ACIT, New Delhi V. M/s. Padmini Infrastructure (P) Ltd., New Delhi

ITA 4065/DEL/2010

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3854 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 20-06-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 01-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHWANI TANEJA DR RAKESH GUPTA
• Keywords: Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4065/DEL/2010 AY: 2006-07 ACIT, VS M/S PADMINI INFRASTRUCUTRE (P) LTD. , CIRCLE -14(1), LG, 1 & 3, R-23, C.R. BUILDING, NEHRU ENCLAVE, I.P. ESTATE, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ATIQ AHMAD, SR. DR RESPONDENT BY : SHRI ASHWANI TANEJA, DR. RAKESH GUPTA, ADVO CATES ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT AG AINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS) XVII, NEW DELHI FOR ASSESSMENT YEAR 2006 07 WHEREIN VIDE ORDER DA TED 08/06/2010 THE LD. FIRST APPELLATE AUTHORITY HAS ALLOWED THE ASSESSEES CLAI M FOR DEDUCTION UNDER SECTION 80-IB OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALL ED THE ACT). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPING AND BUILDING HOUSING PROJECT S. THE RETURN OF INCOME WAS I.T.A. NO. 4065/DEL/2010 ASSESSMENT YEAR: 2006-07 2 FILED DECLARING AN INCOME OF RS. 19,59,220/- AND BO OK PROFIT UNDER SECTION 115 JB AT NIL. THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 3 ,64,15,637/- UNDER SECTION 80- IB OF THE ACT. THE AO WAS OF THE VIEW THAT THE ASSE SSEE COMPANY WAS NOT ELIGIBLE FOR SUCH DEDUCTION AND HE PROCEEDED TO ASS ESS THE COMPANY ON A TOTAL INCOME OF RS. 3,64,15,637/-. THE AO OBSERVED THAT F OR DEDUCTION UNDER SECTION 80-IB OF THE ACT, THE UNDERTAKING MUST COMMENCE THE HOUSING PROJECT ON OR AFTER THE 1 ST DAY OF OCTOBER 1998 WHEREAS, AS PER THE AO, THE AS SESSEE HAD COMMENCED PROJECT BEFORE 01/10/1998. THE AO, IN THE ASSESSMENT ORDER, STATED THAT SINCE THE NOIDA DEVELOPMENT AUTHORITY ACCEPTED THE TENDER INCLUDING THE EARNEST MONEY ON 03/09/1998, THE ASSESSEE HAD FAILE D TO COMPLY WITH THE FIRST CONDITION I.E. THE HOUSING PROJECT WAS STARTED BEFO RE 01/10/1998. THE AO DENIED THE ASSESSEE THE BENEFIT OF SECTION 80 IB (10) OF T HE ACT. 2.1 THE AO ALSO OPINED THAT THE OTHER NECESSARY CON DITION OF THE RESIDENTIAL UNIT HAVING A MAXIMUM BUILT UP AREA OF 1000 FT. WA S ALSO NOT FULFILLED. THE AO COLLECTED DRAWINGS OF THE PROJECT FROM NOIDA DEVELO PMENT AUTHORITY AND ON THE BASIS OF SUCH DRAWINGS, CALCULATED THE BUILT UP AREA. ACCORDING TO THE AO, THE BUILT UP AREA IN RESPECT OF KINGSTON PROJECT AN D MONARCH PROJECT CAME TO 1292.2 AND 1409.2 FT. RESPECTIVELY. DURING THE ASS ESSMENT PROCEEDINGS, THE AO REQUIRED THE ASSESSEE TO FILE COPIES OF SALE DEEDS WHICH WERE FILED SHOWING THE BUILT UP AREA OF LESS THAN 1000 FT. BUT THIS ALSO DID NOT FIND FAVOUR WITH THE AO. THE AO DENIED THE ASSESSEE THE BENEFIT OF SECTION 8 0 IB (10) OF THE ACT ON THIS GROUND ALSO. I.T.A. NO. 4065/DEL/2010 ASSESSMENT YEAR: 2006-07 3 2.2 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE FIRST APPELLATE AUTHORITY WHO, ON FACTS, DIRECTED THE AO TO ALLOW T HE BENEFIT OF DEDUCTION UNDER SECTION 80 IB (10) OF THE ACT TO THE ASSESSEE . 2.3 NOW, THE DEPARTMENT HAS APPROACHED THE ITAT AND HAS CHALLENGED THE ADJUDICATION OF THE LD. CIT (APPEALS) AND HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.3,44,56,419/- MADE ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 80-1B OF THE INCOME T AX ACT, 1961. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN ACCEPTING THE ASSESSEE PLEA THAT DEVELOPME NT AND CONSTRUCTION OF THE PROJECT WAS COMMENCED AFTER 01.10.1998 IN THE ASSES SEES CASE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) ERRED IN ACCEPTING THE ASSESSEE PLEA THAT BUILT UP AREA OF R ESIDENTIAL UNITS OF THE PROJECT WAS LESS THAN 1000 SQ. FT. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THELD. CIT(A) ERRED IN ACCEPTING THE ASSESSEES PLEA THAT AMEND MENT TO SECTION 80-1B DEFINING BUILT UP AREA IS NOT RETROSPECTIVE AND WILL NOT APP LY TO PROJECTS ALREADY COMPLETED AS IS THE ASSESSEES CASE. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. C1T(A) ERRED IN NOT CORRECTLY AP PRECIATING THE FACT THAT THE DEDUCTION U/S 80-1B OF THE ACT WAS DISALLOWED IN TH E ASSESSEES CASE IN AY 2002- 03, 2003-04, 2004-05, 2005-06 AND 2007-08 ALSO. 6. THE APPELLANT CRAVES TO BE ALLOWED TO ADD OR AM END ANY OTHER GROUNDS OF APPEAL. I.T.A. NO. 4065/DEL/2010 ASSESSMENT YEAR: 2006-07 4 3. THE LD. DEPARTMENTAL REPRESENTATIVE REFERRED TO THE ASSESSMENT ORDER AT LENGTH AND SUBMITTED THAT THE ASSESSEE HAD FAILED T O FULFIL THE MANDATORY CONDITIONS FOR THE PURPOSE OF CLAIMING DEDUCTION UN DER SECTION 80-IB (10) AND, THEREFORE, THE AO WAS JUSTIFIED IN DENYING THE BENE FIT OF DEDUCTION TO THE ASSESSEE. THE LD. SENIOR DR VEHEMENTLY ARGUED THAT THE AO HAD MADE ENQUIRIES FROM THE NOIDA DEVELOPMENT AUTHORITY AND BASED ON S UCH INFORMATION HAD CONCLUDED THAT THE PROJECT HAD BUILT UP AREA EXCEED ING THE MAXIMUM PRESCRIBED AREA. IT WAS ALSO SUBMITTED THAT THE PRO JECT WAS COMMENCED BEFORE THE PRESCRIBED DATE AND AS SUCH THE BENEFIT OF DEDU CTION WAS NOT AVAILABLE TO THE ASSESSEE. IT WAS SUBMITTED THAT THE ORDER OF TH E LD. CIT (APPEALS) BE SET- ASIDE AND THAT OF THE AO RESTORED. 4. IN RESPONSE, THE LD. AUTHORISED REPRESENTATIVE R EAD OUT THE RELEVANT PORTIONS FROM THE ORDER OF THE LD. CIT (APPEALS) AN D SUBMITTED THAT THE LD. CIT (APPEALS) HAD RECORDED FACTUAL FINDINGS WHICH W ERE NOT DISPUTED. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE LD. C IT (APPEALS) HAS RECORDED A FACTUAL FINDING THAT THE ASSESSEE HAD NOT CARRIED OUT ANY CHANGE IN LAND PRIOR TO 1 ST OF OCTOBER 1998. IT WAS SUBMITTED THAT THERE WAS N O DEVELOPMENT IN THE LAND AND THE CONSTRUCTION WAS STARTED ONLY AFTER 1 ST DAY OF OCTOBER 1998. IT WAS ALSO SUBMITTED THAT THE ASSESSEE WAS GRANTED DEDUCT ION IN PRECEDING ASSESSMENT YEARS 200001, 200102, 200203, 2003-04 , 200405 AND 200506 AND SUBSEQUENT ASSESSMENT YEAR 200708. THE LD. AUT HORISED REPRESENTATIVE ALSO SUBMITTED THAT THE DATE OF APPROVAL TO THE PRO JECT BY NOIDA DEVELOPMENT I.T.A. NO. 4065/DEL/2010 ASSESSMENT YEAR: 2006-07 5 AUTHORITY PRIOR TO 01/10/1998 CANNOT BE TAKEN AS CO MMENCEMENT OF DEVELOPMENT AND CONSTRUCTION ACTIVITIES. THE LD. AU THORISED REPRESENTATIVE PLACED RELIANCE ON THE ORDER OF THE ITAT PUNE BENCH IN THE CASE OF NIMRITI CONSTRUCTION VERSUS DCIT REPORTED IN 95 TTJ 1117. RELIANCE WAS ALSO PL ACED IN THE CASE OF SHIPRA ESTATES LTD REPORTED IN 35 SOT 2 56 WHEREIN ITAT DELHI HAD ALLOWED RELIEF TO THE ASSESSEE ON SIMILAR FACTS. 4.1 ON THE SECOND ISSUE, I.E. THE DISPUTE REGARDING THE BUILT UP AREA, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE BUILT UP AREA WAS LESS THAN 1000 FT. AS PER THE SALES DEEDS. IT WAS FURTHER SUBMITT ED THAT THE DEFINITION OF BUILT UP AREA WHICH WAS INTRODUCED BY THE FINANCE ACT, 2 004 W.E.F. 01/04/2005 TO INCLUDE BALCONY, ETC. CANNOT BE APPLIED TO A PROJEC T WHICH STOOD COMPLETED IN 2001. IT WAS ALSO SUBMITTED THAT THE DEDUCTION HAD ALREADY BEEN ALLOWED IN EARLIER AND SUBSEQUENT YEARS AND, THEREFORE, THE RU LE OF CONSISTENCY SHOULD BE APPLIED AND THE DEDUCTION BE ALLOWED TO THE ASSESSE E IN THIS YEAR AS WELL. IT WAS ALSO SUBMITTED THAT THE AMENDMENT WHICH INSERTED TH E DEFINITION OF BUILT UP AREA WAS ONLY PROSPECTIVE IN NATURE AND, THEREFORE , PRIOR TO 01/04/2005, IN CALCULATING THE AREA OF A RESIDENTIAL UNIT, AREA CO VERED BY A BALCONY WAS TO BE EXCLUDED. RELIANCE WAS PLACED ON THE JUDGMENT OF TH E HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF COMMISSIONER OF INCOME TAX VERSUS ARIF INDUSTRIES LTD REPORTED IN (2017) 80 TAXMANN.COM 374 (ALLAHABAD) F OR THE PROPOSITION THAT PRIOR TO 01/04/2005, THE DEFINITION OF BUILT UP ARE A WOULD EXCLUDE AREA COVERED I.T.A. NO. 4065/DEL/2010 ASSESSMENT YEAR: 2006-07 6 BY A BALCONY. THE LD. AUTHORISED REPRESENTATIVE PLA CED EXTENSIVE RELIANCE ON THE ORDER OF THE LD. CIT (APPEALS) AND ARGUED THAT THE DEDUCTION HAD BEEN RIGHTLY ALLOWED BY THE LD. FIRST APPELLATE AUTHORITY ON BOT H THE COUNTS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL ON RECORD. AS FAR AS THE ISSUE OF DATE OF COMMENCEM ENT OF THE PROJECT IS CONCERNED, THE LD. FIRST APPELLATE AUTHORITY HAS RE CORDED A FINDING THAT NO DEVELOPMENT ACTIVITY WAS CARRIED ON BY THE ASSESSEE PRIOR TO THE APPOINTED DATE, THAT IS, 01/10/1998. A PERUSAL OF THE ASSESSM ENT ORDER SHOWS THAT THE AO HAS TREATED THE DATE OF APPROVAL OF THE PROJECT BY THE NOIDA AUTHORITY, I.E., 03/09/1998 AS THE DATE OF COMMENCEMENT OF PROJECT. HOWEVER, THIS REASONING OF THE AO SEEMS ILLOGICAL AS GRANT OF APPROVAL DOES NO T NECESSARILY MEAN COMMENCEMENT OF DEVELOPMENT AND BUILDING ACTIVITIES . THE AO HAS NOT DEMONSTRATED WITH CONCRETE EVIDENCE THAT THE ASSESS EE HAD IN FACT COMMENCED OPERATIONS RELATING TO DEVELOPMENT AND CONSTRUCTION PRIOR TO 01/10/1998. EVEN IN THE PROCEEDINGS BEFORE US, THE DEPARTMENT COULD NOT DEMONSTRATE THAT THE ASSESSEE HAD COMMENCED THE DEVELOPMENT AND CONSTRUC TION BEFORE THE APPOINTED DATE. IN SUCH A CIRCUMSTANCE WE ARE UNABL E TO CONCUR WITH THE INTERPRETATION OF THE AO ON THIS ISSUE. THE ITAT PU NE BENCH IN THE CASE OF NIMRITI CONSTRUCTION VERSUS DCIT IN ITA NO. 1389/PN/2003 REPORTED IN 95 TTJ 1117 HAS HELD THAT ACTIVITIES LIKE APPROVAL OF THE PLAN, MARKETING FOR BOOKING THE RESIDENTIAL UNITS, AVAILING OF FINANCE, RECEIPT OF ADVANCE BOOKING MONEY, ETC I.T.A. NO. 4065/DEL/2010 ASSESSMENT YEAR: 2006-07 7 CANNOT BE CONSTRUED TO MEAN COMMENCEMENT OF DEVELOP MENT AND CONSTRUCTION OF HOUSING PROJECT. THE LD. CIT (APPEALS) HAS TAKEN NOTE OF THIS ORDER OF THE ITAT PUNE BENCH WHILE ALLOWING RELIEF TO THE ASSESS EE ON THIS ISSUE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ADJUDICATION OF THE LD. CIT (APPEALS) ON THIS ISSUE AND WE DISMISS THE DEPARTMENTS CHALLENGE ON THIS ISSUE. 5.1 AS FAR AS THE SECOND ISSUE BEFORE US IS CONCERN ED, IT IS UNDISPUTED THAT THE BASIS FOR CALCULATION OF BUILT UP AREA HAS BEEN INS ERTED IN THE ACT W.E.F. 01/04/2005 AND PRIOR TO THIS THE BUILT UP AREA WAS TO BE CONSIDERED AS PER THE GENERAL TERMS OF THE AGREEMENTS AND CERTIFICATES IS SUED BY THE ARCHITECTS. IT IS UNDISPUTED THAT THE PROJECT WAS COMPLETED IN THE YE AR 2001 AND AT THAT POINT OF TIME, THE DEFINITION OF BUILT UP AREA WAS NOT IN TH E ACT. THE ASSESSEE HAD FURNISHED SALE DEEDS BEFORE THE AO WHERE IN THE BUI LT UP AREA WAS LESS THAN 1000 FT.. THESE SALE DEEDS WERE NOT FOUND TO BE IN CORRECT OR FABRICATED. THE SALE DEEDS HAVE BEEN SIGNED BOTH BY THE BUYERS AS WELL A S BY THE SELLER AND HAVE BEEN DULY WITNESSED. THE ASSESSEE HAS ALSO SUBMITTE D CERTIFICATES FROM THE ARCHITECTS REGARDING THE TWO PROJECTS KINGSTON AN D MONARCH WITH RESPECT TO THE BUILT UP AREA. THE AO WAS CALLED UPON BY THE LD. CIT (APPEALS) TO FURNISH REMAND REPORT IN RESPECT OF THE CERTIFICATE S RELATING TO THESE TWO PROJECTS AND THE LD. CIT (APPEALS) HAS NOTED THAT I N THE REMAND REPORT THE AO HAS NOT DOUBTED THE GENUINENESS OF THESE CERTIFICAT ES. IT IS ALSO A FACT ON RECORD THAT THE ASSESSEE HAS BEEN GRANTED DEDUCTION UNDER SECTION 80-IB (10) OF THE I.T.A. NO. 4065/DEL/2010 ASSESSMENT YEAR: 2006-07 8 ACT FOR ASSESSMENT YEARS 200001 TO 200506 AND ASS ESSMENT YEAR 200708. THERE HAS BEEN NO CHANGE IN FACTS AND CIRCUMSTANCES IN THE YEAR UNDER CONSIDERATION AND THERE BEING NO EVIDENCE TO THE CO NTRARY, THE RULE OF CONSISTENCY REQUIRES THAT THE SETTLED POSITION SHOU LD NOT BE DISTURBED. THE HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VERSUS ARIF INDUSTRIES LTD (SUPRA) HAS ALSO HELD THAT THE INSERTION OF THE DEF INITION OF BUILT UP AREA WAS PROSPECTIVE IN NATURE. WHILE DOING SO, THE HONBLE HIGH COURT OF ALLAHABAD REFERRED TO THE JUDGMENT OF THE HONBLE APEX COURT RENDERED IN CIT VERSUS SARKAR BUILDERS (2015) 7 SCC 579 WHEREIN THE HONBL E APEX COURT WAS CONSIDERING THE APPLICABILITY OF SECTION 80-IB (14) IN RESPECT OF PROJECTS WHICH WERE APPROVED BEFORE 01/04/2005. THE HONBLE ALLAHA BAD HIGH COURT HAS NOTED THAT THE HONBLE APEX COURT HAS OPINED IN PARAGRAPH 25 OF THE JUDGMENT IN THE CASE OF SARKAR BUILDERS (SUPRA) THAT ONE CANNOT EXP ECT AN ASSESSEE TO COMPLY WITH THE CONDITION THAT WAS NOT A PART OF THE STATU TE WHEN THE HOUSING PROJECT WAS APPROVED. THE HONBLE APEX COURT FURTHER HELD T HAT HOLDING CONTRARY WOULD LEAD TO ABSURD RESULTS AND THAT THE ONLY WAY TO RESOLVE THE ISSUE WOULD BE TO HOLD THAT CLAUSE (D) WAS TO BE TREATED AS BEI NG INEXTRICABLY LINKED WITH THE APPROVAL AND CONSTRUCTION OF THE HOUSING PROJEC T AND THAT AN ASSESSEE CANNOT BE CALLED UPON TO COMPLY WITH THE SAID CONDI TION WHEN IT WAS NOT IN CONTEMPLATION EITHER OF THE ASSESSEE OR EVEN THE LE GISLATURE WHEN THE HOUSING PROJECT WAS ACCORDED APPROVAL BY THE LOCAL AUTHORIT IES. I.T.A. NO. 4065/DEL/2010 ASSESSMENT YEAR: 2006-07 9 5.2 THEREFORE, RESPECTFULLY FOLLOWING THE RATIO OF THE JUDGMENTS OF THE HONBLE APEX COURT IN THE CASE OF SARKAR BUILDERS ( SUPRA) AS WELL AS OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF ARIF IN DUSTRIES LTD (SUPRA) WE FIND NO REASON TO INTERFERE WITH THE ADJUDICATION OF THE LD. CIT (APPEALS) ON THIS ISSUE ALSO. 5.3 GROUND NO. 5 OF THE APPEAL MENTIONS THAT THE DE DUCTION UNDER SECTION 80-IB OF THE ACT WAS DISALLOWED IN THE ASSESSEES C ASE IN ASSESSMENT YEAR 2002 03, 200304, 200405, 200506 AND 200708. HOWEVER, THIS ASSERTION IS FACTUALLY INCORRECT AND THE SAME IS DISMISSED AS IN VALID. 6. IN THE FINAL RESULT, THE APPEAL OF THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH OCTOBER, 2017 SD/- SD/- (PRASHANT MAHARISHI) (S UDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 25TH OCTOBER, 2017 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR I.T.A. NO. 4065/DEL/2010 ASSESSMENT YEAR: 2006-07 10