The ITO, Ward-3(2),, JAMNAGAR v. Shri Narottam Karamshi Boda,, JAMNAGAR

ITA 647/RJT/2010 | 2001-2002
Pronouncement Date: 18-03-2011 | Result: Dismissed

Appeal Details

RSA Number 64724914 RSA 2010
Assessee PAN AADFN8830G
Bench Rajkot
Appeal Number ITA 647/RJT/2010
Duration Of Justice 1 year(s) 1 month(s) 21 day(s)
Appellant The ITO, Ward-3(2),, JAMNAGAR
Respondent Shri Narottam Karamshi Boda,, JAMNAGAR
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 18-03-2011
Assessment Year 2001-2002
Appeal Filed On 27-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.127/RJT/2008 (ASSESSMENT YEAR 2004-05) THE ITO WD.2(1) VS M/S NANDANVAN BUILDERS RAJKOT 29-A CHOKHAWALA CHAMBERS BARDAN STREET DANAPITH RAJKOT PAN : AADFN8830G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AVINASH KUMAR RESPONDENT BY : SHRI JC RANPURA O R D E R PER AL GEHLOT AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-III RAJKOT DATED 29-11-2007 FOR THE ASSESSMENT YEAR 200 4-05. THE FOLLOWING EFFECTIVES GROUND ARE RAISED IN THE APPEAL: 1. THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AND ON FACTS IN RESTRAINING THE ADDITION TO RS.9 760/- AS AGAINST T HE ORIGINAL ADDITION OF RS.4 06 463/- MADE ON ACCOUNT OF UNEXPL AINED CASH CREDIT MADE U/S 68 OF THE ACT. 2. THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AND O N FACTS IN RESTRICTING THE ADDITION TO RS.1 00 000/- AS AGAINS T THE ORIGINAL ADDITION OF RS.12 09 385/- MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. 3. THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AND O N FACTS IN RESTRICTING THE ADDITION TO RS.2 07 153/- AS AGAINS T THE ORIGINAL ADDITION OF RS.22 17 091/- ON ACCOUNT OF C LAIM OF DEDUCTION U/S 80IB(10) OF THE ACT. 2. WITH REGARD TO GROUND NO.1 THE BRIEF FACTS ARE THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D A DISCREPANCY OF ITA NO.127 /RJT/2008 2 RS.4 06 463 IN THE ACCOUNT OF RAZIABEN J BHARMAL ON VERIFYING THE ACCOUNTS IN THE BOOKS OF THE ASSESSEE AND THE CONTRA ACCOUNT IN THE BOOKS OF RAZIABEN J BHARMAL. THE ASSESSEE EXPLAINED THAT THE ASSESSEE HAD EXECUTED DEVELOPMENT AGREEMENTS WITH RAZIABEN J BHARMAL AND HUSAINBHAI J BHARMAL THROUGH THEIR DONEE OF POWER OF ATTORNEY SHRI JOEBHAI BHARMAL (IN SHORT PRINCIPALS) FOR DEVELOPMENT AND CONSTRUCTION OF RESIDENTIAL-CUM-SHO P PROJECT KNOWN AS NANDANVAN VIDE DEVELOPMENT AGREEMENTS DATED 20-06 -2003. AS PER THE TERMS OF AGREEMENT THE RESPONSIBILITY FOR SALE OF RESIDE NTIAL UNITS / SHOPS WAS WITH THE ASSESSEE WHEREAS THE PRINCIPALS WERE REQUIRED TO E XECUTE SALE DEED ETC AND TO RECEIVE THE SALE CONSIDERATION OR ADVANCE TOWARDS B OOKING OF RESIDENCE / SHOP. THE SALE CONSIDERATION OR THE ADVANCE WAS RECEIVED BY THE PRINCIPALS AND DEDUCTING THE COST OF LAND OF RESPECTIVE UNIT BALA NCE AMOUNT WAS TO BE GIVEN TO THE ASSESSEE TOWARDS COST OF DEVELOPMENT OF THE PRO JECT. SINCE THE ASSESSEE WAS NOT DIRECTLY INVOLVED IN THE SALE INSTANCES OR BOOKING ADVANCES THE PRINCIPALS HAD MADE ENTRIES FOR ENTIRE SALE PROCEED INGS WHEREAS THE ASSESSEE HAS MADE THE ENTRIES AS REDUCED BY THE COST OF LAND . THERE IS MISTAKE IN MAKING THE HAVALA ENTRIES TOWARDS COST OF LAND IN BOOKS OF THE PRINCIPALS. THE CHART EXPLAINING THE DISCREPANCY SUBMITTED BY THE ASSESSE E WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER. ACCORDINGLY HE MADE THE IMPUGNE D ADDITION. 2.1 ON APPEAL THE CIT(A) FOUND FROM THE CHART (PAG E 11 OF THE PAPER BOOK) EXPLAINING THE DIFFERENCE FILED BY THE ASSESSEE THA T THE DIFFERENCE WAS DUE TO THE FACT THAT THERE WERE THREE ACCOUNTS IN THE ASSESSEE S BOOKS OF ACCOUNT OF RAZIABEN HUSSAINBHAI AND RAZIABEN & HUSSAINBHAI. HOWEVER IN THE BOOKS OF ACCOUNT OF RAZIABEN AND HUSSAINBHAI ACCOUNT EACH T HERE WAS ONE ACCOUNT OF THE ASSESSEE. THUS IF IN THE ASSESSEES BOOKS IF ONLY COMBINED ACCOUNT IS MADE THE DIFFERENCE REMAINED AT RS.2 14 760. THE CIT(A) FURTHER FOUND THAT THE ASSESSEES SUBMISSION AS TO THE ENTRIES RELATED TO RANJITSINH ZALA AND MAHESH TRIVEDI IS FOUND ACCEPTABLE AND THUS CONSIDERING TH E DETAILS FILED THERE REMAINS A DIFFERENCE OF RS.9 760 WHICH IS NOT RECONCILED. TH EREFORE OUT OF A TOTAL ADDITION OF RS.4 06 463 ADDITION TO THE EXTENT OF RS.9 760 IS CONFIRMED. ITA NO.127 /RJT/2008 3 3. BEFORE US THE REVENUE FAILED TO BRING ON RECORD ANY CONTRARY MATERIAL TO DISAPPROVE THE CHART FURNISHED BY THE ASSESSEE IN W HICH THE DIFFERENCE WAS EXPLAINED. THE LD. CIT(A) HAS VERIFIED THE RECONCI LIATION CHART FILED BY THE ASSESSEE AND FOUND THAT OUT TOTAL DIFFERENCE OF RS. 4 06 463 ONLY A DIFFERENCE OF RS.9 760 REMAINED UNEXPLAINED AND THEREFORE THE ADD ITION WAS RESTRICTED TO RS.9 760. IN THE ABSENCE OF ANY CONTRARY MATERIAL SHOWN TO US BY THE REVENUE WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE CI T(A). WE UPHOLD HIS ORDER ON THIS ISSUE. GROUND NO.1 OF THE REVENUE FAILS. 4. WITH REGARD TO GROUND NO.2 THE ASSESSING OFFICER NOTICED THAT SHRI PRABHATBHAI V MEHTA AND M/S GOKUL CEMENT PRODUCTS A SSESSEE HAS SHOWN TO HAVE PURCHASES AT RS.5 14 060 AND RS.6 95 775. NOT ICES SENT U/S 133(6) TO THESE PARTIES RETURNED WITH THE REMARKS NOT KNOWN . THE ASSESSING OFFICER THEREFORE PROPOSED FOR THE ADDITION OF THESE AMOUN TS U/S 69C OF THE ACT. THE ASSESSEE EXPLAINED THAT THE PURCHASES FROM M/S GOKU L CEMENT PRODUCTS JETALSAR IS EVIDENT FROM THE SALE BILLS RAISED BY T HEM WHEREIN QUANTITATIVE DETAILS RATE AND TOTAL PRICE IS MENTIONED AND THEIR IDENTIT Y IS EVIDENCED BY THEIR OFFICE / RESIDENCE TELEPHONE NUMBERS AND MOBILE NUMBERS. TH E MODE OF TRANSPORTATION OF THE MATERIAL IS ALSO REFLECTED IN THE SALE BILLS AS WELL. SIMILARLY THE ASSESSEE HAS EFFECTED PURCHASES OF BRICKS; KAPCHI; SAND; MOR UM ETC FROM SHRI PRABHATBHAI V MEHTA SANT KABIR ROAD RAJKOT. THE PURCHASES AR E DULY SUPPORTED BY BILLS RAISED BY THE SAID PARTY WHEREIN QUANTITATIVE DETAI LS RATE AND TOTAL PRICE IS MENTIONED. COPIES OF BILLS ISSUED BY BOTH THE PART IES WERE ENCLOSED FOR VERIFICATION. IT WAS FURTHER SUBMITTED THAT THE PU RCHASE OF RAW MATERIALS FOR BUILDING CONSTRUCTION IS PRIME REQUIREMENT AND UNLE SS SUCH MATERIAL IS PURCHASED BUILDING CONSTRUCTION IS NOT POSSIBLE AND THAT THE ASSESSEE HAS EFFECTIVE GENUINE PURCHASES AND MERE NON COMPLIANCE OF NOTICE U/S 133 (6) CANNOT BE A BASE FOR ADVERSE FINDING. THE ASSESSING OFFICER HOWEVER W AS NOT CONVINCED WITH THE EXPLAINED OFFERED BY THE ASSESSEE. ACCORDING TO HI M THE ASSESSEE HAS FAILED TO PROVE THAT THE PARTY IS EXISTED AND PURCHASE WAS MA DE FROM THE SAID PARTY. MERE FURNISHING OF THE PURCHASE BILLS IS NOT SUFFICIENT. NO CONFIRMATION LETTER OR CONTRA ITA NO.127 /RJT/2008 4 ACCOUNT IN THE BOOKS OF THE PARTY ARE FURNISHED. N O DELIVERY CHALLAN OR TRANSPORT BILLS ARE FURNISHED. THE COPIES OF PURCHASE BILLS FURNISHED BY THE ASSESSEE DOES NOT BEAR THE SALES TAX REGISTRATION NUMBER OF THE P ARTY BILL NUMBER IS ALSO HANDWRITTEN. THE PAYMENTS OF THE ALLEGED PURCHASES WERE NOT BY CHEQUE. THE ASSESSING OFFICER THEREFORE INFERRED THAT IT IS EVI DENT THAT THE SAID PARTY VIZ. GOKUL CEMENT PRODUCTS IS ONLY EXISTED ON PAPER AND FOUND TO BE BOGUS. SIMILAR WERE THE FINDINGS BY THE ASSESSING OFFICER IN THE CASE O F PURCHASES FROM SHRI PRABHATBHAI V MEHTA. THEREFORE ADDITION OF RS.12 09 385 (RS. 5 14 060 + RS. 6 95 775) WAS MADE BY THE ASSESSING OFFICER. 5. ASSESSEE TOOK THE ISSUE BEFORE THE CIT(A) AND SU BMITTED THAT THE TIME GIVEN BY THE ASSESSING OFFICER WAS VERY SHORT AND T HEREFORE THE ASSESSEE COULD NOT PRODUCE THE PARTIES. HOWEVER ALL THE RELEVANT MATERIALS SUCH AS BILLS TRANSPORTATION PARTICULARS ETC. WERE FURNISHED TO SHOW THAT THE PURCHASES WERE GENUINE. THE ADDITION IS MADE MERELY BECAUSE THE N OTICES ISSUED U/S 133(6) WERE NOT SERVED AND THE TIME GIVEN BY THE AO WAS VE RY SHORT AND THUS THE ASSESSEE WAS PRECLUDED FROM FURNISHING THE CLARIFIC ATION IN THE MATTER AND THE ORDER PASSED BY THE ASSESSING OFFICER IS VIOLATIVE OF THE PRINCIPLES OF NATURAL JUSTICE BY NOT GIVING SUFFICIENT EFFECTIVE AND REA SONABLE OPPORTUNITY OF BEING HEARD. FOR THIS PROPOSITION THE ASSESSEE RELIED U PON THE JUDGMENT OF THE SUPREME COURT IN SONA BUILDERS VS UOI (2001 251 ITR 197 (SC). FURTHER THE ASSESSEE SUBMITTED AFFIDAVITS DULY SWORN IN BY BOTH THE PARTIES WHEREBY THEY HAVE CONFIRMED THE TRANSACTIONS RELATED TO PURCHASE S MADE BY THE ASSESSEE. IT WAS THEREFORE PLEADED THAT CONSIDERING THE EVIDENCE S OF PURCHASES LIKE BILLS TRANSPORTATION BILLS ETC. IT IS CLEAR THAT THE PURC HASES MADE BY THE ASSESSEE ARE GENUINE AND ADDITION MADE BY THE AO REQUIRED TO BE DELETED AND THE SAME MAY KINDLY BE DELETED. FURTHER IT WAS ALSO SUBMITTED T HAT THE GROSS PROFIT RATIO FOR THE RELEVANT PREVIOUS YEAR IS 21.98%. IF IT IS ASSUMED THAT THE SAID PURCHASES ARE BOGUS THEN THE GROSS PROFIT OF THE ASSESSEE WOULD H AVE BEEN WORKED OUT AT RS.37 82 718 AND GROSS PROFIT RATIO WOULD HAVE BEEN 32.31% WHICH IS IMPROBABLE IN THIS LINE OF BUSINESS. ITA NO.127 /RJT/2008 5 4.1 IN A FURTHER SUBMISSION THE ASSESSEE EXPLAINED BEFORE THE CIT(A) THAT THE ASSESSING OFFICER WHILE MAKING THE ADDITION TOTALLY IGNORED THE FACT THAT IN THE ACCOUNT OF M/S GOKUL CEMENT PRDUCTS THERE WAS AN OP ENING BALANCE OF RS.5 00 680 AND DURING THE YEAR UNDER CONSIDERATION PURCHASES WERE OF RS.1 95 095 SIMILARLY IN THE ACCOUNT OF PRABHATBHA I V MEHTA THERE WAS AN OPENING BALANCE OF RS.51 000 AND DURING THE YEAR UN DER CONSIDERATION PURCHASES WERE OF RS.4 63 060 WHICH MAKES IT CLEARL Y THAT THE NEW PURCHASES DURING THE RELEVANT PREVIOUS YEAR WERE RS.6 58 155. 4.2. THE ABOVE SUBMISSIONS OF THE ASSESSEE WERE FOU ND ACCEPTABLE TO THE CIT(A). THE CIT(A) FOUND THAT THE ASSESSING OFFICE R MADE THE ADDITION ONLY ON THE GROUND THAT NOTICES U/S 133(6) COULD NOT BE SER VED ON M/S GOKUL CEMENT PRODUCTS AND SHRI PRABHATBHAI V MEHTA. HOWEVER TH ERE WERE OTHER EVIDENCES AVAILABLE ON RECORD WHICH THE ASSESSING OFFICER COU LD HAVE USED FOR FINDING OUT THOSE TWO PARTIES AND THE AFFIDAVITS. THE ASSESSIN G OFFICER WITHOUT MAKING ANY EFFORTS TO FIND OUT THE PARTIES RESORTED TO MAKE T HE ADDITION. FURTHER THE ASSESSING OFFICER HAS MADE THE ADDITIONS OF TOTAL C REDIT BALANCES IN THE ACCOUNT OF BOTH THE SAID PARTIES WHICH INCLUDED BALANCES AT TH E BEGINNING FO THE YEAR AMOUNTING TO RS.5 00 680 AND RS.51 000. THE CIT(A) THEREFORE HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION TO THE EXTENT OF RS.5 51 680 BEING PURCHASES MADE DURING THE LAST YEAR AND THEREFORE THIS ADDITION WAS DELETED. FURTHER CONSIDERING THAT THE ASSESSEE HAD DISCHARG ED ITS ONUS AND COMPLIED WITH ITS DUTIES PROVING THAT PURCHASES ARE GENUINE PARTIES ARE NOT BOGUS GOODS HAVE BEEN RECEIVED AND ONLY AFTER RECEIVING THE GOO DS THE CONSTRUCTION WAS COMPLETED. THE NET PROFIT OF THE ASSESSEE WAS AT 2 1.27% WHICH ITSELF SUGGEST SATISFACTORY RESULTS. TAKING INTO CONSIDERATION TH AT THE BOOKS OF ACCOUNT ARE AUDITED AND THE AUDITOR HAS NOT QUALIFIED HIS REPOR T OR POINTED OUT ANY DEFECT IN HIS REPORT THE CIT(A) HELD THAT THE AO WAS NOT JUS TIFIED IN MAKING THE ADDITION ONLY ON THE GROUND THAT THE NOTICES COULD NOT BE SE RVED AT THE MOST IT CAN BE PRESUMED THAT THE ASSESSEE DID PURCHASES FROM SAID PARTIES BUT FROM OTHER UNREGISTERED DEALER AND GOT BENEFIT OF MARGIN OF PU RCHASES FROM UNREGISTERED ITA NO.127 /RJT/2008 6 DEALER. THE CIT (A) THEREFORE HELD THAT AN ESTIMAT ION OF PROFIT CAN BE MADE WHICH WILL BE FAIR AND REASONABLE UNDER THE FACTS AND CIR CUMSTANCES OF THE CASE. HE THEREFORE SUSTAINED AN ADDITION OF RS. 1 LAKH OUT OF TOTAL ADDITION OF RS. 12 09 385. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSEE LD.AR OF THE ASSESS EE HAS FILED COPIES OF ACCOUNTS OF M/S GOKUL CEMENT PRODUCTS AND SHRI PRAB HATBHAI V MEHTA WHICH WERE BEFORE THE LOWER AUTHORITIES ALSO. AS HAS BEE N FOUND BY THE CIT(A) THE ASSESSING OFFICER HAS NOT TAKEN ANY INITIATIVE TO F IND OUT THE PARTIES APART FROM ISSUING NOTICES U/S 133(6) WHICH HAVE BEEN RETURNED BY POSTAL AUTHORITIES. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THA T RETURN OF NOTICES U/S 133(6) IS NOT CONCLUSIVE PROVE TO HOLD THAT THE PARTIES WE RE NON EXISTENT. THE COPIES OF BILLS PRODUCED BY THE ASSESSEE DID BEAR THE TELEPHO NE NUMBERS AND OTHER PARTICULARS. THE CIT(A) HAS TAKEN INTO CONSIDERATIO N THESE ACCOUNTS AND FOUND THAT ADDITION 5 51 680 PERTAINED TO OPENING BALANCE APPEARING IN THE ACCOUNTS OF THE PARTIES AND THERE WAS NO SCOPE FOR ADDITION ON THIS ACCOUNT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE CIT(A) F INALLY HELD THAT AT THE MOST IT COULD BE PRESUMED THAT THE IMPUGNED PURCHASES COULD BE HELD TO BE PURCHASES FROM UNREGISTERED DEALERS IN THE WAKE OF FINDING FR OM THE ASSESSING OFFICER THAT THE PURCHASE BILLS DID NOT BEAR THE SALES-TAX NUMBE RS AND ON THIS ACCOUNT THE LD.CIT(A) RESORTED TO ESTIMATION OF PROFIT BESIDES FINDING THAT THE NET PROFIT AT 21.27% SHOWN BY THE ASSESSEE IS SATISFACTORY WHICH LEAD TO SUSTAINING AN ADDITION OF RS.1 LAKH. IN OUR VIEW THE FACTUAL FI NDING RECORDED BY THE CIT(A) IS WORTHY OF ACCEPTANCE PARTICULARLY WHEN NOTHING CON TRARY TO HIS FINDINGS ARE BROUGHT ON RECORD BY THE REVENUE. IN THIS VIEW OF THE MATTER WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE. GROUND 2 OF THE REVEN UE IS DISMISSED. 5. IN GROUND 3 THE REVENUE AGITATES THE ACTION OF T HE CIT(A) IN RESTRICTING THE ADDITION TO RS.2 07 153 AS AGAINST THE ORIGINAL ADD ITION OF RS.22 17 091 ON ACCOUNT OF CLAIM OF DEDUCTION U/S 80IB(10) OF THE A CT. THE BRIEF FACTS LEADING TO ITA NO.127 /RJT/2008 7 THE CONTROVERSY ARE THAT THE ASSESSEE IN ITS RETUR N OF INCOME HAS DEDUCTION OF RS.22 17 091 U/S 80IB(10) WHICH WAS SUPPORTED BY TH E AUDIT REPORT IN FORM NO.10CCB. ON VERIFICATION THE ASSESSING OFFICER FO UND THAT MORE THAN 9.38% OF THE AREA OF THE APPROVED WAS IN RESPECT OF SHOPPING ESTABLISHMENT WHICH IS IN VIOLATION OF SECTION 80IB(10) AS IT EXISTED DURING A.Y. 2004-05. ACCORDING TO HIM THE DEDUCTION IS ALLOWABLE PURELY ON THE RESIDENTIA L PROJECTS AND THERE IS NO SCOPE FOR COMMERCIAL SPACE IN THE PROJECT UPTO A.Y. 2004- 05. FURTHER AS PER SECTION 80-IB A PROJECT WILL EITHER BE QUALIFIED FOR DEDUCT ION OR WILL NOT QUALIFY FOR DEDUCTION. HE FURTHER FOUND THAT THE ASSESSEE HAS INCLUDED THE SHOPPING AREA OF 8652.33 SQ.FT IN THE PROJECT AND THEREFORE DEDUCTI ON WAS NOT ALLOWABLE. HE ALSO OBSERVED THAT FROM ASSESSMENT YEAR 2005-06 PERMISSI ON FOR COMMERCIAL ESTABLISHMENTS HAS BEEN GRANTED BY THE STATUTE BUT THAT TOO UPTO 5% OF THE TOTAL BUILT UP AREA OF THE PROJECT. WITH THESE OBSERVATI ONS THE ASSESSING OFFICER DENIED DEDUCTION U/S 80IB(10) AMOUNTING TO RS.22 17 091 TO THE ASSESSEE. 5. THE ASSESSEE CARRIED THE MATTER BEFORE CIT(A) AN D RAISED VARIOUS SUBMISSIONS WHICH ARE REPRODUCED IN THE CIT(A)S O RDER FROM PAGES 9 TO 13. THE CIT(A) FINDING FAVOUR WITH THE SUBMISSIONS OF T HE ASSESSEE DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80IB(10) O N THE PROJECT EXCLUDING 9.38% WHICH IS MEANT OF COMMERCIAL PURPOSE BY OBSERVING A S UNDER: 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS MENTIONE D BY THE ASSESSING OFFICER AND THE SUBMISSION FILED BY THE A R OF THE APPELLANT. IT IS SEEN THAT THE ASSESSING OFFICER H AS REJECTED THE APPELLANTS CLAIM ONLY ON THE GROUND THAT MORE THAN 9.38% OF THE AREA OF THE APPROVED PROJECT WAS IN RESPECT OF SHOP PING ESTABLISHMENT AND ACCORDING TO HIM THE PROVISIONS O F SECTION 80IB STIPULATES THAT THE ELIGIBLE PROJECT SHOULD BE A PU RELY RESIDENTIAL PROJECT AND THERE IS NO SCOPE FOR COMMERCIAL SPACE IN THE PROJECT UP TO A.Y. 2004-05. AS AGAINST THIS THE APPELLANT S CONTENTION IS THAT ITS PROJECT STANDS APPROVED BY THE RAJKOT URBA N DEVELOPMENT AUTHORITY ON 25.10.2002 WAS SUBSEQUENTLY REVISED AN D APPROVED ON 03.01.2004 AND INCLUDED COMMERCIAL AREA WHICH IS 9.38% AND THAT ALL SHOPS ARE SMALL SIZE AND ARE IN THE NATURE OF UTILITY SHOPS LIKE GROCERY SHOP MEDICAL SHOP MILK DAIRY ETC. M EANT TO SERVE THE OCCUPANTS WITH DAILY NEEDS. IT IS ALSO CONTENDED T HAT THE PROJECT ITA NO.127 /RJT/2008 8 SITE FALLS UNDER RESIDENTIAL ZONE AND IN VIEW OF TH E INSERTION OF THE PROVISIONS OF SECTION 80-IB(10) TO PROMOTE HOUSING IT HAS TO PROVIDE IN A PLANNED MANNER FACILITIES NEEDED IN A MODERN D EVELOPING SOCIETY FOR THE CONVENIENCE OF ITS RESIDENTS AND TH ESE HOUSING PROJECTS MAY CONTAIN SHOPS ETC. AND THE AMENDMENT MADE TO THE PROVISIONS OF SECTION 80-IB(10) IS THOUGH EFFECTIVE FROM 1.04.2005 SHALL NOT APPLY TO EARLIER YEARS AND THE DEDUCTION UNDER SECTION 80- IB(10) WILL BE AVAILABLE EVEN IF THE SHOPS AND OTH ER COMMERCIAL ESTABLISHMENTS ARE INCLUDED IN THE HOUSING PROJECT. 5.3 IN VIEW OF THE DISCUSSION IN THE FOREGOING PARA AND PARTICULARLY KEEPING IN VIEW THE PROVISIONS OF SECT ION 80IB (10) IT IS SEEN THAT THE CONSTRUCTION PROJECT UNDER CONSIDE RATION WAS APPROVED BY THE LOCAL AUTHORITY AND ALL OTHER COND ITIONS FOR ELIGIBILITY OF THE PROJECT WERE SATISFIED BY THE APPELLANT. TH E DENIAL OF CLAIM OF THE APPELLANT BY THE AO ON ACCOUNT OF RATHER RESTRI CTED AND NARROW INTERPRETATION OF PROVISIONS OF CLAUSE (C) OF SECTI ON 80IB(10) IS NOT TENABLE AND THIS VIEW GETS SUPPORT FROM THE ORDER O F THE HONBLE SUPREME COURT IN CASE OF BAJAJ TEMPO LTD (SUPRA) W HEREIN IT WAS HELD THAT PROVISIONS SHOULD BE INTERPRETED LIBERALL Y. THE APPELLANT AS PER THE NEEDS OF BUSINESS CONSTRUCTED COMMERCIAL I.E. SMALL SHOPS FOR UTILITY WHICH DOES NOT LED TO CONCLUSION THAT THE APPELLANT VIOLATED THE RELEVANT PROVISIONS AND WAS NOT ELIGIB LE FOR DEDUCTION AS CLAIMED. IT IS HELD BY THE HONBLE ITAT CHENNA I A BENCH IN THE CASE OF ARUN EXCELLO FOUNDATIONS (P) LTD VS. ACIT 1 08 TTJ (CHENNAI) 71 THAT: AS REGARDS SECOND ISSUE THE PROVISIONS OF S.80-IB (10) ARE VERY CLEAR. THE THREE CONDITIONS LAID DOWN IN THE PROVISIONS ARE (1) SUCH UNDERTAKING HAS COMMENCED OR COMMENC ES DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT ON OR AGFTER 1 ST DAY OF OCTOBER 1998; (2) THE PROJECT IS ON THE SI ZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE; AND (3) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN TWEN TY-FIVE KILOMETERS FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE. HERE THE ASSESSEE HAS COMPLIED WITH ALL THE THREE C ONDITIONS AS IS APPARENT FROM THE ORDERS OF THE LOWER AUTHORI TIES. THE ASSESSEE HAS USED 9.31 PER CENT OF THE TOTAL CONSTR UCTION AREA FOR COMMERCIAL CONSTRUCTION. THE LEARNED AUTH ORITIES REPRESENTATIVE OF THE ASSESSEE HAS ALREADY RAISED ALTERNATIVE PLEA IN THIS REGARD THAT HE DEDUCTION U NDER S.80- IB(10) ON THE RESIDENTIAL UNITS CONSTRUCTED BY THE ASSESSEE BE GIVEN ON PRO RATA BASIS. HERE WE AGREE WITH TH E PLEA ITA NO.127 /RJT/2008 9 TAKEN BY THE ASSESSEE ON THE RESIDENTIAL UNITS CONS TRUCTED ON PRO RATA BASIS. THE ASSESSEE IS NOT ELIGIBLE FO R DEDUCTION UNDER S.80-IB(10) ON THE COMMERCIAL AREA CONSTRUCTE D IN THE PROJECT I.E. TO THE EXTENT OF 9.31 PER CENT OF THE TOTAL CONSTRUCTED AREA. THIS FACT IS NOT IN DISPUTE. IN VIEW OF THIS THIS ISSUE OF THE ASSESSEE IS ALLOWED IN FAVOUR OF THE ASSESSEE. 5.4 RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE ITAT CHENNAI A BENCH AS ABOVE I DIRECT THE ASSESSING O FFICER TO ALLOW THE CLAIM OF THE APPELLANT ON THE RESIDENTIAL UNITS CONSTRUCTED ON PRO RATA BASIS. THE APPELLANT IS NO T ELIGIBLE FOR DEDUCTION UNDER S. 80-IB(10) ON THE COMMERCIAL AREA CONSTRUCTED IN THE PROJECT I.E. TO THE EXTENT OF 9. 38 PER CENT OF THE TOTAL CONSTRUCTED AREA. HENCE IT IS HELD THAT THE APPELLANT IS ELIGIBLE FOR DEDUCTION UNDER S.80IB-(1 0) ON THE TOTAL CONSTRUCTED RESIDENTIAL AREA EXCEPT ON 9.38% PART WHICH IS COMMERCIAL AREA AND ACCORDINGLY ASSESSING OFFICER IS DIRECTED TO RE-WORK OUT THE 80-IB(10) CLAIM OF T HE APPELLANT 6. THE LD.DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT DEDUCTION U/S 80-IB(10) IS NOT EXIGIBLE ON A H OUSING PROJECT WHICH INCLUDES COMMERCIAL SPACE. IN THE INSTANT CASE 9.38% OF TH E HOUSING PROJECT INCLUDES COMMERCIAL SPACE AND THEREFORE THE ASSESSING OFFIC ER WAS JUSTIFIED IN HIS ACTION. IT IS ONLY FROM ASSESSMENT YEAR 2005-06 THE STATUTE PROVIDES FOR 5% COMMERCIAL PROJECT IN SECTION 80IB(10) OF THE ACT. 7. THE LD.AR OF THE ASSESSEE ON THE OTHER HAND WI THOUT ELABORATING ON THE ISSUE HAS BROUGHT TO OUR NOTICE THAT THE HONBLE BO MBAY HIGH COURT HAS UPHELD THE DECISION OF THE TRIBUNAL IN THE CASE OF CIT VS M/S BRAHMA ASSOCIATES WHEREIN IT HAS BEEN HELD AS FOLLOWS: (I) S.80-IB(10) (PRE AMENDMENT W.E.F. AY 2005-06) DOES NOT DEFINE THE EXPRESSION HOUSING PROJECT BUT REFERS TO HOUSING PROJECTS WHICH ARE APPROVED BY THE LOCAL AUTHORITIE S. UNDER THE LOCAL LAWS THE AUTHORITIES ARE EMPOWERED TO APPROV E PROJECTS AS HOUSING PROJECTS WITH COMMERCIAL USER TO THE EXTE NT PERMITTED UNDER THE DC RULES FRAMED BY THE RESPECTIVE LOCAL A UTHORITY. ACCORDINGLY IF THE LEGISLATURE INTENDED TO RESTRIC T THE BENEFIT OF ITA NO.127 /RJT/2008 10 DEDUCTION ONLY TO THE PROJECTS APPROVED EXCLUSIVELY FOR RESIDENTIAL PURPOSES THEN IT WOULD HAVE STATED SO. HOWEVER AS THE LEGISLATURE HAS PROVIDED THAT THE DEDUCTION IS AVAILABLE TO ALL HOUSING PROJECTS WITH COMMERCIAL USER APPROVED AS A HOUSING PROJECT ARE ELIGIBLE FOR DEDUCTION; (II) WHILE THE SPECIAL BENCH WAS RIGHT IN HOLDING T HAT A PROJECT WITH RESIDENTIAL AND COMMERCIAL USER TO THE EXTENT PERMITTED UNDER DC RULES WOULD BE A HOUSING PROJECT AND ELIGIBLE FOR DEDUCTION IT WAS NOT JUSTIFIED IN CONFIRMING THE DEDUCTION ONLY TO PROJECTS HAVING COMMERCIAL AREA UPTO 10% OF THE BUA BECAUSE ONCE TH E BASIC ARGUMENT OF THE REVENUE THAT THE HOUSING PROJECTS W ITH COMMERCIAL USER ARE NOT ENTITLED TO SECTION 80IB(10) DEDUCTION IS REJECTED N RESTRICTION COULD BE IMPOSED. IF THE PROJECT IS AP PROVED AS A HOUSING PROJECT DEDUCTION U/S 80IB(10) IS ALLOWAB LE IRRESPECTIVE OF THE COMMERCIAL AREA; (III) THE INSERTION OF CLAUSE (D) TO S.80-IB(10) W. E.F. 1.4.2005 TO DENY S.80-IB(10) DEDUCTION TO PROJECTS HAVING COMME RCIAL USER BEYOND THE PRESCRIBED LIMITS IS NOT RETROSPECTIVE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS RECORD PERUSED. WE ARE OF THE OPINION AS ON DATE THE ISSUE IS SQUARELY COVERED BY THE ABOVE JUDGMENT OF THE BOMBAY HIGH COURT. THE SPECIAL BENCH OF THE PUNE B ENCH OF THE TRIBUNAL IN 119 ITD 255 (PUNE)(SB) HAD HELD THAT IN A HOUSING P ROJECT WHICH IS APPROVED BY THE LOCAL AUTHORITY UPTO 10% OF THE TOTAL PROJECT A PPROVED BY THE LOCAL AUTHORITY COULD BE USED FOR COMMERCIAL USER. WHEREAS THE HO NBLE HIGH COURT WHILE REJECTING THE ARGUMENT OF THE REVENUE THAT THE HOUS ING PROJECTS WITH COMMERCIAL USER ARE NOT ENTITLED TO SECTION 80IB(10) DEDUCTION HELD THAT NO RESTRICTION COULD BE IMPOSED. THE HONBLE COURT ALSO OBSERVED THAT IF THE LEGISLATURE INTENDED TO RESTRICT THE BENEFIT OF DEDUCTION ONLY TO THE PROJE CTS APPROVED EXCLUSIVELY FOR RESIDENTIAL PURPOSES THEN IT WOULD HAVE STATED SO. FINALLY THE HONBLE BOMBAY HIGH COURT HELD THAT IF THE PROJECT IS APPROVED AS A HOUSING PROJECT DEDUCTION U/S 80-IB(10) IS ALLOWABLE IRRESPECTIVE OF THE COMM ERCIAL AREA. THIS JUDGMENT OF THE BOMBAY HIGH COURT CLINCHES THE ISSUE BEFORE US IN ASSESSEES FAVOUR. NO OTHER CONTRARY DECISION HAS BEEN BROUGHT TO OUR NOT ICE. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE HOUSING PROJECT IN QUESTION IS NOT APPROVED BY THE LOCAL AUTHORITY AS SUCH. THEREFORE APPLYING THE RATIO O F JUDGMENT OF THE HONBLE ITA NO.127 /RJT/2008 11 BOMBAY HIGH COURT IN THE CASE OF CIT VS M/S BRAHMA ASSOCIATES WE DO NOT SEE ANY MERIT IN THE GROUND RAISED BY THE REVENUE. THE SAME IS REJECTED. 9. IN THE RESULT APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11-03-2011. SD/- SD/- (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT DT : 11 TH MARCH 2011 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) JAMNAGAR 4. THE CIT JAMNAGAR 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT