TMI Blog2017 (4) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... which are approved after 01.04.2005. The project of the assessee was approved on 24.03.2005 and consequently, the amendment brought in on 01.04.2005 is not applicable to the project of assessee. Where the assessee has received sanction on 24.03.2005 and the local authority has even issued the completion certificate on 08.06.2007 for construction of the said flats, then in order to determine the built up area of the flats, the area of balcony and terrace is to be excluded and since in respect of balance flats after such exclusion, the area is less than 1000 sq.ft., the assessee is entitled to prorata deduction under section 80IB(10) of the Act. Further, the assessee is also entitled to prorata deduction under section 80IB(10) of the Act in respect of on- money received on such flats which are entitled to the claim of deduction The search was carried out against the assessee on 16.10.2008 and the assessee had filed the original return of income on 14.09.2008, hence as per provisions of section 153C r.w.s. 153A of the Act , the proceedings relevant to the year under consideration would abate. Hence, the assessee while filing the return of income in response to notice issued under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in law and on facts in upholding the order passed by the Assessing Officer u/s. 153C r.w.s. 143(3) of the Income- tax Act, 1961 which is illegal, invalid and bad in law. The ld. CIT(A) ought to have set aside the order of the Assessing Officer as it was not passed in accordance with law. 4. The learned Authorized Representative for the assessee fairly pointed out that the said ground of appeal is not pressed and hence, the same is dismissed as not pressed. The appeal of the assessee is dismissed. ITA No.5837/M/2012, assessment year : 2008-09 Assessee s appeal 5. The assessee has raised the following grounds of appeal:- 1. The learned CIT (A) has erred in law and on facts in upholding the order passed by the Assessing Officer u/s. 153C r.w.s. 143(3) of the Income-tax Act, 1961 which is illegal, invalid and bad in law. The Id CIT (A) ought to have set aside the order of the Assessing Officer as was not passed in accordance with law. 2. The learned CIT (A) has erred in law and on facts in holding that some of the flats constructed by the appellant exceeded the prescribed ceiling of 1,000 sq. ft. and, therefore, the appellant was not entitled to deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (10) of the Act, wherein few of the flats constructed by the assessee exceeded the prescribed ceiling limit of 1000 sq.ft. The Revenue is also in appeal in assessment year 2008-09 against the order of CIT(A) in allowing the deduction under section 80IB(10) of the Act, wherein prorata deduction was allowed under section 80IB(10) of the Act where the built up area after joining of flats did not exceed 1000 sq.ft. since the flats were not constructed as per building plans, the case of Revenue was that the assessee had violated the conditions laid down in the said section. 9. We proceed to decide the present appeals after hearing both the learned Authorized Representatives by this consolidated order for the sake of convenience. 10. Briefly, in the facts of the case, search and seizure action under section 132(1) of the Act was carried out in the case of M/s. Tharwani Group on 16.10.2008. The assessee was flagship concern of the said group and was also covered by action under section 132 / 133A of the Act. In view thereof, notice under section 153A(1) of the Act was issued by the ACIT, CC -1, Thane. Subsequently, an action under section 153C of the Act was also initiated as during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 059/- in return u/s. 139(1) to ₹ 21,49,54,293/- it is submitted that since the declared income directly sprang from the housing project and therefore qualifies for deduction u/s. 80IB(10). The project is approved by the local authority and the local authority has issued commencement and completion certificate which have been submitted. 11. The first issue which was considered by the Assessing Officer was whether the assessee which claimed to have commenced construction on 24.03.2005 had in fact completed the project on 05.07.2007. Summons under section 131 of the Act was issued to the Secretary of Tharwani Heights, in response to which he submitted a certificate issued by the local authority dated 31.12.2009, scanned copy of which is reproduced at page 4 of the assessment order. The said certificate stated that the project was completed on 02.09.2009. The Assessing Officer was of the view that the information given by the assessee that it had completed the project on 05.07.2007 was incorrect. This fact was brought to the notice of assessee and in reply, it was explained that fi rst the project was completed within period of four years from the end of financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clear violation of conditions of built up area under section 80IB(10) of the Act in the said project. The Assessing Officer in order to verify the built up area, directed the Architect to measure the said flats, who in turn, furnished his report which is placed at page 14 of the assessment order. The Architect reported that flat No.1003 A Wing, flat No.1801 B Wing and flat No.1101 B Wing at Tharwani Heights had area which was more than 1000 sq.ft. It was also pointed out that by measuring the flats, the area of balcony, dry balcony and flower beds was also included. It was further reported by the Architect that all the flats in both the A and B wings were identical on alternate floors and also wings A and B were identical to each other. Another issue which was pointed out by the Architect was that existing flats were not as per approved plans provided by the Assessing Officer but the physical layout of the flats was similar to the brochure of the project Tharwani Heights. The Assessing Officer in view thereof, concluded by holding that on each floor of both the wings, there were residential units which had built up area of more than 1000 sq.ft. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any alteration to combine two flats. At the time of possession only, there was a single 3BHK flat. (iii) It is the assessee who insisted for two separate agreements for a single flat. Flat owners never requested builder for two agreements. (iv) These are not exceptional cases. It is a very uniform and generalized feature that on each floor there is a single 3BHK flat for which flat owners made two agreements, as per the insistence of the builder. 13. In view of 52 instances of clear violation of stipulated conditions, the Assessing Officer held that the assessee was not entitled to claim the deduction under section 80IB(10) of the Act holding as under:- a) List of flats containing details of flats owners flat type (2BHK or 3BHK), area received from the co-operative housing society of Tharwani Heritage, clearly shows there are many flats having built up area more than 1000 sq. ft. b) Architect's Report clearly says that built up area is more than 1000 sq. ft., there are no provisions of kitchen and the existing flats are not found to be as per approved plans. c) As per approved plan there should be 54 1BHK flats in the project Tharwani Heights but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer that in each of the 3BHK flats, two electric meters were installed, out of which, three phase meter was being used and the single phase meter was not used. Even at the time of booking, the noting of the flats booked in the seized documents was for an area exceeding 1000 sq.ft., hence, the Assessing Officer held that the basic condition was violated. The assessee had further made disclosure on account of consideration received in cash for sale of servant quarters which was nothing but extension of original flats sold by the assessee and once the same is included, then there is violation of limit of 1000 sq.ft. prescribed under the Act. The Assessing Officer thus, held that the assessee was not entitled to claim the deduction under section 80IB(10) of the Act by not adhering to the built up area of 1000 sq.ft. of each flat and also by not completing the project within specified time. The contention of assessee that it was not allowed cross-examination of witnesses was also found to be not correct since the opportunity was given but the assessee did not attend on the said date. 15. The second issue which was decided against the assessee was on account of unprove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty was formed, which was registered with the Registrar of Cooperative Societies, who issued the registration certificate on 13.05.2008; the copies of possession letters, certificate of registration, etc. were also made available. In respect of construction of servant toilets, certificate dated 31.12.2009 was produced by the Secretary of M/s. Tharwani Heights Cooperative Housing Society Ltd., wherein the date of completion was on 02.09.2009. It was pointed out that the said certificate is not relevant for adjudicating the issue in dispute, since the same relates to regularization of servants toilets, which were constructed subsequent to taking over the possession by the purchasers of flats. The CIT(A) was of the view that where the local authority had issued the occupancy certificate vide letter dated 08.06.2007 certifying that the completion of the project on 21.02.2007 and granted permission to use the premises for residential purpose, then the date of completion of project shall be taken to be the date on which completion certificate was issued by the local authority. As per section 80IB(10)(a) of the Act, the CIT(A) held that the assessee had fulfilled the legal requirements in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcluded from the built up area of respective flats as per GDCR, 1975. The copy of the said valuation report was handed over to the assessee, who in turn, filed written submissions which are reproduced at pages 21 to 27 of the appellate order. It was stressed by the assessee that the area of balcony / open terrace is not to be included in the built up area of the flats in the housing project approved prior to 01.04.2005. For projects approved prior to 01.04.2005, the built up area calculated as per DC regulations was relevant for the purpose of examining the fulfillment of eligibility criteria under section 80IB(10) of the Act. The assessee also pointed out that the Valuation Officer himself had considered the area of merged flats on the basis of Development Control Rules and wherein out of 156 flats, area of 33 flats was more than 1000 sq.ft. In respect of balance 123 flats, the assessee pointed out that the built up area of each of the flats i.e. residential unit was below 1000 sq.ft., wherein the Valuation Officer had considered the total area i.e. after merger of units two or three. In respect of flat Nos.202 + 203, A wing and flat Nos.201 and 202, B wing, it was pointed out tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction (P) Ltd. Vs. ITO (2011) 64 DTR (Mum) (Trib) 251. The CIT(A) thus held that where the project of the assessee was approved on 24.03.2005 i.e. prior to 01.04.2005, the definition of built up area as given in section 80IB(14) of the Act was not applicable and accordingly, area of balcony and terrace was not to be included in the built up area of residential units. The CIT(A) further held that only 33 residential units, out of 156 units should be considered as having built up area of more than prescribed limit of 1000 sq.ft., as determined by the Valuation Officer. The CIT(A) further allowed prorata deduction under section 80IB(10) of the Act in respect of balance flats where the area was 1000 sq.ft. or less. The income relatable to 33 flats which exceeded the prescribed built up area of 1000 sq.ft. was held to be not entitled to the claim of deduction under section 80IB(10) of the Act. The CIT(A) further held the assessee to be entitled to claim the deduction under section 80IB(10) of the Act on the additional income which was derived from the housing project. He further held that the assessee could lodge a fresh claim in the return filed under section 153A of the Act, on the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prorata deduction in respect of flats joined since no such proportionate deduction is provided in the Act. The Revenue is also aggrieved by the factum of date of completion of the project, in view of the certificate produced by the Secretary of the Cooperative Housing Society, wherein the date of completion of the project was shown as 02.09.2009. 24. The learned Authorized Representative for the assessee elaborately took us through the facts of the case, wherein the Assessing Officer had denied the deduction under section 80IB(10) of the Act on two counts i.e. date of completion of the project and the built up area of flats exceeding 1000 sq.ft. In respect of first contention raised by the learned Authorized Representative for the assessee was that the assessee had completed the project within time frame i.e. 21.02.2007 and it had received the completion certificate from the local authority on 08.06.2007. On 13.05.2008, the society was also formed and entire maintenance of the project was handed over by the assessee to the said society. He further pointed out that two servant toilets were constructed on the ground floor for which permission was received and vide certificate date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction claimed under section 80IB(10) of the Act could not be denied on the units which were within prescribed limits. He further placed reliance on the ratio laid down by the Pune Bench of Tribunal in ITO Vs. Gajraj Constructions (2015) 41 ITR (Trib) 425 (Pune), wherein the assessee had offered additional receipts as business income and claimed the deduction under section 80IB(10) of the Act, which was allowed to the assessee. 25. In respect of servant toilets being not complete on the date of completion of the building, the learned Authorized Representative for the assessee referred to the ratio laid down by the Pune Bench of Tribunal in M/s. Surana Mutha Developers Vs. ITO in ITA No.360/PN/2013, relating to as sessment year 2009- 10, order dated 10.04.2015 and pointed out that in the facts of the said case, fourth building was not completed, but the Tribunal allowed prorata deduction. He further stressed that the Hon ble Supreme Court in CIT Vs. Sarkar Builders reported in 375 ITR 392 (SC) had laid down that the area of balcony and terrace are to be excluded from the built up area for projects which were sanctioned prior to 01.04.2005 and following the said propositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no merit in the order of Assessing Officer in this regard. He fairly accepted the contention of the learned Departmental Representative for the Revenue but pointed out that where the combined area of units after merger was less than 1000 sq.ft., then the assessee was entitled to the said benefits. 28. Both the learned Counsels before closing their arguments, fairly admitted that the cross appeals of assessee and the Revenue in assessment year 2009- 10 were on identical facts and issue of claim of deduction under section 80IB(10) of the Act. The learned Authorized Representative for the assessee pointed out that the ground of appeal No.1 raised in assessment year 2009-10, as in assessment year 2008-09 was not pressed. 29. We have heard the rival contentions and perused the record. The issue which arises in the present bunch of appeals is against the claim of deduction under section 80IB(10) of the Act. The assessee had envisaged the development of plot of land at Palm Beach Road, Navi Mumbai for construction of two units of buildings having total number of 156 flats in the project known as Tharwani Heights. The plan for the said project was sanctioned on 24.03.2005 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal before us only in restricting the claim on such flats where the area was more than 1000 sq.ft. and also the on-money received in relation to such flats. The Revenue on the other hand, is in appeal against the allowance of deduction under section 80IB(10) of the Act whether prorata or otherwise, where the assessee has violated the basic conditions of not constructing the units as per sanctioned plan and merging the flats thereon. The Revenue is also in appeal in allowing the said deduction on the on-money received. Another aspect of the issue raised before us is the date of completion of project, wherein the assessee claims that it had completed the project within time frame. On the other hand, the Assessing Officer had denied the said claim because two servant toilets were constructed, for which the occupancy certificate was received on 31.12.2009 and since the assessee had received the sanction for construction of the project on 24.03.2005, then the completion on 31.12.2009, has relied on to deny the claim under section 80IB(10) of the Act. 30. First, we take up the issue of combination of flats by the assessee. Undoubtedly, the assessee had at start envisaged constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ats which are constructed by the assessee, wherein the Assessing Officer had given a finding that the area of flats was more than 1000 sq.ft. since he has included the area of balcony or open terrace. Various physical verification exercise and statements of the persons and also perusal of the documents seized during the course of search were based upon by the Assessing Officer for coming to the said conclusion. However, the issue is now settled by the Hon ble Supreme Court in CIT Vs. Sarkar Builders reported in 375 ITR 392 (SC), wherein it has been held that in respect of projects which were sanctioned prior to 01.04.2005, the area of balcony and terrace is to be excluded from the area of units for working out the total area of the flats, which is eligible for deduction under section 80IB(10) of the Act. The amendment brought in by insertion of 80IB(14) of the Act is w.e.f. 01.04.2005 and accordingly, is applicable for such projects which are approved after 01.04.2005. The project of the assessee was approved on 24.03.2005 and consequently, the amendment brought in on 01.04.2005 is not applicable to the project of assessee. Where the assessee has received sanction on 24.03.2005 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACIT reported in 124 TTJ 674 (Jd), which had dealt with the scope of assessments under section 153A of the Act vis- -vis new claim made for deduction or allowance. The Tribunal had observed that since having regard to the provisions of section 139(5) of the Act, since the assessments under section 153A of the Act are in relation to undisclosed income, it has to be concluded that new claims of deduction or allowance cannot be made in respect of completed assessments. The Tribunal further noted that in terms of second proviso to section 153A(1) of the Act, assessments pending on the date of initiation of search shall abate. The Tribunal relying on the same held that where the income returned by the assessee under section 139(1) of the Act had achieved finality, the claim of the assessee was untenable. The Tribunal also observed that even before us the assessee has not asserted that on the date of search, the assessment for instant year was pending so as to abate. 33. However, the facts of the present case are at variance, wherein the search was carried out against the assessee on 16.10.2008 and the assessee had filed the original return of income on 14.09.2008, hence as per provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as registered with the Registrar of Cooperative Societies and the certificate of registration is dated 13.05.2008. The assessee claimed that it had handed over the maintenance of building to the said society. Thereafter, on a later date, two servant toilets were constructed on the ground floor, for which permission was received and occupancy certificate was issued on 31.12.2009. The case of the Assessing Officer was that since the completion certificate is dated 31.12.2009, then the said project is completed on 31.12.2009 which is beyond the date prescribed in the Act and hence, the assessee is not eligible to claim the said deduction under section 80IB(10) of the Act. The CIT(A) has allowed the claim of assessee since the completion certificate only talks about two servant toilets and no other construction. Once the building has been completed by the assessee and the completion certificate has been issued and units have been occupied by the purchasers of the individual units as early as February, 2007 / June 2007, there is no merit in the order of Assessing Officer in denying the claim under section 80IB(10) of the Act. Another aspect of the issue is that even the society for mana ..... 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