SAI SHIV DEVELOPERS, MUMBAI V. ASST CIT 21(2), MUMBAI

ITA 6113/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0374 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 30-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVIKIRAN
• Assessee Lawyers: D C JAIN
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6114/MUM/2014 ASSESSMENT YEAR: 2004 - 05 & ITA NO. 6113/MUM/2014 ASSESSMENT YEAR: 2005 - 06 M/S SAI SHIV DEVELOPERS C/O D.C. JAIN & CO. 75, BOMBAY MUTUAL BLDG. 293, DR. D.N. ROAD, FORT, MUMBAI - 400001 VS. ACIT 21(2), C - 10, 5 TH FLOOR, ROOM NO. 508, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 PAN NO. AANFS2229J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.C. JAIN, AR REVENUE BY: SHRI K. RAVI KIRAN, DR DATE OF HEARING : 17/05/2017 DATE OF PRONOUNCEMENT: 10/08/2017 ORDER PER N.K. PRADHAN, A.M . THE CAPTIONED APPEALS FILED BY THE ASSESSEE FOR THE AY 2004 - 05 & 2005 - 06 ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 32, MUMBAI AND ARISE OUT OF ORDER U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT). AS COMMO N ISSUES ITA NO 611 3 & 611 4 /MUM/2014 2 ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUND OF APPEAL FILED BY THE ASSESSEE FOR THE AY 2004 - 05 IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY LEVIED U/S 271(1)(C), BEING THE 100% OF THE TAX EVADED I.E. RS.1,51,011/ - OUT OF 200% OF RS.3,02,022/ - LEVIED BY THE ASSESSING OFFICER (AO) . THE APPEAL FOR THE AY 2005 - 06 IS ON SIMILAR GROUND. THE ONLY DIFFERENCE IS 100% OF THE TAX EVADED I.E. RS.1,54,031/ - OUT OF 20 0% OF RS.3,08,062/ - LEVIED BY THE AO. 3. WE BEGIN WITH THE AY 2004 - 05. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 01.11.2004 DECLARING TOTAL INCOME OF RS.1,40,151/ - . IN THE REGULAR ASSESSMENT U/S 143(3) DATED 29.12.2006 , THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IB AMOUNTING TO RS.2,12,08,349/ - IN RESPECT OF BUILDING NO. 2 & 4 IN SAI BABA ENCLAVE WAS ACCEPTED. THERE WAS A SURVEY ACTION IN THE PREMISES OF THE ASSESSEE ON 02.03.2006. THE AO HAS OBSERVED THAT EXAMI NATION OF MATERIALS IMPOUNDED DURING THE SURVEY PROCEEDINGS REVEAL THAT IN RESPECT OF BUILDING NO. 4 , ONE FLAT ON EVERY FLOOR IS EXCEEDING THE BUILT - UP AREA OF 1000 SQ FT AS PER THE AREA MENTIONED IN THE AGREEMENTS. IN ALL THERE ARE 21 FLATS WHOSE AREA EXC EED 1000 SQ FT. IN RESPECT OF BUILDING NO. 2 , THERE ARE 9 INSTANCES WHERE TWO FLATS HAVE BEEN JOINED INTO TWO IN WHICH ONE SINGLE FAMILY IS LIVING AND TWO FLATS ARE CONVERTED INTO SINGLE RESIDENTIAL UNIT EXCEEDING THE PRESCRIBED AREA NORM OF 1000 SQ FT U/S 80IB. THE AO HAS NOTED THAT ONE OF THE CONDITIONS OF THE PROVISIONS OF SECTION 80IB IS THAT THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT UP AREA OF ITA NO 611 3 & 611 4 /MUM/2014 3 1000 SQ FT WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI. IN THE ASSESSEES CASE THIS CONDITION IS NOT FULFILLED AND THE ASSESSEE HAS VIOLATED THE PROVISIONS BY CONSTRUCTING FLATS EXCEEDING 1000 SQ FT BUILT UP AREA IN BUILDING NO. 4 AND IN RESPECT OF BUILDING NO. 2, TWO FLATS HAVE BEEN COMBINED. THEREFORE, THE AO REJECTED THE CLAIM OF DEDUCTION OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 04.08.2011 HELD AS UNDER: RESPECTFULLY FOLLOWING THE DECISION OF THE MUMBAI ITAT AS ABOVE, THE AO IS DIRECTED TO COMPUTE THE DEDUCTION U/S 80IB (10) IN RESPECT THE PROFITS OF UNDERTAKING FOR AY 2004 - 05 & 2005 - 06 ON PRORATA BASIS IN RESPECT OF ONLY THOSE FLATS WHOSE BUILT UP AREA (NOT THE SALEABLE OR SUPER BUILT UP AREA) DOES NOT EXCEED 1000 SQ FT EVEN AFTER JOINING T HE TWO FLATS INTO ONE RESIDENTIAL UNIT. ACCORDINGLY , THIS GROUND OF APPEAL IS PARTLY ALLOWED FOR BOTH AYS. 5. IN APPE AL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), THE ITAT E BENCH, MUMBAI IN ITA NO. 7572/MUM/2011 FOR AY 2004 - 05 AND ITA NO. 7574/MUM/2011 FOR AY 2005 - 06 VIDE ORDER DATED 20.02.2013 HELD AS UNDER: WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. IT HAS ALREADY BEEN POINTED OUT THAT THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST A FOREMENTIONED ORDER OF LD. CIT(A). AS A MATTER OF FACT LD. CIT(A) HAS FOUND THAT THE BUILT UP AREA EXCEEDS 1000 SQ FT ONLY IN RESPECT OF TWO UNITS IN BUILDING NO. 2. IN BUILDING NO. 4, THERE IS NO FLAT EXCEEDING BUILT UP AREA OF 1000 SQ FT. NO EVIDENCE HAS BEEN PRODUCED BY THE REVENUE TO CONTROVERT THESE FINDINGS OF FACTS RECORDED BY LD. CIT(A). THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW ITA NO 611 3 & 611 4 /MUM/2014 4 RELIED UPON BY LD. CIT(A), WE ARE OF THE OPINION THAT THERE IS NO INFIRMITY IN THE DIRECTIONS GIVEN BY LD. CIT(A) TO THE AO. 6. THEN THE AO INITIATED PENALTY PROCEEDINGS AND IN THE ABSENCE OF UNIT - WISE DETAILS AND THE YEAR IN WHICH THE SAME IS OFFERED, CALCULATED VIDE ORDER DATED 30.03.2013 THE NET PROFIT ON PRORATE BASIS AS UNDER: SQ FT PER JOINED FLAT OF TWO UNITS 1098.01 SQ FT + 1084.63 SQ FT = 2182.64 SQ FT AVERAGE SQ FT PER FLAT = 2182.64/2 = 1091.32 AVERAGE RATE AS PER DETAILS RS.3,000/ - TOTAL CONSIDERATION (50% OF THE TOTAL) 3,000 X 1091.32 = 32,73,960/ - NET PROFIT @ 15% AS PER ROI RS.4,91,094/ - THE AO THEN LEVIED A PENALTY OF RS.3,02,022/ - FOR AY 2004 - 05 & RS.3,08,062/ - FOR AY 2005 - 06 @ 200% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED . 7. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) . THE LD. CIT(A) VIDE ORDER DATED 25.07.2014 REDUCED THE PENALTY IMPOSED BY THE AO TO 100% OF THE TAX SOUGHT TO BE EVADED. 8. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE BROADLY SUBMITS THAT THE DETAILS OF BUILT UP AREA OF ALL FLATS OF BUILDING NO. 4 AND BUILDING NO. 2 DULY CERTIFIED BY THE ARCHITECT WERE GIVEN DURING THE ORIGINAL ASSESSMENT PROCEEDING BEFORE THE AO. AS PER IT , THE BUILT UP AREA OF ALL FLATS WERE LESS THAN 1000 SQ FT. HE FURTHER SUBMITS THAT IF THE AO WERE NOT TO BE LIEVE THE ARCHITECT CERTIFICATE, HE COULD HAVE GOT THE FLAT MEASURED BY DEPUTING SOME OTHER INDEPENDENT AGENCY BUT HE DID NOT ITA NO 611 3 & 611 4 /MUM/2014 5 DO THE SAME DESPITE THE REQUEST MADE BY THE ASSESSEE DURING RE - ASSESSMENT PROCEEDINGS. THE LD. COUNSEL ALSO SUBMITS THAT AS AGAI NST THE TOTAL DENIAL OF DEDUCTION U/S 80IB(10), THE DISALLOWANCE WHICH REMAINED AFTER THE DECISION OF THE LD. CIT(A) WAS ONLY IN RESPECT OF FOUR FLATS SOLD TO TWO INDI VIDUALS FORMING TWO UNITS WHERE BUILT UP AREA EXCEEDED 1000 SQ FT. IT IS STATED THAT AGAI NST SUCH ORDER OF THE LD. CIT(A), THE DEPARTMENTAL APPEAL TO THE ITAT HAS BEEN DISMISSED. ANOTHER LIMB OF ARGUMENT OF THE LD. COUNSEL IS THAT THE AO HAS COMPUTED THE INCOME SOUGHT TO BE EVADED ON PRO RATA BASIS IN SPITE OF THE FACT THAT ALL THE DETAILS W ERE AVAILABLE. 9. PER CONTRA THE LD. DR SUBMITS THAT THE LD. CIT(A) HAS REASONABLY RESTRICTED THE PENALTY U/S 271(1)(C) TO 100% OF THE TAX SOUGHT TO BE EVADED FOR BOTH THE ASSESSMENT YEARS. 10. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIALS ON RECORD. AS DELINEATED AT PARA 4 AND 5 HERE - IN - ABOVE , AS AGAINST THE TOTAL DENIAL OF DEDUCTION U/S 80IB (10), THE DISALLOWANCE WHICH REMAINED AFTER THE ORDER OF THE LD. CIT(A) WAS ONLY IN RESPECT OF FOUR FLATS SOLD TO TWO INDI VIDUALS FORMING TW O UNITS WHERE BUILT UP AREA EXCEEDED 1000 SQ FT. THE APPEAL FILED BY THE DEPARTMENT AGAINST SUCH ORDER OF THE LD. CIT(A) HAS BEEN DISMISSED BY THE ITAT. 10.1 WE FIND THAT THE DETAILS OF BUILT UP AREA OF ALL FLATS OF BUILDING NO. 4 AND BUILDING NO. 2 DU LY CERTIFIED BY THE ARCHITECT WERE GIVEN BY THE ASSESSEE DURING THE ORIGINAL ASSESSMENT PROCEEDING BEFORE THE AO. IF THE AO WERE NOT TO BELIEVE THE ARCHITECT CERTIFICATE, HE COULD HAVE GOT ITA NO 611 3 & 611 4 /MUM/2014 6 THE FLAT MEASURED BY DEPUTING SOME OTHER INDEPENDENT AGENCY BUT HE DID NOT DO THE SAME. 10.2 WE FIND THAT THE AO HAS LEVIED PENALTY U/S 271(1)(C) ON THE BASIS OF NET PROFIT WORKED OUT ON PRO RATA BASIS. WE HAVE MENTIONED IT AT PARA 6 HERE - IN - ABOVE. PENALTY IMPOSED ON INCOME ARRIVED ON THE BASIS OF PRO RATA CALCULATION LAC KS OBJECTIVITY. IN THE SCHEME OF THE ACT, THE PROCEEDINGS FOR IMPOSITION OF PENALTY, THOUGH EMANATING FROM THE PROCEEDINGS OF ASSESSMEN T, ARE ESSENTIALLY INDEPENDENT. FINDINGS GIVEN I N ASSESSMENT PROCEEDINGS ARE CERTAINLY RELEVANT, BUT SUCH FINDINGS ARE MA TERIAL ALONE AND MAY NOT JUSTIFY THE IMPOSITION OF PENALTY IN A GIVEN CASE, BECAUSE THE CONSIDERATIONS THAT ARISE IN PENALTY PROCEEDINGS ARE DIFFERENT FROM THOSE THAT ARISE IN ASSESSMENT PROCEEDINGS. WE MAY REFER TO THE DECISION IN BANARAS TEXTORIUM VS. CI T (1988) 169 ITR 782, 790, 791 (ALL); CIT VS. GOVINDANKUTTY MENON , (1989) 178 ITR 509, 515 (KER); HOTEL & ALLIED TRADES (P) LTD. VS. CIT (1996) 221 ITR 619, 646 (KER). 10.2 IN VIEW OF THE REASONS NARRATED AT PARA 10 ,10.1 & 10. 2 HERE - IN - ABOVE, WE CANCEL THE ORDER OF THE LD. CIT(A) RESTRICTING THE PENALTY IMPOSED BY THE AO. 11. IN THE RESULT, THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 10/08/2017 . SD/ - SD/ - ( MAHAVIR SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 10/08/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : ITA NO 611 3 & 611 4 /MUM/2014 7 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI