SHREE KRISHNA SAI DEVELOPMENT CORPORATION, MUMBAI V. ITO 17(2)(1), MUMBAI

ITA 3385/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1203 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 22-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANT J LAL
• Assessee Lawyers: R C JAIN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI V.DURGA RAO, JM ITA NOS.3385 & 3386/MUM/2009 : ASST.YEAR 2005-2006 & 2006-2007 M/S.SHREE KRISHNA SAI DEVELOPMENT CORPORATION DADA BAZAR, BHARTIYA KRIDA MANDIR, 57 NAIGAON CROSS ROAD, MUMBAI 400 031. PA NO.AAKFS7230G. VS. THE INCOME TAX OFFICER WARD 17(2)(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C.JAIN RESPONDENT BY : SHRI HEMANT J.LAL O R D E R PER R.S.SYAL, AM : THESE TWO APPEALS BY THE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX U/S.263 ON 24.3.2009 IN RELATION TO THE ASSESSMENT YEARS 2005-2006 AND 2006-2007. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE WAS DOING BUSINESS OF DEVELOPMENT AND CONSTRUCTION ON LAND. ASSESSMENTS U /S.143(3) FOR ASSESSMENT YEARS 2005-2006 AND 2006-2007 WERE COMPLETED ON 24. 12.2007 AND 19.12.2008 ALLOWING WITH DEDUCTION U/S.80-IB AMOUNTING TO RS.6 6,15,960 AND RS.24,44,803 RESPECTIVELY. ON THE PERUSAL OF THE ASSESSMENT RECO RDS FOR THESE YEARS IT WAS NOTICED BY THE CIT THAT DEDUCTION U/S.80-IB WAS WRONGLY ALL OWED BY THE ASSESSING OFFICER WITHOUT PROPER VERIFICATION OF THE CERTIFICATE ISSU ED BY CIDCO. HE FOUND THAT ONE OF THE BASIC REQUIREMENTS FOR GRANTING DEDUCTION U/ S.80-IB WAS THAT THE DEVELOPMENT AND CONSTRUCTION OF HOUSING PROPERTY SH OULD COMMENCE ON OR AFTER 1.10.1998. THE ASSESSEE WAS SHOW CAUSED AS TO WHY D EDUCTION U/S.80-IB OUGHT NOT TO HAVE BEEN DENIED SINCE THE COMMENCEMENT CERTIFIC ATE ISSUED BY THE CIDCO INDICATED THE DATE OF COMMENCEMENT AS 7.4.1998. HE FURTHER TOOK NOTE OF THE FACT THAT FORM NO.10CCB FILED BY THE CHARTERED ACCOUNTAN T SIMPLY MENTIONED THAT THE ITA NOS.3385 & 3386/MUM/2009 M/S.SHREE KRISHNA SAI DEVELOPMENT CORPORATION. 2 DATE OF COMMENCEMENT OF THE UNDERTAKING WAS AFTER 01.10.1998. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE STATED THAT TH OUGH THE COMMENCEMENT CERTIFICATE BY CIDCO INDICATED THAT THE DATE OF COM MENCEMENT WAS 7.4.1998 BUT THE ACTUAL COMMENCEMENT BEGUN ONLY AFTER OBTAINING PERMISSION FROM THE DISTRICT COLLECTOR, THANE ON 19.5.1999. COPY OF ORDER DATED 19.5.1999 OF THE DISTRICT COLLECTOR, THANE WAS PLACED BEFORE THE CIT. NOT CON VINCED, THE LEARNED CIT HELD THAT THE ASSESSEE HAD NOT CATEGORICALLY PROVED THE DATE OF COMMENCEMENT OF BUSINESS AND IT WAS FOR THE ASSESSING OFFICER TO EX AMINE IN DETAIL ALL THE RELEVANT DOCUMENTS TO COME TO THE CONCLUSION REGARDING THE A CTUAL DATE OF COMMENCEMENT OF BUSINESS. HE, THEREFORE, HELD BOTH THE ASSESSMEN T ORDERS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THESE WERE SET ASIDE AND THE AO WAS DIRECTED TO REDO THE ASSESSMENTS IN ACCORDANCE WITH LAW WITH REGARD TO THE CLAIM U/S.80-IB VIS--VIS DATE OF COMMENCEMENT OF BUSINES S. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBVIOUS FROM THE IMPUGNED ORDER THAT THE DEDUCTION IN THE OPINION OF THE LEARNED CIT WAS NOT PROPERLY GRANTED BY THE ASS ESSING OFFICER FOR THE REASON THAT THE DEVELOPMENT AND CONSTRUCTION OF HOUSING PR OPERTY SHOULD HAVE BEEN COMMENCED ON OR AFTER 1.10.1998 WHEREAS THE CERTIFI CATE ISSUED BY THE CIDCO INDICATED THE DATE OF COMMENCEMENT AS 7.4.1998. BU T FOR THAT THERE IS NO DISPUTE ON THE FULFILLMENT OF THE OTHER CONDITIONS NECESSAR Y FOR THE GRANTING OF DEDUCTION U/S.80-IB FOR THE YEARS IN QUESTION. IT IS WELL SET TLED THAT THE JURISDICTION U/S.263 CAN BE EXERCISED ONLY WHEN THE ASSESSMENT IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BOTH THESE CONDITIONS ARE CONJUNCTI VE AND NOT DISJUNCTIVE AS HAS BEEN HELD BY THE HONBLE SUPREME COURT IN SEVERAL C ASES INCLUDING CIT VS. GREENWORLD CORPORATION [(2009) 314 ITR 81 (SC)] . FROM HERE IT FOLLOWS THAT IN ORDER TO HAVE JURISDICTION U/S.263, THE ASSESSMENT ORDER SHOULD NOT ONLY BE SHOWN AS PREJUDICIAL TO THE INTEREST OF THE REVENUE BUT A LSO ERRONEOUS. AN ASSESSMENT ORDER IS SAID TO BE PREJUDICIAL TO THE REVENUE WHEN INCOME HAS BEEN ASSESSED AT A ITA NOS.3385 & 3386/MUM/2009 M/S.SHREE KRISHNA SAI DEVELOPMENT CORPORATION. 3 LOWER AMOUNT OR A LOWER RATE OF TAXATION HAS BEEN A PPLIED, THE ULTIMATE EFFECT OF WHICH IS THAT THE RIGHTFUL TAX DUE TO THE GOVERNMEN T DID NOT REACH ITS COFFERS. NOW WE WILL PROCEED TO EXAMINE AS TO WHETHER THE AS SESSMENT ORDERS PASSED BY THE A.O. CAN BE HELD AS PREJUDICIAL TO THE INTEREST OF THE REVENUE OR NOT. IN OTHER WORDS WHETHER THE ASSESSEE WAS ALLOWED DEDUCTION U/S.80-I B TO WHICH IT WAS NOT RIGHTFULLY ENTITLED. HERE IT IS IMPORTANT TO MENTIO N THAT IT IS NOT THE FIRST YEAR IN WHICH THE CLAIM FOR DEDUCTION U/S.80-IB WAS MADE. C OPY OF ASSESSMENT ORDERS FROM ASSESSMENT YEAR 2001-2002 ONWARDS HAVE BEEN PL ACED ON RECORD IN WHICH SUCH CLAIM FOR DEDUCTION U/S.80-IB HAS BEEN DULY A CCEPTED IN ASSESSMENTS MADE U/S 143(3) OF THE ACT. THE LEARNED A.R. WAS FAIR EN OUGH TO CONCEDE THAT THE ASSESSMENT ORDERS PASSED FROM ASSESSMENT YEAR 2003- 2004 HAVE BEEN SUBJECTED TO REASSESSMENT AFTER PASSING OF THE IMPUGNED ORDER. WE HAVE PERUSED THE ORDER FOR ASSESSMENT YEAR 2001-2002 PASSED BY THE A.O. U/S.14 3(3), A COPY OF WHICH IS PLACED AT PAGE 20 OF THE PAPER BOOK. IT INDICATES T HAT THERE WAS NO DISPUTE ON THE DATE OF COMMENCEMENT OF THE CONSTRUCTION. IN THIS O RDER, IT HAS BEEN MENTIONED IN PARA 7 THAT THE ASSESSEE ALSO STATES IT RECEIVED N .A. ORDER FOR ASSESSMENT YEAR 2000-2001. THIS FACTUAL ASSERTION OF THE ASSESSEE WAS NOT CONTROVERTED BY THE AO. AGAINST DENIAL OF SOME PART OF DEDUCTION U/S.80-IB( 10), THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) WHO VIDE HIS ORDE R DATED 29.8.2003, COPY PLACED AT PAGE 23 ONWARDS OF THE PAPER BOOK, ACCEPTED THE ASSESSEES CLAIM AND DIRECTED TO GRANT DEDUCTION U/S.80-IB(10) AS CLAIMED. ON PAGE 3 OF THAT ORDER PASSED BY THE LEARNED CIT(A) IT HAS BEEN MENTIONED THAT : AS FAR AS THE CONDITION OF THE COMMENCEMENT OF THE PROJECT AFTER THE FIRST DAY OF OCTOBER, 1998 AND THE AREA OF RESIDENTIAL UNIT IS CONCERNED, SAME ARE UNDISPUTED . THE LEARNED A.R. STATED THAT THE REVENUE ACCEPTED THIS ORDER PASSED BY THE CIT(A ) FOR ASSESSMENT YEAR 2001- 2002 AND NO FURTHER APPEAL WAS PREFERRED BEFORE THE TRIBUNAL. THIS SUBMISSION HAS NOT BEEN DISPUTED BY THE LEARNED DEPARTMENTAL REPRE SENTATIVE AS WELL. FROM HERE IT FOLLOWS THAT THE FIRST YEAR IN WHICH THE DATE OF CO MMENCEMENT WAS REQUIRED TO BE ITA NOS.3385 & 3386/MUM/2009 M/S.SHREE KRISHNA SAI DEVELOPMENT CORPORATION. 4 EXAMINED WAS A.Y. 2000-2001 AND ACCORDING TO THE AS SESSMENT ORDER FOR ASSESSMENT YEAR 2001-2002 THE ASSESSEE RECEIVED SUC H NO OBJECTION ORDER IN THAT EARLIER YEAR. NEITHER THE ASSESSMENT ORDER FOR ASSE SSMENT YEAR 2000-2001 NOR FOR ASSESSMENT YEAR 2001-2002 HAVE BEEN CHALLENGED BEFO RE THE HIGHER AUTHORITIES ON THE QUESTION OF DATE OF COMMENCEMENT. THUS IT IS PA TENT THAT AS PER THE INITIAL TWO ASSESSMENT ORDERS THE ASSESSEE SATISFIED THE A.O. T HE CONDITION AS REGARDS THE CORRECT DATE OF COMMENCEMENT, WHICH HAS NOT BEEN DI SPUTED BY THE REVENUE EITHER BY WAY OF REVISION OR REASSESSMENT OR RECTIFICATION PROCEEDINGS. 4. BE THAT AS IT MAY THE ASSESSEE ARGUED BEFORE THE LEARNED CIT THAT THE COMMENCEMENT CERTIFICATE ISSUED BY CIDCO ON 7.4.199 8 WAS ONLY APPROVAL LETTER FOR COMMENCING THE CONSTRUCTION WHEREAS THE ACTUAL COMMENCEMENT WAS DONE ONLY AFTER RECEIVING CERTIFICATE FROM DISTRICT COLLECTOR OF THANE ON 19.5.1999. WE HAVE PERUSED THE COPY OF CERTIFICATE ISSUED BY CIDCO DAT ED 7.4.1998, WHICH IS AVAILABLE AT PAGE 6 ONWARDS OF THE PAPER BOOK. THE VERY FIRST PAGE INDICATES THAT THE PERMISSION WAS GRANTED BY CIDCO SUBJECT TO CERTAIN CONDITIONS FOR THE DEVELOPMENT WORK. CLAUSE NO.16 OF THIS CERTIFICATE STATES THAT THE GRANT OF THIS PERMISSION IS SUBJECT TO THE PROVISIONS OF ANY OTHE R LAW FOR THE TIME BEING IN FORCE AND THAT MAY BE APPLICABLE TO THE CASE. THE MOST RE LEVANT CLAUSE IS 31, WHICH READS AS UNDER:- 31. NO DEVELOPMENT SHALL BE TAKEN UP UNLESS THE N. A. PERMISSION IS OBTAINED FROM THE COLLECTOR UNDER THE PROVISIONS OF M.L.R. CODE 1966. 5. ON GOING THROUGH THIS CLAUSE IT IS MORE THAN CL EAR THAT THE ASSESSEE WAS DEBARRED FROM TAKING UP ANY DEVELOPMENT WORK WITHOU T OBTAINING PERMISSION FROM THE COLLECTOR. IN COMPLIANCE WITH THIS CERTIFICATE THE ASSESSEE APPLIED TO THE DISTRICT COLLECTOR, THANE ON 30.5.1998 AND FINAL NO OBJECTIO N CERTIFICATE WAS ISSUED BY THE DISTRICT COLLECTOR ON 19.5.1999. COPY OF SUCH CERTI FICATE OF DISTRICT COLLECTOR, ITA NOS.3385 & 3386/MUM/2009 M/S.SHREE KRISHNA SAI DEVELOPMENT CORPORATION. 5 THANE IS AVAILABLE ON PAGES 16 ONWARDS OF THE PAPER BOOK. WHEN WE READ THE COMMENCEMENT CERTIFICATE ISSUED BY CIDCO DATED 7.4. 1998 IN JUXTAPOSITION TO THE PERMISSION GRANTED BY THE DISTRICT COLLECTOR, THANE ON 19.5.1999, IT BECOMES APPARENT THAT THE DEVELOPMENT WORK COULD NOT HAVE B EEN TAKEN UP BY THE ASSESSEE WITHOUT TAKING PERMISSION FROM THE DISTRICT COLLECT OR, THANE, WHICH WAS IN FACT GRANTED ON 19.5.1999. ONCE SUCH PERMISSION IS GRANT ED ON 19.5.1999, THE ASSESSEE BECAME ENTITLED TO COMMENCE THE CONSTRUCTION AND DE VELOPMENT ACTIVITY OF THE PROJECT. IT IS THUS CLEAR THAT THE LEARNED CIT THOU GH TOOK NOTE OF PERMISSION GRANTED BY THE DISTRICT COLLECTOR ON 19.5.1999 BUT STILL ST ICK ON TO THE COMMENCEMENT CERTIFICATE ISSUED BY CIDCO DATED 7.4.1998, WHICH W AS SUBJECT TO PERMISSION FROM DISTRICT COLLECTOR, THANE. HE DID NOT THINK IT APP ROPRIATE TO DEAL WITH THE PERMISSION GRANTED BY THE DISTRICT COLLECTOR, THANE , WHICH WAS A PRE-CONDITION TO TAKE UP THE DEVELOPMENT AND CONSTRUCTION WORK. FROM THESE FACTS IT CLEARLY EMERGES THAT THE DATE OF COMMENCEMENT BY THE ASSESSEE WAS A FTER 1.10.1998 AND THE LEARNED CIT WAS NOT JUSTIFIED IN SUBSTITUTING IT WITH 7.4.1 998. WHEN THIS CONDITION OF COMMENCING THE CONSTRUCTION ACTIVITY BEFORE 1.10.19 98 IS SATISFIED, THERE REMAINS TO DOUBT THAT THE DEDUCTION WAS RIGHTLY ALLOWED TO THE ASSESSEE AND AS SUCH THE ASSESSMENT ORDER CANNOT BE HELD AS PREJUDICIAL TO T HE INTEREST OF REVENUE. EVEN IF THE ASSESSING OFFICER PASSED THE ORDER WITHOUT APPL ICATION OF MIND BUT THE RIGHTFUL CLAIM WAS ALLOWED, THE JURISDICTION OF THE CIT U/S. 263 WAS OUSTED AS THE ASSESSMENT ORDER COULD NOT BE SAID TO BE PREJUDICIAL TO THE IN TEREST OF REVENUE ALBEIT ERRONEOUS. IT HAS BEEN NOTICED ABOVE THAT BOTH THE CONDITIONS VIZ., ASSESSMENT ORDER IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF R EVENUE, SHOULD BE SATISFIED SO AS CONFER THE JURISDICTION TO CIT U/S 263. THE RELIAN CE OF THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE CASE OF ARVEE INTERNATIONAL VS. ADDL.CIT [(2006) 101 ITD 495 (MUM.)] IS MISPLACED BECAUSE IN THAT CASE THE ASSESSMENT O RDER WAS BOTH ERRONEOUS SO WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE INASMUCH AS THE ASSESSING OFFICER ALLOWED DEDUCTION ON SALE OF IMPO RT ENTITLEMENTS OVER AND ABOVE 100% DEDUCTION FOR THE SAME IN EARLIER YEAR ON THE BASIS OF RECEIPT OF SUCH IMPORT ITA NOS.3385 & 3386/MUM/2009 M/S.SHREE KRISHNA SAI DEVELOPMENT CORPORATION. 6 ENTITLEMENT. IT WAS IN SUCH CIRCUMSTANCES OF THE A SSESSMENT ORDER IN THAT CASE BEING BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERE ST OF THE REVENUE, THAT THE TRIBUNAL UPHELD THE REVISIONAL ORDER PASSED U/S.263 . AS IN THE INSTANT CASE THE ASSESSMENT ORDER IS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE INASMUCH AS THE RIGHTFUL DEDUCTION HAS BEEN GRANTED U/S.80-IB(10) W HEN SEEN IN THE LIGHT OF ACTUAL DATE OF COMMENCEMENT BEING AFTER 01.10.1998, WE AR E UNABLE TO SUSTAIN THE VIEW TAKEN BY THE LEARNED CIT. THE IMPUGNED ORDER IS, TH EREFORE, SET ASIDE. 6. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED ON THIS 2 ND DAY OF JULY, 2010. SD/- SD/- (V.DURGA RAO) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 2 ND JULY, 2010 . DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENTS. 3. THE CIT CONCERNED 4. THE CIT(A)-XVII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.