The ACIT-CC-1, Ahmedabad V. M/s. Giriraj Corporation, Ahmedabad

ITA 2704/AHD/2009

• Counselvise Citation: 270420514 RSA 2009
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 29-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: P M MEHTA
• Keywords: Capital asset; Opportunity of being heard
• Section: 143(3); 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO.2704, 2705 & 2706 / AHD/2009 (ASSESSMENT YEAR 2005-06, 2006-07 & 2007-08) ACIT, CIRCLE 1(3), AHMEDABAD VS. SHRI GIRIRAJ CORPORATION, M.H. MILL COMPOUND, KHOKHRA, AHMEDABAD C.O.2356/AHD/2009 IN I.T.A.NO. 2704/AHD/2009 (ASSESSMENT YEAR 2005-06) SHRI GIRIRAJ CORPORATION, VS. ACIT, CIRCLE 1(3) M.H. MILL COMPOUND, AHMEDABAD KHOKHRA, AHMEDABAD PAN/GIR NO. : AAEFG2116M (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S. K. GUPTA, CIT DR RESPONDENT BY: SHRI P M MEHTA, AR DATE OF HEARING: 12.03.2012 DATE OF PRONOUNCEMENT: 13.04.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THESE ARE THREE APPEALS OF THE REVENUE WHICH ARE D IRECTED AGAINST A COMBINED ORDER OF LD. CIT(A)-I, AHMEDABAD DATED 17. 06.2009 FOR ASSESSMENT YEARS 2005-06, 2006-07 & 2007-08 AND THE CROSS OBJECTION IS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2005- 06. SINCE COMMON I.T.A.NO.2704,2705,2706 /AHD/2009 C.O.256/AHD/2009 2 ISSUE IS INVOLVED, ALL THESE APPEALS WEE HEARD TOGE THER AND ARE BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SA KE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE THREE APPEALS OF THE REVEN UE:- 3. THE BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NO TED BY LD. CIT(A) IN PARA 3 OF HIS ORDER WHICH IS REPRODUCED BELOW: 3. THE NEXT ISSUE INVOLVED IN ALL APPEALS RELATE TO DISALLOWANCE OF THE CLAIM OF DEDUCTION U/S.80 18(10) OF THE I.T. AC T. THE CLAIM WHICH IS DISALLOWED IS AS UNDER: ASSESSMENT YEAR DISALLOWANCE 2005-06 RS. 52,56,860/- 2006-07 RS. 90,54,674/- 2007-08 RS. 2,13,67,936/- THE A.O. NOTICED THAT THE APPELLANT HAD DEVELOPED H OUSING PROJECTS, BEING NAVDEEP CO OPERATIVE HOUSING SOCIETY LIMITED AND RADHE HOUSING SOCIETY LIMITED RADHE HOUSING AND COMMERCIA L CO OPERATIVE SOCIETY LIMITED. THE A.O. HAS STATED THAT THE MUNIC IPAL AUTHORITIES HAD APPROVED THE PROJECT BY GIVING PERMISSION TO FTAJES HKUMAR SAVJIBHAI VASANI BEING POWER OF ATTORNEY HOLDER OF DIFFERENT PERSONS. HE NOTICED THAT THE LAND WAS REGISTERED IN THE NAME OF THE SOC IETIES AND PERMISSION FOR DEVELOPMENT WAS ALSO GIVEN IN THE NAME OF TWO S OCIETIES. THE APPELLANT HAD SHOWN THE WORK IN PROGRESS IN THE PRO FIT & LOSS ACCOUNT AS ALSO DIRECT AND INDIRECT EXPENSES AS ALSO THE PROFI T IN THE PROFIT & LOSS ACCOUNT OF THE RESPECTIVE YEARS. THE AO HAS REJECTE D THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 80 IB OF THE IT ACT ON THE FOLLOWING GROUNDS'- (A) THE PROJECT HAS BEEN DEVELOPED ON AN AREA 13642 AND 6990 SQ. MTRS. THE PIECE OF LAND IS OWNED BY SOCIETY I.E. NA VDEEP CO-OPERATIVE HOUSING SOCIETY LIMITED AND KADHE HOUSING AND COMME RCIAL CO- OPERATIVE HOUSING SOCIETY LIMITED. THE LAY OUT PLAN HAS BEEN APPROVED BY AMC ON 25/06/2004 AND SUBSEQUENT DATES FOR CONST RUCTION OF 115 UNITS OF RESIDENCES. THUS IT IS CLEAR THAT THE APPE LLANT IS NOT OWNER OF THE PROJECT. (B) THE CONSTRUCTION WORK IS DONE AS PER THE D EVELOPMENT/ CONSTRUCTION AGREEMENT AND HENCE THE APPELLANT IS M ERELY A CONTRACTOR FOR THE PURPOSE OF CONSTRUCTION OF THE PROJECTS. (C) APPELLANT'S CLAIM THAT IT HAS PAID MONEY FOR P URCHASE OF LAND AND TAKEN THE POSSESSION FOR DEVELOPMENT AND CONSTRUCTI ON OF PROJECT AND HENCE IT IS REAL OWNER OF PROJECT, IN VIEW OF SECTI ON 53A OF TRANSFER OF I.T.A.NO.2704,2705,2706 /AHD/2009 C.O.256/AHD/2009 3 PROPERTY ACT, IS ALSO NOT ACCEPTABLE BECAUSE OWNERS HIP OF LAND TRANSFERS ONLY WHEN REGISTERED SALE DEED US EXECUTED. (D) ALL THE EXPENSES ARE BEING DONE ON BEHALF OF THE CO-OPERATIVE SOCIETY AND THE SOCIETY HAS THE ULTIMATE LIABILITY TOWARDS SUCH EXPENSES. (E) AS PER THE TERMS OF THE AGREEMENT, TILL TH E COMPLETION OF THE HOUSING PROJECT, THE WORK IN PROGRESS IS TO BE COMP UTED ON THE BASIS OF WORK CONTRACT. THIS CLAUSE CLEARLY EVIDENCES THE ST ATUS OF THE APPELLANT, AS BEING THAT OF A WORKS CONTRACTOR AND NOT A DEVELOPE R OF PROJECT. (F) IN THE BOOKS OF ACCOUNTS, THE APPELLANT FI RM HAS NEVER SHOWN ANY INCOME FROM SALE OF FLATS/BUNGALOWS/ROW HOUSES BUT HAS MERELY SHOWN WORK DONE WHICH HAS BEEN SUBSEQUENTLY TRANSFERRED T O THE SOCIETY. (G) THE DEDUCTION IS NOT AVAILABLE TO APPELLA NT, WHO IS ENGAGED IN THE BUSINESS OF DEVELOPING A LAND AND DOING A LABOUR WO RK FOR CONSTRUCTION FOR OTHER ENTITY. THE DEDUCTION SHALL AVAILABLE ON IF THE UNDERTAKING IS DEVELOPING AND CONSTRUCTING THE HOUSING PROJECT. (H) THE PROJECT HAS BEEN ARTIFICIALLY DIVIDED INTO FOUR PARTS AND EACH PART IS CONSTRUCTED BY SEPARATE FIRM. IN THIS WAY, FOUR FIRMS NAMELY, SHRI HARI ASSOCIATES, SHRI NAND CORPORATION, GIRIRAJ COR PORATION AND VASUDEV DEVELOPERS HAVE BEEN CARRIED OUT THE CONSTRUCTION W ORK. AS PER THE PLAN APPROVED BY THE AMC ON 25/06/2004, THE SCHEME WAS T O HAVE COMMERCIAL BUILT UP AREA OF 10977.04 SQ. MTRS. IN A DDITION, THE REMAINING AREA WAS TO HAVE RESIDENTIAL UNITS, OUT OF THE TOTA L AREA OF 56336.16 SQ. MTRS., AS THE SCHEME WAS APPROVED BY THE LOCAL AUTH ORITY JOINTLY IN THE NAME OF SOCIETIES. THE COMMERCIAL AREA IN THE COMPL EX IS AN INTEGRAL PART IF THE PROJECT APPROVED AS IS EVIDENT BY THE BLUE P RINT OF THE PROJECT. THE AREA OF COMMERCIAL COMPLEX COMES TO 19.52% OF THE T OTAL AREA OF THE PROJECT WHICH IS MORE THAN THE PRESCRIBED LIMITS UN DER SECTION 80IB(10). MOREOVER WHEN THE PROJECT IS APPROVED AS 'HOUSING P ROJECT VIS-A VIS COMMERCIAL COMPLEX', IT CANNOT BE SAID TO BE A HOUS ING PROJECT ELIGIBLE FOR DEDUCTION. RELIANCE PLACED ON THE DECISION OF H ON'BLE ITA MUMBAI 'C BENCH IN THE CASE OF LAUKIK DEVELOPERS V. DCIT105IT O 657(MUM.) 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN ALL THE THREE YEARS. NOW, THE REVENUE IS IN APPEAL BEFORE US. 5. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). HE FURTHER SUBMITTED THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF I.T.A.NO.2704,2705,2706 /AHD/2009 C.O.256/AHD/2009 4 HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF RADHE DEVELOPERS AS REPORTED IN 341 ITR 403. OUR ATTENTION WAS DRAWN T O PAGE 12 PARA 3.2 OF THE ORDER OF LD. CIT(A) AND IT WAS SUBMITTED THAT T HE ISSUE IN QUESTION WAS DECIDED BY LD. CIT(A) AS PER THIS PARA OF HIS O RDER. IT WAS ALSO SUBMITTED THAT DEVELOPMENT AGREEMENT IS AVAILABLE I N THE PAPER BOOK AND ITS ENGLISH VERSION CAN BE SEEN ON PAGES 116-130 & 140-154 OF THE COMPILATION FILED BY THE ASSESSEE CONTAINING 163 PA GES. IT IS ALSO SUBMITTED THAT THE LAND IN QUESTION WAS ALSO PURCHA SED BY THE ASSESSEE FIRM FROM TWO SOCIETIES AND THE CONCERNED AGREEMENT FOR PURCHASE OF THE LAND WAS EXECUTED ON 22.06.2001 & 19.03.2002 AND EN GLISH VERSION OF THIS IS ALSO AVAILABLE ON PAGES 131-139 & 155-163 O F THE COMPILATION. IT IS ALSO SUBMITTED THAT THE AGREED PRICE OF THE LAND WAS RS.93 LACS & RS.48 LACS RESPECTIVELY OUT OF WHICH THE ASSESSEE ALREADY PAID PART CONSIDERATION AND THE POSSESSION OF THE LAND WAS GIVEN TO THE ASS ESSEE BY THE ORIGINAL LAND OWNER BY VIRTUE OF DEVELOPMENT AGREEMENT ENTER ED INTO BY THE ASSESSEE WITH THE SAID TWO SOCIETIES BEING, THE OWN ERS OF THE LAND. IT IS FURTHER SUBMITTED THAT SINCE AS PER THE PROVISIONS OF SECTION 2(47)(V) OF THE INCOME TAX ACT, 1961, AND SECTION 53 A OF TRANS FER OF PROPERTY ACT, THE ASSESSEE HAS TO BE CONSIDERED AS OWNER OF THE L AND IN QUESTION AND THEREFORE, THE A.O. WAS NOT JUSTIFIED IN DENYING TH E SAID BENEFIT OF SECTION 80-IB(10) OF THE ACT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENTS CITED BY THE LD. A.R. OF THE ASSESSEE. WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY LD. CIT(A) AS PER PARA 3.2 OF H IS ORDER WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 3.2 I HAVE CAREFULLY CONSIDERED THE ABOVE ASSESSM ENT ORDER AND THE SUBMISSIONS ON THE ISSUE. IT IS NOTICED THAT TH E APPELLANT HAS ENTERED INTO AGREEMENT FOR DEVELOPMENT OF THE HOUSI NG PROJECTS I.T.A.NO.2704,2705,2706 /AHD/2009 C.O.256/AHD/2009 5 WITH NAVDEEP CO-OP. HSG. SOCIETY AND RADHE HOUSING AND COMMERCIAL CO OPERATIVE SOCIETY. THE APPELLANT HAS AS PER DEVELOPMENT AGREEMENT CARRIED OUT THE WORK OF DEVEL OPMENT OF THE TWO SOCIETIES. THE A.O'S ARGUMENTS ARE MAINLY BASED ON THREE GROUNDS I.E. THE LAND WAS REGISTERED IN THE NAME OF SOCIETY AND THAT THE PERMISSION FOR DEVELOPMENT WAS IN THE NAME OF S OCIETY, SECONDLY, IN THE ACCOUNTS THE SALE WAS NOT SHOWN BU T THE PROFIT WAS SHOWN AND THIRDLY, ON TOTAL AREA OF LAND OF M.H. MI LLS, THERE IS COMMERCIAL CONSTRUCTION OF 19.20% OF TOTAL AREA.. A S AGAINST THIS, THE APPELLANT HAS CLARIFIED AND PROVED THAT THE DEV ELOPMENT WAS CARRIED OUT BY THEM. EVEN THE COST FOR OBTAINING PE RMISSION WAS BORNE BY THE APPELLANT. THE APPELLANT HAD ENTERED I NTO BOTH THE AGREEMENTS FOR DEVELOPMENT AS ALSO BANAKHAT FOR PUR CHASE OF LAND WITH THE TWO SOCIETIES AND AS PER THE AGREEMENT THE Y HAVE CARRIED OUT THE DEVELOPMENT WORK. THUS, APPELLANT IN PRESEN T CASE HAS ACQUIRED DOMINANT CONTROL OVER THE LAND AND AS PER BANAKHAT AGREEMENT ENTERED WITH SOCIETIES; DEVELOPER WAS BOU ND TO PAY AMOUNT FOR ACQUIRING THE LAND IRRESPECTIVE OF THE F ACT WHETHER IT IS ABLE TO SELL THE UNITS. POSSESSION OF THE LAND WAS ALSO GIVEN TO APPELLANT DEVELOPER AND RISKS ASSOCIATED WITH HOUSI NG PROJECT WERE ON IT. THE APPELLANT IS NOT EARNING REMUNERATION AT FIXED RATE. THE APPELLANT SUBMITTED THAT THEY ARE FOLLOWING PER CENTAGE COMPLETION METHOD OF ACCOUNTING AND THUS THE PROFIT /LOSS IN RESPECT OF THE PROJECT WAS SHOWN ON YEAR TO YEAR BASIS AND IT WAS NOT CORRECT TO SAY THAT THE APPELLANT HAD NOT SHOWN ANY INCOME ON SALE OF UNITS. IT IS ALSO SEEN FROM THE AGREEMENT FOR DE VELOPMENT AS WELL AS THE BANAKHAT AGREEMENT THAT THE RISK FOR DEVELOP MENT INCLUDING COST IS TO BE BORNE BY THE APPELLANT. IT IS NOTICED THAT APPELLANT IS FOLLOWING PERCENTAGE COMPLETION METHOD OF ACCOUNTIN G AND PROFIT IS SHOWN WITH REFERENCE TO WORK IN I.E. PROJECT WOR K CARRIED OUT DURING THE YEAR. OTHER CONDITIONS OF SECTION 80IB(1 0) ARE NOT DISPUTED BY THE AO AND ASSESSEE HAS FURNISHED ALL I NFORMATION THERETO. IN THE PRESENT CASE THE ASSESSEE HAS CARRIED DEVELO PMENT ACTIVITY ONLY FOR 13,642 SQUARE METERS IN CASE OF NAVDEEP AN D 6990 IN CASE OF RADHE AND HAS NOT CARRIED OUT ANY COMMERCIAL CON STRUCTION ON LAND WHICH IS ACQUIRED BY ASSESSEE WITH DOMINANT CO NTROL. THE APPELLANT HAS NO CONNECTION WITH COMMERCIAL ACTIVIT Y CARRIED OUT BY OTHER FIRM ON ADJOINING LANDS. THE DECISION OF L AUKIK DEVELOPERS V/S DEPUTY COMMISSIONER OF INCOME TAX RE LIED UPON BY THE ASSESSING OFFICER ARE NOT APPLICABLE TO APPE LLANT'S CASE, AS IN THE SAID CASE THE FIRM HAS CARRIED OUT COMMERCIA L ACTIVITY I.T.A.NO.2704,2705,2706 /AHD/2009 C.O.256/AHD/2009 6 WHEREAS IN THE PRESENT CASE, ASSESSEE HAS NOT CARRI ED OUT ANY COMMERCIAL ACTIVITY. HENCE, DEDUCTION UNDER SECTION 80IB(10) CANNOT BE DENIED. ACCORDINGLY THE APPELLANT WAS ENTITLED TO DEDUCTION U/S.80 IB(10). ON CONSIDERATION OF ALL THESE ASPECTS AND THE RATIO OF THE DECISION OF ITAT, AHMEDABAD IN THE CASE OF RADHE DEVELOPERS AND SUBSEQUENT DECISION IN THE CASE OF SHAKTI DEVELOPER S THE A.O. IS DIRECTED TO ALLOW DEDUCTION U/S. 80 IB(10) TO THE A PPELLANT. 7. FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT HE HAS DECIDED THIS ISSUE BY FOLLOWING THE TRIBUNAL DE CISION RENDERED IN THE CASE OF RADHE DEVELOPERS AND THE SUBSEQUENT DECISIO N OF THE TRIBUNAL IN THE CASE OF SHAKTI CORPORATION. NOW, THIS ISSUE IS COVERED BY THIS JUDGMENT OF HONBLE GUJARAT HIGH COURT CITED BY LD. A.R. OF THE ASSESSEE, INSTEAD OF REFERRING TO THESE TRIBUNAL DE CISIONS, NOW, WE CONSIDER THIS JUDGMENT OF HONBLE GUJARAT HIGH COUR T RENDERED IN THE CASE OF RADHE DEVELOPERS (SUPRA). THE ISSUE IN QUE STION WAS DECIDED BY THE HONBLE GUJARAT HIGH COURT AS PER PARA 36 OF TH IS JUDGMENT WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 36 WE HAVE NOTED AT SOME LENGTH, THE RELEVA NT TERMS AND CONDITIONS OF THE DEVELOPMENT AGREEMENTS BETWEE N THE ASSESSEES AND THE LAND OWNERS IN THE CASE OF RADHE DEVELOPERS. WE ALSO NOTED THE TERMS OF THE AGREEMENT OF SALE EN TERED INTO BETWEEN THE PARTIES. SUCH CONDITIONS WOULD IMMEDIAT ELY REVEAL THAT THE OWNER OF THE LAND HAD RECEIVED PART OF SAL E CONSIDERATION. IN LIEU THEREOF HE HAD GRANTED DEVELOPMENT PERMISSI ON TO THE ASSESSEE. HE HAD ALSO PARTED WITH THE POSSESSION OF THE LAND. THE DEVELOPMENT OF THE LAND WAS TO BE DONE ENTIRELY BY THE ASSESSEE BY CONSTRUCTING RESIDENTIAL UNITS THEREON AS PER THE P LANS APPROVED BY THE LOCAL AUTHORITY. IT WAS SPECIFIED THAT THE ASSE SSEE WOULD BRING IN TECHNICAL KNOWLEDGE AND SKILL REQUIRED FOR EXECUTIO N OF SUCH PROJECT. THE ASSESSEE HAD TO PAY THE FEES TO THE AR CHITECTS AND ENGINEERS. ADDITIONALLY, THE ASSESSEE WAS ALSO AUTH ORISED TO APPOINT ANY OTHER ARCHITECT OR ENGINEER, LEGAL ADVI SER AND OTHER PROFESSIONALS. HE WOULD APPOINT SUB-CONTRACTOR OR L ABOUR CONTRACTOR FOR EXECUTION OF THE WORK. THE ASSESSEE WAS AUTHORISED TO ADMIT THE PERSONS WILLING TO JOIN THE SCHEME. TH E ASSESSEE WAS I.T.A.NO.2704,2705,2706 /AHD/2009 C.O.256/AHD/2009 7 AUTHORISED TO RECEIVE THE CONTRIBUTIONS AND OTHER D EPOSITS AND ALSO RAISE DEMANDS FROM THE MEMBERS FOR DUES AND EXECUTE SUCH DEMANDS THROUGH LEGAL PROCEDURE. IN CASE, FOR SOME REASON, THE MEMBER ALREADY ADMITTED IS DELETED, THE ASSESSEE WO ULD HAVE THE FULL RIGHT TO INCLUDE NEW MEMBER IN PLACE OF OUTGOI NG MEMBER. HE HAD TO MAKE NECESSARY FINANCIAL ARRANGEMENTS FOR WH ICH PURPOSE HE COULD RAISE FUNDS FROM THE FINANCIAL INSTITUTION S, BANKS, ETC. THE LAND OWNERS AGREED TO GIVE NECESSARY SIGNATURES, AG REEMENTS, AND EVEN POWER OF ATTORNEY TO FACILITATE THE WORK OF TH E DEVELOPER. IN SHORT, THE ASSESSEE HAD UNDERTAKEN THE ENTIRE TASK OF DEVELOPMENT, CONSTRUCTION AND SALE OF THE HOUSING UNITS TO BE LO CATED ON THE LAND BELONGING TO THE ORIGINAL LAND OWNERS. IT WAS ALSO AGREED BETWEEN THE PARTIES THAT THE ASSESSEE WOULD BE ENTITLED TO USE THE FULL FSI AS PER THE EXISTING RULES AND REGULATIONS. HOWEVER, IN FUTURE, RULES BE AMENDED AND ADDITIONAL FSI BE AVAILABLE, THE ASSESS EE WOULD HAVE THE FULL RIGHT TO USE THE SAME ALSO. THE SALE PROCE EDS OF THE UNITS ALLOTTED BY THE ASSESSEE IN FAVOUR OF THE MEMBERS E NROLLED WOULD BE APPROPRIATED TOWARDS THE LAND PRICE. EVENTUALLY AFTER PAYING OFF THE LAND OWNER AND THE ERSTWHILE PROPOSED PURCHASER S, THE SURPLUS AMOUNT WOULD REMAIN WITH THE ASSESSEE. SUCH TERMS A ND CONDITIONS UNDER WHICH THE ASSESSEE UNDERTOOK THE DEVELOPMENT PROJECT AND TOOK OVER THE POSSESSION OF THE LAND FROM THE ORIGI NAL OWNER, LEAVES LITTLE DOUBT IN OUR MIND THAT THE ASSESSEE H AD TOTAL AND COMPLETE CONTROL OVER THE LAND IN QUESTION. THE ASS ESSEE COULD PUT THE LAND TO USE AS AGREED BETWEEN THE PARTIES. THE ASSESSEE HAD FULL AUTHORITY AND ALSO RESPONSIBILITY TO DEVELOP THE HO USING PROJECT BY NOT ONLY PUTTING UP THE CONSTRUCTION BUT BY CARRYIN G OUT VARIOUS OTHER ACTIVITIES INCLUDING ENROLLING MEMBERS, ACCEP TING MEMBERS, CARRYING OUT MODIFICATIONS ENGAGING PROFESSIONAL AG ENCIES AND SO ON. MOST SIGNIFICANTLY, THE RISK ELEMENT WAS ENTIRE LY THAT OF THE ASSESSEE. THE LAND OWNER AGREED TO ACCEPT ONLY A FI XED PRICE FOR THE LAND IN QUESTION. THE ASSESSEE AGREED TO PAY OF F THE LAND OWNER FIRST BEFORE APPROPRIATING ANY PART OF THE SALE CON SIDERATION OF THE HOUSING UNITS FOR HIS BENEFIT. IN SHORT, THE ASSESS EE TOOK THE FULL RISK OF EXECUTING THE HOUSING PROJECT AND THEREBY MAKING PROFIT OR LOSS AS THE CASE MAY BE. THE ASSESSEE INVESTED ITS OWN F UNDS IN THE COST OF CONSTRUCTION AND ENGAGEMENT OF SEVERAL AGENCIES. THE LAND OWNER WOULD RECEIVE A FIX PREDETERMINED AMOUNT TOWA RDS THE PRICE OF LAND AND WAS THUS INSULATED AGAINST ANY RISK. BY NO STRETCH OF IMAGINATION CAN IT BE SAID THAT TH E ASSESSEE ACTED ONLY AS A WORKS CONTRACTOR. THE TERMS 'WORKS CONTRA CTOR' HAS BEEN RECEIVING JUDICIAL ATTENTION IN SEVERAL CASES IN TH E CASE OF CIT V. I.T.A.NO.2704,2705,2706 /AHD/2009 C.O.256/AHD/2009 8 GLENMARK PHARMACEUTICALS LTD. [2010] 324 ITR 199 (B OM), THE BOMBAY HIGH COURT OBSERVED AS UNDER (PAGE 207) : 'CONTRACT OF WORK OR A CONTRACT OF SALE 8. FROM THE ABOVE PARA OF THE JUDGMENT OF HONBLE G UJARAT HIGH COURT, WE FIND THAT IT IS NOTED BY THE HONBLE GUJA RAT HIGH COURT IN THAT CASE THAT THE ASSESSEE DEVELOPER WAS AUTHORIZED TO HAVE THE POSSESSION OF THE LAND FOR DEVELOPMENT OF THE HOUSING PROJECT AND THE ASSESSEE WAS ALSO AUTHORIZED TO RECEIVE THE CONTRIBUTION AND OTHER DE POSITS AND ALSO RAISE DEMANDS FROM THE MEMBERS FOR THE DUES AND EXECUTE S UCH DEMANDS THROUGH LEGAL PROCEDURES. IT IS ALSO NOTED BY HON BLE GUJARAT HIGH COURT IN THAT CASE THAT THE ASSESSEE HAD UNDERTAKEN ENTIR E RISK OF DEVELOPMENT, CONSTRUCTION AND SALE OF THE HOUSING UNITS TO BE LO CATED ON THE LAND BELONGING TO THE ORIGINAL LAND OWNER. IT IS ALSO NOTED BY THE HONBLE GUJARAT HIGH COURT THAT FROM THE TERMS & CONDITIONS OF THE DEVELOPMENT AGREEMENT UNDER WHICH THE ASSESSEE HAD TO UNDERTAKE THE DEVELOPMENT PROJECT AND TOOK OVER THE POSSESSION OF THE LAND FR OM THE ORIGINAL OWNER, THERE IS LITTLE DOUBT IN THEIR MINDS THAT THE ASSES SEE HAD TOTAL AND COMPLETE CONTROL OVER THE LAND IN QUESTION. IT IS ALSO NOTE D BY THE HONBLE GUJARAT HIGH COURT THAT THE ASSESSEE HAD FULL AUTHORITY AND ALSO RESPONSIBILITY TO DEVELOP THE HOUSING PROJECT BY NOT ONLY PUTTING CON STRUCTION BUT ALSO CARRYING OUT VARIOUS OTHER ACTIVITIES INCLUDING ENR OLLING MEMBERS, ACCEPTING MEMBERSHIP, CARRYING OUT MODIFICATION, EN GAGE PROFESSIONAL AGENCY AND SO ON AND MOST SIGNIFICANTLY RISK ELEMEN T WAS ENTIRELY THAT OF THE ASSESSEE. 9. NOW, IN THE LIGHT OF THESE FACTS OF THAT CASE, W E EXAMINE THE DECISION OF LD. CIT(A) IN THE PRESENT CASE. WE FIND THAT LD. CIT(A) HAS DECIDED THE ISSUE BY OBSERVING THAT IT IS SEEN FROM THE AGREEMENT FOR DEVELOPMENT AS WELL AS BANAKHAT FOR PURCHASE OF LAN D THAT RISK FOR DEVELOPMENT INCLUDING COST IS TO BE BORNE BY THE AS SESSEE BUT HE HAS NOT I.T.A.NO.2704,2705,2706 /AHD/2009 C.O.256/AHD/2009 9 GIVEN ANY BASIS REGARDING THIS FINDING. FROM THE A SSESSMENT ORDER, WE FIND THAT IT IS OBSERVED BY THE A.O. THAT FROM BOOK S OF ACCOUNT, THE ASSESSEE NEVER SHOWN ANY INCOME FROM SALE OF FLATS / BUNGALOWS / ROW HOUSES BUT HAS MERELY SHOWN WORK DONE SUBSEQUENTLY TRANSFERRED TO THE SOCIETY. THIS FINDING OF THE A.O. HAS NOT BEEN DIS LODGED BY LD. CIT(A) AND WITHOUT DOING SO AND WITHOUT DISLODGING THIS AR GUMENT OF THE A.O., IT CANNOT BE SAID THAT THE ASSESSEE HAD TOTAL AND COMP LETE CONTROL OVER THE LAND IN QUESTION. MOREOVER, THERE IS ONE MORE OBJE CTION OF THE A.O. THAT THE COMMERCIAL COMPLEX 19.52% OF THE TOTAL AREA OF THE PROJECT WHICH IS MORE THAN THE PRESCRIBED LIMIT U/S 80-IB(10). FOR WORKING OUT THIS AREA OF COMMERCIAL COMPLEX, THE A.O. HAS CONSIDERED THE TOT AL AREA OF 56336.16 SQ. MTRS. AND COMMERCIAL BUILT-UP AREA OF 10977.04 SQ. MTRS. AS PER PLAN APPROVED BY AMC ON 25.06.2004. REGARDING THIS OBJE CTION OF THE A.O., LD. CIT(A) HAS SIMPLY STATED THAT THE ASSESSEE HAS CARRIED OUT DEVELOPMENT ACTIVITY ONLY FOR 13642 SQ. MTRS. IN CA SE OF NAVDEEP & 6990 SQ. MTS. IN CASE OF RADHE AND HAS NOT CARRIED OUT A NY COMMERCIAL CONSTRUCTION ON THE LAND, WHICH IS ACQUIRED BY THE ASSESSEE WITH DOMINANT CONTROL. HE FURTHER OBSERVED THAT THE ASSESSEE HA S NO CONNECTION WITH COMMERCIAL ACTIVITIES CARRIED OUT BY OTHER FIRM AT THE ADJOINING LAND. BUT HE HAS NOT GIVEN ANY BASIS OF THESE OBSERVATIONS. THIS IS NOT COMING OUT AS TO WHO HAD CARRIED OUT THE CONSTRUCTION OF COMME RCIAL BUILT UP AREA APPROVED BY AMC ON 25.06.2004 AND WHETHER THERE IS SEPARATE APPROVAL OF AMC IN RESPECT OF 13642 SQ. MTRS. AND 6990 SQ. M TRS., ON WHICH CONSTRUCTION HAD BEEN CARRIED OUT BY THE ASSESSEE. IF THE APPROVAL OF AMC IS COMMON AND ONE FOR THE ENTIRE AREA OF 56336. 16 SQ. MTRS., WHICH HAS BEEN DIVIDED INTO FOUR DEVELOPERS THEN, HOW THE COMMERCIAL AREA OF THE ENTIRE PROJECT CAN BE DISREGARDED FOR WORKING O UT THE PERCENTAGE OF COMMERCIAL BUILT UP AREA IN THE HOUSING PROJECT UND ERTAKEN BY THE I.T.A.NO.2704,2705,2706 /AHD/2009 C.O.256/AHD/2009 10 ASSESSEE. ON THIS ASPECT ALSO, NO LIGHT HAS BEEN T HROWN BY LD. CIT(A) AND HE HAS SIMPLY STATED THAT THE TRIBUNAL DECISION RENDERED IN THE CASE OF LOKIK DEVELOPERS VS DCIT RELIED UPON BY THE A.O. IS NOT APPLICABLE IN THE PRESENT CASE ON THIS BASIS THAT IN THE PRESENT CASE, THE ASSESSEE HAS NOT CARRIED OUT ANY COMMERCIAL ACTIVITY BUT WITHOUT EXA MINING THE APPROVAL OF AMC IN RESPECT OF 13642 SQ. MTRS AND 6990 SQ. MT RS., IF ANY GRANTED, IT CANNOT BE SAID THAT OUT OF ONLY ONE HOUSING PROJECT APPROVED BY AMC, IF HOUSING PORTION IS DEVELOPED/CONSTRUCTED BY ONE PER SON AND THE COMMERCIAL PORTION IS CONSTRUCTED/DEVELOPED BY ANOT HER PERSON, THEN IN RESPECT OF THIS PERSON WHO HAS CONSTRUCTED THE HOUS ING PORTION, COMMERCIAL PORTION HAS TO BE DISREGARDED FOR THE PU RPOSE OF WORKING OUT THE PERCENTAGE OF COMMERCIAL BUILT UP AREA IN THE H OUSING PROJECT. IN THE CASE OF BRAHMA ASSOCIATES VS JCIT AS REPORTED IN 11 9 ITD 255 (SB) PUNE, THIS QUESTION WAS RAISED BEFORE THE SPECIAL B ENCH OF THE TRIBUNAL THAT IF COMMERCIAL AREA IS MORE THAN THE PRESCRIBED AREAS OF COMMERCIAL SPACE IN A HOUSING PROJECT, THEN THE PROPORTIONATE DEDUCTION WOULD BE ALLOWED OR NOT AND IT WAS HELD BY THE SPECIAL BENCH OF THE TRIBUNAL THAT PROPORTIONATE DEDUCTION IS ALLOWABLE IF THE PERCENT AGE OF COMMERCIAL USE IS NOT MORE THAN 10%. BUT IF THE PROFIT OF RESIDEN TIAL PORTION CAN BE WORKED OUT INDEPENDENTLY, THEN THE DEDUCTION COULD BE CONFINED ONLY TO THE PROFITS OF THE HOUSING PROJECT. AFTER THIS DEC ISION OF SPECIAL BENCH OF THE TRIBUNAL, THERE IS JUDGMENT OF HONBLE BOMBAY H IGH COURT IN THE SAME CASE IN INCOME TAX APPEAL NO.1194/10 DATED 20. 02.2011 AS PER WHICH THIS DECISION OF SPECIAL BENCH OF THE TRIBUNA L WAS PARTLY REVERSED AND HENCE, THIS ISSUE SHOULD BE DECIDED AFTER CONSI DERING JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF B RAHMA ASSOCIATES (SUPRA) AND ALSO AFTER FINDING THAT WHETHER THERE I S DOMINANT CONTROL OR NOT AND WHETHER THERE IS SEPARATE APPROVAL OF AMC F OR THE PORTION OF THE I.T.A.NO.2704,2705,2706 /AHD/2009 C.O.256/AHD/2009 11 HOUSING PROJECT UNDERTAKEN BY THIS ASSESSEE. IN VI EW OF THE ABOVE DISCUSSION, WE FEEL THAT THE ENTIRE MATTER SHOULD G O BACK TO THE FILE OF LD. CIT(A) FOR A FRESH DECISION AND HENCE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF L D. CIT(A) FOR A FRESH DECISION. HE SHOULD PASS NECESSARY ORDER AS PER LA W IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. 10. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE ALLOWED FOR STATISTICAL PURPOSES. 11. NOW, WE TAKE UP THE C.O. FILED BY THE ASSESSEE. THE GROUNDS RAISED BY THE ASSESSEE IN THE C.O. ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) SHOULD HAVE UPHELD THE ASSESSEE'S CONTENTION THAT THE ASSESSMENT FRAMED U/S.153AWAS NOT VALID IN LAW. 2. WITHOUT PREJUDICE AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) SHOULD HAVE HELD THAT IT WA S NOT AT ALL A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 153A. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) SHOULD HAVE APPRECIATED THAT NO INCRIMINATING MATER IAL OR ANY UNDISCLOSED ASSET RELATABLE TO THIS ASSESSMENT YEAR WAS FOUND AT ALL AND HENCE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REOPENING THE ASSESSMENT BY INVOKING THE PROVISIONS OF SECTION 15 3A. 4. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) SHOULD HAVE REALIZED THAT FOR T HIS ASSESSMENT YEAR SINCE NO INCRIMINATING MATERIAL WAS FOUND AT A LL AND NO UNDISCLOSED ASSET HAD SURFACED THE ASSESSING OFFICE R SHOULD NOT HAVE FRAMED THE ASSESSMENT U/S. 153A. 5. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) SHOULD HAVE REALIZED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN EMBARKING UPON THE PRO CESSING AND SCRUTINY OF THE ASSESSMENT IN A FASHION WHICH WAS P ERMISSIBLE IN A REGULAR ASSESSMENT U/S. 143(3) BUT IN THIS PARTICUL AR CASE IT WAS NOT PERMISSIBLE U/S.153A. 6. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF CROSS OBJECTIONS EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE SAME. I.T.A.NO.2704,2705,2706 /AHD/2009 C.O.256/AHD/2009 12 13. SINCE THE ENTIRE MATTER IN RESPECT OF REVENUES APPEALS ARE RESTORED BACK TO THE FILE OF LD. CIT(A), WE FEEL IT PROPER T HAT THE ISSUE RAISED BY THE ASSESSEE IN THE C.O. SHOULD ALSO BE DECIDED AFR ESH BY LD. CIT(A) AND HENCE, WE SET ASIDE THE ORDER OF LD. CIT(A) IN THIS REGARD ALSO AND RESTORE THIS MATTER ALSO BACK TO HIS FILE FOR A FRESH DECIS ION. 14. IN THE RESULT, ALL THE APPEALS OF THE REVENUE AND THE C.O. OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 15. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 2/4 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 4/4.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.10/4 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 13/4/12 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.13/4 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13/4/12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .