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2016 (2) TMI 600

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..... is not possible for us to hold that the project was completed within the prescribed period, more so in the light of the fact that the completion certificate was issued on 26.9.2011 and also in the light of the judgment of the Hon'ble M.P. High court in the case of CIT vs. Global Reality (2015 (10) TMI 2384 - MADHYA PRADESH HIGH COURT ), according to which the date of issuance of completion certificate is the date of completion of the project. In the light of these facts, we are of the view that the assessee is not entitled for deduction under section 80IB(10) of the Act in respect of Fortuna Reviera Blues Housing Project also. - Decided against assessee - ITA No.525/LKW/2013 - - - Dated:- 14-1-2016 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER For The Appellant: None For The Respondent : Shri. Amit Nigam, D.R. ORDER PER SUNIL KUMAR YADAV: This appeal is preferred by the assessee against the order of the ld. CIT(A), inter alia, on the following grounds:- 1. BECAUSE the CIT(A) has erred in law and on facts in holding that selection of case under Computer Aided Scrutiny System (CASS) was valid in view of the dec .....

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..... ent Authority, even after taking cognizance of the application for compounding submitted on 14.3.2008 and formal application for issuance of completion certificate that had been filed on 27.3.2008, took some time in issuing formal completion certificate, the appellant's claim for exemption under section 80IB(10) could not have been denied. 6. BECAUSE completion certificate dated 23.10.2009 as issued by the Executive Engineer, LDA, Lucknow should be held to be related back to 27.3.2008, when the appellant had applied for issuance of completion certificate, after complying with all the requirement of Urban Land (planning and Development) Act 1973 under which LDA is constituted. 7. BECAUSE on similar fact, and after due deliberations on all the aspects of the matter, the appellant's claim for exemption under section 80IB(10) had duly been upheld by the Hon'ble ITAT for the assessment year 2007-08 (the subsequent assessment year) and also for the earlier assessment year i.e. assessment year 2005-06 and accordingly the CIT(A) should have accepted and upheld the appellant's claim for exemption under section 80IB(10) in relation to the project 'Fortuna Apartmen .....

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..... cknow Development Authority, the appellant's claim for exemption on this second project undertaken by the appellant, cannot be said to be justified. 13. BECAUSE the certificate dated 26.9.2011, as issued by LDA, on the facts of the present case, should have been held to be related back to the period prior to 31.3.2011, by which date the project had duly been completed. 14. BECAUSE in reality there was no violation of clause (d) of section 80IB(10) and denial of the appellant's claim for exemption under section 80IB(10), in relation to Fortuna Reviera Blues Housing Project is not justified either on facts or in law. 15. BECAUSE the order appealed against is contrary to the facts, law and principles of natural justice. 2. This appeal came up for hearing on 10.12.2015, but none appeared on behalf of the assessee. However, an application for adjournment was moved on the ground that the counsel for the assessee, Shri. Pradeep Kumar Kapoor, C.A. was preoccupied in the marriage ceremony of his son held on 4.12.2015, therefore, he could not assist properly the senior counsel for preparing the impugned case. The request for adjournment was turned down in the light of t .....

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..... rtificate was issued after 31.3.2008, the project was not completed within the prescribed period. Accordingly, the Tribunal has denied the benefit of exemption under section 80IB(10) of the Act. The ld. D.R. has further invited our attention that in the instant case, deduction was claimed on two projects one is Fortuna Apartment and the other is Fortuna Reviera Blues Apartments . 6. The Fortuna Apartment project was approved before 1.4.2004, therefore, it should have been completed before 31.3.2008. The issue of claim of deduction under section 80IB(10) of the Act on Fortuna Apartment project was considered by the Tribunal in assessment year 2006-07 and the Tribunal has came to the conclusion that the project was completed after 31.3.2008. Therefore, the assessee is not entitled for deduction under section 80IB(10) of the Act. Thus, this issue is covered by the order of the Tribunal dated 22.8.2012. 7. So far as the other project in the name of Fortuna Reviera Blues Apartments is concerned, this project was approved on 3.6.2005, therefore, the project should have been completed within five years from the end of the financial year, in which the housing project is ap .....

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..... was issued on 23.10.2009. While giving a categorical finding with respect to the completion of the project, the Tribunal has also taken into account various applications filed by the assessee for grant of completion certificate. Since the Tribunal has given a categorical finding in this regard, we prefer to extract the relevant observations of the Tribunal as under:- 11. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the lower authorities, judgments referred to by the parties and the material available on record, we find that the Assessing Officer has denied benefit of deduction under section 80IB(10) of the Act for various reasons. In earlier years also benefit of deduction was denied by the Assessing Officer as well as the ld. CIT(A). 12. The first objection for denial of benefit of deduction under section 80IB(10) of the Act was that the housing project was constructed on three different plots. This issue was examined by the Tribunal in earlier assessment years and it was finally concluded that the total land involved, on which housing project was raised, is more than one acre and hence the first condition .....

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..... uction u/s 80IB(10) is available to an eligible assessee who takes the work of developing and building housing project which is approved by the local authority before 31st March 2007 and as per clause (a) to sub section 10 of section 80IB of the Act, such undertaking has to commence the development and construction of the housing project on or after 1st day of October 1998 and complete such construction on or before 31st March 2008. In the instant case, the assessee commenced the construction of housing project after the 1st day of October 1998 and completed the project before 31st March 2008. The another provision as per sub clause (i) to clause (a) of sub section 10 of section 80IB is that the approval of the local authority has to be taken before 1st day of April 2004. In the instant case, there is no dispute that the approval was taken by the assessee from Lucknow Development Authority before 1st April 2004. Even the Assessing Officer himself admitted that first approval was taken on 24/11/2001 and thereafter another approval was taken on 03/06/2003. Both these dates are prior to the cut off date i.e. 1st day of April 2005. Therefore, the assessee fulfilled the conditions as la .....

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..... an one phase but the size of the plot on which project is undertaken must be more than one acre and the project shall be completed before 31st March 2008. In the instant case, housing project of the assessee was on the area which was more than one acre and the project had been completed before the specified date, therefore, the condition laid down in section 80IB(10)(b) of the Act is also fulfilled. In the present case, no doubt the assessee got the first approval on 24/11/2001 which was superseded by the approval granted on 22/06/2003 by the local authority i.e. Lucknow Development Authority and the area of the land was aggregating 4550.07 sq. mtr., the project was started after 1st October 1998 by taking the approval before 1st April 2004 and was completed before 31/03/2008, the area of the land on which the housing project was constructed was 4550.07 sq. mtr. i.e. more than one acre. Therefore, the assessee fulfilled the conditions laid down in section 80IB(10) and as we have already pointed out that the audit report as per rule 18 BBB in Form No. 10CCB was furnished during the assessment proceedings i.e. before the completion of the assessment, as such the assessee also fulfill .....

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..... tion can be claimed on a year to year basis where the assessee is showing profit from partial completion of the project in every year. (b) In case it is late, found that the condition of completing the project within the specified time limit of 4 years as started in section 80-IB(10) has not been satisfied, the deduction granted to the assessee in the earlier years is should be withdrawn. 7.5 Admittedly the assessment year 2007-2008 is the year in which the project is not shown to have been completed but the profits have been disclosed on partial completion method. In this view of the matter and having regard to the Circular as aforesaid as well as the findings of fact reached by the earlier Tribunal in assessee s own case for assessment year 2005-2006, we do not find any reason to deviate from the well reasoned decision already reached in assessee s own case in allowing deduction u/s 80 IB(10) of the Act. Setting aside the finding as well as the order of learned CIT(A), we allow the grounds raised in appeal by the assessee. 16. Therefore, whatever findings are given by the Tribunal in assessment years 2005-06 and 2007-08 with regard to the completion of project .....

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..... n certificate in respect of such housing project is issued by the local authority. In the instant case, undisputedly completion certificate was issued by the local authority, though in the name of a dead person, on 23.10.2009. For claiming deduction under section 80IB(10) of the Act, the housing project should have been completed before 31.3.2008 as per provisions of section 80IB(10)(a)(i) of the Act. The relevant clause 80IB(10) and Explanation are extracted hereunder for the sake of reference:- [(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, [2008] by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,- (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,- (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project ha .....

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..... t was informed to the assessee that the assessee has to contact the competent authority on 4.4.2008 for receiving the objections under section 15(3), if any. Thereafter, another application dated 27.3.2008, which is available at page 25 of the compilation of the assessee, was submitted to the LDA. This application was also filed on behalf of a dead person. On perusal of this application, it appears that through this application, completion certificate was sought. Thereafter, completion certificate was granted to Shri Karuna Shanker Dubey, a dead person, which is appearing at page 26 of the compilation of the assessee. In this certificate, a reference was made to a permit No.24939, dated 6.11.2008. Though this letter may be issued to a dead person, but it has its own evidentiary value with regard to the completion of the project. In this certificate, a reference was made to a permit No.24939, dated 6.11.2008, meaning thereby the process of completion of the project was not finalized till 6.11.2008 and some permit number was issued. From a careful perusal of this completion certificate, no inference can be drawn from anywhere that the project was completed before 31.3.2008. 21. .....

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..... ission, the assessee has contended that it has executed the sale deed in favour of various allottees of the flats, therefore, at the time of execution of the sale deed, the project was completed and these facts were not taken into account by the Tribunal while adjudicating the appeal for assessment year 2006-07 and the ld. CIT(A) in the instant case. 12. We have carefully perused the copies of the sale deeds filed before us and from the sale deeds we find that most of the sales were executed in 2004 and in the present case the assessee itself has moved application for completion of the project as observed by the Tribunal in its order in the month of March, 2008. If the contention of the assessee is accepted that the project was completed at the time of sale deed executed in favour of the proposed buyers, then as to why he has moved to the Local Authority for completion of the project in March, 2008. In the light of these facts, the so called sale deeds executed by the assessee in favour of the buyers did not render any assistance in adjudicating the date of completion of the project. 13. Our attention was also invited to the judgment of the Hon'ble M.P. High court in the .....

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..... e completed, to get the. benefit of the prescribed deduction. The amended section 80-IB(10)(a) extends the benefit even to housing projects approved by the local authority before March 32,2007, instead of March 31,2005, as was provided in the unamended provision. Therefore, the necessity was felt to make a distinction between the two classes of housing projects for specifying the time frame for completion. The one approved by the local authority before April 1, 2004 and the other class of housing project approved by the local authority on or after April 1,2004 till March 31,2007. In either case, the time frame for completion of the project has been prescribed as four years. In that, the project approved before April 1,2004 has been given time to complete before March 31,2008 and in the latter category within four years from the end of the financial year in which the housing project was approved by the local authority. The municipal laws of different States in respect of procedure for issuance of completion certificate are not uniform. To wit, in some States, the dispensation provided is to issue partial or full occupation certificate; and, thereafter, completion certificate a .....

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..... it was not a case of imposing a new condition, much less, with retrospective effect unlike introduction of new condition in the shape of clause (d), which obviously could be applied only prospectively. Clause (a) stands on a completely different pedestal. It cannot be treated as a new condition linked to the approval and construction or having retrospective effect as such. For, it gives at least four years' time to both classes of housing projects: housing projects approved prior to April 1, 2004 and after April 1, 2004. The four year period obviously has prospective effect, albeit limiting the period for completion of the project, to avail of the benefit. Four years' time for completion of the project, by no standards, could be said to be unreasonable, harsh, absurd or incapable of compliance. It was also not a case of withdrawal of vested right of the developer, as such. No developer can claim a vested right to complete the housing project in an indefinite period. The right arising from section 80-IB, is coupled with the obligation or duty to complete the project in the specified time frame. If the developer does not complete the housing project within the specified time, .....

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..... onstruction of the housing project is taken to be the date on which the completion certificate is issued by the local authority. To interpret it to include an ex post facto certificate or such certificate issued by the local authority after the cut- off date, would not only result in rewriting of the express provision and run contrary to the unambiguous position pronounced in the section but also doing violence to the legislative intent. For, Explanation (ii) will then have to be read as date of completion of construction of the housing project shall be taken to be the date as certified by the local authority in that behalf , irrespective of the date of issuance of such certificate by the local authority. Indeed, in a given case if the assessee is able to substantiate that the completion certificate was in fact issued by the local authority before the cut-off date but could not be produced by him within time due to reasons beyond his control, the argument of substantial compliance with the provision can be tested. Any other interpretation would result not only in uncertainty (in finalisation of assessment proceedings due to non-issuance or delayed issuance of such certifica .....

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..... rawal of the benefit claimed by him on that count. 14. Our attention was also invited to the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Hindustan Samuch Awas Ltd., 377 ITR 150 on this issue, in which their Lordships have held that the date of completion of the project has to be the date of issue of completion certificate by the Municipal Authorities, but where the Architect of the project has given a certificate prior to 31.3.2008 and the assessee has submitted the application to the Municipal Authority along with such certificate well in time and the requisite fee was also deposited, then if the certificate was issued late in October, 2008, the delay could not be attributed to the assessee and the project is deemed to have been completed within the prescribed period. But in the instant case, no certificate was issued by the Architect. Moreover, the requisite application for issuance of completion certificate was not moved in proper format and along with requisite documents. Therefore, in the light of these facts, it cannot be held that the project was completed within the prescribed period. We, therefore, following the order of the Tribunal for asse .....

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..... cited by Learned A.R. of the assessee. 5.1 The first judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Allahabad High Court rendered in the case of Rajeev Sharma (supra). In this case, the questions of law before Hon ble High Court are available in Para 13 of this judgment and the same are reproduced below for the sake of ready reference: (a) Whether notice under section 143(2) of the Act issued after the assessee proclaimed his original return 'as true and correct' is not a valid notice just because it was not issued with reference to a pending return ? (c) Whether on the facts and in the circumstances of the case the learned Income-tax Appellate Tribunal was justified in holding that non-issuance of notice under section 143(2) of the Act has vitiated the assessment order and ignoring that issuance of such notice is a machinery provision and does not go to the root of the assessment, more so when the assessee was afforded and he availed of full opportunity ? (d) Whether notice under section 143(2) of the Act is a machinery provision and as per the wording of section 148(1) 'so far as may be' provisions of section .....

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..... scrutiny without application of mind. Therefore, this judgment is also not rendering any help to the assessee. 5.3 The next judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Apex Court rendered in the case of Sirpur Paper Mill Ltd. (Supra). In that case, it was held that in exercise of power u/s 25 of the Act, the Commissioner must bring to bear an unbiased mind, consider impartially the objections raised by the aggrieved party and decide the dispute according to procedure consistent with the principles of natural justice. It was also held that the Commissioner cannot permit his judgment to be influenced by matters not disclosed to the assessee. In the present case, the facts are totally different. Nothing has been brought on record by the Learned A.R. of the assessee that any dispute was raised or could have been raised before the Assessing Officer justifying non selection of the assessee s case for scrutiny and therefore, this judgment is not applicable. 5.4 The next judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Calcutta High Court rendered in the case Eastern Scales (Pvt.) Ltd. (supra). In that case, the iss .....

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..... n, this judgment is also not rendering any help to the assessee in the present case. 5.7 The next judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Apex Court rendered in the case of Orient Paper Mills Ltd. (supra). In this case, this was the decision of Hon'ble Apex Court that if the power exercised by the Collector was a quasi judicial power, as has been held by Apex Court, that power cannot be controlled by the directions issued by the Board. It was also held that no authority however high placed can control the decision of a judicial or a quasi judicial authority. In the present case, the facts are different. In the present case, this is not the case of the assessee that any superior authority has controlled the action of the Assessing Officer. The Assessing Officer selected the case on his own although he took the help of computer and therefore, this judgment is also not rendering any help to the assessee in the present case. 5.8 The next judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Apex Court rendered in the case of Sheo Shanker Sitaram (supra). In this case, it was the decision of Hon'ble Apex C .....

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..... formed for selecting some cases for scrutiny as deterring measure. These guidelines may be such that the person having income above a prescribed limit will be scrutinized in larger percentage compared to small tax payers. It may be a policy that very small tax payers will not be scrutinized at all. If such a system is devised by the Department in a general manner without targeting a particular assessee, it cannot be said that such system of selecting a case for scrutiny is interfering with the independent decision of the Assessing Officer who is to select the case for scrutiny. Inspite of such guidelines, the ultimate decision is of the Assessing Officer that a particular case is falling in such guideline and in this process, if the Assessing Officer is taking help of computer in analyzing data disclosed by the tax payer in the return of income then it cannot be said that the decision for selecting the case for scrutiny is not independent decision of the Assessing Officer. This is not the case of the assessee that there is any specific direction of any higher authority to select the case of this particular assessee for scrutiny. The guideline may be this as to what should be perce .....

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