KESHVI DEVELOPERS, MUMBAI V. CIT 24, MUMBAI

ITA 3832/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8583 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER VIT SING H
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.3832/MUM/2011(A.Y.2006-07) M/S. KESHVI DEVELOPERS, AVISHKAR BUILDING, GROUND FLOOR, PRATAP NAGAR, OFF JOGESHWARI VIKHROLI LINK ROAD, JOGESHWARI (EAST), MUMBAI - 400 060. PAN: AAAFK 5156 D (APPELLANT) VS. THE ITO WD 24(1)(1), C-13 R. NO.507, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI -51. (RESPONDENT) APPELLANT BY : SHRI VIMAL PUNMIYA RESPONDENT BY : SHRI SURINDER VIT SIN GH DATE OF HEARING : 04/10/2012 DATE OF PRONOUNCEMENT : 1 0/10/2012 ORDER PER I.P.BANSAL, J.M THIS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRE CTED AGAINST ORDER DATED 11/3/2011 PASSED BY LD. CIT-24, MUMBAI UNDER SECTIO N 263 OF THE INCOME TAX ACT,1961(THE ACT). GROUNDS OF APPEAL READ AS U NDER: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX- CITY 24 (CIT), MUMBAI H AS ERRED IN INITIATING THE REVISIONARY PROCEEDINGS UNDER SECTION 263 OF TH E INCOME TAX ACT, 1961. THE GROUNDS FOR INITIATING PROCEEDING UNDER SECTION 263 IS INCORRECT AND BAD IN LAW AS THIS SPECIFIC ISSUE HAS BEEN CONSIDERED B Y THE ASSESSING OFFICER (AC) IN HER ORDER PASSED UNDER SECTION 143(3) OF TH E ACT.. THE AO HAS EXAMINED THE SUBMISSION MADE BY APPELLANT ON THE AF ORESAID MATTER AND EXPLAINED THE BASIS ON WHICH THE DEDUCTION UNDER SE CTION 80(18) HAS BEEN CLAIMED. THE LEARNED CIT HAS NOT APPLIED HIS MIND A ND DISREGARDED THE ORDER OF THE AO PASSED UNDER SECTION 143(3) WHICH IS INCO RRECT AND BAD IN LAW AND NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF TH E REVENUE. 2) THE LEARNED CIT HAS ERRED BY NOT CONSIDERING THE SUBMISSIONS MADE ON 5- 10-2010 INCLUDING ITAT JUDGMENTS ON THE SPECIFIC IS SUE REFERRED TO IN THE NOTICE ISSUED FOR SECTION 263 PROCEEDINGS, WHICH AR E IN FAVOUR OF THE ITA NO.3832/MUM/2011(A.Y.2006-07) 2 APPELLANT. THE ISSUES REFERRED TO IN THE SAID JUDGM ENTS ARE IDENTICAL TO THE ISSUES REFERRED BY LEARNED CIT IN HIS NOTICE FOR IN ITIATING THE PROCEEDINGS UNDER SECTION 263. HOWEVER THE LEARNED CIT HAS NOT APPLIED HIS MIND AND DISREGARDED THE SUBMISSIONS MADE BY THE APPELLANT I N THIS ASPECT. 3) THE LEARNED CIT HAS ERRED IN SETTING ASIDE THE O RDER OF THE AO UNDER SECTION 143(3) FOR THE FOLLOWING REASONS A. THE REASONS FOR SETTING ASIDE THE ACS ORDER UND ER SECTION 143(3) [SIZE OF THE FLAT EXCEEDING 1000 SQ FT.] IS NOT IN AGREEMENT WITH THE REASONS FOR INITIATING THE PROCEEDINGS UNDER SECTION 263.. B. THE LEARNED CIT HAS NOT GIVEN ANY OPPORTUNITY TO THE APPELLANT FOR EXPLAINING/SUBMITTING THE POINT OF VIEW IN CONNECTI ON WITH ISSUES RAISED BY HIM REGARDING THE SIZE OF THE FLAT. C. THE ISSUES RAISED BY LEARNED CIT IN HIS ORDER FO R SETTING ASIDE AOS ORDER UNDER SECTION 143(3) ARE ALREADY CONSIDERED BY THE AC AND CONFIRMED.( I.E NONE OF THE FLATS IN THE BUILDING EXCEED 1000 SQ FT .) D. THE LEARNED CIT HAS NOT APPLIED HIS MIND AND HAS DISREGARDED THE SUBMISSIONS MADE BY THE APPELLANT 2. THE ASSESSEE IN THE PRESENT CASE IS A BUILDER AN D DEVELOPER. IT CLAIMED DEDUCTION UNDER SECTION 80 IB(10) OF THE ACT AMOUNT ING TO RS.4,48,970/-, WHICH WAS ALLOWED BY THE AO VIDE ORDER DATED 29/12/ 2008 PASSED UNDER SECTION 143(3) OF THE ACT. THE ASSESSMENT ORDER IS A SPEAKING ORDER IN WHICH THE AO HAS FOUND THAT ASSESSEE HAS FULFILLED ALL TH E CONDITIONS LAID DOWN IN SECTION 80 IB(10). THESE FINDINGS OF AO ARE AFTER CALLING VARIOUS DETAILS FROM ASSESSEE FROM TIME TO TIME AND AFTER DELIBERATION ON ON THE ISSUE AT LENGTH HE HAS RECORDED A FINDING THAT THE ASSESSEE IS ENTI TLED TO GET BENEFIT OF DEDUCTION UNDER SECTION 80 IB(10) AS IT HAD FULFILL ED ALL THE CONDITIONS LAID DOWN IN SECTION 80 IB(10). 2.1 AT PAGE -78 OF THE PAPER BOOK THE ASSESSEE HAD FILED COPY OF THE SHOW CAUSE NOTICE ISSUED BY LD. CIT FOR INITIATING PROC EEDINGS UNDER 263 OF THE ACT. THE REASONS SET OUT FOR INITIATION OF PROCEE DINGS IS THAT APPROVAL BY THE LOCAL AUTHORITIES WAS GIVEN TO M/S. MAJAS LAND DEVE LOPMENT CORPORATION, THEREFORE, DEDUCTION HAS WRONGLY BEEN ALLOWED IN TH E HANDS OF THE ASSESSEE AND SUCH DEDUCTION WAS NOT AVAILABLE TO THE ASSESSEE, T HEREFORE, THE ASSESSMENT ORDER ITA NO.3832/MUM/2011(A.Y.2006-07) 3 IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE AND ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY POWER UNDER S ECTION 263 SHOULD NOT BE EXERCISED. COPY OF REPLY DATED 5/10/2010 IS PLA CED AT PAGES 70 TO 74 OF THE PAPER BOOK. IT WAS SUBMITTED THAT M/S.MAJAS LA ND DEVELOPMENT CORPORATION (MLDC) HAS EXECUTED DEVELOPMENT AGREEME NT DATED 6/12/1995 WITH THE ASSESSEE (KD) AND THUS KD HAS UNDERTAKEN T HE PROJECT FROM MLDC AND ACCORDINGLY MLDC HAS GIVEN TO KD ALL THE RIGHTS OF CONSTRUCTION OF THE PREMISES, SEEKING APPROVAL OF REGULATORY AUTHORITY , EXECUTING AGREEMENT WITH CUSTOMERS AND COLLECTING SALE PROCEEDS THEREOF , HOST OF RIGHT AND RESPONSIBILITY IN ACCORDANCE WITH THE EXECUTION OF THE PROJECT. IT WAS SUBMITTED THAT SINCE KD IS INCURRING THE ENTIRE PRO JECT COST AND SALES PROCEEDS WAS ALSO COLLECTED BY IT, PROFIT/LOSS FRO M THE ABOVE WILL ACCRUE TO KD AND SUBSEQUENTLY IN THE RETURN OF INCOME IT WILL HAVE TO OFFER INCOME OR LOSS FROM THE PROJECT FOR TAX. KD IS AN UNDERTAKIN G AND DEDUCTION UNDER SECTION 80 IB(10) IS CLAIMABLE BY AN UNDERTAKING. AS MLDC HAS NOT UNDERTAKEN THE PROJECT CONSEQUENTLY, MLDC DID NOT C LAIM DEDUCTION UNDER SECTION 80IB(10). RELIANCE WAS PLACED ON THE DECIS ION OF ITAT IN THE CASE OF RADHE DEVELOPERS VS. ITO, ITA NO.2482/AHD/2006 AND IN THE CASE OF CIT VS. VRM INDIA LTD., ITA NO.811/DEL/2008 AND THUS IT WAS SUBMITTED THAT THE GRANT OF DEDUCTION UNDER SECTION 80 IB(10) BY THE A O TO THE ASSESSEE DID NOT MAKE ASSESSMENT ORDER EITHER ERRONEOUS OR PREJUDICI AL TO THE INTEREST OF REVENUE. LD. CIT HAS TURN DOWN THESE ARGUMENTS OF THE ASSESSEE AND HAS HELD THAT DEDUCTION IS NOT ALLOWABLE TO THE ASSESS EE. FOR HOLDING SO LD. CIT HAS ALSO TAKEN INTO CONSIDERATION ANOTHER FACT THAT FLAT NO.34 ON 3 RD FLOOR OF FWING WAS MORE THAN 1000 SQ.FT. (ACTUALLY 1250 SQ .FT.) AND THUS LD. CIT HAS SET ASIDE THE ORDER AND DIRECTED THE AO TO MAKE FRESH ASSESSMENT ON THE ABOVE ISSUE AFTER ALLOWING OPPORTUNITY TO THE ASSES SEE. 2.2 THE CASE OF ASSESSEE BEFORE US IS TWO FOLD. FI RSTLY THE ASSESSEE IS OBJECTING TO THE INVOCATION OF SECTION 263 ON THE G ROUND THAT ASSESSMENT ORDER WAS PASSED BY AO AFTER CALLING FOR VARIOUS D ETAILS AND AFTER ITA NO.3832/MUM/2011(A.Y.2006-07) 4 EXAMINATION OF DETAILS AO HAS FOUND THAT ASSESSEE H AS FULFILLED ALL THE CONDITIONS LAID DOWN IN SECTION 80 IB(10). THE VIE W TAKEN BY THE AO IS SUPPORTED BY THE DECISIONS OF ITAT, THEREFORE, THE ORDER OF AO CANNOT BE SAID TO BE ERRONEOUS. UNLESS THE ASSESSMENT ORDER IS ER RONEOUS, POWER UNDER SECTION 263 CANNOT BE EXERCISED. SECONDLY, THE LD. CIT HAS DEBARRED FROM TAKING AN ISSUE WHICH WAS NOT DESCRIBED IN THE SHOW CASE NOTICE. THIS CONTENTION HAS BEEN RAISED FOR THE REASON THAT LD. CIT HAS TAKEN ANOTHER GROUND OF FLAT BEING MORE THAN 1000 SQ.FT TO SET AS IDE THE ASSESSMENT ORDER. 3. LD. A.R OF THE ASSESSEE AFTER NARRATING THE FACT S FIRST REFERRED TO THE DECISION OF TRIBUNAL IN THE CASE OF RADHE DEVELOPE RS AND OTHERS VS. ITO 113 TTJ (AHD) 330 IN WHICH IT HAS BEEN HELD THAT AN UND ERTAKING DEVELOPING OR BUILDING A HOUSING PROJECT IS ENTITLED TO DEDUCTION UNDER SECTION 80 IB(10) IRRESPECTIVE OF THE FACT WHETHER IT IS THE OWNER O F THE LAND OR NOT. HE SUBMITTED THAT THIS DECISION HAS BEEN FOLLOWED BY V ARIOUS OTHER BENCHES OF THE TRIBUNAL AND THE AFOREMENTIONED DECISION OF TRI BUNAL HAS BEEN CONFIRMED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. RADHE DEVELOPERS, 341 ITR 403. 3.1 COMING TO THE SECOND PROPOSITION LD. AR REFERRE D TO THE DECISION OF ITAT KOLKATTA DATED 29/7/2012 IN ITA NO.353/KOL/201 2 IN THE CASE OF GPSK CAPITAL PVT. LTD. VS. CIT (COPY OF ORDER PLACE D ON OUR RECORD AND COPY WAS ALSO GIVEN TO LD. DR), WHEREIN IT HAS BEEN HELD THAT THE ORDER PASSED BY LD. CIT UNDER SECTION 263 WAS BAD AS IT WAS IN EXCE SS OF HIS JURISDICTION WHEN IT EXCEEDS THE ISSUE WHICH WAS RAISED IN THE S HOW CAUSE NOTICE UNDER SECTION 263. 3.2 LD. A.R FURTHER SUBMITTED THAT EVEN ON MERITS A REA OF FLAT NO.34 DID NOT EXCEED 1000 SQ.FT. HE SUBMITTED THAT IN THE AS SESSMENT ORDER ITSELF AO HAS FULFILLED THE CONDITIONS OF MINIMUM BUILT UP AR EA OF EACH RESIDENTIAL UNIT ITA NO.3832/MUM/2011(A.Y.2006-07) 5 AND THIS FINDING HAS BEEN GIVEN AFTER DELIBERATING ON THE DETAILS FILED BY THE ASSESSEE. HE SUBMITTED THAT COPY OF THE TITLE DEE D OF THE SAID FLAT IS PLACED AT PAGES 7 TO 18 OF THE PAPER BOOK AND FLAT NO.34 W AS COMPRISING OF THREE FLATS AND THE AREA DOES NOT EXCEED 1000 SQ.FT. AND HAS BEEN MENTIONED AS 1000 SQ.FT IN PARA 3 OF THE TITLE DEED. THUS IT WA S PLEADED BY LD. A.R THAT IMPUGNED ORDER PASSED BY LD. CIT SHOULD BE QUASHED. 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY LD. CIT. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. WE HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER. THE AO HAS RECORDED A CATEGORICAL FINDING T HAT ASSESSEE HAS FULFILLED ALL THE CONDITIONS LAID DOWN TO CLAIM DEDUCTION UND ER SECTION 80 IB(10). THE REASONS STATED BY LD. CIT IN HIS SHOW CAUSE NOTICE WAS THAT ASSESSEE DID NOT OWN LAND, THEREFORE, WAS NOT ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80 IB(10). THIS CONCLUSION OF LD. CIT IS AGAINST T HE DECISION OF HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. RADHE DEVE LOPERS (SUPRA). THEREFORE, ASSESSMENT ORDER TO THAT EXTENT CANNOT B E SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. THE SECOND REASON STATED BY LD. CIT IS THAT FLAT NO.34 EXCEED 1000 SQ.FT. THIS IS ALSO FA CTUALLY INCORRECT AS IT DID NOT EXCEED 1000 SQ.FT. MOREOVER, THAT ISSUE WAS NO T RAISED BY LD. CIT IN HIS SHOW CAUSE NOTICE. THEREFORE, ALSO THAT GROUND COU LD NOT BE TAKEN. 6. IN VIEW OF ABOVE DISCUSSIONS, WE ARE OF THE OPIN ION THAT LD. CIT(A) HAS WRONGLY EXERCISED POWER UNDER SECTION 263. THE ASS ESSMENT ORDER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F REVENUE. ORDER PASSED BY ITA NO.3832/MUM/2011(A.Y.2006-07) 6 LD. CIT UNDER SECTION 263 IS QUASHED AND APPEAL FIL ED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 10 TH DAY OF OCT., 2012 SD/- SD/- (RAJENDRA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 10 TH OCT., 2012. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R A BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.3832/MUM/2011(A.Y.2006-07) 7 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 04/10/2012 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 08/10/2012 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER