Income Tax Appellate Tribunal - Mumbai
Pramukh Enterprises, Mumbai vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH "C", MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI RAJENDRA SINGH(A.M) ITA NO.6055/MUM/09(A.Y. 2005-06) The ITO - 20(20(3), Room No.411, 4th Floor, Piramal Chambers, Parel, Mumbai - 12. (Appellant) Vs. M/s. Pramukh Enterprises, 16/2, Matru Mandir , Jawahar Nagar No.2, Goregaon (W), Mumbai - 62 PAN:AAGFP 0242H (Respondent) Appellant by : Shri Ajit Kumar Sinha Respondent by : Shri Sunil Talati ORDER PER N.V.VASUDEVAN, J.M,
This is an appeal by the revenue against the order dated 10/08/2009 of CIT(A)XX, Mumbai relating to assessment year 2005-06. Ground No.I & II raised by the revenue read as follows:
"1. The learned CIT(A) has erred in facts and in law and in the circumstances of the case in directing the Assessing Officer to allow the deduction u/s. 80 IB(10) to the tune of Rs.2,88,87,805/-. II. The learned CIT(A) has erred in law on facts and in circumstances of the case in directing to allow the deduction u/s. 80 IB(10) without appreciating the fact that the working partner of the assessee firm, Shri Jitendra S. Brahmabhat in his statement recorded during the Survey proceedings u/s. 133A on 9/2/2006, has himself admitted that the assessee firm has violated the provisions of Section 80 IB(10)(a), 80 IB(10)(b),80 IB (10)(c) and 80 IB(10)(d) of the Income Tax Act, 1961."
2. The assessee is a partnership firm. It carries on business as Builder & Developer of properties. During the previous year under consideration, one project, "Prathmesh Park" at Andheri (West), was completed under the Scheme of Slum Rehabilitation. The income attributable to such project was Rs.2,80,67,805/-. A deduction of the same was claimed under the provisions of sec.80IB(10) of the Act. The original return of income, declaring NIL income was filed on 31.10.2005. This return was accompanied by the Tax Audit report, etc, as per the provisions of the law.
3. A survey u/s.133A of the Act was carried out on 08.02.2006 and the focus of the survey was to verify the claim made for deduction u/s.80IB(10) of the Act. Accordingly, during the course of the survey, the Authorized Office recorded the statement of one of the partners. The partner of the Assessee was examined and the focus was mainly on the issue as to whether the conditions which are required to be fulfilled, for claiming deduction u/s.80IB(10) of the Act were fulfilled by the Assessee or not. The partner of the Assessee in his statement accepted that, none of the conditions laid down u/s.80IB(10)(a) to 80IB(10)(d) were fulfilled by the assessee, and therefore, the assessee was not entitled for the deduction u/s.80IB(10) of the Act. Also, during the course of survey, a further disclosure of Rs.20 lakhs being the amount attributable to unaccounted cash receipts obtained against the sale of flats was admitted. Accordingly, a revised return of income was submitted by the assessee on 13.2.2006 declaring total income of Rs.3,00,67,805/- (Rs.2,80,67,805/- attributable to the withdrawal of the deduction u/s.80IB(10) of the Act and ` 20 lakhs attributable to unaccounted cash receipts against sale of flats.
4. The assessee received a scrutiny notice u/s.143(2) of the Act on 17.02.2006. According to the Assessee it consulted experts on the issue as to whether the assessee was entitled for deduction u/s.80IB(10) of the Act and was advised that the claim made by the Assessee was within the parameters of law. Thereafter, the Assessee filed another revised return of income, once again, claiming the deduction u/s.80IB(10) as well as withdrawing the so-called unaccounted cash receipts as of Rs.20 lakhs was filed on30.03.2007. In this return of income, once again, the income was declared at ` NIL which was as per the original return of income filed u/s.139(1) of the Act.
5. During the previous year relevant to the Assessment Year under consideration, the Assessee completed Phase-I of "Prathmesh Park" Project on undivided Plot No.CTS 720 (Part) & 727. The said project was part & parcel of Slum Rehabilitation scheme governed by The Maharashtra Slum Area (Improvement, Clearance & Re-Development) Act, 1971 (MSAA). Under MSAA, a Slum Rehabilitation Authority(SRA) is constituted by the Government and the said SRA grants project. MSAA was enacted to make better provision for improvement & clearance of Slum Areas in the State and their Re-Development and for the protection of occupiers from eviction & distress warrants. SRA formulates the Slum Rehabilitation scheme and the builder Developer who is approved to execute such Slum Rehabilitation Scheme shall have to carry out the work, as stipulated by SRA under their direct control and supervision. SRA notifies Slum Rehabilitation Scheme in the official gazette accordingly. Thereafter, the SRA declares such areas as Slum Rehabilitation area, and acquires the land. It has also right of demolition of existing structures and such other rights as are vested in the Municipal Corporation. Thereafter, SRA entrust the work of development of such area to any other agency as per the provisions of the Act. Thereafter, such agency shall have to carry out the rehabilitation work as per the norms, plan and procedure laid down by SRA under their direct control & supervision. In the present case, the assessee was the approved agency for rehabilitation wok on the above Prathmesh Park Scheme.
6. It is necessary to narrate the history of the benefit of deduction, allowed under the Income Tax Act, 1961 (the Act), on profits derived by an undertaking developing and building housing projects, while computing total income. Such benefit was first introduced by the Finance Act, 1998 w.e.f. 1-4-99 in the form of Sub-Section (4F) to Sec.80IA of the Act. Those provisions read as follows:
'This section applies to an undertaking engaged in developing and building housing projects approved by a local authority subject to the condition that the size of a plot of land has a minimum area of one acre and the residential unit has a maximum built-up area not exceeding one thousand square feet; Provided that the undertaking such undertaking commences development and construction of the housing project on or after the 1st day of October, 1998 and completes the same before 31st day of March, 2001;
7. By the Finance Act, 1999 w.e.f. 1-4-2000, the benefit of the above deduction was available u/s.80-IB(10): The said provisions read as follows:
"(10) The amount of deduction in the case of an undertaking developing and building housing projects approved by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,
(a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes the same before 31st day of March, 2003;
(b) the project is on the size of a plot of land which has a minimum area of one acre:
(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place;
8. By the Finance Act, 2000 w.e.f.1-4-2001 the words "Before 31st day of March, 2001 were inserted after the words "housing project approved". Thus all conditions for grant of deduction remained the same except that the approval of local authority for the development has to be obtained before 31st day of March, 2001. For AY 02-03, the law applicable was that the condition regarding completion of the project before 31st March, 2003 was dispensed with. For AY 03-04 and 04-05, the law applicable was that all conditions remained the same except the condition regarding approval of the project by the local authority which could be before 31st day of March, 2005. Another important change was that the period of completion of the construction on or before 31st March, 2003 was dispensed with and there was no time limit given for completion of the construction. This was the law for A.Y.04-05 when the Assessee submitted its proposal for slum rehabilitation and the permission for carrying out the development was accorded on 17.11.2003 and when the Assessee commenced development.
9. By the Finance Act, 2004 w.e.f. 1.4.2005 Clause (d) to section 80IB(10) was introduced which provided that built up area of shops or other commercial establishments included in the housing project should not exceed 5% of the aggregate built up area of the housing project or 2000 sq.ft., whichever is less. The provisions as they read applicable from AY 05-06 is as follows:
"(10) The amount of deduction in the case of an undertaking developing and building housing projects approved by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if, such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction
(i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008;
(ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority.
Explanation.For the purposes of this clause,
(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;
(ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority;
Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf;
(b) the project is on the size of a plot of land which has a minimum area of one acre:
(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place;
(d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less."
As per the amended law in view of insertion of clause (d) the built up area of shops and other commercial establishment included in the housing project should not exceed five percent of the aggregate built up area of the housing project or 2000 sq.ft., whichever is less.
10. The AO on scrutiny of the claim of the Assessee for deduction u/s.80-IB(10) of the Act was of the view that the Assessee did not satisfy the requirements as laid down in Sec.80-IB(10) (a) and (d) of the Act and was therefore not entitled to deduction u/s.80-IB (10) of the Act. The CIT(A) however held that the Assessee fulfilled all the conditions for allowing deduction u/s.80-IB (10) of the Act and was therefore entitled to deduction u/s.80-IB (10) of the Act. Against the order of CIT(A), the revenue has raised Ground No.I and II before the Tribunal. We will now deal with each of the conditions which were held to be not fulfilled by the AO but which were considered as fulfilled by the CIT(A) and the rival contentions of the parties before us.
11. Non-fulfillment of the provisions of Sec.80IB(10)(a) of the Act According to the Assessing Officer, as per the provisions of sec.80IB(10)(a) of the Act, two conditions have to be fulfilled i.e. the project should have commenced on or after 01.10.1998; and project construction should have been completed and profit derived therefrom, for claiming deduction withing the time as prescribed in sub-clause (ii) of clause (a) of Sec.80IB(10) of the Act i.e. 31.03.2005.
The Assessing Officer noticed that in the Balance Sheet of the Assessee as on 31.3.1998, work-in-progress was shown at Rs.1,83,880/- and therefore he was of the view that the project had commenced prior to 1.10.1998 and therefore the Assessee was not entitled to benefits of Sec.80IB(10) of the Act. He further found that the letter of intent of SRA was issued on 17.01.1997 and therefore the construction of the project would have commenced on or before 1.10.1998. The AO was also of the view that the Assessee had not completed the project on or before 31.03.2005. He found that the assessee has not even applied for completion certificate of the project even on the date of survey i.e. 09.02.2006. Therefore, according to the learned Assessing Officer, the assessee did not satisfy the condition laid down in Sec.80IB(10)(a) of the Act.
13. Before CIT(A) the assessee submitted, the letter of intent means, the SRA has expressed its intention for Slum Rehabilitation Project on a particular site and assessee being willing, the letter of intent has been issued to it. This letter does not mean that the development & construction work of the project has been awarded to the assessee and the assessee has started the construction etc. This letter, according to the Assessee, was part of negotiations with the SRA by the assessee. The assessee pointed out that vide its application dated 02.11.1998 it had requested for certificate of commencement to the SRA. The SRA vide their letter dated 02.12.1998 had issued the certificate of commencement, in which, it has been stated that, "With reference to your application No.3265 dated 02.11.1998 for development permission and grant of commencement certificate u/s.44 & 69 of the Maharashtra Regional Town Planning Act, 1966 to carry out development & building permission........The commencement certificate/building permission, is granted........".
14. As regards the work-in-progress shown as on 31.03.1998 of Rs. 1,83,880/- in the balance sheet, the assessee submitted that the Managing Partner, while answering Q.No.10 in the statement recorded at the time of Survey, had categorically submitted that, the details of work-in-progress will be submitted later. The assessee gave a break-up of the work-in-progress of Rs.1,83,880/- as on 31.03.1998. One of the conditions required is to have conveyance of the land, if the land covered by the slums belongs to the private parties. Since SRA had issued letter of intent to the assessee, the conveyance deed was executed and the charges relevant to the registration of such deed and such other incidental charges were shown as work-in-progress. The Assessee submitted that not a single rupee was spent either on development of the land or of the construction of the building. Therefore, it was submitted that the AO was not right in holding that, the development & construction of the project commissioned prior to 01.10.1998. The Assessee argued that the certificate of commencement issued by a Statutory Body i.e. SRA, conclusively proves that the assessee could commence development & construction only after 02.12.1998. Accordingly, it was submitted that, there was no force either on facts or in law in the finding of the learned Assessing Officer regarding commencement of development & construction of project prior to 01.10.1998.
8. Regarding the observations of the Assessing Officer that the project was not completed till the date of claim of deduction, as the completion certificate was not even applied even on the date of survey i.e.09.02.2006. The assessee submitted that the project of Prathmesh Park is part of the Rehabilitation project approved by SRA. As per the rules of the said authority, first of all, the assessee has to construct the Rehabilitation buildings as per the requirements/plans of the SRA, and thereafter, it has to apply for occupation certificate of rehabilitation buildings. The assessee prior to the date of survey had already applied for such occupation certificate for rehabilitation buildings. As per the rule of SRA, only on issuance of occupation certificate of rehabilitation buildings, the assessee can apply for completion certificate of saleable buildings. Since SRA had not issued the Occupation certificate, for the reasons beyond control of the assessee, obtaining of completion certificate for saleable buildings was not possible. It was pointed out that this aspect was clearly explained by the partner during the course of survey.
9. Without prejudice to the above, the assessee submitted that the proviso below section 80 IB(10)(b) of the Act, which stipulates that, "Provided that, nothing contained in clause (a) or clause (b) shall apply to a Housing Project, carried out in accordance with a scheme framed by the Central Government or a State Government for re-construction or re-development of existing buildings, in area declared to be slum areas under any law, for the time being in force, and such scheme, is notified by the Board, in this behalf is applicable in the case of the assessee. The assessee's project was a Slum Rehabilitation Project being approved and allotted by SRA under MSAA. The CBDT vide their clarification under F.No.205/3/2001/IT A-II dated 4/5/2001 being a letter addressed to Maharashtra Chamber of Housing Industry, has clarified with regard to query, regarding the definition of Housing Project that, any project which has been approved by a local authority as a housing project, should be considered adequate, for the purpose of Section 10(23G) & 80IB(10). Both these sections, 10(23G) & 80IB(10) are related to exemption / deduction of income/profit from the Housing Projects. Thus, the project of the assessee was undoubtedly approved project of SRA i.e. local authority, and related to Slum Rehabilitation / Re-Development scheme. Thus, the proviso below section 80IB (10)(b) was squarely applicable to the case of the assessee. Therefore, even otherwise, the condition of section 80IB(10)(a) were not applicable to the case of the assessee.
10. The CIT(A), on a consideration of the above submission of the Assessee noticed that the conclusion of the AO that the project had commenced prior to 1/10/98 was based on two factors, viz., (i) letter of intent issued by SRA on 17/1/1997, and(ii) work in progress of Rs. 1,83,880/- shown by the assessee as on 31/3/1998. Besides, the AO has also relied upon the admission made by the assessee's partner in his statement recorded during the course of survey admitting the non-fulfillment of the conditions stipulated by Sec. 80 IB(10)(a) of the Act. The CIT(A) held that the letter of intent dated 17.1.1997 was issued with regard to the authorization to allot the work to the assessee by the SRA. Therefore, such letter of intent can not be considered as an evidence for the commencement of the work. He held that the AO failed to consider the application made by the assessee as on 2/11/1998 for issuance of certificate of commencement of the work and the consequent certificate issued by SRA on 2/12/1998, granting the assessee the permission to carry out development and building construction on the said plot of land. The CIT(A) therefore, held that the development and construction work was started only after 2/12/1998. He also held that the AO has not brought any material or evidence on record to establish that expenses incurred by the assessee are directly related to the development and construction of the project. The CIT(A) also held that since the Assessee was seeking to work for SRA and therefore conveyance of the land belonging to a third part upon which the hutments have been created, was absolutely necessary for the assessee. He therefore held that the conveyance charges paid pursuant to the letter of intent and shown as work in progress of Rs. 1,83,880/- as on 31/3/1998 cannot be considered as commencement of the development and construction of the housing project.
11. The CIT(A) also found that the conclusion of the AO the project of the assessee should have been completed within stipulated time, as against which, even on the date of survey, such project completion documents, etc. were not available with the assessee, were not relevant. In this regard, the CIT(A) agreed with the submission of the Assessee, that the proviso below sub-clause (b) of sec. 80 IB(10) clearly and explicitly explains, that provisions of sub-clause (a) and sub-clause (b) of sec.80 IB(10) were not applicable to the projects framed by the Central or the State Government for reconstruction or redevelopment of slum areas under any law, for the time being in force, and such scheme being notified by the Board, in this behalf. Undisputedly, the project of the assessee is that of, redevelopment of the slum area, within the provisions of MSAA and assigned by SRA constituted under MSAA. He was of the view that the Board, vide their F. No.205/3/2001/IT A-II dated 4/5/2001 - in a letter issued to Maharashtra Chamber of Housing Industry, the Board has clarified that, any project which has been approved by an appropriate Local Authority, as a Housing project, shall be considered adequate, for the purpose of sec. 10(23G) and sec. 80 IB (10) of the Act. This according to the CIT(A) was sufficient compliance of the proviso below Sec.80-IB(10) (b) of the Act.
12. Before us, the learned D.R. relied on the order of the AO. The learned counsel for the Assessee reiterated the stand of the Assessee as was put forth before the CIT(A) and also relied on the order of the CIT(A).
13. After considering the rival submissions and the order of the CIT(A), we are of the view that the conclusion of the CIT(A), with regard to commencement of work on or before 1.10.1998 are correct and do not call for any interference. The development & reconstruction permission granted by the stipulated authority is undisputedly as on 2/12/1998, and, therefore, such direct evidence cannot be disregarded. The value of the work-in-progress referred to by the AO was only the cost of the expenses for getting a proper deed of conveyance and that had nothing to do with actual commencement of any construction. Accordingly, in view of specific evidence, CIT(A) had rightly held that the construction and commencement of the project was only after 1/10/1998.
14. As far as the condition regarding completion of project before the stipulated time, it is not in dispute that the Assessee did not complete the project on or before 31.3.2005. The facts as per Assessee's own admission in the written submissions filed before the Revenue authorities was that the assessee's project was granted approval for development & construction by the SRA vide their letter dated 02.12.1998. The work of development and construction of both rehabilitation building/shops as well as free-sale buildings commenced w.e.f. 02.12.1998. The 3 rehabilitation buildings and 17 shops were constructed by the assessee in between 02.12.1998 and August, 2004. The 3 rehabilitation buildings as well as the 17 shops were physically being transferred to the eligible slum dwellers/shop keepers, free of cost, on 18.09.2004. Simultaneously, as per the progress of construction of rehabilitation buildings/shops, the SRA gave permission to construct, the free-sale buildings also. Accordingly, the free-sale buildings also were completed and sold away during the previous year relevant to the Assessment Year 2005-06.
15. On the issue regarding non fulfillment of the condition regarding completion of the project on or before 31-3-2005, the Assessee's submissions, which found favour with the CIT(A) was that the Assessee was carrying out a Slum Rehabilitation Scheme and therefore proviso below clause (b) to Sec.80-IB (10) would apply and therefore the condition mentioned in Clause(b) to Sec.80-IB(10) need not be complied with. The said proviso was inserted w.e.f. 1-4-2005 by The Finance (No.2) Act 2004. The same reads as follows:
"Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf;"
The assessee's project was a Slum Rehabilitation Project being approved and allotted by SRA under MSAA. The CBDT's clarification under F.No.205/3/2001/IT A-II dated 4/5/2001 relied upon by the Assessee cannot be said to be a notification by the Board of a scheme of slum rehabilitation under the proviso referred to above. In fact the CBDT's clarification referred to and relied upon by the Assessee is dated 4/5/2001 and the proviso came into force only w.e.f. 1-4-2005. The clarification given by the CBDT is in the context of what is a housing project. By no stretch of imagination the said clarification of the CBDT can be said to be a notification under the proviso, on which the Assessee can take shelter. In our view the CIT(A) totally misdirected himself, in accepting the plea of the Assessee in this regard.
16. It was submitted by the learned counsel for the Assessee that even though the assessee's project was approved by the State Government the scheme is not notified by the Board and the assessee cannot be denied the benefit just because the Board has not notified the project. The learned counsel's submissions in this regard were that neither under the Income tax Act or Rules or any other notification by the CBDT has any guidelines, rules or procedure have been laid down as to how, where and when an assessee should approach to get the project notified. It was the submission that the assessee cannot be compelled to perform some act when no prescribed rules, guidelines, procedure etc are laid down for the same.
17. We are of the view that the claim made by the assessee in this year is based on amended section 80IB(10). It is no doubt true that the Assessee was carrying out a Slum Rehabilitation Scheme. The proviso below clause (b) to Sec.80-IB (10) was inserted by The finance (No.2) Act, 2004 w.e.f 1-4-2005. As per the proviso the conditions mentioned in Sec.80-IB (10) (a) & (b) need not be fulfilled in the case of Slum Rehabilitation Scheme carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf. In the absence of a notification by the Board, it is not possible to ignore the condition laid down in Sec.80-IB(10) (a) or (b). Since, the condition that the project should have been completed on or before 31.3.2005 is admittedly not complied with by the Assessee, We hold that the A.O. has rightly denied the deduction under section 80IB(10) on the ground that the project was not completed within the stipulated time as required under clause (a) to Sec.80IB(10) of the Act. Thus the appeal of the revenue on this aspect stands allowed.
18. Non-fulfillment of the provisions of Sec.80IB(10)(b) of the Act According to the AO as per the provisions of section 80 IB(10)(b) of the Act, two conditions have to be fulfilled i.e.:
(b) the project is on the size of a plot of land which has a minimum area of one acre:
The AO held that (i) the project is built on plot area of 3788.75 sq.mt. i.e. less than one acre; and (ii) Though the housing project i.e. Prathmesh Park, Phase - I, was carried out under State government Scheme ( Slum Rehabilitation Authority) but the same was not notified by the Board i.e. CBDT and therefore the proviso below Sec.80-IB(10)(b) of the Act, cannot be taken advantage of by the Assessee. We have already seen the proviso below Sec.80-IB(10)(b) of the Act, and as to how the Assessee does not satisfy that requirement, while dealing with the compliance of conditions mentioned in Sec.80-IB(10)(a) of the Act. The proviso is also applicable to Sec.80-IB(10)(a) of the Act.
19. According to the AO both the above conditions were not satisfied in the case of the Assessee. In support of his findings, the AO has relied upon various questions and answers recorded in the statement dated 9/2/2006 of Shri Jitendra S. Brahmbhatt, working partner of the assessee firm. The same are referred to in Para 2.2 of the assessment order being answer to Q.Nos. 9 & 11 of the above said statement. The AO held that, the assessee's Prathmesh Park, project was constructed on 3788.75 sq. meters of land, which is less than one acre. Besides, the Project of the assessee is not approved by the CBDT. Accordingly, the assessee has not satisfied the conditions laid down in Sec. 80 IB (10)(b) of the Act.
20. Before CIT(A), the assessee submitted that the Managing Partner during the course of his statement vide answering Q.No.11 has clearly clarified that, the total plot area is about 5700 sq. meters, out of which, 3788.75 sq. meters are occupied by Prathmesh Park project(saleable buildings) whereas remaining area of bout 1900 sq. meters are occupied by the Rehabilitation buildings. The approval of the SRA is for both the types of buildings i.e. Project as a whole and the project is situated on undivided plot CTS 720 (Part) and 727, for which, there is one single conveyance deed. It was pointed out that the above factual aspect was duly brought to the notice of the Authorized Officer, by the partner of the assessee firm. The Assessee had obtained conveyance for the entire piece of land admeasuring 5796.40 sq.meters through a single conveyance deed. The Assessee pointed out that the real picture was, the entire 5796.40 sq. meters of land was occupied by slum dwellers having their hutments. Thus, the land in utilization or related to the entire project, shall be considered as admeasuring 5796.40 sq. meters and not 3788.75 meters adopted by the AO. Even the SRA has also taken into consideration, the total land of 5796.40 sq. meters for the project, as a whole and have approved the plans, accordingly. It was submitted that the AO failed to appreciate the correct facts of the case of the assessee. Therefore, the condition laid down regarding the measurement of the land u/s. 80IB (10(b) was fully satisfied by the assessee.
21. Without prejudice to the above the argument regarding application of the provision below section 80 IB (10)(b) was again reiterated.
22. The CIT(A) agreed with the contentions put forth by the Assessee. He held that the facts as brought on record by the assessee, clearly showed that the total plot area under consideration of scheme approved by Slum Rehabilitation authority was around 5700 sq. meters and these facts were very well stated by the partner of the assessee firm while answering Q. No.11 in the statement recorded during the course of survey and that the the land admeasuring around 5700 sq. meters on which original slum was existing was to be re-developed. As per the approved schme of SRA, land admeasuring 1900 sq. meters was to be used for construction of Rehabilitation buildings, to be constructed by the assessee. After completing the construction of Rehabilitation Buildings, as per the plans of the SRA, the assessee was to transfer such Rehabilitation buildings to the original slum dwellers, free of cost. In lieu of such cost of construction borne by the assessee, the SRA has allotted 3788.75 sq. meters of land to the assesssee free of cost, upon which, saleable buildings of Prathmesh Park, Phase I Project are constructed and sold to the general public at market rates. He therefore held that the total project covering Rehabilitation buildings and Saleable buildings was on 5688.75 sq. meters i.e. more than one acre of land.
23. We are of the view that the findings of the CIT(A) in this regard are correct and do not call for any interference. The AO has not properly appreciated the working the slum rehabilitation scheme. The CIT(A) has rightly appreciated the same and his findings are correct and are hereby upheld. In view of the above decision, it is not necessary to decide the question regarding applicability of the benefit under the proviso below Sec.80-IB(10)(b).
24. Non-fulfilment of the provisions of Sec.80IB(10)(c) of the Act According to the AO, as per the provisions of section 80 IB (10) (c), the built-up area of each residential unit shall not exceed 1000 sq. ft. According to the AO, the above condition was not satisfied in the case of the Assessee because the following flats were in excess of 1000 Sq.ft. though having two different flat numbers but were in fact one flat. The AO has given example in respect of the following flats:
Flat No.B-605 / 606 - Shailesh K. Chauhan / Sharwati Chauhan Flat No.B-905 / 906 Abdul Wahid sheikh / Shoaib Wahid sheikh Flat No.B-901 / 902 Roshini Rao Flat No.B- 801 / 802 - Abhijeet Khande In support of his findings, the AO relied on various questions & answers recorded in the statement dated 9/2/2006 of Shri Jitendra S. Brahmbhatt, working partner of the assessee firm. The same are referred to in para 2.3 of the assessment order.
25. Before CIT(A), the assessee submitted that it had not combined two flats and the combined measurement of such two flats was not exceeding 1000 sq. ft. The Assessee drew attention of the CIT(A) to the statement recorded at the time of Survey in which a reference was made to Flat No.B-605 & 606. The Assessee pointed out that in the statement of the managing partner it has been clearly stated that, "I agree with the statement, except the built up area of each flat is 412 sq. fts" (q.No.13), "Even after alterations the build-up area of both the flats put together is less than 1000 sq. ft" (Q.No.14). The Assessee thus submitted that the measurement of the flats quoted during the course of survey and relied upon by the AO was never accepted on factual basis, as exceeding 1000 sq. fts. The Assessee pointed out that it had submitted the copies of the agreement executed between it and the buyer of the flats before AO and that the measurements of flats as per the agreement were as under:-
Flat No. Sq. ft of the flat as per agreement.
B-605 412 B-606 412 B-801 412 B-802 296 B-901 412 B-902 296 B-905 412 B-906 412 The Assessee submitted that even assuming that the allegation of the AO that the assessee had combined two flats as one flat and sold the same to the buyers, the overall measurement of such combined two flats can not exceed 1000 sq. ft. The Assessee submitted that, none of the residential units was admeasuring more than 1000 sq. ft. Besides, the plan for construction of residential units in free sale buildings were also being duly approved by SRA and in such plans also, the measurement has been shown for each residential unit below 1000 sq. fts.
26. The CIT(A) on consideration of the above submissions, found that the copies of the agreement executed between the assessee and the concerned buyers of the flats clearly showed that the measurement of each flat was less than 1000 sq. ft. each. The CIT(A) also found that the plans for construction of the residential units as approved showed that constructed area shown for each residential unit was less than 1000 sq. ft. He was of the view that if two different buyers / individuals of the same family happen to purchase two different adjacent flats from the assessee in their individual names and later on, join the flats as a single unit as per their own convenience, the assessee cannot be held responsible or penalized for the same. He also held that, even in that eventuality, in the case of the assessee, the total area of the two flats joined together would be less than 1000 sq. ft. each. In this regard, the CIT(A) also held that the assessee has executed the agreements for each residential unit separately and such agreements clearly and unambiguously shows the measurement of each flat of "built-up area" of less than 1000 sq. ft., which is in accordance to the approved plan, therefore, CIT(A) was of the considered opinion that it is incorrect to conclude that, the "built-up area" of some of the residential units was exceeding 1000 sq. ft each in violation of / non-fulfillment of the conditions laid down by the provisions of section 80 IB(10)(c) of the Act. Accordingly, the findings of the AO regarding non-fulfillment of the conditions prescribed u/s. 80 IB (10)(c) were held to be not correct.
27. Before us, the learned D.R. relied on the order of the AO. We are of the view that the findings of the CIT(A) on this issue have to be upheld. The learned AO based his conclusions on the issue only on the statement of one of the flat buyer viz., Mrs.Sharvati Chauhan. The partner of the Assessee when he was examined at the time of survey and when the statement of Mrs.Shravati Chauhan was confronted to him, has clearly stated that even assuming two adjoining flats were combined, the total area of such combined flats did not exceed 1000 Sq.ft. Besides the above, the various agreement between the parties were produced before AO and the AO has not brought out any material on record to show that built up area of any flat in the project was more than 1000 Sq.ft. In these circumstances, we uphold the findings of the CIT(A) and hold that the Assessee has fulfilled the condition laid down in Sec.80IB (10)(c) of the Act.
28. Non-fulfillment of the provisions of Sec.80IB(10)(d) of the Act:
According to the AO, as per the provisions of Sec. 80 IB(10)(d), the built-up area of shops / commercial establishments included in project shall not exceed 5% of the total built-up area or 2000 sq.fts. whichever is lower.
29. In support of his findings, the AO relied upon various questions and answers, recorded in the statement dated 9/2/2006 of Shri Jitendra B.Brahmbhatt, working partner of the assessee firm. The same are referred to in para 2.4 of the assessment order and in particular answer to Q. Nos. 12 of the statement recorded at the time of survey.
30. After considering his statement as well as the contention of the assessee during the course of assessment proceedings, the AO has held that, as against provisions of 80 IB(10(d), the total area of shops and commercial establishments in the project are 3547 sq. ft., and therefore, the conditions laid down in the section has not been fulfilled by the assessee. Thus, according to the AO, the assessee did not fulfill the conditions of Sec. 80 IB(10)(d) of the Act.
31. Before CIT(A), the Assessee submitted that the SRA carries out detailed survey regarding the inhabitants of the Slum area, and accordingly, decides to construct multi-storeyed flats of specific measurements to be given to the slum-dwellers, as a part of rehabilitation work. These types of accommodation are normally classified into; a residential unit, a residential cum commercial unit, or a commercial unit, which is inexistence since long times in the slum areas. Accordingly, in Rehabilitation Scheme, residential and commercial units for the original slum dwellers rehabilitation are to be constructed by the builder as per the plan of the SRA. The Assessee submitted that in the entire process of rehabilitation scheme, the type of building i.e. residential or commercial, their measurements, other amenities, etc., both in the cases of rehabilitation buildings as well as saleable buildings are being determined by SRA.
32. The Assessee pointed out that the SRA planned and approved construction of the following buildings.
3 buildings & 17 shops as a part & parcel of rehabilitation buildings and shops to be given to the original slum dwellers under the rehabilitation scheme, free of cost.
3 buildings as a part & parcel of free-sale buildings or saleable buildings i.e. Prathmesh Park, Phase-I Project.
The Assessee thus submitted that it was mandatory for the assessee to construct 17 shops in the rehabilitation portion of the scheme as per the plans & norms of the SRA. The SRA was also duty-bound under The Maharashtra Slum Area (Improvement, Clearance & Re-development) Act, 1971, to provide for such 17 shops to the old Slum shop-keeper considering their right, title & entitlement in the old slum area. Besides, it was also mandatory & obligatory for the assessee to construct and handover 3 buildings & 17 shops to the SRA/original slum dwellers, as approved by SRA, free of cost. In the original slum area, 17 shops were in existence, and therefore, in the rehabilitated area, shops were mandatorily to be constructed. The norms of the SRA provides for area construction for each shop at 225 sq.ft. i.e. 3825 sq.fts. But as against, considering the factual/actual measurements of each shop, the SRA provided to construct 17 shops on 3547 sq.ft. Thus, construction of the shops on 3547 sq.ft. was mandatory for the assessee. Neither the assessee nor the SRA has any discretion left with them to make any compromise in construction of 17 shops in the Rehabilitation component to the handed-over free of cost.
33. The Assessee by way of an alternate argument, submitted that only by virtue of construction of 3 buildings and 17 shops, as rehabilitation buildings, the assessee was allotted 3788.75 sq.meters of land, free of cost, upon which, 3 saleable buildings under the name & banner of Prathmesh Park, Phase-I, were being constructed. Thus, the assessee has never constructed any shop for the sale purposes. On the contrary, the cost of construction of 3 buildings and 17 shops, as rehabilitation buildings, was nothing but the cost of land being paid by the assessee for acquiring land for Prathmesh Park, Phase-I, project. Thus, at the outset, there is no element of any income or profit on mandatory construction of 3 rehabilitation buildings and 17 shops, as per the norms of the statutory authority i.e. SRA. As against the provisions of sec.80IB(10) of the Act, deals with the deduction from the total income of the assessee, and such total income is derived from the sale of 3 saleable buildings, as discussed above. Thus, in other words, the concept of income has direct nexus with the concept of admissible deduction, and in instant case of the assessee, both the concepts of income & admissible deduction are related to income derived from the sale of 3 saleable buildings and not any other premises including 17 shops constructed by the assessee. The provisions of sec.80IB(10) provides that, "the amount of deduction in the case of an undertaking developing & building, housing projects approved before......... by a local authority, shall be hundred percent, of the profits derived, in the previous year relevant to any Assessment Year from such housing project, if .........." Thus, for considering the eligibility of deduction, the concept of profit derived and its nexus to such Housing projects, are very vital factors to be taken into account. There was no element of any commercial consideration being received in the construction of 17 shops, and on the contrary, it was one kind of payment for acquisition of plot of land for the commercial activities of the assessee.
34. Without prejudice to the above, the assessee submitted that the assessee's project was granted approval for development & construction by the SRA vide their letter dated 02.12.1998. The work of development and construction of both rehabilitation building/shops as well as free-sale buildings commenced w.e.f. 02.12.1998. The 3 rehabilitation buildings and 17 shops were thus constructed by the assessee in between 02.12.1998 and August, 2004. The 3 rehabilitation buildings as well as the 17 shops were physically being transferred to the eligible slum dwellers/shop keepers, free of cost, on 18.09.2004. Simultaneously, as per the progress of construction of rehabilitation buildings/shops, the SRA was giving permission to construct, the free-sale buildings also. Accordingly, the free-sale buildings also were completed and sold away during the previous year relevant to the Assessment Year 2005-06.
35. The Assessee submitted that the relevant provisions of sec.80IB(10)(d) which lays down the restriction of construction of commercial premises either to the extent of 5% of the project land or 2000 sq.fts., whichever is lower, was enacted into the statue book by the Finance Act, 2004 w.e.f. 01.04.2005 i.e. Assessment Year 2005-06. This Finance Act, 2004 was placed before the Hon'ble Parliament on 08.07.2004 as 13th Lok Sabha came into existence during this period, after General Elections. The said Finance Act, received the assent of Hon'ble President of India on 10.09.2004. Thus, this amendment in the Act was introduced by the Government prospectively i.e., it was applicable to such Projects which comes into operation on approval, after the date of the approval of the Finance Bill. As against this, the assessee's project, came into existence as back as 02.12.1998 and the assessee had constructed the 17 shops much before the introduction of the Finance Act, 2004. In this connection, The Assessee pointed out that the date of receiving of the assent to the Finance Bill from the Hon'ble President of India was on 10.09.2004 but the Assessee transferred and physically handed-over 3 rehabilitation buildings and 17 shops, free of cost on 18.09.2004. Thus the construction of the project was completed much prior to the introduction of the Finance Act, 2004. Under the circumstances, no person can predict the new provisions coming into the Act. Therefore, the construction of the rehabilitation building and 17 shops were constructed as per the norms of SRA. Besides, in the old provisions of I.T. Act, especially sec.80IB(10) of the Act, there were no restrictions on construction of any commercial shops, etc. Therefore, it is highly inappropriate to make application of prospective law introduced in the statute book in such a manner, that it is applied on retrospective basis.
36. The Assessee had relied on the decision of the ITAT Mumbai in the case of Saroj Sales Organization Vs. ITO 115 TTJ 485 (mum) and the decision of Chennai Bench in the case of Arun Excello Foundations (P) Ltd. VS. ACIT 108 TTJ 71. The case of Saroj Sales Organization (supra) was a case of a Builder where there were two projects being constructed by name Nisarg and Breezy Corner. For AY 05-06, The Assessee claimed deduction u/s.80-IB(10) of the Act on the profits of Nisarg Project. The AO treated both the projects as one project and found that in the project Breezy corner the built up area of some of flats were more than 1000 sq.ft. and he therefore held that the Assessee was not entitled to deduction u/s.80-IB(10) of the Act. The second reason given by the AO was that shopping area of Nisarg project was 7.60% of the built up area of Nisarg Project. The AO relied on the amendment to Sec.80-IB(10) w.e.f. 1-4-05 whereby Clause (d) to section 80IB(10) of the Act was introduced and it was laid down therein that the built up area of shops and other commercial establishment included in the housing project should not exceed five percent of the aggregate built up area of the housing project or 2000 sq.ft., whichever is less and rejected the claim of the Assessee for deduction. The Tribunal on the second issue held that the housing project Nisarg was approved before 31st March, 2005 and when approval was obtained there was no stipulation as to the shopping complex area(commercial space) permissible in the project. The amendment were subsequently made while extending the deduction of income from housing project approved upto 31st March, 2007 and therefore on this ground deduction u/s.80-IB(10) cannot be denied to the Assessee.
37. The CIT(A) accepted the contentions on behalf of the Assessee and he held that the Assessee did not violate the conditions laid down in Sec.80-IB(10)(d) of the Act.
38. Before us, the learned D.R. submitted that the legislature in its wisdom had thought it fit to introduce a condition for allowing deduction u/s.80-IB(10) w.e.f. 1-4-2005 and therefore the law including clause (d) of Sec. 80-IB(10) has to be applied by the AO while making assessment from A.Y.05-06 till the law remains the same. It was his argument that the Amended provisions refer to all projects approved before 31.3.2007 and does not differentiate between Housing Project approved before 2004 or 2003 or one approved by SRA. He drew our attention to clause(a) of Sec.80-IB(10) and submitted that the legislature has consciously made a distinction between projects approved upto a particular date and prescribed different time limits for their completion. It was his submission that had the legislature wanted to make a distinction between projects commenced prior to 1-4-2005 and completed after the amendment by introducing clause(d) to Sec.80IB(10) then the legislature would have said so in clear terms. Absence of such clear distinction in the amended provisions can only lead to an inference that the restriction regarding commercial area in a housing project is applicable to all projects irrespective of the date on which the project was approved by the local authority on and from 1-4-2005. His further submission was that the plea of hardship cannot be accepted in the light of the clear language used in the amended provisions. It has to be presumed that the legislature was fully conscious of the possible hardship, such as the one in the case of the Assessee, and in its wisdom had thought it fit to amend the law.
39. The learned counsel for the Assessee reiterated the stand of the Assessee as was taken before the Revenue authorities. Strong reliance was placed by him on the decision of the ITAT Mumbai in the case of Saroj Sales Organization (Supra) and two other decisions of Mumbai Bench of ITAT in the case of ITO Vs. M/S. Pathare & Associates ITA 993/Mum/2009 order dated 17/12/2009 for AY 05-06 and ITO Vs. M/S.H.D. Enterprises ITA No.5712/Mum/2008 order dated 6/8/2009 for AY05-06 following the decision in the case of Saroj Sales Organization (Supra) on identical facts.
40. We have considered the rival submissions. The issue regarding satisfication of the condition laid down u/s.80-IB(10)(d) has to be examined in the light of the question whether the law as it existed when the Assessee submitted its proposal for slum rehabilitation and the permission for carrying out the development was accorded and when the Assessee commenced development is to be applied or the law as amended by the Finance Act, 2005 w.e.f. 1-4-2005 whereby it was laid down that the built up area of the shops and commercial establishment included in the housing project should not be more than 5% of the total built up are of the project or 2000 Sq.ft. whichever is less is to be applied? On the above issue we have already noticed that co-ordinate benches of ITAT have already expressed opinion. The decision in the case of Saroj Sales Organization (Supra) is directly on the issue. Judicial discipline demands that we should follow decision of a co-ordinate bench on identical facts.
41. We have already seen that that the provisions of Sec.80-IB(10) as it stood at different point of time contemplates different conditions to be fulfilled by an Assessee to claim deduction under that section. Invariably by the time an Assessee commences his project and by the time the project is completed and profit offere to tax, the conditions to be fulfilled materially change. If the conditions regarding restriction on existence of built up area of commercial space, which condition did not exist when the Assessee commenced the project, is imposed on the Asseseee, then the Assessee would be put to great hardship. Let us assume an Assessee applies and obtains approval of a local authority for building a housing project in the previous year relevant to AY 02-03. As per the law as it stood in the previous year relevant to AY 02-03 upto 04-05, there was no time limit within which the construction has to be completed or any restriction regarding commercial area that can be built in a housing project. Let us assume that the Assessee complies with all the conditions for allowing relief u/s.80-IB(10) i.e., it is approved as a housing project by the local authority but the area of commercial space as approved by the local authority is more than 2000 sq.ft. The Assessee commences the project but is able to complete only in the previous year relevant to AY 05-06. As per the change in law from AY 05-06 with regard to the area of commercial space in a housing project the Assessee would loose his eligibility to claim deduction. In such cases there is definitely grave hardship to the Assessee. We therefore find no grounds to take a view different from the one taken by the co-ordinate bench of the Tribunal in the case of Saroj Sales Organization (Supra). We are of the view that the legislature would not have intended to take away a vested right without clear words to that effect in the provisions of Sec.80-IB(10) as amended by the Finance Act, 2005, w.e.f. 1-4-2005. We therefore hold following the decision in the case of Saroj Sales Organisation (Supra) that the law as it existed when the Assessee submitted its proposal for slum rehabilitation and the permission for carrying out the development was accorded will apply and therefore the restriction of existence of commercial space in the project has to be examined in the light of the principle laid down by the Special Bench of ITAT in the case of Brahma Associates 122 TTJ 433 (SB) (Pune). The special Bench in the aforesaid decision has laid down the following principles in this regard.
"(a) The deduction under section 80 IB (10), as applicable prior to 1st April 2005, subject to and in the light of the observations made in the preceding paragraphs, is admissible in case of a 'housing project' comprising residential housing units and commercial establishments. In case these projects are approved as housing projects by the local authority, such an approval as housing project is sufficient for the purposes of eligibility. In any other case, where 90% or more of the total built up area is used for dwelling units, in accordance with the scheme of section 80 IB(10), the benefit of deduction under section 80 IB(10) will not be declined. In case commercial use of built up area is more than 10% but the residential segment of the project satisfies requirements of Section 80 IB(10) on standalone basis, i.e. (i) the size of the plot, excluding portion under commercial unit, is more than minimum area of one acre, (ii) residential units built on such area must satisfy condition of clause (c) of the provision, and (iii) other necessary conditions are fulfilled, and where income from construction of residential dwelling units can be worked out on standalone basis, deduction under section 80 IB (10) will be available in respect of residential segment of the project.
(b) The deduction under section 80IB(10) is available in respect of profits of housing project as a whole, and, as such, it is not relevant as to what is the portion of profits which can be said to be attributable to residential units. This is subject to the rider that in case commercial use of built up area in a project is more than 10% and, for this reason the project can not be said to be a predominantly housing project, but, in terms of observations made in paragraph 115 above, the assessee is entitled to deduction in respect of residential unit segment of the overall project on fulfillment of necessary conditions, the entitlement of incentive deduction will be confined to only to the profits to the residential segment of the overall project.
(c) The limit on commercial use of built up area as prescribed by clause (d) of Section 80 IB (10) has no retrospective application, and it applies only w.e.f the assessment year 2005-06."
Admittedly the built up area of commercial space in the project was less than the parameter laid down by the Special Bench referred to above. In those circumstances, we hold that the CIT(A) was justified in holding that the Assessee satisfied the condition mentioned in Sec.80-IB(10)(d) of the Act.
42. While concluding on the issue of Assessee's claim for deduction u/s.80-IB(10) of the Act, we notice that while deciding the question as to whether Assessee satisfied the condition laid down in Sec.80_IB(10)(d) of the Act, we have held that the law as on the date when the Assessee got its project approved by the SRA will apply. If that be so, the condition u/s.80-IB(10)(a) in the relevant A.Y. i.e., AY 99-2000 was that the Assessee should derive profits by developing and building housing projects approved by a local authority on a size of plot of land which has a minimum area of one acre and the residential unit has a maximum built-up area not exceeding one thousand square feet and further the Assessee should commence development and construction of the housing project on or after the 1st day of October, 1998 and complete the same before 31st day of March, 2001. It therefore follows that the Assessee should have completed the construction as on 31.3.2001. Admittedly the Assessee has not completed the construction even as on 31.3.2005. Therefore this condition would then remain not satisfied. Our conclusion on Ground No.I and II raised by the Revenue is that, the Assessee has satisfied all the conditions for claiming u/s.80-IB (10) of the Act, referred to by the AO in the order of Assessment except the condition that the project should be completed on or before 31.3.2005 and in such circumstances, we have to hold that the Assessee would not be eligible for deduction u/s.80-IB(10) of the Act.
43. Ground No.III raised by the Revenue reads as follows:
III. The learned CIT(A) erred in facts and circumstances of the case in deleting the addition amounting to Rs.51 lakhs made on account of unexplained receipts of money ignoring the fact that this amount included Rs.20 lakhs voluntarily declared as undisclosed income by the Assessee at the time of survey.
44. This addition was made by the AO based on Page No.1, 7 and 10 being loose papers which were impounded in the course of survey at the on 9-2-2006. These were marked as A/1 pages 1, 7 and 10. The loose sheets evidenced receipt of money by the Assessee from buyers of the flats. According to the AO, these amounts were not recorded in the books of accounts and therefore the AO made an addition of Rs.59,20,000/- which is the sum total of Rs.1,20,000, Rs.51,00,000 and Rs.7,00,000 found recorded in page No.7, 10 and 1 respectively. The AO fortified his conclusion that these were unaccounted receipts on the basis of surrender of income of Rs.20 lacs in the statement of the partner of the Assessee recorded at the time of survey. The addition was made u/s.69-A of the Act.
45. Before CIT(A), the Assessee submitted that Page No.1 is a receipt of Rs. 3,50,000/- issued to one Shri T.M.Chaudhary for Flat No.B-606. On the bottom side of the receipt an amount of Rs. 3,50,000/- in respect of Flat No.C-602 has been shown to have been received from one Shri K.F.K. Bhili. The assessee admitted to have received money of Rs.3,50,000/- towards Flat No. C-602 from Shri Bhili as booking amount in between 22/01/2004 & 10/2/2004. Thus, both Shri T.M. Chaudhary and Shri Bhili paid booking amount of Rs. 3,50,000/- each totaling to Rs. 7,00,000/- to the assessee. The Assessee pointed out that as per the terms & conditions agreed between the Assessee and the aforesaid parties, they were supposed to make the full payment of consideration for flat Nos. B-606 & C-602 on or before 10/02/2004. Since they failed to make the payments, on or before the stipulated date, the booking was cancelled and amount received of Rs. 7,00,000/- from them were returned back to them. Since the booking was cancelled, in a very short span of time of 21 days only, nothing was recorded in the books of accounts because ultimately, it would have been merely contra entries only. The Assessee further pointed out that thereafter, the Flat Nos. B-606 & C-602 were sold to Shri Shailesh K. Chauhan and Shri Vijay R. Khedkar, who paid the total consideration and the same has been duly recorded in the books of accounts. Even the sale agreements with both these occupants have duly been executed and registered. Therefore, the token booking amount on cancellation of the booking was returned by the appellant, and therefore, the same never generated any receipt or income to the appellant. It was submitted that, the addition to the tune of Rs. 7,00,000/- out of total addition of Rs.59,20,000/- stands fully explained and the assessee has on one hand received the booking amount and on another hand has returned the booking amount on cancellation of the booking.
46. The Assessee explained Page No.7 as a receipt regarding an amount of Rs.1,20,000/- dated 17/2/2005. The Assessee pointed out that the receipt is not at all signed by the person whose name appears on the receipt i.e. Ashok M. Raut. The Assessee submitted that there was no person connected with it by the name of Ashok M. Raut. The Assessee explained that, some customer or agency might have forgotten such receipt during their his visit at its office. The Assessee submitted that the, the receipt being unsigned it cannot be said that the Assessee received any money. The Assessee pointed out that these facts were explained in the statement by the Partner of the appellant firm. Accordingly, it was submitted that the Ld. A.O while considering the total addition of Rs.59,20,000/- wrongly attributed the alleged amount of Rs. 1,20,000/- as receipt of the assessee merely on the fact that, it was found from us.
47. The Assessee explained Page No.10 which contained the jottings of Rs. 51,00,000/-. On this page agreement value of the saleable areas in respect of 6 flats have been jotted down proposed to be allotted to certain persons for a total consideration of Rs.51,00,000/-. The Assessee explained that at the relevant point of time, the assesseee had negotiated and agreed the sale value receivable on sale of 6 flats at Rs. 51,00,000/-. Thereafter, the transaction of sale to the persons whose names have been mentioned against the relevant flat Nos. could not be completed, as they failed to make payment of agreed amount by the agreed date. Thus, on this page, the sale value receivable from prospective customers at relevant point of time was jotted down. Since the sale could not be made to them due to non-payment from their side of the total consideration, such flats were sold to other customers and the actual sale price recovered from new customers was much more higher than Rs.51,00,000/- shown in the paper. In this connection, the Assessee pointed out that Shri T.M. Chaudhary & Shri K.F.K. Bhili whose names also appear in page-1 also appear on Page No.10. The Assessee pointed out that, the partner in his statement has categorically clarified that, the transactions are duly recorded in the relevant books of accounts in the statement itself. The Ld. A.O has never verified or pointed out that, the relevant transactions are not recorded in the books. The relevant chart of old consideration agreed upon of Rs. 51,00,000/- in respect of 6 flats as well as the actual sale consideration received from new customers on cancellation of booking of old customers was given, which is as given below:
Flat No. Name of the old customers as jotted down in Page No.10 Saleable area (Sq.Ft) Agreed consideration.
Actual sale made to new customer on non-payment by old customer Sale consideration received from new customer recorded in books.
C-601 KFK Bhili 550 8,25,000 Santosh Achrekar 10,40,815 C-602 R.M. Agaria 550 8,25,000 Vijay R. Khedkar 14,82,780 B-604 A.V. Oomatia 600 9,00,000 Nasrat Ali Mohmad 11,84,500 B-605 Z.A.Oomatia 550 8,25,000 Shailesh Chauhan 9,79,015 B-606 T.Chaudhary 550 8,25,000 Shailesh Chauhan 9,79,015 B-703 T.M.Oomatia 600 9,00,000 Zubeda K. Nadar 11,02,315 The Assessee submitted that in the books of accounts, the sale consideration received from the final customers has been recorded and that the same is much than the sale consideration shown in the impounded Page No.10.
48. Without prejudice to the above, the Assessee submitted that the ld. Assessing Officer has invoked the provisions of Sec.69A by treating the amount of Rs.59,20,000/- as deemed income of the assepssee. Provisions of Sec. 69A of the Act stipulates that, where in any financial year, the assessee is found to be the owner of any money and such money is not recorded in the books of accounts, if any, maintained by the assessee for any source of income, and the assessee offers no explanation or the explanation offered by the assessee is not satisfactory such money so owned by the assesee shall be deemed to be the income of the assesee. Thus, as per the provisions of Sec. 69A which deals with unexplained money, etc., two conditions are to be fulfilled i.e. (i) the assessee is found to be the owner of the money and (ii) such money is not recorded in the books of accounts. In the instant case of the assesse, there is no case of the ld. A.O that assessee was found in possession of Rs. 59,20,000/- which were not recorded in the books. Not a single unaccounted rupee was found during the course of survey. The Hon'ble Calcutta High Court in the case of Chandulal & Company. Vs. CIT (136 ITR 889) has held that, both the above referred conditions shall be fulfilled for invoking the provisions of Sec. 69 A of the Act. Accordingly, the liability u/s. 69A will arise only if the assessee is found to be the owner of the money. Besides all the papers found during the course of survey were duly & satisfactorily with cogent, concrete and substantiating material were explained. Even during the course of the statement also, no where the partner of the assessee firm has accepted such papers or transactions recorded therein as out of books of accounts. It was submitted that, the Ld. A.O erred in making the impugned addition.
49. The CIT(A) at the outset noticed that the conclusion of the Assessing Officer were mainly based on the admission of the assessee's partner made during the course of survey. He was of the view that the disclosure made was based on the impounded documents found from the possession of the assessee and the jottings made therein. In this regard, the CIT(A) noticed that Shri Jitendra Brambhatt, partner of the Assessee in the statement recorded at the time of survey had clarified that the page No.10 of the loose paper file impounded u/s. 133A related to some cash payments received on sale of certain flats. In the said statement he has further offered a sum of Rs.20 lakhs as its unaccounted receipts on sale of flats and on account of any other irregularities that may be found in the books /accounts/documents etc. He has specifically admitted receipts of "On money" of Rs. 7,00,000/- and Rs. 1,20,000/- impounded at page Nos.1 & 7 and the balance disclosure made in on account of any other irregularities, if found in the case of the appellant.
50. The CIT(A) noticed that on the impounded loose paper at page no.1 which evidenced payment of Rs.3,50,000/- each i.e. Rs. 7 lakhs by Shri T.M. Chaudhary and Shri K.F.K Bhili for flat nos.B-606 and C-601, the contention of the assessee was that it was part payment for purchase of such flats, in absence of making full payments, the amounts were returned to the parties and such flats were sold to other persons. He held that the Assessee did not produce any evidence of payment of this money as claimed by the Assessee except submissions that there is no sale of flats to the above referred two persons. He found that no entries of receipt of cash and return of cash are found recorded in its books of account maintained for the relevant assessment year. In these circumstances, the CIT(A) upheld the addition of Rs.7,00,000/- made by the AO.
51. As regards to page no.10, the CIT(A) found considerable force in the submissions and arguments of the Assessee that the sale of six flats recorded in the impounded paper never materialized with the parties mentioned therein due to various reasons and ultimately these flats were sold to various other parties as per the details provided during the assessment at much higher rates than the sale price quoted in the said impounded paper. He held that the copies of sale deeds produced for this purpose to strengthened Assessee's submission. Under these circumstances, the CIT(A) held that in absence of any evidence being placed on record that, any of the old customers mentioned in the page No.10 are owner of the flats shown against their names and also, in light of the agreements placed by the assessee on record for new owners for the same flats showing higher consideration, he was inclined to accept the contentions of the assessee that, the agreed sale consideration with its six old customers for sale of six flats at Rs.51 lakhs, as recorded on page no.10, did not materialized and subsequently, all these six flats were sold to its new customers at a higher value, as recorded in its books of account based on the specific sale deeds entered into with each such party. He held that there is no evidence brought on record to prove that the assessee had received cash or money from these persons. Accordingly, on account of these facts of the case and in the absence of any material brought on record in support of the addition of unexplained money, the entire addition of Rs. 51,00,000/- was found to be unjustified and therefore, deleted.
52. As regards the page no.7 containing details of Rs. 1,20,000/-, which the Assessee disowned, the CIT(A) held that since, the document was found from the possession of the assessee it was his responsibility to offer proper and plausible explanation about the same. Since, no plausible explanation was offered by the asseseee on the paper impounded from its premises, the entries recorded therein were held to be in connection with it unaccounted income not recorded in its regular books of account. Therefore, addition made on this account was confirmed.
53. The CIT(A) also directed the AO to allow deduction U/s.80IB(10) on the addition sustained as above. Against the aforesaid order of the CIT(A), the revenue has raised ground no.III before the Tribunal.
54. We have heard the submissions of the learned D.R. who relied on the order of the AO. The learned counsel for the Assessee reiterated the plea of the Assessee as put forth before the CIT(A) and the order of the CIT(A).
55. We have considered the rival submissions. The addition deleted by the CIT(A) was made by the AO on the basis of page-10 of the seized document. On this page agreement value of the saleable areas in respect of 6 flats have been jotted down. According to the Assessee it was a note of proposed allotment of flats to certain persons for a total consideration of Rs.51,00,000/-. The Assessee explained that at the relevant point of time, the assesseee had negotiated and agreed the sale value receivable on sale of 6 flats at Rs. 51,00,000/-. Thereafter, the transaction of sale to the persons whose names have been mentioned against the relevant flat Nos. could not be completed, as they failed to make payment of agreed amount by the agreed date. Thus, on this page, the sale value receivable from prospective customers at relevant point of time was jotted down. Since the sale could not be made to them due to non-payment from their side of the total consideration, such flats were sold to other customers and the actual sale price recovered from new customers was much more higher than Rs.51,00,000/- shown in the paper. The partner in his statement has categorically clarified that, the transactions are duly recorded in the relevant books of accounts in the statement itself. The Ld. A.O has accepted this fact. The sale consideration received from the final customers is much than the sale consideration shown in the impounded Page No.10. We are of the view that in the light of all these surrounding circumstances, the CIT(A) was justified in accepting the plea of the Assessee. Besides the above, we do not find any material brought on record by the AO to show that these monies were received from the persons against whose names they were found to be recorded especially when the flat nos. against which their names were found were found allotted to third parties. When these persons did not have any interest on any of the flats in the project of the Assessee it is not possible for them to have paid any money to the Assessee. In these circumstances, we feel that the CIT(A) was right in deleting the addition made by the AO. We therefore confirm the order of CIT(A) and dismiss ground No.III of the revenue.
56. In the result, appeal by the Revenue is partly allowed.
Order pronounced in the open court on the 26th day of Nov. 2010
Sd/- Sd/-
(RAJENDRA SINGH) (N.V.VASUDEVAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated. 26th Nov.2010
Copy to: 1. The Appellant 2. The Respondent 3. The CIT City -concerned
The CIT(A)- concerned 5. The D.R"C" Bench.
(True copy)
By Order
Asst. Registrar, ITAT, Mumbai Benches
MUMBAI.
Vm.
Details
Date
Initials
Designation
1
Draft dictated on
Sr.PS/PS
2
Draft Placed before author
Sr.PS/PS
3
Draft proposed & placed before the Second Member
JM/AM
4
Draft discussed/approved by Second Member
JM/AM
5.
Approved Draft comes to the Sr.PS/PS
Sr.PS/PS
6.
Kept for pronouncement on
Sr.PS/PS
7.
File sent to the Bench Clerk
Sr.PS/PS
8
Date on which the file goes to the Head clerk
9
Date of Dispatch of order
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ITA NO.6055/MUM/09(A.Y. 2005-06)