TMI Blog2018 (4) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... be held as invalid. Claim of deduction under section 80IB(10) - Held that:- There is nothing either in the statement of Sashikant Chhatrawala or Sameer Bhojwani to conclude that the housing project was constructed as per seized unapproved plan dated 31st December 2001. As regards the allegation of the Assessing Officer that four flats have been merged to make it two flats, thereby, violating the conditions of 80IB(10)(c), the learned Commissioner (Appeals) held, if after the flats were sold by the assessee the purchasers merged the flats the assessee cannot be held responsible for alleged violation of conditions of section 80IB(10) of the Act. Commissioner (Appeals) held, when the assessee has constructed the housing project as per the approved plan with each residential unit having built–up area of less than 1,000 sq.ft, assessee’s claim of deduction under section 80IB(10) cannot be disallowed. Accordingly, he directed the Assessing Officer to allow assessee’s claim of deduction under section 80IB(10) of the Act. Allowance of assessee’s claim of deduction under section 80IB(10) in respect of leave and licence fees - Held that:- The unsold flats, being stock-in-trade of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The grounds raised by the assessee in cross objections which are common for all the assessment years are as under: 1.1 On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) - 51 [ the CIT(A) ] erred in holding that the (i) the computer printout which is a plan can certainly be said to be a plan pertaining to the Appellant (ii) the word belonging in section 153C of the Act has to be understood as covering a document which is pertaining to the assessee (iii) amendment made to the provisions of section 153C of the Act w.e.f. 1 .6.2015 is clarificatory in nature and therefore, applies retrospectively. 1.2 On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in confirming the validity of the assessment framed under section 153C of the Act which assessment was founded on a notice issued without the requisite conditions precedent mentioned under section 153C of the Act being satisfied. 5. Brief facts are, the assessee a company is engaged in the business of developing and constructing housing projects. A search and seizure operation under section 132 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch and post search proceedings the Assessing Officer concluded that the housing project was not constructed as per the plan approved by the BMC, therefore, not in compliance with the conditions prescribed under section 80IB(10) of the Act. Accordingly, the Assessing Officer disallowed assessee s claim of deduction under section 80IB(10) of the Act for the assessment years 20050 06 to 2011 12. Being aggrieved with the aforesaid decision of the Assessing Officer, the assessee preferred appeals before the first appellate authority. 7. The learned Authorised Representative reiterating the stand taken 6. In the appeals preferred for assessment years 2005 06 to 2010 11, wherein, proceedings were initiated under section 153C of the Act, the assessee challenged the validity of the assessment order passed under section 153C of the Act, inter alia, on the ground that the Assessing Officer has not recorded any satisfaction to the effect that the seized documents belongs to the assessee. It was submitted by the assessee that the seized document on the basis of which the Assessing Officer initiated proceedings under section 153C of the Act is an unapproved plan found in the computer of Sash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the learned Authorised Representative submitted that the satisfaction note makes it very clear that the basis for initiation of proceedings under section 153C of the Act is the floor plans seized from the searched person. In this regard, he also drew our attention to the notice issued under section 153C of the Act by the Assessing Officer on 6th January 2011. The learned Authorised Representative submitted, in his satisfaction note the Assessing Officer except stating that the seized plan belongs to the assessee has not provided any reason on what basis he comes to such conclusion. The learned Authorised Representative submitted, after examining all the material on record, though, the learned Commissioner (Appeals) was satisfied and has also concluded that the seized document cannot be said to be belonging to the assessee, however, he has upheld the validity of the proceedings initiated under section 153C of the Act by referring to the amended provisions of section 153C of the Act, wherein, the expression pertains to has been used. The learned Authorised Representative submitted, the expression pertains to which has been introduced to section 153C of the Act by Finance Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed floor plan does not tally with the plan approved by the BMC and does not bear any signature, name of the project, name of the owner of the property, except, the date 31.12.2001. The seized floor plan has no other reference as regards any person, project, owner, etc. The learned Commissioner (Appeals) has also accepted the aforesaid factual position. Section 153C(1) of the Act, as it stood prior to its amendment by Finance Act, 2015 w.e.f. 1st June 2015, empowered the Assessing Officer to initiate proceedings under the said provision if he is satisfied that any money, bullion, jewellery, valuable articles, books of account, seized documents etc. belongs or belong to a person other than the searched person. Thus, the condition precedent for initiation of proceedings under section 153C of the Act as it existed earlier was, the Assessing Officer must be satisfied that the seized document or other articles belongs to a person other than the person against whom the search operation was carried out. Therefore, the pertinent issue which arises for consideration in the present appeals is, whether the seized drawing/ floor plan can be said to be belonging to the assessee. It is manifest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of jurisdiction by the A.O under Sec. 153C in the case of the assessee company, it would be relevant to refer to the relevant extract of the pre-amended Sec.153C, as was applicable in the case of the assessee, and read as under: Sec. 153C. (1) Notwithstanding anything contained in s. 139, s. 147, s. 148,s. 149,s. 151 and s. 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in s. 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person. . Thus a bare perusal of the aforesaid statutory provision reveals beyond any scope of doubt that up to 30th May 2015, the requirement as per the mandate of law for the purpose of assumption of jurisdiction u/s. 153C was that the A.O of the person searched should be satisfied that money, bullion, jewellery or other valuable article or thing or books of accounts or documents seized belonged to a person other than the person referred to Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess income of such other person in accordance with the provisions of section 153A . That as the aforesaid amendment to Section 153C is not retrospective in nature and is applicable only w.e.f 01.06.2015, therefore, the case of the present assessee company would be regulated by the pre-amended provisions as were available on the statute till 30.05.2015. We find that our aforesaid observations stands fortified by the judgment of the Hon ble High Court of Bombay in the case CIT, Central -3, Mumbai Vs. Arpit Land (P) Ltd., (2017) 78 taxmann.com 300 (Bom), wherein the Hon ble High Court had held as under:- 6. We note that in terms of Section 153C of the Act at the relevant time i.e. prior to 1st June, 2015 the proceedings under Section 153C of the Act could only be initiated/proceeded against a party-assessee if the document seized during the search and seizure proceedings of another person belonged to the party -assessee concerned. The impugned order records a finding of fact that the seized document which formed the basis of initiation of proceedings against the respondent assesse s do not belong to it. This finding of fact has not been shown to us to be incorrect. Further, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd ourselves to be in agreement with the ld. A.R that despite specific requests made by the assessee vide his reply dated 22.03.2013 filed in response to the Show cause notice is sued by the A.O, therein calling upon the latter to explain as to how the incriminating documents, viz. Page No. 107-108 (supra) were alleged to be related to the assessee company , no reply had been furnished by the A.O . We further find that the contention of the assessee raised before the A.O that the same seized documents , viz. Page No. 107-108 (supra) had been referred to and related by him in Para no. 5 of his Show cause notice issued to M/s. Simtools Pvt. Ltd. (supra), had also remained uncontroverted by the A.O. We are of the considered view that as no reference of the projects undertaken by the assessee company, viz. Grandezza and Supremes finds any mention in the aforesaid seized documents, viz. Page No. 107-108, nor any reference of the assessee company is found therein, therefore, it could safely be concluded that the requisite conditions for assumption of jurisdiction under Sec. 153C had not been satisfied. 11. No contrary decision on the issue has been brought to our notice by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and laid supporting evidence, however, the Assessing Officer relying upon the seized unapproved plan and statement recorded under section 132(4) from Sashikant Chhatrawala and Sameer Bhojwani came to a conclusion that the housing project has not been constructed as per the approved plan, thereby violating the conditions of section 80IB(10) of the Act. The Assessing Officer, thus, concluded that the assessee having altered the approved plan and constructed flats having floor area of 2,000 sq.ft. is not eligible for deduction as per section 80IB(10)(c) of the Act. 14. Without prejudice to the aforesaid conclusion, the Assessing Officer held that, since, the leave and licence fee received by the assessee from letting out of unsold stock of flats is not derived from the activity of developing housing project, the assessee will not be eligible to avail deduction under section 80IB(10) of the Act in respect of leave and licence fee. Being aggrieved with the aforesaid decision, assessee preferred appeals before the first appellate authority. 15. In the course of appeal proceedings, the learned Commissioner (Appeals) directed the Assessing Officer to conduct certain enquiries with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Commissioner (Appeals) found that the housing project was not constructed as per the unapproved plan seized by the Department but has been constructed as per the approved plan which has a refuge area in 8th Floor and fire fighting passages on 9th to 12th Floor. The learned Commissioner (Appeals) found that the Municipal authorities have also issued occupancy certificates with plans which are same as the plans approved by the Municipal authorities. He found that as per approved plan the built up area of each of the residential unit is less than 1,000 sq.ft. He also found that each of the residential units in each floor have been sold to difference purchasers even though some of the purchasers may be relatives. In this context, the learned Commissioner (Appeals) observed that the restriction in selling more than one unit to husband and wife came into effect by introduction of clause (f) of Explanation to section 80IB(10) by Finance (No.2) Act, 2009, hence, would not apply to assessee s housing project which was approved and flats were allotted prior to such amendment which will apply prospectively. In this regard, he also drew support from CBDT Circular no.05/2010, dated 3rd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. The learned Departmental Representative submitted, the information / evidences obtained by the learned Commissioner (Appeals) during the appellate proceedings were neither confronted to the Assessing Officer nor remand report was called from him. Therefore, there is violation of rule 46A of the Rules, for which the order of the learned Commissioner (Appeals) requires to be set aside. Proceeding further with the other facets of the issue relating to allowance of deduction claimed under section 80IB(10) of the Act, the learned Departmental Representative submitted that in the course of the search and seizure operation as well as post search proceedings, not only incriminating material was found indicating the fact that the assessee has constructed the housing project deviating from the approved plan but the statements recorded from the architect and the director of the assessee also corroborated the fact that the assessee has constructed the housing project without complying to the conditions of section 80IB(10) of the Act. In this context, the learned Departmental Representative selectively referred to the statements recorded from Sashikant Chhatrawala and Sameer Bhojwani. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Representative submitted, as per sub section (4) of section 250 read with sub rule (4) of rule 46A, the learned Commissioner (Appeals) is empower to conduct necessary enquiry as he deems fit for deciding the appeal. He submitted, in case, the learned Commissioner (Appeals) decides to conduct such enquiry, there is no necessity under the statute to allow opportunity to the Assessing Officer to comment upon the result of such enquiry. The learned Authorised Representative submitted, the restrictions imposed under sub rule (1) to (3) of rule 46A only apply to the additional evidences produced by the assessee. He submitted, the learned Commissioner (Appeals) since has co terminus powers of the Assessing Officer, he can conduct any enquiry which the Assessing Officer has failed to do. Therefore, there is no need for him to call for a remand report from the Assessing Officer which is required in case of furnishing of additional evidence by the assessee. Therefore, the learned Authorised Representative submitted, Revenue s argument of violation of rule 46A by the learned Commissioner (Appeals) has to be rejected. So far as other allegation of the Revenue regarding violation of conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also accepted assessee s claim of deduction under section 80IB(10) of the Act. Thus, the learned Authorised Representative submitted, there is no substance in the allegation of the Department that the housing project was constructed as per the unapproved plan, thereby, violating the conditions of section 80IB(10) of the Act. As regards the allegation of the Department that two flats were let out to a single person with a single invoice, the learned Authorised Representative drawing our attention to the said invoice submitted that at the relevant time it was only an advance received and the assessee had not even entered into a leave and license agreement with the concerned person. Thus, it was submitted by the learned Authorised Representative, the finding of the learned Commissioner (Appeals) being on the basis of cogent evidence and facts brought on record, no interference is called for. In support of his contentions, the learned Authorised Representative relied upon the following decisions: i) Smt. Prabhavati S. Shah v/s CIT, [1998] 100 Taxman 404 (Bom.); ii) ITO v/s Industrial Roadways, [2008] 112 ITD 293 (Mum.); iii) DCIT v/s Thoresen Chartering Singapore (Pte. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the housing society, he found that the housing project has been constructed with four flats in each floor which is evident from the maintenance receipts issued by the society as well as the shares allotted by the society to flat owners. Further, to verify whether the housing project was constructed as per the approved plan, learned Commissioner (Appeals) called for the original approved plan from the assessee bearing the seal of the BMC. After obtaining the said plan and cross verifying with the seized drawings, he found that 11 out of 12 seized drawings tallied with the original approved plan bearing the seal of BMC. Thus, as could be seen from the aforesaid facts, since necessary information / factual details were not forthcoming from the Assessing Officer, learned Commissioner (Appeals) decided to conduct an independent enquiry on his own to ascertain the correct factual position relating to construction of the housing project. Section 250 of the Act lays down the procedure to be followed by the Commissioner (Appeals) in the matter of disposal of an appeal filed before him. Sub section (4) of section 250, empowers the Commissioner (Appeals) to make further enquiry or direct the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, the Appellate Assistant Commissioner is empowered to make such further inquiry as he thinks fit or to direct the Income-tax Officer to make further inquiry and to report the result of the same to him. Sub-section (5) of Section 250 of the Act empowers the Appellate Assistant Commissioner to allow the appellant, at the hearing of the appeal, to go into any ground of appeal not specified in the grounds of appeal, on his being satisfied that the omission of the ground from the form of appeal was not wilful. It is clear from the above provisions that the powers of the Appellate Assistant Commissioner are much wider than the powers of an ordinary court of appeal. The scope of his powers is coterminous with that of the Income-tax Officer. He can do what the Income-tax Officer can do. He can also direct the Income-tax Officer to do what he failed to do. The power conferred on the Appellate Assistant Commissioner under Sub-section (4) of Section 250 being a quasi-judicial power, it is incumbent on him to exercise the same if the facts and circumstances justify. If the Appellate Assistant Commissioner fails to exercise his discretion judicially, and arbitrarily refuses to make e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner (Appeals) also demonstrated such fact. Further, evidence has been brought on record to indicate that each floor is having four flats with independent electricity metering units. Moreover, the very fact that BMC has issued occupancy certificates in respect of the flats in the housing project is suggestive of the fact that the housing project has been constructed as per the approved plan. Admittedly, there is no allegation by the BMC that the housing project has been constructed deviating from the approved plan. At least, department has not brought any such fact on record. Thus, as per the facts and evidences brought on record either as a result of enquiry conducted by the learned Commissioner (Appeals) or being produced by the assessee before the departmental authorities, it is established that the housing project was constructed as per the plan approved by BMC and not otherwise. Though, in the statement recorded Sashikant Chhatrawala, the so called architect did say that he has prepared two sets of plans, however, he never stated that the housing project was constructed as per unapproved plan. Further, in the statement recorded from Sameer Bhojwani he has not only disowned the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are dismissed. 21. In ground no.(vi), Revenue has challenged allowance of assessee s claim of deduction under section 80IB|(10) of the Act in respect of leave and licence fees. 22. As discussed in the earlier part of the order, the Assessing Officer while completing the assessment for the assessment years under appeal, disallowed assessee s claim of deduction under section 80IB(10) of the Act in respect of the housing project alleging violation of conditions of the said provision. Without prejudice to the aforesaid conclusion, the Assessing Officer also held that the assessee is not eligible to claim deduction under section 80IB(10) of the Act in respect of leave and licence fees, since, it is not derived from the activity of developing and constructing the flat. While deciding the assessee s appeals on the aforesaid issue, the learned Commissioner (Appeals) held that, since, the housing project developed by the assessee is otherwise eligible for deduction under section 80IB(10) of the Act, leave and licence fee derived from letting out the unsold stock of flats in the said housing project has to be treated as profit derived from the housing project, hence, eligible for deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the flats, which is integral part of the housing project is also allowable for deduction u/s 80IB of the Act. He relied on various decisions in support of the same. 4. On the other hand, Revenue Officers are of the opinion that such receipts are not allowable profits and denied the claim of deduction. 5. Before us, ld Counsel for the assessee submitted that there is no dispute on the facts and the dispute is only with regard to the definition of eligible profits whether it includes rental income earned by the assessee from the unsold part of the housing project. Bringing our attention to various decision placed before us, Ld Counsel for the assessee mentioned that the scrap sales are held to be eligible profits. He also mentioned that the interest payments received by the assessee from the debtors, relating to the sale proceeds, were also found eligible for claim of deduction u/s 80IB of the Act. In support of his argument, Ld Counsel for the assessee relied on the decision of ITAT, Hyderabad in the case of ACIT vs. Biotech Medicals (P) Ltd [2009] 119 ITD 143 (Hyd). Further, Ld Counsel also relied on the decision of the ITAT Mumbai Bench in the case of Tata Infomedia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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