Income Tax Appellate Tribunal - Mumbai
Cosmos Enterprises , Mumbai vs Assessee on 21 August, 2013
आयकर अपीलीय अिधकरण, अिधकरण "सीसी"
सी खंडपीठ मुंबई INCOME TAX APPELLATE TRIBUNAL,MUMBAI - 'C' BENCH.
सव[ौी बी आर. िमƣ िमƣल, Ûयाियक सदःय/ सदःय एवं ौी राजेÛि,ले ि लेखा सदःय Before S/Sh. B.R. Mittal, Judicial Member & Rajendra, Accountant Member आयकर अपील सं/.ITA No.6625/Mum/2010,िनधा[ िनधा[रण वष[/Assessment Year-2007-08 Cosmos Enterprises ITO WD 1(3) 201 Arihant, Parsi Agyari Lane, Vs Vardan Wagle Ind.Estate, Tembhi Naka,Thane (W) 400602 Thane (W)Mumbai- 400604 PAN: AAEFC2382F (अपीलाथȸ/ Appellant) (ू×यथȸ / Respondent) आयकर अपील सं/.ITA No.6744/Mum/2010,िनधा[ िनधा[रण वष[/Assessment Year-2007-08 ITO WD 1(3) Cosmos Enterprises Vardan Building, MIDC , WIE,, Vs 201Arihant Building, Agyari Thane (W)Mumbai- 400601 LaneTembhi Naka,Thane(W) PAN: AAEFC2382F (अपीलाथȸ/ Appellant) (ू×यथȸ / Respondent) िनधा[ǐरती ओर से / Appellant by: Dr. Sunil U.Pathak & Shri Subodh Ratna Parkhi राजःव कȧ ओर से/Revenue by : Smt. C. Tripura Sundari सुनवाई कȧ तारȣख/ Date of Hearing : 21-08-2013 घोषणा कȧ तारȣख / Date of Pronouncement : 15-10-2013 आयकर अिधिनयम, अिधिनयम 1961 कȧ धारा 254 (1) के अ Ûत ग[ त आ दे श Order u/s.254(1)of the Income-tax Act,1961(Act) PER Bench:
Cross appeals have been filed by the Assessing Officer (AO) and the Assessee against the order dated 03.06.2013 of CIT(A)-2,Thane.Assessee has raised following grounds of appeal. "1A. The Id.CIT(A) erred in confirming the addition of Rs.5,32,95,1841 made to the returned income of the appellant by disallowing the claim for deduction u/s 801B (10) of the I. Tax Act in respect of profit derived from the housing project "Cosmos Park" developed by the appellant at Ghodbunder Road, Thane.
1B. The ld.CIT (A) erred in not appreciating the fact that the housing project "Cosmos Park"
developed by appellant fulfilled all the conditions imposed by section 8IB(10)of the I. Tax Act 1961 and hence the deduction u/s 801B (10) was correctly claimed.
1C. The ld. CIT (A) erred in confirming the action of the id. A.O. in denying the appellant the benefit of deduction u/s 80 IB(10) for the reason that completion certificate in respect of buildings of the housing project was not issued to the appellant by the local authority, ignoring the fact that actual construction work of all the buildings was fully completed within the prescribed time limit and that grant of completion certificate by the local authority is not a condition precedent for successful claim of deduction u/s 801B(10).
1D. Without prejudice to the above, it is prayed that the id CIT (A) erred in not appreciating the argument of your appellant that as per development control rules for the city of Thane in absence of express refusal by the local authority within 21 days of submission of application documents, the completion certificate is deemed to be granted to the developer and accordingly the housing project of your appellant was deemed to be completed within the prescribed time limit.
2. The appellant craves leave to add, alter, amend and/or vary any of the above grounds at any time before the decision of the appeal."
2 ITA No. 6625/Mum/2010 Cosmos EnterprisesAssessee has also filed following additional grounds of appeal,along with an application to admit the same:
On the facts and in law, the ld CIT (A) erred in not deciding all the issues raised and argued in appeal before him relating to the claim for deduction u/s.80IB(10)in respect of the housing project "Cosmos Park" at Thane.
The above ground is legal in nature and all the relevant facts are on record and thus the same may kindly be admitted.
We find that the additional ground is arising directly out of the order of the CIT(A) is pure legal in nature.Therefore,additional ground filed by the assessee stand admitted. Grounds of appeal raised by the AO read as under:-
Whether on facts & in the circumstances of the case and in the law, Hon'ble CIT (A) was justified in deleting the addition of Rs.15,02,914/-made on account of bogus purchases from 4 parties without verifying the facts.
2Whether on facts & in the circumstances of the case & in law, Hon'ble CIT(A) was justified in deleting the addition of Rs.1,50,291/- u/s 69C of the I.T. Act, 1961, for expenses assumed to be incurred on obtaining bogus bills.
3.The appellant craves leave to add, amend alter or delete any grounds of appeal.
ITA No.6625/Mum/2010/AY -2007-08:2.Assessee,an association of person(AOP),engaged in the business of builder and developer,filed its return of income on 26.10.2007 declaring income at Rs. Nil.AO finalised the assessment u/s. 143(3) of the Act on 31.12.2009 determining the total income of the assessee at Rs.5.49 Crores. During the assessment proceedings,AO found that assessee had declared total turnover of Rs.19.4 Crores and Net Profit of Rs. 5.32 Crores,that it had claimed deduction u/s.80IB(10) of the Act for the entire income.He directed the assessee to submit explanation with regard to the claim made u/s.80IB of the Act.After considering the same he held that the housing project consisted of 9 buildings,that the copy of first sanction was issued by the municipal authorities on 18.02.2003, that project was first approved on or before 31.03.2004,that as per the provisions of section 80IB(10)(a)(i) of the Act,assessee was required to complete the construction of the housing project before 31.03.2008,that it had to obtain Occupation Certificate(OC) of all the 9 buildings from the local authorities on or before 31.03.2008,that the assessee had neither completed the construction of project nor had obtained OC in respect of all the 9 buildings on/before 31.03.2008. AO issued a letter,on 06.11.2009,to Thane Municipal Corporation (TMC) in this regard.Vide its letter dated 10.11.2009,TMC informed the AO that the project was approved for development on 28.02.2003 and till 10.11.2009 OC was not issued to the assessee.AO held that assessee had violated the provisions of section 80IB(10(a)(i) r.w.explanation (i) and (ii) by not obtaining OC/ Completion Certificate(CC)of the local authorities.Accordingly,vide his letter dated 31.11.2009, he asked the assessee-AOP to show cause as to why its claim made u/s.80IB(10) should not be disallowed. After considering the submissions of the assessee,AO held that housing project was not completed before 31.03.2007,that deemed approval of TMC before 31.03.2008 did not exist,that it had violated the provisions of the section under consideration:
2.1.Assessee preferred an appeal before the First Appellate Authority (FAA).It was submitted before him that phase-I of the housing project was completed before 31.03.2007, that the assessee had applied for OC from the local authority on 23.10.2007,that as per applicable Development Control Rules (DCR) for the City of Thane in the absence of express refusal by the local authority within twenty one days of the submission of necessary documents such certificate was deemed to be granted to the developer, that the Construction Certificate in respect of phase-I buildings were issued on 13.04.2004 and 04.12.2004 and not on 08.02.2003,that accordingly the said housing project was required to be completed prior to 31.03.2009 and not before 31.03.2008 as held by 3 ITA No. 6625/Mum/2010 Cosmos Enterprises the AO,that the condition for claim to be made u/s.80IB(10)was that housing project should be approved by the local authority,that grant of CC by the local authority was not a condition manda
-tory for successful claim to be made u/s. 80IB of the Act.
After considering the submissions of the assessee and the assessment order,FAA held that section 80IB(10)(a)(expl.)(ii) mandated that the date of completion of construction of housing project had to be taken as the date on which CC was issued by the local authority,that CC in respect of 9 buildings of the housing project of the assessee had not been granted by the local authorities till December 2009,that the argument of the assessee about deeming a grant of CC had to be ignored, that provisions of section 80IB(10)made it clear that issue of CC was mandatory,that entire emphasis for claiming deduction under the section was based on the period of commencement as well as the completion of the housing project for which the particular time frame had been prescri
-bed,that the housing project were eligible for deduction u/s.80IB(10) of the Act if the developer adhered to the specified time period prescribed in the section,that because of the failure of the assessee to obtain the mandatory CC from the local authority it was not eligible for the deduction, that the assessee had not complied with the basic condition, that CC issued by local authority had not been filed by the assessee,that the local authority had informed that CC was not issued by it. Finally,upholding the order of the AO,FAA dismissed the appeal filed by the assessee. He further mentioned that AO had also disallowed deduction u/s. 80IB(10) on other grounds also like existence of residential units about 1000 sq. ft. and the existence of commercial establishment in the project,that assessee had violated the basic condition for claiming the deduction,that other grounds were infructuous.In short he did not adjudicate the other issue raised by the assessee.He held that as the main ground of appeal had been decided against the assessee,so there was no need to decide the other grounds.
2.3.Before us,Auhtorised Representative(AR)submitted that there was difference between the a letter intimating permission to construct and a commencement certificate, in the case under consi
-deration commencement certificates were issued on 13.04.2004 and 04.12.2004 by TMC,that phase I of the project, consisting of 5 buildings,was completed on 28.03.2007,that an application was submitted to TMC on 27.10.2007for issuing OC,that assessee did not get any refusal letter from TMC,that only condition for claiming deduction u/s.80IB was completion of housing project in stipulated time,that OC by local authority was not mandatory,that as per rule 37 of Developme
-nt Control Rules,1994(DCR) if local authority did not reject the application made by the assessee within a period 21 days it had to be deemed that OC was issued to the assessee , that TMC had not rejected the application made by the assessee,that cluster of buildings from out of a large layout would be eligible for deduction u/s.80IB(10)of the Act,that completion of construction of housing project was sufficient compliance of sub section (a)and the explanation,that housing projects commenced prior to 1stApril,2005 were entitled for deduction u/s.80IB inspite of commercial area being in excess of limits prescribed by sub-section(d)to section 80IB (10),that housing project developed by the assessee was more than 25 kms.from the city of Mumbai,that upper limit of area of 1000 Sq.ft.of residential units was not applicable.that property tax levied by TMC was paid by the assessee during the year under consideration,that levy of property tax proved completion of project.He relied upon the cases of Vandana Properties (254CTR258),Saroj Sales Organization (supra),Mudhit M. Gupta(51DTR217) Brigade Enterprises Pvt. Ltd.(119 TTJ 269),Magarpatta Township Development & Construction Co.(150TTJ590),M/s.Rahul Construc -tion Co. (ITANo. 1250/PN/ 2009 & 707/PN/2010 Dt.30.03.2012)Viswas Promoters (P) Ltd.(255 CTR 149), Runwal Multi-housing Pvt. Ltd-(ITA No.1015,1016 & 1017/PN/2011 Dt. 21.11.2012). For the proposition that completion of construction of housing project is sufficient compliance with sub-section (a) to section. 80IB(10),AR relied upon the cases of Tarnetar Corporation( 210 Taxman 206), Ramsukh Properties(138 ITD 278),Hiranandani Akruti JV (39 SOT 498),Regency Mahavir Construction (ITA 1309/PN/2009 & 567/PN/2010 Dt.14.12.2012),City Development 4 ITA No. 6625/Mum/2010 Cosmos Enterprises Corporation (ITA 57 & 1287/PN/2010-Dt. 22.09.2012), Hindustan Samuha Awas Ltd. (ITA 945 to 950/PN/ 2010 -Dt. 20.08.2011), Varun Developers(ITA1624/PN/2011-Dt. 22.03.2013)and Sai Krupa Developers(ITA 3661/M/2011-Dt. 14.03.2012) He also relied upon the affidavit dated 12.08.2013 filed by Sh.Suraj Ramesh Parmar one of the partners of a firm that is one of the constituent of AOP.He referred to averments of the affidavit wherein it had been mentioned that that the project 'Cosmos Park' consisted of two phases namely Phase I and Phase II,that in phase I,five buildings namely Vinca (1 &2) Copperleaf (3 &
4) and Whitefield (9) were constructed , that said project had commenced in financial year 2004- 05 and was completed in financial year2007-08,that deduction u/s 801B(10)was claimed in respe
-ct of phase I of project -I and same was for A.Y. 2007-08,that construction of 5 buildings comprising of phase I of Cosmos Park was fully completed as per sanctioned plans,that AOP had applied to TMC,through its architect M/s. Archetype Consultants (I) Pvt. Ltd.,for grant of OC for the said 5 buildings on 23.10.2007,that TMC had not granted it the OC,that TMC did not issue any rejection letter to the AOP,that it was orally informed that the OC had not been granted as it had not satisfied the revised ULC norms of 2007,that Government of Maharashtra sought to change the ULC norms through the resolution dated 12.04.2007,that as per change introduced AOP was expected to construct a larger number of smaller flats in the project to be handed over to Government authorities,that it was not possible for the AOP as project was substantially complete by that date,that the State of Maharashtra had adopted the Urban Land (Ceiling & Regulation) Repeal Act, 1999 on 29th November, 2007 and in view of the said ULC Repeal Act,all the procee
-dings under the said ULC Act 1976 stood abated, that after that government was not entitled to initiate any action in furtherance of any of the provisions of the said UILC Act,that a Writ Petition No. 5684 of 2007 was filed in Bombay High Court, Nagpur Bench against the said Resolution dated 12.04.2007 on the ground that there was no power vested in the State Government either u/s 20, 21 or any other provisions of the ULC Act to nullify or cancel the order passed or building permit issued by the Planning Authority under the Maharashtra Regional and Town Planning Act, that the Hon.Bombay High Court, Nagpur Bench, vide its judgment dt.14.06.2008,quashed and set aside the resolutions dt.12.4.2007 and 08.11.2007,that the AOP had constructed all the 5 buildings in phase I which was considered as a project as per sanctioned plan , that non issue of OC by TMC in respect of the said 5 buildings for want of NOC from ULC department was not on account of any failure, illegality attributable to it but is on account of change in policy by the State Government,that flat owners were handed over possession of the constructed premises of phase I of Cosmos Park complex in F.Y.2006-07,that TMC had levied property tax in respect of the units constructed in the said 5 buildings.Referring to pages 11to13A,19 and 20 of the Paper Book (PB),he submitted that date of first sanction and date of completion of construction of the project in question was 28.02.2003 and 23.10.2007 respectively,that all the 5 buildings comprising of the project Cosmos Park Phase were completed before the time stipulated by the Act. Referring to the averments of the affidavit,he stated that rule resolution dated 12.4.2007 and 08.11.2007 passed under ULC Act were quashed by the Nagpur Bench of Hon'ble Bombay High Court,that resolution required that assessee should construct certain number of houses for weaker sections, that by the time resolution was passed assessee had completed the major portion of phase I,that after quashing of Resolution assessee was not supposed to do anything. Departmental Representative (DR) submitted that project was not completed in time,that first date of approval had to be taken as the date of commencement of the project,that local authority had not mentioned about two phases of the project,that development plan was about nine buildings, that even phase one was not over in stipulated period,that sanction date was important,that OC was a must for claiming exemption under the Act,that there was no approval from TMC,that AO had made queries with the local authorities,that assessee had not fulfilled the conditions as envisaged the by the Act for claiming deduction u/s.80IB of the Act,that project was not completed by 31.03.2008,that project has to be taken as a whole,that delay in obtaining OC was 5 ITA No. 6625/Mum/2010 Cosmos Enterprises because the assessee had violated the provisions of ULC Act,that assessee was carrying out job of sub-contractor,that for claiming benefit of the section assessee should comply the provisions fully,that deeming sanction cannot be equated with CC,that commercial area was constructed by the assessee while completing the housing-project.
2.4.We have heard the rival submissions and perused the material before us.Undisputed facts of the case under consideration can be summarised as under:
i)assessee had developed housing project in the name and style of Cosmos Park comprising of 9 buildingsVinca-1-2,Copperleaf-I-II,Iberis-I-II,Mayflower-I-II &Whitefield at Ghodbunder Road, Thane (W),
ii)assessee claimed that it had completed a cluster of 5 buildings that was eligible for claiming deduction u/s.80IB of the Act,
iii).AO held that the assessee had not completed the housing project in prescribed period,that in absence of CC from the local municipal authorities and because of certain other violations like total area of some of the flats of the project and existence of commercial premises it was not entitled to the deduction,
iv).FAA upheld the order of the AO but did not adjudicate grounds pertaining to size of flats and commercial area.
We find that deduction claimed u/s.80IB (10) was rejected by the FAA on the ground that the assessee had not produced the OC of TMC certifying completion of the housing project.We find that the assessee had made an application of local authority,i.e.TMC,for development and construction of a housing project and TMC had issued Sanction of Development Permission on 18.2.2003.It appears that the AO had taken the said permission as commencement certificate.In our opinion Sanction of Development Permission cannot be equated with commencement certifi- cate. TMC had issued commencement certificates on 13.04.2004 and 04.12.2004 for construction of first phase of the project.From perusal of pages no.11to13/13A of the PB it is clear that sanction to commence the work-commencement certificate- was issued by TMC in the months of April and December 2004.Therefore dates of commencement of project has to be taken as 13. 04.2004 and 04.12.2004.In our opinion,AO was not justified in holding that commencement certificate was received by the assessee 18.2.2003.
Now,we would like to discuss the issue of OC.Page no. 19 and 20 of the PB are the letters dated 27.03.2007,sent by the architect of the assesse,to TMC intimating it that first phase of the project, consisting of 5 buildings,had been completed.TMC was requested by the assessee to issue of OC. As stated earlier,FAA held that in absence of OC form TMC assessee was not entitled to claim deduction u/s.80IB of the Act.We find that issue of obtaining OC from local authority has arisen before various judicial forums from time to time. In the case of Sai Krupa Developers (supra)the issue of OC was dealt as under:
"8.Regarding completion certificate, reliance was placed on the decision of 1TAT in the case of M/s. Saroj Sales Organisation,115 TTJ 485.It was submitted that as per section 80IB(10), which is applicable in respect of the housing projects approved before 31.3.2005, there was no requirement of obtaining completion certificate. Reliance was placed on the decision of 1TAT Mumbai in the case of Hiranandani Akruti vs DC1T, 3SOT 498, wherein, the ratio of decision in the case of Saroj Sales Corporation was followed, which is as under:
"We are of the view that we are not supplying any words to the statute but are only holding that the law as it existed in the Y. 2001-05 when the assessee submitted its proposal for slum rehabilitation and the permission for carrying out the development was accorded on 17.11.2003 and when the assessee commenced development is to be applied. Therefore, the submissions of the learned D.R. in this regard cannot be accepted. We are of the view that 6 ITA No. 6625/Mum/2010 Cosmos Enterprises the legislature would not have intended to take away a vested right without clear words to that effect in the provisions of Sec.80IB( 10) as amended by the Finance Act, 2005, w.e.f. 01.4.2005.We, therefore, hold following the decision in the case of Saroj Sates Organization (Supra) that the law as existed in the A.Y.2004-0S when the assessee submitted its proposal for slum rehabilitation and the permission for carrying out the development was accorded on 17.11.2003 and when the assessee commenced development is to be applied."
9.After considering the assessee's submissions,the C1T(A) directed the AO to allow deduction u/s. 80IB (10) of the Act, inter alia,observing as under:
"Regarding first objection of the AO, it is seen from the development agreement entered into by the appellant with M/s. Sai Samarth Enterprises that the appellant had the rights to appropriate the sale proceeds. Further it is seen from the P&L account that the assessee has admitted the sale proceeds of flats/shops constructed by them and it is not a case where the assessee has admitted contract receipts received from M/s. Sai Samarth Enterprises. If the assessee had admitted contract receipts from M/s Sai Samarth Enterprises, the TDS provisions should be applicable and they should have deducted TDS whereas as seen from the statement of total income, the assessee has not claimed any credit for TDS. This shows that the assessee was not a contractor as held by the AO. The assessee being a developer is entitled to deduction u/s. 80IB(10). There is no requirement in section 801B(10) that the assessee should be owner of the land and the same is supported by the decision of the ITAT Ahemedabad in the case of Radhe Developers (supra).Regarding the next objection of the AO, that the project was not completed before 31.3.2008, the contention of the representative is that as the project of the appellant was approved before 31.3.2005, there was no requirement of obtaining the completion certificate.The assessee has fulfilled all the conditions. In the circumstances, I accept the plea of the representative that deduction u/s. 80IB(10) cannot be denied merely because the appellant did not obtain the completion certificate on or before 31.3.2008. In view of above, I find that there is no justification for denying deduction u/s. 801B(10)."
10.Aggrieved by the stand so taken by the CIT(A), the revenue is in appeal before us.
11.Having heard the learned Departmental Representative and going to the facts of the case and detailed reasoning given by the C1T(A), we are not inclined to disturb the well reasoned order of the CIT(A), wherein, he has allowed the claim for deduction u/s. 80IB(10) to the assessee firm.
12.In the result, appeal filed by the revenue is dismissed."
In the case of City Development Corporation (ITA1489/PN/2009 and 1100/PN/2010-AY.2006- 07and 07-08dated22.09.2012)issue before the B Bench of Pune Tribunal was similar to the issue before us.In that matter CC was issued by the local authority after the stipulated date though the architect of the assessee had made an application for issue of OC and he had mentioned that building in question was complet.AO and FAA held that in absence of the OC,assessee was not entitled to claim deduction u/s.80IB of the Act,though it had made application within time. Deciding the appeal Tribunal held as under:
"12.We have carefully considered the rival submissions.Quite clearly, the dispute is with regard to the completion certificate of building 'E' having been issued by the local authority i.e.Pune Municipal corporation, on 5-5-2008. Sub-clause (i) of clause (a) to section 80-lB(10) requires that the construction of the project in question is to be completed on or before 31-3-2008. Clause (ii) of Explanation below section 80-IB(1O)(a) prescribes that the date of completion of construction of housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority. In the present case, it has been issued on 5-5-2008 and hence the case set up by the Revenue that the completion is beyond the mandated date of 31-3-2008.In this background, we find that there is no dispute that the assessee applied for obtaining the completion certificate in respect of building E' on 12-3- 2008. From the discussion made by the Assessing Officer in the assessment order,wherein the factual assertions of the assessee have been reproduced, it is quite evident that the assessee asserted that before 31-3-2008, the construction of building was complete in all respects; that electrical connection was provided to each flat owner; road was complete; water and drainage connection was available; sewerage system was operating; club house was functional; etc. The assessee also pointed out that the local 7 ITA No. 6625/Mum/2010 Cosmos Enterprises authority had also initiated property tax assessments for each of the flats and the same demonstrated that all the flats in the building were complete. In fact, in para 6.9 of the assessment order, the Assessing Officer noticed that "the facts that the flats were completed and possession given will not come to the rescue of the assessee". The aforesaid finding of the Assessing Officer supports the assertion made by the assessee that factually speaking construction of flats in building 'E' was also complete and possession handed over to the actual user/customers prior to 31-3-2008. Pertinently, on the basis of the architect's certificate confirming completion of construction of building, the assessee applied for the completion certificate to the Pune Municipal Corporation on 12-3-2008. It has been pointed out before us that the local authority i.e. Pune Municipal Corporation did not raise any objection with regard to assessee's application and the certificate for building 'E' was thereafter issued on 5-5-2008. The moot question is as to whether in such a situation can it be said that the assessee's project did not comply with the condition prescribed in sub-clause (i) of clause (a) to section 80-IB(10)of the Act whereby the construction was to be completed on or before 31-3-2008. Somewhat similar situation was considered by our co-ordinate Bench in the case of Hindustan Samutha Awas Ltd. (supra) wherein also on the strength of architect's certificate, an application for obtaining completion certificate was moved to the local authority on 25-2-2008 but in actuality the completion certificate was issued by the local authority on 10-10-2008, The Tribunal noticed that the delay in issuing completion certificate was not attributable to the assessee as no objections were raised by the local authority. The Tribunal after considering its earlier decisions in the case of M/s. Satish Bohra & Associates Vs. ACIT in ITA No. 713 and 714/PN/2010 for A.Y. 20ó4-05 and 2005-06 dated7-1- 2011M/s. D.K. Constructions Vs. ITO ITA No.243/PN/20lO for A.Y. 2006-07; dated 6-12-2010and Sanghvi and Doshi Enterprises Vs. ITO and others TA No. 259 to 263/MDS/2010 dated 19-5-2011 for A.Y. 2005-06 and 2006-07(TM) has concluded as follows:
'From the above, once this is clear that the date that appears on the Architect's Completion certificate filed before the local authority is relevant one. In the instant case, the said date is 25-3- 2008 and the assessee filed requisite form before the local authorities intimating the completion of the project. The said certificate/intimation was accepted by the local authority without any amendments or objections. Local authority has not raised any queries on the quality construction of the building or the completion of the same as per the plans approved by such authority. In such circumstances, in our opinion, the delay in obtaining the completion certificate on 10-10-2008 is certainly not attributable to the assessee and obtaining the said certificate before 31-3-2008 is beyond the control of the assessèe. Assessee's job includes the completion of the building in accordance with the approved plans and intimation of the same to the local authority by way of filing the requisite forms together with the completion certificate given by the Architect, the specialist in the matter and the assessee has done his job scrupulously in this case. 1-fowever, the local authority has neither objected to the said application of the assessee and the Architect by raising any objections for accepted by issue of said completion certificate till 10-10-2008. Therefore, the delay in grant of the said certificate is certainly not attributable to the assessee. Therefore, in our opinion, the assessee is not defaulter or this account and thus, the AC has erred in denying the deduction u/s 80-IB(10) of the Act. Accordingly, the order of the CIT(A) has to be reversed. Thus, the grounds raised in the appeal are allowed"
13.The aforesaid decision of the Tribunal is clearly applicable to the facts of the present case also. In the present case, the completion certificate was applied for before 31-3-2008 i.e. on 12-3-2008. It is undisputable that the application of the assessee has been approved by the local authority without raising any amendment or objection, as has been asserted by the assessee all along and the delayed issuance of the completion certificate by the local authority on 5-5-2008, albeit after the mandated date of 31-3-2008 cannot be attributed to the assessee. In this background of the matter, we therefore, find ample force in the plea of the assessee that denial of deduction u/s 80-IB(10) on such score is uncalled for. In conclusion therefore, in the instant factual background, we hold that the assessee has complied with the condition of completing the construction of the project within the mandated date of 31-3-2008 even with regard to building 'E', following the parity of the reasoning lid down in the case of Hindustan Samutha Awas Ltd. (supra).
14.Sub-clause(i) of clause (a) to section 80-IB(10) of the Act requires that the undertaking, developing and building a housing project "completes such construction" or before 31-3-2008. In the present case, assessee has factually asserted right from the stage of assessment proceedings, that the construction of building 'E' was complete in all respects as per sanctioned plan and all the flats were handed over to the 8 ITA No. 6625/Mum/2010 Cosmos Enterprises actual users/customers prior to 31-3-2008. In the background of the aforesaid factual position which has remained uncontroverted, in our view, on a plain reading of sub-clause (i) of clause (a) to section 80- IB(10) the condition prescribed therein is fulfilled., inasmuch as the construction of building 'E' was complete before 31-3-2008. However, on the reading of clause (ii) of the Explanation below sec. 80- IB(10)(a) of the Act, it emerges that the completion of construction of a housing project is to be taken to be the date on which completion certificate is issued by the local authority, which in the present case is issued on 5-5-2008 i.e. beyond the stipulated date of 31-3-2008. The moot question is in case the condition of completion construction contained in the substantive section 80-IB(10)(a)(i) is factually found to be complied with, can the contents of the Explanation clause (ii) thereof, alter the situation? Can an Explanation appended to a section, enlarge the scope of the main section so as to make it more onerous for a taxpayer? Be that as it may, we do not dwell on this aspect any further, as the assessee has been found to be eligible for necessary relief because the condition prescribed in section 80-IB(10)(a)(i) of the Act has been complied with in view of the stated precedents. We therefore, set aside the order of the CIT(A) on this aspect and hold that the assessee cannot be denied the claim of deduction u/s 80-IB(10) on the strength of non-issuance of the completion certificate for building 'E' by the Pune Municipal Corporation before 31- 3-2008, having regard to the facts and circumstances of the case."
Similarly, in the case of Hindustan Samuha Awas Ltd.(ITA945-50/PN/2010-AYs.2002-03to 2007
-08,dtd.30.08.2011,B Bench of Pune Tribunal has held that the date that appeared on the Architect's Completion certificate filed before the local authority was a relevant one,that in the case of the assessee said date was 25-3-2008 and the assessee had filed requisite form before the local authorities intimating the completion of the project, that certificate-intimation was accepted by the local authority without any amendments or objections,that Local authority had not raised any queries on the quality construction of the building or the completion of the same as per the plans approved by such authority,that in such circumstances the delay in obtaining the completion certificate on 10-10-2008 is was certainly not attributable to the assessee and obtaining the said certificate before 31.3.2008 was beyond the control of the assessee,that assessee's job included the completion of the building in accordance with the approved plans and intimation of the same to the local authority by way of filing the requisite Forms together with the Completion certificate given by the Architect,that the assessee had done his job scrupulously,that the local authority had neither objected to the application of the assessee ,that the delay in grant of the certificate was certainly not attributable to the assessee,that the assessee was not defaulter on this account and the AO had erred in denying the deduction u/s 801A(10) of the Act.
We find that Hon'ble High Court of Gujarat had an occasion,in the case of Tarnetar Corporation (supra)to deal with the same issue.In that matter assessee got approval for development of housing project from the local authorities before 01.04.2004 and it completed the construction in the year 2006.On 15.02.2006 it applied to the local authorities for use of the buildings.For technical reasons local authority did not grant the permission up to March 2009.AO disallowed the claim made u/s.80IB of the Act.FAA allowed the appeal filed by the assessee and the Tribunal upheld the order of the FAA.When the matter reached to the Hon'ble High Court question to be decided by it was whether an assessee;who completes housing project well before final date but local authority,for technical reasons,grants business use permission after such date;will be entitled to deduction u/s.80IB of the Act ?Considering these facts Hon'ble High Court held that "6.In the present case, therefore, the fact that the assessee had completed the construction well before 31st March,2008 is not in doubt. It was, of course, true that formally BU permission was not granted by the Municipal Authority by such date. It is equally true that explanation to clause
(a) to section 80-IB(l0) links the completion of the construction to the BU permission being granted by the local authority. However,not every condition of the statute can be seen as mandatory. If substantial compliance thereof is established on record, in a given case, the court may take the view that minor deviation thereof would not vitiate the very purpose for which deduction was being made available.
7.In the present case, the facts are peculiar. The assessee had not only completed the construction two years before the final date and had applied for BU permission. Such BU permission was not 9 ITA No. 6625/Mum/2010 Cosmos Enterprises rejected on the ground that construction was not completed, but the some other technical ground. In that view of the matter, granting benefit of deduction cannot be held to be illegal."
We are of the opinion that from the above discussion one thing is clear that for claiming deduction u/s.80IB the basic condition to be fulfilled is to complete the housing project before a particular date.Grant of CC is the prerogative of local authority-assessee has no control over it.If the local authority do not reject the application filed the assesee then.in our opinion,for the inaction of the local authority a legitimate claim of a benevolent legislation should not be rejected by the AO. Here we would like to reproduce Rule 37 of DCR(Pg. of PB)that reads as under :
"The Commissioner, on acceptance of the completion certificate, shall sanction an occupation certificate, in the form in Appendix K within 21 days from the date of receipt of the completion certificate, after which period it shall be deemed to have been approved by the Commissioner for occupation, provided the building has been constructed as per the sanctioned plans. Where the occupation certificate is refused, the reasons for such refusal shall be communicated to the Owner."
In our opinion,the provision of deeming sanction was introduced in the DCR with an aim to save the common citizens from the inherent bureaucratic delay.We find that TMC had not sent any letter to the assessee intimating the reasons for not issuing CC.If the violation of Resolution of DCR Act was the reason,after the decision of the Hon'ble jurisdictional High Court,that reason also does not exits.In short,in absence of denial by the TMC Rule 37 of DCR comes in picture. After considering the peculiar facts of the case; assessee had completed the housing project before stipulated time and it had made an application on 23.10.2007 to TMC to issue CC,there is nothing on record that application made by the assessee for issue of CC was rejected by TMC for non completion of the project or for any other voilation,possession of the flats was handed over to the owners of the residential units,TMC had raised property bills for the housing project,assessee has also paid property tax amounting to Rs.14.51 lacs on 14.12.2007,Rule 37 of DCR provides for deeming approval of CC; we are of the opinion that FAA was not justified in holding that the assesee-AOP was not entitled for 80IB(10)deduction only because it had not obtained CC from the local authority for the phase I of the housing project.Our views are supported by the cases, including the judgment of the Hon'ble High Court of Gujarat,referred above. Therefore,reversing the decision of the FAA,we allow effective ground of appeal in favour of the assessee.
Before proceeding further,we would like to clearify that though we have held that considering the peculiar facts of the case under consideration assessee-AOP is eligible for deduction under 80IB of the Act,but we have dealt with the quantum of deduction.In our opinion it is the job of the officers of the department.FAA has not dealt with the issues of size of some of residential units and size of allowable commercial use of the housing project,while deciding the appeal filed by the assessee.In our opinion,these factors decide the quantum of deduction available.In other words we have only held that deduction u/s.80IB could not be denied to the assesee just because it had not obtained CC from TMC,but what should be exact deduction has to decided by the AO after the FAA passes a speaking order about the two issues.
3.Referring to the additional grounds,AR submitted that the assessee had raised specific issues before the FAA,that FAA did not adjudicate the grounds pertaining to area of commercial complex,areas of flats and definition of city of Mumbai,that issue raised by the assessee were vital and had direct bearing on the result of the appeal.In this regard he referred to Mumbai Municipal Corporation Act-1988,Bombay General Clause Act1904, The Greater Bombay Laws and Bombay High Court (Declaration of limits) Act1945,and Maharashtra Land Revenue Code-1966.He argued that City of Mumbai existed upto Chunabhatti on the eastern side.He referred to the maps issued by Municipal Corporation.He relied upon the cases of Silver Land Developers Pvt. Ltd.
10 ITA No. 6625/Mum/2010 Cosmos Enterprisesdecided by the I Bench of Mumbai (2506/Mum/ 2009) dated 11.07.2012 and decision of Hon'ble jurisdictional High Court delivered in the case of Mavaji Mulji Merchant v/s.State of Maharashtra & others,1993(3) Bom.C.R.220.(Bom.) 3.1.We find that assessee had,while filing appeal before the FAA had agitated various issue because AO had denied it the benefit of section 80IB(10) not only on one ground but on various grounds.In our opinion,while deciding the appeal FAA should adjudicate all the ground that are raised by an assessee.Provisions of section 250 of the Act provides that while disposing of the appeal he would not only determine the issues raised before him,but he would also mention the reasons for arriving at the decision.Therefore,by not adjudicating the grounds of appeal raised by the assessee,FAA has not adhered to the mandate of the Act.We admit the additional ground as same is of legal in nature and will have bearing on the outcome of the appeal. Deciding the additional ground in favour of the assessee,we direct the FAA to decide the un- adjudicated grounds of appeal afresh,after affording a reasonable opportunity of hearing to the assessee-AOP.
As a result appeal filed by the assessee stands partly allowed.
ITA No.6774/Mum/2010,AY2007-084.Now,we would take the appeal filed by the AO.Both the ground of appeal are inter-linked.They are about deletion of an addition made on account of bogus purchases and commission paid for the said purchases.First Ground of appeal is about addition of Rs. 15.02 lacs on account of bogus purchases made by the assessee.AO received information from the investigation wing,Mumbai that assessee had debited certain expenses on account of purchases which were alleged to be in nature of accommodation entries.On the basis of said information, AO recorded statement of one Shri Dharmesh Hakani on 19.11.2009. As per the AO,Shri Hakani stated that he had provided accommodation entries to the assessee by issuing bogus sale-bills without supplying any material, that the total amount involved in such transaction amounted to Rs. 15.02 lacs. AO asked the assessee why an addition should not be made to its income for the purchases made from Mr. Hakani.Assessee requested the AO to allow it to cross-examine the witness to establish genuinen
-ess of their claim.AO issued summons to Shri Hakani,but nobody appeared on the stipulated date.AO held that assessee had made bogus purchases and inflated its expenses to the tune of Rs. 15.02 lacs.
4.1.Against the abve addition,assessee preferred an appeal before the FAA.After considering the submissions of the assessee and the assessment order,he held that issue of bogus purchases required detailed analysis and investigation on the part of the AO.With regard to copies of main statements of four parties the contention of the assessee about making genuine purchases and making payment by cheque had not been controverted by the AO, that the assessee had discharged its onus, that the AO did not discharge the onus by not making further enquiries with the bank,that in absence of enquiry about withdrawals made against the cheque issued by the assessee and giving back of the said money to it assessee could not be held guilty of making bogus purchase/taking back the money in cash after issuing the cheque against those party, that AO had based his order only on the statement of Shri Hakani, that in the absence of cross- examination of Shri Hakani by the assessee statement made by him could not be against it, that the AO had not produced any corroborative evidence on record to prove his allegations,that without affording any opportunity of cross-examination of the person in question the AO could not take any unilateral decision, that the opportunity of cross-examination was a sine-qua-non of the due process of law, that no adverse inference could be drawn against the assessee unless it was afforded due opportunity of cross-examination of a person whose statements were used against it. Finally,he allowed the appeal of the assessee and deleted the addition made by the AO.
11 ITA No. 6625/Mum/2010 Cosmos Enterprises4.2.Before us,DR submitted that Shri Hakani was owner of four concerns who had claimed to have supplied material to the assessee,that he admitted before the AO that he had issued bogus bills,that assessee had not purchased any material from Hakani owned entities.AR submitted that there was no evidence with AO to make addition,that material was purchased by the assessee,that payment was made by the assessee to Hakani by cheque,that there was no allegation that assessee had received back the money from Hakani,that assessee was not given a chance to cross examine the witness.
4.3.We have heard the rival submissions and perused the material on record.Additon was made by the AO only on the basis of the information received from the investigation wing and the statement of Sh.Hakani.It is one of the well settled principles of taxation jurisprudence that if tax liability is to be fastened to an assessee on the basis of statement of a person then assesee has to be given a chance of cross-examination that person.There is no need to afford an opportunity of cross-examination, if statement is not used against the assesse.In the case under consideration AO had made an addition,holding that assessee had made bogus purchases,relying upon the statement of a third party.Principles of natural justice demand that evidences collected behind the back of the assessee had to confronted to him for rebuttal.As the AO did not adhered to the settled legal procedure,so,FAA was justified in allowing the appeal filed by the assessee.
Therefore,upholding his order,we decide Ground no.1 against the AO.
5.Second ground of appeal filed by the AO is about addition of Rs. 1.5 lacs made by the AO u/s. 69C of the Act on account of expenses incurred by the assessee for obtaining the bogus bills of purchases.During the assessment proceedings,AO held that for obtaining bogus purchase bills assessee-AOP must have incurred expenditure @10%of the bill amount.He made an addition of Rs.1.5lakhs to the total income of the assessee.In the appellate proceedings.FAA deleted the said addition holding that as fact of purchase of bogus bills was not established,so no addition could be made.
5.1.Before us,DR and AR made submissions that were made with regard to ground no.2.We have already upheld the order of the FAA while deciding earlier Ground,so following the same Ground no.2 is also decided against the AO.Appeal filed by the AO is rejected.
As a result,appeals filed by the assessee and the AO stand partly allowed and dismissed respectively.
पǐरणामतः िनधा[ǐरती और िनधा[रण-अिधकारȣ Ʈारा दाǔखल कȧ गई अपीलɅ बमशःआंिशक Ǿप से मंजूर और नामंजूर कȧ जाती हɇ .
Order pronounced in the open court on 15th October,2013.
आदे श कȧ घोषणा खुले Ûयायालय मɅ Ǒदनांक 15 अÈटू बर, 2013 को कȧ गई ।
Sd/- Sd/-
(बी.आर
बी आर.् िमƣल.B.R.Mittal
िमƣल ) (राजेÛि/Rajendra)
Ûयाियक सदःय /JUDICIAL MEMBER लेखा सदःय /ACCOUNTANT MEMBER
th
मुंबई/Mumbai,Ǒदनांक/Date: 15 October,2013
SK
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. Assessee /अपीलाथȸ 2. Respondent /ू×यथȸ
12 ITA No. 6625/Mum/2010 Cosmos Enterprises
3. The concerned CIT (A) /संबƨ अपीलीय आयकर आयुƠ, 4. The concerned CIT /संबƨ आयकर आयुƠ
5. DR "C" Bench, ITAT, Mumbai /ǒवभागीय ूितिनिध सी खंडपीठ,आ.अ.Ûयाया.मुब ं ई
6. Guard File/गाड[ फाईल स×याǒपत ूित //True Copy// आदे शानुस ार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai