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2018 (4) TMI 698 - AT - Income TaxAssessment u/s 153C - Held that - The conclusion drawn by the first appellate authority regarding the retrospective application of amended provision of section 153C of the Act cannot be sustained and the assessee s case would be governed by the provisions of sub section (1) of section 153C of the Act as it existed prior to its amendment by Finance Act, 2015, w.e.f. 1st June 2015. As discussed earlier, the seized document on the basis of which the Assessing Officer has initiated proceedings under section 153C has been factually proved to be not belonging to the assessee which has also been accepted by the first appellate authority. Therefore, the condition precedent of section 153C of the Act was not satisfied at the time of initiation of assessment proceedings under the said provision. That being the case, the proceedings initiated under section 153C of the Act for the assessment years 2005 06 to 2010 11 are vitiated and as a natural corollary, the assessment orders passed in pursuance to such proceedings have to 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 housing project, being the immediate source of the impugned rental income, we find direct nexus of the said income to the housing project on hand. Therefore, the said income is derived from the housing project, making the income eligible for deduction u/s 80IB(10) of the Act.
Issues Involved:
1. Deduction under section 80IB(10) of the Income Tax Act. 2. Validity of proceedings under section 153C of the Income Tax Act. 3. Levy of interest under section 234B of the Income Tax Act. Issue-wise Detailed Analysis: 1. Deduction under section 80IB(10) of the Income Tax Act: The Revenue's appeal pertained to the allowance of the assessee's claim of deduction under section 80IB(10) for various assessment years. The Assessing Officer (AO) disallowed the deduction based on the seized unapproved plan, alleging that the housing project was not constructed as per the approved plan by the Bombay Municipality Corporation (BMC), thus violating section 80IB(10) conditions. The Commissioner (Appeals) (CIT(A)) conducted an independent enquiry, verifying the original approved plan and obtaining information from the housing society. It was found that the project was constructed as per the approved plan, with each flat having a built-up area of less than 1,000 sq.ft. The CIT(A) concluded that the AO's reliance on the unapproved plan was misplaced and directed the AO to allow the deduction. The Tribunal upheld the CIT(A)'s decision, noting that the project complied with the approved plan and the conditions of section 80IB(10). 2. Validity of proceedings under section 153C of the Income Tax Act: The assessee challenged the validity of the proceedings initiated under section 153C, arguing that the seized document (unapproved plan) did not belong to the assessee, as required by the pre-amended section 153C. The CIT(A) initially upheld the proceedings, interpreting the term "belonging to" as "pertaining to" the assessee, based on the 2015 amendment. However, the Tribunal disagreed, citing judicial precedents that the amendment applies prospectively from June 1, 2015. Since the seized document did not belong to the assessee, the condition precedent for section 153C was not met, rendering the proceedings and subsequent assessments invalid. Consequently, the Tribunal quashed the assessment orders for the relevant years. 3. Levy of interest under section 234B of the Income Tax Act: The appeals related to the levy of interest under section 234B arose from proceedings under section 154. Given that the Tribunal quashed the assessments under section 153C, the section 154 proceedings and resultant orders were also invalid. Thus, the grounds regarding section 234B became academic and infructuous. Conclusion: The Tribunal dismissed the Revenue's appeals, upheld the assessee's cross objections, and quashed the assessment orders for the years in question. The Tribunal confirmed the allowance of the deduction under section 80IB(10) and invalidated the proceedings under section 153C, rendering the section 154 proceedings and related interest levy moot.
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