M/S. G.V. CORPORATION, MUMBAI V. THE ITO 23(2)(3), MUMBAI

ITA 4512/MUM/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2644 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 14-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 13-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAGATI KUMAR
• Keywords: Opportunity of being heard; Assessment record; Set aside
• Section: 143(3); 80IB; 131; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, SR.V.P. AND SHRI J.SU DHAKAR REDDY, AM I.T.A. NO. 4512/MUM/2007 ( ASSESSMENT YEAR :2004-05) M/S. G.V. CORPORATION PLOT NO. 1, HARIOM NAGAR, MULUND (EAST), MUMBAI-400 081. PAN: AAFFG 9658 C VS. INCOME TAX OFFICER 23(3)(2), C-10, 3 RD FLOOR, PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, MUMBAI-400 051. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. HIRO RAI RESPONDENT BY : MR. PRAGATI KUMAR, (CIT) DR O R D E R PER R.V.EASWAR, SENIOR VICE PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE AND IT IS DIRECTED AGAINST THE ORDER P ASSED BY THE CIT UNDER SECTION 263 OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2004-05. THE ASSESSEE HAS BEEN ASSESSED AS A N ASSOCIATION OF PERSONS AND IT IS ENGAGED IN THE BUS INESS AS BUILDERS AND CONSTRUCTION CONTRACTORS. 2. IN RESPECT OF THE YEAR UNDER APPEAL, THE ASSESSE E FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.NIL. IN THE RETURN DEDUCTION OF RS.1,89,18,106/- WAS CLAIMED UNDER SEC TION 80IB. THE RETURN WAS ORIGINALLY PROCESSED UNDER SECTION 1 43(1) BUT THEREAFTER IT WAS TAKEN UP FOR SCRUTINY BY ISSUE OF NOTICE UNDER SECTION 142(1). ULTIMATELY, THE ASSESSMENT WAS COMP LETED UNDER SECTION 143(3) BY ORDER DATED 29.12.2006 AND IN THI S ORDER THE ASSESSING OFFICER OBSERVED THAT AFTER VERIFICATION OF THE SUBMISSIONS AND THE DETAILS FURNISHED THE INCOME DE CLARED IS ACCEPTED AND THE ASSESSED INCOME WAS TAKEN AT RS.NI L. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER ALSO OBSERV ED THAT THE ITA NO.4512/MUM/07 2 ASSESSEE HAD CLAIMED DEDUCTION OF RS.1,89,18,106/- UNDER SECTION 80IB. 3. AFTER COMPLETION OF THE ASSESSMENT AS ABOVE, THE ASSESSING OFFICER HIMSELF SENT A PROPOSAL TO THE CI T ON 23.4.2007 REQUESTING THE LATTER TO TAKE ACTION UNDE R SECTION 263 OF THE ACT ON TWO GROUNDS. THE FIRST GROUND WAS THA T THE RETURN WAS FILED INDICATING THE STATUS OF THE ASSESSEE AS FIRM AND IN THE AUDIT REPORT FILED WITH THE RETURN ALSO THE STA TUS WAS MENTIONED AS FIRM. HOWEVER, IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE CLAIMED THE STATUS OF AN A SSOCIATION OF PERSONS WHICH WAS ACCEPTED. ACCORDING TO THE ASSESS ING OFFICER, THE ACCEPTANCE OF THE STATUS AS AOP WAS ERRONEOUS. THE SECOND GROUND WAS THAT THE DEDUCTION UNDER SECTION 80IB WA S WRONGLY GIVEN, OVERLOOKING THE PROVISIONS OF SUB-SECTION (2 ) OF THE SECTION. ACCORDING TO THE ASSESSING OFFICER, THE AS SESSEE AOP CONSISTED OF M/S. GAUTAM ENTERPRISES AND M/S. V.M.CORPORATION. UNDER SUB-SECTION (2) OF SECTION 8 0IB THE BENEFIT OF DEDUCTION WAS NOT AVAILABLE TO THE CASES OF RECONSTRUCTION OF EXISTING BUSINESS. IT WAS THE ASS ESSING OFFICERS VIEW THAT THE ASSESSEE AOP WAS RECONSTRUC TED OUT OF THE BUSINESSES CARRIED ON BY THE AFORESAID TWO ENTI TIES AND THEREFORE THE DEDUCTION WAS NOT AVAILABLE. THE ALLO WANCE OF THE DEDUCTION OVERLOOKING THE PROVISIONS OF SUB-SECTION (2) OF SECTION 80IB WAS PREJUDICIAL TO THE INTERESTS OF TH E REVENUE. FOR THESE TWO GROUNDS, THE ASSESSING OFFICER SUGGESTED ACTION UNDER SECTION 263 BY THE CIT. 4. ON THE BASIS OF THE ASSESSING OFFICERS SUGGESTI ONS, THE CIT CALLED FOR THE ASSESSMENT RECORDS AND EXAMINED THEM AND FOUND THAT THOUGH THE ASSESSEE HAD CLAIMED THE STAT US OF A FIRM IN THE RETURN OF INCOME AND THE AUDIT REPORT, THE A SSESSING OFFICER HAD COMPLETED THE ASSESSMENT IN THE STATUS OF AN AOP ITA NO.4512/MUM/07 3 WHICH WAS NOT PERMISSIBLE IN LAW AS HELD BY THE ALL AHABAD HIGH COURT IN CWT VS. J.K. SRIVASTAVA, (1983) 142 ITR 18 3 AND BY THE RAJASTHAN HIGH COURT IN CIT VS. SURESH CHANDRA GUPTA (1988) 173 ITR 407. HE THEREFORE, TOOK THE VIEW THA T COMPLETION OF THE ASSESSMENT IN THE STATUS OF AN AOP WAS ERRON EOUS. THE CIT ALSO EXAMINED THE RECORDS TO ASCERTAIN WHETHER THE DEDUCTION UNDER SECTION 80IB WAS PROPERLY ALLOWED. HE CAME TO THE CONCLUSION THAT THE ASSESSING OFFICER DID NOT E XAMINE THE QUESTION WHETHER THE REQUIREMENTS OF SUB-SECTION ( 2) OF SECTION 80IB WERE COMPLIED WITH. ACCORDING TO THE CIT, THE ASSESSEE SHOULD BE AN INDUSTRIAL UNDERTAKING WHICH FULFILS T HE CONDITIONS MENTIONED IN CLAUSE (I) TO (IV) OF SUB-SECTION (2) AND CLAUSE (I) REQUIRES THAT THE INDUSTRIAL UNDERTAKING SHOULD NOT HAVE BEEN FORMED BY THE SPLITTING OF OR RECONSTRUCTION OF A B USINESS ALREADY IN EXISTENCE. ACCORDING TO THE CIT THE ASSE SSEE HAD BEEN FORMED BY THE RECONSTRUCTION OF THE BUSINESSES CARR IED ON BY M/S.GAUTAM ENTERPRISES AND M/S. V.M. CORPORATION AN D THUS THERE WAS A VIOLATION OF THE CONDITIONS OF SUB-SECT ION (2). THE CIT FURTHER HELD THAT UNDER CLAUSE (II) OF SUB-SECT ION (2), THE INDUSTRIAL UNDERTAKING SHOULD NOT HAVE BEEN FORMED BY THE TRANSFER OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. HE HELD THAT THE ASSESSING OFFICER OUGHT TO HAVE CA LLED FOR THE BALANCE SHEET OF M/S. GAUTAM ENTERPRISES AND M/S. V.M.CORPORATION IN ORDER TO ASCERTAIN WHETHER ANY M ACHINERY USED BY THEM WAS TRANSFERRED TO THE ASSESSEES BUSI NESS. THE CIT ALSO NOTICED THAT AT NO STAGE OF THE ASSESSMENT PROCEEDINGS DID THE ASSESSEE OFFER TO PRODUCE EVIDENCE IN SUPPO RT OF THE FACT THAT EACH RESIDENTIAL UNIT IN THE BUILDINGS CONSTRU CTED BY THE ASSESSEE WAS LESS THAN 1000 SQ.FT. OF BUILT-UP AREA AS REQUIRED BY CLAUSE (C) OF SUB-SECTION (10) OF THE SECTION. THE ASSESSING OFFICER DID NOT GET THE MEASUREMENTS CHECKED THROUG H THE DEPARTMENTAL VALUERS AND ONLY SUCH AN ENQUIRY WOULD HAVE ITA NO.4512/MUM/07 4 ENABLED HIM TO COME TO THE RIGHT CONCLUSION ABOUT T HE ELIGIBILITY OF THE ASSESSEE TO THE DEDUCTION, ACCORDING TO THE CIT. 5. ON THE ABOVE BASIS, THE CIT ISSUED NOTICE UNDER SECTION 263 OF THE ACT IN RESPONSE TO WHICH THE ASSESSEE MA DE DETAILED SUBMISSIONS WHICH WERE CONSIDERED BY THE CIT BUT RE JECTED BY HIM. IT IS NECESSARY TO SUMMARISE HIS FINDINGS AND WE DO SO IN THE FOLLOWING MANNER: (A) THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE TO SHO W THAT ALL THE THREE CONDITIONS MENTIONED IN SECTION 80IB (10) HAVE BEEN FULFILLED. (B) SOME OF THE RESIDENTIAL UNITS, WHEN COUPLED WITH TH E ADJOINING UNIT, RESULTED IN THE BUILT-UP AREA EXCEE DING THE MAXIMUM PERMISSIBLE LIMIT OF 1000 SQ.FT. (C) THERE WAS A RECONSTRUCTION OF TWO EXISTING BUSINESS ES THOSE OF M/S. GAUTAM ENTERPRISES AND M/S. V.M. CORPORATION TO FORM A NEW BUSINESS NAMELY THAT OF T HE ASSESSEE AND THIS IS IN VIOLATION OF THE CONDITIONS PRESCRIBED IN SECTION 80IB(2). IN HOLDING SO, THE C IT REJECTED THE ASSESSEES CONTENTION THAT SECTION 80I B(10) IS NOT CONTROLLED OR GOVERNED BY THE CONDITIONS MENTIONED IN SECTION 80IB(2), BUT WAS AN INDEPENDEN T PROVISION AND THEREFORE IT WAS NOT NECESSARY FOR TH E ASSESSEE TO FULFIL THE CONDITIONS MENTIONED IN SUB- SECTION (2) THE CIT ALSO REJECTED THE ASSESSEES CONTENTION THAT IT WAS NOT NECESSARY FOR THE ASSESS EE TO SHOW THAT IT IS AN INDUSTRIAL UNDERTAKING, IN WHICH CASE ALONE THE PROVISIONS OF SUB-SECTION (2) WOULD APPLY . ACCORDING TO THE CIT ONCE THE ASSESSEE ADMITTED THA T IT WAS NOT AN INDUSTRIAL UNDERTAKING, IT WOULD AUTOMATICALLY LEAD TO REJECTION OF ITS CLAIM UNDER SECTION 80IB. IT WAS THE VIEW OF THE CIT THAT THE DEDUCTION ITA NO.4512/MUM/07 5 UNDER SECTION 80IB(10) WAS MEANT ONLY FOR AN INDUST RIAL UNDERTAKING. (D) THE ASSESSEE DID NOT PUT FORTH ANY PLEA THAT IT IS NOT A CASE OF RECONSTRUCTION OF EXISTING BUSINESSES. (E) THE ASSESSEE DID NOT PROVE BEFORE THE ASSESSING OFF ICER THAT ALL THE RESIDENTIAL UNITS IN THE BUILDINGS WER E NOT MORE THAN 1000 SQ.FT EACH OF BUILT-UP AREA. THE ASSESSEES CONTENTION THAT THE ASSESSING OFFICER MA DE A PERSONAL VISIT TO THE BUILDINGS TO SATISFY HIMSELF IS NOT SUPPORTED BY ANY ORDER SHEET ENTRY. THE ASSESSING OFFICER OUGHT TO HAVE CARRIED OUT A VERIFICATION OF THE ACTUAL MEASUREMENTS THROUGH DEPARTMENTAL VALUERS. THIS WAS NOT DONE. SOME OF THE OCCUPANTS OF THE RESIDENTIAL UNITS HAVE STATED DURING THE ASSESSMENT PROCEEDINGS THAT THEY HAVE JOINED OR MERGED TO RESIDENTIAL UNITS WITH THE RESULT THAT THE BUILT-UP AREA HAD EXCEEDED 1000 SQ.FT. THERE WAS A VIOLATION OF CLAUSE (C) OF SECTION 80IB(10). 6. ON THE BASIS OF THE ABOVE FINDINGS, THE CIT CON CLUDED THAT THE ASSESSMENT WAS ERRONEOUS AND PREJUDICIAL T O THE INTERESTS OF THE REVENUE AND ACCORDINGLY SET ASIDE THE SAME WITH A DIRECTION TO THE ASSESSING OFFICER TO COMPLETE IT AFRESH ACCORDING TO LAW AND AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AND AFTER TAKING INTO ACCOUNT HIS OB SERVATIONS MADE IN THE ORDER UNDER SECTION 263 AND AFTER REFER RING THE MATTER OF MEASUREMENT OF THE BUILT-UP AREA OF ALL I NDIVIDUAL FLATS UNDER SECTION 131 (1)(D) THROUGH THE DEPARTMENTAL V ALUATION OFFICERS AND PARTICULARLY THOSE FLATS WHICH HAVE BE EN JOINED BY TWO PURCHASERS WHETHER THEY HAPPENED TO BE HUSBAND AND WIFE OR OTHERWISE. IT IS AGAINST THE AFORESAID ORDER OF THE CIT THAT THE ASSESSEE HAS COME IN APPEAL BEFORE THE TRIBUNAL. ITA NO.4512/MUM/07 6 7. IT IS FIRST CONTENDED ON BEHALF OF THE ASSESSEE THAT THE VIEW TAKEN BY THE CIT THAT SECTION 80IB(2) ALSO APP LIES TO ASSESSEES CLAIMING DEDUCTION UNDER SUB-SECTION (10 ) OF THE SECTION IN RESPECT OF HOUSING PROJECTS IS ERRONEOUS AND UNTENABLE AS HAS BEEN HELD BY THE MUMBAI BENCH OF T HE TRIBUNAL IN (A) M/S. PARTH CORPORATION VS. ITO IN ITA NOS.3178 & 3179/MUM/2007 DATED 12.5.2008 AND (B) SHREEJEE R ATNA CORPORATION VS. ITO IN ITA NO.3106/MUM/2007 DATED 10.02.2009. IT IS THEREFORE CONTENDED THAT THE CIT WAS NOT RIGHT IN LAW IN HOLDING THE ASSESSMENT TO BE ERRONEOUS AN D PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THE GROUND THAT THE ASSESSING OFFICER OVERLOOKED THE PROVISIONS OF SUB- SECTION (2) OF SECTION 80IB. COPIES OF THE ORDERS OF THE TRIBUNAL IN THE ABOVE CASES WERE FILED. WE FIND FORCE IN THE CONTENTION. A PERUSAL OF THE ORDERS OF THE TRIBUNAL SHOWS THAT THE TRIBUNAL HAS TAKEN THE VIEW, ON IDENTICAL MATTERS WHILE HEARING AN APP EAL FROM THE ORDER OF THE CIT PASSED UNDER SECTION 263 OF THE AC T, THAT THE CIT IS NOT RIGHT IN HOLDING THAT AN ASSESSEE ENGAGE D IN DEVELOPING HOUSING PROJECTS AND CLAIMING EXEMPTION OF ITS INCOME UNDER SECTION 80IB(10) SHOULD BE AN INDUSTRI AL UNDERTAKING AND SHOULD THEREFORE FULFIL ALL THE CON DITIONS PRESCRIBED BY SUB-SECTION (2). IN PARAGRAPH 8 OF IT S ORDER IN THE CASE OF PARTH CORPORATION (SUPRA) THE TRIBUNAL HAS DISCUSSED THE ISSUE AND THE CONCLUSIONS CAN BE SUMMARIZED AS BELOW:- (A) THE PROVISIONS OF SECTION 80IB(2) HAVE NO APPLICATI ON FOR CLAIMING DEDUCTION UNDER SECTION 80IB(10) AND THEREFORE, THE CONDITION THAT THE ASSESSEE SHOULD B E AN INDUSTRIAL UNDERTAKING IS NOT APPLICABLE FOR CLAIMI NG THE DEDUCTION UNDER SUB-SECTION (10). (B) SECTION 80IB(2) RELATES TO INDUSTRIAL UNDERTAKING WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING WHEREAS SECTION 80IB(10) RELATES TO DEDUCTION IN T HE CASE OF AN UNDERTAKING WHICH DEVELOPS AND BUILDS ITA NO.4512/MUM/07 7 HOUSING PROJECT. IN CIT VS N.C.BUDHARAJA & CO.204 ITR 412, THE SUPREME COURT HAS HELD THAT BUILDING OF RO ADS ETC. DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF ARTICLES OR THINGS. IF THAT IS SO, IT IS IMPERMISSI BLE TO INSIST THAT AN UNDERTAKING WHICH IS ENGAGED IN BUIL DING HOUSING PROJECTS SHOULD ALSO FULFIL THE CONDITIONS OF SUB- SECTION (2) WHICH APPLIES TO AN INDUSTRIAL UNDERTAK ING WHICH IS ENGAGED IN THE MANUFACTURE OR PRODUCTION O F ARTICLES OR THINGS. (C) THE CBDT HAS ISSUED CIRCULAR NO.772 DATED 23.12.199 8 EXPLAINING THE EARLIER PROVISIONS OF SECTION 80IA(4 F) WHICH CORRESPOND TO SECTION 80IB(10). IT HAS BEEN EXPLAINED THAT THE SECTION HAS BEEN INTRODUCED TO PROMOTE INVESTMENTS IN HOUSING. THE CONDITIONS ARE THAT THE PROJECT SHOULD BE APPROVED BY THE LOCAL AUTHORI TIES, THE SIZE OF THE LAND SHOULD BE A MINIMUM OF ONE ACR E, THE RESIDENTIAL UNIT SHOULD NOT EXCEED 1000 SQ.F.T BUILT UP AREA AND THE UNDERTAKING SHOULD COMMENCE AND COMPLETE THE PROJECT WITHIN A SPECIFIED PERIOD. IF THESE CONDITIONS ARE FULFILLED, THE ENTIRE PROFIT FROM TH E PROJECT WOULD BE DEDUCTIBLE. THERE IS NO WHISPER IN THE CIR CULAR THAT THE ASSESSEE SHOULD ALSO FULFIL ALL THE CONDIT IONS NECESSARY FOR BEING TERMED AS AN INDUSTRIAL UNDERTAKING AS A PREREQUISITE FOR CLAIMING THE BEN EFIT OF THE DEDUCTION. 8. THE AFORESAID REASONING OF THE TRIBUNAL IN M/S. PARTH CORPORATION HAS BEEN FOLLOWED BY THE TRIBUNAL IN TH E CASE OF SHREEJEE RATNA CORPORATION (SUPRA) . IN THE LIGHT O F THE AFORESAID ORDERS OF THE CO-ORDINATE BENCHES, IT IS NOT POSSIB LE TO ACCEPT THE VIEW TAKEN BY THE CIT THAT AN ASSESSEE CLAIMING DEDUCTION UNDER SUB-SECTION (10) OF SECTION 80IB IS GOVERNED ALSO BY SUB- SECTION (2) OF THE SECTION AND IT IS NECESSARY FOR HIM TO FULFIL THE ITA NO.4512/MUM/07 8 CONDITIONS MENTIONED IN THAT SUB-SECTION AND PROVE THAT HE IS AN INDUSTRIAL UNDERTAKING. IN ADDITION TO THE ABOV E REASONING OF THE TRIBUNAL, WHICH HAS BEEN PRESSED INTO SERVICE B EFORE US ON BEHALF OF THE ASSESSEE, IT WAS FURTHER SUBMITTED TH AT THERE IS INHERENT EVIDENCE IN SECTION 80IB ITSELF TO SHOW TH AT THE CONDITIONS MENTIONED IN SUB-SECTION (2) ARE NOT REQ UIRED TO BE FULFILLED BY AN ASSESSEE ENGAGED IN THE DEVELOPMENT OF HOUSING PROJECTS AND CLAIMING DEDUCTION UNDER SUB-SECTION ( 10). IT IS POINTED OUT THAT THERE ARE SEVERAL SUB-SECTIONS, WH ICH SPECIFICALLY REQUIRE THE ASSESSEE CLAIMING DEDUCTIO N THEREUNDER THAT IT SHOULD NOT BE FORMED BY RECONSTRUCTION OR S PLITTING UP OF EXISTING BUSINESSES AND IF, AS CLAIMED BY THE CIT, SUB-SECTION (2) AND THE CONDITIONS MENTIONED THEREIN ARE TO GOV ERN AN ASSESSEE CLAIMING DEDUCTION UNDER THE OTHER SUB-SEC TIONS INCLUDING SUB-SECTION (10), THEN THERE WAS REALLY N O NEED FOR THE LEGISLATURE TO SPECIFICALLY PROVIDE IN SOME OF THE SUB-SECTIONS THAT THE BUSINESS SHOULD NOT HAVE BEEN FORMED BY TH E SPLITTING UP OR RECONSTRUCTION OF AN EXISTING BUSINESS OR BY THE TRANSFER OF ANY BUILDING OR MACHINERY PREVIOUSLY USED FOR AN Y PURPOSE. IN THIS BEHALF OUR ATTENTION WAS DRAWN TO SUB-SECTI ONS (7), (7A) AND (7B). A PERUSAL OF THESE SUB-SECTIONS SHOWS THA T THEY APPLY RESPECTIVELY TO THE HOTEL, MULTIPLEX THEATRE AND C ONVENTION CENTRE. CLAUSE (C) (I) AND (II) OF SUB-SECTION (7) PROVIDES THAT THE DEDUCTION IN RESPECT OF THE PROFITS OF THE HOTEL SH ALL BE AVAILABLE ONLY IF THE BUSINESS IS NOT FORMED BY THE SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE O R BY THE TRANSFER TO A NEW BUSINESS OF A BUILDING PREVIOUSLY USED AS A HOTEL OR ANY MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. SIMILARLY, CLAUSE(B)(II) OF SUB-SECTION ( 7A) PROVIDES FOR SUCH A CONDITION IN THE CASE OF PROFITS OF A MULTIP LEX THEATRE. CLAUSE (B)(II) OF SUB-SECTION (7B) ALSO PRESCRIBES AN IDENTICAL CONDITION IN THE CASE OF CONVENTION CENTRE. THERE WAS NO NEED, AS RIGHTLY POINTED OUT ON BEHALF OF THE ASSESSEE, F OR PRESCRIBING ITA NO.4512/MUM/07 9 THESE CONDITIONS IN THE SUB-SECTIONS NOTED ABOVE, I F SUB-SECTION (2) AND THE CONDITIONS PRESCRIBED THEREIN ARE TO HA VE OVERRIDING EFFECT OR TO GOVERN ALL THE OTHER SUB-SECTIONS OF S ECTION 80IB. THEREFORE, THERE IS GOOD REASON TO HOLD THAT THE CO NDITIONS PRESCRIBED IN SUB-SECTION (2) ARE RELEVANT ONLY IN THE CASE OF AN INDUSTRIAL UNDERTAKING AND WHEREVER SUCH CONDITIONS ARE REQUIRED TO BE FULFILLED BY OTHER TYPES OF BUSINESS ES, SUCH AS A HOTEL OR A MULTIPLEX THEATRE OR A CONVENTION CENTRE THE LEGISLATURE HAS EXPRESSLY SAID SO AND SUB-SECTION ( 10) NOT HAVING SPECIFICALLY PROVIDED FOR SUCH CONDITIONS IN THE CA SE OF AN UNDERTAKING ENGAGED IN THE DEVELOPMENT OF HOUSING P ROJECTS, IT IS NOT POSSIBLE TO TELESCOPE THE CONDITIONS MENTION ED IN SUB- SECTION (2) INTO THE PROVISIONS OF SUB-SECTION (10) . SUB-SECTION (10) HAS TO BE INTERPRETED ON ITS OWN TERMS. 9. THUS THE FIRST REASON GIVEN BY THE CIT NAMELY T HAT THE PROVISIONS OF SUB-SECTION (10) ARE GOVERNED BY THE PROVISIONS OF SUB-SECTION (2) OF SECTION 80IB IS WITHOUT MERIT. 10. IT IS THEN CONTENDED ON BEHALF OF THE ASSESSEE THAT THE CIT WAS WRONG IN MAKING AN OBSERVATION IN PARAGRAPH 6 O F HIS ORDER THAT THE ASSESSEE NEITHER BEFORE HIM NOR BEFORE THE ASSESSING OFFICER HAD ARGUED THAT THEIR CASE IS NOT A CASE OF RECONSTRUCTION OF THE BUSINESSES ALREADY IN EXISTENCE. IN OTHER WO RDS, THE SUBMISSION IS THAT THE ASSESSEE EVEN FACTUALLY HAD ESTABLISHED THAT ITS BUSINESS OF DEVELOPING HOUSING PROJECTS IN MULUND, MUMBAI WAS NOT THE RESULT OF RECONSTRUCTION OR SPLI TTING UP OF ALREADY EXISTING BUSINESSES. IN THIS CONNECTION, OU R ATTENTION WAS DRAWN TO THE ASSESSEES REPLY DATED 9 TH MAY, 2007 TO THE SHOW CAUSE NOTICE ISSUED BY THE CIT, A COPY OF WHIC H HAS BEEN PLACED AT PAGES 35 TO 44 OF THE PAPER BOOK. IN SUB- PARA (III) OF PARAGRAPH 2 OF THE REPLY (AT PAGE 40 OF THE PAPER B OOK) THE ASSESSEE HAS DENIED THAT IT WAS FOUND BY WAY OF REC ONSTRUCTION ITA NO.4512/MUM/07 10 OR SPLITTING UP OF BUSINESS ALREADY IN EXISTENCE. A PERUSAL OF THE PARAGRAPH SHOWS THAT THE ASSESSEE HAS SUPPORTED ITS CONTENTION BY REFERENCE TO THE FOLLOWING FACTS. INITIALLY THE LAND IN HARI OM NAGAR BELONGED TO M/S. GAUTAM ENTERPRISES WHO WERE NOT IN A POSITION TO CONSTRUCT THE HOUSING PROJECT INDEPENDE NTLY. M/S. V.M. CORPORATION, WHO APPARENTLY HAD THE TECHNICAL EXPERTISE, WERE APPROACHED FOR A JOINT VENTURE PROPOSAL AND TH US BOTH THE ENTITIES CAME TOGETHER IN 1999 AS G.V.CORPORATION A ND AS AN ASSOCIATION OF PERSONS. GAUTAM ENTERPRISES INTRODUC ED A PLOT OF LAND MEASURING 4275 SQ.MTRS INTO THE AOP. NO CONSTR UCTION ACTIVITY HAD EARLIER BEEN COMMENCED ON THE SAID PLO T OF LAND BY EITHER OF THE GROUP ENTITIES AND AT THE TIME OF THE FORMATION OF THE AOP THE LAND WAS BARREN AND IT WAS INTRODUCED BY GAUTAM ENTERPRISES INTO THE AOP AS ITS CAPITAL. GAUTAM EN TERPRISES HAD OTHER PROJECT PARTNERS FORMING AOPS WITH THEM I N RESPECT OF DIFFERENT PLOTS OF LAND. HOWEVER, AS FAR AS THE PRE SENT AOP IS CONCERNED, IT WAS A FRESH VENTURE AND IT WAS NOT A RECONSTRUCTED ENTITY, NOR WAS THERE ANY BUSINESS ALREADY IN EXIST ENCE WHICH CAN BE SAID TO HAVE BEEN SPLIT UP TO FORM THE BUSI NESS OF THE PRESENT AOP. THE AOP IS A SEPARATE LEGAL ENTITY FO RMED TO CONSTRUCT THE HOUSING PROJECT ON THE LAND CONTRIBUT ED BY GAUTAM ENTERPRISES AS A FRESH PROJECT. THESE FACTS STATED BY THE ASSESSEE IN ITS REPLY TO THE SHOW CAUSE NOTICE ISSU ED BY THE CIT HAVE NOT BEEN CONTROVERTED EITHER BY THE CIT OR ON BEHALF OF THE DEPARTMENT BEFORE US. IN SUCH A SITUATION, EVEN ASS UMING FOR THE SAKE OF ARGUMENT THAT THE CIT IS RIGHT IN LAW I N SAYING THAT THE CONDITIONS OF SUB-SECTION (2) OF SECTION 80IB G OVERNED THE CLAIM FOR DEDUCTION UNDER SUB-SECTION (10), IT IS F ACTUALLY NOT POSSIBLE TO HOLD THAT THE ASSESSEES BUSINESS WAS F ORMED BY THE RECONSTRUCTION OR SPLITTING UP OF A BUSINESS ALREAD Y IN EXISTENCE. IT FOLLOWS THAT THE ASSESSEE CANNOT ALSO BE SAID TO HAVE USED THE PLANT OR MACHINERY EARLIER USED FOR ANY PURPOSE. IN FACT, THERE IS NO SUGGESTION TO THAT EFFECT IN THE SHOW CAUSE N OTICE OR IN THE ITA NO.4512/MUM/07 11 ORDER OF THE CIT. THUS, FACTUALLY ALSO THE ASSESSEE HAS DEMONSTRATED THAT IT WAS NOT FORMED BY THE RECONSTR UCTION OR SPLITTING UP OF AN EXISTING BUSINESS. 11. SO FAR AS THE OTHER CONDITION NAMELY THAT EACH RESIDENTIAL UNIT IN THE HOUSING PROJECT SHALL NOT EXCEED BUILT UP AREA OF 1000 SQ.FT. AS DEFINED IN CLAUSE (A) OF SUB-SECTION (10) OF SECTION 80IB, THE STAND TAKEN BY THE CIT IS THAT THE ASSESS EE HAS NOT PRODUCED THE RELEVANT DETAILS AND PROVED THAT THE C ONDITION HAS BEEN SATISFIED AND FURTHER THAT THE ASSESSING OFFIC ER HAS NOT VERIFIED THE ACTUAL MEASUREMENTS OF EACH FLAT. IN THIS CONNECTION, IT IS NECESSARY TO REFER TO THE ASSESSE ES LETTER DATED 15.12.2006 WRITTEN TO THE ASSESSING OFFICER, THE CO PY OF WHICH IS PLACED IN THE PAPER BOOK. THE ASSESSEE HAS FURNISH ED, INTER- ALIA, THE TOTAL LAY OUT PLAN OF HARI OM NAGAR AND O THER DETAILS RELATING TO THE PROJECT AND HAS STATED THEREIN THAT THE RESIDENTIAL UNITS WERE OF BUILT UP AREA OF LESS THAN 1000 SQ.FT . EACH. IN SUPPORT OF THE CLAIM, THE ASSESSEE HAD FURNISHED AN NEXURE V TO THE AFORESAID LETTER CONTAINING THE DETAILS OF THE SALES IN BUILDING NOS. 1 TO 4 IN MILLENNIUM PARK. THIS ANNEXURE CONTA INED THE BUILDING NO., FLAT NO., CARPET AREA OF EACH FLAT, I TS BUILT UP AREA, THE NAME OF THE PURCHASER, ADDRESS AND THE SALE VAL UE OF THE FLAT. NO FAULT HAS BEEN FOUND IN THESE DETAILS WHI CH SHOW THAT EACH FLAT WAS OF BUILT UP AREA LESS THAN 1000 SQ.FT . PARAGRAPH 9 OF THE ORDER OF THE CIT ALSO SHOWS THAT BEFORE THE COMPLETION OF THE ASSESSMENT THE ASSESSING OFFICER HAD MADE ENQUI RIES UNDER SECTION 131 OF THE ACT WITH REGARD TO THE BUILT UP AREA OF THE RESIDENTIAL UNITS. IT IS BETTER TO REPRODUCE THE OB SERVATIONS OF THE CIT HIMSELF IN THIS CONNECTION:- NO REFERENCE WAS MADE BY THE ASSESSING OFFICER AT ALL TO HAVE AN AUTHENTIC MEASUREMENT. THE ASSESSEES CONTENTION THAT THE AO DEPUTED AN INDEPENDENT ARCHITECT IS ALSO NOT BORNE OUT FROM TH E RECORDS/ ORDER SHEET. THE DETAILS WERE FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS ON ITA NO.4512/MUM/07 12 27.12.2006 AND THE ASSESSMENT COMPLETED ON 29.12.2006. EARLIER SOME ENQUIRIES WERE MADE U/S.131 OF THE I.T. ACT. MR.GIRISH S. PARWATKAR VID E HIS LETTER DATED 04.12.2006 STATED THAT AT THE TIME OF POSSESSION, THE ADJACENT SELF CONTAINED ROOM (I.E. FLAT NO. 404) IS ENCLOSED TO THE FLAT NO.405 BY THE BUIL DER. ONE SHRI MUKESH MOHANLAL MISHRA, DEPOSED U/S.131 ON 08.12.2006 BEFORE THE AO IN REPLY TO THE QUESTION HAVE YOU JOINED THE FLAT NO.705/03 AND 706/03 THAT FOR SECURITY REASON WE HAVE MADE AN EXTRA WINDOW. THIS RESULTED IN COVERAGE OF SOME AREA OF SOME PASSAGE. IN REPLY TO QUESTION NO.6, SH RI BHAGAWAT WANI IN EXAMINATION U/S.131 STATED ON 07.12.06 THAT THE BUILDER HAD JOINED THE FLAT NO.70 2 & 701, BY BREAKING THE COMMON WALL OF THE HALL. 12. THE AFORESAID OBSERVATIONS ARE INDICATION OF TH E FACT THAT ASSESSING OFFICER DID APPLY HIS MIND TO THE QUESTIO N WHETHER EACH RESIDENTIAL UNIT EXCEEDED BUILT UP AREA OF 100 0 SQ.FT. AND HAD ALSO CONDUCTED ENQUIRIES IN THOSE CASES WHERE T HE FLATS WERE SO JOINED AS TO EXCEED THE AFORESAID LIMIT AND HAD ALSO ENQUIRED INTO THE REASON WHY THEY WERE JOINED. WE A RE NOT ABLE TO THINK OF ANY REASON AS TO WHY THE ASSESSING OFFI CER SHOULD HAVE CONDUCTED THE ABOVE ENQUIRIES UNDER SECTION 13 1 EXCEPT FOR THE REASON THAT HE CAME TO KNOW THAT THE TWO FL ATS EXCEEDED THE PRESCRIBED BUILT UP AREA AND WANTED TO KNOW THE REASON FOR THE SAME. EVEN IN THE PROPOSAL SUBMITTED BY THE AS SESSING OFFICER TO THE CIT INVITING THE LETTER TO TAKE ACTI ON UNDER SECTION 263, WHICH IS REPRODUCED IN THE FIRST TWO PAGES OF THE ORDER OF THE CIT, WE FIND NO MENTION OF ANY CASE WHERE THE R ESIDENTIAL UNIT EXCEEDED THE BUILT UP AREA OF 1000 SQ.FT. APP ARENTLY THE ASSESSING OFFICER BY CONDUCTING THE ENQUIRIES UNDER SECTION 131 OF THE ACT WAS SATISFIED THAT IT WAS DUE TO COMPELL ING REASONS OF THE PURCHASERS OF THE UNITS THAT THE FLATS WERE SO JOINED THAT THEY EXCEEDED THE AFORESAID LIMIT AND THAT IT DID N OT CONSTITUTE ANY VIOLATION OF THE BASIC CONDITIONS SUBJECT TO WH ICH THE DEDUCTION WAS GRANTED TO THE ASSESSEE. IN THE COUR SE OF THE HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSE SSEE STATED ITA NO.4512/MUM/07 13 THAT OUT OF 140 FLATS, ONLY 9 FLATS OR RESIDENTIA L UNITS WERE COMBINED BY THE OWNERS INTO FOUR FLATS FOR REASONS THAT ARE VERY VALID. FOR EXAMPLE, HE DREW OUR ATTENTION TO FLAT NOS. 704 TO 706 IN ANNEXURE V FILED BY THE ASSESSEE UNDER COVER OF LETTER DATED 15.12.2006 ADDRESSED TO THE ASSESSING OFFICER WHICH SHOWED THAT ALL THE THREE PURCHASERS OF THE THREE R ESIDENTIAL UNITS WERE SONAWANES AND BELONG TO THE SAME FAMILY AND APPARENTLY THEY INSISTED THAT THE THREE ADJACENT FL ATS, EACH OF LESS THAN 1000 SQ.FT. BUILT UP AREA, PURCHASED BY T HEM SHOULD BE JOINED SO THAT THEY WILL HAVE A SINGLE FLAT OF 1 602 SQ.FT. OF BUILT UP AREA. IT IS COMMON KNOWLEDGE THAT MEMBERS OF THE SAME FAMILY WHO PURCHASE SEPARATE RESIDENTIAL UNITS ADJACENT OR CONTIGUOUS TO EACH OTHER OFTEN JOIN THEM BY BREA KING DOWN A WALL OR BY OPENING A DOOR WAY OR IN MANY OTHER WAYS SO THAT THE ENTIRE FAMILY LIVES TOGETHER AND GETS MORE SPACE TO LIVE. IN MANY CASES, A REQUEST IS MADE BY THE PURCHASERS TO THE B UILDER OR DEVELOPER OF THE HOUSING PROJECT TO JOIN THE FLATS/ RESIDENTIAL UNITS AND THE REQUEST IS CARRIED OUT BY THE BUILDER . IN SUCH CASES, IT IS NOT POSSIBLE TO HOLD THAT THE BUILDER BUILT THE RESIDENTIAL FLAT OF MORE THAN 1000 SQ.FT. OF BUILT- UP AREA. THERE IS NO EVIDENCE ON RECORD TO SUGGEST THAT THE ASSESS EE ITSELF ADVERTISED THAT THE FLATS WERE OF MORE THAN 1000 SQ .FT. AND THAT MERELY TO GET THE BENEFIT OF SEC.80-IB HE DREW THE PLANS IN SUCH A MANNER THAT EACH RESIDENTIAL UNIT WAS SHOWN AS NO T MORE THAN 1000 SQ.FT. OF BUILT-UP AREA. IT IS NOT ALSO T HE CASE OF THE CIT THAT EACH FLAT IN THE HOUSING PROJECTS UNDERTAK EN BY THE ASSESSEE COULD NOT HAVE BEEN USED AS AN INDEPENDENT OR SELF- CONTAINED RESIDENTIAL UNIT NOT EXCEEDING 1000 SQ.FT . OF BUILT-UP AREA AND THAT THERE WOULD BE A COMPLETE, HABITABLE RESIDENTIAL UNIT ONLY IF TWO OR MORE FLATS ARE JOINED WITH EACH OTHER, WHICH WOULD ULTIMATELY EXCEED 1000 SQ.FT. OF BUILT-UP ARE A. IN SUCH A SITUATION, MERELY BECAUSE 9 OUT OF 140 PURCHASERS DESIRED TO JOIN THE FLATS PURCHASED BY THEM INTO ONE SINGLE UN IT, WHICH ITA NO.4512/MUM/07 14 EXCEEDED 1000 SQ.FT. OF BUILT-UP AREA, CANNOT DISEN TITLE THE ASSESSEE TO THE DEDUCTION. IN OTHER WORDS, TAKING T HE EXAMPLE OF THE FLATS PURCHASED BY THE SONAWANES, THERE IS NO ALLEGATION THAT THE FLAT NO.704 MEASURING 244 SQ.FT. PURCHASED BY MEERA SONAWANE, FLAT NO.705 MEASURING 578 SQ.FT. PURCHASE D BY SUPRIYA SONAWANE AND FLAT NO.706 MEASURING 780 SQ.F T. PURCHASED BY ETHIN SONAWANE WERE NOT INDEPENDENT RE SIDENTIAL UNITS BY THEMSELVES AND COULD BECOME INDEPENDENT RE SIDENTIAL UNITS ONLY WHEN THEY WERE JOINED OR COMBINED TOGETH ER. IF EACH RESIDENTIAL UNIT DOES NOT EXCEED THE BUILT UP AREA OF 1000 SQ.FT., THE FACT THAT THEY WERE JOINED TOGETHER BY THE PURC HASERS FOR BETTER LIVING OR FOR MORE SPACE OR FOR ANY OTHER RE ASON DOES NOT DISENTITLE THE ASSESSEE TO THE CLAIM FOR DEDUCTION UNDER SECTION 80IB. 13. EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT THE RE WAS A VIOLATION OF THE CONDITION (C) PRESCRIBED BY SECTIO N 80IB(10), THE RESULT THEREOF WOULD NOT BE DENIAL OF THE CLAIM FOR DEDUCTION AS HAS BEEN HELD BY THE SPECIAL BENCH (PUNE) IN THE CA SE OF BRAHMA ASSOCIATES VS. JCIT.OSD) CIRCLE-4, PUNE, (20 09) 119 ITD 255(SB). IN THIS CASE IT WAS FOUND THAT A SMALL PART OF THE BUILDING WAS BUILT FOR COMMERCIAL USE. THE CONDITIO N THAT THE ENTIRE BUILDING SHOULD HAVE BEEN BUILT FOR RESIDENT IAL USE WAS THUS NOT SATISFIED. HOWEVER THE PORTION USED FOR CO MMERCIAL PURPOSES WAS MINIMAL AND LESS THAN 10% OF THE TOTAL BUILT UP AREA. IN SUCH CIRCUMSTANCES, THE TRIBUNAL HELD THA T THE DEDUCTION UNDER SECTION 80IB(10) CANNOT BE TOTALLY DENIED AND IF IT IS FOUND THAT EVEN IF THE COMMERCIAL USE EXCEEDS 10%, BUT THE RESIDENTIAL SEGMENT OF THE PROJECT SATISFIES ALL TH E REQUIREMENTS OF SUB-SECTION (10) ON STAND ALONE BASIS AND THE IN COME FROM THE CONSTRUCTION OF THE RESIDENTIAL UNITS CAN BE AS CERTAINED ON A STAND ALONE BASIS, THE DEDUCTION WOULD BE AVAILABLE IN RESPECT OF THE RESIDENTIAL SEGMENT OF THE PROJECT. APPLYING, WITH RESPECT, ITA NO.4512/MUM/07 15 THE RATIO LAID DOWN IN THE SPECIAL BENCH CASE, WE F IND THAT IN THE PRESENT CASE THE VIOLATION, IF ANY, OF CONDITIO N (C) OF SUB- SECTION (10) IS MUCH LESS THAN 10%, SAY AROUND 6.5% TO 7% ONLY, AND THEREFORE THE DEDUCTION FOR THE PROFITS A RISING FROM THE HOUSING PROJECT CANNOT BE DENIED. THE EXTENT OF VIO LATION, IF AT ALL THERE IS A VIOLATION, IS SO LESS THAT IT WOULD BE INAPPROPRIATE TO DENY THE DEDUCTION TOTALLY. THE SPECIAL BENCH HA S FURTHER HELD THAT EVEN IF THE COMMERCIAL USER OF THE BUILT UP AREA OF THE BUILDING EXCEEDS 10%, THE ASSESSEE WOULD STILL GET THE PROPORTIONATE DEDUCTION, I.E. THE DEDUCTION WOULD B E CONFINED ONLY TO THE PROFITS OF THE RESIDENTIAL SEGMENT OF T HE OVERALL PROFIT. THEREFORE, EVEN IF THE ASSESSEE CANNOT BE GIVEN THE ENTIRE DEDUCTION UNDER SECTION 80IB, IT SHOULD BE ELIGIBLE FOR THE PROPORTIONATE DEDUCTION AS ENVISAGED BY THE SPECIAL BENCH. IT HAS BEEN BROUGHT TO OUR NOTICE BY THE ASSESSEE THAT THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF ARUN E XCELLO FOUNDATIONS (P) LTD. VS. ACIT., (2007) 108 TTJ 71 A ND THE BANGALORE BENCH OF THE TRIBUNAL IN DCIT VS. BRIGADE ENTERPRISES (P) LTD., (2008) 119 TTJ 269 HAVE HELD THAT EVEN WHERE THE VIOLATION EXCEEDS THE LIMIT OF 10%, THE E NTIRE DEDUCTION CANNOT BE DENIED BUT THE SAME SHOULD BE A LLOWED PROPORTIONATELY. IN THIS VIEW OF THE MATTER ALSO TH E GRANT OF DEDUCTION BY THE ASSESSING OFFICER IN THE PRESENT C ASE CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE. 14. THERE IS ONE MORE ASPECT OF THE MATTER WHICH IS THAT THE ASSESSING OFFICER HAS CONSIDERED THE ALLEGED VIOLAT IONS OF CLAUSE (C) OF SUB-SECTION (10) AS NOT MATERIAL AND AFFECTI NG THE MERITS OF THE ASSESSEES CLAIM AND THIS IS EVIDENT FROM THE F ACT THAT HE HAS HIMSELF NOT DENIED THE DEDUCTION DESPITE THE FACT T HAT HE CONDUCTED ENQUIRIES UNDER SECTION 131 OF THE ACT IN SOME CASES TO FIND OUT WHY THE RESIDENTIAL UNITS WERE MORE THA N 1000 SQ.FT. ITA NO.4512/MUM/07 16 OF BUILT UP AREA. APPARENTLY, THE ASSESSING OFFICE R HAS TAKEN THE SAME VIEW WHICH THE SPECIAL BENCH OF THE TRIBUN AL (PUNE) (SUPRA) AS WELL AS THE CHENNAI AND BANGALORE BENCHE S TOOK IN THE CASES CITED ABOVE. EVEN WHILE PROPOSING ACTION UNDER SECTION 263 OF THE ACT TO THE CIT, THE ASSESSING OF FICER HAS NOT REFERRED TO ANY VIOLATION OF THE CONDITION THAT THE RESIDENTIAL UNIT SHOULD NOT BE MORE THAN 1000 SQ.FT OF BUILT UP AREA . THUS THE ASSESSING OFFICER SEEMS TO HAVE TAKEN A PLAUSIBLE V IEW OF THE PROVISIONS OF LAW AND THE CONSEQUENCES OF THE VIOLA TION, A VIEW WHICH HAS ALSO APPEALED TO THE SPECIAL BENCH OF THE TRIBUNAL AND TWO OTHER BENCHES. IT IS NOW WELL SETTLED THAT NO ACTION CAN BE TAKEN UNDER SECTION 263 ON THE FOOTING THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE MERELY BECAUSE THE ASSESSING OFFICER ADOPTED ONE OF THE SEVERAL PLAUSIBLE VIEWS THAT CAN BE REASONABLY TAKEN. REFE RENCE IN THIS CONNECTION MAY BE MADE TO THE JUDGEMENTS OF THE SUP REME COURT IN THE CASES OF MALABAR INDUSTRIAL CO. LTD. ( 243 ITR 83) AND CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 WHERE THIS ASPECT HAS BEEN HIGHLIGHTED. IN THESE CIRCUMSTANCES , IT IS NOT POSSIBLE TO UPHOLD THE VIEW TAKEN BY THE CIT THAT T HE ASSESSEE HAVING VIOLATED ONE OF THE CONDITIONS OF SUB-SECTIO N (10), IS NOT ELIGIBLE FOR THE DEDUCTION THEREUNDER. 15. THAT TAKES US TO THE THIRD CONTENTION OF THE AS SESSEE TAKEN BEFORE US NAMELY THAT THE ASSESSMENT HAVING B EEN COMPLETED AFTER DUE ENQUIRY, THE SAME CANNOT BE SAI D TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. OUR ATTENTION WAS DRAWN TO THE LETTER DATED 14.08.2006 ISSUED BY THE ASSESSING OFFICER CALLING FOR SEVERAL DETAILS O NE OF WHICH WAS TO ASK THE ASSESSEE TO JUSTIFY THE CLAIM UNDER SECTION 80IB WITH RESPECT TO THE STATUTORY REQUIREMENTS. THE ASS ESSEE SUBMITTED TWO SEPARATE REPLIES, ONE DATED 13.09.200 6 WHICH CONTAINED AN ANNEXURE (ANNEXURE 5) FURNISHING FULL DETAILS OF ITA NO.4512/MUM/07 17 THE CUSTOMERS TO WHOM THE FLATS WERE SOLD. WE HAVE ALREADY REFERRED TO THIS ANNEXURE AND TO THE DETAILS IT CON TAINED. THE ASSESSEE ALSO FILED ANOTHER LETTER DATED 27.12.2006 TO THE ASSESSING OFFICER EXPLAINING HOW IT WAS FORMED AND GIVING ALL OTHER DETAILS REGARDING THE HOUSING PROJECT, THE AP PROVAL OF THE LAY OUT PLAN ETC. AND ALSO JUSTIFYING THE CLAIM FOR DEDUCTION UNDER SECTION 80IB. A COPY OF THIS LETTER IS AT PAG ES 29 TO 32 OF THE PAPER BOOK. THIS LETTER IS ACTUALLY IN RESPONS E TO THE ASSESSING OFFICERS QUERY BY LETTER DATED 22.12.200 6. WE HAVE ALSO EARLIER REFERRED TO PARAGRAPH 9 OF THE ORDER O F THE CIT AND HAVE ALSO EXTRACTED SOME PARTS THEREOF WHICH CONTAI NED REFERENCE TO THE ENQUIRIES CONDUCTED BY THE ASSESSI NG OFFICER UNDER SECTION 131 OF THE ACT IN THE COURSE OF THE A SSESSMENT PROCEEDINGS. THESE ENQUIRIES APPEAR TO HAVE BEEN C ONDUCTED, AS WE HAVE ALREADY NOTED, TO VERIFY WHETHER THE FLA TS EXCEEDED THE LIMIT OF THE BUILT UP AREA OF 1000 SQ.FT. AND I F SO, WHAT WAS THE REASON FOR THE SAME. IN THIS BACKGROUND, WE ARE UNABLE TO AGREE WITH THE CONCLUSION OF THE CIT THAT THE ASSES SING OFFICER DID NOT VERIFY WHETHER THE ASSESSEE SATISFIED THE C ONDITION MENTIONED IN CLAUSE (C) OF SUB-SECTION (10). WE HAV E ALREADY REFERRED TO A LETTER DATED 15.12.2006 FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER (COPIES SEPARATELY HANDED OVE R TO US) IN WHICH THE ASSESSEE ASSERTED THAT THE RESIDENTIAL UN ITS WERE OF BUILT UP AREA OF LESS THAN 1000 SQ.FT. EACH. APPARE NTLY, THE ENQUIRIES MADE BY THE ASSESSING OFFICER UNDER SECTI ON 131 OF THE ACT WERE A CONSEQUENCE TO THIS ASSERTION, AS WE CAN INFER FROM THE OBSERVATION OF THE CIT IN PARAGRAPH 7 OF H IS ORDER THAT THE ASSESSING OFFICER CONDUCTED ENQUIRIES UNDER SEC TION 131 OF THE ACT BEFORE THE ASSESSEE FILED THE DETAILS UNDER COVER OF A LETTER DATED 27.12.2006. APPARENTLY THE ASSESSING O FFICER CONDUCTED THE ENQUIRIES INTO THE EXTENT OF THE AREA OF THE FLATS BETWEEN 15.12.2006 AND 27.12.2006. THAT HE WAS SATI SFIED THAT THERE WAS NO VIOLATION OF THE CONDITION MENTIONED I N CLAUSE (C) OF ITA NO.4512/MUM/07 18 SUB-SECTION 10 WOULD BE A REASONABLE INFERENCE BECA USE IN HIS LETTER DATED 22.12.2006, THERE IS NO FURTHER ENQUIR Y ABOUT THE AFORESAID CONDITION HAVING BEEN FULFILLED AND THE E NQUIRY MADE IN THAT LETTER WAS ONLY ABOUT THE APPROVAL OF THE B UILDING PLANS AND WHETHER THEY WERE APPROVED BEFORE THE PRESCRIBE D TIME LIMIT. THUS THERE IS INHERENT EVIDENCE IN THE RECO RD ITSELF TO SHOW THAT THE ASSESSING OFFICER DID MAKE ENQUIRIES INTO ALL THE CONDITIONS OF SUB-SECTION (10) AND WAS SATISFIED TH AT THERE WAS NO VIOLATION. WHAT HE PROPOSED TO THE CIT BY LETTER DATED 23.4.2007 WAS (A) THAT THE STATUS OF THE ASSESSEE W AS WRONGLY DECLARED AND ACCEPTED & (B) THAT THE CONDITIONS OF SUB-SECTION (2) WOULD GOVERN THE PROVISIONS OF SUB-SECTION (10) ALSO. THE CIT, IMPROVING UPON THE PROPOSAL PUT UP BY THE ASSE SSING OFFICER, HAS TAKEN THE GROUND THAT THE ASSESSING OF FICER DID NOT CONDUCT ANY ENQUIRY INTO THE CONDITIONS OF SUB-SECT ION (10). THIS, WITH RESPECT, APPEARS TO US TO BE INCORRECT. 16. THE LAST ASPECT WHICH REMAINS TO BE CONSIDERED IS WHETHER THE ASSESSMENT COULD BE TERMED AS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE BECAUSE OF THE FACT THA T THE STATUS OF THE ASSESSEE WAS WRONGLY TAKEN AS AOP, WHEREAS IT S HOULD HAVE BEEN TAKEN AS A FIRM. IT IS NO DOUBT TRUE THAT THE ASSESSEE CLAIMED THE STATUS OF FIRM IN THE RETURN AND EVEN THE AUDIT REPORT MENTIONED THE STATUS AS THAT OF A FIRM. H OWEVER THE ASSESSEE ITSELF CLAIMED IN THE COURSE OF THE ASSESS MENT PROCEEDINGS THAT THE STATUS WAS NOT THAT OF A FIRM BUT IT WAS AN AOP AND IN SUPPORT OF THE SAME FILED AN AGREEMENT DATED 25.11.1999 BETWEEN M/S. GAUTAM ENTERPRISES AND M/S. V.M.CORPORATION AS CONSTITUTING THE BASIS FOR THE C LAIM OF THE CHANGED STATUS. THERE WAS ALSO A SUPPLEMENTARY AGRE EMENT DATED 19.04.2000 EFFECTING SOME FURTHER TERMS AND C ONDITIONS BETWEEN THE AFORESAID PARTIES AND BOTH THESE AGREEM ENTS WERE UNDISPUTEDLY PART OF THE RECORD OF THE ASSESSING OF FICER. IT IS ITA NO.4512/MUM/07 19 OPEN TO THE ASSESSEE TO CLAIM, IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THAT ITS CORRECT STATUS IS SOMETHING DI FFERENT FROM WHAT WAS MENTIONED AS ITS STATUS IN THE RETURN OF I NCOME AND THERE APPEARS TO BE NO STATUTORY PROHIBITION ON DOI NG SO. IT IS FOR THE ASSESSING OFFICER TO LOOK INTO THE CLAIM AND DE CIDE THE SAME IN ACCORDANCE WITH LAW AND THE FACTS. IN CASE THE A SSESSEE IS TO BE ASSESSED AS A PARTNERSHIP FIRM, THE BASIC CONDIT ION IS THAT IT SHOULD BE EVIDENCED BY A PARTNERSHIP DEED AND THE I NDIVIDUAL SHARES OF THE PARTNERS SHOULD HAVE BEEN SPECIFIED T HEREIN SEE SECTION 184(1) OF THE ACT. IF THERE IS NO PARTNERSH IP DEED THEN THERE IS NO QUESTION OF THE ASSESSEE BEING ASSESSED AS A PARTNERSHIP FIRM. IT IS COMMON GROUND BETWEEN THE P ARTIES THAT IN THE PRESENT CASE THERE WAS NO PARTNERSHIP DEED G OVERNING THE RELATIONSHIP BETWEEN M/S. GAUTAM ENTERPRISES AND M/ S. V.M. CORPORATION. THEREFORE THE QUESTION OF ASSESSING TH E ASSESSEE AS A PARTNERSHIP FIRM DOES NOT ARISE. IN THE JUDGEMENT OF THE ALLAHABAD HIGH COURT (SUPRA) CITED IN PARAGRAPH 2 O F THE IMPUGNED ORDER, THE ASSESSEE CLAIMED THE STATUS OF AOP BUT THE ASSESSING OFFICER COMPLETED THE ASSESSMENT IN THE S TATUS OF INDIVIDUAL WHICH WAS DISAPPROVED BY THE HIGH COURT AND IT WAS HELD THAT THE ASSESSING OFFICER CANNOT DO SO WITHOU T ISSUING A NOTICE TO FILE RETURN IN THE STATUS OF INDIVIDUAL. SIMILARLY, THE RAJASTHAN HIGH COURT (SUPRA) HELD THAT THE ASSESSIN G OFFICER CANNOT CHANGE THE STATUS OF THE ASSESSEE DECLARED IN THE RETURN WITHOUT GIVING AN OPPORTUNITY OF BEING HEARD. THESE TWO JUDGEMENTS DO NOT DEAL WITH THE CASE OF AN ASSESSEE ITSELF CLAIMING A STATUS DIFFERENT FROM WHAT WAS SHOWN IN THE RETURN OF INCOME AND THE ACCEPTANCE THEREOF BY THE ASSESSING OFFICER. IT IS NOT A CASE OF THE ASSESSING OFFICER CHANGING THE ST ATUS OF THE ASSESSEE WITHOUT ISSUING NOTICE OR WITHOUT HEARING THE ASSESSEE. IN THE CASE BEFORE US, THE ASSESSING OFFICER HAS AC CEPTED THE CLAIM MADE BY THE ASSESSEE IN THE COURSE OF THE ASS ESSMENT PROCEEDINGS THAT ITS CORRECT STATUS WAS THAT OF AN AOP AND NOT A ITA NO.4512/MUM/07 20 FIRM AS MENTIONED IN THE RETURN OF INCOME. THERE W AS ALSO NO PARTNERSHIP DEED IN EXISTENCE. IT IS NOT THE CASE O F THE CIT THAT THE AGREEMENTS BETWEEN M/S. GAUTAM ENTERPRISES AND M/S. V.M.CORPORATION GAVE RISE TO A PARTNERSHIP AGREEMEN T. IN THIS SITUATION, WE ARE OF THE VIEW THAT THE ASSESSING OF FICER COMMITTED NO ERROR IN ACCEPTING THE STATUS OF THE A OP CLAIMED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. 17. FOR THE AFORESAID REASONS, WE ARE OF THE VIEW T HAT THE CIT WAS NOT RIGHT IN LAW AND ON FACTS IN HIS CONCLUSION THAT THE ASSESSMENT MADE BY THE ASSESSING OFFICER WAS ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HIS ORD ER UNDER SECTION 263 OF THE ACT IS THEREFORE SET ASIDE AND T HE APPEAL IS ALLOWED WITH NO ORDERS AS TO COSTS. ORDER PRONOUNCED ON THIS 22 ND DAY OF DECEMBER, 2009. SD/- (J.SUDHAKAR REDDY) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER SENIOR VICE PRESIDENT MUMBAI, DATED 22 ND DECEMBER, 2009. SOMU COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE MUMBAI. 4. THE CIT-23, MUMBAI 5. THE DR G BENCH BY ORDER /TRUE COPY/ ASSTT. REGISTRAR, I.T.A.T, MUMBAI