Income Tax Appellate Tribunal - Pune
Mateshwari Developers,, Raigad vs Department Of Income Tax on 30 January, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND Ms. SUSHMA CHOWLA, JUDICIAL MEMBER
ITA No.214/PN/2009
Assessment Year: 2005-06
M/s. Mateshwari Developers
SRDV Chawl, Room No.1,
Akurli Village, Panvel,
Raigad. .... Appellant
PAN: AALFM7324C
Vs.
Income Tax Officer,
Ward (2), Panvel .... Respondent
CO No.40/PN/2011
Assessment Year: 2005-06
Income Tax Officer,
Ward (2), Panvel .... Cross Objector
Vs.
M/s. Mateshwari Developers
SRDV Chawl, Room No.1,
Akurli Village, Panvel,
Raigad. .... Respondent
PAN: AALFM7324C
ITA No.142/PN/2010
Assessment Year: 2006-07
Income Tax Officer,
Ward (2), Panvel .... Appellant
Vs.
M/s. Mateshwari Developers
SRDV Chawl, Room No.1,
Akurli Village, Panvel,
Raigad. .... Respondent
PAN: AALFM7324C
Assessee by : Sunil U. Pathak
Revenue by : Rajesh Damor
Date of hearing : 03-12-2014
Date of pronouncement : 30-01-2015
2
ITA No.214/PN/2009
CO No.40/PN/2011
ITA No.142/PN/2010
M/s. Mateshwari Developers
ORDER
PER SUSHMA CHOWLA, JM:
Out of this bunch of files, the appeal in ITA No.214/PN/2009 is filed by the assessee against the order of CIT(A)-I, Thane, dated 28.11.2008 relating to assessment year 2005-06 against order passed under section 143(3) of the Income Tax Act, 1961. The Revenue has filed the Cross Objections against the appeal filed by the assessee relating to assessment year 2005-06. Further, the Revenue has also filed an appeal against the order of CIT(A)-I, Thane, dated 15.10.2009, relating to assessment year 2006-07 against order passed under section 143(3) of the Income Tax Act, 1961.
2. All the three appeals relating to the same assessee were heard together and are being disposed of by this consolidated order for the sake of convenience.
3. The assessee in ITA No.214/PN/2009 has raised the following grounds of appeal:-
1. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in upholding the disallowances made by Assessing Officer, of lawful claim of exemption of income u/s 80IB(10) Rs.39,32,000/- by assessee.
2. On facts and circumstances of case and in law, the learned CIT(A) confirmed disallowances made by AO u/s 80IB(10) without verifying the evidence and facts submitted by assessee at the time of hearing before him.
3. The learned CIT(A) has erred in law in not considering affidavit of Architect and approved plan by Collector, Alibag.
4. The learned CIT (A) erred in law by not considering at all Tribunal decisions submitted by assessee at the time of hearing.
5. The learned CIT(A) erred in law and facts by confirming disallowance made by AO of Rs.14,50,023/- u/s 40(ia).3 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010
M/s. Mateshwari Developers
6. The learned CIT(A) erred in law and facts by confirming disallowance made by AO of Transport Charges including cost of material Rs.13,16,955/- u/s 40(ia).
7. The learned CIT (A) erred in law and facts by confirming disallowance made by AO of third party expenditure Rs.3,73,000/- treating as unaccounted expenditure.
8. The learned CIT(A) erred in law and facts by confirming addition made by AO for extra work done @ 8% of third party receipts Rs.36,860/-
9. The Learned CIT (A) in reaching to the conclusion and confirming such huge additions omitted to consider relevant factors, considerations, principles and evidences submitted by assessee, while he was overwhelmed, influenced and prejudiced by irrelevant consideration and factor including survey u/s 133 A.
10. The appellant craves, leave to add, amend or modify any grounds of appeal on or before final hearing of appeal.
4. The Revenue in CO No.40/PN/2011 has raised the following grounds of objections:-
1. The assessee has erred in stating that the Hon. CIT(A) has confirmed the denial of deduction u/s 80IB(10) without verifying the evidence.
2. The assessee has failed to appreciate that the confirmation of disallowance of Rs.14,50,023/- u/s 40(a)(ia) on account of labour charges, was made by the Hon.CIT(A) after due consideration of facts and law.
3. The assessee has failed to appreciate that the confirmation of disallowance of Rs.13,16,955/- u/s 40(a)(ia) on account of transport charges, was made by the Hon.CIT(A) after due consideration of facts and law.
4. The assessee has failed to appreciate that the confirmation of disallowance of Rs.3,73,000/- on account of unaccounted expenses, was made by the Hon. CIT(A) after due consideration of facts and law.
5. The assessee has failed to appreciate that the confirmation of disallowance of Rs.36,860/- for unaccounted business receipts, was made by the Hon. CIT(A) after due consideration of facts and law.
6. The claim of deduction u/s 80IB(10), is not available to the assessee for the following reasons -4 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010
M/s. Mateshwari Developers
a) In the present case, the original plan was sanctioned on 28.10.1995 whereas the provisions of sec. 80IB(10) came into existence w.e.f. 01.10.1998 and applicable for the projects in which the plans are approved after 01.10.1998. Thus, in the instant case the provisions of sec. 80IB(10) are not applicable. Therefore, the Hon. ITAT is requested to consider this fact while deciding the issue on the appeal filed by the assessee.
b) In the present case, the revised plan was claimed to be passed somewhere in the year 2003 (no proof has been submitted from the competent authority). As per the explanation to the provisions of sec 80IB(10) in the cases 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. Therefore, as the original plan was sanctioned on 28.10.1995, the deduction u/s 80IB(10) is not available to this project. The Hon. ITAT is requested to consider this fact while deciding the issue on the appeal filed by the assessee.
c) During the course of assessment proceedings the assessee has failed to furnish the commencement certificate of the project, copy of sanction plan duly approved by competent authority which are mandatory requirements to fulfill the conditions laid down for claiming deduction u/s 80IB(10) of the I.T. Act.
Therefore, the Hon. ITAT is requested to consider this fact while deciding the issue on the appeal filed by the assessee.
7. The appellant craves leave to add, amend or alter any ground/ grounds, which may be necessary.
5. The first issue raised by the assessee vide grounds of appeal No.1 to 3 is against the denial of deduction under section 80IB(10) of the Act.
6. The brief facts of the case are that, the assessee was a builder and during the year under consideration, was developing two projects namely Apeksha Complex and Mateswari Complex at Village Akurli, Panvel. The Apeksha Complex, as per the assessee was a residential cum commercial project, whereas Mateswari Complex was purely residential complex. The assessee had claimed deduction under 5 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers section 80IB(10) of the Act and had filed the return of income at Nil. The Assessing Officer during the course of assessment proceedings, noted that the assessee had not enclosed the Form No.10CCB along with return of income. However, from the perusal of Form No.10CCB enclosed with the return of income relating to assessment year 2006- 07, it was noted by the Assessing Officer that the local authority mentioned was Alibag Collector Office. The Assessing Officer further noted certain points in the Audit Report furnished in Form No.10CCB for assessment year 2006-07. As per the said Audit Report, the date of commencement of the operation by the undertaking was 22.11.2002 whereas the assessee firm had come into existence on 25.10.2002. In column 14(q), the date of approval by the local authority was mentioned as 16.04.2003. However, on going through the return for financial year 2003-04 i.e. year ending 31.03.2004, the Assessing Officer found that there was closing work-in-progress of Rs.1,05,90,758/-, meaning thereby that the project was initiated in financial year 2003-04. The opening work-in-progress in the financial year 2003-04 was only Rs.1,21,120/-. The Assessing Officer thus, concluded that the project was started even before approval by the appropriate authority. The assessee had failed to enclose the copy of approval by the local authority along with return of income. In the Form No.10CCB filed relating to assessment year 2006-07, in column 7, the Auditor mentioned the deduction under section 80IA of the Act being claimed. However, the eligible undertaking was entitled only to the deduction under section 80IB(10) of the Act in the case of housing projects. Further, the spot enquiries confirmed that there were 23 shops in J and K buildings. However, in the Audit Report, there was no mention of any commercial shops in the project. The assessee was 6 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers asked to explain whether it fulfills the conditions laid down in section 80IB(10) of the Act. The assessee did not submit any reply. In order to verify the claim of assessee under section 80IB(10) of the Act, survey under section 133A of the Act was undertaken on 30.08.2007. During the course of survey, the physical measurements of flats and shops were taken by the survey team. The details of area of flats and shops of both the complexes were tabulated in Annexure-2 attached to the assessment order. It was found that Apeksha Complex had commercial area of more than 2000 sq. ft. During the course of survey proceedings, plan signed by Sarpanch in Bundle-1, at document Nos.12 and 13 was found, which reflected the commercial area. However, there was no date on this plan. The document further confirms that the shops measuring 4667 sq. ft. were commercial area, even in the map of Village Grampanchayat, though the same Grampanchayat was not the approving authority. The approving authority in the case was District Collector, Alibag. During the course of survey, statement of Shri Babubhai Patel, one of the partners was recorded on 30.08.2007, in which he confirmed the area of shops being more than 2000 sq. ft. The partner of the assessee firm further confronted with the fact that for claiming deduction under section 80IB(10) of the Act in assessment year 2005-06 and 2006-07, it was mandatory that the plan should be approved by the local authority and he was asked the date of approval and date of application seeking approval from local authority. In reply, he explained that for Apeksha Complex, application was made to the Collector, Alibag in the year 2003 and the approval was received in the year 2003 itself. As regards the copy of the application, it was submitted that the same was lost in floods.
7ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010
M/s. Mateshwari Developers
7. During the course of assessment proceedings, the assessee was again confronted with the above said facts and in the absence of any explanation furnished by the assessee and also non-production of required approval i.e. certificate from the District Collector, Alibag, the Assessing Officer was of the view that the project of assessee was not eligible for claim of deduction under section 80IB(10) of the Act. The said deduction was not allowed on account of two issues i.e. the commercial area in the housing project exceeded 5% of the aggregate built up area or 2000 sq. ft., whichever was less and further, the assessee had not furnished any approval from the appropriate authority in respect of the said project.
8. The CIT(A) observed that filing of Audit Report in Form No.10CCB along with the return of income was mandatory for claiming the deduction under section 80IB(10) of the Act. Since the assessee had not filed the said Form No.10CCB along with return of income, the CIT(A) held that the assessee had violated the specific conditions given in section 80IA(7) of the Act, which is applicable to section 80IB(10) of the Act, in view of the provisions of section 80IB(13) of the Act. Further, the CIT(A) observed that the assessee along with the return of income filed for assessment year 2006-07 had annexed the Audit Report in Form No.10CCB, which reflected in item No.9 that the initial assessment year from when deduction was claimed was 31.03.2006 i.e. assessment year 2006-07. The CIT(A) thus, observed that the same clearly shows that the assessee was intending to claim deduction under section 80IB(10) of the Act from assessment year 2006-07. Further, in the Form No.10CCB, the assessee had claimed deduction under section 80IA(a) and 80IB(10) of the Act, meaning thereby that the assessee had not filed the Form No.10CCB along with the return of 8 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers income for assessment year 2005-06. Another point noted by the CIT(A) was that in the acknowledgement for filing the return of income for assessment year 2005-06, the assessee had typed "Certificate and Report" in item No.6 of list of documents attached with the return. However, Form No.10CCB had been added later on in ink.
9. The CIT(A) further held that the local authority for passing the building project in Village Akurli, could not be the Collector, Alibag and further, the assessee had not submitted the approval letter of Collector, Alibag during the course of assessment proceedings or even during the course of appellate proceedings. The assessee had only furnished the copy of letter of housing plan sanctioned by the office of Collector, Alibag, which in turn was only a letter giving NA permission and was not a sanction letter for housing project. Further, in Form No.10CCB filed along with the return of income for assessment year 2006-07, the assessee had mentioned the date of commencement of the project as 22.11.2002 and the date of approval by the local authority as 16.04.2003, which clearly shows that the project was started without any sanction of the local authority. Further, the said sanction order dated 16.04.2003 was neither furnished before the Assessing Officer nor before the CIT(A).
10. Another aspect considered by the CIT(A) was the building plan signed by Sarpanch, Akurli Grampanchayat found from the premises of Hari Om Associates during the course of survey under section 133A of the Act and it was observed by the CIT(A) that on enquiry, it transpires that the Grampanchayat was the local authority who was empowered to pass the building project in the territorial jurisdiction in the State of Maharashtra.
9ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010
M/s. Mateshwari Developers
11. The second objection raised by the Assessing Officer as to the building having commercial area of more than 2000 sq. ft. The CIT(A) noted that the actual commercial area was 4667 sq. ft. which was shown in the building plans and also was confirmed by the partner of the assessee firm in the statement recorded under section 133(1) of the Act. In view of the same, the CIT(A) vide para 5.1.6 held as under:-
"5.1.6 Thus, the factual and legal position of this case can be summarized as under:-
i. The appellant has not enclosed Form No 10CCB with the return of income filed for AY 05-06. This is the violation of the mandatory provisions of Section 80IA(7) rws 80IB(13) of the IT Act, 1961.
ii. The building complex 'Apeksha' is having 4667 sq ft commercial area which clearly violates the provisions contained in Section 80IB(10) , condition No (d).
iii. The building project commenced without any valid sanction from the 'local authority.' The local authority's sanction order which is mandatory for the building projects claiming deduction u/s 80IB(10) has not been filed during the course of assessment proceedings and also during the course of appellate proceedings. The claim of filing sanction order of 'local authority' has been found to be false as the appellant has enclosed a letter of 'NA permission' in the name of sanction order' for building project.
iv. In Form No 10CCB filed with return of income for AY 2006-07, the initial year for claim of deduction u/s 80IB(10) has been shown as AY 2006-07.
In view of the above facts and in view of the explicit violation of various provisions of Section 80IB(10), I am not in a position to interfere with the order of the AO on this issue. The disallowance of the claim of deduction u/s 80IB(10) is upheld. The grounds of appeal No 1 & 2 are, therefore, dismissed.
12. The assessee is in appeal against the order of CIT(A) in not allowing deduction under section 80IB(10) of the Act. 10 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010
M/s. Mateshwari Developers
13. Further, the ground of appeal No.1 raised in the Cross Objection by the Revenue is in support of the order of CIT(A).
14. The Revenue in assessment year 2006-07 has agitated against the grant of deduction under section 80IB(10) of the Act by the CIT(A) and has raised the following grounds of appeal:-
1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A)-I, Thane was justified in holding that the deduction u/s 80IB(10), as applicable prior to 1st April, 2005, is admissible in case of a 'housing project' comprising residential housing units and commercial establishments?
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A)-I, Thane was justified in holding that the residential projects having commercial area more than 2,000 sq.ft.
or 5% of the total built area is eligible for the claim of deduction for entire profits of project u/s 80IB(10)?
3. The appellant prays the order of the Ld. CIT(A)-I, Thane, may be vacated and that of the Assessing Officer be restored. The appellant craves leave to add, amend or alter any ground/ grounds, which may be necessary.
15. Further, the additional grounds of appeal have also been raised by the Revenue, which read as under:-
1. In the present case, the original plan was sanctioned on 28.10.1995 whereas the provisions of sec. 80IB(10) came into existence w.e.f. 01.10.1998 and applicable for the projects in which the plans are approved after 01.10.1998. Thus, in the instant case the provisions of sec. 80IB(10) are not applicable.
Therefore, the Hon. ITAT is requested to consider this fact while deciding the issue on the appeal filed by the assessee.
2. In the present case, the revised plan was claimed to be passed somewhere in the year 2003 (no proof has been submitted from the competent authority). As per the explanation to the provisions of sec. 80IB(10) in the cases where the plan is revised, the date of original sanction of plan is considered for application of provisions of sec. 80IB(10). Therefore, the deduction u/s 80IB(10) is not available to this project. The Hon. ITAT is requested to consider this fact while deciding the issue on the appeal filed by the assessee.
11ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010
M/s. Mateshwari Developers
3. Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A)-I, Thane was justified in allowing the deduction u/s 80IB(10) even in absence of commencement certificate of the project from the competent authority.
4. Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A)-I, Thane was justified in allowing the deduction u/s 80IB(10) even in absence of sanction for approval of the project by the competent authority.
5. The appellant prays the order of the CIT(A)-I, Thane, may be vacated and that of the Assessing Officer be restored.
6. The appellant craves leave to add, amend or alter any ground/ grounds, which may be necessary.
16. We proceed to decide the appeal filed by the assessee in assessment year 2005-06 and the appeal filed by the Revenue in assessment year 2006-07 against the claim of deduction under section 80IB(10) of the Act after hearing both the Authorized Representatives.
17. The learned Authorized Representative for the assessee pointed out that the deduction under section 80IB(10) of the Act was denied to the assessee in assessment year 2005-06 on several issues and the first issue was non-submission of Audit Report in Form No.10CCB along with return of income. Our attention was drawn to the copy of acknowledgement of filing the return of income at pages 6 and 7 of the Paper Book, in which documents attached with the return of income at serial No.6, it was mentioned certificate and report (Form No.10CCB). The learned Authorized Representative for the assessee further pointed out that the said Audit Report in Form No.10CCB is attached at pages 26 and 27 of the Paper Book. The learned Authorized Representative for the assessee further referred to the assessment order, wherein at page 2, the Assessing Officer mentioned that the assessee had not enclosed the Form No.10CCB along with return of income for assessment year 2005-06. However, at page 5, the Assessing Officer 12 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers notes that the Form No.10CCB was enclosed with the return of income. Without prejudice to its claim of having furnished Form No.10CCB along with return of income, the learned Authorized Representative for the assessee pointed out that the Audit Report can be filed at any time of proceedings i.e. even before the Tribunal as appellate proceedings were continuation of the assessment proceedings. Reliance in this regard, was placed in CIT Vs. Mayur Foundation (2005) 274 ITR 562 (Guj) and Hastimal Sancheti Research Foundation Vs. ITO, in ITA No.225/PN/2008, relating to assessment year 2004-05 order dated 26.03.2010.
18. The second contention raised by the learned Authorized Representative for the assessee was that the Assessing Officer had rejected the claim of deduction under section 80IB(10) of the Act as the commencement certificate was not filed by the assessee. It was clarified by the learned Authorized Representative for the assessee for the project at Alibag, Panvel that for the commencement of the said project, approval of the Grampanchayat and Collector had to be taken. Our attention was drawn to the letter placed at page 61 of the Paper Book along with English transaction at page 62 of the Paper Book. It was further pointed out by the learned Authorized Representative for the assessee that the records of the assessee and Grampanchayat were washed away in floods. Our attention was further drawn to the completion certificate placed at page 66 along with its English transaction at page 67 of the Paper Book, which was dated 21.07.2006, which was filed before the Assessing Officer. Further, the assessee made request for admission of additional evidence and it was pointed out that the assessee had sought the copy of the permission granted by the Grampanchayat from the owner of land, which is 13 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers placed as additional evidence along with its English transaction and the same may be admitted. The learned Authorized Representative for the assessee further pointed out that another aspect for rejection of the claim under section 80IB(10) of the Act was that the project comprised of commercial area exceeding 2000 sq. ft. It was pointed out by the learned Authorized Representative for the assessee that as per the commencement certificate, the construction started on 02.05.2003 and the condition of the commercial area being less than 2000 sq. ft., does not apply to the earlier projects. Reliance in this regard, in Opel Shelters Pvt. Ltd. Vs. ACIT in ITA No.219/PN/2009 & another, relating to assessment year 2005-06, vide order dated 31.05.2011, Manan Corporation Vs. ACIT, in Tax Appeal No.1053 of 2011, vide order dated 03.09.2012 (Guj), and CIT & Another Vs. G.R. Developers (2013) 353 ITR 1 (Kar).
19. Another objection raised by the Assessing Officer was that in Form No.10CCB filed for assessment year 2006-07, the date of commencement of the project was mentioned as 22.11.2002, whereas the date of approval of the plan was stated to be 16.04.2003. In reply, the learned Authorized Representative for the assessee pointed out that the assessee had incurred some nominal expenses like leveling of land, creation of compound wall, etc. amounting to Rs.1,21,120/- and such expenditure could not be considered as incurred on development and construction of the project. It was vehemently stated by the learned Authorized Representative for the assessee that the construction of the project was commenced only after obtaining the approval from the local authority and hence, the assessee was entitled to the claim of deduction under section 80IB(10) of the Act. 14 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010
M/s. Mateshwari Developers
20. The learned Departmental Representative for the Revenue in reply, pointed out that the CIT(A) in para 5.1.1 at page 17 of the appellate order has given a finding that the assessee while claiming the deduction in assessment year 2006-07 had mentioned that it was the first year of its claim. The second issue raised by the learned Departmental Representative for the Revenue was that the Collector had sanctioned the said plan prior to 1998 and only the projects which were approved after 1998 could claim the deduction under section 80IB(10) of the Act. Further, in respect of the violation of commercial area, the learned Departmental Representative for the Revenue placed reliance on the ratio laid down by Mumbai Bench of the Tribunal in ITO Vs. Everest Home Construction (India) (P) Ltd. (2012) 26 taxmann.com 246 (Mum.).
21. In rejoinder, the learned Authorized Representative for the assessee pointed out that the first plan was approved prior to 01.10.1998 which was the layout plan. However, the building plan was approved in assessment year 2002-03 and the assessee was entitled to the claim of deduction under section 80IB(10) of the Act. It was further pointed out by the learned Authorized Representative for the assessee that even if the plan was approved before the due date, but the construction commenced after 01.10.1998, so there was no violation of the provisions of section 80IB(10) of the Act.
22. We have heard the rival contentions and perused the record. During the year under consideration, the assessee had carried on the construction activity and had claimed deduction under section 80IB(10) of the Act in respect of project Apeksha Complex, which was a residential cum commercial project. Survey under section 133A of 15 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers the Act was conducted upon the assessee during the course of assessment proceedings on 30.08.2007 and statement of one of the partners of the assessee firm was recorded. The Assessing Officer after analyzing the issue, had denied the deduction under section 80IB(10) of the Act, which was confirmed by the CIT(A) relating to assessment year 2005-06, against which the assessee is in appeal. Similar claim of deduction under section 80IB(10) of the Act in assessment year 2006-07 was denied by the Assessing Officer. However, the same was allowed by the CIT(A), against which, the Revenue is in appeal.
23. The first objection raised by the Assessing Officer in denying the claim under section 80IB(10) of the Act in assessment year 2005-06 was that the assessee had not filed the Form No.10CCB along with return of income. For claiming the deduction under section 80IB(10) of the Act, the requirement is to furnish the Audit Report in Form No.10CCB along with return of income. In case, where the said Audit Report is not furnished along with return of income, then the deduction under section 80IB(10) of the Act from the profits and gains of undertaking are not admissible, in view of provisions of section 80IA(7) r.w.s. 80IB(11) of the Act. The plea of the assessee however, before us is that, it had duly submitted the Form No.10CCB at the time of filing the return of income for assessment year 2005-06. The assessee has placed on record the copy of acknowledgement of filing the return of income for assessment year 2005-06 at pages 6 and 7 of the Paper Book, wherein there is a mention of certificate and audit report and with ink, there is mention of 10CCB. The Assessing Officer while passing the assessment order at page 2 comments that the assessee has not furnished the Audit Report along with return of 16 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers income, however, at page 5, the Assessing Officer accepts the fact that the assessee has furnished the Audit Report in Form No.10CCB along with return of income. The Assessing Officer had confronted the assessee with the fact pertaining to the approval from the statutory authority required as per the provisions of section 80IB(10) of the Act and also the facts stated by the assessee in his return of income and in Form No.10CCB enclosed with the return, during the course of recording the statement of the partner Shri Babubhai Patel under section 131 of the Act while completing the assessment in the case of assessee. Thus, there are several conflicting views of the Assessing Officer vis-à-vis the filing of the Audit Report in Form No.10CCB. However, it is an admitted fact that the assessee had furnished the said Audit Report in Form No.10CCB during the course of appellate proceedings and even before us, and the same is placed at pages 26 and 27 of the Paper Book. The said Audit Report can be filed during appellate proceedings as the same are continuation of assessment proceedings. The said view has been laid down by the Hon'ble Gujarat CIT Vs. Mayur Foundation (supra). Applying the said principle laid down by the Hon'ble Gujarat High court, we reverse the findings of authorities below, in this regard. The assessee had furnished the Audit Report before the authorities below and also before us and in view thereof, we hold that the assessee had complied with the provisions of the Act in furnishing the Audit Report, which in turn enables the assessee to claim the deduction under section 80IB(10) of the Act.
24. The second issue raised in the present appeal is non-furnishing of the Commencement Certificate from the local authority. The project of the assessee is situated in village Akurli, Tal. Panvel and the 17 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers requirement of provisions of the Act are that the Commencement Certificate should be issued by the local authority. In the case of assessee, admittedly, the local authority was the Grampanchayat, though, a plea was raised by the assessee before the authorities below that the local authority, who sanctions the building project was the Collector, Alibag. The assessee had furnished the approval letter of Collector, Alibag, during the course of assessment proceedings. However, the Commencement Certificate issued by the Grampanchayat was not furnished by the assessee as the same reportedly, was washed away in floods both from the office of the assessee and from the office of the Collector. However, the assessee had furnished the Completion Certificate issued by Grampanchayat, which is placed at page 63 of the Paper Book along with its English translation at page 64. The letter dated 22.05.2009 reads as under:-
"To, Respected Sarpanch Saheb, Grampanchayat Aakurli, Tal. Panvel, Dist. Raigad.
Respected Sir, At village Aakurli, at Gat No. 98, Hissa No. 1 & 2, the application for approval for the construction of building is submitted to the Office of Collector, Raigad Alibag. The said plan is approved by The Collector, Raigad Alibag as on dated 02/05/2003 and has given the permission to construct the building. The said plan is also approved by Grampanchayat, Akurli & has given the permission to construct the building at the said premises. But all the related records were washed out in flood occurred as on dated 26/07/2005.
As the approval from the Grampanchayat, Akurli had been taken for the construction of building, the Grampanchayat, Akurli had also issued the completion certificate as on dated 21/07/2006. As per the completion certificate the Grampanchayat has levied the property tax (Ghar Patti) to all Flat owners as per the measure area of the flats & also collects the said tax from the flat owners. So we request you to issue the letter that we (M/s Mateshwari Developers) had taken the approval of building plan from the Grampanchayat, Akurli.
Recd. by, 18 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers Your's truly, Signature of Surpanch Grampanchayat Aakurli M/s.Mateshwari Developers Tal Panvel Partner's Signature"
25. The perusal of the said communication clearly reflects that the assessee had furnished the application for approval of the construction of building to the office of the Collector, Raigad, Alibag, which was approved on 02.05.2003. The letter further mentions that the said plan was also approved by the Grampanchayat, Akurli, who had given the permission to construct the building at the said premises. The said letter further mentions that the related records were washed away in floods occurred on 26.07.2005. It further stated that the Grampanchayat had issued the Completion Certificate dated 21.07.2006 and had also levied the property tax to all the flat owners. The letter dated 22.05.2009 was issued by the Grampanchayat in reply to the letter dated 18.05.2009 issued by the assessee to the Grampanchayat, the copies of which are placed at pages 61 and 62 of the Paper Book. The Completion Certificate is placed at pages 66 and 67 of the Paper Book which dated 21.07.2006 in which it is certified that the assessee had taken construction permission from the Collector, Raigad, Alibag and the construction of building has been completed.
26. The assessee during the course of hearing has furnished an application for admission of additional evidence being the copy of Grampanchayat permission issued vide letter dated 05.02.2003. The claim of the assessee before the authorities below and even before us was that he had lost the said certificate in floods and even the Grampanchayat had lost the certificate in the floods. However, copy of the Grampanchayat certificate was obtained from the owner of the plot 19 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers of land and the said photo copy of certificate is placed at page 4 of the Paper Book along with its English translation at page 5 of the Paper Book. Vide meeting held on 05.02.2003, the Grampanchayat at Akurli had given permission to the assessee for the construction of complex, residential and commercial purposes. In view of the said certificate being a State record, the same is admitted as additional evidence, where the Grampanchayat had given the permission for construction of the building at the site on 05.02.2003 and the copy of the Certificate being filed by the assessee as an additional evidence, we find no merit in the orders of authorities below in denying the claim of deduction under section 80IB(10) of the Act for the reason that the assessee had failed to furnish the Commencement Certificate of the construction of the project. In any case, the assessee had furnished the Completion Certificate and had also furnished a communication, under which it was stated by the Sarpanch, Grampanchayat, Akurli that the building plans were approved by the Grampanchayat, Akurli, who in turn had given the permission for construction of the building at the said site. Further, the plans were also approved by the Collector, Raigad, Alibag on 02.05.2003 and the Completion Certificate was issued on 21.07.2006. In the entirety of the above said documents and evidences furnished by the assessee, the findings of CIT(A) are reversed. The assessee having obtained the Commencement Certificate from the competent authority i.e. the Grampanchayat and in addition having received the Commencement Certificate from the Collector, Raigad, Alibag, we find no merit in the orders of the authorities below in denying the claim of deduction under section 80IB(10) of the Act on this account.
20ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010
M/s. Mateshwari Developers
27. The learned Departmental Representative for the Revenue had raised an issue that the assessee was not entitled to the claim of deduction under section 80IB(10) of the Act for the instant year since the assessee in the Audit Report filed for assessment year 2006-07 had mentioned that, it was the first year of claim of deduction under section 80IB(10) of the Act. The Audit Report in Form No.10CCB for the instant year is placed at pages 56 and 57 of the Paper Book. The assessee has claimed that the initial assessment year from when the deduction was being claimed was 31.03.2005 (2005-06), similar reporting has been made in the Audit Report in Form No.10CCB relating to assessment year 2006-07. The perusal of return of income filed for assessment year 2005-06 on 31.10.2005 clearly reflects that the assessee had shown the income from business at Rs.39,32,000/- and against which, it had claimed deduction under Chapter VI(A) at Rs.39,32,000/- and had declared the income at Nil. The Assessing Officer at page 2 of the assessment order relating to the instant assessment year has given a finding that during the year, the assessee had shown the sale of flats at Rs.2.47 crores and after debiting various expenses, had shown net profit of Rs.39,20,000/-. Further, it has been noted by the Assessing Officer that the assessee had claimed deduction under section 80IB(10) of the Act of Rs.39,32,000/- and returned Nil income. In the totality of the above facts and circumstances, where the assessee had made the declaration in the return of income, we find no merit in the plea of the learned Departmental Representative for the Revenue in this regard and the same is dismissed.
28. Another issue on which the deduction under section 80IB(10) of the Act was refused to the assessee was that the project of the 21 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers assessee comprised of commercial area of about 4000 sq. ft. The case of the assessee before us was that the Commencement Certificate for construction of the said project was issued on 02.05.2003 and the condition of the requisite of commercial usage does not apply to the earlier projects, which were sanctioned by the authorities. The present provisions of section 80IB(10) of the Act were substituted by the Finance (No.2) Act of 2004 w.e.f. 01.04.2005, under which as per clause (d) to section 80IB(10) of the Act, limit of commercial usage in a housing project is provided. However, the pre-amended provisions of section 80IB(10) of the Act which were amended by the Finance Act, 2000 w.e.f. 01.04.2001 and Finance Act, 2003 with retrospective effect from 01.04.2002 read as under:-
"(10) The amount of profits in case of an undertaking developing and building housing projects approved before the 31st day of March, 2005 by a local authority, shall be hundred per cent of the profits derived in any 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;
(b) the project is on the size of a plot of land which has a minimum area of one acre; and
(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place."
29. Under the said provisions, admittedly, there was no clause relating to the built up area of shops and commercial establishments. The project of the assessee before us was approved on 05.02.2003 and admittedly, the pre-amended provisions of the Act were applicable.
30. The Pune Bench of the Tribunal in Opel Shelters Pvt. Ltd. Vs. ACIT in ITA No.219/PN/2009 & another, relating to assessment year 22 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers 2005-06, vide order dated 31.05.2011, while deciding the issue of application of amended provisions of section 80IB(10) of the Act w.e.f. 01.04.2005 to the projects already approved and started in earlier years, had considered the various decisions on the issue including the ratio laid down by the Mumbai Bench of the Tribunal in Hiranandani Akruti Vs. DCIT, ITA No.5416/Mum/2009, relating to assessment year 2006-07, vide order dated 30.03.2010, and held as under:-
"19. We, thus, find that the issues raised in the present appeals are fully covered in favour of the assessee by the decision of Mumbai Bench of the Tribunal in the case of Hiranandani Akruti J.V v/s. DCIT (Supra). Respectfully followig the said decision in the case of Hiranandani Akruti J.V. (Supra), we decide the issues in favour of the assessees that a housing project will also consist of commercial area to a permissible limit, as settled by the Special Bench of the Tribunal in the case of Bramha Assocates (Supra) (now upheld by the Hon'ble Bombay High Court) as applicable upto A.Y. 2004-05. And secondly, the law as it existed in the Assessment Year when the assessee submitted its proposal of the project and permission for the same was accorded to and when the assessee commenced the project is to be applied. In the present case, undisputedly the assessees had started the project in the year 2001 when sub-clause (d) to Section 80IB(10) was not in existence, hence it cannot be applied on such projects as held by the Mumbai Bench of the Tribunal in the case of Hirnandani Akruti J.V. (Supra). In this regard, we also find strength from this plea of the Ld. A.R. which was also raised before in the case of Hiranandani Akruti J.V. that if the assessee had followed WIP (Work-in-progress) method, the income from the project would have been taxable in the earlier years as the project was completed earlier to the amendment and in that case, as per the old provision the assessee would have been eligible for the deduction. But, just because the assessee has followed the Project Completion method, in these cases, the deduction is being denied because it falls in A.Y. 2005-06. In our view the newly inserted clause (d) to Section 80IB(10) will not apply on the projects approved upto 31.3.05 since in those projects assessees are required to construct what has been approved. The only fissible compliance is required to be met as per the harmonious interpretation of Section 80IB(10) as amended is to complete such projects (approved before 1.4.2004) on or before 31.3.2008. In the cases before us the projects have been completed well before this date. Putting of such condition of time limit is well understood. Since the legislature intended the completion of projects within a time frame to avoid inconvenience to the beneficiaries i.e. the buyers. In this regard the Legislature has categorised the time limit for the projects approved on different period before 31.3.2007 but requirement remained the same that projects would be approved by the local authority. Compliance of the 23 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers requirement provided in clause (d) to the Section is possible only in those projects which have been started on or after 1.4.2005 as by then those assessees were all aware about the provisions laid down in clause (d).
20. By applying the principle of harmonious construction to interpret the provisions under Sub-section (10) to Section 80IB as amended w.e.f. 1.4.2005 we come to the conclusion that the Legislature always intended that the project must be approved by the local authority, thus in those approved projects where construction has been started much earlier than 1.4.2005, the assessees are required to complete the plan as it has been approved. As putting such assessees to complete the plan meeting out condition under clause (d) of the subsection would lead into absurdity and impossibility for the assessee and in contradiction to the provisions u/s. 80 IB(10) as prevailed at the time of approval and commencement of the construction of the project well before 1.4.2005. Bombay Bench of the Tribunal in the case of Hiranandani Akruti J.V (supra) has discussed all these relevant aspects raised by the Department. In the case of Hiranandani Akruti J.V V/s. DCIT, it has been held that the law as existed when the assessee submitted its proposal and permission for carrying out the development was accorded and when the assessee commenced development is to be applied. In the present cases, as per page nos.17 and 20 of the paper book in the case of Opel Shelter the project was commenced on 23.2.2001 and even completed on 14.5.2004, similarly as per the contents of page No.2 of the assessment order and page no. 41 of the paper book in the case of D.S. Kulkarni and Associates, the project was commenced on 12.4.2001 and completed in the month of November 2003. Thus, the assessees were supposed to complete the projects as per the law as existed in the A.Y. 2001-02 in the case of Opel Shelters and in the A.Y. 2002-03 in the case of D.S. Kulkarni and Associates. We thus following the decision in the case of Hiranandani Akruti JV V/s. DCIT (Supra) hold that amended provisions under Section 80 IB(10) w.e.f. 1.4.2005 are not applicable in the present case, hence assessees are eligible for the claimed deduction u/s. 80 IB (10) of the Act. We accordingly direct the A.O to allow the claimed deduction to the assessees."
31. The Hon'ble High Court of Gujarat in Manan Corporation Vs. ACIT, in Tax Appeal No.1053 of 2011, vide order dated 30.09.2012 had held that the amendment brought in to section 80IB(10) of the Act by the Finance Act, 2004 w.e.f. 01.04.2005 was a substantive amendment and not a clarificatory amendment and the amendment of this nature could not have retrospective effect.
32. In view of the above said proposition laid down, we hold that the pre-amended provisions of section 80IB(10) of the Act are to be applied 24 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers to the project undertaken by the assessee, where the approval for the commencement of construction was given before 01.04.2005. As per the additional evidence furnished by the assessee which has been admitted by us, the Commencement Certificate was issued by the Grampanchayat on 05.02.2003 i.e. approved before 01.04.2004 and construction had to be completed on or before 31.03.2008. The assessee has filed the Completion Certificate dated 21.07.2006 at pages 66 and 67 of the Paper Book under which, it has been certified that the said project has been completed as on the date of certificate i.e. within stipulated date provided under the Act. The project having been approved by the competent authority and having been completed by the assessee in line with the approval given by the competent authority, merely because the commercial area of the said project was about 4000 sq. ft., does not dis-entitles the assessee from the claim of deduction under section 80IB(10) of the Act. Accordingly, we direct the Assessing Officer to allow the said deduction to the assessee.
33. The learned Departmental Representative for the Revenue had relied on the decision of the Mumbai Bench of the Tribunal in ITO Vs. Everest Home Construction (India) (P) Ltd. (2012) 26 taxmann.com 246 (Mum.) for the proposition that the limit on the commercial built up area prescribed in section 80IB(10) of the Act w.e.f. 01.04.2005 would also be applicable to the instant project even if such project has been approved by the local authority prior to 01.04.2005. The said decision relied upon by the learned Departmental Representative for the Revenue is no longer good law having regard to the judgment of Hon'ble Jurisdictional High Court in CIT Vs. M/s. Happy Home Enterprises in Income Tax Appeal No.201 of 2012, dated 19.09.2014. As per the Hon'ble High Court, clause (d) of section 80IB(10) of the Act 25 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers as amended by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005 shall not be applicable to the housing projects approved before 31.03.2005. Therefore, the stand of the learned Departmental Representative for the Revenue based on the order of the Mumbai Bench of the Tribunal in ITO Vs. Everest Home Construction (India) (P) Ltd. (supra) is not justified.
34. Another aspect raised by the learned Departmental Representative for the Revenue was that the Collector had sanctioned the plan prior to 1998 and only projects approved after 1998 could claim the deduction under section 80IB(10) of the Act. As pointed out by us in the paras hereinabove, the pre-amended provisions of section 80IB(10) of the Act are attracted in the case under which, as per clause (a) of section 80IB(10), it was provided that the deduction under section 80IB(10) of the Act would be available to such undertaking which had commenced or commences, developed and construction of the housing project on or after 01.10.1998. The assessee has placed on record the Commencement Certificate under which, permission was given to construct the building for residential and commercial purpose by the Grampanchayat at Akurli vide its meeting held on 05.02.2003. Since the permission for construction has been given after 01.04.1998, the provisions of section 80IB(10) of the Act (pre-amended) are clearly attracted and since the assessee has fulfilled the conditions laid down in clause (a) of section 80IB(10) (pre-amended), and had commenced the construction of housing project after first day of October, 1998, the assessee is entitled to the claim of deduction under section 80IB(10) of the Act. Accordingly, we find no merit in the submissions made by the learned Departmental Representative for the Revenue in this regard and the same is dismissed. The Assessing Officer is directed to allow 26 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers deduction under section 80IB(10) of the Act to the assessee for the captioned assessment year.
35. Another issue raised in the present appeal is that in Form No.10CCB, the date of commencement of the project has been mentioned as 22.11.2002 whereas the date of approval was stated to be 16.04.2003. The case of the Assessing Officer was that the assessee had commenced the construction prior to the approval and hence, the assessee was not eligible for the claim of deduction under section 80IB(10) of the Act. Another plea raised in this regard was that in the audit report filed in Form No.10CCB relating to assessment year 2006-07, the year of construction was mentioned to be first year. We find no merit in the plea of the Revenue authorities in this regard, where nominal expenses of Rs.1,21,120/- were incurred by the assessee prior to the development and construction of the project. We find merit in the claim of the assessee that it had commenced construction only after obtaining approval from the local authority, hence, the assessee is eligible to the claim of deduction under section 80IB(10) of the Act. Further, merely because in the audit report relating to assessment year 2006-07, the year of project was mentioned as first year, does not change the factum that the assessee had already claimed the deduction under section 80IB(10) of the Act. The assessee had in Form No.10CCB filed for assessment year 2005- 06 has also mentioned that the year of start of project was first year. In view thereof, there is no merit in denial of deduction under section 80IB(10) of the Act. The grounds of appeal No.1 to 4 raised by the assessee in assessment year 2005-06 are thus, allowed. The ground of appeal No.1 raised in Cross Objections by the Revenue is thus, dismissed.
27ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010
M/s. Mateshwari Developers
36. The Revenue is in appeal against the order of CIT(A) in granting the relief under section 80IB(10) of the Act in assessment year 2006-
07. The facts and issue arising in ITA No.142/PN/2010 are identical to the facts and issue in ITA No.214/PN/2009 and our decision in ITA No.214/PN/2009 shall apply mutatis mutandis to the appeal filed by the Revenue in ITA No.142/PN/2010. The grounds of appeal raised by the Revenue are thus, dismissed.
37. The additional grounds of appeal raised by the Revenue on plans approved prior to 01.10.1998 are also dismissed.
38. The issue in grounds of appeal No.5 & 6 raised by the assessee in ITA No.214/PN/2009 are against the disallowance under section 40(a)(ia) of the Act.
39. The assessee has also filed an additional ground vis-à-vis disallowance under section 40(a)(ia) of the Act and pointed out that where the profits of the undertaking have increased on account of the disallowance made by the Assessing Officer, the said profits being eligible for deduction under section 80IB(10) of the Act, then any increase in the profits should also be made eligible for the deduction under section 80IB(10) of the Act. The learned Authorized Representative for the assessee clearly pointed out that the ends of justice would be met in case the additional ground of appeal is allowed in the hands of the assessee as against the grounds of appeal raised.
40. We find merit in the plea of the assessee that where a person is eligible to the claim of deduction under section 80IB(10) of the Act, then such deduction is allowable on the profits of the business which have been computed in the hands of the assessee. In the facts of the present case, the Assessing Officer while computing the profits of the 28 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers business, had made certain additions on account of disallowance under section 40(a)(ia) of the Act for non-deduction of tax at source. The said addition has been added to the profits declared by the assessee and consequently, the profits of the business have increased. The said increased profits are the eligible profits of the business. Since the assessee is entitled to the claim of deduction under section 80IB(10) of the Act as held by us in the paras hereinabove on its profits from the business, such deduction under section 80IB(10) of the Act is also allowable on the enhanced profits of the business which are the profits eligible for the claim of deduction under section 80IB(10) of the Act. Accordingly, we allow the additional ground of appeal raised by the assessee in this regard. The grounds of appeal No.5 and 6 are thus, dismissed and additional grounds of appeal are allowed.
41. The issue in ground of appeal No.7 is with regard to enhancement in the hands of the assessee on account of additional income offered pursuant to the survey proceedings. The assessee had offered an expenditure of Rs.3,73,000/- as an additional income being unaccounted expenditure and the said additional income was added in the hands of the assessee. The learned Authorized Representative for the assessee fairly admitted that the assessee is not eligible for claim of deduction under section 80IB(10) of the Act on such additional income. Hence, the ground of appeal No.7 raised by the assessee is dismissed.
42. The issue in ground of appeal No.8 raised by the assessee is against the addition made on account of extra work done, wherein the Assessing Officer had estimated the profits @ 8% of third party receipts. The learned Authorized Representative for the assessee 29 ITA No.214/PN/2009 CO No.40/PN/2011 ITA No.142/PN/2010 M/s. Mateshwari Developers pointed out that the said receipts on account of extra work were part of its project and were not to be taxed separately. Even if the said income was taxed in the hands of the assessee, then the assessee is entitled to the claim of deduction under section 80IB(10) of the Act on such enhanced profits. We direct the Assessing Officer to allow the deduction under section 80IB(10) of the Act on such enhancement of profits. The ground of appeal No.8 is thus, allowed as indicated.
43. The Revenue raised grounds of appeal in Cross Objections, which are in support of the order of the CIT(A). In view of our decision in respect of various grounds of appeal raised by the assessee except ground of appeal No.7, we find no merit in the Cross Objections raised by the Revenue in this regard, except ground of appeal No.4 raised in the Cross Objections. Accordingly, the Cross Objections raised by the Revenue are partly allowed.
44. In the result, appeal of the assessee and Cross Objections of the Revenue are partly allowed and appeal of the Revenue is dismissed.
Order pronounced on this 30th day of January, 2015.
Sd/- Sd/-
(G.S. PANNU) (SUSHMA CHOWLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, Dated: 30 th January, 2015.
GCVSR
Copy of the order is forwarded to: -
1) The Assessee;
2) The Department;
3) The CIT(A)-I, Thane;
4) The CIT-I, Thane;
5) The DR "A" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Assistant Registrar
I.T.A.T., Pune