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TMI Blog2010 (6) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... , on which no deduction under section 80-IB(10) was claimed and (c) it had developed only a office block in the project - In case plea of the assessee is found to be correct that no such deduction is claimed on the commercial area, then there is no merit in the disallowance on this count Regarding covered area of each unit was found to be in excess of 1500 sq. feet as per the report of DVO - assessee admits that the DVO had visited their premises but strongly objects to the reference made to DVO and the findings of DVO - Held that: assessee has been denied opportunity of hearing and meeting the objections raised by DVO. The Assessing Officer/DVO have failed to give proper opportunity of hearing to the assessee - Appeal is partly allowed X X X X Extracts X X X X X X X X Extracts X X X X ..... f Punjab. The same was published in the Gazette of Punjab Govt. dated 22-3-2002 and was later notified by Nagar Panchyat, Zirakpur on 26-4-2002 as "Town Planning Scheme". Out of the said area, the assessee sold about 3 acres of land in which a colony named M/s. Gulmohar Enclave was developed by the purchaser. On the balance of 5.7 acres of land, two blocks of houses were built by the assessee i.e. Alpine Block and Centre Block. The Alpine Block had 68 houses and the Centre Block had 35 houses. As per the brochure, the entire project had three categories of houses with category A having 867 (GF) and 726 (FF), Category B with 844 (GF) and 834 (FF) and Category C with 759 (GF) and 749 (FF) super covered area in square feet. The brochure of the project stated "All the three categories of independent houses with covered area ranging from 1500 feet to 1650 feet are planned for…". The assessee claimed that during the year it had sold 42 houses of which two houses were of category A, 18 houses of category B and 21 houses of category C. The claim of the assessee before Assessing Officer vide letter dated 11-12-2007 was that all the houses in the Alpine Scheme were below 1500 square f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eported that the total commercial area of the project works out to 5401 square feet as against 2076.50 square yards (18688.5 square feet) notified in the Town Planning Scheme of the Housing Project of the assessee. The said report was also confronted to the assessee. The Assessing Officer was of the view that the assessee had not fulfilled the conditions laid down in section 80-IB(10) of the Act, (a) as the maximum built up area of residential unit should not exceed 1500 square feet and (b) the built area of shops and other commercial establishment included in the housing project should not exceed 5 per cent of aggregate built up area of the housing project, or 2000 square feet, whichever is less. The assessee vide its reply dated 11-12-2007 had submitted that the provisions of section 80-IB(10) of the Act were not applicable on account of the following reasons, summarized by the Assessing Officer at page 9 of the assessment order:-- (a) Under the provisions of the Act, the undertaking's project was approved by the competent authority. (b) After the scheme has been approved by Govt. of Punjab, the Nagar Panchyat writes to the Town and Country Planning for master plan of the are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegory 'C' [each having plot area of 100 Sq.Yrd. having super covered area of 1508 Sq.ft. as per assessee's brochure] as against 1439.00 Sq.ft as per DVO's report. Therefore, in view of the above, it is clear that the assessee has misled the department by stating that all the houses sold during the year are below 1500 Sq.Ft. area. During the financial year 2004-05, two house of Category 'A' which were sold were of 1521 Sq.ft (as per DVO's report and 18 house of category 'B' which were sold during the year were of 1678 Sq.Ft built up area (as per DVO's report). Nevertheless, in order to claim under section 80-IB(10) deduction, all the conditions have to be fulfilled simultaneously. Even if one single residential unit or commercial establishments exceed the specified limit stated in the Act, the assessee become ineligible for deduction and in any case, there is no provision for proportionate deduction under the Act. (iii) The assessee's next contention is that the assessee has neither constructed commercial complex during the year under reference nor claim any exemption on such activity. But the fact is that the assessee has sold two show rooms during the year as per agreement dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completely different from the area approved by the local authority. Further, the commercial area determined by the DVO was in excess of the prescribed limit and as such it was held that the assessee did not fulfil the conditions of maximum commercial area and as such was not eligible for deduction under section 80-IB(10) of the Act. The assessee is in appeal before us. 10. The contention of the learned AR for the assessee was that in the brochure for advertisement and market campaign, construction of 68 houses of different categories of less than 1500 square feet covered area was published, in order to avail exemption under section 80-IB(10) of the Act. The said earmarked area had no commercial plot whatsoever. The learned AR for the assessee filed on record the approved sketch of the Town Planning Scheme, under which plan for 68 houses were got approved from the concerned municipal body i.e. Nagar Panchyat, Zirakpur. The learned AR further pointed out that the brochure does not mention other houses/commercial property as no exemption for the same had been made. The total units, consisting of 68 housing was marked green in the sketch plan filed on record, which were approved by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evance of the learned AR was that there was violation of provisions of section 55A of the Income-tax Act and/or section 16A of the Wealth-tax Act as no intimation of any reference to DVO by Assessing Officer or reports of DVO were communicated to the assessee for his comments. The learned AR further submitted that the Assessing Officer has failed to refer to the original report of DVO dated 27-12-2007 giving real covered area. The said fact was also pointed out to the CIT(A) who has failed to address the same and moreover the request of assessee to summon DVO was not allowed. The learned AR for the assessee submitted that the reliance of the Assessing Officer and CIT(A) on Laukik Developers (supra) is misplaced as the same stands overruled by the ratio laid down by Special Bench of Pune Tribunal in Brahma Associates v. Jt. CIT [2009] 119 ITD 255. 11. The learned DR for the Revenue strongly defended the orders of the authorities below and pointed out that the assessee was not entitled to the deduction under section 80-IB(10) of the Act as no approval was obtained for building a housing project. Further, it was pointed out that as per the DVO report dated 28-12-2007, the built up ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rify at the earliest regarding the terms and conditions details of scheme as proposed by party procedure for getting the approval and details of action in case of sale of some portion of notified area by the party. The information is urgently required and may be dealt with in Priority basis. M/s Dee Ess Estate sold 3 acres of land clarification is seeked whether such sale of land is allowed as per norms or not. Further information be provided to this office whether M/s Dee Ess Estate has seeked approval for such sale or not. You are kindly requested to provide this information to this office at the earliest as lot of time has already passed." 14. The Executive Officer, Municipal Council, Zirakpur vide letter dated 4-6-2009 had replied to the said letter of the Assessing Officer and clarified that assessee can sell one or more chunk of plots to different buyers from the earmarked salable area. The clarification is as under:- "It is in reference to your above cited letter regarding the subject matter cited above. This is to clarify that under the town planning scheme an approval of the draft layout of the area notified is accorded wherein planning of roads, parks, parking, size o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; [and] (b) the built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less.] 16. The conditions laid down for grant o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer was the commercial area being developed by the assessee and its relatability to the claim of deduction under section 80-IB(10) of the Act. The explanation of the assessee was that it had developed 2 acres of land out of total of 5.7 acres of land with each unit being less than 1500 Sq.feet of covered area, against which it had claimed deduction under section 80-IB(10) of the Act. The assessee further claims that (a) no commercial unit was sold during the year; (b) some commercial plots were sold by assessee, on which no deduction under section 80-IB(10) was claimed and (c) it had developed only a office block in the project. We find that the Assessing Officer has failed to consider the facts in the correct perspective and in the interest of justice, we are of the view that the same needs reconsideration in accordance with the law on this point. In case plea of the assessee is found to be correct that no such deduction is claimed on the commercial area, then there is no merit in the disallowance on this count. The Assessing Officer shall also verify the extent of commercial exploitation in the housing project against which deduction is claimed under section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the findings of DVO. The allegation of learned AR for the assessee is against the violation of conditions prescribed under section 55A of the I.T. Act and/or section 16A of the Wealth-tax Act. The condition of allowing an opportunity to be heard by Assessing Officer before making reference to DVO and/or by the DVO before finalizing his report, being not granted, is strongly objected to. The second objection is to the manner in which second report has been given by DVO, in which in contrast to the first report, it was reported that the built up area was more than 1500 sq. Feet. The learned AR pointed out that reference was made by Assessing Officer to DVO on 24-12-2007, inspection was done by DVO on 26-12-2007 and first report was submitted by DVO on 27-12-2007. The second report, after the telephonic call of Assessing Officer, was submitted on 28-12-2007, with revised measurements. The assessee has not been allowed any opportunity of hearing by the Assessing Officer and/or the DVO in this regard. We find violation of principles of natural justice that nobody is to be condemned unheard. The assessee has been denied opportunity of hearing and meeting the objections raised by DVO. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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