MUKESH KIMTANI, ULHASNAGAR V. ACIT CEN CIR 1, THANE

ITA 2696/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88611 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 21-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER JIT SINGH
• Assessee Lawyers: DR P DANIELSHRI S M MAKHIJA
• Keywords: Difference of opinion; Change of opinion
• Section: 143(3); 153A; 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 2696/MUM/2014 (ASSESSMENT YEAR: 2005-06) SHRI MUKESH KIMTANI VS. ACIT, CENTRAL CIRCLE-1 OFFICE NO. 1, GROUND FLOOR KALA PALACE, MADHUBEN HOTEL ROAD, ULHASNAGAR 421001 I.T. ASHAR PARK, 6TH FLOOR WAGLE INDUSTRIAL ESTATE THANE (WEST) PAN - ACGPK4387A APPELLANT RESPONDENT APPELLANT BY: DR. P. DANIEL/SHRI S.M. MAKHIJA RESPONDENT BY: SHRI SURENDER JIT SINGH DATE OF HEARING: 11.03.2015 DATE OF PRONOUNCEMENT: 18.03.2015 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 AND IT PERT AINS TO A.Y. 2005-06. 2. FACTS IN BRIEF ARE AS FOLLOWS. ASSESSEE IS A DIRECT OR OF KONARK INFRASTRUCTURE LTD. WHICH WAS ENGAGED IN DIVERSIFIE D BUSINESS ACTIVITIES SUCH AS OCTROI AND TOLL COLLECTION, STEEL INDUSTRY, DEVE LOPMENT AND CONSTRUCTION COMMERCIAL AND HOUSING PROJECTS, ETC. THE GROUP IS ALSO KNOWN AS REGENCY GROUP WHICH IS SUBSTANTIALLY ENGAGED IN STEEL ROLL ING MILL AND COMMERCIAL/HOUSING PROJECTS. 3. SEARCH WAS CARRIED OUT AT KONARK GROUP OF COMPANIES AND ALSO THE RESIDENTIAL PREMISES OF THE ASSESSEE. DURING THE CO URSE OF SEARCH SEVERAL INCRIMINATING MATERIALS WERE FOUND AND THEREFORE A NOTICE UNDER SECTION 153A WAS ISSUED AND SERVED ON THE ASSESSEE IN RESPE CT OF WHICH THE ASSESSEE DECLARED TOTAL INCOME OF ` 1,14,75,900/-, AS DECLARED IN THE ORIGINAL RETURN FILED UNDER SECTION 139(1) OF THE ACT. ASSES SEE CLAIMED DEDUCTION UNDER SECTION 80IB(10) OF THE ACT TO THE TUNE OF ` 2,62,13,437/- SINCE HE WAS ITA NO. 2696/MUM/2014 SHRI MUKESH KIMTANI 2 A BUILDER AND DEVELOPER HAVING PROPRIETORSHIP CONCE RN UNDER THE NAME AND STYLE OF NANCY BUILDERS. HE UNDERTOOK A HOUSING P ROJECT AT PUNE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ORIGINAL PROJECT WAS APPROVED BY THE LOCAL AUTHORITY ON 30 TH MARCH, 2011 FOR THREE BUILDINGS, I.E. A, B & C ON THE LAND ADMEASURING 40 00 SQ.MTS. WHICH IS LESS THAN ONE ACRE (4048 SQ.MTS.) THEREFORE, ACCORDING T HE AO, THE CONDITION PROVIDED UNDER SECTION 80IB(10) SUB-CLAUSE (B) WAS NOT FULFILLED. THEREFORE A SHOW CAUSE NOTICE WAS ISSUED IN THAT REGARD. IN RES PONSE TO THE NOTICE ASSESSEE SUBMITTED THAT THERE WAS A MISTAKE ON THE PART OF THE LAND REVENUE AUTHORITIES IN AS MUCH AS THE AREA WAS ACTU ALLY 40.50 ACRES IN THE 7/12 EXTRACT WHEREAS IT WAS WRONGLY MENTIONED AS 40 ACRES. UPON A PETITION FILED BY THE ASSESSEE TO THE PUNE REVENUE AUTHORITI ES, THE TAHSILDAR, PUNE CITY ISSUED A FRESH 7/12 EXTRACT MENTIONING THE COR RECT AREA. IT WAS ALSO SUBMITTED THAT THE ASSESSEE APPLIED FOR A REVISED A PPROVAL PLAN AND THE LOCAL AUTHORITY HAS APPROVED THE PLAN FOR TOTAL AREA OF 4 0.50 ACRES. SINCE THE PLEA OF THE ASSESSEE WAS CORROBORATED BY THE PUNE MUNICI PAL CORPORATIONS CERTIFICATE, AO ALLOWED THE CLAIM OF DEDUCTION UNDE R SECTION 80IB(10) OF THE ACT IN HIS ORDER DATED 29.12.2011. 4. THE LEARNED COMMISSIONER, IN EXERCISE OF HIS POWERS VESTED UNDER SECTION 263 OF THE ACT, PERUSED THE ASSESSMENT RECO RD AND NOTICED THAT THE AO HAS WRONGLY ALLOWED THE DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. IN HIS OPINION THE ORIGINAL PROJECT WAS APPROVED BY TH E LOCAL AUTHORITY FOR THREE BUILDINGS, I.E. A, B AND C ON THE LAND ADMEASURING 3147 SQ.MTS. (NET AREA OF PLOT) WHICH IS LESS THAN ONE ACRE. THOUGH IN THE TH IRD APPROVAL OF PUNE MUNICIPAL CORPORATION THE LAND SIZE WAS INCREASED T O 4050 SQ.MTS. AS GROSS AREA OF PLOT, AFTER DEDUCTING AREA FOR ROAD AND OPE N SPACE THE NET AREA WAS WORKED OUT TO 3192 SQ.MTS. ONLY. FURTHER, ASSESSEE HAD TAKEN TDR FROM SHRI SATISH MAJAR, PUNE FOR EXPANDING THE BUILDING FROM PARKING PLUS ONE TO PARKING PLUS FOUR FLOORS. THESE CHANGES WERE MADE B Y THE ASSESSEE ON HIS OWN AND HENCE HE IS NOT ELIGIBLE FOR DEDUCTION UNDE R SECTION 80IB(10). HE HAS ALSO TAKEN NOTE OF THE CBDT CLARIFICATION (CIRC ULAR NO. 5 OF 2005) TO OBSERVE THAT THOUGH THE SECTION DOES NOT SPECIFICAL LY PROVIDE FOR AREA LIMIT FOR GARDEN, DEVELOPMENT PLAN, ROADS, ETC. BUT IT SH OULD CONFORM TO THE ITA NO. 2696/MUM/2014 SHRI MUKESH KIMTANI 3 PROJECT PLAN APPROVED BY THE LOCAL AUTHORITY IN ACC ORDANCE WITH THE REGULATIONS IN FORCE AND IN THIS CASE THE NET PLOT AREA IS ONLY 3147 SQ.MTS. WHICH IS LESS THAN ONE ACRE. THEREFORE, THE REVISIO NAL AUTHORITY WAS OF THE OPINION THAT THE ORDER OF THE AO WAS PRIMA FACIE ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HE ALSO REFERRED TO VAR IOUS DECISIONS ON THIS POINT TO REINFORCE HIS CONCLUSION AND FINALLY OBSERVED TH AT THE ASSESSMENT ORDER PASSED UNDER SECTION 153A R.W.S. 143(3) IS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF REVENUE AND THEREFOR E THE ASSESSMENT ORDER WAS SET ASIDE TO THE FILE OF THE AO TO PASS A FRESH ASSESSMENT ORDER AFTER CONDUCTING NECESSARY ENQUIRIES TO ASCERTAIN FULFILM ENT OF CONDITIONS RELATING TO AREA OF LAND FOR ALLOWABILITY OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. 5. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. AS COUL D BE NOTICED FROM THE GROUNDS OF APPEAL, THE MAIN CONTENTION OF THE A SSESSEE IS THAT THE LEARNED CIT ERRED IN PASSING AN ORDER UNDER SECTION 263 OF THE ACT SINCE THE ORDER PASSED BY THE AO UNDER SECTION 153A R.W.S 143 (3) BE NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF REVEN UE FOR THE SIMPLE REASON THAT THE AO HAD CONSIDERED THE ISSUE INDEPENDENTLY AND AFTER TAKING INTO ACCOUNT THE SUBMISSIONS OF THE ASSESSEE AND THE MAT ERIAL ON RECORD HE WAS SATISFIED THAT THE ASSESSEE IS ENTITLED TO DEDUCTIO N UNDER SECTION 80IB(10) OF THE ACT IN WHICH EVENT THE VIEW TAKEN BY THE COMMIS SIONER CAN AT BEST BE CONSIDERED AS A CHANGE OF OPINION WHICH IS NOT PERM ISSIBLE UNDER SECTION 263. IT WAS ALSO CONTENDED THAT THE LEARNED COMMISS IONER ERRED IN RELYING UPON VARIOUS JUDICIAL PRONOUNCEMENTS, WHICH ARE DIS TINGUISHABLE AND THE REVISIONAL AUTHORITY IGNORED THE DECISION OF THE JU RISDICTIONAL BENCH OF ITAT/HIGH COURT WHICH WAS RELIED UPON BY THE ASSESS EE IN THE COURSE OF PROCEEDINGS UNDER SECTION 263. THE LEARNED COUNSEL FOR THE ASSESSEE FILED PAPER BOOK CONTAINING 105 PAGES AND ALSO A FACT SHE ET TO BRIEFLY BRING OUT THE FACTS. THE CASE OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO MADE INDEPE NDENT INQUIRY AND UPON SCRUTINY OF THE CLAIM OF THE ASSESSEE DEDUCTIO N WAS GRANTED UNDER SECTION 80IB(10) OF THE ACT. THE AREA OF THE PLOT W AS CERTIFIED BY THE PUNE MUNICIPAL CORPORATION, WHICH WAS TAKEN NOTE OF BY T HE AO. THE DECISION OF ITA NO. 2696/MUM/2014 SHRI MUKESH KIMTANI 4 THE HON'BLE BOMBAY HIGH COURT, IN THE CASE OF GABRI EL INDIA LTD. 203 ITR 108, SQUARELY APPLIES TO THE FACTS OF THE INSTANT C ASE IN AS MUCH AS THE REVISIONAL AUTHORITY HAS NO JURISDICTION TO TAKE A DIFFERENT VIEW ON THE MATTER SO LONG AS THE AO HAD TAKEN NOTE OF THE FACT S AND LEGAL DECISIONS TO COME TO A FAIRLY ACCEPTABLE CONCLUSION, WHICH IS NO T TOTALLY CONTRARY TO THE LAW. HE ALSO RELIED UPON SEVERAL OTHER DECISIONS ON THIS ASPECT. HE HAS ALSO REFERRED TO PAGE NO. 88 OF THE PAPER BOOK TO ESTABL ISH THAT AREA OF THE PLOT IS 40.50 ACRES AND REDUCTION OF AREA FOR SETTING UP RO ADS, GARDENS, ETC. SHOULD NOT BE EXCLUDED FOR THE PURPOSE OF CONSIDERING WHET HER AREA OF THE PLOT IS MORE THAN ONE ACRE OR NOT AND IN THIS REGARD HE REL IED UPON THE DECISION OF THE ITAT, MUMBAI BENCHES IN THE CASE OF M/S. VIDHI BUILDERS (PAGES 95 TO 104 OF CASE LAW PAPER BOOK) AS WELL AS THE CASE OF M/S. UMIYA ENTERPRISES (PAGES 48 TO 54 OF THE CASE LAW PAPER BOOK). HE FUR THER SUBMITTED THAT DEMARCATION OF SOME AREA FOR ROAD WIDENING, ETC. HA D BEEN COMPENSATED BY GIVING FSI RIGHTS, WHICH WAS UTILISED FOR THE SAME PROJECT. IN PARTICULAR, HE RELIED UPON THE DECISION OF THE PUNE BENCH IN THE C ASE OF BUNTY BUILDERS 127 ITD 286 WHEREIN THE FACTS ARE AS FOLLOWS: - ASSESSEE FIRM WAS IN THE BUSINESS OF CONSTRUCTION AS A BUILDER. IT PURCHASED LAND ADMEASURING 4600 SQ.MTS., WHICH WAS DEMARCATED INTO THREE PLOTS AND THE LAYOUT WAS SANCTIONED BY PUNE M UNICIPAL CORPORATION WHEREIN AN AREA ADMEASURING 690.70 SQ.M TS. WAS RESERVED FOR AMENITY SPACE WHICH WAS TO BE HANDED OVER TO PU NE MUNICIPAL CORPORATION IN WHICH EVENT THE NET AREA AVAILABLE F OR THE PROJECT HAS BECOME 3909 SQ.MTS. UNDER THESE FACTS THE BENCH OBS ERVED THAT THE LANGUAGE OF SECTION 80IB(10) SHOWS THAT THE PROJECT HAS TO BE ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE A CRE AND ALL THE CALCULATIONS AND SPECIFICATIONS ARE BASED UPON THE AREA OF 4600 SQ.MTS. IN OTHER WORDS, GRANTING OF FSI, CALCULATION OF AME NITIES, ETC. WERE BASED UPON THE AREA OF LAND WHICH IS ABOVE ONE ACRE IN WH ICH EVENT ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IB (10) OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE CIRCULAR ISSUED BY CBDT DATED 15 TH JULY, 2005 IS NOT APPLICABLE FOR THE ASSESSMENT YEAR UNDE R CONSIDERATION; IN FACT THE CIRCULAR ISSUED BY CBDT WAS CONSIDERED BY VARIO US BENCHES OF ITAT, PUNE. HE THUS STRONGLY SUPPORTED THE ORDER PASSED B Y THE AO AND SUBMITTED THAT THIS IS NOT A FIT CASE FOR INVOKING PROVISIONS OF SECTION 263 OF THE ACT AND HENCE THE ORDER PASSED BY THE REVISIONA L AUTHORITY DESERVES TO BE QUASHED. ITA NO. 2696/MUM/2014 SHRI MUKESH KIMTANI 5 6. ON THE OTHER HAND, THE LEARNED D.R. SUBMITTED THAT THE ASSESSEE MERELY PURCHASED DEVELOPMENT RIGHTS AND ON THE BASI S OF DEMARCATION OF SOME LAND FOR ROAD WIDENING, ETC. HE WAS ENTITLED F OR FSI WHICH COULD HAVE BEEN SOLD TO OUTSIDERS ALSO THOUGH, IN THE INSTANT CASE, IT WAS UTILISED FOR THIS PROJECT BUT THE FACT REMAINS THAT FSI GRANTED CAN BE SOLD OUTSIDE AND HENCE THE PORTION WHICH WAS DELINEATED FOR ROAD, PA RKS, ETC. SHOULD NOT BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF COMPUTI NG NET AVAILABLE AREA FOR DEVELOPMENT. IN THE INSTANT CASE THE NET AVAILABLE AREA FOR DEVELOPMENT IS LESS THAN ONE ACRE. HE STRONGLY RELIED UPON THE CIR CULAR ISSUED BY CBDT TO SUBMIT THAT THE VIEW TAKEN BY THE AO IS CONTRARY TO THE CIRCULAR ISSUED BY CBDT WHICH IS BINDING UPON THE AO AND HENCE THE VIE W TAKEN BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 7. JOINING THE ISSUE THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT IT WAS NOT THE CASE OF THE AO OR CIT, AT ANY STAGE, THAT FSI WAS UTILISED FOR ANY OTHER PURPOSE. IN OTHER WORDS, MERELY BECAUSE T HE NET AREA OF PLOT HAS BEEN WORKED OUT BY THE PUNE MUNICIPAL CORPORATION O NLY FOR THE PURPOSE OF DETERMINATION OF TDR PERMISSIBLE, IT CANNOT BE TAKE N INTO CONSIDERATION FOR THE PURPOSE OF CONSIDERING THE CONDITIONS PRESCRIBE D UNDER SECTION 80IB(10) OF THE ACT. HE ALSO SUBMITTED THAT THE ITAT, PUNE B ENCHES HAS SPECIFICALLY CONSIDERED THE CIRCULAR AND THE FACT THAT THE BUILD ERS WHO SACRIFICE AMENITIES, SPACE BUT SHOULD NOT BE IN A DISADVANTAG EOUS POSITION BECAUSE THE DEVELOPMENT AUTHORITY SANCTIONS ADDITIONAL FSI ON THE SPACE EARMARKED FOR AMENITIES AND UNDER THESE FACTS ITAT, PUNE BENC HES HAD TAKEN A VIEW THAT THE AREA OF LAND, FOR THE PURPOSE OF PROVISION S OF SECTION 80IB(10), IS THE AREA WHICH WAS PROJECTED BEFORE THE MUNICIPAL AUTHO RITIES FOR THE PURPOSE OF OBTAINING APPROVAL AND NOT THE NET AREA ON WHICH BU ILDING CAN BE CONSTRUCTED. HE HAS ALSO RELIED UPON THE DECISION O F THE ITAT, HYDERABAD BENCHES IN THE CASE OF SIGMA CONSTRUCTIONS 59 SOT 8 3 WHEREIN IDENTICAL ISSUE WAS CONSIDERED IN FAVOUR OF THE ASSESSEE AND THE SAME WAS CONFIRMED BY THE HON'BLE HIGH COURT OF ANDHRA PRADESH IN ITTA NO. 502 OF 2013 DATED 24.10.2013. ITA NO. 2696/MUM/2014 SHRI MUKESH KIMTANI 6 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT THE AO HAD TAKEN INTO CONSIDERATION THE REVISED CERTIFICATE ISSUED BY THE PUNE MUNICIPAL CO RPORATION WHILE GRANTING THE BENEFIT OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. IN THE LIGHT OF SEVERAL DECISION CITED BEFORE US IT CANNOT BE DISPU TED THAT THE VIEW TAKEN BY THE AO IS ONE OF THE POSSIBLE VIEWS ON THE MATTER. AS RIGHTLY OBSERVED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE GABRIAL INDIA LTD. (SUPRA) AS WELL AS THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CAS E OF SUNBEAM AUTO LTD. [322 ITR 167 (DEL)] MERELY BECAUSE THE COMMISSIONER OF INCOME TAX HOLDS A DIFFERENT OPINION ON THE MATTER AN ORDER PASSED BY THE AO CANNOT BE CONSIDERED AS ERRONEOUS AND PREJUDICIAL TO THE INTE RESTS OF REVENUE PARTICULARLY WHEN IT CANNOT BE ATTRIBUTED TO LACK O F ENQUIRY BY THE AO. HAVING REGARD TO THE OVERALL CIRCUMSTANCES OF THE C ASE WE ARE OF THE FIRM VIEW THAT THE LEARNED COMMISSIONER HAS NO JURISDICT ION TO INVOKE PROVISIONS OF SECTION 263 OF THE ACT IN THE FACTS AND CIRCUMST ANCES OF THE CASE. WE, THEREFORE, QUASH THE PROCEEDINGS INITIATED UNDER SE CTION 263 OF THE ACT AND ALLOW THE APPEAL FILED BY THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2015. SD/- SD/- (N.K. BILLAIYA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 18 TH MARCH, 2015 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CENTRAL, PUNE 4. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.