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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA no.5643/Mum./2015 (Assessment Year : 2005–06) Dy. Commissioner of Income Tax Central Circle–3(4) ……………. Appellant Central Range–3, Mumbai v/s M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M C.O. no.105/Mum./2017 Arising out of ITA no.5643/Mum./2015 (Assessment Year : 2005–06) M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex ……………. Cross Objection St. Andrews Road, Op Holy Family Original Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M v/s Dy. Commissioner of Income Tax ……………. Respondent Central Circle–3(4) Original Appellant Central Range–3, Mumbai ITA no.5644/Mum./2015 (Assessment Year : 2006–07) Dy. Commissioner of Income Tax Central Circle–3(4) ……………. Appellant Central Range–3, Mumbai v/s M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M
2 M/s. Jivesh Developers & Properties Pvt. Ltd.
C.O. no.106/Mum./2017 Arising out of ITA no.5644/Mum./2015 (Assessment Year : 2006–07) M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex ……………. Cross Objection St. Andrews Road, Op Holy Family Original Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M v/s Dy. Commissioner of Income Tax ……………. Respondent Central Circle–3(4) Original Appellant Central Range–3, Mumbai ITA no.5645/Mum./2015 (Assessment Year : 2008–09) Dy. Commissioner of Income Tax Central Circle–3(4) ……………. Appellant Central Range–3, Mumbai v/s M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M C.O. no.108/Mum./2017 Arising out of ITA no.5645/Mum./2015 (Assessment Year : 2008–09) M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex ……………. Cross Objection St. Andrews Road, Op Holy Family Original Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M v/s Dy. Commissioner of Income Tax ……………. Respondent Central Circle–3(4) Original Appellant Central Range–3, Mumbai
3 M/s. Jivesh Developers & Properties Pvt. Ltd.
ITA no.5646/Mum./2015 (Assessment Year : 2007–08) Dy. Commissioner of Income Tax Central Circle–3(4) ……………. Appellant Central Range–3, Mumbai v/s M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M C.O. no.107/Mum./2017 Arising out of ITA no.5646/Mum./2015 (Assessment Year : 2007–08) M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex ……………. Cross Objection St. Andrews Road, Op Holy Family Original Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M v/s Dy. Commissioner of Income Tax ……………. Respondent Central Circle–3(4) Original Appellant Central Range–3, Mumbai ITA no.5647/Mum./2015 (Assessment Year : 2009–10) Dy. Commissioner of Income Tax Central Circle–3(4) ……………. Appellant Central Range–3, Mumbai v/s M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M
4 M/s. Jivesh Developers & Properties Pvt. Ltd.
C.O. no.109/Mum./2017 Arising out of ITA no.5647/Mum./2015 (Assessment Year : 2009–10) M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex ……………. Cross Objection St. Andrews Road, Op Holy Family Original Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M v/s Dy. Commissioner of Income Tax ……………. Respondent Central Circle–3(4) Original Appellant Central Range–3, Mumbai ITA no.5648/Mum./2015 (Assessment Year : 2010–11) Dy. Commissioner of Income Tax Central Circle–3(4) ……………. Appellant Central Range–3, Mumbai v/s M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M C.O. no.110/Mum./2017 Arising out of ITA no.5648/Mum./2015 (Assessment Year : 2010–11) M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex ……………. Cross Objection St. Andrews Road, Op Holy Family Original Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M v/s Dy. Commissioner of Income Tax ……………. Respondent Central Circle–3(4), Mumbai Original Appellant
5 M/s. Jivesh Developers & Properties Pvt. Ltd.
ITA no.5649/Mum./2015 (Assessment Year : 2011–12) Dy. Commissioner of Income Tax Central Circle–3(4) ……………. Appellant Central Range–3, Mumbai v/s M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M ITA no.6940/Mum./2014 (Assessment Year : 2009–10) M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Appellant Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M v/s Dy. Commissioner of Income Tax ……………. Respondent Central Circle–24 & 26, Mumbai ITA no.6941/Mum./2014 (Assessment Year : 2010–11) M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Appellant Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M v/s Dy. Commissioner of Income Tax ……………. Respondent Central Circle–24 & 26, Mumbai
6 M/s. Jivesh Developers & Properties Pvt. Ltd.
ITA no.6891/Mum./2014 (Assessment Year : 2005–06) Asstt. Commissioner of Income Tax Central Circle–24 & 26 ……………. Appellant Central Range–5, Mumbai v/s M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M ITA no.6892/Mum./2014 (Assessment Year : 2006–07) Asstt. Commissioner of Income Tax Central Circle–24 & 26 ……………. Appellant Central Range–5, Mumbai v/s M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M ITA no.6893/Mum./2014 (Assessment Year : 2007–08) Asstt. Commissioner of Income Tax Central Circle–24 & 26 ……………. Appellant Central Range–5, Mumbai v/s M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M
7 M/s. Jivesh Developers & Properties Pvt. Ltd. ITA no.6894/Mum./2014 (Assessment Year : 2008–09) Asstt. Commissioner of Income Tax Central Circle–24 & 26 ……………. Appellant Central Range–5, Mumbai v/s M/s. Jivesh Developers & Properties Pvt. Ltd., 1st Floor, Samir Complex St. Andrews Road, Op Holy Family ……………. Respondent Hospital, Bandra (W), Mumbai 400 050 PAN – AAACJ9758M Assessee by : Shri Yogesh Thar a/w Shri Chaitanya Doshi Revenue by : Shri Manjunath Swamy Date of Hearing – 08.03.2018 Date of Order – 28.03.2018
O R D E R PER BENCH
This bunch consists of 19 appeals. The first set of seven appeals by the Revenue and six cross objections by the assessee arise out of the orders passed in quantum proceedings by the learned Commissioner (Appeals)–51, Mumbai, for the assessment years 2005– 06 to 2011–12. Whereas, the rest of the appeals, four by the Revenue and two by the assessee, arise out of proceedings initiated under section 154 of the Income Tax Act, 1961 (for short “the Act”) by the Assessing Officer.
Since, all the appeals and cross objections pertain to the same assessee and involve common issues, they were heard together and,
8 M/s. Jivesh Developers & Properties Pvt. Ltd. as a matter of convenience, are being dispose off by way of this consolidated order.
ITA no.5643 to 5649/Mum./2015 Revenue’s Appeal for A.Y. 2005–06 to 2011–12 C.O. no.105 to 110/Mum./2017 Assessee’s Cross Objection for A.Y. 2005–06 to 2010–11
The only common issue arising out of Revenue‟s appeal pertains to allowance of assessee‟s claim of deduction under section 80IB(10) of the Act. Whereas, in the common grounds raised in the cross objections, the assessee has raised certain issues challenging the validity of the proceedings initiated under section 153C of the Act. Since, the grounds raised in the cross objections are on purely legal and jurisdictional issues we propose to deal with the cross objections of the assessee at the very outset.
The grounds raised by the assessee in cross objections which are common for all the assessment years are as under:–
“1.1 On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) - 51 ["the CIT(A)"] erred in holding that the – the computer printout which is a plan "can certainly be (i) said to be a plan pertaining to the Appellant" (ii) the word "belonging" in section 153C of the Act has to be understood as covering a document which is pertaining to the assessee (iii) amendment made to the provisions of section 153C of the Act w.e.f. 1 .6.2015 is clarificatory in nature and therefore, applies retrospectively.
9 M/s. Jivesh Developers & Properties Pvt. Ltd. 1.2 On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in confirming the validity of the assessment framed under section 153C of the Act which assessment was founded on a notice issued without the requisite conditions precedent mentioned under section 153C of the Act being satisfied.”
Brief facts are, the assessee a company is engaged in the business of developing and constructing housing projects. A search and seizure operation under section 132 of the Act was conducted on 30th November 2010 in case of one Sameer Bhojwani and his group entities. In consequence to the search and seizure operation, proceedings under section 153C of the Act were initiated against the assessee for the assessment years 2005–06 to 2010–11. The assessee complied to the notices issued under section 153C of the Act by filing returns of income. In course of the assessment proceedings, the Assessing Officer while examining assessee‟s claim of deduction under section 80IB(10) of the Act in respect of a housing project, namely, „Quantum Park Project‟ found that as per the material unearthed during the search operation, the said project was built by the assessee under the Slum Rehabilitation Authority (SRA) Scheme. He found that as per plan approved by Bombay Municipality Corporation (BMC), the building will have four flats in each floor with built–up area of less than 1,000 sq.ft. per flat. On the basis of material on record, the Assessing Officer found that during the search and seizure operation, two sets of plans were seized in respect of Quantum Park Project. In one of the
10 M/s. Jivesh Developers & Properties Pvt. Ltd. plans, each floor of the building consists of two flats having built–up area of 2,000 sq.ft. per flat, whereas, as per the second plan each floor of the building has four flats each flat having built–up area of 1,000 sq.ft. While the second plan is as per the BMC approved plan for SRA project, the first plan having two flats in each floor, according to the Department, was meant for potential customers. One Sashikant Chhatrawala, from whose computer these two sets of plans were found and print outs were taken and seized was examined on oath during the search proceedings. A statement on oath was also recorded from Sameer Bhojwani, the director of the assessee company during the search and seizure operation. In course of proceedings under section 153C of the Act, when the assessee was confronted with the unapproved plan seized from the computer of Sashikant Chhatrawala, and called upon to justify its claim of deduction under section 80IB(10) of the Act, the assessee submitted that the unapproved plan was never acted upon and the building was constructed as per the plan approved by the BMC. However, the Assessing Officer did not accept the contention of the assessee. Referring to the statement recorded from Sashikant Chatrawala and Sameer Bhojwani during the search and post–search proceedings the Assessing Officer concluded that the housing project was not constructed as per the plan approved by the BMC, therefore, not in compliance with the conditions prescribed under section 80IB(10) of
11 M/s. Jivesh Developers & Properties Pvt. Ltd. the Act. Accordingly, the Assessing Officer disallowed assessee‟s claim of deduction under section 80IB(10) of the Act for the assessment years 20050–06 to 2011–12. Being aggrieved with the aforesaid decision of the Assessing Officer, the assessee preferred appeals before the first appellate authority.
In the appeals preferred for assessment years 2005–06 to 2010– 11, wherein, proceedings were initiated under section 153C of the Act, the assessee challenged the validity of the assessment order passed under section 153C of the Act, inter–alia, on the ground that the Assessing Officer has not recorded any satisfaction to the effect that the seized documents belongs to the assessee. It was submitted by the assessee that the seized document on the basis of which the Assessing Officer initiated proceedings under section 153C of the Act is an unapproved plan found in the computer of Sashikant Chhatrawala. The said plan apart from being unapproved is unsigned as well and does not bear any information whatsoever about the person who has made it or the purpose thereof or its owner. The plan also does not suggest the name of the property, the name of the owner of the property, name of the Architect / licensed surveyor, the number of floors proposed to be constructed, etc. Thus, it was submitted by the assessee that since the seized document (unapproved plan) bears no reference either to the assessee or to the housing project, it cannot be
12 M/s. Jivesh Developers & Properties Pvt. Ltd. said to be belonging to the assessee as envisaged under section 153C of the Act. The learned Commissioner (Appeals) after considering the submissions of the assessee in the context of facts and material available on record, accepted the fact that the computer print out of the unapproved plan (seized document) on the basis of which the assessment has been framed does not bear the name or any other details except the date 31.12.2001. However, he observed that the said plan is of a building which was presumably proposed on 31st December 2012. Further, the learned Commissioner (Appeals), though, agreed that the computer print out of the unapproved plan cannot be said to be belonging to the assessee, however, according to him, the said plan can certainly said to be a plan pertaining to the assessee. The learned Commissioner (Appeals) observed, the word “belonging to” in section 153C of the Act has to be understood as covering a document which is “pertaining to” the assessee. In this context, he referred to the amendment made to section 153C of the Act by Finance Act, 2015 w.e.f. 1st June 2015 and observed that the said amendment being clarificatory in nature would apply retrospectively. Thus, he rejected assessee‟s ground challenging the validity of the proceedings initiated under section 153C of the Act.
The learned Authorised Representative reiterating the stand taken before the first appellate authority submitted that the seized
13 M/s. Jivesh Developers & Properties Pvt. Ltd. documents (print out of the unapproved plan) on the basis of which proceedings under section 153C of the Act was initiated cannot be said to be belonging to the assessee which is the condition precedent for initiation of proceedings under section 153C of the Act. Drawing our attention to the satisfaction note of the Assessing Officer before issuing notice under section 153C of the Act, the learned Authorised Representative submitted that the satisfaction note makes it very clear that the basis for initiation of proceedings under section 153C of the Act is the floor plans seized from the searched person. In this regard, he also drew our attention to the notice issued under section 153C of the Act by the Assessing Officer on 6th January 2011. The learned Authorised Representative submitted, in his satisfaction note the Assessing Officer except stating that the seized plan belongs to the assessee has not provided any reason on what basis he comes to such conclusion. The learned Authorised Representative submitted, after examining all the material on record, though, the learned Commissioner (Appeals) was satisfied and has also concluded that the seized document cannot be said to be belonging to the assessee, however, he has upheld the validity of the proceedings initiated under section 153C of the Act by referring to the amended provisions of section 153C of the Act, wherein, the expression “pertains to” has been used. The learned Authorised Representative submitted, the expression “pertains to” which has been introduced to section 153C of
14 M/s. Jivesh Developers & Properties Pvt. Ltd. the Act by Finance Act, 2015 w.e.f. 1st June 2015 will apply prospectively and not retrospectively as held by the learned Commissioner (Appeals). In this context, he relied upon the following decisions:–
i) CIT V/S Meghmani Organics Ltd., 40 taxmann.com 299 (Del.); ii) Pepsi Foods Pvt. Ltd. v/s ACIT, 52 taxmann.com 220 (Del.); iii) ARN Infrastructure India Ltd. v/s ACIT, 394 ITR 569 (Del.);& iv) DCIT v/s National Standard India Ltd., 166 ITD 426 (T.M).
Further, the learned Authorised Representative submitted, there is nothing on record to suggest that the Assessing Officer of the searched person has recorded satisfaction that the incriminating material / seized document belongs to the assessee. Thus, it was submitted, in the absence of any satisfaction recorded to indicate that the seized document belongs to the assessee, the proceedings under section 153C of the Act is vitiated.
The learned Departmental Representative relying upon the observations of the learned Commissioner (Appeals) submitted that from the materials seized during the search operation and post search inquiry conducted by the Department it was found that the print out of the unapproved plan recovered from the computer of the architect belongs to the assessee‟s housing project. Therefore, the Assessing Officer before issuing notice under section 153C of the Act has
15 M/s. Jivesh Developers & Properties Pvt. Ltd. recorded a satisfaction to that effect. That being the case, assessee‟s argument against the validity of the proceedings under section 153C of the Act should not be entertained.
We have patiently and carefully considered rival submissions and perused materials on record. We have also applied our mind to the decisions relied upon. Undisputedly, for the assessment year 2005–06 to 2010–11, the Assessing Officer has initiated proceedings under section 153C of the Act and has also completed the assessments under the said provision. It is also a fact on record, which is very much evident from the satisfaction note of the Assessing Officer before issuing notice under section 153C of the Act, the basis for initiation of the assessment proceedings under section 153C of the Act is the print out of the drawing/ floor plan found and seized from the computer of Sashikant Chhatrawala, stated to be an Architect / designer which have been marked as A–24 and A–25. It is also an accepted factual position that the seized unapproved floor plan does not tally with the plan approved by the BMC and does not bear any signature, name of the project, name of the owner of the property, except, the date 31.12.2001. The seized floor plan has no other reference as regards any person, project, owner, etc. The learned Commissioner (Appeals) has also accepted the aforesaid factual position. Section 153C(1) of the Act, as it stood prior to its amendment by Finance Act, 2015 w.e.f.
16 M/s. Jivesh Developers & Properties Pvt. Ltd. 1st June 2015, empowered the Assessing Officer to initiate proceedings under the said provision if he is satisfied that any money, bullion, jewellery, valuable articles, books of account, seized documents etc. belongs or belong to a person other than the searched person. Thus, the condition precedent for initiation of proceedings under section 153C of the Act as it existed earlier was, the Assessing Officer must be satisfied that the seized document or other articles “belongs to” a person other than the person against whom the search operation was carried out. Therefore, the pertinent issue which arises for consideration in the present appeals is, whether the seized drawing/ floor plan can be said to be belonging to the assessee. It is manifest and apparent on record that the learned Commissioner (Appeals) after examining the material on record has given a categorical finding that the seized document on the basis of which proceedings under section 153C of the Act was initiated cannot be said to be belonging to the assessee. Even otherwise also, as per the factual position emanating from record, the seized document does not bear any reference to the assessee. In the satisfaction note, the Assessing Officer has merely mentioned that the seized documents belongs to the assessee without providing any basis or reasoning as to how he has come to such inference considering the fact that the seized document does not make any reference either to the assessee or the housing project. Therefore, to that extent we agree with the learned Commissioner (Appeals) that
17 M/s. Jivesh Developers & Properties Pvt. Ltd. the seized document cannot be said to be belonging to the assessee. Admittedly, the aforesaid finding of the learned Commissioner (Appeals) has not been challenged by the Department. Therefore, the next issue which arises for consideration is, whether the expression “pertains to” as used in amended provision of section 153C of the Act would apply to assessee‟s case. The reasoning of the learned Commissioner (Appeals) in this regard is, the amendment made to section 153C of the Act by Finance Act, 2105 w.e.f. 1st June 2015, being clarificatory in nature will apply retrospectively. It needs to be examined whether the amendment brought to the provisions of section 153C by Finance Act, 2015 substituting the words “belongs to” with “pertains to” in respect of books of account, seized documents, etc. would apply retrospectively. The Hon'ble Delhi High Court in case of ARM Infrastructure India Ltd. (supra) while referring to the amended section 153C of the Act has held that the said amended provision would apply prospectively w.e.f. 1st June 2015. The Tribunal, Mumbai Bench, in case of DCIT v/s National Standard India Ltd., [2017] 85 taxmann.com 87 (Mum.), while examining the issue of retrospective applicability of the amended provisions of section 153C of the Act has held in the following manner:–
“9. We have heard the Authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on record. We are of the considered view that before adverting to and adjudicating the validity of the assumption of jurisdiction by the A.O under Sec. 153C in the case
18 M/s. Jivesh Developers & Properties Pvt. Ltd. of the assessee company, it would be relevant to refer to the relevant extract of the pre-amended Sec.153C, as was applicable in the case of the assessee, and read as under:– “Sec. 153C. (1) Notwithstanding anything contained in s. 139, s. 147, s. 148,s. 149,s. 151 and s. 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in s. 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person.”. Thus a bare perusal of the aforesaid statutory provision reveals beyond any scope of doubt that up to 30th May 2015, the requirement as per the mandate of law for the purpose of assumption of jurisdiction u/s. 153C was that the A.O of the person searched should be satisfied that money, bullion, jewellery or other valuable article or thing or books of accounts or documents seized „belonged‟ to a person other than the person referred to Section 153A. We find that the scope of the aforesaid statutory provision in light of the conscious, purposive and intentional us age of the term „belongs‟ or `belong to‟ in respect of a „documents‟, therein excluded from its scope and gamut such seized documents, which though were found to pertain or relatable to such „Other person‟, but however not found to be „belonging‟ to the latter. The legislature therein realizing the fact that the usage of the aforesaid terms seriously jeopardised the assumption of jurisdiction by the A.O in a case where any „books of accounts‟ or „documents‟ which though pertained to or any information contained therein related to such other person, but were not found to be „belonging‟ to him, thus, vide an amendment made available on the statute by the Finance Act, 2015, had with effect from 01.06.2015 dispensed with the terms „belongs‟ or „belong to‟, in respect of the „books of accounts‟ or „documents‟ seized during the course of search proceedings, and therein substituted the same by clause (b) of Section 153C (1), which therein takes within its sweep any „books of accounts‟ or „documents‟ which pertain or pertains to or any information contained therein, relates to such other person. The relevant extract of the memorandum explaining the aforesaid amendment to Sec. 153C, as had been made available on the statute vide the Finance Act, 2015, is reproduced as under:- “Disputes have arisen as to the interpretation of the words "belongs to" in respect of a document as for instance when a given document seized from a person is a copy of the original document. Accordingly it is proposed to amend the aforesaid section to provide that notwithstanding anything contained in
19 M/s. Jivesh Developers & Properties Pvt. Ltd. section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing belongs to, or any books of account or documents seized or requisitioned pertain to, or any information contained therein, relates to any person, other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A”. That as the aforesaid amendment to Section 153C is not retrospective in nature and is applicable only w.e.f 01.06.2015, therefore, the case of the present assessee company would be regulated by the pre-amended provisions as were available on the statute till 30.05.2015. We find that our aforesaid observations stands fortified by the judgment of the Hon‟ble High Court of Bombay in the case CIT, Central -3, Mumbai Vs. Arpit Land (P) Ltd., (2017) 78 taxmann.com 300 (Bom), wherein the Hon‟ble High Court had held as under:- 6. We note that in terms of Section 153C of the Act at the relevant time i.e. prior to 1st June, 2015 the proceedings under Section 153C of the Act could only be initiated/proceeded against a party-assessee if the document seized during the search and seizure proceedings of another person belonged to the party - assessee concerned. The impugned order records a finding of fact that the seized document which formed the basis of initiation of proceedings against the respondent assesse‟s do not belong to it. This finding of fact has not been shown to us to be incorrect. Further, the impugned order placed reliance upon a decision of Gujarat High Court in Vjaybhai N. Chandrani Vs. Asstt. CIT, [2011] 333 ITR 436 which records that the condition precedent for issuing notice under Section 153C of the Act is that the document found during search proceedings should belong to assessee to whom notice is issued under Section 153C of the Act. It was fairly pointed out to us by Mr.Mistry, the learned Senior Counsel for the respondent-assessee that the above decision was reversed by the Supreme Court in CIT V/s Vijaybhai N. Chandrani [20131 357 ITR 713/217 Taxman 138/35 taxmann.com 580. However, we find that the Apex Court reversed the view of Gujarat High Court on the ground that efficacious alternative remedy was available to the petitioner to raise its objections before the authorities under the Act. Therefore, the Gujarat High Court should not have exercised its extra ordinary writ jurisdiction to entertain the petition. However, the Apex Court also clarified that it was not expressing any opinion of the correctness or otherwise of construction placed by the High Court on Section
20 M/s. Jivesh Developers & Properties Pvt. Ltd. 153C of the Act. The Revenue has not pointed out any reason why the construction put on Section 153C of the Act by Gujarat High Court is not correct/appropriate. We find that in any case our Court has also taken a similar view in CIT V/s. Sinhgad Technical Education Society [2015] 378 ITR 84/235 Taxman 163/63 taxmann.com 14 (Bom.) and refused to entertain Revenue's appeal”. 10. We have further perused the „Satisfaction note‟ of the A.O, as well as the seized documents, viz. Page No. 107-108 (supra) which had been referred to by the A.O to justify the assumption of jurisdiction under Sec. 153C in the case of the assessee company. We find that a bare perusal of the aforesaid seized documents viz. Page No. 107-108 (supra) does neither make any reference of the assessee company, nor of any transaction entered into by the latter, which could go to justify the assumption of jurisdiction by the A.O under Sec.153C. We are of the considered view that in the absence of any „document‟ belonging to the assessee having been seized during the course of search proceedings in the case of Lodha Group (Supra), the assumption of jurisdiction by the A.O under Sec.153C by referring to the aforesaid seized doucuments, viz. Page No. 107- 108(supra), is highly misplaced. We further find ourselves to be in agreement with the ld. A.R that despite specific requests made by the assessee vide his reply dated 22.03.2013 filed in response to the „Show cause‟ notice is sued by the A.O, therein calling upon the latter to explain as to how the incriminating documents, viz. Page No. 107-108 (supra) were alleged to be related to the assessee company , no reply had been furnished by the A.O . We further find that the contention of the assessee raised before the A.O that the same seized documents , viz. Page No. 107-108 (supra) had been referred to and related by him in Para no. 5 of his „Show cause‟ notice issued to M/s. Simtools Pvt. Ltd. (supra), had also remained uncontroverted by the A.O. We are of the considered view that as no reference of the projects undertaken by the assessee company, viz.„Grandezza‟ and Supremes‟ finds any mention in the aforesaid seized documents, viz. Page No. 107-108, nor any reference of the assessee company is found therein, therefore, it could safely be concluded that the requisite conditions for assumption of jurisdiction under Sec. 153C had not been satisfied.“
No contrary decision on the issue has been brought to our notice by the learned Departmental Representative. Therefore, in view of the ratio laid down in the decisions referred to above, the conclusion
21 M/s. Jivesh Developers & Properties Pvt. Ltd. drawn by the first appellate authority regarding the retrospective application of amended provision of section 153C of the Act cannot be sustained and the assessee‟s case would be governed by the provisions of sub–section (1) of section 153C of the Act as it existed prior to its amendment by Finance Act, 2015, w.e.f. 1st June 2015. As discussed earlier, the seized document on the basis of which the Assessing Officer has initiated proceedings under section 153C of the Act has been factually proved to be not belonging to the assessee which has also been accepted by the first appellate authority. Therefore, the condition precedent of section 153C of the Act was not satisfied at the time of initiation of assessment proceedings under the said provision. That being the case, the proceedings initiated under section 153C of the Act for the assessment years 2005–06 to 2010–11 are vitiated and as a natural corollary, the assessment orders passed in pursuance to such proceedings have to be held as invalid. Accordingly, we quash the assessment orders passed for assessment years 2005–06 to 2010–11. Consequently, the cross objections are allowed.
Having held so, now, we have to advert back to the issue of allowance of assessee‟s claim of deduction under section 80IB(10) of the Act as raised in the Revenue‟s appeals.
22 M/s. Jivesh Developers & Properties Pvt. Ltd. 13. In view of our decision in assessee‟s cross objections, though, the issue raised by the Revenue in assessment years 2005–06 to 2010–11 have become academic, however, it is not so in case of assessment year 2011–12, wherein, the assessment was completed under section 143(3) and not under section 153C of the Act. Therefore, the issue raised by the Department in its appeals also needs to be addressed on merits. As discussed earlier, on the basis of the print out of floor plans recovered / sized from the computer of Sashikant Chhatrawala, the Assessing Officer found certain deviation between the approved plan and the seized unapproved floor plan. He, therefore, called upon the assessee to explain why deduction claimed under section 80IB(10) in respect of housing project should not be disallowed. Though, the assessee objected to the proposed disallowance by justifying the claim of deduction under section 80IB(10) of the Act and laid supporting evidence, however, the Assessing Officer relying upon the seized unapproved plan and statement recorded under section 132(4) from Sashikant Chhatrawala and Sameer Bhojwani came to a conclusion that the housing project has not been constructed as per the approved plan, thereby violating the conditions of section 80IB(10) of the Act. The Assessing Officer, thus, concluded that the assessee having altered the approved plan and constructed flats having floor area of 2,000 sq.ft. is not eligible for deduction as per section 80IB(10)(c) of the Act.
23 M/s. Jivesh Developers & Properties Pvt. Ltd.
Without prejudice to the aforesaid conclusion, the Assessing Officer held that, since, the leave and licence fee received by the assessee from letting out of unsold stock of flats is not derived from the activity of developing housing project, the assessee will not be eligible to avail deduction under section 80IB(10) of the Act in respect of leave and licence fee. Being aggrieved with the aforesaid decision, assessee preferred appeals before the first appellate authority.
In the course of appeal proceedings, the learned Commissioner (Appeals) directed the Assessing Officer to conduct certain enquiries with regard to assessee‟s claim of deduction under section 80IB(10) of the Act qua the housing project and furnish necessary details. Since, the Assessing Officer did not comply to the directions of the first appellate authority, he called for the assessment record to examine the required details. Further, to cross verify the details available on record and also to ascertain the number of residential units constructed and sold in the housing project and other relevant details relating to the housing project, the learned Commissioner (Appeals) conducted independent enquiry with the society of flat purchasers of the housing project constructed by the assessee. As observed by the learned Commissioner (Appeals), the society vide its letter dated 29th August 2014, submitted the information called for by the learned Commissioner (Appeals) along with copies of maintenance bills raised
24 M/s. Jivesh Developers & Properties Pvt. Ltd. by the society along with the details of shares allotted by the society to each flat owner. From the materials available in assessment record as well as information obtained as a result of enquiry with the housing society, the learned Commissioner (Appeals) found that the number of residential units sold by the assessee tallies with the number of residential units as per the approved plan. From the details of shares allotted and copies of the last maintenance bills raised by the society on the flat owners it was found that each floor of the housing project consists of four flats and not two as alleged by the Assessing Officer. The first appellate authority while examining the seized documents found that out of 12 floor plans (drawings) seized, 11 were those of approved plans. Therefore, he directed the assessee to produce copies of plans bearing stamp of approval of municipal authorities and also produce the original plans for verification. On examining the original plan of the housing project bearing stamp of approval of municipal authority and cross verifying them with the approved plans seized from the computer he found them to be the same. The learned Commissioner (Appeals) observed, the only material on the basis of which the Assessing Officer denied assessee‟s claim under section 80IB(10) of the Act is the unapproved plan dated 31st December 2012 seized from the computer of Sashikant Chhatrawala, which does not have any other details except the date. From the material on record, the learned Commissioner (Appeals) found that the housing project
25 M/s. Jivesh Developers & Properties Pvt. Ltd. was not constructed as per the unapproved plan seized by the Department but has been constructed as per the approved plan which has a refuge area in 8th Floor and fire fighting passages on 9th to 12th Floor. The learned Commissioner (Appeals) found that the Municipal authorities have also issued occupancy certificates with plans which are same as the plans approved by the Municipal authorities. He found that as per approved plan the built–up area of each of the residential unit is less than 1,000 sq.ft. He also found that each of the residential units in each floor have been sold to difference purchasers even though some of the purchasers may be relatives. In this context, the learned Commissioner (Appeals) observed that the restriction in selling more than one unit to husband and wife came into effect by introduction of clause (f) of Explanation to section 80IB(10) by Finance (No.2) Act, 2009, hence, would not apply to assessee‟s housing project which was approved and flats were allotted prior to such amendment which will apply prospectively. In this regard, he also drew support from CBDT Circular no.05/2010, dated 3rd June 2010. The learned Commissioner (Appeals) noted that even after more than 10 years from the date of issuance of share certificates, the housing society charges separate maintenance in respect of each of the residential unit. Each residential unit has a separate electricity metering unit. As regards the statement of Sashikant Chhatrawala, relied upon by the Assessing Officer, the learned Commissioner (Appeals) observed that
26 M/s. Jivesh Developers & Properties Pvt. Ltd. the said person is having SSC qualification, hence, cannot be an Architect. He also observed that there is nothing either in the statement of Sashikant Chhatrawala or Sameer Bhojwani to conclude that the housing project was constructed as per seized unapproved plan dated 31st December 2001. As regards the allegation of the Assessing Officer that four flats have been merged to make it two flats, thereby, violating the conditions of 80IB(10)(c), the learned Commissioner (Appeals) held, if after the flats were sold by the assessee the purchasers merged the flats the assessee cannot be held responsible for alleged violation of conditions of section 80IB(10) of the Act. The learned Commissioner (Appeals) held, when the assessee has constructed the housing project as per the approved plan with each residential unit having built–up area of less than 1,000 sq.ft, assessee‟s claim of deduction under section 80IB(10) cannot be disallowed. Accordingly, he directed the Assessing Officer to allow assessee‟s claim of deduction under section 80IB(10) of the Act. Being aggrieved of the aforesaid decision, the Revenue is in appeal.
Ground no.(i) to (v) bring out various facets of Department‟s challenge to allowance of assessee‟s claim of deduction under section 80IB(10) of the Act. The first issue raised by the Revenue is on the alleged violation of rule 46A of the I.T. Rules, 1962, by the learned Commissioner (Appeals).
27 M/s. Jivesh Developers & Properties Pvt. Ltd.
The learned Departmental Representative submitted that in the course of appeal proceedings, the learned Commissioner (Appeals) conducted independent enquiry with the housing society by calling for certain information. He submitted, the learned Commissioner (Appeals) also called for certain evidences from the assessee. On the basis of such information / evidences obtained during the appellate proceedings, the learned Commissioner (Appeals) decided the issue of deduction under section 80IB(10) of the Act in favour of the assessee. The learned Departmental Representative submitted, the information / evidences obtained by the learned Commissioner (Appeals) during the appellate proceedings were neither confronted to the Assessing Officer nor remand report was called from him. Therefore, there is violation of rule 46A of the Rules, for which the order of the learned Commissioner (Appeals) requires to be set aside. Proceeding further with the other facets of the issue relating to allowance of deduction claimed under section 80IB(10) of the Act, the learned Departmental Representative submitted that in the course of the search and seizure operation as well as post search proceedings, not only incriminating material was found indicating the fact that the assessee has constructed the housing project deviating from the approved plan but the statements recorded from the architect and the director of the assessee also corroborated the fact that the assessee has constructed the housing project without
28 M/s. Jivesh Developers & Properties Pvt. Ltd. complying to the conditions of section 80IB(10) of the Act. In this context, the learned Departmental Representative selectively referred to the statements recorded from Sashikant Chhatrawala and Sameer Bhojwani. The learned Departmental Representative submitted, when two sets of plans were seized from the business premises of the director of the assessee company and the architect has stated that the plans related to the housing project, the onus is on the assessee to rebut the presumption that the housing project was constructed as per the unapproved plan. Learned Departmental Representative submitted, the Assessing Officer on the basis of material on record having found that the assessee has constructed the building as per the unapproved plan by deviating from the plan approved by the BMC, deduction under section 80IB(10) of the Act was rightly disallowed. The learned Departmental Representative submitted, the learned Commissioner (Appeals) while allowing relief to the assessee has failed to consider various factual aspects such as absence of Air Handling Unit (AHUs), statements of Sashikant Chhatrawala, single invoice issued towards renting out two flats to Mrs. Boehringer, as well as the evidence on record indicating that the sales representatives while marketing the flats were referring to the floor plan as per the seized unapproved plan. The learned Departmental Representative submitted, in view of the evidence available on record, the learned Commissioner (Appeals) was not justified in allowing assessee‟s claim of deduction
29 M/s. Jivesh Developers & Properties Pvt. Ltd. under section 80IB(10) of the Act. In support of his contention, the learned Departmental Representative relied upon the following decisions:–
i) Roshan D. Hatti v/s CIT, [1977] 107 ITR 938 (SC); ii) Mohan Singh v/s ACIT, [2017] 85 taxmann.com 219; and iii) Dinesh Parikh v/s CIT, [2011] 12 taxmann.com 490;
The learned Authorised Representative strongly supporting the finding of the learned Commissioner (Appeals) submitted that in the course of appellate proceedings learned Commissioner (Appeals) did request the Assessing Officer to make certain enquiries and furnish certain details, however, the Assessing Officer failed to comply to the directions of the first appellate authority. He submitted, since the Assessing Officer did not carry out his direction, learned Commissioner (Appeals) called for assessment record for necessary verification and conducted enquiry independently to ascertain the correctness of assessee‟s claim with regard to fulfillment of conditions of section 80IB(10) of the Act. The learned Authorised Representative submitted, as per sub–section (4) of section 250 read with sub–rule (4) of rule 46A, the learned Commissioner (Appeals) is empower to conduct necessary enquiry as he deems fit for deciding the appeal. He submitted, in case, the learned Commissioner (Appeals) decides to conduct such enquiry, there is no necessity under the statute to allow opportunity to the Assessing Officer to comment upon the result of
30 M/s. Jivesh Developers & Properties Pvt. Ltd. such enquiry. The learned Authorised Representative submitted, the restrictions imposed under sub–rule (1) to (3) of rule 46A only apply to the additional evidences produced by the assessee. He submitted, the learned Commissioner (Appeals) since has co–terminus powers of the Assessing Officer, he can conduct any enquiry which the Assessing Officer has failed to do. Therefore, there is no need for him to call for a remand report from the Assessing Officer which is required in case of furnishing of additional evidence by the assessee. Therefore, the learned Authorised Representative submitted, Revenue‟s argument of violation of rule 46A by the learned Commissioner (Appeals) has to be rejected. So far as other allegation of the Revenue regarding violation of conditions of section 80IB(10) of the Act is concerned, the learned Authorised Representative reiterating the stand taken before the first appellate authority submitted that the basic flaw in the conclusion drawn by the Assessing Officer is because of the reliance placed upon the seized unapproved plan dated 31st December 2001. He submitted, the Assessing Officer without making any independent enquiry to find out whether the housing project has actually been constructed as per the approved plan or the seized unapproved plan has come to his conclusion that the housing project has been constructed as per the unapproved plan. The learned Authorised Representative submitted that in the course of first appellate proceedings the learned Commissioner (Appeals) has conducted independent enquiry and
31 M/s. Jivesh Developers & Properties Pvt. Ltd. corroborative evidences have been brought on record to demonstrate that the housing project has been constructed as per the plan approved by the BMC. He submitted, if there would have been any contravention of the approved plan the BMC would not have issued occupancy certificates in respect of each of the flat in the housing project. He submitted, there is no such allegation by the Municipal authorities with regard to the violation of the approved plan. The learned Authorised Representative submitted, before the Assessing Officer the assessee has made detailed submissions both factually and legally justifying its claim of deduction under section 80IB(10) of the Act. Without controverting the facts brought on record, the Assessing Officer has disallowed assessee‟s claim of deduction under section 80IB(10) simply relying upon the unapproved plan. The learned Authorised Representative submitted, assessee has started claiming deduction under section 80IB(10) from assessment year 2004–05. Assessee‟s claim of deduction was examined in detail by the Assessing Officer in assessment year 2004–05 and the Assessing Officer after conducting enquiry with the flat purchasers has allowed assessee‟s claim of deduction. The learned Authorised Representative submitted, even in the original assessment completed under section 143(3) of the Act for assessment year 2009–10, a copy of which is placed at Page– 55 of the paper book, the Assessing Officer while referring to the assessment order passed under section 143(3) of the Act for the
32 M/s. Jivesh Developers & Properties Pvt. Ltd. assessment years 2004–05, 2005–06, 2006–07, 2007–08 and 2008– 09 has also accepted assessee‟s claim of deduction under section 80IB(10) of the Act. Thus, the learned Authorised Representative submitted, there is no substance in the allegation of the Department that the housing project was constructed as per the unapproved plan, thereby, violating the conditions of section 80IB(10) of the Act. As regards the allegation of the Department that two flats were let out to a single person with a single invoice, the learned Authorised Representative drawing our attention to the said invoice submitted that at the relevant time it was only an advance received and the assessee had not even entered into a leave and license agreement with the concerned person. Thus, it was submitted by the learned Authorised Representative, the finding of the learned Commissioner (Appeals) being on the basis of cogent evidence and facts brought on record, no interference is called for. In support of his contentions, the learned Authorised Representative relied upon the following decisions:–
i) Smt. Prabhavati S. Shah v/s CIT, [1998] 100 Taxman 404 (Bom.); ii) ITO v/s Industrial Roadways, [2008] 112 ITD 293 (Mum.); iii) DCIT v/s Thoresen Chartering Singapore (Pte.) Ltd., [2008] 24 SOT 433 (Mum.); iv) CIT v/s Magarpatta Township Development & Construction Co. Ltd., ITA no.293/2013 (Bom.);
33 M/s. Jivesh Developers & Properties Pvt. Ltd. v) DCIT v/s Magarpatta Township Development & Construction Co. Ltd., 141 ITD 682 (Pune); vi) Poddar & Ashish Developers v/s ITO, 152 ITD 117 (Mum.); vii) Baba Promoters & Developers v/s ITO, 54 SOT 89 (Mum.) viii) Emgeen Holdings Pvt. Ltd. v/s DCIT, 47 SOT 98 (Mum.); & ix) ACIT v/s Sincity Housing, ITA no.5183/Mum./2014.
We have considered rival submissions and perused materials on record. We have also applied our mind to the decisions relied upon by both the parties. At the very outset, we have to address the contention of the learned Departmental Representative regarding alleged violation of rule 46A by the learned Commissioner (Appeals). In this regard, it is the submission of the learned Departmental Representative that during the appellate proceedings, the learned Commissioner (Appeals) has conducted independent enquiry and called for information from the housing society as well as the assessee and on the basis of such enquiry / information has granted relief to the assessee without giving any opportunity to the Assessing Officer to examine and have his say on the evidences brought on record. For deciding this issue, it is necessary to look into the observations of the learned Commissioner (Appeals) in Para–14.5 of his order. It has been noted by the learned Commissioner (Appeals) that the Assessing Officer was specifically asked to make certain enquiries and furnish certain details in respect of assessee‟s claim of deduction under section 80IB(10) of the Act. As
34 M/s. Jivesh Developers & Properties Pvt. Ltd. noted by the learned Commissioner (Appeals), since the Assessing Officer did not respond to or comply with the directions of the learned Commissioner (Appeals), he had to call for the assessment record for verifying the factual details. Further, since, the dispute between the Department and the assessee pertained to the issue whether the housing project has been constructed as per the approved plan and complying to the conditions of section 80IB(10) of the Act, it required factual verification. Therefore, to ascertain the fact whether the housing project was built as per the approved plan, learned Commissioner (Appeals) decided to conduct an independent enquiry with the housing society and as per the information obtained from the housing society, he found that the housing project has been constructed with four flats in each floor which is evident from the maintenance receipts issued by the society as well as the shares allotted by the society to flat owners. Further, to verify whether the housing project was constructed as per the approved plan, learned Commissioner (Appeals) called for the original approved plan from the assessee bearing the seal of the BMC. After obtaining the said plan and cross verifying with the seized drawings, he found that 11 out of 12 seized drawings tallied with the original approved plan bearing the seal of BMC. Thus, as could be seen from the aforesaid facts, since necessary information / factual details were not forthcoming from the Assessing Officer, learned Commissioner (Appeals) decided to conduct
35 M/s. Jivesh Developers & Properties Pvt. Ltd. an independent enquiry on his own to ascertain the correct factual position relating to construction of the housing project. Section 250 of the Act lays down the procedure to be followed by the Commissioner (Appeals) in the matter of disposal of an appeal filed before him. Sub– section (4) of section 250, empowers the Commissioner (Appeals) to make further enquiry or direct the Assessing Officer to make enquiry if he deems it fit and necessary for disposal of the appeal. Rule 46A lays down the procedure for acceptance additional evidence to be furnished by the assessee before the Commissioner (Appeals). As per sub–rule (1), (2) and (3) of rule 46A, if the assessee wants to furnish additional evidence, he not only has to substantiate the reasons for which he wants to produce such evidence but the first appellate authority if he admits such evidence is also required to allow reasonable opportunity to the Assessing Officer to examine such evidence. However, sub–rule (4) of rule 46A carves out an exception to sub–rule (1) to (3) by providing that if the first appellate authority for enabling him to dispose off the appeal directs production of any document or examination of any witness he can do so without any hindrance. Thus, sub section (4) of section 250 read in conjunction with rule 46A(4) makes it abundantly clear that the first appellate authority has unfettered power to conduct enquiry or call for any documentary evidence if he considers them necessary for disposal of the appeal. The restrictions imposed under sub–rule (1) to (3) of rule 46A would
36 M/s. Jivesh Developers & Properties Pvt. Ltd. not affect the power of the first appellate authority in such cases. The Hon'ble Jurisdictional High Court while dealing with identical issue in Smt. Prabhavati S. Shah v/s CIT, [1998] 231 ITR 001 (Bom.) has held in the following manner:–
“On a plain reading of Rule 46A, it is clear that this rule is intended to put fetters on the right of the appellant to produce before the Appellate Assistant Commissioner any evidence, whether oral or documentary, other than the evidence produced by him during the course of the proceedings before the Income- tax Officer, except in the circumstances set out therein. It does not deal with the powers of the Appellate Assistant Commissioner to make further enquiry or to direct the Income-tax officer to make further enquiry and to report the result of the same to him. This position has been made clear by Sub-rule (4) which specifically provides that the restrictions placed on the production of additional evidence by the appellant would not affect the powers of the Appellate Assistant Commissioner to call for the production of any document or the examination of any witness to enable him to dispose of the appeal. Under Sub-section (4) of Section 250 of the Act, the Appellate Assistant Commissioner is empowered to make such further inquiry as he thinks fit or to direct the Income-tax Officer to make further inquiry and to report the result of the same to him. Sub-section (5) of Section 250 of the Act empowers the Appellate Assistant Commissioner to allow the appellant, at the hearing of the appeal, to go into any ground of appeal not specified in the grounds of appeal, on his being satisfied that the omission of the ground from the form of appeal was not wilful. It is clear from the above provisions that the powers of the Appellate Assistant Commissioner are much wider than the powers of an ordinary court of appeal. The scope of his powers is coterminous with that of the Income-tax Officer. He can do what the Income-tax Officer can do. He can also direct the Income-tax Officer to do what he failed to do. The power conferred on the Appellate Assistant Commissioner under Sub- section (4) of Section 250 being a quasi-judicial power, it is incumbent on him to exercise the same if the facts and circumstances justify. If the Appellate Assistant Commissioner fails to exercise his discretion judicially, and arbitrarily refuses to make enquiry in a case where the facts and circumstances so demand, his action would be open for correction by a higher authority.”
37 M/s. Jivesh Developers & Properties Pvt. Ltd. 20. Similar view has been expressed by the Tribunal in Industrial Roadways (supra) and Thoresen Chartering Singapore Ltd. (supra).No contrary decision on the issue has been brought to our notice by the learned Departmental Representative. It is fairly well settled that the first appellate authority enjoys power coterminous with the assessing officer. In the instant case the learned Commissioner (Appeals) in exercise of his power under section 250(4) read with rule 46A(4) has undoubtedly conducted enquiry which he found necessary for disposal of the appeal. Therefore, there was neither any necessity or requirement under law to confront the result of enquiry to the Assessing Officer, as it is not a case of admission of additional evidence furnished by the assessee in terms of rule 46A(1). Rather, it is a perfect example of a case where the Commissioner (Appeals) has sincerely and diligently discharged his statutory duties and obligations by conducting necessary enquiry to ascertain the correct facts. Thus, applying the ratio laid down in the decisions referred to above, we hold that there is no violation of rule 46A of the rules in the instant case. Therefore, the argument of the department in this regard cannot be accepted. So far as the other aspects of the Department‟s challenge to allowance of assessee‟s claim of deduction under section 80IB(10) of the Act are concerned, a bare perusal of the assessment order would reveal that relying heavily upon the seized unapproved plan dated 31st December 2001, the Assessing Officer has concluded that four flats in
38 M/s. Jivesh Developers & Properties Pvt. Ltd. each floor of the housing project have been merged into two as a result of which the floor area of each flat has exceeded 1,000 sq.ft., thereby, violating the condition of section 80IB(10)(c) of the Act. Of course, the Assessing Officer selectively relied upon the statement recorded from Shahikant Chatrawal, whom the Assessing Officer presumed to be the architect of the housing project. However, the enquiry conducted by the learned Commissioner (Appeals) with the housing society clearly revealed that the housing project has four flats in each floor having built–up area of less than 1,000 sq.ft. The supporting evidences submitted by the housing society before the learned Commissioner (Appeals) also demonstrated such fact. Further, evidence has been brought on record to indicate that each floor is having four flats with independent electricity metering units. Moreover, the very fact that BMC has issued occupancy certificates in respect of the flats in the housing project is suggestive of the fact that the housing project has been constructed as per the approved plan. Admittedly, there is no allegation by the BMC that the housing project has been constructed deviating from the approved plan. At least, department has not brought any such fact on record. Thus, as per the facts and evidences brought on record either as a result of enquiry conducted by the learned Commissioner (Appeals) or being produced by the assessee before the departmental authorities, it is established that the housing project was constructed as per the plan approved by
39 M/s. Jivesh Developers & Properties Pvt. Ltd. BMC and not otherwise. Though, in the statement recorded Sashikant Chhatrawala, the so called architect did say that he has prepared two sets of plans, however, he never stated that the housing project was constructed as per unapproved plan. Further, in the statement recorded from Sameer Bhojwani he has not only disowned the unapproved plan but has categorically stated that the housing project was constructed as per the approved plan. Even, during the assessment proceedings also assessee denying all allegations had submitted that housing project was constructed as per the plan approved by BMC and brought some evidence on record to substantiate its claim. Thus, when in course of assessment proceedings the assessee had asserted that the housing project was constructed as per the approved plan, the minimum that the Assessing Officer was required to do was to conduct an independent enquiry with the BMC and the housing society to ascertain the correctness of assessee‟s claim. In that process Assessing Officer could have factually verified not only the exact number of flats available in each floor with their built–up area but also existence of AHU and fire refuge space. Instead of doing that the Assessing Officer has found an easy way out for denying assessee‟s claim of deduction under section 80IB(10) by simply relying upon the seized unapproved plan and statement of Sashikant Chhatrawala. Absolutely no evidence worth its name has been placed before us by the department to persuade us to reverse
40 M/s. Jivesh Developers & Properties Pvt. Ltd. the decision of the Commissioner (Appeals). On the contrary, the evidences brought on record clearly support the factual findings of learned Commissioner (Appeals) and which, in our view, the department has failed to controvert. Another relevant fact which needs to be mentioned is, assessee claimed deduction under section 80IB(10) for the first time in assessment year 2004–05. The Assessing Officer after making necessary enquiry having found that assessee has fulfilled the conditions of section 80IB(10) allowed the deduction. The Assessing Officer in similar manner allowed assessee‟s claim of deduction in scrutiny assessments made for assessment years 2005– 06 to 2009–10. Therefore, considering the totality of facts and circumstances of the case, we have no hesitation in upholding the decision of the learned Commissioner (Appeals) on the issue. As regards the case laws cited by learned Departmental Representative, though, the principle laid down therein are well accepted, however, they do not come to the rescue of the department as the decision of the learned commissioner (Appeals) is purely on factual basis and on appreciation of facts and evidences brought on record. Ground nos. (i) to (v) are dismissed.
In ground no.(vi), Revenue has challenged allowance of assessee‟s claim of deduction under section 80IB|(10) of the Act in respect of leave and licence fees.
41 M/s. Jivesh Developers & Properties Pvt. Ltd.
As discussed in the earlier part of the order, the Assessing Officer while completing the assessment for the assessment years under appeal, disallowed assessee‟s claim of deduction under section 80IB(10) of the Act in respect of the housing project alleging violation of conditions of the said provision. Without prejudice to the aforesaid conclusion, the Assessing Officer also held that the assessee is not eligible to claim deduction under section 80IB(10) of the Act in respect of leave and licence fees, since, it is not derived from the activity of developing and constructing the flat. While deciding the assessee‟s appeals on the aforesaid issue, the learned Commissioner (Appeals) held that, since, the housing project developed by the assessee is otherwise eligible for deduction under section 80IB(10) of the Act, leave and licence fee derived from letting out the unsold stock of flats in the said housing project has to be treated as profit derived from the housing project, hence, eligible for deduction under section 80IB(10) of the Act. While coming to such conclusion, the learned Commissioner (Appeals) relied upon the decision of the Tribunal, Mumbai Bench, in case of AHCL–PEL v/s ITO, ITA no.2168/Mum./2009 & Ors., dated 29th October 2014.
We have heard the parties. While learned Departmental Representative relied upon the observations of the Assessing Officer and the grounds raised, the learned Authorised Representative
42 M/s. Jivesh Developers & Properties Pvt. Ltd. supporting the decision of the learned Commissioner (Appeals) submitted that the Tribunal in case of assessee‟s sister concern M/s. AHCL–PEL (supra) has held that leave and licence fee derived from letting out unsold flats held as stock in trade of the housing project would also be eligible for deduction under section 80IB(10) of the Act. He further submitted that in assessee‟s own case for assessment year 2004–05, the Tribunal following its own decision in AHCL–PEL (supra) had allowed assessee‟s claim of deduction under section 80IB(10) in respect of leave and licence fees. Having considered rival submissions, it is noted that in assessee‟s own case for assessment year 2004–05, the Co–ordinate Bench while deciding identical issue in ITA no.575/ Mum./2008, dated 23rd September 2016, has held as under:–
“4. After hearing both the parties and on perusal of the cited decision of the Tribunal in the case of M/s. AHCL-PEL (supra), wherein one of us (AM) is a party to the said order, we find, the facts as well as the conclusions drawn by the Tribunal will help the assessee. Considering the importance of the said paras for the sake of completeness of this order, the same are extracted as under:- “3. At the outset, Shri Mayur Kisnadwala, Ld Counsel for the assessee mentioned that the assessee is a builder and engaged in the business of development of housing project which is allowable for deduction u/s 80IB of the Act. There is no dispute about the project and the allowability of deduction of profits relatable to the sale proceeds of the flats of the said housing project. The only dispute relates to the allowability of deduction u/s 80IB of the Act in respect of the rental income earned by the assessee in respect of certain unsold flats held as stock-in-trade. It is the case of the assessee that some of the flats which are left unsold were let out under „leave and license system‟ and the said income being directed connected to the flats, which is integral part of the housing project is also allowable for deduction u/s 80IB of the Act. He relied on various decisions in support of the same.
43 M/s. Jivesh Developers & Properties Pvt. Ltd.
On the other hand, Revenue Officers are of the opinion that such receipts are not allowable profits and denied the claim of deduction. 5. Before us, ld Counsel for the assessee submitted that there is no dispute on the facts and the dispute is only with regard to the definition of eligible profits whether it includes rental income earned by the assessee from the unsold part of the housing project. Bringing our attention to various decision placed before us, Ld Counsel for the assessee mentioned that the scrap sales are held to be eligible profits. He also mentioned that the interest payments received by the assessee from the debtors, relating to the sale proceeds, were also found eligible for claim of deduction u/s 80IB of the Act. In support of his argument, Ld Counsel for the assessee relied on the decision of ITAT, Hyderabad in the case of ACIT vs. Biotech Medicals (P) Ltd [2009] 119 ITD 143 (Hyd). Further, Ld Counsel also relied on the decision of the ITAT Mumbai Bench in the case of Tata Infomedia Ltd vs. ACIT [2009] 116 ITD 426 (Mum), which is delivered in the context of deduction u/s 80Q of the Act, wherein it was held that advertisement income constitutes eligible profits. In this case, the income is earned on sale of yellow pages. Drawing parallal to the above instances, Ld Counsel for the assessee submitted that the rental receipts earned out the unsold flats of the housing project should be held eligible for deduction. Further, Ld Counsel for the assessee brought our attention to the judgment of the Hon‟ble Supreme Court in the case of Liberty India vs. CIT [2009] 317 ITR 218 (SC) for the proposition that the income with first degree nexus should be considered as eligible income for the purpose of claim of deduction uj/s 80IB of the Act.” 6. On the other hand, Ld DR relied on the orders of the Revenue Authorities. 7. We have heard both the parties and perused the orders of the Revenue Authorities as well as cited decisions of the Tribunal and the higher judiciary. On hearing both the parties, we find, the said propositions mentioned above are helpful for deciding the issue on hand. Considering the fact that the unsold flats, being stock-in- trade of the housing project, being the immediate source of the impugned rental income, we find direct nexus of the said income to the housing project on hand. Therefore, the said income is derived from the housing project, making the income eligible for deduction u/s 80IB(10) of the Act. Therefore, the conclusions drawn by the CIT (A) are not sustainable in law. Accordingly, we reverse the order of the CIT (A) on this issue and allow the ground no.1 in all the three appeals.”
44 M/s. Jivesh Developers & Properties Pvt. Ltd. 5. Considering the above, we are of the opinion, the grounds raised by the assessee should be allowed in favour of the assessee and against the Revenue. We order accordingly.”
Respectfully following the aforesaid decision of the Co–ordinate Bench in assessee‟s own case, we uphold the decision of the learned Commissioner (Appeals) on this issue. Ground raised is dismissed.
In the result, Revenue‟s appeals are dismissed.
ITA no.6891 to 6894/Mum./2014 Revenue’s Appeal for A.Y. 2005–06 to 2008–09 ITA no.6940 and 6941/Mum./2014 Assessee’s Appeal for A.Y. 2009–10 and 2010–11
Respective appeals of the Revenue and assessee arise out of proceedings initiated under section 154 of the Act.
The only common dispute in all these appeals relates to levy of interest under section 234B of the Act.
While deciding assessee‟s cross objections for the impugned assessment years, we have held the proceedings initiated under section 153C of the Act to be invalid and as a consequence have quashed the assessment orders passed under section 143(3) r/w 153C of the Act for the aforesaid assessment years. That being the case, the proceedings initiated under section 154 of the Act and all orders passed in consequence thereof cannot survive. Therefore, the grounds
45 M/s. Jivesh Developers & Properties Pvt. Ltd. raised in all these appeals are of mere academic interest, hence, have become infructuous.
In the result, all these appeals are dismissed.
To sum up, assessee‟s cross objections being C.O. no.105 to 110/Mum./2017 are allowed; Revenue‟s appeals in ITA no.5643 to 5649/Mum./2015 are dismissed; Revenue‟s appeals in ITA no.6891 to 6894/Mum./2014 are dismissed; and Assessee‟s appeals in ITA no.6940 and 6941/Mum./ 2014 are dismissed. Order pronounced in the open Court on 28.03.2018
Sd/- Sd/- N.K. PRADHAN SAKTIJIT DEY ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 28.03.2018
Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary (Sr. Private Secretary) ITAT, Mumbai