Income Tax Appellate Tribunal - Indore
Saroj Kapoor Prop.Krishna Homes, ... vs Department Of Income Tax on 22 February, 2012
1
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER
AND
SHRI R.C. SHARMA, ACCOUNTANT MEMBER
ITA No. 317/Ind/2011
A.Y. 2004-05
Assistant Commissioner of Income Tax
1(1), Bhopal ... Appellant
Vs.
Saroj Kapoor,
Prop. Krishna Homes, Bhopal
PAN - ABWPK 4857 E ... Respondent
Appellant by : Shri Arun Dewan, Sr. DR
Respondent by : S/Sh. H.P. Verma & Girish Agrawal
Date of Hearing : 22.2.2012
Date of Pronouncement : 22.2.2012
O R D E R
PER JOGINDER SINGH, judicial member
The Revenue is aggrieved by the impugned order dated 14.9.2011 passed by the ld. first appellate authority, Bhopal, 2 with regard to deletion of penalty of Rs.3 lacs levied by the Assessing Officer u/s 271(1)(c) of the I.T. Act.
2. During hearing, the learned counsel for the assessee Shri H.P. Verma and Shri Girish Agrawal submitted that since the quantum addition has been deleted by the Tribunal vide order dated 16.4.2010, the penalty imposed u/s 271(1)(c) does not survive. The learned counsel for the assessee also furnished the copy of the order passed by the Tribunal in ITA No.194/Ind/2008 and CO No.51/Ind/2008 (order dated 16.4.2010). This assertion of the learned counsel for the assessee was not controverted by the Revenue.
3. We have considered the rival submissions and perused the material available on file. Uncontrovertedly, the quantum addition has already been deleted by the Tribunal after making an elaborate discussion in its order dated 16.4.2010, therefore, the very basis of levying the penalty is no more in existence.
We are reproducing herewith the relevant portion of the aforesaid order dated 16.4.2010 for ready reference:
3"This appeal filed by the Revenue and cross objection filed by the assessee arise out of order of the Ld. CIT(A)-I, Bhopal, dated 18.01.2008, for the assessment year 2004-05.
2. We have heard both the parties and have also perused the material available on record.
3. First, we shall take up the Revenue's appeal wherein the Revenue is aggrieved by the decision of the Ld. CIT(A) in allowing deduction to the assessee u/s 80IB(10) on pro-rata basis. This is the only issue involved, though the Revenue has taken five grounds.
4. The facts, in brief, are that the assessee is engaged in the business of developing and construction of Housing Projects and claimed deduction u/s 80IB(10) amounting to Rs. 1,52,67,762/-. The A.O. found that in the year under consideration, the assessee developed and sold housing projects comprising of Row houses and flats in Green City at E-8, Arera Colony, Bhopal. The A.O. in order to ascertain actual built up area of each house of the project conducted a physical verification on the site on 8.12.2006 and on taking measurement of three flats, the built up area of such flats was found to be more than 1500 sq.ft. The details of such flats are as under :-
House No. measured & Name of the Total built up
Project owner/occupier
area
A-2-18 Green city Smt. Kavita Bhatt 1875.33 sq.ft.
A-4 Green city Shri O.P. Beohar 1928.56 sq.ft.
A-6, Green city Smt. Krishna Murthy w/o 2639.14 sq.ft.
Shri C. S. Krishna
Murthy
5. The A.O., accordingly, gave the copies of the measurement so taken for the comments of the assessee and was also required to explain as to why the deduction u/s 80IB(10) should have been disallowed. The assessee vide its letter Dated 26.12.2006 has submitted that measurements were not correctly taken and also submitted the areas as per the report of a technical expert, was within the prescribed limit of 1500 sq.ft.The A.O., however, rejected such claim of the assessee and such report for the reason that the measurements were done by the Department in the presence of assessee's representative. Thereafter, the A.O. referred to the 4 provisions of section 80IB(10) and clause (a) of section 80IB(14) and held that definition of built up area had been defined, which was of clarificatory nature and, therefore, as per this definition, the measurements taken by the Engineer hired by the assessee was not of much use as there was no concept of net built up area in section 80IB. The ld. A.O. also held that provisions of section 80IB(14)(a) of the Act was of clarificatory nature, hence had retrospective application. The A.O. further found that in case of house no. A/6 on the date of physical verification nobody had pointed out any discrepancies in the measurements taken by the Department and fact of so called additional construction by the owners subsequently was brought to the notice of the Department, which was an after thought on the part of the assessee. It was also held that even if 400 sq.ft. area was excluded then also the remaining part was more than the limit prescribed u/s 80-IB. Accordingly, the A.O. rejected the claim of the assessee for deduction u/s 80-IB(10) of the Act. Aggrieved by this, the assessee carried the matter into appeal before the ld. CIT(A), wherein it was contended that the assessee had complied with all the three conditions as laid down u/s 80IB(10). The assessee also gave the details of the types of flats constructed by the assessee. In this regard, the assessee submitted that in first phase, the residential flats were constructed admeasuring 929.46 sq.ft., 1082.35 sq.ft. of which no measurements were done by the Department. In the second phase, 9, A-1 Type and 13 A-II type Duplex Houses were constructed and the measurement of Duplex Houses was found less than 1500 Sq.ft. by the approved Valuation Officer. It was also submitted that in the third phase, Duplex Houses and EWS Flats were constructed and the area of such Duplex Residential was 1254.22 sq.ft. and EWS Flats was 217 Sq.ft. It was also submitted that physical measurement of houses constructed in third phase was also not done by the Department. The assessee also submitted that in case of A/6 Duplex Houses, the Department primarily measured the area thereof at 3812 Sq.ft., which was subsequently corrected to 2639.14 Sq.ft., by the Department on its own, which fact indicated that the assessee's representative had not checked the measurement and its calculation. It was also contended that the owner of such house had also accepted that 400 sq.ft. of additional portion was constructed subsequently by the owner. The assessee also submitted that the provisions of clause (a) of sub section (14) of section 80IB were of prospective nature and the correct method to calculate the built up area had to be in accordance with M.P. Bhoomi Vikas Rules, 1984, which was applicable in the State of M.P. where the such Housing Project had been constructed. The assessee also referred to the methodology of measurement as per these rules to compute the built up area, which was also adopted by the approved Valuation Officer and on that basis, it was found that such built up area was 5 less than 1500 sq.ft. The assessee also submitted that the measurement was done by the Department through unqualified persons inspite of the fact that services of technical personnel to carry out such jobs were also available with the Department and this approach of the Department indicated that it was a predetermined action to disallow the eligible claim of the assessee. The Ld. CIT(A) after considering all the documents as well as legal position narrated by the assessee held that the assessee was entitled for pro-rata deduction in respect of such housing project as the three flats were having built up area of more than 1500 sq.ft. The relevant findings of the Ld. CIT(A) are as under :-
"I have carefully examined the detailed reasons given by the Assessing Officer in the assessment order and various submissions of the appellant on this issue and also the legal position brought out by the AR, I find that only three duplex residential houses have been measured, which according to the appellant is below 1,500 sq.ft. I find that the measurement of flats and duplexs Type A-III and EWS flats are below 1,500 sq.ft. as per the certificate of measurement of engineer and declaration made by the appellant under Prakoshta Swamitva Adhinium 1976, duly registered, filed by the appellant. The measurement of duplex type A-I and A-II after considering the deduction, permissible under Bhoomi Vikas Rules, 1984, as per the certificate of the engineer submitted by the appellant is less than 1,500 sq.ft. I, therefore, of the considered view that it will be fair enough to tax the profit of 3 duplexs of Type AI & AII of phase/part 2 which were measured by the Department and found exceeding 1,500 sq.ft. As per the profit and loss account submitted by the appellant, it is seen that the total sale consideration of duplexes and flats is Rs. 6,73,38,296/- and sale of 3 duplex type A-I & A-II is for Rs. 39,18,920/-. The pro-rata rate of profit on these three Duplexes @ 22.67 % comes to Rs. 8,88,420/-. But, however, it is seen that the A.O. has disallowed the entire claim, instead of disallowance on pro rata basis, which in my opinion is not proper. Thus, the disallowance is restricted to Rs. 8,88,420/- only and as such the appellant gets a relief of Rs. 1,43,79,342/- i.e. ( Rs. 1,52,67,762/- minus Rs. 8,88,420/-) and the appeal is partly allowed."
6. The ld. CIT DR contended that whatever flats were measured on sample basis were found having built up area of more than 1500 sq.ft. Hence, other flats were also to be considered of having built up area of more than this limit. It was further contended that provisions of section 80IB(14)(a) were of clarificatory nature and, hence, applicable for the year under consideration also and if that be the case, then the M.P. Bhoomi Vikas Rules were not relevant and consequently methodology of 6 such rules could also not be applied in computing the built up area of each flat. The ld. CIT DR further contended that it was a case of row housing and not a case of tower/multi-storeyed flats, hence, no question of common parking areas or common facilities, which could be excluded in computing built up area. The ld. CIT DR further contended that assessee's engineer's subsequent report was not to be accepted without confronting the same to the A.O. or verification of the same by the technical persons, hence, in view of the fact that no such exercise was done by the CIT(A), the same could not be given any weightage. The ld. CIT DR further contended that the ld. CIT(A) also did not verify the approved map/registration documents to find out the correct facts. Hence, the order of Ld. CIT(A) was not correct. Thereafter, the Ld. CIT(A) referred to page 123 & 124 to draw our attention towards the amount of consideration, which was not same, hence, the units could not be of same size. The ld. CIT DR further contended that the provisions of section 80IB(10) were unambiguous and there was no methodology prescribed therein to give pro-rata deduction and, therefore, when some flats were found to having built up area of more than 1500 sq.ft, then, the assessee was not eligible for deduction u/s 80IB(10). The ld. CIT DR thereafter also referred to the engineer's report submitted by the assessee and submitted that it was not as per the criteria laid down in the Act, hence, not correct piece of evidence. The ld. CIT DR further submitted that letter of the owner of the house of A/6 was a case of after thought only, hence, not considerable. Accordingly, he prayed that the order of the A.O. was to be confirmed.
7. The Learned counsel for the assessee submitted that following four questions were to be decided :-
(i) Whether provisions of section 80IB(14)(a) of the Act were retrospective or prospective ?
(ii) If prospective, then what criteria had to be adopted to compute the built up area ?
(iii) Whether actual area of three flats was more than 1500 sq.ft. or not.
(iv) Whether the Ld. CIT(A) was correct in giving pro rata deduction ?
8. As regards to question no. 1, he submitted that this issue came up for consideration before the Tribunal in the case of Air Developers as reported in 14 ITJ 206 (Nagpur), wherein the Tribunal held that the definition of built up area as prescribed in section 80IB(14)(a) could not be said to be retrospective. The Learned counsel for the assessee further contended that in the case of 7 Brahma Associates, Special Bench of the Tribunal had also held that the provisions specifying maximum commercial area limits were also of prospective nature. In this regard, the Learned counsel further referred to notes to clauses as well as C.B.D.T. circular wherein it had been clarified that definition of built up area had to be applied with effect from assessment year 2005-06. It was also contended that such definition was in the nature of substantive provisions, hence, it could not be considered clarificatory and retrospective. For this proposition, the Learned counsel relied on the decision of the Hon'ble Supreme Court in the case of Govind Das as reported in 103 ITR 123. Thereafter, the Learned counsel submitted that the A.O. had worked out the built up area as per such definition by including mumty, stair case, balcony, arch, projection and terrace and if that was excluded then the area was less than the specified limits. The Learned counsel further submitted that in the year under consideration i.e. in assessment year 2004-05, there was no definition of built up area in the Act. Hence, either common sense meaning or other legislations dealing with the same subject were to be resorted to find out the meaning of built up area. The Learned counsel thereafter submitted that this housing project as per the Act had been approved as a housing project by a local authority. Hence, definition of built up area had also to be taken as given by the local authorities. In this regard, he again relied on the decision of the Tribunal in the case of Air Developers (supra). The Learned counsel thereafter referred to the M.P. Bhoomi Vikas Adhiniyam read with Bhopal Master Plan to show that the items added by the Assessing Officer were not to be added and, thus, the calculation done by the technical expert appointed by the assessee was correct and consequently, the area of three flats was also less than 1500 sq.ft. As regard to the specific issue of area of flat no. A/6, the Learned counsel submitted that at the time of physical verification, only the tenant was available and the owner of that flat, subsequently filed a confirmation to the effect that 400 sq.ft. area had been constructed by him after purchase of the property and the same was to be accepted. The Learned counsel further submitted that the A.O. did not change the cost of construction of this flat for the additional construction. Hence, the built up area as claimed by the assessee could not be disturbed. It was also contended that the A.O. had stated that it was stated by the assessee and her representative in the course of physical verification on 8.12.06 that no additional construction was done by the owner, which was not a correct fact as neither any statement was recorded, nor any question was put to the assessee or her representative in this regard. The Learned counsel further contended that the assessee was entitled for pro-rata deduction, which was duly supported by the decision of the Tribunal in the case of Air Developers (supra), the decision of the Special Bench in 8 the case of Brahma Associates as reported in 22 DTR 1, and also by the decision of the Calcutta Bench of the Tribunal in the case of ACIT vs. Bengal Ambuja Housing Development Limited, which had also been confirmed by the Hon'ble Calcutta High Court. The Learned counsel also drew our attention to the relevant portion of the judicial decisions relied by him.
9. The Learned counsel for the assessee drew our attention to the fact that the A.O. had also appointed a technical expert , namely, Shri Amogh Kumar Gupta, who vide its report Dated 2.12.2008 had also stated that flats constructed by the assessee were having built up area of less than 1500 sq.ft. However, the A.O. completely ignored this report. The Learned counsel also submitted that even as per the A.O., all the flats were not having the same built up area, because even as per the version of A.O. in the assessment order at page 6 were that house no. A/6, was quite bigger than this category of other houses in the project.
10. The ld. CIT DR, in the rejoinder, mainly reiterated the submissions made earlier and further submitted that the object of State Government Rules/ By Laws were different from the object of provisions of section 80IB(10), hence, said rules could not be conclusive. He further contended that once the measurement taken by the Department had been signed by the Project Manager of the assessee, as evident from the assessment record, hence, there was no necessity for the A.O. to consider the report of the technical expert submitted subsequently, as the matter had to be given finality. He further contended that in the case of Air Developers only a few flats were found to be of more than 1500 sq.ft. Hence, whereas in the present case, all the flats measured on sample basis were found to have a built up area of more than 1500 sq.ft. Hence, this decision was not of any help to the assessee.
11. We have considered the submissions made by both the sides, material on record and the orders of the authorities below.
12. It is noted that the assessee is engaged in the construction of houses. At the impugned houses have been constructed in three phases having different dimensions and designs. The A.O. has, however, taken the measurement physically only of one category of houses and that too has been carried out by non-technical staff, although the Department can utilize the services of technical personnel for this purpose. Thus, at the very out-set, we are of the opinion that sample adopted by the Assessing Officer is not representative of whole of the housing project and, therefore, the 9 very basis as such action of A.O. is flawed. It is further noted that even the measurement of these flats, namely, A/6 has been revised by the Department, itself, which shows that the measurement of sample flats has also not been done in a scientific manner. The other fact, which is important is that the A.O. also took the help of technical expert and even as per his report after taking into consideration, the local by- laws, the area of certain flats measured by the Department is less than 1500 sq.ft. and the A.O. has not given any cognizance to this fact which makes the approach of A.O. unjustified. We further find that whatever explanations/clarifications/objections have been raised by the assessee subsequent to the measurement done by the Department, the same have been rejected in a summarily manner merely for the reason that during the course of physical measurement representative of the assessee were present and it also signed the measurements taken by the Department. In our opinion, this approach of the A.O., who is a judicial officer is not justified, because before making addition or rejecting a genuine claim of the assessee, it is the bounden duty of the A.O. to deal with the objections of the assessee. We are further unable to understand why the A.O. did not do the re-verification exercise to find out the correct measurement. We also find that as per the ld. CIT DR, the sale consideration is different with reference to different flats and, therefore, there must be different sizes. In our opinion, this fact rather supports the claim of the assessee, because this again goes to show that sample taken by the Department is not the representative one. Thus, on the basis of above facts itself, the action of the A.O. is not correct in law.
13. Having stated so, now we shall deal with other aspects. On the aspect of nature of provisions of section 80IB(14)(a),we find that it is a settled proposition of law that when a particular term is defined by an amendment, which results into increase/levy of civil liability, the same has to be considered as the substantive one, hence prospective. The judicial decisions cited by the assessee also support this view. Accordingly, we reject the contention of the revenue that the provisions of section 80IB(14)(a) are of retrospective nature. This view leads us to another question i.e. in the absence of any specific term in the Act how that term should be interpreted. In this regard, it is also a settled principle that some common sense approach or dictionary meaning if the term is of general nature should be found out or if the term is of technical nature, then the definition of such term used in other laws should be taken into consideration. Accordingly, we hold that the meaning of term "built up area" prior to insertion of definition clause in the Act has to be found out as per the local law i.e. rules and regulations of Bhopal Municipal Corporation as well as from M.P. 10 Bhoomi Vikas Rules and as a consequence thereof, the built up area of such flats is undisputedly less than the specified limit. Hence, the assessee, in our opinion, is eligible for deduction u/s 80IB(10). In this view of the matter, there remains no question for any pro-rata deduction. However, we consider it pertinent to state that it is beneficial provision and, therefore, it should be interpreted in a liberal manner and in case it is necessary then the assessee can be granted pro rata deduction. In this regard, we are further of the view that if the legislator did not want to give any pro-rata deduction, it could have been provided by the legislator specifically that if one house was found to be having built up area on the ground of specified limit, then the assessee would not be entitled for any deduction u/s 80IB(10). In this view of the matter, we dismiss all the grounds raised by the Revenue.
14. In the result, the appeal filed by the Revenue is dismissed.
15. Now, we shall take up assessee's cross objection, wherein the assessee is aggrieved by the decision of Ld. CIT(A) in rejecting its claim for deduction u/s 80IB in respect of three sample houses physically measured by the Department.
16. The facts has already been narrated as above and have no necessity tobe repeated again. However, he drew our attention to the finding of the Ld. CIT(A) wherein the Ld. CIT(A) had accepted that the area of these flats was also less than the specified limit, hence, the Ld. CIT(A) should have accepted the claim of the assessee in toto.
17. The ld. CIT DR, on the other hand, preferred to rely on the order of the Ld. CIT(A) on this aspect.
18. We have considered the submissions made by both the sides, material on record and the orders of the authorities below.
19. It is noted that the Ld. CIT(A) has observed in the findings reproduced hereinbefore that the measurement of Duplex flat Type A/1 and Type A/2 as per the Bhoomi Vikas Rules, 1984, was less than 1500 sq.ft. and the assessee has complied with all other conditions and, inspite of that the Ld. CIT(A) has granted only pro- rata deduction. We further find that the Ld. CIT(A) has not given any specific findings on the legal contentions raised by the assessee, which results into an inference that the Ld. CIT(A) has not accepted 11 the plea of assessee regarding applicability of local rates to compute built up area. However, since we have accepted the legal contentions raised by the assessee in this regard, hence, we find no reason not to grant a deduction thereon u/s 80IB(10). Accordingly, we accept this ground of the cross objection filed by the assessee and direct the A.O. to grant deduction u/s 80IB as claimed by the assessee.
20. In the result, the cross objection stands allowed.
21. To sum up, the Revenue's appeal is dismissed and cross objection is allowed."
3.1 If the facts of the present appeal are kept in juxtaposition with the order mentioned hereinabove, undisputedly, in the quantum appeal of the case of the assessee, the addition was deleted by the Tribunal and no contrary decision was produced before us by either side. We are of the view that where the additions made in the assessment order, on the basis of which, penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment, consequently, no penalty survives and the same is liable to be cancelled because when the very basis for levying the penalty is no more in existence, there is no question of penalty u/s 271(1)© of the Act. Our view is fortified by the decision from Hon'ble Apex Court in the case of K.C. Builders vs. ACIT (265 12 ITR 562) (SC). The Tribunal in the aforesaid order has already considered the issue by following various judicial pronouncements. In view of these facts and judicial pronouncements, we find no merit in the appeal of the Revenue, consequently, the stand of the ld. first appellate authority is affirmed.
Finally, the appeal of the Revenue is dismissed.
Order was pronounced in the open Court in the presence of learned representatives from both the sides at the conclusion of the hearing on 22.2.2012.
Sd sd (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 22.2.2012
Copy to: Appellant, Respondent, CIT, CIT(A), DR, Guard File !vys!