DCIT, Trichy V. M/s. Mangalam Estates, Trichy

ITA 2104/CHNY/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2389 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-03-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 10-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAGE NDRA PRASAD
• Assessee Lawyers: R SIVARAMAN
• Keywords: Valuation report
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NOS. 2103, 2104, 2105, 2106 & 2107/MDS/2010 (ASSESSMENT YEARS : 2002-03, 2004-05, 2006-07, 20 07-08 & 2008-09) THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE I, TIRUCHIRAPPALLI. (APPELLANT) V. M/S MANGALAM ESTATES, NO.60, MANGAMMA NAGAR, SRIRANGAM, TRICHY. PAN : AAHFM 7875 L (RESPONDENT) I.T.A. NOS. 1809, 1810, 1811 & 1812/MDS/2010 (ASSESSMENT YEARS : 2004-05, 2005-06, 2006-07 & 2 007-08) M/S MANGALAM ESTATES, NO.60, MANGAMMA NAGAR, SRIRANGAM, TRICHY. (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE I, TIRUCHIRAPPALLI. (RESPONDENT) REVENUE BY : SHRI NAGENDRA PRASAD, CIT ASSESSEE BY : SHRI R. SIVARAMAN, ADVOCATE DATE OF HEARING : 20.03.2013 DATE OF PRONOUNCEMENT : 11.04.2013 O R D E R PER BENCH : THESE ARE APPEALS FILED BY THE REVENUE AND ASSESS EE RESPECTIVELY, DIRECTED AGAINST A CONSOLIDATED ORDER DATED 29.9.2010 OF I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 2 COMMISSIONER OF INCOME TAX (APPEALS), TIRUCHIRAPPAL LI, FOR THE IMPUGNED ASSESSMENT YEARS. APPEALS OF THE ASSESSEE ARE TAKEN UP FIRST FOR DISPOSAL. 2. GRIEVANCE RAISED BY THE ASSESSEE IN ITS APPEALS FOR ASSESSMENT YEARS 2004-05 TO 2007-08 IS ONE AND THE SAME. THIS CONCERNS DISALLOWANCE OF ITS CLAIM FOR DEDUCTION UNDER SECTI ON 80-IB(10) OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'), FOR ONE OF ITS HOUSING PROJECTS CALLED SHRI VIJAYA RENGAM. 3. FACTS APROPOS ARE THAT ASSESSEE, A PARTNERSHIP F IRM ENGAGED IN CONSTRUCTION AND PROMOTION OF FLATS SIN E 1986, WAS SUBJECTED TO A SEARCH PROCEEDING ON 29.8.2007. ASSESSEE HAD DEVEL OPED ABOUT 35 HOUSE PROJECTS IN TIRUCHI. ASSESSEE HAD ORIGINALLY FILED ITS RETURNS FOR ASSESSMENT YEAR 2004-05 ON 1.10.2004, FOR ASSESSMEN T YEAR 2005- 06 ON 31.10.2005, FOR ASSESSMENT YEAR 2006-07 ON 31 .10.2006 AND FOR ASSESSMENT YEAR 2007-08 ON 31.10.02007. THEREA FTER, PURSUANT TO SEARCH PROCEEDINGS, ASSESSEE WAS ISSUED NOTICE U NDER SECTION 153A FOR FILING RETURNS FOR THESE ASSESSMENT YEARS AS WELL AS ASSESSMENT YEARS 2002-03 AND 2008-09. IN THE RETUR NS FILED I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 3 PURSUANT TO SUCH NOTICE, IT SEEMS ASSESSEE DECLARED THE SAME INCOME AS SHOWN IN THE ORIGINAL RETURNS. 4. ONE OF THE HOUSING PROJECTS UNDERTAKEN BY THE AS SESSEE WAS CALLED SHRI VIJAYA RENGAM AND ASSESSEE HAD CLAIME D DEDUCTION UNDER SECTION 80-IB(10) ON THE PROFITS ARISING OUT OF SUCH PROJECT IN ITS RETURNS FOR ASSESSMENT YEARS 2004-05 TO 2007-08. A SSESSING OFFICER WAS OF THE OPINION THAT ASSESSEE WAS NOT OWNER OF T HE LAND ON WHICH THE HOUSING PROJECT WAS BEING DEVELOPED AND ASSESSE E HAD MERELY ACTED AS CONTRACTOR. FURTHER, AS PER THE ASSESSING OFFICER, ONE OF THE FLATS OF THE SAID PROJECT EXCEEDED 1500 SQ.FT. ASS ESSING OFFICER (A.O.) ALSO NOTED FROM THE VALUATION REPORT SUBMITTED BY T HE ASSESSEE THAT BUILT-UP AREA OF COMMERCIAL PORTION CAME TO 3719 SQ .FT. THUS, AS PER A.O., THERE WERE VIOLATION OF SUB-CLAUSE (C) AND (D ) OF SECTION 80- IB(10) OF THE ACT. FURTHER, AS PER A.O., ASSESSEE WAS ONLY A CONTRACTOR AND WAS NOT ELIGIBLE FOR CLAIMING SUCH D EDUCTION AT ALL. HE DENIED THE DEDUCTION FOR THESE FOUR YEARS AND THE D ISALLOWANCE MADE FOR THESE YEARS WERE AS UNDER:- ASSESSMENT YEAR AMOUNT 2004 - 05 ` 2,13,745/ - 2005 - 06 ` 38,68,035/ - 2006-07 ` 38,42,689/- 2007 - 08 ` 7,27,931/ - I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 4 PROFIT FROM THE PROJECT, WHILE EFFECTING THE DISALL OWANCE OF THE CLAIM PREFERRED UNDER SECTION 80-IB(10), WAS REWORKED BY THE ASSESSING OFFICER IN ACCORDANCE WITH ACCOUNTING STANDARD 7, B ASED ON A STATEMENT FURNISHED BY THE ASSESSEE. 5. ASSESSEES APPEALS BEFORE CIT(APPEALS) WERE NOT SUCCESSFUL. LD. CIT(APPEALS) HELD THAT BENEFIT UNDER SECTION 80 -IB(10) WAS AVAILABLE ONLY TO A LAND OWNER, WHO WAS ALSO A DEVE LOPER AND COULD NOT BE PASSED ON TO A BUILDER BY GIVING A LIBERAL I NTERPRETATION OF SECTION. HE THUS CONFIRMED THE DISALLOWANCE FOR AL L THE IMPUGNED ASSESSMENT YEARS. 6. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDERS OF AUTHORITIES BELOW, SUBMITTED THAT THERE WAS NO DISP UTE THAT ASSESSEE WAS DEVELOPING THE HOUSING PROJECT. ACCORDING TO H IM, IT MIGHT BE TRUE THAT THE LAND OWNERSHIP WAS WITH VENDORS. BUT , ASSESSEE HAD DEPLOYED ITS MEN, MONEY AND EXPERTISE IN DEVELOPING THE PROJECT AND FOR FINDING THE BUYERS OF THE FLATS. ACCORDING TO HIM, IT WAS NOT NECESSARY THAT OWNERSHIP OF THE LAND SHOULD BE WITH THE PROJECT DEVELOPER FOR CLAIMING A DEDUCTION UNDER SECTION 80 -IB(10) OF THE I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 5 ACT. RELIANCE WAS PLACED ON THE DECISION OF HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. SANGHVI AND DOSHI ENTERPRISE [TC(A) NOS. 581 & 582 OF 2011 AND 314 & 315 OF 2012 & M.P. NO. 1 OF 2011 DATED 1.11.2012]. 7. AS FOR ONE OF THE FLATS HAVING BUILT-UP AREA EXC EEDING 1500 SQ.FT., LEARNED A.R. SUBMITTED THAT MEASUREMENT TAK EN BY THE ASSESSING OFFICER INCLUDED CAR PARKING SPACE. ACCO RDING TO LEARNED A.R., ASSESSING OFFICER HAD HIMSELF ADMITTED THAT T HE CAR PARKING SPACE COULD NOT BE INCLUDED THE BUILT-UP RESIDENTIA L AREA AND THERE WAS NO VIOLATION OF CLAUSE (C) OF SECTION 80-IB(10) OF THE ACT. VIS-- VIS COMMERCIAL AREA EXCEEDING 2000 SQ.FT., LEARNED A.R. SUBMITTED THAT WHEN THE PROJECT WAS STARTED, THERE WAS NO RES TRICTION ON COMMERCIAL AREA THAT COULD BE BUILT WITHIN A PROJEC T. ACCORDING TO HIM, SUB-SECTION (10) OF SECTION 80-IB WAS SUBSTITU TED BY FINANCE (NO.2) ACT, 2004 WITH EFFECT FROM 1.4.2005. ASSESS EE HAD STARTED CLAIMING DEDUCTION UNDER SECTION 80-IB(10) ON SHRI VIJAYA RENGAM PROJECT FROM ASSESSMENT YEAR 2004-05 ONWARDS. THE LAW AS IT STOOD PRIOR TO SUCH SUBSTITUTION, DID NOT PLACE ANY RESTR ICTION ON THE AREA OF COMMERCIAL USE INCLUDED IN A HOUSING PROJECT. ACCO RDING TO HIM, HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V. ARUN EXCELLO I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 6 FOUNDATIONS PVT. LTD. [TC(A) NOS. 1348 & 1349 OF 20 07 DATED 18.10.2012] HAD HELD THAT SECTION 80-IB(10) MENTION ED CONSTRUCTION OF ANY BUILDING AND WIDEST POSSIBLE MEANING HAD TO BE GIVEN TO SUCH BUILDING. ACCORDING TO LEARNED A.R., IT COULD NOT BE GIVEN A RESTRICTED MEANING TO MEAN THAT ONLY IF ALL THE AREA IN A HOUS ING PROJECT WAS USED FOR RESIDENTIAL PURPOSE, THEN ONLY A DEDUCTION UNDER SECTION 80- IB(10) WILL BE AVAILABLE. FURTHER, ACCORDING TO HI M, ASSESSEE HAD NOT CLAIMED ANY DEDUCTION UNDER SECTION 80-IB FOR THE C OMMERCIAL SPACE WITHIN THE RESIDENTIAL PROJECT AND THEREFORE, DENIA L OF CLAIM OF DEDUCTION WAS NOT JUSTIFIED. 8. PER CONTRA, LEARNED D.R. SUBMITTED THAT HON'BLE APEX COURT IN THE CASE OF SURAJ LAMP AND INDUSTRIES PVT. LTD. V. STATE OF HAR YANA (340 ITR 1) HAD HELD THAT UNLESS A PROPERTY WAS TRA NSFERRED THROUGH A REGISTERED CONVEYANCE DEED, A PERSON WOULD NOT BECO ME OWNER. ACCORDING TO HIM, THE DECISION GIVEN BY HON'BLE JUR ISDICTIONAL HIGH COURT, WHICH WAS RELIED ON BY THE LEARNED A.R., WAS WITHOUT CONSIDERING THE ABOVE LAW LAID DOWN BY HON'BLE APEX COURT. FURTHER, ACCORDING TO HIM, THE COMMERCIAL AREA IN THE PROJEC T EXCEEDED 2000 SQ.FT., AND BY VIRTUE OF SUB-CLAUSE (D) OF SECTION 80-IB(10), ASSESSEE COULD NOT CLAIM A DEDUCTION UNDER THE SAID SECTION. I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 7 9. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IT IS TRUE THAT ASSESSEE WAS NOT THE LAND OWNER. A T THE SAME TIME, IT IS AN ACCEPTED POSITION THAT THE ASSESSEE WAS A FLA T PROMOTER CONSTRUCTING FLATS AND SELLING IT. THE LAND OWNER WAS ONE SHRI T.V. ANAND AND APPROVAL FOR PROJECT WAS ALSO OBTAINED IN THE NAME OF SHRI T.V. ANAND. HOWEVER, IT IS NOT DENIED THAT ASSESSE E WAS THE DEVELOPER OF THE PROJECT AND WHEN THE ULTIMATE SALE OF FLATS WERE EFFECTED TO CUSTOMERS, IT WAS A CONFIRMING PARTY. IT IS NOT DISPUTED BY THE ASSESSING OFFICER THAT ASSESSEE WAS ENGAGED IN THE WORK OF DEVELOPING AND CONSTRUCTING THE BUILDING STRUCTURE. HOWEVER, ACCORDING TO HIM, UNLESS ASSESSEE WAS OWNING THE LA ND, IT COULD NOT BE GIVEN THE DEDUCTION CLAIMED UNDER SECTION 80-IB( 10) OF THE ACT. ASSESSING OFFICER, DESPITE NOTING THE DECISION OF A HMEDABAD BENCH OF THIS TRIBUNAL IN THE CASE OF RADHE DEVELOPERS V. ITO (23 SOT 420), DECLINED TO FOLLOW THE SAID DECISION STATING THAT IT HAD NOT BECOME FINAL. HOWEVER, IN OUR OPINION, REFUSAL TO FOLLOW A DECISION OF TRIBUNAL, WHEN NO OTHER CONTRARY DECISIONS ARE THER E, WAS NOT APPROPRIATE ON THE PART OF THE ASSESSING OFFICER. FURTHER, HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SANGHVI AN D DOSHI ENTERPRISE (SUPRA), HAS HELD THAT WHEN THE BUILDERS RESPONSIB ILITY WAS NOT LIMITED I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 8 TO CONSTRUCTION AS PER THE DIRECTIONS OF THE OWNER, AND WHERE HE CARRIED THE RISK ELEMENT THAT WAS INVOLVED IN A PRO JECT, THEN THE BUILDER COULD NOT BE CONSIDERED AS A NORMAL BUILDER UNDERTAKING MERE CONSTRUCTION. FURTHER, THE DECISION OF AHMEDABAD B ENCH OF THIS TRIBUNAL IN THE CASE OF RADHE DEVELOPERS (SUPRA), W HICH WAS NOT FOLLOWED BY THE ASSESSING OFFICER, WAS LATER CONFIR MED BY THE HON'BLE GUJARAT HIGH COURT IN CIT V. RADHE DEVELOPERS (341 ITR 403). THUS, THE POSITION AS OF NOW IS THAT THERE IS NO REQUIREM ENT THAT A DEVELOPER OF A PROJECT NECESSARILY HAD TO BE THE OWNER OF THE LAND, FOR AVAILING A DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT. 10. COMING TO THE ARGUMENT OF THE DEPARTMENT THAT O NE OF THE FLATS EXCEEDED 1500 SQ.FT., ASSESSING OFFICER HIMSELF HAD GIVEN A CLEAR FINDING THAT THE SAID FLAT NO.101 IN PROJECT SHRI VIJAYA RENGAM WAS HAVING A BUILT-UP AREA LESS THAN 1500 SQ.FT. WHEN T HE CAR PARKING AREA WAS EXCLUDED. ASSESSING OFFICER HAD HIMSELF ALSO N OTED THAT THERE WAS NO VIOLATION OF CLAUSE (C) OF SECTION 80-IB(10) OF THE ACT. 11. THIS LEAVES US WITH THE LAST GROUND TAKEN BY TH E DEPARTMENT REGARDING COMMERCIAL AREA HAVING EXCEEDED 2000 SQ.F T. THERE IS NO DISPUTE THAT IN THE VALUATION REPORT OF SHRI VIJAY A RENGAM PROJECT I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 9 FILED BY THE ASSESSEE, PLINTH AREA OF COMMERCIAL ES TABLISHMENT WAS MENTIONED AS 2567 SQ.FT., EQUIVALENT TO 3.81% OF TH E TOTAL PLINTH AREA OF ALL THE RESIDENTIAL FLATS. IT IS ALSO NOT DISPU TED THAT ASSESSEE HAD STARTED CLAIMING DEDUCTION UNDER SECTION 80-IB(10) ON THE SAID PROJECT FROM ASSESSMENT YEAR 2004-05 ONWARDS. PRIO R TO SUBSTITUTION OF SUB-SECTION (10) OF SECTION 80-IB BY FINANCE (NO .2) ACT, 2004 WITH EFFECT FROM 1.4.2005, THERE WAS NO SPECIFIC RESTRIC TION THAT A CLAIM COULD NOT BE ALLOWED IF THERE WAS ANY COMMERCIAL AR EA INCLUDED IN THE PROJECT. IN THE CASE OF ARUN EXCELLO FOUNDATIONS P VT. LTD. (SUPRA), WHERE ALSO THE QUESTION WAS REGARDING ELIGIBILITY F OR A CLAIM OF DEDUCTION UNDER SECTION 80-IB(10) WHEN COMMERCIAL S PACE WAS THERE IN THE BUILT-UP AREA, THEIR LORDSHIPS HELD AT PARAS 33 TO 40 OF THE JUDGMENT AS UNDER:- 33. THUS, GIVEN THE FACT THAT THE ONE AND ONLY DEFI NITION WE HAVE ON THE HOUSING PROJECT IS UNDER SECTION 80HH BA AND IT REFERS TO THE PROJECT OF CONSTRUCTION OF A BUILDING APART FROM OTHER THINGS, WE HOLD THAT THE EXPRESSION HOUSING PROJECT AS DEFINED THEREIN REFERRING TO ANY BUILDING, SHOULD BE TAKEN AS REFERABLE TO A STRUCTURE THAT IS BUILT IRRESPECTIVE OF ITS USAGE AS FOR RESIDENTIAL/COMMERCIAL USAGE FOR THE PURPOSE OF UNDERSTANDING THE SCOPE OF SECTION 80-IB(10) OF THE ACT. THUS, AS RIGHTLY POINTED OUT BY LEARNED SENIOR COUNSEL AP PEARING FOR THE ASSESSEE, IRRESPECTIVE OF THE PURPOSE FOR WHICH THE HOUSING PROJECT HAS BEEN DEVELOPED AND CONSTRUCTED, SO LONG AS THE CONDITIONS STIPULATED UNDER SECTION 80-IB(10) OF TH E ACT ARE I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 10 SATISFIED, THE ASSESSEE WOULD BE ENTITLED TO THE BE NEFIT OF DEDUCTION UNDER THE SAID PROVISION. 34. IT IS ALSO A MATTER OF RELEVANCE THAT THE DEVE LOPMENT CONTROL RULES ALSO DRAWS DIVISIONS OF THE ZONES AS RESIDENTIAL ZONES, COMMERCIAL ZONES AND MIXED ZONES. EVEN HERE , RESIDENTIAL ZONE IS NOT A WATERTIGHT COMPARTMENT TO HAVE HOUSES ALONE, GIVEN THE NEED FOR PROVIDING FOR OTHER INFRASTRUCTURAL FA CILITIES, THE ZONAL CLASSIFICATION TAKES NOTE FOR THE SPACE FOR C OMMERCIAL ESTABLISHMENT IN PRIME HOUSING ZONE ALSO. 35. AS FAR AS THE ASSESSEES CASE IS CONCERNED, TH E REVENUE DOES NOT DENY THE FACT THAT THE ASSESSEE HAD COMPLI ED WITH CLAUSES (A) AND (B) AND THAT IT HAS COMMENCED THE D EVELOPMENT OF CONSTRUCTION OF THE PROJECT ON 1 ST OCTOBER 1998 AND THAT THE AREA OF THE LAND SATISFIES THE MINIMUM REQUIRED ARE A OF ONE ACRE. THE ONE AND ONLY DISPUTE HEREIN IS AS TO THE BUILT- UP AREA, AS REGARDS THE RESIDENTIAL UNIT, LATER ON CONVERTED AS COMMERCIAL UNIT. 36. IT MAY BE SEEN THAT THE BUILT-UP AREA OF 8.33% , AS RELATABLE TO COMMERCIAL AREA, HAS NOTHING TO DO WIT H THE DISPUTE RAISED, SINCE THE ASSESSEE HAS NOT MADE ANY CLAIM F OR DEDUCTION ON THIS. HOWEVER, AS A MATTER OF PRINCIPLE, CONSID ERING THE UNDERSTANDING THAT WE PLACE ON THE EXPRESSION HOUS ING PROJECT, IN A GIVEN CASE, WE DO NOT FIND SUCH OCCUPATION OF COMMERCIAL AREA IN A HOUSING PROJECT WOULD NEGATE THE CLAIM OF THE ASSESSEE FOR 100% DEDUCTION OF THE PROFITS AND GAINS FROM THE BU SINESS OF UNDERTAKING, DEVELOPMENT AND CONSTRUCTION OF HOUSIN G PROJECT SUBJECT TO THE ASSESSEE COMPLYING WITH THE OTHER CO NDITIONS UNDER CLAUSES (A), (B) AND (C) OF SECTION 80-IB(10) OF THE ACT. 37. LEAVING THAT ASPECT ASIDE, ON A READING OF THE THREE CLAUSES, IT IS CLEAR THAT IN A GIVEN CASE, WHEN THE HOUSING PROJECT, A 100% RESIDENTIAL UNIT, SATISFIES OTHER CLAUSES (A ) AND (B) AND THE BUILT-UP AREA AS GIVEN UNDER CLAUSE (C) OF SECT ION 80-IB(10) OF THE ACT, THERE COULD BE NO DIFFICULTY FOR THE RE VENUE TO GRANT THE DEDUCTION. THE QUESTION BECOMES A LITTLE COMPL ICATED WHEN I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 11 100% RESIDENTIAL HOUSING PROJECT HAS BUILT-UP AREA OF MIXED NATURE. WHILE FEW OF THE UNITS MAY SATISFY THE CRI TERIA OF THE BUILT-UP AREA OF LESS THAN 1500 SQ.FT., THERE MAY B E UNITS WHICH HAVE BUILT-UP AREA CROSSING THE LIMIT AS SPECIFIED IN CLAUSE (C) OF SECTION 80-IB(10) OF THE ACT. IN SUCH AN EVENT, ON A READING OF THE PROVISION, WE HOLD THAT THE ASSESSEE WOULD NOT BE ENTITLED TO HAVE THE BENEFIT OF 100% ABSOLUTE DEDUCTION UNDER S ECTION 80- IB(10) OF THE ACT IN RESPECT OF THE ENTIRE PROJECT, BUT WOULD BE ENTITLED TO PRO-RATA DEDUCTION ON THE UNITS SATISFY ING THE CONDITION UNDER CLAUSE (C). GIVEN THE OBJECT OF TH E PROVISIONS UNDER SECTION 80-IB(10) OF THE ACT, WHEN THE DEDUCT ION TO BE GRANTED IS ON THE PROFITS AND GAINS OF UNDERTAKING DEVELOPING AND CONSTRUCTING APPROVED HOUSING PROJECTS, IN THE ABSE NCE OF RESTRICTIVE COVENANT UNDER SUB-SECTION (10) OF SECT ION 80-IB, WE DO NOT FIND ANY JUSTIFIABLE GROUND TO HOLD THAT ON THE MERE FACT OF SOME OF THE UNITS HAVING THE BUILT-UP AREA EXCEE DING THE CONDITION SPECIFIED UNDER CLAUSE (C), THE CLAIM FOR DEDUCTION WOULD STAND REJECTED ON THE ENTIRE PROJECT. AS POI NTED OUT IN THE DECISION OF THE BOMBAY HIGH COURT REPORTED IN [2011 ] 333 ITR 289 CIT V BRAHMA ASSOCIATES, WITH ZONES CLASSIFICAT ION PERMITTING COMMERCIAL ESTABLISHMENT IN RESIDENTIAL FLATS TOO, ONCE THE LOCAL AUTHORITIES APPROVED THE PROJECT WITH OR WITHOUT THE COMMERCIAL USE AS PERMITTED UNDER THE RULES, THE PR OJECT APPROVED IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 -IB(10). THE FACT THAT THE HOUSING PROJECT HAS RESIDENTIAL FLATS AND COMMERCIAL USER, BY ITSELF, CANNOT, IN ANY WAY, STA ND IN THE WAY OF GRANTING DEDUCTION. THE RESTRICTION UNDER SECTION 80-IB(10)(C) CANNOT BE CONSTRUCTED AS NEGATIVE CONDITION TO DENY THE BENEFIT TO AN ASSESSEE, WHEN THE APPROVED PROJECT HAS RESID ENTIAL UNITS OF MORE THAN 1500 SQ.FT. THE IDEA OF PRESCRIBING S UCH RESTRICTION IS TO ENCOURAGE CONSTRUCTION OF AFFORDABLE HOUSES T O COMMON MAN AND THE RESTRICTION IS NOT BY WAY OF NEGATIVE CONDI TION TO REJECT A CLAIM WHERE THE HOUSING PROJECTS HAVE UNITS WITH TH E BUILT-UP AREA EXCEEDING THE PRESCRIBED LIMIT AS WELL AS WITH IN THE LIMITS. SO TOO, IN A CASE WHERE THE PROJECT CONTAINS COMMER CIAL AS WELL AS RESIDENTIAL AREA. I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 12 38. AS FAR AS THE LAW AS IT STOOD DURING THE RELEV ANT ASSESSMENT YEAR OR EVEN THEREAFTER UPTO 2004-05 IS CONCERNED, THE SECTION CONTAINS NO CONDITION THAT THE HOUSING PROJECT HAS TO BE OUT AND OUT A RESIDENTIAL ONE OR IS THERE A CEIL ING REFERABLE TO COMMERCIAL USAGE. FOR THE FIRST TIME IN 2005, CLAU SE (D) WAS INSERTED UNDER FINANCE (NO.2) ACT OF 2004, WHICH RE STRICTED THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCIAL EST ABLISHMENTS INCLUDED IN THE HOUSING PROJECT AS NOT TO EXCEED FI VE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET, WHICHEVER IS LESS. 39. THUS, GOING BY SECTION 80-IB(10) OF THE ACT, A S IT STOOD DURING THE ASSESSMENT YEAR, FOUR THINGS ARE CLEAR, NAMELY EXPRESSION HOUSING PROJECT CANNOT RECEIVE A RESTR ICTED MEANING, AS HAD BEEN PROPOUNDED BY THE REVENUE. THE MEANING OF THE EXPRESSION HOUSING PROJECT, AS GIVEN UNDER SECTIO N 80HHBA OF THE ACT, HENCE, WOULD GOVERN THE CASE HEREIN. HENC E, THE HOUSING PROJECT WOULD INCLUDE COMMERCIAL BUILDINGS ALSO. S ECONDLY, THERE IS NO RESTRICTION THAT THE BUILT-UP AREA FOR THE HO USING PROJECT CANNOT HAVE ANY COMMERCIAL UNITS. THIRDLY, THE PRO VISION OF LAW AS IT STOOD PRIOR TO THE AMENDMENT IN 2005 CONTAINED N O SUCH CEILING AS TO THE EXTENT OF THE BUILT-UP AREA OF THE SHOPS AND COMMERCIAL UNITS INCLUDED IN THE HOUSING PROJECT. FINALLY, TH IS IS MADE CLEAR BY THE INSERTION OF THE CLAUSE (D) UNDER THE FINANC E ACT IN SECTION 80-IB(10) OF THE ACT, WHICH, FOR THE FIRST TIME SPOKE ABOUT THE RESTRICTION ON THE COMMERCIAL AREA IN THE HOUSING PROJECT. HENCE, THE AMENDMENT MAKES CLEAR THAT THE LAW AS IT STOOD TILL 2005 DID NOT CONTEMPLATE ANY RESTRICTION S AS TO THE EXTENT THAT THE COMMERCIAL ESTABLISHMENT SHOULD OCC UPY IN HOUSING PROJECT. THE ONLY CONDITION THAT THE PROVI SION CONTEMPLATED IN CLAUSE (C) TO SECTION 80-IB(10), AS IT STOOD DURING THE RELEVANT ASSESSMENT, WAS THAT IF THERE B E A HOUSING UNIT IN A HOUSING PROJECT, THE SAID UNIT SHALL NOT HAVE A BUILT-UP AREA BEYOND WHAT IS CONTEMPLATED UNDER CLAUSE (C) O F SECTION 80- IB(10) OF THE ACT, WHICH MEANS, IN A GIVEN PROJECT, EVEN IF THE TOTAL BUILT-UP AREA OCCUPIED BY THE COMMERCIAL ESTA BLISHMENT IS 100% OR 90% OR MORE, BUT LESS THAN 100% AND THE RES IDENTIAL UNIT OCCUPIED A MINOR AREA ONLY, THE ASSESSEE WOULD NEVE RTHELESS BE I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 13 ENTITLED TO THE RELIEF OF 100% DEDUCTION UNDER THE SAID PROVISION. THE ONLY CONDITION IS THAT WHERE THERE IS RESIDENTI AL UNIT, IN THE CASE OF CITIES LIKE DELHI AND MUMBAI OR PLACES WITH IN TWENTY FIVE KILOMETERS FROM THE MUNICIPAL LIMITS OF THESE CITIE S, THE RESIDENTIAL UNIT SHALL BE OF AN EXTENT OF ONE THOUS AND SQUARE FEET OR ONE THOUSAND AND GIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE, AS THE CASE MAY BE. 40. THUS, IN THE FACE OF THE CLEAR PROVISIONS AND GOING BY THE STRICT CONSTRUCTION, ONE CANNOT READ ANY LIMITATION INTO THE EXPRESSION HOUSING PROJECT TO MEAN THE RESIDENTIA L PROJECT ALONE AND THAT IF AND WHEN THE PROJECTS HAVE MIXED BUILT-UP AREA OF COMMERCIAL AND RESIDENTIAL, THE QUESTION OF DISA LLOWANCE WILL ARISE ONLY IF AND WHEN THE RESIDENTIAL FLATS ARE BE YOND THE LIMIT AS PROVIDED UNDER SUB CLAUSE (C) OF SECTION 80-IB(1 0) OF THE ACT AND NOT OTHERWISE. EVEN HEREIN, THE DISALLOWANCE C OULD BE ONLY PROPORTIONATE TO THE EXTENT OF UNITS IN VIOLATION O F THE AREA PRESCRIBED UNDER CLAUSE (C). IN A PURE COMMERCIAL HOUSING PROJECT, THE QUESTION OF APPLICABILITY OF SUB-CLAUS E (C) DOES NOT ARISE AT ALL. THUS, THERE CAN BE NO DOUBT THAT SETTING APART 3.81 % OF TOTAL BUILT-UP AREA FOR COMMERCIAL SPACE CANNOT, DEPRIVE THE ASSES SEE FROM PREFERRING A CLAIM UNDER SECTION 80-IB(10) OF THE A CT. FURTHER, ASSESSEE HAD NOT CLAIMED SUCH DEDUCTION ON COMMERCI AL AREA AT ALL AND THIS POSITION HAS NOT BEEN DISPUTED BY THE REVE NUE. 12. NO DOUBT, BY VIRTUE OF SUBSTITUTION OF SUB-SECT ION (10) OF SECTION 80-IB(10) WITH EFFECT FROM 1.4.2005, CLAUSE (D) HAS BEEN INTRODUCED WHEREIN IT IS MENTIONED THAT BUILT-UP OF SHOPS AND COMMERCIAL ESTABLISHMENT INCLUDED IN A HOUSING PROJECT SHALL N OT EXCEED 5% OF I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 14 THE AGGREGATE BUILT-UP AREA OR 2000 SQ.FT., WHICHEV ER WAS LESS. ADMITTEDLY, THE COMMERCIAL AREA IN THE HOUSING PROJ ECT HERE EXCEEDED 2000 SQ.FT. NEVERTHELESS, AS NOTED BY US, THE FIRST YEAR IN WHICH ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80-IB(10) IN RESPECT OF SHRI VIJAYA RENGAM WAS ASSESSMENT YEAR 2004-05, WHEN NO SUCH STIPULATION WAS THERE IN THE ACT. THE CLAIM IN THE SUBSEQUENT YEAR WAS ALSO ON THE SAME PROJECT. IN O UR OPINION, ONCE THE ASSESSEE FULFILLED THE REQUIREMENT OF SECTION 8 0-IB(10), AS IT STOOD FOR ASSESSMENT YEAR 2004-05, IT CANNOT BE DECLINED SUCH DEDUCTION IN A SUBSEQUENT YEAR, FOR A REASON THAT SOME LIMITATIO NS WERE BROUGHT INTO THE ACT THROUGH LATER AMENDMENT. IN OTHER WOR DS, THE SUBSTITUTED SUB-SECTION (10) OF SECTION 80-IB WILL APPLY ONLY T O PROJECTS, WHICH WERE INITIATED AFTER 1.4.2005 AND NOT PRIOR TO THAT . PROJECTS PRIOR TO THAT DATE, IN OUR OPINION, WILL BE GOVERNED BY EARL IER LAW. A BENEFIT ALREADY GIVEN TO ASSESSEE COULD NOT HAVE BEEN DENIE D THROUGH A SUBSEQUENT AMENDMENT, ESPECIALLY WHEN ASSESSEE HAD ACTED BASED ON THE EARLIER POSITION OF LAW. ONCE ASSESSEE SATI SFIED THE CONDITIONS SPECIFIED UNDER SUB-SECTION (10) OF SECTION 80-IB F OR ASSESSMENT YEAR 2004-05, IN RESPECT OF ITS PROJECT SHRI VIJAY A RENGAM, IN OUR OPINION, FOR THE SAME PROJECT IN THE SUCCEEDING YEA RS, IT CANNOT BE I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 15 DENIED SUCH BENEFIT. THE PROFITS FROM THIS PROJECT FOR ALL THE YEARS, WERE WORKED OUT BASED ON PERCENTAGE COMPLETION METH OD AS PRESCRIBED IN ACCOUNTING STANDARD 7 OF INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND ASSESSING OFFICER HIMSELF HAD INSISTED ON SUCH METHOD. IN TAKING THIS VIEW, WE ARE FORTIFIED BY THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF MANAN COR PORATION V. ACIT [TAX APPEAL NO.1053 OF 2011 DATED 03.09.2012]. 13. THEREFORE, IN OUR OPINION, NONE OF THE REASONS CITED BY THE ASSESSING OFFICER FOR REFUSING THE ASSESSEE ITS CLA IM FOR DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT, IN RESPECT OF T HE PROJECT SHRI VIJAYA RENGAM WAS VALID. LD. CIT(APPEALS) FELL IN ERROR IN CONFIRMING DENIAL OF SUCH DEDUCTION. WE, THEREFORE, SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO GRA NT THE ASSESSEE THE DEDUCTION CLAIMED UNDER SECTION 80-IB(10) IN RESPEC T OF SHRI VIJAYA RENGAM PROJECT. 14. APPEALS OF THE ASSESSEE ARE ALLOWED. 15. NOW, WE TAKE UP APPEALS OF THE REVENUE. THESE APPEALS HAVE BEEN PREFERRED FOR ASSESSMENT YEARS 2002-03, 2004-0 5, 2006-07, 2007-08 AND 2008-09. TWO EFFECTIVE GROUNDS HAVE BE EN TAKEN. FIRST IS REGARDING ADDITION OF UNACCOUNTED CASH RECEIPTS FOR SPECIFIC I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 16 SERVICES MADE BY THE ASSESSING OFFICER, WHICH WAS D ELETED BY THE CIT(APPEALS). SECOND IS REGARDING ADDITION FOR UNA CCOUNTED CASH RECEIPTS FOR EXTRA WORK MADE BY THE ASSESSING OFFIC ER, SCALED DOWN BY THE LD. CIT(APPEALS) TO 8% OF SUCH RECEIPTS. 16. FACTS APROPOS ARE THAT DURING THE SEARCH PROCEE DING ON 29.8.2007, ONE FILE WHICH CONTAINED BOOKING FORMS O F PURCHASE OF FLATS FOR ONE OF THE PROJECTS NAMED SRI LAMBODARA , WAS FOUND AND SEIZED. SUCH BOOKING FORMS MENTIONED VARIOUS AMOUN TS COLLECTED BY THE ASSESSEE FROM ITS CUSTOMERS UNDER THE FOLLOWING HEADS:- (1) SALES TAX (2) UDSL REGISTRATION CHARGES (3) SERVICE TAX (4) EB/WATER/DRAINAGE/HOUSE TAX, ETC. (5) ASSOCIATION CORPUS FUND (6) ONE YEAR MAINTENANCE (7) EXTRA WORK 17. DURING THE POST-SEARCH PROCEEDING BEFORE ASSIST ANT DIRECTOR OF INCOME-TAX, TIRUCHY, ASSESSEE FILED SIMILAR DETAILS WITH RESPECT TO ITS OTHER PROJECTS AS WELL, NAMELY, SRI GANESH DARSHAN, SRI KANDA, SRI KAPILA, SRI VIJAYA RANGAM AND SRI ANNAMALAI. THE AM OUNTS COLLECTED BY THE ASSESSEE FROM ITS CUSTOMERS, AS PER SUCH DET AILS WERE AS UNDER:- I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 17 SL.NO. NAME OF THE PROJECT AMOUNT RECEIVED IN CASH FOR EXTRA WORK TOTAL AMOUNT RECEIVED IN CASH INCLUDING EXTRA WORK ASST. YEAR OF COMPLETION 1. SRI ANNAMALAI 20,43,210 31,77,040 2008 - 09 2. SRI VIJAYARENGAM 33,42,021 1,04,71,302 2007 - 08 3. SRI GANESH DHARSAN 5,38,250 30,75,750 2002 - 03 4. SRI KAPILA 10,00,000 16,70,000 2004 - 05 5. SRI KANDA 9,51,163 17,01,163 2006 - 07 6. SRI LAMBODARA 41,79,183 78,87,891 2008 - 09 TOTAL 1,20,53,827 2,79,83,146 ASSESSEE WAS REQUIRED TO EXPLAIN WHY THE SUM OF ` 2,79,83,146/- SHOULD NOT BE TREATED AS UNACCOUNTED RECEIPTS AND A DDED TO INCOME OF THE RESPECTIVE ASSESSMENT YEARS AS PER THE ABOVE SPLIT-UP GIVEN BY IT. REPLY OF THE ASSESSEE WAS THAT THE SUMS REC EIVED FROM THE FLAT BUYERS WERE FOR EFFECTING PAYMENTS TO VARIOUS STATU TORY BOARDS AND AUTHORITIES AND ALSO FOR MEETING COST OF EXTRA WORK IN THE FLATS. AS PER THE ASSESSEE, SUCH EXTRA WORKS WERE NOT COVERED UND ER THE CONSTRUCTION AGREEMENT BUT, WERE PERFORMED AS PER T HE REQUIREMENT OF INDIVIDUAL FLAT BUYERS. IT WAS ONLY REIMBURSEME NT OF COST OF SUCH WORK. THE AMOUNTS RECEIVED FOR SERVICE CHARGES WER E TO MEET COST OF REGISTRATION OF LAND, ELECTRICITY BOARD DEPOSIT, DR AINAGE DEPOSIT, PAYMENT OF HOUSE TAX AND FOR CONTRIBUTION TO THE CO RPUS FUND OF THE HOUSING SOCIETY TO BE FORMED. AS PER THE ASSESSEE, THE SUM RECEIVED I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 18 ALSO INCLUDED ONE-YEAR MAINTENANCE CHARGES, WHICH W AS TO BE HANDED OVER TO SUCH SOCIETY. ASSESSEE ALSO SUBMITT ED THAT REGISTRATION EXPENSES, DRAINAGE DEPOSIT, CORPORATIO N TAX, CORPUS FUND FOR SOCIETY AND ONE-YEAR MAINTENANCE CHARGES WERE S UPPORTED BY VOUCHERS AND DOCUMENTS AND THESE WERE PRODUCED AT T HE TIME OF POST-SEARCH PROCEEDING BEFORE THE DEPARTMENT AND AL L THESE WERE FOUND IN ORDER. ASSESSEE DID ADMIT THAT SUCH AMOUN TS WERE NOT REFLECTED IN ITS REGULAR BOOKS OF ACCOUNTS, BUT, AC CORDING TO IT, THESE WERE EITHER REIMBURSEMENTS FOR EXTRA WORK DONE OR F OR PAYING TO VARIOUS AUTHORITIES AS MENTIONED ABOVE. AS PER THE ASSESSEE, THE SEARCH OFFICIALS HAD MADE ENQUIRIES WITH THE STAKE- HOLDERS WHO HAD ADMITTED THAT EXTRA WORKS WERE DONE BY THE ASSESSEE FOR WHICH PAYMENTS WERE EFFECTED BY THEM. ASSESSEE REITERATE D THAT IT HAD MAINTAINED RECORDS IN RESPECT OF PAYMENTS TO GOVERN MENT AND QUASI- GOVERNMENT BOARDS AS ALSO TO THIRD PARTIES, EXCEPT FOR EXTRA WORK. WITH RESPECT TO EXTRA WORK, AS PER THE ASSESSEE, VO UCHERS WERE HANDED OVER TO RESPECTIVE CUSTOMERS, ONCE THE WORK WAS COMPLETED. 18. HOWEVER, THE ASSESSING OFFICER WAS NOT IMPRESSE D. ACCORDING TO HIM, NONE OF THE RECEIPTS, WHICH WERE MENTIONED IN THE BOOKING FORMS AS RECEIVED IN CASH, APPEARED IN THE REGULAR BOOKS OF ACCOUNTS I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 19 OF THE ASSESSEE. FURTHER, AS PER ASSESSING OFFICER , THE RECEIPTS WERE NOT PROPERLY VOUCHED. THE TRANSACTIONS WERE NOT EN TERED IN THE BOOKS. ASSESSEE HAD NOT GIVEN ANY RECEIPTS TO THE CUSTOMERS WITH REGARD TO THESE AMOUNTS. CERTAIN PAYMENTS TOWARDS SALES TAX, ELECTRICITY BOARD CHARGES WERE ALREADY REFLECTED IN THE BOOKS OF ACCOUNTS AND THEREFORE, THE CLAIM OF THE ASSESSEE T HAT SUCH PAYMENTS WERE EFFECTED OUTSIDE THE BOOKS FROM MONEY COLLECTED IN CASH FROM THE CUSTOMERS, WAS INCORRECT. HE REFUSED TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT CASH TRANSACTIONS, WHICH WERE OUTSIDE THE BOOKS, WERE ALL DONE ON BEHALF OF FLAT BUYERS. FURTHER, ACCORDING TO HIM, THE POSSIBILITY OF EXPENSES RELAT ING TO EXTRA WORK BEING LOADED IN THE CONSTRUCTION COST ALREADY ACCOU NTED COULD NOT BE RULED OUT. THERE WERE NO SEPARATE REGISTER FOR MAT ERIAL PURCHASED, OR FOR LABOUR PAYMENTS EFFECTED FOR THE EXTRA WORK. T HEREFORE, HE CONSIDERED WHOLE OF THE AMOUNT ` 1,20,53,827/- RECEIVED FOR EXTRA WORK, AS INCOME OF THE ASSESSEE IN THE RESPECTIVE A SSESSMENTS. NEVERTHELESS, SINCE SUCH AMOUNT WAS INCLUDED IN THE TOTAL AMOUNT OF ` 2,79,83,146/-, WHICH HE PROPOSED TO ADD, NO SEPARA TE ADDITION WAS MADE. EFFECTIVELY, AN ADDITION OF ` 2,79,83,146/- WAS MADE FOR I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 20 IMPUGNED ASSESSMENT YEARS AS PER THE BREAK-UP GIVEN IN THE TABLE AT PARA 17 ABOVE. 19. ASSESSEE MOVED IN APPEAL BEFORE CIT(APPEALS) AG AINST THESE ADDITIONS. AS PER ASSESSEE, THERE WAS A DETAILED B REAK-UP OF VARIOUS SERVICES RENDERED AND MONEY COLLECTED FROM THE FLAT BUYERS FOR SUCH SERVICES. EACH OF THE PARTY HAD GIVEN AFFIDAVIT CE RTIFYING THE WORK DONE BY THE ASSESSEE ON THEIR BEHALF AND PAYMENTS E FFECTED FOR SUCH WORK. AS PER THE ASSESSEE, SUCH SUPPLEMENTARY SERV ICES TO FLAT BUYERS WERE AN ACCEPTED TRADE PRACTICE AND NOT SOME THING NEW. HENCE, CONSIDERING WHOLE OF THE RECEIPTS AS INCOME WAS UNFAIR. 20. LD. CIT(APPEALS) WAS APPRECIATIVE OF THE CONTEN TIONS OF THE ASSESSEE. ACCORDING TO HIM, CLAIM OF THE ASSESSEE THAT IT HAD COLLECTED SPECIFIC SUMS FOR SPECIFIC SERVICES STOOD SUBSTANTIATED. CONSTRUCTION AGREEMENT WITH CUSTOMERS CONTAINED A S PECIFIC CLAUSE THAT EXPENSES FOR SPECIFIC SERVICES AND EXTRA WORK WERE TO BE BORNE BY THE FLAT BUYERS. ACCORDING TO HIM, COLLECTIONS FROM FLAT BUYERS FOR SPECIFIC SERVICES, WERE PAID TO GOVERNMENT DEPARTME NTS AND COULD NOT BE CONSIDERED AS INCOME OF THE ASSESSEE. THUS, HE HELD THAT THE I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 21 SUM OF ` 1,59,29,319/- COLLECTED BY THE ASSESSEE FROM ITS C USTOMERS, FOR SPECIFIC SERVICE, COULD NOT BE ADDED AS ITS INC OME. 21. AS FAR THE ISSUE OF EXTRA WORK, CIT(APPEALS) WA S OF THE OPINION THAT THE WHOLE OF SUCH RECEIPTS COULD NOT BE CONSID ERED AS INCOME OF THE ASSESSEE. ACCORDING TO HIM, THE VIEW OF THE AS SESSING OFFICER THAT ENTIRE RECEIPTS TOWARDS EXTRA WORK WAS INCOME, WAS INCORRECT, IN THE ABSENCE OF ANY SPECIFIC SEIZED RECORDS WHICH SU GGESTED SO. ASSESSING OFFICER HAD ONLY SURMISED THAT THERE WAS SOME POSSIBILITY OF EXPENSES FOR EXTRA WORK LOADED INTO THE ACCOUNTE D CONSTRUCTION COSTS. CONSIDERING THESE ASPECTS, LD. CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE INCOME FROM EXTRA WORK AT 8% OF THE RECOVERIES EFFECTED FOR SUCH EXTRA WORK. IN OT HER WORDS, HE SCALED DOWN THE ADDITION FOR EXTRA WORK TO 8% OF ` 1,20,53,827/-. 22. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT ASSESSEE HAD NOT PRODU CED BEFORE THE ASSESSING OFFICER ANY PROOF FOR EXPENSES INCURRED O UT OF THE COLLECTIONS MADE FROM ITS CUSTOMERS IN CASH, WHETHE R IT WAS FOR ELECTRICITY BOARD CONNECTION, WATER CONNECTION, COR PORATION TAX, DRAINAGE DEPOSIT OR FOR FUNDING THE SOCIETY. NOTHI NG WAS BROUGHT ON I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 22 RECORD TO SHOW ANY AMOUNT EXPENDED IN ANY EXTRA WOR K. THE BOOKS SUBMITTED BY THE ASSESSEE DID NOT SHOW ANY SUCH REC EIPTS FROM CUSTOMERS NOR WERE ANY EXPENSES OF NATURE MENTIONED BY THE ASSESSEE SHOWN THEREIN. IF AT ALL ANY EXPENSES WER E INCURRED FOR EXTRA WORK, IT WOULD HAVE BEEN ALREADY INCLUDED IN THE CONSTRUCTION COST ACCOUNTED IN THE BOOKS. ASSESSEE HAVING FAILE D TO ACCOUNT THE CASH RECEIVED BY IT FROM ITS CUSTOMERS, AS MENTIONE D IN THE BOOKING FORMS SEIZED AT THE TIME OF SEARCH, COULD NOT SAY T HAT ALL SUCH CASH RECEIPTS WERE EXPENDED IN VARIOUS SERVICES RENDERED TO ITS CUSTOMERS. LD. CIT(APPEALS) FELL IN ERROR WHEN HE HELD THAT SUCH COLLECTIONS WERE MADE BY THE ASSESSEE FOR MEETING S TATUTORY PAYMENTS ON BEHALF OF FLAT OWNERS. THERE WAS NOTHI NG ON RECORD TO SHOW THAT ASSESSEE HAD EXPENDED ANY SUM OUT OF THE CASH RECEIVED FOR DOING EXTRA WORK. DESPITE NO EVIDENCE BEING PR ODUCED BY THE ASSESSEE, LD. CIT(APPEALS) REDUCED THE ADDITION TO 8% OF SUCH RECEIPTS. IN OTHER WORDS, CIT(APPEALS) GAVE SUBSTA NTIAL RELIEF TO THE ASSESSEE WITHOUT ANY CORROBORATING EVIDENCE BUT, ME RELY RELYING ON THE SUBMISSIONS OF THE ASSESSEE. FURTHER, ACCORDIN G TO HIM, THERE WAS NOTHING ON RECORD TO SHOW THAT ASSESSEE HAD PRO DUCED VOUCHERS FOR SUCH PAYMENTS. THUS, LEARNED D.R. SUBMITTED TH AT THE ORDER OF LD. I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 23 CIT(APPEALS) HAD TO BE SET ASIDE AND ADDITION OF TH E A.O. HAD TO BE REINSTATED. 23. PER CONTRA, LEARNED A.R., IN SUPPORT OF THE ORD ER OF CIT(APPEALS), SUBMITTED THAT ASSESSEE HAD FURNISHED BREAK-UP OF COLLECTION AND EXPENSE DETAILS HEAD-WISE AND PAGE-W ISE DURING THE COURSE OF POST-SEARCH ENQUIRIES BEFORE ASSISTANT DI RECTOR OF INCOME- TAX. ACCORDING TO HIM, THIS FACT WAS VERY MUCH NOT ED BY THE ASSESSING OFFICER HIMSELF IN THE ASSESSMENT ORDER. A COPY OF SUCH BREAK-UP WAS BEFORE HIM AS WELL. THIS BREAK-UP, AC CORDING TO LEARNED A.R., CLEARLY SHOWED THAT THE CASH RECEIPTS FROM THE CUSTOMERS WERE ONLY FOR PAYMENTS OF STATUTORY FEES, LEVIES AND FOR MEETING THE CORPUS FUND OF THE SOCIETY AND MAINTENA NCE EXPENSES FOR ONE YEAR. THE BREAK-UP OF RECEIPTS TOWARDS EXTRA W ORK, WAS ALSO CLEARLY FURNISHED. ACCORDING TO HIM, IN RESPECT OF THE CLAIM OF EXPENSES OUT OF SUCH RECEIPTS, ASSESSEE HAD ALSO FI LED AFFIDAVITS FROM VARIOUS FLAT OWNERS. RELYING ON COPIES OF SUCH AFF IDAVITS PLACED AT PAPER-BOOK PAGES 7 TO 103, LEARNED A.R. SUBMITTED T HAT IT WAS BASED ON THESE RECORDS, A BREAK-UP WAS COMPUTED AND FURNI SHED BEFORE THE ADIT, TIRUCHY. IN THE FACE OF SUCH EVIDENCE, TO SA Y THAT ASSESSEE HAD NOT PRODUCED RECORDS IN SUPPORT OF ITS CLAIM, W AS INCORRECT. I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 24 ACCORDING TO LEARNED A.R., IT WAS TRUE THAT ASSESSE E HAD NOT SHOWN SUCH CASH RECEIPTS OR PAYMENTS EFFECTED THEREFROM I N ITS REGULAR BOOKS OF ACCOUNTS. THIS WAS ONLY DUE TO A REASON T HAT SUCH MONEY WAS NEVER A PART OF THE INCOME OF THE ASSESSEE, BUT , WERE COLLECTION FOR PAYMENTS TO BE EFFECTED AND FOR MEETING THE COS T OF EXTRA WORK, ALL OF WHICH WERE REQUIRED BY THE FLAT OWNERS. AS PER LEARNED A.R., A FLAT SOLD TO A CUSTOMER, ONLY MET THE CONDITION OF A STA NDARD FLAT AND WAS NOT FURNISHED. ALMOST ALL THE CUSTOMERS REQUIRED A DDITIONAL FACILITIES AS PER THEIR PERSONAL TASTE. THESE WERE NOT PART O F THE REGULAR INCOME OF THE ASSESSEE. SUCH WORK WAS UNDERTAKEN O NLY ON COST REIMBURSEMENT BASIS AND AS A SERVICE TO THE CUSTOME RS. NEVERTHELESS, LD. CIT(APPEALS) HELD 8% OF SUCH AMOU NT TO BE PROFIT OF THE ASSESSEE AND ASSESSEE PREFERRED NOT TO FILE AN APPEAL AGAINST THIS FINDING SO AS TO GIVE A QUIETUS TO THE LEGAL P ROCEEDING. ACCORDING TO HIM, CIT(APPEALS)S ORDER WAS WELL-REASONED AND THERE WAS NO REASON TO INTERFERE WITH SUCH ORDER. 24. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT ASSESSEE HAD RECEIVED ` 2,79,83,146/-, AS MENTIONED IN TABLE AT PARA 17 ABOVE, IN CASH FROM I TS VARIOUS CUSTOMERS AND THIS WAS NOT ACCOUNTED IN ITS REGULAR BOOKS OF I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 25 ACCOUNTS. NEVERTHELESS, ASSESSEE HAD ALL ALONG CLA IMED THAT THESE WERE ONLY REIMBURSEMENT OF VARIOUS STATUTORY LEVIES AND FOR MEETING THE ADDITIONAL WORK REQUIREMENTS MANDATED BY ITS CU STOMERS OUTSIDE THE AGREEMENTS ENTERED WITH THEM. DETAILS OF SUCH AMOUNTS FOUND BY THE SEARCH OFFICIALS AT THE TIME OF SEARCH, WERE IN RESPECT OF ONE OF THE PROJECTS OF THE ASSESSEE CALLED SRI LAMBODARA ALO NE. IT IS AN ADMITTED POSITION THAT WITH RESPECT TO THE OTHER PR OJECTS, ASSESSEE ITSELF HAD FILED SIMILAR DETAILS, DURING THE POST-S EARCH PROCEEDING BEFORE ADIT (INV.), TRICHY. THIS IS MENTIONED AT P ARA FIVE OF THE ASSESSMENT ORDER ITSELF. IN THE STATEMENT TAKEN FR OM SHRI T.V. MURALI, WHO WAS THE MANAGING PARTNER OF THE ASSESSEE-FIRM, IN ANSWER TO QUESTION NO.46, IT WAS MENTIONED AS UNDER:- Q.NO.46: IN THE SAME ANNEXURE AS REFERRED IN THE AB OVE Q.NO.45, IN SHEET NO.26 THERE IS A NOTING THAT FOR DOING EXTRA WORK CASH RECEIVED IS ` 80,12,762/-. WHETHER THESE RECEIPTS HAVE BEEN REFLECTED IN THE BOOKS OF ACC OUNTS. ANS: NO. THE ABOVE SAID AMOUNT WAS COLLECTED FRO M THE PROSPECTIVE FLAT OWNERS TOWARDS EXTRA WORK AS REIMBURSEMENT FOR THE INTERNAL WORKS CARRIED OUT BY THE FIRM AS AN ADDED SERVICE. THUS, INSOFAR AS RECEIPT FOR EXTRA WORK WAS CONCERN ED, ASSESSEE ALL ALONG MAINTAINED THAT THESE WERE REIMBURSEMENT OF I NTERNAL WORK TERMED BY IT AS ADDITIONAL SERVICE TO ITS CUSTOMERS . AS FOR THE I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 26 COLLECTIONS MADE BY THE ASSESSEE TOWARDS SALES TAX, SERVICE TAX, REGISTRATION CHARGES, ETC., THERE WAS ONE ANOTHER Q UESTION NUMBERED AS QUESTION. NO.44. THE SAID QUESTION AND REPLY IS REPRODUCED HEREUNDER:- Q.NO.44: TOWARDS SALES TAX, SERVICE TAX, REGISTRATI ON, EB, HOUSE TAX, DRAINAGE, WATER, CORPUS FUND, MAINTENANCE A ND EXTRA WORK, YOU HAVE (THE FIRM) COLLECTED FROM V ARIOUS PROJECTS AS SHOWN BELOW:- 1. ANNAMALI PROJECT : ` 31,77,040 2. LAMBODARA PROJECT : ` 78,87,891 3. SHRI VIJAYA RANGAM PROJECT : ` 1,04,71,302 4. SRI KANDA PROJECT : ` 17,01,163 5. SRI KAPILA PROJECT : ` 16,70,000 6. GANESH DHARSAN PROJECT : ` 30,75,750 TOTAL RECEIPTS : ` 2,79,83,146 WHY THESE RECEIPTS ARE NOT REFLECTED IN THE BOOKS O F ACCOUNTS? ANS: THE ABOVE RECEIPTS DO NOT COME IN THE FIRMS BOOKS OF ACCOUNTS BECAUSE THE ABOVE MENTIONED EXPENSES TO WARDS EB & OTHER THINGS WERE INFORMED TO THE FLAT BUYE RS AT THE TIME OF BOOKING AND THE SAME WERE COLLECTED AND REMITTED TO THE RESPECTIVE AUTHORITIES AS SERVIC E TO OUR CUSTOMERS. THUS, WHILE ADMITTING THAT THE SAID RECEIPTS WERE N OT ACCOUNTED IN THE BOOKS OF ACCOUNTS, IT WAS ALSO MENTIONED THAT THESE WERE RECEIVED FOR ONWARD TRANSMISSION TO RESPECTIVE AUTHORITIES, AS A SERVICE TO ITS CUSTOMERS. LD. CIT(APPEALS) HAS CLEARLY MENTIONED IN PARA FIVE OF HIS I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 27 ORDER THAT FOR THE PAYMENTS OF REGISTRATION EXPENSE S, DRAINAGE DEPOSIT, ELECTRICITY BOARD CHARGES, CORPORATION TAX , CORPUS FUND AND ONE-YEAR MAINTENANCE CHARGES, THERE WERE VOUCHERS A ND DOCUMENTS IN SUPPORT. IN ANY CASE, ASSESSEE HAD FILED AFFIDA VITS FROM EACH OF THE FLAT OWNERS FOR SUCH RECEIPTS AND PAYMENTS EFFE CTED THEREFROM. NOTHING HAS BEEN BROUGHT BEFORE US BY THE REVENUE T O DISBELIEVE SUCH AFFIDAVITS. COMPUTATION OF BREAK-UP OF SERVIC E CHARGES RECEIVED AND PAID WAS ALSO FURNISHED BY THE ASSESSEE BEFORE THE ADIT, TRICHY. IN FACT, ASSESSING OFFICER HAD HIMSELF REFERRED TO THE CHART GIVEN BY THE ASSESSEE TO ADIT, TRICHY, DURING THE COURSE OF POST-SEARCH ENQUIRIES. THEREFORE, PREPONDERANCE OF PROBABILITY WAS THAT ASSESSEE HAD PRODUCED RECORDS TO SHOW THE PAYMENTS EFFECTED BY IT OUT OF THE SERVICE CHARGES RECEIVED FROM ITS CUSTOM ERS. AFFIDAVITS WERE ALSO THERE WHICH SHOWED THAT MONEY RECEIVED FO R SERVICES FROM FLAT OWNERS WERE PAID FOR MEETING VARIOUS STATUTORY REQUIREMENTS ON BEHALF OF SUCH FLAT OWNERS. IN SUCH CIRCUMSTANCES, LD. CIT(APPEALS) WAS JUSTIFIED IN TAKING A VIEW THAT THERE WAS NO NE CESSITY FOR ANY ADDITION FOR SERVICE CHARGES. 25. AS FOR REIMBURSEMENTS FOR EXTRA WORK, IT IS A N ORMAL PRACTICE OF FLAT BUILDERS TO DO SUCH EXTRA WORK AS REQUIRED BY THEIR CUSTOMERS AND I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 28 GET PAID FOR IT. NO DOUBT, SOME OF SUCH EXPENSES F OR EXTRA WORK MIGHT HAVE BEEN LOADED INTO THE EXPENDITURE ITEMS ACCOUNT ED BY THE ASSESSEE FOR THE WORK. BUT, TO CONSIDER WHOLE OF T HE MONEY FOR SUCH EXTRA WORK AS INCOME, WILL NOT BE FAIR. ASSESSEE, THOUGH IT HAD NOT ACCOUNTED THE CASH RECEIPTS FOR EXTRA WORK IN ITS B OOKS OF ACCOUNTS, WOULD HAVE NECESSARILY INCURRED EXPENDITURE FOR MEE TING THE ADDITIONAL REQUIREMENTS OF ITS CUSTOMERS. CONSIDER ING THE PROBABILITY OF DUPLICATION OF EXPENSES, THE CIT(APPEALS) HAD HE LD 8% OF SUCH AMOUNT TO BE INCOME OF THE ASSESSEE OVER AND ABOVE WHAT IT HAD RETURNED. THERE IS NOTHING ON RECORD TO SHOW THAT ASSESSEE HAD MADE ANY INCOME IN EXCESS OF NORMAL PROFIT THAT IT WOULD HAVE MADE OUT OF SUCH EXTRA WORK. AS POINTED OUT BY LEARNED A.R., THERE IS NO SEIZED RECORD WHICH WOULD SHOW ANY INCOME ARISING T O THE ASSESSEE OUT OF SUCH EXTRA WORK. IN FACT, DETAILS WITH REGA RD TO SUCH EXTRA WORK AS ALSO SERVICE CHARGES AND REIMBURSEMENT WERE GIVE N BY THE ASSESSEE ITSELF BEFORE THE ADIT, TRICHY, DURING THE COURSE OF POST- SEARCH PROCEEDING. 26. IN SUCH CIRCUMSTANCES, WE ARE OF THE OPINION TH AT CIT(APPEALS) WAS JUSTIFIED IN SCALING DOWN THE ADDITION IN RESPE CT OF EXTRA WORK TO 8% OF SUCH AMOUNTS RECEIVED. WE THUS DO NOT FIND A NY REASON TO I.T.A. NOS. 2103 TO 2107/MDS/10 I.T.A. NOS. 1809 TO 1812/MDS/10 29 INTERFERE WITH THE ORDER OF CIT(APPEALS) FOR IMPUGN ED ASSESSMENT YEARS IN THIS REGARD. 27. IN THE RESULT, APPEALS OF THE REVENUE FOR ALL T HE YEARS STAND DISMISSED. 28. TO SUMMARIZE THE RESULT, APPEALS FILED BY THE A SSESSEE ARE ALLOWED, WHEREAS, APPEALS OF THE REVENUE ARE DISMIS SED. ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 11 TH OF APRIL, 2013, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 11 TH APRIL, 2013. KRI. COPY TO: (1) ASSESSEE (2) ASSESSING OFFICER (3) CIT(A), TIRUCHIRAPPALLI (4) CIT, CENTRAL-II, CHENNAI (5) D.R. (6) GUARD FILE