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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: Shri Joginder Singh & Shri Rajendra
आदेश / O R D E R Per Joginder Singh (Judicial Member) Both these appeal are by the assessee against the impugned orders both dated 26/12/2011 of the ld. Commissioner of Income Tax, Mumbai, challenging invocation of revisional jurisdictional u/s 263 of the Income Tax Act, 1961 (hereinafter the Act) holding that the assessee is not entitled to claim deduction u/s 80IB(10) of the Act, amounting to Rs.8,02,85,320/- (A.Y.2008-09) and Rs.9,95,748/- (A.Y. 2009-10) in respect of profits arising from housing project.
2. During hearing of this appeal, ld. counsel for the assessee, Shri Sunil U. Pathak along with Shri Subodh Ratnaparkhi, contended that the eligible housing project was consisted of building C (Ochana) and D (Allamanda) and four the other buildings, no deduction was claimed by the assessee u/s 80IB(10) of the Act, meaning thereby, the other buildings not part of eligible project and the assessee has satisfied all the conditions mentioned in the section. It was further contended that simply because the lay out plan was for the entire land, which was common for various buildings, does not mean that the term “housing project” meant all the buildings mentioned in the lay out plans. Plea was also raised that the issue was debatable and went two views are possible which favours the assessee, has to be adopted. It was contended that the building, which was commercial use, the assessee did not make any claim u/s 80IB(10). Our attention was invited to page 58 of the paper book and page 29 of the paper book along with page 30. It was strongly contended that the Assessing Officer after due examination of facts allowed the claimed deduction for which our attention was invited to page-3, para 10.2 of the assessment order. Reliance was placed upon the decision of the Tribunal in the case of M/s Siddhi Real Estate Developers vs CIT (ITA Nos. 2630 to 2635/Mum/2012) order dated 13/05/2014, Malabar Industrial Company Ltd. Vs CIT 243 ITR 83 (SC), CIT vs Max India Ltd. 295 ITR 282 (SC). On the issue of Cluster of buildings from out of large layout and eligibility for deduction u/s 80IB(10) of the Act, the ld. counsel placed reliance upon the decision in CIT vs Vandana Properties 353 ITR 36 (Bom.), DCIT vs Karunal P. Gala (ITA No.7724/Mum/2010) order dated 03/08/2012, Madhur M. Gupta vs ACIT (51 DTR 217)(Mum.)(2011), DCIT vs Magarpatta Township Development and Construction Co. 141 ITD 682 (Pune)(2012), M/s Rahul Construction Company vs ITO (ITA No.1250/Pn/2009 and 707/PN/2010) order dated 30/03/2012 of the Pune Bench of the Tribunal, ITO vs Cosmos Enterprises (ITA No.6744/Mum/2010) order dated 15/10/2013, ACIT vs Cosmos Realtors & ORs. (ITA No.5360/Mum/2010) order dated 28/02/2014 and CBDT Notification No.205/3/2001/ITA II dated 04/05/2011. Further the ld. counsel contended that for the projects approved prior to 31/03/2005, the restriction of commercial area imposed by sub-section (d) to section 80IB(10) is not applicable, for which reliance was placed upon the decision in CIT vs Sarkar Builders (119 DTR 241)(2015)(SC) and CIT vs Brahma Associates (333 ITR 289) (Bom.)(2011).
2.1. On the other hand, the ld. DR, Shri Sunil K. Jha, defended the invocation of revisional jurisdiction by inviting out attention to page-3 (para-7) of the impugned order by contending that the assessee has not fulfilled the conditions mentioned in sections 80IB(10) and the remaining buildings are part of the same projects, therefore, it is a single project for the purposes of section 80IB(10) of the Act. The crux of the argument is in support of the impugned order.
2.2. We have considered the rival submissions and perused the material available on record. If the observation made in the assessment order, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, the facts, in brief, are that M/s Gala Lifestyle Siddhi Group, at the relevant time was engaged in the business of construction of residential and commercial project at Thane. Search and seizure action was carried out u/s 132 of the Act at Gala Sharma Siddhi Group of cases on 28/08/2008 and simultaneously survey u/s 133A was conducted at various business premises of group entities. The case of the assessee was also covered u/s 132 of the Act as the search was conducted at the residential premises at 401, Prince Palace, Thane on 28/08/2008. Survey action u/s 133A was carried out at the business premises of the assessee at B-103 Allmanda, pride park, Thane (W) and A-Wing, Norita Building, pride park, Thane (W). Notice u/s 153A of the Act was served upon the assessee on 16/07/2009 to which the assessee filed return of income on 17/08/2009, declaring total income of Rs.5,63,000/-, after claiming Rs.1,05,29,951/- as deduction u/s 80IB(10) of the Act. Subsequently, vide letter dated 11/11/2010, the assessee furnished computation of income, profit & loss account, audit report u/s 44AB(in Form 3CB and 3CD) along with its enclosure. The ld. Assessing Officer issued/served notice u/s 143(2) dated 20/08/2009. Another notices u/s 143(2) and 142(1) along with questionnaire were duly served upon the assessee on 22/10/2010. The assessee, in response to aforesaid notices, attended the proceedings from time to time and furnished necessary details as is evident from para 4 to 6 of the assessment order. During the relevant previous year, the assessee was engaged in the development of project namely “Pride Park” Phase-II and Phase-III and Chithalsar, Manpada, Thane(W). The assessee prepared separate profit & loss account with respect to sales effected from Phase-II for Ochana and Allmanda Buildings. In a separate profit & loss account, the assessee claimed profit of Rs.1,02,85,320/- as deduction u/s 80IB(10) of the Act. The ld. Assessing Officer duly examined the evidences filed by the assessee, bases of claim and found that the assessee has duly fulfilled the conditions laid down u/s 80IB(10) of the Act and accepted the claim of the assessee as is oozing out para 10.2 of the assessment order. For ready reference, the same is reproduced hereunder:-
“10.2. During the relevant previous year sales were affected from Phase-II for Ochana and Allamanda buildings. A separate Profit & loss Account has been prepared and a net profit of Rs.8,02,85,320/- was disclosed and claimed this profit as deduction u/s 80IB(10) of the I.T. Act. The case has been examined on the basis of the evidences produced by the assessee and it is found that all the conditions as laid down u/s 80IB(10) are satisfied and found that the claim of the assessee for deduction u/s 80IB(10) is acceptable.”
2.3. It is also noted that the ld. Assessing Officer found that the assessee affected sales of parking units of Phase-I (Norita of Pride Park) for which separate profit & loss account was maintained and the amount of Rs.1,15,000/- was also claimed as deduction u/s 80IB(10), which was denied as deduction with a reasoning as is evident from para 11 to 11.5 of the assessment order and thereafter completed the assessment.
2.4. From the above, it can be easily inferred that the assessment order was not framed in a mechanical manner and was passed after application of mind and on appreciation of facts, considering the documentary evidences filed by the assessee.
2.5. Now, we shall analyze, invocation of revisional jurisdiction u/s 263 by the ld. Commissioner, wherein, the reasons for disallowing the claimed deduction u/s 80IB(10) of the Act are enumerated hereunder:- a. The housing project included shops and commercial establishments to the extent of 17,445 sq. ft. which was in excess of the statutory limit and hence, the assessee was not entitled to claim the deduction. b. The housing project comprised of buildings A, B, C, D, E and F and since some of the buildings were completed after 31 st March, 2008, the condition of completion of the project was not fulfilled by the appellant and hence, the deduction u/s 80IB(10) was not available to the appellant. c. The assessee's claim that the eligible project Pride Park II consisted of buildings C (Ochana) and D (Allamanda) was not justified and the project for the purposes of section 801B(10) meant all the buildings proposed in the layout plan. d. The entire land under development at Chitalsar-Manpada, Thane, on which several buildings were constructed constituted a single project for the purposes of section 801B(10) of the I. Tax Act. e. The Thane Municipal Corporation had also clarified that the housing project comprised of buildings A, B. C, D, E and F and the claim of the assessee that the eligible housing project consisted only of buildings C and D only was not justified.
2.6. If the aforesaid observations of the ld. Commissioner are analyzed with the facts of the present appeal, the ld. CIT ignored the factual matrix that the eligible housing project, for which claimed deduction u/s 80IB(10) of the Act was made, were consisting of building C (Ochana) and D (Allamanda) and the remaining buildings were not part of the eligible project. It is also noteworthy that even the ld. Assessing Officer has specifically mentioned in the assessment order that the assessee has satisfied all the conditions stipulated in the section with respect to these two buildings, therefore, there is no reason to disallow the claimed deduction, simply, because, the layout plan was entire land which was common for various buildings but the fact remains that for the remaining buildings, no such claim was made by the assessee, therefore, there is no reason to include buildings, A, B, E and F as part of the project for claiming deduction u/s 80IB(10) of the Act. So far as, the letter from the municipal corporation, Thane, is concerned, it is not relevant because for the remaining building, no deduction was claimed u/s 80IB(10) by the assessee.
2.7. It is also noted that the Tribunal for A.Y. 2005- 06, vide order dated 03/08/2012 (ITA No.7724/Mum/ 2010) in the case of DCIT vs Krunal Pravinchandra Gala (present assessee) on the issue of existence of commercial area in the housing project approved prior to 01/04/2005 and claim of deduction u/s 80IB(10) dismissed the appeal of the Revenue. The relevant portion of the order is reproduced hereunder for ready reference:-
“This appeal has been filed by the department against the order dated 13-8-2010, passed by the CIT(A)-II, Thane for the quantum of assessment passed under Section 143(3) for the assessment year 2005- 2006 on the following grounds of appeal :-
“1. On the facts and in law, the Ld CIT(A) has erred in holding that the existence of commercial area in the housing project approved prior to 01/04/2005 cannot come in the way of assessee’s claim for deduction u/s.80IB(10) of the Income Tax Act, 1961.
2. On the facts and in law, the Ld CIT(A) has erred in holding that the project ‘Pride Park’ of the assessee is eligible for deduction u/s.80IB(10) of the Income Tax Act, 1961, on ‘stand alone’ basis.
On the facts and in law, the Ld CIT(A) has erred in holding that as the assessee has not claimed the deduction on commercial component of the project, the deduction u/s. 80IB(10) of the Income Tax Act, 1961, is allowable to the assessee.”
Brief facts of the case are that the assessee is engaged in the construction and development of housing project through its proprietory concern ‘M/s Hemal Builders’. The said firm has developed a cluster of buildings at Village Chitalsar-Manpada, District Thane. The said cluster of building includes one building “Pride Plaza” which houses commercial establishments and other buildings were for residential units/\ under the project name “Pride Park”. The assessee had shown a net profit of Rs.12,89,205/- on total sales of Rs.49,96,960/- which includes gains on transfer of development rights of Rs.10,00,000/- which was separately shown as net profit. On the balance sales of unsold flats of Phase I of the housing project “Pride Park”, amounting to Rs.39,96,960/-, during the year under consideration, a net profit of Rs.12,89,205/- was worked out and has been claimed as exempt under Section 80IB(10).
The Assessing Officer has rejected the claim on the ground that as per the approved plan of housing project Phase 1 of the “Pride Park”, the commercial units have also been constructed and sold along with the residential units having area of 1598 sq.mt The assessee’s contentions have been that both the projects were independent and distinct even though they were covered under the same sanctioned plan of the local authority. Both projects were located at a distance and the account of both the projects have been separately maintained.
3. Before the CIT(A), the assessee made detail submission highlighting the project work details, accounts for both the projects which were separately maintained, purchase bills of material, which were separately identified and the agreements for sale of premises in respect of both the projects. The said submissions have been incorporated by the CIT(A) from page 4 to 10 of the appellate order. The CIT(A) after considering the facts and submissions of the assessee allowed the claim of the assessee on various counts, firstly, that similar issue has been decided in favour of the assessee by the CIT(A) for the assessment year 2004-2005; secondly, on the fact, it was clear that the assessee has not included the commercial area of the project “Pride Park” for the purpose of any claim under Section 80IB(10), hence, there was no point of making disallowance of such claim by the Assessing Officer and that claim under Section 80IB(10) pertains purely for residential units, which satisfied all the conditions and thirdly, the assessee’s case, otherwise also, is covered by the decision of the ITAT Special Bench in the case of Brahma Associates, and various other decision of the Tribunal, like M/s. Saroj Sales Corporation Vs. ITO, reported in 3 DTR (Trib.)(Mum) 494.
At the outset, learned counsel submitted that this issue now stands covered by the decision of Hon’ble Jurisdictional High Court in the case of CIT Vs. Brahma Associates, reported in (2011) 333 ITR 289, wherein the decision of the Special Bench has been upheld. On the other hand, learned Senior DR fairly agreed that the issue involved in this case stands covered by the decision of the Hon’ble Jurisdictional High Court.
After carefully considering the rival submissions and finding of the CIT(A) as well as the decision in the case of CIT Vs. Brahma Associates (supra), we find that on the facts of the case itself, as held by the CIT(A), there is no question of disallowing the claim under Section 80IB(10) merely on the ground that approval was granted for commercial and residential purposes together. In fact, the assessee has maintained two separate accounts for commercial and residential project and has claimed deduction under Section 80IB(10) only in respect of residential project. Further, there is no other allegation that various terms and conditions laid down under Section 80IB(10) does not fulfill in the assessee’s case. In any case, this issue now stands covered by the decision of the Hon’ble Jurisdictional High Court in the case of Brahma Associates (supra), wherein it has been held that existence of commercial units in a project commenced and completed prior to 01-04-2005, will not have any adverse impact on the claim for deduction u/s. 80IB(10). In this case, it is an undisputed fact that housing project has been commenced on 23.1.2003 and was completed on 12-2-2004 i.e. much before 1-4-2005. Thus, following the decision of the Hon’ble High Court, we do not find any substance in the grounds raised by the department and is accordingly dismissed.
In the result, the appeal of the department is dismissed.”
2.8. It is noteworthy that in the aforesaid order while coming to a particular conclusion, the Bench duly considered the decision of the Special Bench of the Tribunal in the case of Brahma Associates and other decision like M/s Saroj Sales Corporation and further which was duly affirmed by Hon’ble jurisdictional High Court in CIT vs Brahma Associates (2011) 333 ITR 289, holding that existence of commercial units in a project commenced and completed prior to 01/04/2005 will not have any adverse impact on the claimed deduction u/s 80IB(10), thus, from this angle, the assessee is having a case in its favour.
2.9. The case of the assessee is further fortified by the decision in Siddhi Real Estate Developers vs CIT (ITA No.2630 to 2635/Mum/2012) order dated 13/05/2014 and CIT vs Vandana Properties (2012) 353 ITR 36 (Bom.) and various decisions (supra) relied upon by the assessee.
2.10. If the issue of section 263 is analyzed with the help of various other decisions, the landmark decision from Hon’ble Apex Court is Malabar Industrial Company Ltd. Vs CIT (2000) 243 ITR 83 (SC); (2000) 109 taxman 66 (SC) holding that before invoking jurisdiction u/s 263 of the Act, the assessment order should be erroneous as well as prejudicial to the interest of Revenue. The Hon’ble Court held that if the Revenue is losing tax lawfully payable by a person, it will be prejudicial to the interest of the Revenue. However, every loss of Revenue, as a consequence of order of Assessing Officer, cannot be treated as prejudicial to the Revenue.
2.11. The Assessing Officer issued notice dated 11/10/2010 (page 26 of the paperbook) to the assessee, which was replied by the assessee on 18/10/2010 (pages 27 & 28 of the paperbook). It is noteworthy that before framing the assessment u/s 143(3) of the Act, the assessee vide letter dated 20/12/2010, (page 29 to 31 of the paper book), addressed to the ld. DCIT, furnished the following reply:-
To, The Deputy, Comm. Of I.Tax, Central Circle-1, Thane
In the matter of Kunal Pravin Gala Prop: M/s Hemal Builders, Assessment Years; 2008-09 to 2009-10 P.A. No.;AGLPG 2012M
Respected Sir, I have vide my letter dt. 18.10.2010 explained the claim for deduction u/s 80IB(10) vis-a-vis the various phases of the project “pride park”at Ghodbunder Road, Thane. In support of my claim for the said deduction in respect of phase II of the project, I submit the necessary explanation supported by evidences as under:- (i) Name of the Housing “Pride Park Phase II” Project & Location Buildings names Ochna & Allamanda Opp. Lawkim, Ghodbunder Road, Thane (ii) Area of project plot of 7293 Sq. Mtrs (layout of the plot phase II enclosed as Annexure “A”) (iii) Date of Commencement Ochna -28.4.2006 Allamanda- 05.03.2004/29.03.2007 (Copy of commencement certificates from TMC enclosed as Annexure “B1 to B3” (iv) Date of completion Ochana-19.06.2007 Allamanda-24.08.2007 (Occupation certificates from TMC enclosed as Annexure “C1 to C2”) (v) Built up area of units Less than 1000 sq. Feet. (As per statement giving flat wise built up area enclosed as Annexure “D1 to D2”) (vi) Commercial NIL-Entire project is residential establishment housing project (vii) Layout plan Copy of layout plan sanctioned by TMC for construction of housing project is enclosed as Annexure “E”
Apart from the above, I submit that I have maintained books of accounts giving phase wise details of income and expenditure and accordingly the phase wise profit of the project can be computed. The audited financial statements also provide the exact phase wise profit in respect of each of the phases distinctly. The books of accounts are audited and necessary audit report in form no. 10CCB filed in support of the claim.
A copy of the layout plan sanctioned by the TMC for construction of building "Ochna" & "Allamanda" is enclosed as Annexure "E". In the said regards, we clarify that as per the regulations of the Municipal Corporation. It is mandatory to reflect existing buildings already constructed on any plan put up for new construction. It is accordingly the case that the already constructed buildings i.e. Type B (Pride Plaza) and Type A (Norita) are also reflected in figured dimensions i.e. shaded colour as per the requirement of the municipal authorities. It is for this reason that building B 1 having area of only 945 sq. mtrs, the development rights of which have been sold by me in previous year relevant to A.Y. 2005-06 is also reflected on the said plan inspite of the fact that the said building is not part of my project "Pride Park" and is constructed by a third party. A certificate from Architect, M/s. Archetype Consultations (1) Ltd. confirming the above fact is enclosed as Annexure "F".
I further clarify that the V.P.No. for each plot is common and the same number continues in the commencement certificate always. It is for this reason that all subsequent building sanctions are termed as amended permissions by the local authority. This is as per the procedure of municipal authorities. However, as far as the provisions of sec.-80IB-{-W) are concerned, .the only requirement is that-the project for. which deduction U/S 80lB (10) is claimed complies with all the conditions imposed by the said section. I further submit that a "plot of land" is not to be considered as a "project" referred to U/S 80lB (l0) of the LT. Act. A plot of land is a wider term with a specific project being limited to a building or cluster of buildings constructed on such plot of land which may have other building/s also as separate project/s. The Development Control Regulations of the Municipal Corporation of the City of Thane are produced in support.”
2.12. If the totality of facts are analyzed, we are satisfied that requisite details were duly furnished by the assessee and the same were duly examined by the Assessing Officer. In such a situation, we are of the view, that there is a distinction between “lack of enquiry” and “inadequate enquiry”. In the present case the Assessing Officer collected necessary details, examined the same and then framed the assessment u/s. 143(3) of the Act.
Therefore, in such a situation the decision from Hon'ble High Court of Delhi in CIT vs. Anil Kumar Sharma (2011) 335 ITR 83 (Del.)(supra), clearly comes to the rescue of the assessee . The Hon'ble High Court held as under :-
“ Held, dismissing the appeal, that the present case would not be one of “lack of enquiry” even if the enquiry was termed inadequate. The Tribunal found that complete details were filed before the Assessing Officer and that he applied his mind to the relevant material and fact, although such application of mind was not discernable from the assessment order. The Tribunal held that the Commissioner in proceedings u/s. 263 also had all these details and materials available before him but had not been able to point out defects conclusively in the material, for arriving at a conclusion that particular income had escaped assessment on account of non-application of mind by the Assessing Officer . The Tribunal was right and the order of revision was not valid.”
2.13. The aforesaid order clearly fits into the facts before us . While coming to the aforesaid conclusion the Hon'ble High Court duly considered the decision in CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del.) (para-6 & 7).
We are expected to ascertain whether the Assessing Officer had investigated the issue and applied his mind towards the whole record made available by the assessee during assessment proceedings. Uncontrovertedly, necessary details were produced by the assessee and examined by the Assessing Officer, therefore, it is not a case of lack of enquiry by the Assessing Officer. Identical ratio was laid down by the Tribunal in the case of Reliance Gas Transportation Infrastructure Ltd. vs. CIT (2014) 100 DTR (Mum.) (Trb.) 1 , order dated 10/1/2014. In another case from Hon'ble Jurisdictional High Court in CIT vs. Development Credit Bank Limited (2010) 323 ITR 206, on identical fact wherein assessment order was passed after considering all details called for and furnished by the assessee. The ld. Commissioner invoked revisional jurisdiction on the ground that enquiry was not conducted, the Hon'ble High Court held that the ld. Commissioner was not justified. Identical is the situation from Hon'ble High Court Punjab & Haryana in Hari Iron Trading Company vs. CIT (263 ITR 437) order dated 23/5/2003. The Hon'ble High Court of Delhi in CIT vs. Eicher (294 ITR 310) (Del.) wherein the entire material was placed by the assessee before the Assessing Officer at the time of original assessment, the Assessing Officer applied his mind to the material and accepted the view canvassed by the assessee and mere fact that he did not express this in the assessment order, cannot be a ground to conclude that income has escaped assessment, further supports the case of the assessee.
Identically, the Hon'ble High Court of Delhi in CIT vs. Ashish Rajpal (320 ITR 674) vide order dt.14/5/2009, decided in favour of the assessee . The Hon'ble Jurisdictional High Court in CIT vs. Gabriel India Ltd. (203 ITR 108) held that there must be material before the Commissioner to satisfy himself that two requisite provided u/s. 263 are present, otherwise power cannot be exercised at the whims and caprice of the Commissioner. We have also seen the factual finding recorded in the assessment order (reproduced hereinabove) before framing the assessment u/s. 143(3) of the Act and are satisfied that the ld. Assessing Officer made necessary enquiries, asked for details, which were furnished by the assessee, therefore, the observation made by the ld. Commissioner is not substantiated as has been alleged in the revisional order.
2.14. Admittedly, an incorrect assumption of fact or an incorrect application of law would satisfy the requirement of order being erroneous u/s.
The phrase “prejudicial to the interest of the Revenue” u/s. 263, has to be read in conjunction with the expression “erroneous” order by the Assessing Officer . Every loss of Revenue as a consequence of assessment order cannot be termed as prejudicial to the interest of Revenue . Meaning thereby “prejudice” must be prejudice to the Revenue administration. At the same time, if another view is possible revision is not permissible. Our view is fortified by the decision from Himachal Pradesh Financial Corpn. (186 Taxmann 105)(HP), Bismillah Trading Co. (248 ITR 292)(Ker.) and CIT vs. Green World Corpn. (314 ITR 81)(SC). For invoking revisional jurisdiction u/s. 263 the assessment order must contain grievous error which is subversive of the administration of Revenue . Further, exact error must be disclosed by the Commissioner as was held in CIT vs. G.K. Kabra (211 ITR 336)(AP). Totality of facts, clearly indicates that assessment u/s. 143(3) of the Act was framed by the Assessing Officer after obtaining necessary details from the assessee and further the same were examined by him. Therefore, even if, the same has not been spelt elaborately in the assessment order it cannot be said that there is a lack of enquiry or prejudice has been caused to the Revenue, as we have discussed various case laws in earlier part of this order which are identical to the facts before us. In view of these facts and the judicial pronouncement from Hon'ble Apex Court and various Hon'ble High Courts we set aside the order of the ld. Commissioner holding that invoking of revisions jurisdiction u/s 263 of the Act, in both the assessment years, being the issue involved is same, is not within the parameter of law, therefore, decide the appeals in favour of the assessee.
Finally, both the appeals of the assessee are allowed.
This order was pronounced in the open in the presence of ld. representatives from both sides at the conclusion of the hearing on 04/04/2016.