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2020 (7) TMI 306 - AT - Income TaxReopening of assessment u/s 147 - Deduction u/s 80IB(10) - HELD THAT - AO held a bona fide belief that as the assessee had contravened the provisions of Sec. 80IB(10)(a)(iii), it was thus not entitled for claim of deduction u/s 80IB; and the A.O on the basis of verifications carried out in the course of the assessment proceedings for A.Y 2012-13, had gathered, that the built-up area of some of the residential units in the project viz. Adityavardhan was more than the prescribed area of 1000 sq. ft, which being in contravention of the norms prescribed in Sec. 80IB(10)(c) rendered the assessee ineligible for claim of deduction under the said statutory provision. Accordingly, the reopening of the case before us was carried out on the basis of fresh tangible material which clearly established that the A.O had a reason to believe that the income of the assessee chargeable to tax had escaped assessment. As such, the facts involved in the aforesaid case being distinguishable as against those in the case before us, would thus not assist the case of the assessee. No infirmity in the assumption of jurisdiction by the A.O u/s 147 of the Act, and are thus not inclined to subscribe to the claim of the ld. A.R that the concluded assessment in the case of the assessee had been reopened on a mere change of opinion . As such, holding a conviction that the A.O had rightly assumed jurisdiction and reopened the case of the assessee u/s 147 of the Act, we uphold the same to the said extent. Grounds of appeal Nos. 1 2 are dismissed. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings - HELD THAT - Assessee was obligated to complete the construction of the housing project as per the approved plan and comply with the I.O.D conditions, and by no means could be permitted to construe the completion of the construction of buildings as completion of the housing project. Assessee at the time of approval of its plan was well conversant of the fact that on the South side of the plot of land where the road was to be constructed there was a hill on which there was a pylon i.e a tower for transmission of electricity of Tata Electric Company. Now when the assessee at the time of getting its plan approved was well aware of the existence of a pylon i.e a tower for transmission of electricity of Tata Electric Company on the south side of the plot where it had agreed to construct a 18.30 mt wide D.P Road, it could not thereafter be allowed to plead impossibility of performance of the said act. Be that as it may, in the backdrop of our aforesaid observations, we are of a strong conviction that as the assessee had failed to complete the construction of the housing project within the prescribed time limit envisaged in Sec. 80IB(10)(a)(iii) of the Act, therefore, the A.O had rightly declined its claim for deduction u/s 80IB(10) of the Act . Explanation (ii) to Sec. 80IB(10) contemplates that the date of completion of construction of the housing project has to be taken as the date on which the completion certificate in respect of such housing project is issued by the local authority. At this stage, we may herein observe that the importance of the Explanation (ii) to Sec. 80IB(10) cannot be undermined for the purpose of construing the scope and gamut of the said statutory provision. Our said conviction is fortified by the judgment of the Hon ble Apex Court in the case of Dilip Kumar 2018 (7) TMI 1826 - SUPREME COURT wherein it was observed that an Explanation to a statutory provision is inter alia an internal aid for construing the same. In the backdrop of our aforesaid observations, we are of the considered view that the assessee had failed to show as to how its case comes squarely within the realm of the deduction contemplated u/s 80IB(10) of the Act. Accordingly, in our considered view, the A.O had rightly concluded that de hors satisfaction of the conditions contemplated in Sec. 80IB(10) of the Act, the assessee was not entitled for claim of deduction under the said statutory provision. We thus not finding favour with the order of the CIT(A), to the extent he had concluded that the assessee had satisfied the conditions contemplated in Sec. 80IB(10) of the Act, set aside his order. The Grounds of appeal No. 1 4 raised by the revenue are allowed. Built-up area used in Sec. 80IB(10)(c) - HELD THAT - Clause (a) was inserted in Section 80IB(14) defining the words built-up area to mean the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls, but did not include the common areas shared with other residential units. In our considered view, if the assessee in the case before us had de facto provided the exclusive possession/enjoyment of the dry balcony attached with a flat to the purchaser of the said flat (as advertised by it in its brochures), then the same will have to be included while computing the built-up area of such flat, failing which the very purpose of the definition of the said term in Sec. 80IB(14)(a) would be rendered as otiose. But then, in the absence of the correct factual position the aforesaid issue before us cannot be adjudicated. We thus in all fairness restore the issue to the file of the A.O for fresh adjudication. In case, the flat purchaser is de facto in exclusive possession/enjoyment of the dry balcony attached with the flat, then the area of the same shall be included while computing the built-up area of such flat. However, if such projection is either in the nature of a service projection to be used for servicing the building or carrying out repairs of the building, or a common area shared with the other residential units, then the same would not be included in the built-up area of the flat.Ground of appeal No. 2 filed by the revenue is allowed for statistical purposes. Deduction u/s 80IB(10) - flats which were less than 1000 sq. feet in size, when the provisions of the said section allow deduction only upon completion of the entire project and not on part project or on part fulfillment of the requirements stated in the said section, we are afraid does not find favor with us - HELD THAT - We have perused the order of the CIT(A) and concur with his view that the A.O had failed to point out any arrangement of business between the assessee and any other person with whom he had close relations, which had resulted into generation of excessive profits within the meaning of Sec. 80IB(10) of the Act. Also, the claim of the assessee that as the land was purchased way back in the year 2004/2005, therefore, the excess profit was attributable to the steep rise in the price of land in the year in which the flats were sold, had also not been taken cognizance of by the A.O in the course of the assessment proceedings. In our considered view, the CIT(A) has rightly concluded that a high GP rate cannot be a sole decisive factor for declining an assessee s claim of deduction u/s 80IB(10) of the Act. We thus not finding any infirmity in the view taken by the CIT((A) in context of the issue under consideration uphold his observations to the said extent. Ground of appeal No. 3 raised by the revenue is dismissed. Construing of the term built-up area - HELD THAT - As in year under consideration, in A.Y 2011-12 also the CIT(A) had found favour with the claim of the assessee that the area of dry balcony was not to be included while calculating the built-up area of the flats in the assessee s project. As such, on the basis of his said observations, the CIT(A) while disposing off the appeal for A.Y 2011-12, had concluded, that the area of all the residential units was well within the prescribed limit of 1000 sq.ft. As we have after exhaustive deliberations not found favour with the manner as per which the CIT(A) had construed the term built-up area which stands defined in Sec. 80IB(14)(a), therefore, with specific directions we have restored the matter to the file of the A.O for fresh adjudication. Accordingly, we are of the considered view that on the same terms the matter in the present appeal also requires to be restored to the file of the A.O, who is directed to adjudicate the issue afresh considering our observations/directions recorded while disposing off the Grounds of appeal Nos. 2 5.
Issues Involved:
1. Validity of reassessment proceedings under section 147 of the Income Tax Act. 2. Eligibility for deduction under section 80IB(10) of the Income Tax Act. 3. Compliance with conditions under section 80IB(10)(a)(iii) and section 80IB(10)(c). 4. Inclusion of "dry balcony" area in the "built-up area" calculation. 5. Pro-rata deduction for eligible residential units. 6. High gross profit rate and its impact on deduction eligibility. Issue-wise Detailed Analysis: 1. Validity of Reassessment Proceedings under Section 147: The assessee challenged the reassessment proceedings initiated by the AO under section 147, claiming that the jurisdictional pre-conditions necessary to be satisfied were not fulfilled. The assessee argued that the reassessment was based on a mere change of opinion. However, the Tribunal upheld the validity of the reassessment, noting that the AO had tangible material to believe that income had escaped assessment, based on information received from the Municipal Corporation of Greater Mumbai (MCGM) indicating non-compliance with building IOD conditions and the built-up area exceeding 1000 sq. ft. 2. Eligibility for Deduction under Section 80IB(10): The assessee claimed deduction under section 80IB(10) for its housing project "Adityavardhan." The AO disallowed the deduction, citing non-compliance with the conditions of section 80IB(10)(a)(iii) and section 80IB(10)(c). The CIT(A) allowed the deduction, stating that the assessee had completed the project within the stipulated time, but the Tribunal found that the project was not completed as per the approved plan, and the "Building Completion Certificate" and "Occupation Certificate" were not issued by MCGM due to non-compliance with IOD conditions. 3. Compliance with Conditions under Section 80IB(10)(a)(iii) and Section 80IB(10)(c): The AO observed that the assessee did not complete the housing project within the stipulated period and the built-up area of some flats exceeded the prescribed limit of 1000 sq. ft. The CIT(A) disagreed, citing that the delay in obtaining the completion certificate was due to reasons beyond the assessee's control. The Tribunal, however, upheld the AO's view, emphasizing the statutory requirement for a completion certificate from the local authority and the non-compliance with the approved plan. 4. Inclusion of "Dry Balcony" Area in the "Built-up Area" Calculation: The assessee argued that the "dry balcony" area should not be included in the built-up area as it was 6 inches below floor level and not part of the residential unit sold. The AO included the dry balcony area, citing that it was usable and part of the built-up area as per section 80IB(14)(a). The Tribunal agreed with the AO, stating that the dry balcony area should be included in the built-up area calculation if it was de facto in exclusive possession/enjoyment by the flat purchaser. 5. Pro-rata Deduction for Eligible Residential Units: The CIT(A) allowed pro-rata deduction for residential units whose built-up area did not exceed the prescribed limit, despite some units exceeding the limit. The Tribunal upheld this view, stating that within a composite housing project, the assessee can claim deduction for eligible units and proportionate relief for units satisfying the built-up area requirement. 6. High Gross Profit Rate and Its Impact on Deduction Eligibility: The AO questioned the high gross profit rate of 63.08%, suggesting it indicated excessive profits. The CIT(A) and the Tribunal found no merit in this argument, noting that the AO failed to point out any arrangement of business resulting in excessive profits. The Tribunal upheld the CIT(A)'s view that a high GP rate alone cannot be a decisive factor for declining deduction under section 80IB(10). Conclusion: The Tribunal upheld the reassessment proceedings and the AO's disallowance of deduction under section 80IB(10) due to non-compliance with statutory requirements. The inclusion of the dry balcony area in the built-up area calculation was affirmed, and the pro-rata deduction for eligible units was allowed. The high gross profit rate was not considered a valid ground for denying the deduction. The appeals of the assessee were dismissed or allowed for statistical purposes, while the revenue's appeals were partly allowed.
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