ITO 25(2)(2)), MUMBAI V. PRATHMESH REALTORS, MUMBAI

ITA 3382/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3280 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 09-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PANDIAN
• Keywords: Bogus purchase; Unexplained expenditure
• Section: 69C; 37(1); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SANJAY ARORA , A M AND SHRI AMARJ I T SINGH , J M ./ I.T.A. NO. 3382/MUM/2014 ( / ASSESSMENT YEAR: 2010 - 11 ) INCOME TAX OFFICER - 25(2)(2), C - 11, BLDG., ROOM NO. 106, P RATYAKSHKAR BHAVAN, KURLA COMPLEX, BANDRA(E), MUMBAI - 51 / VS. PRATHMESH REALTORS A - 101, SWETA PARK, DAULAT NAGAR ROAD NO. 2, BORIVALI (E), MUMBAI - 400 066 ./ ./ PAN/GIR NO. AAIFP 8 580 C ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI S. PANDIAN / RESPONDENT BY : SHRI TARUN GHIA / DATE OF HEARING : 16.03.2016 / DATE OF PRONOUN CEMENT : 10 .0 6 .2016 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 35, MUMBAI (CIT(A) FOR SHORT) DATED 14.2.2014 , PARTLY ALLOWING THE A SSESSEES APPE AL CONTESTING ITS ASSESSMENT U/S.143(3) O F THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2010 - 11 VIDE ORDER DATED 12.3.2013. 2. THE FIRST ISSUE UNDER APPEAL (RAISED VIDE GROUNDS 1 AND 2) IS THE VALIDITY OR OTHERWISE IN L AW OF THE PROPORTIONATE DEDUCTION TO THE ASSESSEES, A BUILDER AND DEVELOPER, HOUSING PROJECT BY THE NAME PRATHMESH HERITAGE, AT MIRA ROAD (E), 2 ITA NO. 3382/MUM/2014 (A.Y. 2010 - 11) ITO VS. PRATHMESH REALTORS THANE (FALLING WITHIN 25 KM OF THE MUNICIPAL LIMITS OF MUMBAI), I.E., QUA THE RESIDENTIAL UNITS THAT DO NOT ME ET THE STIPULATED CRITERIA OF THE MAXIMUM BUILT - UP AREA OF 1000 SQ. FT. PER SECTION 80 - I B (10)(C). THE REVENUE PLEADS ITS CASE WITH REFERENCE TO THE DECISION BY THE T RIBUNAL IN THE CASE OF ASST. CIT VS. VISWAS PROMOTERS (P.) LTD. [2010] 126 ITD 263 (CHEN), ADVOCATING LIT ERAL INTERPRETATION OF THE STATUTE, SO THAT THE WORD PROJECT APPEARING THEREIN , NOT DEFINED, I S TO BE CONSIDERED AS ONE SINGLE PROJECT AS APPROVED BY THE LOCAL AUTHORITY. THE ASSESSEE, ON THE OTHER HAND, HAS RELIED ON A SERIES OF THE DECIS IONS BY THE TRIBUNAL, WHICH THOUGH HAV E BEEN RENDERED WITHOUT CONSIDERING THE DECISION IN VISWAS PROMOTERS (P.) LTD. (SUPRA). MORE IMPORTANTLY , THE SAID DECISION STANDS SINCE DISAPPROVED BY THE HON'BLE HIGH COURT IN VISWAS PROMOTERS (P) LTD. V. ASST. CIT [ 2013] 29 TAXMANN.COM 19 (MAD) DATED 01.11.2012 (COPY ON RECORD). 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. E VEN AS CLARIFIED BY THE BENCH DURING HEARING , THE HONBLE JURISDICTIONAL HIGH COURT HAS IN CIT VS. BRAHMA ASSOCIATES [2011 ] 333 ITR 289 (BOM) CLEARLY HELD LIKE - WISE, I.E., AS BY THE T RIBUNAL IN VISWAS PROMOTERS (P.) LTD. (SUPRA), AS NOTED BY THE TRIBUNAL IN ASST. CIT VS. EKTA SANKALP DEVELOPERS [2015] 152 ITD 805 (MUM), REPRODUCING FROM THE SAID DECISION (REFER PARA 31 AT PGS . 302 - 303 OF THE REPORTS) AT PARA 5 OF THE ORDER: SECTION 80 - IB(10) ALLOWS DEDUCTION TO THE ENTIRE PROJECT APPROVED BY THE LOCAL AUTHORITY AND NOT TO A PART OF THE PROJECT. IF THE CONDITIONS SET OUT IN SECTION 80 - IB(10) ARE SATISFIED, THEN DEDUCTION IS A LLOWABLE ON THE ENTIRE PROJECT APPROVED BY THE LOCAL AUTHORITY AND THERE IS NO QUESTION OF ALLOWING DEDUCTION TO THE PART OF THE PROJECT . [EMPHASIS, OURS] FURTHER STILL, THE SAID UNDERSTANDING BY THE HON'BLE COURT STANDS APPROVED BY THE HONBLE SUPREME COURT IN CIT VS. SARKAR BUILDERS [2015] 375 ITR 392 (SC) , WITH THE DICTUM OF NON - DEDUCTION ON OR WITH REFERENCE TO A PART OF THE PROJECT, RATHER, FOLLOW S 3 ITA NO. 3382/MUM/2014 (A.Y. 2010 - 11) ITO VS. PRATHMESH REALTORS THAT OF THE ENTIRE PROJECT BEING A SINGLE PROJECT. THE CONDITIONS FOR ELIGIBILITY ARE , IT MAY BE APPRECIA TED, QUALIFYING CONDITIONS AND, THEREFORE, OPERATE CUMU L ATIVELY. SO, HOWEVER, THE TRIBUNAL PER ITS DECISION IN EKTA SANKALP DEVELOPERS (SUPRA) HAS CLARIFIED THAT THE CONDITION AS TO THE CAP ON THE BUILT - UP AREA, SPECIFIED PER CLAUSE (C) OF SECTION 80 - IB(1 0), DOES NOT APPLY TO THE HOUSING PROJECT AS A WHOLE, BUT ONLY QUA EACH RESIDENTIAL UNIT. WE MAY REPRODUCE HEREIN UNDER THE RELEVANT PART OF THE SAID ORDER (REFER PARA 5): 5. WE, FACED WITH THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF BRAHMA ASSOCIATES (SUPRA), .. THE PROVISION IS ACCORDINGLY EXAMINED CLOSELY, TO FIND CLAUSE (C) AS WORDED DIFFERENTLY FROM THE OTHER CLAUSES OF SECTION 80 - IB(10), SETTING FORTH THE CONDITIONS PRECEDENT FOR THE ELIGIBILITY TO DEDUCTION OF THE PROFIT S OF THE PROJECT. THE SAID CLAUSE, ON A FAIR CONSTRUCTION, WAS FOUND TO CONTAIN A CONDITION WITH REFERENCE TO THE RESIDENTIAL UNIT COMPRISING THE HOUSING PROJECT. THE CONDITION, BY NECESSARY IMPLICATION, APPLIES TO ALL THE RESIDENTIAL UNITS OF THE HOUSING PROJECT . THE CONVERSE, HOWEVER, CANNOT BE SAID TO HOLD, SO THAT ONLY SUCH HOUSING PROJECT, ALL THE RESIDENTIAL UNITS COMPRISING WHICH SATISFY THE CONDITION OF SECTION 80 - IB(10)(C), IS AN ELIGIBLE PROJECT. THE WORD PROJECT, CLEARLY MENTIONED IN EACH OF TH E OTHER CLAUSES, IS CONSPICUOUS BY ITS ABSENCE IN CLAUSE (C). THAT IS, S. 80 - IB(10)(C) REPRESENTS A CONDITION PRECEDENT QUA THE RESIDENTIAL UNIT COMPRISING THE HOUSING PROJECT AND NOT QUA THE PROJECT; ITS LANGUAGE NOT ADMITTING OF SUCH A VIEW. WE MAY THOUG H AT ONCE CLARIFY THAT THE DECISION BY THE HONBLE COURT BEING BINDING, WE WOULD NOT HAVE FOR A MOMENT HESITATED TO HOLD OTHERWISE IF WE FOUND ANYTHING TO SO SUGGEST IN THE DECISION IN BRAHMA ASSOCIATES (SUPRA), WHICH IS SANS ANY REFERENCE TO S. 80 - IB(10)( C), OR IF THAT MEANING OR INTENTION WAS FOUND EXPRESSED IN ITS PLAIN LANGUAGE; IT BEING TRITE THAT THERE IS NO EQUITY ABOUT TAX AND THERE IS NO ROOM FOR INTENDMENT, SO THAT ONE HAS TO LOOK FAIRLY AT THE LANGUAGE USED, EVEN AS EXHORTED TIME AND AGAIN BY THE APEX COURT. ALSO, FISCAL STATUTES ARE TO BE STRICTLY INTERPRETED, AND SO ARE THE EXEMPTION PROVISIONS. IT IS ONLY ONCE AN ENTITY OR INCOME, WHICH IS THE SUBJECT MATTER OF EXEMPTION, IS FOUND, ON SUCH CONSTRUCTION, TO BE WITHIN THE AMBIT OF THE PROVISION, THAT A LIBERAL APPROACH IS TO BE ADOPTED TOWARD EFFECTUATING THE OBJECT OF THE PROVISION, FOR WHICH WE MAY REFER TO BAJAJ TEMPO LTD. VS. CIT [1992] 196 ITR 188 (SC) RELIED UPON BY THE TRIBUNAL IN THE VARIOUS 4 ITA NO. 3382/MUM/2014 (A.Y. 2010 - 11) ITO VS. PRATHMESH REALTORS ORDERS, AS FAR AS APPEARS ON A READING OF THEIR EXTRACTS AS LISTED IN THE TRIBUNALS ORDER FOR A.Y. 2007 - 08 (SUPRA) . THE INTERPRETATION IS ALSO IN ACCORD WITH A PURPOSIVE AND LIBERAL APPROACH, ADVOCATED BY THE APEX COURT IN, INTER ALIA, BAJAJ TEMPO LTD. (SUPRA) . THE PROVISION BEING AN INCENTIVE PROVISIO N, TOWARD PROMOTING THE GROWTH OF AFFORDABLE HOUSING IN THE COUNTRY, THE CONSTRUCTION ENABLES THE SAME, WHILE AT THE SAME TIME OPERATING TO EXCLUDE THE EXTENSION OF THE INCENTIVE TO HOUSING THAT IS NOT COVERED OR TARGETED BY THE PROVISION, AS SOUGHT TO BE INCLUDED BY THE LD. AR. AGAIN, IT IS TRITE LAW THAT THE BENEFIT OF ANY AMBIGUITY, IF ANY, IN THE LANGUAGE OF THE PROVISION, SO THAT TWO REASONABLE VIEWS ARE PERMISSIBLE, IS TO GO TO THE TAX PAYER. WE MAY CLARIFY THAT OUR DECISION, EVEN AS SOUGHT TO BE EMP HASIZED EARLIER, DESPITE APPROVING THE PROPORTIONATE DEDUCTION, I.E., W.R.T. SECTION 80 - IB(10)(C), IS, FOR THE REASONS AFORE - STATED, THUS NOT IN CONFLICT WITH THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN BRAHMA ASSOCIATES (SUPRA). THE DEDUCTION TOWARD THE RESIDENTIAL UNITS SATISFYING THE CONDITION OF S. 80 - IB(10)(C), ARRIVED AT ON A PROPORTIONATE BASIS, IS THEREFORE UPHELD. THE DECISION BY THE HONBLE HIGH COURT IN VISWAS PROMOTERS (P) LTD. (SUPRA) SHALL , IN VIEW OF THE BINDING DECISION S IN T HE CASE OF BRAHMA ASSOCIATES (SUPRA) AND SARKAR BUILDERS (SUPRA) , THEREFORE NOT OBTAIN, EVEN AS NOTICED BY THE TRIBUNAL IN EKTA SANKALP DEVELOPERS (SUPRA). SO, HOWEVER, FOR THE REASONS MENTIONED THEREIN , AND WHICH WE HAVE REPRODUCE D HEREINBEFORE, PROPORTIO NATE DEDUCTION, AS EXPLAINED THEREIN, ON THE PROFITS OF A HOUSING PROJECT WHICH OTHERWISE SATISFIES THE CONDITION OF SECTION 80 - IB(10) , I.E., AS REFERABLE TO RESIDENTIAL UNITS HAVING THE MAXIMUM BUILT - UP AREA AS PRESCRIBED PER CLAUSE ( C ) THEREOF , WOULD QUA LIFY FOR DEDUCTION ON A PROPOR - TIONATE BASIS, I.E., TO THE EXCLUSION OF THE OTHER RESIDENTIAL UNITS. WE DECIDE ACCORDINGLY , DISPOSING GROUNDS 1 & 2 OF THE APPEAL . 4. THE ONLY OTHER ISSUE RAISED BY THE REVENUE IS OF ADDITION U/S. 69C IN RESPECT OF BOGUS P URCHASE S AT RS.22,76,268/ - , AGITATED VIDE G ROUNDS 3 TO 7 OF ITS APPEAL. TOWARD THIS, THE LD. AR WOULD BEFORE US RAISE AN ALTERNATIVE ARGUMENT, I.E., EVEN GRANTING SO, 5 ITA NO. 3382/MUM/2014 (A.Y. 2010 - 11) ITO VS. PRATHMESH REALTORS THE ASSESSEE WOULD STAND TO BE ALLOW ED DEDUCTION U/S.80 - IB(10) ON THE ENHANCED PROFIT, I.E., TO THE EXTENT OF AN ADDITION U/S. 69C. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. T HE LD. CIT(A) , WE FIND , HAS DISALLOWED 15% OF THE IMPUGNED PURCHASES , RESTRICTING THUS THE ADDITION TO INCOME TO RS.3,41,440/ - , FOLLOWING THE D ECISION IN CIT VS. SIMIT P. SHETH [2013] 356 ITR 451 (GUJ) . FURTHER, S HE REGARDED THE SAME AS A DISALLOWANCE U/S. 37(1). THE FIRST QUESTION THEREFORE THAT ARISES IS IF THE ADDITION IS OF UNEXPLAINED EXPENDITURE , DEEMED AS INCOME U/S. 69C , OR WOULD APPROP RIATELY BE DISALLOWABLE AS A N EXPENDITURE U/S. 37(1). THIS IS SO AS IT MAY BE APPRECIATED THAT IT IS ONLY IN THE CASE OF THE LAT T ER THAT THE DISALLOWANCE W OULD GO TO SWELL THE PROFIT (FROM THE SAME QUALIFYING UNIT), BEAR THE SAME CHARACTER, SO AS TO BE ELI GIBLE FOR DEDUCTION - AND WHICH IN THE INSTANT CASE IS U/S.80 - IB(10) , ON THE INCREASE THEREIN . TOWARD THIS, W E A RE AT LOSS TO UNDERSTAND AS TO HOW AND ON WHAT BASIS THE ASSESSEE HAVING CLAIMED THE EXPENDITURE THROUGH ITS BOOKS OF ACCOUNT , SO THAT THE SOURCE IS EXPLAINED WITH REFERENCE THERETO, T H E REVENUE REGARDS IT AS UNEXPLAINED EXPENDITURE AND , CONSEQUENTLY , DEEM S IT AS INCOME U/S. 69 - C . WE, ACCORDINGLY, AGREE WIT H THE LD. CIT(A) THAT EVEN IF REGARDED AS BOGUS PURCHASE , THE SAME WOULD STAND TO BE DISALLOW ED U/S. 37(1), LEADING TO AN INCREASE IN THE ASSESSABLE PROFITS OF THE ELIGIBLE UNIT. WE MAY HERE ALSO CLARIFY THAT HAD IT NOT BEEN S O , THE ADDITION OF INCOME U/S. 69C , I.E., ON ACCOUNT OF EXPENDITURE NOT EXPLAINED AS TO ITS SOURCE, THE SAME W OULD NOT BE LIABLE TO BE R EGARDED AS THE PROFIT OF THE ELIGIBLE UNIT. THE NEXT ISSUE BEFORE US WOULD BE IF THE ASSESSEES ALTERNATE CONTENTION COULD BE AC CED ED TO; IT BEING NOT IN APPEAL AS WELL AS HAVING NOT PREFERRED A CROSS OBJECTION , I.E., COULD THE S A M E BE ADMITTED FOR CONSIDE RATION. IN OUR VIEW, THE SAME IS TO BE REGARDED AS CONCESSION BY THE ASSESSEE WITH REGARD TO THE ISSUE IN PRINCIPLE , I.E., QUA THE ADDITION FOR RS.22.76 LACS, WHICH WE HAVE CLARIFIED TO BE IN LAW A DISALLOWANCE U/S. 37(1) OF THE ACT. THE QUESTION OF APPLIC ATION OR OTHERWISE OF THE DECISION IN THE CASE 6 ITA NO. 3382/MUM/2014 (A.Y. 2010 - 11) ITO VS. PRATHMESH REALTORS OF SIMIT P. SHETH (SUPRA), I.E., WITH REFERENCE TO WHICH THE LD. CIT(A) HAS ALLOWED RELIEF TO THE ASSESSEE, AND WHICH DECISION WAS NOT EVEN REFERRED TO DURING HEARING, DOES NOT CONSEQUENTLY ARISE. FURTHER, EVE N IF THEREFORE THE ASSESSEE IS NOT IN APPEAL, WITH THER E FURTHER BEING NO PL E A, SIMILARLY, FOR DEDUCTION U/S.80 - IB(10) ON THE SUM DISALLOWED, WE REGARD THE SAME AS IN THE NATURE OF A CONSEQUENTIAL PLEA LEGAL IN NATURE. WE HAVE ALREADY HELD THAT THE ADDIT ION AS MADE HAS BEEN RIGHTLY REGARDED BY THE LD. CIT(A ) AS A DISALLOWANCE U/S. 37(1). WE, THEREFORE, ACCEPTING THE ASSESSEES PLEA THAT THE ENTIRE AMOUNT A DDED BE REGARDED AS A DISALLOWANCE, APPROVE OF THE ALLOWANCE OF THE ASSESSEES CLAIM FOR DEDUCTION U/S.80 - IB(10)(A) WITH REFERENCE TO THE INCREASED AMOUNT AND DIRECTED FOR THE COMPUTATION OF DEDUCTION U/S.80 - IB(10) AT THE AMOUNT SO DETERMINED. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED ON THE AFORE - SAID TERMS. ORD ER PRONOUNCED IN THE OPEN COURT ON JUNE 10 , 201 6 SD/ - SD/ - ( AMARJ I T SINGH ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 10 . 0 6 .201 6 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI