9911796707
TMI Blog2011 (7) TMI 1157X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(1) of the Act selected the case for scrutiny and accordingly issued notice under section 143(2) of the Act to the assessee. In response, the authorized representative of the assessee attended and filed various details as called for. In the original assessment order dated 23.11.2006, passed under section 143(3) of the Act, the AO observed that "the assessee is engaged in the business of developing i.e. constructing a home projects known as 'Kumar Pinnacle' at Tadiwala Road, Pune which consists of residential units (flats) and commercial establishments (shops). During the year, the assessee has shown work being in progress. Expenditure of capital nature has been accounted for under the head 'Work-in-Progress". In the next para he observed that "During the year under consideration the assessee company has shown net profit on sale of shops to the tune of ₹ 24,72,625/- which is not qualified for deduction under section 80IB(10). The details filed in this regard, has already filed in the assessment year 2003-04". Subject to the above remark and after discussion, the AO after allowing deduction under section 80IB-(10) of ₹ 2,48,21,145/- compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to AY 2004-05 also. It is thus clear that the assessee is not entitled for deduction under section 80IB(10) for the breach of condition of commercial construction. The claim of deduction under section 80IB(10) of ₹ 2,48,21,215/-has been wrongly allowed in the assessment order under section 143(3) for the year under consideration. Therefore, I have reason to believe that, there is income which has escaped the assessment and proceeding under section 147 is required to be initiated in this case. Dy. Commissioner of Income Tax, (Circle 1(2), Mumbai" Dated - 30.3.2009 In response to the notice issued under section 148 of the Act, the assessee's representative vide letter dated 27.4.2009 stated that the return of income originally filed may be treated as the final return of income for the said assessment year. During the course of re-assessment proceedings, the AO observed that the assessee is builder and developer. During the year, the assessee has declared income from business of developing i.e. constructing the home project known as "Kumar Pinnacle" located at Tadiwalla Road, Sangmwadi, Pune which consists of residential units(flats) and commercial e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O. 3. Though the commercial area in the project is also allowable for deduction (as it was sanctioned before AY 2005-06), the assessee has paid tax on the same. 4. Profits from residential units of the said project are separately ascertainable and have been reflected separately; 5. The assessee has claimed deduction under section 80IB(10) of the Act in respect of profits from residential portion only. 6. Residential portion in respect of which deduction under section 80IB(10) has been claimed satisfied all the conditions of section 80IB(10) of the Act We would like to bring to kind attention of Your Honor the fact That THOUGH THE SPECIAL BENCH OF THE ITAT IN ITS ORDER REFERRED ABOVE HAS RULED THAT COMERCIAL AREA UP TO 10% OF THE TOTAL AREA OF A HOUSING PROJECT SHALL BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) OF THE I.T.ACT, THE 'A' ON ITS OWN HAD ALREADY OFFERED TO TAX INCOME FROM SALE OF COMERCIAL AREA IN THE PROJECT VIZ 'KUMAR PINNACLE' and HAS CLAIMED DEDUCTION IN RESPECT OF PROFITS FROM RESIDENTIAL AREA ONLY. The residential portion in respect of which the deduction has been claimed satisfies all the requirements of Section 80IB(10) of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (A) observed that the decision of Laukik Developers (supra) has been dismissed by the Tribunal on a incorrect footing, on a myopic view presented before them of the applicability of Income Tax to only limited big cities having its own problems of facilitation of shopping. He further observed that the law, however, is for India as a whole and not everywhere such restrictive requirements for approval of housing projects exists. He further observed that the deduction under section 80IB(10) was allowable only in respect of pure residential projects, without any commercial element in it and held that in the case of the appellant admittedly the project is residential cum commercial, therefore, the assessee is not entitled to deduction under section 80IB of the Act and accordingly upheld the disallowance made by the AO. 5. Being aggrieved by the order of the learned Commissioner of Income Tax (A), the assessee is in appeal before us taking following grounds of appeal: "On the facts and in the circumstances of the case and in law, the learned CIT(A): Reassessment under section 147 1. erred in confirming the action of the AO and upholding the validity of proceedings initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a of commercial units 7,562 sq.ft. e) Built up area of residential units 124,920 sq.ft f) Percentage of commercial area (C/b)*100 5.70% 7. Challenging the validity of the reassessment proceedings he submits that the reopening was made by the AO based on the reason that the housing project "Kumar Pinnacle" is sanctioned as 'residential cum-commercial' project and does not satisfies the condition under clause (d) of section 80IB(10) of the Act. (as prospectively inserted from AY 2005-06). He further submits that considering the sequence of events summarized below, the reassessment proceedings is based on mere change of opinion and hence bad in law: Date Particulars of events 31.10.2004 The appellant filed its Return of Income and claimed deduction under section 80IB(10) of the Act 24.11.2005 Survey under section 133A of the Act was conducted for assessing eligibility of the Project for 80IB(10) claim, wherein the fact that the project consists of convenient shopping area more than 2,000 sq. ft/5% of the total built-up area was noted by the department. 23.11.2006 Assessment order passed under section 143(3) of the Act allowing 80IB(10) claim on profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it specified under section 80IB(10) of the Act and; (ii) The project is sanctioned as 'housing cum residential project' 8. He further submits that the Learned Commissioner of Income Tax (A) has erred in concluding that the action of the AO in relying on newly inserted clause (d) applicable from AY 2005-06 and in initiating the reassessment proceedings is not change of opinion. He further submits that the applicability of pre-amended/amended law was in itself an opinion which differed between the Assessing Officers. He further submits that project includes commercial area, itself indicates that the project should have been sanctioned as 'residential cum commercial' project and not otherwise. He further submits that the Learned Commissioner of Income Tax (A) has erred in drawing a conclusion that the change of opinion exists only on applicability of clause (d) to section 80IB(10) of the Act and the reassessment proceedings are valid so far as the AO has also based his reason that the project is sanctioned as 'residential cum commercial' project. He further submits that since the survey was carried on 24.11.2005 i.e., before completion of the original assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (A) has grossly erred in concluding that the AO's action was otherwise possible even under section 154 of the Act and hence, the present case is not on account of change in opinion and for this proposition, the reliance was also placed on the decision of the Hon'ble Bombay High Court in Hindustan Unilever Ltd. V/s DCIT (2010) 325 ITR 102 (Bom). He further submits that recently similar view has again been taken by Hon'ble Bombay High Court in Titanor Components Ltd. V/s ACIT and others. In support of his submissions that the reassessment proceedings based on mere change of opinion are invalid and bad-in-law, he relied on the following decisions: 1 CIT V/s Kelvinator of India Ltd 320 ITR 561 (SC) 2 Siemens Information System Ltd. 295 ITR 333) (Bom) (HC) 3 Rallies India Ltd. V/s ACIT 323 ITR 54 (Bom) 4 Cartini India Pvt.Ltd V/s ACIT (1604/Mum/2010) 16.3.2011 (Trib) (Mum) 5 CIT V/s Max India Limited 295 ITR 282 (SC) 6 M/s Mistry Lalji Narsi Development Corporation V/s ACIT Writ Petition No.2097 of 2009 (Bom) (HC) 7 Purity Techtextile Pvt.Ltd V/s ACIT 325 ITR 459 (Bom) 8 Audco India Ltd. V/s ITO (2010) 5 Taxman 14 (Mum ITAT) In the light of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g project. In view of the said contention, the learned Commissioner of Income Tax (A) has concluded that the Special Bench of the Tribunal relying on the said Development Rules had taken a broader view and the decision may or may not apply to the Projects in other cities. However, he submits that the learned Commissioner of Income Tax (A) failed to appreciate that the project of the assessee "Kumar Pinnacle" is based out of Pune and hence, the decision of the Special Bench of the Tribunal was squarely applicable to the facts of the present case and ought to have been followed by the learned Commissioner of Income Tax (A). He, therefore, submits that the claim of deduction under section 80IB(10) be allowed to the assessee. 10. On the other hand, the learned D.R. submits that in this case, the assessee has filed its return of income for assessment year 2004-05 on 31.10.2004. The assessment was completed under section 143(3) on 23.11.2006. Notice under section 148 was issued on 30.3.2009. Therefore, reopening has been done within four years from the end of the relevant assessment year, therefore, the assessee does not have shelter to proviso to section 147, therefore, reope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f is 7565.62 sq.ft. which is more than the basic qualification of 2000 sq.ft. and secondly, Pune Municipal Corporation records clearly reveal that the two projects were allowed as residential cum commercial project, whereas only residential projects are eligible for deduction under section 80IB(10) of the Act. We further find that the AO after considering the survey report (supra) has held that the project known as "Kumar Pinnacle" located at Tadiwalla Road, Sangmwadi, Pune consists of residential units (flats) and Commercial establishment (shops) is eligible for deduction under section 80IB(10) excluding the profit on sale of shops to the tune of ₹ 24,72,625/-, not qualified for deduction under section 80IB(10) of the Act which has also been disallowed by the assessee himself while filing the return of income. We further find that subsequently, the second AO for the impugned assessment year on the same set of facts has taken a view which is different from the view taken by the previous AO on the interpretation of the same provisions of law. According to him, the project known as "Kumar Pinnacle", Pune has more commercial construction than the condition la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief." 16. In Siemens Information System Ltd.(supra), it has been held (page 334 Head Note): "Held, that the second Assessing Officer for the assessment year 2003-04 on the same set of facts had taken a view which was different from the view taken by the previous Assessing Officer for the assessment year 2001-02, on the interpretation of the same provisions of law. The other reason given for the notice was the decision of the Tribunal in Navin Bharat Industries Ltd. v. Deputy CIT [2004] 270 ITR (AT) 1 (Bom). That decision was not an authority for the proposition that losses suffered being undisputedly covered by section 10A as it then stood could be set off against profits of other business income of the assessee or vice versa. The decision, therefore, by itself or in conjunction with a change of opinion as to the true construction of the provision, could not also give rise to "reason to believe" that income had escaped assessment. The notice was not valid and was liable to be quashed." 17. In R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment under section 143(3) of the Act raised specific query as to why the subsidy received by the assessee should not be treated as revenue receipt and charged to tax. The AO after considering the assessee's explanation did not make any addition while completing the assessment, treating the same as capital receipt. Subsequently, the AO issued notice under section 148 on the ground that in view of the decision in the case of Sahney Steel and Press Works Ltd. (228 ITR 253) (SC) the amount of ₹ 30,00,000/- being subsidy received from Punjab Small Industries and Export Corporation Ltd. should be considered as revenue receipt, therefore, he has reason to believe that income has escaped assessment. On appeal, the learned Commissioner of Income Tax (A) held that the AO was justified in issuing notice under section 147 of the Act. On further appeal by the assessee before the Tribunal, the Tribunal following the decision of the Hon'ble Supreme Court in the case of Kelvinator of India Ltd. (supra) and the decision of the Hon'ble Delhi High Court in the case of CIT V/s Eicher Ltd. (2007) 294 ITR 310(Del) has held that the reassessment proceedings are invalid and consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overall project on fulfillment of necessary conditions, the entitlement of incentive deduction will be confined to only to the profits to the residential segment of the overall project. (c) The limit on commercial use of built-up area as prescribed by cl. (d) of s. 80-IB(10) has no retrospective application, and it applies only w.e.f. the asst. yr. 2005-06." 21. On further appeal by the Revenue in CIT V/s Brahma Associates (2011) 333 ITR 289 (Bom), it has been observed and held by the Hon'ble Jurisdictional High Court (page 291 Head Note): "The assessee had undertaken a construction project at Pune under the layout approved by the Pune Municipal Corporation which is the local authority. The project consists of fifteen residential buildings and two commercial buildings. The local authority had approved the said project as "residential plus commercial". The percentage of the commercial area to the total area of the plot was 20.83 percent. The project commenced on August, 14, 2000 and was completed on October, 3, 2005. The assessee claimed special deduction in respect of the profits. The claim was rejected by the AO and the Commissioner (Appeals). The Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aller qualifying units by fulfilling all the conditions as laid down under s. 80-IB(10), the denial of claim by the assessee is on account of rather restricted and narrow interpretation of provisions of cl. (c) of s. 80-IB(10) while coming to such conclusion, we also find support from the order of the Hon'ble Supreme Court in case of Bajaj Tempo Ltd. (supra), wherein it was held that provisions should be interpreted liberally and since in the present case also, the assessee by claiming pro rata income on qualifying units has complied with all the provisions as contained in the said section, in our considered opinion, such claim of the assessee was rightly allowed by the learned CIT(A) by reversing the order of the AO." 23. Here it is important to note that the Hon'ble Calcutta High Court vide its judgement dated January 5, 2007 in ITA No.458/2006 has confirmed the order of the Kolkatta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd (supra), the appeal filed by the Revenue was dismissed. 24. In Rajesh Jhaveri Stockbrokers P.Limited, (supra) relied on by the learned D.R., it has been held (page 502 Head Note): "Taxing income escaping a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the facts of the present case. 27. The second decision relied upon by the learned D.R. in Viswas Promoters Pvt.Ltd. (supra) is also distinguishable in view of the decision of the Special Bench of the Tribunal in the case of Brahma Associates(supra) and also by the Hon'ble Bombay High Court in Brahma Associates (supra). 28. Applying the ratio of the above decisions, relied on by the learned Counsel for the assessee to the facts of the present case and keeping in view that the decision of the Tribunal in the case of Laukik Developers (supra) has been considered by the Special Bench of the Tribunal in the case of Brahma Associates (supra) and also by the Hon'ble High Court in the case of CIT V/s Brahma Associates (supra), we are of the view that the learned Commissioner of Income Tax was not justified in not following the decision of the Special Bench of the Tribunal in Brahma Associates (supra) and has further erred in violating the Rule of Judicial Discipline as it is settled law that the decision of the jurisdictional Tribunal or Special Bench of the Tribunal and the jurisdictional High Court is binding on the authorities working under that jurisdiction. In this view of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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