act on a wholesale basis by noticing that few of the flats in the project do not comply with the limit on built-up area prescribed by clause (c) to section 80-IB(10) of the Act. The order of the CIT(A) is set-aside and the Assessing Officer is directed to re-compute the deduction allowable u/s 80-IB(10) of the Act on the basis of the profits proportionate to residential units in the project which comply with the requirement of clause (c) to section 80-IB(10) of the Act. The disallowance of deduction u/s 80-IB(10) of the Act shall be limited to the profits relating to those units which exceed the maximum built-up area of 1500 sq.ft. prescribed in clause (c) to section 80-IB(10) of the Act. We hold so. 18. In this manner, on Grounds of Appeal No.1 & 2, assessee partly succeeds.

Therefore, in principle, the issues stand covered in favour of the

assessee. Hence, all the grounds on merits are allowed in favour of the

assessee.

AO and the CIT(A) made their orders on 30-03-2015 and

27-09-2016 respectively. Further, the order of the Tribunal for A.Y.

2011-12 (supra) being dated 29-01-2015, is in existence at the relevant

point of time. Therefore, it is an undisputed fact that the AO/CIT(A)

has not followed the decision of the jurisdictional Tribunal in assessee’s

own case for the A.Y. 2011-12 intentionally. The principles of judicial

discipline demand that the orders of the higher appellate authorities

should be followed unreservedly by the lower authorities. The reasons

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given by the AO, i.e. “in order to keep the issue alive till it reaches its

finality, as well as, to maintain consistency in appeal process; I am

unable to allow the claim of assessee preferred u/s.80IB(10) of the Act”

is no ground for not following the order of Tribunal. In this connection,

we wish to refer to the decision of Visakhapatnam Bench of the Tribunal

in the case of Cargo Handling Private Workers Pool vs DCIT in ITA No

152 to 156/ Vizag/2011 wherein it was held that the orders passed by

the Tribunal are binding on all the tax authorities functioning under the

jurisdiction of Tribunal. The operational paras of the order of the

Tribunal (supra) is extracted as under :

"Next we shall dwell upon the judicial rulings about the binding nature of orders passed by the Income tax Appellate Tribunal. The Hon'ble MP High Court in the case Agarwal Warehousing and Leasing Ltd. Vs. CIT (257 ITR 235) has held that the orders passed by the tribunal are binding on all the tax authorities functioning under the jurisdiction of the tribunal. While so holding, it followed the decision of the Hon'ble Supreme Court in the case of UOI Vs. Kamlakshi Finance Corporation Ltd (AIR 1992 Supreme Court 711, 712) 55 ELT 433 (S.C) which has ruled as under:

"It cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of appellate authorities. The order of the Appellate collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the Department – in itself an objectionable phrase – and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to the assessees and chaos in administration of tax laws".

The Hon'ble M.P High Court further observed in clear terms as under: "Obviously, the Commissioner of Income tax (Appeals) not only committed judicial impropriety but also erred in law in refusing to follow the order of the Appellate Tribunal. Even where he may have some reservations about the correctness of the decision of the Tribunal, he had to follow the order. He could and should have left it to the Department to take the matter in further appeal to the Tribunal and get the mistake, if any, rectified."

Further in Khalid Automobiles Vs. UOI (1995) (4 SCC (Suppl.) 652), the Hon'ble Apex Court held that an order of Tribunal was binding on the Assessing officer and the first appellate authority and the failure to follow the same may constitute contempt of Tribunal's order. Similar views have been expressed in Sales tax matters in

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Rajendra Mills ltd Vs. Jt. CIT (1971) 28 STC 483 (Mad), Senthil Raj Metals Vs. GTO (1990) 79 STC 38 (Mad).

Therefore, we are of the opinion that it is a case of dishonouring

the order of the jurisdiction Tribunal. The supervisory authorities of the

AO and the CIT(A) may consider taking appropriate action in respect of

such officers as per the procedure. Accordingly, we allow the grounds

raised by the assessee.

Order pronounced in the open court on this 18th day of July, 2018.

Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य

पुणे Pune; �दनांक Dated : 18th July, 2018 सतीश आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत

अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-2, Kolhapur 4. The Pr.CIT-II, Kolapur िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “A Bench” Pune; 5. गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

स�यािपत �ित //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune