ACIT 25(1), MUMBAI vs. AMBER ENTERPRISES, MUMBAI

आदेश / O R D E R

PER R.C.SHARMA (A.M):

This is an appeal filed by the Revenue against the order of CIT(A)- 35, Mumbai dated 27/05/2014 for A.Y.2010-11 in the matter of order passed u/s.143(3) of the Income Tax Act, 1961 (hereafter “the Act”). 2. Following grounds have been taken by the Revenue:- “i. On the facts and in the circumstances of the case and in law, the Ld.CIT(A)erred in allowing the assessee's deduction in respect of entries for various payments found in the impounded material. ii. On the fact's-and in the circumstances of the case and in law, the Ld. ClT(A) erred in not appreciating the difference between the eligible business expenses and mere entries of certain payments. iii. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in not appreciating the failure of the assessee in establishing that the payment as per entries in the

2 ITA No.5176/Mum/2014 M/s. Amber Enterprises impounded material were made wholly and exclusively for the purpose of business. iv. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing deduction u/s. 80IB(10) of the 1 T Act without appreciating the fact that the assessee has not claimed the deduction in return filed u/s. 139(1) of the I. T. Act. v. On the facts and in the circumstances of the case and in law , the Ld CIT(A) has erred in. not appreciating the fact that the assessee has wrongly shown sale of 3 residential units i.e. 104, 105 & 106 under the sale of commercial spaces as combined unit is exceeding the threshold of area of l000 sq. ft basing essential condition u/s. 80IB(10) (c). vi. On the facts and in the circumstances of the case and in law , the LD CIT(A) has erred in not appreciating the fact that the assessee has violated the condition stipulated u/s. 80B(10)(f) of the I T Act as more than one residential units have been sold to spouse/relative of the owner. vii. On the facts and in the circumstances of the case and in law, the Ld(CIT(A) has erred in not appreciating the fact that the assessee has not complied with essential condition of completion of project within 5 yrs as stipulated in section 80FB (10) (a) (iii). viii. On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in concluding that the deduction under chapter VIA can be complied while computing undisclosed income. The Ld CIT(A) has also erred in not appreciating the fact that the assessee neither recorded in his books of account nor has disclosed to the department such income by filing return or otherwise. ix. The appellant prays that the order of the Ld.CIT(A) on the above grounds be set aside and that of the A.O. be restored." 3. Rival contentions have been heard and record perused. Facts in

brief are that the assessee, M/s. Amber Enterprises, is a partnership firm

constituted on 31.03.2004 comprising of 3 partners initially and later on

reconstituted on 20.02.2006 by admitting, two more-partners. The firm is

engaged in the business of building construction. The assessee firm had

initiated and undertaken a project named Orchid Premises in Borivali

3 ITA No.5176/Mum/2014 M/s. Amber Enterprises (East), Mumbai falling in the category of Slum Rehabilitation Project. Two

buildings were constructed out of which one was rehabilitation of slum

occupants residing previously on the land before and one building which

was used entirely for sale purpose. A survey action U/S.133A of the Act

was carried out at the office premises of the assessee on 23.02.2012 wherein the assessee offered a sum of `3 crores as additional income.

very same document amounting to `6.19 Crores was not given any credit.

The learned A.O has made an addition of `8,94,79,880/- as undisclosed

income compiled by him based on seized material. In fact he has added

the total receipt shown in seized material as mentioned in his assessment

order at page no 15 in para No 5.2.1 without allowing the expenses

incurred by the assessee which are incorporated in the very same seized

material. Though the AO has quantified these expenditure to the tune of `6,19,51,735/-, the AO has not allowed the same. AO also disallowed

assessee’s claim of deduction under Section 80IB(10).

of expenses found recorded in the very same seized document on which

unaccounted receipts were found recorded. Claim of deduction under

Section 80IB(10) was also allowed after observing as under:-

The facts of the case are that the appellant is a firm engaged in the building-activity, and survey U/S.133A was carried out on 23.02.2010 wherein 3 diaries marked 'A-l, A-2, A-3 were impounded. The diaries had in them the record of various amounts

4 ITA No.5176/Mum/2014 M/s. Amber Enterprises received by the firm and also expenses met by the firm. The first ground of appeal pertains to non consideration of expenses as being allowable by the AO. The AO has taken into cognizance the receipt of Rs.8,94,79,8807- but has " not given allowance for the expenses to the extent of Rs.6,19.,51,735/-., It is a matter of fact that the income recorded is on the basis of diaries impounded during the survey and the appellant has produced evidences for various expenses also recorded in the very same diaries. It is also a fact that the appellant has taken some "on money" from some of the flat/shop purchasers and it is against this money that he has paid money for the purchases, both for which the transactions are recorded in the impounded documents; I am in agreement with the contention of the appellant that since undisclosed income is being computed from the impounded material, then the benefit of the expenses must also be given to arrive at the net figure. The various judicial decisions stated by the appellant have been gone through in detail and they all highlight the basic principle of natural justice. Apart from the other decisions referred to supra, specific reference is made to the decision in the case of Dharmesh Builders and Developers Pvt. Ltd. vs. DCIT 2006 102 lTD - Pune which holds that in this case the impounded documents should be read as a whole and it cannot only be read to the extent that which is advantageous to the revenue. In terms of violation of Section 40A(3), it needs to be recognized that once the income is being computed from sources that were undisclosed and have come to light only by virtue of survey action then compliance of other specifications in this case having been cash payments above Rs.20,000/- would not remain significant in terms of calculation of the –total undisclosed income. It may also be emphasized that the interest and purpose of the statute is to derive/arrive at-the figure of total 'income' and not only, the receipts. Therefore, what needs to be brought to tax in this case also is the total undisclosed income and not total undisclosed receipts alone. By not giving benefit to the expenses/there would be an anomalous situation wherein the expenses made to earn the income are not being given credit for. Similar view has been held by various courts cited supra. Therefore, in principle it is held that-the expenses-found in the impounded diaries should also be given benefit for and what is-to be brought to tax is the net income of the appellant. 5. Ground Nos.2,3 & 4 are being adjudicated together. The appellant is also disputing the working of the undisclosed income and also the calculation of the expense as per the impounded materials. The first quantum of dispute in the receipts is with respect to Rs.83 lacs being shown on page.97 of Annexure A-l disclosed by the appellant. The contention of the appellant that the said amount

5 ITA No.5176/Mum/2014 M/s. Amber Enterprises does not pertain to the income of the firm because this was an amount received back from Mr.Deepak Salda on 16.02.2008 as against the amount paid to him in April, 2004 for purchase of land as the deal was cancelled is not accepted in the face of the facts of the case. The appellant has referred to the said entry on page 97 of Annexure A-l by attributing that the said amount was received back. However, from the evidences filed before the AO or before this office during appeal, there is nothing to substantiate the submission of the appellant that the said Rs.83 lacs was given to Mr.Deepak Salda and was therefore, the same amount which .was received back in 2008. No documents visa-vis the said land purchased have been shown for examination (in the absence of any specific evidence, the contention of the appellant cannot be accepted that "the deal was not materialized and cash was received back from him on 16.02.2008. The contention of the appellant that if at all the said amount should be added, it could be added in the F.Y 2004-05 in which the payment is made and not in the A.Y.2010 cannot be accepted in the absence of any evidence that this amount to any earlier payment having being made using the funds of the Anyhow it is not the case of the appellant that it has disclosed the said' amount in its return for A.Y.2004-05 to evidence the fact that any such payment has been made at that juncture to Mr. Deepak Salda. In the absence of any credible evidence to substantiate his- argument, the claim of the appellant on this ground is dismissed. 6. Ground No.4: This ground is being dealt with first since it pertains to the calculation of net receipts of the appellant. It is the contention of the appellant that the AO has wrongly included receipt of Rs.1 crore and expenditure of Rs.34,98,500/- pertaining to Vasai land transaction while calculating the income/expenditure from the impounded material. From the arguments put forth by the appellant and examination of the Assessment Order passed in the case of Gulam Rasui Sheikh for A.Y.2005-06 while there is reference to the land at Vasai, however it is not clear as to how the receipt is being shown in the diaries of the firm which actually pertain to transactions being done by Mr.Gulam Rasul Sheikh in his individual capacity. Therefore, in the absence of any credible evidence to link the two transactions, the said component is to be considered as part of the receipts of the appellant as taken by the Assessing Officer. As regards the benefit for expenses to the extent of Rs.34,98,5007-, keeping in view the decision in principle taken on Ground No.l above, the appellant shall be allowed the expenses to the extent of Rs.34,98,500/- appearing In the impounded material. This ground is therefore partly allowed.

6 ITA No.5176/Mum/2014 M/s. Amber Enterprises 7. Ground No.3: It is the contention of the appellant that the AO has not accounted for the expenses paid to Ilyas to the tune of Rs.60 lacs and Rs.57,77,500/- paid to M/s JJ. Construction. An apparent perusal of the annexures provided during the course of appeal indeed shows that the amounts paid to Ilyas to the extent of Rs.60 lacs featuring on page 89 of A-l annexure and .57,77,500/- paid in cash to M/S.J& J Construction remained unaccounted for in the total expenses taken at Rs,6,19,51,735/-. The said expenses are to be accounted for in light of the decision taken supra in Ground No.1. Therefore, the calculation of the receipt and expenses shall be as under: Receipt amount worked out by the AO To be taken as such : Rs.8,94,79,880 Less: Expenses amount worked out by the AO :Rs.6,19,51,735 Add: As discussed above in Ground Nos.3 & 4 : Rs.1,17,77,500 TOTAL : Rs.7,37,29,235 8. Ground No.5: This ground is regarding admissibility of deduction u/s.80IB(10) to the appellant. With respect to the availability of deduction u/s.80IB, the AO has denied it that the appellant had not claimed it on the original return of income filed on 15.10.2010 but has only made a claim for the same in the computation at the time of assessment proceedings. Also the AO pointed out that the return of income was not accompanied by the mandated Audit Report U/S.80IB. 8.1. Appellant's submissions: In the present case, the said project is SRA Project, which is approved by Concerned Authorities. It fulfills all the conditions namely, 1. The project is approved by the Local Authority which is SRA on 17-05-2005. Copy enclosed herewith. 2. The size of the plot of the land is more than one acre, though as per condition, it should be minimum one acre. But this condition is not applicable in the case of a housing project, carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared as slum area under any law and such scheme is notified by the Board in this behalf. Surely our project is under SRA. Hence this condition is also fulfilled. 3. The Built-up area of the Shop and commercial establishment should not exceed 5% of the aggregate built-up area of the housing project or 2000 sq. ft., whichever is less. However w.e.f. A.Y. 2010-

7 ITA No.5176/Mum/2014 M/s. Amber Enterprises 11, the built-up area of the shops and other commercial establishments included in the housing project should not exceed 3 per cent of the total built-up area of the housing project or 5,000 sq. ft., whichever is more. In the present case total built-up area is given below. Flat (Sale) 20046 Commercial Shop (Sale) 1820 Office 1655 3475 Total 23521 Since the total commercial area built-up is less than 5000 sq. ft., which is applicable from A.Y. 2010-11, hence our project fulfills the said condition also. Even otherwise, if some of this units in the housing project exceeded the area limit given above, relief under Section 80IB must be given on pro-rata basis based on the following judicial pronouncement. a. CIT Vs Sheth Developer. (P) Ltd. (2009) 33 SOT 277 ( Mum.) b. SJR Builder v. CIT (2010) 3 ITR (Trib.) 569 (Bang.) 4. None of the residential unit exceed the maximum limit of 1000 sq. ft. Built-up area in the present case. Hence our project falls under the above category. 5. In the present project, one residential unit is allotted to only one person/company in accordance with the condition No.6 of the 80 IB. Hence our case fulfills the said condition fully. 6. Deduction should be claimed in the Return of Income and return should be submitted on or before the due date of submission of Return of Income. This is the only condition, which our client could not fulfill as they have not claimed the said deduction u/s. 80 IB while filling the Return of Income and filed the Return on 15th October, 2010. 7. There is one more condition, which need to be fulfilled i.e. Audit Report u/s. 80 IB in the prescribed Form No. 10 CCB should be submitted alongwith the Return of Income. In the present case, Assessee could not submit the audit report in . prescribed-form as reported u/s. 80 IB of Income Tax Act, 1961. In this connection we submit with respect -the following legal position for your information. A. Revised Portion: B. Revised Computation (1) the assessee discovers any omission or any wrong statement In the return, he may furnish a revised return at any time before the

8 ITA No.5176/Mum/2014 M/s. Amber Enterprises expiry of 1 year from the end of the relevant assessment year or before completion of the assessment, whichever is earlier. 10 As held in the case of GOETZE (INDIA) LTD. Vs. CIT reported in 284 ITR 323 S.C, that if any deduction is required to be claimed through after filing of the return, it can be claimed through revised return only, In this case after filing revised return claim of deduction was put by letter. It may be noted here that intimation u/s. 143 (1) is not assessment order as held in the-case of S.R. Koshti V/S. CIT reported in 276 ITR 165 Gujarat' Revised return can be-filed after intimation is received. (2)B. Revised Computation. At present assessment proceedings for A.Y. 09-10 are in progress. During the course of assessment proceedings, if the income is required to be enhanced, reduced, what is the remedy as the time for filing the revised return is over. The assessing officer is required to assess the correct income which has either accrued or received. Even if any legitimate claim is allowable to the assessee, the assessing officer would allow. Authorities: i. 336 ITR 585 Gujarat Rotary Club of Ahmedabad V/s. ACIT As held in this case, if the revised computation of income was submitted by the assessee in assessment proceedings and the recomputation was correct and accepted by the assessing officer. Simply because it was submitted "beyond time specified in section 139(5) and therefore it was invalid and on this ground reassessment proceedings cannot be initiated.” ii. 276 ITR 165 Gujarat S, R. Koshti V/s. CIT As held in this case, if the assessee is in a position to show that he has been over assessed regard less of whether over assessment is a result of assessee’s own mistake or otherwise, the commissioner has power to correct such an assessment u/s. 264 (1) of the I T Act. On page 175 it was held in this case that, the state authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The state authorities can not adopt the attitude which private litigants might adopt. While giving this judgment, decision given by the Supreme Court in the cases of Ramlal V/s. Rewa Coalfields Ltd. AIR 162 S.C.361 State of West Bengal V/s. Administrator, Howaraha Municipality AIR 1972 S.C.74 and Bhabhutmal Raichand Oswai V/s. Laxmibai R Tarte AIR 1975 S.C1297 were considered. On page 175 there is mention of unreported decision of Gujarat high Court in the case of Vinay Chandulal Satia V/s. N O Parekh, CIT. Special Civil Application No.622 of 1981 in which it is mentioned that the authorities under the act are under an obligation to act in accordance with law. The tax can be collected only as provided under the act. If an assessee, under

9 ITA No.5176/Mum/2014 M/s. Amber Enterprises a mistake, misconception or on not being property instructed, is over assessed, the authorities under the act are required to assist him and ensure that, only-legitimate taxes due are collected. iii.336 ITR 434 P & HCIT V/s. Metalman Auto P Ltd As held in this case that, if there is omission to claim the exemption in the return, the assessing officer can not debar the assesses from claiming the deduction. The judgement of the honorable Supreme Court in Goetze (India) (2006) 284 ITR 323 5.C. was not applicable to such exemption. iv. 332 ITR-306 P&H V/s. Ramco International 111 ITR 1 SC, 12 As held in his case, claim u/s. 80IB was not allowed on the ground that assessee had not filed revised return, ITAT allowed deduction on the ground that assessee was not making any fresh claim and duly furnished documents and- Form 10CCB during assessment proceedings. There was no requirement for filing any revised return. The judgment of Goetze (India) (2006) 284 ITR 323 SC was not-applicable. v. 303 ITR 256 Delhi. High Court CIT V/s. Bharat Aluminium Co. Ltd. As held in this case that, if any revised claim of expenses incurred is made' during assessment proceedings, it is not a new claim but enhancing quantum of expenditure. Assessment based revised claim was valid. vi. Duty of Assessing Officer (i) 56 ITR 198 S.C. Navnitlal C. Zaven V/s. K K Sent, ACIT Bombay (ii) 107 ITR 63 Gujarat Chokshi Metal Refinery V/s. CIT It was held in the above cases that at the time of original assessment, the assessee did not claim relief though the responsibility or claiming refund and relief rested with the assessee, the income tax officer should have drawn the attention of the assessee to the relief which the assessee was entitled but the assessee had omitted to claim. To sum-up, we say that though Return is filed within prescribed limit as per Sec 139 (1) and audit Report was not submitted as per the provision of Sec. 80 IB(10) of the Income Tax Act, 1961, but in the light of above legal pronouncement, our assessee is eligible for deduction u/s. 80 IB(10) of Income Tax Act, 1961 and we are enclosing herewith our revised computation of Income alongwith Audit Report u/s. 80 IB(10) of Income Tax Act, 1961 with the request to kindly consider the same while passing assessment order for Computing the income for which, we shall be grateful to you. We further submit that, our client is not educated and is not aware all the provision of Income Tax. Though ignorance is not an excuse but sufficient reason for delay in submission of audit report and for

10 ITA No.5176/Mum/2014 M/s. Amber Enterprises not claiming exemption u/s.80IB. Further Section 80IB is a beneficial provision for the assessee and hence it should be construed liberally. In view of this we say kindly consider the same and give the relief u/s, 80 IB of Income Tax Act, 1961. 11.2) Without prejudice to above, we further submit that learned A.O observation that claim is after thought is not correct as assessee is not claiming anything new by cooking up the stories but the said claim is genuine and legitimate one, which is the lawful right of the assessee and due to ignorance of law, it could not be claimed in the original return of income . Further Non submission of Audit report in form No 10 CCB is a technical default .We place our reliance in case of "Ideal Home Co -Operative Buildings Society Limited Vs. ACIT, ITA no 526/ Banglore /2013 Pronounced on 7.03.2014, where it is held that "Department should not take advantage of ignorance of an assessee and every assessee should be made known of his/its tax liability as well as benefits, relief and deduction available under statute — CBDT circular dated 11 April 1955 'directed AO not to take advantage of assessee's ignorance .and/or .mistake — In instant case, assessee has not offered interest income for taxation, hence assessee was not in a position to., claim deduction u/s 80P(2) — When AO roped in interest income for taxation, he was duty-bound in view of CBDT circul.ar and on principles of equity and justice to examine claim of deduction u/s 80P(2) — Tribunal empowered to entertain a new claim for deduction otherwise than by.way of filing a revised return — Matter remitted to AO." 11.3) We are also producing Circular No.14(XL-35) dated 11.04.1955 which says that, Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It..is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regards the Officer should take the initiative in guiding a taxpayer where proceeding or other particulars before them indicate the some refund or relief is due to him. This attitude would, in the long run, benefit the department for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and relief assessee on whom it is imposed by law, Officer should- a) Draw their attention to any refunds or relief to which they appear to be clearly entitled but which they have omitted to claim for some reason or other. b) Freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.

11 ITA No.5176/Mum/2014 M/s. Amber Enterprises 11.4) Judicial precedents clearly establish that the taxpayer is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims not made in the return filed by it. The decision of the Supreme Court in the following cases, 1) Jute Corporation of India Limited v/s CIT (1991) 187 ITR 688 (SC) 2) ACIT v/s Gurjargravures Pvt Ltd. (1978) 111 ITR 1 SC 3) National Thermal Power Company-Ltd. V/s CIT (1998) 229 ITR 383. 11.5) The Bombay High court (High Court) In the case of Pruthvi Brokers &. Shareholder Pvt.Ltd. V/s CIT (ITA No. 3908 of 2010) held that the taxpayer is entitled to claim the deduction before the appellate authorities which was not claimed in the original or revised income tax return but was claimed in the assessment and appellate proceedings. The tax department have been relying on the Supreme Court decision in the case of Goetze (India) Limited-to contend, that the taxpayer cannot make a claim for deduction other than by filling a revised return. However, the Bombay High Court after discussing the Supreme Court decision in the case of Goetze (India) Limited held that if a claim is not made before the AO, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in the case of Goetze (India) Limited. The Bombay High Court also observed that the. Supreme Court had made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the tribunal to entertain and allow additional claim. In view of the above discussion we say that the Assessing Officer has not suggested or establish that .the omission was deliberate & malafied etc and hence the error in not claiming the deduction in return of income was inadvertent cannot be faulted. The appellant has rightly claimed deduction under section 8016(10) of the Income Tax Act, 1961 at the time of assessment proceedings and pray before you to kindly allow the deduction under section 80IB(10) to the appellant. Also we say that, though Return is filed with in prescribed limit as per Sec 139 (1) and audit Report was not submitted as per the provision of Sec. 80 IB(10) of the Income Tax Act, 1961, but in the light of above legal pronouncement, our assessee is eligible for deduction u/s. 80 IB(10) of Income Tax Act, 1961 and the appellant has already filed revised computation of Income alongwith Audit Report u/s. 80 IB(10) of Income Tax Act, 1961 before the A.O at the time of assessment proceedings.

12 ITA No.5176/Mum/2014 M/s. Amber Enterprises We further submit that, our client is not educated and is not aware all the provision of Income Tax. Though ignorance of law is not an excuse but sufficient reason for delay in submission of audit report and for not claiming exemption u/s. 80 IB. Further Section 80 IB is a beneficial provision for the assessee and hence it should be construed liberally. In view of this we say kindly consider the same and give the relief u/s. 80 IB of Income Tax Act, 1961." 9. The matter was remanded to the AO for his comments and report has been received on 20th May, 2014 raising the following issues: Decisions: I have gone through the contentions of the appellant and the non allowabllty of 80IB deduction by the AO and the facts of the case and the legal position in this regard. The facts of the case is that the original return of income was filed on 15.10.2010. As already seen supra for the current year the date of filing of return has been extended to 15.10.2010. Therefore, the return is in time as per the requirement of section 139(1) of the I.T.Act, 1961. The appellant has while filing the return not claimed deduction u/s.80IB and has done so only subsequently during the course of assessment. This has been done by virtue of filing revised computation of income and not by filing revised return. Therefore, the question that arises is that whether 80IB deduction would be allowed or not? The appellant has. referred to the decisions of (i) Jute Corporation of India vs. CIT (it) ACIT vs. Gurjagravures Pvt. Ltd, -and (iii) NTPC vs. CIT (All of them referred supra) in the appellant' submission to substantiate his claim for claiming of section 80IB as part of the' assessment proceedings. In terms of ratio of the decision of the Hon'ble Apex Court in Goetz- India, the issue has been examined to see whether the said decision would be applicable or not. The issue is. clarified in a recent judgement of the Hon'ble High Court in the case of Pruthvi Brokers and Shareholder Pvt. Ltd. vs. CIT wherein the 'decision in the case of Goetze India has been discussed and it has been .held that while the assessing authority cannot entertain the claim for deduction otherwise than by filing return, however this does not limit the power of the appellate authorities to entertain the claim for deduction otherwise than by revised return. In this regard, the matter was remanded to the AO to go over the claim of the appellant and. the AO has examined the claim against the various provisions that need to be met with by the appellant to be allowed the claim of 80IB(10), Therefore, in' light of this, the issue of admissibility of section 80IB deduction is being adjudicated upon'in terms of the merit of the section as to whether the appellant meets the condition of 80IB or not?

13 ITA No.5176/Mum/2014 M/s. Amber Enterprises 1. Date of filing of return: The first ground on which the AO has not recommended the allowability is that the return of income .should be filed on or before the due date for filing of return as mandated u/s.139. In this regard it is seen that the fact of the case is that the .return was filed on 15.10.2010. However, for the year in question, the of the appellant is accepted that in the relevant year the CBDT had extended he due date of filing of return from 30.09.2010 to 15.10.2010. This is a matter of fact and record. 2. Submission of Audit Report: The AO has pointed out that the appellant had not submitted the Audit Report in Form No.10 CCB alongwith the return of income. The appellant has referred to the decision in the case of Allahabad High 'Court in the case, of CIT vs. Dhampur Sugar Ltd. 90 ITR 236 which made a distinction between revised return and a correction in return. It is held that if the assessee files some application for correcting a return already filed or making amends therein, it would not mean that he has filed a revised return. It will retain the character of an original return. But once the revised return is filed, the original return must be taken to have been withdrawn and to have been substituted by a fresh return for the purpose of assessment. The appellant has also made reference to decisions in the-case of (i) CIT vs. Ramco International 221 CTR 491 (P&H) (ii) CIT vs. Natraj Stationery Products (P) Ltd. (2009) 312 1TR 222(iii) Pradeep Kumar Haflakka vs. ACIT.12(3), Murnbai (iv) ACIT. Vs. M/s.NHK Spring India Ltd. to substantiate his point. The appellant in his submissions has also highlighted the decisions of the judicial authorities which have held that requirement of Audit Report u/s.80IB is procedural in nature and not mandatory and the appellant has furnished the audit report before the AO at the time of assessment . The same are as under: - (i). As in the case of M/s. Unicorn Industries P. Ltd., V/s. Dy. Commissioner of Income-tax Secunderabad. Circle 3(3), Hyderabad, it. was pronounced that provisions of section 80IA (7) requiring to furnish the audit report along with the return of income is directory and not mandatory in nature. The Authorized Representative for the assessee relied on considering the law laid down by the Full Bench of the Hon'ble Punjab and Haryana High Court in the case of.Punjab Financial Cprporation (254 ITR 6), which has been followed by the very Court-in its subsequent decision in the case of CIT V/s. Mahaiaxmi Rice Factory (supra) we hold that provisions of S.80IA (7) is directory and the defect on account of non-furnishing of audit-report is a curable one. (ii) In this case of M/s. Unicorn Industries P. Ltd., V/s.- Dy. Commissioner of Income-:tax Secunderabad, It is well settled

14 ITA No.5176/Mum/2014 M/s. Amber Enterprises position of law that statutory provisions akin to S.80IA(7) which require furnishing of audit report alongwith the return are directory and not mandatory. If the audit report has not been furnished alangwith the return, it can be submitted before the finalisation of the assessment proceedings. The non-furnishing of audit report alongwith the return will render the return defective. However, the defect is curable. The Assessing Officer has to give an opportunity to the assessee in terms of S.139 (9) of the Act to rectify the, defect. (iii) As in case of Commissioner Of Income Tax vs. Panama Chemicals Works on 29 August, 2006r the pronouncement contains; "Form No. 10CCB provides for submission of audit report under Sections 80IA (7), 80IB and 80IC. The question that falls for our consideration is as to whether the requirement, of submission of Form No. 10CCB is mandatory or directory. As observed by the Bombay High Court, the requirement of filing the report is mandatory and failure to file it is fatal. But that is not so insofar as the requirement of filing it along with the return is concerned. If, in a given case, the assessee fails to file such report along with the return and files it subsequently, but before completion of the assessment, it will not be fatal to the claim of the assessee and the ITO will have the power to accept the same if he is satisfied that the delay in filing the same was for good and sufficient reasons. It Is not disputed that return was filed in time. The question that has been raised is as to what would be' the effect if Form No. 10CCB is filed later on during pendency of the assessment. It is not disputed that the report in the prescribed Form No. 10CCB was filed by the assessee before completion of the assessment. It is, therefore, clear that the assessee complied with .all the provisions of law except that in submission of Form No. 10CCB, there was delay." After going through the various arguments above and also as has been highlighted in the decision of M/s.Vanshee Builders and Developers by the ITAT, Bangalore in which very detailed discussion has been taken up in light of decision given by the High Courts earlier, it emerges that the filing of Audit Report as part of return is of a directory nature and merely a technical default would not disallow the if other conditions are met. In the case of Bajaj Tempo Ltd. vs. CIT 1992 104 CTR (SC) 116, the Apex Court has held as under: provision in the taxing statute granting incentives for promoting growth and development should be construed liberally. Since a provision intended for promoting economic growth has to be interpreted liberally, the restriction on interest too has to be

15 ITA No.5176/Mum/2014 M/s. Amber Enterprises construed so as to advance the objective of the provision and not to frustrate it". In the present case also it is seen that it cannot be said that it is an afterthought to claim deduction only because the Audit Report was submitted later during the course of assessment. What is required to be seen is whether the conditions are required to be fulfilled by the appellant to claim 80IB are met with or not. Therefore,' merely the fact that Audit Report was not filed with the return of income would not make the appellant ineligible to claim 80IB deduction. So now we see whether the conditions of 80IB(10) are met or not. For this a gist is produced below to see what the prescribed conditions are : (i) The case of the appellant is approved by the local authority after the first day of April, 2005 and so the project has to be completed within 5 years form the end of the financial year in which housing project is approved by the local authority which means that the project should have been completed before 31.03.2011. (ii) The project must be on size of plot of land of minimum one acre. (iii) The residential unit should have a maximum built up area of 1000 sq.ft. being situated in Mumbai. (iv) The built up area of shop and other commercial establishments shall be included in the housing, project and should not exceed 3% of the aggregate built-up area of the housing project or 5000 sq.ft. whichever is higher. (v) Not more, than one residential unit should be allotted to any person who is not an individual. (vi) When a residential unit is allotted to any individual, then no other residential unit in such housing project should be allotted to the individual or spouse or minor children of such individual or.HUF in which the individual is the kart or any person correcting such individual, spouse, minor child or HUF. To verify the satisfaction of the above conditions, the matter was remanded to the AO which has been received in this office on 20.05.2014 and the issues are" examined in light of the same and the replies of the appellant on this issue. The project has been approved on 17-06.2005 and, therefore, would need to be completed by 31.03.2011. The project is on a plot of land which is more than one acre. 3. In para 4 of the Remand Report the AO has stated that "As per 80IB(10)(c) maximum built-up area of a residential unit should be 1000 sq.ft. if such residential unit is situated in Delhi-or Mumbai. In

16 ITA No.5176/Mum/2014 M/s. Amber Enterprises the instant case, the built-up area of every residential unit is less than 1000 sq.ft. The same has been certified by the architect whose statement has been recorded by the undersigned. However, it is seen that the sale of three residential flats i.e. No.104, No.105, No.106 together has been shown under the sale of commercial spaces. The total built up area of this combined unit is 2009 sq.ft. which is clearly more than 1000 sq.ft. which is the essential condition to claim deduction' u/s.80IB(10). As this condition is not satisfied, the deduction is not allowable. After going through the appellant's .reply stating that 'regarding the honest dormitory^ we would like to draw your attention to the revised approved plan, in which the area was approved as a commercial premises and not residential and the condition (c) of section 80IB(10) specifically limits the area to 1000 sq.ft. for residential premises and not .commercial premises. The said area was approved and sold as commercial premises only and it is envisaged from the agreement where it is written as commercial premises. It 'is not the case that the appellant has sold the flats and then converted it into commercial premises but it is sold as commercial premises only and the plan is approved by the concerned Authority. Hence to say that Flat Nos.104, 105 & 106 are sold and the total area exceed 1000 sq.ft. is not correct because appellant has not sold flat but the commercial premises and the area restriction as mentioned in clause c of section 80IB(10) is not Commercial premises. We are hereby producing the approved plan and sale agreement which mentions the dormitory as commercial area. After having examined the documents in this regard, the issue is decided in favour of the since the plans show the said Nos. were indeed commercial premises and thereby not being part of the conditions that are required. 4. The next observation of the AO is with respect to the condition that-the built up area of commercial establishments included in the housing project should not exceed 3% of the aggregate built up area or 5000 sq.ft. whichever is higher. The.AO in his remand report stated that 'As per 80IB(10(d) the builtup area of Shops and other commercial establishments included in the housing project does not exceed three percent of the aggregate builtup area of the housing project or five thousand square feet, whichever is higher However, the stipulation of 3% or 5000 sq.ft. is introduced w.e.f. from A.Y.2010-11. Prior to this amendment, which is brought about through Finance Act, 2010, the condition stipulated at 5% or 2000 sq.ft. whichever is less. Clearly, as per the building plan the commercial space is 3459 sq.ft. (Carpet Area) which is more than the original condition stipulated i.e. 2000 sq.ft. of built up area. Therefore, as per the old condition the assessee would not have satisfied this condition to claim deduction u/s.80IB(10). This only

17 ITA No.5176/Mum/2014 M/s. Amber Enterprises indicates that claiming of deduction u/s.80IB by the assessee is an afterthought and hence was claimed at the time of assessment and not in the original return, of income." In this regard, the reply of the appellant attaching therewith the explanatory note is found to be satisfactorily explained as to why the new provision would be applicable in the case of the appellant and is given as under: "However, as per the Finance Act, 2010, it has been amended to the built-up area of the shops and other commercial establishments included in the housing project .does not exceed [three] per cent of the aggregate built-up area of the housing project or [five thousand square feet, whichever is higher" For further classification we hereby produce relevant extract from Explanatory notes to the provision of finance Act, 2010 Vide F..No.l42/1/2011-SO(TPL) issued by Ministry of Finance, Department of Revenue, (Central Board of Direct Taxes), new provision will be applicable for A.Y 2010-11, read, as under 16. Deduction for developing and building housing projects 16.1 Under the existing provisions of section 80-IB(10), 100 per cent deduction is available in respect of profits derived by an undertaking from developing and. building housing projects approved by a local authority before 31.3.2008. This benefit is available subject to; inter alia, the following conditions: (a) The project has to be completed within 4 years from the end of the financial year in which the project is approved by the local authority. (b) The built-up, area-of the shops and other commercial establishments included in the housing project should not exceed 5 per cent of the total built-up area of the housing project or 2,000 sq.ft. Whichever is less. 16.2 To allow for extraordinary conditions due to the global recession and the resultant slowdown in. the housing sector, the period allowed for completion of a housing project in order to qualify for availing the tax benefit under the section, has-been increased from the existing 4 years to 5 years from the end of the financial year in which the housing project is(approved)by the-local authority. This extension will be available for housing projects approved on or after 1-.4. 2005 but on or before 31.3.2008. 16.3 Further, the norms for built-up area of shops and other commercial establishments in eligible housing projects have also been enhanced in order to enable basic facilities for the residents. The permissible built-up area of the shops and other commercial establishments which can be included in the eligible housing project

18 ITA No.5176/Mum/2014 M/s. Amber Enterprises

is increased to three per cent of the aggregate built-up area of the housing project or 5000 sq. ft., whichever is higher. This benefit will be available to projects approved on or after 1.4.2005 but before 31.03.2008, which are pending for completion. 16.4 Applicability - These amendments have been made applicable with retrospective effect from 1st April, 2010 and will accordingly apply to the assessment year 2010-11 and subsequent assessment years. I have gone through the contention of the AO and the submissions of the appellant and the position of the law in this regard. The AO has rightly pointed out that the amendment has come in 80IB(10)(d) from 01.04.2010 and apparently, therefore, the appellant would not be a beneficiary of the amendment. However, the clarification and the explanatory notices which are given in Finance Act, 2010 by virtue of which the said amendment has come clearly specifies that the benefit of amendment shall be available to project approved .after 01.04.2005 and before 31.03.2008 which are pending. Therefore, the case of the appellant would be covered in the explanatory note. 5. The next observation of the AO in his remand report was that some flats/shops have been allotted to spouse/relative of the individual clearly violating the conditions stipulated u/s.80IB(10(f), the details of which are given as under: Flat No/Shop Total Sr.No Name Relation Area 1 P.D.Bhatkar Shop 2 611 Husband & Wife Mrs.S.P.Bhatkar Shop 3 2 Mr. Vishnu Kumar Bohra Flat No. 201 948 Self Mr. Vishnu Kumar Bohra Flat No.202 Self 3 Md.Wasif A. Shaikh Flat No. 301 948 Relatives Mrs.Zulekhabi Abdul Shaikh Flat No.302 4 Mr.Anil Surendra Sharma Flat No.401 948 Husband & Wife Mrs.Poonam Anil Sharma & Anil Flat No.402 Surendra Sharma 5 Mr.Samsuddin Y. Patel Flat No. 504 1728 Husband & Wife Mrs.Sahera S. Patel Flat No. 505 Mr.Samduddin Y. Patel Flat No. 507 & Sahera S. Patel

In the above mentioned cases, clearly it is-seen that husband and wife have been allotted-flats in the same project and in Sr.No.5, the

19 ITA No.5176/Mum/2014 M/s. Amber Enterprises individual and his wife have been allotted flats whose total built up are is more than 1000 sq.ft. whose total built up area is more than 1000 sq.ft. Therefore, the condition laid down u/s.80IB(10)(c) and'8OIB(f) are not satisfied by the assessee. In this regard, reply to the above is as under: 1. In point 6, the Assessing officer has drawn attention to the premises sold to relatives. We would like to explain the same as : a) Shop no 2 & 3 has been sold to husband & wife The shop no 2 and 3 has been sold to Mr. P.D Bhatkar and Mrs.S. P Bhatkar respectively. The relation between the Two is that of husband & wife. However it should 'be noted that the shops are' commercial in nature and condition (f) of Section SOIB (10) read as: In a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely- I. The individual or the spouse or the minor children of such individual, II. The Hindu undivided family in which such individual is the Karta, III. Such Any person representing such individual, the spouse or the minor children of such individual is the Karta. Since the Act specifically provides for residential unit to be considered for this section, the commercial premises does not fall under the purview of this section and the condition f of section 80IB(10) is not violated. b) Flat no 201-202, Flat no 301-302 and Flat no 401-402. Flat 201 & 202 have been sold to Mr. Vishnu Kumar Bohra, Fiat No 501 & 302 is jointly sold to Mr.Mohmmed Wasif A.Shaikh, Mrs. Zulekhabi Abdul Aziz Shaikh, Mohd Rafik Abdul Aziz Shaikh and Flat no 401 has been sold to Mr.Anil Sure'ndra. Sharma and 402 jointly to him and his wife Mrs. Poonam Anil Sharma. In these case it should be noted that even though more than one residential unit has been sold to same party or related party the areas of these flats is 474 square feet, and aggregate in each case is 948 square feet, which does not exceed maximum limit of 1000 square feet as specified in the condition. Further the said party has not merged the fiat. Hence the condition is satisfied. However in case of Flat No 504,505 & 507, which are allotted to members of same family, which has -a-aggregate area of 1728 sq.ft which exceeds the limit of 1000-sq.ft, we further submit that, Even in case where total area exceeded the maximum limit as specified

20 ITA No.5176/Mum/2014 M/s. Amber Enterprises in condition (c) of the section, the relief has been granted, as it is a common practice among a member of same family to join more than one residential unit to create more space for enhancing standard of living. The same has been held in the case of 38 SOT 174 (MUM) G.V Corporation vs. ITO on 29 December, 2006, It is common knowledge members of the same family who purchase separate residential units adjacent or contiguous to each other often join them by breaking down a wall or by opening a door way or in many other ways so that the entire family lives together and gets more space to live. In many cases, a request is made by the purchasers .to the builder or developer of the housing project to join the flats/residential units and the request is carried out by the builder. In such cases, it is not-possible to hold that the builder built the residential flat of more than 1000 sq.ft. Of built-up area. There is no evidence on record to suggest that the assessee itself advertised that the flats were of more than 1000 sq.ft. And that merely to get the benefit of sec. 80-IB he drew the plan in such a manner that each residential unit was shown as not more than 1000 sq.ft. of built-up area. It is not even the case of CIT that each flat in the housing projects undertaken by the assessee could not have been used as an independent or self contained residential unit not exceeding 1000 sq.ft. of built-up area and that there would be a complete, habitable residential unit only if two or more flats are joined with each other, which would ultimately, exceed 1000 sq.ft. of built-up area. In such a situation, merely because 9 out of 140 purchasers desired to join the flats purchased by them into one single unit, which exceeded 1000 sq.ft. Of built-up area, cannot disentitle the assessee to the deduction. In other words, taking the example of the flats purchased by the Sonawanes (one of the owners of flat not satisfying the condition) there is no allegation that the flat no.704 measuring 244 sq.ft. Purchased by Meera Sonawane, fiat no.705 measuring 578 sq.ft. Purchased by Supriya Sonawane and flat no.706 measuring 780 sq.ft. Purchased by Ethin Sonawane were not independent residential units by themselves and could become independent residential units only when they were joined or combined together. If each residential unit does not exceed the built up area of 1000 sq.ft., the fact that they were joined together by the purchasers for better living or for more space or for any other reason does not disentitle the assessee to the claim for deduction under section 80IB. In the present case the shop or flat was sold as under :

21 ITA No.5176/Mum/2014 M/s. Amber Enterprises

FLAT NAME OF THE PURCHASER DATE OF SALE NO 9ch May, 2008 201 MR. VISHNU KUMAR BOHRA 9th May, 2008 202 MR. VISHNU KUMAR BOHRA MR.MOHMMED WASIF A. SHAIKH, MRS 8th Feb, 2007 301 ZULEKHABI ABDUL AZIZ . SHAIKH, MOHD RAFIK ABDUL AZIZ SHAIKH 8th Feb, 2007 302 MR.MOHMMED WASIF A. SHAIKH MRS ZULEKHABI ABDUL AZIZ SHAIKH, MOHD RAFIK ABDUL AZIZ SHAIKH 2nd November,2008 401 MR-.ANIL SURENDRA SHARMA 2nd November,2008 402 MR. ANIL SURENDRA SHARMA 13th May, 2008 504 MR SAMSUDDIN Y.PATEL 13th May,2008 505 MRS.SAHERA S. PATEL . MR. SAMSUDDIN YAKUB PATEL & MRS SAHERA 16th November,2007 507 SAMSUDDIN PATEL

As for all of the cases above, All the Flats have been sold much before 31-03-2009.Whereas the condition (f) of section 80IB (10), which specifies that not more than one residential unit is to be allotted to a person, has been brought with prospective effect from 1-4-2010 i.e. A.Y 2010-2011. Our client has sold the flat before the introduction of this condition, Sale copies of Agreement were produced before Assessing Officer and he has not pointed out any deficiency with regards to date of sale, Thus the condition is not applicable in our case. We have relied on the judgment in case of Om Trinetri Builders & vs. Assessee on 25 April, 2012 ITAT Mumbai ITA NO. 7147/MUM/2010(A.Y.2006-07) which has similar facts of the case. It was noted that the-size of each fiat, as evident from building plan as duly approved by Municipal authorities, was less-than 1,000 sq. ft. It was not even revenues case that each of flat on stand alone basis was not a residential unit. Even flats we're constructed or planned in such a way that two flats could indeed be merged into one larger unit, 'as long each flat was on independent residential unit, deduction under section 80-IB (10) could not be declined. What section 80-IB(10) refers to is 'residential unit’ and in the absence of anything to the contrary in the Act, the expression 'residential units' must have the same connotations as assigned to it by local authorities granting approval to the project. The local authority had approved the" building plan with residential units of

22 ITA No.5176/Mum/2014 M/s. Amber Enterprises less than 1,000 sq.fi. And granted completion certificate as such. There was no ambiguity about the factual position, Further, -the prohibition against sale of more than one flat in a housing project to members of a family has been inserted specifically with effect from 1-4-2010 and, said amendment in law can only be treated as prospective in effect. So far as pre-amendment position is concerned, as long as residential unit has less than specified area, is as per the duly approved plans and is capable of being used for residential purposes on stand alone basis, deduction under, section 80-IB(10) cannot be declined in respect of the same merely because the end user, by buying more than one such unit in .the name of fam.ily members, has merged these residential units into a larger residential unit of a size which is in excess of specified size. It is usual to take note of legislative amendment by virtue of which the legislature put certain restrictions on sale of residential units to certain family members of a person who has been sold a residential unit in the housing project. Section 80-16(10) now provides an additional eligibility condition that in a case where a residential unit, in the housing project is allotted to any person being individual, no other residential unit in such housing project is allotted to any of the following person, namely (1) the individual or the spouse, or the minor children of such .individual, (ii) the HUF in which such individual, is a karta, (iii) any person representing such individual the spouse or 7 minor children if such individual, or the HUF in which such individual is a karta. [Para 7]. It is clear that the amendment has been brought with prospective effect from 1.4.2010 and there is no indication whatsoever to suggest that these need to be applied with retrospective effect. The amendment seeks to plug a loophole but restricts the remedy with effect from 1-4:2010, i.e., assessment year 2010-11. The law is very clear that unless provided in .the statute, the-law is always presumed to be prospective in nature. It will, therefore, be contrary of the scheme of law to proceed on the basis that wherever adjacent residential units are sold to family members, all these residential units are to be considered as one unit. If law permitted so, there was no need of the insertion of clause (f) to section under section 80-1B (1 0) It will be unreasonable to proceed on the basis that legislative amendment was infructuous or uncalled for - particularly as the amendment is not even stated to be for removal of doubts. On the contrary, this amendment shows that no such eligibility conditions could be read into pre-amendment legal position. [Para 8) We have also relied on the case of CIT vs. CHD developers Ltd; 362 ITR 177 (Dei), wherein it was held that project approved before amendment made does not fall in the purview of that condition and thus the conditions are not applicable. In this case, Assessee, a

23 ITA No.5176/Mum/2014 M/s. Amber Enterprises real estate developer obtained approval for housing project on 16.05.2005 from the development Authority. It completed the project in 2008 and by a letter dated 05.08.2008 applied to the competent authority for the issue of the completion certificate. The assessee's claim for deduction u/s 80IB(10) was denied inter alia,- on the ground the completion certificate was not obtained within the period of four year as prescribed by the finance Act,2004 w.e.f 01.04.2005 the tribunal allowed assessee claim for deduction accepting the assessee's claim that, since the approval was granted to the assessee on 16.03.2005 i.e prior to 01.04.2005, the assessee was not expected to fulfill the conditions which were not on the statue when such approval was granted to assessee. On appeal by the Revenue, the Delhi High court upheld the decision of and held as under : The approval for the project was given by the development authority on 16.03.2005. Clearly, the approval related to the period, prior to amendment, which insisted on the issuance of completion certificate by the end of the four year period, was brought into force. The application of such stringent condition, which are left to an independent body such as the local authority who is to issue the completion certificate, would have led to not only hardship but absurdity. ii) As a consequence, the tribunal was not, therefore, in error of law while holding in favour of Assessee. In view of the above discussion, we say that, assessee has fulfilled all the conditions-as specified in section 80IB (10) and the objection raised In Remand Report are not valid and against the facts on records. After going through the facts on this issue, it is seen that for the flats which are in the category of commercial in any case the limitation as prescribed in subsection (e) and (f) would not be applicable and with respect to other units which are residential, the fact of the case is that the said flats were sold to these persons before the insertion of the amendment on 01.04.2010. Reference in this regard is made to the decision of the Hon'ble Mumbai Tribunal in the case of Om Trinetri Builders referred to supra where the Hon'ble Tribunal has clearly held that this additional eligibility

24 ITA No.5176/Mum/2014 M/s. Amber Enterprises condition having specifically been inserted from 01.04.2010, cannot have a retrospective effect. Considering the decision made on merit on the impounded documents, the appellant has made an alternate argument that BOIB should also be granted on the assessed income and not returned income. In this regard, the legal position has been gone through. The issue first earns up before the Calcutta Bench of the Tribunal in the case of Bhag Chand Jain v, ACIT, 65 ITD 11. In this case, the assessee claimed that the Assessing Officer ought to have allowed admissible deductions under Chapter VIA from the income computed special block assessment procedure. It was argued on behalf of the that, though S. 158BB(1) provided for computation of undisclosed income in accordance with the provisions of Chapter IV, so long as there was no specific embargo on allowing deductions under Chapter VIA, deductions permissible 'under that Chapter should be allowed against the computed undisclosed income. It was claimed that the legislative- intent to allow such deductions could be gauged from the. Explanation to S. 158BB, wherein it was specifically provided that set off of brought forward losses under Chapter VI was not to be allowed against un- disclosed income. It was argued that the very fact that no such restriction was placed in respect of deductions under Chapter VIA, implied that such deductions were allowable. On behalf of the Revenue, it was argued that the income of the block period had to be computed as per S.158BB(1), which specifically provided that the total income was to be computed in accordance with Chapter IV and hence no other deduction or allowance mentioned in any other Chapter of the Income-tax Act could be allowed. The tribunal observed that there could have been a practical difficulty for the tax-gatherers as to the question of set off of those losses which were brought forward while aggregating the income of all the years of block period for the purpose of block assessment. Hence, the Explanation to S. 158BB sought to clarify this position. The Tribunal referred to the CBDT Circular No. 717 dated 14th August 1995, where the CBDT had clarified that brought forward1 losses or unabsorbed depreciation would be allowed to be carried forward and set off in subsequent regular assessments, and could not be set off against the undisclosed income determined in the

25 ITA No.5176/Mum/2014 M/s. Amber Enterprises block assessment. The Tribunal further noted that if the assessee had shown in any income in the normal course, the deduction under Chapter VIA, rebates, etc. were allowable in the regular, assessment, and that the assessee also got a deduction of the assessed figure while computing the undisclosed income for block assessment period. The Tribunal was of the view that when the assessee. had neither recorded in his books of account a particular income nor had disclosed to the Department such income by filing his return or otherwise, the legislature seemed to be disinclined to allow deduction under Chapter VIA or rebate u/s.88 against the undisclosed income of the block period. The Tribunal therefore held that in view of the specific reference to Chapter IV and absence of any reference to the other Chapters for the purpose of computing the undisclosed income, deductions under Chapter VIA could not be allowed to an assessee while computing the income of the block period. The issue again came up for consideration before the Pune Bench of the n the case of Control Touch Electronics (Pune) (P) Ltd., 11 ITD 522. In this case, the assessee had claimed deduction u/s.80I in respect of undisclosed income declared by it for the block period. This claim was rejected by the Assessing Officer, on the ground that the total income of the block period was to be computed in the manner provided in Chapter IV. Before the Tribunal, it was argued on behalf of the assessee that the scheme of the Act was to determine the total income, which could be computed only after allowing deductions under Chapter VIA, Reliance was placed on the provisions of S. 158BH, which provided that all the provisions of the Act were applicable to assessment made under Chapter XIVB, except those specifically excluded. It was argued that the only exclusions related to the set off of unabsorbed losses and depreciation are as per the provisions of S. 158BB(1). It was claimed that computation, under Chapter IV included deductions under Chapters V, VI and VIA, by placing reliance on the decisions of the Tribunal in the cases of Aqua Alloys (P) Ltd. v. Dy. CIT, 66 TTJ.(Pune) 71, and Kashmir Steel Roiling Mills v. Dy. CIT, 5JL Taxman 424 (Asr.). On behalf of the Revenue, it was argued that undisclosed income was to be computed in accordance with the provisions of Chapter IV, and therefore allowing any deduction u/s.80I did not arise. The Tribunal rejected the Revenue's interpretation of S. 158BB, The Tribunal felt that such an interpretation would lead to absurd results, inasmuch as it would :o double taxation of a part of

26 ITA No.5176/Mum/2014 M/s. Amber Enterprises the income, which could not have been intended by the legislature. The Tribunal observed that the amount to be deducted in computing the undisclosed income was the amount of total income computed in accordance with the provisions of the Act, including the provisions of Chapter VIA. If the interpretation of the Revenue were to be accepted, the total income including undisclosed income was to be computed as per the provisions of Chapter IV only i.e. without allowing deduction under Chapter VIA. According to the Tribunal, such a computation would amount to taxing part of the income twice which part of income already been allowed as a deduction in the regular assessment or in the return The Tribunal held that it was a well settled principle of interpretation that provisions of a statute should' be construed reasonably and harmoniously. Further, if the liberal interpretation led to absurd results, then the Court could read down such provisions in consonance with-the intention of the legislature. The Tribunal observed that the intention of the legislature was to assess only the total income of the assessee, which was to be computed in accordance with the provisions of the Act. The undisclosed income could be- worked out only if the provisions of S. 158BB(1) were not read in isolation, but along with other provisions of Chapter XIVB, including S. I58BH. Only if so construed, would it result in computation of real undisclosed income. The Tribunal noted that S. 158BH specifically provided that all the provisions of the Act applied to the assessment made under; Chapter XIVB, except as otherwise provided in that Chapter the Tribunal observed that a refusal of Chapter XIVB showed that the provisions of Chapter VIA had not been excluded. It further noted that wherever any exclusion was intended, the legislature had specifically provided so, as in the case, of unabsorbed losses and unabsorbed depreciation. The Tribunal noted that, had the legislature intended not to compute undisclosed income beyond Chapter IV, it would not have provided for exclusion of those unabsorbed losses which-were brought forward, which were dealt with in Chapter VI. It further noted that S.158BB referred to computation of total income, and not income or gross income. According to the Tribunal, total income could only be computed in accordance with and by applying all the provisions of the Act unless otherwise specifically provided. Therefore, on a combined reading of all the provisions, the Tribunal held that the total income u/s. 158BB(l) should be computed after allowing deduction under Chapter VIA, and therefore directed grant of deduction u/s.80IA against the undisclosed income.

27 ITA No.5176/Mum/2014 M/s. Amber Enterprises The objective of-the computation under Chapter XIVB is to determine the additional income which has-not been disclosed. From the actual income (including undisclosed income), the assessed and returned income is to be reduced. Where on the one hand, the actual income is taken by adopting such basis different from the one adopted for determining the assessed and returned income, the resulting computation was bound to give an incorrect additional income. Both the computations would have to be on the same basis — likes would have to be compared with likes. Since the returned or assessed income is computed\after deductions under Chapter VIA, the actual income would also have to be taken on the same basis, and it is only then that the correct undisclosed income can be computed. As observed by the Pune Bench of the Tribunal, the intention of the legislature behind a legislation cannot be to produce absurd results. If literal interpretation leads to absurdity the statute has to be read down in a manner that is reasonable. It certainly cannot be the intention of the legislature to bring to tax those deductions under Chapter VIA, which had been allowed in regular assessment, merely because a search has taken place. Non-consideration of such deductions while computing the undisclosed income has the effect of withdrawing it of deductions already granted during a regular assessment. If one examines the format of the return of undisclosed income required to be filed under Chapter XIVB (Form 2B), one would notice that Part III of the Form, containing the detailed computation of the undisclosed income, requires the deduction of items of Chapter VIA, both from total income (including undisclosed income), as well as from returned/assessed income. This clearly indicates the intention behind the provisions of Chapter XIVB. . The Calcutta Bench of the Tribunal did not appreciate the arithmetical implications of the computation canvassed by the Revenue. The Pune Bench, on the other hand, rightly considered an actual example, to understand how non-consideration of deductions under Chapter VIA would result in double taxation. Therefore, the better view is that deductions under Chapter VIA are also to be taken into account in computing the undisclosed income under Chapter XIVB. A useful reference may be made to the decisions in the cases of Kamkap (India) v. DCIT, 67 ITD 237 (Pat.), and Pooja Bhatt v. ACIT, 73 ITD 205 (Mum.), A. A. Nadiadwala v. DCIT, 75 ITD 394 and B.D.A. Ltd. v. ACIT, 65 ITD 501 (Mum.). One may also refer to the decision of the Special Bench of the Settlement Commission in the case of J. K. Exports, delivered in S.A. No. 21 dated 29-1-1996 wherein the Commission held that the deductions

28 ITA No.5176/Mum/2014 M/s. Amber Enterprises under Chapter VIA would be allowed in computing the undisclosed income under Chapter XIVB of the Income-tax Act. In light of the above, it is held that 80IB deduction would be admissible on the assessed income. Though the discussion is on block assessment procedure, it essentially lays the philosophy behind the allowability of deduction against assessed income.

Against the above order of the CIT(A) Revenue is in further appeal before

us.

through the orders of the authorities below. We had also deliberated on

the judicial pronouncements referred by the lower authorities in their

respective orders as well as cited by the learned A.R. and learned D.R,

during the course of hearing before us, in the context of factual matrix of

the case. From the record we find that the assessee is engaged in the

business of Builder and Developer. During year under consideration the

assessee has developed buildings falling under the category of slum

rehabilitation. There was survey under Section 133A of the Act at

assessee’s business premises. During the course of survey assessee has surrendered additional income of `3 crores. As per the loose papers found

and seized during the course of survey the AO observed that assessee had receipt of `8.90 crores, on the very same paper there was a noting for

expenditure of `6.19 crores. However, the AO added the receipt but did

not give credit of the expenditure, which were noted on the very same

paper. During the course of assessment proceedings the assessee has

also raised claim with regard to deduction under Section 80-IB(10) of the

Act. The AO also declined the same. Various other additions were also

29 ITA No.5176/Mum/2014 M/s. Amber Enterprises made. The assessee’s claim for allowing expenditure against income

found during the course of survey was accepted by the CIT(A) after

having detailed finding in para 4 of his appellate order. The CIT(A)

analysed the income and expenditure noted on the seized paper. After

finding that the expenditures were genuinely incurred for the purpose of

business, he allowed netting of these expenditures against the income

found to be noted on the very same seized paper marked as Annexure A-

1, A-2 and A-3. The CIT(A) observed that income is to be computed based

on the seized material and corresponding expenditure recorded in the

seized material have to be considered and net effect shall be given while

making addition on account of undisclosed income of the assessee. The

learned CIT(A) has met with each and every objections of the AO with

regard to the nature of expenditure noted on the seized paper. As the

assessee was carrying out construction activity and he has built two

buildings, one for SRA, which was given to the existing tenants and

another for sale, assessee was also in receipt of some on money from

some of the flat owners. This money he has spent on the project and

these transactions were not recorded in the regular books but was

recorded in the papers which were seized during the course of survey on 23rd February, 2010. Since these expenditures were not found to be

recorded in the regular books of account, the AO did not consider the

same. As per our considered view, since the undisclosed income is

computed from the seized material based on on-money received from

purchaser of flats and the said fact is also confirmed by the partner of the

30 ITA No.5176/Mum/2014 M/s. Amber Enterprises assessee during the course of survey, the corresponding expenditure

recorded in the seized paper has to be considered and net effect should

be given while adding the undisclosed income, since seized document or

statement of assessee should be read as a whole if it is to be relied on.

Therefore, the entire on-money received is not income of the assessee

because it represents the price received by the seller of goods. Only

realisation of the excess over expenditure incurred should form part of

profit included in consideration for sale. While arriving at this conclusion

the CIT(A) has also relied on various judicial pronouncements. The

detailed finding so recorded by the CIT(A) have not been controverted by

the learned D.R. by bringing any cogent material on record. Accordingly

we do not find any reason to interfere in the order of the CIT(A) for

allowing the claim of expenditure against income found on the very same

seized paper/diary.

Section 80IB(10). We found that this claim was raised by the assessee

during the course of assessment proceedings. The CIT(A), after relying on

the decision of the Hon'ble Supreme Court in the case of Goetz (India)

Ltd. accepted assessee’s claim and remanded the matter back to the file

of the AO for verifying various conditions required to be fulfilled for

allowing the claim under Section 80IB(10). The AO has given detailed

remand report, which has been duly considered by the CIT(A) in his order

and after calling rejoinder on the same, the CIT(A) recorded his finding

31 ITA No.5176/Mum/2014 M/s. Amber Enterprises with respect to each and every conditions having been fulfilled by the

assessee for claim of deduction under Section 80IB(10) of the Act. The

CIT(A), after applying various judicial pronouncements came to the

conclusion that the requirement of audit report under Section 80IB is

procedural in nature and not mandatory and the assessee has furnished

the audit report before the AO at the time of assessment. In the case of

Unicorn Industries P. Ltd. the Hyderabad Bench of ITAT observed that it is

well settled position of law that statutory provisions akin to Section 80-

IA(7) which require furnishing of audit report alongwith return are directory

and not mandatory. If the audit report has not been furnished along with

the return it could be submitted before finalisation of assessment

proceedings. Non furnishing of audit report along with return will render

the return defective. However, defect is curable.

are required to be fulfilled: -

(i) The case of the appellant is approved by the local authority after the first day of April, 2005 and so the project has to be completed within 5 years form the end of the financial year in which housing project is approved by the local authority which means that the project should have been completed before 31.03.2011.

(ii) The project must be on size of plot of land of minimum one acre.

(iii) The residential unit should have a maximum built up area of 1000 sq.ft. being situated in Mumbai.

(iv) The built up area of shop and other commercial establishments shall be included in the housing, project and

32 ITA No.5176/Mum/2014 M/s. Amber Enterprises should not exceed 3% of the aggregate builtup area of the housing project or 5000 sq.ft. whichever is higher.

(v) Not more, than one residential unit should be allotted to any person who is not an individual.

(vi) When a residential unit is allotted to any individual, then no other residential unit in such housing project should be allotted to the individual or spouse or minor children of such individual or.HUF in which the individual is the karta or any person correcting such individual, spouse, minor child or HUF.

remanded by the CIT(A) to the AO, which have been received by the CIT(A) on 20th May, 2014. After considering the remand report the CIT(A)

found that as per revised approved plan, wherein area was approved as

commercial premises and not residential and conditions (C) of Section

80IB specifically limits the area to 1000 sq.ft. for residential premises and

not commercial premises. The said area was built and sold as commercial

premises only and it is also envisaged from the agreement wherein it was

written as commercial premises. It is not the case of Revenue that the

assessee has sold the flats and then converted it into commercial

premises but it is sold as commercial premises only and the plan is

approved by the concerned Authority. Hence to say that Flat Nos.104,

105 & 106 are sold and the total area exceed 1000 sq.ft. is not correct

because assessee has not sold flat but the commercial premises and the

area restriction' as mentioned in clause c of section 80IB(10) is not

Commercial premises.

33 ITA No.5176/Mum/2014 M/s. Amber Enterprises 10. With regard to AO’s objection that area of commercial

establishments included in the housing project should not exceed 3% of

the built up area or 5000 sq.ft. whichever is less, the CIT(A) observed as

under: -

"However, as per the Finance Act, 2010, it has been amended to,

The built-up area of the shops and other commercial establishments included in the housing project .does not exceed [three] per cent of the aggregate built-up area of the housing project or [five thousand square feet, whichever is higher"

For further classification we hereby produce relevant extract from Explanatory notes -to the- provision of finance Act, 2010 Vide F..No.l42/1/2011-SO(TPL) issued by Ministry of Finance, Department of Revenue, (Central Board of Direct Taxes), new provision will be applicable for A.Y 2010-11, read, as under

16.1 Under the existing provisions of section 80-IB(10), 100 per cent deduction is available in respect of profits derived by an undertaking from developing and. building housing projects approved by a local authority before 31.3.2008. This benefit is available subject to; inter alia, the following conditions:

(a) The project has to be completed within 4 years from the end of the financial year in which the project is approved by the local authority.

(b) The built-up, area-of the shops and other commercial establishments included in the housing project should not exceed 5 per cent of the total built-up area of the housing project or 2,000 sq.ft. Whichever is less.

16.2 To allow for extraordinary conditions due to the global recession and the resultant slowdown in. the housing sector, the period allowed for completion of a housing project in order to qualify for availing the tax benefit under the section, has- been increased from the existing 4 years to 5 years from the end of the financial year in which the housing project is

34 ITA No.5176/Mum/2014 M/s. Amber Enterprises (approved) by the local authority. This extension will be available for housing projects approved on or after 1-4-2005 but on or before 31.3.2008. Further, the norms for built-up area of shops and other commercial establishments in eligible housing projects have also been enhanced in order to enable basic facilities for the residents. The permissible built-up area of the shops and other commercial establishments which can be included in the eligible housing project is increased to three per cent of the aggregate built-up area of the housing project or 5000 sq. ft., whichever is higher. This benefit will be available to projects approved on or after 1.4.2005 but before 31.03.2008, which are pending for completion. 11. The other objections of the AO with regard to assessee’s eligibility of claim under Section 80IB has been dealt with the CIT(A) threadbare and after recording detailed finding reached to the conclusion that all the terms and conditions as stipulated in the amended provisions of law has been fulfilled. Detailed findings so recorded by the CIT(A) after relying on various judicial pronouncements are as per material on record, which require no interference on our part. Moreover, the learned D.R. could not controvert the findings recorded by the CIT(A). Accordingly we do not find any reason to interfere in the order of the CIT(A) allowing the claim for deduction under Section 80IB(10) of the Act.

Mumbai; Dated 09/05/2018 Karuna Sr.PS

35 ITA No.5176/Mum/2014 M/s. Amber Enterprises Copy of the Order forwarded to : The Appellant 1. 2. The Respondent. 3. The CIT(A)-35, Mumbai. 4. CIT-25, Mumbai 5. DR, A Bench, ITAT, Mumbai BY ORDER, 6. Guard file. स�या�पत ��त //True Copy// (Asstt. Registrar) ITAT, Mumbai