TMI Blog2014 (11) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... is no room under the area of the terrace and such terraces are exclusively used by the respective unit owners - as per the Revenue the projected terrace falls within the meaning of words 'projections' and 'balconies' contained in section 80IB(14)(a) of the Act and the same is not a common area shared with other residential units and in this manner, in terms of section 80IB(14)(a) of the Act, such an area is liable to be included in the expression 'built-up area'. Applicability of the definition of built-up area – Effect of amendment w.e.f. 01.04.2005 – Held that:- Such definition was to be retrospectively applied yet the area of open terrace would not fall within the meaning of the expression 'built-up area' - section 80-IB (14) defining 'Built-up area' will have relevance on and from 01.04.2005 - going by the substantive part of Section 80-IB (10), what is required for grant of deduction is a Housing Project approved by the Local Authority - once the Local Authority have excluded open terrace from the working of Built-up area, it is not open to the Revenue to review the approval given by the competent authority to hold that terrace would also be included in the built-up area - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gar, Pune, which is eligible for section 80IB(10) benefits - assessee is eligible for deduction u/s 80IB(10) of the Act even in relation to impugned additional income offered in a statement deposed u/s 132(4) of the Act during the course of search and subsequently declared in the return of income filed in response to notice u/s 153A(1)(a) of the Act - assessee's claim for deduction u/s 80IB(10) of the Act in relation to the additional income is liable to be upheld. Deletion of peak negative balance in the cash book prepared on the basis of seized diaries – Held that:- The CIT(A) made no mistake in deleting the addition because the quantum of undisclosed income offered by the assessee in the course of search as additional income is more than the impugned addition sought to be made by the Assessing Officer on account of peak negative balance in the cash book - if the addition was to be sustained in addition to the undisclosed income already declared, it would amount to double addition - the order of the CIT(A) is upheld – Decided against revenue. - ITA Nos. 18, 19 & 20/PN/2013, ITA Nos. 60 & 61/PN/2013 - - - Dated:- 28-10-2014 - G. S. Pannu, AM And R. S. Padvekar, JM,JJ. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer examined the claim of the assessee with reference to the various conditions prescribed in section 80IB(10) of the Act. It was only in relation to the condition prescribed in clause (c) of section 80IB(10) of the Act that the project of the assessee was found to be violative of. The aforesaid stand of the Assessing Officer that the project of the assessee is violative of the condition prescribed in clause (c) of section 80IB(10) of the Act, which is the subject-matter of controversy before us. Sub-clause (c) of section 80IB(10) of the Act requires that the residential units in the housing project undertaken by the assessee ought to have maximum built-up area of 1000 sq.ft., where such units are located within the city of Delhi and Mumbai and 1500 sq.ft. at any other place. For the purpose of present appeal, the limit on the built-up area prescribed in clause (c) of section 80IB(10) of the Act is 1500 sq.ft., as the project of the assessee is located in the city of Pune. 6. The housing project of the assessee was approved by the local authority on 29.07.2005, and as per the Assessing Officer six residential units i.e. six row houses No. 21, 24, 33, 35, 68 75 were ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clause (c) of section 80IB(10) of the Act, and accordingly, he denied the claim of the assessee for deduction u/s 80IB(10) of the Act amounting to ₹ 1,39,50,823/-. The aforesaid issue was carried by the assessee in appeal before the CIT(A). The CIT(A) has upheld the stand of the Assessing Officer that the built-up area of the aforesaid six units was violative of the condition prescribed in clause (c) of section 80IB(10) of the Act. However, the CIT(A) held that the deduction u/s 80IB(10) of the Act cannot be denied in its entirety inasmuch as according to him, the profits relatable to the six residential units which violated the condition prescribed in section 80IB(10)(c) of the Act only shall be denied the benefit of section 80IB(10) of the Act. As a result, the CIT(A) while retaining the denial of deduction in relation to the aforesaid six units, allowed pro-rata deduction in respect of profits from the residential units of the project which complied with the requirements of section 80IB(10)(c) of the Act. Thus, assessee was allowed partial relief. 10. Not being satisfied with the order of the CIT(A), assessee as well as the Revenue are in appeal before us by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les of the local authority in question i.e. Pimpri Chinchwad Municipal Corporation (PCMC). Further, heavy reliance has also placed on an unreported judgement of the Hon'ble Madras High Court in the case of M/s Ceebros Hotels Private Limited vs. DCIT, vide Tax Case (Appeal) No. 581 of 2008 order dated 19.10.2012, a copy of which was placed on record. The judgement of the Hon'ble Madras High Court has been relied upon to support the proposition that the area of an open terrace is liable to be excluded from the working of the built-up area of the unit. It is also contended that the Hon'ble Madras High Court has further followed the aforesaid judgement in its latter judgement in the case of CIT vs. Sanghvi and Doshi Enterprise, (2013) 255 CTR 156 (Mad.). 13. On the other hand, the learned CIT-DR has vehemently submitted that open terrace which is a subject-matter of controversy was a private terrace which was available for use of the owner of the unit to the exclusion of others. The learned CIT-DR has emphasized that in the present case the housing project of the assessee is comprising of independent row houses built on a Duplex model and it is not a case of multi-storey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (f) of the Act, so however, the only controversy before us revolves around the condition prescribed in clause (c) of section 80IB(10) of the Act. As per clause (c) of section 80IB(10) of the Act, the maximum built-up area of the residential units comprised in the eligible housing project shall not exceed 1000 sq.ft. where such units are situated within city of Delhi and Mumbai or within 25 km. from the Municipal limit of such cities and in other places the prescribed limit is 1500 sq.ft.. The housing project of the assessee before us is located within the Municipal limits of PCMC and therefore in terms of clause (c) of section 80IB(10) of the Act, the maximum built-up area of the residential unit is capped at 1500 sq.ft.. The dispute before us is with regard to six residential units, which have been detailed by us earlier, wherein as per the Assessing Officer, the individual built-up area exceed 1500 sq.ft.. The working of built-up area done by the Assessing Officer is sought to be resisted by the assessee and the bone of contention is whether or not to include the area of projected terrace (open to sky) for computing the built-up area of the respective units. 15. The Finance ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her residential units? 18. A bare perusal of the aforesaid question of law before the Hon'ble Madras High Court would reveal that the issue related to whether open space of the terrace would fall within the expression 'built-up area'. The facts before the Hon'ble High Court were that assessee had constructed various apartment blocks and each block had 64 apartments. The apartments located at first to sixth floor were of areas less than 1500 sq.ft.. However, the flats located on the 7th floor had the advantage of exclusive open terrace. While considering the relief u/s 80IB(10) of the Act, the Assessing Officer took into consideration the area of such exclusive/private open terrace as a part of the built-up area of the units located at the 7th floor. After considering the above aspect, the builtup area of the flats located at the 7th floor exceeded 1500 sq.ft. and hence the Assessing Officer held that the condition prescribed in clause (c) of section 80IB(10) of the Act was not fulfilled. The said position taken by the Assessing Officer was upheld right up to the Tribunal. However, the Hon'ble High Court disagreed with the stand of the Revenue and held that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er prejudice the claim of the assessee herein, for the definition given under Section 80-IB (14) does not appear to go against what has been defined to include the measurement of the plinth area of building under the Building Regulations and Indian Standard Method of Measurement of Plinth, Carpet and Rentable Areas of Buildings as issued by Bureau of Indian standard. Since, Clause 4.1.2 clearly excludes open terrace for plinth area and what is included in Clause 4.1.1. is as stated in Clause (d), which reads as under : e) In case of open verandah with parapats: 1) 100 percent areas for the portion protected by the projections above, and 2) 50 percent, area for the portion unprotected from above. Revenue does not dispute the fact that the open terrace is not a project-ion like a balcony to fit in with the definition under Section 2.4 of Indian Standard Method of Measurement of Plinth, Carpet and Rentable Areas of Buildings as issued by Bureau of Indian Standard. 32. Thus, going by the definition under Indian standard Method of Measurement of Plinth, Carpet and Rentable Areas of Buildings, even by making a reference to the definition of Built-up area under Sub-Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the balcony ware shown, but, were excluded in the built-up area, the Income Tax Authority cannot add Balcony as built-up area and deny the benefit to the assesses. 35. The Karnataka High Court further pointed out that as per Section 80-IB (10), the Housing project must be one approved by a local authority. In respect of the approval obtained prior to 01.04.2005, if Sub-Section 14 (a) of Section 80-IB has to be held applicable, then, the assesses has to necessarily seek for a modified plan. Once, a valid approval is obtained and the building is constructed in all respects prior to 01.04.2005, then, the assesses would be entitled to the benefit of Section 80-IB. This is irrespective of the date of sale, that is, even if it is subsequent to 01.04.2005, the assesses has to have the benefit of Section 80-IB. As far as the introduction of definition of Built-up area in Subjection 14 {a) of Section 80-IB, under Finance (No.2) Act, 2004 is concerned, the Karnataka High Court held that having regard to the fact that they came into force from 01.04.2005, the same will have relevance to those Housing Projects, which were approved subsequent to 01.04.2005. 36. We agree with the views ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also, the learned CIT-DR has raised the said issue though she has fairly conceded that such a finding was not emerging from the orders of the lower authorities. Be that as it may, the Hon'ble High Court has noted and dealt with the said argument in the following words :- 29. Thus, in the face of terrace being an open area, not being a projection and hence, not included in the plinth area, the question herein is as to whether the Tribunal is justified in confirming the order of assessment to include the terrace area into the built-up area solely by reason of the fact that the assessee had sold it to purchasers of the 7th floor as a private terrace. 30. We do not think, the Tribunal is justified in taking the view that open terrace would form part of the built-up area for the purpose of sub-clause (c) of section 80-IB(10). As already seen in the preceding paragraphs, an assessee having an Approved Plan project alone has the right to claim deduction under section 80-IB. Any project undertaken not approved by the Local Authority is outside the purview of the Act. Thus, when a Local Authority, endowed with the jurisdiction to grant the approval is guided in its approval by Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which was approved on 19.07.2003, much before the insertion of section 80IB(14)(a) of the Act by the Finance (No.2) Act, 2004 w.e.f.01.04.2005. The following observations of the Tribunal have emphasized by the learned CIT-DR :- 20. Now coming to the issue as to whether balconies and projections are to be included in the built-up area, we observe that the Ld. CIT(A) has rightly stated that when the projections/elevations are just have 4 , 3 , 5 and 7 of the floor level, they implies that there are extended area and can be utilized as carpet area. Not only this, Ld. CIT(A) has also stated that the booking confirmation/ particulars sheets that are made at the time of booking the flats give the exact area that is sold to the buyers and the books impounded and inventoried also give the picture to the actual area sold, and this includes all projections and other common areas. Therefore, we agree with Ld. CIT(A) that the said extended area of projections/elevations/balconies are to be included while measuring all the flats and, accordingly, Ld. CIT(A) has rightly held that area of some of the flats exceeded the prescribed limit of 1000 sq.ft.. We also agree that sub-section (14)(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT-DR on the decision of the Hyderabad Bench of the Tribunal in the case of Modi Builders Realtors (P.) Ltd. (supra) to submit that the 'built-up area' would include a portico and balcony. Factually speaking, the Hyderabad Bench of the Tribunal was considering the inclusion or otherwise of area comprised by balcony and portico which is quite distinct from the controversy before us. Moreover, in view of the judgement of the Hon'ble Madras High Court which is a superior authority than a Tribunal, the parity of reasoning laid down by the Hon'ble High Court is liable to be followed. 27. Considered in the above background, we conclude by holding that the Assessing Officer and thereafter the CIT(A) has erred in including the area of projected terrace (open to sky) for the purposes of computing 'built-up area' while examining the condition prescribed in clause (c) of section 80IB(10) of the Act. Once the area of projected terrace (open to sky) is excluded then there is no dispute that the residual built-up area of six units in question falls within the prescribed limit of 1500 sq.ft.. As a result, we hold that assessee fulfills the condition prescribed in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search and seizure action, undisclosed income amounting to ₹ 7 crores was disclosed on account of unaccounted receipts and payments for the various real-estate projects undertaken by assessee and other group entities. In para 8.2 of the assessment order, the Assessing Officer has enumerated the details of the entities and the respective years for which the assessee group made the aforesaid declaration of undisclosed income of ₹ 7 crores. For the present, we are concerned with the declaration of ₹ 60,00,000/- made by the assessee for the assessment year under consideration in respect of the project, Sai Nisarg Park Mayureshwar, which was undertaken by the assessee though his proprietary concern, M/s Mangalmurti Developers. The said undisclosed income was stated to be the amounts received from the customers on sale of flats in the housing project, Sai Nisarg Park - Mayureshwar, which was not recorded in the regular books of account. However, the Assessing Officer noted that such additional income of ₹ 60,00,000/- declared in the course of search was not disclosed in the return of income filed. On being show-caused, assessee contended that such receipts w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the judgement of the Hon'ble Bombay High Court in the case of CIT vs. Sheth Developers (P) Ltd., 254 CTR 127 (Bom). 33. On the other hand, the learned CIT-DR has opposed the prayer of the assessee by pointing out that the impugned income was declared during the course of search as 'undisclosed income' and thus it was to be taxed as income from 'other sources', which is not eligible for section 80IB(10) benefits. Moreover, as per the learned CIT-DR, onus is on the assessee to establish that such undisclosed income was eligible for deduction u/s 80IB(10) of the Act, which the assessee has failed to do. In the course of her submissions, reliance has been placed on the decision of the Chandigarh Bench of the Tribunal in the case of Liberty Plywood (P.) Ltd. vs. ACIT, (2013) 140 ITD 490 (Chandigarh). 34. We have carefully considered the rival submissions. Factually speaking, it is quite evident that in the course of his deposition u/s 132(4) of the Act on 14.08.2008, assessee declared certain additional incomes for various assessment years, which were hitherto not forming part of the income declared in the regular books of account. The Assessing Officer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the impugned sum of ₹ 60,00,000/- has been earned by the assessee in the course of development and execution of housing project, Sai Nisarg Park - Mayureshwar, though such income was hitherto not reflected in the regular books of account. Further, there is no dispute to the fact-situation that the profits of the Sai Nisarg Park Mayureshwar project undertaken by the assessee are entitled to the benefits of section 80IB(10) of the Act. 35. In the above background, the moot question is whether such additional income declared in the course of search is eligible for the benefits of section 80IB(10) of the Act, especially when the relevant project is otherwise eligible for the benefits of section 80IB(10) of the Act. 36. In this context, it was a common point between the parties that an identical controversy has been considered by the Pune Bench of the Tribunal in the case of M/s Malpani Estates vs. ACIT vide ITA Nos.2296 to 2298/PN/2012 vide order dated 30.01.2014. The relevant discussion in the order of the Tribunal dated 30.01.2014 (supra) is reproduced hereinafter to facilitate appreciation of reasoning that prevailed with the Tribunal to allow the claim of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; at Pimple Saudagar, Pune. However, as per the CIT(A), the income in question is assessable under the head 'income from other sources'. Ostensibly, the CIT(A) has not agreed with the inference of the Assessing Officer that the impugned income does not fall under any heads of income u/s 14 of the Act because according to her such income is liable to be assessed under the head 'income from other sources. Thus, as of now, before us the inference of the Assessing Officer does not survive any longer since the order of the Assessing Officer has merged in the order of the CIT(A) and in any case the Revenue is not in appeal on this aspect. Be that as it may, factually speaking, it cannot be denied that the additional income in question relates to the housing project, 'The Crest' at Pimple Saudagar, Pune undertaken by the assessee. The material seized in the course of search; the deposition made by the assessee's partner during search u/s 132(4) of the Act; and, also the return of income filed in response to notice issued u/s 153A(1)(a) of the Act after the search, clearly show that the source of impugned additional income is the housing project, 'The Crest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment or re-assessment of total income of six assessment years preceding the assessment year relevant to the previous year in which such search is conduced or requisition is made. Shorn of other details, it would suffice for us to notice clause (i) of the Explanation below section 153A(2) of the Act, which reads as under :- Explanation. For the removal of doubts, it is hereby declared that, - (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section. 14. In terms of the above referred clause (i) of the Explanation, it is evident that all the provisions of the Act shall apply to an assessment made u/s 153A of the Act save as otherwise provided in the said section, or in section 153B or section 153C of the Act. In the background of the expression all other provisions of this Act shall apply contained in Explanation (i) below section 153A of the Act, and in the context of the controversy before us, the moot point to be examined is as to whether or not deductions enumerated in Chapter VIA of the Act are to be considered in making an assessment made u/s 153A(1)(b) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g regard to the facts of the present case. No doubt the Hon'ble Supreme Court has observed that reopening of an assessment u/s 147/148 is for the benefit of the Revenue. In the case before the Hon'ble Supreme Court, assessee wanted to set-off loss against the escaped income which was taxed in the re-assessment proceedings and the claim of such setoff was not made in the return of income originally filed. According to the Hon'ble Supreme Court, the claim was not entertainable because the said claim not connected with the assessment of escaped income. In-fact, the judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works Pvt. Ltd. (supra) is not an authority to say that assessee cannot raise a claim pertaining to an issue which is connected to the assessment of escaped income. In-fact, if a claim which is connected to the escaped income is set-up before the Assessing Officer in the course of re-assessment proceedings, the same is liable to be considered and the judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works Pvt. Ltd. (supra) only precludes such new claims by the assessee which are unconnected with the assessment of esca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y High Court in the case of Sheth Developers (P) Ltd. (supra), the claim of the assessee is justified. 18. In-fact, once it is factually explicit that the additional income in question is derived from the housing project, 'The Crest' at Pimple Saudagar, Pune, which is eligible for section 80IB(10) benefits, such an income merely goes to enhance the 'business income' derived from the eligible housing project and shall be entitled for section 80IB(10) benefits, even as per the ratio of the judgment of the Hon'ble Bombay High Court in the case of Gem Plus Jewellery India Ltd. (supra). 19. In the result, on the basis of the aforesaid legal position and the material and evidence on record, assessee is eligible for deduction u/s 80IB(10) of the Act in relation to impugned additional income offered in a statement u/s 132(4) of the Act in the course of search and subsequently declared in the return filed in response to notice u/s 153A(1)(a) of the Act. In the result, appeal of the assessee for assessment year 2008-09 is allowed. 37. In view of the legal position explained in the above precedent and the material and evidence on record, assessee is eligible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the learned CIT-DR on the said decision does not help the case of the Revenue. 40. In the result, we set-aside the order of the CIT(A) and direct the Assessing Officer to allow the deduction u/s 80IB(10) of the Act even in relation to the income surrendered during the course of survey on account of the undisclosed receipts from the housing project, Sai Nisarg Park - Mayureshwar amounting to ₹ 60,00,000/-. Thus, on this Ground assessee succeeds. 41. In the cross-appeal of the Revenue for assessment year 2007-08, Ground of Appeal No.4 relates to the action of the CIT(A) deleting an addition of ₹ 7,95,200/- which was made by the Assessing Officer for peak negative balance in the cash book prepared on the basis of seized diaries. 42. In the course of search certain diaries were seized on the basis of which assessee prepared a cash book which was scrutinized by the Assessing Officer during the assessment proceedings. The Assessing Officer observed that there was a peak negative cash balance of ₹ 7,95,200/- for the period under consideration which was added to the returned income. The assessee asserted that the addition was not justified because the negati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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