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

ITA 2710/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67908 (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
• Bench Allotted: C
• Next Hearing Date: 30-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 17-09-2010
• Court: TRIBUNAL
• Department Lawyers: DK MISHR A
• Assessee Lawyers: PRAKASH SHAH
• Keywords: Initiation of penalty proceedings
• Section: 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.2710 AND 2711/AHD/2010 [ASSTT.YEAR : 2006-2007 AND 2007-2008] KAMLESHKUMAR GANDALAL SHAH-HUF C/O. MEHTA LODHA & COMPANY 1 ST FLOOR, SAKAR-I OFF GANDHI GRAM RLY. STATION ASHRAM ROAD, AHMEDABAD. PAN : AAIHS 5640 C /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 : THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-XV, AHMEDABAD DATED 13.7.2010 AND 20.7.2010 RESPECTIVEL Y FOR THE ASSESSMENT YEARS 2006-2007 AND 2007-2008. 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 ` 70,11,618/- FOR THE ASSTT.YEAR 2006-2007 AND FOR T HE ASSTT.YEAR 2007-2008 OF ` 42,06,519/- 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 ` 70,11,618/- AND ` 42,06,519/- FOR THE ASSTT.YEARS 2006-2007 AND 2007- 2008 RESPECTIVELY UNDER SECTION 80IB(10) OF THE IT ACT. THE AO DISALLOWED THE CLAIM OF DEDUCTION TO THE ASSESSEE O N THE GROUND THAT THE ASSESSEE ACTED ONLY AS AN AGENT OF THE LAN D OWNER, AND ITA NO.2709/AHD/2010 -3- THEREFORE, IS NOT QUALIFIED AS A DEVELOPER, AS THER E IS NO CONSTRUCTIVE OWNERSHIP OF THE LAND WITH THE ASSESSE E. 8. ON APPEAL BEFORE THE LEARNED CIT(A) CONFIRMED TH E ORDER OF THE AO, FOR THE REASONS THAT PURCHASE OF LAND AN D ITS DEVELOPMENT ARE MANDATORY ON THE PART OF THE PERSON CLAIMING 100% DEDUCTION UNDER SECTION 80IB(10). THE ASSESSE E ENTERED INTO A WORKS CONTRACT IS CLEAR FROM THE CLAUSES OF THE DEVELOPMENT AGREEMENT DATED 5.5.2004. THE LAND WAS OWNED BY SM T. PREMILABEN PRAVINKUMAR SHAH AND SHRI ARCHIT KAMLESH KUMAR SHAH WITH WHOM THE ASSESSEE ENTERED INTO A WORKS CO NTRACT TO CONSTRUCT ROW HOUSES IN ARIHANT BUNGALOW SCHEME. BY REFERRING TO PARA-4 OF THE AGREEMENT AND CLAUSE 7 O F THE DEVELOPMENT AGREEMENT, THE LEARNED CIT(A) ARRIVED A T THE CONCLUSION THAT THE ASSESSEE WAS ENGAGED BY THE LAN DOWNERS FOR CARRYING OUT THE HOUSING PROJECT AS PER THE SPECIFI CATION AND PLAN OBTAINED BY THE LANDOWNERS FROM THE LOCAL AUTHORITY . THE ASSESSEE HAS NO AUTHORITY OR POWERS TO CONSTRUCT TH E HOUSE BUILDING PROJECT ON HIS OWN, ON THE SAID LAND, AND THE ASSESSEE WAS MERELY A BUILDER WHO CARRY OUT THE WORK AS PER THE DIRECTIONS AND PLAN ETC. GIVEN TO IT. THE LEARNED CIT(A) ALSO OBSERVED THAT THE ASSESSEE HAS NOT DEVELOPED MINIMUM ONE ACRE OF LAND MANDATORILY PROVIDED IN SECTION 80IB(10) THE ACT. HE OBSERVED THAT ALTHOUGH IT WAS NOT DISPUTED BY THE AO THAT CO NDITIONS MENTIONED IN CLAUSES (B), (C) & (D) OF SECTION 80IB (10) WERE NOT SATISFIED BY THE ASSESSEE, STILL IN THE INTEREST OF REVENUE, HE ASKED THE DVO TO INSPECT THE PROJECT U/S.131(1)(D) OF THE IT ACT VIDE ITA NO.2709/AHD/2010 -4- LETTER DATED 17.8.2009 AND THE DVO WAS ASKED TO INF ORM IF THE TWO CONDITIONS MENTIONED IN CLAUSE (A)&(B) ABOVE WE RE FOUND FULFILLED BY THE ASSESSEE. THE DVO IN HIS REPORT D ATED 11.6.2010 STATED THAT ONLY 31 RESIDENTIAL UNITS WERE CONSTRUC TED BY THE ASSESSEE, WHICH AS PER THE PERMISSIBLE FSI COULD HA VE BEEN CONSTRUCTED ON PLOT AREA OF JUST 2243.2 SQ.METERS, HAD THE MULTISTORIED BUILDINGS OF RESIDENTIAL FLATS WERE CO NSTRUCTED, BUT THE ASSESSEE CONSTRUCTED ROW HOUSES NOT UTILIZING T HE PERMISSIBLE FSI IN TRUE SPIRIT. THE LEARNED CIT(A) DISTINGUISHE D THE ORDER OF THE ITAT, AHMEDABAD BENCH IN THE CASE OF RADHE DEVE LOPERS BY THE DECISION OF THE SAME TRIBUNAL IN THE CASE OF M/ S.SHAKTI CORPORATION IN ITA NO.1503/AHD/2008 IN A.Y.2005-200 6, AND 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. THEREFORE, THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE AO. THE ASSESSEE ENTE RED INTO A WORKS CONTRACT IS CLEARLY FROM CLAUSES OF THE DEVEL OPMENT AGREEMENT DATED 5.5.2004 AND NO DEDUCTION CAN BE AL LOWED UNDER SECTION 80IB(10) RETROSPECTIVELY I.E. W.E.F. 1 ST APRIL, 2001. 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 ITA NO.2709/AHD/2010 -5- 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. 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) ALSO OBSERVED THAT THE ASSESSEE HAS NOT PROPERLY UTILIZED THE AREA OF THE LAND, IN OTHER WO RDS, HAS NOT DEVELOPED THE AREA OF LAND, BECAUSE, AS PER PERMISS IBLE FSI, MORE NUMBER OF RESIDENTIAL UNITS IN MULTISTORIED BUILDIN GS COULD HAVE BEEN CONSTRUCTED. WE FIND THAT THE ISSUE OF LAND O WNERSHIP 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 ITA NO.2709/AHD/2010 -6- DISALLOWING THE CLAIM OF DEDUCTION UNDER SECTION 80 IB OF THE ACT, ON SUCH GROUND. 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 F ULLY 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. IN THE ABOVE CIRCUMSTANCES, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE, AND DIRECT THE AO TO ALLOW DEDUCTION UNDER SECTION 80IB(10) OF THE IT ACT, AS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME, AND THUS ALLOW TH E GROUNDS OF THE APPEALS OF THE ASSESSEE IN BOTH THE YEARS UNDER CONSIDERATION. 13. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( ' #$ ' #$ ' #$ ' #$ /KUL BHARAT /JUDICIAL MEMBER . .. . . . . . /N.S. SAINI /ACCOUNTANT MEMBER