TMI Blog2009 (11) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee that the calculation of interest u/s 234A and 234B of the Act was not in accordance with the Act as the AO had failed to consider the amount paid u/s 140A of the Act. While giving effect to this common order, the AO shall look into the misgiving of the assessee and take remedial action, if found necessary. 2.3. In the remaining grounds, the cruxes of the issues, for the sake of convenience and clarity, are reformulated in concise manners as under: (i) the assessment was bad in law as the mandatory conditions to invoke the jurisdiction u/s 153A of the Act did not exist or having not been complied with - as the reasons for issuance of Notice u/s 153A were not given and the assessee had reason to believe that the same was not recorded, the mandatory conditions to assume jurisdiction was to record reasons and in the absence of the same, the assessment was bad in law; (ii) without prejudice, the assessee denies itself liable to be assessed at ₹ 8.08 crores as against ₹ 70.34 lakhs returned; - the lower authorities were not justified in disallowing the claim of ₹ 7.25 crores u/s 80-IB(1) of the Act; - the authorities have failed to see re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are that the assessee was carrying on the business of developing and construction of residential flats. During the years under dispute, the assessee was executing two projects Anriya Dwellington Phase I II consisting of 152 and 11 flats respectively. 5.1. The premises of the assessee and the residences of its directors were subjected to action u/s 132 of the Act on 30/9/05. In compliance to a notice u/s 153A of the Act for the AY 2005-06, the assessee had furnished a ROI, admitting an income of ₹ 70.34 lakhs after claiming deduction u/s 80-IB. The AO, had, however, concluded the assessment u/s 143(3) rws 153A of the Act, determining the income at ₹ 8.08 crores. In doing so, the AO has observed thus (i) While purchasing a flat No.2 in Anriya Residency, the assessee had paid the consideration of ₹ 15 lakhs through cheques and cash of ₹ 3.5 lakhs. However, the cash paid was not finding a place in the books of account. When the AR of the assessee was confronted, he had agreed for addition. Hence, addition of ₹ 3.5 lakhs was made u/s 69 of the Act; (ii) The assessee had purchased lands at Allalasandra for a consideration of ₹ 3 cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for habitable purpose or not. But the explanation has come into effect from 1.4.2005 and AY 2005-06. Facts of the case records reveal that by that time, the project was already complete and the seized document vide No.A1/APM/SPL/7 reveals that the appellant had sent letters to take occupation of the flat to the respective owners before 1.4.2005. Therefore, I concur with the view of the authorized representative when he expresses: The Finance (No:2) Bills 2004 which was enacted on 10th of September 2004 introduced definition of built up area into section 10-IB for the first time. By the time the definition was inserted the building complete in all respects. No adjustments/corrections were possible to structure at this moment. However, the explanation inserted by the FA 2004 does not take away any rights of the assessee over the property or other allied rights. It only clarifies what is to be included while calculating the area of 1500 sq.ft. Therefore, the clarificatory explanation is, I find applicable to all pending cases and, therefore, I find the action of AO justified and, therefore, dismiss the grounds of appeal. 6.1. After distinguishing the case laws ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... built-up area of 1500 sft. the unit had a maximum built-up area of 1500 sft as per structural design and the plan approved by BBMP whose bye-laws excluded the open balcony in its definition; (v) The AO in his impugned orders, had observed that the built-up area in 12 out of the total flats constructed exceed the ceiling limit of 1500 sft. as envisaged in s.80-IB(10) of the Act; - When the plan got sanctioned for the AY 04-05, the word built-up area was not defined in the Act when the project in Phase I got under-way. As such, the assessee had to follow the meaning of the term built-up area as followed by the Building Industry Practice and floor area defined in the bye-laws of BBMP; - As per the Building Industry Practice, the term built-up area in each flat was defined as habitable area of the flat unit including the wall thickness. The built-up area excludes common area of the building and open balconies which were not habitable and have only utility value; - As per the bye-laws of BBMP; the floor area which was also called as built up area exempts open balconies for the purpose of arriving at the built up area . The sanctioned plan prohibits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (x) ₹ 8,67,450 being 1/5th of cash payments of ₹ 4337250/- was made as detailed below: Sl. No. Details of cash payments made Amount 01 Bylappa for purchase of land 497850 02 Mrs. subbalakshmi for purchase of land 88400 03 Mrs. Subbalakshmi for purchase of land 846000 04 Mrs. Subbalaksmi for purchase of land 1000000 05 Cash deposited in to current account of M/s. Construction solutions (P) Ltd. 655000 06 Narayanaswamy for purchase of land This amount has already been considered for addition/disallowance u/s 40A(3) supra 500000 07 Cash deposited in to current account of M/s. Construction solutions (P) Ltd. 400000 08 Mrs. Shalini R Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) .. 8.1.1. As could be seen from the impugned order of the AO that the assessment was initially concluded u/s 143(3) of the Act. Subsequent to search operation in the premises of the assessee and its directors, the assessment in question got reopened automatically by virtue of s.153A of the Act. Thus, the AO was within his powers provided by the Act and that the conduct of search u/s 132 or the requisition of books/assets under s.132A of the Act would suffice for the issuance of notice u/s 153A of the Act and assume jurisdiction over the assessee. 8.1.2. With due respects, we have perused the case laws reported in 260 ITR 80 (SC) and 289 ITR 341 (SC) on which the assessee had placed strong reliance. With regards, we would like to point out that the said rulings of the Highest Court of the land were in respect of mere information from CBI received and on the basis of which the search conducted and consequent block assessment was not valid. However, the present case on hand is on the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. and, therefore, it was submitted that proportionate deduction u/s 80IB ought to have been granted by the authorities below : 9.1.1 Having heard rival issue, we are of view, an identical issue had cropped up before the Hon ble Tribunal in ITA No: 1192/Bang/2008 dated: 21/8/2009 in the case of SJR Builders v. ACIT . After deliberating the issue in a comprehensive manner coupled with analyzing the numerous judicial precedents, the Hon ble Tribunal was of the firm view that - 12. Considering the rival submissions, we are of the view that the appeal by the assessee is to be allowed to the extent of the flats the built-up area of the flat is not more than 1500 sft. We agree with the submission of the learned representative for the assessee that while considering the built-up-area of 1500 sft. for the purpose of exemption u/s 80-IB(10), the mezzanine floor and common areas are to be excluded. The assessing officer is directed accordingly. We hold that in respect of the pent houses the built-up-area of which is more than 1500 sft. they may be excluded for exemption. However, in the light of the decision of the Special Bench in the case of Brahma Associates [supra ITA No:1417/P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vely] It is ordered accordingly. 10. The next ground is with regard to the following disallowances u/s 40A (3) of the Act: (i) ₹ 3.5 lakhs payments made towards the purchase of flat: As per the assignment-cum-sale dated 13/4/2006 (seized during the course of search), the assessee had purchased a flat bearing No.002 in Anriya Residency from V.Vijayaraghavan and Smt.V.Latha for a sale consideration of ₹ 18.5 lakhs, out of which, ₹ 15 lakhs was paid through cheques and the balance amount of ₹ 3.5 lakhs was paid in cash. On verification of cash book, the AO found that there was entry for ₹ 15 lakhs only whereas the alleged cash payment of ₹ 3.5 lakhs had not passed through the books of account. According to the AO, when the A.R of the assessee was countered with, perhaps, he had consented for the addition as unexplained investment u/s 69 of the Act. The assessee has now come up with a theory that the said payment of ₹ 3.5 lakhs was paid from the available cash balances with the assessee and that if at all it was to be added then the same shall also become part of the cost of flat. The assessee had flatly denied the AO s assertion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce sheet. It could be seen from the impugned order of the AO that this piece of argument was not advanced during the course of assessment proceedings. For argument sake without conceding that the new theory of payments have been accounted for under the head work-in-progress was not finding a place in the impugned assessment orders. However, the crux of the issue before us is that the assessee had contravened the provisions of s.40A(3) of the Act while making the payments in cash. As such, the AO was within his domain in invoking the provisions of s.40A(3) of the Act. However, while doing so, the AO, perhaps, by oversight, had resorted to disallow the cash payments of ₹ 5 lakhs made in the case of C.Narayanaswamy and Ajithkumar twice. Hence, the cash payments are restricted to ₹ 3837250 [43,37,250 5,00,000] and the disallowance is brought down to ₹ 7,67,450 [Rs.8,67,450 1,00,000 ] instead of ₹ 8,67,450/- resorted to by the AO. Thus, the assessee gets a relief of ₹ 1 lakh. It is ordered accordingly. 11. In the result, the assessee s appeals for the AYs 2005-06 and 2006-07 are partly allowed. Pronounced in the open court on 13th Nov, 2009. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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