Shri Kamleshkumar Gandalal Shah, Ahmedabad V. The Income tax Officer,Ward-9(2), Ahmedabad

ITA 2709/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67906 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 17-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DK MISHR A
• Assessee Lawyers: PRAKASH SHAH
• Keywords: Initiation of penalty proceedings
• Section: 10; 234B; 80IB

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . . . . , , , , ! ! ! ! ' #$ ' #$ ' #$ ' #$ , , , , % % % % BEFORE S/SHRI N.S. SAINI, ACCOUNTANT MEMBER AND KUL BHARAT, JUDICIAL MEMBER) ITA NO.2709/AHD/2010 [ASSTT.YEAR : 2006-2007] KAMLESHKUMAR GANDALAL SHAH C/O. MEHTA LODHA & COMPANY 1 ST FLOOR, SAKAR-I OFF GANDHI GRAM RLY. STATION ASHRAM ROAD, AHMEDABAD. PAN : ACZPS 3894 H /VS. ITO, WARD-9(2) AHMEDABAD. ( (( ('( '( '( '( / APPELLANT) ( (( ()*'( )*'( )*'( )*'( / RESPONDENT) +$ , - / ASSESSEE BY : SHRI PRAKASH SHAH / , - / REVENUE BY : SHRI D.K. MISHRA, DR '0 , $1/ DATE OF HEARING : 30 TH OCTOBER, 2013 234 , $1/ DATE OF PRONOUNCEMENT : 08.11.2013 5 / O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT( A)-XV, AHMEDABAD DATED 8.7.2010. ITA NO.2709/AHD/2010 -2- 2. THE GROUND NOS.1 AND 5 ARE GENERAL IN NATURE, AN D HENCE REQUIRES NO ADJUDICATION BY US. 3. IN GROUND NO.3 OF THE APPEAL, THE ASSESSEE IS AG GRIEVED BY THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE I NTEREST CHARGED BY THE AO UNDER SECTION 234B OF THE ACT. AT THE TIME OF HEARING, NO SUBMISSIONS WERE MADE BY THE LEARNED CO UNSEL OF THE ASSESSEE. THUS, THIS GROUND OF THE APPEAL OF THE A SSESSEE IS DISMISSED FOR WANT OF PROSECUTION. 4. IN GROUND NO.4, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) CONFIRMING THE INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. AT THE TIME OF HEARING, THE LEARNED AR DID NOT MAKE ANY SUBMISSION ON THIS GROU ND OF THE APPEAL, HENCE, THE SAME IS DISMISSED FOR WANT OF PR OSECUTION. 6. THE ONLY REMAINING GROUND OF THE APPEAL IS GROUN D NO.2, WHERE IN THE GRIEVANCE OF THE ASSESSEE IS THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 80IB(10) OF THE ACT OF ` 74,34,997/- MADE BY THE AO. 7. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IN THE RETURN OF INCOME FILED CLAIMED DEDUCTION OF ` 74,34,997/- UNDER SECTION 80IB(10) OF THE IT ACT. THE AO DISALLOWED THE CLAI M OF DEDUCTION TO THE ASSESSEE ON THE GROUND THAT THE AS SESSEE ACTED ONLY AS AN AGENT OF THE LAND OWNER, AND THEREFORE, IS NOT QUALIFIED ITA NO.2709/AHD/2010 -3- AS A DEVELOPER, AS THERE IS NO CONSTRUCTIVE OWNERSH IP OF THE LAND WITH THE ASSESSEE. 8. ON APPEAL BEFORE THE LEARNED CIT(A) CONFIRMED TH E ORDER OF THE AO, FOR THE REASONS THAT ACCORDING TO SECTIO N 80IB(10) OF THE ACT, THE PROFITS SHOULD BE DERIVED BY AN ASSESS EE FROM CARRYING ON THE BUSINESS OF DEVELOPING AND BUILDING HOUSING PROJECT. SINCE THE ASSESSEE IS NOT THE OWNER OF TH E LAND ON WHICH THE PROJECT IS DEVELOPED AND THE ASSESSEE HAS ALSO NOT ACQUIRED ANY DOMINANT CONTROL OVER THE LAND, AS WELL AS ON T HE HOUSING PROJECT, THEREFORE, THE ASSESSEE COULD NOT BE SAID TO HAVE CARRIED OUT THE BUSINESS, AS REFERRED TO SUB-SECTION 10 OF SECTION 80IB OF THE ACT. THE LEARNED CIT(A) OBSERVED THAT THE TERM DEVELOPER AND BUILDER MEANS A PERSONS WHO IS INVOLVED IN THE PROJECT FROM THE PURCHASE OF LAND UPTO THE SALE OF THE FINAL PRO DUCTS, I.E. HOUSE/FLATS. IN THE INSTANT CASE, THE LAND WAS PUR CHASED FROM SHRI SANJAYBHAI HARIBHAI THAKKAR, AND THE ASSESSEE HAS NOT INVESTED ANY AMOUNT FOR THE PURCHASE OF LAND ON WHICH THE PR OJECT WAS DEVELOPED, AND THEREFORE, IT CAN BE STATED THAT THE PROJECT WAS NOT WHOLLY AND EXCLUSIVELY DEVELOPED BY THE ASSESSEE. BY REFERRING TO PARA-4 OF THE AGREEMENT AND CLAUSE 7 OF THE DEVE LOPMENT AGREEMENT, THE LEARNED CIT(A) ARRIVED AT THE CONCLU SION THAT THE ASSESSEE WAS ENGAGED BY THE LANDOWNERS FOR CARRYING OUT THE HOUSING PROJECT AS PER THE SPECIFICATION AND PLAN O BTAINED BY THE LANDOWNERS FROM THE LOCAL AUTHORITY. THE ASSESSEE HAS NO AUTHORITY OR POWERS TO CONSTRUCT THE HOUSE BUILDING PROJECT ON HIS OWN, ON THE SAID LAND, AND THE ASSESSEE WAS MERELY A BUILDER WHO ITA NO.2709/AHD/2010 -4- CARRY OUT THE WORK AS PER THE DIRECTIONS AND PLAN E TC. GIVEN TO IT. THE LEARNED CIT(A) ALSO OBSERVED THAT THE ASSESSEE HAS NOT DEVELOPED MINIMUM ONE ACRE OF LAND MANDATORILY PROV IDED IN SECTION 80IB(10) THE ACT. HE OBSERVED THAT ALTHOUG H IT WAS NOT DISPUTED BY THE AO THAT CONDITIONS MENTIONED IN CLA USES (B), (C) & (D) OF SECTION 80IB(10) WERE NOT SATISFIED BY THE ASSESSEE, STILL IN THE INTEREST OF REVENUE, HE ASKED THE DVO TO INS PECT THE PROJECT U/S.131(1)(A)(D) OF THE IT ACT VIDE LETTER DATED 17.8.2009 AND THE DVO WAS ASKED TO INFORM IF THE TWO CONDITIO NS MENTIONED IN CLAUSE (B)&(C) ABOVE WERE FOUND FULFIL LED BY THE ASSESSEE, AND THE DVO INFORMED THAT NEAR CORNER A ONE OF THE RESIDENTIAL UNITS, WAS FOUND TO MEASURE 1517.47 SQ. FT. WHICH WAS MORE THAN 1500 SQ.FT., AND THEREFORE, ASSESSEE HAS VIOLATED THE MANDATORY CONDITION OF EXCEEDING 1500 SQ.FT. LIMIT FOR CLAIMING DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. FURT HER, DVO ALSO STATED THAT THE ASSESSEE HAS NOT PROPERLY UTILIZED THE AREA OF LAND IN OTHER WORDS HAS NOT DEVELOPED ONE ACRE OF LAND, BECAUSE AS PER PERMISSIBLE FSI MORE NUMBER OF RESIDENTIAL UNITS IN MULTISTORIED/ BUILDINGS COULD HAVE BEEN CONSTRUCTED. THE DVO ALS O STATED THAT IN CASE OF ROW HOUSES TERRACE WAS AVAILABLE FOR ADD ITIONAL CONSTRUCTION/ADDITIONAL STOREY AT LATER STAGE, WITH OUT ADDITIONAL CONSTRUCTION ALSO TERRACE WAS USABLE AS ANALOGOUS T O BALCONY. THE LEARNED CIT(A) DISTINGUISHED THE ORDER OF THE I TAT, AHMEDABAD BENCH IN THE CASE OF RADHE DEVELOPERS BY THE DECISION OF THE SAME TRIBUNAL IN THE CASE OF M/S.SH AKTI CORPORATION IN ITA NO.1503./AHD/2008 IN A.Y.2005-20 06, AND ITA NO.2709/AHD/2010 -5- HELD THAT THE TRIBUNAL HAS LAID DOWN THAT TO AVAIL DEDUCTION UNDER SECTION 80IB(10) OF THE ACT, THE ASSESSEE SHOULD HA VE ACQUIRED DOMINANT CONTROL OVER THE PROJECT BOTH THROUGH PURC HASE OF LAND AND ITS DEVELOPMENT. IT SHOULD HAVE DEVELOPED THE HOUSING PROJECT AT ITS OWN COST AND RISKS. HE OBSERVED TH AT THE ITAT, MUMBAI LARGER BENCH IN THE CASE OF M/S.B.T.PATIL & SONS BELGAUM CONSTRUCTION P. LTD., DATED 26.10.2009 IN I TA NOS.1408 & 1409/PN/2003 FOR A.Y.2000-2001 AND 2001- 2002) WHERE THE DEDUCTION UNDER SECTION 80IA HAS BEEN DEN IED HOLDING THE ASSESSEE TO HAVE ENTERED INTO A WORKS CONTRACT. THEREFORE, THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE AO. 9. THE LEARNED AR OF THE ASSESSEE SUBMITTED BEFORE US THAT THE ONLY GROUND ON WHICH THE AO HAS DISALLOWED THE CLAI M OF DEDUCTION UNDER SECTION 80IB(10) IS THAT THE ASSESS EE WAS NOT THE OWNER OF THE LAND. HE PLACED RELIANCE ON THE DECIS ION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. R ADHE DEVELOPERS, 341 ITR 403 (GUJ) AND SUBMITTED THAT TH E HONBLE HIGH COURT HAS HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80IB OF THE ACT, EVEN WHERE THE TITLE OF THE LAND HAD NOT PASSED ON TO THE ASSESSEE AND IN SOME CASES , THE DEVELOPMENT PERMISSION ALSO WAS OBTAINED IN THE NAM E OF THE ORIGINAL OWNER. HE SUBMITTED THAT THE SLP FILED BY THE DEPARTMENT AGAINST THE SAID DECISION OF THE HONBLE GUJARAT HIGH COURT WAS DISMISSED BY THE HONBLE SUPREME COURT. ITA NO.2709/AHD/2010 -6- 10. ON THE OTHER HAND, THE LEARNED DR FULLY SUPPORT ED THE ORDERS OF THE LOWER AUTHORITIES. 11. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON REC ORD. IN THE INSTANT CASE, THE AO DISALLOWED THE CLAIM OF THE AS SESSEE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT ON THE GROU ND THAT THE ASSESSEE WAS NOT THE OWNER OF THE LAND ON WHICH THE HOUSING PROJECT UNDER CONSIDERATION WAS DEVELOPED BY THE AS SESSEE. THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE AO ON THE VERY SAME GROUND, AND ALSO FURTHER OBSERVED THAT ON E CORNER HOUSE FLAT WAS OF 1517.47 SQ.FT., I.E. MORE THAN 15 00 SQ.FT. THE LEARNED CIT(A) ALSO OBSERVED THAT THE ASSESSEE HAS NOT PROPERLY UTILIZED THE AREA OF THE LAND, IN OTHER WORDS, HAS NOT DEVELOPED THE AREA OF LAND, BECAUSE, AS PER PERMISSIBLE FSI, MORE NUMBER OF RESIDENTIAL UNITS IN MULTISTORIED BUILDINGS COULD H AVE BEEN CONSTRUCTED. IN CASE OF ROW-HOUSE, TERRACE WAS AVA ILABLE FOR ADDITIONAL CONSTRUCTION/ADDITIONAL STOREY, WHICH WA S USABLE AS ANALOGOUS TO BALCONY. WE FIND THAT THE ISSUE OF LA ND OWNERSHIP IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. R ADHE DEVELOPERS (SUPRA). THEREFORE, RESPECTFULLY FOLLOW ING THE SAME, IN OUR CONSIDERED VIEW, LOWER AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF DEDUCTION UNDER SECTION 80 IB OF THE ACT, ON SUCH GROUND. ITA NO.2709/AHD/2010 -7- 12. WITH REGARD TO OTHER OBSERVATIONS OF THE LEARNE D CIT(A), IN RESPECT OF NON-PROPER DEVELOPMENT OF THE LAND OF ON E ACRE, THE REQUIREMENT OF LAW, AS HELD BY THIS BENCH OF THE TR IBUNAL IN THE CASE OF M/S.SHREENATHHJI CONSTRUCTION VS. ITO, IN I TA NO.3224/AHD/2009 ORDER DATED 9.11.2012 IS AS UNDER: WE FIND THAT IT IS NOT MANDATORY REQUIREMENT TO FU LLY UTILIZE PERMISSIBLE FSI; THERE IS NO CONDITION AS T O FSI UNDER THE SCHEME OF THE PROVISIONS OF SEC. 80IB(10) OF THE ACT;. THE CONTRARY VIEW THUS TAKEN BY THE LEARNED CIT(A) IS NOT SUSTAINABLE. THE LEARNED CIT(A) HAS ALSO OBSERVED T HAT ONE CORNER FLATS WAS OF AN MORE THAN 1500 SQ.FT. NO MA TERIAL WAS BROUGHT BEFORE US BY THE ASSESSEE TO DISPUTE THE AB OVE FINDING OF THE LEARNED CIT(A). WE, THUS, FIND THAT ONE CORNER FLAT IS OF 1517.47 SQ.FT. WE FIND THAT THIS BENCH OF THE TRIB UNAL IN THE CASE OF M/S.AAKAR ASSOCIATES VS. ITO, IN ITA NO.2093/AHD /2009 ORDER DATED 4.5.2011 HAS HELD AS UNDER: 5.5 IN THE LIGHT OF THE VIEW TAKEN IN THE AFORESAI D DECISIONS, ESPECIALLY WHEN THE REVENUE HAVE NOT PLA CED BEFORE US ANY CONTRARY DECISION, WE HAVE NO HESITAT ION IN ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/ S. 80-IB (10) OF THE ACT ON PROPORTIONATE BASIS I.E. ON THE PROFIT DERIVED FROM CONSTRUCTION OF THE RESIDENTIAL UNITS WHICH HAVE A BUILT UP AREA OF LESS THAN 1500 SQ FT ACCORD INGLY, THE AO IS DIRECTED TO ALLOW THE CLAIM FOR DEDUCTION U/S 80IB (10) OF THE ACT ON THE PROFIT DERIVED FROM CONSTRUC TION OF THE RESIDENTIAL UNITS WHICH HAVE A BUILT UP AREA OF LESS THAN 1500 SQ. FT THE UNITS WITH BUILT AREA EXCEEDING 150 0 SQ IF ITA NO.2709/AHD/2010 -8- WOULD NO BE ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. SUBJECT TO THESE DIRECTIONS GROUND NOS.1 TO 3 IN TH E APPEAL ARE ALLOWED TO THE EXTENT INDICATED HEREINBEFORE. IN THE ABOVE CIRCUMSTANCES, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE, AND RESTORE THE MATTER B ACK TO THE FILE OF THE AO WITH DIRECTION TO RESTRICT THE DISALLOWANCE UNDER SECTION 80IB(10) OF THE ACT ONLY IN RESPECT OF PROFIT DERIV ED FROM ONE CORNER FLAT OF 1517.47 SQ.FT. ONLY, AND ALLOW THE D EDUCTION UNDER SECTION 80IB(10) OF THE ACT IN RESPECT OF PROFIT DE RIVED FROM OTHER FLATS WHERE IT IS NOT IN DISPUTE THAT THEY AR E OF 1500 SQ.FTS. OR LESS THAN THAT. THUS, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( ' #$ ' #$ ' #$ ' #$ /KUL BHARAT /JUDICIAL MEMBER . .. . . . . . /N.S. SAINI /ACCOUNTANT MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD