M/s Abad Constructions P.Ltd, Cochin V. DCIT, Cochin

ITA 507/COCH/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4549 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 19-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATISR
• Assessee Lawyers: P K SASIDHARAN
• Keywords: Retrospective amendment; Competent authority; Set aside
• Section: 80IB; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NOS.507 & 508/COCH/2009 ASST. YEARS:2005-06 & 2006-07 M/S. ABAD CONSTRUCTIONS (P) LTD., C/O. ABAD PLAZA COMPLEX, MG ROAD, KOCHI-35. PA NO.AAECA 7823L VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), RANGE-1, ERNAKULAM. (APPELLANT) ( RESPONDENT ) APPELLANT BY SHRI P.K.SASIDHARAN, C.A RESPONDENT BY SHRI S.R.SENAPATI,SR.DR O R D E R PER N.VIJAYAKUMARAN,J.M: BOTH THESE APPEALS ARE BY THE ASSESSEE AGAINST THE COMMON ORDER DATED 27-08-2009 PASSED U/S.263 OF THE I.T.ACT,1961 BY THE LD. COMMISSIONER OF INCOME-TAX, KOCHI, FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07. 2. FOR ASSESSMENT YEAR 2005-06, THE ASSESSMENT WAS COMPLETED U/S.143(3) R.W.S.147 OF THE I.T.ACT, WHER EAS FOR THE ASSESSMENT YEAR 2006-07 ASSESSMENT WAS MADE U/S.143(3) OF THE ACT. BOTH THE ASSESSMENT ORDERS ARE DATED 30-12-2008. ITA NOS. 507 & 508/COCH/2009 2 3. ON VERIFICATION OF THE RECORDS, THE LD. COMMISSI ONER OF INCOME-TAX NOTICED THAT IN RESPECT OF PROJECT MARIN E PLAZA, THERE WAS SOME VIOLATION MADE BY THE ASSESSEE AGAIN ST THE APPROVED PLAN IN THE CONSTRUCTION OF THE APARTMENT AND HENCE THE LD. CIT WAS OF THE VIEW THAT THIS PROJECT WAS NOT ELIGIBLE FOR DEDUCTION U/S.80IB OF THE ACT, FOR BOT H THE YEARS UNDER CONSIDERATION. IT WAS ALSO FURTHER NOTICED BY THE LD. CIT THAT THE ASSESSEES CLAIM FOR DEDUCTION U/S.80I B FOR THESE TWO YEARS HAS NOT BEEN SUBJECTED TO PROPER AN D DETAILED ENQUIRY BEFORE ALLOWING THE SAME. THEREF ORE, THE LD. CIT ISSUED NOTICE U/S.263 ON 23-6-2009. IN RE SPONSE TO THIS NTOCE, THE ASSESSEE COMPANY SUBMITTED A REPLY DATED 15-7-2009. ONE MORE LETTER DATED 4-8-2009 WAS ALSO FILED BY THE ASSESSEE, WHICH IS AVAILABLE ON RECORD. ON CAREFUL CONSIDERATION OF THE SUBMISSIONS, THE LD. CIT WAS O F THE VIEW THAT THERE WAS SOME VIOLATION MADE AGAINST THE APPR OVED PLAN IN THE CONSTRUCTION OF THE APARTMENT. HENCE, HE WAS OF THE VIEW THAT THIS PROJECT WAS NOT ELIGIBLE FOR DED UCTION U/S.80IB. LD. CIT OBSERVED THAT THE ASSESSING OFF ICER HAS FAILED TO MAKE PROPER AND DETAILED ENQUIRY FOR THE ALLOWANCE OF 80IB DEDUCTION. THEREFORE, THE ORDERS OF THE AS SESSING OFFICER ON THIS ISSUE ARE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE, THE LD. CIT EXERCISED REVISIONAL ITA NOS. 507 & 508/COCH/2009 3 POWER U/S.263 AND SET ASIDE THE ORDERS OF THE ASSES SING OFFICER FOR THE LIMITED PURPOSE OF VERIFICATION OF ASSESSEES CLAIM U/S.80IB OF THE ACT AND DIRECTED TO RE-COMPU TE THE DEDUCTION U/S.80IB OF THE ACT, FOR BOTH THE YEARS, AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH SIDES AND CONSIDERED THEIR SUBMISSIONS. THE REPLY MADE BY THE ASSESSEE IN RE SPONSE TO 263 NOTICE HAS BEEN REPRODUCED IN THE IMPUGNED O RDER OF THE CIT. FURTHER IT WAS ARGUED THAT THE CONSTRUCT ION OF THE MARINE PLAZA WAS COMPLETED IN ACCORDANCE WITH THE S TRICT COMPLIANCE OF THE TERMS OF APPROVAL OF THE CORPORAT ION AUTHORITIES. THE COMPLETION AND OCCUPANCY CERTI FICATES WILL GO TO SHOW THAT STRICT COMPLIANCE HAS BEEN MAD E TO THE APPROVED BUILDING PERMIT. THEREFORE, THERE IS NO JUSTIFICATION TO THE LD. CIT TO OBSERVE THAT THERE WAS SOME VIOLATION AGAINST THE APPROVED PLAN. ACCORDING TO THE LD. COUNSEL THE ACTION OF THE LD. CIT IS ONLY AN INDIRE CT APPROACH TO EXTEND THE PERIOD FOR COMPLETION OF THE ASSESSME NT, WHICH IS NOT PERMISSIBLE. FURTHER, THE LD. COUNSEL SUBM ITTED THAT THE BUILDING HAS BEEN CONSTRUCTED IN STRICT COMPLIA NCE OF THE TERMS OF BUILDING PERMIT NO VIOLATION HAS BEEN FOUN D BY THE COMPETENT AUTHORITY. THEY HAVE ISSUED OCCUPANCY ITA NOS. 507 & 508/COCH/2009 4 CERTIFICATE AND COMPLETION CERTIFICATE THAT THEY AR E IN ACCORDANCE WITH THE APPROVED BUILDING PLAN AND THE BUILDING IS NOW FIT FOR OCCUPANCY WILL GO TO SHOW THAT THERE IS NO VIOLATION OF THE BUILDING PERMIT. FURTHER, THE TAHA SILDHAR, KANAYANNUR VIDE HIS ORDER DATED 20-9-2008, ON AN INSPECTION BY THE DY. TAHASILDHAR (BUILDING) ON BEI NG SATISFIED, ASSESSED THE BUILDING TAX IN ACCORDANCE WITH THE RULES. THIS BEING THE CASE, THE LD. COMMISSIONER O F INCOME- TAX ON SURMISES AND CONJUNCTURES OBSERVED THAT SOME VIOLATION HAS BEEN MADE BY THE ASSESSEE AGAINST THE APPROVED PLAN IS TOTALLY BASELESS. THE ASSESSMENT M ADE BY THE TAHASILDHAR WAS ON THE BASIS OF INSPECTION REPO RT SUBMITTED BY THE DY. TAHASILDHAR AND IF THERE WAS A NY DEVIATION IN THE CONSTRUCTION OF THE BUILDING ON TH E PART OF THE ASSESSEE, NATURALLY THE DY. TAHASILDHAR SHOULD HAVE BEEN PIN POINTED THE SAME AND THERE WAS NO QUESTION OF COMPLETION AND OCCUPANCY CERTIFICATE SO ALSO BUILDI NG TAX ASSESSMENT. CONSIDERING THESE FACTS, THE VIOLATIO N ALLEGED BY THE CIT AGAINST THE APPROVED PLAN IS HIGHLY IMAG INARY AND IT IS NOT AMENABLE TO SECTION 263 OF THE ACT AND TH IS SHOWS THAT THERE IS NO ERRONEOUS AND PREJUDICIAL TO THE O RDER PASSED BY THE ASSESSING OFFICER. ITA NOS. 507 & 508/COCH/2009 5 5. WHEN THERE IS NO PRESENT IN THE ELEMENT OF THE TWIN CONDITIONS. ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF THE REVENUE, LAW IS WELL SETTLED AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO.LTD.- 243 ITR 83) . IN THIS DECISION, THE HONBLE APEX COURT HAS H ELD THAT IN THE ABSENCE OF THE ABOVE TWIN CONDITIONS, ASSUMP TION OF JURISDICTION U/S.263 IS NOT PROPER. THE PURPOSE F OR WHICH SECTION 263 IS ENACTED HAS TO BE USED ONLY FOR THAT PURPOSE AND IT COULD NOT BE USED TO INDIRECT GAIN SUCH AS E XTENDING THE ASSESSMENT PERIOD BEYOND THE STIPULATED TIME AS ENVISAGED UNDER THE ACT. COPIES OF COMPLETION CE RTIFICATE, BUILDING PERMIT, BUILDING PLAN, APPROVED PLAN TOGET HER WITH THE WRITTEN SUBMISSION FILED BY THE ASSESSEE BEFO RE THE LD. COMMISSIONER OF INCOME-TAX COUPLED WITH THE KERALA BUILDING TAX ASSESSMENT MADE BY THE TAHASILDHAR WIL L GO TO SHOW THAT THERE IS NO DEVIATION IN THE CONSTRUCTION OF THE APPROVED PLAN AND VIOLATION OF THE TERMS AND CONDIT IONS STIPULATED IN THE BUILDING PERMIT. 6. NOW SECTION 80IB(10) WHICH IS THE CRUX OF THE MA TTER IN THE 263 PROCEEDINGS ALLOWS 100% DEDUCTION OF THE PR OFITS DERIVED BY THE UNDERTAKING IN DEVELOPING AND BUILDI NG HOUSING PROJECTS. [EXPLANATION FOR THE REMOVAL OF DOUBTS, ITA NOS. 507 & 508/COCH/2009 6 IT IS HEREBY DECLARED THAT NOTHING CONTAINED IN THI S SUB SECTION SHALL APPLY TO ANY UNDERTAKING WHICH EXECUT ES THE HOUSING PROJECT AS A WORKS CONTRACT AWARDED BY ANY PERSON]. THIS EXPLANATION IS ADDED AND INSERTED BY THE FINAN CE ACT 2009 WITH RETROSPECTIVE EFFECT FROM 1-4-2001 AND WH ERE THERE IS A DEBATABLE ISSUE, SECTION 263 CANNOT BE I NVOKED AND THE LD. COMMISSIONER OF INCOME-TAX CANNOT SUBST ITUTE HIS VIEW BY WAY OF EXERCISING POWER UNDER SECTION 2 63 OF THE ACT. THIS HAS BEEN SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF MAX INDIA LTD . -295 ITR 282. HENCE CONSIDERING RIVAL ARGUMENTS, WE ARE OF THE VIEW THA T ASSUMPTION OF JURISDICTION U/S.263 BY THE LD. COMMI SSIONER OF INCOME-TAX IS NOT IN ACCORDANCE WITH LAW AS THE LD. CIT HAS NOT POINTED OUT ANY VIOLATION AGAINST THE APPRO VED PLAN IN THE CONSTRUCTION OF THE APARTMENT WHEREAS PER CO NTRA THE ASSESSEE HAS ESTABLISHED BEYOND DOUBT THAT THERE WA S NO VIOLATION OR DEVIATION IN THE CONSTRUCTION OF THE A PARTMENT AND HAS CONSTRUCTED IN STRICT COMPLIANCE OF THE APP ROVED BUILDING PERMIT BY WAY OF COMPLETION CERTIFICATE AN D OCCUPANCY CERTIFICATE ISSUED BY THE MUNICIPAL CORPO RATION AND BUILDING TAX ASSESSMENT MADE BY THE TAHASILDHAR AND THIS BEING THE CASE, 80IB BENEFIT CANNOT BE DENIED. THEREFORE, THE ORDER COULD NOT BE SAID AS ERRONEOUS OR ITA NOS. 507 & 508/COCH/2009 7 PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE , WE HAVE NO HESITATION IN QUASHING THE IMPUGNED ORDER DATED 27-8- 2009 PASSED U/S.263 BY THE LD. COMMISSIONER OF INCO ME-TAX FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 17 TH JUNE,2011. PM. COPY FORWARDED TO: 1. M/S. ABAD CONSTRUCTIONS (P) LTD., C/O. ABAD PLAZA C OMPLEX, MG ROAD, KOCHI-35. 2. THE DY. CIT., CIRCLE-1(2), RANGE-1, ERNAKULAM. 3. CIT, KOCHI. 4. D.R.