Cecon Builders, Hyderabad V. ITO, Ward 10(1), Hyderabad

ITA 550/HYD/2013

• Counselvise Citation: 55022514 RSA 2013
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 19-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K HARITA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Opportunity of being heard
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.550/HYD/2013 ASSESSMENT YEAR 2009-2010 M/S CECON BUILDERS HYDERABAD. PAN AAOFM3021H VS. ITO, WARD 10(1) HYDERABAD (APPELLANT) (RESPONDENT) ITA.NO.590/HYD/2013 ASSESSMENT YEAR 2009-2010 ACIT, CIRCLE 10(1) HYDERABAD VS. M/S CECON BUILDERS HYDERABAD. PAN AAOFM3021H (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. A.V. RAGHURAM FOR REVENUE : MS. K. HARITA DATE OF HEARING : 27.02.2014 DATE OF PRONOUNCEMENT : 07.03.2014 ORDER PER B. RAMAKOTAIAH, A.M. THESE ARE CROSS-APPEALS BY ASSESSEE AND REVENUE AGAINST THE ORDERS OF THE CIT(A)-VI, HYDERABAD DATE D 31.01.2013. THE ISSUE INVOLVED IN THESE APPEALS IS WITH REFERENCE TO CLAIM OF 80IB. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A FIRM CARRYING ON BUSINESS AS BUILDERS AND REAL ESTATE DE VELOPERS. ASSESSEE FILED RETURN OF INCOME CLAIMING DEDUCTION OF 2 ITA.NO.550 & 590/HYD/2013 M/S. CECON BUILDERS, HYDERABAD RS.32,22,094/- UNDER SECTION 80IB(10). ASSESSEE HAS TAKEN-UP DEVELOPMENT OF HOUSING PROJECT AT MIYAPUR AND THE O RIGINAL PLAN FOR CONSTRUCTION OF 9763 SQ. METERS WAS APPROV ED BY THE LOCAL AUTHORITY VIDE PROCEEDINGS DATED 13.07.2007. HOWEVER, ASSESSEE CONSTRUCTED 16307.60 SQ. METERS WHICH WAS REGULARIZED UNDER THE BUILDING PENALIZATION SCHEME OF GOVERNMENT OF ANDHRA PRADESH AND THE ORDERS WERE PA SSED ON 26.08.2010. THE A.O. IN THE COURSE OF ASSESSMENT PR OCEEDINGS OBSERVED THAT ASSESSEE FIRM IS ELIGIBLE FOR THE DED UCTION ONLY IN RESPECT OF CONSTRUCTED AREA OF 9763.76 SQ. METERS U NDER SECTION 80IB. HOWEVER, ON NOTICING THAT THE PROJECT APPROVAL WAS OBTAINED IN THE NAME OF LAND OWNERS SMT. R. SAI RANI AND OTHERS, AND THAT ASSESSEE HAS CONSTRUCTED VIOLATING THE PLAN APPROVED, THE CLAIM OF 80IB WAS NOT ALLOWED. FURTHE R, WHILE DENYING THE CLAIM U/S 80IB, A.O. ALSO CONCLUDED THA T ASSESSEE FIRM HAS NOT PRODUCED THE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS IN THE COURSE OF ASSESSMENT PROCEEDINGS AN D ESTIMATED THE INCOME AT 12.5% ON THE TOTAL TURNOVER OF RS.6.24 CRORES THEREBY, ESTIMATING THE INCOME AT RS.78,05,2 75/- ON THE PROJECT AS AGAINST RS.32,22,094/- OFFERED BY THE AS SESSEE. 3. IN THE APPEAL BEFORE THE CIT(A), THE LEARNED CI T(A) ALLOWED RELIEF ON THE ESTIMATION OF INCOME HOLDING THAT THERE IS NO REASON TO ESTIMATE THE PROFIT AND A.O. HAS NOT P ROVED THAT THE BOOKS OF ACCOUNTS ARE NOT PRODUCED OR SUCH BOOK S ARE NOT RELIABLE. WITH REFERENCE TO THE CLAIM OF 80IB, HE P ARTIALLY AGREED WITH THE A.O. THAT 80IB(10) CANNOT BE ALLOWED ON TH E ADDITIONAL AREA CONSTRUCTED IN VIOLATION OF THE PLAN BUT DIREC TED THE A.O. TO ALLOW DEDUCTION PROPORTIONATELY ON THE ORIGINAL APPROVED PLAN OF 9763 SQ. METERS. THE ASSESSEE IS AGGRIEVED ON THE REJECTION OF CLAIM ON PART OF BUILDING WHEREAS, REV ENUE IS AGGRIEVED IN ITS GROUNDS ON CANCELLATION OF ESTIMAT ION BY THE 3 ITA.NO.550 & 590/HYD/2013 M/S. CECON BUILDERS, HYDERABAD CIT(A) AND PERMITTING DEDUCTION UNDER ORIGINAL APPR OVED PLAN EVEN THOUGH THE SAME WAS VIOLATED. ANOTHER CONTENTI ON MADE BY THE REVENUE IS THAT THE HOUSING PROJECT IS NOT I N THE NAME OF THE ASSESSEE WHICH THE CIT(A) HELD IN FAVOUR OF THE ASSESSEE STATING THAT THERE IS NO SUCH REQUIREMENT FOLLOWING THE ORDER OF THE ITAT, AHMEDABAD BENCH IN THE CASE OF RADHE DEVE LOPERS AND OTHERS VS. ITO AND OTHERS 23 SOT 42. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE OPINION THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION TO THE EXTENT OF CONSTRUCTED AREA OF 9763 SQ. METERS WHICH WAS OR IGINALLY SANCTIONED. THEREFORE, THE REVENUE GROUND ON ALLOWI NG PROPORTIONATE 80IB DEDUCTION DOES NOT REQUIRE ANY RECONSIDERATION AS THE ASSESSEE IS HELD OTHERWISE E LIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) AND THE A.O. HAS N OT FIND OUT ANY REASON TO DENY EXCEPT (A) PLANS ARE NOT IN THE NAME OF THE ASSESSEE (B) THAT THERE IS VIOLATION OF THE BUILDIN G PLANS WHICH WAS REGULARIZED SUBSEQUENTLY ON 26.08.2010. TO THAT EXTENT, REVENUE GROUNDS ARE NOT MAINTAINABLE AS THE COORDIN ATE BENCH IN THE CASE OF RADHE DEVELOPERS (SUPRA) HELD THAT PERMISSION IN THE NAME OF DEVELOPER IS NOT REQUIRED AND WHAT IS REQUIRED IS PERMISSION OF THE PROJECT, ON WHICH THERE IS NO DISPUTE. ACCORDINGLY, THESE GROUNDS ARE NOT MAINTAI NABLE. 5. OTHER GROUND CONTESTED IN THE REVENUES APPEAL IS WITH REFERENCE TO THE ESTIMATION OF INCOME WHICH LE ARNED CIT(A) DID NOT APPROVE AS THERE IS NO CASE FOR REJECTING T HE BOOKS OF ACCOUNTS. WITH REFERENCE TO THIS ASPECT, WE NEED TO DISCUSS THE SAME WITH ASSESSEES CONTENTION ABOUT CLAIM OF 80IB (10) IN THE ADDITIONAL CONSTRUCTED AREA. 6. THERE IS NO DISPUTE WITH REFERENCE TO THE ORIGI NAL PERMISSION BEING OBTAINED FOR 9763 SQ. METERS. THER E IS ALSO 4 ITA.NO.550 & 590/HYD/2013 M/S. CECON BUILDERS, HYDERABAD NO DISPUTE THAT UNDER THE BUILDING PENALIZATION SCH EME THE PROJECT WAS APPROVED BY THE GREATER HYDERABAD MUNIC IPAL CORPORATION VIDE PERMISSION DATED 26.08.2010. THE L EARNED CIT(A) WAS OF THE VIEW THAT THIS ADDITIONAL CONSTRU CTED AREA IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. ASSE SSEE RELIED ON THE DECISION OF COORDINATE BENCH OF BANGALORE IN THE CASE OF ITO VS. MAHAVIR CALYX (ITA.NO.153 & 998/BANG/2011) WHEREIN IT WAS HELD AS UNDER : WE ARE OF THE VIEW THAT THE LEARNED CIT HAS RIGHTL Y PLACED RELIANCE ON THE DECISION OF THE HONBLE APEX COURT IN THE CASES OF PETRON ENGINEERING CONSTRUCTION PVT. LTD., REPORTED IN 175 ITR 523, PANYAM CHEMICALS LTD. REPORTED IN 2 62 ITR 278, N.C. BUDDHIRAJA & CO. REPORTED IN 204 ITR 412, IPCA LABORATORIES LTD. CASE REPORTED IN 266 ITR 521, TO ARRIVE AT THE VIEW THAT THE TAX INCENTIVE BY WAY OF DEDUCTION UNDER SECTION 80IB OF THE ACT IS PREDOMINANTLY FOR THE PU RPOSE OF AUGMENTING AFFORDABLE DWELLING AND OUGHT TO BE INTE RPRETED IN THAT LIGHT. IN VIEW OF THE MATTER, THE INCENTIVE PROVISION MUST BE CONSTRUED IN A MANNER WHICH ADVANCES THE OB JECT AND INTENTION OF LEGISLATURE. THE FACT THAT THE ASS ESSEE HAS OBTAINED APPROVAL FOR THE HOUSING PROJECT CANNOT BE LOST SIGHT OF. AS FOR THE EXCESS ARREAR CONSTRUCTED, IT IS FOR THE BBMP TO LOOK INTO THE VIOLATIONS IF ANY, IN THE CONSTRUCTIO N OF THE HOUSING PROJECT. THAT DOES NOT HOWEVER, AUTHORIZE T HE A.O. TO HOLD THAT THE ASSESSEE HAS NOT GOT APPROVAL FOR THE HOUSING PROJECT OR THE CONDITIONS LAID DOWN IN SECTION 80IB (10) STATED VIOLATED. 7. EVEN THOUGH PRINCIPLES CONSIDERED THEREIN DO APPLY TO THE PRESENT FACTS, WHAT WE ARE UNABLE TO D ECIDE IS WHETHER THE SAME WILL APPLY TO THE ASSESSEE. AS SE EN FROM THE PERMISSION GRANTED BY THE GHMC THE ORIGINAL SANCTIO NED PLAN WAS FOR CELLAR, STILT + 9 FLOORS CONSISTING OF 9763 .76 SQ. METERS. THE REVISED PLAN WAS ALSO STATED TO BE CELLAR, STIL T + 9 FLOORS + PENT HOUSE. WE ARE UNABLE TO UNDERSTAND WHETHER ADD ITION OF ONLY PENT HOUSE WILL INCREASE THE SPACE OF BUILT UP AREA BY 6543.84 SQ. METERS OR THERE ARE ANY OTHER INCREASE IN THE AREA 5 ITA.NO.550 & 590/HYD/2013 M/S. CECON BUILDERS, HYDERABAD OF ADDITIONAL BUILDINGS CONSTRUCTED. SINCE THE PLAN S ARE NOT PLACED ON RECORD, WE ARE UNABLE TO GIVE ANY FINDING ON THIS. MOREOVER, THE BPS SCHEME WAS APPLICABLE ONLY TO THE APPLICATIONS MADE ON BEFORE 31-03-08. THE PLANS WER E APPROVED ONLY IN JULY 2007. PAYMENTS FOR PENALTY WE RE MADE LATER AS CAN BE SEEN FROM COPY OF APPROVAL PLACED O N RECORD. SINCE REVISED PLANS WERE NOT PLACED ON RECORD WE AR E UNABLE TO DECIDE ISSUE ONLY ON LEGAL PRINCIPLES. THE A.O. IS DIRECTED TO EXAMINE THE ORIGINAL PLANS, REVISED PLANS AND EXAMI NE WHETHER THE DEDUCTION UNDER 80IB IS ELIGIBLE FOR REVISED PL AN. IN CASE OF AREA OF FLATS HAVE CHANGED, TO VERIFY WHETHER THE C ONSTRUCTED APARTMENTS ARE WITHIN THE NORMS PRESCRIBED UNDER SE CTION 80IB(10). NEEDLESS TO SAY THAT BALCONIES AND COMMON AREAS ARE NOT TO BE CONSIDERED AS PART OF FLAT AREA AS PER THE DECISIONS OF THE COORDINATE BENCH ON THE ISSUE. HOWEVER, THE PEN T HOUSE CONSTRUCTED AND THE ADDITIONAL SPACE FOR WHICH REVI SED PLANS WERE TAKEN SHOULD BE EXAMINED WHETHER THE PROJECT I TSELF IS ELIGIBLE FOR 80IB (10), ON WHICH THERE IS NO FINDIN G FROM THE A.O. OR BY THE CIT(A) IN THE ORDERS. NOT ONLY THAT AS SEEN FROM THE P & L ACCOUNT ASSESSEE IS STILL CARRYING CLOSIN G STOCK OF MORE THAN RS. 4 CRORES, WHEREAS SALES DURING THE YE AR WAS RS.6.24 CRORES. WHETHER ASSESSEE HASS CONTINUED TO CLAIM 80IB(10) IN LATER YEAR ALSO ON THE BALANCE OF CONST RUCTED AREA REQUIRED TO BE EXAMINED, KEEPING IN MIND THE METHOD OF ACCOUNTING FOLLOWED. AS AO ESTIMATED INCOME FOR NON PRODUCTION OF BOOKS OF ACCOUNT, WE ARE OF THE OPINI ON THAT THESE ASPECTS ALSO REQUIRE EXAMINATION. FOR THESE P URPOSES, WE ARE OF THE OPINION THAT THE ISSUE IN ASSESSEES GRO UNDS REQUIRE RE-EXAMINATION BY AO. THEREFORE, SINCE THE ISSUES A RE RESTORED TO THE FILE OF THE A.O., HE SHOULD EXAMINE THE BOOK S OF ACCOUNTS IN ORDER TO DETERMINE THE EXTENT OF PROFITS DISCLOS ED BY THE 6 ITA.NO.550 & 590/HYD/2013 M/S. CECON BUILDERS, HYDERABAD ASSESSEE. NEEDLESS TO SAY THAT ASSESSEE SHOULD BE G IVEN ADEQUATE OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT, ITA.NO.550/HYD/2013 OF ASSESSEE AND ITA.NO.590/HYD/2013 OF THE REVENUE IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07.03.2014. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 07 TH MARCH, 2014 VBP/- COPY TO : 1. CECON BUILDERS, 1-10-74, TECHNOPOLIS, SUITE T-20 1, BEGUMPET, HYDERABAD. 2. ITO, WARD 10(1), I.T. TOWERS, MASAB TANK, HYDERA BAD 3. CIT(A)-VI, HYDERABAD 4. CIT-V, HYDERABAD 5. D.R. ITAT, A BENCH, HYDERABAD.