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2016 (3) TMI 251 - ITAT AHMEDABAD

2016 (3) TMI 251 - ITAT AHMEDABAD - TMI - Estimation of NP - Additions at 12% of the receipt - Held that:- In the present case, we are therefore of the view that the net profit of 5.55% for the year under consideration also cannot be considered for working out the average profits because, it is after considering the land leveling expenses of ₹ 24.24 lacs which is also disputed by the Revenue. In such a situation, when the books of accounts are rejected, then for estimating the profits, for .....

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such a situation, we are of the view that no interference to the order of ld. CIT(A) in estimating the net profits @ 12% of the Revenue from Kailash Developers is called for - Decided against assessee

Denial of deduction u/s.80IB(10) - Non obtaining completion certificate within a period of 4 years - Held that:- When the housing project was approved on 10.03.2004 by the competent authority, condition for obtaining completion certificate within a period of 4 years from the date of app .....

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edi, Accountant Member These two appeals filed by the Assessee are against the order of CIT(A)-XV, Ahmedabad dated 24.01.2011 for A.Ys. 2007-08 & 2008-09. 2. The relevant facts as culled out from the material on record are as under. 3. Assessee is an individual and proprietor of Yograj Developers and Kailash Developers, which are stated to be engaged in the business as developers for construction of housing projects. Assessee electronically filed his return of income for A.Y. 2007-08 on 28.1 .....

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Y. 2008-09, is concerned, assessee electronically filed the return of income for A.Y. 2008-09 on 29/08/2008 declaring total income of ₹ 5,76,870/-. The case was selected for scrutiny and thereafter assessment was framed u/s.143(3) of the Act vide order dated 27.12.2010 and the total income was determined at ₹ 20,64,430/-. Aggrieved by the order of A.O., assessee carried the matter before the ld. CIT(A) who vide order dated 22.07.2011 granted partial relief to assessee. Aggrieved by t .....

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ate Bench of Tribunal, Assessee preferred appeal before Hon ble Gujarat High Court. Hon ble Gujarat High Court in Tax Appeal No. 853 & 854/A/2013 order dated 22.10.2013 condoned the delayed filing of appeal and also quashed the order of Tribunal dated 22.03.2013 in ITA No. 563 & 564/A/2012 (supra) and remitted the matter back to the Tribunal to decide the appeal afresh on merits. The order of Hon ble High Court reads as under: 2.0. Both these appeals have been preferred by the common app .....

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for me assessment year 2008-09, the common appellant herein -assessee preferred appeals before the learned ITAT being ITA Nos. 563 of 2012 and 564 of 2012. There was a delay of 328 days in preferring the appeal against the order passed by the learned CIT(A) with respect to assessment year 2007-08 and there was a delay of 158 days in preferring the appeal against the order passed by the learned CIT (A) with respect to assessment year 2008-09. The assessee requested the learned Tribunal to condon .....

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eafter they preferred appeals. Therefore, it was requested to condone the delay. By impugned common order, the learned Tribunal has refused to condone the delay and has dismissed the appeal on the ground of limitation observing that there is inordinate delay in preferring the appeals and affidavit of the Income Tax Practitioner is not filed. 2.2. Being aggrieved and dissatisfied with the impugned common order passed by the learned Tribunal in dismissing aforesaid appeals on the ground of limitat .....

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error in not condoning the delay and not considering the appeals on merits. It is required to be noted that there is no observation by the learned Tribunal that there was any deliberate delay on the part of the assessee and /or mere was any mala fide intention on the part of the assessee in not preferring the appeals within a period of limitation, The reasoning given by the learned Tribunal that the assessee has not filed the affidavit of Income Tax Practitioner in support of the affidavits file .....

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ence on the part of the assessee and / or there was any mala fide intention on the part of the assessee in not preferring the appeal within the period of limitation and / or in filing the appeals belatedly. As observed by the Hon ble Supreme Court in the case of Collector, Land Acquisition, Anantnag and Another vs. Mst. Katiji and Others reported in (1987) 2 SCC 107 ordinarily a litigant does not stand to benefit by lodging an appeal late. It is further observed by the Hon ble Supreme Court that .....

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sed of the appeals on merit rather than dismissing the same on the ground of limitation 5.0. In view of the above and for the reasons stated above, both these appeals succeed and the impugned common order passed by the ITAT dated 22.3.2013 in ITA Nos. 563 and 564/AHD/2012 with respect to the assessment year 2007-08 and 2008-09 is hereby quashed and set aside and the delay caused in preferring the respective appeals is hereby condoned and the matter is remitted to the learned ITAT to decide and d .....

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377; 32,36,911/- @ 25% of receipts made by the Assessing Officer. 2. The Ld. CIT (A) erred on facts and in law in confirming disallowance of ₹ 8,67,447/- u/s 80IB(10) without appreciating the deduction u/s 80IB (10) for the very same project was allowed by the Assessing Officer himself in A.Y. 2005-06 in order u/s 143(3) and that non receipt of BU permission was not due to fault of the appellant. 7. 1st ground is with respect to making additions at 12% of the receipt. 8. During the course .....

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Assessee was therefore asked to as to why the net profit in respect of Kailash Developers not be estimated at 48.32% as being the net profit declared by the Assessee in case of the project of Yuvraj Developer . The explanation of the Assessee for different net profits in both the projects inter alia being that the projects of different types, in different locations and the expenditure towards land leveling expenses was incurred in case of Kailash Developer but no such expenditure was required f .....

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nstruction material, wooden items doors etc. prior to 07.10.2006. He was therefore of the view that when the land was not ready for construction till 07.10.2006, the incurring of expenditure towards construction material, purchase of wooden items, doors etc. for the purpose of project cannot be accepted and the expenditure shown by the Assessee was not at all reliable and that the major part of purchases made for Kailash Developer was incurred prior to the land being ready for construction and t .....

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, Assessee carried the matter before ld. CIT(A) who granted partial relief to the Assessee by holding as under:- 9. From the facts on record it is seen that the appellant even during the appellate proceedings could not. produce single bill of Yuvraj Developers. Neither did he produce his books of accounts and vouchers of the two concerns during appellate proceedings though he was specifically required to through this office notice dated 1 1.1.2011. The appellant has also not been able to given a .....

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in concluding that the expenses of Yuvraj Developers where the appellant is claiming 100% tax free profit u/s.80IB(10) were diverted in the concern - Kailash Developers which was doing the project of industrial godowns. The appellant did not produce any books of accounts or any bills during the appellate proceedings of any concern so the conclusions drawn by the AO stand and therefore I have no alternative but to reject the books of accounts of the appellant before which an opportunity has also .....

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ld. CIT(A), Assessee is now in appeal before us. 10. Before us, ld. A.R. reiterated the submissions made before A.O. and CIT(A) and further submitted that estimating the profits @ 12% of the total receipts as the net profits of Kailash Developers will be inappropriate and that the addition on account of estimation @ 12% of profits as against the average profits of 11.3% is on a higher side and is without any basis and therefore the same needs to be deleted. Ld. D.R. on the other hand supported .....

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of income of assessee from a project, the profits of which are taxable. We find that ld. CIT(A) while deciding the issue has noted and given a finding that assessee did not produce the books of accounts nor vouchers of the two concerns either during assessment proceedings and did not produce it even during appellate proceedings though the assessee was specifically asked to produce the same. It is also noted by ld. CIT(A) that assessee has not given any convincing explanation of land leveling exp .....

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been rejected, the next step is to estimate the income. From the statement of profits of 5 years that has been submitted by the assessee and reproduced by ld. CIT(A) at page no.5 of the order, it is seen that based on the net profit for the immediate preceding year, the impugned year and subsequent three assessment years, the assessee has worked out the average net profit at 11.3%, which is after including the net profit of 5.5% for the year under consideration being the year under dispute. We .....

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et profit of 5.55% for the year under consideration also cannot be considered for working out the average profits because, it is after considering the land leveling expenses of ₹ 24.24 lacs which is also disputed by the Revenue. In such a situation, when the books of accounts are rejected, then for estimating the profits, for the reasons stated hereinabove, we are of the view that the average profits should be determined but after excluding the net profit for the impugned year and if that .....

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led for and thus, this ground of assessee is dismissed. 12. Ground No.2 is with respect to denial of deduction u/s.80IB(10) of the Act. 12.1 A.O. noted that assessee has claimed deduction of ₹ 8,67,417/- u/s.80IB(10) of the Act. A.O. on perusing the details and documents furnished by assessee noticed that assessee had entered into agreement with land owners for construction of housing project, the land being owned by landowners, application for housing plan was made by land owners and the .....

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carried before the ld. CIT(A) who upheld the order of A.O. by holding as under: 12. The point of ownership of land not entitling the appellant for the deduction has to be seen in the light of the decision of Hon ble ITAT Bench A Ahmedabad dated 7.11.2008 in the case of M/s. Shakti Corporation,-Baroda in ITA No.1503/Ahd/2008 in AY 2005-06. According to this decision Development Agreement has to be referred to and if it is found that the assessee has practically purchased the land and acquired do .....

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e deeds of land in which the appellant appeared as attorney holder of the land owner - the society . However perusal of one of the sale deeds of land submitted during appellate proceedings dated 22.8.2005 shows that it was the son (Vanrajsinh Dilipsinh Vaghela) of the appellant who acted as the power of attorney holder of the land owners and not the appellant. This sale deed has been entered into by one of the members named Vyas Mukesh Kalidas with the land owners (1) Meenaben R Patel (2) K.R.Pa .....

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has not been able to prove that the land was practically purchased by him and therefore the contention of the AO that he executed the contract awarded by the land owners stands proved and as per Explanation inserted in section 80IB(10) vide Finance (No.2) Act 2009 with r.e.f. 1.4.2001 a person executing a works contract is not entitled for the deduction. The disallowance of 80IB(10) is therefore upheld. 13. Further for being entitled to deduction u/s. 80IB(10) the conditions stipulated from cla .....

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bmitted. After this the appellant obtained Revised development permission dated 1.4.2004 which was submitted and also the revised plan approved by the local authority dated 1.4.2004 in which 117 residential units comprising tenements from Block A to L were approved for construction on plot of land with area of 15985 sq.mtrs., whereas in the original 114 residential units comprising tenements and row houses were approved on the same plot of land. The proofs given like one electricity bill of May .....

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of the deduction u/s.80IB(10). As despite opportunities given the appellant could not furnish the BU permission given by the local authority along with the approved completion plan of the construction completed in my view he has not complied with the condition pertaining to approvals of local authority as per clause (a) of section 80IB(10) and is therefore not entitled for the deduction. 13. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us. 14. Before us, ld. .....

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not the assessee. He submitted that the aforesaid issue is now settled in favour of assessee by the decision of Hon ble Gujarat High Court in the case of CIT v. Radhe Developers reported in (2012) 341 ITR 403 (Guj) & thereafter by series of decisions of Tribunal and therefore on this ground the claim of assessee for deduction u/s.80IB(10) of the Act cannot be denied. He further submitted that ld. CIT(A) had upheld the denial of deduction u/s.80IB(10) of the Act for the reason that BU permis .....

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e.f. 01.04.2005 by Finance (No. 2) Act, 2004 and therefore the condition imposed for completion of project would not be applicable to the project under taken by the eassessee as it was approved in 2003 which is also in line with the Explanation (i) to Section 80IB(10) of the Act and for this proposition, he also relied on the decision of Hon ble Gujarat High Court in the case of ITO vs. Saket Corp. (T. A. No. 107 of 2015). He also placed on record a copy of the same. He therefore submitted that .....

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he assessee and that the assessee had merely acted as a contractor. On the issue of denial of deduction u/s.80IB(10) of the Act for the aforesaid reasons, we find that by now the issue is well settled ,more so, by the decision of Hon ble Gujarat High Court in the case of CIT vs. Radhe Developers (supra) and other cases. The Hon ble High Court in the case of CIT vs. Radhe Developers (supra) has observed that there is no requirement that the land must be owned by the assessee seeking the deduction .....

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decision of Hon ble Gujarat High Court in case of CIT vs. Radhe Developers (supra), we are of the view that assessee is eligible for deduction u/s.80IB(10) of the Act. As far as the denial on deduction by ld. CIT(A) on the ground that BU permission from local authorities were not obtained, it is an undisputed fact that the original permission for the development of the housing project was received on 28.03.2003 and subsequently the revised permission was received on 01.04.2004. Explanation (i) .....

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to have been approved on 28.03.2003, being the date of original approval date and at that time the statute did not mandate the requirement of obtaining BU permission from local authorities. We also find that in the case of ITO vs. Saket Corporation (supra), Revenue had preferred appeal before Hon ble High Court for the reason that the Hon ble ITAT had allowed the appeal of assessee by holding that when the housing project was approved on 10.03.2004 by the competent authority, condition for obta .....

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assessee was entitled to claim deduction u/s.80IB(10) of the Act. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the case of Saket Corpn. (supra) nor has pointed out as to how the ratio of the aforesaid decision rendered by Hon ble Gujarat High Court would not be applicable to the facts of present case nor has placed on record any contrary binding decision. In view of the aforesaid facts, we are of the view that assessee is eligible for deduc .....

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