TMI Blog2011 (4) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... l examination and all the surrounding circumstances which we have discussed in detail above, show that adjacent flat was meant to be single unit only. Thus exceed the requirement sof 80IB for claiming deduction. Decided against assessee. - ITA NO. 1082 (MUM.) OF 2008 - - - Dated:- 1-4-2011 - SHRI T.R. SOOD,AND SMT. ASHA VIJAYARAGHAVAN, JJ. Represented by: Shri Dharmesh Shah for the Appellant. Shri R.K. Singh for the Respondent. ORDER Shri T.R. Sood, AM - In this appeal various grounds have been raised, but at the time of hearing ground Nos.1 to 3 were not pressed, therefore, they are dismissed as not pressed. Ground Nos.4 5 are as under: "(4) The Learned Commissioner of Income Tax [Appeals] ought to have appreciated that the notices issued by the assessing officer are invalid and hence the assessment order u/s.143[3] of the Act was also void ab initio. (5) The Learned Commissioner of Income Tax [Appeals] has erred in law and in facts in not appreciating that the interest charged u/s.234B and 234C of the Act are incorrect." 2. Ground No.4: This ground relates to the service of notice u/s.143[3]. It seems on earlier occasion the Bench had asked the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bdul Khader Ahamed 285 ITR 57 wherein it was clearly held that the aggrieved party could not dispute the record before a higher forum and remedy, if any, would lie against the same authority. The assessee cannot at this stage after a gap of almost five years be allowed to raise this objection regarding service of notice because after such a long gap, it may not always be possible for the Revenue authorities to produce the proof of service of notice. Therefore, assessee could not agitate this issue now. 6. In the rejoinder, Ld. Counsel of the assessee submitted that there cannot be any waiver of the notice and in this regard he relied on the decision of the Hon'ble Gujarat High Court in the case of P.V. Doshi v. CIT [1978] 113 ITR 22. In this decision it was clearly held that the jurisdictional provision which was mandatory and enacted in public interest could never be waived. He also submitted that though Sec.292BB has been inserted by the Finance Act 2008 w.e.f. 1-4-2008, wherein it is provided that if an assessee has attended the proceedings it shall be deemed that notice, if any, under which it is required to be served, has been duly served under any provisions of the Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service of notice, has observed as under: "Even assuming for arguments sake that no notice under Section 143(2) of the Act has been received on behalf of the assessed on 29th December, 2000, then there was no occasion for assessed or his representative to appear before the Assessing Officer on 11th January, 2001. The fact that on 11th January, 2001 Mr. Harish Bansal, Chartered Accountant appeared before the Assessing Officer and filed his Power of Attorney and was asked to file details/information and thereafter on 7th February, 2001, one Shri Mohammad Aslam, Assistant Along with M/s. S. Prasad and Co., Chartered Accountant appeared before the Assessing Officer and filed a letter seeking adjournment, goes on to show that notice under Section 143(2) of the Act has been duly served on the assessed through his representative on 29th December, 2000 and that is why the representatives of the assessed have been appearing before the Assessing Officer in pursuance of the notice." Thus from the above it is clear that allegation that no notice was served but, still assessee's appearance before the authorities itself shows that the notice must have been served otherwise there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided the valid jurisdiction for re-assessment. Therefore, in our view, this decision is not applicable to the facts of the case. 10. Similarly, the question before the Special Bench in the case of Kuber Tobacco Products (P.) Ltd. (supra) was as under: "Whether the assessee who has participated in the block assessment proceedings is precluded from taking any objection that notice under s. 143(2) was not served upon him or was not served upon him in time in view of the provisions of s. 292BB inserted by the Finance Act, 2008 w.e.f. 1st April, 2008 and if so, since when he can be said to be so precluded?" In this case a search was concluded against the assessee u/s.132 of the Act and consequently notice u/s.158BC was issued. The assessment order was silent about the issuance of notice u/s.143[2] and no objection was taken by the assessee either before the AO or CIT[A]. This issue was raised for the first time by way of an additional ground before the Special Bench of the Tribunal. In the meantime u/s.292BB had also been inserted by the Finance Act 2008 w.e.f. 1-4-2008. However, it has to be noticed carefully that in respect of block assessment lot of controversy was going on, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961 upon which the assessee filed a nil return, which was processed and no further action was taken. The income tax authorities moved the Magistrate for the custody of the gold, but this was refused. The Income-tax Department moved the Sessions court, which ordered delivery of gold to it. The Department took possession of the gold and deposited the gold biscuits with the Reserve Bank of India. The Commissioner by letter dated May 30, 2003, directed the Deputy Commissioner who was the assessing officer, to "initiate income-tax proceedings by issuing notice under s. 148 of the Act after recording his reasons for the same" and directing the Assessing Officer "to comply with all the requirements of law while initiation action". On receipt thereof the Deputy Commissioner after verifying the records recorded reasons for the belief that income had escaped assessment and after issuance of notice completed the assessment, treating the value of gold as escaped income. An appeal against the assessment was dismissed but on further appeal, the Appellate Tribunal allowed it, holding that the notice under section 148 had been issued acting under the dictates of his superior without application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the facts required for adjudication of the same are already on the records. This issue was raised even before the CIT[A] and just by over-sight this was omitted while raising the normal grounds. He also relied on the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383. 16. On the other hand, ld. DR had no serious objection for admission of the additional ground. 17. After considering the rival submissions, we find that the issue raised in additional ground is purely of legal nature and all the facts for adjudication of the same are available on record. Therefore, this ground is admitted. 18. After hearing both the parties, we find that the assessee had made a claim u/s.80IB(10) and the AO during assessment proceedings requested the Authorised Representative of the assessee to produce the purchase agreement of the land and copies of sale agreement, brouchers of the projects etc. Some of the details were not filed and accordingly show-cause notice dated 20-3-2006 was issued raising following points: From the details filed and explanation/clarification offered by your representative Shri Kulin Mehta, it is observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the said notice the project viz. Paradise Towers is a residential complex, basically intended for the higher income group complete with the club house, swimming pool etc. The building is having four units per floor and four wings A,B,C and D. it is seen from the details filed by the assessee that each floor adjoining flats have invariably been sold to one buyer only. The adjoining flats have got a long wall separating the units. Typical floor plan of wing A B is attached as Annexure 'A' to this order to bring out clearly the lay out of the adjoining units. The interior lay out as discussed in the show cause notice dt. 29-3-2006 clearly brings out the fact that these adjoining units are being used/intended to be used as a single unit only. When the adjoining units are clubbed into one in any individual case, built up area of the unit is above 2000 sq. feet making the project ineligible for the deduction u/s.80-IB of the Act. A housing project with swimming pool, club house etc. and having small areas with size of 900 sq.ft. for individual flat is something which will not attract higher income ground and therefore, the practical way of attracting customers of the sort that will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h comprised a flat and was sold as such. Investigations further revealed that right from the inception stage, the two residential units were always intended to be sold as one flat, except that on paper i.e. in the brochure and the floor plans, they were shown as two residential units. And once two such individual residential units were combined, the area undisputedly was more than 1,500 sq.ft., a fact not even disputed by the appellant, thereby making it ineligible to claim deduction u/s.80IB.. Detailed below are the results of the enquiries which are also the reasons as to why the appellant is not eligible to claim deduction u/s. 80-IB. (i) The most vital evidence that the single residential unit measuring less than 1500 sq.ft. was never meant to be sold as such is that the builder, i.e. the appellant applied for one electric meter not for every residential unit, as would be practical and expected, but for every two residential units taken together. This clearly proves that the intention was never to sell the individual residential unit measuring less than 1500 sq.ft. as one flat but sell two units combined as one flat. The AO, in his enquiry report dated 27-02-2003, a copy of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... living room, leading to logical conclusion that the two residential units together constitute one flat. (iv) Furthermore, the brochure/floor plan shows that there is only one entry to every two adjoining residential units, further, strengthening fact that the two residential units were never intended to be sold separately but to one owner only. (v) It is common for builders to complete one sample flat at the stage of construction itself for showing to the prospective buyers. In this case, interestingly, the sample flat was made by clubbing together flat No.A-111 and A-112 and a big flat was shown to the buyers. This again substantiates the findings by the AO that the single residential units were never intended to be sold individually but two residential units combined to make a flat and thereby the built up area exceeded 1500 sq.ft. When confronted with this finding, again, no explanation was given by the appellant. (vi) All these find further substantiation from the undisputed fact that no single residential unit has been sold as single residential unit, but in twos as is borne out by the list of occupants mentioned on the board in the lobby, reproduced below:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, if an overall view is taken, each of the above facts indicates that the individual residential unit, measuring less than 1,500 sq.ft. in built up area on paper was never meant to be sold as such but was always to be sold together with the adjoining unit, the built-up area of the two units exceeding 1500 sq.ft. and thereby making the appellant ineligible to claim the deduction u/s.80IB. 5.4 As a last ditch effort, during the appellate proceedings, it was submitted by the appellant that the structural changes in converting two residential units into one residential unit had been undertaken by the respective flat owners. The photo copy of the agreement with the M/s Vatsalya Engineers Pvt. Ltd., sister concern of M/s Thistle Properties Pvt. Ltd. was filed to substantiate that M/s Vatsalya Engineers Pvt. Ltd. as per agreement was required to carry out the structural changes. The matter was remanded to the AO for examination as the agreements were not produced during assessment proceedings and, therefore, constituted fresh evidence. The AO examined the flat owners during remand proceedings on this point and found that "Neither the structural changes were made by any flat owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach other and would be of no use independently, is not correct. He tried to explain that all the flats have independent bath-rooms as well as kitchens and also all the independent flats had independent entries. He also submitted that spot enquiries were made in 2007 in which it was observed that there was no drainage pipe in the kitchen. This report has been made much after the completion of the flat and by that time drainage pipe might had been removed by the individual buyers. 21. He also submitted that it is not correct that all the flats have been sold i.e. two adjoining flats to the same buyer. However, he admitted that the adjoining flats were sold to the members of the same family. He submitted that it is a matter of chance that few of the buyers purchased two adjacent flats and by seeing this behaviour more customers became interested in the pair of flats i.e. to buy adjoining flats but no adverse inference can be drawn from this fact. He then referred to the two affidavits filed at pages 64-65 of the paper book by Shri Sadanand Dattatrey Bapat and Shri Chittaranjan Behel respectively. He pointed out that in these affidavits it is clearly explained that the size of each f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He then referred to copies of affidavits of Shri Sadanand Dattatrey Bapat and Shri Chittaranjan Behel filed by the assessee at pages 64-65 of the paper book and pointed out that the language is identical which only shows that it is a self-serving affidavits. In any case, both the affidavits contained clause [4] through which it is clearly mentioned that the particular buyer was in need of two separate flats and was looking for one flat and such prospective buyers asked the assessee whether same could be combined into one. This clearly shows that assessee had itself converted the two flats into one which becomes further clear from the statement recorded from various parties, e.g. in the case of statement recorded from Shri Davies K. Thalakottur. In response to question whether any internal structural changes were made to the flats, it was stated that internal changes were made through agreement with Vatsalya Engg. Pvt. Ltd. which is a sister concern of the assessee. He then referred to the statement of Shri Anant Gupta at page 75 wherein in response to question no.15 whether the idea of purchasing two units was his own or of the builder's, it was stated that it was builder's idea. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jacent flats and the Ld.counsel of the assessee had shown his inability to produce any evidence to show that separate electric meter was provided. It was not difficult if assessee actually had separate meter in each of the flats. The second objection is that physical examination itself shows that adjacent flats were meant to be only one unit. In this regard in the enquiry report dated 23-1-2007, copy of which has been filed by the assessee at pages 45-46 of the paper book, para-3 is relevant and reads as under: "3. The kitchen shown in the layout of every unit is in fact a bedroom k- neither there is any drainage nor is there anything to suggest that the kitchen has been so converted. This shows that though in each unit the space has been earmarked as kitchen but in actual construction or construction plan it was never meant to be a kitchen. The wing-wise observations made will make this fact amply clear." The above clearly shows that the adjacent flats were actually physically one unit. We agree with the submissions of the Ld. DR that if some drainage pipes were laid without which the kitchen cannot function, then the pipes could not have been removed later on. The Ld. counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the facilities of the higher class and hence the flats of smaller sizes [i.e. less than 1,599 sq.ft.] were developed with the objective that the middle class society could afford the cost of flats. However, considering the locality of the project and the nature of constructions, the assessee received more and more booking for purchase of two flats adjoining to each other. Since the demand for 2 adjoining flats increased, the assessee was forced to sell the flats together and also allow the unit holders/prospective purchasers to make necessary changes in the internal construction of their respective units. It is submitted that there are ample evidence to prove that 2 flats were sold together to each buyer by the assessee only to stock-in-trade suit the needs of the buyers and because it was insisted upon by the buyers. In fact because some of buyers purchased 2 flats together, the new and prospective buyers also opted for the same looking at the earliest proposals. This was how the adjoining flats came to be sold to a single buyer." Therefore, it was clearly admitted that all the adjacent flats were sold to the same buyers. There is a further finding by the ld. CIT(A) that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the apparent was not the real, in a case where a party relied on self-serving recitals in documents, it was for that party to establish the truth of those recitals: the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals." We further find no force in the argument of the Ld.counsel of the assessee that in the statement of Shri Davies K. Thalakottur, two flats were purchased by that party to avail large space to question no.9 the answer is as under: Q.9: I the adjacent flat owner is a close relative, what was the purpose behind making two separate agreements and purchasing separate flats. N.A. TO AVAIL OF LARGER SPACE If this answer is examined in the overall circumstances, then it becomes clear that the buyer was looking for a large place and assessee sold large flats in the guise of two flats. Similarly, payment of municipal taxes for each of the flats separately will not prove anything. 28. On the other hand, in the statement recorded from Shri Anand Gupta answer to question No.15 is as under: Q.15: Whether the idea of purchasing two units was your own or your builders.? Ans: Builders. The entire s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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