TaxTMI 
TaxTMI 
2014 (11) TMI 689
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....he Income-tax Act, 1961 (in short "the Act") pertaining to the assessment year 2007-08. 3. In the appeal of the assessee, the following Grounds of Appeal have been raised :- "1. The learned CIT(A) has erred on facts and in law in confirming the disallowance of claim u/s 80IB(10) of Rs. 1,04,36,500/- in relation to the Sai Nisarg Park - Mayureshwar Project on the grounds that 8 units of the Housing Project have a built-up area exceeding 1500 sq.ft. if the area of the terrace open to sky is included. 2. (a) The learned CIT(A) has further erred on facts and in law in considering the amount of Rs. 60 lacs declared as undisclosed receipts against advances from bookings of a project qualifying u/s 80IB(10) as not constituting income eligible for a claim of deduction u/s 80IB(10). (b) Without prejudice to the above, the learned CIT(A) has erred on facts and in law in treating the receipts as income without granting a deduction for the payments/expenditure, when both constituted data from the same seized material." 4. The issue in Ground of Appeal No.1 relates to assessee's claim for deduction u/s 80IB(10) of the Act on account of the profits derived from Sai Nisarg Park....
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....eas shared with other residential units;]" 8. In terms of the aforesaid definition, the Assessing Officer took into consideration the area comprised of the projected terrace also for the purpose of computing the 'built-up area' prescribed in clause (c) of section 80IB(10) of the Act. The following discussion in the order of the Assessing Officer in para 7.2. is worthy of notice :- "7.2 So far as the project of the assessee is concerned, the terraces which have been mentioned in the report are outside the building line, attached to respective floors. In that sense these terraces are a projection attached to the residential unit. There is also no room under the terrace. These terraces are usable exclusively from the relative flats. Hence, projected terrace becomes the part of the "Built-up area" of the respective flat. Therefore, the same is required to be taken for working out the "Built-up area" of the respective flats." 9. On the basis of the aforesaid, Assessing Officer concluded that the built-up area of the row houses No. 21, 24, 33, 35, 68 & 75 was in excess of the limit prescribed in clause (c) of section 80IB(10) of the Act. As a result, the Assessing Office....
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....o the decision of the Ahmedabad Bench of the Tribunal in the case of Amaltas Associates vs. ITO, (2011) 131 ITD 142 for the proposition that open terrace, not being a balcony or verandah cannot be considered as a part of the 'built-up area' as defined in section 80IB(14)(a) of the Act. According to the learned counsel, the Ahmedabad Bench of the Tribunal was considering the stand of the Revenue that open terrace was to be considered a part of the 'built-up area'. According to him, the Ahmedabad Bench of the Tribunal considered the definition contained in section 80IB(14)(a) of the Act and opined that the definition of expression 'built-up area' includes a balcony which is not an open terrace. Further, it has also been submitted that a 'terrace' is not to be equated to a 'projection', which is one of the components finding place in the definition of the expression 'built-up area' as per section 80IB(14)(a) of the Act. The learned counsel further clarified that in so far as the present case is concerned, it is a case of terrace (open to sky) which is quite distinct from a balcony. It is asserted that the two terms are independent and fo....
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....ugh the said aspect is not emerging from the orders of the authorities below, so however, the built-up area as understood for the purposes of sale-purchase between builder and the ultimate buyer can also be relevant factor to consider as to what all areas are to be considered as a part of the expression 'built-up area' contained in clause (c) of section 80IB(10) of the Act. 14. We have carefully considered the rival submissions. Section 80IB(10) provides for deduction in relation to profits derived from undertaking development and building of a housing project subject to certain conditions prescribed therein. One of the foremost condition is contained in clause (a) of section 80IB(10) of the Act which is to the effect that the housing project eligible for the claim of deduction shall be approved by the local authority. The assessee before us is a builder who has undertaken development and construction of a housing project, named, 'Sai Nisarg Park - Mayureshwar' and the said project has been approved by the concerned local authority i.e. PCMC on 29.07.2005 and undisputedly it complies with the requirement of clause (a) to section 80IB(10) of the Act. There are oth....
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....e definition of built-up area inserted by Finance (No.2) Act, 2004 w.e.f. 01.04.2005 is concerned, it is quite clear that the same is applicable for ascertaining the fulfillment of condition prescribed in clause (c) of the Act in relation to the present project, since the project of the assessee has been approved by the local authority on 29.07.2005 i.e. after the definition of built-up area contained in section 80IB(14)(a) of the Act came into force w.e.f. 01.04.2005. Therefore, in the present case, it is imperative that the meaning of expression 'built-up area' is to be understood having regard to its definition contained in clause (a) of section 80IB(14) of the Act. 17. The Hon'ble Madras High Court in the case of M/s Ceebros Hotels Private Limited (supra) was considering the following question of law :- "Whether on the facts and in the circumstances of the case, the Tribunal was correct in including the open space of the terrace of the 7th floor, within the meaning of the 'built-up area', which has been defined to include the inner measurements of the residential unit at the floor level including the projections and balconies as increased by the thickn....
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....find that though the Hon'ble High Court was considering a project approved prior to 01.04.2005 yet it has taken into consideration the definition of 'built-up area' contained in section 80IB(14)(a) of the Act, which was inserted w.e.f. 01.04.2005. As per the Hon'ble High Court even after assuming that such definition was to be retrospectively applied yet the area of open terrace would not fall within the meaning of the expression 'built-up area'. The Hon'ble High Court referred to the Indian Standard Method of Measurement of Plinth, Carpet and Rentable Areas of Buildings as issued of Bureau of Indian Standards and also the meaning of the aforesaid expression assigned as per the rules and regulations of the local authority and concluded that an open terrace could not be equated to a 'projection' or 'balcony' referred to in section 80IB(14)(a) of the Act. The relevant discussion in the order of the Hon'ble High Court is reproduced hereinafter :- "31. As far as the introduction of definition portion in Section 80- IB(14) w.e.f. 01.04.2005 is concerned, even assuming that the definition Section has retrospective effect, we do not think....
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....d reliance on the unreported decision of the Bombay High Court in Income Tax Appeal No.3315 of 2010 (The Commissioner of Income Tar, vs. M/s.Tinnwala Industries), dated 13.04.2012. A reading of the decision of the Bombay High Court shows that the issue raised therein related to the Assessment Year 2004-2005. Similar contention raised before the Court was taken before the Bombay High Court too. Holding the view that the expression "Built-up area" in a Housing Project approved by the Local Authority does not include the balcony area for the period prior to 1st April 2005, the Bombay High Court held that when the Legislature has introduced the definition of ''Built-up area" by including the balcony area from a particular date, then, the same could not be applied retrospectively. 34. In the decision reported in [2012] 21 Taxmann.com 140 (Karnataka), Commissioner of Income Tax, Central circle vs. Anriya Project Management (Services) Private Limited, rendered by Karnataka High Court, a similar such question was considered. The Karnataka High Court pointed out that prior to 01.04.2005, open balcony area have to be excluded in calculating the built-up area. The Karnataka High Co....
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....cise also by the Revenue. Given the fact that contemplation of deduction is to Housing Projects approved by the Local Authority, we hold that once the Local Authority have excluded open terrace from the working of Built-up area, it is not open to the Revenue to review the approval given by the competent authority to hold that terrace would also be included in the built-up area. As already held the definition also does not speak in different language from what is given in the measurement provision of Bureau of Indian Standard in the context of the definition of Balcony in the Indian Standard. 37. In the circumstances, we have no hesitation in allowing the assessee's appeal, by setting aside the order of the Tribunal. Thus, we hold that the assessee is entitled to deduction in respect of flats in the 7th floor, which do not exceed the required extent as per Section 80-IB (10)(c) that open terrace area, cannot form part of the built-up area." 21. Notably, the Hon'ble High Court also considered an argument from the side of the Revenue to the effect that the sale of the area of open terrace by the assessee to the respective purchaser would justify the inclusion of such ter....
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....e for exclusive use of the respective unit owner is a ground to consider it as a part of 'built-up area' for the purposes of clause (c) of section 80IB(10) of the Act. Thus, the argument of the learned CIT-DR is hereby rejected. 23. In view of the aforesaid judgement of the Hon'ble Madras High Court, we are unable to uphold the stand of the Assessing Officer to include area of terrace as a part of the 'built-up area' in a case where such terrace is a projection attached to the residential unit and there being no room under such terrace, even if the same is available exclusively for use of the respective unitholders. 24. Before parting, we may also refer to the decisions of the Mumbai Bench of the Tribunal in the case of Siddhivinayak Homes, Mumbai (supra) and that of the Hyderabad Bench of the Tribunal in the case of Modi Builders & Realtors (P.) Ltd. (supra) which have been relied upon by the learned CIT-DR in support of her submissions. The Mumbai Bench of the Tribunal was considering as to whether the projections/elevations which were at the floor level and could be utilized as a carpet area were to be considered for the purposes of computing built-up a....
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....part therefrom, it would be also worthwhile to note that the Hon'ble Madras High Court in the case of M/s Ceebros Hotels Private Limited (supra) followed a judgement of the Hon'ble Karnataka High Court in the case of CIT vs. Anriya Project Management (Services) Private Limited, (2012) 21 taxmann.com 140 (Karnataka) and held that the introduction of definition of 'built-up area' in section 80IB(14)(a) of the Act came into force from 01.04.2005 and "the same will have relevance to those Housing Projects, which were approved subsequent to 01.04.2005". The aforesaid view rendered by the Hon'ble Madras and Karnataka High Courts is divergent to what has been concluded by the Mumbai Bench of the Tribunal to the effect that the definition contained in section 80IB(14)(a) of the Act is applicable to assessment year 2007-08 though the project was approved prior to 01.04.2005. In view of the ratio of the decision of the Mumbai Bench of the Tribunal being divergent to that held by the Hon'ble Madras High Court in the case of M/s Ceebros Hotels Private Limited (supra), we are unable to apply it in preference to that of the Hon'ble Madras High Court, which is a superi....
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....separately. Ostensibly, assessee has been found to have fulfilled the condition prescribed in clause (c) of section 80IB(10) of the Act even in relation to six units in question and therefore the entire project of the assessee is eligible for deduction u/s 80IB(10) of the Act. In such circumstances, we reject the Grounds of Appeal No.1 to 3 raised by the Revenue. 30. Now, we take-up the Ground of Appeal No.2 in the appeal of the assessee for assessment year 2007-08. The said Ground relates to assessee's claim for deduction u/s 80IB(10) of the Act in respect of an income of Rs. 60,00,000/- declared by the assessee in the course of search conducted u/s 132(1) of the Act. 31. The relevant facts in the context of the above controversy can be summarized as follows. The assessee individual is a part of Wadhwani group of cases, which was subject to a search and seizure action by the Department u/s 132 of the Act on 13.08.2008. In the course of search, certain incriminating material and information was found. Some of the entities in the group were also simultaneously covered by survey actions u/s 133A of the Act. The group was found to be dealing in purchase and sale of land, dev....
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.... which was eligible for section 80IB(10) benefits. In support of his assertions, a reference has been made to para 8.13 of the assessment order, wherein the Assessing Officer has tabulated the entries found noted in the seized material, which showed the respective projects and the amounts received from different customers. Furthermore, a reference has also been made to an order passed by the Assessing Officer for the impugned assessment year u/s 154 of the Act dated 18.04.2011, wherein the impugned sum of Rs. 60,00,000/- has been accepted as undisclosed receipts from the customers on sale of flats relating to the housing project in question, a copy of the said order has been placed at pages 24 to 31 of the Paper Book. On the basis of the aforesaid fact-situation, the plea of the assessee is that the income in question was nothing but undisclosed sale proceeds received from customers of the Sai Nisarg Park - Mayureshwar; and, therefore the same was to be treated as 'business income' relating to the housing project, which is eligible for section 80IB(10) benefits. Thus, such additional income was also entitled to the benefits of section 80IB(10) of the Act. In support of his ....
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....tain to the assessment year under consideration. In-fact, the tabulation made by the Assessing Officer in para 8.13 of the assessment order which is stated to be based on the seized material, reveals the names of the customers, the date and the amounts received in relation to the housing project, Sai Nisarg Park - Mayureshwar undertaken by the proprietary concern, M/s Mangalmurti Developers. A copy of the deposition made by the assessee u/s 132(4) of the Act has also been placed in the Paper Book at pages 189 to 214, which also supports the aforesaid fact-situation. Therefore, considering the (i) material seized in the course of search; (ii) deposition made by the assessee in the course of search u/s 132(4) of the Act; and, (iii) findings of the Assessing Officer in the assessment order passed u/s 153A(a) r.w.s. 143(3) of the Act dated 27.10.2010 (especially paras 8.2, 8.4 and 8.13) read with order u/s 154 dated 18.04.2011 (supra), it would be appropriate to deduce that the source of the impugned additional income is the housing project, Sai Nisarg Park - Mayureshwar, which has been executed by the assessee in his proprietary concern, M/s Mangalmurti Developers. In other words, fac....
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....t pages 35 to 52. A perusal of the seized material shows that a complete detail of that on-money received is enumerated, viz. name of the customers, amount and the respective flat sold in the project. Even in the deposition made u/s 132(4) of the Act, the partner of the assessee firm made a yearwise detail of additional income declared on account of on-money received on sale of flats in the project. Accordingly, the impugned sum has been declared as unaccounted income from the housing project in question. In the return of income filed in response of notice issued u/s 153A(1)(a) of the Act, assessee has declared such additional income as income from housing project, 'The Crest' at Pimple Saudagar, Pune. The declaration made in the return of income has not been disputed by the Assessing Officer. The only dispute raised by the Assessing Officer is with regard to nature of such income, which according to the Assessing Officer "does not fall under of the any heads of income as described u/s 14 of the I.T. Act". In coming to such conclusion, he has disagreed with the stand of the assessee that such additional income was a 'business income' of the assessee relating to the ....
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....ss undeclared incomes and such provisions are for the benefit of the Revenue and therefore a claim u/s 80IB(10) of the Act cannot be considered in such proceedings, especially when such a claim was not made in the return of income originally filed under section 139 of the Act. In this regard, the learned Departmental Representative has referred to the judgment of the Hon'ble Supreme Court in the case of CIT vs. Sun Engineering Works Pvt. Ltd., 198 ITR 297 (SC) to point out that even in the cases of re-assessment u/s 147/148 of the Act fresh claims cannot be raised by the assessee. Secondly, it is pointed out by the learned Departmental Representative that even if the claim was to be considered then it was not allowable because the requisite condition that the return of income has to be accompanied by the prescribed audit report has not been complied with by the assessee. On the basis of aforesaid reasons, the claim of the assessee has been opposed. 13. Sections 153A to 153C of the Act contain provisions relating to assessments to be made in cases where search is initiated u/s 132 or a requisition is made u/s 132A of the Act after 31st May, 2003. Clause (b) of sub-section (1)....
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....er-alia include section 80IB(10) of the Act, are not applicable to an assessment made under sections 153A to 153C of the Act. In our considered opinion, the phraseology of section 153A r.w. Explanation (i) as noted above, does not support the premise arrived at by the CIT(A) and accordingly, the same is rejected. Therefore, assessee's claim for deduction u/s 80IB(10) of the Act even with regard to the enhanced income was well within the scope and ambit of an assessment u/s 153A(1)(b) of the Act and the Assessing Officer was obligated to consider the same as per law. 15. The other argument of the Ld. CIT-DR to the effect that the return of income was not accompanied by the prescribed audit report on the enhanced claim of deduction is too hyper-technical, and superficial. Pertinently, the Assessing Officer has not altogether denied the claim of deduction and in any case, the claim was initially made in the return originally filed, which was duly accompanied by the prescribed audit report. 16. The argument set-up by the learned Departmental Representative on the basis of the judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works Pvt. Ltd. (supra), in ....
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....t of the Hon'ble Supreme Court in the case of Sun Engineering Works Pvt. Ltd. (supra) does not help the Revenue in the present case. 17. In-fact, the Hon'ble Bombay High Court in the case of Sheth Developers (P) Ltd. (supra) was considering the claim of deduction u/s 80IB(10) of the Act in relation to the undisclosed income declared consequent to the search action. In the case before the Hon'ble High Court, it was factually emerging that undisclosed income was earned by the assessee in the course of carrying on his business activity of a 'builder' and the same was accepted by the Department, but the claim of the deduction u/s 80IB(10) was denied in relation to such income. However, the claim was upheld by the Hon'ble Bombay High Court. In the present case, factually, there is no material to negate the assertion of the assessee, which are borne out of the material on record, that the additional income in question has been received in the course of carrying on its business activity of developing the housing project, 'The Crest' at Pimple Saudagar, Pune, which is eligible for section 80IB(10) benefits. Therefore, in terms of the parity of reasoning l....
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....e fact-situation in the case before the Chandigarh Bench of the Tribunal and find that the ratio of the said decision has to be understood with reference to peculiar facts of the case. In the case before the Chandigarh Bench of the Tribunal, the undisclosed income surrendered by the assessee in the course of search was in the shape of unaccounted cash, investments etc. and the material seized did not show the sources of acquisition of the undisclosed income reflected by such unaccounted cash, etc.. So however, in the present case, it is factually clear that the impugned additional income is nothing but monies received by the assessee from customers against sale of flats in its housing project, Sai Nisarg Park - Mayureshwar, which was not recorded in the regular account books. Clearly, in the case before us, source of additional income is the execution of the housing project and once the source of income is established, the assessability has to follow. The said fact-position is quite different and distinct from what was before the Chandigarh Bench of the Tribunal and therefore the proposition laid down by the Chandigarh Bench of the Tribunal is not applicable to the present fact-sit....