The ITO, Ward-9(2), Ahmedabad V. M/s. Megha Developers, Ahmedabad

ITA 232/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8988 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 31-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 23-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80IB

Judgement Text

ITA NO. 232 / AHD / 201 4 A SSESSMENT Y EAR: 2 001 - 02 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, SMC , AHMEDABAD [CORAM: PRAMOD KUMAR AM] ITA NO. 232 /AHD/201 4 ASSESSMENT Y EAR : 20 01 - 02 INCOME TAX OFFICER , WARD 9(2), AHMEDABAD .. .APPELLANT VS. MEGHA DEVELOPERS .. .. . RESPONDENT PARTH AVENUE, NEAR AVNI BHAVAN, SABARMATI, AHMEDABAD 380 005. [PAN: A AFFM 7541 M ] APPEARANCES BY: RAJ DEEP SINGH , FOR THE APPELLANT NONE , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : 31.01.2017 DATE OF PRONOUNCING T HE ORDER : 28 . 0 3 .2017 O R D E R 1. THIS APPEAL CHALLENGES CORRECTNESS OF LEARNED CIT(A) S O R DER DATED 12 TH NOVEMBER 2013, VACATING PENALTY OF RS.10,55,663/ - IMPOSED ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 20 01 - 02 . 2. NONE APPEARED FOR THE ASSESSEE BUT I HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION. 3. THE QUANTUM ADDITION , IN RESPECT OF WHICH IMPUGNED PENALTY IS LEVIED, IS ON ACCOUNT OF DISALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IB(10). THIS DEDUCTION WAS DECLINED, AND THE ASSESSING OFFICER ALSO IMPOSED PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF THE SAME. ITA NO. 232 / AHD / 201 4 A SSESSMENT Y EAR: 2 001 - 02 PAGE 2 OF 4 AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED C I T (A) WHO DELETED T HE PENALTY AND OBSERVED, INTER ALIA, AS FOLLOWS : - 5. I HAVE PERUSED THE FACTS SO ENUMERATED BY A.O IN THE PENALTY ORDER. IT IS BEYOND DISPUTE THAT ORIGIN ALLY THE LD. CIT(A) ON APPEAL FROM THE APPELLANT ALLOWED THE CLAIM U/S. 80IB(10) OF THE ACT. THE HON'BLE ITAT AHMEDABAD SET A SIDED THE ORDER OF LD. CIT(A) AND DIRECTED TO VERIFY THE CLAIM CONSIDERING THE RATIO OF ITS ORDER IN THE CASE OF SHAKTI CORPORATIO N. IT IS THEREFORE PRIMA FACIE THE QUESTION OF ALLOWABILITY U/S. 80IB (10) OF THE ACT IN THE CASE OF APPELLANT WAS DEBATABLE AND THERE WERE MORE THAN ONE OPINION. FURTHER THE APPELLANT BONAFIDELY ON THE BASIS OF CERTIFICATE FROM CHARTERED ACCOUNTANT IN FOR M 10 CCB CLAIMED SUCH DEDUCTION WITH DECLARATION OF ALL MATERIAL FACTS. IT IS THE LEGAL INTERPRETATION AND OPINION OF A.O AS WELL AS LD . CIT(A) ON THE ISSUE OF DEDUCTION U/S. 80 IB (10) OF THE ACT AND NOT THE FACTS OF THE CASE WHICH LED TO ULTIMATELY DISALL OWANCE OF SUCH CLAIM THAT TOO IN SECOND ROUND OF ASSESSMENT. THEREFORE THOUGH APPELLANT NEITHER BEFORE A.O NOR BEFORE ME REPLIED ABOUT THE SHOW CAUSE OF PENALTY BUT THE IMPORTANT QUESTION IS WHETHER A.O IS JUSTIFIED IN DRAWING HIS SATISFACTION ABOUT FURNI SHING OF INACCURATE PARTICULARS AND IMPOSITION OF PENALTY. IN MY VIEW SUCH SATISFACTION IS NOT JUSTIFIED AND CANNOT BE SUSTAINED IN THE FACTS AND CIRCUMSTANCES OF APPELLANT'S CASE. 'HON'BLE ITAT AHMEDABAD IN THE CASE OF M/S. OM SHIV ASHISH BUILDERS V/S. AC IT CIR - 5 BARDOA IN ITA NO. 659/AHD/2012 FOR A.Y 2003 - 04 VIDE ORDER DTD. 15 - 6 - 2012 HELD SO. THE A.O. IS DIRECTED TO DELETE THE PENALTY SO IMPOSED. ALL THE GROUNDS ARE THEREFORE TREATED AS ALLOWED. 4. AGGRIEVED BY THE RELIEF SO GRANTED BY THE LEARNED C I T ( A ) , THE A SSESSING OFFICER IS IN APPEAL BEFORE ME. 5. HAVING HEARD THE LEARNED D EPARTMENTAL REPRESENTATIVE AND HAVING PERUSED THE MATERIAL ON RECORD, I AM NOT INCLINED TO DISTURB WELL REASONED FINDINGS OF THE LEARNED C I T ( A ) . THE MERE FACT T HAT THE ASSESSEE S TRADING ACCOUNT DOES NOT SHOW ANY RECEIPTS ON SALE OF HOUSING UNITS CANNOT BY ITSELF MEAN THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80IB(10). THE TRUE TEST FOR DETERMINING ELIGIBILITY FOR DEDUCTION UNDER SECTION 80IB(10) IS WHETHER TH E ASSESSEE WAS BEARING THE ENTREPRENEURIAL RISK OR NOT. THAT WOULD DEPEND ON A VARIETY OF FACT OR S AND THE KIND OF BUSINESS MODEL EMPLOYED BY THE ASSESSEE. WHILE ON THIS SUBJECT, I MAY REFER TO THE FOLLOWING OBSERVATIONS MADE BY THE DIVISION BENCH OF THI S TRIBUNAL IN THE CASE OF SHR I UM EYA CORPORATION VS. ITO (ITA NO.211/AHD/2010; ORDER DATED 07.07.201 5 : - ITA NO. 232 / AHD / 201 4 A SSESSMENT Y EAR: 2 001 - 02 PAGE 3 OF 4 7. IN OUR HUMBLE UNDERSTANDING, THEREFORE, IN ORDER TO ANSWER THE QUESTION AS TO WHETHER THE CONDITION PRECEDENT FOR DEDUCTION UNDER SECTION 80IB HAS BEEN SATISFIED INASMUCH AS WHETHER OR NOT THE ASSESSEE IS ENGAGED IN DEVELOPING AND BUILDING HOUSING PROJECTS , ALL THAT IS MATERIAL IS WHETHER ASSESSEE IS TAKING THE ENTREPRENEURSHIP RISK IN EXECUTION OF SUCH PROJECT. WHEN PROFITS OR LOSSES, AS A RESULT OF EXECUTION OF PROJECT AS SUCH, BELONG PREDOMINANTLY TO THE ASSESSEE, THE ASSESSEE IS OBVIOUSLY TAKING THE ENTREPRENEURSHIP RISK QUA THE PROJECT AND IS, ACCORDINGLY, ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) IN RESPECT OF THE SAME. THE ASSUMPTION OF S UCH AN ENTREPRENEURSHIP RISK IS NOT DEPENDENT ON OWNERSHIP OF THE LAND. THE BUSINESS MODEL OF DEVELOPING AND BUILDING HOUSING PROJECTS BY BUYING, ON OUTRIGHT BASIS, AND CONSTRUCTING RESIDENTIAL UNITS THEREON COULD PROBABLY BE THE SIMPLEST BUSINESS MODELS IN THIS LINE OF ACTIVITY, BUT MERELY BECAUSE THERE IS AN IMPROVISATION IN THE BUSINESS MODEL OR BECAUSE THE ASSESSE HAS ADOPTED SOME OTHER BUSINESS MODELS FOR THE PURPOSE OF DEVELOPING AND BUILDING HOUSING PROJECT DOES NOT VITIATE FUNDAMENTAL CHARACTER OF THE BUSINESS ACTIVITY AS LONG AS THE RISKS AND REWARDS OF DEVELOPING THE HOUSING I.T.A. NO.: 211(AHD) OF 2010 ASSESSMENT YEAR: 2006 - 07 PAGE 5 OF 7 PROJECT, IN SUBSTANCE, REMAIN WITH THE ASSESSEE . IT IS DIFFICULT, IF NOT ALTOGETHER IMPOSSIBLE, TO VISUALIZE ALL THE BUSINESS MODELS THAT AN ASSESSEE MAY USE IN THIS DYNAMIC COMMERCIAL WORLD EVEN AS, IN SUBSTANCE, THE FUNDAMENTAL CHARACTER OF THE BUSINESS REMAINS THE SAME, BUT CERTAINLY SUCH MODALITIES OR COMPLEXITIES OF BUSINESS MODELS CANNOT COME IN THE WAY OF ELIGIBILITY FOR AN INCENTIVE WHICH IS FOR THE PURPOSE OF DEVELOPING AND BUILDING A HOUSING PROJECT . THERE IS NO JUSTIFICATION, CONCEPTUAL OR LEGAL, IN RESTRICTING ELIGIBILITY OF DEDUCTION UNDER SECTION 80IB(10) TO ANY PARTICULAR BUSINESS MODEL THAT AN E NTREPRENEUR ADOPTS IN THE COURSE OF DEVELOPING AND CONSTRUCTING HOUSING PROJECT. 6. IN VIEW OF THE ABOVE DISCUSSIONS, AND FINDING NO FLAWS IN THE REASONING ADOPTED BY THE LEARNED CIT (A) IN HIS WELL REASONED ORDER, I CONFIRM THE RELIEF GRANTED BY THE LEAR NED C IT(A) AND DECLINE TO INTERFERE IN THE MATTER. 7. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF MARCH, 2017 . SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 28 TH DAY OF MARCH , 2017 . PBN/* ITA NO. 232 / AHD / 201 4 A SSESSMENT Y EAR: 2 001 - 02 PAGE 4 OF 4 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL A HMEDABAD BENCHES, AHMEDABAD