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2025 (6) TMI 1399 - AT - Income TaxDenial of deduction u/s 80IB(10) - as per revenue assessee failed to file supporting evidences/ assessee failed to file the completion certificate - AR has stated that this being the 6th year of claiming this deduction the same would be allowable to the assessee HELD THAT - We find that the assessment was framed on best judgment basis and even in the remand report Ld. AO did not render any such finding on merits and merely opposed admission of additional evidences. The arguments as advanced before us are new arguments and the submissions made before us has not been dealt with by any of the lower authorities. The plea involves factual verification and re-examination of impugned claim of the assessee. The Explanation mandate issue of certificate by local authority whereas Ld. AR has stated that the said certificate is to be issued by an Architect which would be sufficient compliance under the relevant law. We remit the impugned issue back to the file of Ld. AO for fresh adjudication with a direction to the assessee to plead and prove its case. No other ground has been urged in the appeal. The appeal stand partly allowed for statistical purposes.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this matter are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Entitlement to deduction under section 80-IB(10) and compliance with completion certificate requirement Relevant legal framework and precedents: Section 80-IB(10) provides deduction to residential housing projects subject to conditions including completion within a prescribed period. Explanation (ii) to sub-section (10) mandates that the date of completion shall be the date on which the completion certificate is issued by the local authority. The Supreme Court and Karnataka High Court decisions in PCIT vs. Majestic Developers clarified the nature of the completion certificate and its issuer. Court's interpretation and reasoning: The Tribunal noted that the project was approved on 24-05-2006, requiring completion by 31-03-2012 (five years from the end of the approval year). The assessee did not claim the deduction in earlier years due to lack of profits and the claim was denied in AY 2011-12 reassessment. The Tribunal rejected the assessee's plea that the deduction was previously allowed on merits, finding no such examination or verification had occurred. The Tribunal relied heavily on the precedent where the Karnataka High Court held that the "completion certificate" under Explanation (ii) to section 80-IB(10) is not the certificate issued by the Municipal Corporation but the certificate issued by a registered architect/engineer/supervisor certifying the completion of the building in accordance with sanctioned plans and building byelaws. The occupancy certificate is issued subsequently by the local authority after inspection. Key evidence and findings: The assessee produced a completion certificate dated 27-02-2008 issued by a registered architect certifying completion on 25-02-2008. Correspondence requesting issuance of occupancy certificate was also submitted. However, the Assessing Officer ignored this evidence and denied the deduction for failure to produce a certificate from the local authority. Application of law to facts: The Tribunal observed that the Explanation mandates the completion certificate to be issued by the local authority, but the Karnataka High Court's interpretation clarifies that the certificate issued by the architect suffices as the completion certificate within the meaning of the Act. The Tribunal found no legal basis to insist on a certificate from the Municipal Corporation when the architect's certificate is available. Treatment of competing arguments: The Revenue contended that the certificate must be issued by the local authority, while the assessee argued that the architect's certificate fulfills the statutory requirement. The Tribunal, following the Karnataka High Court and Supreme Court decisions, rejected the Revenue's contention and accepted the architect's certificate as valid evidence of completion. Conclusions: While the Tribunal recognized the merits of the assessee's claim based on the architect's certificate, it noted that the lower authorities had not adjudicated the matter on merits and had merely opposed admission of additional evidence. Therefore, the matter was remitted to the Assessing Officer for fresh adjudication, directing the assessee to plead and prove its case. Issue 2: Interpretation of "completion certificate" under Explanation (ii) of section 80-IB(10) Relevant legal framework and precedents: The Karnataka High Court's detailed analysis in PCIT vs. Majestic Developers, upheld by the Supreme Court, interpreted the term "completion certificate" as the certificate issued by a registered architect/engineer/supervisor under the relevant municipal building byelaws and not necessarily a certificate issued by the local authority or Municipal Corporation. Court's interpretation and reasoning: The Court explained that the completion certificate certifies that the construction conforms to sanctioned plans and building byelaws, and is issued by professionals responsible for supervision. The local authority issues the occupancy certificate only after inspection based on this completion certificate. Key evidence and findings: The certificate produced by the assessee complied with the format prescribed under Schedule-VIII of the building byelaws and was issued by a registered architect. The Tribunal found that the Revenue's insistence on a certificate from the local authority was not supported by the legal framework. Application of law to facts: The Tribunal applied the legal interpretation to the facts, concluding that the architect's certificate satisfies the statutory requirement for claiming deduction under section 80-IB(10). Treatment of competing arguments: The Revenue's argument that the certificate must be from the local authority was rejected as inconsistent with the statutory scheme and judicial precedents. Conclusions: The Tribunal affirmed that the completion certificate issued by the architect is the relevant document under Explanation (ii) of section 80-IB(10), and the Revenue cannot insist on a local authority certificate beyond this. Issue 3: Penalty under section 271(1)(c) for wrongful claim of deduction Relevant legal framework: Section 271(1)(c) imposes penalty for concealment of income or furnishing inaccurate particulars. The penalty is consequential to the quantum addition. Court's interpretation and reasoning: Since the quantum addition relating to denial of deduction under section 80-IB(10) was remitted for fresh adjudication, the Tribunal held that the penalty issue also requires reconsideration in light of the quantum decision. Application of law to facts: The penalty confirmed by the CIT(A) was based on the disallowance of deduction. Given the quantum appeal's remand, the penalty matter was also restored to the Assessing Officer for fresh adjudication. Conclusions: The penalty appeal was allowed for statistical purposes, pending fresh determination after quantum adjudication. Issue 4: Procedural propriety of assessment and evidentiary considerations Relevant legal framework: Assessments under section 143(3) read with section 144 can be framed on best judgment basis where the assessee fails to cooperate or produce evidence. Court's interpretation and reasoning: The Tribunal noted that the assessment was framed on best judgment basis as the assessee failed to make effective representation initially. The Assessing Officer opposed admission of additional evidence during remand without adjudicating merits. Application of law to facts: The Tribunal found that the lower authorities had not examined the merits of the claim or the evidence properly and had rejected the claim on procedural grounds. Conclusions: The Tribunal remitted the matter to the Assessing Officer for fresh adjudication on merits, allowing the assessee to produce evidence and plead its case. 3. SIGNIFICANT HOLDINGS "The completion certificate which is referred to in Section 310 of KMC Act is completion certificate which is required to be issued by Architect, engineer or supervisor, as the case may be, factum of completion of building or project to the Commissioner. It is only after such completion certificate being furnished and inspection conducted by the Commissioner, occupancy certificate would be issued by Commissioner of BBMP. Hence, contention of Revenue that completion certificate is required to be issued by local Authority as prescribed under Second Explanation to sub-clause (3) of sub-section (10) of Section 80-IB of the Act cannot be accepted." "Though said material evidence being available, same had been ignored by Assessing Officer and same was taken note of by CIT (Appeals) to allow the deduction claimed under section 80-IB of the Act by the assessee. As such, we are not inclined to accept contention raised by Revenue." "Considering all these facts, we remit the impugned issue back to the file of Ld. AO for fresh adjudication with a direction to the assessee to plead and prove its case." Core principles established include:
Final determinations:
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