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2015 (9) TMI 796 - ITAT PUNE

2015 (9) TMI 796 - ITAT PUNE - TMI - Validity of reopening u/s.147 - proportionate deduction u/s.80IB(10) - Held that:- As regards the argument of the Ld. Counsel for the assessee that no reasons are recorded for issue of notice u/s.148 for both these assessment years, we find from the perusal of the order sheet entries that the reasons recorded by the AO are sufficient for reopening of the assessment. The argument of the Ld. Counsel for the assessee that the reopening is based on change of opin .....

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case the project has been approved prior to 01-04-2005 and the assessee has admittedly completed construction of all the 7 buildings, therefore, the denial of deduction u/s.80IB(10) for non production of completion certificate for the 7th building is not justified in view of the decision of M/s. Satish Bora & Associates Versus Assistant Commissioner of Income Tax (2011 (1) TMI 1215 - ITAT PUNE ). In view of the above decision, the assessee is not required at all to submit the completion certific .....

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to 1943/PN/2013 - Dated:- 28-8-2015 - SHRI R.K. PANDA AND SHRI VIKAS AWASTHY, JJ. For The Appellant: Shri S.N. Doshi For The Department Shri Rajesh Damor ORDER PER R.K. PANDA, AM ITA Nos. 908 to 910/PN/2010 filed by the assessee relating to Assessment Years 2007-08, 2006-07 & 2005-06 respectively are recalled matters for the limited purpose of deciding certain issues which remained to be adjudicated by the Tribunal. ITA Nos. 1873 to 1875/PN/2013 filed by the Assessee and ITA Nos. 1941 to 19 .....

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s. 2007-08, 2005- 06 & 2006-07. The assessee filed a Miscellaneous Application before the Tribunal and the Tribunal vide order dated 11-06-2013 in M. A.No.80/PN/2011 recalled the order for the limited purpose of deciding the validity of reopening u/s.147 for A.Yrs. 2005-06 and 2006-07 and the alternate contention of the assessee regarding proportionate deduction u/s.80IB(10) for A.Yrs. 2005-06 to 2007-08 respectively. 3. So far as the issue relating to reopening of assessments for A.Yrs. 200 .....

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ange of opinion as similar claim made u/s.80IB(10) has been allowed in A.Y. 2004-05 in the assessment order made u/s.143(3). (c) No new tangible material has come in possession of the AO to reopen these completed assessments although made u/s.143(1). (d) Even the notice dated 12-11-2007 of the Pune Municipal Corporation cannot be considered as new material for the obvious reason that in the said notice the Pune Municipal Corporation has confirmed that the construction has been completed and the .....

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ssions Ltd. Vs. ITO ITA No.2230/Mum/2010 order dated 07-10-2011. 5. The Ld. Departmental Representative on the other hand submitted that after completion of the assessment for A.Y. 2004-05 certain facts came to the notice of the AO which led him to initiate reassessment proceedings u/s.147/148. He submitted that during the course of assessment proceedings for A.Y.2007-08 the AO made enquiries with the local authority, i.e. Pune Municipal Corporation vide her letter dated 19-06-2008. In response .....

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ngs, i.e. Building Nos. D1 to D6, completion certificate for D7 building has not been given by the Pune Municipal Corporation. Further, the Pune Municipal Corporation vide letter No. BCO/3579 dated 12-11-2007 issued a notice to the assessee directing him to stop construction of the project due to certain ambiguity in ULC. Therefore, the AO had sufficient tangible materials for issue of notice u/s.148 by reopening the assessment u/s.147. Further, the assessments for A.Yrs. 2005-06 and 2006-07 wer .....

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non-jurisdictional Assessing Officer with a wrong PAN Number. Therefore, the return was not readily traceable by the jurisdictional Assessing Officer. He accordingly submitted that the reassessment proceedings initiated by the AO being in accordance with law, the same should be upheld. 7. We have considered the rival arguments made by both the sides, perused the order of the AO and CIT(A) and the paper book filed on behalf of the assessee. From the submission of the Ld. Counsel for the assessee .....

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e assessment for A.Y. 2004- 05. Therefore, tangible material has come in the hands of the Assessing Officer during A.Y. 2007-08 for which remedial measures were taken by the Assessing Officer for A.Yrs. 2005-06 and 2006-07 by reopening of the assessments. 8. As regards the argument of the Ld. Counsel for the assessee that no reasons are recorded for issue of notice u/s.148 for both these assessment years, we find from the perusal of the order sheet entries that the reasons recorded by the AO are .....

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iew of the matter, we are of the considered opinion that the reopening of the assessments by the AO is valid. The grounds raised by the assessee on this issue for A.yrs. 2005-06 & 2006-07 are accordingly dismissed. 9. So far as the second issue is concerned, i.e. non consideration of the alternate ground relating to pro-rata deduction for A.Yrs. 2005-06 to 2007-08, we have held in the succeeding paragraphs that the assessee is eligible for deduction u/s.80IB(10) in respect of the entire hous .....

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uction of ₹ 1,68,38,012/- u/s.80IB(10) of the I. T. Act. The AO disallowed the claim made u/s.80IB(10) on the ground that the assessee has not fulfilled the conditions laid down in the provisions of section 80IB(10). The assessee preferred an appeal before the CIT(A) who dismissed the appeal of the assessee. On further appeal filed by the assessee the Tribunal vide order dated 31-03-2011 restored the issue of allowability of deduction u/s.80IB(10) to the file of the AO with a direction to .....

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days from the date of filing of the application. The assessee has completed the entire project and part completion certificate for building Nos. D1 to D6 are already issued by PMC. The completion certificate for building No. D7 is awaited. It was submitted that the alleged major problem relating to ULC matter has been found to be incorrect and not at all in existence due to the order of the Hon ble High Court which quashed the initiation of revisional proceedings u/s.34. 12. So far as the objec .....

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ate delay in initiation of the proceedings and not on merits. 5.2 It is clear that the PMC raised its objection and much beyond the stipulated period of 21 days from the receipt of the application for the completion certificate and thus fulfils the condition laid down in rule 7.7 of the Development Control (DC) Rules of the PMC, as far the time limit is concerned. However the objection raised by the PMC vide letter dated 25.10.2007 was a major objection whereby the notice for stopping the constr .....

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oposed society in which the flat owners are members. It is in this context that the assessee's role in the Housing project' is required to be seen and examined. In view of the same, it is clear that the objection though raised late by the PMC is a major one and hence is clearly distinguishable from the objections of a minor nature raised in the case of M/s. Satish Bora and Associates. 5.4 As per the provisions of see 80 IB(10), in order to allow the claim, one of the prime conditions is .....

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the Local Authority that no completion certificate has been granted to the said project. However, subsequently they informed that only part completion certificate i.e. in respect of buildings D-l to D-6 have been issued by them. Further, the assessee has also admitted vide his letter dated 07 12/2009 the fact that completion certificate has been issued in respect of six out of seven buildings only and the same has not been issued by the local authority for the seventh building. It is very much c .....

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at the PMC has still not issued the final completion certificate to the assessee till the date of passing this order. The letter dated 05.11.2012 from the PMC clearly states that the proceeding in respect of issue of final completion is still on. As such the assessee has violated the provisions stipulated in Explanation(ii) to section 80IB(10)(a) of the Act. 5.5 The tax incentive by way of deduction u/s. 80IB(10) is predominantly for the purpose of augmenting affordable dwelling units; not withs .....

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tificate, the intent of Legislature gets defeated. The provision of section 80IB(10) is a beneficial provision to the assessee. However, the conditions stipulated for getting the deduction needs to be fulfilled strictly. In the present case, though the assessee fulfills the other requisite conditions, the condition regarding the completion of the project within the stipulated period, may be due to some technical reasons, has not been fulfilled by the assessee and therefore the assessee's cla .....

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10) of the assessee for year under consideration is hereby disallowed. 14. In appeal the Ld. CIT(A) granted the pro-rata deduction, i.e. allowed the claim of deduction u/s.80IB(10) in respect of Building Nos. D1 to D6. He however denied the claim of deduction u/s.80IB(10) in respect of Building No. D7. The relevant observation of the Ld. CIT(A) at para 4.6 to 5 of the order read as under 4.6. I have considered the submissions of the appellant and the contention of the Assessing Officer in reject .....

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e PMC in the letter dated 05. 11.2012 addressed to the Assessing Officer stated in response to specific question as to whether a completion certificate had been issued in response to the application made by the assessee, that "the proceedings in respect of issue of completion certificate in respect of building no. 07 is in progress." The Assessing Officer relied upon this observation of PMC to hold that the completion certificate from the local authority as required under the Income Ta .....

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the title of the land, leading to the possibility of razing down unauthorized construction thereon. The Assessing Officer also noted that the department had not accepted the decision of the ITAT, Pune in the case of Satish Bora and Associates and had filed a reference before the High Court in that case. 4.7 The appellant s submission is that the Assessing Officer has travelled beyond the confines prescribed by the ITAT in examining the facts to see if Satish Boar case is applicable. This submiss .....

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islature have also introduced a deeming provision of 21 days to put constraint upon PMC, we after detailed deliberation in preceding paragraphs have come to a conclusion that in case of small objections of PMC raised after expiry of deeming period of 21 days under Rule 7.7 of DC Rules under PMC, the date when the applicant acquired deeming sanction will be treated as the date of Completion (occupancy) Certificate to meet out the requirement of Explanation (ii) to Section 80IB(10)(a) of the Act. .....

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all work vide its letter dated 12.11.2007 was received almost a year later. This letter put an immediate halt to the construction activity being undertaken at the appellant s Sunder Sahawas project. As already stated above this letter of PMC was issued in view of the major violation relating to the FSI as well as irregular construction carried out on lands declared as surplus vacant land. However, the Bombay High Court has subsequently intervened and quashed the revisional order of the Collecto .....

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toppage order issued by PMC involved the misuse of ULC Provision by certain developers and the grant of FSI on surplus vacant lands by the revenue and municipal authority, this order of PMC has been quashed by higher Court following which the order has been vacated by PMC. 4.9. The facts stated above, make it clear that it is not a case of 'small objections' which have been spelt out by the ITAT in the Satish Bora case but relate to a major objection which has been consequently withdrawn .....

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the ratio of Satish Bora case. Accordingly, it is held that the Assessing Officer has correctly appreciated the caveats laid down in Satish Bora case after examining the factual aspects of the appellant's case. 4.10. The alternative contention of the appellant is that deduction u/s 80IB10) may be allowed in respect of the six buildings which are admittedly completed before 31.03.2008. Reliance has been placed on the following decisions of ITAT, Pune at Bombay High Court a) M/s. Vandana Prope .....

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ed the decision of the jurisdictional High Court and ITAT, Pune and following the precedent of judicial discipline, the alternate contention of the appellant that deduction u/s.80IB(10) should be allowed in respect of the 06 buildings which were admittedly completed before 31.03.2008, is found acceptable. Accordingly, ground No.1 to 3 are held to be partly allowed. 5. Unnumbered ground of appeal is a residual ground and says that appellant be allowed to add, amend, alter or delete any ground of .....

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ing of the assessment u/s.147 without appreciating the fact that there has not been any new tangible material possessed by the AO justifying the reopening of the assessment. 2. On the facts and in the circumstances of the case and without prejudice to above ground, the CIT(A) has erred in not allowing the claim made u/s.80IB(10) for the entire housing project. The above grounds of appeal may kindly be allowed to be altered, modified, amended, etc in the interest of natural justice. Grounds by Re .....

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3. The Ld. Commissioner of Income-tax (Appeals) erred on facts and in law, in allowing the deduction u/s 80IB(10) when the assessee had completed only six building out of 7 building, the plan was approved by Local Authority for 7 buildings thus the assessee violated the provision of sub section (ii) of clause (a) to section 80IB(10) of the Act, 1961. 4. For these and such above other grounds as may be urged at the time of the hearing, the order of the learned CIT(Appeals) may be vacated and that .....

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der while deciding the appeal has in principle held that the profit in respect of the entire housing project including the 7th building is eligible for deduction u/s.80IB(10). The Hon ble Tribunal, however, required the AO to verify the correctness of the additional evidences filed before the Tribunal. The decision of the Tribunal was misconstrued by the AO who again confirmed the disallowance of deduction u/s.80IB(10) in respect of the entire housing project. Since the assessee had produced the .....

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all the buildings is completed and these are under occupation. He submitted that since construction of all the buildings have been completed the assessee should be allowed the deduction u/s.80IB(10) in respect of the profits of the entire project for all the 3 assessment years. 17. He further submitted that the project has been sanctioned on 22-12-2003, i.e. prior to 01-04-2005. Referring to the decision of Hon ble Delhi High Court in the case of CIT Vs. CHD Developers Ltd. reported in 362 ITR 1 .....

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/PN/2013 order dated 28-08- 2014 he submitted that the Tribunal following the above decision of Hon ble Delhi High Court has held that since the date of commencement of the project in that case is admittedly 16-07-2002, therefore, the amendment w.e.f. 01-04-2005 requiring the certificate of completion of project within 4 years of approval is not applicable to the project approved prior to that date. It was accordingly held that the assessee is entitled to claim deduction u/s.80IB(10) of the I. T .....

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filed by the land owners as well as Civil Application filed by the asssessee. He submitted that the Pune Municipal Corporation by its letter dated 09-09-2010 vacated the notice dated 12-11-2007 suggesting very clearly that even the socalled discrepancy never existed on the said date. He submitted that in the instant case the licensed architect filed the application dated 17-05-2006 along with the completion certificate for providing occupancy certificate for all the 7 buildings. The PMC granted .....

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. Satish Bora and Associates (Supra). 19. The Ld. Departmental Representative on the other hand heavily relied on the order of the AO. He submitted that since the assessee has not produced the completion certificate for the Building No. D7, therefore, in view of the provisions of section 80IB(10) the assessee is not entitled to the benefit of deduction u/s.80IB(10) for the entire project. 20. As regards the order of the CIT(A) giving pro-rata deduction in respect of 6 buildings is concerned he s .....

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dingly supported the order of the AO and submitted that the grounds raised by the assessee be dismissed and the grounds raised by the revenue be accepted. 21. We have considered the rival arguments made by both the sides, perused the order of the Ld. CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant the assessee carried out construction of a housing project called Sundar Sahavas and claimed deduction u .....

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6 and since on 12-11-2007 the local authority had issued a notice to the assessee directing him not to carry out further construction work on the project as there was certain ambiguities under the Urban Land Ceiling Act, therefore, the assessee is not entitled to the benefit of deduction u/s.80IB(10). According to the AO, as per Explanation (ii) to section 80IB(10) the date of completion of the housing project shall be the date on which the completion certificate in respect of such housing proje .....

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ee. As regards the reliance on the decision of the Tribunal in the case of M/s. Satish Bora and Associates (Supra) is concerned, the AO held that since the department is in appeal before the Hon ble High Court, therefore, the same cannot be followed. 22. We find in appeal the Ld. CIT(A) allowed the claim of prorata deduction in respect of the 6 buildings which were admittedly completed before 31-03-2008. While doing so, he relied on various decisions of the Tribunal and the decision of the Hon b .....

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ued the completion certificate. It is also the submission of the Ld. Counsel for the assessee that in view of the decision of the Hon ble Delhi High Court in the case of CHD Developers Ltd. (Supra) the assessee is not required to produce the completion certificate to avail the deduction u/s.80IB(10) in respect of a housing project which has been approved prior to 01-04-2005. 23. We find merit in the above argument of the Ld. Counsel for the assessee. Admittedly, the project has been sanctioned b .....

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f has also mentioned that all the buildings are constructed and are under occupation. The letter issued by PMC on 12-11-2007 directing the assessee to stop the construction work has been vacated by the Hon ble Bombay High Court vide order dated 30-06-2010. The relevant observation of the Hon ble High Court at para 3 and 4 reads as under 3. In so far as challenge to the Revisional order on aforesaid grounds of inordinate delay and the levy of penalty is concerned, the said issue is no more res-in .....

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ions of levying penalty at the rate mentioned in the ready reckoner for regularizing the construction on the surplus vacant land. 4. Since in the instant case revisional proceedings were initiated after a period of about five years, for the view that the Division Bench of this Court has taken in the judgment (Supra), the above petition is required to be allowed and is accordingly allowed in terms of prayer clause (b). Rule is accordingly made absolute in the above terms. Therefore, now the quest .....

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01-04-2005. 24. We find an identical issue had come up before the Tribunal in the case of System Enterprises vide ITA No.1123/PN/2013 order dated 28-08-2014 for A.Y. 2009-10. The Tribunal following the decision of Hon ble Delhi High Court in the case of CHD Developers Ltd.(Supra) and the decision of Hon ble Karnataka High Court in the case of M/s Ittina Properties Pvt. Ltd. vide ITA No.556/PN/2013 and batch of other appeals order dated 15-07-2014 has held that amendment w.e.f. 01- 04-2005 requi .....

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decisions cited before us. We find the Assessing Officer in the instant case denied the benefit of deduction u/s.80IB(10) on 4 counts (a) the housing project last sanctioned was for the construction of 65 units which has not been completed in the stipulated time frame, (b) the built up area of 2 row houses 1 & 7 are more than 1500 sq.ft. each (c) the housing project was required to be completed in totality and not individual flats and (d) the condition laid down in section (a) and (b) of 80I .....

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ess than 1500 sq.ft. after excluding terrace, balcony and projections etc., and therefore the 2 units fulfil conditions prescribed u/s.80IB(10)(14)(a) of the I. T. Act. The above observations of the Ld. CIT(A) are not challenged by the Revenue and therefore it has attained finality and therefore we are not concerned with the above objections of the Assessing Officer. 10.2 The other ground on which the Assessing Officer based his rejection of deduction u/s.80IB(10) is that the assessee has not be .....

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proved before 31-03-2004 and therefore according to both of them the project should have been completed before 31-03-2008. 10.3 We find the Hon ble Delhi High Court in the case of CHD Developers Ltd. (Supra) has observed as under (Short Notes) Section 80-IB(10) of the Income-tax Act, 1961, before substitution by the Finance (No. 2) Act, 2004 allowed a hundred per cent, deduction of the profits in the case of an undertaking developing and building housing projects approved before March 31, 2005, .....

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n to be the date on which the completion certificate in respect of such housing project is issued by the local authority. The assessee, a real estate developer, obtained approval for a housing project on March 16, 2005, from the Development Authority. It completed the project in 2008 and by letter dated November 5, 2008 applied to the competent authority for the issue of the completion certificate. For the assessment year 2007-08, its claim to deduction under section 80-IB(10) of the Income-tax .....

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essee was not expected to do or to fulfil the conditions which were not in existence at the relevant point of time or made compulsory by amendment in the Act from the future date. Since the assessee was to complete the project on or before March 31, 2009, and a request was duly made with the competent authority on November 5, 2008, mentioning that the project had been completed and the completion certificate may be issued and if the certificate was not issued by the competent authority the asses .....

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IB(10). On appeal: Held, dismissing the appeal, that the approval for the project was given by the Development Authority on March 16, 2005. Clearly the approval related to the period prior to 2005, i.e., before the amendment, which insisted on issuance of the completion certificate by the end of the fouryear period, was brought into force. The application of such stringent conditions, which are left to an independent body such as the local authority who is to issue the completion certificate, wo .....

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e it could claim the benefit provided under Sec. 80 IB. The said provision came on the statute book by Finance Act 2004, with effect from 1/4/2005. The plan which is sanctioned in this case is of 16/3/2004 i.e., prior to the said provision coming into force. This court in more than one case has held that the said provision is prospective in nature and it has no application to house products which was approved by the local authority prior to 1/4/2005. In that view of the matter, the benefit under .....

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do not see any merit in the appeals and the said questions of law are answered in the sense that the said provision has no application to the facts of this case . 10.5 Since the date of the commencement of the project in the instant case is admittedly 16-07-2002 as held by the Assessing Officer as well as the CIT(A), therefore, respectfully following the decisions cited (Supra) it has to be held that amendment w.e.f. 01-04-2005 requiring certificate of completion of project within 4 years of app .....

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