DCIT (OSD) RG 8(1), MUMBAI V. CORDCON BUILDERS P.LTD, MUMBAI

ITA 7346/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2500 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 13-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B D NAIK
• Keywords: Depreciation; Audit objection; Question of law; Tangible material; Difference of opinion; Competent authority; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 133A; 80IB; 147; 148

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.7346/MUM/2013 ASSESSMENT YEAR: 2007-08 DCIT(OSD), RANGE-8(1), ROOM NO.260A, 2 ND FLOOR, AAYAKAR BAHVAN, M.K. ROAD, MUMBAI-400020 / VS. M/S CORDCON BUILDERS PVT. LTD. SAGAR CITY, V.P. ROAD, ANDHERI (EAST), MUMBAI-400058 ( / REVENUE) ( ! /ASSESSEE) PAN. NO. AABCC5459M / REVENUE BY SHRI B.D. NAIK ! / ASSESSEE BY NONE ' # $ ! % / DATE OF HEARING : 12/11/2015 $ ! % / DATE OF ORDER: 30/11/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 04/09/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO A LLOWING DEDUCTION OF RS.16,90,070/- CLAIMED U/S 80IB(10) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 2 2. DURING HEARING, THE LD. DR, SHRI B.D. NAIK, ADVANCED ARGUMENTS WHICH IS IDENTICAL TO THE GROUND RAISED. NONE WAS PRESENT FOR THE ASSESSEE IN SPITE OF ISSUA NCE OF REGISTERED NOTICE, THEREFORE, WE HAVE NO OPTION TO PROCEED EX- PARTE TO QUA THE ASSESSEE AND PROCEED TO DISPOSE OF F THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD . 2.1. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WITHOUT G OING INTO MUCH DELIBERATION, WE FIND THAT THE IMPUGNED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL FOR A.Y. 2006-07 (ITA NO.3162/MUM/2012) OR DER DATED 15/05/2015, WHICH IS REPRODUCED HEREUNDER FOR READY REFERENCE AND ANALYSIS:- THIS IS AN APPEAL FILED BY REVENUE AGAINST THE OR DER OF CIT(A)-16, MUMBAI DATED 29-2-2012, FOR THE ASSESSME NT YEAR 2006-2007, IN THE MATTER OF ORDER PASSED UNDER SECT ION 143(3) R.W.S147 OF THE I.T. ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF IN THIS CASE ARE THAT ASSESSMENT U/S.143(3 ) WAS COMPLETED ON 29-12- 2008, DETERMINING TOTAL INCOME AT RS.4,78,32,068/- UNDER NORMAL PROVISIONS OF THE ACT . SUBSEQUENTLY, NOTICE U/S.148 DATED 31-3-2011 WAS IS SUED AND SERVED UPON THE ASSESSEE ON 31-3-2011. IN THE REASS ESSMENT PROCEEDINGS, THE AO MADE AN ADDITION OF RS.5,29,49, 927/- BY DISALLOWING ASSESSEES CLAIM OF DEDUCTION U/S.80IB( 10) VIDE ORDER DATED 20.12.2011. M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 3 3. IN APPEAL FILED BEFORE THE CIT(A), THE ASSESSEE CHALLENGED BOTH VALIDITY OF REOPENING U/S.147 AS WELL AS MERIT OF THE ADDITION SO MADE. BY THE IMPUGNED ORDER THE CIT(A) NOT ONLY QUASHED THE REASSESSMENT BUT ALSO DELETED THE ADDIT IONS MADE BY THE AO DISALLOWING CLAIM U/S.80IB. THE PRECISE O BSERVATION OF THE CIT(A) WAS AS UNDER :- 2.3.1. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE APPELLANT AND ALSO CAREFULLY GONE THROUGH THE DOCUM ENTS AVAILABLE ON RECORD. I FIND THAT SECTION 147 PROVID ES THAT IF THE AO HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 163, ASSESS OR RE ASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX, WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SU BSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THE SECTION. THE BASIC POSTULATE WHICH UNDERLINES SECTION 147 IS THE FORMA TION OF THE BELIEF BY THE AO THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. THE AO MUST HAV E REASON TO BELIEVE THAT SUCH IS THE CASE BEFORE HE PROCEEDS TO ISSUE A NOTICE UNDER S. 147. THE REASONS WHICH ARE RECORDED BY THE AO FOR REOPENING AN ASSESSMENT ARE THE ONLY REASONS WH ICH CAN BE CONSIDERED WHEN THE FORMATION OF THE BELIEF IS IMPU GNED. THE RECORDING OF REASONS DISTINGUISHES AN OBJECTIVE FRO M A SUBJECTIVE EXERCISE OF POWER. THE REQUIREMENT OF RE CORDING REASONS IS A CHECK AGAINST ARBITRARY EXERCISE OF PO WER. FOR IT IS ON THE BASIS OF THE REASONS RECORDED AND ON THOSE R EASONS ALONE THAT THE VALIDITY OF THE ORDER REOPENING THE ASSESS MENT IS TO BE DECIDED. THE REASONS RECORDED WHILE REOPENING THE A SSESSMENT M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 4 CANNOT BE ALLOWED TO GROW WITH AGE AND INGENUITY, B Y DEVISING NEW GROUNDS IN REPLIES AND AFFIDAVITS NOT ENVISAGED . WHEN THE REASONS FOR REOPENING AN ASSESSMENT WERE RECORDED. THE PRINCIPLE OF LAW, THEREFORE, IS WELL SETTLED THAT T HE QUESTION AS TO WHETHER THERE WAS REASON TO BELIEVE, WITHIN THE MEA NING OF SECTION 147 THAT INCOME HAS ESCAPED ASSESSMENT, MUS T BE DETERMINED WITH REFERENCE TO THE REASONS RECORDED B Y THE AO. THE REASONS WHICH ARE RECORDED CANNOT BE SUPPLEMENT ED BY AFFIDAVITS. THE IMPOSITION OF THAT REQUIREMENT ENSU RES AGAINST AN ARBITRARY EXERCISE OF POWERS UNDER SECTION 148. 2.3.2 IN CALCUTTA DISCOUNT CO. LTD. VS. ITO (1961) 41 ITR 191 (SC), THE SUPREME COURT HAS EXPATIATED THE EXPRESSI ON 'REASON TO BELIEVE' AS POSTULATING BELIEF AND THE EXISTENCE OF REASONS FOR THAT BELIEF. THE COURT PROCEEDED TO SAY THUS: 'THE BELIEF MUST BE HELD IN GOOD FAITH IT CANNOT BE MERELY A PRETENC E. IT CONTEMPLATES EXISTENCE OF REASONS ON WHICH THE BELI EF IS FOUNDED, AND NOT MERELY A BELIEF IN THE EXISTENCE O F REASONS INDUCING THE BELIEF. THE COURT IS NOT CONCERNED WIT H THE QUESTION WHETHER THE MATERIALS MAY BE REGARDED BY A COURT, BEFORE WHICH A DISPUTE IS RAISED, TO BE SUFFICIENT TO SUSTAIN THE BELIEF ENTERTAINED BY THE ITO.II ON A CHALLENGE BEI NG THROWN, IT IS NECESSARY FOR THE ITO TO ESTABLISH THAT THERE AR E MATERIALS FROM WHICH HE COULD FORM THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT OR HAS BEEN UNDER-ASSESSED. THEREFORE, T HERE MUST BE MATERIAL FOR THE FORMATION OF THE BELIEF THAT IN COME HAS ESCAPED ASSESSMENT. THE IMPORTANCE OF THE AVAILABIL ITY OF MATERIALS FOR FORMULATION OF BELIEF HAS BEEN STRESS ED IN SEVERAL DECISIONS, THE IMPORTANT AMONGST THEM BEING GIVEN B ELOW: M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 5 Y. RAJAN VS. ITO (1970) 77 ITR 839 (AP); N. SUNDARESWARAM VS. CIT (1972) 84 ITR 173 (KER); SITAR AM JINDAL VS. ITO (1972) 84 ITR 162 (CAL); UNION CARBIDE (INDIA) LTD. VS. ITO (1973) 87 ITR 529 (CAL); R. DALMIA VS. UNION OF INDIA (1972) 84 ITR 616 (D EL); SMT. HEMLATA AGARWAL VS. CIT (1967) 64 ITR 428 (A LL); SHARMA & CO. VS. ITO (1972) 86 ITR 741 (ALL); GRAHAMS TRADING CO. (INDIA) LTD. VS. ITO (1976) 1 05 ITR 1 (CAL). 2.3.3 THE JURISDICTIONAL HIGH COURT IN THE CASE OF N.D. BHATT, LAC & ANR.VS. LB.M. WORLD TRADE CORPORATION (1995) 216 ITR 811 (BORN) HAS HELD THUS:- IT IS ALSO WELL-SETTLED THAT THE REASONS FOR REOPENING ARE REQUIRED TO BE RECORDED B Y THE ASSESSING AUTHORITY BEFORE ISSUING ANY NOTICE UNDER S. 148 BY VIRTUE OF THE PROVISIONS OF S. 148(2) AT THE RELEVA NT TIME. ONLY THE REASONS SO RECORDED CAN BE LOOKED AT FOR SUSTAI NING OR SETTING ASIDE A NOTICE ISSUED UNDER S. 148. IN THE CASE OF EQUITABLE INVESTMENT CO. (P) LTD. VS. ITO & ORS. (1 988) 73 CTR (CAL) 236 : (1988) 174 ITR 714 (CAL), A DIVISIO N BENCH OF THE CALCUTTA HIGH COURT HAS HELD THAT WHERE A NOTIC E ISSUED UNDER S. 148 OF THE IT ACT, 1961, AFTER OBTAINING T HE SANCTION OF THE CIT IS CHALLENGED, THE ONLY DOCUMENT TO BE LOOK ED INTO FOR DETERMINING THE VALIDITY OF THE NOTICE IS THE REPOR T ON THE BASIS OF WHICH THE SANCTION OF THE CIT HAS BEEN OBTAINED. THE IT DEPARTMENT CANNOT RELY ON ANY OTHER MATERIAL APART FROM THE REPORT. 2.3.4 THE SAME PRINCIPLE WAS REITERATED IN THE DECI SION OF HINDUSTAN LEVER LTD. VS. R.B. WADKAR (2004) 268 ITR 332 (BORN) WHEREIN THE HON'BLE COURT HELD THUS: M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 6 ' ... THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE AO. NO SUBSTITUTION OR DELETION IS PERMISSIB LE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENC E CAN BE ALLOWED TO BE DRAWN BASED ON REASONS NOT RECORDED. IT IS FOR THE AG TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS RE CORDED BY HIM. HE HAS TO SPEAK THROUGH HIS REASONS. THE REASO NS RECORDED SHOULD BE CLEAR AND UNAMBIGUOUS AND SHOULD NOT SUFF ER FROM ANY VAGUENESS. THE REASONS RECORDED MUST DISCLOSE H IS MIND. REASONS ARE THE MANIFESTATION OF MIND OF THE AG. TH E REASONS RECORDED SHOULD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR THEREASONS. REASONS PROVIDE L INK BETWEEN CONCLUSION AND EVIDENCE. THE REASONS RECORDED MUST BE BASED ON EVIDENCE. THE AO, IN THE EVENT OF CHALLENGE TO T HE REASONS MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL AVAILABLE ON RECORD. THAT VITAL LINK IS THE SAFEGUARD AGAINST AR BITRARY REOPENING OF THE CONCLUDED ASSESSMENT. THE REASONS RECORDED BY THE AO CANNOT BE SUPPLEMENTED BY FILING AFFIDAVI T OF MAKING ORAL SUBMISSION, OTHERWISE, THE REASONS WHICH ARE L ACKING IN MATERIAL PARTICULARS WOULD GET SUPPLEMENTED, BY THE TIME THE MATTER REACHES TO THE COURT, ON THE STRENGTH OF AFF IDAVIT OR ORAL SUBMISSIONS ADVANCED. ' . 2.3.5 IN CIT VS. KELVINATOR OF INDIA LTD. (2010) 32 0 ITR 561(SC) , THE HON'BLE SUPREME COURT HAD HELD THAT P RIOR TO DIRECT TAX LAWS (AMENDMENT) ACT, 1987, REOPENING CO ULD BE DONE UNDER TWO CONDITIONS AND FULFILLMENT OF THE SA ID CONDITIONS ALONE CONFERRED JURISDICTION ON THE AO TO MAKE A BA CK ASSESSMENT, BUT IN S. 147 (W.E.F. 1ST APRIL, 1989), THEY ARE GIVEN A GO BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 7 THE AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPE D ASSESSMENT, CONFERS JURISDICTION TO REOPEN THE ASSE SSMENT. THEREFORE, POST 1ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATI ON TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH, S. 147 WO ULD GIVE ARBITRARY POWERS TO THE AO TO REOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO REOPEN. THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS SHOULD ALSO TO BE KEPT IN MIND. T HE AO HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. B UT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERT AIN PRE- CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN-B UILT TEST TO CHECK ABUSE OF POWER BY THE AO. HENCE, AFTER' 1ST A PRIL, 1989, AO HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPI NION' IN S. 147. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM TH E COMPANIES AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT RE-INTRODUCED THE SAID EXPRESSION AND DELETED THE W ORD 'OPINION' ON THE GROUND THAT IT WOULD VEST ARBITRAR Y POWERS IN THE AO. M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 8 2.3.6 IT IS A SETTLED LAW THAT AO ACQUIRES JURISDIC TION TO REOPEN ASSESSMENT UNDER S. 147(A) R/W S. 148 ONLY IF ON TH E BASIS OF SPECIFIC, RELIABLE AND RELEVANT INFORMATION COMING TO HIS POSSESSION SUBSEQUENTLY, HE HAS REASONS WHICH HE MU ST RECORD, TO BELIEVE THAT BY REASON OF OMISSION OF FAILURE ON THE PART OF THE ASSESSEE TO MAKE A TRUE AND FULL DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT DURING THE CONCLUDED A SSESSMENT PROCEEDINGS, ANY PART OF HIS INCOME, PROFIT OR GAIN S CHARGEABLE TO INCOME-TAX HAS ESCAPED ASSESSMENT. HE MAY START REASSESSMENT PROCEEDINGS EITHER BECAUSESOME FRESH F ACTS COME TO LIGHT WHICH WERE NOT PREVIOUSLY DISCLOSED OR SOM E INFORMATION WITH REGARD TO THE FACTS PREVIOUSLY DIS CLOSED COMES INTO HIS POSSESSION WHICH TENDS TO EXPOSE THE UNTRU THFULNESS OF THOSE FACTS. IN SUCH SITUATIONS, IT IS NOT A CASE O F MERE CHANGE OF OPINION OR THE DRAWING OF A DIFFERENT INFERENCE FRO M THE SAME FACTS AS WERE EARLIER AVAILABLE BUT ACTING ON FRESH INFORMATION. HOWEVER, IN THE INSTANT CASE I FIND THAT LD. AO HAS NOT COME TO ANY CONCLUSION THAT THE INFORMATION PROVIDED BY THE APPELLANT IN THE ORIGINAL ASSESSMENT WERE NOT CORRECT. IN THE CA SE OF TRANSWORLD INTERNATIONAL INC. VS. JT.CIT (2005) 273 ITR 242 (DEL), THE HON'BLE DELHI HIGH COURT HELD THAT WHEN SUFFICIENT MATERIAL WAS PLACED ON RECORD AND THE AO HAD ARRIVE D AT CONCLUSION THAT THE ASSESSEE WAS ENTITLED TO A PART ICULAR RELIEF (DEPRECIATION IN THAT CASE) THEN ON THE SAME MATERI AL A DIFFERENT VIEW COULD NOT BE TAKEN HAVING FOUND THAT THE AMOUN T REPRESENTING PAYMENT TO CHIT-HOLDERS WAS IN FACT PAID TO A DIRECTOR OF THE ASSESSEE, A PRIVATE COMPANY CONTROL LED BY THE RECIPIENT, AND THAT THE SAID MONEY WAS AVAILABLE WI TH THE ASSESSEE ITSELF AS UNDISCLOSED INCOME AND THUS, THE IMPUGNED M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 9 ADDITION WAS JUSTIFIED, FINDING OF THE TRIBUNAL IS A FINDING OF FACT, AND THERE IS NO GROUND FOR INTERFERENCE; NO S UBSTANTIAL QUESTION OF LAW ARISES. 2.3.8 IN GODREJ AGROVET LTD. VS. DY. CIT & ANR. (20 10) 230 CTR (BOM) 65 (2010) 323 ITR 97 (BOM), THE BOMBAY HI GH COURT HAS HELD THAT TRIBUNAL HAVING FOUND THAT NO N EW INFORMATION/ MATERIAL HAD COME TO THE NOTICE OF THE AO AFTER COMPLETION OF THE ORIGINAL ASSESSMENT TO FORM ANY B ELIEF ABOUT ESCAPEMENT OF ASSESSEE'S INCOME AND THAT SUCH A PUR PORTED BELIEF WAS ENTIRELY BASED ON REAPPRAISAL OR RECONSI DERATION OF THE MATERIAL/INFORMATION ALREADY AVAILABLE ON RECOR D AT THE TIME OF COMPLETION OF THE ORIGINAL ASSESSMENT, IT WAS JU STIFIED IN HOLDING THAT THE REOPENING OF THE ASSESSMENT WAS NO T VALID; NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATIO N. SIMILARLY IN THE CASE OF CIT VS. JAGSON INTERNATIONAL LTD. (2010 ) 321 ITR 544 (DEL), THE HON'BLE DELHI HIGH COURT HAS HELD TH AT REASONS QUOTED FOR REOPENING ASSESSMENT, WERE PRACTICALLY T HE SAME, AS THE REASONS FOR THE NOTICE UNDER S. 154, FOR RECTIF ICATION OF THE ALLEGED MISTAKES IN THE REVISED ASSESSMENT ORDER-RE CTIFICATION NOTICE HAD BEEN DROPPED BY THE SAME AO. HE CANNOT A GAIN START REASSESSMENT PROCEEDINGS ON THE BASIS OF THE SAME R EASONS. WHERE THE CONDITION PRECEDENT FOR ISSUANCE OF A NOT ICE IS ABSENT, THE NOTICE MIGHT BE CHALLENGED BY FILING A WRIT PETITION UNDER ART. 226 OF THE CONSTITUTION OF INDIA. REASSE SSMENT NOTICE ISSUED BY AO LACKED JURISDICTION. 2.3.9 IN A RECENT DECISION IN THE CASE IF ROSE SERV ICED APARTMENTS (P) LTD VS. DCIT (2011) 56 DTR (DEL) 353 , THE M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 10 HON'BLE DELHI HIGH COURT WHILE PLACING RELIANCE IN THE CASES OF JINDAL PHOTO FILMS LTD. VS. DCIT (1998) 234 ITR 170 (DEL), CIT VS. KELVINATOR OF INDIA LTD. (2010) 228 CTR (SC ) 488 AND ACIT VS. RAJESH JHAVERI STOCK 2003- 04, ASSESSEE FI LED AN AUDIT REPORT IN FORM 10CCB IN WHICH RELEVANT PARTICULARS OF THE LICENSE TO WORK THAT WAS GRANTED TO THE UNIT OF ASS ESSEE WAS DISCLOSED. THE LICENSE TO WORK DATED 14-8-2000, COP Y OF WHICH WAS FILED BEFORE AO, CONTAINED A DISCLOSURE OF THE FACT THAT THE PLANS HAD BEEN APPROVED BY THE SARPANCH BY HIS LETT ER DATED 129-1988. THE BASIS ON WHICH THE ASSESSMENT FOR ASS ESSMENT YEARS 2003-04 AND 2004-05 HAD BEEN SOUGHT TO BE REO PENED WAS THAT IT WAS DURING THE COURSE OF ASSESSMENT PRO CEEDINGS FOR SUBSEQUENT YEARS THAT THE REVENUE HAD OBTAINED A CO PY OF THE LICENSE WHICH SHOWED THAT THE PLANS HAD BEEN APPROV ED AS FAR BACK AS ON 12-9- 1988. THE BOMBAY HIGH COURT HELD T HAT BASICALLY, THE VALIDITY OF THE EXERCISE OF THE POWE RS TO REOPEN AN ASSESSMENT HAS TO BE DECIDED WITH REFERENCE TO THE REASONS RECORDED WHILE REOPENING THE ASSESSMENT. THE REASON S RECORDED WHILE REOPENING THE ASSESSMENT DID NOT JUSTIFY THE EXERCISE OF THE POWER IN THE FACTS OF THIS CASE AS THERE WAS FU LL AND TRUE DISCLOSURE. 2.3.11 IN THE CASE OF PURITY TECHTEXTILE, THE REAS SESSMENT NOTICE APPEARED TO HAVE BEEN ISSUED PURSUANT TO AN AUDIT R EPORT AND THE ASSESSING OFFICER HAD NO REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. THE HON'BLE BOMBAY HIGH COURT W HILE DEALING WITH THE ISSUE OBSERVED THAT DURING THE COU RSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2003-04, THE ASSESSEE FILED AN AUDIT REPORT IN FORM 10CCB IN WHI CH RELEVANT M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 11 PARTICULARS OF THE LICENSE TO WORK THAT WAS GRANTED TO THE UNIT OF THE ASSESSEE WAS DISCLOSED. THE LICENSE TO WORK DAT ED 14-8- 2000, COPY OF WHICH WAS FILED BEFORE THE AO, CONTAI NS A DISCLOSURE OF THE FACT THAT THE PLANS HAVE BEEN APP ROVED BY THE SARPANCH BY HIS LETTER DATED 12-9-1988. THE BASIS O N WHICH THE ASSESSMENT FOR ASSESSMENT YEARS 2003-04 AND 2004-05 HAS BEEN SOUGHT TO BE REOPENED IS THAT IT WAS DURING THE COU RSE OF ASSESSMENT PROCEEDINGS FOR SUBSEQUENT YEARS THAT TH E REVENUE HAD OBTAINED A COPY OF THE LICENSE WHICH SHOWED THA T THE PLANS HAVE BEEN APPROVED AS FAR BACK AS ON 12-9-1988. THI S STATEMENT WHICH IS CONTAINED IN THE REASONS, ON THE BASIS OF WHICH THE ASSESSMENT IS SOUGHT TO BE REOPENED, IS B ELIED BY THE RECORD WHICH SHOWS THAT THE REVENUE WAS IN POSSESSI ON OF THE MATERIAL PRODUCED BY THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2003-04 WHICH SHOWED THAT THE PLANS HAD BEEN APPROVED IN THE YEAR 1988. THEREFORE, THE BASIS ON WHICH THE ASSESSMENT UNDER SECTION 143(3) HAS BEEN SOUGHT TO BE REOPENED IS FACTUALLY INCORRECT. THE AO GRANTED THE ASSESSEE A DEDUCTION UNDER SECTI ON 80-IB AFTER BEING APPRAISED OF ALL THE RELEVANT DETAILS, INCLUDING THOSE IN FORM 10CCB WHICH SHOWED THAT PLANS HAD BEEN APPR OVED IN 1988. THE AO HAS NOTED, WHILE SEEKING APPROVAL OF T HE CIT, THAT DURING THE COURSE OF REVENUE AUDIT PROCEEDINGS , AN AUDIT OBJECTION HAS BEEN RAISED ON THE GROUND THAT THE AS SESSEE WAS NOT ELIGIBLE TO A DEDUCTION UNDER SECTION 80-IB FRO M ASSESSMENT YEAR 2002-03. THE AO NOTES THAT THE AUDIT OBJECTION WAS NOT ACCEPTED BUT THAT AS A PRECAUTIONARY MEASURE THE AS SESSMENT WAS REOPENED UNDER SECTION 147. THERE IS MERIT IN T HE SUBMISSION URGED ON THE PART OF THE ASSESSEE THAT T HE AO HAD NO M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 12 REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T. BASICALLY, THE VALIDITY OF THE EXERCISE OF THE POWE RS TO REOPEN AN ASSESSMENT HAS TO BE DECIDED WITH REFERENCE TO THE REASONS RECORDED WHILE REOPENING THE ASSESSMENT. THE REASON S RECORDED WHILE REOPENING THE ASSESSMENT DO NOT JUSTIFY THE E XERCISE OF THE POWER IN THE FACTS OF THIS CASE. 2.3.12 IT THUS IS APPARENT THAT THE AO DID NOT HAVE BEFORE HIM ANY ADDITIONAL MATERIAL AT ALL TO FORM A BELIEF THA T INCOME HAD ESCAPED ASSESSMENT. THE APPELLANT HAD ADMITTEDLY PL ACED ON RECORD BEFORE AO FOR ASSESSMENT YEAR 2006-07 THE EN TIRE DETAILS AND THE APPROVED PLAN OF ITS PROJECT BY THE BMC AND THE OTHER EVIDENCE WHICH UNEQUIVOCALLY SUPPORT THE APPELLANT' S CONTENTION THAT THE PROJECT GOT COMPLETED ON 26-03- 2008 AND COMMENCED WELL AFTER OCTOBER 1998. THERE WAS, HENCE , A TOTAL ABSENCE OF 'TANGIBLE MATERIAL', TO JUSTIFY THE CONC LUSION THAT INCOME HAD ESCAPED ASSESSMENT FOR THE RELEVANT ASSE SSMENT YEAR. THERE WAS NO MATERIAL BEFORE THE AO, THAT WOU LD LEAD TO A FORMATION OF BELIEF THAT THE INCOME HAD ESCAPED ASS ESSMENT. IN THE PRESENT CASE, AS WELL THE AO APPEARS TO HAVE RE LIED EXCLUSIVELY ON AN AUDIT OBJECTION. THERE WAS, HENCE , A TOTAL ABSENCE OF 'TANGIBLE MATERIAL', TO JUSTIFY THE CONC LUSION THAT INCOME HAD ESCAPED ASSESSMENT. ALL THE CONDITIONS W ERE FULFILLED BY THE APPELLANT FOR THE CLAIM OF THE DED UCTION UNDER SECTION 80IB(10) AND THE LD. AO VERIFIED THE SAME D URING THE ORIGINAL ASSESSMENT WHICH WAS COMPLETED AFTER CONDU CTING A SURVEY OPERATION U/S. 133A OF THE ACT. IN VIEW OF T HE FOREGOING THE ISSUE OF NOTICE U/S. 148 IS BAD IN LAW AND THUS CANNOT BE SUSTAINED. THIS GROUND OF APPEAL IS THUS ALLOWED. M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 13 GROUND OF APPEAL NO. 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED JT.CIT, ERRED IN DENYING THE CLAIM OF THE APPELLANT COMPANY U/S 80IB(10). 2. THE LEARNED JT. CIT FAILED TO APPRECIATE THAT THE APPELLANT'S CLAIM U/S 80IB(10) IS AS PER THE PROVISIONS OF LAW AND THAT THE SAME HAS BEEN CORRECTLY CLAIMED AND ALLOWED IN THE ORIGINAL ASSESSMENT. 3. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, THE JT. CIT OUGHT NOT TO HAVE DENIED THE CLAIM OF THE APPELLANT U/S 8 0IB (10). 3.1 BRIEF FACTS OF THE CASE & AO 'S CONCLUSIONS 3.1.1 DURING THE REASSESSMENT PROCEEDINGS, THE LD. AO OBSERVED THAT AS CERTIFIED IN FORM NO.10CCB BY THE ACCOUNTANT, THE APPELLANT COMPANY WAS DEVELOPING PR OJECT ON A PLOT, ADMEASURING 40703 SQ.MTRS. DURING THE YEAR UN DER CONSIDERATION, TWO BUILDINGS NAMELY INDIAN OCEAN AN D ATLANTIC SAGAR WERE COMPLETED AND THERE WAS CLOSING WORK IN PROGRESS OF RS.936.75 LAKHS IN RESPECT OF BUILDING UNDER CON SIDERATION. THE APPELLANT, HOWEVER, NEITHER FURNISHED PROJECT A PPROVAL NOR PROJECT COMPLETION CERTIFICATE. THE APPELLANT FURNI SHED INTIMATION OF DISAPPROVAL, BUILDING COMMENCEMENT CE RTIFICATE AND OCCUPATION CERTIFICATE OF THE BUILDING AND CLAI MED DEDUCTION U/ S.80IB(10) OF RS.5,29,49,927/-. THE AP PELLANT SUBMITTED THAT THE DURING THE COURSE OF ORIGINAL AS SESSMENT PROCEEDINGS U/S.143(3) VIDE LETTER DATED 18/3/2008 IT WAS M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 14 INFORMED THAT IT WAS HAVING FOUR BUILDINGS PROJECT ON THE SAID PLOT OF LAND AND OUT OF THE SAME ONLY TWO BUILDINGS NAMELY INDIAN OCEAN AND ATLANTA SAGAR WERE COMPLETED. INITIALLY, THE APPELLANT INTENDED TO CLAIM DEDUCTIO N U/ S.80IB IN RESPECT OF ATLANTIC SAGAR BUILDING. HOWEVER, DURING SURVEY OPERATION IT WAS NOTICED THAT ATLANTIC SAGAR COMMEN CED PRIOR TO 1998 AND AREA OF SOME FLATS WAS MORE THAN 1000 S Q.FT. DUE TO THIS SURVEY, THE APPELLANT WITHDREW ITS CLAIM U/ S. 80IB IN RESPECT OF ATLANTIC SAGAR. THE APPELLANT HAD CONSIDERED BOT H THE ABOVE BUILDINGS AS A PART OF SAME PROJECT. SINCE, THE APP ELLANT VIOLATED THE BUILT UP AREA NORM AND DEVELOPMENT & C ONSTRUCTION COMMENCED PRIOR TO SEPTEMBER 1998, THE DEDUCTION U/ S. 80IB IS NOT ADMISSIBLE FOR THE ENTIRE PROJECT. THE APPELLAN T FURTHER SUBMITTED THAT THE CA IN FORM NO.10CCB HAD CERTIFIE D THAT SIZE OF THE PLOT ON WHICH THE SAID PROJECT WAS BEING DEV ELOPED WAS 40803 SQ.MTRS. THUS, THE APPELLANT'S SUBSEQUENT CON TENTION THAT AREA MARKED FOR BUILDING INDIAN OCEAN AT 4981.96 SQ .MTRS. IS AFTER THOUGHT AND IS CONTRARY TO THE CERTIFICATE GI VEN IN FORM NO.10CCB. SINCE, ONE OF THE BUILDINGS IN THE PROJEC T AS POINTED ABOVE VIOLATED THE CONDITIONS, DEDUCTION U/ S. 80IB (10) IS NOT CORRECT. 3.1.2. WITHOUT PREJUDICE TO THE ABOVE, THE LD.AO FU RTHER OBSERVED THAT AS PER PROVISIONS OF SECTION 80IB(10) READ WITH RULE 158BBB, IN ORDER TO CLAIM DEDUCTION, THE APPEL LANT IS REQUIRED TO FURNISH SEPARATE AUDIT REPORT ALONG WIT H PROFIT & LOSS ACCOUNT AND BALANCE SHEET AS IF THE UNDERTAKIN G OR ENTERPRISE WAS A DISTINCT ENTITY. HOWEVER, NO SUCH SEPARATE M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 15 REPORT IS FURNISHED BY THE APPELLANT. FROM THE PLAN OF BUILDING INDIAN OCEAN, IT IS SEEN THAT OUT OF THE AREA OF 49 81.96 ST.MTRS. AND AREA OF 183.27 SQ.MTRS. IS HILLOCK AREA .ON WHI CH CONSTRUCTION IS NOT FEASIBLE. IF THIS UNFEASIBLE AR EA IS EXCLUDED THE ACTUAL AREA FOR DEVELOPMENT WILL FALL BELOW 1 A CRE AND AS PER THE SAID SECTION THE AREA OF THE PLOT SHOULD BE MINIMUM OF 1 ACRE. THE LD.AO OBSERVED THAT AREA FOR DEVELOPMENT COMES AROUND 38% OF THE PLOT. THE APPELLANT FURTHER SUBMI TTED THAT IT HAS ITSELF VIDE LETTER DATED 18/3/2008 HAS STATED T HAT ON THE AFORESAID COMMON PLOT, CERTAIN BASIC WORK SUCH AS A CCESS ROAD, DRAINAGE LINE, PERMANENT WATER LINE. BOUNDARY WALL, REMOVING OF SLUMS, SHIFTING OF MOSQUE, MOTHERSA, ETC. WOULD BE DONE LATER ON. FROM THIS IT IS CRYSTAL CLEAR THAT, EVEN THOUGH , THE BUILDING INDIAN OCEAN IS COMPLETE WITHOUT COMPLETION OF THE ABOVE WORK, IT CANNOT BE SAID THAT THE PROJECT AS A WHOLE IS A COMPLETE PROJECT.1 THE APPELLANT HAS CONTENDED THAT THE AREA EARMARKED FOR INDIAN OCEAN IS 4981.96 SQ.MTRS. FROM THE BUILD ING PLAN OF INDIAN OCEAN, IT IS SEEN THE TOTAL BUILT UP AREA OF A & B WING WORKS OUT AS FOLLOWS: 'A'- WING = 4 FLATS = 665.56X4 = 2662.24SQ.FT. 'B'- WING = 4 FLATS 485.44 + 675.78 + 484.44 + 657.78 = 2320.44 SQ.FT. TOTAL = 4982.68 SQ.FT. ADD: SAY 30% FOR COMMON FACILITIES SUCH AS LIFT, PASSAGE, STAIRCASE, ETC. TOTAL = 1494 .80 SQ.FT. AREA OCCUPIED BY THE BUILDING = 6477.48 SQ.FT. = 60 0 SQ.MTRS 3.1.3. THE LD.AO THUS CONCLUDED THAT THE ACTUAL ARE A UTILIZED FOR CONSTRUCTION WORKS OUT TO 600.68 SQ.MTRS. I.E. 12% OF THE PLOT EARMARKED FOR DEVELOPMENT OF THE BUILDING INDI AN OCEAN. M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 16 ACCORDINGLY, THE LD. AO REJECTED THE CLAIM OF THE APPELLANT OF DEDUCTION ULS. 80IB(10) AT RS.5,29,49,927/-. 3.2 APPELLANT'S CONTENTIONS AND SUBMISSIONS: 3.2.1 DURING THE COURSE OF APPELLATE PROCEEDINGS TH E APPELLANT SUBMITTED THAT THAT THE PROCEDURE TO BE FOLLOWED IN MUMBAI FOR CONSTRUCTION HAS NOT BEEN TAKEN INTO CONSIDERATION. AS PER THE PROCEDURE IN MUMBAI FOR ANY CONSTRUCTION ACTIVITY T O COMMENCE (WHICH PROCEDURE IS WELL DOCUMENTED) A BUILDER HAS TO UNDERTAKE THE FOLLOWING STEPS FOR EXECUTION OF A CO NSTRUCTION PROJECT, VIZ; A BUILDER HAS TO FIRST SUBMIT APPLICATION AND DES IGN PLANS AT THE BUILDING PROPOSAL OFFICE OF BMC AS PRESCRIBED B Y SECTION 373 OF THE BMC ACT AND PAY SCRUTINY FEE (MUNICIPAL) . THE FILE IS THEN FORWARDED TO THE CONCERNED OFFIC ER IN THE BUILDING PROPOSAL DEPARTMENT. THEN THE FILE IS FORW ARDED TO THE SURVEY OFFICE, WHICH MAKE ITS REMARKS ON THE APPLIC ATION FILE AND CHECK THE REMARKS FROM THE DEVELOPMENT PLAN OFF ICE (OBTAINED DURING THE DESIGN STAGE OF THE PROJECT). IF THE SURVEY OFFICE IS SATISFIED WITH ITS REVIEW, IT WILL SEND T HE APPLICATION FILE BACK TO THE BUILDING PROPOSAL DEPARTMENT. A SUB-ENGINEER FROM THE BUILDING PROPOSAL OFFICE WILL CONDUCT A SITE INSPECTION WITHIN 3 TO 4 DAYS OF REC EIVING THE FILE FROM THE SURVEY OFFICE. THE DATE AND TIME OF THE SI TE INSPECTION ARE ARRANGED BY THE COMPANY'S ARCHITECT. THE BUILDI NG COMPANY MUST BE ON-SITE WHEN THE INSPECTION TAKES PLACE. M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 17 AFTER THE SITE INSPECTION, THE APPLICATION FILE R ETURNS TO THE BUILDING PROPOSAL OFFICE TO RECEIVE AN INTIMATION O F DISAPPROVAL (AUTHORIZATION) I.E. I.O.D ... THE INTI MATION OF DISAPPROVAL IS ISSUED WITH A LIST OF LINO-OBJECTION CERTIFICATES (NOCS) WHICH THE APPLICANT MUST OBTAIN SEPARATELY F ROM VARIOUS DEPARTMENTS AND GOVERNMENT AUTHORITIES. FIN AL CLEARANCE TO BUILD WILL ONLY BE GIVEN ONCE THE COMP ANY OBTAINS ALL NOCS. ON SUBMISSION OF ALL REQUIRED NOCS MENTIO NED IN THE IOD AND ON COMPLIANCE OF THE IOD CONDITIONS, THE AP PLICANT MAY SUBMIT REQUEST FOR THE COMMENCEMENT CERTIFICATE (CC). CONSTRUCTION CAN COMMENCE ONLY IF THE INTIMATION OF DISAPPROVAL (IOD) CERTIFICATE AND COMMENCEMENT CERT IFICATE (CC) IS RECEIVED. THERE IS NO PROJECT APPROVAL CERT IFICATE THAT IS REQUIRED TO BE SEPARATELY ISSUED BY THE BMC. THE IO D & CC IS THE PROJECT APPROVAL. (CERTIFICATE FROM ARCHITECT P AGE 118) ONCE THE BUILDING IS COMPLETE THE BUILDER HAS TO AP PLY FOR AN O.C. I.E. OCCUPANCY CERTIFICATE WHICH SIGNIFIES THA T THE BUILDING IS COMPLETE AND CAN BE INHABITED. THE OCCUPATION CE RTIFICATE GIVEN BY THE BMC WOULD BE SUFFICIENT PROOF THAT THE HOUSING PROJECT IS COMPLETED. EVEN IN DY. CIT VS. ANSAL PRO PERTIES & INDUSTRIES LTD. (2008) 22 SOT 45 (DEL.) IT WAS CONS IDERED SUFFICIENT THE BOMBAY HIGH COURT IN BRAHMA ASSOCIATES V JCI T HAS HELD THAT SECTION 80-IB(10) (PRE AMENDMENT W.E.F. A Y 2005-06) DOES NOT DEFINE THE EXPRESSION 'HOUSING PROJECT' BU T REFERS TO HOUSING PROJECTS WHICH ARE APPROVED BY THE LOCAL AU THORITIES. UNDER THE LOCAL LAWS, THE AUTHORITIES ARE EMPOWERED TO APPROVE M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 18 PROJECTS AS 'HOUSING PROJECTS' WITH COMMERCIAL USER TO THE EXTENT PERMITTED UNDER THE DC RULES FRAMED BY THE R ESPECTIVE LOCAL AUTHORITY. ACCORDINGLY, IF THE LEGISLATURE IN TENDED TO RESTRICT THE BENEFIT OF DEDUCTION ONLY TO THE PROJE CTS APPROVED EXCLUSIVELY FOR RESIDENTIAL PURPOSES, THEN IT WOULD HAVE STATED SO. HOWEVER, AS THE LEGISLATURE HAS PROVIDED THAT T HE DEDUCTION IS AVAILABLE TO ALL HOUSING PROJECTS APPROVED BY A LOCAL AUTHORITY, THE RESULT IS THAT EVEN PROJECTS WITH CO MMERCIAL USER APPROVED AS A 'HOUSING PROJECT' ARE ELIGIBLE FOR DE DUCTION; WHILE THE SPECIAL BENCH WAS RIGHT IN HOLDING THAT A PROJECT WITH RESIDENTIAL AND COMMERCIAL USER TO THE EXTENT PERMI TTED UNDER DC RULES WOULD BE A 'HOUSING PROJECT' AND ELIGIBLE FOR DEDUCTION, IT WAS NOT JUSTIFIED IN CONFINING THE DE DUCTION ONLY TO PROJECTS HAVING COMMERCIAL AREA UPTO 10% OF THE BUA BECAUSE ONCE THE BASIC ARGUMENT OF THE REVENUE THAT THE HOU SING PROJECTS WITH COMMERCIAL USER ARE NOT ENTITLED TO S ECTION 80IB(10) DEDUCTION IS REJECTED, NO RESTRICTION COUL D BE IMPOSED. IF THE PROJECT IS APPROVED AS A 'HOUSING PROJECT' D EDUCTION U/S BO-IB(10) IS ALLOWABLE IRRESPECTIVE OF THE COMMERCI AL AREA. 3.2.2. THE APPELLANT FURTHER SUBMITTED THAT EACH B UILDING IS A SEPARATE PROJECT BY ITSELF. THE DEDUCTION UNDER SEC TION 80(IB) IS FOR A HOUSING PROJECT. ON A PIECE OF LAND A BUILDER CAN HAVE MULTIPLE PROJECTS SOME OF WHICH MAY BE ELIGIBLE FOR 80 (IB) DEDUCTIONS AND SOME MAY NOT BE. THE DEDUCTION IS QU A THE HOUSING PROJECT AND NOT THE ASSESSEE. EACH BUILDING WILL HAVE A SEPARATE PLAN APPROVAL AND COMMENCEMENT AND COMPLET ION DATE. IF THE DEDUCTION IS TO BE ALLOWED CONSIDERING ALL THE BUILDINGS AS ONE PROJECT THE SECTION WOULD BE NOT B E WORKABLE. M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 19 EACH BUILDING HAS A SEPARATE, DISTINCT AND INDEPEND ENT IDENTITY ON ITS OWN. IT IS A PROJECT WHICH IS CAPABLE OF STA NDING ON ITS OWN LEGS. THE APPELLANT FURTHER PLACED RELIANCE ON THE DECISION OF SAROJ SALES ORGANISATION AND THE ITAT, MUMBAI 'F ' BENCH IN THE CASE OF VANDANA PROPERTIES APPEAL NO. ITA NO.1253/MUM/2007. THE APPELLANT FURTHER SUBMITTED T HAT IT HAS NOT CLAIMED DEDUCTION FOR ITS PROJECT ATLANTIC SAGA R AS ITS IOD AND COMMENCEMENT WAS PRIOR TO 1998. THIS PROJECT WA S SANCTIONED SEPARATELY AND HAS NO BEARING ON THE IND IAN OCEAN PROJECT FOR WHICH 80IB HAS BEEN CLAIMED. THE APPELL ANT FURTHER SUBMITTED THAT THE OBSERVATION RAISED FOR DENYING D EDUCTION U/ S 80(IB)(10) IS TOTALLY ERRONEOUS AND ALSO NOT IN LIN E WITH THE TRIBUNAL JUDGMENTS AND THE CLARIFICATION OF THE CBD T F. NO. 205/3/2001/ITA II WHERE IT HAS CLARIFIED THAT ANY P ROJECT WHICH HAS BEEN APPROVED BY A LOCAL AUTHORITY AS A HOUSING PROJECT SHOULD BE CONSIDERED ADEQUATE FOR THE PURPOSES OF S ECTION 80(IB)(10). THE APPELLANT FURTHER SUBMITTED THAT TH E CA.' S CERTIFICATE MENTIONS THE ENTIRE PLOT AREA WHICH WAS PURCHASED BY THE ASSESEE COMPANY, HENCE THERE IS NO DISCREPAN CY. 3.2.3. THE APPELLANT FURTHER SUBMITTED'. THAT RULE 18BBB REQUIRES SEPARATE REPORT [10CCB] FOR EACH 'UNDERTAK ING OR ENTERPRISE'. THE APPELLANT FURTHER SUBMITTED THAT A UDIT REPORT FOR THIS PROJECT IN FORM 10CCB AND HAVE ALSO GIVEN PROJECT WISE PROFIT AND LOSS ACCOUNT DURING THE ASSESSMENT. READING RULE 18BBB AND SECTION 80LBTOGETHER MEANS 'UNDERTAK ING' AND 'HOUSING PROJECTS' MEAN TWO DIFFERENT THINGS. SOME OF THE ASSESEE'S HAVE A DIVISION WHICH CARRIES OUT SEVERAL HOUSING PROJECTS. IN SUCH PROJECTS DIFFICULTY ARISE AS TO P REPARING M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 20 SEPARATE BALANCE SHEETS FOR EACH PROJECT AS THE RES OURCES ARE COMMON. THE COMPANY HAS GIVEN SEPARATE REPORT FOR I NDIAN OCEAN A SEPARATE PROJECT. IT HAS ONLY ONE UNDERTAKI NG I.E. CORDCON BUILDERS WHICH DOES THE CONSTRUCTION FOR WH ICH THE ACCOUNTS ARE PREPARED AND BALANCE SHEET FOR WHICH H AS BEEN SUBMITTED THE ENTIRE LAND AREA IS 40,803.10 SQ. MTR . (ABOUT 10 ACRE) OF WHICH 1873.27 SQ MTS WAS HILLOCK LAND. THE COMPARISON MADE IN BY THE A.O. WITH 4981.96 SQ MTS IS INCORRECT AND WRONG AS IT HAS TO BE COMPARED WITH T HE TOTAL PILOT AREA WHICH COMPARISON IS ALSO OF NO SIGNIFICA NCE TO THE CLAIM UNDER SECTION 80IB. THE APPELLANT FURTHER SUB MITTED THAT MAJOR PORTION OF THE HILLOCK AREA HAS BEEN LEVELED AND ONLY 716 SQ MTRS REMAIN WHICH IS A HILL AND STILL EXITS ON S ITE. THE HILLOCK AREA WAS ALSO NOT IN ONE PLACE BUT SCATTERED ON THE ENTIRE PLOT OF LAND. THE CONTENTION RAISED IN THE ABOVE PARA IS BA SED ON WRONG FACTS AND MISINTERPRETATION OF DATA. PHYSICAL VERIFICATION WILL PROVE THE COMPANY'S STAND. THE FACTS HAVE BEEN MISINTERPRETED AND IT HAS BEEN SOUGHT TO LINK THE E NTIRE HILLOCK AREA TO THE AREA OF THE INDIAN OCEAN BUILDING. SINC E THE COMPARISON ITSELF IS WRONG THE OBSERVATIONS IN THIS PARA HAVE NO BEARING ON THE CLAIM U/S 80IB. THE APPELLANT FURTHE R SUBMITTED THAT THE ACT ONLY STATES THAT 'THE PROJECT IS ON TH E SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE'. IT D OES NOT TALK ABOUT UTILIZATION OF THE SAME. A BUILDER MAY DEVELO P ONLY 50% AND KEEP 50% VACANT. EVEN IN SUCH CASE DEDUCTION CA NNOT BE DENIED. AS PER BMC RULES CERTAIN AREA HAS TO BE KEP T FOR RG., GARDEN ETC. THE PLOT SIZE HAS TO INCLUDE THE SAME. THE COMPANY HAS A LARGE PLOT OF LAND ON WHICH A NUMBER OF BUILD INGS WILL BE CONSTRUCTED. AS PER CBDT CLARIFICATION TO THE MAHAR ASHTRA M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 21 CHAMBER OF HOUSING INDUSTRY EACH BUILDING IS A SEPA RATE PROJECT. THE ASSESSEE HAS GIVEN POSSESSION, PEOPLE HAVE COME TO STAY IN THE BUILDING, WATER CONNECTION, TELEPHONE A ND ELECTRICITY CONNECTION HAS BEEN PROVIDED AND SOCIETY FORMED .TH E FACT OF OCCUPATION AND COMPLETION HAS BEEN VERIFIED BY THE SURVEY TEAM. THE VERY FACT THAT THE BMC HAS GIVEN THE OCCU PATION CERTIFICATE IS PROOF OF COMPLETION OF THE PROJECT. THE SECTION ITSELF STATES THAT THE O.C. IS PROOF OF COMPLETION. 3.2.4 THE APPELLANT FURTHER SUBMITTED THAT THE UNDE RSTANDING AND AREA CALCULATION APPEARS TO BE ERRONEOUS. THE R ELEVANCE OF AREA OCCUPIED BY THE BUILDING HAS NOT BEEN UNDERSTO OD AND THE BASIS OF CALCULATION IS TOTALLY WRONG. THE BMC PROV IDES FOR CONSTRUCTION BASED ON FSI I.E. FLOOR SPACE INDEX WH ICH IS LINKED THE PLOT SIZE, AREA TO BE KEPT FOR R.G., BALCONY ET C. IN ORDER TO DETERMINE THE AREA ONE IS REQUIRED TO MULTIPLY THE AREA OF EACH FLOOR AS DETERMINED BY NUMBER OF FLOORS TO GET THE BUILT UP AREA, WHICH HAS NOT BEEN DONE. THE AREA OF EACH FLOOR AS PER THE A.O'S WORKING IS 6477.48 SQ FEET. FOR FIFTEEN FLOOR S THE BUILT UP AREA WILL BE 97162.20 SQUARE FEET. F.S.I. GRANTED I S 1 I.E. FOR CONSTRUCTION OF 97162.20 SQ FEET THE PLOT SIZE HAS TO BE MINIMUM 9026.65 SQ MTS I.E. MORE THAN ONE ACRE WHICH IS APP ROVED BY THE BMC. THE APPELLANT FURTHER SUBMITTED THAT AS PER PL AN THE ACTUAL PERMISSIBLE AREA FOR INDIAN OCEAN IS 6555.83 SQ MTRS I.E. 70566.95 SQUARE FEET HENCE THE CALCULATION OF THE B UILDING BEING OF ONLY 6477.48 SQ FEET IS BASELESS. ARCHITECT CERT IFICATE AND PLAN WERE GIVEN IN SUPPORT OF THE ABOVE . THE SECTI ON NOWHERE TALKS ABOUT AREA OCCUPIED BY THE BUILDING. THE SECT ION IS VERY CLEAR THE PLOT SIZE HAS TO BE MINIMUM ONE ACRE; IT DOES NOT TALK M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 22 ABOUT CONSTRUCTED AREA. THE CONSTRUCTED AREA CANNOT BE EVEN CONSIDERED AS THE INCOME TAX APPLIES TO THE ENTIRE COUNTRY. THE DEVELOPMENT RULES ARE HOWEVER FRAMED STATE WISE AND EVEN CITY WISE. IN LONAVALA THE FSI IS ONLY 0.25. A BUILDER C ANNOT CONSTRUCT MORE EVEN IF HE HAS A BIG PLOT. EVEN IF P LOT SIZE IS MORE THAN ONE ACRE CONSTRUCTED AREAS WILL BE LESS. THE APPELLANT FURTHER SUBMITTED THAT THE REASONING AND LOGIC I.E. AREA ACTUALLY UTILIZED FOR CONSTRUCTION IS 12% OF P LOT EARMARKED FOR DEVELOPMENT OF INDIAN OCEAN BUILDING. IN AN ARE A LIKE ANDHERI IN MUMBAI IN NORMAL COURSE, NO DEVELOPER WO ULD LEAVE AROUND 88 % AREA OF THE PLOT VACANT- IS IRRELEVANT AND THE CALCULATION IS WRONG. THE IMPORTANT FACT IS THAT CO NSTRUCTION IS DECIDED BY THE DEVELOPMENT RULES FRAMED BY THE BMC AND THE BUILDER HAS NO FREEDOM IN THE AREA TO BE CONSTRUCTE D. HE HAS TO FOLLOW THE RULES FRAMED BY BMC. IN CERTAIN CASES IN MUMBAI CITY ITSELF THE BMC HAS GIVEN 4 FSI, IN SOME AREAS 1.33 FSI, IN SOME AREAS 1 FSI. 3.3 DECISION 3.3.1 I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE APPELLANT AND ALSO CAREFULLY GONE THROUGH THE DOCUMENTS AVAIL ABLE ON RECORD. IT IS SEEN THAT THE APPELLANT IS A PVT. LTD . COMPANY AND IS IN THE BUSINESS OF CONSTRUCTION. THE APPELLANT R ESIDENTIAL BUILDING PROJECT IS SITUATED AT GILBERT HILL, ANDHE RI WHICH THE APPELLANT ACQUIRED IN THE YEAR 1993. THE ENTIRE ARE A OF THE LAND ADMEASURES ABOUT 40803.10 SQ.MTRS. WHICH IS APPROX. 10 ACRES OF LAND. THE APPELLANT COMPANY DECLARED PROFITS FOR TWO RESIDENTIAL PROJECTS DURING THE A.Y. 2006-07 VIZ. A TLANTIC SAGAR M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 23 AND INDIAN OCEAN BUILDINGS AND ALSO SALE OF FSI IN RESPECT OF PACIFIC TOWER, A RESIDENTIAL PROJECT, SITUATED ON T HE SAME LAND. THE APPELLANT CLAIMED DEDUCTION/ S. 80IB IN RESPECT OF INDIAN OCEAN PROJECT AND NOT IN RESPECT OF ATLANTIC SAGAR AS ACCORDING TO IT, IT FULFILL ALL CONDITIONS LAID DOWN IN SECTI ON 80IB. NO DEDUCTION WAS CLAIMED IN RESPECT OF ATLANTIC SAGAR PROJECT AS CLAIMED BY THE LD.AO. 3.3.2 BEFORE, I PROCEED TO DECIDE THE ISSUE IT IS I MPORTANT TO EXTRACT THE RELEVANT PROVISION OF THE SECTION 80IB( 10) AS IT STOOD AT THE RELEVANT PERIOD OF TIME. THE PROVISIONS OF T HE SECTION STATES AS UNDER:- '80-LB. DEDUCTION IN RESPECT OF PROFITS AND GAINS F ROM CERTAIN INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE D EVELOPMENT UNDERTAKINGS. (10) THE AMOUNT OF PROFITS IN CASE OF AN UNDERTAKIN G DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BY A LOCAL A UTHORITY, SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN ANY PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUS ING PROJECT IF, - (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1 ST DAY OF OCTOBER, 1998, AND COMPLETES THE SA ME BEFORE THE 31ST DAY OF MARCH, 2001; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WH ICH HAS MINIMUM AREA OF ONE ACRE AND M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 24 (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP ARE A OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN TWEN TY-FIVE KILOMETERS FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE. ' FOR BRINGING THIS PROVISION, THE NOTES ON CLAUSE S TO THE FINANCE BILL, 1999 HAS EXPLAINED THAT, THE PROVISIO N ALSO SEEKS TO PROVIDE THAT FOR APPROVED HOUSING PROTECTS THE P ROFITS WHICH ARE FULLY DEDUCTIBLE, THE BUILT-UP AREA IN REGIONS OTHER THAN OUTSIDE TWENTY-FIVE KMS OF MUNICIPAL LIMITS OF DELH I AND MUNICIPAL LIMITS OF DELHI AND MUMBAI THE BUILT-UP A REA OF THE RESIDENTIAL UNITS DOES NOT EXCEED ONE THOUSAND FIVE HUNDRED SQUARE FEET. 3.3.3 FURTHER, THE MEMO CONTAINED IN FINANCE BILL, 1999 HAS EXPLAINED THE PROVISIONS BROUGHT BY THE LEGISLATURE W.E.F. 1ST APRIL, 2000 AND THE SAME READS AS UNDER: 'TAX INCENTIVE FOR PROMOTION OF HOUSING LIBERALIZATION OF TAX HOLIDAY TO APPROVED HOUSING P ROJECTS - UNDER S. 80-IA OF THE IT ACT, PROFITS OF APPROVED H OUSING PROJECTS WHERE THE DEVELOPMENT AND CONSTRUCTION COM MENCES ON OR AFTER 1ST OCT., 1998 AND IS COMPLETED BY 31ST MA RCH, 2001 ARE FULLY DEDUCTIBLE. THE CONDITIONS NECESSARY FOR CLAIMING THE BENEFIT ARE THAT THE APPROVED HOUSING PROJECT SHOUL D BE ON MINIMUM AREA OF ONE ACRE AND SHOULD HAVE DWELLING U NITS MAY BE UP TO A MAXIMUM LIMIT OF BUILT UP AREA OF 1000 S Q.FT. IT IS PROPOSED TO MODIFY THE EXISTING BENEFITS TO PROVIDE THAT IN AREAS M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 25 OTHER THAN FALLING IN AND WITHIN 25 KMS. FROM THE M UNICIPAL LIMITS OF DELHI AND MUMBAI, THE BUILT UP AREA OF DW ELLING UNITS MAY BE UP TO A MAXIMUM LIMIT OF 1500 SQ.FT. INSTEAD OF 1000 SQ.FT. AT PRESENT TO MAKE THEM ENTITLED FOR BENEFIT . THE BUILT UP AREA FOR AREAS FALLING IN DELHI AND MUMBAI AND WITH IN25 KMS. OF THE MUNICIPAL LIMITS OF BOTH, ,HOWEVER, SHALL RE MAIN THE SAME. THE PROPOSED AMENDMENT WILL TAKE EFFECT FROM 1ST AP RIL, 2000, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASS T. YR. 2000-01 AND SUBSEQUENT YEARS. ' 3.3.4 IN ORDER TO BE ELIGIBLE UNDERTAKING, DEVELOPI NG AND BUILDING HOUSING PROJECTS AND FOR CLAIMING DEDUCTIO N UNDER S. 80-IB(10), FINANCE ACT, 2000 W.E.F. 1ST APRIL, 2000 HAS LAID DOWN VARIOUS CONDITIONS AND THE PROVISIONS OF S. 80 -IB AMENDED BY VARIOUS FINANCE ACTS AS AMENDED W.E.F. 1ST APRIL , 2000 BY THE FINANCE ACT, 2000 AND BY THE FINANCE ACT, 2003 AND AS SUBSTITUTED BY THE FINANCE (NO. 2) ACT, 2004, THE H OUSING PROJECTS MUST BE APPROVED ON OR BEFORE 31ST MARCH, 2007 BY THE LOCAL AUTHORITY. THESE PROVISIONS ENVISAGE FURTHER THAT FOR THE ELIGIBILITY OF DEDUCTION UNDER S.80-IB(10) OF PROFI TS FROM SUCH HOUSING PROJECTS, THE FOLLOWING CONDITIONS ARE TO B E COMPLIED WITH: (A) SUCH HOUSING PROJECTS MUST BE APPROVED FROM TH E LOCAL AUTHORITY. M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 26 (B) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECTS ON OR AFTER 1 ST OCT.,1998 AND COMPLETED SUCH CONSTRUCTION. (I) FOR ASST. YRS. 2000-01 TO 2001-02 ON OR BEFORE 31ST MARCH, 2002. (II) FOR ASST. YRS. 2002-03 TO 2004-05 WITHOUT ANY DATE. (III) FOR AND FROM ASST. YR. 2005-06 AS AMENDED BY THE FINANCE (NO. 2) ACT, 2004 W.E.F. 1ST APRIL, 2005- (1) IN A CASE WHERE HOUSING PROJECT HAS BEEN APPROV ED BY THE LOCAL AUTHORITY ON OR BEFORE 1ST APRIL, 2004, ON OR BEFORE 31ST MARCH, 2008. (2) WHERE HOUSING PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY ON OR AFTER 1ST APRIL, 2004 WITHIN FOUR Y EARS FROM THE END OF THE FINANCIAL YEAR IN WHICH HOUSING PROJECT HAS BEEN APPROVED BY THAT LOCAL AUTHORITY. 3.3.5 FURTHER, THE EXPLANATION AS BROUGHT OUT BY TH E FINANCE (NO. 2) ACT, 2004 W.E.F. 1ST APRIL, 2005 FOR THE PU RPOSES OF THIS CLAUSE READS AS UNDER: '(I) IN A CASE WHERE THE APPROVAL IN RESPECT OF TH E HOUSING PROJECT IS OBTAINED MORE THAN ONCE, SUCH HOUSING PR OJECT SHALL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE ON WHIC H THE BUILDING PLAN OF SUCH HOUSING PROJECT IS FIRST APPR OVED BY THE LOCAL AUTHORITY; M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 27 (II) THE DATE OF COMPLETION OF CONSTRUCTION OF THE HOUSING PROJECT SHALL BE TAKEN TO BE THE DATE ON WHICH THE COMPLETI ON CERTIFICATE IN RESPECT OF SUCH HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY. ' AND CONDITION (B) IS THAT THE PROJECT HAS TO BE O N THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE. FURTHER, THE PROVISO TO S. 80-IB(10) AT THE END OF CL. (B) AS BR OUGHT OUT BY THE FINANCE (NO. 2) ACT, 2004 W.E.. 1ST APRIL, 2005 PR OVIDES AS UNDER: 'NOTHING CONTAINED IN CL. (A) OR CL. (B) OF S. 80-I B(10) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACCORDANC E WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMENT OF E XISTING BUILDINGS IN AREAS DECLARED TO BE SLUM AREAS UNDER ANY LAW FOR THE TIME BEING IN FORCE AND SUCH SCHEME IS NOTIFIED BY THE BOARD IN THIS BEHALF' CLAUSES (C) AND (D) AS BROUGHT OUT BY THE FINANCE ( NO. 2) ACT, 2004 W.E.F. 1ST APRIL, 2005 READS AS UNDER: (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP ARE A OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN TWEN TY-FIVE KILOMETERS FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE; AND (D) (W.E.F.1ST APRIL, 2005) THE BUILT-UP AREA OF TH E SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOU SING, M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 28 PROJECT DOES NOT EXCEED FIVE PER CENT OF THE AGGREG ATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET, WHICHEVER IS LESS. 11 3.3.6 PRIOR TO ITS SUBSTITUTION BY THE FINANCE (NO. 2) ACT, 2004 W.E.F. 1ST APRIL, 2005, SUB-S. (10) AS AMENDED BY T HE FINANCE ACT, 2000 W.E.F. 1ST APRIL, 2001 AND FINANCE ACT, 2 003 W.E.F. 1ST APRIL, 2002 READS AS UNDER: (10) THE AMOUNT OF PROFITS IN CASE OF AN UNDERTAKI NG DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED B EFORE THE 31ST DAY OF MARCH, 2005 BY A LOCAL AUTHORITY, SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN ANY PREVIOUS YEA R RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF, - (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WH ICH HAS A MINIMUM AREA OF ONE ACRE; AND (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP ARE A OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN TWEN TY-FIVE KILOMETERS FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE. 3.3.7 THE CHANGES BROUGHT OUT BY THE SUBSTITUTION B Y THE FINANCE (NO. 2) ACT, 2004 W.E.F. 1ST APRIL, 2005 HA VE BEEN M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 29 EXPLAINED IN NOTES ON CLAUSES OF THE FINANCE (NO.2) ACT, 2004 WHICH READS AS UNDER: UNDER THE EXISTING PROVISIONS CONTAINED IN SUB-SO (10), HUNDRED PER CENT DEDUCTION OF THE PROFITS OF AN UND ERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS IS ALLOWED IF THE HOUSING PROJECT IS APPROVED BY A LOCAL AUTHORITY BE FORE THE 31ST MARCH, 2005 SUBJECT TO THE CONDITIONS SPECIFIED IN CLS. (A) TO (C) OF THE SAID SUB-SECTION. THE EXISTING PROVISIONS OF THE SAID SUB- SECTION PROVIDES THAT (A) THE UNDERTAKING SHOULD HA VE COMMENCED DEVELOPMENT OF THE HOUSING PROJECT AFTER THE 1ST DAY OF OCTOBER, 1998, (B) THE PROJECT SHOULD BE ON A SI ZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE, AND (C) THE RESIDENTIAL UNIT SHOULD HAVE A MAXIMUM BUILT-UP ARE A OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNITS A RE SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN TWEN TY-FIVE KILOMETERS FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE. SUB-CL. (D) SEEKS TO SUBSTITUTE SUB-SO (L0) OF THE SAID SECTION SO AS TO PROVIDE, INTER ALIA, A HUNDRED PER CENT DEDUC TION OF THE PROFITS DERIVED BY AN UNDERTAKING DEVELOPING AND BU ILDING HOUSING PROJECTS APPROVED BY A LOCAL AUTHORITY BEFO RE 31ST MARCH, 2007 INSTEAD OF 31ST MARCH, 2005 UNDER THE E XISTING PROVISIONS, SUBJECT TO THE CONDITIONS THAT (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUC TION OF THE HOUSING PROJECT ON OR AFTER 1ST OCT., 1998 AND COMPLETES THE CONSTRUCTION WITHIN FOUR YEARS, FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY TH E LOCAL M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 30 AUTHORITY; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE EXCEPT IN THE CASE O F A HOUSING PROJECT CARRIED OUT IN ACCORDANCE WITH A SCHEME FRA MED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONS TRUCTION OR REDEVELOPMENT OF EXISTING BUILDINGS, AND SUCH SC HEME IS NOTIFIED BY THE BOARD IN THIS BEHALF; (C) THE RESID ENTIAL UNIT HAS A MAXIMUM BUILT UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN TWENTY-FIVE KILOMETERS FROM THE MU NICIPAL LIMITS OF THESE CITIES AND ONE THOUSAND AND FIVE-HU NDRED SQUARE FEET AT ANY OTHER PLACE; AND (D) THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIVE PER CENT OF THE AGGREG ATE BUILT-UP AREA OF HOUSING PROJECT OR TWO THOUSAND SQUARE FEET , WHICHEVER IS LESS. IT IS FURTHER PROPOSED TO INSERT AN EXPLANATION IN CL. (A) OF THE PROPOSED SUB-SO (10) SO AS TO PROVIDE THAT THE DATE OF APPROVAL SHALL BE THE DATE ON WHICH THE BUILDING PLAN OF THE SAID PROJECT IS FIRST APPROVED BY THE LOCAL AUTHORITY IN CASE WH ERE THE APPROVAL IN RESPECT OF THE SAME IS OBTAINED MORE TH AN ONCE AND ALSO TO PROVIDE THAT THE DATE OF COMPLETION OF CONS TRUCTION SHALL BE THE DATE ON WHICH THE COMPLETION CERTIFICATE IS ISSUED BY THE LOCAL AUTHORITY. FURTHER, ALSO THE SAME PROVISIONS WERE EXPLAINED I N THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE (NO. 2) ACT, 2004 WHICH READS AS UNDER: M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 31 EXTENSION OF THE TIME-LIMIT FOR OBTAINING APPROVAL OF HOUSING PROJECTS FOR THE PURPOSE OF TAX HOLIDAY UNDER S. 80 -IB, AND ALLOWING DEDUCTION FOR REDEVELOPMENT OR RECONSTRUCT ION OF EXISTING BUILDINGS UNDER THE EXISTING PROVISIONS CONTAINED IN SUB-SO ( 10) OF S. 80- IB, A DEDUCTION EQUAL TO ONE HUNDRED PER CENT OF TH E PROFITS OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJ ECTS IS ALLOWED IF THE HOUSING PROJECT IS APPROVED BY A LOC AL AUTHORITY BEFORE 31ST MARCH, 2005. THE DEDUCTION IS SUBJECT T O THE CONDITIONS THAT THE UNDERTAKING SHOULD HAVE COMMENC ED DEVELOPMENT OF THE HOUSING PROJECT AFTER THE 1ST DA Y OF OCTOBER, 1988, THE PROJECT SHOULD BE ON A SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE AND THAT THE RESIDENTIAL UNIT SHOULD HAVE A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED IN DELHI OR MUMBAI AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT OTHER PLACES. IT IS PROPOSED TO SUBSTITUTE THE EXISTING SUB-SECTI ON SO AS TO RATIONALIZE THE PROVISIONS AND PROVIDE ADDITIONAL I NCENTIVES. WITH A VIEW TO ALLOW MORE HOUSING PROJECTS TO AVAIL OF THE TAX HOLIDAY UNDER THIS PROVISION, IT IS PROPOSED TO EXT END THE TIME- LIMIT FOR OBTAINING APPROVAL FROM THE LOCAL AUTHORI TY TO 31ST MARCH, 2007. HOWEVER, IT IS ALSO PROPOSED TO PROVID E A TIME- LIMIT FOR THE COMPLETION OF THE HOUSING PROJECT WIT HIN 4 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE PRO JECT IS APPROVED BY THE LOCAL AUTHORITY. IT IS PROPOSED TO TAKE THE DATE OF APPROVAL AS THE DATE ON WHICH THE BUILDING PLAN IS FIRST APPROVED BY THE LOCAL AUTHORITY AND THE DATE OF COM PLETION OF M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 32 THE HOUSING PROJECT AS THE DATE ON WHICH THE COMPLE TION CERTIFICATE IS ISSUED BY SUCH AUTHORITY. IT IS FURTHER PROPOSED TO PROVIDE THAT THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDING IN THE HOUSING PROJECT SHALL NOT EXCEED FIVE PER CENT OF T HE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR 2,000 SQ. F T., WHICHEVER IS LESS. WITH A VIEW TO ENCOURAGE THE REDEVELOPMENT OF SLUM DWELLINGS, IT IS PROPOSED TO RELAX THE CONDITION OF MINIMUM PL OT SIZE OF ONE ACRE IN THE CASE OF A HOUSING PROJECT, CARRIED OUT IN ACCORDANCE WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMENT OF E XISTING BUILDINGS AND NOTIFIED BY THE BOARD IN THIS BEHALF IT IS ALSO PROPOSED TO DEFINE THE EXPRESSION 'BUILT -UP AREA' TO MEAN THE INNER MEASUREMENTS OF THE RESIDENTIAL UNIT AT THE FLOOR LEVEL, INCLUDING THE PROJECTIONS AND BALCONIES, AS INCREASED BY THE THICKNESS OF THE WALLS BUT NOT INCLUDING THE CO MMON AREAS SHARED WITH OTHER RESIDENTIAL UNITS. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST APRIL, 2 005 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASST. YR. 200 5-06 AND SUBSEQUENT YEARS. ' 3.3.8 FROM A PLAIN READING OF THE PROVISIONS, THE F OLLOWING CONDITIONS MUST BE SATISFIED TO CLAIM THE DEDUCTION U/S 80IB(10) OF THE ACT NAMELY; M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 33 THE PROJECT SHOULD BE APPROVED BY A LOCAL AUTHOR ITY BEFORE MARCH 31ST 2007. THE SIZE OF THE PLOT OF LAND IS A MINIMUM OF ONE ACRE. THE UNDERTAKING COMMENCES DEVELOPMENT AND CONSTRU CTION OF THE HOUSING PROJECT AFTER SEPTEMBER 30, 1998 AND IT SHOULD COMPLETE CONSTRUCTION WITHIN 4 YEARS FROM THE END O F FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS FIRST APPROVED OR BEFORE APRIL L' 2008, WHICHEVER IS LATER. THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCI AL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT SHAL L NOT EXCEED 5 PER CENT OF THE AGGREGATE BUILT- UP AREA OF THE H OUSING PROJECT OR 2,000 SQ. FT WHICHEVER IS LESS. RETURN OF INCOME SHOULD BE SUBMITTED ON OR BEFORE DUE DATE OF SUBMISSION OF RETURN OF INCOME. THE BUILT-UP AREA OF EACH RESIDENTIAL UNIT SHOULD BE SUBJECT TO THE FOLLOWING MAXIMUM LIMIT PLACE WHERE RESIDENTIAL UNIT IS SITUATED MAXIMUM BUILT UP AREA OF EACH RESIDENTIAL UNIT - WITHIN THE CITIES OF DELHI AND MUMBAI 1,000 SQ. FT -WITHIN 25 KMS FROM THE LOCAL LIMITS OF DELHI AND MUMBAI 1,000 SQ.FT AT ANY OTHER PLACE 1,500 SQ. FT M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 34 3.3.9 IT IS ALSO A MATTER OF FACT THE APPELLANT'S PREMISES WERE SURVEYED BY THE REVENUE ON 22.09.2005, ACCORDING TO THE APPELLANT INCOME-TAX OFFICERS DURING SURVEY HAVE PH YSICALLY VERIFIED THE DETAILS OF THE PROJECT AND AFTER INVES TIGATION AND SEEKING THE APPELLANT S EXPLANATION THE CLAIM OF THE APPELLANT WAS ACCEPTED U/S. 80IB. THE LD.AO ACCORDINGLY PASSE D AN ORDER U/S. 143(3) OF THE ACT. LATER ON IT SEEMS THA T THE THERE WAS AN AUDIT OBJECTIONS AND THE LD. AO OBJECTED TO THE AUDIT OBJECTIONS VIDE HIS LETTER DATED 13.11.2009, A COPY OF WHICH IS SUBMITTED BY THE LD.AR OF THE APPELLANT (PAGE 63 TO 67 OF THE PAPER BOOK). THEREFORE, THE LD.AO VIGOROUSLY FOLLOW ED THE DROPPING OF THE AUDIT OBJECTION AS LATE AS 1.12.201 1, HOWEVER, NO REPLY WAS RECEIVED FROM THE SENIOR AUDIT OFFICER LAP-I, MUMBAI AND THEREAFTER ACCORDINGLY, THE LD.AO ISSUED THE NOTICES U/S. 148 R.W.S. 147 AND FRAMED THE RE-ASSES SMENT. I FIND THAT THE MAIN OBJECTION OF THE LD.AO THAT THE APPEL LANT'S ONE PROJECT VIZ. ATLANTIC OCEAN STARTED COMMENCED PRIOR TO 1998, THEREFORE, ALL OTHER PROJECTS IRRESPECTIVE THEIR DA TE OF COMMENCEMENT WILL NOT BE ELIGIBLE FOR DEDUCTION U/S . 80IB. AS IS EVIDENT FROM THE PLAIN READING OF THE PROVISIONS OF SECTION 80LB THAT THE DEDUCTION IS QUA THE PROJECT AND NOT QUA T HE ASSESSEE. THEREFORE IT IS WRONG TO PRESUME THAT IF ANY PROJEC T FULFILLING THE CONDITIONS OF SECTION 80IB COMMENCED ITS PRODUCTION AFTER 1998 WILL ALSO BE NOT ELIGIBLE FOR DEDUCTION U/S. 80IB. EACH PROJECT IS A SEPARATE PROJECT AND THEREFORE, SEPARATE YARDSTIC KS NEED TO BE ADOPTED. MY OBSERVATION GETS SUPPORT FROM THE FINDI NG BY THE DECISION OF HON'BLE TRIBUNAL IN THE CASE OF SAROJ S ALES ORGANIZATION AND VANDANA PROPERTIES (SUPRA). THE AP PELLANT AS FAR AS THE APPELLANT'S INDIAN OCEAN BUILDING PROJEC T IS M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 35 CONCERNED THE FOLLOWING FACTS ARE EVIDENT FROM THE FACTS PLACED ON RECORD. (I) THE PROJECT HAS COMMENCED AFTER 1ST DAY OF OCTO BER, 1998 WHICH IS EVIDENT FROM THE LETTER OF MUNICIPAL CORPO RATION OF GREATER MUMBAI, DATED 06.10.2001 GIVING LETTER OF I OD U/S. 346 OF THE BOMBAY MUNICIPAL CORPORATION ACT, AS, AMENDE D UP TO DATE WHICH CLEARLY SPECIFY THAT THE PERMISSION WAS ACCORDED TO THE APPELLANT WITH REFERENCE TO HIS NOTICE LETTER N O.337 DATED 24.09.2001 FOR PROPOSED BLDG. NO.3, ON PLOT BEARING CTS NO.254A TO E, VILLAGE ANDHERI, AT GILBER HILL. FURT HER, THE A LETTER DATED 10.05.2002 A COMMENCEMENT CERTIFICATE HAS BEEN ISSUED BY MUNICIPAL CORPORATION OF GREATER MUMBAI. (II) THE PROJECT STOOD COMPLETED ON 26.03.2008 I.E . 31.03. 2008 WHICH IS EVIDENT BY THE_ OCCUPATION CERTIFICATE ISS UED BY THE EXECUTOR ENGINEER BUILDING, VIDE HIS LETTER INDICAT ING THEREIN THAT THE PROJECT WAS COMPLETED ON 26.03.2008 UNDER THE SUPERVISION OF SHRI NITIN SHAH, LICENCE SURVEYOR, L ICENCE NO.S/424/LS. IT ALSO CLEARLY INDICATE THAT THE BUIL DING NO.3 CONSISTING OF WING A & B COMPRISING OF STILT PLUS 1 ST TO 15TH UPPER FLOOR ON PLOT BEARING CTS NO.254, 276 AND 277 OF VILLAGE ANDHERI, SITUATED AT GILBERT HILL, ANDHERI (W), MUM BAI WAS COMPLETED ON 26.03.2008. FURTHER, THE SITE PLAN APP ROVED BY THE BMC CLEARLY INDICATE THAT THE SITE PLAN OF BLDG. NO .3, I.E. THE INDIAN OCEAN APPROVED ON 08.04.2005 IS 6555.83 SQ. MTRS. I.E. NEARLY 70566.95 SQ.FTS. IT IS ALSO A MATTER OF FACT THAT AS PER BMC RULES FSI OF 1.33 IS AVAILABLE DEPENDING ON THE PLOT SIZE. THE PLOT SIZE IS THEREFORE 4929.19 SQ.MTRS. BY DOIN G THE REVERSE M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 36 CALCULATION WHICH IS EQUIVALENT TO 1.22 ACRES. THER EFORE, THE PLOT AREA OF THE PROJECT IS MORE THAN 1 ACRE. (III) NONE OF THE RESIDENTIAL UNITS AS PER THE PLAN APPROVED BY THE BMC, IT IS FOUND THAT THE AREA OF EACH FLAT IS LESS THAN 1000 SQ.FT, THIS FACT IS ALSO VERIFIED BY THE REVENUE DU RING THE SURVEY OPERATION AND THERE IS NO DISPUTE TO THIS FACT. EVE N THE ARCHITECT CERTIFICATE SPECIFIES THE SAME. (IV) EVEN THE PROJECT SO APPROVED BY THE BMC DOES NOT HAVE ANY SHOP OR COMMERCIAL ESTABLISHMENT AS IS EVIDENT BY THE APPROVED SITE PROJECT AS WELL AS BY THE ARCHITECT C ERTIFICATE. THE COPY OF THE APPROVED PLAN OF THE BMC IS PLACED ON R ECORD BY THE APPELLANT. (V) THE PERUSAL OF THE APPROVED PLAN BY THE BMC IN DICATES THAT THERE ARE 118 FLATS AND FLAT WISE AREAS STATEMENT A S APPROVED BY THE BMC IS ALSO PLACED ON RECORD BY THE APPELLANT. 3.3.10 IN VIEW OF THE FOREGOING, THE LD AO'S CONTEN TION THAT THE PLOT AREA IS LESS THAN 1 ACRE IS ERRONEOUS AND COMP LETELY IGNORES THE FACTS ON RECORD. THE LD.AO HAS WORKED O UT THE AREA ON THE BASIS OF A HILLOCK WHOSE AREA HAS BEEN SHOWN TO 1873.27 SQ.MTRS ON THE ENTIRE PLOT OF AREA AND NOT ON THE A REA THAT RELATES TO SITE OF BUILDING ATLANTIC OCEAN. THEREFO RE, IF THE ENTIRE PLOT AREA IS TAKEN INTO ACCOUNT I.E. 40803.1 0 SQ.MTRS THE AREA OF THE HILLOCK IS REMARKABLY REDUCED IN PROPOR TION THE TOTAL AREA OF THE HILLOCK AND NEARLY COMES TO 4.59%. FURT HER, THE LD.AO HAS NOT TAKEN INTO ACCOUNT THE FACT THAT THE HILLOCK AREA WAS LEVELED BY THE APPELLANT AND ONLY A SMALL PORTI ON OF 716 M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 37 SQ.MTRS REMAINED WHICH IS YET TO BE LEVELED FOR THE PURPOSES OF CONSTRUCTION. THEREFORE, THE COMPUTATION DONE BY TH E LD.AO IN ARRIVING AT THE PLOT AREA IS BASED ON WRONG FIGURES ADOPTED BY HIM PURELY BASED ON FORM NO.10CCB WHICH IS FOR THE PURPOSE OF THE ENTIRE DEVELOPMENT ON THE LAND AREA AND GIVE S DETAILS OF THE PROFITS EARNED BY THE APPELLANT PROJECT WISE. T HEREFORE, THE COMPUTATION DONE BY THE LD.AO IS BASED ON THE PRESU MPTION THAT THE ENTIRE HILLOCK AREA IS SITUATED ON THE LAN D ON WHICH THE INDIAN OCEAN PROJECT IS SITUATED WHICH APPARENTLY I S NOT EVIDENCED BY THE FACTS ON RECORD. FURTHER, THE LD. AO HAS WORKED OUT THE BUILT UP AREA OF THE WING A & B IN T HE BUILDING. HE STATED THAT THE BUILT UP AREA IN A WING AND B WI NG RELATES ONLY 4 FLATS WHILE THE FACT IS THAT THE BUILDING IS 15 FLOOR INCLUDING THE STILT AND THE NUMBER OF FLATS ARE 118 AND NOT 4 FLATS IN EACH WING. THEREFORE, EVEN THE WORKING OUT THE BUILT UP OF THE FLAT IS ERRONEOUS. THIS IS EVIDENT BY THE CO MPLETE WORKING OF THE BUILT UP AREA APPROVED BY THE BMC. THEREFORE , THERE IS NO MERIT IN THE LD. AO'S COMPUTATION, THE ENTIRE PR OJECT HAS BEEN APPROVED BY THE BMC AND THEY HAVE ALSO INDICAT ED THE PERMISSIBLE BUILT UP AREA OF THE BUILDING NO.3 AT 6 553.83 SQ. MTRS. THE REMAINING OBSERVATION OF THE LD.AO IS BAS ED ON THE BUILT UP AREA WHICH IS ERRONEOUS AS EVIDENT FROM TH E FACTS ON RECORD. THEREFORE, THE ENTIRE REASONS FOR NOT GRANT ING DEDUCTION U/S. 80LB ARE BASED ON CONJECTURE AND SURMISES, COM PLETELY DIVORCED FROM THE FACTS ON RECORD. THE INADVERTENT FACT OF THE CASE ARE THAT THE PROJECT IS APPROVED BY THE LOCAL AUTHORITY, THE PROJECT COMMENCED PRODUCTION ON 10.03.2002 I.E. AFT ER 1ST OF OCTOBER, 1998, AND THE PROJECT WAS COMPLETED ON 26- 3-2008. THE AREA OF THE PROJECT IS MORE THAN AN ACRE I.E. 4 981.96 M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 38 SQ.MTRS. AND THE APPELLANT HAS OBTAINED THE COMPLET ION CERTIFICATE FROM THE LOCAL AUTHORITIES. IN VIEW OF THE FOREGOING, THE IRRESISTIBLE CONCLUSION IS THAT THE APPELLANT I S ENTITLED FOR DEDUCTION U/S.80IB. THEREFORE, THE DISALLOWANCES MA DE BY THE LD. AO ARE NOT SUSTAINABLE BOTH ON FACTS AND IN LAW AND IS ACCORDINGLY DELETED. 4. AGAINST THE ABOVE ORDER OF CIT(A) THE REVENUE IS IN APPEAL BEFORE US CHALLENGING THE ACTION OF CIT(A) NOT ONLY FOR VALIDITY OF REOPENING BUT ALSO AGAINST THE DELETION OF DISAL LOWANCE U/S.80IB(10). 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THI S CASE ASSESSMENT WAS REOPENED AFTER IT WAS COMPLETED UNDE R SCRUTINY ASSESSMENT U/S.143(3) CONSEQUENT TO SURVEY UNDERTAK EN AT ASSESSEES PREMISES, WHEREIN THE AO HAS MADE DETAIL ED ENQUIRY AND AFTER RECORDING DETAILED FINDING ON EACH POINT OF ASSESSEES CLAIM OF DEDUCTION U/S.80IB(10) WAS ALLOWED. THEREA FTER ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/S.148. WHILE DECIDING THE APPEAL, CATEGORICAL FINDING HAS BEEN R ECORDED BY THE CIT(A) TO THE EFFECT THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS U/S.143(3) ENTIRE DETAILS AN D APPROVED PLAN OF ITS PROJECT BY BMC AND OTHER EVIDENCE WHICH UNEQUIVOCALLY SUPPORTS THE ASSESSEES CONTENTION TH AT THE PROJECT GOT COMPLETED ON 26-3-2008 AND COMMENCED WE LL AFTER OCTOBER, 1998, WERE FILED AND CONSIDERED. THUS, THE RE WAS TOTAL ABSENCE OF TANGIBLE MATERIAL TO JUSTIFY THE CONCLUS ION THAT INCOME HAS ESCAPED ASSESSMENT IN THE RELEVANT ASSES SMENT YEAR. M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 39 THERE WAS NO MATERIAL BEFORE THE AO WHICH COULD LEA D TO THE FORMATION OR BELIEF THAT THE INCOME HAD ESCAPED ASS ESSMENT. AFTER RECORDING DETAILED FINDING AND APPLYING THE P ROPOSITION OF LAW LAID DOWN BY THE HONBLE SUPREME COURT AND THE HIGH COURT, THE CIT(A) HAS ANNULLED THE REOPENING U/S.14 7 OF THE ACT. 6. WITH REGARD TO MERIT OF THE DISALLOWANCE, WE FO UND THAT SITE PLAN OF THE PROJECT WAS APPROVED BY THE BMC IN RESP ECT OF INDIAN OCEAN PROJECT ON 8-4-2005 WAS 6555.83 SQ.MTR S. OF LAND. THE CIT(A) EVEN AFTER APPLYING THE REVERSE CA LCULATION WITH REGARD TO BMC RULES FSI OF 1.33 FOUND THAT THE PLOT SIZE WAS 4929.19 SQ.MTRS., WHICH IS EQUIVALENT TO 1.22 A CRES. THUS, THE CONTENTION OF THE AO THAT PLOT SIZE OF THE INDI AN OCEAN PROJECT WAS BELOW 1 ACRE IS INCORRECT. THE CIT(A) H AS ALSO RECORDED A CATEGORICAL FINDING TO THE EFFECT THAT N ONE OF THE RESIDENTIAL UNIT WAS MORE THAN 1000 SQ.FT. THIS FAC T WAS ALSO VERIFIED BY THE REVENUE AUTHORITIES DURING THE SURV EY OPERATION CARRIED OUT AT ASSESSEES PROJECT SITE EVEN BEFORE ORIGINAL ASSESSMENT U/S.143(3) WHEREIN ASSESSEES CLAIM U/S. 80IB(10) WAS ALLOWED. WE FOUND THAT AO HAS WORKED OUT THE AR EA ON THE BASIS OF A HILLOCK WHOSE AREA HAS BEEN SHOWN TO 187 3.27 SQ.MTR.S ON THE ENTIRE PLOT OF AREA AND NOT ON THE AREA THAT RELATES TO SITE OF BUILDING ATLANTIC OCEAN. THEREFO RE, IF THE ENTIRE PLOT AREA IS TAKEN INTO ACCOUNT I.E. 40803.1 0 SQ.MTRS. THE AREA OF THE HILLOCK IS REMARKABLY REDUCED IN PROPOR TION THE TOTAL AREA OF THE HILLOCK AND NEARLY COMES TO 4.59%. THUS , THE COMPUTATION DONE BY THE AO IN ARRIVING AT THE PLOT AREA IS BASED ON WRONG FIGURES ADOPTED BY HIM. THE CIT(A) H AS RECORDED A CATEGORICAL FINDING TO THE EFFECT THAT T HE COMPUTATION M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 40 DONE BY THE AO WAS BASED ON THE PRESUMPTION THAT TH E ENTIRE HILLOCK AREA IS SITUATED ON THE LAND ON WHICH THE I NDIAN OCEAN PROJECT IS SITUATED, WHICH APPARENTLY IS NOT EVIDEN CED BY THE FACTS ON RECORD. THE DETAILED FINDING RECORDED BY C IT(A) AT PARA 3 HAS NOT BEEN CONTROVERTED BY LD. DR BY BRINI NG ANY POSITIVE MATERIAL ON RECORD. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS RECORDED BY THE CIT(A) WHICH MAKES THE PROJECT ELIGIBLE FOR CLAIM OF DEDUCTION U /S.80IB(10) OF THE ACT. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME , CONCLUSION DRAWN IN THE IMPUGNED ORDER, CONCLUSION DRAWN BY THE TRIBUNAL IN ITS ORDER DATED 15/05/2015 (FOR A.Y. 2006- 07), MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSELS, IF KEPT IN JUXTAPOSITION AND A NALYZED, THE TRIBUNAL ALSO DISPOSED OFF THE LEGAL ISSUE OF 147 A ND ALSO FOUND THAT ASSESSMENT WAS REOPENED AFTER IT WAS COM PLETED UNDER SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT, CO NSEQUENT UPON TO A SURVEY UNDER TAKEN AT THE PREMISES OF THE ASSESSEE AND AFTER DETAILED ENQUIRY ALLOWED THE CLAIMED DEDU CTION U/S 80IB(10) OF THE ACT AND THEREAFTER THE ASSESSMENT W AS REOPENED. THERE IS CATEGORICAL FINDING THAT THE PR OJECT WAS COMPLETED ON 26/03/2008 AND THE PLAN WAS APPROVED B Y THE COMPETENT AUTHORITY. IN PARA -6 OF THE ORDER OF TH E TRIBUNAL, THE ISSUE OF DISALLOWANCE HAS ALSO BEEN DISCUSSED A ND FOUND THAT THE AREA OF THE PLOT WAS 1.22 ACRES (4929.19 S Q. MT.) AND M/S CORDCON BUILDERS PVT. LTD. ITA NO.7346/MUM/2013 41 NONE OF THE UNIT WAS MORE THAN 1000 SQ. FT. IN THE AREA. THIS FACTUM WAS EVEN VERIFIED BY THE REVENUE AUTHORITIES , THUS, IN THE ABSENCE OF ANY ADVERSE MATERIAL, WE FIND NO INF IRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INC OME TAX (APPEALS), WHICH IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. DR AT THE CONCLUSION OF THE HEARING ON 12/11/2015. SD/- SD/- ( RAMIT KOCHAR ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER ' # MUMBAI; ' DATED : 30/11/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. )*+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / ' 0! ( )* ) / THE CIT, MUMBAI. 4. / / ' 0! / CIT(A)- , MUMBAI 5. 23 -! , / )*% ) 4 , ' # / DR, ITAT, MUMBAI 6. 5 6# / GUARD FILE. / BY ORDER, .2*! -! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ' # / ITAT, MUMBAI