PRAKRUTI CONSTRUCITONS P.LTD, MUMBAI v. DCIT 1(2), MUMBAI

ITA 2265/MUM/2011 | 2007-2008
Pronouncement Date: 20-07-2011 | Result: Allowed

Appeal Details

RSA Number 226519914 RSA 2011
Assessee PAN AAACP9299D
Bench Mumbai
Appeal Number ITA 2265/MUM/2011
Duration Of Justice 3 month(s) 30 day(s)
Appellant PRAKRUTI CONSTRUCITONS P.LTD, MUMBAI
Respondent DCIT 1(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 20-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 20-07-2011
Date Of Final Hearing 06-07-2011
Next Hearing Date 06-07-2011
Assessment Year 2007-2008
Appeal Filed On 21-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND R.K.PANDA (A.M ) ITA NO.2264 AND 2265/MUM/2011 (ASSESSMENT YEARS :2004-05 AND 2007-08) PRAKRUTI CONSTRUCTIONS PVT.LTD. 21 WOUDBY ROAD HAJRIMAL SOMANY MARG OPP.BOMBAY GYMKHANA FORT MUMBAI-400001. PAN: AAACP9299D INCOME TAX OFFICER CIRCLE -1(2)(4) AYAKAR BHAVAN NEW MARINE LINES MUMBAI-400020. APPELLANT V/S RESPONDENT APPELLANT BY : S/SHRI RAJAN VORA & NIKHIL TIWARI RESPONDENT BY : SHRI DEVI SINGH O R D E R PER D.K.AGARWAL (JM) THESE TWO APPEALS PREFERRED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 25.1.201 1 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A ) FOR THE ASSESSMENT YEARS 2004-05 AND 2007-08. SINCE FAC TS ARE IDENTICAL AND COMMON ISSUE IS INVOLVED BOTH THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE O F CONVENIENCE. ITA NO.2264/MUM/2011(AY-2004-05) 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE- COMPANY IS ENGAGED IN THE BUSINESS AS BUILDER AND DEVELOPER FILED RETURN DECLARING TOTAL INCOME AT R S.NIL ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 2 ACCOMPANYING WITH THE STATEMENT SHOWING COMPUTATI ON OF TOTAL INCOME AUDITED REPORT REQUIRED TO BE FILED UNDER THE PROVISIONS OF SECTION 44AB OF THE INCOME TAX ACT 1 961( IN SHORT THE ACT) IN THE PRESCRIBED FORMAT 3CD AND ITS ENCLOSURES. THE AO AFTER PROCESSING OF THE RETURN U NDER SECTION 143(1) OF THE ACT SELECTED THE CASE FOR SC RUTINY AND ACCORDINGLY ISSUED NOTICE UNDER SECTION 143(2) OF T HE ACT TO THE ASSESSEE. IN RESPONSE THE AUTHORIZED REPRESEN TATIVE 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 T HAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPIN G I.E. CONSTRUCTING A HOME PROJECTS KNOWN AS KUMAR PINNAC LE AT TADIWALA ROAD PUNE WHICH CONSISTS OF RESIDENTIAL U NITS (FLATS) AND COMMERCIAL ESTABLISHMENTS (SHOPS). DU RING THE YEAR THE ASSESSEE HAS SHOWN WORK BEING IN PROGRESS . EXPENDITURE OF CAPITAL NATURE HAS BEEN ACCOUNTED F OR UNDER THE HEAD WORK-IN-PROGRESS. IN THE NEXT PARA HE OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION THE ASS ESSEE COMPANY HAS SHOWN NET PROFIT ON SALE OF SHOPS TO TH E TUNE OF RS.24 72 625/- WHICH IS NOT QUALIFIED FOR DEDUCTIO N 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 ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 3 UNDER SECTION 80IB-(10) OF RS.2 48 21 145/- COMPUTE D THE INCOME AT RS.24 78 250/- AND AFTER DEDUCTING THE BR OUGHT FORWARD LOSSES OF RS.24 78 250/- DETERMINED THE T OTAL INCOME AT RS.NIL. 3. SUBSEQUENTLY THE AO ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 30.3.2009 AFTER RECORDING THE FOLLOWI NG REASONS: THE RETURN OF INCOME IS FILED ON 31.10.2004 DECLARING TOTAL INCOME OF RS. NIL/-. THE ORDER UND ER SECTION 143(1) WAS PASSED ON 2.3.2005 AND UNDER SECTION 143(3) ON 23.11.2006. THE ASSESSEE IS ENGAGED IN THE CONSTRUCTION AND LAND DEVELOPMENT BUSINESS. THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION UNDER SECTION 80IB (10) OF T HE IT ACT WHICH WAS ALLOWED AT RS.2 48 21 145/-. DURI NG THE YEAR ASSESSEE WAS CONSTRUCTING HOUSING PROJECT KNOWN AS KUMAR PINNACLE AT PUNE WHICH CONSISTS O F RESIDENTIAL UNITS (FLATS) AND COMMERCIAL ESTABLISHM ENT (SHOPS). THE SURVEY UNDER SECTION 133A WAS CARRIED OUT ON 24.11.2005 FOR THE SPECIFIC OBJECTIVE OF VERIFICATI ON OF CORRECTNESS OF CLAIM OF DEDUCTION UNDER SECTION 80I B (10) OF THE ACT. AS PER THE PROVISIONS OF THE ACT FOR THE AY 2005-06 THE BUILT UP AREA OF THE COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT SHO ULD NOT EXCEED FIVE PERCENT OF AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET WHICHEVER IS LESS. THE AREA UTILIZED FOR THE COMMERCIAL CONSTRUCTION IN THE PROJECT ITSELF IS 7 565.62 SQ.FT. DURING THE SURVEY ACTION IT WAS FOUND THAT THE BUILT UP AREA OF THE COMMERCIAL ESTABLISHMENT IS M UCH MORE THAN THE BASIC QUALIFICATION OF 2000 SQ.FT.. SECONDLY THE PUNE MUNICIPAL CORPORATION RECORDS CLEARLY REVEALS THAT THE TWO PROJECTS WERE ALLOWED AS A RESIDENTIAL CUM COMMERCIAL PROJECTS WHEREAS ONLY RESIDENTIAL PROJECTS ARE ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80IB(10) AND NOT RESIDENTIAL CUM COMMERCIAL PROJECT. IN VIEW OF THE ABOVE FACTS MENTIONED IN ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 4 ASSESSMENT ORDER UNDER SECTION 143(3) FOR AY 2005- 06 IT IS CLEAR THAT THE KUMAR PINNACLE HAS MORE COMMERCIAL CONSTRUCTION THAN THE CONDITIONS LAID DO WN IN EXPLANATION TO SECTION 80IB (10) INSERTED WITH E FFECT FROM 1.4.2005 WHICH SAYS THAT BUILT UP AREA OF TH E SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED 5% OF THE AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR 2000 SQ. FT. WHICHEVER IS LESS. THOUGH THIS CONDITION W AS INSERTED W.E.F 1.4.2005 THE SAID AMENDMENT IS CLARIFICATARY IN NATURE AND APPLICABLE TO AY 2004- 05 ALSO. IT IS THUS CLEAR THAT THE ASSESSEE IS NOT EN TITLED FOR DEDUCTION UNDER SECTION 80IB(10) FOR THE BREAC H OF CONDITION OF COMMERCIAL CONSTRUCTION. THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) OF RS.2 48 21 215 /- HAS BEEN WRONGLY ALLOWED IN THE ASSESSMENT ORDER UNDER SECTION 143(3) FOR THE YEAR UNDER CONSIDERATI ON. 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. SD/- DY. COMMISSI ONER OF INCOME TAX (CI RCLE 1(2) MUMBAI DA TED -30.3.2009 IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT THE ASSESSEES REPRESENTATIVE VIDE LETTER DATE D 27.4.2009 STATED THAT THE RETURN OF INCOME ORIGINAL LY FILED MAY BE TREATED AS THE FINAL RETURN OF INCOME FOR TH E SAID ASSESSMENT YEAR. DURING THE COURSE OF RE-ASSESSMEN T 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. CONSTRUCTI NG THE HOME PROJECT KNOWN AS KUMAR PINNACLE LOCATED AT ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 5 TADIWALLA ROAD SANGMWADI PUNE WHICH CONSISTS OF RESIDENTIAL UNITS(FLATS) AND COMMERCIAL ESTABLISHME NT SHOPS. THE PROJECT WAS APPROVED BY LOCAL AUTHORITY OF PUN E MAHARASHTRA VIDE LETTER DATED 20.3.2001. THE PROJ ECT CONSISTED OF BUILDING A-1 A-2 A-3 WITH 10 SHOP S IN EACH BUILDING HAVING SALABLE TOTAL BUILT-UP AREA OF 856 5 SQ.FT. (ACTUAL AREA 7562 SQ.FT.). THE AO ALSO NOTED THE F OLLOWING FACTS : AREA OF PLOT 139327.60 SQ.FT. DATE OF FIRST COMMENCEMENT 23.5.2001 CC NO.2881 DATE OF COMPLETION 16.9.2003 AREA OF RESIDENTIAL UNITS 580 SQ.FT./1075 SQ.FT. SURVEY NO.343/2 THE AO FURTHER OBSERVED THAT IN THIS CASE SURVEY U NDER SECTION 133A WAS CARRIED OUT BY THE ADIT(INV) II PUNE ON 24.11.2005 TO VERIFY WHETHER THE PROJECT OF THE AS SESSEE KUMAR PINNACLE IS PROJECT ELIGIBLE UNDER SECTION 80IB(10) OF THE ACT. THE COMMERCIAL AREA IN THE PROJECT IS 8565 SQ. FT. (BUILT UP). THE PUNE MUNICIPAL CORPORATION RECORDS CLEARLY REVEAL THAT THE PROJECT WAS ALLOWED AS A RESIDENTI AL CUM COMMERCIAL PROJECT WHEREAS ONLY RESIDENTIAL PROJECT S ARE ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80IB(10) A ND NOT RESIDENTIAL CUM COMMERCIAL PROJECTS. IT IS THUS CL EAR THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTI ON 80IB(10) FOR THE BREACH OF CONDITION OF COMMERCIAL CONSTRUCT ION. THE ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 6 AO AFTER TAKING INTO CONSIDERATION THE FACTS RELAT ING TO THE UNITS CONSTRUCTED COMMERCIAL AND RESIDENTIAL AREA OBSERVED THAT THE BUILDING KNOWN AS KUMAR PINNACLE IS NOT A PROJECT ELIGIBLE UNDER SECTION 80IB(10) OF THE ACT. ACCOR DINGLY THE ASSESSEE WAS ASKED TO EXPLAIN WHY DEDUCTION UNDER SECTION 80IB(10) CLAIMED FROM THE INCOME FROM THE SAID PROJ ECT SHOULD NOT BE DISALLOWED. THE ASSESSEE VIDE LETTE R DATED 11.12.2009 AFTER RELYING ON THE DECISION OF THE S PECIAL BENCH OF THE TRIBUNAL IN M/S BRAHMA ASSOCIATES V/S JCIT (2009) 119 ITD 255 (PUNE) INTERALIA EXPLAINED THAT 1. THE HOUSING PROJECT KUMAR PINNACLE IN RESP ECT OF WHICH THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB(10) WAS COMMENCED IN THE YEAR 2001. THE AMENDMENT BROUGHT IN BY THE FINANCE (NO.2) ACT 20 04 BY INSERTION OF CLAUSE (D) IS PROSPECTIVE AS HAS BE EN HELD BY THE SPECIAL BENCH AND AS SUCH IT WILL NOT APPL Y TO THE ASSESSEES PROJECT KUMAR PINNACLE AS IT HAD A LREADY COMMENCED AS STATED ABOVE. 2. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IB(10) IN RESPECT OF PROFITS FROM THIS PROJECT IN THE YEAR AY 2004-05 AND THE SAME WAS EARLIER RIGHTLY ALLOWED BY THE AO. 3. THOUGH THE COMMERCIAL AREA IN THE PROJECT IS AL SO ALLOWABLE FOR DEDUCTION (AS IT WAS SANCTIONED BEFOR E AY 2005-06) THE ASSESSEE HAS PAID TAX ON THE SAME. 4. PROFITS FROM RESIDENTIAL UNITS OF THE SAID PROJE CT ARE SEPARATELY ASCERTAINABLE AND HAVE BEEN REFLECTE D SEPARATELY; 5. THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB(10) OF THE ACT IN RESPECT OF PROFITS F ROM RESIDENTIAL PORTION ONLY. ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 7 6. RESIDENTIAL PORTION IN RESPECT OF WHICH DEDUCTIO N 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 HO NOR 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 DED UCTION HAS BEEN CLAIMED SATISFIES ALL THE REQUIREMENTS OF SECTION 80IB(10) OF THE INCOME TAX ACT 1961. IN LIGHT OF THE FACTS MENTIONED ABOVE WE ARE SURE T HAT YOUR HONOUR WILL RESPECTFULLY FOLLOW THE ORDER OF T HE HONBLE SPECIAL BENCH OF THE ITAT IN THIS REGARD A ND ALLOW THE ASSESSEES CLAIM FOR DEDUCTION UNDER SEC TION 80IB(10) OF THE IT ACT 1961 FOR AY 2004-05 5. THE ASSESSEE VIDE ITS LETTER DATED 5.12.2009 F URTHER EXPLAINED AS UNDER : DEDUCTION UNDER SECTION 80IB(10) IS ALLOWABLE IN THE CASES WHERE TOTAL BUILT UP COMMERCIAL AREA IS 10% OF THE TOTAL AREA M/S BRAHMA ASSOCIATES V/S JCIT (119 ITD 255)) SPECIAL BENCH THE ASSESSEE CLAIMED A HOUSING PROJECT HAVING COMMERCIAL AREA UP TO 10% OF THE CONSTRUCTION ELIG IBLE FOR DEDUCTION UNDER SECTION 80IB(1A). THE ASSESSEE STATED THAT PRIOR TO 1.4.2005 THERE WAS NO RESTRIC TION ON THE EXISTENCE OF COMMERCIAL AREA IN A BUILDING PROJ ECT HOWEVER THE AO DID NOT ACCEPT THE ASSESSEES EXPLA NATION. ACCORDING TO THE AO THERE IS NO PROVISIONS UNDER SECTION 80IB(10) WHICH PROVIDES 10% COMMERCIAL AREA. SECTI ON 80IB (10) AS IT STOOD IN THE PREVIOUS YEAR RELEVANT TO T HE ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 8 ASSESSMENT YEAR 2004-05 CLEARLY STATES ONLY ABOUT RESIDENTIAL UNITS. THE AO AFTER RELYING ON THE D ECISION OF THE TRIBUNAL IN LAUKIK DEVELOPERS V/S DCIT (105 IT D 657) HELD THAT BUILDING PROJECT KUMAR PINNACLE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) AND ACCORDINGLY HE DISALLOWED THE DEDUCTION OF RS.2 48 21 145/- CLAI MED BY THE ASSESSEE UNDER SECTION 80IB(10) AND COMPLETED THE ASSESSMENT AT AN INCOME OF RS.2 48 21 145/- VIDE O RDER DATED 30.12.2009 PASSED UNDER SECTION 143(3) READ W ITH SECTION 147 OF THE ACT. 4. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (A ) THE ASSESSEE CHALLENGED THE VALIDITY OF THE PROCEEDING S INITIATED UNDER SECTION 148 AND DISALLOWANCE OF DEDUCTION UND ER SECTION 80IB(10). THE LEARNED COMMISSIONER OF INCO ME TAX (A) ON THE ISSUE OF PROCEEDINGS INITIATED UNDER SEC TION 148 AFTER CONSIDERING THE PROVISIONS OF SECTION 80IB(10 ) AND THE DECISION OF THE TRIBUNAL IN THE CASE OF LAUKIK DEV ELOPERS (SUPRA) HAS HELD THAT THE AO HAS RIGHTLY GAUGED THE CORRECT POSITION OF LAW THAT BEFORE INSERTION OF CLAUSE (D ) IT WAS ONLY PURE RESIDENTIAL PROJECTS WHICH WAS ELIGIBLE TO DED UCTION UNDER SECTION 80IB(10). HE FURTHER HELD THAT ON IN CORRECT APPLICATION OF LAW ACTION UNDER SECTION 148 AND S ECOND RE- ASSESSMENT IS PERFECTLY JUSTIFIED. ON MERITS THE L EARNED COMMISSIONER OF INCOME TAX (A) OBSERVED THAT THE DE CISION ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 9 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 REQUIREME NTS FOR APPROVAL OF HOUSING PROJECTS EXISTS. HE FURTHER OB SERVED THAT THE DEDUCTION UNDER SECTION 80IB(10) WAS ALLOWABLE ONLY IN RESPECT OF PURE RESIDENTIAL PROJECTS WITHOUT ANY C OMMERCIAL ELEMENT IN IT AND HELD THAT IN THE CASE OF THE APPE LLANT ADMITTEDLY THE PROJECT IS RESIDENTIAL CUM COMMERCIA L THEREFORE THE ASSESSEE IS NOT ENTITLED TO DEDUCTI ON 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 UND ER SECTION 147 OF THE ACT ON THE GROUND THAT INCOME H AD ESCAPED ASSESSMENT; ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 10 2. FAILED TO APPRECIATE THAT REOPENING UNDER SECTIO N 147 COULD NOT BE MADE MERELY ON CHANGE OF OPINION WHERE ALL THE MATERIAL FACTS HAD BEEN DISCLOSED BY THE APPELLANT; 3. ERRED IN EQUATING THE PROVISIONS OF SECTION 147 WITH THOSE OF SECTION 154. DEDUCTION UNDER SECTION 80IB(10) 4. ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING THE DEDUCTION UNDER SECTION 80IB(10) O N THE GROUND THAT ONLY PURE HOUSING PROJECT ARE ELIGIBL E PROJECT AND THAT DEDUCTION IS NOT ALLOWED TO A RESIDENTIAL-CUM-COMMERCIAL PROJECT THOUGH APPROVE D BY LOCAL AUTHORITY AS HOUSING PROJECT. 5. ERRED IN NOT FOLLOWING THE BINDING DECISION OF T HE HONBLE SPECIAL BENCH IN THE CASE OF JCIT V/S BR AHMA ASSOCIATES (119 ITD 255) WHICH NOW HAS BEEN APPROV ED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S BRAHMA ASSOCIATES (ITA NO.1194 OF 2010); 6. ERRED IN CONFIRMING THE ACTION OF THE AO AND HOLDING THAT CLAUSE (D) OF SECTION 80IB(10) INSERTE D W.E.F. 1.4.2005 WOULD BE APPLICABLE RETROSPECTIVELY TO PRO JECTS APPROVED PRIOR TO 1.4.2005 6. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE PROJECT KUMAR PINNACLE IS LOCATED AT SURVEY NO.343/2 TADIWALA ROAD SANGAMW ADI PUNE. THE DETAILS OF THE CONSTRUCTION OF BUILDINGS COMMENCED AND COMPLETED ARE AS FOLLOWS : SR. NO. PARTICULARS OF BUILDINGS COMMENCE- MENT DATE COMPLETION DATE 80-IB(10) DEDUCTION ON PROFITS FROM T HE SAID BUILDINGS CLAIMED IN 1 A1 A2 AND A3 (CONSIST OF RESIDENTIAL 23 MAY 2001 (REFER SANCTION PLAN AT PAGES 50 16 SEPT. 2003 AND 23 MAR . 2004 (REFER AY 2004-05; AND AY 2005-06 (NOT I N APPEAL; ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 11 AND CONVENIENT SHOPPING AREA) TO 52 OF AY 2004-05 OCCUPANCY CERTIFICATE PAGE S 53 TO 58 OF AY 2004 -05 PENDING FOR DISPOSAL B EFORE THE HONBLE CIT(A) 2 A6 (CONSIST ONLY RESIDENTIAL AREA) 29 JULY 2005 (REFER SANCTION PLA N AT PAGES 33 TO 35 OF PAPER BOOK FOR AY 2007 - 08) 22 FEB 2007 (REFER OCCUPANCY CERTIFICATE PAGES 36 TO 37 OF PAPER BOOK FOR AY 2007-08) AY 2007-08 THE AREA AND OTHER DETAILS OF THE PROJECT KUMAR PINNACLE ARE AS FOLLOWS: SR. NO. PARTICULARS AREA A) DATE OF COMMENCEMENT OF PROJECT 23 MAY 2001 B) TOTAL PLOT AREA 139 328 SQ.FT (3.20 ACRES) C) TOTAL BUILT UP AREA 132 482 SQ.FT D) BUILT UP AREA 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 K UMAR PINNACLE IS SANCTIONED AS RESIDENTIAL CUM-COMMERC IAL PROJECT AND DOES NOT SATISFIES THE CONDITION UNDER CLAUSE (D) OF SECTION 80IB(10) OF THE ACT. (AS PROSPECTIVELY I NSERTED FROM AY 2005-06). HE FURTHER SUBMITS THAT CONSIDER ING THE SEQUENCE OF EVENTS SUMMARIZED BELOW THE REASSESSME NT ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 12 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 PROFITS FROM RESIDENTIAL AREA AND DISALLOWING THE SAME ON THE PROFITS FROM SALE OF CONVENIENT SHOPPING AREA. 30.3.2009 REASSESSMENT PROCEEDINGS INITIATED BASED ON THE REASON THAT THE PROJECT IS SANCTIONED AS RESIDENTIAL CUM COMMERCIAL PROJECT AND INCLUDES CONVENIENT SHOPPING/COMMERCIAL AREA MORE THAN LIMIT SPECIFIED UNDER NEWLY INSERTED CLAUSE (D) TO SECTION 80IB(10) OF THE ACT. 30.12.2009 REASSESSMENT ORDER PASSED BY THE LEARNED AO DISALLOWING THE ENTIRE CLAIM OF 80IB(10) DEDUCTION BASED ON THE GROUND THAT THE PROJECT INCLUDES CONVENIENT SHOPPING AREA OF MORE THAN 2 000 SQ. FT. CONSIDERING AMENDMENT AS RETROSPECTIVE IN APPLICATION AND HENCE THE CONDITION SPECIFIED UNDER SECTION 80IB(10) IS NOT SATISFIED. FROM THE ABOVE SEQUENCE OF EVENTS HE SUBMITS THAT THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) OF THE AC T WAS ALLOWED BY THE AO DURING THE COURSE OF REGULAR ASSE SSMENT WITH DUE KNOWLEDGE ABOUT INSERTION OF CLAUSE (D) TO SECTION 80IB(10) OF THE ACT AND ALSO CONSIDERING THE FACT THAT THE SUBJECT PROJECT INCLUDES CONVENIENT SHOPPING AREA M ORE THAN THE PRESCRIBED LIMIT. THE SAID FACT IS FORTIFIE D BY THE ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 13 ACTION OF THE AO IN DISALLOWING 80IB(10) DEDUCTION ON COMMERCIAL PROFITS WHILE PASSING ORDER UNDER SECTIO N 143(3) OF THE ACT. FURTHER IT CAN ALSO BE SEEN THAT THE SURVEY ACTION WAS CONCLUDED PRIOR TO PASSING ASSESSMENT ORDER UND ER SECTION 143(3) OF THE ACT AND IT WAS SPECIFICALLY N OTICED THAT THE PROJECT INCLUDES COMMERCIAL AREA. HENCE THE A O HAD FORMED HIS OPINION THAT CLAUSE (D) TO SECTION 80IB( 10) OF THE ACT IS NOT APPLICABLE TO THE PROJECTS APPROVED AND COMMENCED PRIOR TO 1.4.2004 AND ACCORDINGLY DID N OT ALLOW DEDUCTION UNDER SECTION 80IB(10) OF THE ACT ON COMM ERCIAL PROFITS. HE FURTHER SUBMITS THAT THE ASSESSEE HAD SUBMITTED ALL THE FACTUAL DETAILS REGARDING THE ELIGIBILITY OF THE HOUSING PROJECT KUMAR PINNACLE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND IT WAS ALSO VERIFIED DU RING THE COURSE OF SURVEY UNDER SECTION 133A OF THE ACT AND THERE WERE NO ADDITIONAL INFORMATION WHICH HAS COME TO TH E NOTICE OF THE AO VITIATING THE 80IB(10) CLAIM OF THE ASSE SSEE WHICH CALLS FOR INITIATION OF REASSESSMENT PROCEEDINGS. HE FURTHER SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME T AX (A) UPHELD THE ACTION OF THE AO IN INITIATING REASSES SMENT PROCEEDINGS BASED ON THE FOLLOWING REASONING: (I) COMMERCIAL AREA IN THE PROJECT EXCEEDS LIMIT S PECIFIED UNDER SECTION 80IB(10) OF THE ACT AND ; ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 14 (II) THE PROJECT IS SANCTIONED AS HOUSING CUM RES IDENTIAL PROJECT 8. HE FURTHER SUBMITS THAT THE LEARNED COMMISSIONE R OF INCOME TAX (A) HAS ERRED IN CONCLUDING THAT THE A CTION OF THE AO IN RELYING ON NEWLY INSERTED CLAUSE (D) APP LICABLE FROM AY 2005-06 AND IN INITIATING THE REASSESSMENT PROCEEDINGS IS NOT CHANGE OF OPINION. HE FURTHER S UBMITS THAT THE APPLICABILITY OF PRE-AMENDED/AMENDED LAW W AS IN ITSELF AN OPINION WHICH DIFFERED BETWEEN THE ASSE SSING 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 COMM ISSIONER OF INCOME TAX (A) HAS ERRED IN DRAWING A CONCLUSIO N 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 BA SED HIS REASON THAT THE PROJECT IS SANCTIONED AS RESIDENTI AL CUM COMMERCIAL PROJECT. HE FURTHER SUBMITS THAT SINC E THE SURVEY WAS CARRIED ON 24.11.2005 I.E. BEFORE COMPL ETION OF THE ORIGINAL ASSESSMENT PROCEEDINGS IT IS EVIDENT THAT THE AO WAS HAVING COMPLETE KNOWLEDGE OF THE PROJECT INCLUD ING COMMERCIAL AREA AND HAD FORMED HIS OWN OPINION ABOU T NON- APPLICABILITY OF CLAUSE (D) TO SECTION 80IB(10) OF THE ACT AND ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 15 RESTRICTING THE DISALLOWANCE TO THE EXTENT OF PROFI TS DERIVED FROM COMMERCIAL AREA. HE FURTHER SUBMITS THAT THE CONSTITUTION OF SPECIAL BENCH IN RESPECT OF ELIGI BILITY OF PROJECT FOR CLAIM OF 80IB(10) DEDUCTION ON INCLUSI ON OF COMMERCIAL AREA CLEARLY SHOWS THAT THE ISSUE WAS SU BJECT TO TWO POSSIBLE VIEWS. THE LEARNED COMMISSIONER OF IN COME TAX (A) SHOULD HAVE APPRECIATED THAT THE ACTION OF THE AO IN INITIATING REASSESSMENT PROCEEDINGS EVEN AFTER THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) WAS ASSESSED AND A LLOWED BY THE AO IN ORIGINAL PROCEEDINGS IS MERE CHANGE O F OPINION. HE FURTHER SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN OBSERVING THAT THE AO HAD DI RECT SUPPORT OF THE DECISION OF THE TRIBUNAL IN THE CAS E OF LAUKIK DEVELOPERS (SUPRA) WITHOUT APPRECIATING THAT THE SA ID DECISION WAS OVERRULED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S BRAHMA ASSOCIATES(SUPRA) WHICH HAS BEEN SUBSEQUENTLY APPROVED BY THE HONBLE BOMBAY HIGH COURT. THE SAID FACT WAS CLEARLY BROUGHT OUT IN AS SESSEES SUBMISSION BEFORE THE LEARNED COMMISSIONER OF INCOM E TAX (A). HE FURTHER SUBMITS THAT THE LEARNED COMMISSI ONER OF INCOME TAX (A) FAILED TO APPRECIATE THAT THE PROJ ECT OF THE ASSESSEE KUMAR PINNACLE IS BASED IN PUNE AND HEN CE THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL WAS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND OU GHT TO HAVE ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 16 BEEN FOLLOWED BY THE LEARNED COMMISSIONER OF INCOME TAX (A) IN VIEW OF PRINCIPLE OF JUDICIAL DISCIPLINE AN D FOR THIS PROPOSITION THE RELIANCE WAS ALSO PLACED ON CIT VS . THANA ELECTRICITY SUPPLY LTD. (1994) 206 ITR 727 (BOM). H E FURTHER SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME TA X (A) HAS ERRED IN CONCLUDING THAT DISALLOWANCE OF 80IB (10) ON ACCOUNT OF INCLUSION OF COMMERCIAL AREA EXCEEDING L IMITS SPECIFIED UNDER CLAUSE (D) OR THE PROJECT BEING SA NCTIONED AS RESIDENTIAL CUM COMMERCIAL AREA IS THE CORRECT LA W WITHOUT APPRECIATING THAT THE ISSUE WAS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BEN CH OF THE TRIBUNAL IN THE CASE OF M/S BRAHMA ASSOCIATES (SUPR A). HE FURTHER SUBMITS THAT THE LEARNED COMMISSIONER OF I NCOME TAX (A) HAS GROSSLY ERRED IN CONCLUDING THAT THE AOS ACTION WAS OTHERWISE POSSIBLE EVEN UNDER SECTION 154 OF TH E ACT AND HENCE THE PRESENT CASE IS NOT ON ACCOUNT OF CH ANGE IN OPINION AND FOR THIS PROPOSITION THE RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN HINDUSTAN UNILEVER LTD. V/S DCIT (2010) 325 ITR 10 2 (BOM). HE FURTHER SUBMITS THAT RECENTLY SIMILAR VIEW HAS AGAIN BEEN TAKEN BY HONBLE BOMBAY HIGH COURT IN TITANOR COM PONENTS LTD. V/S ACIT AND OTHERS (2011-TIOL-386-HC-MUM-IT). IN SUPPORT OF HIS SUBMISSIONS THAT THE REASSESSMENT ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 17 PROCEEDINGS BASED ON MERE CHANGE OF OPINION ARE INV ALID 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 TEXTILE 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 ABOVE HE SUBMITS THAT RE-ASSES SMENT PROCEEDINGS BASED ON MERE CHANGE OF OPINION AND HE NCE THE SAME ARE BAD IN LAW AND SHOULD BE QUASHED. 9. ON MERITS THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT CONSIDERING THE FACTS THE ISSUE IS SQU ARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V/S BRAHMA ASSOCIATES (2011) (333 ITR 289) (BOM) UPHOLDING T HE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL W HEREIN IT HAS BEEN HELD THAT THE LEGISLATURE WAS WELL AWARE THAT A HOUSING PROJ ECT CONSISTS OF COMMERCIAL UNITS EVEN BEFORE 1 APRIL 2 005 AND HENCE READING THE DEVELOPMENT RULES AND THE ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 18 INCOME TAX ACT 1961 HARMONIOUSLY THE LEGISLATURE HAD IMPLIEDLY APPROVED COMMERCIAL UNITS BEFORE 1 APRIL 2005 (REFER PARA 21) IF THE PROJECT EVEN THOUGH SANCTIONED AS RESIDEN TIAL CUM COMMERCIAL HAS BEEN APPROVED AS A HOUSING PROJECT HAVING PERMISSIBLE COMMERCIAL AREA ACCORDI NG TO DEVELOPMENT RULES THEN THE ENTIRE PROFITS BOTH O N SALE OF RESIDENTIAL AND COMMERCIAL UNITS WILL BE ELIGIB LE FOR 80IB(10) DEDUCTION (REFER PARA 22 AND 23). HE FURTHER SUBMITS THAT THE ISSUE IS ALSO COVERED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN M/S BRAHMA ASSOCIATES (SUPRA) WHEREIN IT HAS BEEN HELD THAT CLAUSE (D) TO SECTION 80IB(10) INSERTED W.E.F AY 2 005- 06 IS PROSPECTIVE IN ITS APPLICATION (REFER PARA 86 ) THE PROJECT EVEN IF APPROVED A RESIDENTIAL CUM COMMERCIAL BY THE LOCAL AUTHORITY BUT IF CONSIST O F COMMERCIAL AREA OF LESS THAN 10% THE SAME WILL BE ELIGIBLE FOR 80IB(10) DEDUCTION. IF THE COMMERCIA L AREA EXCEEDS 10% AND THE RESIDENTIAL PORTION ON A STANDALONE BASIS SATISFIES THE CONDITION UNDER SECT ION 80IB(10) PROPORTIONATE DEDUCTION SHOULD BE ALLOWED (REFER PARA 115). HE FURTHER SUBMITS THAT THE SPECIAL BENCH OF THE TRIBUNAL HAS SPECIFICALLY DEALT WITH AND DISSENTED THE DECI SION OF THE MUMBAI BENCH OF THE TRIBUNAL IN LAUKIK DEVELOPERS (SUPRA) RELIED UPON BY THE AO AND THE LEARNED COMMISSIONER OF INCOME TAX (A). HE FURTHER SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) DID NOT FOLLOW THE D ECISION OF THE SPECIAL BENCH OF THE TRIBUNAL ON THE GROUN D THAT THE SPECIAL BENCH WHILE DECIDING THE ISSUE OF INCLUSI ON OF ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 19 COMMERCIAL AREA HAD CONSIDERED THE DEVELOPMENT RUL ES OF PUNE AND MUMBAI WHICH MANDATES A DEVELOPER TO EARM ARK CERTAIN SPACE FOR CONVENIENT SHOPPING IN A HOUSING PROJECT. IN VIEW OF THE SAID CONTENTION THE LEARNED COMMIS SIONER OF INCOME TAX (A) HAS CONCLUDED THAT THE SPECIAL BENC H OF THE TRIBUNAL RELYING ON THE SAID DEVELOPMENT RULES HA D 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 A PPRECIATE 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 SUB MITS THAT THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) BE A LLOWED TO THE ASSESSEE. 10. ON THE OTHER HAND THE LEARNED D.R. SUBMITS THA T IN THIS CASE THE ASSESSEE HAS FILED ITS RETURN OF INCOME F OR ASSESSMENT YEAR 2004-05 ON 31.10.2004. THE ASSESS MENT WAS COMPLETED UNDER SECTION 143(3) ON 23.11.2006. N OTICE UNDER SECTION 148 WAS ISSUED ON 30.3.2009. THEREFOR E REOPENING HAS BEEN DONE WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR THEREFORE THE ASSESS EE DOES ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 20 NOT HAVE SHELTER TO PROVISO TO SECTION 147 THEREFO RE REOPENING OF THE ASSESSMENT IS VALID. IN SUPPORT THE RELIANCE WAS PLACED ON THE DECISIONS OF THE HONBL E SUPREME COURT IN THE CASE OF ACIT V/S RAJESH JHAVE RI STOCKBROKERS PRIVATE LIMITED (2007) 291 ITR 500(SC ) AND KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF SOM D ATT BUILDERS PRIVATE LIMITED V/S DCIT (2006) 98 ITD 78 (KOL). HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A) UPHOLDING THE ACTION OF THE AO IN RE-OPENING THE ASSESSMENT IS VALID IN LAW. 11. ON MERITS HE SUBMITS THAT THE ASSESSEE WAS DEVELOPING A PROJECT AT PUNE WHICH WAS APPROVED AS RESIDENTIAL CUM-COMMERCIAL PROJECT. THE AO WAS O F THE VIEW THAT DEDUCTION UNDER SECTION 80IB(10) IS PERMI TTED ONLY IN RESPECT OF HOUSING PROJECT AND NOT TO RESIDENT IAL CUM COMMERCIAL PROJECT. THE LEARNED COMMISSIONER OF IN COME TAX (A) HAS CONFIRMED THE VIEW OF THE AO. THE L EARNED DR WHILE RELYING ON THE ORDER OF THE AO AND LEARNED COMMISSIONER OF INCOME TAX (A) ALSO RELIED ON THE D ECISION IN LAUKIK DEVELOPERS (SUPRA) WHEREIN IT HAS BEEN H ELD THAT HOUSING PROJECT FOR CONSTRUCTION OF RESIDENTIAL HO USES ALSO CONSISTING OF COMMERCIAL SHOPS AND APPROVED BY LOCA L AUTHORITIES AS RESIDENTIAL AS WELL AS COMMERCIAL P ROJECT IS NOT A HOUSING PROJECT ELIGIBLE FOR RELIEF UNDER SECTION ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 21 80IB(10). THE RELIANCE WAS ALSO PLACED IN ACIT I N ACIT V/S VISWAS PROMOTERS PVT.LTD. (2010) 5 ITR 449 (CHENN AI). HE FURTHER SUBMITS THAT THE ORDER PASSED BY THE AO AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TA X (A) BE UPHELD. 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH THAT PRIOR TO THE COMPLETION OF THE ORIGINAL ASSESSMENT PASSE D UNDER SECTION 143(3) VIDE ORDER DATED 23.11.2006 A SURVE Y UNDER SECTION 133A WAS CARRIED OUT ON 24.11.2005 FOR THE SPECIFIC PURPOSE OF VERIFICATION OF CORRECTNESS OF CLAIM O F DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. ACCORDING TO THE AO AS PER THE RELEVANT PROVISIONS OF THE ACT FOR THE ASS ESSMENT YEAR 2005-06 THE BUILT UP AREA OF COMMERCIAL ESTAB LISHMENTS INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED 5% OF AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR 2000 SQ. FT. WHICH EVER IS LESS. ACCORDING TO THE AO IN THE C ASE OF THE ASSESSEE THE AREA UTILIZED FOR COMMERCIAL CONSTRUC TION IN THE PROJECT ITSELF IS 7565.62 SQ.FT. WHICH IS MORE THA N THE BASIC QUALIFICATION OF 2000 SQ.FT. AND SECONDLY PUNE MU NICIPAL CORPORATION RECORDS CLEARLY REVEAL THAT THE TWO PRO JECTS WERE ALLOWED AS RESIDENTIAL CUM COMMERCIAL PROJECT WHER EAS ONLY RESIDENTIAL PROJECTS ARE ELIGIBLE FOR DEDUCTION UN DER SECTION ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 22 80IB(10) OF THE ACT. WE FURTHER FIND THAT THE AO AFTER CONSIDERING THE SURVEY REPORT (SUPRA) HAS HELD THA T THE PROJECT KNOWN AS KUMAR PINNACLE LOCATED AT TADIWA LLA ROAD SANGMWADI PUNE CONSISTS OF RESIDENTIAL UNIT S (FLATS) AND COMMERCIAL ESTABLISHMENT (SHOPS) IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) EXCLUDING THE PR OFIT ON SALE OF SHOPS TO THE TUNE OF RS.24 72 625/- NOT QU ALIFIED FOR DEDUCTION UNDER SECTION 80IB(10) OF THE ACT WHICH HAS ALSO BEEN DISALLOWED BY THE ASSESSEE HIMSELF WHILE FI LING THE RETURN OF INCOME. WE FURTHER FIND THAT SUBSEQUENTL Y THE SECOND AO FOR THE IMPUGNED ASSESSMENT YEAR ON THE SAME SET OF FACTS HAS TAKEN A VIEW WHICH IS DIFFERENT F ROM THE VIEW TAKEN BY THE PREVIOUS AO ON THE INTERPRETATION OF THE SAME PROVISIONS OF LAW. ACCORDING TO HIM THE PROJECT KN OWN AS KUMAR PINNACLE PUNE HAS MORE COMMERCIAL CONSTRU CTION THAN THE CONDITION LAID DOWN IN EXPLANATION TO SECTION 80IB(10) INSERTED W.E.F.1.4.2005 WHICH SAYS THAT THE BUILT- UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISH MENTS INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED FIVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET WHICHEVER IS LESS. HE WA S OF THE VIEW THAT THOUGH THIS CONDITION WAS INSERTED W.E.F. 1.4.2005 THE SAID AMENDMENT IS CLEARLY CLARIFICATARY IN NATU RE AND APPLICABLE TO THE ASSESSMENT YEAR 2004-05 ALSO AND HENCE ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 23 THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SEC TION 80IB(10) OF THE ACT AMOUNTING TO RS.2 48 21 145/ - AND FOR THIS PROPOSITION THE RELIANCE WAS ALSO PLACED IN THE CASE OF LAUKIK DEVELOPERS (SUPRA) AFTER DISTINGUISHING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL ON THE SIMILA R ISSUE IN THE CASE OF M/S BRAHMA ASSOCIATES (SUPRA). 13. THE CLAIM OF THE ASSESSEE IS THAT THE SECOND AO FOR THE SAME ASSESSMENT YEAR ON THE SAME SET OF FACTS C ANNOT DIFFERS WITH THE OPINION OF THE EARLIER AO ON THE I NTERPRETATION OF THE SAME PROVISIONS OF LAW WITHOUT ANY OTHER ADD ITIONAL MATERIAL THEREFORE THE SECOND AO CANNOT ASSUME TH E JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 OF T HE ACT AND FOR THIS PROPOSITION THE RELIANCE WAS PLACED ON VAR IOUS DECISIONS CITED (SUPRA). 14. PER CONTRA THE CASE OF THE REVENUE IS THAT SI NCE REOPENING HAS BEEN DONE WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR THEREFORE THE ASSES SEE DOES NOT HAVE SHELTER OF PROVISO OF SECTION 147 THEREF ORE THE REOPENING OF THE ASSESSMENT IS VALID AND FOR THIS PROPOSITION THE RELIANCE WAS PLACED ON THE TWO DECI SIONS (SUPRA). 15. IN KELVINATOR OF INDIA LTD. (SUPRA) IT HAS B EEN HELD (PAGE 562 HEAD NOTE): ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 24 THE CONCEPT OF 'CHANGE OF OPINION' ON THE PART OF T HE ASSESSING OFFICER TO REOPEN AN ASSESSMENT DOES NOT STAND OBLITERATED AFTER THE SUBSTITUTION OF SECTION 147 OF THE INCOME-TAX ACT 1961 BY THE DIRECT TAX LAWS (AMENDMENT) ACTS 1987 AND 1989. AFTER THE AMENDMENT THE ASSESSING OFFICER HAS TO HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT BUT THI S DOES NOT IMPLY THAT THE ASSESSING OFFICER CAN REOPE N AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT O F 'CHANGE OF OPINION' MUST BE TREATED AS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER. HENCE AFTER APRIL 1 1989 THE ASSESSING OFFICER HAS POWER TO REOPEN AN ASSESSMENT PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO TH E CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMAT ION 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 HA D TAKEN A VIEW WHICH WAS DIFFERENT FROM THE VIEW TAKE N BY THE PREVIOUS ASSESSING OFFICER FOR THE ASSESSMENT Y EAR 2001-02 ON THE INTERPRETATION OF THE SAME PROVISIO NS 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 DECISI ON WAS NOT AN AUTHORITY FOR THE PROPOSITION THAT LOSSE S SUFFERED BEING UNDISPUTEDLY COVERED BY SECTION 10A AS IT THEN STOOD COULD BE SET OFF AGAINST PROFITS OF OTHE R BUSINESS INCOME OF THE ASSESSEE OR VICE VERSA. THE DECISION THEREFORE BY ITSELF OR IN CONJUNCTION WI TH A CHANGE OF OPINION AS TO THE TRUE CONSTRUCTION OF TH E PROVISION COULD NOT ALSO GIVE RISE TO REASON TO B ELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. THE NOTICE WAS NOT VALID AND WAS LIABLE TO BE QUASHED. 17. IN RALLIES INDIA LTD. (SUPRA) IT HAS BEEN HE LD (PAGE 56 HEAD NOTE): HELD ALLOWING THE PETITION (I) THAT DURING THE COURSE O F THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 25 BROUGHT HIS MIND TO BEAR UPON THE QUESTION AS TO WH ETHER THE ASSESSEE WAS ENTITLED TO CLAIM A DEDUCTION UNDE R SECTION 36(1)(VII) WITH RESPECT TO BAD DEBTS DETA ILS OF WHICH WERE FURNISHED TO THE ASSESSING OFFICER PURS UANT TO WHICH AN ASSESSMENT ORDER CAME TO BE PASSED UNDE R SECTION 143(3). THE REASON WHICH WEIGHED WITH THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT WAS THAT THE ASSESSEE HAD NOT DEBITED ANY AMOUNT TOWARDS THE WRI TE OFF OF DEBTS/ADVANCES TO THE PROFIT AND LOSS ACCOUN T. SUCH A REQUIREMENT IS NOT CONTAINED IN SECTION 36(1 )(VII). THERE WAS AN ABSENCE OF TANGIBLE MATERIAL ON THE BA SIS OF WHICH THE ASSESSMENT COULD HAVE BEEN REOPENED. T HE REASON WHICH WEIGHED WITH THE ASSESSING OFFICER WAS EXTRANEOUS TO THE BASIS ON WHICH THE DEDUCTION CAN LEGITIMATELY BE CLAIMED UNDER SECTION 36(1)(VII). T HIS WAS CASE OF A MERE CHANGE OF OPINION WITHOUT ANY TANGIB LE MATERIAL. THE REOPENING OF THE ASSESSMENT ON THIS GROUND WAS HENCE UNSUSTAINABLE.(II) THAT ON THE DAT E ON WHICH THE ASSESSING OFFICER PURPORTED TO EXERCISE H IS POWER TO REOPEN THE ASSESSMENT UNDER SECTION 147 T HE LEGISLATIVE AMENDMENT BY THE INSERTION OF CLAUSE (I ) TO EXPLANATION (1) TO SECTION 115JB HAD NOT BEEN BROUG HT INTO FORCE ON THE STATUTE BOOK. THE ORDER OF THE ASSESSING OFFICER WITH REFERENCE TO THE COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB WAS AT THE LEAST A PROBABLE VIEW AND AS A MATTER OF FACT THE CORRECT V IEW TO TAKE IN VIEW OF THE DECISION OF THE SUPREME COURT I N CIT V. HCL COMNET SYSTEMS AND SERVICES LTD. [2008] 305 ITR 409. IT IS WELL-SETTLED THAT THE LAW LAID DOWN BY THE SUPREME COURT IS DECLARATORY OF THE POSITION AS IT ALWAYS STOOD. IN ANY EVENT THE VIEW OF THE ASSESSING OFFI CER WAS SUPPORTED BY THE INTERPRETATION PLACED EVEN CONTEMPORANEOUSLY IN THE JUDGMENT OF THE COURT IN C IT V. ECHJAY FORGINGS P. LTD. [2001] 251 ITR 15AND IN THE JUDGMENTS OF THE DELHI HIGH COURT IN CIT V. EICHER LTD. [2006] 287 ITR 170AND CIT V. HCL COMNET SYSTEMS AND SERVICES LTD. [2007] 292 ITR 299. IN THE CIRCUMSTAN CES THERE WAS NO WARRANT FOR REOPENING THE ASSESSMENT I N EXERCISE OF THE POWER CONFERRED UNDER SECTION 147. 18. IN CARTINI INDIA PVT.LTD. (SUPRA) IT HAS BEE N OBSERVED THAT THE AO WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT RAISED SPECIFIC QUERY AS TO WHY THE SUBSIDY RECEIVED BY THE ASSESSEE SHOULD NOT BE TRE ATED AS ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 26 REVENUE RECEIPT AND CHARGED TO TAX. THE AO AFTER CO NSIDERING THE ASSESSEES EXPLANATION DID NOT MAKE ANY ADDITIO N WHILE COMPLETING THE ASSESSMENT TREATING THE SAME AS CA PITAL RECEIPT. SUBSEQUENTLY THE AO ISSUED NOTICE UNDE R SECTION 148 ON THE GROUND THAT IN VIEW OF THE DECISION IN T HE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. (228 ITR 253) (S C) THE AMOUNT OF RS.30 00 000/- BEING SUBSIDY RECEIVED FRO M PUNJAB SMALL INDUSTRIES & 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 TH AT 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 HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUP RA) AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT V/S EICHER LTD. (2007) 294 ITR 310(DEL) HAS HELD TH AT THE REASSESSMENT PROCEEDINGS ARE INVALID AND CONSEQUEN TLY THE ORDER OF THE REASSESSMENT IS ANNULLED. 19. IN TITANOR COMPONENTS LTD. (SUPRA) IT HAS BEEN HELD THAT EVEN IF THE ASSESSEE MAKE WRONG CLAIM OF DEDUC TION BUT THE SAME WAS ALLOWED BY THE AO THE ASSESSMENT CAN BE REOPENED ONLY IF ANY FAILURE TO MAKE FULL DISCLOS URE IS ATTRIBUTED TO THE ASSESSEE. ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 27 20. IN BRAHMA ASSOCIATES (SUPRA) THE PUNE SPECI AL BENCH OF THE TRIBUNAL VIDE PARAGRAPH 120 APPEARING AT PAGES 331 AND 332 OF THE REPORT HAS HELD AS UNDER : 120. TO SUM UP THE CONCLUSIONS ARRIVED AT BY THIS SPECIAL BENCH ARE AS FOLLOWS : (A) THE DEDUCTION UNDER S. 80-IB(10) AS APPLICABLE PRIOR TO 1ST APRIL 2005 SUBJECT TO AND IN THE LIGHT OF THE OBSERVATIONS MADE IN THE PRECEDING PARAS IS ADMISS IBLE IN CASE OF A HOUSING PROJECT COMPRISING RESIDEN TIAL HOUSING UNITS AND COMMERCIAL ESTABLISHMENTS. IN CAS E THESE PROJECTS ARE APPROVED AS HOUSING PROJECTS BY THE LOCAL AUTHORITY SUCH AN APPROVAL AS HOUSING PROJEC T IS SUFFICIENT FOR THE PURPOSES OF ELIGIBILITY. IN ANY OTHER CASE WHERE 90 PER CENT OR MORE OF THE TOTAL BUILT- UP AREA IS USED FOR DWELLING UNITS IN ACCORDANCE WITH THE SCHEME OF S. 80-IB (10) THE BENEFIT OF DEDUCTION UNDER S. 80- IB(10) WILL NOT BE DECLINED. IN CASE COMMERCIAL USE OF BUILT-UP AREA IS MORE THAN 10 PER CENT BUT THE RESI DENTIAL SEGMENT OF THE PROJECT SATISFIES REQUIREMENTS OF S. 80- IB(10) ON STANDALONE BASIS I.E. (I) THE SIZE OF TH E PLOT EXCLUDING PORTION UNDER COMMERCIAL UNIT IS MORE TH AN MINIMUM AREA OF ONE ACRE (II) RESIDENTIAL UNITS BU ILT ON SUCH AREA MUST SATISFY CONDITION OF CL. (C) OF THE PROVISION AND (III) OTHER NECESSARY CONDITIONS ARE FULFILLED AND WHERE INCOME FROM CONSTRUCTION OF RESIDENTIAL DWELLING UNITS CAN BE WORKED OUT ON STANDALONE BASIS DEDUCTION UNDER S. 80-IB(10) WILL BE AVAILABLE IN RESPECT OF RESIDENTIAL SEGMENT OF THE PROJECT. (B) THE DEDUCTION UNDER S. 80-IB(10) IS AVAILABLE I N RESPECT OF PROFITS OF HOUSING PROJECT AS A WHOLE A ND AS SUCH IT IS NOT RELEVANT AS TO WHAT IS THE PORTION OF PROFITS WHICH CAN BE SAID TO BE ATTRIBUTABLE TO RESIDENTIAL UNITS. THIS IS SUBJECT TO THE RIDER THAT IN CASE COMMERCIA L USE OF BUILT-UP AREA IN A PROJECT IS MORE THAN 10 PER C ENT AND FOR THIS REASON THE PROJECT CANNOT BE SAID TO BE A PREDOMINANTLY HOUSING PROJECT BUT IN TERMS OF OBSERVATIONS MADE IN PARA 115 ABOVE THE ASSESSEE I S ENTITLED TO DEDUCTION IN RESPECT OF RESIDENTIAL UNI T SEGMENT OF THE OVERALL PROJECT ON FULFILLMENT OF NE CESSARY CONDITIONS THE ENTITLEMENT OF INCENTIVE DEDUCTION WILL BE ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 28 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 RETROS PECTIVE APPLICATION AND IT APPLIES ONLY W.E.F. THE ASST. Y R. 2005- 06. 21. ON FURTHER APPEAL BY THE REVENUE IN CIT V/S B RAHMA ASSOCIATES (2011) 333 ITR 289 (BOM) IT HAS BEEN OB SERVED AND HELD BY THE HONBLE JURISDICTIONAL HIGH COURT (PAGE 291 HEAD NOTE): THE ASSESSEE HAD UNDERTAKEN A CONSTRUCTION PROJECT AT PUNE UNDER THE LAYOUT APPROVED BY THE PUNE MUNICI PAL CORPORATION WHICH IS THE LOCAL AUTHORITY. THE PROJE CT CONSISTS OF FIFTEEN RESIDENTIAL BUILDINGS AND TWO COMMERCIAL BUILDINGS. THE LOCAL AUTHORITY HAD APPRO VED 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 O N 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 TRIBUNAL HE LD THAT WHERE THE PROJECT IS APPROVED AS RESIDENTIAL P LUS COMMERCIAL THE DEDUCTION UNDER SECTION 80IB(10) W OULD BE ALLOWABLE ONLY IF THE TOTAL BUILT-UP AREA USED F OR RESIDENTIAL UNITS IN THE PROJECT IS 90 PER CENT OR MORE; WHERE THE COMMERCIAL USER WAS MORE THAN 10 PER CENT OF THE TOTAL BUILT UP AREA AND THE PROFIRS OF THE RESI DENTIAL UNITS CAN BE WORKED OUT ON STAND ALONE BASIS THEN DEDUCTION UNDER SECTION 80-IB(10) WOULD BE ALLOWABL E ONLY ON THE RESIDENTIAL UNITS. ON APPEAL TO THE HIG H COURT: HELD THAT CLAUSE (D) INSERTED TO SECTION 80IB(10) WITH EFFECT FROM APRIL 1 2005 IS PROSPECTIVE AND NOT RETROSPECTIVE AND HENCE CANNOT BE APPLIED TO THE PE RIOD PRIOR TO APRIL 1 2005. SINCE DEDUCTIONS UNDER SEC TION 80IB(10) WERE ON THE PROFITS DERIVED FROM THE HOUS ING PROJECTS APPROVED BY THE LOCAL AUTHORITY AS A WHOLE THE TRIBUNAL WAS NOT JUSTIFIED IN RESTRICTING SECTION 8 0IB(10) DEDUCTION ONLY TO A PART OF THE PROJECT. HOWEVER I N THE ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 29 PRESENT CASE SINCE THE ASSESSEE HAS ACCEPTED THE DECISION OF THE TRIBUNAL IN ALLOWING SECTION 80IB(1 0) DEDUCTION TO A PART OF THE PROJECT THE FINDING OF THE TRIBUNAL IN THAT BEHALF COULD NOT BE DISTURBED. 22. IN BENGAL AMBUJA HOUSING DEVELOPMENT LTD. V/S DEPUTY COMMISSIONER OF INCOME TAX (IT APPEAL NO.159 5 (KOL) OF 2005 DATED 24.3.2006 IT HAS BEEN HELD AS UNDER (PAGE 297 OF (2009) 33 SOT) : 22. IT IS APPARENT FROM THE PERUSAL OF S. 80-IB(10 ) THAT THIS SECTION HAS BEEN ENACTED WITH A VIEW TO PROVID E INCENTIVE FOR BUSINESSMEN TO UNDERTAKE CONSTRUCTION OF RESIDENTIAL ACCOMMODATION FOR SMALLER RESIDENTIAL U NITS AND THE DEDUCTION IS INTENDED TO BE RESTRICTED TO T HE PROFIT DERIVED FROM THE CONSTRUCTION OF SMALLER UNI TS AND NOT FROM LARGER RESIDENTIAL UNITS. THOUGH THE AO HA S DENIED THE CLAIM OF THE ASSESSEE OBSERVING THAT LAR GER UNITS WERE ALSO CONSTRUCTED BY THE ASSESSEE AT THE SAME TIME IT IS ALSO A FACT ON RECORD THAT THE ASS ESSEE HAD CLAIMED DEDUCTION ONLY ON ACCOUNT OF SMALLER RESIDENTIAL UNITS WHICH WERE FULFILLING ALL THE CON DITIONS AS CONTAINED IN S. 80-IB(10) AND THE SAME HAS NOT BEEN DISPUTED BY THE AO ALSO. WE HAVE ALSO NOTED DOWN TH E FACT THAT EVEN THE PROVISIONS AS LAID DOWN IN S. 80 -IB(10) DOES NOT SPEAK REGARDING SUCH DENIAL OF DEDUCTION I N CASE OF PROFIT FROM A HOUSING COMPLEX CONTAINING BO TH THE SMALLER AND LARGE RESIDENTIAL UNITS AND SINCE T HE ASSESSEE HAS ONLY CLAIMED DEDUCTION ON ACCOUNT OF SMALLER QUALIFYING UNITS BY FULFILLING ALL THE COND ITIONS AS LAID DOWN UNDER S. 80-IB(10) THE DENIAL OF CLAIM B Y THE ASSESSEE IS ON ACCOUNT OF RATHER RESTRICTED AND NAR ROW INTERPRETATION OF PROVISIONS OF CL. (C) OF S. 80-IB (10) WHILE COMING TO SUCH CONCLUSION WE ALSO FIND SUPPORT FRO M THE ORDER OF THE HON BLE SUPREME COURT IN CASE OF BAJ AJ TEMPO LTD. (SUPRA) WHEREIN IT WAS HELD THAT PROVIS IONS SHOULD BE INTERPRETED LIBERALLY AND SINCE IN THE PR ESENT CASE ALSO THE ASSESSEE BY CLAIMING PRO RATA INCOME ON QUALIFYING UNITS HAS COMPLIED WITH ALL THE PROVISIO NS AS CONTAINED IN THE SAID SECTION IN OUR CONSIDERED OP INION SUCH CLAIM OF THE ASSESSEE WAS RIGHTLY ALLOWED BY T HE LEARNED CIT(A) BY REVERSING THE ORDER OF THE AO.' ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 30 23. HERE IT IS IMPORTANT TO NOTE THAT THE HONBLE CALCUTTA HIGH COURT VIDE ITS JUDGEMENT DATED JANUARY 5 200 7 IN ITA NO.458/2006 HAS CONFIRMED THE ORDER OF THE KOLKATTA BENCH OF THE TRIBUNAL IN THE CASE OF BENGAL AMBUJA HOUS ING DEVELOPMENT LTD (SUPRA) THE APPEAL FILED BY THE RE VENUE WAS DISMISSED. 24. IN RAJESH JHAVERI STOCKBROKERS P.LIMITED (SUP RA) RELIED ON BY THE LEARNED D.R. IT HAS BEEN HELD (PA GE 502 HEAD NOTE): TAXING INCOME ESCAPING ASSESSMENT IN THE CASE OF AN INTIMATION UNDER SECTION 143(1)(A) IS COVERED BY TH E MAIN PROVISION OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM APRIL 1 1989 AND INITIATING REASSESSMENT PROCEEDI NGS IN THE CASE OF INTIMATION WOULD BE COVERED BY THE MAIN PROVISION OF SECTION 147 AND NOT THE PROVISO THERET O. ONLY ONE CONDITION HAS TO BE SATISFIED. FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSE SSING OFFICER POWERLESS TO INITIATE REASSESSMENT PROCEEDI NGS WHEN INTIMATION UNDER SECTION 143(1) HAS BEEN ISSUE D. ADANI EXPORTS V. DEPUTY CIT (ASSESSMENT) [1999] 240 ITR 224 (GUJ) DISTINGUISHED. HELD ACCORDINGLY THAT THE ASSESSING OFFICER HAD JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 FOR BRINGING TO TAX INCOME ESCAPING ASSESSMENT IN AN INTIMATION UNDER SECTION 143(1)(A) ON THE GROUND THAT THE CLAI M FOR BAD DEBTS BY THE ASSESSEE WAS NOT ACCEPTABLE AS THE CONDITIONS FOR ALLOWANCE SPECIFIED IN SECTION 36(1) (VII) AND (2) WERE NOT FULFILLED. 25. IN VISWAS PROMOTERS PVT.LTD. (SUPRA) RELIED ON BY THE LEARNED D.R. IT HAS BEEN HELD (PAGES 449-450 HEAD NOTE): ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 31 HELD ALLOWING THE APPEAL THAT THE ELIGIBILITY CONDITIO NS UNDER SECTION 80-IB ARE THAT THE BUILT-UP AREA SHOU LD NOT EXCEED 1500 SQ. FT. IN THE CONTEXT OF CITIES OTHER THAN DELHI AND MUMBAI AND THE PROFITS MUST BE DERIVED IN THE PREVIOUS YEAR FROM THE HOUSING PROJECT. THIS RESTRI CTION IS APPLICABLE FOR THE ENTIRE PROJECT. IF SOME OF THE RESIDENTIAL UNITS OF THE PROJECT COMPRISED AREA EXC EEDING THE PRESCRIBED LIMIT THE BENEFIT COULD NOT BE EXTE NDED TO THE PROJECT. APPROVAL WAS ACCORDED TO THE ENTIRE PR OJECT. BLOCKS OF RESIDENTIAL UNITS WERE PARTS OF THE PROJE CT AND NOT THE PROJECT BY ITSELF AND SUCH A BLOCK OF RESID ENTIAL UNITS COULD NOT BE CONSTRUED TO BE A SEPARATE PROJE CT. THEREFORE THE ASSESSEE DID NOT COMPLY WITH THE CONDITIONS PRECEDENT FOR AVAILING OF THE BENEFIT OF SECTION 80-IB(10). 26. THE DECISIONS RELIED ON BY THE LEARNED D.R. ARE DISTINGUISHABLE ON FACTS AND ARE NOT APPLICABLE. I N THE CASE OF RAJESH JHAVERI STOCKBROKERS P. LIMITED (SUPRA) THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(1)(A) W HEREAS IN THE PRESENT CASE THE AO AFTER EXAMINING THE ISS UE AND CONSIDERING SURVEY REPORT HAS ACCEPTED THE CLAIM OF THE ASSESSEE BY AN ORDER PASSED UNDER SECTION 143(3) OF THE ACT. THEREFORE THE DECISION RELIED ON BY THE LEARNED D. R. IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS O F THE PRESENT CASE. 27. THE SECOND DECISION RELIED UPON BY THE LEARNED D.R. IN VISWAS PROMOTERS PVT.LTD. (SUPRA) IS ALSO DISTINGU ISHABLE IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THE TR IBUNAL IN THE CASE OF BRAHMA ASSOCIATES(SUPRA) AND ALSO BY THE HONBLE BOMBAY HIGH COURT IN BRAHMA ASSOCIATES (SU PRA). ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 32 28. APPLYING THE RATIO OF THE ABOVE DECISIONS RELI ED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE TO THE FACTS O F THE PRESENT CASE AND KEEPING IN VIEW THAT THE DECISION OF THE TRIBUNAL IN THE CASE OF LAUKIK DEVELOPERS (SUPRA) H AS BEEN CONSIDERED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) AND ALSO BY THE HONB LE HIGH COURT IN THE CASE OF CIT V/S BRAHMA ASSOCIATES (SU PRA) WE ARE OF THE VIEW THAT THE LEARNED COMMISSIONER OF I NCOME 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 D ISCIPLINE AS IT IS SETTLED LAW THAT THE DECISION OF THE JURISDICTIO NAL TRIBUNAL OR SPECIAL BENCH OF THE TRIBUNAL AND THE JURISD ICTIONAL HIGH COURT IS BINDING ON THE AUTHORITIES WORKING U NDER THAT JURISDICTION. IN THIS VIEW OF THE MATTER WE ARE O F THE VIEW THAT IT IS A CASE OF MERE CHANGE OF OPINION AS TO THE TRUE CONSTRUCTION OF THE PROVISION COULD NOT ALSO GIVE RISE TO REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSM ENT AND THEREFORE THE PROCEEDINGS INITIATED UNDER SEC TIONS 147/148 OF THE ACT ARE INVALID AND CONSEQUENTLY THE ORDER OF THE RE-ASSESSMENT PASSED BY THE AO IS ANNULLED. 29. ON MERITS IN THE ABSENCE OF ANY CONTRARY DECI SION PLACED ON RECORD BY THE LEARNED D.R. AGAINST THE DECISION OF ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 33 BRAHMA ASSOCIATES (SUPRA) WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80I B(10) OF THE ACT AS UNDISPUTEDLY THE DEDUCTION UNDER SECTION 80IB(10) IS ON THE PROFITS DERIVED FROM THE HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY AS A WHOLE. THE ORDER PASSED BY THE AO AND THE LEARNED COMMISSIONER OF INCOME TAX (A) DISA LLOWING THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) IS RE VERSED AND CONSEQUENTLY THE CLAIM OF THE ASSESSEE OF DEDU CTION UNDER SECTION 80IB(10) IS ALLOWED. THE GROUNDS TA KEN BY THE ASSESSEE ARE THEREFORE ALLOWED. ITA NO.2265/MUM/2011(AY-2007-08) 30. THE GROUNDS TAKEN BY THE ASSESSEE READ AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A): DEDUCTION U/S 80IB(10) 1. ERRED IN CONFIRMING THE DISALLOWANCE OF THE DEDUCTION UNDER SECTION 80IB(10) AMOUNTING TO RS.4 47 60 209/- ON THE GROUND THAT THE PROJECT HAD COMMERCIAL AREA EXCEEDING 5% AND HENCE DID NOT COMPLY WITH THE CONDITION PRESCRIBED UNDER CLAUSE (D) OF SECTION 80IB(10) OF THE ACT. 2. FAILED TO APPRECIATE THAT CLAUSE (D) AS INSERTED W.E.F. 1.4.2005 IS ONLY APPLICABLE TO PROJECTS APPR OVED FROM 1.4.2005 AND THEREAFTER AND WOULD NOT BE APPLI CABLE TO PROJECTS SANCTIONED PRIOR TO SAID DATE. 3. FURTHER FAILED TO APPRECIATE THAT THE COMMERCIAL AREA WAS CONSTRUCTED AND SOLD PRIOR TO 1.4.2005 AN D HENCE THE CONDITION PRESCRIBED UNDER CLAUSE (D) TO ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 34 SECTION 80IB(10) COULD NOT HAVE BEEN APPLICABLE T O THE FACTS OF THE PRESENT CASE. 4. WITHOUT PREJUDICE TO THE ABOVE SHOULD HAVE RESTRICTED THE DISALLOWANCE OF DEDUCTION U/S 80IB(1 0) ONLY TO THE EXTENT OF PROFITS OF COMMERCIAL AREA A ND NOT THE ENTIRE PROFITS OF THE PROJECT 31. AT THE TIME OF HEARING BOTH PARTIES HAVE AG REED THAT THE FACTS OF THE ABOVE ISSUE ARE SIMILAR TO THE F ACTS OF THE CASE FOR THE ASSESSMENT YEAR 2004-05 THEREFORE TH E PLEA TAKEN BY THEM IN RESPECT OF DEDUCTION UNDER SECTIO N 80IB(10) IN THE APPEAL FOR THE SAID ASSESSMENT YEAR MAY BE CONSIDERED WHILE DECIDING THE APPEAL FOR THIS YEAR. 32. THAT BEING SO AND IN THE ABSENCE OF ANY DISTING UISHING FEATURES BROUGHT ON RECORD BY THE PARTIES WE FOR THE REASONS AS MENTIONED IN ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2004-05 IN PARAGRAPH 29 OF THIS ORD ER HOLD THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION UNDE R SECTION 80IB(10) OF THE ACT AS CLAIMED. THE AO IS DIRECTE D TO ALLOW THE SAME. THE GROUNDS TAKEN BY THE ASSESSEE ARE T HEREFORE ALLOWED. 33. IN THE RESULT THE ASSESSEES APPEALS ARE ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JULY 2011. SD. SD. (R.K.PANDA) (D.K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 20TH JULY 2011 ITA NO.2264 AND 2265/MUM/2011 (AYS :2004-05 AND 2007-08) 35 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER ASSTT. REGISTRAR ITAT MUMBAI