Income Tax Appellate Tribunal - Pune
Kolte Patil Developers Ltd, Pune vs Assessee on 20 February, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA Nos.1411 to 1415/PN/2013
(A. Ys. : 2003-04, 2005-06 & 2007-08 to 2009-10)
M/s Kolte Patil Developers Ltd.
2nd Floor, City Point,
Dhole Patil Road,
Pune - 411 001.
PAN : AAACK7310G .... Appellant
Vs.
Dy. Commissioner of Income Tax,
Central Circle 1(1), Pune. .... Respondent
ITA Nos.1478 to 1483/PN/2013
(Assessment Years : 2004-05 to 2009-10)
Dy. Commissioner of Income Tax,
Central Circle- 1(1), Pune. .... Appellant
Vs.
M/s Kolte Patil Developers Ltd.
2nd Floor, City Point,
Dhole Patil Road,
Pune - 411 001.
PAN : AAACK7310G .... Respondent
Assessee by : Mr. Sunil Pathak &
Mr. Nikhil Pathak
Department by : Mr. A. K. Modi
Date of hearing : 05-01-2015
Date of pronouncement : 20-02-2015
ORDER
PER G. S. PANNU, AM
The captioned appeals relate to same assessee belonging to different assessment years and involve certain common issues, therefore they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
2. At the time of hearing, cross-appeals of the assessee and the Revenue for assessment year 2007-08 vide ITA Nos.1413 & 1481/PN/2013 respectively 2 M/s Kolte Patil Developers Ltd.
were taken as the lead case. The aforesaid appeals are directed against the order of the Commissioner of Income Tax (Appeals)-II, Pune dated 28.03.2013 which, in turn, has arisen from an order dated 31.12.2010 passed by the Assessing Officer u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961 (in short "the Act").
3. In the appeal of the assessee, the concise Grounds of Appeal raised read as under :-
"1] The learned CIT(A) erred in confirming the disallowance of Rs.5,61,48,006/- made on account of alleged bogus purchases from six parties without appreciating that the said purchases were genuine and hence, the said disallowance was not justified.
2] The learned CIT(A) erred in confirming the disallowance of deduction u/s 80IA(4) of Rs.33,59,56,749/- in respect of the profits derived from the Industrial Park 'Giga Space' without appreciating that the disallowance of deduction was not justified on facts of the case.
3] The learned CIT(A) erred in holding that the assessee had made unrecorded payments of Rs.99 lacs to various parties on the basis of certain seized papers without appreciating that the assessee had not made any such payments and hence, no addition was warranted on facts of the case."
4. The assessee before us is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in the business of builders and developers. A search action u/s 132(1) of the Act was carried out at the premises of the assessee on 22.08.2008. For assessment year 2007-08, assessee filed a return of income on 11.02.2009 in response to a notice u/s 153A of the Act, disclosing total income of Rs.71,78,88,401/-. In the assessment finalized u/s 143(3) r.w.s. 153A of the Act dated 31.12.2010, the total income of the assessee was determined at Rs.1,14,12,79,241/- after making additions/disallowances on account of the bogus steel purchases, denial of deduction u/s 80-IA(4)(iii) of the Act and unexplained expenditure u/s 69C of the Act. The additions so made by the Assessing Officer were carried in appeal before the CIT(A), who has since allowed partial relief. Not being satisfied with the reliefs allowed by the CIT(A), 3 M/s Kolte Patil Developers Ltd.
assessee is in appeal before us on the aforestated Grounds of Appeal and Revenue is also in appeal before us raising the following Grounds of Appeal :-
"1) On the facts and circumstances of the case, the Ld. Commissioner of Income-tax (A) erred in treating the bogus purchases of steel from five parties namely (a) Vora Mercantile Pvt. Ltd., (b) M/s Mayoora Metal Trade Corporation, (c) M/s Yash Trading Co., (d) M/s Shree Surya Steel and
(e) M/s Satyam Steel as genuine ignoring the materials available on records brought by the A.O.
2) On the facts and circumstances of the case, the Ld. Commissioner of Income-tax (A) erred in allowing benefit of telescopy on unexplained investment in land against inflated purchase of steel."
5. The first Ground of Appeal in assessee's appeal is with regard to a disallowance of Rs.5,61,48,006/- sustained by the CIT(A) out of a total addition of Rs.7,75,34,092/- made by the Assessing Officer on account of purchase of steel held to be bogus. The CIT(A) partly upheld the addition made by the Assessing Officer out of the total addition of Rs.7,75,34,092/- and deleted a sum of Rs.2,13,86,086/-. The Revenue by way of Ground of Appeal No.1 in the cross-appeal has agitated the addition deleted by the CIT(A). Since, the two Cross-Grounds relate to the same issue, they are being taken- up together.
6. The facts relevant to appreciate the controversy are as follows. In the course of search action u/s 132(1) of the Act, the Department made enquiries with some of the suppliers of steel to the assessee. In the course of such enquiries, statements of six suppliers of steel, namely, (i) M/s Unique Ferro Metals Pvt. Ltd.; (ii) M/s Fresho Metals Pvt. Ltd.; (iii) M/s Praky Metals Pvt. Ltd.; (iv) M/s Meghana Enterprises; (v) M/s Narendrakumar & Co.; and, (vi) M/s R.D. Jain & Co. were recorded u/s 131 of the Act wherein the parties deposed that they had not made any actual sales/ supplies of steel to the assessee-company but only accommodation bills were issued by them. It was stated by such parties that the bills raised by them were settled by cheque payments, which were returned back by way of cash after deducting 1% on 4 M/s Kolte Patil Developers Ltd.
account of commission. It is also emerging from the assessment order that statement of one of the Transporter, namely, M/s New ARC Transport was also recorded by the Department who also deposed that he had issued bogus lorry receipts to one of the suppliers in respect of the sales made to the assessee and that he had actually not made any delivery of goods to the assessee-company. In the assessment order, the statements recorded of such persons have been exhaustively referred to. The Assessing Officer referred to the statement of one Shri Krishnakumar Gupta, Director of three of the aforesaid companies, namely, M/s Fresho Metal Pvt. Ltd.; M/s Unique Ferro Metal Pvt. Ltd; and, M/s Praky Mercantile Pvt. Ltd., wherein it was admitted that the activity of trading in steel was not carried out by the said companies and that the only activity carried out was of cheuqe discounting whereby cheques were received from beneficiaries and cash was returned to them after deducting commission. Similarly, Assessing Officer referred to the statement of Shri Kirti Shah, a partner of M/s Meghna Enterprises wherein it is stated that the said firm did not carry out any actual activity in trading of steel but was carrying out cheque discounting activities whereby cheques were received from the beneficiaries and cash were returned back after deducting commission. The Assessing Officer has also referred to the statement of one Shri Narendrakumar Timbadia, who was Proprietor of two concerns, namely, M/s Narendrakumar & Co. and M/s R.D. Jain & Co.. In his statement, Shri Narendrakumar Timbadia admitted that his proprietory concerns had issued accommodations bills to the assessee-company. The statement of the Transporter, Shri Bhaskar M. Darandale of New ARC Transport has also been referred to wherein the said person admitted that he had issued bogus lorry receipts to M/s M/s R.D. Jain & Co. without actual delivery of any material.
7. In addition to the statement of the aforesaid suppliers of steel and the Transporter, the Assessing Officer has also referred to the statements of the employees of the assessee-company. In this connection, reference has been 5 M/s Kolte Patil Developers Ltd.
made to the statements of Shri S.V. Ranaware, Asstt. Vice President, Accounts as well as Shri Hemant Y. Wadnerkar, Sr. Executive, Purchase. As per the Assessing Officer, above two persons admitted that the delivery challans and Goods Receipt Note (GRN) were required before passing of the purchase bills. The Assessing Officer has contended that both of them also admitted that in many cases purchase bills were passed without verifying the delivery challans and GRNs. The Assessing Officer required the assessee to furnish supporting documents in the form of delivery challans, GRNs, etc. in respect of the purchases made from the above six parties. It has been stated by the Assessing Officer that the assessee had failed to produce the requisite supporting documents. The Assessing Officer has also referred to the statement recorded of Shri Rajesh Patil, Chairman & Managing Director of the assessee-company in the course of search u/s 132(4) of the Act dated 30.09.2008 and by reproducing the relevant portion of the statement recorded, Assessing Officer observed that assessee was not able to substantiate the genuineness of the purchase of steel effected from the above six parties.
8. Apart from the above six parties, Assessing Officer has observed that steel purchases made from the following five parties, namely, (i) Vora Mercantile Pvt. Ltd.; (ii) M/s Mayoora Metal Trade Corporation; (iii) Yash Trading & Co.; (iv) M/s Shri Surya Steel; and, (v) M/s Satyam Steel were also not supported by delivery challans, GRNs, etc. and therefore he held that purchases effected from the above parties were also not genuine.
9. The Assessing Officer had required the assessee to show-cause as to why the purchases from the aforesaid 11 parties be not be considered as bogus purchases. The assessment order reveals that the claim of the assessee was that the purchases were genuine and one of the reasons canvassed was that the consumption of steel stood established. According to the assessee, if the steel has been consumed, it is fair to conclude that the 6 M/s Kolte Patil Developers Ltd.
purchases of steel would have been effected. With respect to the six parties whose statements were recorded u/s 131 of the Act, it was contended by the assessee that no proper opportunity of cross-examination was allowed by the Department. To counter the enquiries conducted by the Assessing Officer, assessee also obtained and furnished an affidavit of one of the suppliers, namely, Shri Deepak Jain, partner of Shri Surya Steel wherein he confirmed of having supplied steel to the assessee. The detailed reply of the assessee has indeed been reproduced by the Assessing Officer in the assessment order.
10. The Assessing Officer after considering the stand of the assessee as well as the result of enquiries conducted by him, disallowed purchases effected from the aforesaid parties totaling to Rs.7,75,34,092/-/- in assessment year 2007-08. Similar additions have been made in other captioned assessment years though of varying amounts but the parties/suppliers remain the same set of 11 suppliers referred above. The Assessing Officer has furnished various reasons to support the disallowance. Firstly, the Assessing Officer has contended that the assessee was not able to furnish the supporting documents viz. delivery challans/GRNs, etc. with regard to the purchases effected from the said 11 suppliers. Secondly, the Assessing Officer has also noted that assessee could not submit any inward register/stock register to prove that the material was indeed received at the respective construction sites. Thus, as per the Assessing Officer, assessee was not able to demonstrate that it had actually received delivery of steel in respect of impugned purchase. Thirdly, the Assessing Officer also held that the six parties were not in possession of any transport bills or octroi receipts or the challans to substantiate delivery of goods to the assessee. Fourthly, the Assessing Officer also referred to the statements of six parties recorded u/s 131 of the Act wherein they had categorically denied having supplied the material to the assessee. In this context, the Assessing Officer observed that the said parties confirmed that the bills issued by them were mere 7 M/s Kolte Patil Developers Ltd.
accommodation entries whereby cash was returned back after deducting their discounting/commission charges. Fifthly, the Assessing Officer also rejected assessee's plea that no proper opportunity of cross-examination was granted with respect to the said six parties. In this context, the Assessing Officer referred to the statement of Shri Rajesh Patil recorded on 30.09.2008 wherein he was allowed an opportunity to cross-examine the six parties. It has been observed by the Assessing Officer that Shri Rajesh Patil did not opt for cross- examination on the ground that the CFO of assessee-company, Shri Lakhe was out of station. The Assessing Officer notes in the assessment order that another opportunity of cross-examination was allowed to the assessee in the course of assessment proceedings on 29.11.2010 but none of the parties appeared on that date. Considering the aforesaid, the Assessing Officer contended that the assessee was indeed allowed an opportunity to cross- examine the parties but since it was refused by the assessee at the time of search, it cannot be said that proper opportunity has not been allowed to the assessee. Sixthly, the working submitted by the assessee showing consumption of steel to justify that purchases in-effect were made, was also rejected by the Assessing Officer. As per the Assessing Officer, the said working does not give a clear picture because multiple projects were going on, which were spread over a number of years. Therefore, the analysis given by the assessee was not an objective analysis. Further, as per the Assessing Officer, the enquiries and investigations carried out in the post-search period established that the claimed purchases of steel from the said parties were bogus and the purchase bills were mere accommodations entries. Seventhly, reliance was also placed on the statement of Shri Bhaskar Maruti Darandale, Prop. of New ARC Transport, whereby he admitted that the bogus bills were issued and no material was actually transported. Further, as regards the affidavit of Shri Deepak Jain, partner of Shri Surya Steel furnished by the assessee, the Assessing Officer rejected the same on the ground that assessee could not produce any supporting documents to establish that the 8 M/s Kolte Patil Developers Ltd.
steel was actually purchased. The Assessing Officer also referred to the plea raised by the assessee regarding certain contradictions in the statement of Shri Narendrakumar Timbodia. This plea has been rejected on the ground that Shri Narendrakumar Timbodia clearly deposed that he was providing accommodation/bogus bills for a profit on commission basis.
11. For all the aforesaid reasons, the Assessing Officer held that the six parties whose statements were recorded u/s 131 of the Act had actually not made any supply of steel to the assessee and therefore assessee had not effected the purchase of steel, etc. from such parties. Now, with regard to the other set of five suppliers, Assessing Officer noted that such purchases were not supported by the basic supporting evidences like GRN, transport bill, payment slip, octroi challan, delivery challan, etc.. The purchase from such five suppliers were also held to be bogus. In this manner, the purchases of Rs.7,75,34,092/- from the aforesaid 11 parties was held to be bogus and accordingly the said amount was added to the returned income.
12. In appeal before the CIT(A), assessee assailed the addition in law and on facts. The CIT(A) has referred to the discussion in the assessment order in quite detail and ultimately he has concluded that so far as purchases made from six parties whose statements were recorded u/s 131 of the Act in the post-search enquiries were concerned, the Assessing Officer was justified in treating them as bogus. With respect to the said parties, the assessee had furnished an affidavit from Shri Narendrakumar Timbodia, Prop. of Narendrakumar & Co. and R.D. Jain & Co., wherein it was averred that the purchases effected from the said concerns were genuine. The CIT(A) admitted such additional evidence, however, he did not find any merit in the same. The CIT(A) has made a detailed discussion in this regard in para 4.9 of his order. As per the CIT(A), the affidavit furnished by the said Shri Narendrakumar Timbodia was an afterthought and that it did not invalidate his 9 M/s Kolte Patil Developers Ltd.
earlier deposition made, where he had categorically admitted of having provided accommodation entries to the assessee-company. In sum and substance, in respect of purchases effected from such six parties, the CIT(A) confirmed the addition on the ground that the said parties had denied of having supplied material to the assessee and also for the reason that assessee was not able to substantiate the purchases on the basis of any supporting evidences.
13. As regards, the balance five parties, where no statements were recorded u/s 131 of the Act, the CIT(A) accepted the plea of the assessee and deleted the addition. As per the CIT(A), the search did not reveal any corroborative evidence to suggest that the purchases from the said parties were in-genuine. The CIT(A) also noted that the payments to all the said five parties were made by cheques and the invoices raised by them were also available and they had their sales-tax numbers. The CIT(A) was also referred to the fact that one of the parties, M/s Surya Steels had furnished an affidavit accepting the sales of steel to the assessee. The CIT(A) has also noticed in para 12.4 of his order that in the remand proceedings, the Assessing Officer had accepted that delivery challans and weighment slips were submitted by the assessee in respect of purchase made from Shri Surya Steel and M/s Mayoora Metal Trade Corporation. With respect to the other three concerns, namely, Vora Mercantile Pvt. Ltd.; Satyame Steel; and Yash Trading & Co., the CIT(A) noted that the Assessing Officer had not brought on record any material which could prove that the purchases made from the said parties were not genuine. In sum and substance, with respect to the purchase made from five parties, the CIT(A) disagreed with the Assessing Officer and held the same to be genuine purchases.
14. In this background, the rival counsels have made their submissions. The Ld. Representative for the assessee has vehemently argued that the 10 M/s Kolte Patil Developers Ltd.
CIT(A) ought to have held that the purchases from six parties were also genuine. According to the Ld. Counsel, the purchases effected from all the parties are supported by the bills and the payments were made to the suppliers by account payee cheques. It was vehemently argued that there was no evidence found in the course of search which could substantiate that cash was returned back to the assessee by any of the above six parties against cheque payments made by the assessee. The objection raised before the lower authorities of denial of appropriate opportunity of cross-examination was also reiterated before us. On this aspect, it has been submitted that in the course of assessment proceedings, the Assessing Officer had issued summons to these parties for cross-examination by the assessee but the parties did not turn up at the appointed time and date. Therefore, according to the assessee, it was not allowed an appropriate opportunity of cross- examination of the parties. Explaining the circumstances in which Shri Rajesh Patil could not avail the opportunity of cross-examination at the time of search, the Ld. Representative explained that at the relevant point of time Shri Lakhe, CFO of the assessee-company was not in station and therefore no effective cross-examination could have been carried out, as Shri Rajesh Patil, CMD of the assessee-company, was not aware of the day-to-day activities of purchase from the said parties which was only known to Shri Lakhe. It was therefore contended that the statements of the six suppliers, whose cross-examination has not been allowed to the assessee, cannot be used against the assessee to hold the purchase as bogus.
15. With regard to the non-maintenance of transport receipts, GRNs, delivery challans, stock register, etc. the Ld. Representative submitted that at the relevant point of time, assessee's accounting system were not perfect and therefore it could not locate and produce such documents at the time of assessment proceedings. In this case, it was pointed out that so far as the other five parties are concerned, assessee had duly located such supporting 11 M/s Kolte Patil Developers Ltd.
documents like GRNs, challans, transport receipts, etc., and therefore on that basis, the CIT(A) allowed appropriate relief. But in any case for the other six parties in question, the absence of the aforesaid documents would not mean that the purchases were bogus.
16. With regard to the case of the Assessing Officer that the evidence of transportation or supplies was in-adequate the Ld. Representative submitted that in most of the cases, payments were made to suppliers inclusive of transport charges and therefore there was no reason for obtaining transport receipts separately. It is submitted that absence of transport receipts did not mean that purchase are bogus. In this context, the assessee also made a submission that the there are a number of suppliers of steel, cement, etc. who are engaged in this line of business as agents without the requisite infrastructure. But the assessee is concerned with procuring material at the best prices and at times it is impossible for a developer/builder to find out exact person from whom such agents have obtained the material and supplied to the assessee. In such a scenario, if the suppliers/agents have evaded sales-tax or income-tax, they would obviously give statements disowning the transaction for their own vested purposes. It was therefore contended that merely because the six suppliers in question disowned the transactions, it would not show that the purchase were indeed bogus.
17. In the course of the hearing, it has also been pointed out that the affidavit of one of Shri Narendrakumar Timbodia, who is the Prop. of M/s Narendrakumar & Co. and partner of M/s R.D. Jain & Co. was furnished before the CIT(A). By referring to such affidavit, a copy of which is placed in the Paper Book at pages 85 to 88, it was submitted that the genuineness of the purchase stands established. According to the Ld. Representative, such affidavit of Shri Narendrakumar Timbodia has been unjustly rejected by the CIT(A) and the addition sustained.
12 M/s Kolte Patil Developers Ltd.
18. Another point made by the Ld. Representative for the assessee is based on the fact that the consumption of steel has indeed taken place. According to the Ld. Representative, if the steel purchased from the above parties is excluded then the actual consumption of steel as per the books of account would be much less than the quantity of steel that is required to undertake construction of a building. In this context, a reference has been invited to pages 42 to 78 of the Paper Book wherein is placed the relevant charts to show that in the absence of the aforesaid purchases, the construction of the building would not be complete, because construction cannot be undertaken in the absence of steel consumption. The Ld. Representative submitted that the aforesaid plea of the assessee has been merely overlooked by the lower authorities without contradicting the same. In this case, assessee has relied upon various case laws for the proposition that in case where certain purchase bills are held to be bogus, the assessee could not have constructed the projects as per the engineer's certificate, and therefore it shows that assessee had indeed effected such purchase. In this case, reliance was placed on the following decisions : (i) Balaji Textile Industries (P) Ltd. vs. ITO, (1994) 49 ITD 177 (Bom); (ii) J.R. Solvent Industries (P) Ltd. vs. ACIT, 68 ITD 65 (TM) as also the decision of ITAT, Pune Bench in the case of ACIT vs. Kogta Import Export Pvt. Ltd. vide ITA No.708/PN/2011 and Others dated 29.09.2006.
19. In the end, an alternate plea has also been raised that in case the impugned purchases are held to be bogus, the entire amount of purchase cannot be added to total income, instead the addition should be limited only to the element of gross profit therein. In this context, reliance has been placed on the following decisions : (i) CIT vs. Simit P. Sheth, (2013) 356 ITR 451 (Guj); (ii) CIT vs. Bholanath Poly Fab Pvt. Ltd., (2013) 355 ITR 290 (Guj); and,
(iii) Sanjay Oilcake Industries vs. CIT, (2009) 316 ITR 274 (Guj).
13 M/s Kolte Patil Developers Ltd.
20. Per contra, the Ld. CIT-DR has opposed the pleas of the assessee. According to the Ld. CIT-DR, the enquiries made by the Assessing Officer with respect to the six parties and the statements deposed by the said parties u/s 131 of the Act clearly establish that no steel was supplied to the assessee. The statement of the Transporter was also pointed out to say that the actual movement of goods was also not established. With regard to the denial of opportunity of cross-examination of the suppliers, the Ld. CIT-DR reiterated the stand of the Assessing Officer by pointing out that due opportunity was allowed at the time of search but assessee did not avail of the same. The Ld. CIT-DR has further highlighted that the assessee has not substantiated the purchases with any supporting documents and therefore the onus cast on the assessee was not discharged. With regard to the plea of the assessee based on the factum of consumption of steel, the Ld. CIT-DR submitted that such plea of the assessee was not backed by proper material and evidence. He has referred to the certification of Chartered Engineer relied upon by the assessee in this regard and it is submitted that the same is vague and quite general. The Ld. CIT-DR has also opposed the alternate plea of the assessee to the effect that only element of gross profit be taxed and not the entire amount of unproved purchases.
21. With regard to the purchases from five parties, which have been found to be genuine by the CIT(A), the Ld. CIT-DR has argued that the conclusion drawn by the Assessing Officer was quite justified. According to him, even for such five parties, the modus operandi of making the purchases was similar to the six parties wherein the statements of the parties were recorded. The Ld. CIT-DR pointed out that the absence of documentation in respect of the five parties is similar to that in the case of six parties wherein the transaction have been found to be in-genuine even by the CIT(A). In sum and substance, the Ld. CIT-DR has assailed the order of the CIT(A) in deleting the addition with respect to the five parties.
14 M/s Kolte Patil Developers Ltd.
22. With respect to the relief allowed by the CIT(A), the Ld. Representative for the assessee has defended the same. In this context, the Ld. Representative also pointed out that the primary onus cast on the assessee for all the 11 parties stood discharged as it had furnished complete details of purchase, bills of purchase as also the fact that the payments were made by cheques. With regard to the chart and certificate of Chartered Engineer relied upon before the lower authorities to substantiate that the purchases were indeed effected, the Ld. Representative pointed out that neither the Assessing Officer and nor the CIT(A) have controverted the same. Apart from the aforesaid, Ld. Representative vehemently pointed out that in so far as the five parties are concerned, there was no evidence to say that the purchase were bogus as no specific enquiries were carried out by the Revenue.
23. We have carefully considered the rival submissions. In sum and substance, the dispute is with regard to the purchases claimed to have been effected by the assessee from the aforesaid 11 parties. The case setup by the Assessing Officer is that the purchase of steel, etc. made from the said 11 parties was in-genuine and therefore an amount of Rs.7,75,34,092/- representing purchases effected from such parties has been disallowed while computing the total income. The reasons for the Assessing Officer to hold the purchases as bogus have been detailed by us in the earlier part of this order and are not being repeated for the sake of brevity. Be that at it may, in our view, the purchases effected from six parties stand on a different footing than the purchases effected from the balance five parties. The point of distinction is the manner and the material relied upon by the Assessing Officer in order to treat such purchases as bogus. In so far as the purchase from the six parties is concerned, the same has been held to be bogus based on the enquiries conducted by the Department in the post-search proceedings. Statements of the six parties were recorded u/s 131 of the Act, which elucidated that all of them denied of having made actual supply of goods to the assessee. In one 15 M/s Kolte Patil Developers Ltd.
of the cases, the Assessing Officer has also referred to the statement recorded of the Transporter wherein also it was confirmed by him that no actual transportation of goods was effected. The aforesaid adverse material obtained by the Revenue was put across to the assessee right from the beginning. In this context, it would also be relevant to observe that neither the six suppliers and nor the assessee has been able to produce on record even the primary evidence to show the movement of goods from them to the assessee. For instance, no delivery challans or octroi receipts or any other form of evidence of delivery has been brought out. The plea of the assessee was that the payments have been made through cheques and that the purchases are evidenced by the bills raised by the said suppliers. Assessee also asserted that cross-examination of the said parties was not allowed to the assessee.
24. As per the Revenue, in the course of post-search investigations itself, Shri Rajesh Patil, CMD of the assessee-company was confronted on this aspect and was offered cross-examination of the said parties. It appears that the assessee did not avail of this opportunity as the CFO of the assessee- company was not present because the day-to-day nitty-gritty of purchases was not known to the CMD. Even in the course of assessment proceedings, it transpires that the Assessing Officer allowed an opportunity of cross- examination but on the relevant date and time, the suppliers did not turn-up. Be that as it may, in our considered opinion, cross-examination of the suppliers would become material only when the assessee is able to demonstrate with certain primary evidence that the statements given by the suppliers are wrong or that they do not reflect the correct state of affairs. In this context, assessee has merely referred to the purchase bills issued by the suppliers and the cheque payments made. So however, there is no other evidence, namely, GRNs, octroi receipts, delivery challans, etc. which would show that the supplies were indeed made. Therefore, in such a situation, can 16 M/s Kolte Patil Developers Ltd.
the absence of cross-examination be fatal to the addition in question ?, especially when at the initial stage, an opportunity of cross-examination was indeed allowed, which could not be availed for the reasons we have already stated above. In our view, the right of cross-examination is not automatic, but it would be incumbent only in a situation where the assessee is able to prima- facie demonstrate that the onus cast on him to establish his version of affairs is based on primary evidence. In this case, the assessee had failed to lead any primary evidence, viz. GRNs, octroi receipts, delivery challans, etc. which would show that the supplies were indeed made.
25. Now, the assessee has also referred to an affidavit of Shri Narendrakumar Timbodia, Prop. of Narendrakuma & Co. and partner of R.D. Jain & Co., wherein he confirmed that the purchases made by the assessee from him were genuine. This affidavit was obtained by the assessee only after the completion of assessment proceedings and was submitted to the CIT(A). The CIT(A) has admitted such additional evidence and on that there is no dispute. However, he has not accepted the averments made therein. We have also perused the copy of such affidavit, a copy of which has been placed in Paper Book. In this connection, we have also perused the statement of Shri Narendrakumar Timbodia recorded u/s 131 of the Act on 15.09.2008, whose relevant portion has been extracted in the assessment order itself. In his deposition, he has categorically confessed that there is no actual supply of goods to the assessee and he explained that in order to give a colour of genuineness to the sale bills, they have prepared the Lorry Receipt of M/s New ARC Transport showing transportation of goods to the assessee. The aforesaid averment of the said person made in the course of post-search enquiries stood corroborated by the statement deposed by the Transporter, M/s New ARC Transport. In contrast, the affidavit furnished in the course of the appellate proceedings before the CIT(A) does not deal with the above circumstance and it does not even explain the reasons for retraction of his 17 M/s Kolte Patil Developers Ltd.
statement, and in any case, the retraction is uncorroborated. In-fact, the statement made by him in the course of post-search enquiries stands corroborated by the statement of the Transporter whereas there is no such corroboration to his averments made in the affidavit furnished before the CIT(A). Under these circumstances, in our view, the original admission of the said person made at the time of post-search enquiries would hold the field. Thus, on this aspect also, we find that the CIT(A) made no mistake. Therefore, on the aspect of the purchases effected from the six parties with whom enquiries were conducted during post-search period, the CIT(A) justifiably held such purchases as bogus. We hereby affirm his action, and assessee fails on this aspect.
26. Before parting on this issue, we may also touch-upon an alternate plea raised by the assessee with regard to the quantum of addition on this count. In this context, assessee pointed out that if the entire amount of purchase debited in the Profit & Loss Account with respect to the six parties is disallowed, it would mean that the corresponding consumption of steel has not taken place in quantitative terms. Before the lower authorities, assessee had furnished a working, which was confirmed by a structural engineer regarding the minimum requirement of steel in the projects undertaken by the assessee. As per the said working, if the aforesaid disputed quantity of steel purchase was excluded, it would show that the consumed quantity of steel was lower than the minimum required to undertake construction. Therefore, according to the assessee, the only presumption that can be withdrawn is that assessee had indeed effected the purchases. It was pointed out that on the failure of the assessee to substantiate the purchases, at best, the addition can be made with respect to the gross profit element corresponding to the amount of purchases but not the entire amount of purchase bills. The reliance has also been placed on certain decisions in this regard, which we have noted in earlier paras.
18 M/s Kolte Patil Developers Ltd.
27. We have carefully considered the aforesaid alternate plea of the assessee but find ourselves unable to accept the same, having regard to the facts and circumstances of the present case. The proposition being relied upon by the assessee on the strength of the decisions of the Hon'ble Gujarat High Court noted earlier is not disputed. But the moot question is as to whether the position canvassed by the assessee that the quantity of steel corresponding to the impugned purchases has been consumed stands established or not ? The confirmation of the structural engineer, a copy of which has been placed in Paper Book at page 79 does not elaborate as to the time period in which the consumption of steel has taken place. Moreover, at the relevant point of time, multiple projects of the assessee were under construction and there is no material to co-relate as to whether at the time when the impugned purchases were effected any projects were being carried out. Therefore, the ratio of the judgements of the Hon'ble Gujarat High Court in the case of (i) Bholanath Poly Fab Pvt. Ltd. (supra); and, (ii) Sanjay Oilcake Industries (supra) cannot be applied in the present case. Therefore, the action of the CIT(A) in holding the purchases effected from six parties as bogus is affirmed.
28. Now, we may deal with the decision of the CIT(A) whereby the purchases made from five parties have been accepted. In this context, we find that the Assessing Officer did not carry out any third party verification as he had undertaken with respect to the six parties discussed earlier. The five parties i.e. (i) Vora Mercantile Pvt. Ltd.; (ii) M/s Mayoora Metal Trade Corporation; (iii) Yash Trading & Co.; (iv) M/s Shri Surya Steel; and, (v) M/s Satyam Steel were not put through any enquiry or verification by the Assessing Officer. It was only on the basis of the documents put-forth by the assessee that purchases from the said parties have been held to be bogus. Notably, assessee had furnished the invoices raised by the said parties and had also explained that all the payments were made by the cheques.
19 M/s Kolte Patil Developers Ltd.
Assessee had also furnished their sales-tax numbers. With respect to the transportation, assessee had explained that the responsibility of transportation was of the supplier and therefore assessee could not produce the transport receipts. The explanations put-forth by the assessee were not subject to any enquiry or verification by the Assessing Officer but have been merely disbelieved. The Assessing Officer, in our view, was influenced by the outcome of enquiries made with respect to the other six parties. However, in the absence of any material on record to negate the position canvassed by the assessee with respect to the said five parties, the explanation of the assessee could not be disbelieved. Under these circumstances, in our view, the CIT(A) made no mistake in deleting the addition with respect to the aforesaid five parties. As a consequence, on this aspect Revenue fails.
29. In the result, whereas the Ground of Appeal No.1 in the appeal of the assessee is dismissed the Ground of Appeal No.1 in cross-appeal of the Department also stands dismissed.
30. In assessment year 2007-08, the second Ground of Appeal raised by the assessee is relating to the denial of deduction u/s 80-IA(4)(iii) of the Act in respect of profits and gains derived from an Industrial Park - Giga Space. In this context, brief facts are that assessee had claimed deduction u/s 80-IA(4)(iii) of the Act of Rs.33,59,56,749/- in respect of the Industrial Park by the name of 'Giga Space' developed at Lohegaon, Pune. Before the Assessing Officer, assessee contended that the Industrial Park - Giga Space complied with all the conditions laid down in section 80-IA(4)(iii) of the Act and the said Industrial Park was also notified by the Central Government in accordance with the Industrial Park Scheme (IPS), 2008 notified by the Central Government. However, the Assessing Officer disagreed with the assessee on two counts. Firstly, the Assessing Officer observed that the Industrial Park was not complete as on 31.03.2007 because the completion 20 M/s Kolte Patil Developers Ltd.
certificate or the occupation certificate was obtained by the assessee from the 'local authority' (i.e. Pune Municipal Corporation) only on 09.05.2007. In this context, Assessing Office referred to the expression 'date of commencement' as defined in clause 2(f) of the IPS, 2008, and as per the said definition the date of commencement was 09.05.2007. As per the Assessing Officer, the deduction u/s 80-IA(4)(iii) of the Act could be claimed only when the project is complete and since in this case the date of completion is to be understood as 09.05.2007, which is beyond the end of the previous year under consideration, therefore, assessee was not eligible for claiming deduction u/s 80-IA(A)(iii) of the Act in the instant assessment year 2007-08. Secondly, as per the Assessing Officer, in the previous year relevant to the assessment year under consideration, the Industrial Park of the assessee did not fulfill the criteria of locating the minimum number of thirty industrial units. In this connection, the Assessing Officer has enumerated in para 5.4 of the assessment order that as on 31.03.2007 only 21 industrial units were operational in the Industrial Park - Giga Space. The Assessing Officer referred to sub-clause (2) of clause (5) of the IPS, 2008 to say that the tax benefits under the Act will be available to the undertaking only after minimum number of thirty units are located in the Industrial Park. Since the aforesaid condition of locating a minimum number of thirty units was not fulfilled in the instant case as on 31.03.2007, the Assessing Officer held that the claim of deduction for assessment year 2007- 08 was not justified.
31. The aforesaid objections of the Assessing Officer were challenged by the assessee in appeal before the CIT(A). Before the CIT(A), assessee contended that the Assessing Officer erred in rejecting the claim of the assessee on grounds which are not relevant. The assessee explained that the construction of Industrial Park was completed within the period prescribed in section 80-IA(4)(iii) of the Act and in compliance with the requirements of IPS, 2008 also. However, the CIT(A) has not differed with the Assessing Officer 21 M/s Kolte Patil Developers Ltd.
and according to him the claim of the assessee was correctly denied. The CIT(A) observed that the Industrial Park of the assessee had not commenced as on 31.03.2007 and therefore it could not be said to have been completed during the year under consideration. Hence, according to him, in assessment year 2007-08, the claim for deduction u/s 80-IA(4)(iii) of the Act was not tenable. With regard to the second objection of the Assessing Officer regarding the location of minimum thirty units in the park, the CIT(A) held that in the absence of thirty industrial units being located in the Industrial Park as on 31.03.2007 it could not be said that the Industrial Park was actually developed. The CIT(A) noted that during the previous year under consideration, only 21 units were located in the Industrial Park and therefore it could not be said that the undertaking of the assessee developed the park in accordance with the IPS, 2008 notified by the Government. The CIT(A) noted that the date of commencement of the Industrial Park is 09.05.2007 which is beyond the previous year relevant to the assessment year under consideration and therefore before the said date it could not said that the Industrial Park of the assessee was in operation. The CIT(A) has observed that locating of thirty industrial units in the Industrial park is an essential requirement to be fulfilled for beginning to claim deduction u/s 80-IA(4) of the Act. The CIT(A) has also placed reliance on the decision of the Hon'ble Third Member of the Tribunal in the case Marigold Premises Pvt. Ltd. vs. CIT vide ITA No.723/PN/2007 dated 27.07.2011 in order to support his conclusion. In sum and substance, the CIT(A) has confirmed the stand of the Assessing Officer, against which assessee is in appeal before us.
32. Before us, the Ld. Representative for the assessee vehemently pointed out that the project of the assessee was approved under the IPS, 2008 and in term of which, it is permitted to commence the Industrial Park between 01.04.2006 and not later than 31.03.2009, a date which has been further extended to 31.03.2011 by the statute. It was contended that the final 22 M/s Kolte Patil Developers Ltd.
completion certificate for the project was obtained from the 'local authority' on 09.05.2007 and therefore it has complied with the requirements of IPS, 2008 as the commencement is within the stipulated period. It was contended that there was no condition in the IPS, 2008 that before claiming deduction for a particular year the Industrial Park should be completed within that year; and, that so long as the Industrial Park was completed within the timeframe stipulated in IPS, 2008 there was no reason to disallow the claim of the assessee. Elaborating further, it was pointed out that in IPS, 2008 there is no stipulation that the profits arising the date of commencement of park alone would be eligible for deduction. Therefore, according to the Ld. Representative, if the objection raised by the Assessing Officer is upheld it would lead to an absurd situation whereby on one hand the Industrial Park of an assessee would enjoy the notification under IPS, 2008 and at the same time it would suffer disallowance of its claim for deduction u/s 80-IA(4)(iii) of the Act. Factually speaking, it was explained that the construction of the said Industrial Park began in October, 2004 onwards and the construction has been spread over a few years. The assessee completed construction of buildings stage-wise and part of the constructed units were also sold in the period under consideration and the final completion certificate on 09.05.2007 was received only when the last of the units was completed. The Ld. Representative pointed out that as when the units were sold by the assessee, the income therefrom was recognized and the profits earned from the Industrial Park were offered to tax over the years.
33. With regard to the objections of the CIT(A) that deduction is available only when assessee develops an Industrial Park and since in this case the development was not complete till 31.03.2007, the Ld. Representative vehemently pointed out that having regard to the fact-situation in the present case, it cannot be said that assessee has not developed the Industrial Park. At this point, the Ld. Representative pointed out that in the subsequent 23 M/s Kolte Patil Developers Ltd.
assessment years, the Assessing Officer has allowed the deduction u/s 80- IA(4)(iii) of the Act in respect of the profits of the Industrial Park - Giga Space. In nutshell, the plea of the assessee is that there is no condition prescribed that an Industrial Park should be fully complete before claiming deduction u/s 80-IA(4)(iii) of the Act. It is submitted that so long as the terms and conditions under which the Industrial Park is approved under the IPS, 2008 are fulfilled by the assessee, the deduction has to be allowed to the assessee. It was emphasized that in the present year assessee was engaged in development of the Industrial Park and the profits accrued to the assessee because certain units in the Industrial Park were sold and possession given to the clients. Therefore, the profits are relatable to the development of an Industrial Park ,which is approved under IPS, 2008 and such profits are eligible for benefit of section 80-IA(4)(iii) of the Act.
34. At this stage, the Ld. Representative for the assessee has referred to the provisions of section 80-IB(10) of the Act which envisage deduction with regard to the profits derived from development and construction of a housing project. It was emphasized that one of the conditions for availing deduction u/s 80-IB(10) of the Act is to the effect that the 'housing project' should be constructed within the stipulated period prescribed therein. The Ld. Representative pointed out that the aforesaid stipulation did not imply that the deduction u/s 80-IB(10) of the Act shall be allowed only once the housing project of the assessee is completed. In the present case, it was pointed out that so long as the Industrial Park has been developed within the period prescribed in the statute and in accordance with the IPS, 2008, the profits arising from such activity are to be allowed deduction u/s 80-IA(4) of the Act even if it pertains to a period prior to the completion of construction of the Industrial Park. At this point, it is also sought to be emphasized that section 80-IA(4)(iii) of the Act uses the expression "develops' and not the word "developed". Therefore, it was contended that the profits which have been 24 M/s Kolte Patil Developers Ltd.
disclosed by the assessee from the development of Industrial Park during the year under consideration qualify for deduction u/s 80-IB(10) of the Act, as they have been derived from development of an Industrial Park duly notified and approved by the Central Government.
35. It was contended by the Ld. Representative that the emphasis laid by the lower authorities on the 'date of commencement' mentioned in the IPS, 2008 is relevant only to decide whether the Industrial Park of the assessee is within the scope of IPS, 2008. It was contended that one of the grounds for approval of the Industrial Park is that it should commence after first day of April, 2006 and not later than 31st March, 2009. It was pointed out that the said condition has been complied with by the assessee as the date of commencement is 09.05.2007. In sum and substance, the stand of the assessee is that the lower authorities have misdirected themselves in denying the claim of the assessee for deduction u/s 80-IA(4) of the Act.
36. On the other hand, the Ld. Departmental Representative has reiterated the two objections raised by the income-tax authorities in support of the case of the Revenue. The Ld. CIT-DR has also reiterated the reliance placed by the lower authorities on the decision of the Third Member of the Tribunal in the case of Marigold Premises Pvt. Ltd. (supra). As per the Ld. CIT-DR, the analogy of section 80-IB(10) of the Act relied upon by the assessee is not relevant in the present case since the wordings of the sections are different. The Ld. CIT-DR has referred to the discussion made by the CIT(A) in para 5.2 of his order to justify that the Assessing Officer was correct in examining as to whether or not the Industrial Park in question was completed during the previous year under consideration. It has been emphasized that IPS, 2008 itself provides that the date on which the completion certificate or occupation certificate is obtained from the local authority, the Industrial Park would be understood to have commenced from that date. In the present case, that date 25 M/s Kolte Patil Developers Ltd.
is 09.05.2007 and therefore as on 31.03.2007 relevant to the assessment year under consideration, the Industrial Park of the assessee could not be said to be 'completed' or 'developed' so as to seek deduction u/s 80-IA(4)(iii) of the Act. In this context, the reliance placed by the CIT(A) on the decision of the Third Member of the Tribunal in the case of Marigold Premises Pvt. Ltd. (supra) was reiterated.
37. We have carefully considered the rival submissions. Factually speaking, the Industrial park - Giga Space developed by the assessee is notified by the Central Government in accordance with the IPS, 2008. There is also no denying the fact that the Industrial Park - Giga Space approved under the IPS, 2008 has been found to be eligible for deduction u/s 80- IA(4)(iii) of the Act in the subsequent assessment years. In the subsequent assessment years, the profits derived from the development of Industrial Park
- Giga Space have been considered for deduction u/s 80-IA(4)(iii) of the Act by the Assessing Officer. In the instant assessment year 2007-08, which is the first year of claim by the assessee, the Assessing Officer as well as the CIT(A) have rejected the claim. The grounds on which the said claim has been denied, have already been enumerated by us in the earlier part of this order.
38. Before we proceed to address the controversy surrounding the objections raised by the Revenue, it would be appropriate to briefly touch-upon the relevant provisions of the Act and the clauses of the IPS, 2008 in question. Section 80-IA of the Act prescribes for deduction in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.. Sub-section (1) of section 80-IA prescribes that where the gross total income of assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4), there shall been allowed in computing the total income of the assessee a 26 M/s Kolte Patil Developers Ltd.
deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years in accordance with and subject to the provisions of the section. Sub-section (2) of section 80-IA prescribes that the deduction specified in sub-section (1) may, at the option of the assessee, be claimed for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication services or develops an industrial park or develops a special economic zone or generates power or commences transmission or distribution of power or undertakes substantial renovation and modernization of the existing transmission or distribution lines. Shorn of other details, we may now come to sub-section (4) of section 80-IA, which enumerates the various businesses to which the provisions of section 80-IA of the Act are applicable, such business being referred to as the 'eligible business'. For the purpose of the present controversy, we are concerned with the sub-clause (iii) of sub-section (4) to section 80-IA of the Act, whose relevant portion reads as under :-
"(iii) any undertaking which develops, develops and operates or maintains and operates an industrial park [or special economic zone] notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, [2006] :
[Provided that ......................... .. [Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words "31st day of March, 2006", the figures, letters and words "31st day of March, 2011" had been substituted;]"
39. In terms of the aforesaid, any undertaking which is engaged in (i) developing; (ii) developing and operating; or (iii) maintaining and operating an industrial park notified by the Central Government in accordance with the scheme framed by the Central Government for the period beginning on 1st day of April, 1997 and ending on 31st March, 2006 shall be eligible for the benefit 27 M/s Kolte Patil Developers Ltd.
of section 80-IA of the Act. It may be noted that by the Finance (No.2) Act, 2006, the applicability of sub-clause (iii) was extended from 31.03.2006 to 31.03.2009. In other words, any undertaking which was engaged in (i) developing; (ii) developing and operating; or (iii) maintaining and operating an industrial park shall be eligible for deduction for the period beginning on 1st day of April, 1997 and ending on 31st March, 2009.
40. Notably, for the period under consideration before us, the Central Government formulated a Scheme in exercise of the powers under clause (iii) of sub-section (4) of section 80-IA of the Act and it was called 'Industrial Park Scheme, 2008'. The said Scheme defines 'industrial park' in clause 2(h) as under :-
"2(h) "industrial park" means a project in which plots of developed space or built up space or a combination, with common facilities and quality infrastructure facilities, is developed and made available to the units for the purposes of industrial activities or commercial activities in accordance with this scheme."
41. Similarly, clause 2(i) of the Scheme defines 'infrastructure facility' as under :-
"2(i) "infrastructure facility" means facilities required for development operation and maintenance of the industrial park and include roads (including approach roads), water supply, sewerage and effluent treatment facilities, solid waste management facilities, telecom network, generation and distribution of power, air conditioning."
42. Clause 2(f) of the Scheme defines the term 'date of commencement' as under :-
"2(f) "date of commencement" means the date of obtaining the completion certificate or occupation certificate, as the case may be, from the relevant local authority, certifying thereby that all the required development activities for the project have been completed."
28 M/s Kolte Patil Developers Ltd.
43. Clause 3 of the Scheme provides for the procedure for approval, which reads as under :-
"(1) Any undertaking which develops, develops and operates or maintains and operates an industrial park may make an application for notification under clause (iii) of sub-section (4) of section 80-IA of the Act, in the prescribed form, IPS-I, to the Secretary (ITA-I section), Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, North Block, New Delhi. (2) The Central Board of Direct Taxes shall process the application for approval and notification by the Central Government and for this purpose it may call for reports from other Departments or agencies, as it may deem fit."
44. Clause 4 of the Scheme provides the criteria for approval, which reads as under :-
"4. An undertaking shall be considered for notification under clause (iii) of sub-section (4) of section 80-IA of the Act, if it fulfils all of the following conditions, namely :-
(1) The date of commencement of the Industrial Park
should be on or after the 1st day of April, 2006 and not
later than 31st of March, [2011];
(2) The are allocated or to be allocated to industrial units
shall not be less than seventy-five per cent of the
allocable area;
(2A) The area allocated or to be allocated for commercial activity shall not be more than ten per cent of the allocable area;
(3) There shall be a minimum of thirty industrial units
located in an industrial park;
(4) For the purpose of computing the minimum number of
industrial units; all units of a person and his associated enterprises will be treated as a single unit;
(5) The minimum constructed floor area shall not be less than 15,000 square meters;
(6) No industrial unit, along with the units of an associated enterprise, shall occupy more than twenty-five per cent of the allocable area;
(7) The industrial park should be owned by only one
undertaking; and,
(8) Industrial units shall only undertake activities defined in
clause (j) of para (2)."
45. Clauses 5 and 6 of the Scheme pertain to General Conditions and Withdrawal of approval which read as under :-
29 M/s Kolte Patil Developers Ltd.
"General Conditions.
"5. (1) The industrial park shall be constructed as developed on the date of commencement.
(2) Tax benefits under the Act will be available to the undertaking only after minimum number of thirty units are located in the Industrial Park. (3) The tax benefits under the Act will be available to the undertaking only if the undertaking and the industrial park have been notified by Central Board of Direct Taxes under section 80-IA of the Act.
(4) The tax benefits under the Act will be available only to the undertaking notified by the Central Government and not to any other person who may subsequently develop, develops and operates or maintains and operates the notified industrial park, for any person.
(5) The undertaking must keep separate books of account for the industrial park and must file its income-tax returns by the due date to the Income-tax Department.
(6) An industrial park approved under Industrial Park Scheme, 2002 will continue to be governed by the provisions of that Scheme to the extent it is not in contravention with the provisions of Act, as amended from time to time. (7) The undertaking shall electronically furnish an annual report to the Central Board of Direct Taxes in Form IPS-II.
Withdrawal approval.
6. The Central Government may withdraw the approval given to an undertaking under this Scheme if the undertaking fails to comply with any of the conditions listed in paragraphs 4 and 5 of this Scheme :
Provided that before withdrawal of approval, the undertaking shall be given an opportunity of being heard by the Central Government."
46. Having taken note of the provisions of the scheme, we may also refer to rule 18C of the Income Tax Rules, 1962 (in short "the Rules") which deals with the eligibility of an Industrial Park for benefits of section 80-IA(4)(iii) of the Act.
Rule 18C of the Rules, as applicable for the assessment year under consideration reads as under :-
"Eligibility of Industrial Parks for benefits under section 80-IA(4)(iii). 18C. (1) The undertaking shall begin to develop, develop and operate or maintain and operate an industrial park any time during the period beginning on the 1st day of April, 2006, and ending on the 31st day of March, [2011]. (2) The undertaking and the Industrial Park shall be notified by the Central Government under the Industrial Park Scheme, 2008.
(3) The undertaking shall continue to fulfill the conditions envisaged in the Industrial Park Scheme, 2008."
30 M/s Kolte Patil Developers Ltd.
47. From a perusal of the aforesaid relevant provisions of the Act, Rules and Scheme, it is noticed as follows. Than an undertaking which is engaged in (i) developing; (ii) developing and operating; or (iii) maintaining and operating an industrial park notified by the Central Government in accordance with the scheme shall be eligible for the benefits of section 80-IA(4)(iii) of the Act. The aforesaid three categories are distinct and so far as the assessee is concerned, it has claimed approval under the scheme on the strength of it being engaged in developing of an industrial park. Therefore, it is in the aforesaid context that one has to determine the requirements which the assessee is called upon to fulfill in order to claim deduction u/s 80-IA(4)(iii) of the Act.
48. Under the scheme, assessee was eligible to be considered for notification under clause (iii) of sub-section (4) of section 80-IA of the Act, if it fulfilled the criteria laid down in clause 4 of the Scheme, which we have reproduced above. The foremost requirement was that the date of commencement of the Industrial Park should be on or after the 1st day of April, 2006 and not later than 31st March, 2009. Clause 4 of the Scheme has seven other criterion for approval which we are not dealing individually, as undisputedly the Industrial Park of the assessee fulfills all the criteria prescribed in clause 4 of the Scheme for obtaining the notification under clause (iii) of sub-section (4) of section 80-IA of the Act. We say so for the reason that the Revenue does not dispute that the undertaking of the assessee has been approved under the scheme and for the subsequent assessment years the claim of deduction u/s 80-IA of the Act stands allowed by the Assessing Officer. Secondly, the General Conditions prescribed in clause 5 of the Scheme have been fulfilled by the assessee and in-fact there is no case made out by the Revenue that the Central Government has invoked clause 6 of the Scheme, which permits the Central Government to withdraw the approval given to the undertaking under the Scheme if it fails to comply 31 M/s Kolte Patil Developers Ltd.
with any of the conditions listed in clauses 4 and 5 of the Scheme. Be that as it may, it would be appropriate to infer that so far as the compliance of assessee's undertaking to the requirements of the Scheme are concerned, there is no dispute.
49. Now, the claim of the assessee is that it started the process of development of the Industrial Park somewhere in October, 2004 and the construction was spread over a number of years. As and when the individual units were being completed, assessee sold it to the clients. The assessee was offering and recognizing income on such sales in the respective years, and the income under consideration this year is from the sale of units. During the year under consideration, Assessing Officer has noted that only 21 units were located in the Industrial Park. In other words, only 21 units were operational and not the complete 30 units, i.e. the total number of units which were to be developed in the Industrial Park. The Assessing Officer has referred to clause 2(f) of the Scheme to say that the 'date of commencement' of Industrial Park is the date on which the completion certificate was obtained from the local authority certifying thereby that all the required development activities of the project has been completed. As per the Assessing Officer, in this case, the certificate from the local authority has been obtained on 09.05.2007 and therefore in terms of the Scheme, the date of commencement of the Industrial Park is to be understood as 09.05.2007 which falls beyond the previous year relevant to the assessment year under consideration. On this basis, it is said that the Industrial Park of the assessee was not complete as on 31.03.2007, and thus deduction u/s 80-IA of the Act could not be allowed for assessment year 2007-08.
50. It is to be appreciated that clause 2(f) of the Scheme defining the expression 'date of commencement' is relevant in the context of condition (1) of clause 4 of the Scheme which prescribes the criteria for approval of an 32 M/s Kolte Patil Developers Ltd.
Industrial Park. Condition (1) of clause 4 of the Scheme prescribes that an undertaking shall be considered for notification under clause (iii) of sub-section (4) of section 80-IA of the Act if the date of commencement of the Industrial Park is on or after 01.04.2006 and not later than 31.03.2009. In this case, date of commencement of 09.05.2007 determined in accordance with clause 2(f) of the Scheme fulfills the condition (1) of clause 4 of the Scheme. Pertinently, the meaning of the expression 'date of commencement' contained in clause 2(f) of the Scheme is to be understood in the context of the Scheme. The question is as to whether the 'date of commencement' in clause 2(f) of the Scheme can be used to deny a claim of deduction u/s 80-IA(4) of the Act, especially in the face of an undisputed fact-situation that the undertaking of the assessee contains to be approved/notified under the Scheme. If a condition prescribed in the Scheme is found to fulfilled for the purposes of notification of the Scheme u/s 80-IA(4)(iii) of the Act, can it be simultaneously said that the same condition is not fulfilled in the context of application of section 80-IA(4)(iii) of the Act r.w. rule 18C of the Rules; and, the answer, in our view, is obviously No.
51. At this point, we may also refer to rule 18C of the Rules which prescribes the eligibility of an Industrial Park for benefits of section 80-IA(4)(iii) of the Act. The provisions of the rule as applicable for the year under consideration have been reproduced by us in the earlier paragraphs. Sub-rule (1) of rule 18C of the Rules says that the undertaking ought to begin to develop, develop and operate or maintain and operate an Industrial Park at any time during the period beginning on 01.04.2006 and ending on 31.03.2009. Sub-rule (2) of rule 18C of the Rules says that the undertaking of an Industrial Park shall be notified by the Central Government under the IPS, 2008. Sub-rule (3) of rule 18C of the Rules says that the undertaking shall continue to fulfill the conditions envisaged the IPS, 2008. Notably, there is no dispute that the undertaking of the assessee i.e. Industrial Park - Giga Space 33 M/s Kolte Patil Developers Ltd.
is duly notified by the Central Government under the IPS, 2008 and it continues to fulfill the conditions envisaged in the IPS, 2008 inasmuch as there is no withdrawal of approval by the Central Government, as provided for in clause 6 of the Scheme. Therefore, to say on the strength of clause 2(f) of the Scheme that the assessee has not complied with the requirements of the Scheme for staking claim u/s 80-IA(4)(iii) of the Act in the face of the fact that the undertaking i.e. the an Industrial Park continues to be notified by the Central Government, is unjustified and uncalled for.
52. The Revenue has emphasized that the development envisaged in the approval ought to have been completed by the assessee before 31.03.2007 itself i.e. within the previous year relevant to the assessment year under consideration, before it could claim the benefits of section 80-IA(4)(iii) of the Act. There is no dispute that the undertaking of the assessee is notified by the Central Government in accordance with the IPS, 2008 for the purposes of clause (iii) of section 80-IA(4) of the Act. Moreover, the eligibility conditions prescribed in rule 18C of the Rules, which we have reproduced in the earlier paras and which is relevant for the year under consideration, belies the stand of the Revenue. The opening sentence in sub-rule (1) of rule 18C of the Rules says that the "undertaking shall begin to develop; develop and operate; and, maintain and operate .........". The aforesaid wordings show that the Industrial Park in question is eligible for the benefit of section 80-IA(4)(iii) of the Act in the instant year also. Quite clearly, an undertaking which begins to develop is also eligible for the benefit of section 80-IA(4)(iii) of the Act. In this case, in the instant assessment year, assessee has developed and sold 21 units out of the total 30 units envisaged in the approval and it has obtained the completion certificate on 09.05.2007 after completing the balance units. The units sold by the assessee have yielded profits during the year under consideration which the assessee has declared in its Profit & Loss Account. Thus, going by the eligibility conditions contained in rule 18C of the Rules, the undertaking of the 34 M/s Kolte Patil Developers Ltd.
assessee which stands notified for the purposes of section 80-IA(4)(iii) of the Act, is entitled to the benefits of section 80-IA(4)(iii) of the Act qua the profits from such development which have been declared by the assessee in its books of account for the year under consideration. The stand of the Revenue that the claim of deduction can be availed only after the park is developed i.e. only after issuance of completion certificate by the 'local authority' does not emerge from the reading of section 80-IA(4)(iii) of the Act r.w. rule 18C of the Rules, as it stands for the period under consideration.
53. At this stage, we may also refer to the stand of the Revenue based on the clause 5 of Scheme. As per the condition (2) of clause 5, it is prescribed that the tax benefits under the Act will be available to the undertaking only after minimum number of thirty units are located in the Industrial Park. On the strength of this, it is pointed out that as on 31.03.2007 i.e. before the close of the previous year relevant to the assessment year under consideration, the minimum number of thirty units are not located in the Industrial Park; and, thus as per the Revenue assessee is not entitled to the claim of deduction in this assessment year. The aforesaid condition contained in clause 5(2) of the Scheme have to be understood in the context of condition (3) of clause 4 of the Scheme. The condition (3) of clause 4 of the Scheme prescribes that for obtaining approval, the Industrial Park should have a minimum of thirty industrial units located in it. The General condition contained in clause 5(2) only echoes the criteria for approval prescribed in clause 4 of the Scheme. However, the conditions prescribed in the Scheme are for the purposes of enabling the Central Government to consider an undertaking fit for notification for the purposes of section 80-IA(4)(iii) of the Act. The approval granted to the Industrial Park of the assessee under the Scheme continues to hold the field and there is no case of the Revenue that it has been withdrawn in terms of clause 6 of the Scheme. Thus, it is safe to deduce that the Industrial Park of 35 M/s Kolte Patil Developers Ltd.
the assessee has complied with the provisions prescribed in clause 5 of the Scheme.
54. Moreover, even if one has to appreciate the condition (2) of clause 5 of the Scheme which uses the words "............ tax benefits ........ will be available ............. only after minimum number of thirty units are located ...........". The implication of the said condition, as understood by the Revenue, is that a minimum number of thirty units should be located before the end of the financial year for which the deduction is being claimed. Quite clearly, the aforesaid condition in clause 5 of the Scheme does not prescribe that the compliance for the location of minimum number of thirty units in the Industrial Park is to be seen in the context of every assessment year in which the assessee is claiming deduction u/s 80-IA of the Act. The compliance has to be seen in the context of the period permissible under the Scheme for development of the Industrial Park. Ostensibly, the period permissible in the Scheme for location of minimum thirty units has been complied with by the assessee as its date of completion is 09.05.2007 i.e. much earlier than the outer limit of 31.03.2009 prescribed by the Scheme. On this aspect, the Ld. Representative for the assessee has pointed out that clause 5(2) of the Scheme merely implies that when the claim of deduction is before an income- tax authorities, it should be seen that the minimum number of thirty units are located in the Industrial Park. It is pointed out that even the outer limit for availment of benefit of section 80-IA(4)(iii) of the Act in the present case is 31.03.2009; and, when the assessment order was passed by the Assessing Officer in this case on 31.03.2010, the only point of scrutiny was to enquire whether or not thirty units have been located in the Industrial Park ? In the present case, it is pointed out that it is undisputed that the minimum thirty units have been located in the Industrial Park before the date specified in the Scheme as well as the Act and therefore the said condition has been fulfilled.
36 M/s Kolte Patil Developers Ltd.
55. We find enough merit in the interpretation put-forth by the assessee. Ostensibly, the conditions in the Scheme have been inserted with an objective that once an undertaking is considered for notification u/s 80-IA(4)(iii) of the Act, there is a mechanism available to check as to whether the conditions prescribed in the Scheme have been complied with. In other words, in the context of the present controversy vis-à-vis clause 5(2) of the Scheme the objective is to ensure that the assessee does not claim deduction without putting the park to use for minimum 30 industrial units in accordance with the Scheme approved but it does not envisage that the location of minimum 30 industrial units be seen for every assessment year for which the claim is lodged, moreso, when the profits are declared by an assessee based on its normal method of income recognition. It may be pointed out that the provisions of section 80-IA(4)(iii) of the Act itself envisages deduction in case of an undertaking which develops, develops and operates or maintains and operates an Industrial Park for the period beginning on the 1st April, 2006 and ending on or before 31st March, 2009. Similarly, the scheme also envisages that the date of commencement of an Industrial park should be on or after 01.04.2006 but not later than 31.03.2009. Where the projects involve a period of gestation in its construction, the period of development may extend beyond one assessment year. Therefore, assessee would be eligible to claim deduction with respect to the profits from Industrial Park over multiple assessment years so long as the dates prescribed in the Act as well as in the Scheme for development of the Industrial Park are adhered to. The assessee would declare profits on the basis of its method of accounting and in our view, in respect of the relevant assessment years, any profits derived from the eligible business categorized in section 80-IA(4)(iii) of the Act shall be entitled for a deduction u/s 80-IA(4)(iii) of the Act. In our view, so long as the profits are derived from the eligible business and the business of the undertaking has been developed in accordance with the Scheme in which it is notified, then assessee shall be eligible for the benefit of section 80-IA(4)(iii) of the Act.
37 M/s Kolte Patil Developers Ltd.
56. In this context, we may mention that a similar controversy had arisen in the context of the claim of deduction u/s 80-IB(10) of the Act, wherein an assessee can claim deduction in the years when it sells some of the residential units although the housing project is still under construction period as stipulated in section 80-IB(10) of the Act. The CBDT vide Instruction No.4 of 2009 dated 30.06.2009 clarified that the deduction u/s 80-IB(10) of the Act can be claimed on a year to year basis where an assessee was showing profits from partial completion of the project in every year. It has also been clarified by the CBDT that on a later date, if it is found that the condition of the completion of project within the stipulated time is not fulfilled by the assessee then the Assessing Officer can withdraw the deduction allowed to the assessee in earlier years. In our considered opinion, a similar analogy has to be applied in the present case to understand the import and meaning of condition (2) of clause 5 of the Scheme. In our considered opinion, the lower authorities are not justified in disallowing the deduction claimed by the assessee u/s 80-IA(4)(iii) of the Act merely because the minimum number of thirty units are not located in the Industrial Park before 31.03.2007 when otherwise it is factually true that the minimum number of units have been located in Industrial Park in compliance with period stipulated and approved in the Scheme. Therefore, on this aspect, we find no reason to uphold the objection of the Revenue.
57. In-fact, the controversy before us in relation to the claim of deduction u/s 80-IA(4)(iii) of the Act pertaining to the instant assessment year is similar to what was considered by the Mumbai Bench of the Tribunal in the case of Ferani Hotels Pvt. Ltd. vs. DCIT, vide ITA Nos.1828 & 1829/Mum/2009 dated 24.02.2012 pertaining to assessment years 2004-05 and 2005-06. The aforesaid decision was relied upon by the assessee in the course of hearing. In the case before the Mumbai Bench of the Tribunal, assessee had claimed deduction u/s 80-IA(4)(iii) of the Act in respect of profits from development of 38 M/s Kolte Patil Developers Ltd.
an Industrial Park. The claim was disputed by the Revenue for assessment years 2004-05 and 2005-06. The objection of the Revenue was that the notification issued by the Central Government notifying the Industrial Park was dated 12.07.2006. It was also the case of the Revenue that as on the last day of the relevant assessment years i.e. 2004-05 and 2005-06, all the 33 units approved in the Scheme were not developed in the Industrial Park. As per the Revenue, the notification was also issued by the Central Government on 12.07.2006, which was posterior to the assessment years 2004-05 and 2005-
06. The claim of the assessee was that it was following percentage completion method of accounting and was offering income on the basis of the percentage of construction completed. Thus, the profits from the industrial Park were also offered for assessment years 2004-05 and 2005-06 on which claim for deduction u/s 80-IA(4)(iii) of the Act was made. Assessee also submitted that ultimately all the conditions prescribed for deduction u/s 80- IA(4)(iii) of the Act were complied with and that in the subsequent assessment year 2006-07 assessee was indeed allowed the deduction by the Assessing Officer. The Tribunal held that the denial of deduction on the aforesaid grounds in assessment yeas 2004-05 and 2005-06 was not justified. It was specifically noted that because in the first two years the minimum number of units were not located in the Industrial Park was not a valid ground for disallowing the claim especially when in the ultimate analysis the Industrial Park was developed in accordance with the approval granted by the Central Government. The following discussion in the order of the Tribunal worthy of notice :-
"25. From the reasons assigned by the revenue authorities for rejecting the claim of the Assessee for deduction u/s.80-IA(4)(iii) of the Act, it is clear that an Assessee who adopts the percentage completion method of accounting of income from developing industrial park can get deduction of only that part of the profits that are offered to tax in the year in which the notification is received. Had the Assessee in the present case followed project completion of method of accounting of income from developing industrial park, the Assessee would have got the benefit of deduction of the entire profits from the development of industrial park. It will result in a situation where the method of 39 M/s Kolte Patil Developers Ltd.
accounting followed by the Assessee (such as the one in the present case) will deny the benefit available under the law. The method of accounting is such that the Assessee can never get the benefit even in a later year. It is no doubt true that the satisfaction of the conditions for grant of deduction as on the last date of the previous year is necessary. If due to subsequent events that take place after the last date of the previous year, conditions for grant of deduction are satisfied, then the Assessing Officer can take cognizance of the same. The CBDT in Instruction No.4/2009 dt. 30.06.2009 clarified the position with regard to allowing deduction u/s.80-18(10) of the Act. U/s.80-IB(10) of the Act, deduction of 100% profits derived from developing and building housing projects is allowed. One of the conditions to be satisfied for claiming such deduction was that the housing project should have commenced construction on or after 1.10.1998 and completed the construction within 4 years from the financial year in which the housing project is approved by the local authority. The question arose whether the deduction can be claimed by Assessees who follow percentage completion method of accounting by showing part of the profits or the deduction would be available only in the year of completion of the project u/s.80-IB(10) of the Act. The CBDT clarified that deduction can be claimed on a year to year basis where the Assessee is showing profit from partial completion of the project every year. It further clarified that if the condition for completion of the project within the specified time limit is not satisfied, the deduction granted to an Assessee in earlier years can be withdrawn. We are of the view that there is no reason why similar benefit should not be extended to Assessee claiming benefit u/s.80-IA(4)(iii) of the Act when the conditions for grant of deduction were satisfied by the Assessee even before the AO passed the order of assessment. The facts of the present case justify considering the plea of the Assessee for grant of deduction u/s.80- IA(4)(iii) of the Act in respect of profits declared in AY 04-05 and 05-06 and allowing the same as admittedly the conditions for grant of such deduction were satisfied though at a later point of time but nevertheless before completion of assessment for those assessment years. We direct accordingly. The appeals of the Assessee are accordingly allowed."
58. The aforesaid decision of the Tribunal in the case of Ferani Hotels Pvt. Ltd. (supra), in our view, fully covers the controversy before us. In the present case also it is not in dispute that the assessee has developed and located the minimum number of 30 industrial units in the Industrial Park within the period specified in the Scheme as well as the provisions of section 80-IA(4)(iii) of the Act. It is also not in dispute that in the subsequent assessment years, the Assessing Officer has allowed the deduction u/s 80-IA(4)(iii) of the Act. In the instant assessment year, assessee has operationalised 21 industrial units out of the minimum 30 required to be developed. The balance of the 9 units have been completed on 09.05.2007 i.e. the date on which assessee has obtained the completion certificate from the Pune Municipal Corporation. Hypothetically speaking, if the assessee had not recognized the profits on the 21 units sold 40 M/s Kolte Patil Developers Ltd.
during the year under consideration but would have waited recognition of income after the completion of the complete 30 units, then such profits would have been offered by the assessee to tax in the subsequent assessment year, wherein in any case the Assessing Officer has held the assessee entitled for the deduction u/s 80-IA(4)(iii) of the Act. However, assessee has declared income from the sale of units on a progressive basis i.e. in the year in which the particular industrial units have been sold. This has lead to a conflict between the assessee and the Revenue with regard to the assessee's claim for deduction u/s 80-IA(4)(iii) of the Act. The moot question is - can the method of accounting followed by the assessee be determinative of assessee's claim for deduction u/s 80-IA(4)(iii) of the Act especially in a situation where assessee is otherwise said to have complied with the requirements of section 80-IA(4)(iii) of the Act read along with the provisions of the IPS, 2008 under which the Industrial Park of the assessee has been notified. In-fact, if the stand of the Revenue is to be accepted, what would happen is that assessee's claim for deduction u/s 80-IA(4)(iii) of the Act shall be denied in the instant year and in the subsequent years also assessee would not be able to claim the benefit because the impugned profits would not have been accounted for by the assessee in the subsequent years. That would mean that the assessee would never get the benefit of section 80- IA(4)(iii) of the Act qua the impugned profits derived from the development of the Industrial Park merely because of the method of accounting followed. In- fact, the Mumbai Bench of the Tribunal in the case of Ferani Hotels Pvt. Ltd. (supra) observed that the Revenue deserves to be satisfied that the conditions for grant of deduction are fulfilled on the last day of the previous year, so however, if the subsequent events after the last date of the previous year show that the conditions for grant of deduction are fulfilled, then the Assessing Officer ought to take cognizance of the same and allow the claim of the assessee. Following the aforesaid parity of reasoning, in our view, in the present case too it is undeniable that assessee has complied with the 41 M/s Kolte Patil Developers Ltd.
requirement of locating minimum of 30 industrial units in the Industrial Park within the period prescribed in the Scheme, and therefore its claim for assessment year 2007-08 was unjustly disallowed.
59. Before parting, we may also refer to the decision of the Hon'ble Third Member of the Tribunal in the case of Marigold Premises Pvt. Ltd. (supra) relied upon by the Revenue before us. The issue in the case of Marigold Premises Pvt. Ltd. (supra) was the claim of deduction u/s 80-IA(4)(iii) of the Act in the context of the Industrial Park Scheme, 2002. In the case before the Hon'ble Third Member of the Tribunal, assessee had undertaken construction of an Industrial Park approved under the IPS, 2002. Assessee claimed deduction for assessment year 2003-04 which was denied by the Assessing Officer on the ground that as per the approval under the IPS, 2002 assessee had to locate 30 units in the Industrial Park while assessee was able to locate only 6 units by 31.03.2003. The Hon'ble Third Member of the Tribunal held that the deduction u/s 80-IA(4)(iii) of the Act could availed by the assessee only when the undertaking begins to operate an Industrial Park and such a conclusion was arrived at by the Hon'ble Third Member of the Tribunal on the basis of the provisions of section 80-IA(4)(iii) of the Act read with the then applicable rule 18C of the Rules. The relevant discussion in the order of the Hon'ble Third Member of the Tribunal reads as under :-
"31. In my humble opinion the legislature has consciously used the expression "develops an industrial park" instead of using the expression "undertakes to develop an industrial park". Wherever legislature intended to extend the benefit of deduction to an undertaking which has to merely commence its activity, without completing minimum stipulated phase, it was specified in the relevant provisions. For example, in section 80IC(2) it was stated that if an undertaking begins to manufacture or produce any article or thing it becomes an eligible undertaking. On the contrary, section 80IA of the Act specifies that an assessee shall be eligible to claim deduction "in accordance with and subject to the provisions of this section". As stated earlier, sub-clause (2) thereof used the expression "develops" instead of the expression "to develop". Section 80IA (4) (iii) (which was referred to in section 80IA(2)4 specifies that an undertaking which develops an industrial park notified by the Central Government in accordance with the scheme framed and notified by the Government is eligible 42 M/s Kolte Patil Developers Ltd.
for deduction. It is relevant to notice here that in section 80(4) (iii) legislature has not used the expression such as "an undertaking which begins to develop". Rule 18C of the I.T. Rules prescribes the procedure to be followed by an industrial park to avail the benefits under section 80IA(4)(iii) of the Act. Rule 18C, as it existed at the relevant point of time, reads as under :
"18C, Eligibility of Industrial Park and Special Economic zones for benefits under section 80-IA(4)(iii) - (1) The undertaking shall begin to operate an industrial park during the period beginning on the 1st day of April, 1997, and. eroding on the 31si day of March, 2002. (1A) The undertaking shall begin to develop or develop and operate or maintain and operate a special economic zone any time during the period beginning on the 1st day of April, 2001 and ending on 31st day of March, 2006.
(2) The undertaking shall be duly approved by the Ministry of Commerce and Industry in the Central Government under the scheme for industrial park or Special Economic Zones notified by that Ministry.
(3) The undertaking shall continue to fulfill the conditions envisaged in the scheme.
(4) On approval under sub-rule (2), the Central Board of Direct Taxes, shall notify industrial parks for benefits under section 80-IA."
31.1 As could be noticed from the aforementioned Rule, in order to avail benefit under section 80IA, an industrial park has to begin its operations which can only be a subsequent event i.e., after it has developed to an extent where it fulfills the minimum criteria to be treated as an industrial park. However, Sub-Rule (1A), which refers to an undertaking set up in a Special Economic Zone, used the expression "shall begin to develop"; if the intention was to give the same treatment to an undertaking which develops an industrial park, the same could have been mentioned in Sub-Rule (1) or it could have been included in Sub-Rule (1A). Rule making authority, in exercise of its delegated legislation, appears to have consciously maintained a distinction between an industrial park and an undertaking set up in a special economic zone whereby an industrial park gets eligibility to claim deduction only after it begins to operate the park and not before. During the developmental stage, particularly when the minimum development is not achieved, it cannot be said that if: was operating an industrial park since the scheme, to which a reference is made in the subsequent paragraphs, imposes minimum conditions to be fulfilled to be considered as an industrial park. In the instant case, assessee has constructed only six units and at this stage it is difficult to hold that the assessee has fulfilled the stipulated condition of not only construction of specified units but also allocation of floor area to different entrepreneurs as per the scheme. Rule 18C was amended w.e.f. 8.1.2008 whereby an undertaking which begins to develop an industrial park any time during the period beginning on the 1st day of April, 2006 and ending on 31st day of March, 2011 was made eligible to claim deduction. Admittedly, it is not the assessee's case that it has commenced the process of development after 1st day of April, 2006 and thus subsequent rule has not application to the instant case."
60. The aforesaid discussion would show that the Hon'ble Third Member was guided by the then relevant provisions of rule 18C of the Rules which 43 M/s Kolte Patil Developers Ltd.
have since been amended qua the assessment year before us. In the previously worded rule 18C of the Rules, the wordings were that the "undertaking shall begin to operate an Industrial Park .......". However, the rule 18C(1) of the Rules, which has since been amended and which is relevant for the year under consideration reads to say that "undertaking shall begin to develop, develop and operate or maintain and operate an Industrial Park.........". This distinction has been noticed by the Hon'ble Third Member himself in the above discussion. Rule 18C of the Rules provides the eligibility of Industrial Parks for the benefits u/s 80-IA(4)(iii) of the Act and even an undertaking which begins to develop is also eligible for the claim of deduction provided that it takes place during the period beginning on 01.04.2006 and before 31.03.2009 and fulfills the conditions envisaged in the IPS, 2008. The aforesaid aspect fully covers the controversy before us even if it is assumed that the objection of the Assessing Officer of locating 30 units is required to be seen as on 31.03.2007 also. Undeniably, assessee has operationalized 21 industrial units in the instant assessment year which signifies that its activities are covered within the expression "begin to develop" contained in rule 18C(1) of the Rules. Therefore, the decision of the Third Member in the case of Marigold Premises Pvt. Ltd. (supra) does not help the case of the Revenue qua the instant assessee. Moreover, the claim before the Hon'ble Third Member was with respect to an Industrial Park which was approved under the Industrial Park Scheme, 2002 whereas assessee's case is covered by the Industrial Park Scheme, 2008.
61. Therefore, considering the amendment of rule 18C of the Rules made w.e.f. 01.08.2008 where an undertaking begins to develop an Industrial Park is also eligible for the deduction so long as the development is otherwise complete within the period specified in the Scheme as well as it fulfills the conditions envisaged in the Scheme. The decision in the case of Marigold Premises Pvt. Ltd. (supra) went against the assessee because at the relevant 44 M/s Kolte Patil Developers Ltd.
point of time rule 18C of the Rules mandated that the deduction was available to the assessee when the assessee began to operate an Industrial Park whereas in the subsequently amended rule 18C of the Rules, which is applicable to the case before us, it is differently worded. The aforesaid difference has also been appreciated by the Hon'ble Third Member in its decision in the case of Marigold Premises Pvt. Ltd. (supra). Therefore, in our view, there is no justification for the denial of deduction nu/s 80-IA(4)(iii) of the Act in the instant assessment year with regard to the profits earned by the assessee from Industrial Park - Giga Space of Rs.33,59,56,749/-.
62. In the result, on this aspect we set-aside the order of the CIT(A) and direct the Assessing Officer to allow the deduction made u/s 80-IA(4)(iii) of the Act of Rs.33,59,56,749/-. Thus, on this aspect assessee succeeds.
63. The last Ground of Appeal in assessment year 2007-08 raised by the assessee is with regard to an addition of Rs.99,00,000/- made by the Assessing Officer u/s 69C of the Act. In this context, brief facts are that the aforesaid addition was based on certain loose papers found during the course of search which showed that assessee had made payments for acquisition of lands at Jambhe which were not recorded in the relevant purchase deed and were also not accounted for in the account books. Such amount of payments as reflected by the seized documents was computed at Rs.99,00,000/- which was added to the returned income u/s 69C of the Act. The CIT(A) has also affirmed the addition but has directed the Assessing Officer not to make a separate addition on this count as the aforesaid amount was subsumed in the addition of Rs.5,61,48,006/- sustained by him on account of bogus steel purchase.
64. In the above manner, assessee in its appeal is contesting the action of the CIT(A) in sustaining the addition of Rs.99,00,000/- u/s 69C of the Act in-
45 M/s Kolte Patil Developers Ltd.
principle whereas the Revenue in its cross-appeal by way of Ground of Appeal No.2 is contesting the action of the CIT(A) in allowing the telescopic benefit in respect of unexplained investments against the bogus purchases.
65. We have considered the rival stands on this issue and find that in terms of the discussion made by the CIT(A) in paras 6.3 to 6.10 of the impugned order, it stands established that the seized documents reflected investments made by the assessee for purchase of lands over and above the amounts declared in the regular books of account. Before us, assessee has reiterated the submissions made before the lower authorities, however, the income-tax authorities have co-related the amounts recorded in the seized material with the transactions of land at Jambhe and therefore, the unexplained investment stands established. Therefore, in-principle, we uphold the stand of the income-tax authorities in making an addition of Rs.99,00,000/- u/s 69C of the Act. Thus, Ground of Appeal No.3 raised by the assessee is dismissed.
66. With respect to the grievance of the Revenue against the telescopic benefit allowed by the CIT(A) in respect of unexplained investment of Rs.99,00,000/- against the bogus purchase, we find that there is no error on the part of the CIT(A). The CIT(A) noted that after the sustenance of addition on account of bogus steel purchases in assessment year 2007-08 to the extent of Rs.5,61,48,006/- that much cash would be available with the assessee to be set-off against the unexplained investment of Rs.99,00,000/-. There is no material to find fault with the aforesaid finding of the CIT(A), which we hereby affirm. Thus, Revenue fails in its Ground of Appeal No.2 also.
67. In the result, appeal of the assessee for assessment year 2007-08 is partly allowed and that of the Revenue is dismissed.
46 M/s Kolte Patil Developers Ltd.
68. Now, we may take-up the cross-appeals pertaining to assessment year 2008-09 vide ITA Nos.1414 & 1482/PN/2013 respectively. Both the appeals are directed against the order of the Commissioner of Income Tax (Appeals)-II, Pune dated 28.03.2013 which, in turn, has arisen from an order dated 31.12.2010 passed by the Assessing Officer u/s 143(3) r.w.s. 153A of the Act.
69. In this appeal, assessee raised the following concise Grounds of Appeal read as under :-
"1] The learned CIT(A) erred in confirming the disallowance of Rs.18,08,186/- made on account of alleged bogus purchases from M/s. Fresho Metals Pvt. Ltd. without appreciating that the said purchases were genuine and hence, the said disallowance was not justified. 2] The learned CIT(A) erred in confirming the disallowance of deduction u/s 80IA(4) of Rs.19,80,90,000/- in respect of the profits derived from the Industrial Park 'E Space' without appreciating that the disallowance of deduction was not justified on facts of the case.
3] The learned CIT(A) erred in confirming the disallowance of Rs.5,44,375/- in respect of brokerage paid to M/s. Regenesis Project Management Company Pvt. Ltd. on sale of land at Jambhe, Pune without appreciating the said payment was an allowable business deduction and hence, the disallowance was not justified."
70. In the appeal of the assessee, the first issue relates to addition sustained by the CIT(A) of Rs.18,08,186/- on account of bogus purchase of steel from one of the six parties with whom enquiries were conducted at the time of search proceedings against the assessee. The facts and circumstances in relation to the aforesaid dispute are similar to those considered by us in the Ground of Appeal No.1 of the assessee for assessment year 2007-08 in earlier paras. It was a common ground between the parties that the decision in relation to assessment year 2007-08 would also be applicable on this aspect in assessment year 2008-09. Following our decision in assessee's appeal for assessment year 2007-08, the order of the CIT(A) sustaining addition on account of bogus purchase of steel from the six 47 M/s Kolte Patil Developers Ltd.
parties amounting to Rs.18,08,186/- for the year under consideration is hereby affirmed.
71. The second issue raised by the assessee is with regard to a deduction claimed by it u/s 80-IA(4)(iii) of Rs.19,80,90,000/- in respect of Industrial Park E - Space, at Pune. The assessee had claimed the deduction in assessment year 2008-09 as well as in assessment year 2009-10 of Rs.19,80,90,000/- and Rs.3,16,31,476/- respectively. The said claim of deduction has been denied by the Assessing Officer as well as the CIT(A) primarily on the ground that the Industrial Park of the assessee was not notified by the CBDT as an eligible Industrial Park. In brief, the facts are that the project of the assessee consisted of three buildings, the details of which have been furnished by the assessee before the Assessing Officer and there is no dispute on these aspects. The sum and substance of the objection of the Assessing Officer was to the effect that the project 'E - Space' was not duly notified by the CBDT and that the assessee also did not fulfill the condition of 30 units as laid down in the Industrial Park Scheme, 2002. The Assessing Officer has also observed that more than 25% of the allocated area is allotted to one Shri Ashok Puri which was also in violation of the provisions of section 80-IA(4)(iii) of the Act. The CIT(A) has also affirmed the decision of the Assessing on similar grounds.
72. In the above background, the plea of the assessee before us was that the construction of the said project was stared on 09.02.2005 and it was completed on 25.04.2007. It is explained that the provisions of section 80-IA(4)(iii) of the Act were amended by Finance Act, 2006 whereby the date of completion of the Park was extended to 31.03.2009 from the earlier limit of 31.03.2006. When assessee started construction of the project, the Industrial Park Scheme (IPS), 2002 was in force, which was applicable to projects completed before 31.03.2006. It is pointed out that when the date of 48 M/s Kolte Patil Developers Ltd.
completion was extended by Finance Act, 2006 to 31.03.2009, the IPS, 2002 was not extended. But a new Industrial Park Scheme, 2008 was introduced only on 08.01.2008. It was pointed out that prior to the amendment made by the Finance Act, 2006, the scheme in operation was Industrial Park Scheme, 2002. The claim of the assessee is that its project should be considered for approval under Industrial Park Scheme, 2002 which was in force when the assessee made the application to the Ministry of Commerce & Industry, Department of Industrial Policy and Promotion (Govt. of India) on 08.08.2007. In this connection, our attention has been drawn to page 204 of the Paper Book wherein is placed a copy of the said application filed with the Govt. of India. The Ld. Counsel further submitted that it was only subsequently on 05.01.2009 that the Ministry of Commerce & Industry indicated to the assessee that since the date of commencement of Industrial Park developed by the assessee was after 31.03.2006, assessee was not eligible to be approved under the Industrial Park Scheme, 2002. The Ld. Representative pointed out that the Industrial Park of the assessee was completed on 25.04.2007 and that point of time no scheme was formulated by the Government, thus assessee's case ought to have been considered under the Industrial Park Scheme, 2002 because the Industrial Park Scheme, 2008 came only on 08.01.2008.
73. At this point, it was pointed out that as per the provisions of Industrial Park Scheme, 2002, if the application was to be rejected the same should be disposed-off within 12 weeks after giving opportunity of hearing to the assessee. In the present case, it was pointed out that assessee-company did not receive any order within 12 weeks and on the contrary the application made by the assessee-company was acted upon and it was only on 05.01.2009 a letter was received wherein assessee was held ineligible for notification under the Industrial Park Scheme, 2002. The Ld. Representative submitted that the question of complying with the various conditions in 49 M/s Kolte Patil Developers Ltd.
Industrial Park Scheme, 2008 would not arise as on the date of completion of the project on 25.04.2007, the Industrial Park Scheme, 2008 was not notified.
74. On this aspect, the stand of the Revenue is that the assessee was entitled to claim deduction u/s 80-IA(4)(iii) of the Act only if the Industrial Park is notified under Industrial Park Scheme, 2002 or Industrial Park Scheme, 2008. In the present case, the project of the assessee has not been notified in either of the two schemes and therefore there is no question of allowing deduction u/s 80-IA(4)(iii) of the Act to the assessee.
75. We have carefully considered the rival submission. In the present case, there is no dispute that assessee has not received any notification in respect of the Industrial Park E - Space developed by it either under the Industrial Park Scheme, 2002 or Industrial Park Scheme, 2008. Notably, section 80-IA(4)(iii) of the Act provides that any undertaking which develops, develops and operates or maintains and operates an Industrial Park notified by the Central Government in accordance with scheme framed and notified by that Government would alone be entitled to claim the deduction. The requirement of Industrial Park to be notified under the Industrial Park Scheme framed by the Government is a mandatory condition. Quite clearly, in the present case, assessee applied for a notification under the Industrial Park Scheme, 2002 which has not been granted and in so far as the Industrial Park Scheme, 2008 is concerned, the assessee has not made any application and therefore there would not be any notification by the Central Government in this regard.
76. The case setup by the assessee is that it had made an application seeking notification of its project under the Industrial Park Scheme, 2002 on 08.08.2007 after completion of its project on 25.04.2007. It has been contended that the assessee's eligibility for the claim has to be considered under the Industrial Park Scheme, 2002 only. Quite clearly, the aforesaid 50 M/s Kolte Patil Developers Ltd.
contention of the assessee is untenable because the Industrial Park Scheme, 2002 was applicable only upto March 31, 2006. Factually speaking, in the present case, the construction of Industrial Park E - Space was completed after 31.03.2006 and therefore the provisions of Industrial Park Scheme, 2002 are not applicable to the instant project. Assessee also raised a plea before us to the effect that during the period from April 01, 2006 till January 08, 2008 no scheme was in operation as the Industrial Park Scheme, 2002 had culminated and the new scheme i.e. Industrial Park Scheme, 2008 was not notified. The Ld. Representative submitted that since Industrial Park Scheme, 2008 was notified only on January 08, 2008 and since assessee had made and application for approval of 08.08.2007 its project would be governed by Industrial Park Scheme, 2002. This plea of the assessee is also not acceptable because at the relevant point of time no scheme was in operation. A similar situation had arisen before the Hon'ble Delhi High Court in the case of Regency Soraj Infrastructures vs. UOI & Others, (2012) 345 ITR 105 (Del), wherein assessee had constructed an Information Technology Park. On September 23, 2006, it filed an application with the Ministry of Commerce & Industry for the registration of the Industrial Park under the Industrial Park Scheme, 2002. The application was returned. The assessee thereafter moved an application dated June 26, 2009 which was rejected on the ground that the park developed by the assessee did not fulfill the requirements of Industrial Park Scheme, 2008. Contesting the aforesaid stand of the CBDT, assessee filed a Writ Petition before the Hon'ble High Court contending that it was entitled for registration under Industrial Park Scheme, 2002 and was therefore eligible for exemption u/s 80-IA(4)(iii) of the Act. The aforesaid stand of the assessee was dismissed by the Hon'ble High Court on the ground that when assessee filed the application for registration on September 23, 2006, the Industrial Park Scheme, 2002 had come to an end as such scheme was applicable only upto March 31, 2006. The Hon'ble High Court noted that Industrial Park setup by the assessee was not operational/functional by March 51 M/s Kolte Patil Developers Ltd.
31, 2006, and it became operational on a subsequent date. Under these circumstances, the Hon'ble High Court negated the plea of the assessee that its claim be considered under Industrial Park Scheme, 2002.
77. In our view, the judgement of the Hon'ble Delhi High Court in the case of Regency Soraj Infrastructures (supra) clearly covers the present controversy against the assessee. In the present case also, when assessee filed an application with the Central Government for registration of its Industrial Park under the Industrial Park Scheme, 2002, the said scheme had come to an end as it was applicable only upto March 31, 2006. It is also an admitted fact that the Industrial Park setup by the assessee was not operational/functional by March 31, 2006, as the date of completion of the said Industrial Park is stated to be 25.04.2007. Therefore, in our considered opinion, assessee cannot claim the benefit of the Industrial Park Scheme, 2002. In the absence of the notification mandated by section 80-IA(4)(iii) of the Act, the claim of the assessee for deduction u/s 80-IA of the Act in relation to its project E - Space has been rightly denied by the income- tax authorities. The aforesaid action of the lower authorities is hereby affirmed and assessee fails on this Ground. Thus, Ground of Appeal No.2 of the assessee is dismissed.
78. The last Ground in assessee's appeal for assessment year 2008-09 is with regard to an amount of Rs.5,44,375/- representing brokerage paid to M/s Regencies Project Management Company Pvt. Ltd. (in short "M/s Regencies PMCPL"), which has been disallowed by the lower authorities.
79. Brief facts in this context are that assessee-company had paid brokerage to M/s Regencies PMCPL. It was noticed that the brokerage was paid for the transaction of Jambhe land. In the course of assessment proceedings, the Assessing Officer found that the brokerage was paid to M/s 52 M/s Kolte Patil Developers Ltd.
Regencies PMCPL which was subsidiary of the assessee-company. On being asked to explain, assessee furnished certain explanations, which were not found satisfactory by the Assessing Officer. According to the Assessing Officer, the stated transaction of sale of land was within the concerns of the same group, thus payment of brokerage was artificial, excessive and only an arrangement to reduce tax liability by a colourable device. Accordingly, the aforesaid amount was disallowed.
80. Before the CIT(A), it was explained that the assessee as well as its Directors and their family members had acquired lands in Jambhe, Pune and it was realized that the said land would fetch good profits if a township was constructed thereon. As the assessee group did not have a large project of 300 or 400 acres, it was interested in finding an investor who shall join the group and provide finance for the project. The assessee formed a subsidiary M/s Regencies PMCPL and inducted some professionals therein who were assigned the job of finding a joint venture partner. The said subsidiary company was instrumental in identifying an investor M/s ICICI ventures, with whom assessee formed a joint venture company. The subsidiary company was instrumental in negotiating a good price for the land to be transferred to the said joint venture company by the assessee. It was explained that because of the efforts of M/s Regencies PMCPL, appellant could sell the land to the joint venture and hence the claim of brokerage payment to M/s Regencies PMCPL was justified. The CIT(A) has also disagreed with the assessee and has sustained the addition. As a consequence, assessee is in appeal before us.
81. At the time of hearing, it was a common point between the parties that the brokerage paid to M/s Regencies PMCPL was on same lines as was paid by Shri Rajesh Patil, CMD of the assessee-company in his personal capacity. It was submitted that in the hands of Shri Rajesh Patil also, similar transaction 53 M/s Kolte Patil Developers Ltd.
had been carried out whereby the brokerage was paid to M/s Regencies PMCPL. The Assessing Officer in the case of Shri Rajesh Patil for the assessment years under consideration, had disallowed such expenditure and the matter had travelled to the Tribunal vide ITA Nos.1355 to 1358/PN/2013 and Others vide order dated 30.06.2014. The Tribunal considered an identical controversy and held that the expenditure on payment of brokerage to M/s Regencies PMCPL was an allowable expenditure. The relevant discussion in the order of the Tribunal dated 30.06.2014 (supra) reads as under :-
"13.1 We find the AO in the instant case disallowed the claim of brokerage paid to Regenesis PMCPL on the ground that Regenesis PMCPL is a subsidiary of KPDL whose controlling management is in the hands of Shri Rajesh Patil and Milind Patil. Since the assessee is also a director of KPDL there was no need for payment of any brokerage and the transaction was carried out for reducing the tax liability. We find the Ld.CIT(A) upheld the action of the AO on the ground that the brokerage payment to Regenesis is prima-facie not linked to the transfer of the land but to the identification of suitable investment partner in order to develop the lands into a special township. The transfer of land is not incidental to the entire arrangement. The assessee has not received anything more than the prevailing market price and the transaction is nothing but a colourable device. According to her, the real beneficiaries in the whole process are not only the assessee and the other members who sold the land and claimed brokerage but also Regenesis PMCPL who offered NIL to nominal income are also get entitled to a share of the residual profit of the joint venture.
13.2 It is the submission of the Ld. Counsel for the assessee that the transaction is not at all a coulourable device since the company Regenesis PMCPL has paid tax on its income which is not marginal but substantial, the assessee has paid service tax for the brokerage so paid. It is also the submission of the Ld. Counsel for the assessee that as per the MOU Regenesis had agreed to explore potential investors, institutional investors and real estate funds etc. who may co-invest with KPDL to develop a big township project. Without the assistance of Regenesis PMCPL, which was a professionally managed company by hiring experts from real estate business, the assessee and the other members could not get such huge price and enmass transfer of the land. We find merit in the above submission of the Ld. Counsel for the assessee. From the various details furnished by the assessee in the paper book we find Regenesis had employed various persons with high educational qualifications and vast experience in the field of realty market since some of the employees had worked with Renonwed organisations in the realty market like Mahendra realty, Knightfrank, ICICI one source Ltd. ICICI Bank (property service Division), HDFC, Reliance Industries Ltd., DLF universal Ltd. etc. In our opinion by appointing Regenesis, the assessee and other persons could sell the vast land at a time and in some cases over the market price and therefore, the brokerage/commission so paid is an expenditure incurred wholly and exclusively in connection with such transfer and is allowable u/s.48(i) of the I.T. Act.
54 M/s Kolte Patil Developers Ltd.
13.3 So far as the claim of the revenue that the assessee had sold the land at prevailing market rates and that the assessee has not received anything extra than the prevailing market price and for which reliance has been placed on one instance, we find from the copy of the development agreement dated 19-01-2007 (placed at pages 189 to 247 of the paper book) that the assessee has sold the development rights in one of the lands to the ICICI Venture company for Rs.13.07 crores as against the Stamp duty valuation of Rs.20 lakhs. Therefore, the claim of the revenue that the assessee has not received more than the prevailing market price is not correct. Therefore, we find merit in the submission of the Ld. Counsel for the assessee that the assessee and other persons were able to convince ICICI Ventures to make payment for sale of land at higher price and this was because of the efforts put in by Regenesis finds some merit.
13.4 So far as the claim of the revenue that Regenesis PMCPL has offered NIL to nominal income and payment of brokerage is a colourable device to reduce the tax we find the same is also not correct. From the various details furnished by the assessee in the paper book we find Regenesis has earned substantial profit of Rs.6.53 lakhs in A.Y. 2006-07 (paper book page 39) Rs.11.63 lakhs in A.Y. 2007-08 (paper book page 65) and Rs.25.42 lakhs in A.Y. 2008-09 (paper book page 98). Apart from the above, the assessee has also paid service tax on the brokerage paid and such service tax is @ 12.24% (paper book page 255). Therefore, if the action of the assessee is to reduce the tax liability by paying brokerage to Regenesis PMCPL then such company would not have paid tax on the huge income declared nor the assessee would have paid service tax to the Government Account. Therefore, the allegation of the revenue that Regenesis PMCPL has offered NIL to nominal income and the assessee claimed the brokerage to reduce the capital gain tax also does not find much force.
13.5 We further find merit in the argument of the ld. Counsel for the assessee that when the total capital gain earned by the assessee is Rs.26.13 crores for the A.Y. 2006-07 to A.Y. 2008-09 and he has duly paid taxes thereon and the capital gain earned by the individual members of the group is Rs.148.95 crores there was no justification on the part of the assessee to claim such a meagre commission for sale of the land which is hardly 0.5% to 1.5% as against the prevailing market rate of about 2% and above. In this view of the matter we find merit in the submission of the Ld. counsel for the assessee that the payment of brokerage at Rs.25,96,400/- was an expenditure incurred wholly and exclusively in connection with the transfer of the land which is an allowable expenditure u/s.48(i) of the I.T. Act. We therefore set-aside the order of the CIT(A) and direct the AO to delete the disallowance made."
82. The Ld. Departmental Representative has not disputed the aforesaid factual matrix and in view of the precedent by way of order of the Tribunal dated 30.06.2014 (supra) in the case of Rajesh Patil, we hold that the lower authorities have erred in disallowing the expenditure represented by the payment of Rs.5,44,375/- to M/s Regencies PMCPL. As a result, the order of the CIT(A) is set-aside and the Assessing Officer is directed to delete the 55 M/s Kolte Patil Developers Ltd.
addition of Rs.5,44,375/-. Thus, assessee succeeds on Ground of Appeal No.3.
83. In the result, the appeal of the assessee for assessment year 2008-09 is partly allowed.
84. In the cross-appeal of the Revenue for assessment year 2008-09 the only issue is with regard to the addition of Rs.1,68,41,376/- on account of bogus purchases, which has been deleted by the CIT(A). On this aspect, it was a common point between the parties that the issue related to purchases from the five parties from whom the purchases were found to be genuine by the CIT(A) in assessment year 2007-08 also. In assessment year 2007-08, Revenue had contested the stand of the CIT(A) by way of Ground of Appeal No.1 in ITA No.1481/PN/2013 which has been dealt with by us in the earlier part of this order. The facts and circumstances in relation to the said addition are similar to those considered by us while dealing with the Ground of Appeal No.1 in the Revenue's appeal for assessment year 2007-08 (supra). As a consequence, our decision in the appeal of the Revenue for assessment year 2007-08 would apply mutatis-mutandis herein also and as a consequence, the order of the CIT(A) deleting an addition of Rs.1,68,41,376/-, we hereby affirm. Thus, Revenue fails in its appeal.
85. In the result, for assessment year 2008-09 whereas the appeal of the assessee is partly allowed that of the Revenue is dismissed.
86. Now, we may take-up the cross-appeal of the assessee and the Revenue for assessment year 2009-10 vide ITA Nos.1415 & 1483/PN/2013 respectively. Both the appeals are directed against the order of the Commissioner of Income Tax (Appeals)-II, Pune dated 28.03.2013 which, in 56 M/s Kolte Patil Developers Ltd.
turn, has arisen from an order dated 31.12.2010 passed by the Assessing Officer u/s 143(3) of the Act.
87. In the appeal of the assessee for assessment year 2009-10, the concise Grounds of Appeal raised read as under :-
"1] The learned CIT(A) erred in confirming the disallowance of deduction u/s 80IA(4) of Rs.3,16,31,476/- in respect of the profits derived from the Industrial Park 'E Space' without appreciating that the disallowance of deduction was not justified on facts of the case.
2] The learned CIT(A) erred in confirming the disallowance of Rs.12,23,903/- in respect of brokerage paid to M/s. Regenesis Project Management Company Pvt. Ltd. on sale of land at Jambhe, Pune without appreciating the said payment was an allowable business deduction and hence, the disallowance was not justified."
88. In so far as the Ground of Appeal No.1 is concerned, it is similar to the Ground of Appeal No.2 for assessment year 2008-09 dealt with by us in the earlier part of this order. In assessment year 2008-09, assessee's claim for deduction u/s 80-IA(4) of the Act amounting to Rs.19,80,90,000/- in respect of E - Space project has been held to be rightly denied by the income tax authorities. The facts and circumstances of the dispute relating to the deduction u/s 80-IA(4) of the Act in respect of E - Space project in assessment year 2009-10 continues to be similar to that considered by us in assessment year 2008-09. Therefore, out decision in the Ground of Appeal No.2 in assessee's appeal for assessment year 2008-09 would apply mutatis- mutandis herein also. As a consequence, the action of the lower authorities in denying assessee's claim for deduction u/s 80-IA(4) of the Act amounting to Rs.3,16,31,476/- in respect of profits derived from the project E - Space is hereby affirmed. Thus, on this Ground assessee fails.
89. The last Ground of Appeal in appeal of the assessee is with regard to the disallowance of Rs.12,23,903/- in respect of brokerage paid to M/s Regencies Project Management Company Pvt. Ltd.. The facts and 57 M/s Kolte Patil Developers Ltd.
circumstances on this issue are similar to those considered by us in the appeal of the assessee for assessment year 2008-09 vide Ground of Appeal No.3. Therefore, out decision in assessment year 2008-09 shall apply mutatis- mutandis in this appeal also. As a consequence, the order of the CIT(A) is set-aside and the Assessing Officer is directed to delete the addition of Rs.12,20,903/-.
90. In the result, appeal of the assessee for assessment year 2009-10 is partly allowed.
91. In the cross-appeal of the Revenue for assessment year 2009-10, the only issue is with regard to the addition of Rs.52,36,454/-/- on account of bogus purchases, which has been deleted by the CIT(A). On this aspect, it was a common point between the parties that the issue related to purchases from the five parties from whom the purchases were found to be genuine by the CIT(A) in assessment year 2007-08 also. In assessment year 2007-08, Revenue had contested the stand of the CIT(A) by way of Ground of Appeal No.1 in ITA No.1481/PN/2013 which has been dealt with by us in the earlier part of this order. The facts and circumstances in relation to the said addition are similar to those considered by us while dealing with the Ground of Appeal No.1 in the Revenue's appeal for assessment year 2007-08 (supra). As a consequence, our decision in the appeal of the Revenue for assessment year 2007-08 would apply mutatis-mutandis herein also and as a consequence, the order of the CIT(A) deleting an addition of Rs.52,36,454/-, we hereby affirm. Thus, Revenue fails in its appeal.
92. Now, we may take-up the appeal of the assessee for assessment year 2003-04 vide ITA No.1411/PN/2013, which is directed against the order of the Commissioner of Income Tax (Appeals)-II, Pune dated 28.03.2013 which, in 58 M/s Kolte Patil Developers Ltd.
turn, has arisen from an order dated 31.12.2010 passed by the Assessing Officer u/s 143(3) r.w.s. 153A of the Act.
93. In this appeal, concise Ground of Appeal raised by the assessee reads as under :-
"1] The learned CIT(A) erred in confirming the disallowance of Rs.1,62,362/- made on account of alleged bogus purchases from M/s Narendrakumar & Co. without appreciating that the said purchases were genuine and hence, the said disallowance was not justified."
94. The aforesaid Ground is similar to the Ground of Appeal No.1 in assessee's appeal for assessment year 2007-08 wherein purchases made from the impugned party has been held to be a bogus transaction. Following the reasoning contained in our order for assessment year 2007-08 of this issue herein also. The action of the income-tax authorities in making an addition of Rs.1,62,362/- on account of bogus purchases from M/s Narendrakumar & Co. is hereby affirmed. Thus, appeal of the assessee for assessment year 2003-04 is dismissed.
95. Now, we may take-up the appeal of the Revenue for assessment year 2004-05 vide ITA No.1478/PN/2013, which is directed against the order of the Commissioner of Income Tax (Appeals)-II, Pune dated 28.03.2013 which, in turn, has arisen from an order dated 31.12.2010 passed by the Assessing Officer u/s 143(3) r.w.s. 153A of the Act.
96. It was a common point between the parties that so far as the dispute in this appeal is concerned with regard to the disallowance of Rs.38,32,375/- on account of bogus purchases, it is similar to the issue which has been dealt with by us in the Department's appeal for assessment year 2007-08 vide Ground of Appeal No.1. As a consequence, our decision in assessment year 59 M/s Kolte Patil Developers Ltd.
2007-08 in the Department's appeal on this aspect shall apply mutatis- mutandis herein also. Thus, the Ground raised by the Revenue is dismissed.
97. In the result, the appeal of the Revenue for assessment year 2004-05 is dismissed.
98. Now, we may take-up the appeal of the assessee for assessment year 2005-06 vide ITA No.1412/PN/2013, which is directed against the order of the Commissioner of Income Tax (Appeals)-II, Pune dated 28.03.2013 which, in turn, has arisen from an order dated 31.12.2010 passed by the Assessing Officer u/s 143(3) r.w.s. 153A of the Act.
99. In this appeal, concise Ground of Appeal raised by the assessee reads as under :-
"1] The learned CIT(A) erred in confirming the disallowance of Rs.13,40,168/- made on account of alleged bogus purchases from M/s R.D. Jain & Co. without appreciating that the said purchases were genuine and hence, the said disallowance was not justified."
100. The aforesaid Ground is similar to the Ground of Appeal No.1 in assessee's appeal for assessment year 2003-04 wherein purchases made from the impugned party has been held to be a bogus transaction. Following the reasoning contained in our order for assessment year 2003-04 of this issue herein also. The action of the income-tax authorities in making an addition of Rs.13,40,168/- on account of bogus purchases from M/s R.D. Jain & Co. is hereby affirmed. Thus, appeal of the assessee for assessment year 2005-06 is dismissed.
101. Now, we may take-up the appeal of the Revenue for assessment year 2005-06 vide ITA No.1479/PN/2013, which is directed against the order of the Commissioner of Income Tax (Appeals)-II, Pune dated 28.03.2013 which, in 60 M/s Kolte Patil Developers Ltd.
turn, has arisen from an order dated 31.12.2010 passed by the Assessing Officer u/s 143(3) r.w.s. 153A of the Act.
102. It was a common point between the parties that so far as the dispute in this appeal is concerned with regard to the disallowance of Rs.52,92,674/- on account of bogus purchases, it is similar to the issue which has been dealt with by us in the Department's appeal for assessment year 2008-09 vide Ground of Appeal No.1. As a consequence, our decision in assessment year 2008-09 in the Department's appeal on this aspect shall apply mutatis- mutandis herein also. Thus, the Ground raised by the Revenue is dismissed.
103. In the result, the appeal of the Revenue for assessment year 2005-06 is dismissed.
104. Now, we may take-up the appeal of the Revenue for assessment year 2006-07 vide ITA No.1480/PN/2013, which is directed against the order of the Commissioner of Income Tax (Appeals)-II, Pune dated 28.03.2013 which, in turn, has arisen from an order dated 31.12.2010 passed by the Assessing Officer u/s 143(3) r.w.s. 153A of the Act.
105. It was a common point between the parties that so far as the dispute in this appeal is concerned with regard to the disallowance of Rs.39,69,358/- on account of bogus purchase, it is similar to the issue which has been dealt with by us in the Department's appeal for assessment year 2008-09 vide Ground of Appeal No.1. As a consequence, our decision in assessment year 2008-09 in the Department's appeal on this aspect shall apply mutatis-mutandis herein also. Thus, the Ground raised by the Revenue is dismissed.
106. In the result, the appeal of the Revenue for assessment year 2006-07 is dismissed.
61 M/s Kolte Patil Developers Ltd.
107. Resultantly, whereas the appeals of the assessee are partly allowed that of the Revenue are dismissed.
Order pronounced on 20 th February, 2015.
Sd/- Sd/-
(R.S. PADVEKAR) (G.S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, Dated: 20 th February, 2015.
Sujeet
Copy of the order is forwarded to: -
1) The Assessee;
2) The Department;
3) The CIT(A)-II, Pune;
4) The CIT-II, Pune;
5) The DR "B" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Assistant Registrar
I.T.A.T., Pune