DCIT CEN CIR 9, MUMBAI vs. ACME COMBINES, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद� राजे� के अनुसार PER RAJENDRA, AM- Challenging the order of the CIT (A)-37,Mumbai, dated 1/01/2014, the Assessing officer (AO) has filed the present appeal.Effective ground of appeal

is about allowing the deduction under section 80. IB of the Act. 2.Assessee-firm,a builder and developer, filed its return of income on 9/10/2010, declaring total income at rupees nil, after claiming deduction of Rs. 48.09 Lacs under section 80. IB(10) of the Act.The AO completed the assessment,under section143 (3) of the Act,determining the income of the assessee at Rs.48,09,782/-.He did not allow the assessee’s claim of deduction made under section 80. IB(10).He observed that assessee had completed construction of a housing project at Vasai having plot size of 6984.50 sq.mts.,that the project consisted of three buildings, that the area of the project was less than 1 acre, that the assessee was not entitled to claim deduction as per the provisions of the Act. In the earlier round of assessment, in the regular assessment under section143 (3) the AO had denied the claim made by the assessee under section 80. IB (10). At that time it was held that three buildings each considered a separate project and therefore the plot area for each project was less than 1 acre.The assessee, contended that three buildings constituted a single project. However,the AO made the disallowance. In the appellate proceedings, the First Appellate Authority (FAA)decided the issue in favour of the assessee.The appeals filed by the AO before the Tribunal as well as before the Honorable Jurisdictional High Court were dismissed. In the meanwhile an Action under section 132 of the Act was carried out on Acme group on 24/07/2008, wherein the assessee – firm was also covered. Accordingly notices u/s. 153A of the Act was issued for a AY 2004-05 to 2008-09. While completing the assessments, the AO again denied the claim made by the assessee under section 80. IB (10) of the Act for the reason that each building being a separate project was built on a plot of land having area less than 1 acre. In addition to it the AO held that some of the combine residential units exceeded 1000 sq.ft. 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the FAA. After considering the available material on record, he held that identical issue had arisen in the earlier years, that the appeal filed by the Department was dismissed by the Tribunal as well as by the Honorable Bombay High Court. With regard to the issue pertaining to built-up area of some of the residential units, exceeding 1000 square feet, he held that assessee had claimed 1377/14 Acme Combines that two independent flats by way of two separate agreements were sold to the buyers, that the records of the Municipal Corporation showed that two flats as independent units, that society charges and municipal taxes were payable for these two flats separately, that the builder had handed over separate flats to the flat purchaser, that afterwards the purchaser combine the two flights, that the builder was not responsible for the same, that purchase of two adjoining flats by one family itself was not restricted under section 80 IB(10),that the restriction on sale of two flats to an individual/same family members was introduced with effect from 1/04/2010, that the FAA had, while deciding the appeals for the AY 2004-05 to 2008 – 09 had decided the issue in favour of the assessee. While completing the assessment under section 153A of the Act,the AO mentioned that new facts had is which were not available at the time of earlier proceedings,had come in possession of the department. In order to ascertain to which new facts were found by the Department-during the search proceedings speciallyqy,after the order of the Tribunal, he directed the AO to furnish the same.After considering the remand report of the AO, the FAA observed that the fact mentioned in the original assessment order as well as in the impugned assessment order u/s. 153A were identical,that in the original assessment proceedings the issue was decided against the AO up to the High Court level,that it could not be said that new set of facts had emerged during the course of search proceedings, that the AO himself had admitted those facts in the remand report.Considering these facts, the FAA decided the first ground of appeal in favour of the assessee. With regard to the area of flats,exceeding 1000 sq.feet,the FAA considered the assessment order and the remand report of the AO along with the rejoinder filed by the assessee. He found that the AO had recorded the statements of the owners of the four flats, that at the time of original assessment proceedings the then AO had not made any disallowance with regard to the area of the some of the flats,that the disputed apartments/residential units had been sold as to individual residential units, that there were two separate agreements/sale deeds for the same, that the society charges and municipal taxes payable by the owners of the residential units was separately charged for both the residential units and not on a combine basis as would have been the case if the combine flats had been prepared and sold as a single residential unit. The assessee had argued that the said units had been sold to purchasers as separate units and as per the agreements buyers were prohibited from making any alteration in the structural design of the flats, that once the possession was handed over to the purchaser the role of the builder was over, that if subsequently the owners modified the internal structure of the flat no responsibility could be fixed on the builder. After considering the available material, the FAA referred to the cases of Global Realities (134 ITD 407), Haware Construction (64 DTR 251),he held that built-up area of the flats as per the ministerial regulation was l less than 1000 square feet, that the order of the AO could not be sustained. Finally he allowed the appeal filed by the assessee. 4.During the course of hearing before us the Departmental Representative (DR) left the issue to the discretion of the bench. The Authorised Representative (AR) stated that the Tribunal and the Honorable Bombay High Court had dismissed the appeal filed by the assessee for the earlier years. 5.We find that while deciding the appeal, for the AY.s. 2004 – 05 to 2008 –

09. (ITA/4149 – 4153/Mum/2012 ,dated 2/01/2014), the Tribunal has deliberated upon both the issues and has decided them under: “5.We have carefully perused the orders of the lower authorities and the assessment order u/s. 143(3) which travelled upto the High Court. The assessment under consideration are framed 1377/14 Acme Combines u/s. 153A of the Act after search and seizure operation. We find that identical issues were also there in the regular assessment framed u/s. 143(3) of the Act. No new facts or findings which have emerged during the search proceedings in regard to issue of size of plot. However, while completing the assessment u/s. 153A, the AO has not accepted the order of the Tribunal by stating that new facts emerged which were not available at the time of earlier proceedings u/s. 143(3) of the Act. During the appellate proceedings,the Ld. CIT(A) requested the AO to furnish what are those new facts which have emerged after the date of the order of the Tribunal . The AO filed a remand report dt. 27.2.2012.The relevant portion of the Remand report is reproduced hereunder: “The assessee has contended that no new facts have been mentioned in the impugned assessment order other than the ones enumerated in the original order that has been set aside by the Hon’ble ITAT on the issue of plot of land being less than one acre. In this regard, I have verified the regular assessment records of the assessee firm for the A.Yrs 2004-05 & 2005-06 and also the assessment records for the A.Yrs 2004-05 to 2008-09 and the respective orders passed u/s. 143(3) r.w.s. 153A of the I.T. Act, 1961. On perusal of the details filed and verified from the records, it is observed that in both the assessment orders the respective A.O’s have pointed out almost same set of facts as far as non compliance of conditions laid down u/s. 80IB(10(b) of the I.T. Act is concerned. It is also a matter of fact that the assessee firm has got relief on this count from the CIT(A) and Hon’ble ITAT Mumbai has further upheld the decision of the CIT(A) by dismissing the appeal filed by the revenue for A.Y. 2004-05 and 2005- 06 with respect to original assessment orders passed u/s. 143(3) of the Act. Later, the revenue has also lost its case before Hon’ble High Court of Bombay. However, the revenue has not accepted the judicial decision in this regard and preferred an SLP before Hon’ble Supreme Court of India which is pending as of now.” 6.A perusal of the aforestated remand report show that the AO confirmed that the facts mentioned in the original assessment order as well as in the impugned assessment order u/s. 153A are the same. This being the fact of the matter, it cannot be said that new set of facts have emerged during the course of assessment u/s. 153A. Now that this issue has already attained its finality in favour of the assessee by the decision of the Tribunal in & 4061/M/08 which has been confirmed by the Hon’ble Jurisdictional High Court in I.T.X.A.L. 1452 with 1453/2010. Respectfully following the order of the Tribunal as confirmed by the Hon’ble Jurisdictional High Court, ground No. 1 is accordingly dismissed. 7.The issue raised in ground No. 2 relates to the grievance that some of the residential units are having a built up area exceeding 1000 sq. ft. is in contravention of the provisions of Sec. 80IB(10)(c) of the Act. It was the contention of the assessee that the expression “residential units” must have a connotation as assigned to it by local authorities granting approval to the project and if a local authority has approved buildings plan with residential unit of less than 1000 Sq ft and granted completion certificate as such deduction u/s. 80IB(10) has to be allowed. The assessee further contended that purchase of two adjoining flats by the same buyers or within one family by itself was not restricted and no adverse conclusions could be drawn from them. It was further submitted that even if the allegation of the Ld. AO that the two flats were sold as one combined unit was correct, facts on record would reveal that the total combined area in no case exceeds 1000 sq. ft. We find force in the submissions of the assessee. The prohibition against sale of more than one flat in a housing project to members of same family has been inserted specifically with effect from 1.4.2010 and the same cannot be treated with retrospective effect. 8.A perusal of the provisions of Sec. 80IB(10) would show that it provides deduction for housing projects which are approved on or after 1.10.1998 and upto 31.3.2008. It also differentiates the projects approved between 1.10.1998 to 31.3.2004, 1.4.2004 to 31.5.2005 and 1.4.2005 to 31.3.2008. If the section is further analysed, it is based upon the approval of the project. If the project is already approved prior to 1.4.2005, any subsequent restriction brought in Sec. 80IB would have to be given perceptive effect. Similar view has taken by the Tribunal in the case of Global Reality Vs ITO 134 ITD 407, Haware Constructions (P) Ltd.