M/s. Kirti Construction, Baroda V. The Income tax Officer, Ward-2(1), Baroda

ITA 1558/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5781 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 10-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NOS. 1558 & 1559/AHD/2016 (ASSESSMENT YEARS : 2010-11 & 2011-12) M/S. KIRTI CONSTRUCTION AYODHYA TOWNSHIP KEDAR PARK, NR. MOTINAGAR-3, TARSALI ROAD, BARODA 390010 APPELLANT VS. ITO, WARD - 2(1), BARODA & ACIT, CIRCLE-2(1), BARODA RESPONDENT PAN: AAGFK7066A / BY ASSESSEE : SHRI S. N. SOPARKAR, A.R. / BY REVENUE : SHRI PRASOON KABRA, SR. D.R. /DATE OF HEARING : 28.03.2018 /DATE OF PRONOUNCEMENT : 28.03.2018 ORDER PER S. S. GODARA, JUDICIAL MEMBER THESE TWO ASSESSEES APPEALS FOR ASSESSMENT YEARS 20 10-11 & 2011-12 ARISE AGAINST CIT(A)-4, VADODARAS SEPARATE ORDERS; BOTH DATED 26.02.2016, IN CASE NOS. CAB/4-291/2015-16 & CAB/4-290/2015-16, AF FIRMING ASSESSING OFFICERS ACTION DISALLOWING ITS SECTION 80IB(10) D EDUCTION CLAIM OF RS.33,29,300/- ON ACCOUNT OF UNUTILIZED FSI (FLOOR SPACE INDEX) AS FOLLOWED IN ITA NOS. 1558 & 1559/AHD/16 [M/S. KIRTI CONSTRUCTIO N VS. ITO/ACIT] A.YS. 2010-11 & 2011-12 - 2 - LATTER ASSESSMENT YEAR INVOLVING IDENTICAL DEDUCTIO N OF RS.35,62,766/-; RESPECTIVELY, IN PROCEEDINGS U/S. 143(3) OF THE INC OME TAX ACT, 1961; IN SHORT THE ACT; RESPECTIVELY. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. IT EMERGES AT THE OUTSET THAT BOTH THE LOWER AUT HORITIES HAVE DISALLOWED ASSESSEES SECTION 80IB(10) DEDUCTION CLAIM PERTAIN ING TO UNUTILIZED FSI INVOLVING THE AMOUNT IN QUESTION OF RS.33,29,300/-. THE CIT( A) HAS HELD THE VERY REASONING IN THE IMPUGNED LATTER ASSESSMENT YEAR AS WELL. IT EMERGES FROM THE CIT(A)S ORDER IN FORMER ASSESSMENT YEAR 2010-11 THAT HE HAS DISCU SSED THE ENTIRE ISSUE AS FOLLOWS: 4.3.1 I HAVE CONSIDERED THE SUBMISSIONS OF TH E LEARNED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFIC ER. AT THE OUTSET, I AM IN AGREEMENT THAT THE CALCULATION OF UNUTILIZED FSI DONE BY THE ASSES SING OFFICER IS NOT FORTHCOMING CORRECTLY FROM THE RECORDS. THE REASON FOR THE SAME APPEARS T O BE TOTAL NON COOPERATION BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. IN PARA 5 OF THE ASSESSMENT ORDER IN ASSESSING OFFICER HAS CALCULATED THE UTILIZATION OF FSI AT 12992 SQ. MTRS AS AGAINST THE AVAILABLE FSI OF 51974.19 SQ. MTRS AT PAGE NO 3 AND DETERMINED RS.33,29,300/- AS PERTAINING TO 5196.80 SQ. MTRS. HOWEVER, BELOW THE TABLE, HE HAS MENTIONED TOTAL FSI AS 18,188 SQ. MTRS. THUS, THERE IS CONTRADICTION IN TH E FINDINGS OF THE ASSESSING OFFICER WHICH NEEDS CORRECTION AT HIS END. ON THE HAND, THIS IS A RUNNING PROJECT AND DETAILS OF LAND HOLDING ETC. WERE AVAILABLE THE ASSESSING OFFICER I N RESPECT OF PRECEDING ASSESSMENT YEARS ALSO. THE LD. AUTHORIZED REPRESENTATIVE HAS G IVEN FOLLOWING WORKING OF FSI- UTILIZED AND UNUTILIZED AFTER CONSIDERING INDIVID UAL PLOTS OF EACH BLOCK AS UNDER:- KIRTI CONSTRUCTION AYODHYA TOWN SHIP NEAR MOTI NAGAR-2, TARSALI, VADODARA BLOCKWISE DETAIL WHERE 801B CLAIM HAS CLAIMED PAGE NO. TOTAL FSI ACHIEVEABLE TOTAL FSI USED TOTAL FSI LEFT 2 6551 2639 3912 3 5571 2405.75 3165.25 4 4291 1767 2524 5 4070 1560.3 2509.7 6 4004.68 1494.11 2510.57 7 2112.97 884.96 1228.01 8 1420.8 605.03 815.77 TOTAL 28021.45 11356.1 16665.3 THESE FIGURES GIVEN BY THE APPELLANT ON THE BASIS O F APPROVED DRAWING BY LOCAL AUTHORITY AND DRAWING SHOWING THE DETAILS OF UNIT W ISE AREA WHICH WERE SUBMITTED IN APPEAL FILED AGAINST ORDER U/S 150 OF THE INCOME TA X ACT. 1961 FOR ASSESSMENT YEAR 2005- ITA NOS. 1558 & 1559/AHD/16 [M/S. KIRTI CONSTRUCTIO N VS. ITO/ACIT] A.YS. 2010-11 & 2011-12 - 3 - 06. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE CONTENTIONS OF THE APPELLANT AFTER GIVING OPPORTUNITY OF BEING HEARD AND THEREAFTER DETERMINE THE CORRECT AMOUNT OF UNUTILIZED FSI. THE ASSESSING OFFICER IS ALSO DIRECTED TO DETERMINE CORRECT AMOUNT OF DISALLOWANCE ON ACCOUNT OF UNUTILIZED FSI VIS-A-VIS THE TOTAL TURNO VER AND PROFIT OF THE PROJECT AFTER CONSIDERING THE OBJECTIONS RAISED BY THE LD. AUTHOR IZED REPRESENTATIVE. ASSESSING OFFICER IS DIRECTED TO VERIFY EARLIER RECORDS ALSO. 4.3.2. NOW COMING TO THE LEGAL ISSUE OF NOT ALLOWIN G DEDUCTION UNDER SECTION 80IB(10) ON THE PORTION OF UNUTILIZED FSI. FROM THE FIRST SUBMI SSIONS FILED BEFORE ME, IT TRANSPIRES THAT APPELLANT IS CONTENDING THAT NO DISALLOWANCE CAN BE MADE IN RESPECT OF UNUTILIZED FSI AS THERE IS NO PRECONDITION OF THE SAME IN THE SECTION THAT MINIMUM SO MUCH FSI WILL HAVE TO BE USED BY THE ASSESSEE IN ORDER TO AVAIL DEDUCTION U/S 80IB(10) OF THE ACT. I AGREE WITH THE AUTHORIZED REPRESENTATIVE THAT THERE IS NO SUCH CON DITION IN THE ACT. BUT IF THAT CONTENTION IS ACCEPTED THEN THEORETICALLY EVEN CONSTRUCTION OF ONE HOUSE ON A 100 ACRE PLOT OF LAND WILL MAKE THE WHO E PROJECT ELIGIBLE FOR DEDUCTION U/S 80IB(10). THAT WAS NOT THE INTENTION OF BRINGING THE SECTION ON STATUTE. IN LATER SUBMIS SIONS, THE AUTHORIZED REPRESENTATIVE HAS ACCEPTED THAT THE MATTER WAS EXAMINED BY THE HON'BL E ITAT, AHMEDABAD IN ITA NOS 1686/AHD/20L3, 1325/AHD/2011, 485, 288, 2331 AND 24 34/AHD/2012 ITO VS M/S. KIRTI CONSTRUCTION (CROSS-APPEALS) ASST.YEARS - 2005-06, 2007-08, 2008-09 & 2009-10, VIDE THEIR ORDER DATED 13.11.2014, IT WAS DIRECTED AS UN DER :- '22.1. THE ONLY EFFECTIVE GROUND RAISED IN THIS REV ENUE'S APPEAL IS AGAINST IN ALLOWING DEDUCTION OF RS.79,21,904/- U/S.80IB(10) R .W.S. 80IB(1) TO ASSESSEE ON PROFIT DERIVED FROM SALE OF UNUTILIZED FSI. SINCE T HIS ISSUE HAS BEEN RESTORED BACK TO THE FILE OF AO FOR VERIFICATION AND DECISION AFR ESH IN THE LIGHT OF THE JUDGEMENT OF HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OFC IT VS. MOON STAR DEVELOPERS IN TAX APPEAL NO.549 OF 2008, THEREFORE TAKING A CO NSISTENT VIEW IN THIS YEAR ALSO, THIS GROUND OF REVENUE'S APPEAL IS RESTORED BACK TO THE FILE OF AO FOR VERIFICATION AND DECISION AFRESH. THUS, THIS GROUND OF REVENUE'S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES.' AS MENTIONED IN PARA 3.3 ABOVE WHILE ADJUDICATING T HE GROUND NO. 1, THIS DECISION OF THE TRIBUNAL WAS NOT BEFORE THE ASSESSING OFFICE R AT THE TIME OF FINALIZATION OF ASSESSMENT ORDER. HOWEVER, THE CIT(A) IS DUTY BOUND TO CONSIDER THE SAME BECAUSE IT HAS A DIRECT BEARING ON THE ISSUE AND THAT ORDER WAS DELI VERED IN THE CASE OF ASSESSEE ONLY WHEN GROUND WAS RAISED BY THE DR BEFORE THE TRIBUNAL WHI LE ADJUDICATING OTHER ISSUES. MOREOVER, THE DECISION OF HON'BLE GUJARAT HIGH COUR T WHICH IS REFERRED TO IN THE DECISION OF TRIBUNAL IN PARA ABOVE, IS DIRECTLY APPLICABLE I N THE CASE OF THE ASSESSEE AS HE WAS ALSO A PARTY TO THAT DECISION WHERE HONBLE HIGH COURT H AS APPROVED THAT DEDUCTION U/S 80IB(10) WILL NOT BE ALLOWED IF PERCENTAGE OF UTILI ZED FSI IS LESS THAN 65 % OF THE AVAILABLE FSI. FROM THE DETAILS FILED BEFORE ME, IT TRANSPIRE S THAT FSI UTILIZED BY THE APPELLANT WAS 40.52% ONLY. THIS IS ACCORDING TO THE APPELLANT ON LY. PAGE NO. TOTAL FSI ACHIEVEABLE TOTAL FSI USED TOTAL FSI LEFT %FSI USED 2 6551 2639 3912 40.28 3 5571 2405.75 3165.25 43.18 4 4291 1767 2524 41.17 5 4070 1560.3 2509.7 38.33 6 4004.68 1494.11 2510.57 37.30 7 2112.97 884.96 1228.01 41.88 8 1420.8 605.03 815.77 42.58 TOTAL 28021.45 11356.15 16665.3 40.52 ITA NOS. 1558 & 1559/AHD/16 [M/S. KIRTI CONSTRUCTIO N VS. ITO/ACIT] A.YS. 2010-11 & 2011-12 - 4 - IT IS WORTH MENTIONING THAT WITH THE CASE OF CIT VS MOONSTAR DEVELOPERS [2014] 367 ITR 621(GUJ.) , THE CASE OF APPELLANT WAS ALSO ADJUDICATED BY THE HON'BLE GUJARAT HIGH COURT AND THE SAME WAS LISTED AS: 1156/2010 KIRTI CONSTRUCTION 51974 12992 25 HERE 25 IS THE % UTILIZATION OF FSI BY THE APPELLAN T WHICH WAS SUBMITTED BY IT BEFORE THE HIGH COURT. IN BOTH THE SITUATION, THE P ERCENTAGE OF UTILIZED FSI IS MUCH LESS THAN 65 % WHICH WAS SET AS A BENCHMARK BY THE HON'B LE HIGH COURT IN THE CASE OF MOONSTAR DEVELOPERS (SUPRA) AND , THEREFORE, THE CLAIM OF THE APPELLANT FOR DE DUCTION U/S 80IB(10) ON THE UNUTILIZED FSI IS NOT JUSTIFIED. HO WEVER, THE ASSESSING OFFICER IS ONCE AGAIN DIRECTED TO VERIFY THE CORRECT AREA AS WELL A S AMOUNT OF UNUTILIZED FSI WHILE GIVING APPEAL EFFECT AFTER ACCORDING OPPORTUNITY TO THE AP PELLANT TO RECONCILE THESE FIGURES. 4.3.3. THE AUTHORIZED REPRESENTATIVE HAS FURNISHED VARIOUS REASONS DUE TO WHICH IT WAS NOT POSSIBLE TO FULLY UTILIZE THE FULL FSI OF THE P ROJECTS. HE HAS DISCUSSED IN DETAILS THE RATIO OF GUJARAT HIGH COURT'S DECISIONS IN THE CASES OF CIT VS MOONSTAR DEVELOPERS [2014] 367 ITR 621(GUJ.) AND SUBSEQUENT DECISION IN THE CASE OF CIT VS SHREENATH INFRASTRUCTURE [2014] 44 TAXMANN.COM 461(GUJ.) ON THE ISSUE OF UNITIZED FSI DUE TO COMPELLING REA SONS. LD. AUTHORIZED REPRESENTATIVE HAS GIVEN FOLLOWING R EASONING IN HIS WRITTEN SUBMISSION DATED 26TH AUGUST, 2015 :- IT IS SUBMITTED THAT THE PROJECT 'AVODHYA TOWNSHIP' IS LOCATED AT TORSALI AREA OF VADODARA. TORSALI AREA IS NOT A DEVELOPED AREA AS C OMPARED TO OTHER PARTS OF CITY OF VADODARA. IN VIEW OF THE SAME, THE PEOPLE FROM T HE HIGHER STRATA OF THE SOCIETY DID NOT PREFER TO STAY IN TORSO// AREA. THUS, IT IS ESSENTIALLY AN AREA OF LOWER INCOME GROUP OF THE SOCIETY. KEEPING IN MIND THE CO MMERCIAL VIABILITY FOR SALE OF UNITS, ASSESSEE FIRM WAS CONSTRAINED TO PUT OF SCHE ME OF SMALL UNITS IN THE RANGE OF 300 TO 900 SQ.FTS. FURTHER, ON VERIFICATION OF THE ORDER PASSED BY THE HONOURABLE ITAT, IT WILL BE APPRECIATED THAT ASSESSEE FIRM COULD NOT CONSTRUCT THE 456 UNITS APPROVED BY LOCAL AUTHORITY FROM ASSESSMENT YEAR 2005-06 TO 2009-10 I .E. IN 5 YEARS OF TIME. THIS ALSO SUBSTANTIATES THE FACT THAT THE AREA IN WHICH THE SCHEME WAS CARRIED OUT IS OF LOW INCOME GROUP AND IT IS DIFFICULT TO SELL EVEN T HE SMALLER SIZE OF THE UNITS. 4.3.4. I DO NOT AGREE WITH THE AUTHORIZED REPRESENT ATIVE THAT THE APPELLANT HAD EXPLOITED THE PROJECT LAND TO THE MAXIMUM KEEPING IN MIND THE VARIOUS REASONS CITED BY HIM. THE HON'BLE HIGH COURT IN THE CASE OF SHREENATH INFRASTRUCTURE (SUPRA) HAS NOT MENTIONED ANY SPECIFIC LEGAL AND REGULATORY IMPEDIMENTS, HOWE VER, THESE MAY INCLUDE INSTANCES LIKE THE EXISTENCE OF THE HIGH TENSION ELECTRICITY LINE PASSING ON THE PLOT, DRAIN, PROVISION OF ROAD OR OTHER ITEM OF PUBLIC UTILITY OR IRREGULAR S HAPE OF PLOT ETC. NECESSITATING HIGHER MARGINS. I AM OF THE OPINION L:HAT THE APPELLANT DI D NOT HAVE SUFFICIENT REASONS FOR NOT BEING ABLE TO FULLY UTILIZE THE FSI IN THE PROJECT. HON'BLE GUJARAT HIGH COURT IN THE CASE OF MOON STAR DEVELOPERS (SUPRA) HAS CONSIDERED UTILIZATION OF FSI UP TO 65% AS REA SONABLE. HOWEVER, LATER ON HON'BLE GUJARAT HIGH COURT IN THE CASE OF SHREENATH INFRASTRUCTURE (SUPRA) HAS ALLOWED DEDUCTION DUE TO SPECIAL REASONS FOR UNDERUTILIZATIETN OF FSI WHICH ARE NOT PRESENT IN T HE CASE OF THE APPELLANT AS MENTIONED ABOVE. AFTER CONSIDERING THESE DIRECT DECISIONS AN D FACTS OF THE CASE, THE ACTION OF THE ASSESSING OFFICER TAXING THE UNUTILIZED FSI IS UPHE LD AND THIS GROUND OF APPEAL IS DISMISSED. HOWEVER, THE ASSESSING OFFICER IS DIREC TED TO RECONCILE THE FIGURES OF UNUTILIZED FSI AFTER CONSIDERING COMPLETE RECORDS OF THE APPEL LANT AND AFTER ACCORDING OPPORTUNITY TO THE APPELLANT TO RECONCILE THE FIGURES AS MENTIONED IN PARA ABOVE. ITA NOS. 1558 & 1559/AHD/16 [M/S. KIRTI CONSTRUCTIO N VS. ITO/ACIT] A.YS. 2010-11 & 2011-12 - 5 - 3. BOTH THE PARTIES REITERATE THEIR RESPECTIVE STAN DS AGAINST AND IN SUPPORT OF THE IMPUGNED DISALLOWANCE. WE NOTICE IN THIS BACKDROP THAT A CO-ORDINATE BENCHS ORDER IN ASSESSEES CASE ITSELF IN ASSESSMENT YEARS 2005-06 TO 2009-10 (SUPRA) HAS ALREADY REMITTED THE VERY ISSUE BACK TO THE ASSESSI NG OFFICER TO BE DECIDED IN LIGHT OF HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT IN MOONSTAR DEVELOPERS (SUPRA). SUFFICE TO SAY, WE ARE OF THE VIEW THAT WE NEED TO FOLLOW THE SAME COURSE OF ACTION HEREIN AS WELL BY ADOPTING JUDICIAL CONSISTENCY. W E THEREFORE RESTORE ASSESSEES SOLE SUBSTANTIVE GRIEVANCE BACK TO THE ASSESSING OF FICER TO BE DECIDED IN LIGHT OF HIS FINDINGS IN SAID EARLIER ASSESSMENT YEARS AFTER AFF ORDING ADEQUATE OPPORTUNITY OF HEARING. 4. THESE TWO ASSESSEES APPEALS ARE ALLOWED FOR STA TISTICAL PURPOSES. [PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF MARCH, 2018.] SD/- SD/- ( AMARJIT SINGH ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 28/03/2018 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 4 5 / GUARD FILE. BY ORDER / . // . /0