M/s. V.S. Joshi & Associates, Kolhapur V. Income tax Officer, Kolhapur

ITA 477/PUN/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5344 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 24-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Sale consideration of property below Jantri Value; Reasonable cause; Condonation of delay
• Section: 80IB; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.477/PUN/2017 / ASSESSMENT YEAR : 2012-13 M/S. V.S. JOSHI & ASSOCIATES, 1156, E-WARD, MANIK CHAMBERS, SYKES EXTENSION, KOLHAPUR 416 001 PAN : AADFV3050C . /APPELLANT VS. ITO, WARD-2(1), KOLHAPUR . / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI MUKESH JHA / DATE OF HEARING : 26.06.2018 / DATE OF PRONOUNCEMENT: 18.07.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF CIT(A)-2, KOLHAPUR, DATED 27-09-2016 FOR THE ASSESSMENT YEAR 2012- 13. 2. CONDONATION OF DELAY : BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS DELAY OF 74 IN FILING THE APPEAL B EFORE THE TRIBUNAL. IT WAS SUBMITTED THAT ASSESSEE FILED AN APPLICATION U/S.15 4 OF THE I.T. ACT ON 28-09-2016 POINTING OUT CERTAIN MISTAKES IN THE SAID APPEAL ORDER. THE APPLICATION REMAINED UNDECIDED. LD. COU NSEL ITA NO.477/PUN/2017 M/S. V.S. JOSHI & ASSOCIATES 2 REFERRED TO THE AFFIDAVIT OF THE ASSESSEE DATED 21-06-201 8 EXPLAINING THE DELAY. THE CONTENTS OF THE SAID AFFIDAVIT READ AS UNDER : 5. IN THIS APPEAL BEFORE CIT(A) PERTAINING TO A.Y. 2012-13 (SUBSEQUENT ASSESSMENT YEAR) THE DIRECTIONS WERE ISSUED TO A.O. TO DENY THE DEDUCTION AS EXPLAINED ABOVE. IT IS UNDISPUTED FAC T AND LAW THAT NON- CONSIDERATION OF THE JUDGMENT OF CO-ORDINATE BENCH OF THE TRIBUNAL IS THE MISTAKE APPARENT FROM RECORDS. ACCORDINGLY THE ASSESSEE FILED APPLICATION BEFORE LD.CIT(A) UNDER S.154 OF THE ACT DT. 13-10-2016 THAT IS ON THE SAME DATE THE APPEAL ORDER OF THE LD .CIT(A) WAS RECEIVED. THE LD.CIT(A) DID NOT DECIDE THE APPLICATION U/S. 154 ONE WAY OR THE OTHER. THE ASSESSEE PERUSED THE MATTER AT H IS END BUT COULD NOT GET ANY ORDERS ON THE SAID APPLICATION FILED UNDER S.154 OF THE ACT. 6. THE FILING OF APPLICATION U/S.154 ON THE BASIS O F APPELLATE ORDER OF THE TRIBUNAL IS ALSO ONE LEGAL FORUM AND ASSESSEE W AS PURSUING THE SAME BUT WAS NOT SUCCESSFUL. THIS IS ALSO CONSIDERED A REASONABLE CAUSE TO CONDONE THE DELAY OCCURRED IN FILING THE APPEAL. 7. THERE IS NO INTENTIONAL DELAY. THE BALANCE OF C ONVENIENCE IS IN FAVOUR OF THE ASSESSEE. 8. IN VIEW OF THIS IT IS PRAYED THE DELAY BE CONDON ED AND APPEAL BE ADMITTED FOR ADJUDICATION IN ACCORDANCE WITH THE PR OVISIONS OF LAW. 3. ON GOING THROUGH THE CONTENTS OF THE AFFIDAVIT AND HEA RING THE PARTIES ON THIS PRELIMINARY ISSUE, WE FIND IT IS A FACT THAT A SSESSEE FILED AN APPLICATION U/S.154 OF THE ACT BEFORE THE CIT(A) ON THE DATE OF RECEIP T OF THE ORDER. IT SHOWS THE SERIOUSNESS OF THE ASSESSEE. HE ALSO UNDERTOOK MEASURES TO FOLLOW IT UP WITH THE O/O. THE CIT(A ) AND THEY DID NOT YIELD ANY RESULT. IT IS NOT KNOWN WHY THE SAID AP PLICATION OF THE ASSESSEE WAS NOT ADJUDICATED BY THE CIT(A). ALL THESE EF FORTS OF THE ASSESSEE ARE UNDISPUTED BY THE REVENUE. ON VERIFICATION O F THE ISSUE RAISED IN THE SAID APPLICATION FOR RECTIFICATION, WE FIND THE ISSU E IS LINKED TO THE ISSUE RAISED IN THE GROUNDS IN THIS APPEAL. ASSESS EE EXPECTED THAT THE MATTER CAN BE SETTLED THROUGH THE ROUTE OF SECTION 154 OF THE ACT. THEREFORE, ASSESSEE WAITED FOR THE OUTCOME OF THE PROCEEDINGS U/S.154 OF THE ACT, WHICH CAUSED THE DELAY IN FILING OF THIS AP PEAL WITH THE DELAY OF 74 DAYS. IN OUR OPINION, THERE IS NO FAULT ON THE ASSESSEE AND THE CAUSE STATED BY THE ASSESSEE CONSTITUTES REA SONABLE CAUSE. THE CIT(A) OUGHT TO HAVE DISPOSED OF THE APPLICATION OF THE ASSESSEE ITA NO.477/PUN/2017 M/S. V.S. JOSHI & ASSOCIATES 3 U/S.154 OF THE ACT. THEREFORE, THE DELAY OF 74 DAYS IN FILING THE APPEAL BEFORE US IS CONDONABLE AND, THEREFORE, THE APPEAL IS ADMIT TED FOR ADJUDICATION. AS SUCH, THE DELAY IS ONLY 2 MONTHS AND NOT YEARS. NEXT, WE SHALL TAKE UP THE APPEAL ON MERITS. 4. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE HON'BLE TRIBUNAL 'A BENCH PUNE, IN THE CASE OF THE ASSESSEE (ITA/1709/PN/2014)DECIDED ON 29 TH JAN, 2015) A. Y. 2011-12 HELD THAT THE AMENDMENTS BROUGHT IN S. 80IB(10) CLAUSE (E) AN D (F), INSERTED FROM 01-04-2010 IT WAS INCONCEIVABLE AS TO HOW THE AMEND MENT BY FINANCE ACT, 2009 WOULD BE APPLIED TO THE EARLIER CONCLUDED TRANSACTIONS? THE OBJECTION OF REVENUE WAS HELD UNSUSTAINABLE. IN THE CIRCUMSTANCES THE LD. CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE A.O. TO DENY THE DEDUCTION CLAIMED U/S. 80IB(10) OF THE ACT . THE DEDUCTION CLAIMED BE ALLOWED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A)'S ORDER DT . 27-09-2016 WAS RECEIVED ON 13-10-2016. THE APPEAL WAS REQUIRED TO BE FILED ON OR BEFORE 12-12-2016. T HE APPEAL IS DELAYED. IMMEDIATELY UPON RECEIPT OF THE ORDER OF THE LD. CIT (A) DT . 27-09-2016 THE ASSESSEE FILED THE APPLICATION UNDER SECTION 154 ON 28-09-2016 POINTING OUT CERTAIN MISTAKES IN THE SAID APPEAL ORDER . THE APPLICATION REMAINED UNDECIDED. THE APPELLANT ASSESSEE WAS PURSUING THE SAID APPLICATION WHICH CAUSED DELAY IN FILING THIS APPEAL . THE DELAY IS FOR SUFFICIENT CAUSE. THE APPELLANT WOULD FILE SEPARATE APPLICATION FOR C ONDONATION OF DELAY SUPPORTED BY SWORN-AFFIDAVIT . THE DELAY BE CONDONED. 3. THE APPELLANT CRAVES TO LEAVE, ADD/AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 5. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSESSEE IS A FIRM AND IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. ASSESSEE FILE D THE RETURN OF INCOME ON 29-09-2012 DECLARING TOTAL INCOME OF RS.4,25,62 0/-. DURING THE YEAR, ASSESSEE CARRIED ON THREE HOUSING PROJ ECTS NAMELY, VISHWASAGAR, VISHWANAYAN AND VISHWA ENCLAVE APARTMENTS. OUT OF THESE PROJECTS, VISHWA ENCLAVE APARTMENT IS ELIGIBLE FOR DED UCTION U/S.80IB(10) OF THE ACT. ASSESSEE MAINTAINED SEPARATE ACC OUNTS FOR THIS PROJECT AND CLAIMED DEDUCTION U/S.80IB(10) OF THE AC T FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AT RS.1,49,76,143/-. ON VERIFICATION OF THE DETAILS/RECORDS FURNISHED BY THE ASSESSE E AND ON PERUSING THE ASSESSMENT ORDER OF THE ASSESSEE FOR THE EARLIER A .Y. 2011- 12, THE AO DENIED THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE. ITA NO.477/PUN/2017 M/S. V.S. JOSHI & ASSOCIATES 4 5.1 BACKGROUND FACTS RELATING TO THE DENIAL OF THE SAID DE DUCTION U/S.80IB(10) OF THE ACT INCLUDES THAT THE AO AND CIT(A) DE NIED THE CLAIM OF THE ASSESSEE. AS PER THE AO, THE ASSESSEE (1) C OULD NOT COMPLY WITH THE CONDITION RELATING TO BUILT UP AREA OF FLATS/UNITS NO T EXCEEDING 1500 SQ.FT.; (2) THE ASSESSEE COULD NOT COMPLY WITH THE PRO VISIONS OF THE ONLY FLAT TO ONE RELATIVE AND, IF FACT, A NUMBER OF FLATS WERE SOLD TO A NUMBER OF RELATIVES; AND (3) ASSESSEE COULD NOT COMPLY WITH THE PROVISIONS OF COMPLETION OF THE PROJECT WITHIN 5 YEARS FROM THE END OF FINANCIAL YEAR IN WHICH THE PROJECT WAS APPROVED. ASSES SEE CARRIED THE MATTER TO THE TRIBUNAL. THE TRIBUNAL VIDE ITA NO.1709/PN/ 2014, DATED 29-01-2015 FOR THE A.Y. 2011-12 SET-ASIDE THE ORDER OF C IT(A) AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. IN THE ASSESSMENT PROCEEDINGS, ASSESSEE RELIED ON THE HONBLE SUPREME COURT JUDGMENT IN SLP NO.7717 OF 1990 IN THE CASE OF UNION OF INDIA AND OTHERS VS. KAMLAK SHI FINANCE CORPORATION LTD. AIR 1992 SUPREME COURT 711, 712) 55 ELT 433 (S.C) THE DEPARTMENT IS IN THE PROCESS OF FILING APPEAL BEFORE TH E HONBLE HIGH COURT, MUMBAI U/S.260A OF THE ACT. EVENTUALLY, THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S.80IB(10) OF THE ACT BY HOLDING AS UNDER : 10.1 WITH DUE RESPECT TOWARDS RATIOS OF HIGHER UPS DISCUSSED AS ABOVE, VERY RESPECTFULLY IT IS ESSENTIAL TO STATE HERE THA T THE DECISION OF THE HBLE TRIBUNAL (SUPRA) HAS BEEN JUST RECEIVED BY THE CONC ERNED JURISDICTIONAL AO AND AS SUCH THE DECISION IS BEING ANALYZED IN TH E LIGHT OF THE LEGAL PRONOUNCEMENT AND IN THE PROCESS OF FILING OF APPEA L BEFORE THE HON. HIGH COURT, MUMBAI U/S.260A OF THE ACT. IN ORDER TO KEEP THE ISSUE ALIVE TILL IT REACHES ITS FINALITY, AS WELL AS, TO MAINTA IN CONSISTENCY IN APPEAL PROCESS; I AM UNABLE TO ALLOW THE CLAIM OF ASSESSEE PREFERR ED U/S.80IB(10) OF THE ACT; HENCE, THE CLAIM OF ASSESS EE FOR DEDUCTION OF RS.1,49,76,143/- IS HEREBY REJECTED, SIMULTANEOUSLY INITIATING PENAL PROCEEDINGS U/S.271(1)(C) OF THE ACT, SEPARATELY. 10.2 ENDORSING THE ABOVE ISSUE RELEVANT TO DEDUCTIO N U/S.80IB(10) OF THE ACT, FURTHER, IT MAY ALSO BE STATED HERE THAT T HE FACTS POINTED OUT BY MY PREDECESSOR WHICH LED HIM TO REJECT THE CLAIM OF ASSESSEE FIRM FOR DEDUCTION MADE U/S.80IB(10) OF THE ACT REMAIN CONTI NUED FOR THE YEAR UNDER CONSIDERATION TOO. MOREOVER, WITH DUE RESPEC T, IT MAY BE STATED THAT, AS FAR AS, DECISION OF THE HBLE APEX COURT R ELIED UPON BY ASSESSEE ITA NO.477/PUN/2017 M/S. V.S. JOSHI & ASSOCIATES 5 IS CONCERNED, IT IS DISTINGUISHABLE ON FACTS, BECAU SE ON DIFFERENT SET OF FACTS RELEVANT TO THE PROVISIONS OF CENTRAL EXCISE AND CUSTOMS ACT AND IN THE DIFFERENT PERSPECTIVE THAT MATTER HAS BEEN DECI DED BY THE HBLE SUPREME COURT. 6. IN THE APPELLATE PROCEEDINGS BEFORE THE CIT(A), ASSESSEE S COUNSEL SUBMITTED THAT THE ISSUE IS COVERED BY VIRTUE OF THE OR DER OF TRIBUNAL FOR A.Y. 2011-12. ON THE FIRST OBJECTION THAT SOME OF THE FLATS EXCEEDED THE SPECIFIED AREA OF 1500 SQ.FT., THE CIT(A) AFTER CONSIDERING THE CONTENTS OF PARA NOS. 15 TO 17 OF THE ORDER OF TRIBUNAL FOR THE A.Y. 20 11-12 (SUPRA) HELD AS UNDER : 8. FROM THE ABOVE, IT IS EVIDENT THAT THE PROPORTI ONATE PROFITS OF ONLY THOSE RESIDENTIAL UNITS IN THE PROJECT WHICH COMPLY WITH THE REQUIREMENT OF CLAUSE (C) OF SECTION 80IB(10) ARE TO BE ALLOWED AS A DEDUCTION. IN OTHER WORDS, THE DISALLOWANCE OF DEDUCTION SHALL BE LIMITE D TO PROFITS RELATING TO THOSE UNITS WHICH EXCEED THE AREA OF LIMITATION OF 1500 SQ.FT. IT HAS BEEN SUBMITTED BEFORE ME THAT DURING THE YEAR NO SUCH UN ITS WERE SOLD AND, THEREFORE, THERE IS NO QUESTION OF ANY PROPORTIONATE DISALLOWA NCE. NEVERTHELESS, THE AO IS DIRECTED TO VERIFY IF AT AL L ANY OF THE UNITS FOR WHICH SALES HAVE BEEN RECOGNIZED DURING THE YEAR EX CEED 1500 SQ.FT. OF BUILT-UP AREA (AS DEFINED U/S.80IB(10)) AND IF SO, DENY THE BENEFIT OF DEDUCTION ON THE PROFITS FROM THOSE UNITS ALONE. 6.1 REGARDING THE SECOND OBJECTION THAT ASSESSEE SOLD M ORE THAN ONE FLAT TO THE SAME BUYER/RELATIVE OF THE BUYER, THE CIT(A) AFT ER CONSIDER THE CONTENTS OF PARA NO.7 AND 8 OF THE ORDER OF TRIBUNAL (SUPRA) HELD AS UNDER : 9. FROM THE DETAILS FILED BEFORE ME, I FIND THAT THERE ARE ONLY TWO SUCH TRANSACTIONS WHEREIN FLATS HAVE BEEN SOLD TO NEAR RELATIVES VIZ. FLAT NO.101 AND 102 IN A WING TO MS. L.H. SHAH AN D MRS. H.M. SHAH (DATE OF SALE DEED 30/3/2012) AND THE SECOND INST ANCE BEING FLATS NO.408 AND 409 TO MRS. M.R. SOMANI AND MRS. R.V. SO MANI (DATE OF SALE AGREEMENT 29/01/2010). FOLLOWING THE DECISION OF THE HONBLE TRIBUNAL, IT IS APPARENT THAT ONLY FLATS NO.101 AND 102 IN A WING ARE HIT BY THE PROVISIONS OF CLAUSE (F) OF SECTION 80IB(10) . THE AO IS THEREFORE, DIRECTED TO DENY THE DEDUCTION U/S.80IB(10) TO THE PROFITS FROM FLATS NO.101 AND 102 OF THE A WING. (PARA 9 OF THE CIT (A). 6.2 REGARDING THE THIRD OBJECTION FOR DENIAL OF DEDUCTION T HAT THE PROJECT WAS NOT COMPLETE AS ON 31-03-2012, THE CIT(A) A FTER CONSIDERING THE CONTENTS OF PARA NO.13 OF THE TRIBUNAL (SUPRA) HELD AS UNDER : ITA NO.477/PUN/2017 M/S. V.S. JOSHI & ASSOCIATES 6 IT IS EVIDENT FROM THE ABOVE THAT THE PROJECT IS COMPLETE AS ON 31/03/2011 AND THEREFORE, ELIGIBLE FOR A DEDUCTION U/S.80IB(10). BASED ON THE DISCUSSION ABOVE, GROUND NO.1 IS PARTLY ALLO WED IN VIEW OF MY SPECIFIC DIRECTIONS IN PARAGRAPH 8 DIRECTING THE AS SESSING OFFICER TO VERIFY IF ANY OF THE FLATS SOLD DURING THE YEAR EXCEED THE AREA LIMIT OF 1500 SQ.FT. AS ALSO MY SPECIFIC DIRECTION IN PARAGRAPH 9 DIRECT ING THE ASSESSING OFFICER TO DENY DEDUCTION UNDER SECTION 80IB TO PRO FITS FROM 2 FLATS, VIZ 101 AND 102 IN THE A WING OF THE PROJECT. (PARA 10 OF THE CIT(A). EVENTUALLY, THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASS ESSEE. IN THE PROCESS, THE ORDER OF TRIBUNAL STANDS DISHONOURED IN THE DISGUISE OF KEEPING THE ISSUE ALIVE AS MENTIONED BY THE AO IN PARA N O.10.1 OF HIS ORDER. 7. AGGRIEVED WITH THE PART RELIEF GIVEN BY THE CIT(A), THE AS SESSEE IS IN APPEAL BEFORE US WITH THE GROUNDS EXTRACTED ABOVE. 8. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE ORDER S OF THE REVENUE AUTHORITIES. ON GOING THROUGH THE FACTS, SUBMISSIO NS AND THE ORDERS OF THE REVENUE AS WELL AS THE ORDER OF PUNE BENC H OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.1709/PN/2014, DATE D 29-01-2015 FOR THE A.Y. 2011-12, WE FIND THE TRIBUNAL ANSWERED ALL THE O BJECTIONS RAISED BY THE AO IN FAVOUR OF THE ASSESSEE. THEREFORE, WE FIND IT RELEVA NT TO THE EXTRACT THE FINDING GIVEN BY THE TRIBUNAL AND THE SAME READS AS UNDER : 6. HOWEVER, ASSESSEE SUBMITTED THAT THE FLATS IN Q UESTION WERE ALLOTTED TO THE SPOUSES OF THE INDIVIDUAL WHO WERE ALREADY A LLOTTED A FLAT IN THE SAID PROJECT PRIOR TO THE INSERTION OF SUCH RESTRIC TION IN SECTION 80-IB(10) OF THE ACT. THE CLAIM OF THE ASSESSEE WAS THAT IT HAS ALLOTTED THE SAID FLATS IN THE MONTH OF OCTOBER, 2008 AND THE SALE AGREEMEN TS WERE DULY REGISTERED IN OCTOBER, 2008 ITSELF. NOTABLY, THE RE STRICTION CONTAINED IN SUB-CLAUSES (E) AND (F) TO SECTION 80-IB(10) OF THE ACT RELATING TO THE LIMIT OF ALLOTMENT OF NOT MORE THAN ONE RESIDENTIAL UNIT IN THE HOUSING PROJECT TO THE RELATED PERSONS SPECIFIED THEREIN, WAS INSERTED BY THE FINANCE (NO.2) ACT, 2009 W.E.F. 01.04.2010. ON THIS BASIS, THE STA ND OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES AS WELL AS BEFORE US I S THAT THE AFORESAID ALLOTMENT OF FLATS MADE IN OCTOBER, 2008 IS NOT HIT BY THE SAID RESTRICTION WHICH HAS COME ON THE STATUTE ON A LATER DATE. 7. WE FIND THAT THE ASSESSING OFFICER HAS NOT DISPU TED THE ASSERTIONS OF THE ASSESSEE THAT THE AFORESAID FLATS WERE SOLD TO THE SAID PARTIES IN THE MONTH OF OCTOBER, 2008 AND THE SALE AGREEMENTS WERE DULY REGISTERED IN ITA NO.477/PUN/2017 M/S. V.S. JOSHI & ASSOCIATES 7 OCTOBER, 2008. HOWEVER, AS PER THE ASSESSING OFFICE R, THERE WERE CERTAIN NUMBER OF UNSOLD FLATS SHOWN IN WORK-IN-PROGRESS AN D THERE WAS A POSSIBILITY THAT THE ASSESSEE MAY EVEN AFTER 01.04. 2010 SELL FLATS TO THE RELATIVES OF THE PERSONS ALREADY HOLDING THE FLATS. THE ASSESSING OFFICER ALSO DISAGREED WITH THE ASSESSEE THAT THE PROVISION S INSERTED BY THE FINANCE (NO.2) ACT, 2009 W.E.F. 01.04.2010 WERE NOT APPLICABLE TO THE FLATS WHICH ALREADY STOOD SOLD BY THE ASSESSEE IN O CTOBER, 2008. THE AFORESAID STAND OF THE ASSESSING OFFICER HAS ALSO B EEN AFFIRMED BY THE CIT(A). 8. IN OUR CONSIDERED OPINION, THE AFORESAID STAND O F THE REVENUE IS QUITE INDEFENSIBLE. QUITE CLEARLY, THE RESTRICTION ON ALL OTMENT OF FLATS TO THE RELATIVES AND OTHER SPECIFIED PERSONS CONTAINED IN SUB-CLAUSE (E) AND (F) TO SECTION 80- IB(10) OF THE ACT HAVE BEEN INSERTED BY THE FINANCE (NO.2) ACT, 2009 W.E.F. 01.04.2010. THE OBJECTION OF THE ASSESS ING OFFICER ON THE ALLOTMENT OF FLATS AND ITS SALE TO THE SPOUSES OF THE INDIVIDUAL WHO WERE ALREADY HOLDING FLATS IN THE PROJECT, IS RELATING T O THE PERIOD OCTOBER, 2008 I.E. A PERIOD MUCH PRIOR TO THE AMENDMENT BROUGHT B Y FINANCE (NO.2) ACT, 2009 W.E.F. 01.04.2010. IT IS INCONCEIVABLE AS TO H OW THE AMENDMENT BY WAY OF INSERTION OF SUB-CLAUSE (E) AND (F) TO SECTI ON 80-IB(10) OF THE ACT MADE BY FINANCE (NO.2) ACT, 2009 IS BEING APPLIED F OR AN EARLIER CONCLUDED TRANSACTION, AS THERE IS NO PROVISION FOR RETROSPECTIVELY APPLYING THE AMENDMENT. THEREFORE, IN OUR CONSIDERE D OPINION, THE SAID OBJECTION BY THE REVENUE IS UNSUSTAINABLE. WE HOLD SO. 9. ANOTHER OBJECTION RAISED BY THE ASSESSING OFFICE R WAS BASED ON CLAUSE (A) TO SECTION 80-IB(10) OF THE ACT, WHICH WAS TO T HE EFFECT THAT THE ASSESSEE DID NOT COMPLETE CONSTRUCTION OF THE PROJE CT WITHIN THE STIPULATED DATE. THE RELEVANT FACTS IN THIS REGARD ARE AS FOLL OWS. THE PROJECT OF THE ASSESSEE CONSISTED OF A, B AND C WINGS. THE PROJECT WAS APPROVED BY THE LOCAL AUTHORITY I.E. KOLHAPUR MUNICIPAL CORPORA TION (KMC) ON 27.10.2005. AS A CONSEQUENCE, IN TERMS OF SUB-CLAUS E (III) OF CLAUSE (A) TO SECTION 80-IB(10) OF THE ACT, THE ASSESSEE WAS REQU IRED TO COMPLETE THE CONSTRUCTION OF THE PROJECT WITHIN 5 YEARS FROM THE ENTIRE OF THE FINANCIAL YEAR IN WHICH IT WAS APPROVED BY THE LOCAL AUTHORIT Y. THEREFORE, THE STIPULATED DATED FOR COMPLETION OF THE CONSTRUCTION OF THE PROJECT WAS 31.03.2011. IN THE BACKGROUND OF THE AFORESAID LEGA L POSITION, ASSESSEE CANVASSED BEFORE THE ASSESSING OFFICER THAT THE COM PLETION CERTIFICATE FOR THE A AND B WING WAS ISSUED BY THE LOCAL AUTHORITY ON 26.03.2010 AND FOR THE C WING IT WAS ISSUED ON 25.03.2011. ON THIS BASIS, IT WAS CANVASSED THAT THE CONSTRUCTION OF THE PROJECT WAS COMPLETED WITHIN THE STIPULATED DATE CONTAINED IN CLAUSE (A) TO SECTION 80-IB(10) OF THE ACT. 10. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE PLEA OF THE ASSESSEE BY MAKING THE FOLLOWING DISCUSSION :- IN THIS CONNECTION, IT MAY BE REITERATED THAT THE ASSESSEE HIMSELF SUBMITTED THAT THERE WAS CLOSING WORK IN PROGRESS O F THE FLATS OF THE UNITS BEARING NUMBERS 104, 208, 310 AND 703 WHI CH THE ASSESSEE PLEADED OF HAVING LESS THAN 1500 SQ.FTS. I N EACH UNIT OF ITS BUILT-UP AREA, THOUGH IN THE INITIAL SUBMISSION SUCH BUILT-UP AREA OF EACH SUCH UNIT WAS SPECIFIED BY THE ASSESSE E FOR MORE THAN 1500 SQ.FTS.. WHEN THERE WERE INCOMPLETE UNITS /FLATS AS ADMITTED BY THE ASSESSEE ITSELF, IT CANNOT BE SAID THAT THE PROJECT WAS COMPLETED. AS FAR AS FOR GETTING THE BENEFIT OF DEDUCTION U/S 80-IB(10) OF THE ACT, THE PROJECT FOR WHICH THE APP ROVAL WAS TAKEN FOR COMMENCEMENT IS REQUIRED TO BE COMPLETED IN FUL L. PART COMPLETION OF THE PROJECT, EVEN IF THE CERTIFICATE OF COMPLETION HAS BEEN OBTAINED FROM THE MUNICIPAL AUTHORITY, WHEN TH E ASSESSEE ITSELF ADMITTED THAT THERE WERE INCOMPLETE UNITS LE FT/KEPT AS WORK- IN-PROGRESS, IT CANNOT BE SAID THAT THE PROJECT WAS COMPLETED AND THE CONDITION OF COMPLETION OF THE PROJECT AS LAID DOWN IN SECTION ITA NO.477/PUN/2017 M/S. V.S. JOSHI & ASSOCIATES 8 80-IB(10) OF THE ACT WAS FULFILLED. AS SUCH, THE AS SESSEES CONTENTION THAT THE PROJECT WAS COMPLETED PRIOR TO 31.03.2011 IS ALSO NOT ACCEPTABLE AND HENCE THE SAME IS NOT ACCEP TED. 11. THE AFORESAID DISCUSSION REVEALS THAT AS PER TH E ASSESSING OFFICER, THERE WERE CERTAIN FLATS LYING IN CLOSING WORK-IN-P ROGRESS AS ON 31.03.2011 AND THEREFORE HE DID NOT ACCEPT ASSESSEE S PLEA THAT THE CONSTRUCTION OF THE PROJECT WAS COMPLETE. 12. IN THIS CONTEXT, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE COMPLETION CERTIFICATES ISSUED BY THE LOCAL AUT HORITY DEMONSTRATED THAT THE CONSTRUCTION OF THE PROJECT WAS COMPLETE W ITHIN THE STIPULATED DATE AND THAT ASSESSEE HAS COMPLIED WITH THE REQUIR EMENTS OF CLAUSE (A) TO SECTION 80- IB(10) OF THE ACT. 13. WE HAVE CONSIDERED THE OBJECTION RAISED BY THE LOWER AUTHORITIES AND FIND THAT THE SAME IS UNTENABLE IN THE EYES OF LAW. FIRSTLY, IT IS NOT IN DISPUTE THAT THE COMPLETION CERTIFICATES ISSUED BY THE LOCAL AUTHORITY ARE EVIDENCING THE COMPLETION OF CONSTRUCTION WITHIN TH E STIPULATED DATE. IN- FACT, EXPLANATION (II) BELOW SECTION 80-IB(10)(A) O F THE ACT SUGGESTS THAT THE DATE OF COMPLETION OF CONSTRUCTION OF HOUSING P ROJECT SHALL BE TAKEN TO BE THE DATE ON WHICH THE COMPLETION CERTIFICATE IN RESPECT OF HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY. IN THE PR ESENT CASE, THE SAID CERTIFICATES HAVE BEEN ISSUED WITHIN THE DATE STIPU LATED BY WAY OF CLAUSE (A) TO 80-IB(10) OF THE ACT. APART THEREFROM, FACTU ALLY THERE IS NO EVIDENCE LEAD DOWN BY THE ASSESSING OFFICER TO DEMONSTRATE T HAT THE CONSTRUCTION OF THE PROJECT WAS NOT COMPLETE. THE LD. REPRESENTA TIVE FOR THE ASSESSEE POINTED OUT THAT THE OBJECTION OF THE ASSESSING OFF ICER WAS BASED ON THE UNSOLD FLATS LYING IN WORK-IN-PROGRESS. IT WAS POIN TED OUT THAT THE OBJECTION OF THE ASSESSING OFFICER IS BASED ON MERE SURMISES AND CONJECTURES. IN OUR CONSIDERED OPINION, THE REFEREN CE MADE BY THE ASSESSING OFFICER TO CLOSING WORK-IN-PROGRESS OF CE RTAIN FLATS TO SAY THAT THE PROJECT WAS INCOMPLETE IS QUITE IRRELEVANT. IN THE BALANCE SHEET, ASSESSEE HAS SHOWN A NUMBER OF UNSOLD FLATS AS WORK -IN-PROGRESS. THE UNSOLD FLATS DO NOT SIGNIFY NON-COMPLETION OF THE C ONSTRUCTION OF THE PROJECT AND THEREFORE, IN OUR VIEW, THE SAID OBJECT ION RAISED BY THE ASSESSING OFFICER IS QUITE IRRELEVANT IN THE CONTEX T OF EXAMINING THE COMPLIANCE OF CLAUSE (A) TO 80-IB(10) OF THE ACT. T HE ASSESSEE HAS FULFILLED THE REQUIREMENT OF CLAUSE (A) TO SECTION 80-IB(10) OF THE ACT ON THE BASIS OF THE COMPLETION CERTIFICATES ISSUED BY THE LOCAL AUT HORITY. WE HOLD SO. 14. THE THIRD AND THE LAST OBJECTION RAISED BY THE ASSESSING OFFICER WAS BASED ON CLAUSE (C) TO SECTION 80-IB(10) OF THE ACT . CLAUSE (C) RESTRICTS THE BUILT-UP AREA OF THE RESIDENTIAL UNIT FOR THE PROJE CT IN QUESTION AT A MAXIMUM OF 1500 SQ.FT.. AS PER THE ASSESSING OFFICE R, THE BUILT-UP AREA OF SOME OF THE FLATS IN THE PROJECT EXCEEDED THE LIMIT OF 1500 SQ.FT. AND THEREFORE HE HELD THAT THE PROJECT OF THE ASSESSEE WAS NOT ELIGIBLE FOR THE DEDUCTION U/S 80-IB(10) OF THE ACT. 15. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSES SEE SUBMITTED THAT FOR FOUR OF THE FLATS, THE ASSESSING OFFICER ERRONEOUSL Y TOOK THE BUILT-UP AREA AS BEING IN EXCESS OF 1500 SQ.FT. BASED ON THEIR CA RPET AREA AND NOT THE COVERED AREA OF EACH OF THE INDIVIDUAL FLATS. FOR T HE OTHER THREE UNITS, THE LD. REPRESENTATIVE SUBMITTED THAT AS REGARDS ONE OF THE FLATS NAMELY FLAT NO. 601, THE SAME WAS NOT INCLUDED IN THE PROFIT CA LCULATED FOR THE PURPOSES OF DEDUCTION U/S 80-IB(10) OF THE ACT. ANO THER FLAT NO. 702 WAS UNSOLD AND WAS INCLUDED IN THE CLOSING STOCK. NEVER THELESS, IT IS CONCEDED BY THE LD. REPRESENTATIVE THAT THE SAID TH REE FLATS COMPRISED OF A BUILT-UP AREA IN EXCESS OF 1500 SQ.FT.. THE PLEA OF THE APPELLANT BEFORE US IS THAT MERELY BECAUSE OF SOME FLATS ARE IN EXCE SS OF 1500 SQ.FT., IT WOULD NOT RESULT IN WHOLESALE DENIAL OF DEDUCTION U /S 80-IB(10) OF THE ACT ON THE ENTIRE PROJECT. THE LD. REPRESENTATIVE SUBMI TTED THAT THE PROFITS ITA NO.477/PUN/2017 M/S. V.S. JOSHI & ASSOCIATES 9 RELATABLE TO THE UNITS WHICH HAVE A BUILT-UP AREA O F UPTO 1500 SQ.FT. BE ALLOWED DEDUCTION U/S 80-IB(10) OF THE ACT. IN OTHE R WORDS, THE LD. REPRESENTATIVE CONTENDED THAT PROPORTIONATE RELIEF BE ALLOWED U/S 80- IB(10) OF THE ACT QUA THE PROFITS RELATING TO FLATS WHICH COMPLY WITH THE REQUIREMENTS OF CLAUSE (C) TO SECTION 80-IB(10) OF THE ACT. THE SAID STAND OF THE ASSESSEE IS SUPPORTED BY THE JUDGEMENT OF TH E HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BENGAL AMBUJA HOU SING DEVELOPMENT LTD., (IT APPEAL NO.458 OF 2006) DATED 05.01.2007. 16. THE LD. DEPARTMENTAL REPRESENTATIVE HAS ALSO NO T DISPUTED THAT THE PUNE BENCH OF THE TRIBUNAL HAS BEEN CONSISTENTLY AL LOWING PROPORTIONATE RELIEF IN CASES WHERE SOME OF THE FLATS DO NOT COMP LY WITH THE REQUIREMENTS OF CLAUSE (C) TO SECTION 80-IB(10) OF THE ACT INASMUCH AS THE PROFITS RELATABLE TO THE RESIDENTIAL UNITS WHICH CO MPLY WITH THE REQUIREMENTS OF CLAUSE (C) TO SECTION 80-IB(10) OF THE ACT HAVE BEEN HELD TO BE ELIGIBLE FOR DEDUCTION. 17. IN VIEW OF THE AFORESAID PRECEDENT, IN OUR VIEW , THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DENYING THE DEDUCTION U/S 80- IB(10) OF THE ACT ON A WHOLESALE BASIS BY NOTICING THAT FEW OF THE FLATS I N THE PROJECT DO NOT COMPLY WITH THE LIMIT ON BUILT-UP AREA PRESCRIBED BY CLAUSE (C) TO SECTION 80-IB(10) OF THE ACT. THE ORDER OF THE CIT(A) IS SE T-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE DED UCTION ALLOWABLE U/S 80-IB(10) OF THE ACT ON THE BASIS OF THE PROFITS PR OPORTIONATE TO RESIDENTIAL UNITS IN THE PROJECT WHICH COMPLY WITH THE REQUIREM ENT OF CLAUSE (C) TO SECTION 80-IB(10) OF THE ACT. THE DISALLOWANCE OF D EDUCTION U/S 80-IB(10) OF THE ACT SHALL BE LIMITED TO THE PROFITS RELATING TO THOSE UNITS WHICH EXCEED THE MAXIMUM BUILT-UP AREA OF 1500 SQ.FT. PRE SCRIBED IN CLAUSE (C) TO SECTION 80-IB(10) OF THE ACT. WE HOLD SO. 18. IN THIS MANNER, ON GROUNDS OF APPEAL NO.1 & 2, ASSESSEE PARTLY SUCCEEDS. THEREFORE, IN PRINCIPLE, THE ISSUES STAND COVERED IN FAVOUR OF THE ASSESSEE. HENCE, ALL THE GROUNDS ON MERITS ARE ALLOWED IN FAVOUR OF THE ASSESSEE. 9. BEFORE PARTING WITH THE ORDER, WE FIND IT RELEVANT TO OB SERVE THAT AO AND THE CIT(A) MADE THEIR ORDERS ON 30-03-2015 AND 27-09-2016 RESPECTIVELY. FURTHER, THE ORDER OF THE TRIB UNAL FOR A.Y. 2011-12 (SUPRA) BEING DATED 29-01-2015, IS IN EXISTENCE AT THE RELEVANT POINT OF TIME. THEREFORE, IT IS AN UNDISPUTED FACT THAT THE AO/CIT(A) HAS NOT FOLLOWED THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2011-12 INTENTIONALLY. THE PRINCIPLES O F JUDICIAL DISCIPLINE DEMAND THAT THE ORDERS OF THE HIGHER APPELLATE A UTHORITIES SHOULD BE FOLLOWED UNRESERVEDLY BY THE LOWER AUTHORITIES. T HE REASONS ITA NO.477/PUN/2017 M/S. V.S. JOSHI & ASSOCIATES 10 GIVEN BY THE AO, I.E. IN ORDER TO KEEP THE ISSUE ALIVE TILL IT REACHES ITS FINALITY, AS WELL AS, TO MAINTAIN CONSISTENCY IN APPEAL PR OCESS; I AM UNABLE TO ALLOW THE CLAIM OF ASSESSEE PREFERRED U/S.80IB(1 0) OF THE ACT IS NO GROUND FOR NOT FOLLOWING THE ORDER OF TRIBUNAL. IN THIS CONNECTION, WE WISH TO REFER TO THE DECISION OF VISAKHAPATNAM BENCH OF THE TRIBU NAL IN THE CASE OF CARGO HANDLING PRIVATE WORKERS POOL VS DC IT IN ITA NO 152 TO 156/ VIZAG/2011 WHEREIN IT WAS HELD THAT THE ORD ERS PASSED BY THE TRIBUNAL ARE BINDING ON ALL THE TAX AUTHORITIES FUNCTIONIN G UNDER THE JURISDICTION OF TRIBUNAL. THE OPERATIONAL PARAS OF THE ORDER OF THE TRIBUNAL (SUPRA) IS EXTRACTED AS UNDER : 'NEXT WE SHALL DWELL UPON THE JUDICIAL RULINGS ABOU T THE BINDING NATURE OF ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL. THE HON'BLE MP HIGH COURT IN THE CASE AGARWAL WAREHOUSING AND LEASING L TD. VS. CIT (257 ITR 235) HAS HELD THAT THE ORDERS PASSED BY THE TRIBUNA L ARE BINDING ON ALL THE TAX AUTHORITIES FUNCTIONING UNDER THE JURISDICTION OF THE TRIBUNAL. WHILE SO HOLDING, IT FOLLOWED THE DECISION OF THE HON'BLE SU PREME COURT IN THE CASE OF UOI VS. KAMLAKSHI FINANCE CORPORATION LTD (AIR 1992 SUPREME COURT 711, 712) 55 ELT 433 (S.C) WHICH HAS RULED AS UNDER: 'IT CANNOT BE TOO VEHEMENTLY EMPHASIZED THAT IT IS OF UTMOST IMPORTANCE THAT, IN DISPOSING OF THE QUASI-JUDICIAL ISSUES BEFORE TH EM, REVENUE OFFICERS ARE BOUND BY THE DECISIONS OF APPELLATE AUTHORITIES. TH E ORDER OF THE APPELLATE COLLECTOR IS BINDING ON THE ASSISTANT COLLECTORS WO RKING WITHIN HIS JURISDICTION AND THE ORDER OF THE TRIBUNAL IS BINDING UPON THE A SSISTANT COLLECTORS AND THE APPELLATE COLLECTORS WHO FUNCTION UNDER THE JUR ISDICTION OF THE TRIBUNAL. THE PRINCIPLES OF JUDICIAL DISCIPLINE REQUIRE THAT THE ORDERS OF THE HIGHER APPELLATE AUTHORITIES SHOULD BE FOLLOWED UNR ESERVEDLY BY THE SUBORDINATE AUTHORITIES. THE MERE FACT THAT THE ORD ER OF THE APPELLATE AUTHORITY IS NOT 'ACCEPTABLE' TO THE DEPA RTMENT IN ITSELF AN OBJECTIONABLE PHRASE AND IS THE SUBJECT MATTER OF AN APPEAL CAN FURNISH NO GROUND FOR NOT FOLLOWING IT UNLESS ITS O PERATION HAS BEEN SUSPENDED BY A COMPETENT COURT. IF THIS HEALTHY RUL E IS NOT FOLLOWED, THE RESULT WILL ONLY BE UNDUE HARASSMENT TO THE ASS ESSEES AND CHAOS IN ADMINISTRATION OF TAX LAWS'. THE HON'BLE M.P HIGH COURT FURTHER OBSERVED IN CLEA R TERMS AS UNDER: 'OBVIOUSLY, THE COMMISSIONER OF INCOME TAX (APPEALS ) NOT ONLY COMMITTED JUDICIAL IMPROPRIETY BUT ALSO ERRED IN LAW IN REFUS ING TO FOLLOW THE ORDER OF THE APPELLATE TRIBUNAL. EVEN WHERE HE MAY HAVE SOME RESERVATIONS ABOUT THE CORRECTNESS OF THE DECISION OF THE TRIBUNAL, HE HAD TO FOLLOW THE ORDER. HE COULD AND SHOULD HAVE LEFT IT TO THE DEPARTMENT TO TAKE THE MATTER IN FURTHER APPEAL TO THE TRIBUNAL AND GET THE MISTAKE, IF ANY, RECTIFIED.' FURTHER IN KHALID AUTOMOBILES VS. UOI (1995) (4 SCC (SUPPL.) 652), THE HON'BLE APEX COURT HELD THAT AN ORDER OF TRIBUNAL WAS BINDING ON THE ASSESSING OFFICER AND THE FIRST APPELLATE AUTHO RITY AND THE FAILURE TO FOLLOW THE SAME MAY CONSTITUTE CONTEMPT OF TRIBUNAL'S ORDER. SIMILAR VIEWS HAVE BEEN EXPRESSED IN SALES TAX MATT ERS IN ITA NO.477/PUN/2017 M/S. V.S. JOSHI & ASSOCIATES 11 RAJENDRA MILLS LTD VS. JT. CIT (1971) 28 STC 483 (M AD), SENTHIL RAJ METALS VS. GTO (1990) 79 STC 38 (MAD). THEREFORE, WE ARE OF THE OPINION THAT IT IS A CASE OF D ISHONOURING THE ORDER OF THE JURISDICTION TRIBUNAL. THE SUPERVISORY AUTHORIT IES OF THE AO AND THE CIT(A) MAY CONSIDER TAKING APPROPRIATE ACTION IN RESPECT OF SUCH OFFICERS AS PER THE PROCEDURE. ACCORDINGLY, WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF JULY, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 18 TH JULY, 2018 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-2, KOLHAPUR 4. THE PR.CIT-II, KOLAPUR 5. , , A BENCH PUNE; 6. / GUARD FILE.