Income Tax Appellate Tribunal - Mumbai
Acit-25(3), Mumbai vs Assessee on 31 October, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "E", MUMBAI
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER
ITA No.3396/M/2011
Assessment Year: 2004-05
ACIT-25(3), M/s. Ekta Bhoomi Developers,
C-11, R. No.308, Rock Avenue,
Pratyaksh Kar Bhavan, Vs. Near Hindustan Naka,
Bandra-Kurla Complex, Kandivali (West)
Bandra (E), Mumbai - 400 067
Mumbai 400 051 PAN: AAAFE 8787A
(Appellant) (Respondent)
Assessee by : Shri S.C. Tiwari, A.R.
Revenue by : Shri Pankaj Kumar, D.R.
Date of Hearing : 06.08.2014
Date of Pronouncement : 31.10.2014
ORDER
Per Sanjay Garg, Judicial Member:
The present appeal has been filed by the Revenue against the order dated 21.02.11 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2004-05.
2. The Revenue has taken the following grounds of appeal:
1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding the re-opening of assessment as bad in law even though there was specific information with the A.O. based on which reasons of reopening were recorded.
2. On the fact and in the circumstances of the case and in law, the ld.CIT(A) erred in directing the AO to allow deduction of Rs. 84,81,101/-
u/s 80IB(10) of the IT Act without appreciating the fact that Income Tax Act does not stipulate any prorate provision for allowing 80IB claim.
3. On the fact and in the circumstances of the case, and in law, the 2 ITA No.3396/M/2011 M/s. Ekta Bhoomi Developers Id. CIT(A) erred in directing the AO to delete the addition of Rs. 10,95,000/- made on account of loose papers impounded during the course of Survey carried out u/s 133A by Investigation Wing.
4. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the A.O. be restored."
3. The brief facts of the case are that the assessee filed the original return of income declaring the total income of Rs.Nil. In the said return, deduction u/s.80IB(10) of Income Tax Act, 1961 was claimed by the assessee at Rs.1,95,52,603/-. The whole of the profit, as per P& L account, was claimed as deduction u/s.80IB(10). Later on, the assessee filed a revised return of income declaring total income at Rs.62,54,502/- and reduced the claim of deduction u/s 80IB(10) by Rs.62,54,502/- i.e. the profit attributable to the non- residential area comprising in the housing project. A survey action was carried out u/s. 133A by the then Assessing Officer (hereinafter referred to as the AO) on 3/2/2006. After the survey action, the assessee filed a second revised return of income wherein income was declared at Rs.1,10,71,502/-. In the second revised return, the deduction u/s.80IB(10) was further reduced by Rs.48,17,000/-. This reduction was made on account of the profit attributable to non residential area, car parking and deposits received from purchasers of various units / flats in the housing project developed by the assessee by the name "Ekta Bhoomi Classic". The assessment was completed by the A.O. on 31.3.06 wherein the total income was determined at Rs.1,10,71,502/- which was the amount of income declared in the second revised return of income filed by the assessee allowing the deduction u/s.80IB(10) at Rs.84,81,101/-.
4. Again a survey u/s.133A was carried out on 27.09.2006 by the DDlT (lnv),Unit- IV(3), Mumbai. This survey was carried out in the group cases of the assessee. After receipt of the report of survey action, the case of the assessee was reopened u/s.147. Though it was claimed by the Revenue that the 3 ITA No.3396/M/2011 M/s. Ekta Bhoomi Developers notice u/s.148 was issued on 2/7/2008 by the then A.O, however, the assessee claimed that the same was not served upon it. A letter dated 6/1112009 was written by the AO to the assessee wherein it was further stated that the assessee did not file the return in response to notice issued u/s.148 dated 2/7/2008. In the said letter it was further stated by the A.O that assessment was getting barred by limitation on 31/12/2009. The assessee vide letter dated 14/11/2009 stated to the A.O that notice issued u/s.148 was not received by the assessee and therefore no return was filed. The then AO did not pass any assessment order thereafter before 31/12/2009 and closed the matter. Subsequently another notice u/s.148, dated 31/3/2010 was issued by the AO which was received by the assessee on 7/4/2010. In response to this notice issued u/s.148, the assessee submitted vide letter dated 27/4/2010 inter-alia that the notice issued was illegal, out of jurisdiction and bad in law. The assessee asked for the copy of reasons along with copy of the satisfaction recorded by the CIT. The A.O. furnished a copy of reasons recorded for issue of notice u/s.148 to the assessee. The assessee vide letter dated 6/10/2010 filed objection for reopening of the assessment and stated that the reopening of the assessment was not in accordance with law and requested to drop the reassessment proceedings. Further explanation was submitted and furnished in the reassessment proceedings. The ld. A.O did not accept the submissions of the assessee and proceeded to pass the reassessment order. He concluded that the area of the flats of the housing project under consideration was more than 1,000 sq. ft. He therefore disallowed the deduction u/s.80IB(10) of Rs.84,81,101/-, which was earlier allowed in the assessment completed u/s.143(3). Further addition of Rs.10,95,000/- was also made on account of receipts in cash by the assessee. The assessee challenged the reassessment order and the impugned additions before the Ld. CIT(A).
4 ITA No.3396/M/2011M/s. Ekta Bhoomi Developers
5. In appeal before the ld. CIT(A), it was submitted by the ld. A.R. of the assessee that the reopening was bad in law. It was submitted that the notice, under section 148, dated 02.07.08 was not served upon the assessee and the assessment had got time barred by 31.12.09. The fresh notice, under section 148, dated 31.03.10 was wrong and illegal.
On merits, it was further submitted that no incriminating material was found against the assessee during the second survey. The conclusion of the Revenue Authorities that the area of the flats of the housing project under consideration was more than 1,000 sq. ft. was wrong. The view was based on wrong appreciation of facts and evidence. Further that no cash amount of Rs.10,95,000/- was received by the assessee. The alleged loose papers did not suggest that any cash amount was received. The AR further explained the figure of Rs.10,95,000/- to the Ld. CIT(A) stating that the agreement value of the flats in question was more than the stamp duty recknor value. Both the figures were written side by side. All the payments were duly accounted for and there was no receipt of any cash payment. After going through the submissions of the Ld. A.R. and the evidences on the file, the Ld. CIT(A) held that the reopening in this case was bad in law and that there was no reason to believe that the income of the assessee had escaped assessment. The relevant part of the findings of the Ld. CIT(A) for the sake of convenience is reproduced as under:
"6. I have considered the submissions of the appellant and perused the reassessment order and also gone through the reasons recorded for reopening the assessment. From the perusal of the reasons recorded and the reply of the appellant submitted to the A.O, it is seen that in the original assessment proceedings a survey was conducted u/s.133A and after examining the relevant details and verification in survey proceedings the then A.O completed the assessment u/s.143(3) wherein he allowed the deduction u/s.80IB(10) only for the residential area comprised in the housing project 'Ekta Bhoomi Classic" developed by the appellant. The appellant itself has not claimed the deduction u/s.80IB(10) for the profit 5 ITA No.3396/M/2011 M/s. Ekta Bhoomi Developers attributable to the non residential area on account of shops, office premises and prayer hall etc. and also no deduction was claimed for the amount received on account of car parking and deposits. The area wise statements and details of sale of various units of the housing project were furnished in the original assessment proceedings and the copy of the same were also furnished in the reassessment proceedings and also the copies of the same have been furnished in the paper book filed before me. Perusal of the area wise statement would show that there is no flat which is exceeding the area of 1000 sq.ft. (built up). The A.O. has also no dispute as far as this aspect is concerned except the flat No.105 & 106 of 'A' wing whose area was stated to be 1593 sq.ft, by the A.O as mentioned b y h i m i n p a r a 4 . 2 o f t h e r e a s s e s s m e n t o r d e r . I n t h e a p p e l l a t e proceedings it was submitted that flat No.105 & 106 of 'A' wing was not combined as stated by the ld.A.0. The appellant states that in 'A' wing instead of 105 & 106 the office premises were constructed and in all 11 offices were constructed in 'A' wing in place of flat No.105 & 106. The details of the said 11 offices were given in the original assessment proceedings as well as in the reassessment proceedings. The appellant further states that in 'B' wing a prayer hall was made in place of flat No.105 & 106 whose area was 1593 sq.ft. Thus the appellant states that the ld. A.O. was not correct in stating that the flat No.105 & 106 in 'A' wing was combined and sold as a flat whose area exceeded 1000 sq.ft. The appellant further states that before coming to this conclusion the ld.A.O. did not ask any clarification from the appellant regarding this aspect. The appellant further states that the details filed on record of the A.O clearly show that unit No. 105 & 106 of 'B' wing is not at all a flat but it is a prayer hall (Upasana) whose area was 1593 sq.ft. and this area was considered as non residential area in the original assessment proceedings and the appellant included this area for the purpose of arriving at the profit attributable to non residential area on which the appellant did not claim deduction u/s.80IB(10). The relevant chart of the working of residential and non residential area and profit attributable to non residential area has been placed in the paper book at page 149 which shows that profit attributable to non residential area was worked out at Rs.62,54,502/- and this is the amount on which no deduction was claimed u/s.80IB(10) in first revised return filed by the appellant on 6/1/2006. Thus the profit attributable to the area of Upasana (Prayer Hall) constructed by the appellant in place of flat No. 105 & 106 in 'B' wing was included in the profit amount of Rs.62,54,502/- and this area was considered as non residential area. After filing this revised return of income a survey was conducted on 3/2/2006 and the deduction was further reduced for the car parking, deposits etc. In view of all these facts on record it is clear that the assessee has not claimed deduction on the profit attributable to the area of Upasana constructed in place 6 ITA No.3396/M/2011 M/s. Ekta Bhoomi Developers of flat No.105 & 106 in 'B' wing and paid tax in the revised return filed before completion of the assessment u/s.143(3) on 31/03/2006. Thus all the facts of area wise details of shops, offices, Upasana and residential units were submitted by the appellant before the completion of assessment u/s 143(3). Perusal of the reassessment order shows that except the allegation of flat No.105 & 106, the A.O has not pointed out any other instance of flat whose area exceeded 1,000 sq. ft. Copy of agreement for sale of prayer hall was examined and the plan attached to the said agreement shows that it is a big hall does not have any specification of residential flat. This hall was sold to one M/s. Shri Vardhman Sthanakvasi Jain Shravak Sangh, Mahaveer Nagar. Kandivali (W), Mumbai 400 067. The buyer is a Jain Association and the hall was purchased for their meditation/prayers for religious purposes. In the said agreement the description of the unit sold is mentioned in clause 2 as hall No.106 having usable carpet area of 1593 sq.ft. on first floor in wing 'B' as per the plan annexed as Annexure - A. All these things make it absolutely clear that the full facts regarding the housing project developed by the appellant such as area details, details of residential flats, details of shops and office premises and details of prayer hail (Upasana) was furnished by the appellant in the original assessment proceedings before completion of assessment u/s.143(3). The assessment was completed u/s.143(3) after conducting a survey uls.133A and admittedly after verification of all the details and building project. The appellant withdrew the deduction originally claimed for the profit attributable to the area of shops office premises and Upasana (prayer hail) in the revised return filed before completion of assessment u/s.143(3). The detailed working of the profit attributable to the non residential area was also filed in the original assessment proceedings as such, the appellant, in my opinion cannot be blamed for not disclosing the relevant material facts fully and truly in the original assessment proceedings as far as the claim of deduction u/s.80IB(10) is concerned.
7. Similarly the other ground of reopening that cash of Rs.10,95,000/- was received by the appellant as per the loose paper impounded during the survey conducted by the investigation wing has also no substance. The relevant impounded page is page 89, copy of which was furnished in the paper book by the appellant. Perusal of the said page would show that the following notings are there on this page.
Rajul Shah 5,05,000
" 4,00,000
Nirav Modi 1,90,000
-------------
10,95,000
=======
7 ITA No.3396/M/2011
M/s. Ekta Bhoomi Developers
This is the amount which was added by the ld. A.O. in the reassessment made and this is one of the reasons for reopening the assessment. Perusal of this further shows that except the above notings, nothing has been written about these figures as to whether the figures are the amount in rupees. It is not clear whether these figures denote any receipt or any payment nor these figures are indicative of any amount received in cash or in cheque. Nowhere on this page above, below or on both sides of these figures it is written that this is the amount received in cash. The word 'cash' is nowhere written on this page. Thus these figures are not indicative of any cash receipt as alleged by the ld. A.O. Thus prima facie, leave aside the explanation submitted by the appellant, it cannot be inferred that the figure of 10,95,000 represents the amount in rupees which was received by the appellant in cash. The appellant has successfully explained that this amount is a difference of Rs.37,25,000/(written on page No.88) and the amount of 26,30,000 (written on page No.89). The appellant further submitted that on page No.88 in the name of Rajul Shah one shop is appearing to have been sold for Rs.5,05,000/-. Similarly on page No.8 it is also written that one shop was sold to Nirav Modi for Rs.1,90,000/-. Thus the two entries of these three figures have been correlated with the figures and sales details of shop / offices written on impounded page No.88. The figures written on page No.88 have been further correlated by the appellant with the books of account and the details of sale of office premises submitted in the original assessment proceedings. In view of this discussion in my view this reason is also not relevant for reopening the assessment. Because the appellant has submitted all the details and facts relating to sate of shops / office premises which are written on page No.88 & 89 of the impounded material. These details were furnished much before completion of assessment proceedings u/s.143(3). A survey was carried out on the appellant and needless to say that before allowing the deduction u/s 80IB(10) the relevant aspects were verified by the then AO. In my opinion no fault can be found with the appellant in not furnishing and disclosing fully and truly all the material facts in the assessment proceedings completed u/s.143(3). The first reason for reopening was that the appellant was accepting part of sale consideration in cash is merely a bald statement without reference to any corroborative evidence or material found in the survey conducted by the investigation wing. This is further forfeited with the fact that no addition was made in the reassessment order on account of acceptance of any part consideration in cash as alleged. In view of the above discussion find full force in the argument of the ld.A.R that there was no failure on the part of the appellant to disclose fully and truly all material facts necessary for the assessment. A notice u/s.148 was issued on 31/03/2010. The assessment year involved is A.Y.2004-05. Thus the notice has been issued after expiry of 4 years from the end of the relevant assessment year because the period of 4 years 8 ITA No.3396/M/2011 M/s. Ekta Bhoomi Developers expires on 31/3/2009. Admittedly the original assessment was completed u/s.143(3). The first proviso to section 147 of I.T.Act, 1961 reads as under:-
'Income escaping assessment 147 .........
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year....."
In view of the above discussion and the relevant facts on record I am of the considered opinion that there is no failure on the part of the appellant do disclose fully and truly all material facts necessary for the assessment in the original assessment proceedings completed u/s.143(3). Therefore the case of the appellant squarely falls within the meaning of proviso to section 147 and in my considered view the proceedings initiated u/s 147 for reopening the assessment is not in accordance with law. I therefore concur with the argument of the appellant that the reopening of the assessment was bad in law and consequently the impugned reassessment order passed u/s.147 needs to be held as void abinitio. I hold accordingly and the impugned assessment order is quashed and is hereby annulled."
6. Thus the Ld. CIT(A) even deleted on merits the addition of Rs.8,48,110/- which was made on account of disallowance of deduction under section 80IB(10) holding that there was no flat which area was exceeding 1,000 sq. ft. and there was no violation of the clause (C) of section 80IB(10) of the Income Tax Act. He also held it on merits that there was no receipt of cash amount of Rs.10,95,000/- by the assessee. The Ld. CIT(A) not only held that the reopening was bad in law but also decided the issues on merits in favour of the assessee. Aggrieved by the order of the ld. CIT(A), the Revenue has thus 9 ITA No.3396/M/2011 M/s. Ekta Bhoomi Developers come in appeal before us.
7. We have heard the rival contentions and have also gone through the records. A perusal of the above reproduced finding of the Ld. CIT(A) reveals that the Ld. CIT(A), in his detailed order, has given categorical finding that there was no reason or evidence to believe that the flat in question was exceeding area of 1,000 sq. ft. The unit No.105 & 106 of 'B' Wing was not the area of flats but it was a prayer hall having area of 1593 sq. ft., which area was treated by the assessee as non residential area in original assessment proceedings and no deduction under section 80IB(10) was claimed in respect of the said area. Even a survey was conducted on 03.02.06 and the assessee had reduced the deduction in respect of car parking and deposits etc. also. It has also been held by the Ld. CIT(A) that the finding of the AO that Flat Nos.105 & 106 of 'A' Wing were combined was also wrong. It was established before the Ld. CIT(A) that in 'A' Wing instead of 105 & 106, the office premises was constructed and in all 11 offices were constructed in 'A' Wing upon which no deduction under section 80IB(10) was claimed. The Ld. CIT(A) also categorically observed that the loose papers upon which the figure of Rs.10,95,000/- was written were not suggestive of the fact that the assessee had received any amount in cash. Even the assessee had properly explained and reconciled the figures before the Ld. CIT(A). Under such circumstances, the Ld. CIT(A) held that there was no reason to believe that the income of the assessee had escaped assessment. The ld. D.R could not draw our attention to any document on the file which was found during the second survey action from which it can be said that the AO had reasons to believe that the income of the assessee had escaped assessment. Even the Ld. A.R. has further brought to our notice the flat that the assessment year in question being 2004-05, the clause 'd' was inserted to section 80IB(10) from 01.04.05 had prospective 10 ITA No.3396/M/2011 M/s. Ekta Bhoomi Developers effect and the assessee was even entitled to claim deduction on the commercial area in view of the law laid down by the Hon'ble Bombay High Court in the case of "CIT v. Brahma Associates" (2011) 333 ITR 289 (Bomb.) wherein the Hon'ble Bombay High Court has held that the deduction under section 80IB(10) is allowable to a housing project approved by the local authority having residential units with commercial user to the extent permitted under the Development Control rules/regulations framed by the respective local authority and that the clause 'd' was not applicable to the projects approved before the insertion of the said clause i.e. from 01.04.05.
8. We note that the assessee itself has not claimed any deduction in respect of the commercial area and even has not agitated in any further appeal in this respect. So far the reopening of the assessment is concerned, we do not find any infirmity in the order of the Ld. CIT(A) while holding that the reopening was bad in law. Since we have upheld the order of the Ld. CIT(A) that reopening was bad in law, hence the consequential addition is also not sustainable in the eyes of law. Hence, we do not find any merit in the appeal of the Revenue and the same is hereby dismissed accordingly.
Order pronounced in the open court on 31.10.2014.
Sd/- Sd/-
(N.K. Billaiya) (Sanjay Garg)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 31.10.2014
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
11 ITA No.3396/M/2011
M/s. Ekta Bhoomi Developers
The CIT (A) Concerned, Mumbai
The DR Concerned Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.