Income Tax Appellate Tribunal - Bangalore
Pramod And Others, Bangalore vs Assessee
ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 1
IN THE INCOME-TAX APPELLATE TRIBUNAL
BANGALORE BENCH 'A'
BEFORE SHRI. K. P. T. THANGAL, VICE PRESIDENT
AND
SHRI. A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
1. I.T.A.No.800/Bang/2009
(Assessment year : 2004-05)
2. I.T.A.No.801/Bang/2009
(Assessment year : 2004-05)
3. I.T.A.No.802/Bang/2009
(Assessment year : 2004-05)
4. I.T.A.No.1023/Bang/2009
(Assessment year : 2004-05)
5. I.T.A.No.1024/Bang/2009
(Assessment year : 2005-06)
6. I.T.A.No.962/Bang/2009
(Assessment year : 2005-06)
7. I.T.A.No.977/Bang/2009
(Assessment year : 2005-06)
8. I.T.A.No.978/Bang/2009
(Assessment year : 2005-06)
9. I.T.A.No.979/Bang/2009
(Assessment year : 2005-06)
1. M/s. Pramod & Others,
2. Mrs. Vasantha Kumari,
3. Mr. C. Gopalan,
4-5. M/s. Gopalan Enterprises,
6. Mr. C. Gopalan,
7. M/s. Gopalan Enterprises,
8. M/s. Pramod & Others,
9. Mrs. Vasantha Kumari,
No.5, Richmond Road, Bangalore .. Appellant
v.
1-5. Commissioner of Income tax,
Bangalore-1, Bangalore
6-7. Income-tax Officer,
Ward-1(4), Bangalore .. Respondent
Appellant by : Shri. K. R. Pradeep
Respondent by : Shri. Jason P. Boaz
ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 2
ORDER
PER K. P. T. THANGAL, VICE PRESIDENT :
All these appeals are by the assessees belonging to the same group. ITA Nos.800 to 802 and 1023, 1024/Bang/2009 are against the order of the Commissioner of Income-tax passed u/s.263, while ITA Nos.962, 977 to 979/Bang/2009 are against the order of the Commissioner of Income-tax(A), arising out of the assessment order of the Assessing Officer passed u/s.143(3).
2. As per the records, there is a delay in filing appeal Nos.800 to 802 of about 86 days. The assessee filed an affidavit and submitted the delay occurred under the following circumstances. The regular accountant working for M/s. Gopalan Enterprises group received the order of the Commissioner of Income-tax U/S.263 in the case of C. Gopalan, Vasantha Kumari, Pramad and others on 14.3.2009. Somehow the orders were misplaced alongwith other files and the accountant lost sight of them. Subsequently, on 31.7.2009 when the accountant was looking for some papers in the files realized the mistake committed and noted the orders were wrongly placed in the file instead of sending them to the assessee's representative's office for filing the appeals. Hence there is a delay of about 2 months and 24 days in filing the appeal which occurred due to inadvertence and it ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 3 was an unintentional mistake which the assessee's representative submitted to be condoned and excused. He further submitted assessee will suffer irreparable damage and injury if the issue is not decided on merit on the other hand, he submitted, the other party will not suffer.
3. The learned DR on the other hand submitted, on reading of the above explanation would make it clear that the delay was not because of any real and genuine defects and laxity, which he submitted may not be condoned.
4. Hearing the rival submissions, we are of the view that the delay is to be condoned and for the mistake of the accountant the assessee should not be made to suffer. We condone the delay and proceed to decide the issue on merit.
5. In ITA Nos.1023 and 1024/Bang/2009, the assessee's representative submitted that though the appeals were filed in time, as an abundant caution, the assessee has filed an affidavit and made a request for condonation of the delay for the reason that the order u/s.263 received from the Commissioner of Income-tax was misplaced and thereafter the assessee made a request for making available certified copies. The assessee's representative brought our ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 4 attention to page 23 of the paper book which is a letter dt.31.8.2009, which has been acknowledged by the revenue on 2.9.2009, which reads as under :
"We request your honour to kindly provide us certified copies of the orders passed u/s.263 of the Act for the above mentioned assessment years 2004-05 and 2005-06 as the originals sent by your office has been misplaced at our end. The fees paid copies of challan towards copying charges is enclosed."
Thereafter copies were made available to the assessee on 18.9.2009 and the appeals were filed on 5.11.2009. Apparently the appeal is filed within time but as an abundant caution the assessee filed an affidavit explaining the reasons for the delay and made a request for condonation.
6. Hearing the learned DR, we are convinced the delay is to be condoned and hence we condone the delay and proceed to decide the issue on merit.
7. The assessment order for Assessment Year 2004-05 was passed by the Assessing Officer u/s.143(3) on 20.6.2006. Subsequently on perusal of the records, Commissioner of Income-tax formed the opinion in all these five appeals that the order passed by the ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 5 Assessing Officer was erroneous and prejudicial to the interests of revenue within the meaning of section 263 for the reasons mentioned below.
8. The Assessing Officer allowed the assessee's claim of deduction u/s.80IB(10) wrongly as the assessee had not fulfilled the conditions laid down in clause (10) of Section 80IB for the housing projects as a whole. The Commissioner of Income-tax noted that as per the information available, some of the housing units which were sold during the relevant financial year for the assessment year under consideration, exceeded the specified limit of maximum built-up area for residential units, as the built-up area of the flats have been arrived at considering only the inner measurement of the units at the floor level without taking consideration of the common areas shared with other residential units. He further noted the Assessing Officer allowed the assessee's claim of deduction u/s.80IB as the amount of undivided interest of Rs.1,58,90,000/- in the land which was paid to vendors/land owners and income of Rs.20,34,248/- were considered as profits derived from the project eligible for deduction u/s.80IB(10).
9. In the premises of the above facts, show cause notice was issued on 2.12.08 calling for objection from the assessee. Assessee's ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 6 representative filed a written submission dt.9.12.08. In the written submission the assessee claimed that there was no material to initiate proceedings contemplated u/s.263. There was no error in the order for assessment year under consideration in all the cases posted on 26.12.2006. It was further contended, though it is stated in the notice that the assessment order suffers from error, no specific error which is prejudicial to the interests of revenue has been specified therein and, therefore, the notice is not as per law. Assessee further objected the allegation that the assessee has not fulfilled the conditions laid down in clause (c) of section 80IB(10) and there are certain units which exceed the built-up area prescribed in the section to claim the benefit. In spite of such a claim in the notice there is no specific mention as to which are the units that have violated this provision i.e., exceeding the built-up area. It was contended that the assessee has not constructed any project wherein the built-up area exceeds the maximum built-up area of 1,500 sft i.e., the limit prescribed as far as the city of Bangalore is concerned. In fact, the Assessing Officer personally verified these flats by conducting physical inspection of the building and the assessment took place after a number of hearings. The eligibility for deduction was examined in detail. It was contended that in the absence of any specific mention of the flats which has more area than the maximum prescribed, to claim the ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 7 benefit u/s.80IB(10), the assessee is handicapped to give a proper reply.
10. Coming to the receipt of amount towards undivided interest in land paid to the vendors, it was contended that it is a receipt on sale of project as a whole and, therefore, it is also eligible for deduction. In the case it is nowhere mentioned that undivided interest in land should be excluded u/s.80IB(10).
11. Coming to the miscellaneous receipts, it was contended that this receipt was towards additional consideration received from the buyers of the flats for providing additional/modified specification in the building. It was submitted that without prejudice if the miscellaneous receipts are excluded from the sale receipts, then cost should also be excluded on proportion basis, in which case there will be no deduction claimed and allowed. In the premises of the above facts, it was requested to drop the proceedings as there was no error in the order which was prejudicial to the interests of the revenue. It was further submitted that the built-up area details submitted for each residential units is the area which is sold to each individual buyer and consist of the entire built-up area without any separation between the ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 8 common area and the carpet area and no area has been retained after the sale.
12. Considering the assessee's submission, the Commissioner of Income-tax came to the conclusion that the Assessing Officer has allowed the deduction claimed u/s.80IB(10) without examining any detail of the receipts on account of undivided interest in land paid to the vendors and miscellaneous income while calling for relevant details and violation of area specification. Thus he held that the Assessing Officer failed to examine the exact nature of the receipts and whether such receipts were from the business housing project. He further held the Assessing Officer failed to examine the basis of measurement of the built-up area of the units of the housing project, but he accepted the claim of the assessee that none of the flats exceeds the maximum built-up area prescribed by the section for claiming deduction u/s.80IB(10). He further held the common area shared with other residential units has been excluded for the purpose of measuring the built-up area of the units by clause (a) to sub-section 14 of section 80IB which was inserted by the Finance Act (No.2) 2004 only w.e.f.1.4.2005. The information available on record does not indicate that the built-up area of the units for the purpose of ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 9 section 80IB(10) was measured taking into consideration the common area shared with other residential units.
13. This issue was taken up with the assessee vide letter dt.2.12.2008 and the assessee had not touched the point directly in the reply. Mere statement that similar stereo type notices were issued in two other cases indicating non-application of mind before issue of notice is no answer. Hence, the Commissioner of Income-tax formed the opinion that the Assessing Officer failed to make necessary verification before allowing deduction u/s.80IB(10). Assessment order, therefore, was held erroneous and prejudicial to the interests of revenue. Hence, he set aside the same and directed the Assessing Officer to make fresh assessment after making necessary verification keeping in mind the above observations. Aggrieved by the above order, assessee is in appeal before the Tribunal.
14. The learned representative for the assessee brought our attention to paper book pages 27 to 28 which is a notice dt.6.2.2009 issued by the Commissioner of Income-tax. Particularly drawing our attention to para 2, the learned representative submitted that the learned Commissioner of Income-tax has not given any details except stating that "the available information in the records indicates that ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 10 none of the housing units which were sold during the relevant financial year exceeded the specified limit of maximum built-up area for residential unit, as the built-up area of the flats has been arrived at considering only the inner measurements of the units at the floor level without including the common areas shared with other residential units." The assessee's representative again submitted that the objection of the Commissioner of Income-tax with regard to the undivided interest in land amounting to Rs.1,34,40,450/- paid to the vendors/land owners and other miscellaneous income of Rs.1,11,19,806/- has been wrongly considered by the Assessing Officer as profit derived from the project for deduction u/s.80IB(10), is too vague and there is no specific finding that the order is erroneous and prejudicial to the interests of revenue. He submitted the assessee sold the land and building together for profit. Every flat owner had an undivided share in the land. Therefore, one cannot be separated from the other that is to say the assessee has sold an unspecified part of the land to an individual purchaser along with the flats.
15. Coming to the miscellaneous receipts objected by the Commissioner of Income-tax, the learned counsel submitted these are part of construction that is some of the flat owners have specified type of tiles or marbles and additional charges (miscellaneous) are ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 11 collected on this account only. He submitted all the flats were constructed within the prescribed limit of 1,500 sft and there is no instance of any flat where the area is more. The eligibility for deduction was considered by the Assessing Officer in detail and after satisfying himself he allowed the claim of deduction. The learned representative submitted the receipt of undivided interest in the land is the receipt towards the sale of apartment. It is the sale proceeds of the flat which is a part of the sale and is, therefore, eligible for deduction. The Act has nowhere excluded any such receipts. Section 80IB(10) speaks of profits from eligible undertaking developing and building housing projects as well as the land, that is to say both the land and building are to be considered while computing 80IB(10) deduction.
16. The assessee's representative brought our attention to pages 38 to 40 of the paper book that is the statement of the flats sold for the assessment year under consideration. None of the flats, he submitted exceeded the area of 1,500 sft. The learned representative for the assessee further submitted that for the purpose of section 80IB(10), the definition of built-up area was inserted by the Finance Act (No.2) 2004, w.e.f.1.4.2005 and, therefore, for the year under consideration the common area is to be excluded while computing the deduction ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 12 u/s.80IB(10). According to the Commissioner of Income-tax, the order of the Assessing Officer is erroneous and prejudicial to the interests of revenue for the reason that while computing the area of the residential units, the Assessing Officer excluded the common areas shared. Even if the order of the Assessing Officer is prejudicial to the interests of revenue, it is not erroneous in the light of clause (14)(a) to section 80IB which came into effect from 1.4.2005. The learned representative invited our attention to page 70 of the paper book which is the description of the apartment, which clearly shows the built-up area at 895 sft and one number of cellar car parking space. Our attention was again invited to page 109 of the paper book that is the letter dt.7.3.2006 addressed to the Assessing Officer and submitted the sale deeds of 94 flats were submitted before the Assessing Officer prior to this date and this was the letter enclosing the sale deeds of another three flats bringing the total number of flats to 97. About the remaining one, it was mentioned "We could not get copies of the remaining 1 sale deed but however we confirm that the built-up area of the sale flats is less than 1500 sft and immediately on receipt, the same will be submitted to you." The finding of the Commissioner of Income-tax that the Assessing Officer has not considered the facts in detail and had not applied the mind is incorrect. The individual sale deeds were submitted before the ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 13 Assessing Officer and considered. Hence, the learned representative submitted that the finding of the Commissioner of Income-tax that the Assessing Officer failed to make necessary verification before allowing the deduction u/s.80IB(10) is incorrect and, therefore, the further conclusion by the Commissioner of Income-tax the order of the Assessing Officer is erroneous and prejudicial to the interests of revenue is also incorrect.
17. In the premises of the above submissions, the assessee's representative submitted that the revenue cannot take a different stand for different years. For the above proposition he relied on the decision of the Hon'ble Madras High Court in the case of Commissioner of Income-tax v. L. G. Ramamurthi & Others (1977) 110 ITR 453. He further submitted relying upon the jurisdictional High Court decision in the case of Nippon Electronics (India) Pvt. Ltd., (181 ITR 518) that the eligibility for claim should be verified in the initial year and once the eligibility is accepted, the same must be continued. The assessee's representative further relied on the decision of the Hon'ble Bombay High Court in the case of Siemens Inforamtion System Ltd., (295 ITR 333) for the proposition that there cannot be any change of opinion if the allowance has been given in the original assessment. The Assessing Officer would be incorrect if ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 14 a decision is taken contrary to the decision originally taken. In any case, the assessee's representative submitted there cannot be a total rejection of the claim. Restriction of deduction, if any, should be limited proportional to the violation in any particular residential unit in comparison with the total project as held by the Hon'ble ITAT, Kolkata bench in the case of ACIT v. Bengal Ambuja Housing Development Ltd., in ITA Nos.1735 and 1595/Kol/2005, dt.24.3.2006, for the Assessment Year 2002-03.
18. In reply to the above, the learned DR first objected the condonation application filed by the assessee. He submitted the submission that the papers were mixed up with some other papers and after a long gap assessee's accountant while searching for some other records found it etc., are too vague and shows the laxity on the part of the assessee in filing the appeal. He submitted further there is no positive evidence with regard to the above submissions. Hence, he submitted the appeal should be rejected on this ground.
19. Considering the rival submissions, we are of the view that by not condoning the delay and thereby preventing the assessee from processing the matter on merit is a difficult proposition to accept for the reason that by deciding the issue on merit, revenue is not ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 15 prejudiced anyway. If we reject the application on this technical ground and if the assessee is really having a reasonable cause, it will amount to injustice. Hence, we condone the delay and proceed to decide the issue on merit.
20. The learned DR submitted to come to the real facts, it is necessary to go to the appeal by the assessee on the assessment completed for the Assessment Year 2005-06. The assessment order for Assessment Year 2005-06 was the root cause for the Commissioner of Income-tax to pass the order. Assessment orders u/s.143(3) for Assessment Year 2005-06 in ITA No.962, 977, 978 and 979/Bang/2009 are dated 26.12.2007, whereas orders u/s.263 in ITA Nos.1023 and 1024/Bang/2009 is dated 6.3.2009 and in ITA Nos.800 to 802/Bang/2009, order u/s.263 is dated 26.2.2009.
21. With the above introduction, the senior DR took us through the assessment orders which were the basis for the reopening of the earlier years' assessment orders. According to the Senior DR the assessment orders are cryptic and are almost identical. The Assessing Officer collected the details from the Sub-Registrar and Corporation Offices regarding the plant sanction, property sold etc., and held the sale deed copies were obtained from the assessee in the case of some ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 16 of the flats sold during the year under consideration and on the basis of the verification of the details collected, it was found that the working of three bed room flats explaining the super built-up area including common area such as corridor, stair case, community hall, gym, swimming pool etc., and actual area of the flat available for exclusive use of the buyer in the project 'Temple Tree', was as under :
Housing Unit Area in
sq.ft.w.r.t
clause (c) of
section
80IB(10)
1. No.A-301 1276 2 Bedroom
A-301/1 770 Pent House
Terrace/projection 675 Projection registered for
exclusive use of the owner
Total 2,721
2. No.A-302 1276 3 Bedroom
A-302/1 345 Pent House
Terrace/projection 1095 Projection registered for
exclusive use of the owner
Total 2716
3. No.B-301 1276 3 Bedroom
No.B-301/1 344 Pent house
Terrace/projection 1095 Projection registered for
exclusive use of the owner
Total 2716
4. No.B-306 1277 3 Bedroom
Terrace/projection 810 Projection registered for
exclusive use of the owner
Total 2087
5. C-302 1492 3 Bedroom
(including pent
house)
Terrace/projection 1095 Projection registered for
exclusive use of the owner
2587
ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 17
22. From the above facts, the Assessing Officer concluded that housing units sold during the year were exceeding the limit laid down in clause (c) of section 80IB(10). It was under these circumstances he made a proposal to disallow the claim of the assessee for the Assessment Year 2005-06. Again the learned DR brought our attention to para 8 of the assessment order for the Assessment Year 2005-06 in regular appeal which reads as under :
"8. From the reply received and enquiries conducted, it is observed that the pent house units are single units having entry from the main door of the house and pent houses are accommodating bed rooms and study rooms. The place registered as terrace nothing but projection to the pent house with vitrified/mat/ceramic tiles having about 4 to 5 raised walls around and have been registered for the exclusive use of the buyer. There is no other access to the pent house or terrace which is projection to the pent house except from the main door of the house. It is also found that the KEB/Electric connection to the main house and pent house are single having single meter reading. It is also fact that the said flats with pent house were registered on the same day and to the same persons in separate deeds with main and sub numbers wherever the total built up area is crossing the limit of 1500 sqft and pent houses with less than 1500 sqft built up area have been registered with ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 18 single deed and number, without attributing any reasons for such bifurcations."
The assessee's explanation on the point was that this point has already been explained for the earlier years etc., was rejected by the Assessing Officer as a submission too vague.
23. Thereafter the learned DR brought our attention to the order of the Assessing Officer in respect of which appeals are filed on order of the Commissioner of Income-tax u/s.263, for the proposition that in reality the Assessing Officer has not considered these facts which subsequently came to the knowledge of the Assessing Officer. The mere fact that the learned DR's submission that the submission of the assessee's representative that the Assessing Officer applied his mind and there were about 16 hearings, does not cure the defect in the assessment order. Even after giving a number of opportunities and hearings, if the Assessing Officer fails to look into the facts which require consideration, then the order is erroneous and prejudicial to the interests of revenue. On the very facts the Assessing Officer failed to conduct proper enquiry which gives jurisdiction to the Commissioner of Income-tax. In the assessment order the Assessing Officer had made a detailed tabulation to arrive at the taxable income. A reading of the order of the Assessing Officer will make it clear that ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 19 with regard to deduction u/s.80IB(10) he had not applied his mind and had also not conducted proper enquiry. The only relevant discussion by the Assessing Officer clearly shows he has not considered the facts which came into light while passing the order for the year 2005-06. It was on the premises of the above facts, the learned Commissioner of Income-tax assumed jurisdiction u/s.263 and set aside the assessment order. Once again the learned DR brought our attention to para 8 of the assessment order which is quoted hereinabove in para 21. The fact that the pent house units are single units having entry from the main door of the house and pent house accommodate study and bed rooms etc., as noted by the Assessing Officer for this year was not considered by the Assessing Officer for the previous years. Such lack of enquiry led to order u/s.263 by the Commissioner of Income-tax. Hence, the learned DR submitted that the order of the Commissioner of Income-tax passed u/s.263 is to be upheld. He further submitted there is a lack of application of mind by the Assessing Officer which gives clear jurisdiction to the Commissioner of Income-tax and for the above proposition he relied on the following decisions :
i) Smt. Renu Gupta v. CIT (2008) 301 ITR 45 (Raj);
ii) Duggal & Co., v. CIT (1996) 220 ITR 456 (Del);
ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 20
iii) K. A. Ramaswamy Chettiar and Another v. CIT(1996) 220 ITR 657
iv) Toyota Motor Corpn.v. CIT(2008) 218 CTR 539 (SC)
24. In reply the learned representative for the assessee brought our attention to para 14 of the order which the learned DR submitted was the basis for passing order u/s.263. The submission that the Assessing Officer has not applied his mind is devoid of merit. He took us through para 14 which reads as under :
"14. The facts and circumstance differs from the case referred to. In the previous year the verification is done in respect of the flats sold during the year 2003-04 i.e., for Assessment Year 2004-05 as verified from the records by surveying the units which are in the margin of 1500 sq.ft that in the case of "Temple Tree" and "Millenium Habitate"
projects of the group. In the present case the units taken were from the flats sold during the year 2004-04 i.e., Assessment Year 2005-06 and fresh materials were brought are registered sale deeds, as basis for considering built up area with pent house, projections, etc.,"
The learned representative submitted the submission of the DR that there was a failure on the part of the Assessing Officer to conduct enquiry and there was no proper application of mind is incorrect. ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 21
25. From the above the learned representative submitted there is a clear finding by the Assessing Officer the facts for the Assessment Years 2004-05 and 2005-06 are quite different. Therefore, he objected that the regular assessments for 2005-06 were the basis to pass order u/s.263 is without merit.
26. The learned representative further submitted the Commissioner of Income-tax has not visited the building before passing the order whereas the Assessing Officer visited the flat and satisfied himself before deciding the issue in assessee's favour. The Commissioner of Income-tax without visiting the flat says the stair case is from inner side of the flat whereas there is no such case by the Assessing Officer who actually visited the place. Therefore, this finding of the Commissioner of Income-tax is to be rejected as superfluous. The assessee has not violated any rules if the flat owners subsequently have made any changes, for which the assessee is not responsible. Hence, the appeals by the assessees are to be allowed, he submitted.
27. Considering the rival submissions, we are of the view that the reasoning given by the Commissioner of Income-tax to invoke jurisdiction u/s.263 does not stand the scrutiny. It is true the assessment order is not elaborate and is not discussing the issue in ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 22 detail, but that does not make the assessment order erroneous. According to the DR the assessment was completed for the Assessment Year 2005-06 wherein the Assessing Officer found that built-up area in the Millenium Habitate project at least three flats were more than the maximum prescribed limit in the statute u/s,80IB(10)(C). However, the assessee's representative's submission is that while considering the built-up area, the Commissioner of Income-tax has taken into consideration the floor level including the projection and balconies, as increased by the thickness of the wall, but excluding the common area shared with other residential units.
28. The definition of the built-up area as it stands now came into effect w.e.f.1.4.2005 and, therefore, this definition is not applicable for the Assessment Year 2004-05. Therefore, there is no error nor mistake in the order of the Assessing Officer with regard to the above point. The assessee's representative further submitted with regard to Millenium Habitate, the actual built area of the three flats C-315, D- 312 and E-306, in the third floor including the pent house is 1475 sqft, 1420 sqft and 1475 sqft respectively is actually less than 1,500 sqft.. The Assessing Officer held that the projection to the pent house registered for the exclusive use of the buyer in all the three flats were added to this. It was only after this addition, the area crossed the ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 23 1,500 sqft limit. As stated above, the projection and balconies were included in the built-up area only after the change that came into effect w.e.f.1.4.2005 in the form of section 80IB(14)(a). It is also the case of the assessee that the entry into the terrace from these three flats on the third floor were not from the respective flats. It was common entrance and the agreement for sale is also separate for the flats as well as for this part. Therefore, the assessee's representative's submission that this cannot be treated as one, we are of the view is to be accepted.
29. The case of the revenue on the other hand is that now the entrance is from the flats itself. Therefore, it should be treated as one. We are unable to subscribe to this view for the reason that if two flats are separately sold and subsequently if the owner removes the wall by adding a stair case, it is connected, it is difficult to hold that as far as the buyer is concerned, at the time of his selling both was one single flat. Definitely, this provision is not applicable if the change is made by the occupants or the purchaser subsequent to the sale of the flats. If the builder himself had built and provided the facility before sale, then the section 80IB(10) is violated.
ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 24
30. The submission of the learned DR that these facts came into knowledge of the revenue while passing the order for the Assessment Year 2005-06 and, therefore, the Commissioner of Income-tax reopened the assessments on the basis of the new facts prima facie, is unacceptable. There is another specific finding by the Assessing Officer that he visited the flats and satisfied himself that in none of the flats the area was more than the maximum prescribed by the statute whereas it was the submission of the assessee that the Commissioner of Income-tax had not visited but on presumption he concluded on the basis of the records that were made available before him. The order of the Assessing Officer which is for the Assessment Year 2005-06 is the basis for order u/s.263. We had mentioned herein above that flat nos.C-315, D-312 and E-310 even according to the Assessing Officer is less than 1,500 sft. This goes beyond the maximum limit if projection to the pent house is also added which is in the exclusive use of the buyer.
31. In the order of the Commissioner of Income-tax, the learned Commissioner of Income-tax specifically mentions that Assessing Officer failed to make necessary verification before allowing deduction u/s.80IB(10) with regard to the measurement of the built- up area of each units. He also mentions this is because the common ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 25 areas shared with residential units has been excluded for the purpose of measurement of the built-up area by clause (a) of sub-section 14 of section 80IB inserted by the Finance Act (No.2) 2004, w.e.f.1.4.2005. We are afraid reasoning of the Commissioner of Income-tax is self- defeating. The section comes into effect from 1.4.2005 which is effective from Assessment Year 2006-07. In other words, the Commissioner of Income-tax is trying restrictive effect for the change made in clause (a) of section 80IB(14). We are afraid this cannot be considered in section 263 for the simple reason that in any case this will be a debatable point and any debatable issue cannot be considered in section 263 order. Therefore, the first reasoning of the Commissioner of Income-tax with regard to the excess area fails and it is dismissed.
32. Coming to the second point, the argument of the representative for the assessee is recorded by the Commissioner of Income-tax vide page 3, para 7 of his order, observing as under :
"7. Regarding the receipt of the amounts towards undivided interest in land paid to the vendors/land owners, it has been submitted that it is a receipt on sale of apartments consisting of undivided interest of land and building and the said sum being the sale proceeds on sale of flats, is part of the sales and is eligible for deduction. It has been pointed out that the ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 26 Act has nowhere excluded any such receipts and section 80IB(10) speaks of profit from eligible undertaking and residential projects consists of both land and building."
Suffice to say that the Commissioner of Income-tax has not given any reason as to why he is coming to the conclusion that when the Act speaks of a project, the undivided interest of the land should be treated separately and the building portion should be taken separately. There is no decided case referred. In the absence of any decided case, in the normal parlance, 'project' has to be treated as one and the same. The building is not sold separately. Firstly because no person could claim his undivided interest in the land by identifying that this part of the land is his. As such, we are of the view that it should be treated as one and the same as contended by the learned representative for the assessee. Even if it is a debatable point, this cannot be a subject matter of section 263, for the reason that u/s.263 the Commissioner of Income-tax gets jurisdiction only if the order is erroneous and prejudicial to the interests of revenue. Both the elements have to be present together. In this case it is difficult to hold that the view expressed by the Commissioner of Income-tax that the land should be treated separately and the building should be treated separately is the right view. It is a plausible view. A plausible view does not make the order of the Assessing Officer erroneous and prejudicial to the ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 27 interests of revenue. This reason of the Commissioner of Income-tax is hence, without merit.
33. Coming to the miscellaneous receipts, the assessee's representative submitted that these are additional charges received from the buyers of the flats for providing additional/modified specification like tiles, marbles etc., and, therefore, it is part and parcel of the construction cost and it cannot be treated separately. We heard the learned DR on the point.
34. We are of the view that the view canvassed by the learned representative for the assessee which was also the argument advanced before the Commissioner of Income-tax(A) is to be accepted. Simply because it is termed as miscellaneous, it cannot be excluded from the receipts eligible for deduction u/s.80IB(10).
35. The assessee's representative also relied on the following decisions so as to bring home the point that the Commissioner of Income-tax lacks jurisdiction u/s.263. Firstly he relied on the decision of the Allahabad High Court in the case of Commissioner of Income-tax v. Goyal Private Family Specific Trust (171 ITR 698), wherein it is held that merely because the Assessing Officer's order is ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 28 brief and cryptic it is not sufficient to brand the assessment order as erroneous and prejudicial to the interests of revenue. Unless specific error has been pointed out, the order cannot be termed as prejudicial to the interests of revenue. Even if it is prejudicial it cannot be said that the Commissioner of Income-tax assumes jurisdiction unless the order is erroneous as well. In the cases before us, the Commissioner of Income-tax assumes jurisdiction and directs the Assessing Officer to pass order on points on which two views are possible. Hence, we are of the view the order passed by the Commissioner of Income-tax is without jurisdiction. The learned representative for the assessee also relied on the following decisions :
i) CIT v. Kanda Rice Mills - 178 ITR 446(P&H);
ii) CIT v. Chawla Trunk House - 139 ITR 182 (P&H);
iii) CIT v. Mahendra Kumar Bansal 297 ITR 99 (All);
iv) Rayon Silk Mills v. CIT-221 ITR 155 (Guj);
v) CIT v. Taj Printers - 178 ITR 384 (All);
vi) CIT v. Sakthi Charities - 244 ITR 226 (Mad)
36. In the case of Sakthi Charities (244 ITR 226) (Supra), the Hon'ble High Court held Commissioner of Income-tax had no jurisdiction to set aside the assessment order merely to conduct another enquiry to reach the same result which was arrived at earlier. The Hon'ble High Court further held that though it is not expected of ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 29 the Commissioner of Income-tax to record his final conclusion in the order passed in revision, he must at least indicate in his order how the order of the ITO is erroneous and prejudicial to the interests of the Revenue.
37. Suffice to say that the Commissioner of Income-tax has invoked jurisdiction in the instant case mainly on three points as mentioned elsewhere in this order. Firstly some of the flats area exceeds the limit prescribed under the Act i.e., 1,500 sft. We have elaborately discussed the issue and held that the conclusion arrived at by the Commissioner of Income-tax is without merit.
38. Coming to the second and third points, that is the land and building should be treated separately for calculating deduction u/s.80IB(10) and miscellaneous receipts respectively also, in view of our elaborate discussions in the foregoing paragraphs, the Commissioner of Income-tax's conclusion is without merit. On facts, on the issue that land and building should be treated separately, we have held that definitely there are two views possible since there is no decided case. Hence, there is no scope for proceedings u/s.263 on this point also.
ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 30
39. Coming to the point relating to miscellaneous receipts on which the Commissioner of Income-tax directed the same to be excluded, on facts it is the case that these are the payments collected for extra work done for the buyers, though it is named as 'miscellaneous expenditure'. It is nothing but a part of the project work. For the reasons stated, we set aside the order of the Commissioner of Income-tax u/s.263 in the case of all the assessees. Appeals by the assessees are allowed.
ITA.962/Bang/2009 - C. Gopalan - Assessment Year 2005-06 :
40. Though the assessee has urged as many as 11 grounds, in fact it is confined to two points, namely non-allowance of deduction u/s.80IB(10) and levy of interest u/s.234B and 234C.
41. The assessee's representative relied on the decision of the ITAT, Bangalore Bench in the case of M/s. Gopalan Enterprises (I) (P) Ltd., vide ITA No.395/Bang/2006 and M/s. ACIT v. Bengal Ambuja Housing Development Ltd., in ITA Nos.1735 & 1595/Kol/2005 (Kolkata Bench ITAT).
42. The issue is discussed by the Commissioner of Income-tax(A) vide paras 3.1 to 3.3 as under :
ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 31 "3.1 Ground No.1 to 4 : All these grounds pertain to eligibility of deduction u/s.80IB(10) of Income tax Act, 1961.
The Authorised Representative pleads that similar additions were also made in the related case of M/s. Gopalan Enterprises (India) Pvt. Ltd., by the Assessing Officer but the learned Commissioner of Income-tax(A) and also ITAT decided the case in favour of the assessee vide ITA No.395/Bang/2006 dt.24.10.2008 which was allowed by the Commissioner of Income-tax(A) and also ITAT. Copies of the orders were placed on record which were perused. A further case law, viz., M/s. G R Developers v. DCIT, Circle -3(1), Bangalore in ITA No.668 & 669/Bang/2006 dt.5.2.2009 filed by the Authorised Representative was also perused.
3.2 I find difference in facts of the cited cases and the case on hand. In the case of M/s. G. R. Developers, the issue was whether the exemption u/s.80IB is available to a project which is in major way residential and a small portion of it involves commercial construction? The Assessing Officer and the Commissioner of Income-tax(A) held, in that case, that such exemption is available purely to housing projects involving only residential units. The learned Tribunal held that proportional exemption could be made available to the assessee u/s.80IB(10) of Income tax Act. It is observed that the facts of Gopalan Enterprises the other cited cases differ from the facts of the case on hand though similar in one way that like the case of the appellant, occupants of flats below the terrace made construction on terrace for habitable usage but the difference lies in the nature of construction and its usage. In the case of Gopalan Enterprises, the constructions were found ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 32 to be temporary structure of tiled roofing over the terrace floor for occupants below to shield them from sun and rain and therefore the learned Commissioner of Income-tax(A) as well as the ITAT held that such temporary structures cannot be added to the built-up-area sanctioned by BDA and therefore held that the built-up-area is less than 1500 sqft and thus allowed the relief u/s.80IB(10) of I.T.Act. But in the case on hand, the Assessing Officer has given a specific finding that all the occupants of the flat below the terrace have constructed permanent structures to be used as pent house with single bed room besides constructing projections for exclusive use by them vide page 4 of the assessment order, thus exceeding the prescribed limit of 1500 sqft per residential unit. In view of the above finding of fact, not even disputed by the authorized representative. I see no reason to allow the appeal on this ground.
3.3 However, the AR pleaded further that the Assessing Officer has allowed the claim of the appellant in just the preceding year i.e. in Assessment Year.2004-05 and facts being similar, a different view taken by the successor is wrong and unjustified. However, from records, I find that the assessment of Assessment Year.2004-05 has been set aside by the Commissioner of Income-tax u/s.263 of I.T.Act for doing it denovo and therefore the argument of similar facts and hence deletion is not sustainable. The case laws cited by the A.R. of Karnataka and Madras High Courts are also not applicable because the situation and facts when assessment of Assessment Year.2004-05 was completed has changed after it being ripped ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 33 open u/s.263 of I.T.Act. I confirm the addition and dismiss the grounds of appeal."
Reading of the above makes it clear that the plea of the assessee's representative that for earlier years on identical facts the issue which was decided in assessee's favour was rejected holding that the Commissioner of Income-tax has invoked the jurisdiction u/s.263 for 2004-05.
43. The assessee's plea that the jurisdictional High Court and Madras High Court decision in the case of Commissioner of Income- tax v. L. G. Ramamurthi & Others (supra) was also rejected by the Commissioner of Income-tax(A) holding that after invoking of the jurisdiction by the Commissioner of Income-tax u/s.263, the facts has undergone change. Suffice to say that we have dealt with the order of the Commissioner of Income-tax u/s.263 for the Assessment Year 2004-05 and the same has been set aside as beyond scope of section
263. Therefore, appeal by the assessee on this point deserves to be allowed.
ITA.800 to 802,962,977 to 979, 1023 & 1024/B/09 Page - 34
44. The other issue relating to levy of interest u/s.234B and 234C are only consequential. The Assessing Officer may give consequential relief.
ITA Nos.977, 978 & 979/Bang/2009 - M/s. Gopalan Enterprises, M/s. Pramod & Others & Mrs. Vasantha Kumari :
45. Since the issues involved in these appeals are identical to ITA.962/Bang/2009, which we have dealt in paras 37 to 41 above, following the same, we allow the appeals of the assessees.
46. In the result, ITA Nos.800 to 802, 1023 & 1024/Bang/2009 are allowed and ITA Nos.962, 977 to 979/Bang/2009 are also allowed. Order pronounced in open court on 10th day of February, 2010.
Sd/- Sd/-
(A. MOHAN ALANKAMONY) (K. P. T. THANGAL)
ACCOUNTANT MEMBER VICE PRESIDENT
Bangalore
Dated : 10th February, 2010
MCN*
Copy to:
1. The assessee
2. The Assessing Officer
3. The Commissioner of Income-tax
4. Commissioner of Income-tax(A)
5. DR
6. GF, ITAT, New Delhi
7. GF, ITAT, Bangalore