2017 (12) TMI 1336 - AT - Income Tax

Denying deduction u/s.80IB(10) - admission of additional evidences - non issue of completion certificate by the local authority - non adherence to relevant provisions to get legitimate claim - Held that - In the instant case, the direction of the District Collector vide item No.17 (supra) to the assessee includes the Assistant Director, Town Planning, Pune shall issue the requisite completion certificate. This direction is not in tune with the said provisions of the Act. Neither the village Gram Panchayat (local authority) nor the Assistant Director, Town Planning, Pune, nor the Collector of the District responded positively to the request letters of the assessee. This being the bureaucratic response to the legitimate demand of the assessee for the issue of completion certificate, it needs to be reconsidered if the AO is justified in denying deduction u/s.80IB(10) of the Act in respect of the otherwise, eligible profits of the housing project of the assessee. It is relevant to mention that the project was completed in all respect. Neither the local government nor the flat owners nor the District Collector-cum-Asst. Director, Town Planning have any complaints on the issue of date of completion of the Housing Project. The flat buyers have already occupied the flats (copies of possession letters are placed in the paper book) without having any illegalities associated with the project qua the construction of the project are on records of the local authority or the District Collector. In these circumstances, we are of the opinion that these papers/additional evidences filed by the assessee before us are required to be admitted as the same are obtained by the assessee in the period subsequent in time under the Right to Information Act, 2005. Therefore, considering the principles of natural justice, we are of the opinion that these papers should be remanded to the file of the AO for considering the same and decide the issue based on the facts relating to the issue of completion certificate. AO shall grant reasonable opportunity of being heard to the assessee in accordance with set principles of natural justice

Issues Involved:
1. Non-issuance of completion certificate by local authority.
2. Rejection of deduction claim under Section 80IB(10) of the Income Tax Act, 1961.
3. Compliance with the Maharashtra Regional and Town Planning Act, 1966.
4. Admissibility of additional evidence obtained under the Right to Information Act, 2005.

Issue-wise Detailed Analysis:

1. Non-issuance of Completion Certificate by Local Authority:
The core issue revolves around the assessee’s inability to produce a completion certificate from the local authority for a housing project located outside the municipal limits of Pune. The Collector of Pune, being the sanctioning authority, did not have a system of issuing completion certificates under the Maharashtra Regional and Town Planning Act, 1966. The assessee argued that under the said Act, a completion certificate issued by a local architect should suffice. However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] insisted on a completion certificate from the local authority, which was not issued due to the absence of a formal system.

2. Rejection of Deduction Claim under Section 80IB(10):
The AO rejected the assessee’s claim for deduction under Section 80IB(10) on the grounds of non-issuance of a completion certificate by the local authority. Despite the project being completed by 31-03-2011 and certified by the project architect on 09-01-2009, the AO added back the claimed deduction amounting to ?1,39,59,759/- to the returned income. The CIT(A) upheld this rejection, focusing on the statutory requirement for a completion certificate from the local authority.

3. Compliance with the Maharashtra Regional and Town Planning Act, 1966:
The assessee contended that the project was approved by the Collector, Pune, and completed within the stipulated time. The completion certificate from the architect was submitted to the relevant authorities, but no formal certificate was issued by the local authority due to the non-existence of such a procedure. The CIT(A) emphasized the necessity of a completion certificate from the local authority, relying on a previous Tribunal order in a similar case.

4. Admissibility of Additional Evidence Obtained under the Right to Information Act, 2005:
The assessee submitted additional evidence obtained under the Right to Information Act, 2005, which included replies from the Gram Panchayat, the Collector, and the Assistant Director of Town Planning, Pune. These documents indicated that the local authorities did not have a system for issuing completion certificates for projects outside municipal limits. The Tribunal admitted these additional evidences, considering them crucial for deciding the appeals and remanded the issue to the AO for reconsideration based on these facts.

Conclusion:
The Tribunal acknowledged the bureaucratic hurdles faced by the assessee in obtaining the completion certificate and noted that the project was completed in all respects, with no complaints from flat buyers or local authorities. The Tribunal directed the AO to reconsider the denial of deduction under Section 80IB(10) in light of the additional evidence and the principle of natural justice. The AO was instructed to pass a speaking order, considering the peculiar facts of the case and relevant judicial pronouncements. The appeals were allowed for statistical purposes, and the Tribunal suggested that the Principal CIT/AO address the procedural issues with the State Authorities to prevent future hardships for taxpayers.

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