M/s. V.S. Joshi & Associates, Kolhapur V. Additional Commissioner of Income-tax,

ITA 1709/PUN/2014

• Counselvise Citation: 170924514 RSA 2014
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-12-2014
• Assessment Year: 2011-2012
• Appeal Filed On: 11-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Opportunity of being heard
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1709/PN/2014 (ASSESSMENT YEAR : 2011-12) M/S V. S. JOSHI & ASSOCIATES, 1156, E-WARD, MANIK CHAMBERS, SYKES EXTENSION, KOLHAPUR 416 001. PAN : AADFV3050C . APPELLANT VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE-2, KOLHAPUR. . RESPONDENT ASSESSEE BY : MR. M. K. KULKARNI DEPARTMENT BY : MR. RAJESH DAMOR DATE OF HEARING : 02-12-2014 DATE OF PRONOUNCEMENT : 29-01-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPUR DATED 02.07.2014 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 26.0 2.2014 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2011-12. 2. IN THIS APPEAL, THE FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED BY THE ASSESSEE :- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) KOLHAPUR WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. OF RS.1,96,90,860/- OF THE CLAIM MADE BY THE A SSESSEE UNDER SECTION 80IB(10) OF THE ACT. THE ORDER OF THE CIT(A) CONFIR MING THE DISALLOWANCE IS ILLEGAL AND WITHOUT JURISDICTION. THE SAME BE SET-A SIDE ALLOWING THE CLAIM TO THE APPELLANT-ASSESSEE. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. CLAIMED U/S. 80IB(10) OF THE ACT WITHOUT PROPERLY APPRECIATING T HE PROVISIONS OF LAW AND SETTLED LEGAL POSITION BY HIGH COURTS AND VARIO US BENCHES OF THE TRIBUNAL. THE ORDER PASSED BY LD. CIT(A) SIMPLY CON FIRMS THE PERVERSE ORDER OF THE A.O WHO REJECTED THE BONAFIDE CLAIM MA DE BY THE ITA NO.1709/PN/2014 ASSESSEE UNDER SECTION 80IB(10) OF THE ACT. THE CLA IM BE ALLOWED TO THE ASSESSEE. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. INVOKING THE PROVISIONS OF S.40(A)(I-A) OF THE ACT OF RS.9,35,02 4/- (215914 + 88240 +229031 +198000 + 203839). THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY CIT(A) IS ILLEGAL AND WITHOUT JURISDIC TION. ALTERNATIVELY IT BEING SETTLED LAW THAT THE ASSESSEE IS ENTITLED TO DEDUCT ION UNDER SECTION 80IB(10) ON THE DISALLOWANCE MADE OF RS.9,35,024/-. IT BE HE LD ACCORDINGLY. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOW ANCE MADE BY THE A.O. INVOKING S.40A(2)(B) OF THE ACT OF 1,57,818/- (60,0 00 + 97,818) WHICH IS ILLEGAL AND WITHOUT JURISDICTION. IT BE DELETED. ALTERNATIV ELY, IT BEING SETTLED LAW THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80I B(10) ON THE DISALLOWANCE MADE OF RS.1,57,818/-. IT BE HELD ACCORDINGLY. 5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE AD- HOC ADDITION MADE BY A.O. AND CONFIRMED BY CIT(A) O F RS.30,143/- IS UNJUSTIFIED. IT BE DELETED. 6) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE APPEAL ORDER PASSED BY LD. CIT(A) IS A 'NON-SPEAKIN G ORDER' CONTRARY TO THE PROVISIONS OF S.250(6) OF THE ACT. THE PERUSAL OF S TATEMENT OF FACTS SUBMITTED BEFORE HIM ALONG WITH APPEAL MEMO IN F.35 IT WILL R EVEAL THAT VARIOUS CASE LAWS AND AMENDED PROVISIONS OF LAW WERE DISCUSSED. THE LD. CIT(A) HAD NO TIME TO GO THROUGH THE SAME WHILE HEARING THE APPEA L. THE STARTLING POSITION IS THAT THE LD. CIT(A) DELIVERED HIS VERDICT CONFIRMIN G THE DISALLOWANCE OF CLAIM. THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND CLAIM OF THE ASSESSEE MADE U/S. 80IB(10) BE ALLOWED. 7) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW IT REVEALS THE APPROACH OF BOTH THE AUTHORITIES BELOW APPEARS TO BE CONTRARY TO HON'BLE GUJARAT HIGH COURT VERDICT THAT 'NOT EVERY CONDITION OF STATUTE CAN BE SEEN AS MANDATORY. IF SUBSTANTIAL COMPLIANCE THEREO F IS ESTABLISHED ON RECORD, IN A GIVEN CASE, THE COURT MAY TAKE THE VIEW THAT M INOR DEVIATION THEREOF WOULD NOT VITIATE THE VERY PURPOSE FOR WHICH DEDUCT ION WAS BEING MADE AVAILABLE'. THE APPELLANT HAS MADE SUBSTANTIAL COMP LIANCE AND HENCE DENIAL OF CLAIM WAS NOT JUSTIFIED. IT BE HELD ACCORDINGLY ALLOWING THE CLAIM TO THE ASSESSEE. 8) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEVY OF INTEREST U/S 234A, 234B AND 234C IS NOT JUSTIFIE D. 3. THE APPELLANT BEFORE US IS A PARTNERSHIP FIRM, W HICH IS ENGAGED IN THE BUSINESS OF PROMOTERS, BUILDERS AND CONTRACTORS. F OR THE ASSESSMENT YEAR UNDER CONSIDERATION, IT FILED A RETURN OF INCOME DE CLARING A TOTAL INCOME OF RS.8,72,870/- WHICH WAS PICKED UP FOR SCRUTINY ASSE SSMENT U/S 143(3) OF THE ACT. IN THE ASSESSMENT FINALIZED U/S 143(3) DATED 26.02.2014 THE TOTAL INCOME HAS BEEN DETERMINED AT RS.2,16,86,740/- AFTER MAKIN G CERTAIN ADDITIONS/DISALLOWANCES. THE APPEAL OF THE ASSESSE E AGAINST SUCH AN ASSESSMENT WAS ALSO DISMISSED BY THE CIT(A) BY WAY OF THE IMPUGNED ORDER. ITA NO.1709/PN/2014 NOT BEING SATISFIED WITH THE ORDER OF THE CIT(A), A SSESSEE IS IN FURTHER APPEAL BEFORE US ON THE AFORESTATED GROUNDS OF APPEAL. 4. THE FIRST SUBSTANTIVE ISSUE RAISED BY THE ASSESS EE IS BY WAY OF GROUNDS OF APPEAL NO.1 & 2, WHICH RELATE TO DISALLOWANCE OF ASSESSEES CLAIM FOR DEDUCTION U/S 80-IB(10) OF THE ACT AMOUNTING TO RS. 1,96,90,860/-. AS NOTED EARLIER, ASSESSEE IS ENGAGED IN THE BUSINESS OF PRO MOTERS AND BUILDERS, IT UNDERTOOK DEVELOPMENT AND CONSTRUCTION OF A HOUSING PROJECT, NAMED, VISHWA ENCLAVE. WITH RESPECT TO THE PROFITS AND GAINS EAR NED FROM THE SAID PROJECT, ASSESSEE CLAIMED DEDUCTION U/S 80-IB(10) OF THE ACT AMOUNTING TO RS.1,96,90,860/-. THE ASSESSING OFFICER HAS DISALL OWED THE CLAIM OF DEDUCTION ON THE GROUND THAT ASSESSEE HAS NOT COMPL IED WITH THE SOME OF THE CONDITIONS PRESCRIBED IN SECTION 80-IB(10) OF THE A CT. THE AFORESAID STAND OF THE ASSESSING OFFICER HAS SINCE BEEN AFFIRMED BY TH E CIT(A) ALSO. 5. THE OBJECTIONS RAISED BY THE INCOME-TAX AUTHORIT IES WITH RESPECT TO THE ASSESSEES CLAIM FOR DEDUCTION AND THE RESPECTIVE S TAND OF THE ASSESSEE IS BEING DEALT WITH HEREINAFTER IN SERIATIM. FIRSTLY, THE ASSESSING OFFICER SHOW- CAUSED THE ASSESSEE ON THE GROUND THAT SOME OF THE FLATS IN THE PROJECT WERE SOLD WITHIN MEMBERS OF THE SAME FAMILY WHOSE DETAIL S WERE AS UNDER :- SR. NO. UNIT / FLAT NO. NAME OF THE PARTY 1. 501 MR. S. A. DHAMANKAR 2. 507 MRS. S. S. DHAMANKAR 3. 405 MR. S. M. DHANWADE (DR) 4. 406 MRS. S. S. DHANWADE (DR) 5. 606 MR. S. R. MENON 6. 701 MRS. G.S. MENON 6. HOWEVER, ASSESSEE SUBMITTED THAT THE FLATS IN QU ESTION WERE ALLOTTED TO THE SPOUSES OF THE INDIVIDUAL WHO WERE ALREADY ALLO TTED A FLAT IN THE SAID PROJECT PRIOR TO THE INSERTION OF SUCH RESTRICTION IN SECTI ON 80-IB(10) OF THE ACT. THE CLAIM OF THE ASSESSEE WAS THAT IT HAS ALLOTTED THE SAID FLATS IN THE MONTH OF OCTOBER, 2008 AND THE SALE AGREEMENTS WERE DULY REG ISTERED IN OCTOBER, 2008 ITA NO.1709/PN/2014 ITSELF. NOTABLY, THE RESTRICTION CONTAINED IN SUB- CLAUSES (E) AND (F) TO SECTION 80-IB(10) OF THE ACT RELATING TO THE LIMIT OF ALLOT MENT OF NOT MORE THAN ONE RESIDENTIAL UNIT IN THE HOUSING PROJECT TO THE RELA TED PERSONS SPECIFIED THEREIN, WAS INSERTED BY THE FINANCE (NO.2) ACT, 2009 W.E.F. 01.04.2010. ON THIS BASIS, THE STAND OF THE ASSESSEE BEFORE THE LOWER A UTHORITIES AS WELL AS BEFORE US IS THAT THE AFORESAID ALLOTMENT OF FLATS MADE IN OCTOBER, 2008 IS NOT HIT BY THE SAID RESTRICTION WHICH HAS COME ON THE STATUTE ON A LATER DATE. 7. WE FIND THAT THE ASSESSING OFFICER HAS NOT DISPU TED THE ASSERTIONS OF THE ASSESSEE THAT THE AFORESAID FLATS WERE SOLD TO THE SAID PARTIES IN THE MONTH OF OCTOBER, 2008 AND THE SALE AGREEMENTS WERE DULY REGISTERED IN OCTOBER, 2008. HOWEVER, AS PER THE ASSESSING OFFICER, THERE WERE CERTAIN NUMBER OF UNSOLD FLATS SHOWN IN WORK-IN-PROGRESS AND THERE WA S A POSSIBILITY THAT THE ASSESSEE MAY EVEN AFTER 01.04.2010 SELL FLATS TO TH E RELATIVES OF THE PERSONS ALREADY HOLDING THE FLATS. THE ASSESSING OFFICER A LSO DISAGREED WITH THE ASSESSEE THAT THE PROVISIONS INSERTED BY THE FINANC E (NO.2) ACT, 2009 W.E.F. 01.04.2010 WERE NOT APPLICABLE TO THE FLATS WHICH A LREADY STOOD SOLD BY THE ASSESSEE IN OCTOBER, 2008. THE AFORESAID STAND OF THE ASSESSING OFFICER HAS ALSO BEEN AFFIRMED BY THE CIT(A). 8. IN OUR CONSIDERED OPINION, THE AFORESAID STAND O F THE REVENUE IS QUITE INDEFENSIBLE. QUITE CLEARLY, THE RESTRICTION ON AL LOTMENT OF FLATS TO THE RELATIVES AND OTHER SPECIFIED PERSONS CONTAINED IN SUB-CLAUSE (E) AND (F) TO SECTION 80- IB(10) OF THE ACT HAVE BEEN INSERTED BY THE FINANCE (NO.2) ACT, 2009 W.E.F. 01.04.2010. THE OBJECTION OF THE ASSESSING OFFICER ON THE ALLOTMENT OF FLATS AND ITS SALE TO THE SPOUSES OF THE INDIVIDUAL WHO WERE ALREADY HOLDING FLATS IN THE PROJECT, IS RELATING TO THE PERIOD OCTOBER, 200 8 I.E. A PERIOD MUCH PRIOR TO THE AMENDMENT BROUGHT BY FINANCE (NO.2) ACT, 2009 W .E.F. 01.04.2010. IT IS INCONCEIVABLE AS TO HOW THE AMENDMENT BY WAY OF INS ERTION OF SUB-CLAUSE (E) AND (F) TO SECTION 80-IB(10) OF THE ACT MADE BY FIN ANCE (NO.2) ACT, 2009 IS ITA NO.1709/PN/2014 BEING APPLIED FOR AN EARLIER CONCLUDED TRANSACTION, AS THERE IS NO PROVISION FOR RETROSPECTIVELY APPLYING THE AMENDMENT. THEREFORE, IN OUR CONSIDERED OPINION, THE SAID OBJECTION BY THE REVENUE IS UNSUS TAINABLE. WE HOLD SO. 9. ANOTHER OBJECTION RAISED BY THE ASSESSING OFFICE R WAS BASED ON CLAUSE (A) TO SECTION 80-IB(10) OF THE ACT, WHICH WAS TO T HE EFFECT THAT THE ASSESSEE DID NOT COMPLETE CONSTRUCTION OF THE PROJECT WITHIN THE STIPULATED DATE. THE RELEVANT FACTS IN THIS REGARD ARE AS FOLLOWS. THE PROJECT OF THE ASSESSEE CONSISTED OF A, B AND C WINGS. THE PROJECT WAS APP ROVED BY THE LOCAL AUTHORITY I.E. KOLHAPUR MUNICIPAL CORPORATION (KMC) ON 27.10.2005. AS A CONSEQUENCE, IN TERMS OF SUB-CLAUSE (III) OF CLAUSE (A) TO SECTION 80-IB(10) OF THE ACT, THE ASSESSEE WAS REQUIRED TO COMPLETE THE CONSTRUCTION OF THE PROJECT WITHIN 5 YEARS FROM THE ENTIRE OF THE FINANCIAL YEA R IN WHICH IT WAS APPROVED BY THE LOCAL AUTHORITY. THEREFORE, THE STIPULATED DAT ED FOR COMPLETION OF THE CONSTRUCTION OF THE PROJECT WAS 31.03.2011. IN THE BACKGROUND OF THE AFORESAID LEGAL POSITION, ASSESSEE CANVASSED BEFORE THE ASSESSING OFFICER THAT THE COMPLETION CERTIFICATE FOR THE A AND B WIN G WAS ISSUED BY THE LOCAL AUTHORITY ON 26.03.2010 AND FOR THE C WING IT WAS I SSUED ON 25.03.2011. ON THIS BASIS, IT WAS CANVASSED THAT THE CONSTRUCTION OF THE PROJECT WAS COMPLETED WITHIN THE STIPULATED DATE CONTAINED IN CLAUSE (A) TO SECTION 80-IB(10) OF THE ACT. 10. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE PLEA OF THE ASSESSEE BY MAKING THE FOLLOWING DISCUSSION :- IN THIS CONNECTION, IT MAY BE REITERATED THAT THE ASSESSEE HIMSELF SUBMITTED THAT THERE WAS CLOSING WORK IN PROGRESS O F THE FLATS OF THE UNITS BEARING NUMBERS 104, 208, 310 AND 703 WHICH THE ASS ESSEE PLEADED OF HAVING LESS THAN 1500 SQ.FTS. IN EACH UNIT OF ITS B UILT-UP AREA, THOUGH IN THE INITIAL SUBMISSION SUCH BUILT-UP AREA OF EACH SUCH UNIT WAS SPECIFIED BY THE ASSESSEE FOR MORE THAN 1500 SQ.FTS.. WHEN THERE WE RE INCOMPLETE UNITS/FLATS AS ADMITTED BY THE ASSESSEE ITSELF, IT CANNOT BE SA ID THAT THE PROJECT WAS COMPLETED. AS FAR AS FOR GETTING THE BENEFIT OF DE DUCTION U/S 80-IB(10) OF THE ACT, THE PROJECT FOR WHICH THE APPROVAL WAS TAKEN F OR COMMENCEMENT IS REQUIRED TO BE COMPLETED IN FULL. PART COMPLETION OF THE PROJECT, EVEN IF THE CERTIFICATE OF COMPLETION HAS BEEN OBTAINED FROM TH E MUNICIPAL AUTHORITY, WHEN ITA NO.1709/PN/2014 THE ASSESSEE ITSELF ADMITTED THAT THERE WERE INCOMP LETE UNITS LEFT/KEPT AS WORK- IN-PROGRESS, IT CANNOT BE SAID THAT THE PROJECT WAS COMPLETED AND THE CONDITION OF COMPLETION OF THE PROJECT AS LAID DOWN IN SECTIO N 80-IB(10) OF THE ACT WAS FULFILLED. AS SUCH, THE ASSESSEES CONTENTION THAT THE PROJECT WAS COMPLETED PRIOR TO 31.03.2011 IS ALSO NOT ACCEPTABLE AND HENC E THE SAME IS NOT ACCEPTED. 11. THE AFORESAID DISCUSSION REVEALS THAT AS PER TH E ASSESSING OFFICER, THERE WERE CERTAIN FLATS LYING IN CLOSING WORK-IN-P ROGRESS AS ON 31.03.2011 AND THEREFORE HE DID NOT ACCEPT ASSESSEES PLEA THAT TH E CONSTRUCTION OF THE PROJECT WAS COMPLETE. 12. IN THIS CONTEXT, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE COMPLETION CERTIFICATES ISSUED BY THE LOCAL AUT HORITY DEMONSTRATED THAT THE CONSTRUCTION OF THE PROJECT WAS COMPLETE WITHIN THE STIPULATED DATE AND THAT ASSESSEE HAS COMPLIED WITH THE REQUIREMENTS OF CLAU SE (A) TO SECTION 80- IB(10) OF THE ACT. 13. WE HAVE CONSIDERED THE OBJECTION RAISED BY THE LOWER AUTHORITIES AND FIND THAT THE SAME IS UNTENABLE IN THE EYES OF LAW. FIRSTLY, IT IS NOT IN DISPUTE THAT THE COMPLETION CERTIFICATES ISSUED BY THE LOCA L AUTHORITY ARE EVIDENCING THE COMPLETION OF CONSTRUCTION WITHIN THE STIPULATED DA TE. IN-FACT, EXPLANATION (II) BELOW SECTION 80-IB(10)(A) OF THE ACT SUGGESTS THAT THE DATE OF COMPLETION OF CONSTRUCTION OF HOUSING PROJECT SHALL BE TAKEN TO B E THE DATE ON WHICH THE COMPLETION CERTIFICATE IN RESPECT OF HOUSING PROJEC T IS ISSUED BY THE LOCAL AUTHORITY. IN THE PRESENT CASE, THE SAID CERTIFICA TES HAVE BEEN ISSUED WITHIN THE DATE STIPULATED BY WAY OF CLAUSE (A) TO 80-IB(1 0) OF THE ACT. APART THEREFROM, FACTUALLY THERE IS NO EVIDENCE LEAD DOWN BY THE ASSESSING OFFICER TO DEMONSTRATE THAT THE CONSTRUCTION OF THE PROJECT WA S NOT COMPLETE. THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT TH E OBJECTION OF THE ASSESSING OFFICER WAS BASED ON THE UNSOLD FLATS LYI NG IN WORK-IN-PROGRESS. IT WAS POINTED OUT THAT THE OBJECTION OF THE ASSESSING OFFICER IS BASED ON MERE SURMISES AND CONJECTURES. IN OUR CONSIDERED OPINIO N, THE REFERENCE MADE BY ITA NO.1709/PN/2014 THE ASSESSING OFFICER TO CLOSING WORK-IN-PROGRESS O F CERTAIN FLATS TO SAY THAT THE PROJECT WAS INCOMPLETE IS QUITE IRRELEVANT. IN THE BALANCE SHEET, ASSESSEE HAS SHOWN A NUMBER OF UNSOLD FLATS AS WORK-IN-PROGRESS. THE UNSOLD FLATS DO NOT SIGNIFY NON-COMPLETION OF THE CONSTRUCTION OF THE P ROJECT AND THEREFORE, IN OUR VIEW, THE SAID OBJECTION RAISED BY THE ASSESSING OF FICER IS QUITE IRRELEVANT IN THE CONTEXT OF EXAMINING THE COMPLIANCE OF CLAUSE ( A) TO 80-IB(10) OF THE ACT. THE ASSESSEE HAS FULFILLED THE REQUIREMENT OF CLAUS E (A) TO SECTION 80-IB(10) OF THE ACT ON THE BASIS OF THE COMPLETION CERTIFICATES ISSUED BY THE LOCAL AUTHORITY. WE HOLD SO. 14. THE THIRD AND THE LAST OBJECTION RAISED BY THE ASSESSING OFFICER WAS BASED ON CLAUSE (C) TO SECTION 80-IB(10) OF THE ACT . CLAUSE (C) RESTRICTS THE BUILT-UP AREA OF THE RESIDENTIAL UNIT FOR THE PROJE CT IN QUESTION AT A MAXIMUM OF 1500 SQ.FT.. AS PER THE ASSESSING OFFICER, THE BUI LT-UP AREA OF SOME OF THE FLATS IN THE PROJECT EXCEEDED THE LIMIT OF 1500 SQ.FT. AN D THEREFORE HE HELD THAT THE PROJECT OF THE ASSESSEE WAS NOT ELIGIBLE FOR THE DE DUCTION U/S 80-IB(10) OF THE ACT. 15. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSES SEE SUBMITTED THAT FOR FOUR OF THE FLATS, THE ASSESSING OFFICER ERRONEOUSL Y TOOK THE BUILT-UP AREA AS BEING IN EXCESS OF 1500 SQ.FT. BASED ON THEIR CARPE T AREA AND NOT THE COVERED AREA OF EACH OF THE INDIVIDUAL FLATS. FOR THE OTHE R THREE UNITS, THE LD. REPRESENTATIVE SUBMITTED THAT AS REGARDS ONE OF THE FLATS NAMELY FLAT NO. 601, THE SAME WAS NOT INCLUDED IN THE PROFIT CALCULATED FOR THE PURPOSES OF DEDUCTION U/S 80-IB(10) OF THE ACT. ANOTHER FLAT N O. 702 WAS UNSOLD AND WAS INCLUDED IN THE CLOSING STOCK. NEVERTHELESS, IT IS CONCEDED BY THE LD. REPRESENTATIVE THAT THE SAID THREE FLATS COMPRISED OF A BUILT-UP AREA IN EXCESS OF 1500 SQ.FT.. THE PLEA OF THE APPELLANT BEFORE U S IS THAT MERELY BECAUSE OF SOME FLATS ARE IN EXCESS OF 1500 SQ.FT., IT WOULD N OT RESULT IN WHOLESALE DENIAL OF DEDUCTION U/S 80-IB(10) OF THE ACT ON THE ENTIRE PROJECT. THE LD. ITA NO.1709/PN/2014 REPRESENTATIVE SUBMITTED THAT THE PROFITS RELATABLE TO THE UNITS WHICH HAVE A BUILT-UP AREA OF UPTO 1500 SQ.FT. BE ALLOWED DEDUCT ION U/S 80-IB(10) OF THE ACT. IN OTHER WORDS, THE LD. REPRESENTATIVE CONTENDED TH AT PROPORTIONATE RELIEF BE ALLOWED U/S 80-IB(10) OF THE ACT QUA THE PROFITS RE LATING TO FLATS WHICH COMPLY WITH THE REQUIREMENTS OF CLAUSE (C) TO SECTION 80-I B(10) OF THE ACT. THE SAID STAND OF THE ASSESSEE IS SUPPORTED BY THE JUDGEMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BENGAL AMBUJA HOU SING DEVELOPMENT LTD., (IT APPEAL NO.458 OF 2006) DATED 05.01.2007. 16. THE LD. DEPARTMENTAL REPRESENTATIVE HAS ALSO NO T DISPUTED THAT THE PUNE BENCH OF THE TRIBUNAL HAS BEEN CONSISTENTLY AL LOWING PROPORTIONATE RELIEF IN CASES WHERE SOME OF THE FLATS DO NOT COMPLY WITH THE REQUIREMENTS OF CLAUSE (C) TO SECTION 80-IB(10) OF THE ACT INASMUCH AS THE PROFITS RELATABLE TO THE RESIDENTIAL UNITS WHICH COMPLY WITH THE REQUIRE MENTS OF CLAUSE (C) TO SECTION 80-IB(10) OF THE ACT HAVE BEEN HELD TO BE E LIGIBLE FOR DEDUCTION. 17. IN VIEW OF THE AFORESAID PRECEDENT, IN OUR VIEW , THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DENYING THE DEDUCTION U/S 80- IB(10) OF THE ACT ON A WHOLESALE BASIS BY NOTICING THAT FEW OF THE FLATS I N THE PROJECT DO NOT COMPLY WITH THE LIMIT ON BUILT-UP AREA PRESCRIBED BY CLAUS E (C) TO SECTION 80-IB(10) OF THE ACT. THE ORDER OF THE CIT(A) IS SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE DEDUCTION ALLOWABLE U/S 80-IB(10) OF THE ACT ON THE BASIS OF THE PROFITS PROPORTIONATE TO RESIDENTIAL U NITS IN THE PROJECT WHICH COMPLY WITH THE REQUIREMENT OF CLAUSE (C) TO SECTIO N 80-IB(10) OF THE ACT. THE DISALLOWANCE OF DEDUCTION U/S 80-IB(10) OF THE ACT SHALL BE LIMITED TO THE PROFITS RELATING TO THOSE UNITS WHICH EXCEED THE MAXIMUM BU ILT-UP AREA OF 1500 SQ.FT. PRESCRIBED IN CLAUSE (C) TO SECTION 80-IB(10) OF TH E ACT. WE HOLD SO. 18. IN THIS MANNER, ON GROUNDS OF APPEAL NO.1 & 2, ASSESSEE PARTLY SUCCEEDS. ITA NO.1709/PN/2014 19. IN THE GROUND OF APPEAL NO.3, THE ISSUE RELATES TO A DISALLOWANCE OF RS.9,35,024/- MADE BY THE ASSESSING OFFICER BY INVO KING SECTION 40(A)(IA) OF THE ACT ON THE GROUND THAT NO TAX WAS DEDUCTED IN R ELATION TO PAYMENTS MADE FOR THE AFORESAID EXPENDITURE. ON THIS ASPECT, AN ALTERNATIVE PLEA HAS BEEN RAISED BY THE ASSESSEE BEFORE US, WHICH IS TO THE E FFECT THAT THE AFORESAID DISALLOWANCE ONLY GOES TO INCREASE THE BUSINESS PRO FITS OF THE ASSESSEE WHICH ARE ELIGIBLE FOR THE DEDUCTION U/S 80-IB(10) OF THE ACT. IT IS, THEREFORE CONTENDED THAT EVEN IF THE AFORESAID EXPENSES ARE D ISALLOWED, THE ENHANCED BUSINESS PROFIT SHOULD BE ELIGIBLE FOR DEDUCTION U/ S 80-IB(10) OF THE ACT. THE AFORESAID IS A FRESH PLEA RAISED BEFORE US AND HAS NOT BEEN RAISED BEFORE THE LOWER AUTHORITIES. OSTENSIBLY, BEFORE THE LOWER AU THORITIES ASSESSEES CLAIM FOR DEDUCTION U/S 80-IB(10) OF THE ACT ITSELF WAS IN JE OPARDY AND THEREFORE THERE WAS NO OCCASION TO HAVE RAISED SUCH A PLEA. 20. IN-PRINCIPLE, WE FIND THAT THE PLEA OF THE ASSE SSEE IS QUITE JUSTIFIED AND IS SUPPORTED BY THE PARITY OF REASONING LAID DOWN BY T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY IND IA LTD., 330 ITR 175 (BOM). 21. SINCE THE AFORESAID PLEA WAS NOT RAISED BEFORE THE LOWER AUTHORITIES, WE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK T O THE FILE OF THE ASSESSING OFFICER WHO SHALL VERIFY THE CLAIM OF THE ASSESSEE AS TO WHETHER THE SAID EXPENDITURE/DISALLOWANCE GOES TO INCREASE THE PROFI TS DERIVED BY THE ASSESSEE FROM THE HOUSING PROJECT ELIGIBLE FOR THE BENEFIT O F SECTION 80-IB(10) OF THE ACT. THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A RE ASONABLE OPPORTUNITY OF BEING HEARD AND ONLY THEREAFTER PASS AN ORDER AFRES H ON THIS ASPECT AS PER LAW. ACCORDINGLY, ASSESSEE SUCCEEDS FOR STATISTICA L PURPOSES ON THIS GROUND. 22. IN GROUND OF APPEAL NO.4, ISSUE RELATE TO A DIS ALLOWANCE MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 40A(2)(B) OF THE ACT. ON THIS ASPECT, ITA NO.1709/PN/2014 ASSESSEE HAS ONLY PRESSED ITS ALTERNATIVE PLEA THAT THE PROFITS ENHANCED BY WAY OF THE AFORESAID DISALLOWANCE BE SUBJECT TO THE DEDUCTION U/S 80-IB(10) OF THE ACT. FOLLOWING OUR DECISION IN GROUND OF APPEA L NO.3, HEREIN ALSO WE RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSIN G OFFICER TO CARRY OUT THE NECESSARY VERIFICATION EXERCISE AND THEREAFTER ADJU DICATE THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW. THUS, ON THIS GRO UND ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 23. IN SO FAR AS GROUNDS OF APPEAL NO.5 & 6 ARE CON CERNED, THE SAME HAVE NOT BEEN PRESSED AT THE TIME OF HEARING AND ACCORDI NGLY THE SAME ARE DISMISSED AS NOT PRESSED. 24. THE GROUND OF APPEAL NO.7 IS GENERAL IN NATURE AND IS NOT NEED TO REQUIRE ANY ADJUDICATION. 25. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON 29 TH JANUARY, 2015. SD/- SD /- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 29 TH JANUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE