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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI ASHWANI TANEJA
The instant appeal by the Revenue against the order dated 19th March 2012, passed by the learned Commissioner (Appeals)–32, Mumbai, deleting the penalty imposed under section 271(1)(c) of the Shri Gunshi Karsan Dedhia 2 Income Tax Act, 1961 (for short "the Act") by Assessing Officer for the assessment year 2007–08.
Briefly stated the facts are, the deceased assessee, who is represented in the present appeal through his legal heirs, filed his return of income for the impugned assessment year on 29th October 2007, declaring taxable income of ` 1,17,500. During the assessment proceedings, the Assessing Officer, on verifying the return of income as well as other accompanying statements, noticed that the assessee has shown profit of ` 1,28,13,020, from his proprietary concern which is involved in construction activities. However, against the profit earned, the assessee has claimed deduction of ` 74,67,152 under section 80IB(10) of the Act against the housing project completed by the said proprietary concern. On going through the information submitted by the assessee, the Assessing Officer found that assessee has undertaken a slum rehabilitation project at Ghatkopar named Ghatkopar Janta Buddha Nagar Shri Saidham CHS Ltd., after obtaining approval from Slum Rehabilitation Authority of Maharashtra. The Assessing Officer referring to the provisions of section 80I8(10), observed, for availing deduction under the said provision certain conditions have to be satisfied. However, in case of housing project undertaken by the assessee, he found that some of the conditions of Shri Gunshi Karsan Dedhia 3 section 80IB(10) have not been fulfilled, he observed that since the assessee’s project was approved on 12th November 1999, it should have been completed on 31st March 2008, for availing deduction under section 80IB(10). He also found that the area of the plot on which project was constructed is less than one acre. Thirdly, there is no notification from the Board regarding the scheme. He also found that 24 residential units out of the total 48 units are having built–up area in excess of 1,000 sq.ft. Area of commercial establishment exceeds 2,000 sq.ft. He, therefore, directed the assessee to show cause why deduction claimed under section 80IB(10) will not be disallowed. Though, the assessee objecting to the proposed disallowance of deduction claimed submitted a detailed explanation but the Assessing Officer disallowed assessee’s claim of deduction under section 80IB alleging non–fulfillment of conditions of section 80IB(10) as enumerated by him. Being aggrieved of such disallowance, the assessee preferred appeal before the first appellate authority.
The learned Commissioner (Appeals), however, upheld the decision of the Assessing Officer by observing that the assessee has not fulfilled the basic condition of section 80IB(10) as the plot of land is less than one acre. He also observed that the CBDT has not identified the project. He, therefore, confirmed the disallowance. While doing so, he referred to the decision of the Tribunal in Ramesh Gunshi
Shri Gunshi Karsan Dedhia 4 Dedhia. As it appears, the assessee did not challenge the decision of the first appellate authority by preferring further appeal. Thus, the disallowance of deduction under section 80IB(10) become final as far as the impugned assessment year is concerned. On the basis of the disallowance made, proceedings for imposition of penalty under section 271(1)(c) of the Act was initiated by the Assessing Officer by issuing a show cause notice to the assessee. Of–course, he also brought within the purview of the penalty proceedings two other small disallowances made by him with regard to STT payment and interest payment. The Assessing Officer referring to the discussion made while making such disallowance of assessee’s claim in the assessment order, observed that the assessee being conscious of the fact that he has not fulfilled the condition of section 80IB(10), still went forward to claim the deduction under section 80IB(10). He, therefore, observed that claiming of deduction under section 80IB(10) by the assessee amounts to furnishing of inaccurate particulars of income as such claim is not legally allowed. As far as other disallowances are concerned, the Assessing Officer was of the opinion that assessee has claimed the deduction by furnishing inaccurate particulars. He, therefore, proceeded to pass an order imposing penalty under section 271(1)(c) of the Act. Being aggrieved of the penalty order, the assessee preferred appeal before the learned Commissioner (Appeals).
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Before the first appellate authority, the assessee made detailed submissions making out a case that not only it is not a case of furnishing inaccurate particulars of income, but on merits also, the assessee is entitled for deduction under section 80IB(10) irrespective of the fact that he has accepted the disallowance of its claim by not preferring any appeal before the Tribunal. In this context, it was submitted by the assessee that as per CBDT being notification no.1 of 2011 dated 5th January 2011, formulated for slum re–development by the Maharashtra Government under Maharashtra Regional Town Planning Act, 1966, should be deemed to be a project approved by the CBDT for the purpose of section 80IB(10) from the assessment year 2005–06 onwards. He, therefore, submitted that in view of such notification of the Board, the assessee is eligible for deduction under section 80IB(10). As far as the allegation of the Assessing Officer with regard to non–fulfillment of other conditions relating to built–up area and completion of project, the assessee submitted that on that basis also, the assessee cannot be denied benefit under section 80IB(10) as there are a number of decisions holding that assessee can claim deduction under section 80IB(10) on pro–rata basis depending upon the units which fulfilled the conditions of section 80IB(10). The learned Commissioner (Appeals), after considering the submissions of the Shri Gunshi Karsan Dedhia 6 assessee observed that by virtue of the notification of CBDT, SRS projects have been exempted from the condition having minimum one acre land. He also observed that the conditions for completion of project by 31st March 2008, was inserted w.e.f. 1st April 2005. Whereas, the assessee’s project was approved much before. The learned Commissioner (Appeals) observed that since the issuance of notification by CBDT is a matter between the State Government and CBDT, the assessee did not have any control over that. However, as per the amendment, slum rehabilitation scheme are exempt from the condition of having the project constructed over a plot of land of more than one acre. The learned Commissioner (Appeals) observed, if the assessee would have waited for the notification of the CBDT, it could not have claimed the deduction for the impugned assessment year. Therefore, assessee had to claim the deduction under section 80IB(10). The learned Commissioner (Appeals) observed, the CBDT only in the notification dated 5th January 2011, clarified that it would apply to projects after 1st April 2011, clarified that it would, and applicable from the assessment year 2005–06. It was observed by the learned Commissioner (Appeals) that as at the time of filing of return of income for the assessment year under consideration, the assessee was under bona fide impression that the conditions of clause (a) and (b) of section 80IB(10) was not applicable to projects developed under Shri Gunshi Karsan Dedhia 7 slum rehabilitation scheme of Government of Maharashtra it claimed the deduction. The learned Commissioner (Appeals), therefore, held that mere disallowance of a claim made by the assessee would not result in furnishing of inaccurate particulars of income. In this context, he referred to the decision of the Hon'ble Supreme Court in Reliance Petroproducts Pvt. Ltd., [2010] 322 ITR 158 (SC). As far as the allegation of the Assessing Officer that assessee has violated the condition of section 80IB(10) by building a commercial area of more than 2,000 sq.ft., the learned Commissioner (Appeals) observed that in view of the decision of CIT v/s Brahma Associates, [2011] 333 ITR 289 (Bom.), this condition will not apply to the projects which commenced before 1st April 2005. Similarly, he held that since the assessee has claimed deduction under section 80IB(10) on pro–rata basis for the flats which are having built–up area of 1,000 sq.ft., it cannot be said that it has furnished inaccurate particulars of income. As far as the other two disallowances are concerned, he observed, they are not as a result of furnishing of inaccurate particulars of income. Accordingly, he deleted the penalty imposed.
The learned Departmental Representative, confining his argument to the imposition of penalty in respect of disallowance of deduction under section 80IB(10), submitted that the assessee has Shri Gunshi Karsan Dedhia 8 deliberately furnished inaccurate particulars of income by not providing correct information in the return of income and accompanying documents. In this context, he specifically referred to the audit report in form no.10CCB and drawing the attention of the Bench to column no.23 of the audit report, he submitted that the assessee left certain columns blank without furnishing necessary information. He submitted that non–furnishing of relevant information also amounts to furnishing of inaccurate particulars of income. Further, the learned Departmental Representative referring to Annexure–A of the said audit report, submitted, in Para–3, the assessee has mentioned the size of plot of land on which the project was constructed as more than one acre. Thus, it was submitted by the learned Departmental Representative that the assessee has consciously and deliberately furnished inaccurate particulars of income with regard to the plot of land and has claimed deduction under section 80IB(10) being fully aware that as per the condition of section 80IB(10), he is not eligible to claim such deduction. The learned Departmental Representative submitted, as in the return of income itself the assessee has furnished inaccurate particulars while claiming deduction under section 80IB(10), imposition of penalty under section 271(1)(c) was justified.
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The learned Counsel for the assessee, on the other hand, strongly support the decision of the learned Commissioner (Appeals) submitted, the Assessing Officer has proceeded to impose penalty only for the reason that deduction claimed by the assessee under section 80IB(10) has been disallowed and disallowance was upheld by the first appellate authority which was accepted by the assessee. The learned Counsel for the assessee submitted merely because the assessee has accepted the decision of the first appellate authority as far as disallowance of deduction under section 80IB(10) that will not be a condition precedent for imposing penalty under section 271(1)(c). The learned Counsel for the assessee submitted, the decision taken for not challenging the order of learned Commissioner (Appeals) in quantum proceedings, is for various reasons and for avoiding protracted litigation. However, that cannot be used against the assessee for imposition of penalty. The learned Counsel submitted notwithstanding the fact that assessee has accepted the disallowance of deduction claimed but still it is eligible for deduction under section 80IB(10) as none of the conditions of section 80IB(10) have been violated. He submitted, as far as the allegation of the Assessing Officer that commercial area has exceeded ` 2,000 sq.ft., the said condition will not be applicable to assessee’s project as it was approved prior to 1st April 2005. In this context, he relied upon the decision of the Tribunal,
Shri Gunshi Karsan Dedhia 10 Mumbai Bench, in Brahma Associates (supra) and the decision of the Hon'ble Supreme Court in CIT v/s Veena Developers, approving the decision of Brahma Associates (supra). As far as the allegation of the Department that the housing project is not eligible as the area on which it is constructed is less than one acre, the learned Counsel for the assessee submitted that when there is no dispute to the fact that it is a SRS project, then the condition of plot having more than one acre is not applicable. He submitted, the notification issued by the CBDT also clarified the position. The learned Counsel for the assessee referring to notification no.1 dated 5th January 2011, submitted, the said notification has to be read along with the proviso to section 80BI(10), hence, will apply retrospectively. In this context, he referred to the decision of the Tribunal, Mumbai Bench, in Ramesh Gunshi Dedhia v/s ITO, 148 ITD 356 (Mum.). As far as the allegation of the Assessing Officer that certain residential units exceeded the built–up area of more than 1,000 sq.ft., the learned Counsel for the assessee submitted, deduction under section 80IB(10) can be restricted to residential units which are having less than 1,000 sq.ft. built–up area. IN this context, he referred to certain judicial precedent holding the view in favour of the assessee. Lastly, it was submitted by the learned Counsel, that the only other condition, the assessee is alleged to have violated is non–furnishing of completion certificate. It was submitted,
Shri Gunshi Karsan Dedhia 11 as the assessee’s project was approved prior to 1st April 2005, the amendment made to section 80IB(10), requiring furnishing of completion certificate was introduced from 1st April 2005, there is no need to furnish completion certificate.. In this context, he relied upon the decision of the Hon'ble Delhi High Court in CIT v/s CHD Developers Ltd., [2014] 362 ITR 177 (Del.) and the decision of the Hon'ble Jurisdictional High Court in CIT v/s Sai Krupa Developers, ITA no.1540/2012. Thus, it was submitted by the learned Counsel assessee even on merits also, assessee is eligible to avail deduction under section 80IB(10) notwithstanding the fact that it opted for not contesting the disallowance under section 80IB(10) to avoid litigation with the Department. It was submitted, the decisions relied upon would show that it is a debatable issue on which more than one view is possible, hence, assessee’s claim of deduction under bona fide impression will not amount to furnishing of inaccurate particulars of income. He, therefore, submitted that penalty has been rightly deleted by the first appellate authority.
We have considered the submissions of the parties and perused the material available on record. As could be seen, the major addition on which penalty has been imposed is on account of disallowance of assessee’s claim of deduction under section 80IB(10). It is further
Shri Gunshi Karsan Dedhia 12 evident that the Assessing Officer has made the disallowance by specifically referring to non–fulfillment of certain condition of section 80IB(10) as referred to by us herein before. However, as could be seen from the facts and material brought on record, the allegation of non–fulfillment of this condition are purely debatable issues as there are a number of decisions holding a view in favour of the assessee. As far as the area of less than one acre is concerned, it is clear from the notification issued by the CBDT that such condition will not apply to SRS projects. In this context, it has been submitted by the learned Departmental Representative that since at the time of filing of return of income, the notification was not there, the assessee could not have claimed the deduction. However, it is found that the Tribunal, Mumbai Bench, in case of Ramesh Gunshi Dedhia (supra), has held that the notification issued by the Board on 5th November 2011, will have retrospective operation as it has to be read along with the proviso to clause (a) and (b) of section 80IB(10). Similarly, allegation with regard to non–fulfillment of conditions relating to commercial area and built–up area of residential units as well as non–furnishing of completion certificate, in our view, have been dealt with in various judicial precedents referred to by the learned counsel and a view favourable to the assessee have been taken. Though, it may be a fact that assessee has accepted the disallowance under section 80(IB)(10)
Shri Gunshi Karsan Dedhia 13 by not preferring any appeal against the order of the learned Commissioner (Appeals) but that cannot be a reason alone for concluding that assessee has furnished inaccurate particulars of income. When there are enough material on record to show that the issue on which assessee’s claim of deduction under section 80IB(10) was disallowed are highly debatable issues on which more than one view is possible, the assessee’s claim of deduction in the return of income has to be considered to be under bona fide belief that he is eligible for such deduction. As far as the specific allegation of the learned Departmental Representative that assessee has furnished inaccurate particulars of income by mentioning the are of plot to be more than one acre, it needs to be observed that on reference to the same Annexure–A of the audit report, it would be relevant to note that the assessee has also mentioned the area of plot as 3207.20 sq.mtr. which measure to less than one acre. Thus, it appears that the statement of the assessee that plot of area is more than one acre as referred to by the learned Departmental Representative, a bonafide mistake and cannot be termed as furnishing of inaccurate particulars of income. In view of the aforesaid, we are of the opinion that learned Commissioner (Appeals) was justified in deleting the penalty imposed under section 271(1)(c) of the Act. Accordingly, we uphold the order of the learned Commissioner (Appeals).
Shri Gunshi Karsan Dedhia 14
In the result, Revenue’s appeal stands dismissed. Order pronounced in the open Court on 06.11.2015