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12. The second issue in respect of claim of deduction was the area of flats being in excess of 1000 sq.ft. The Assessing Officer noted that investigation wing during the post search investigation had gathered significant and important information from the Manager of Cooperative Society of Tharwani Heights. It was reported by the investigation wing that total project consisted of Wing 'A' and Wing 'B' i.e. two towers of 27 floors each at Tharwani Heights. Prima facie, the residential units of both the wings were not in accordance with the approved sanctioned plans and further investigation was carried out to find out the built up area of residential units. The list of flats was received from the Manager of Cooperative Housing Society of Tharwani Heights, which is scanned and placed at pages 8 to 10 of the assessment order. The Assessing Officer thus, noted that from the above said list it was clear that there were many flats which were ITA Nos.5836 to 5838/M/2012 ITA Nos.2032 & 2033/PUN/2012 M/s. Sai Homes more than 1000 sq.ft. in both the wings. The Assessing Officer drew up the list of flats numbers having 3 BHK and their areas as per the list of Cooperative Housing Society at pages 10 and 11 of the assessment order. The Assessing Officer thus, noted that 52 instances where there were clear violation of conditions of built up area under section 80IB(10) of the Act in the said project. The Assessing Officer in order to verify the built up area, directed the Architect to measure the said flats, who in turn, furnished his report which is placed at page 14 of the assessment order. The Architect reported that flat No.1003 'A' Wing, flat No.1801 'B' Wing and flat No.1101 'B' Wing at Tharwani Heights had area which was more than 1000 sq.ft. It was also pointed out that by measuring the flats, the area of balcony, dry balcony and flower beds was also included. It was further reported by the Architect that all the flats in both the 'A' and 'B' wings were identical on alternate floors and also wings 'A' and 'B' were identical to each other. Another issue which was pointed out by the Architect was that existing flats were not as per approved plans provided by the Assessing Officer but the physical layout of the flats was similar to the brochure of the project Tharwani Heights. The Assessing Officer in view thereof, concluded by holding that on each floor of both the wings, there were residential units which had built up area of more than 1000 sq.ft. The Assessing Officer thereafter, deliberated upon the built up areas available in the said project and noted that though as per approved plan by NMMC, there were two 2BHK and one 1BHK flat on each floor in both 'A' and 'B' wings. However, in the entire 'A' and 'B' wing, no one BHK flat was in existence. Further, there were amalgamation between the flats, wherein the flats on 26th and 27th floors were merged and there were no walls or partitions showing different flats, whose built up area was more than 1000 sq.ft. The partner of assessee firm in his statement clearly admitted that at floor 27, ITA Nos.5836 to 5838/M/2012 ITA Nos.2032 & 2033/PUN/2012 M/s. Sai Homes there were six flats which were not sold. The Assessing Officer concluded that the assessee had kept the flats as one single big flat as flat for sale and 1BHK flat was missing in stock in trade also. Further, reference was made to advertisement made by the assessee and various aspects of the flats constructed by the assessee and opinion of Architect in respect of three flats and also the report of the Architect that the flats existing in the project were not as per approved plans, but the physical layout was similar to the layout as in the brochure in the project. The Assessing Officer also concluded from the seized and impounded documents i.e. Bundle No.A-3 and A-18, which were the registers, which were maintained for flat owners' details and transactions of flats of Tharwani Heights. The Assessing Officer noted that the payments were received right from 2004 to 2005 against these 3BHK flats establishing that even the booking was made for 3BHK flats only and there are no 1BHK flats in the project. Further, documents also reveal that the assessee had shown 1BHK and 2BHK flats, negotiated for 2BHK and 3BHK and also sold the same but vide separate agreements, one for 1BHK and another for 2BHK. The payment details were also accordingly noted in the diaries and the same were scanned and are reproduced at pages 24 and 25 of the assessment order. Further, statements of purchasers were recorded, who admitted to have purchased one flat, with the understanding that it was a single flat of 3BHK. All these statements were also scanned and reproduced at pages 27 to 36 of the assessment order. The Assessing Officer thus, concluded as under:-

ITA Nos.5836 to 5838/M/2012 ITA Nos.2032 & 2033/PUN/2012 M/s. Sai Homes The Valuation Officer while working out the built up area of the flats had considered the flats which were joined by flat owners and also the balconies and projections. As per the General Development Control Regulations for Navi Mumbai, 1975, the Valuation Officer had reported that out of 156 flats, the built up area of 33 flats was more than 1000 sq.ft. at respective floor level and built up area of balance 123 flats was less than 1000 sq.ft. at floor level. The Valuation Officer had also clarified that the same was due to area of open terrace, balcony being excluded from the built up area of respective flats as per GDCR, 1975. The copy of the said valuation report was handed over to the assessee, who in turn, filed written submissions which are reproduced at pages 21 to 27 of the appellate order. It was stressed by the assessee that the area of balcony / open terrace is not to be included in the built up area of the flats in the housing project approved prior to 01.04.2005. For projects approved prior to 01.04.2005, the built up area calculated as per DC regulations was relevant for the purpose of examining the fulfillment of eligibility criteria under section 80IB(10) of the Act. The assessee also pointed out that the Valuation Officer himself had considered the area of merged flats on the basis of Development Control Rules and wherein out of 156 flats, area of 33 flats was more than 1000 sq.ft. In respect of balance 123 flats, the assessee pointed out that the built up area of each of the flats i.e. residential unit was below 1000 sq.ft., wherein the Valuation Officer had considered the total area i.e. after merger of units two or three. In respect of flat Nos.202 + 203, A wing and flat Nos.201 and 202, B wing, it was pointed out that the built up area after excluding the area of porch was less than 1000 sq.ft. In respect of flat Nos.2701, 2702 and 2703, the assessee pointed out that these were sold to three different parties and area of each of the flat was less than 1000 sq.ft. However, one of the occupants has acquired the other two flats in ITA Nos.5836 to 5838/M/2012 ITA Nos.2032 & 2033/PUN/2012 M/s. Sai Homes second sale from the original buyer and merged all the three units sold. In respect of 301, A wing and 2033, it was stated that area of terrace and / or por ch is to be excluded. The assessee in alternative pointed out that even if there was partial deviation of any condition, the assessee was entitled to prorata deduction as all the other conditions laid down under section 80IB(10) of the Act were fulfilled. The assessee pointed out that even if it is assumed that it had merged two flats i.e. 2BHK + 1BHK converted into 3BHK flats, the built up area of 123 flats remained less than 1000 sq.ft. and hence, prorata deduction is to be allowed in respect of such flats. Various contentions raised by the assessee in respect of merging of flats was not accepted by the CIT(A) since the plan of housing project was approved in such a manner that 1BHK flat was joined with 2BHK flats to make ti 3BHK flats. Further, statements of flat holders were recorded which established that the flats had been sold in the merger stage only. Further, from the seized documents, the Assessing Officer also indicated that the sales had been made for 3BHK only. The CIT(A) thus, held that the assessee had constructed some of the flats whose built up area exceeded the prescribed limit of 1000 sq.ft. and hence, the assessee was held to be not eligible for any concession. The CIT(A) then considered the plea of assessee for exclusion of area of open terrace / open balcony, not to be considered in the built up area. The CIT(A) noted that the definition of built up area was introduced w.e.f. 01.04.2005 by way of section 80IB(14) of the Act and held that the area of 115 flats was found to be more than 1000 sq.ft. at respective floor level because of balcony / open terrace. The CIT(A) held that extended definition of built up area brought on the Statute vide Finance Act 2004 w.e.f. 01.04.2005 was not applicable for the projects approved prior to 01.04.2005. Reliance was placed on the decision of Mumbai Bench of Tribunal in ACIT Vs. Sheth Developers ITA Nos.5836 to 5838/M/2012 ITA Nos.2032 & 2033/PUN/2012 M/s. Sai Homes (2009) 33 SOT 277 (Mum) and Haware Construction (P) Ltd. Vs. ITO (2011) 64 DTR (Mum) (Trib) 251. The CIT(A) thus held that where the project of the assessee was approved on 24.03.2005 i.e. prior to 01.04.2005, the definition of built up area as given in section 80IB(14) of the Act was not applicable and accordingly, area of balcony and terrace was not to be included in the built up area of residential units. The CIT(A) further held that only 33 residential units, out of 156 units should be considered as having built up area of more than prescribed limit of 1000 sq.ft., as determined by the Valuation Officer. The CIT(A) further allowed prorata deduction under section 80IB(10) of the Act in respect of balance flats where the area was 1000 sq.ft. or less. The income relatable to 33 flats which exceeded the prescribed built up area of 1000 sq.ft. was held to be not entitled to the claim of deduction under section 80IB(10) of the Act. The CIT(A) further held the assessee to be entitled to claim the deduction under section 80IB(10) of the Act on the additional income which was derived from the housing project. He further held that the assessee could lodge a fresh claim in the return filed under section 153A of the Act, on the additional income disclosed. The Assessing Officer was directed to scrutinize the claim of deduction under section 80IB(10) of the Act in this regard.

29. We have heard the rival contentions and perused the record. The issue which arises in the present bunch of appeals is against the claim of deduction under section 80IB(10) of the Act. The assessee had envisaged the development of plot of land at Palm Beach Road, Navi Mumbai for construction of two units of buildings having total number of 156 flats in the project known as Tharwani Heights. The plan for the said project was sanctioned on 24.03.2005 and the total area of the plot was more than one acre. Since the project was being carried out in Navi Mumbai, the limit of built up area of flats was 1000 sq.ft. The assessee had got the plan approved, under which it had planned to construct 1BHK and 2BHK flats. During the course of search on the premises of assessee, various incriminating documents were found which reflected the merging of flats by the assessee in the early stage of construction itself. The brochure of the project which was circulated by the assessee talks of 3BHK flats and there was no mention of 1BHK flats at all. Further, the area for servant quarters was also merged in the flats itself. In the post search enquiries, statements of various flat owners were recorded, who admitted that they had bought the merged flats and not merged the same after construction. The Assessing Officer also noted that the assessee had provided two electric meters in the respective areas. However, only one of the meters with higher capacity ITA Nos.5836 to 5838/M/2012 ITA Nos.2032 & 2033/PUN/2012 M/s. Sai Homes was used and the other was not being used. In view of the assessee having violated the conditions of built up area of the flats of being more than 1000 sq.ft., wherein in case of some flats, on merger, the area was more than 1000 sq.ft. and in some cases by including the area of balcony / open terrace, the area was more than 1000 sq.ft. and the flats not being constructed as per the approved plans, the Assessing Officer had denied the claim of deduction under section 80IB(10) of the Act to the assessee. However, during the course of appellate proceedings, the CIT(A) directed the Assessing Officer to get the physical report from the DVO vis-à-vis the area of flats. The DVO in this regard reported that out of total 156 flats i.e. 33 flats had area which was exceeding 1000 sq.ft.; in respect of other flats, in case the area of balcony and open terrace is excluded, then the balance built up area of the flats were less than 1000 sq.ft. The CIT(A) in this regard allowed prorata deduction in respect of such units where the total built up area was less than 1000 sq.ft. The CIT(A) also allowed the aforesaid claim under section 80IB(10) of the Act on the additional income offered by the assessee. The said additional income was offered pursuant to the documents found during the course of search which suggested on-money received by the assessee in respect of flats sold by it. The assessee is in appeal before us only in restricting the claim on such flats where the area was more than 1000 sq.ft. and also the on-money received in relation to such flats. The Revenue on the other hand, is in appeal against the allowance of deduction under section 80IB(10) of the Act whether prorata or otherwise, where the assessee has violated the basic conditions of not constructing the units as per sanctioned plan and merging the flats thereon. The Revenue is also in appeal in allowing the said deduction on the on-money received. Another aspect of the issue raised before us is the date of completion of project, wherein the assessee claims that it ITA Nos.5836 to 5838/M/2012 ITA Nos.2032 & 2033/PUN/2012 M/s. Sai Homes had completed the project within time frame. On the other hand, the Assessing Officer had denied the said claim because two servant toilets were constructed, for which the occupancy certificate was received on 31.12.2009 and since the assessee had received the sanction for construction of the project on 24.03.2005, then the completion on 31.12.2009, has relied on to deny the claim under section 80IB(10) of the Act.

31. Now, coming to the balance flats which are constructed by the assessee, wherein the Assessing Officer had given a finding that the area of flats was more than 1000 sq.ft. since he has included the area of balcony or open terrace. Various physical verification exercise and statements of the persons and also perusal of the documents seized during the course of search were based upon by the Assessing Officer for coming to the said conclusion. However, the issue is now settled by the Hon'ble Supreme Court in CIT Vs. Sarkar Builders reported in 375 ITR 392 (SC), wherein it has been held that in respect of projects which were sanctioned prior to 01.04.2005, the area of balcony and terrace is to be excluded from the area of units for working out the total area of the flats, which is eligible for deduction under section 80IB(10) of the Act. The amendment brought in by insertion of 80IB(14) of the Act is w.e.f. 01.04.2005 and accordingly, is applicable for such projects which are approved after 01.04.2005. The project of ITA Nos.5836 to 5838/M/2012 ITA Nos.2032 & 2033/PUN/2012 M/s. Sai Homes the assessee was approved on 24.03.2005 and consequently, the amendment brought in on 01.04.2005 is not applicable to the project of assessee. Where the assessee has received sanction on 24.03.2005 and the local authority has even issued the completion certificate on 08.06.2007 for construction of the said flats, then in order to determine the built up area of the flats, the area of balcony and terrace is to be excluded and since in respect of balance flats after such exclusion, the area is less than 1000 sq.ft., the assessee is entitled to prorata deduction under section 80IB(10) of the Act. Further, the assessee is also entitled to prorata deduction under section 80IB(10) of the Act in respect of on- money received on such flats which are entitled to the claim of deduction. In this regard, we find support from the ratio laid down by the Pune Bench of Tribunal in ITO Vs. Gajraj Constructions (supra).