Income Tax Appellate Tribunal - Mumbai
Sai Shiv Developers, Mumbai vs Department Of Income Tax on 29 January, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "E", MUMBAI
BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER &
SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER
ITA NO. 7572/MUM/2011(A.Y. 2004-05)
ITA NO.7574/MUM/2011(A.Y. 2005-06)
ITA NO.7577/MUM/2011(A.Y. 2008-09)
The ACIT - 21 (2), M/s. Sai Shiv Developers,
Room No.508, C-10, 5th Floor, BKC, C/o. D.C.Jain & Co.,
Bandra(E), Mumbai - 51. Vs. 75, Bombay Mutual Bldg.,
(Appellant) Dr.D.N. Road, Fort,
Mumbai - 400 001.
PAN: AANFS 2229J
(Respondent)
Appellant by : Shri Girija Dayal, CIT -DR
Respondent by : Shri D.C.Jain
Date of hearing : 29/01/2013
Date of pronouncement : 20/02/2013
ORDER
PER I.P.BANSAL, J.M
All these appeals are filed by the revenue and they are directed against two separate orders of Ld. CIT(A). One consolidated order dated 17/1/2011 for A.Y 2004-05 & 2005-06 and second order dated 17/1/2011 for A.Y 2008-09. Grounds of appeal for A.Y 2004-05 & 2005-06 are identical except difference in figures. Ground of appeal for A.Y 2004-05 read as under:
1. "On the facts & in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that the assessee has fulfilled the conditions laid down in section 801B(10) of the I.T.Act, 1961. The CIT(A) should have appreciated that built-up area of every house should not exceed 1000 sq.ft. There is no provision in the I.T.Act to relax this condition."
2. "On the facts & in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that the additions made on account of unaccounted cash receipts of brokerage of Rs.28,80,000I- and 2 ITA NO. 7572/MUM/2011(A.Y. 2004-05) ITA NO.7574/MUM/2011(A.Y. 2005-06) ITA NO.7577/MUM/2011(A.Y. 2008-09) unaccounted cash receipts on sale of car parking of Rs.17,00,000/- are based on the finding in the case of the assessee for A.Y.2006-07."
3. "On the facts & in the circumstances of the case and in law, the Ld.CIT(A) has erred in not considering the decisions of CIT vs. Kameshwar (1 ITR 94), Homi vs. CIT (41 ITR 135), Parasdas vs. CIT (5 ITR 523), Kanhaiyalal vs. CIT (9 ITR 239), Chaturbhuj vs. CIT (9 ITR 286), Lal Mohan vs. CIT (12 ITR 41), Mangalchand vs. CIT (26 ITR 706), Abdulabhai vs. CIT (22 ITR 241), CIT vs. Southern Shipping (241 ITR 464) and CIT vs. Golcha Properties (227 ITR 391), wherein it has been held that material need not be direct evidence, it may be circumstantial evidence."
2. For A.Y 2005-06 the figures as mentioned in Ground No.2 will be replaced by Rs.6,03,000/- and Rs.9,00,000/-. Grounds for A.Y 2008-09 read as under:
1. "On the facts & in the circumstances of the case and in law, the Ld.CIT(A) has erred in ignoring the fact that the additions made on account of unaccounted cash receipts on sale of flats, unaccounted cash receipts of brokerage received back from brokers and unaccounted cash receipts on sale of car parking were made on the basis of sworn statement recorded u/s.131 of the I.T.Act during the course of survey action u/s.133A of the Act and not merely on assumption."
2. "on the facts & in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that the addition on account of cessation of liability u/s.41(1) was made purely on conjecture and surmise."
3. "On the facts & in the circumstances of the case and in law, the Ld.CIT(A) has erred in not considering the decisions of CIT vs. Kameshwar (1 ITR 94), Homi vs. CIT (41 ITR 135), Parasdas vs. CIT (5 ITR 523), Kanhaiyalal vs. CIT (9 ITR 239), Chaturbhuj vs. CIT (9 ITR 286), Lal Mohan vs. CIT (12 ITR 41), Mangalchand vs. CIT (26 ITR 706), Abdulabhai vs. CIT (22 ITR 241), CIT vs. Southern Shipping (241 ITR 464) and CIT vs. Golcha Properties (227 ITR 391), wherein it has been held that material need not be direct evidence, it may be circumstantial evidence."
3. All these appeals were argued together by both the parties, hence, for the sake of convenience all these appeals are disposed of by this consolidated order. It may also be mentioned here that Ld. AR has stated before us that assessee has accepted the order passed by Ld. CIT(A) and no appeal has been 3 ITA NO. 7572/MUM/2011(A.Y. 2004-05) ITA NO.7574/MUM/2011(A.Y. 2005-06) ITA NO.7577/MUM/2011(A.Y. 2008-09) field by the assessee in respect of these assessment years. The assessment for A.Y 2004-05 and 2005-06 are re-assessment orders which have been passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961(the Act) and assessment for A.Y 2008-09 is an assessment framed under section 143(3) of the Act. The reason for initiating re-assessment proceedings for A.Y 2004-05 and 2005-06 as mentioned in the assessment order was based upon survey action under section 133A of the Act carried out on 2/3/2006. During the survey it was found that the area of certain flats in building No.2 & 4 sold during the years under consideration was more than 1000 sq.ft. Therefore, the deduction u/s. 80 IB (10) was wrongly allowed to the assessee. During the course of survey statement of broker was also recorded and it was revealed that assessee was charging car parking which was not shown in the books of accounts and assessee had also received back the brokerage from brokers @40% of brokerage charged by them. Accordingly on both these issues additions are made and deduction under section 80 IB(10) has been denied.
4. In the appeals filed before Ld. CIT(A) the assessee had challenged the validity of initiation of re-assessment proceedings as well as the additions on merits. Ld. CIT(A) has upheld the validity of initiation of re-assessment proceedings for both the years. However, Ld. CIT(A) has given his finding so it relates to merits. With regard to grant of deduction under section 80IB (10) in respect of these years Ld. CIT(A) has observed that loose sheet found by the AO revealed that in building No.4 there was 21 flats whose areas were more than the permissible limit of 1000 sq.ft and in building No.2 there were two residential units which were made by joining two flats each and size of these two joined units was more than 1000 sq.ft, therefore, the AO had held that assessee is not entitled to get deduction under section under section 80 IB(10).
4 ITA NO. 7572/MUM/2011(A.Y. 2004-05)ITA NO.7574/MUM/2011(A.Y. 2005-06) ITA NO.7577/MUM/2011(A.Y. 2008-09)
5. Before Ld. CIT(A) it was submitted that the loose sheet found were not prepared by the assesse. They belonged to the brokers. The flats were sold on saleable area basis and agreement was done on saleable area, therefore, the brokers had made the details of each flat as per the saleable area and not built- up area. It was submitted that area of all the flats in building No.4 & 2 is duly certified by the architect and area of each flat is less than 1000 sq.ft. It was submitted that according to section 80IB(10) what is to be considered is "built-up area" and not "super built-up area" which is subject matter of sale. So as it relate to two units in which two flats were joined, it was submitted that those flats were not joined by the assessee but they were joined by the purchaser who after purchasing those flats had removed the partition walls to make them one unit. It was submitted that electricity meter and property tax are separately levied on those flats. Thus, it was contended that the deduction under section 80 IB(10) has wrongly been denied.
6. Reference was made to the decision of Mumbai Tribunal in the case of ACIT vs. Seth Developers Pvt. Ltd., 33 SOT 277, wherein it has been held that prior to the introduction of clause (a) to sub-section (14) of section 80 IB, built- up area means what was understood in the common parlance , which would only be carpet area aggregating with the area covered by thickness of the walls and part of balcony could be included therein. The character of the balcony remains and would not change whether it is in excess of 10% of the carpet area or otherwise. The assessee also relied upon the decision of Mumbai Tribunal in the case of G.V. Corporation vs. ITO 133 TTJ 178, wherein it has been held that deduction under section 80 IB(10)can not be denied merely because nine out of 140 purchasers desired to join the flats purchased by them into one single unit, which exceeded 1000 sq.ft of built-up area and the assessee cannot be disentitled to claim the deduction in respect of other flats where area is less than 1000 sq.ft. Considering all these submissions Ld. CIT(A) has given his findings in para 4.3 and has observed that it is matter of common 5 ITA NO. 7572/MUM/2011(A.Y. 2004-05) ITA NO.7574/MUM/2011(A.Y. 2005-06) ITA NO.7577/MUM/2011(A.Y. 2008-09) knowledge that the sale prices of flats in Mumbai are normally fixed and calculated as per saleable area considering proportionate share of common area and these sales are not based on "built-up area". The saleable area is also mentioned in the sale deeds. Recently Government of Maharashtra has made it mandatory to mention built-up area in the sale agreement. The saleable area calculated by the builders usually is 25% to 35% more than the built-up area. The flats as mentioned in the slip found during of survey in building No.4 were No.7 & 8 and if the area of those flats mentioned in the paper is taken as saleable areas then built-up area of these flats will be reduced substantially and in no case it can be more than 1000sq.ft. as working of built built-up area is duly certified by the Architect and the details were filed before AO. He also found the contention of the assessee correct that as per plan built-up area of the flats in building No.4 was less than 1000 sq.ft and thus he has held that so far as it relates to building No.4 there was no violation of the conditions laid down in section 80 IB(10).
7. Coming to building No.2, Ld. CIT(A) observed that the built-up area in respect of flat No.503 and 504 and flat No.s 603 & 604 was mentioned to be more than 1000 sq.ft, details is as under:
Residential Unit. BUA Area.
Flat No.A-503 643.63 sq.ft
Flat No.A-504 454.38 sq.ft
1098.01 sq.ft
Flat No.C-603 644.38 sq.ft.
Flat No. C-604 440.25 sq.ft.
1084.63 sq.ft.
6 ITA NO. 7572/MUM/2011(A.Y. 2004-05)
ITA NO.7574/MUM/2011(A.Y. 2005-06)
ITA NO.7577/MUM/2011(A.Y. 2008-09)
He observed that though it is the claim of assessee that they were not joined by the assessee but by the purchasers but Ld. CIT(A) has rejected such contention on the ground that AO had noted in the assessment order that in building No.2 as many as 9 units were made by two adjacent flats though they exceed the limit of 1000 sq.ft in only two unit of the nine units joined together. Therefore, he observed that the fact remains that as many as 18 flats have been joined to make nine residential units and the design of construction has been made by the assessee to make it convenient to convert two flats in single unit without having too much alteration. Thus the intention of the assessee was to circumvent the limitation of built-up area to get deduction under section 80 IB(10). He also observed that total number of flats in building No.2 are 96 out of which 18 flats have been joined to make nine units. Out of these nine units only two units exceed built-up area of 1000 sq.ft. Therefore, it is only a minuscule number of the units out of the total 96 flats. He observed that it cannot be said that assessee has violated the conditions of 80 IB(10) for the entire project. Relying upon the decision of Seth Developers (supra) and G.V. Corporation (supra) Ld. CIT(A) has directed the AO to compute deduction under section 80 IB (10) on prorata basis in respect of only those flats whose built-up area, (not saleable or super built-up area) does not exceed 1000 sq.ft even after joining two flats into one residential unit. It is in this manner Ld. CIT(A) has allowed the deduction under section 80 IB(10) to the assessee in respect of A.Ys 2004-05 and 2005-06.
8. Ld. CIT-DR arguing the appeals, after narrating the facts for A.Ys 2004- 05 and 2005-06 relied upon the assessment order and pleaded that deduction under section 80 IB(10) was rightly denied by the AO and it has wrongly been allowed by the Ld. CIT(A). He, therefore, pleaded that the order of Ld. CIT(A) on this issue should be set aside and that of AO be restored.
7 ITA NO. 7572/MUM/2011(A.Y. 2004-05)ITA NO.7574/MUM/2011(A.Y. 2005-06) ITA NO.7577/MUM/2011(A.Y. 2008-09)
9. On the other hand Ld. AR relying upon the facts found by Ld. CIT(A) and law applied by him, pleaded that order of Ld. CIT(A) on this issue should be upheld.
10. We have carefully considered the rival submissions in the light of material placed before us. It has already been pointed out that the assessee has not filed any appeal against aforementioned order of Ld. CIT(A). As a matter of fact Ld. CIT(A) has found that the built up area exceeds 1000 sq.ft. only in respect of two units in building No.2. In building No.4, there is no flat exceeding built up area of 1000 sq.ft. No evidence has been produced by the revenue to controvert these findings of facts recorded by Ld. CIT(A). Therefore, considering facts and circumstances of the case and the case law relied upon by Ld. CIT(A), we are of the opinion that there is no infirmity in the directions given by Ld. CIT(A) to the AO. We decline to interfere. Ground No.1 for both the years is dismissed.
11. Apropos Ground No.2 for A.Y.2004-05 & 2005-06 and Ground No.1 of A.Y 2008-09, at the outset it was pointed out by Ld. AR that this issue is covered in favour of the assessee by the decision of Tribunal in assessee's own case dated 11/6/2010 in ITA No.2095/Mum/2010 in respect of assessment year 2006-07. The addition was made on the basis of documents found during the course of survey and these documents were examined by the Tribunal at length and it was held that no additions warranted with regard to the area, parking charges and brokerage. The copy of the said decision is placed in the paper book from pages 1 to 18 . He further submitted that following the said order similar additions were also deleted by the Tribunal in respect of assessment year 2007-08 vide order dated 16/9/2011 passed in ITA No. 5048/M/2010, copy of which is filed at pages 19 to 28 of the paper book. Thus it was submitted by him that this issue is covered in favour of assessee. The relevant observation of the Tribunal which have been reproduced in the 8 ITA NO. 7572/MUM/2011(A.Y. 2004-05) ITA NO.7574/MUM/2011(A.Y. 2005-06) ITA NO.7577/MUM/2011(A.Y. 2008-09) aforementioned order for assessment year 2007-08 are reproduced herein below for the sake of convenience.
"10. We have considered the rival contentions and relevant record including the statements recorded and relied upon by the revenue as well as the impounded documents. It is evident from the record that except the statement recorded on 02.03.2006 of Mr. Anthony Fernandes all other statements have not been attested by any of the authorized officer who administered the oath to the witnesses. Thus, it is clear that except the statement of Shri Anthony Fernandes recorded on 02.03.2006 all other statements are not recorded after administering the oath as nothing reveals from the statement that the authorized officer has administered the oath. Even otherwise, the statement recorded u/s 133A have not evidentiary value unless and until the same are corroborated by the documentary evidence. This proposition of law set out by the decision of the Hon'ble Kerala High Court in the case of Paul Mathews and Sons V/s CIT (supra) as well as the decision of the Hoh. Madras High Court in the case of CIT V/s S Khandar Khan Chand (supra).
11. In the case in hand, admittedly, the statements relied upon by the revenue recorded during the course of survey proceedings and even subsequent to the survey were of Real Estate Agents and not of the assessee or of any person working on behalf of the assessee or connected with the business of the assessee. It is also undisputed fact emerging from the record that Shri Anthony Fernandes and his assistant Shri Kamlesh Yadav were doing their business from the premises of the assessee. We find that the documents impounded during the survey in the shape of loose sheets were also admittedly prepared by the assistant of Shri Anthony Fernandes, Real Estate Agent.
11.1 The AO has made the addition by adopting the estimated rate of sale price of the flat at the rate of ` 4500/- per sq.ft. which is not born out from any of the impounded documents. Therefore, the said rate of ` 4500/- as estimated by the AO is purely based on the statements of Shri Anthony Fernandes and Shri Kamlesh Yadav is not sustainable particularly when these two persons in their own statements have stated while answering the question no.8 that the rate of flats sold is ` 3800 per sq.ft. and the current booking was stated at around ` 4500/- per sq. ft.. As far as the assessed income for the assessment year under consideration is concerned, the same is assessed only with respect to the flats sold during the year and not for the booking of the flats undertaken by the assessee.
12. Even otherwise as per the statements of Shri Anthony Fernandes and Shri Kamlesh Yadav, the rate of ` 4500/- per sq.ft. is not pertaining to the flats which were already sold. Needless to say, Shri Anthony Fernandes was not cross- examined by the assessee during the course of assessment proceedings and later on when the CIT(A) allowed the cross-examination in the remand proceedings the Shri Anthony Fernendes retracted from his earlier statement. Therefore, there is no evidentiary value of these statements of Shri Anthony Fernandes and Shri Kamlesh Yadav. We further note that the AO made the 9 ITA NO. 7572/MUM/2011(A.Y. 2004-05) ITA NO.7574/MUM/2011(A.Y. 2005-06) ITA NO.7577/MUM/2011(A.Y. 2008-09) addition for the sale rate on the assumption that the assessee has shown the rate at ` 2200/- per sq.ft., whereas, even as per the sale documents and rate admitted and undisclosed by the assessee in majority of flats is ` 2750 per sq.ft. and in some cases Rs.3280/- per sq.ft..
13. The CIT (A) has heavily relied upon the impounded document no.8 which is at page 160 of the paper book, wherein the rate and area of the various flats have been mentioned. The CIT (A) has accepted the rates and area given in the said documents but has not accepted the brokerage mentioned in the said documents, therefore, the documents cannot be accepted in part. Moreover, the area of a flat sold by the assessee cannot be more than the area which is transferred by the sale document and the purchaser cannot have legal right and title over the area more than what has transferred under the said document. Even otherwise the area is always constant and subject to physical verification but the AO did not take any step either during the assessment proceedings or during the remand proceedings to verify physically and ascertain actual position of flats sold by the assessee during the year. The CIT (A) while confirming the addition as per the area mentioned in the impounded document no.8 has committed the grave error because the area was not disputed by the AO as disclosed by the assessee and mentioned in the sale documents. Moreover, the impugned order of CIT (A) regulated enhanced assessment to the extent of addition of area as per the impounded document no.8 without following the procedure u/s 251(2) of the Act. Therefore the addition of area by CIT (A) is not sustainable.
14. However, when the documents were impounded from the premises of the assessee and contain the information about the business of the assessee then the rates mentioned in the impounded document no.8 and corroborates the statements of Shri Anthony Fernandes recorded during the survey on 2.3.2006. Therefore, the confirmation of addition by the CIT (A) to the extent of rates mentioned in document no.8 is just and proper. Hence, we uphold the order of the CIT (A) to that extent.
15. Since, there is no documentary evidence with respect to the sale of car parking area except the document no.15 of the impounded documents with respect to flat no.C-38, wherein also ` 50,000/- are mentioned against car parking. Therefore, there is no basis for making addition of 1,00,000/- for each flat for car parking. The AO had not made any inquiry or verification to examine the facts regarding the rate of sale, area, on money payment of brokerage charges and car parking charges from any of the available sources including the buyers of flats as none of the buyers of the flats was examined by the department to verify the involvement of on-money payment and other charges as alleged by the revenue. Even the understatement of area is not examined by the AO at any stage of proceedings. Therefore, it cannot be presumed that all the flats were sold by the assessee through the Real Estate Agent and involved brokerage charges.
16. In view of the above discussion and facts and circumstance of the case, we are of the view that when the statements u/s 133A were recorded at back of the assessee and were subsequently retracted by the witnesses have no evidentiary value to the extent of contents whichever corroborated by documents 10 ITA NO. 7572/MUM/2011(A.Y. 2004-05) ITA NO.7574/MUM/2011(A.Y. 2005-06) ITA NO.7577/MUM/2011(A.Y. 2008-09) impounded during the survey proceedings. Therefore, no addition is warranted with regard to the area, parking charges and brokerage. The addition regarding rate is sustainable only to the extent of rates mentioned in the impounded documents."
12. Ld. DR, however, relied upon the assessment order.
13. After hearing both the parties we found that the deletion of impugned addition has been confirmed by the Tribunal in assessee's own case in respect of subsequent assessment years, i.e. 2006-07 and 2007-08. The relevant observation have already been reproduced. Therefore, the issue is covered in favour of the assessee. We decline to interfere. Ground No.2 for both the years i.e. for A.Y.2004-05 and 2005-06 is dismissed.
15. Ground No.3 of all the appeals is a common ground raising legal issue. No arguments were advanced on such ground. On merits it has already been held that Ld. CIT(A) has committed no infirmity in directing the AO to allow deduction u/s. 80 IB(10) to the assessee. Therefore, we dismiss this ground of revenue for all the years.
16. Apropos, Ground No.2 for A.Y 2008-09, the AO noted that the liability of Rs.9.00 lacs and Rs. 13.00 lacs was shown in the name of M/s. Rayal Canals & M/s. Sapna Enterprises respectively.
17. It was submitted that these amounts are payable as per last year and they are outstanding as on the date also. However, The AO observed that liability with regard to these sums have ceased to exist and he added a sum of Rs.21.00 lacs on account of application of section 41(1) of the Act. Before Ld. CIT(A) it was submitted that these amounts are shown as liability in the balance sheet. The liability is still payable and there is no intention of the assessee in not honouring the liability, therefore, section 41(1) could not be applied. Reference was made to the following decisions to contend that AO 11 ITA NO. 7572/MUM/2011(A.Y. 2004-05) ITA NO.7574/MUM/2011(A.Y. 2005-06) ITA NO.7577/MUM/2011(A.Y. 2008-09) would not be justified in ignoring the liability appearing in balance sheet and making out a case of cessation of liability.
1. Jehangir Gullabhai, 21 SOT 603 (Mum)
2. DSA Engineers , 30 SOT 31 (Mum)
3. Nirmala Overseas, 37 DTR 321 (Del) (Trib)
4. New Commercial Mills, 175 Taxman 179 (Ahd) It was also contended that liability existing in the books, if not written back, cannot be said to have ceased or exist. Reference was made to the decision of Punjab & Haryana High Court in the case of GP International Ltd., 229 CTR
86. Relying upon all these decisions by Ld. CIT(A) has held that addition is liable to be set aside. The department is aggrieved hence in appeal.
18. We have heard both the parties on this issue. There is no dispute on the fact that liability has not been written of in the books of account. There is no material on record to suggest that the liability had ceased to exist. Therefore, in view of the case law relied upon by Ld. CIT(A), we are of the opinion that such addition has rightly been deleted by Ld. CIT(A). We decline to interfere and this ground of the revenue is dismissed.
19. In the result, all the appeals filed by the revenue are dismissed.
Order pronounced in the open court on the 20th day of Feb.2013 Sd/- Sd/-
(N.K.BILLAIYA ) (I.P.BANSAL)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated 20th Feb. 2013
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ITA NO.7574/MUM/2011(A.Y. 2005-06)
ITA NO.7577/MUM/2011(A.Y. 2008-09)
Copy to: 1. The Appellant 2. The Respondent 3. The CIT City -concerned
4. The CIT(A)- concerned 5. The D.R "E" Bench.
(True copy) By Order
Asst. Registrar, ITAT, Mumbai Benches
MUMBAI.
Vm.