The ITO, Ward-1, Mehsana V. M/s. Divya Developers, Mehsana

ITA 1024/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94435 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 04-08-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 10-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Assessee Lawyers: S N DIVETIA
• Keywords: Unexplained investment
• Section: 143(3); 80IB

Judgement Text

, B, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH BEFORE S/SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND KUL BHARAT, JUDICIAL MEMBER) ITA NO.1024, 1025 AND 1026/AHD/2012 [ASSTT.YEAR : 2004-05 AND 2006-07] ITO, WARD-1 MEHSANA. /VS. M/S.DIVYA DEVELOPERS SHYAM VIHAR BUNGALOWS MODHERA ROAD, NR.DEDIYASAN. PAN : AAEFD 3862 D ( / APPELLANT) ( / RESPONDENT) REVENUE BY : SHRI NARENDRA SINGH, SR.DR ASSESSEE BY : SHRI S.N. DIVETIA DATE OF HEARING : 4 TH AUGUST, 2015 DATE OF PRONOUNCEMENT : 11 TH SEPTEMBER, 2015 O R D E R PER KUL BHARAT, JUDICIAL MEMBER : THESE THREE APPEALS BY THE REVENUE ONE QUANTUM AND OTHER TWO RELATED TO PENA LTY PROCEEDINGS. THESE APPEALS ARE DIRECTED AGAINST THE ORDERS OF THE COMM ISSIONER OF INCOME-TAX (APPEALS), GANDHINAGAR, DATED 17.2.2012 AND 1.2.201 2. THESE ARE BEING DISPOSED OF BY THIS COMMON ORDER. FIRST WE TAKE U P THE REVENUES QUANTUM APPEAL. ITA NO.1024/AHD/2012 (REVENUES APPEAL) ITA NO.1024/AHD/2012 (3 APPEALS) -2- 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE REGARDING ALLOWANCE OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT TO THE ASSESSEE, HAS BEEN PROJECTED IN THE APPEAL MEMO IN THE FOLLOWING GROUNDS: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT VARIOUS CONDITIONS REQUIRED FOR CLAIMING DEDUCTION U/S.80IB(10) ARE NOT FULFILLED IN THE CASE OF THE ASSESSEE. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN N OT APPRECIATING THE FACT THAT THE LOCAL AUTHORITY HAS APPROVED THE PLAN OF LAND PLOTTING IN THE NAME OF ORIGINAL HOLDER O THE LAND AND ONLY LAND PL OTTING PROJECT WAS APPROVED. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN A LLOWING DEDUCTION U/S.80IB(10) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS ENTERED INTO CONTRACT WITH INDIVIDUAL PLOT OWNERS TO DEVELO P THE INDEPENDENT LAND. 4. BRIEFLY STATED FACTS ARE THAT IN THE CASE OF THE ASSESSEE, SCRUTINY ASSESSMENT WAS MADE BY DETERMINING THE TOTAL INCOME OF RS.10,27,190/-. AGAINST THIS ORDER, THE ASSESSEE PREFERRED APPEAL B EFORE THE LD.CIT(A), WHO DELETED THE ADDITION. 3. IN FURTHER APPEAL BY THE REVENUE, THE TRIBUNAL I N ITA NO.3832/AHD/2007 VIDE ORDER DATED 11.6.2010 SET ASIDE THE ORDER OF T HE LD.CIT(A) AND THE MATTER WAS RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDI CATION IN THE LIGHT OF THE DECISION IN THE CASE OF SHAKTI CORPORATION IN ITA N O.1503/AHD/2008, 1361/AHD/2006 AND 1769/AHD/2008. THEREAFTER, IN TH E SET ASIDE ASSESSMENT PROCEEDINGS, THE AO AGAIN DISALLOWED THE CLAIM OF T HE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB(10) AND ADDED THE SAME TO THE TO TAL INCOME OF THE ASSESSEE. 4. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD.CIT( A), WHO AFTER CONSIDERING THE SUBMISSIONS AND JUDICIAL PRONOUNCEM ENTS ALLOWED THE APPEAL OF THE ASSESSEE. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US. ITA NO.1024/AHD/2012 (3 APPEALS) -3- 5. THE LD.SR.DR, SHRI NARENDRA SINGH, VEHEMENTLY AR GUED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE IMPUGNE D ADDITION HE SUBMITTED THAT THE AO, IN COMPLIANCE OF THE DIRECTION OF THIS TRIBUNAL, HAS MADE THE ASSESSMENT AFRESH, AND AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES, THE AO HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. THE LD.COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THE BAS IS OF THE DISALLOWANCE UNDER SECTION 80IB(10) BY THE AO IS ILL-FOUNDED AND CONTR ARY TO THE JUDICIAL PRONOUNCEMENTS. HE SUBMITTED THAT THE DEDUCTION WA S DISALLOWED ON THE BASIS THAT THE ASSESSEE WAS NOT OWNER OF THE LAND AND THE LAND IS OWNED BY THE INDIVIDUAL MEMBERS. THE ASSESSEE WAS ONLY A CONTRA CTOR IN COMMON PARLANCE. HE DREW OUR ATTENTION TO PARA-6 OF THE ASSESSMENT O RDER. HE SUBMITTED THAT THIS FINDING OF THE AO IS CONTRARY TO THE JUDGMENT OF TH E HONBLE GUJARAT HIGH COURT RENDERED IT THE CASE OF CIT VS. RADHE DEVELOP ERS (2012) 341 ITR 403, WHEREIN THE CLAIM OF THE ASSESSEE WAS ALLOWED UNDER SETION80IB(10). 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), AS THE AO HAS DISALLOWED THE DEDUCTION SOLELY ON THE BASIS THAT THE ASSESSEE IS NOT THE OWNER OF THE LAND. HOWEVER, WE FIND THAT THE LD.CI T(A) AFTER ELABORATE DISCUSSION ON THE ISSUE, HAS GIVEN A FINDING ON FAC T THAT THE OTHER CONDITIONS OF THE PROVISIONS HAVE BEEN COMPLIED WITH BY THE ASSES SEE AND THAT BY APPLYING THE RATIO OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RADHE DEVELOPERS (SUPRA),THE ASSESSEE IS ELIGIB LE FOR DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. THE RELEVANT OBSERVAT IONS OF THE CIT(A) READS AS UNDER: 4.1 I HAVE CONSIDERED THE FACTS OF THE CASE, THE O BSERVATIONS OF THE AO, THE SUBMISSIONS OF THE APPELLANT AND THE DECISIONS ON THE ISSUE PARTICULARLY THAT OF THE HONBLE JURISDICTIONAL GUJ ARAT HIGH COURT IN THE CASE OF CIT VS. RADHE DEVELOPERS AND SHAKTI CORPORA TION 204 TAXMAN 543 PRONOUNCED ON 13/12/2011. THE MAIN OBJECTIONS O F THE AO WHICH ARE THE BASIS OF NOT GRANTING THE DEDUCTION IS THAT THE LAND WAS NOT OWNED BY THE APPELLANT AND THE APPELLANT HAS ENTERED DEALS F OR CONSTRUCTION OF EACH ITA NO.1024/AHD/2012 (3 APPEALS) -4- PLOT INDEPENDENTLY. THE FOLLOWING PERTINENT OBSERVA TIONS AND FACTS ARE CULLED TOGETHER: A) THE DEVELOPMENT AGREEMENT HAS BEEN EXECUTED FOR THE TWO PLOTS OF LAND (MORE THAN AN ACRE) WHICH WERE OWNED BY THE OT HER PERSONS AND THE APPELLANT WAS NOT THE OWNER OF THE LAND OR PROPERTY AT ANY STAGE. (B) THE APPELLANT WAS THE ONLY ONE AUTHORISED TO DE VELOP THE PLOTS AS PER THE APPROVED PLAN (PARTICULARLY THE ELEVATION AND T HE DIMENSIONS FROM OUTSIDE WERE FIXED), BY CHARGING DEVELOPMENT CHARGE S FROM THE PLOT HOLDERS, WHO PURCHASE SUCH PLOTS FROM THE PARTY OF THE FIRST PART. (C) THE APPELLANT WAS RESPONSIBLE FOR CONSTRUCTION OF ROADS (FOR TO AND FRO APPROACH), WATER, DRAINAGE AND WATER LINES, ELECTRI CITY AND ALL OTHER AMENITIES, FOR THE ENTIRE SCHEME (ON THE PLOTS COMB INED UNDER ONE SCHEME) (D) IN THE SALE DEED OF THE LAND TO THE INDIVIDUAL PLOT HOLDERS BY THE ORIGINAL LAND OWNERS, THE DEVELOPER HAS ALSO BEEN M ADE A PARTY WITH THE STIPULATIONS. THE APPELLANT WAS NOT ONLY RESPONSIBL E FOR DEVELOPING THE COMMON AMENITIES, BUT ALSO THE PURCHASERS WERE BOUN D TO GET THE HOUSES CONSTRUCTED FROM ASSESSEE. IT THEREFORE HAD A GREAT INTEREST IN THE SUCCESS OR FAILURE OF THE SCHEME. IN TOTALITY, THE TOTAL SCHEME WAS PLANNED AND DEVEL OPED OVER A COMBINED PLOT OF LAND WHICH WAS MORE THAN AN ACRE; THE PURCH ASERS OF INDIVIDUAL PLOTS WERE INTERESTED PARTY TO THE DEVELOPMENT OF T HE ENTIRE SCHEME, INCLUDING COMMON AMENITIES LIKE ROADS, WATER, DRAIN AGE AND WATER LINES, ELECTRICITY ETC; THERE WERE COMMON AREAS ALSO LIKE COMMON PLOT AND CHILDREN PLAY AREA IN WHICH ALL THE PURCHASERS OF T HE PLOTS WERE STAKEHOLDERS. IT CANNOT BE COMPARED WITH A CASE WHE RE A PURCHASER AND A SELLER ARE ENTERING A DEED FOR A SINGLE INDEPENDENT PLOT, WITHOUT ANY RESPONSIBILITY OF DEVELOPING THE ENTIRE SCHEME. THE INDIVIDUAL UNITS WERE OF AREA LESS THAN THE MAXIMUM STIPULATED UNDER THE ACT AND THEREFORE THE TOTAL SCHEME BECOMES ELIGIBLE ON THE COUNTS , THE A PPELLANT WAS NOT ONLY RESPONSIBLE FOR DEVELOPING THE COMMON AMENITIES, BU T ALSO THE PURCHASERS WERE BOUND TO GET THE HOUSES CONSTRUCTED FROM ASSESSEE. IT THEREFORE HAD A GREAT INTEREST IN THE SUCCESS OR FAILURE OF THE SCHEME. THE FACT THAT THE DEVELOPER WAS RECEIVING 30% OF TH E TOTAL CONSIDERATION BY WAY OF DEVELOPMENT CHARGES IS MATERIAL EVIDENCE THAT THE APPELLANT WAS NOT ACTING MERELY AS A 'CONTRACTOR' AS ALLEGED BY THE A.O. THE FACT THAT THE PURCHASERS WERE BOUND TO GET THE HOUSES CO NSTRUCTED FROM ASSESSEE, GREATLY ENHANCING THE SCOPE OF EARNING PR OFIT FROM THE ITA NO.1024/AHD/2012 (3 APPEALS) -5- DEVELOPMENT OF THE SCHEME IN TOTALITY; SHOWED THAT THE APPELLANT HAD A GREAT INTEREST IN THE SUCCESS OR FAILURE OF THE SCH EME. UNDER THE DEVELOPMENT AGREEMENT, THE ASSESSEE HAD U NDERTAKEN THE DEVELOPMENT OF HOUSING PROJECT AT ITS OWN RISK AND COST. THE LAND OWNER HAD ACCEPTED THE PART PRICE OF THE LAND AND HAD NO RESPONSIBILITY. THE ENTIRE RISK OF INVESTMENT AND EXPENDITURE WAS THAT OF THE ASSESSEE. RESULTANTLY, PROFIT AND LOSS ALSO ACCRUED SUBSTANTI ALLY TO THE ASSESSEE ALONE, THE OWNERS INTEREST LIMITED TO 70 % OF THE L AND COST DECIDED . THE ASSESSEE HAD TOTAL AND COMPLETE CONTROL OVER THE LA ND AND COULD PUT THE LAND TO THE AGREED USE. IT HAD FULL AUTHORITY AND R ESPONSIBILITY TO DEVELOP THE HOUSING PROJECT BY NOT CARRYING OUT CONSTRUCTIO N, AGREEING TO MODIFICATIONS IN AGREED PLAN AND SPECIFICATIONS, CA RRYING OUT MODIFICATIONS, ENGAGING PROFESSIONAL AGENCIES AND S O ON. THE RISK ELEMENT WAS MAINLY THAT OF THE ASSESSEE. THE ASSESS EE WAS A 'DEVELOPER' IN COMMON PARLANCE AS WELL AS LEGAL PARLANCE AND CO ULD NOT BE REGARDED AS ONLY A 'WORKS CONTRACTOR'. THEREFORE, APPLYING THE RATIO OF THE DECISION OF HO NORABLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS RADHE DEVELOPERS A ND SHAKTI CORPORATION 204 TAXMAN 543; IT IS HELD THAT THE APP ELLANT IS AN UNDERTAKING ENGAGED IN DEVELOPING AND BUILDING HOUS ING PROJECT; THE PROJECT IS ON THE SIZE OF PLOT OF LAND WHICH IS ABO VE THE PRESCRIBED LIMIT AND THEREFORE THE APPELLANT IS ELIGIBLE FOR DEDUCTI ON UNDER SECTION 80IB (10) THE GROUND OF APPEAL IS THEREBY ALLOWED. IN VIEW OF THE ABOVE FINDING OF THE CIT(A), WE DO NOT FIND ANY INFIRMITY THE ORDER OF THE CIT(A) ON THIS ISSUE, AND ACCORDIN GLY, THE ORDER OF THE CIT(A) IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE REVEN UE ARE DISMISSED. 7. ITA NO.1025/AHD/2012 (PENALTY UNDER SECTION 271( 1)(C) OF THE ACT.) 8. THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF THE CIT(A), GANDHINAGAR DATED 1.2.2012 FOR DELETION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT OF RS.6,73,200/-. 9. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 WAS FRAMED BY ORDER DATED 26.1 2.2009 DETERMINING TOTAL INCOME AT RS.21,12,870/-. WHILE PASSING THE ASSESS MENT UNDER SECTION 143(3), ITA NO.1024/AHD/2012 (3 APPEALS) -6- AN ADDITION OF RS.20 LAKHS WAS MADE ON ACCOUNT OF U NEXPLAINED INVESTMENT. THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WAS ALSO INITIATED. CONSEQUENTLY, THE AO LEVIED PENALTY OF RS.6,73,200/ - ON THE UNEXPLAINED INVESTMENT OF RS.20,19,600/-.. AGAINST THIS PENALT Y, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, ALLOWED THE APPEAL BY DELETING THE PENALTY. 10. THE LEARNED SR.DR SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELEING THE ADDITION . HE SUBMITTED THAT THE PARTNER OF THE ASSESSEE-FIRM ITSELF HAD ADMITTED TH E ADDITIONAL INCOME OF RS.20 LAKHS BEING THE UNEXPLAINED INVESTMENT. HE SUBMIT TED THAT UNDER THESE FACTS, WHEN THE ASSESSEE ITSELF HAS ADMITTED THE FACTUM OF UNEXPLAINED INVESTMENT, THE LD.CIT(A) OUGHT TO HAVE CONFIRMED THE PENALTY. 11. ON THE CONTRARY, THE LD.COUNSEL FOR THE ASSESSE E SUBMITTED THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE PENALTY HA S BEEN IMPOSED SOLELY ON THE BASIS OF THE STATEMENT OF PARTNER OF THE FIRM. HOW EVER, THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD THAT THE STATEMENT OF THE PA RTNER WAS CORRECT. HE SUBMITTED THAT THERE IS NO CORROBORATIVE EVIDENCE O N RECORD TO SUGGEST THAT THE STATEMENT OF THE PARTNERS MADE DURING THE COURSE OF SURVEY WAS CORRECT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE STATEMENT MADE DURING THE COURSE OF SURVEY WOULD HAVE NO EVIDENTIARY VALUE CA NNOT BE LEAD TO ANY EVIDENCE WITHOUT ANY CORROBORATIVE SUPPORT. 12. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSE D THE MATERIAL O RECORD. WE FIND THAT THE LD.CIT(A) BY HIS ORDER IN PARA-5 H AS GIVEN AN FINDING THAT ALTHOUGH RS.20 LAKHS WAS DEPOSITED SUBSEQUENT TO T HE SURVEY IN THE BANK ACCOUNT AND WITHOUT EXPLAINING THE SOURCE, THE SAME WAS INTRODUCED IN THE BOOKS OF ACCOUNTS AND REFLECTED IN THE PROFIT AND L OSS ACCOUNT FILED WITH THE DEPARTMENT. HOWEVER, ADDITION OF RS.20 LAKHS WERE ADDED BY THE AO ON THE BASIS OF THE STATEMENT OF THE PARTNER. UNDER THESE FACTS, THE CIT(A) WAS OF THE ITA NO.1024/AHD/2012 (3 APPEALS) -7- VIEW THAT THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SURESHCHANDRA MITTAL, 251 ITR 9 IS APPLICABLE ON TH E FACTS OF THIS CASE AS THE HONBLE COURT HAS TAKEN NOTE OF THE FACT THAT THE T RIBUNAL RECORDED THAT DEPARTMENT HAD NOT DISCHARGED ITS BURDEN OF PROVING CONCEALMENT AND HAD SIMPLY RESTED ITS CONCLUSION ON THE ACT OF VOLUNTAR Y SURRENDER DONE BY THE ASSESSEE IN GOOD FAITH. THE HONBLE SUPREME COURT HAS, THUS, AFFIRMED THE ABOVE VIEW OF THE HONBLE HIGH COURT OF MADHYA PRAD ESH IN THE CASE OF CIT VS. SURENESH CHANDRA MITTTAL, 241 ITR 124. IN THE PRESENT CASE ALSO ENTIRE BASIS OF IMPOSITION OF PENALTY RESTS ON THE STATEME NT OF ONE OF THE PARTNERS OF THE ASSESSEE-FIRM. UNDER THESE CIRCUMSTANCES, RESPECTF ULLY FOLLOWING THE JUDGMENT OF THE HONBLE MADHYA PRADESH HIGH COURT IN THE CAS E OF CIT VS. SURESH CHANDRA MITTAL (SUPRA), WHICH WAS AFFIRMED BY THE H ONBLE SUPREME COURT, WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF THE LD.CIT(A), WHICH IS HEREBY CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE I S DISMISSED. 13. ITA NO.1026/AHD/2012 SECTION 271(1)(C) OF THE A CT. 14. BOTH THE PARTIES ADMITTED THAT THE FACTS IN THI S CASE ARE IDENTICAL WITH THAT OF ITA NO.1025/AHD/2012 FOR THE ASSTT.YEAR 2006-07 EXCEPT QUANTUM. BOTH THE PARTIES HAVE ADOPTED SIMILAR ARGUMENTS AND CONT ENTIONS AS WERE MADE IN THE ITA NO.1025/AHD/2012. 15. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, W E HAVE DISMISSED THE APPEAL OF THE ASSESSEE IN ITA NO.1025/AHD/2012, AND FOR THE SIMILAR REASONS AND FINDING GIVEN BY US SUPRA, AND FOR TAKING CONSI STENT VIEW, THIS APPEAL OF THE REVENUE IN ITA NO.1026/AHD/2012 IS ALSO DISMISSED. 16. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN OPEN COURT 11 TH SEPTEMBER, 2015. SD/- SD/- (P RAMOD KUMAR) ACCOUNTANT MEMBER ( KUL BHARAT ) JUDICIAL MEMBER DATE : 11-9-2015