TMI Blog2015 (6) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... orical finding to the effect that none of the residential unit was more than 1000 sq.ft. This fact was also verified by the revenue authorities during the survey operation carried out at assessee's project site even before original assessment u/s.143(3) wherein assessee's claim u/s.80IB(10) was allowed. We found that AO has worked out the area on the basis of a hillock whose area has been shown to 1873.27 sq.mtr.s on the entire plot of area and not on the area that relates to site of building Atlantic Ocean. Therefore, if the entire plot area is taken into account i.e. 40803.10 sq.mtrs. the area of the hillock is remarkably reduced in proportion the total area of the hillock and nearly comes to 4.59%. Thus, the computation done by the AO in arriving at the plot area is based on wrong figures adopted by him. - Decided in favour of assessee. - ITA No. 3162/Mum/2012 - - - Dated:- 15-5-2015 - Joginder Singh, JM And R C Sharma, AM,JJ. For the Appellant : Shri Premanand J For the Respondent : Shri Chetan A Karia ORDER Per R C Sharma(A. M. ) This is an appeal filed by revenue against the order of CIT(A)-16, Mumbai dated 29-2-2012, for the assessment year 2006-200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the reasons for reopening an assessment were recorded. The principle of law, therefore, is well settled that the question as to whether there was reason to believe, within the meaning of section 147 that income has escaped assessment, must be determined with reference to the reasons recorded by the AO. The reasons which are recorded cannot be supplemented by affidavits. The imposition of that requirement ensures against an arbitrary exercise of powers under section 148. 2.3.2 In Calcutta Discount Co. Ltd. vs. ITO (1961) 41 ITR 191 (SC), the Supreme Court has expatiated the expression reason to believe as postulating belief and the existence of reasons for that belief. The Court proceeded to say thus: The belief must be held in good faith it cannot be merely a pretence. It contemplates existence of reasons on which the belief is founded, and not merely a belief in the existence of reasons inducing the belief. The Court is not concerned with the question whether the materials may be regarded by a Court, before which a dispute is raised, to be sufficient to sustain the belief entertained by the ITO.II On a challenge being thrown, it is necessary for the ITO to establish that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the AG. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The AO, in the event of challenge to the reasons must be able to justify the same based on material available on record. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the AO cannot be supplemented by filing affidavit of making oral submission, otherwise, the reasons which are lacking in material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced. . 2.3.5 In CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561(SC), the Hon'ble Supreme Court had held that prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under two conditions and fulfillment of the said conditions alone conferred jurisdiction on the AO to make a back assessment, but in s. 147 (w.e.f. 1st April, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. However, in the instant case I find that Ld. AO has not come to any conclusion that the information provided by the appellant in the original assessment were not correct. In the case of Transworld International Inc. vs. Jt.CIT (2005) 273 ITR 242 (Del), the Hon'ble Delhi High Court held that when sufficient material was placed on record and the AO had arrived at conclusion that the assessee was entitled to a particular relief (depreciation in that case) then on the same material a different view could not be taken having found that the amount representing 'payment to chit-holders was in fact paid to a director of the assessee, a private company controlled by the recipient, and that the said money was available with the assessee itself as undisclosed income and thus, the impugned addition was justified, finding of the Tribunal is a finding of fact, and there is no ground for interference; no substantial question of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the exercise of the powers to reopen an assessment has to be decided with reference to the reasons recorded while reopening the assessment. The reasons recorded while reopening the assessment did not justify the exercise of the power in the facts of this case as there was full and true disclosure. 2.3.11 In the case of Purity Tech textile, the reassessment notice appeared to have been issued pursuant to an audit report and the assessing officer had no reason to believe that income had escaped assessment. The Hon'ble Bombay High Court while dealing with the issue observed that during the course of assessment proceedings for assessment year 2003-04, the assessee filed an audit report in Form 10CCB in which relevant particulars of the license to work that was granted to the unit of the assessee was disclosed. The license to work dated 14-8-2000, copy of which was filed before the AO, contains a disclosure of the fact that the plans have been approved by the Sarpanch by his letter dated 12-9-1988. The basis on which the assessment for assessment years 2003-04 and 2004-05 has been sought to be reopened is that it was during the course of assessment proceedings for subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO appears to have relied exclusively on an audit objection. There was, hence, a total absence of tangible material , to justify the conclusion that income had escaped assessment. All the conditions were fulfilled by the appellant for the claim of the deduction under section 80IB(10) and the Ld. AO verified the same during the original assessment which was completed after conducting a survey operation u/s. 133A of the Act. In view of the foregoing the issue of notice u/s. 148 is bad in law and thus cannot be sustained. This ground of appeal is thus allowed. Ground of appeal No. 2 1. On the facts and in the circumstances of the case, the learned Jt.CIT, erred in denying the claim of the appellant company u/s 80IB(10). 2. The learned Jt. CIT failed to appreciate that The appellant's claim u/s 80IB(10) is as per the provisions of law and that the same has been correctly claimed and allowed in the original assessment. 3. Under the above facts and circumstances, the JT. CIT ought not to have denied the claim of the appellant u/s 80IB (10). 3.1 Brief Facts of the Case AO's Conclusions 3.1.1 During the reassessment proceedings, the Ld. AO observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant. From the plan of building Indian Ocean, it is seen that out of the area of 4981.96 st.mtrs. and area of 183.27 sq.mtrs. is hillock area .on which construction is not feasible. If this unfeasible area is excluded the actual area for development will fall below 1 acre and as per the said Section the area of the plot should be minimum of 1 acre. The Ld.AO observed that area for development comes around 38% of the plot. The appellant further submitted that it has itself vide letter dated 18/3/2008 has stated that on the aforesaid common plot, certain basic work such as access road, drainage line, permanent water line. boundary wall, removing of slums, shifting of Mosque, Mothersa, etc. would be done later on. From this it is crystal clear that, even though, the building Indian Ocean is complete without completion of the above work, it cannot be said that the project as a whole is a complete project. The appellant has contented that the area earmarked for Indian Ocean is 4981.96 sq.mtrs. From the building plan of Indian Ocean, it is seen the total built up area of A B wing works out as follows: 'A'- Wing = 4 Flats = 665.56X4 = 2662.24sq.ft. 'B'- Wing = 4 Fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the IOD conditions, the applicant may submit request for the commencement certificate (CC). Construction can commence only if the Intimation of Disapproval (IOD) certificate and Commencement Certificate (CC) is received. There is no project approval certificate that is required to be separately issued by the BMC. The IOD CC is the project approval. (Certificate from Architect page 118) Once the building is complete the builder has to apply for an O.c. i.e. Occupancy Certificate which signifies that the building is complete and can be inhabited. The occupation certificate given by the BMC would be sufficient proof that the housing project is completed. Even in Dy. CIT vs. Ansal Properties Industries Ltd. (2008) 22 SOT 45 (Del.) it was considered sufficient The Bombay High Court in Brahma Associates v JCIT has held that Section 80-IB(10) (pre amendment w.e.f. AY 2005-06) does not define the expression 'housing project' but refers to housing projects which are approved by the local authorities. Under the local laws, the authorities are empowered to approve projects as housing projects with commercial user to the extent permitted under the DC Rules framed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CBDT F. No. 205/3/2001/ITA II where it has clarified that any project which has been approved by a local authority as a housing project should be considered adequate for the purposes of section 80(IB)(10). The appellant further submitted that the CA,'s certificate mentions the entire plot area which was purchased by the assesee company, hence there is no discrepancy. 3.2.3. The appellant further submitted . that Rule 18BBB requires separate report [10CCB] for each Undertaking or Enterprise . The appellant further submitted that audit report for this Project in Form 10CCB and have also given project wise profit and loss account during the assessment. Reading Rule 18BBB and section 80IB together means undertaking and housing projects mean two different things. Some of the assesee's have a division which carries out several housing projects. In such projects difficulty arise as to preparing separate balance sheets for each project as the resources are common. The company has given separate report for Indian Ocean a separate project. It has only one undertaking i.e. Cordcon Builders which does the construction for which the accounts are prepared and balance sheet for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply the area of each floor as determined by number of floors to get the built up area, which has not been done. The area of each floor as per the A.O's working is 6477.48 sq feet. For Fifteen floors the built up area will be 97162.20 square feet. F.S.I. Granted is 1 i.e. for construction of 97162.20 sq feet the plot size has to be minimum 9026.65 sq mts i.e. more than one acre which is approved by the BMC. The appellant further submitted that as per plan the actual permissible area for Indian Ocean is 6555.83 sq mtrs i.e. 70566.95 square feet hence the calculation of the building being of only 6477.48 sq feet is baseless. Architect certificate and plan were given in support of the above. The section nowhere talks about area occupied by the building. The section is very clear the plot size has to be minimum one acre; it does not talk about constructed area. The constructed area cannot be even considered as the Income Tax applies to the entire country. The development rules are however framed state wise and even city wise. In lonavala the FSI is only 0.25. A builder cannot construct more even if he has a big plot. Even if plot size is more than one acre constructed areas will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the same before the 31st day of March, 2001; (b) the project is on the size of a plot of land which has minimum area of one acre and (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twentyfive kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place. For bringing this provision, the Notes on Clauses to the Finance Bill, 1999 has explained that, the provision also seeks to provide that for approved housing protects the profits which are fully deductible, the built-up area in regions other than outside twenty-five kms of municipal limits of Delhi and municipal limits of Delhi and Mumbai the built-up area of the residential units does not exceed one thousand five hundred square feet. 3.3.3 Further, the Memo contained in Finance Bill, 1999 has explained the provisions brought by the legislature w.e.f. 1st April, 2000 and the same reads as under: TAX INCENTIVE FOR PROMOTION OF HOUSING Liberalization of tax holiday to approved housing projects - Under s. 80-IA of the IT Act, profits of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of the financial year in which housing project has been approved by that local authority. 3.3.5 Further, the Explanation as brought out by the Finance (No. 2) Act, 2004 w.e.f. 1st April, 2005 for the purposes of this clause reads as under: (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority. and condition (b) is that the project has to be on the size of a plot of land which has a minimum area of one acre. Further, the proviso to s. 80-IB(10) at the end of cl. (b) as brought out by the Finance (No. 2) Act, 2004 w.e. . 1st April, 2005 provides as under: nothing contained in cl. (a) or cl. (b) of s. 80-IB(10) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in c/s. (a) to (c) of the said sub-section. The existing provisions of the said sub-section provides that (a) the undertaking should have commenced development of the housing project after the 1st day of October, 1998, (b) the project should be on a size of a plot of land which has a minimum area of one acre, and (c) the residential unit should have a maximum built-up area of one thousand squarefeet where such residential units are situated within the cities of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place. Sub-cl. (d) seeks to substitute sub-se. (10) of the said section so as to provide, inter alia, a hundred per cent deduction of the profits derived by an undertaking developing and building housing projects approved by a local authority before 31st March, 2007 instead of 31st March, 2005 under the existing provisions, subject to the conditions that (a) such undertaking has commenced or commences development and construction of the housing project on or after 1st Oct., 1998 and completes the construction within four years, from the end of the financial year in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uated in Delhi or Mumbai and one thousand and five hundred square feet at other places. It is proposed to substitute the existing sub-section so as to rationalize the provisions and provide additional incentives. With a view to allow more housing projects to avail of the tax holiday under this provision, it is proposed to extend the time-limit for obtaining approval from the local authority to 31st March, 2007. However, it is also proposed to provide a time-limit for the completion of the housing project within 4 years from the end of the financial year in which the project is approved by the local authority. It is proposed to take the date of approval as the date on which the building plan is first approved by the local authority and the date of completion of the housing project as the date on which the completion certificate is issued by such authority. It is further proposed to provide that the built-up area of the shops and other commercial establishments including in the housing project shall not exceed five per cent of the aggregate built-up area of the housing project or 2,000 sq. ft., whichever is less. With a view to encourage the redevelopment of slum dwellings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant‟s explanation the claim of the appellant was accepted u/s. 80IB. The Ld.AO accordingly passed an order u/s. 143(3) of the Act. Later on it seems that the there was an audit objections and the Ld. AO objected to the audit objections vide his letter dated 13.11.2009, a copy of which is submitted by the Ld.AR of the appellant (Page 63 to 67 of the paper book). Therefore, the Ld.AO vigorously followed the dropping of the audit objection as late as 1.12.2011, however, no reply was received from the Senior Audit Officer LAP-I, Mumbai and thereafter accordingly, the Ld.AO issued the notices u/s. 148 r.w.s. 147 and framed the re-assessment. I find that the main objection of the Ld.AO that the appellant's one project viz. Atlantic ocean started commenced prior to 1998, therefore, all other projects irrespective their date of commencement will not be eligible for deduction u/s. 80IB. As is evident from the plain reading of the provisions of Section 80lB that the deduction is qua the project and not qua the assessee. Therefore it is wrong to presume that if any project fulfilling the conditions of Section 80IB commenced its production after 1998 will also be not eligi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved by the BMC does not have any shop or commercial establishment as is evident by the approved site project as well as by the Architect certificate. The copy of the approved plan of the BMC is placed on record by the appellant. (v) The perusal of the approved plan by the BMC indicates that there are 118 flats and flat wise areas statement as approved by the BMC is also placed on record by the appellant. 3.3.10 In view of the foregoing, the Ld AO's contention that the plot area is less than 1 acre is erroneous and completely ignores the facts on record. The Ld.AO has worked out the area on the basis of a hillock whose area has been shown to 1873.27 sq.mtrs on the entire plot of area and not on the area that relates to site of building Atlantic Ocean. Therefore, if the entire plot area is taken into account i.e. 40803.10 sq.mtrs the area of the hillock is remarkably reduced in proportion the total area of the hillock and nearly comes to 4.59%. Further, the Ld.AO has not taken into account the fact that the hillock area was leveled by the appellant and only a small portion of 716 sq.mtrs remained which is yet to be leveled for the purposes of construction. Therefore, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under scrutiny assessment u/s.143(3) consequent to survey undertaken at assessee's premises, wherein the AO has made detailed enquiry and after recording detailed finding on each point of assessee's claim of deduction u/s.80IB(10) was allowed. Thereafter assessment was reopened by issue of notice u/s.148. While deciding the appeal, categorical finding has been recorded by the CIT(A) to the effect that during the course of original assessment proceedings u/s.143(3) entire details and approved plan of its project by BMC and other evidence which unequivocally supports the assessee's contention that the project got completed on 26-3-2008 and commenced well after October, 1998, were filed and considered. Thus, there was total absence of tangible material to justify the conclusion that income has escaped assessment in the relevant assessment year. There was no material before the AO which could lead to the formation or belief that the income had escaped assessment. After recording detailed finding and applying the proposition of law laid down by the Hon'ble Supreme Court and the High Court, the CIT(A) has annulled the reopening u/s.147 of the Act. 6. With regard to m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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