M/s Dotivalla Court, Amaravati V. ITO ward-I, Amaravati

ITA 277/NAG/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2193 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 06-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Value adopted by valuation officer; Unexplained expenditure; Business income; Cost of acquisition; Fair market value; Corroborative evidences; Valuation report
• Section: 143(3); 133A; 80IB; 131; 145; 2

Judgement Text

1 ITA NOS. 277 & 278/NAG/2012 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NOS. 277 & 278/NAG/2012 ASSESSMENT YEARS : 2007 - 08 & 2008 - 09. M/S DOTIVALLA COURT (AOP), THE INCOME - TAX OFFICER, AMRAVATI. VS. WARD - 1, AMRAVATI. PAN AAAAD 2205P. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.B. ATAL. RESPONDENT : SHRI S.P.G. MUDLIAR. DATE OF HEARING : 12 - 04 - 2016 DATE OF PRONOUN CEMENT : 31 ST MAY, 2016. O R D E R PER MUKUL K. SHRAWAT, J.M. THESE TWO APPEALS OF THE APPELLANT ARE EMANATING FROM THE ORDERS OF LEARNED CIT(APPEALS) - II, NAGPUR BOTH IDENTICALLY DATED 13 - 03 - 2012 PERTAINING TO ASSESSMENT YEARS 2007 - 08 AND 2008 - 09. THE GROUNDS RAISED ARE HEREBY DECIDED AS FOLLOWS : A. ASSESSMENT YEAR : 2007 - 08 GROUND NO.1: THAT KEEPING IN VIEW THE FACTS OF THE CASE LOWER AUTHORITIES ERRED IN REJECTING THE CLAIM OF DEDUCTION OF RS.32,11,087/ - U/S 80IB(10) OF THE I.T. ACT, 1961. THE DISALLOWANCE OF CLAIM IS NOT IN ACCORDANCE WITH THE LAW, MORE PARTICULARLY AS THE SAME IS SUPPORTED BY THE AUDIT REPORT AND ASSESSEE FULFILLS ALL THE CONDITIONS REQUIRED FOR THE CLAIM. THE AO BE DIRECTED TO ALLOW THE CLAIM U/S 80IB(10). 2 ITA NOS. 277 & 278/NAG/2012 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S 143(3) DATED 29 - 12 - 2009 WERE THAT THE ASSESSEE IN THE STATUS OF AOP HAS DEVELOPED A H OUSING P ROJECT, NAMELY, DOTIVALLA COURT. THE AO HAS MENTIONED CERTAIN FACTS ABOUT THE BACKGROUND OF THE SAI D PROJECT THAT THE AOP COMPRISED OF TWO BROTHERS, NAMELY, SHRI ROHINTON HOSANGJI DOTIWALA AND SHRI SHAM HOSANGJI DOTIWALA. IT WAS MENTIONED THAT THE LAND IN QUESTION WAS PURCHASED BY THEIR FATHER BEARING PLOT NO. 18 SITUATED AT NANDGAON PETH, DISTRICT AMRAV ATI ON 22 - 08 - 1947 FOR A CONSIDERATION OF RS.40,000/ - ONLY. ON THE DEATH OF THEIR FATHER ON 25 - 04 - 2959 THE LAND WAS INHERITED BY THE BROTHERS ALONG WITH THE WIFE OF THE DECEASED AND DAUGHTER. THE AO HAS ALSO MENTIONED THAT THE MOTHER H A D EXPIRED ON 22 - 12 - 19 96 AND THEREAFTER THE THREE CHILDREN HAVE BECOME THE OWNERS OF THE SAID PROPERTY. OUT OF THE TOTAL AREA INHERITED BY THE BROTHERS , AOP WAS FORMED AND DECIDED TO DEVELOP A HOUSING PROJECT STYLED AS DHTOWALA COURT. THE AREA ON WHICH THE SAID PROJECT WAS DE VELOPED WAS ADMEASURING 8062.82 SQ.MTS. (86731.57 SQ.FT.) (ABOUT 2 ACRES). 2.1 AS PER THE FACTS, AS STATED BY THE AO, AMRAVATI MUNICIPAL CORPORATION (AMC) VIDE LETTER DATED 31 - 03 - 2001 GRANTED THE PERMISSION FOR THE COMMENCEMENT OF THE CONSTRUCTION FOR A BU ILT UP AREA OF 5890.49 SQ.MTS. ON THE SAID PLOT. IT HAS ALSO BEEN MENTIONED BY THE AO THAT AN EXTENSION FOR THE COMMENCEMENT OF THE CONSTRUCTION WAS GRANTED BY AMC IN THE LETTER DATED 16 - 02 - 2002 ACCORDING TO WHICH THE DATE OF COMMENCEMENT OF THE CONSTRUCT ION WAS EXTENDED UPTO 08 - 05 - 2003. 3. THE PROJECT SANCTIONED BY THE AMC COMPRISED OF FOUR APARTMENT BLOCKS I.E. A, B, C, D CONSISTING OF 11 FLATS EACH I.E. TOTAL 44 FLATS AND 14 ROW HOUSES. THE AO HAS NOTED THAT AS PER THE SANCTION, EACH FLAT WAS HAVING A BUILT UP AREA OF VARYING SIZES BUT NOT EX C EEDING 1500 SQ.FT. LIKEWISE THE 14 R OW HOUSES WERE HAVING BUILT UP AREA RANGING FROM 1417.56 SQ.FT. TO 1496.04 SQ.FT. BUT NOT EXCEEDING 1500 SQ.FT. 3 ITA NOS. 277 & 278/NAG/2012 3.1 AS PER THE TERMS OF THE SANCTION GRANTED, THE ASSESSEE WAS P ERMITTED TO COMMENCE THE CONSTRUCTION ON THE BUILT UP AREA OF 5890.49 SQ.MTS. ON THE TOTAL LAND OF 8062.82 SQ.MTS. THE DEVELOPMENT CHARGES OF RS.6,03,050/ - WAS CHARGED BY AMC. 4. THE REVENUE DEPARTMENT HAS CONDUCTED A SURVEY U/S 133A AT THE PREMISES ON 13 - 01 - 2009. IT WAS FOUND THAT THE ASSESSEE - AOP H A D RAISED LOANS FROM 14 PERSONS WHICH WERE FOUND TO BE ASSOCIATED WITH MUNDHADA FAMILY OF AMRAVATI. 4.1 THE ASSESSEE TOOK AGGREGATE LOAN FROM THE FAMILY MEMBERS OF MUNDHADA FAMILY WHICH AS ON 10 TH MARCH, 2006 WAS AT RS.79,78,780/ - ALONG WITH AN ACCRUED INTEREST. THE AO HAS RECORDED THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH MUNDHADA FAMILY MEMBERS ON 10 - 03 - 2006 TO SELL 9 ROW HOUSES TO THE RESPECTIVE INDIVIDUALS WHO HAVE ADVANCE D LOAN TO THE ASSESSEE. AS PER THE AGREEMENT A CONSIDERATION FOR 9 ROW HOUSES WAS FIXED AT RS.1,45,00,780/ - . IN TERMS OF THE SAID AGREEMENT THE LOAN AND INTEREST THEREON AS ADVANCED BY THE FAMILY MEMBERS OF MUNDHADA FAMILY DEEMED TO HAVE BEEN SQUARED UP WITH EFFECT FROM THE DAT E OF AGREEMENT DATED 10 - 03 - 2006 AND THE BALANCE AMOUNT OF RS.65,22,000/ - WAS REQUIRED TO BE PAID TO THE ASSESSEE BY THE FAMILY MEMBERS OF THE MUNDHADA FAMILY UPTO 31 ST MARCH, 2006. 4.2 IT HAS ALSO BEEN MENTIONED BY THE AO THAT THERE WAS A DEED FOR THE TR ANSFER OF POSSESSION EXECUTED ON 01 - 04 - 2006. ACCORDING TO THE AO AS PER PARA 12 OF THE SAID DEED IT WAS MENTIONED T HAT THE APARTMENTS CONSISTED OF RCC FRAME WORK AND BRICK WALLS. THE VENDOR HAD AGREED TO SELL THE SAID APARTMENTS ON AS IS WHERE IS CONDITION. THE REMAINING CONSTRUCTION WORK WAS TO BE COMPLETED BY THE PURCHASER AT THEIR OWN COST. HOWEVER, IT WAS MENTIO NED THAT IN DOING SO THE PURCHASER SHOULD NOT VIOLATE THE SANCTIONED MUNICIPAL MAP. IT HAS ALSO BEEN MENTIONED THAT THE EXISTING CONSTRUCTION WAS MADE AS REQUIRED BY 4 ITA NOS. 277 & 278/NAG/2012 THE PURCHASERS UNDER THEIR SUPERVISION, HENCE ANY DEFECT IN THE CONSTRUCTION WAS NOT TO B E BLAMED. 5. THE NEXT OBSERVATION OF THE AO WAS THAT 9 R OW HOUSES HAVE BEEN SOLD BY MUNDHADA FAMILY MEMBERS BUT EXECUTED THE DEEDS AS A CONSENTING PARTY. THE ASSESSEE WAS MENTIONED AS VENDORS AND THOSE ROW HOUSES WERE SOLD TO THIRD PARTIES AS PER THE AGR EEMENT DATED 10 - 03 - 2006. THE SAID SALE AGREEMENT HAD STATED THAT THE CONSENTING PARTY I.E. MUNDHADA FAMILY MEMBERS HAD PAID FULL SALE CONSIDERATION TO THE ASSESSEE. IN THE AGREEMENT IT WAS SPECIFIED THAT OUT OF THE TOTAL SALE CONSIDERATION OF EACH ROW HOUS E FIXED BY THE CONSENTING PARTY ( MUNDHADA FAMILY MEMBERS ) WITH THE PURCHASER (THE THIRD PARTY) THE VENDOR (DOTEWALLA BROTHERS) HAVE ALREADY RECEIVED THE CONSIDERATION FIXED. ON THE BASIS OF THOSE FACTS THE OBSERVATION OF THE AO AS PER PARA 4 OF THE ASSESSM ENT ORDER WAS THAT, QUOTE FROM THIS, IT IS ABUNDANTLY CLEAR THAT THE SALE DEED EXECUTED IN RESPECT OF THE 9 ROW HOUSES WAS PRIMARILY BETWEEN THE MUNDHADA FAMILY MEMBERS AND THE THIRD PARTY PURCHASER UNQUOTE. 5.1 IN RESPECT OF THE CALCULATION OF THE EXEM PTION AS CLAIMED BY THE ASSESSEE THE AO HAS NOTED THAT THE TOTAL SALES WERE REFLECTED AT RS.1,58,50,780/ - , OUT OF WHICH THE ASSESSEE HAD ALREADY RECEIVED A SUM OF RS.1,45,00,780/ - FROM MUNDHADA FAMILY MEMBERS. TWO FLATS HAVE ALSO BEEN SOLD DURING THE YEAR FOR A CONSIDERATION OF RS. 5,55,000/ - AND RS.7,95,000/ - . THE ASSESSEE HAD DEBITED A PROPORTIONATE COST OF CONSTRUCTION OF RS.1,19,99,657/ - AND AFTER CLAIMING CERTAIN INDIRECT EXPENSES , NET PROFIT AS PER BOOKS FOR THE YEAR UNDER CONSIDERATION WAS RS.32,11, 087/ - . AS PER THE ACCOUNT, AS PER AO, THE AGGREGATE COST OF CONSTRUCTION WAS RS.4,09,68,473/ - WHICH WAS INCLUSIVE OF THE COST OF LAND DISCLOSED AT RS.86,73,560/ - , THEREFORE THE COST OF CONSTRUCTION WHICH WAS DEBITED TO PROFIT AND LOSS ACCOUNT DURING THE YE AR UNDER CONSIDERATION WAS CALCULATED ON PROPORTIONATE BASIS OF THE AGGREGATE COST OF CONSTRUCTION. THE COST OF LAND REMAINED UNCHANGED AS IT WAS MENTIONED IN THE FINANCIAL YEAR 2002 - 03 5 ITA NOS. 277 & 278/NAG/2012 AS PER TH E AO. THE ENTIRE PROFIT OF RS.32,11,087/ - WAS CLAIMED BY THE ASSESSEE AS DEDUCTION U/S 80IB(10) OF I.T. ACT. THERE WAS NO DISPUTE THAT THE ASSESSEE HAD OBTAINED AN AUDIT REPORT ON FORM 10CCB AS PER SECTION 80IB. HOWEVER, ONE OF THE OBJECTION OF THE AO WAS THAT IT WAS SPECIFIED IN THE REPORT THAT PARTIAL COMPLETION APPROVAL TAKEN ON 15 - 05 - 2007. THE ASSESSEE WAS REQUIRED TO SPECIFY THE BUILT UP AREA OF THE RESIDENTIAL UNIT OF THE PROJECT. ACCORDING TO THE AO DEDUCTION U/S 80IB(10) IS AVAILABLE TO AN UNDERTAKING ENGAGED IN DEVELOPMENT AND BUILDING OF HOUSING PROJECT WITHIN THE CONDITIONS SPECIFIED FOR ELIGIBILITY OF THE DEDUCTION U/S 80IB(10) OF I.T. ACT. ACCORDING TO THE AO CERTAIN CONDITIONS AS SPECIFIED IN THE SAID SECTION HAVE NOT BEEN FULFILLED BY THE ASSESSEE, THEREFORE, NOT ELIGIBLE FOR THE DEDUCTION. 6. THE F IRST CONDITION WHICH ACCORDING TO THE AO WAS NOT COMPLETED BY THE ASSESSEE WAS THAT A PROJECT OUGHT TO HAVE BEEN COMPLETED ON OR BEFORE 31 ST DAY OF MARCH, 2008. THIS IS IN RESPECT OF A PROJECT WHICH WAS APPROVED BY THE LOCAL AUTHORITIES BEFORE 1 ST APRIL, 2004. OTHERWISE A PROJECT IS REQUIRED TO BE COMPLETED WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT WAS APPROVED BY THE LOCAL AUTHORITIES. THE AO HAS RAISED THE OBJECTION IN RESPECT OF THE COMPLETION OF THE PROJE CT IN THE FOLLOWING MANNER : THEREFORE, ON ORDER TO AVAIL THE DEUCTION, THE PROJECT OUGHT TO HAVE BEEN COMPLETED ON OR BEFORE THE 31 ST DAY OF MARCH 2008. THE SANCTION ACCORDED BY THE AMRAVATI MUNICIPAL CORPORATION ENVISAGED A COMPOSITE PROJECT CONSISTING OF 44 RESIDENTIAL UNITS BEING FLATS AND 14 RESIDENTIAL UNITS BEING ROW HOUSE. FROM THE FACTS GATHERED DURING SURVEY, IT WAS OBSERVED TH AT EHE ASSESSEE HAD INDEED CONSTRUCTED 44 FLATS BUT THE NUMBER OF ROW HOUSES CONSTRUCTED ACTUALLY WAS ONLY 10 AS AGAINST 14 ROW HOUSES FOR WHICH THE SANCTION WAS ACCORDED. FURTHER, AS DISCUSSED EARLIER, THE 9 ROW HOUSES WERE TRANSFERRED BY AN AGREEMENT DAT ED 10.03.2006. 6 ITA NOS. 277 & 278/NAG/2012 THE ASSESSEE HAD ENTERED INTO THE AGREEMENT DATED 10.03.2006 TO SELL 9 ROW HOUSES IN INCOMPLETE STAGE OF CONSTRUCTION TO THE MUNDHADA FAMILY MEMBERS. AS DISCUSSED ABOVE, CLAUSE 12 OF THE SAID AGREEMENT CATEGORICALLY STATED THAT ONLY THE RCC AND BRICK WORK IN RESPECT OF AFORESAID 9 ROW HOUSES HAD BEEN COMPLETED AND THAT THESE WERE BEING TRANSFERRED TO THE MUNDHADA FAMILY MEMBERS IN AN INCOMPLETE STAGE. REFERENCE IS ALSO INVITED TO THE ENQUIRIES MADE BY THIS OFFICE WITH THE PARTIES COMPRISING THE MUNDHADA FAMILY MEMBERS FROM WHICH IT EMERGED THAT THE ENTIRE TRANSACTION WITH THE ASSESSEE WAS MANAGED BY SHRI PRASHANT MADANMOHAN MUNDHADA, ON BEHALF OF MUNDHADA FAMILY MEMBERS. IN HIS STATEMENTS RECORDED U/S.131 OF THE I.T.ACT, 1961 ON 19.01.2009, 2 2.01.2009 AND 18.03.2009, SHRI PRASHANT MADANMOHAN MUNDHADA STATED THAT HE WAS MANAGING THE INVESTMENT AND FINANIAL AFFAIRS OF HIS FAMILY. IN F.Y.2002 - 03, THE INDIVIDUALS/HUF HAD ADVANCED LOANS TO THE ASSESSEE WITH AN INTENTION TO EARN INTEREST . HOWEVER, IN VIEW OF THE INABILITY OF THE ASSESSEE TO MAKE REPAYMENTS OF THE LOAN AMOIUNT AND INTEREST ACCRUED THEREON, AN AGREEMENT WAS ENTERED ON 10.03.2006 FOR THE SALE OF 9 ROW HOUSES FOR AN AGGREGATE CONSIDERATION OF RS.1,45,00,780.12. OUT OF THE AFORESAID CON SIDERATION, RS.79,78,780.12 WAS ADJUSTED AGAINST THE OUTSTANDING LOAN ALONG WITH INTEREST ACCRUED THEREON TILL 31.01.2006. THE BALANCE AMOUNT OF RS.65,22,000/ - WAS PAID BY AND ON BEHALF OF THE MUNDHADA FAMILY MEMBERS TO THE ASSESSEE ON 31.03.2006. THE POSS ESSION OF THE 9 ROW HOUSES WAS OBTAINED. BESIDES, AS HAS BEEN DISCUSSED ABOVE, THE SALE AGREEMENT OF 9 ROW HOUSES IN FAVOUR OF THIRD PARTY WAS ESSENTIALLY EXECUTED BY THE MUNDHADA FAM ILY MEMBERS IN FAVOUR OF THIRD PARTY IN AS MUCH AS THE ASSESSEE MERELY EX E CUTED SUCH SALE DEED IN FAVOUR OF THE NOMINEES OF THE MUNDHADA FAMILY M EMBERS. FURTHER FROM THE ABOVE STATEMENT, IT BECOMES APPARENT THAT THE ASSE SSEE HAD TRANSFERRED THE 9 ROW HOUSES TO MUNDHADA FAMILY MEMBERS. IN HIS STATEMENT, SHRI PRASHANT MADANMOHAN MUNDHADA ADMITTED THA T AT THE TIME OF THE AGREEMENT DT.L0.03.2006 OF THE ROW HOUSES, ITS CON STRUCTION WAS INCOMPLETE. SHRI PRASHANT MADANMOHAN MUNDHADA ALSO SUBMITTED THE DETAILS OF EXPENSE S INCURRED BY THEM TOWARDS CONSTRUCTION.AND PRODUCED THE BILLS AND VOUCHE RS IN SUPPORT OF THE SAME. SHRI PRASHANT M UNDHADA ALSO GAVE THE DETAILED ACCOUNT OF EACH FAMILY MEMBER OF MUNDHADA FAMILY SPECIFYING THE COST AT WHICH INDIVIDUAL ROW HOUSES WERE ACQUIRED, FURTHER EXPENDITURE I NCURRED BY EACH 7 ITA NOS. 277 & 278/NAG/2012 MEMBER AND THE FINAL PRIC E AT WHICH TRANSFERS WERE EFFECTED TO THIRD PARTY. (A PROFIT CHART OF 9 ROW HOUSES AS PER MUNDHADA FAMILY RECORDS WAS MENTIONED BY AO , HOWEVER NOT REPRODUCED BY US. ) FROM THE ABOVE, IT BECOMES ABUNDANTLY CLEAR THAT THE ROW HOUSES WERE TRANSFERRED BY THE ASSESSEE TO THE MUNDHADA FAMILY MEMBER SIN CONSIDERABLY INCOMPLETE STAGE AND SUBSTANTIAL EXPENDITURE WAS INCURRED B Y SUCH MUNDHADA FAMILY MEMBERS IN THE COMPLETI ON OF THE CONSTRUCTION OF ROW HOUSES. 7. ON THE ISSUE OF COMPLETION THE AO HAD MADE SOME MORE OBSERVATION THAT AS PER THE CERTIFICATE DATED 15 - 05 - 2007 THE CERTIFICATE H AS STATED ONLY PART COMPLETION. HOWEVER, HE HAS ALSO MENTIONED THAT A CERTIFICATE WAS ALSO ISSUED BY AMC STATING THEREIN THE COMPLETION/OCCUPANCY ISSUED ON TWO DATES I.E. 15 - 05 - 20 07 AND 14 - 03 - 2008. IN ORDER TO ASCERTAIN THE STATUS OF THE COMPLETION A SUMMON WAS ISSUED U/S 131 TO SHRI PRAMOD B. KULKARNI, ENGINEER, TOWN PLANNING OFFICE, AMRAVATI. ACCORDING TO THE AO HE HAS STATED THAT NO COMPLETION CERTIFICATE HAD BEEN ISSUED IN RES PECT OF THE SAID PROJECT. ONLY A PART OCCUPANCY CERTIFICATE WAS GIVEN IN ORDER TO ENABLE TO EXECUTE THE WORK RELATING TO WATER SUPPLY, SEWERAGE ETC. THE REPLY OF THE ASSESSEE AGAINST THE ALLEGATION OF INCOMPLETE ROW HOUSES WAS AS UNDER : A. THE ASSESSEE H AS ARGUED THAT THE VIEW THAT INCOMPLETE ROW HOUSES WERE TRANSFERRED TO THE MEMBERS OF THE MUNDHADA FAMILY IS NOT CORRECT. AT THE TIME OF THE AGREEMENT WITH MUNDHADA FAMILY I.E. 10.03.2006, THE CONSTRUCTION WAS COMPLETE AND THE UNITS WERE IN HABITABLE CONDITION. THE SAID ARGUMENT OF THE ASSESSEE IS COMPLETELY UNTENABLE IN VIEW OF THE DETAILED DISCUSSION IN THIS REGARD IN THE PRE CEDING PARAGRAPH 6.2 ABOVE. AS MENTIONED, NOT ONLY THE AGREEMENT ITSELF IS A TESTIMONY THAT THE CONSTRUCTION OF THE ROW HOUSES WAS INCOMPLETE, BEFORE THE F INAL SALE OF THE ROW HOUSES TO THIRD PARTIES, THE MUNDHADA FAMILY ME MBERS HAVE INCURRED AGGREGATE ADDITIONAL COST ON CONSTRUCTION OF RS.44,3 8,310/ - . THE ASSESSEE HAS ALSO ARGUED THAT THE FACT THAT MUNDHADA FAMILY MEMBERS INCURR ED CONSTRUCTION EXPENSES IN NOT 8 ITA NOS. 277 & 278/NAG/2012 MATERIAL FOR DETERMINING THE ELIGIBILITY OF DEDUCTION. THE CONSTRUCTION CAN BE COMPLETED DIRECTLY B Y THE ASSESSEE OR BY ANY OTHER PERSON. THIS ARGUMENT IS FRIVOLOUS IN VIEW THE FACT THAT THE CONSTRUCTION BY THE MUNDHADA FA MILY MEMBERS WERE CARRIED OUT ON THEIR OWN BEHALF ( AND NOT ON BEHALF OF THE ASSESSEE). THE FINAL S ALE AGREEMENT WITH THIRD PARTY ALSO TRANSFERS THE ROW HOUSES FROM THE MUNDHADA FAMILY MEMBERS TO THE THIRD PARTY. SIGNIFICANTLY, THE TRANSFERS W ERE EFFECTED AT VARYING RATES. STATEMENT OF THE FINAL PURCHASERS HAV E BEEN RECORDED, AND THEY HAVE CLARIFIED THAT THE VARIATION IN PRICE OF THE VAR IOUS ROW HOUSES ARE ON ACCOUNT OF THE FACT THAT EVEN AFTER CONSTRUCTIO N ACTIVITIES BY MEMBERS OF THE MUNDHADA FAMILY, THE ROW HOUSES TRANSFE RRED TO THEM WAS IN INCOMPLETE STAGE. PARTICULAR REFERENCE IN THIS REGARD IS INV ITED TO THE STATEMENTS OF SHRI RAMKISHAN HIRALAL KASAT (ROW HOUSE NO.001 ), SHRI RAJESH GHANSHYAM KASAT (ROW HOUSE NO.014), SHRI LAXMIKANT K. KED IA (ROW HOUSE NO.006) AND SHRI GHANSHYAM HIRALAL KASAT (ROW HOUSE NO.013). - FURTHER, THE ARGUMEN T OF THE ASSESSEE THAT COMPLETION CERTIFICATE HA D BEEN ISSUED BY THE MUNICIPAL AUTHORITIES IS WITHOUT ANY BASIS IN LIGHT OF THE DETAILED DISCUSSION IN PARA 6. 4 ABOVE. 8. T HE SECOND OBJECTION OF THE AO WAS IN RESPECT OF ONE OF THE CONDITION PERTAINING TO THE BUILT UP AREA OF EACH RESIDENTIAL UNIT. ACCORDING TO THE AO SECTION 80IB(10) PRESCRIBES THAT THE BUILT UP AREA OF A RESIDENTIAL UNIT SHOULD BE 1500 SQ.FT. THE AO HAS FU RTHER NOTED THAT THE BUILT UP AREA MEANS INNER MEASUREMENT OF A RESIDENTIAL UNIT AT THE FLOOR LEVEL INCLUDING PROJECTION AND BALCONIES INCREASED BY THICKNESS OF THE WALLS BUT DOES NOT INCLUDE COMMON AREA SHARED WITH OTHER RESIDENTIAL UNITS. TO ASCERTAIN THE AREA OF EACH UNIT A REFERENCE WAS MADE U/S 142A TO THE DISTRICT VALUATION OFFICER, VALUATION CELL, BHOPAL. THE DVO HAD FURNISHED THE DRAWINGS OF THE BUILT UP AREA OF THE ROW HOUSES. IT WAS FOUND THAT AFTER INCLUDING THE AREA OF BALCONY, VERANDA ETC. THE BUILT UP AREA OF EACH ROW HOUSES HAD EXCEEDED THE LIMIT O F 1500 SQ.FT. THE ASSESSEE HAS OBJECTED IN THE FOLLOWING MANNER : B. IN SO FAR AS THE AREA OF RESIDENTIAL UNIT IS CONCERNED, THE 9 ITA NOS. 277 & 278/NAG/2012 ASSESSEE HAS PLACED RELIANCE ON THE SALE DEED WHEREIN THE AREA OF A' DWELLING UNITS ARE STATED TO BE LESS THAN 1500 SQ. FT EA CH. THE ASSESSEE HAS ALSO SUGGESTED THAT THE HIGHER BUILT UP AREA, FOUND DURING THE COURSE OF INSPECTION BY THE DVO , COULD HAVE BEEN ON ACCOUNT OF ADDITIONS/ALTERATIONS CARRIED OUT SUBSEQUENT TO THE SALES EFFECTED BY THEM. THE ASSESSEE ALSO CLAIMED THAT N OTICES HAD BEEN ISSUED BY IT TO THE FINAL PURCHA SERS FOR ILLEGAL CONSTRUCTION. FURTHER, THE ASSESSEE HAS IN HIS SUBMISSION RECEIVED ON 15.12.2009, HAS ARGUED THAT THE DEFINITION OF BUILT UP AREA IN SU B - SECTION (14) OF SECTION 80IB HAS BEEN INSERTED IN THE ACT W.E.F. 01.04. 2005 AND THIS DEFINITION CANNOT BE APPLIED TO THE CASE OF THE ASSESSEE WHERE THE PROJECT HAS BEEN SANCTIONED PRIOR TO THIS DATE. IN THIS CONTEXT, IT IS NO T DISPUTED THAT THE AREA OF A' DWELLING UNITS OF THE PROJECTS INCLUDING THE 9 R OW HOU SES SOLD DURING THE YEAR IS LESS THAN 1500 SQ.FT AS PER THE SALE DEED EXECUTED BETWEEN THE MUNDHADA FAMILY MEMBERS, THE ASSESSEE AND THE FINA L PURCHASERS. HOWEVER, WHAT IS MATERIAL IS WHETHER INDEED THE SAID DWELLIN G UNITS PARTICULARLY THE 9 ROW HOUSES WE RE HAVING BUILT UP AREA OF 1500 SQ.FT. OR LESS. AS MENTIONED IN PARA 6.5 ABOVE, THE ROW HOUSES WERE FOUND TO HAVE AN AREA SUBSTANTIALLY IN EXCESS OF 1500 SQ.FT. EACH AT THE TIME OF INSPECTION BY THE DVO . IN THIS CONTEXT, REFERENCE IS INVITED TO THE STATEMENT OF SHRI PRASHA NT M. MUNDHADA RECORDED ON 19.01.2009. IN RESPONSE TO QUESTION NO.12, SHRI MU NDHADA CATEGORICALLY STATED THAT NO ADDITION TO THE B UILT UP AREA OF THE ROW HOUSES WERE MADE BY THEM DURING THE PERIOD THE Y HAD CARRIED OUT CONSTR UCTION RELATING TO THE ROW HOUSES. ONLY CERTAIN INTE RNAL CHANGES IN THE ROW HOUSES HAD BEEN MADE AT THE EXPRESS REQUEST OF THE FINAL PURCHASER. STATEMENTS OF SOME OF THE FINAL PURCHASERS WERE ALSO RECOR DED WHEREIN WHILE SOME OF THEM (SHRI RAMKISHAN H. KASA T, SHRI RAJESH G. KASAT AND SHRI PRAMOD J. BHARTIYA) ADMITTED ADDITIONAL CONSTRUCTION OF VARYING AREAS FROM 20 SQ.FT. TO 80 SQ.FT., WHILE SOME (SHRI LAXMIKANT K. KED IA, SHRI MILIND RAMDAS DANDE & OR. BIMAL KISHORE SIKCHI) DENIED CARRYING OUT ANY CONSTRUCTI ON OF ADDITIONAL BUILT UP AREA. AT THIS POINT, IT IS RELEVANT TO NOT E THAT THE ADDITIONAL BUILT UP AREA IN EXCESS OF 1500 SQ.FT. FOUND TO HAVE BEEN CONSTRUCTED AT THE TIME OF INSPECTION BY THE DV O IS SUBSTANTIALLY MORE THAN 80 SQ.FT. I N RESPECT OF EVERY RO W HOUSE. IN ANY CASE, EVEN CONSIDERING THE BUILT UP AREA OF EACH RO W HOUSE IN THE PLANS SUBMITTED TO THE LOCAL AUTHORITY, IF THE AREA 10 ITA NOS. 277 & 278/NAG/2012 OF BALCONY , VERANDA AND PORCH PROJECTION IS INCLUDED, THE BUILT UP AREA EXCEEDS 1500 SQ.FT IN RESPECT OF EVERY ROW HOUSE. THE SUBMI SSION OF THE ASSESSEE THAT THE DEFINITION OF BUILT UP AREA IN SUB - SECTION (14) OF SECTION 801B INSERTED W. E.F. 01.04.2005 WOULD NOT BE APPLICABLE I N CASES WHERE PROJECT HAS BEEN APPROVED PRIOR TO 01.04.2005 IS WITHOUT ANY BASIS. IN ORDER TO AVAIL A DEDUCTION, AN ASSESSEE HAS TO SATISFY ALL THE CONDITIONS OF THE STATUTE AS AR E APPLICABLE FOR THE YEAR IN WHICH SUCH DEDUCTION IS CLAIMED. FOR T HE ASSESSMENT YEAR UNDER CONSIDERATION I.E. AY 2007 - 08, THE LAW REQUIRES, INTE R ALIA, THE FOLLOWING CONDITIONS TO BE FULFILLED FOR AVAILING DEDUCTI ON U/S. 80IB(10) OF THE IT,ACT,1961. 8.1 THE AO HAS FINALLY CONCLUDED THAT THE PROJECT W A S NOT COMPLETED ON OR BEFORE 31 ST MARCH, 2008 AND THE BUILT UP AREA OF THE 9 ROW HOUSES HAD EXCEEDED 1500 SQ.F. , THEREFORE, THE ASSESSEE WAS NOT ELIGIBLE FOR THE DEDUCTION U/S 80IB(10). AS A RESULT THE CLAIM OF RS.32,11,087/ - WAS REJECTED. BEING AGGRIEVED, THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 9. BEFORE THE LEARNED CIT(APPEALS) THE FACTS HAVE BEEN ELABORATED AT LENGTH AND IT WAS STATED THAT THE AREA OF EACH ROW HOUSE WAS AS PER THE SANCTIONED MAP AND THE COMPLETION CERTIFICATE OBTAINED ON 15 - 05 - 2007 AND 14 - 03 - 2008 RESPECTIVELY. THE CERTIFICATE OF AN ARCHITECT HAD ALSO BEEN SUBMITTED CERTIFYING THE AREA AT 150 0 SQ.FT. THE DVO HAD SIMPLY MENTIONED THAT SOME ALTERNATION WORK IN THE ROW HOUSES WAS DONE AFTER THE SALE DEED WAS REGISTERED. RATHER THE FAMILY MEMBERS OF MUNDHADA FAMILY VIDE A LETTER DATED 24 - 10 - 2001 HAD UNDERTAKEN THE RESPONSIBILITY OF ANY ADDITION OR ALTERNATION MADE IN THE ROW HOUSES. IN RESPECT OF THE COMPLETION OF THE CONSTRUCTION THE ASSESSEE HAS PLEADED THAT AN EXPENDITURE OF RS.12,36,414/ - ALTHOUGH INCURRED AFTER 31 ST MARCH, 2008 BUT IT WAS NOT FOR THE CONSTRUCTION OF THE ROW HOUSES BUT ONLY FOR SITE DEVELOPMENT EXPENSES SUCH AS ROADS, PARKS, PLAY AREA ETC. HOWEVER, THE LEARNED CIT(APPEALS) WAS NOT CONVINCED AND AFFIRMED THE ACTION OF THE AO AND HELD THAT ALL THE ISSUES AS RAISED BY THE AO WERE CORRECT, HENCE THE CLAIM OF 11 ITA NOS. 277 & 278/NAG/2012 DEDUCTION U/S 80IB(10) W AS RIGHTLY DENIED. THE FINAL VERDICT OF LEARNED CIT(APPEALS) IS REPRODUCED FOR READY REFERENCE ONLY : C] A.O. HELD THAT ASSESSEES PROFIT IS NOT ELIGIBLE FOR 80IB(10) AS 14 ROW HOUSES NOT COMPLETED BEFORE 31.03.2008. APPELLANT HAS CLAIMED THAT EVEN I F 4 ROW HOUSED ARE TAKEN OUT THEN THE PROJECT REMAIN ONE ACRE BUT APPELLANT HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THIS AS THE TOTAL AREA OF PROJECT IS 86735 SQ.FT. AND APPELLANT CLAIMED THAT 4 ROW HOUSES ARE NOT MORE THAN 10000 SQ.FT. IN NEXT YEAR I.E . A.Y.2008 - 09 APPELLANT HAS CLAIMED THAT EVEN IF ALL ROW HOUSES ARE TAKEN OUT THEN THE AREA OF FLAT SOLD IN THAT YEAR IS MORE THAN ONE ACRE BUT APPELLANT HAS BROUGHT NOTHING ON RECORD TO SUBSTANTIATE THIS CLAIM FOR BOTH THE YEARS. HENCE THIS ARGUMENT OF A PPELLANT DESERVES TO BE REJECTED FOR AT LEAST A.Y.2008 - 09 AS TO HOW IF THE AREA OF ROW HOUSES IS TAKEN OUT THEN FLAT AREA IS MORE THAN ONE ACRE. ADMITTEDLY ONLY TWO WERE PARTLY COMPLETELY AND BALANCE HAVE NOT BEEN COMPLETED TILL DATE. HENCE, THERE IS NO QU ESTION OF 80IB(10) BECAUSE UNLESS PROJECT IS COMPLETED AS APPROVED, NO CLAIM CAN BE ALLOWED U/S.80IB(10) AS PER LAW. D] A.O. HELD THAT CONSTRUCTION OF PROJECT IS NOT COMPLETE AS 123644 IS DEBITED TO CONSTRUCTION ACCOUNT AFTER 13.03.2008. A.O. HAS FOUND DISCREPANCIES THAT APPELLANT HAS GOT WORK DONE EVEN AFTER THE CERTIFICATE OF OCCUPANCY ISSUED BY TOWN PLANNING AUTHORITY IN MARCH, 2008. IT MUST BE KEPT IN MIND THAT TWO CERTIFICATES WERE GOT ISSUED BY APPELLANT ONE ON 15.05.2007 AND OTHER ON 14.03.2008 IT IS APPARENT THAT FIRST CERTIFICATE WAS PART OCCUPANCY CERTIFICATE ISSUED TO APPELLANT TO BE ABLE TO EXECUTE VARIOUS FACILITIES TO BE EXTENDED TO THE PROJECT OF ASSESSEE RELATING TO WATER SUPPLY, SEWAGE, ETC. AND THEY ARE ISSUED AT THE REQ UEST OF APPELLANT BUT FINAL CERTIFICATE WAS ISSUED ON COMPLETION OF CONSTRUCTION OF DWELLING UNIT AND IN CASE OF APPELLANT FINAL COMPLETION HAS NOT BEEN ISSUED BY CONCERNED AUTHORITY AS PER LAW AS THE PROJECT WAS NOT COMPLETE AND THIS WAS STATED BY SECTIO N ENGINEER ON 08.12.2009. NOW APPELLANT CLAIM THAT HE WAS NOT ALLOWED TO CROSS EXAMINE THE ENGINEER IS NOT AS MUCH RELEVANCE AS APPELLANT HAS TO PRODUCE THE FINAL COMPLETION CERTIFICATE OF THE 12 ITA NOS. 277 & 278/NAG/2012 PROJECT AND NOT HOUSES AND IT APPEARS THAT APPELLANT HAS NOT DONE SO AND IF HE HAD GOT THE FINAL COMPLETION CERTIFICATE FROM LOCAL AUTHORITY, HE WOULD HAVE PRODUCED IT BEFORE A.O. OR ME BUT HE HAS NOT DONE IT. HENCE, APPELLANTS CLAIM FAIL THAT PROJECT WAS COMPLETE AS A WHOLE AS IS REQUIRED BY LAW OF LAND. HENCE, I HOLD THAT ON ALL FOUR ISSUES RAISED BY A.O., APPELLANTS CASE FAILS AND HENCE A.O. IS DIRECTED TO TAX THE PROFIT FROM SALE OF THESE 9 STRUCTURES IS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10) IS UPHELD AND ALSO THESE ROW HOUSES WERE HAVING AREA BEYOND 1500 SQ.FT. AND SINCE COMPLETION CERTIFICATE WAS NOT OBTAINED FROM MUNICIPAL CORPORATION / T & CP FOR THE ENTIRE PROJECT PROFIT FROM SALE OF THESE WITH IS ALSO NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10). 10. FROM THE SIDE OF THE APPELLANT LEARNED A.R. MR. R.B. ATAL APPEARED AND AT THE OUTSET PLEADED THAT THE CONCERNED AUTHORITIES HAVE ISSUED THE LETTERS ABOUT THE COMPLETION OF THE ROW HOUSES AND ONLY ON THAT BASIS THE ASSESSEE OBTAINED THE WATER CONNECTION, ELECTRICITY CONNECTION AND SEWERAGE CONNECTION ETC. AS PER THE PROVISIONS OF LAW APPLICABLE FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS REQUIRED TO COMPLETE THE PROJECT ON OR BEFORE 31 ST OF MARCH, 2008. THE ASSESSEE HAD COMPLIED WITH THIS CONDITION BY OBTAINING A COMPLETION CERTIFICATE FROM AMC DATED 15 - 05 - 2007 AND LATER ON ANOTHER CERTIFICATE DATED 14 - 03 - 2008 ISSUED BY AMC. ON THE SECOND ISSUE ABOUT THE AREA OF EACH FLAT HE HAS PLEADED THAT AS PER THE SALE DEEDS EXECUTED THE AREA OF EACH ROW HOUSE WAS CLEARLY MENTIONED WHICH WAS LESS THAN 1500 SQ.FT. A T THE TIME OF INSPECTION OF DVO IF ANY ALTERATION WAS MADE THEN IT WAS NOT THE RESPONSIBILITY OF THE ASSESSEE BECAUSE ROW HOUSES HAD ALREADY BEEN TRANSFERRED TO THOSE PURCHASERS. THE DATE - WISE EVENT AND THE RELEVANT CERTIFICATES OBTAINED BY THE ASSESSEE WE RE EXPLAINED IN THE FOLLOWING MANNER : NOTES OF FACTS R.H.DOTIVALLA AND SH DOTIVALLA INHERITED LAND WITH OLD RESIDENTIAL HOUSE AND OUT HOUSES AT CAMP AMRAVATI BEARING SHEET NO.19, NAZUL PLOT NO.18, LAYOUT PLOT NO.22, AREA 86735 SQ. FT.(2 ACRES) R.H.DOTIVALLA AND SH DOTIVALLA ARE NOT BUILDERS THEY DEVELOPED THEIR OWN LAND. 13 ITA NOS. 277 & 278/NAG/2012 DATE FACTS 30.03.2001 AMRAVATI MUNICIPAL CORPORATION SANCTIONED MAP OF CONSTRUCTION VIDE ORDER NO.153 ON LAND MEASURING 86735 SQ.FT. AREA OF CONSTRUCTION 5890 SQ. MT (63181 SQ.FT.) CONSISTING OF TOTAL 44 FLATS AND 14 ROW HOUSES EACH HAVING BUILT UP AREA LESS THAN 1500 SQ.FT. 24.11.2003 DEED OF DECLARATION EXECUTED & REGISTERED. IT CONTAINS BUILD UP AREA OF EACH APARTMENTS WHICH ALL ARE BELOW 1500 SQ.FT. 01.04.2005 DEFINITIO N OF BUILT UP AREA INTRODUCED IN I T ACT FOR FIRST TIME. 10.03.2006 AS ON 10.03.2006 AMOUNT OF LOAN WITH INTEREST RS.79,78,780/ - WAS DUE OF MUNDHADA FAMILY WHICH WAS TAKEN FOR CONSTRUCTION. 10.03.2006 AS ASSESSES WERE NOT ABLE TO PAY LOAN AMOUNT WITH INTEREST TO MUNDHADA FAMILY THEREFORE EXECUTED AGREEMENT TO SELL 9 ROW HOUSES (IE APARTMENT NO.001 TO 007, 013 & 014) TO MUNDHADA FAMILY OR TO THEIR NOMINEES THE CONSTRUCTION IN RCC FRAME STRUCTURE WITH BRICK WALL OVER HEAD TANK WITH PROPORTIONATE SHARE IN LAND OF EACH APARTMENT FOR TOTAL AGREED PRICE OF RS.14500780=12 (RS. ONE CRORE FORTY FIVE LAC SEVEN HUNDRED EIGHTY AND PAISA TWELVE) AND FROM DATE OF AGREEMENT AMOUNT OF RS.79,78,780/ - STOOD PAID UP. 31.03.2006 BALANCE AMOUNT OF RS.65,22,000/ - DEPOSITED BY MUNDHADA FAMILY IN ACCOUNT OF ASSESSES WITH ALLAHABAD BANK ACCOUNT NO. PN 220. FROM DATE 3.8.2006 UPTO 24.10.2007 ON VARIOUS DATES REGISTERED SALE DEEDS OF 9 ROW HOUSES (I.E. APARTMENT NO.001 TO 007, 013, 014) EXECUTED BY ASSESSES IN FAVOUR OF VARIOUS NOMINEES OF MUNDHADA FAMILY, EACH ROW HOUSE HAVING BUILT UP AREA LESS THAN 1500 SQ FT.) 15.05.2007 COMPLETION CERTIFICATE GRANTED BY AMRAVATI MUNICIPAL CORPORATION IN RESPECT OF FOLLOWING APARTMENTS APARTMENT NO.001 TO 007,012,013 & 014 (ROW HOUSES) A BUI LDING : - APARTMENT NO. A101,A102, A103, A201, A202 & A203 B BUILDING : - APARTMENT NO.B101, B102 & B203 14.03.2008 COMPLETION CERTIFICATE GRANTED BY AMRAVATI MUNICIPAL CORPORATION IN RESPECT OF FOLLOWING APARTMENTS. A BUILDING : - A301, A302, A303, A401,A403 B BUILDING : - B103,B201,B202,B301,B302,B303,B401,B403 C BUILIDNG : - C101,C102,C103,C201,C202,C203,C301,C302,C303, C401 & C403 D BUILDING : - D101,D102,D103,D201,D202,D203,D301,D302,D303, D401 & D403 AS SUCH BEFORE LAST DATE OF COMPLETION 31.03.20 08 CONSTRUCTION DONE BY ASSESSES OF BUILDING ABAC & D TOTAL 44 APARTMENTS AND 10 ROW HOUSES. 3.9.2007 AND 7.9.2007 NOTICES BY REG POST A/D GIVEN TO PURCHASERS OF APARTMENT NO.001,003, 005,006,007 AND 014 (ROW HOUSES) THAT AFTER SALE DEEDS THEY HAVE ILLEGALLY MADE ADDITIONAL CONSTRUCTION, AND EXTRA CONSTRUCTION IN AND 14 ITA NOS. 277 & 278/NAG/2012 11. IN RESPECT OF THE LAW ABOUT THE AREA FOR THE YEAR UNDER CONSIDERATION, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS : A) CIT VS. SARKAR BUILDERS 277 CTR 301 (SC). B) CIT VS. VEENA DEVELOPERS 277 CTR 297 (SC). C) CIT VS. BRAMHA ASSOCIATES 333 ITR 289 (BOM.). D) CIT VS. G.R. DEVELOPERS 351 ITR 1 (KAR.). E) CIT VS. ANRIYA PROJECT MANGAT. SERVICES PVT. LTD. 353 ITR 12 (KAR.). F) ACIT VS. PARAS BHOMRAJ OSWAL 46 TAXMANN.COM 15 (PUNE TRIB.). G) COMMON WEALTH DEV VS. ACIT 267 CTR 297 (BOM.). 12. FROM THE SIDE OF THE REVENUE, LEARNED D.R. MR. S.P.G. MUDLIAR APPEARED AND PLEADED THAT AT THE TIME OF SURVEY, CERTAIN DOCUMENTS HAVE BEEN IMPOUNDED AND ON THAT BASIS IT WAS FOUND THAT THE ASSESSEE HAS NOT COM PLIED WITH ALL THE CONDITIONS AS PRESCRIBED U/S 80IB(10) OF I.T. ACT. THEREFORE, THE AO HAS RIGHTLY AND 8.9.2007 AND 29.12.2007 OUTSIDE OF APARTMENTS. 24.10.2007 MUNDHADA FAMILY MEMBERS GAVE LETTER TO ASSESSES THAT AFTER SALE DEEDS OF SAID APARTMENTS (I.E. ROW HOUSES) VARIOUS ADDITION AND A LTERATIONS AND ADDITION ARE MADE BY ITS PURCHASERS, IN SPITE OF SERIOUS OBJECTION TAKEN BY ASSESSES. 13.01.2009 SURVEY WAS CONDUCTED AT PREMISES OF ASSESSES. NO INCRIMINATING MATERIAL FOUND. 17.03.2009 & 18.03.2009 DISTRICT VALUATION OFFICER VISITED THE SIDE FOR INSPECTION. 30.03.2009 REPORT OF DISTRICT VALUATION OFFICER. AS REGARDS 44 APARTMENTS OF BUILDING A B C & D THERE IS NO DISPUTE BY THE DEPARTMENT THAT BUILT UP AREA OF THESE 44 APARTMENTS IS MUCH LESS THAN 1500 SQ.FT. AS PER DVO REPORT AS PER COMPLETION DRAWING SUBMITTED TO MUNICIPAL CORPORATION OF THE TEN APARTMENTS IE ROW HOUSES AFTER EXCLUDING BALCONY VERANDA PORCH/PROJECTION THE BUILT UP AREA OF EACH IS LESS THAN 1500 SQ. FT. AS ON DATE OF INSPECTION BY DVO SIX APARTMENTS I.E. ROW HOUSES AFTER EXCLUDING BALCONY VERANDA PORCH/PROJECTION THE BUILT UP AREA OF EACH OF IT IS LESS THAN 1500 SQ. FT. 15 ITA NOS. 277 & 278/NAG/2012 DENIED THE CLAIM. EVEN BEFORE THE FIRST APPELLATE AUTHORITY THE APPELLANT HAS NOT IMPR OVED THE CASE BY FURNISHING ANY CORROBORATIVE EVIDENCE TO DEMONSTRATE THAT THE PROJECT WAS COMPLETED BEFORE 31 ST MARCH, 2008 AND THAT THE AREA OF THE ROW HOUSE HAD NOT EXCEEDED THE PRESCRIBED LIMIT OF 1500 SQ.FT. WHICH WAS DULY MEASURED BY THE DVO ON SPOT INSPECTION OF THE PROPERTY IN QUESTION. LEARNED D.R. HAS, THEREFORE, CONCLUDED THAT IN THE LIGHT OF THE FACTS OF THE CASE, THE PRECEDENT CITED ARE ALSO NOT APPLICABLE. 13. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE ALSO CAREFULLY PERUSED THE EVID ENCES PLACED ON RECORD. AS FAR AS THE BASIC FACTS ARE CONCERNED PERTAINING TO THE ACQUISITION OF THE LAND IN QUESTION THAT THE SAME WAS INHERITED BY THE ASSESSEE WERE NOT IN DISPUTE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE TOOK LOANS FROM MUNDHADA FAM ILY MEMBERS. IN THE EVENT WHEN THE LOAN COULD NOT BE REPAID THE ASSESSEE HAD AGREED TO SELL 9 ROW HOUSES TO THE MEMBERS OF THE FAMILY FOR A CONSIDERATION OF RS.1,45,00,780/ - . THE SALE OF 9 ROW HOUSES WAS AS PER THE AGREEMENT DATED 10 TH MARCH, 2006. THE SA LE DEED HAS NOT ONLY RECOGNISED THE TRANSFER OF THE ROW HOUSES BUT HAS ALSO RECOGNISED THAT THE POSSESSION WAS TO BE HANDED OVER ON 1 ST APRIL, 2006. FROM THESE ADMITTED FACTUAL POSITION AND AS ARGUED BY LEARNED A.R. THE ASSESSEE WAS COMPELLED TO SELL THE ROW HOUSES TO THE MEMBERS OF MUNDHADA FAMILY. THE IMPUGNED AGREEMENT TO SALE WAS EXECUTED ADMITTEDLY TO SQUARE UP THE LOAN AMOUNT. 14. THE BASIC QUESTION WHICH WAS IN DISPUTE AND VEHEMENTLY RAISED BY THE AO WAS THAT AS PER THE IMPUGNED AGREEMENT DATED 10 T H MARCH, 2006 THE CON STRUCTION OF THE ROW HOUSES WAS INCOMPLETE. THOSE APARTMENTS CONSISTED OF RCC FRAMEWORK AND BRICK WALLS ONLY. BECAUSE OF THIS REASON THE AO HAS HELD THAT THE ASSESSEE SOLD THE ROW HOUSES IN INCOMPLETE MANNER. THE ASSESSEE HAD ALSO NOT OBTAINED THE COMPLETION CERTIFICATE WHICH WAS REQUIRED TO BE PROCURED ON OR BEFORE 31 ST MARCH, 2008, HENCE AS PER AO THE CLAIM OF DEDUCTION U/S 80IB(10) WAS NOT ADMISSIBLE TO THE ASSESSEE. 16 ITA NOS. 277 & 278/NAG/2012 14.1 PRIMA FACIE WE ARE OF THE VIEW THAT MERELY ON THE BASIS OF ONE FACT WHICH WAS NOTED IN THE AGREEMENT THE OTHER CORROBORATIVE EVIDENCES SHOULD NOT HAVE BEEN IGNORED. AS FAR AS THE AREA OF THE PIECE OF LAND WAS CONCERNED, THERE WAS NO DISPUTE. A PLAN FOR CONSTRUCTION OF 14 ROW HOUSES AND 44 FLATS WAS SANCTIONED BY AMC VIDE AN ORDER NO. 153 DATED 30 TH APRIL, 2001. AS PER THE SAID SANCTIONED MAP THE AREA OF EACH ROW HOUSE AS WELL AS THE AREA OF EACH FLAT WAS BELOW 1500 SQ.FT. A DECLARATION WAS EXECUTED IN THIS REGARD ON 24 - 11 - 2003. THE ASSESSEE HAS FURNISHED A COMPLETION PLAN ON 19 - 09 - 2005. ON THE BASIS OF THE DOCUMENTS SUBMITTED AN OCCUPANCY CERTIFICATE OF 10 ROW HOUSES AND 9 FLATS WAS GRANTED BY THE AMC UNDISPUTEDLY DATED 15 - 05 - 2007. RATHER AN APPLICATION OF OCCUPANCY CERTIFICATE OF REMAINING 35 FLATS HAVE ALSO BEEN SUB MITTED BY THE ASSESSEE TO AMC DATED 12 - 03 - 2008. A PAPER BOOK IS FILED ACCORDING TO WHICH ON PAGE 31 THERE IS A CERTIFICATE ISSUED BY MUNICIPAL CORPORATION, AMRAVATI BEARING NO. AMNP/SSNR/BP/153/2000 DATED 08 - 05 - 2001 ACCORDING TO WHICH WITH REFERENCE TO THE ASSESSEES APPLICATION NO. 2203 DATED 27 TH MARCH, 2001 THE COMMENCEMENT WAS GRANTED. ON PAGE 34 TO 36A OF THE PAPER BOOK SEVERAL COMPLETION CERTIFICATES IN RESPECT OF THE UNITS HAVE ALSO BEEN PLACED ON RECORD ISSUED BY ASSISTANT DIRECTOR OF TOWN PLANNING. A CERTIFICATE IS ALSO PLACED ON RECORD OF AMC WHICH HAS CLARI F IED THAT THE CERTIFICATE OF OCCUPANCY AND COMPLETION WAS IN RESPECT OF CERTAIN APARTMENTS AS ON 15 - 05 - 2007 AND CERTIFICATE DATED 14 - 03 - 2008 IN RESPECT OF OTHER UNITS. THE ASSESSEE HAS ALSO FURN ISHED A CERTIFICATE OF COMPLETION ISSUED BY AN ARCHITECT, NAMELY, M/S MAHESH MOKHA. 14.2 OUR ATTENTION HAS ALSO BEEN DRAWN ON A NOTICE ISSUED TO THE PURCHASER OF ROW HOUSES STATING THEREIN THAT IF AN ILLEGAL OR UNAUTHORIZED ADDITIONAL CONSTRUCTION WOULD BE MADE THEN THAT SHOULD BE A VIOLATION OF RULES OF MUNICIPAL CORPORATION. VIDE AN AGREEMENT WHICH WAS EXECUTED IN FAVOUR OF THE PURCHASER HAS SPECIFIED THE ROW HOUSES IN QUESTION, HENCE NO FURTHER ADDITIONAL 17 ITA NOS. 277 & 278/NAG/2012 CONSTRUCTION WAS PERMISSIBLE. IN THE LIGHT OF AL L THESE DOCUMENTS THE FUNDAMENTAL QUESTION IS THAT WHETHER ON THE BASIS OF A DESCRIPTION MENTIONED IN THE IMPUGNED AGREEMENT WHICH WAS EXECUTED AS A TRIPARTITE AGREEMENT THE ROW HOUSES IN QUESTION COULD BE SAID TO BE INCOMPLETE FOR THE PURPOSE OF GRANT O F DEDUCTION U/S 80IB(10) OF I.T. ACT. THE FIRST AND FOREMOST FACT WHICH REQUIRES DUE CONSIDERATION IS THAT THE ASSESSEE HAD OBTAINED A LOAN AND TO SQUARE UP THE LOAN THOSE ROW HOUSES WERE TRANSFERRED TO THE THIRD PARTIES AS DEMANDED OR DIRECTED BY THE MEMB ERS OF MUNDHADA FAMILY. THE ASSESSEE HAD COMPLETED CONSTRUCTION AS SPECIFIED THEREIN AS WELL AS OBTAINED CERTAIN CERTIFICATES FROM THE CONCERNED AUTHORITIES SO THAT THE ROW HOUSES COULD BE OCCUPIED AND THE BASIC FACILITIES SUCH AS SEW ERAGE AND WATER CONNE CTION COULD BE PROVIDED. ALL THESE FACTS OR DOCUMENTARY EVIDENCES HAVE NOT BEEN CHALLENGED BY THE REVENUE DEPARTMENT. THEREFORE, THE VERACITY OF THOSE CERTIFICATES CANNOT BE SAID TO BE DOUBTFUL. FROM THE SIDE OF THE REVENUE DETAILS OF THE EXPENDITURE INCUR RED ON THOSE ROW HOUSES AFTER THE DEED OF TRANSFER HAS BEEN RELIED UPON AND ON THAT BASIS THE ALLEGATION OF THE AO IS THAT THE EXPENDITURE WAS INCURRED FOR THE COMPLETION OF THE ROW HOUSES, THEREFORE, THE CLAIM OF COMPLETION AS ON 31 ST MARCH, 2008 WAS INC ORRECT. HOWEVER, WE ARE NOT CONVINCED BY THE SAID LOGIC OF THE AO SPECIALLY IN THE ADMITTED FACTUAL CIRCUMSTANCES THAT THE ROW HOUSES HAVE ALREADY BEEN TRANSFERRED AND THE POSSESSION WAS TAKEN OVER BY THE RESPECTIVE PURCHASERS. THE DVO HAS ALSO MENTIONED THAT CERTAIN RENOVATIONS AND MODIFICATIONS HAVE BEEN DONE THAT TOO AT THE TIME WHEN HE MADE THE INSPECTION IN THE YEAR 2009. THERE IS NOTHING ON RECORD TO ESTABLISH THAT THOSE RENOVATIONS OR ADDITIONS HAVE BEEN MADE BY THE ASSESSEE. RAT HER THE ASSESSEE HAD PLACED ON RECORD CERTAIN LETTERS ISSUED BY THE ASSESSEE TO THE RESPECTIVE PURCHASERS OBJECTING THE ALTERATIONS IF AGAINST THE PLAN SANCTIONED. THEREFORE, UNDER THE TOTALITY OF THE APPRECIATION OF THE FACTS AND THE EVIDENCE ON RECORD, WE ARE OF THE VIEW THAT MERELY ON ASSUMPTION IT IS NOT JUSTIFIABLE TO IGNORE THE CERTIFICATES ISSUED BY THE CONCERNED AUTHORITIES AND ALLEGED THAT THE COMPLETION WAS BEYOND 18 ITA NOS. 277 & 278/NAG/2012 THE PERIOD PRESCRIBED UNDER THE STATUTE. THIS PART OF THE OBJECTION RAISED BY THE A O IS, THEREFORE, REJECTED. 14.3 THE NEXT OBJECTION OF THE AO WAS THAT THE AREA AS REPORTED BY THE DVO HAD EXCEEDED THE PRESCRIBED LIMIT OF 1500 SQ.FT. AS FAR AS THE PLAN WHICH WAS SANCTIONED FOR THE CONSTRUCTION OF THE UNITS WAS CONCERNED, THERE IS NO DIS PUTE THAT THE PROPOSAL WAS FOR THE CONSTRUCTION OF EACH UNIT ADMEASURING 1500 SQ.FT. HOWEVER, WHEN THE DVO HAD INSPECTED THE PREMISES HE HAS REPORTED THAT THE BUILT UP AREA HAD EXCEEDED IN RESPECT OF FEW UNITS. A VERY FUNDAMENTAL LEGAL QUESTION HAD CROPPE D UP THAT WHILE MEASURING THE BUILT UP AREA OF THE UNITS IN QUESTION, THE DVO HAS TAKEN INTO MEASUREMENT THE PROJECTIONS AND VERANDA ETC. BECAUSE OF THAT MEASUREMENT WHEREIN THE AREA OF THE UNITS WAS INCLUSIVE OF THE PROJECTION IT WAS LEGALLY CORRECT TO A LLEGE THAT THE BUILT UP AREA HAD EXCEEDED THE PRESCRIBED LIMIT FOR A PROJECT WHICH WAS SANCTIONED PRIOR TO 1 ST APRIL, 2005. THE ADMITTED FACTUAL POSITION OF THIS CASE IS THAT THE AMC HAD SANCTIONED THE MAP OF CONSTRUCTION VIDE AN ORDER NO. 153 DATED 31 ST MARCH, 2001. THEREFORE, THE ADMITTED FACTUAL POSITION WAS THAT THE PROJECT IN QUESTION BELONGED TO A PERIOD PRIOR TO 1 ST APRIL, 2005 . PRIOR TO 1 ST APRIL, 2005 THE AREA COVERED UNDER THE PROVISIONS OF SECTION 80IB(10) HAD EXCLUDED THE BALCONY OR PROJECTION FOR THE PURPOSE OF CALCULATING THE BUILT UP AREA. AS THE HOUSING PROJECT IN QUESTION WAS APPROVED ON 31 ST MARCH, 200 1 THE CONSTRUCTION WHICH WAS APPROVED WAS ADMITTEDLY LESS THAN 1500 SQ.FT. IF ANY ADDITION OR ALTERATION HAD BEEN MADE BY THE BUYERS OF THE UNIT AFTER TAKING OVER THE POSSESSION, THEN THE ASSESSEE SHOULD NOT BE HELD RESPONSIBLE. THERE ARE NUMBER OF CASE LAW S WHERE IT HAS BEEN DECIDED THAT THE PROVISIONS OF SECTION 80IB(10) VIS - A - VIS THE AMENDMENT TOOK PLACE FOR THE PROJECTS APPROVED AFTER 1 ST APRIL, 2005 ARE NOT RETROSPECTIVE IN NATURE. IN THE CASE OF CIT VS. ANRIYA PROJECT MANAGEMENT SERVICES P. LTD. 353 IT R 12 (KARN.) IT WAS HELD AS UNDER : (ONLY RELEVANT PORTION IS REPRODUCED). 19 ITA NOS. 277 & 278/NAG/2012 IN THE CASE OF CIT VS. G.R. DEVELOPERS (IT APPEAL NO.355 OF 2009 DISPOSED OF ON THE EVEN DATE) SINCE REPORTED IN [2013]ITR 1 (KARN) WE HAVE HELD THAT THE DEFINITION OF BUILT - UP AREA INSERTED BY THE FINANCE (NO.2) ACT OF 2004 WHICH CAME INTO EFFECT FROM APRIL 1, 2005, IS ONLY PROSPECTIVE IN NATURE. IT HAS NO APPLICATION TO HOUSING PROJECTS WHICH WERE APPROVED BY THE LOCAL AUTHORITY PRIOR TO THAT DATE. PRIOR TO APRIL 1, 2005, IN CALCULATING THE 1,500 SQ.FT. OF A RESIDENTIAL UNIT, THE AREA COVERED BY A BALCONY WAS EXCLUDED. THEREFORE, THE DEFINITION OF BUILT - UP AREA WHICH IS NOW INSERTED HAS NO APPLICATION TO CONSTRUCTIONS WHICH WERE PUT UP IN ACCORDANCE WITH HOUSING PROJECTS APPRO VED BY THE LOCAL AUTHORITY PRIOR TO THAT DATE. IN THE INSTANT CASE, ADMITTEDLY, IF THE BALCONY AREA IS EXCLUDED, NONE OF THE RESIDENTIAL UNITS IS MORE THAN 1,500 SQ.FT. THEREFORE, THE ASSESSEE IS ENTITLED TO 100 PERCENT BENEFIT OF SECTION 80 - IB(10), THE TR IBUNAL WAS NOT JUSTIFIED IN GIVING ONLY THE PROPORTIONATE BENEFIT. IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE TRIBUNAL IS SET ASIDE AND IT IS HELD THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF SECTION 80 - IB(10) IN RESPECT OF THE 152 FLATS. IN THE INSTANT CASE, SO FAR AS THE LAST FLAT IS CONCERNED, THE PURCHASERS HAVE TAKEN THE LAST FLOOR AND THE PENTHOUSE ON THAT FLOOR UNDER TWO INDEPENDENT SALE DEEDS. THEREFORE, THE TOTAL AREA COVERED UNDER EACH SALE DEED IS LESS THAN 1,500 SQ.FT. IN ORDER TO PREVENT SUCH TRANSACTIONS, LAW IS AMENDED PREVENTING A PERSON FROM PURCHASING TWO FLATS IN THE SAME PROJECT WHICH IS AGAIN PROSPECTIVE IN NATURE. THEREFORE, SEEN FROM ANY ANGLE THE ASSESSEE IS ENTITLED TO THE BENEFIT UNDER SECTION 80 - IB(10) OF THE ACT. 14.4 THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE HIGH COURT ON THIS COUNT, THE DENIAL OF EXEMPTION BY THE AO WAS NOT JUSTIFIED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. WE HEREBY CONCLUDE THAT IN THE LIGHT OF THE DISC USSION MADE HEREIN ABOVE AFTER CONSIDERING THE POSITION OF LAW AS WELL AS THE EVIDENCES ON RECORD THE ASSESSEE IS ENTITLED FOR THE DEDUCTION U/S 80IB(10) OF RS. 32,11,087/ - . THE GROUND RAISED IS, THEREFORE, ALLOWED. 20 ITA NOS. 277 & 278/NAG/2012 15. GROUND NO. 2: THAT THE ADDITION OF RS.8,14,656/ - ON ACCOUNT OF SO CALLED RATE DIFFERENCE IN SELLING OF APARTMENTS IS PURELY ON IMAGINATION AND SURMISES, WITHOUT ANY EVIDENCE ON RECORD. THE ADDITION OF RS.8,14,656/ - BEING INCORRECT, IMPROPER AND UNJUST AND AS SUCH THE SAME BE DELETED. TH E AO HAD MADE A REFERENCE TO THE DISTRICT VALUATION OFFICER WHO HAS PREPARED A VALUATION REPORT ACCORDING TO WHICH THE COST OF CONSTRUCTION, EXCLUDING THE COST OF LAND, WAS DETERMINED AT RS.3,92,13,144/ - . ON THE OTHER HAND, THE COST OF CONSTRUCTION AS PER THE ASSESSEE WAS RS.3,48,07,920/ - . THE DIFFERENCE OF RS.43,15,224/ - WAS, THEREFORE, FOR THE PERIOD STARTING FROM 2002 - 03 TO 2008 - 09. THE ALLEGATION OF THE REVENUE DEPARTMENT WAS THAT THE ASSESSEE HAD NOT FURNISHED THE COMPLETE DETAILS OF CONSTRUCTION ALON G WITH THE PROOF OF DAY TO DAY EXPENDITURE. THE AO HAS ALSO NOTED THAT AS PER THE STATEMENT OF CERTAIN PARTIES THERE WAS DISCREPANCY IN THE RATES AT WHICH THE FLATS WERE STATED TO BE SOLD BY THE ASSESSEE. THE AO HAS APPLIED THE PROVISIONS OF SECTION 145 OF I.T. ACT. ACCORDING TO HIM THE ASSESSEE HAD UNDERSTATED THE RECEIPTS FOR THE YEAR UNDER CONSIDERATION. IT WAS HELD BY THE AO AS UNDER : AS MENTIONED ABOVE, THE ASSESSEE HAS, IN THE YEAR UNDER CONSIDERATION, EFFECTED SALE OF 2 FLATS TO SMT. PRABHA V. GUP TA (A - 103) AND SHRI PRAMOD DESHMUKH (B - 203) WITH BUILT - UP AREA OF 722.65 SQ.FT. AND 1081.33 SQ.FT. FOR TOTAL CONSIDERATION OF RS.5,55,000/ - AND RS.7,95,000/ - RESPECTIVELY. THESE ABOVE MENTIONED FLATS HAVE BEEN SOLD AT THE RATE APPROXIMATELY OF RS.750/ - P ER SQ.FT. OF BUILT - UP AREA ADOPTING THE RATE OF RS.1200/ - PER SQ.FT. OF BUILT - UP AREA, THE CONSIDERATION THAT IN ALL PROBABILITIES HAS BEEN CHARGED BY THE ASSESSEE FOR THE ABOVE MENTIOND 2 FLATS ARE RS.8,67,180/ - AND RS.12,97,476/ - . THE ASSESSEE HAS UNDER STAGTED ITS RECEIPTS BY SUM OF RS.8,14,656/ - . THE AMOUNT IS ADDED TO THE ASSESSEES TOTAL INCOME. PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED. 16. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LEARNED CIT(APPEALS) UPHELD THE ADDITI ON AS UNDER : A.O. DURING SURVEY FOUND THAT THE APPELLANT HAD SHOWN RATE OF FLAT@1200 SQ.FT. F.Y.2003 - 04 OF BUILT UP AREA (INVENTORY OF BOOK 21 ITA NOS. 277 & 278/NAG/2012 AT S.NO.B - 26) AND SUBSEQUENT BOOKING OF FLATS IN F.Y.2006 - 07 TO APPELLANTS OWN ARCHITECT MRS. RUPALI BHATTAD 3 FL ATS FOR RS.24,05,000/ - HAVE BEEN MADE OUT THESE PRICE AND SALE DEED EXECUTED IN MARCH, 2008. ALSO APPELLANT HAD HIMSELF SOLD FLATS TO MR DHENGE 2 FLATS FOR RS.26,64,000/ - STATEMENT OF BOTH OF THESE PERSONS WAS RECORDED AND THESE WITNESS OFFERED FOR CROSS E XAMINATION TO APPELLANT COUNSEL. ANT THE ARCHITECT OF APPELLANT ADMITTED THAT NOTHING WAS SPECIAL ABOUT THESE FLATS I.E. NO EXTRA WORK WAS DONE HENCE A.O. CONCLUDED THAT THE FLATS SOLD DURING THE YEAR BY APPELLANT SHOULD HAVE GONE FOR TO THE SAME PRICE. AP PELLANT HAS ONLY SAID THAT IT WAS DISTRESS SELL AND PRICE SHOWN IN SALE DEED BE ACCEPTED. I FIND NO REASON TO INTERFERE AS APPELLANT IS HIMSELF ADVERTISING AS FOUND IN THE PAMPHLET RECORD AND IMPOUNDED DURING SURVEY FROM APPELLANTS PREMISES, THE PRICE AND HIMSELF HAS SOLD THE FLATS TO OTHER FOR THE SAME PRICE INCLUDING THE OWN ARCHITECT I.E. TOOK MONEY IN 2006 - 07 FROM ARCHITECT AT THAT RATE ONLY SO WHY WILL ANY PRUDENT MAN SELF TO OUTSIDER FOR LESS, ARGUMENT OF APPELLANT THAT PROFIT WAS EXEMPT SO WHY SHOUL D HE CHARGE LESS ON PAPER DOES NOT HOLD THE GROUND BECAUSE APPELLANT HIMSELF IS ADVERTISING SELLING OF FLATS OF THAT RATE. HENCE. A.O.S ACTION IS RIGHT, AND ADDITION MADE BY A.O. IS UPHELD. 17. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. THE BASIC ARGU MENT OF LEARNED A.R. BEFORE US IS THAT IF THE ALLEGATION IS THAT THE ASSESSEE HAS NOT SHOWN THE CORRECT SALE PRICE AND SUPPRESSED THE RECEIPTS, EVEN THEN, THE PROFIT EARNED AS ALLEGED BY THE AO OF RS.8,14,656/ - SHOULD QUALIFY FOR DEDUCTION U/S 80IB(10) OF I.T. ACT. ON MERITS ALSO IT WAS PLEADED THAT THE AO HAS HIMSELF COMMENTED THAT IN ALL PROBABILITIES THE ASSESSEE HAD CHARGED RS.1200/ - PER SQ.FT. INSTEAD OF THE RATE PER SQ.FT. SHOWN BY THE ASSESSEE. THE OBJECTION OF THE AO WAS IN RESPECT OF THE FOLLOWING TWO FLATS ONLY : PURCHASER AREA VALUE DATE (I) SAU. PRABHA V. GUPTA 722.65 SQ.FT. RS.5,55,000/ - 04 - 05 - 2006. (II) PRAMOD DESHMUKH 1081 SQ.FT. RS.7,95,000/ - 05 - 07 - 2006 IN RESPECT OF THE ABOVE TWO UNITS OUR ATTENTION HAS BEEN DRAWN ON THE REGISTERED SALE DEEDS ACCORDING TO WHICH THE ASSESSEE HAS DEMONSTRATED THAT THE AVERAGE 22 ITA NOS. 277 & 278/NAG/2012 SALE RATE WAS RS.750/ - PER SQ.FT. IT HAS ALSO BEEN DEMONSTRATED THAT MERELY ON PRESUMPTION THE AO HAD ESTIMATED RS.1200/ - PER SQ.FT. WHICH WAS NOT SUPPORTED BY ANY COGENT EVIDENCE. THE ASSESSEE HAD MAINTAINED REGULAR BOOKS OF ACCOUNTS AND DULY RECORDED THE TRANSACTIONS. NO SPECIFIC DISCREPANCY IN THE SAID BOOKS OF ACCOUNTS IN RESPECT OF ANY OF THE PART ICULAR TRANSACTION WAS DEMONSTRATED BY THE AO. THEREFORE, MERELY ON ESTIMATION OR PRESUMPTION THE IMPUGNED ADDITION WAS MADE. IN THE CASE OF CIT VS. HOTEL JOSHI 242 ITR 478 (RAJ.) SUCH AN ACTION OF THE REVENUE DEPARTMENT WAS DISPROVED. IT HAS ALSO BEEN HE LD THAT IF THE BOOKS OF ACCOUNTS ARE CREDIBLE THEN IN THE ABSENCE OF ANY COGENT EVIDENCE THE BOOK RESULT IS NOT TO BE DISTURBED, HELD IN THE CASE A. ABDUL RAHIM 258 ITR 714 (MAD.). ON DUE CONSIDERATION WE ARE OF THE VIEW THAT THE AO HIMSELF HAS MADE AN EST IMATION BY NARRATING THAT IN ALL PROBABILITIES THE ASSESSEE HAD CHARGED THE RATE PER SQ.FT. MORE THAN RS.750/ - , THEREFORE, IT IS VERY MUCH APPARENT THAT MERELY ON THE BASIS OF A PROBABILITY THE IMPUGNED ADDITION WAS MADE. SUCH ASSUMPTION CANNOT BE APPRO VED UNDER THE PROVISIONS OF LAW SPECIALLY WHEN THE RATE AT WHICH T HOSE FLATS WERE TRANSFERRED WERE DULY SUPPORTED BY THE REGISTERED SALE DEEDS. AS A RESULT, WE FIND NO BASIS FOR THE IMPUGNED ADDITION, HENCE HEREBY DIRECTED TO DELETE THE SAME. GROUND ALLOW ED. 18. GROUND NO. 3: THAT THE DETERMINATION OF LTCG AT RS.17,96,183/ - IS INCORRECT, AND BAD IN LAW AND THE SAME IS WITHOUT APPRECIATING THE APPROVED VALUERS REPORT AS ON 01 - 04 - 1981 DESERVES TO BE DELETED. A REFERENCE WAS MADE TO SUB REGISTRAR, AMRAVATI TO ASCERTAIN THE COST OF THE PROPERTY AS ON 01 - 04 - 1981. ON THE BASIS OF THE INFORMATION THE AO HAD REPLACED THE FAIR MARKET VALUE AS ON 1981 AFTER ASSIGNING THE FOLLOWING REASONS : IN ORDER TO ASCERTAIN COST OF THE PROPERTY AS ON 01.04.1981, REFE RENCE WAS MADE TO THE SUB REGISTRAR, AMRAVATI VIDE LETTER DATED 29.06.2009 REQUESTING THAT OFFICE TO PROVIDE INFORMATION REGARDING THE RATES AT WHICH LAND HAS BEEN SOLD IN THE AREA IN 1981 - 82 WHERE ASSESSEES AOP PROJECT IS LOCATED. SUBSEQUENTLY, 23 ITA NOS. 277 & 278/NAG/2012 ON VERIFI CATION IT WAS FOUND THAT MEMBERS OF ASSESSEE AOP HAD THEMSELVES EFFECTED SALE OF LAND IN APRIL 1981 AND MAY 1981 OF PLOTS OF LAND IN PLOT NO.18, SHEET NO.19 WHICH IS THE SAME NAZUL PLOT NUMBER ON WHICH THE PROJECT IS BEING CONSTRUCTED. THE SALES HAVE BEEN EFFECTED @RS.5/ - AND RS.6/ - PER SQ.FT. IN THE TWO AGREEMENTS DATED 08.04.1981 AND 26.051981 RESPECTIVELY. CONSIDERING THE SAME, IT WOULD BE REASONABLE TO ASSUME THAT THE RATE OF LAND ON WHICH PROJECT IS BEING CONSTRUCTED ON 01.04.1981 WAS RS.6/ - PER SQ.FT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SOLD 9 ROW HOUSES AND TWO FLATS AND THE CORRESPONDING LAND AREA TRANSFERRED VIDE THE SAID AGREEMENTS ARE 22,959 SQ.FT. AND 1,170 SQ. FT. I.E. AN AGGREGATE OF 24,129 SQ.FT. THE COST INFLATION INDEX FOR FY 2001 - 02 IS 426 AND ACCORDINGLY, THE INDEXED COST OF ACQUISITION OF THE ASSET TILL FY 2001 - 02 WORKS OUT AT RS.616,737.24. AT THIS TIME, IT IS CLARIFIED THAT THE INDEXED COST OF ACQUISITION IS COMPUTED TILL F.Y.2001 - 02 AS THE PERMISSION TO THE PROJECT WA S GRANTED BY THE MUNICIPAL CORPORATION VIDE THEIR LETTER DATED 31.03.2001. THE ASSESSEE HAS ADOPTED RS.100/ - RATE OF FAIR MARKET VALUE AT WHICH THE LAND HAS BEEN CONVERTED TO STOCK IN TRADE. ADOPTING THIS RATE, THE FAIR MARKET VALUE OF THE LAND PORTION TRA NSFERRED DURING THE YEAR UNDER CONSIDERATION I.E.24129 SQ.FT. ON THE DATE OF ITS CONVERSION TO STOCK IN TRADE I.E. 31.03.2001 WORKS OUT TO RS.24,12,900/ - . RESULTANTLY, LONG TERM CAPITAL GAINS IS CHARGEABLE ON RS.24,12,900/ - REDUCED BY RS.6,16,737/ - I.E. RS .17,96,163/ - . IN THIS CONTEXT, IT IS NOTED THAT THE ASSESSEE CLAIMS THAT THE VALUE OF LAND AS ON 01.04.1981 WAS RS.35/ - PER SQ.FT. THIS FIGURE IS BASED ON A VALUATION REPORT WHEREIN THE STAMP DUTY RATE PURPORTEDLY PREVAILING FOR THE YEAR 1989 - 90 OF RS.750 PER SQ.MTR HAS BEEN DISCOUNTED TO ARRIVE AT THE RATE OF RS.350/ - SQ.MTR AS ON 01.04.1981. FIRSTLY, NO BASIS HAS BEEN GIVEN AS TO HOW THE STAMP DUTY AS PREVAILING IN YEAR 1989 - 90 IN AN AREA COMPARABLE TO AN AREA WHICH ASSESSEES PROJECT IS LOCATED WAS INDEE D RS.750 PER SQ.MTR. SECONDLY, DISCOUNTING THE SAID RATE BY APPLYING A REVERSE COST INDEX WOULD NOT NECESSARILY RESULT IN GIVING THE RATE PREVAILING AS ON 01.04.1981. THE ESCALATION OF LAND RATE IN AN AREA IS NOT A MATHEMATICAL EXERCISE. CONSIDERING THESE POINTS AS ALSO THAT SALE INSTANCES ARE OF PLOTS SOLD BY THE ASSESSEE AOP THEMSELVES IN APRIL/MAY 1981 IS AVAILABLE, IT IS FAIR AND PROPER THAT THE SAID RATES ARE ADOPTED FOR COMPUTING LONG TERM CAPITAL GAIN. ADDITION TO THIS ISSUE IF OF RS.17,96,163/ - AS LONG TERM CAPITAL GAIN. PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT OF 24 ITA NOS. 277 & 278/NAG/2012 INCOME. 19. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LEARNED CIT(APPEALS) HAS AFFIRMED THE ACTION OF THE AO AS UNDER : IT IS CLEAR THAT A.O. IN ASSES SMENT ORDER AND REMAND REPORT CLEARLY BROUGHT OUT THAT APPELLANT THEMSELVES HAVE SOLD THE PART OF THE LAND IN 1981 AND OUT OF 13 SALE DEEDS GIVEN BY REGISTRAR 2 OF THE SALE DEEDS WERE EXECUTED BY MR. R.H.DOTIVALA ON 26.05.1981 OF PLOT SITUATED AT MOUZA PLO T NO.18, SHEET NO.19 AND PLOT NO. 18 AND SHEET NO.19 THE SAME PRICE OF PLOT WERE @ RS.5/ - & RS.6/ - PER SQ. FT. FOR BOTH PLOTS OF LAND AND THE LAND IN QUESTION IS THE SAME LAND I.E. PLOT NO.18, NAZUL SHEET NO.19 I.E. THERE IS NOT AN IOTA OF DIFFERENCE AND P ART OF SAME LAND IS SOLD IN 1981 ON 26 TH MAY, 1981 AND THERE IS NO NEED TO WORK OUT ANY IMAGINARY FIGURE ,WHEN ACTUAL DETAILS IS AVAILABLE FOR SAME LAND. AND NOW APPELLANT WANTS TO USE VALUATION REPORT OF SOME VALUER WHO IS TRYING TO CALCULATE THE COST OF ACQUISITION BASED ON A SALE OF 1989 - 90 OF RS.750/ - THIS IS ABSURD PREPOSITION WHEN SALE DEEDS OF SAME LAND FOR THE 1981ARE AVAILABLE WHY WILL SALE DEED NEARLY A DECADE LATER BE USED AND TWO MEMBERS OF APPELLANT AOP WHO HAD SOLD THE PART OF THIS PLOT THEMSE LVES PROBABLY HELD BACK THIS INFORMATION WHICH WAS IN THEIR SPECIAL KNOWLEDGE FROM THE VALUER OTHERWISE NO VALUER WILL IGNORE THE TWO SALE DEEDS OF SAME PLOT PARTLY SOLD IN MAY, 1981 AND ATTEMPT TO CALCULATE AS VALUE BASED ON SALE INSTANCE IN 1989 - 90. 20 . ON THIS ISSUE WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. THE APPELLANT HAS FURNISHED A REPLY BEFORE THE LEARNED CIT(APPEALS) AS UNDER : APPELLANT HAS SUBMITTED AS UNDER: - THIS PLOT WAS IN UNDEVELOPED CONDITION IN AS MUCH AS AT THAT TIME THE SURROUNDING AREA WAS NOT DEVELOPED. THERE IS MUCH DIFFERENCE IN THE SITUATION OF LAND IN 1981. THE SITUATION OF THE LAND AT THAT TIME WAS IN MUCH REMOTE AREA AND AT THAT TIME THERE WAS NO MUNICIPAL CORPORATION WHICH CAME INTO EXISTENCE IN 1985. MOREOVER ASSESSEE WAS IN STRINGENT FINANCIAL DIFFICULTIES AND HAD NO SOURCE OF INCOME AND THEREFORE SOLD A PIECE OF PLOT AT THE RAT QUOTED BY BUYER BECAUSE THERE WAS A RUMOUR OF APPLICABILITY OF URBAN LAND CEILING BY STATE OF MAHARASHTRA. 25 ITA NOS. 277 & 278/NAG/2012 IN SUCH CIRCUMSTA NCES THE PLOT WAS SOLD. THE NATURE OF LAND CHANGED DUE TO SIGNIFICANT DEVELOPMENT AS AMRAVATI CITY CONVERTED INTO CORPORATION & MINI BY PASS IS ALSO CONSTRUCTED ADJOINING TO THE PLOT WHICH WAS NOT IN EXISTENCE IN 1981 WHEN THE PLOT WAS SOLD AT RS.6/ - PER SQ.FT. ASSESSEE SOLD A PLOT OUT OF THE SAME LAND ON 17.11.2000 BY REGISTERED SALE DEED. AT THAT TIME THE LAND WAS COVERED WITHIN THE LIMITS OF AMRAVATI MUNICIPAL CORPORATION AND IT WAS VALUED BY REGISTERED VALUER AS ON 01.04.1981 AT THE RATE OF RS.350/ - P ER SQ.MTR. I.E., ABOUT RS.35/ - SQ.FT. THE VALUATION REPORT WAS SUBMITTED BEFORE AO AT THE TIME OF ASST. FOR AY 2001 - 02. THIS VALUATION REPORT WAS RELIED UPON & ACCEPTED BY THE DEPARTMENT AND ASST. WAS COMPLETED U/S143 (1) WITHOUT ANY ADDITION. RELIANCE ON INDEX II DATED 11/5/81 --- SALE DEED MALVIYA FAMILY TRUST FOR A PLOT AREA 5035 SQ.FT. - -- RS.1,80,000/ - I.E. RS.35/ - PER SQ.FT. SITUATION OF THE LAND IS NOT THE SAME IN THE YEAR 2000 & IN THE 1981. IN 1981 IN 2000 - 01 I. MUNICIPAL CORPORATION -- NO -- -- YES -- II. MINI BY PASS -- NO -- -- YES -- III. REVENUE COMMISSIONERATE -- NO -- -- YES -- IV. AMRAVATI UNIVERSITY -- NO -- -- YES -- 21. AS FAR AS THE QUESTION OF VALUE OF THE LAND AS ON 01 - 04 - 1981 IS CONCERNED THE ASSESSEE HAD SUBMITTED A VALUATION REPORT OF A REGISTERED VALUER DATED 26 - 06 - 2001 (PAPER BOOK PAGES 85 TO 91) . ONLY ONE FACT HAD BEEN BROUGHT ON RECORD BY THE ASSESSEES VALUER WAS THAT THE MUNICIPAL CORPORATION WAS INCORPORATED IN 1983. THE VALUE OF 1981 CANNOT BE COMPARED WITH THE VALUE OF 1983. ON DUE EXAMINATION OF THE SAID VALUATION REPORT WE ARE OF THE VIEW THAT COMPARABLE INSTANCES ARE NOT CLOSE TO THE YEAR 1981 HENCE THE DISCOUNTED 26 ITA NOS. 277 & 278/NAG/2012 FIGURES AS ADOPTED BY THE ASSESSEE HAD NO BASIS. COMPARISON WAS ILL - FOUNDED. ON THE OTHER HAND THE METHOD ADOPTED BY THE AO APPEARS TO BE MORE ACCURATE AS WELL AS SCIENTIFIC. HE HAD CALLED FOR THE INFORMATION FROM SUB REGISTRAR, AMRVATI TO PROVIDE INFORMATION REGARDING THE RATES AT WHICH THE LANDS HAVE BEEN SOLD IN THAT AREA WHEN THE ASSESSEES LAND WAS LOCATED FOR THE YEAR 1981 - 82. IT WAS FOUND ON ENQUIRY THAT THE ASSESSEE AOP HAD THEMSELVES HAVE SOLD THE LAND IN APRIL, 1981 AND MAY, 1981 @ RS.5/ - AND RS.6/ - PER SQ.FT. THE DATE OF THE AGREEMENT WAS STATED TO BE 08 - 04 - 1981 AND 26 - 05 - 1981. WE ARE OF THE VIEW THAT THE AO HAD RIGHTLY ADOPTED THE VALUE AS ON 01 - 04 - 1981 BECAUSE THE SAME WAS BASED UPON A DEFINITE EVIDENCE TO CORROBORATE THE SAID FIGURE. AS A RESULT WE HEREBY AFFIRM THE VIEW OF LEARNED CIT ( APPEALS) THAT WHEN A COMPARABLE SALE INSTANCE OF THAT LOCALITY FOR THE YEAR 1981 WAS AVAILABLE THEN THERE WAS NO VALID REASONING TO T AKE A SALE INSTANCE OF A DECADE LATER. TO CONCLUDE THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 22. B . ASSTT. YEAR : 2008 - 09. GROUNDS NOS. 1 TO 4: 1. THAT KEEPING IN VIEW THE FACTS OF THE CASE LOWER AUTHORITIES ERRED IN REJECTING THE CLAIM OF DEDUCTION OF RS.4,87,559/ - U/S 80IB(10) OF THE I.T. ACT, 1961. THE DISALLOWANCE OF CLAIM IS NOT IN ACCORDANCE WITH THE LAW, MORE PARTICULARLY AS THE SAME IS SUPPORTED BY THE A UDIT REPORT AND ASSESSEE FULFILS ALL THE CONDITIONS REQUIRED FOR THE CLAIM. THE AO BE DIRECTED TO ALLOW THE CLAIM U/S 80IB(10). 2. THAT THE ADDITION OF RS.17,10,816/ - ON ACCOUNT OF SO CALLED RATE DIFFERENCE IN SELLING OF APARTMENTS IS PURELY ON IMAGINATION AN D SURMISES, WITHOUT ANY EVIDENCE ON RECORD. THE ADDITION OF RS.17,10,816/ - BEING INCORRECT, IMPROPER AND UNJUST AND AS SUCH THE SAME BE DELETED. 3. THE CIT(APPEALS) ERRED IN MAINTAINING ADDITION OF RS.2,85,391/ - (7,11,586 - 4,26,195) OUT OF THE EXPENDITURE ON CONSTRUCTION. THE ADDITION OF RS.2,85,391/ - UPHELD BY CIT(APPEALS) IS NOT CORRECT AND DESERVES TO BE DELETED. 4. THAT THE DETERMINATION OF LTCG AT RS.3,40,891/ - IS INCORRECT, IMPROPER, AND BAD IN LAW AND THE SAME IS WITHOUT APPRECIATING THE APPROVED VALUER S REPORT AS ON 01 - 04 - 1981 DESERVES TO BE DELETED. 27 ITA NOS. 277 & 278/NAG/2012 23. GROUND NO. 1, 2 AND 4 HAVE ALREADY BEEN DIS CUSSED IN THE ABOVE PARAGRAPHS. ON THE SAME LINES FOR THIS YEAR AS WELL THE GROUND NOS. 1 AND 2 ARE ALLOWED AND GROUND NO. 4 IS DISMISSED. 24. APROPOS TO GROU ND NO. 3: THE FINDING OF THE LEARNED CIT(APPEALS) WAS AS UNDER : IN THE A.YR.2007 - 08, IT WAS HELD THAT HOWEVER IT IS SEEN THAT THE DIFFERENCE BETWEEN DVO AND APPELLANTS FIGURE FOR COST OF CONSTRUCTION IS LESS THAT 10% AND KEEPING IN MIND THAT DVO APPLIES CPWD RATES WHEREAS CONSTRUCTION IS BEING DONE AT AMRAVATI AND ADMITTEDLY THERE WILL RATE DIFFERENCE IN LABOUR AND MATERIAL LIKE SAND, STONES, BRICKS WHICH ARE LOCALLY AVAILABLE. HENCE, DIFFERENCE BEING INSIGNIFICANT AND HAS TO BE IGNORED AND ADDIT ION MADE BY A.O. BASED ON DVOS VALUATION REPORT, DESERVES TO BE DELETED AS OF APTITUDE DIFFERENCE IS LESS THAN 10% .HENCE, ADDITION ON THIS ACCOUNT IS DELETED. BUT IT IS SEEN THAT IN THE YEAR UNDER CONSIDERATION THE ESTIMATE OF EXPENDITURE BY DVO IS RS. 7,11,586/ - I.E. AS PER DVO RS.49,73,545/ - AS PER ASSESSEE RS.42,61,959/ - RS. 7,11,586/ - IT IS MUCH MORE THAN 10% AND HENCE GIVING A BENEFIT OF 10% DUE TO LOCAL COST VARIATION, THE BALANCE ADDITION IS CONFIRMED I.E. APPELLANT GETS A RELIEF OF RS.4,26,195/ - OUT OF RS.7,11,586/ - AND BALANCE ADDITION BY A.O. IS CONFIRMED. 25. AS PER THE ASSESSMENT ORDER PASSED U/S 143(3) FOR ASSESSMENT YEAR 2008 - 09 THE OBSERVATION OF THE AO WAS THAT THE COST OF CONSTRUCTION DURING THE YEAR UNDER CONSIDERATION AS PER THE ASSESSEE WAS RS. 42,61,959/ - . HOWEVER, THE DVO HAD WORKED OUT THE COST OF CONSTRUCTION AT RS.49,73,545/ - . THE DIFFERENCE BETWEEN THE TWO AMOUNTING TO RS.7,11,586/ - WAS TAXED BY THE AO AS UNEXPLAINED EXPENDITURE. ON THIS SHORT ISSUE WE HAVE HEARD BOTH THE SIDES. THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS TO 28 ITA NOS. 277 & 278/NAG/2012 DEMONSTRATE THAT THE COST OF CONSTRUCTION HAS NOT BEEN PROPERLY RECORDED IN THE BOOKS OF ACCOUNTS. ON THE OTHER HAND, THE ASSESSEE HAS VEHEMENTL Y PLEADED T HAT THE EXPENDITURE INCURRED WAS DULY SUPPORTED BY EVIDENCES, HENCE THERE WAS NO RE A SON TO REJECT THE BOOK RESULTS. AS W E HAVE NOTED HEREIN ABOVE IN SEVERAL DECISIONS IT WAS HELD THAT IF THE ASSESSEE HAS SHOWN COST OF CONSTRUCTION ON THE BASIS O F REGULAR BOOKS OF ACCOUNTS MAINTAINED IN THE DAY TO DAY COURSE OF BUSINESS DULY SUPPORTED BY BILLS AND VOUCHERS THEN IT IS NOT PROPER TO ESTIMATE THE COST OF CONSTRUCTION. PLACING RELIANCE ON THE DECISIONS ALREADY DISCUSSED HEREIN ABOVE, WE FIND NO COGENT REASON FOR THE IMPUGNED ADDITION. HENCE THE SAME IS HEREBY DELETED. 26. TO CONCLUDE, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MAY, 2016. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED: 31 ST MAY, 2016. COP Y FORWARDED TO : 1. M/S DOTIVALLA COURT, C/O ADV. R.H. DOTIVALLA, CAMP, OLD BIYANI CHOWK, AMRAVATI. 2. I.T.O., WARD - 1, AMRVATI. 3. COMMISSIONER OF INCOME - TAX - IV, NAGPUR. 4. CIT(APPEALS) - I I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER WAKODE. AS SISTANT REGISTRAR, ITAT, NAGPUR.