Asst.Cit,Cir-5(1), Hyderabad vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES "A", HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND Smt. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA No. & C.O. A.Y. Appellant Respondent/ therein Cross-Objector 1498/Hyd/2012 2003-04 & CO 159/Hyd/12 1499/Hyd/2012 2003-04 & The Asst. CO 160/Hyd/12 Commissioner of M/s. Sahara States, 1500/Hyd/2012 2004-05 Income Tax, Hyderabad & CO 161/Hyd/12 Circle-5(1), 1501/Hyd/2012 2004-05 [PAN: AAAJS2519Q] & Hyderabad. CO 162/Hyd/12 1848/Hyd/2011 2005-06 The Dy. Commissioner & of Income Tax, CO. 4/Hyd/12 Circle-5(1), Hyderabad. 1886/Hyd/2011 2006-07 Sahara States- The Dy. Commissioner Hyderabad, AOP of Income Tax, (Joint Venture), Circle-5(1), Saifabad, Hyderabad. Hyderabad [PAN: AAAJS2519Q]

For Revenue : Smt. Anjala Sahu, DR For Assessee : Shri P.J. Pardiwalla, AR

Date of Hearing : 09-06-2015 Date of Pronouncement : 17-06-2015

ORDER

PER B. RAMAKOTAIAH, A.M. :

These group of appeals, since common issues are involved, are heard together and disposed-off by this common order. Most of the appeals from Assessment Year (AY) 2003-04 to 2005-06 are by Revenue, :- 2 -: M/s. Sahara States

whereas appeal in AY. 2006-07 was filed by M/s. Sahara States. There are cross objections by assessee mostly supporting the orders of the CIT(Appeals).

2. Briefly stated facts common to appeals in all these years are that, assessee is an AOP, constituted vide agreement dt. 30-11-2001. The joint venture agreement was made between M/s. Sahara India Commercial Corporation Ltd., Sahara India Financial Corporation Ltd., Sahara India Corporation Ltd., and Sain Processing and Weaving Mills Pvt. Ltd., with an intention to continue and carry on the project which was being developed individually by them. Assessee-AOP took over the project, developed the housing project and claimed deduction u/s. 80IB(10) of the Income Tax Act [Act], as per the then existing provisions, commencing from AY. 2003-04. In the original assessment completed u/s. 143(3) for AYs. 2003-04, 2004-05 and 2005-06, Assessing Officers (AOs) did examine the eligibility of the assessee and allowed the claim of deduction after due verification of all agreements, documents and also field verification by the Inspector in respective assessment years. Subsequently, while completing the assessment for AY. 2006-07, the AO insisted on furnishing 'Project Completion Certificate'. Since assessee could not furnish the same, AO took the view that assessee was not eligible for deduction u/s. 80IB(10). Consequently, the assessments completed in earlier years were re-opened u/s. 147 mainly on the reason that assessee has failed to furnish the 'Project Completion Certificate'. AO relied on the Board's Letter in D.O. No. 277/Misc.46 dt. 02-05-2008 for verification of the deduction claimed u/s. 80IB(10). Recording the reasons accordingly, the AO issued notices u/s. 147 and completed the assessments disallowing the claim basically on 3 reasons:

:- 3 -: M/s. Sahara States

(a) That the housing project was started much before 01-10- 1998 by acquiring the land in the year 1996;

(b) That AOP has not commenced the project rather continued the ongoing project of the individual members; and

(c) That the project has not been completed within the specified limits i.e., on or before 31-03-2008.

By elaborately discussing these issues, the AO in the impugned assessment years, disallowed the claim in the re-assessment proceedings in AY. 2003-04, 2004-05 & 2005-06 and u/s. 143(3) in AY. 2006-07.

3. Before the Ld.CIT(A) it was contended that assessee has complied with all the conditions of Section 80IB(10). These were verified by the AO at the time of original assessment, including field verification by the I.T.I. Subsequent reopening of assessment is nothing but change of opinion by the officer and there is no valid reason to reopen the assessment u/s. 147. It has raised various contentions and relied on various case law in support of the contentions, questioning the validity of reopening of assessments in the three impugned assessment years. In AY. 2006-07, however, since the assessment was first time completed u/s. 143(3), assessee's argument was with reference to project completion and evidence that the project was completed, but the necessary certificate was not given by the authorities. The Ld.CIT(A) while upholding the assessment and the stand of the AO in AY. 2006-07 however, cancelled/set aside the assessments which were reopened, as bad in law. His order, in detail in AY. 2005-06, was as under:

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"5.3 Given the above ratios, the facts in the present case are examined. Firstly, I find that in the present case, the Assessing Officer had examined the issue of allowability of deduction u/s. 80IB(10) in great amount of detail vide his order dated 30-03-2007 passed u/s. 143(3) of the Act. Relevant portions of the order of the Assessing Officer referred to is quoted below:

"The assessee's project site is situated at Mansoorabad Village, Saroornagar Mandal, Ranga Reddy District. The members of the AOP are M/s. Sahara India Commercial Corporation Ltd., (previous M/s. Sahara India Housing Ltd., Calcutta) M/s. Sahara India Financial Corporation Ltd., (Lucknow), M/s. Sahara India Corporation Ltd., (New Delhi) and M/s. Sain Processing and Weaving Mills (P) Ltd., New Delhi.

During the previous year relevant to the AY. 2005-06, the assessee claimed deduction under sub-section 10 of Sec. 80IB of the IT Act for an amount of Rs. 3,45,15,612/- the profits being derived from developing & building housing project. The sub section 10 of Sec. 80 IB relevant for the AY. 2005-06 stipulated as under:

The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2005, by a local authority, shall be 100% of the profits derived in any previous year relevant to any AY from such housing project, if -

a) Such undertaking has commenced or commences development and construction of the housing project on or after the first day of October 1998 and completes such construction:

(i) In a case where a housing project has been approved by the local authority before the 1st day of April, 2004 on or before the 31st day of March, 2008;

(ii) In a case where a housing project has been or is approved by the local authority on or after the 1st day of April, 2004, within 4 years from the end of the FY in which the housing project is approved by the local authority;

Explanation - for the purpose of this clause -

(i) In a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;

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(ii) The date of completion of construction of the housing 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 Govt. or State Govt. for reconstruction or redevelopment of existing building 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 1,000 sq. ft., where such residential unit is situated within the cities of Delhi or Mumbai or within 25 kilometers from the municipal limits of these cities and 1,500 sq. ft., at any other place.

d) The built up area of the shops and other commercial establishments included in the housing project does not exceed 5% of the aggregate built up are of the housing project or 2,000 sq. ft., whichever is less."

In order to verify the allowability of the assessee's claim of deduction u/s. 80IB (10) of IT Act, the assessee was asked to file certain information/explanation, documents, lay-out plans, typical floor plans, etc., in support of its claim.

The assessee is engaged in the construction of group housing projects and as per the documents and the information produced during scrutiny proceedings, the project is spread over on a total land of 44.63 acres situated at Mansoorabad Village, Saroor nagar Mandal, Ranga Reddy District. This land was acquired by the assessee in the year 1996 from Sri Mayur Kunj & other. As this land was earlier notified for the use of conservation, later on it was changed from conservation use to residential use by the State Govt. of AP and the draft variation was published in the AP Gazedtte, dt. 19-03-1998. The assessee's AR, Shri Mudit Saxena stated that the project was commenced w.e.f. 10-07- 1999.

During the course of scrutiny proceedings, the assessee's AR produced copies of the lay out plan along with the sanction letter of Hyderabad Urban Development Authority (HUDA) (in letter no. 14870/MP2/HUDA/98 dt. 07-07- 1999) and LB Municipality (in proc. No. G2/3221/99 dt. 25-08-1999) in respect of the entire land of 44.63 acres. The assessee's AR stated that the project consisting of various types of houses and these types are further divided into blocks. Copies of typical floor plans approved by HUDA/LB Nagar Municipality :- 6 -: M/s. Sahara States

in respect of all the types/blocks relevant to the financial year 2003-04 and the details of such approvals are furnished by the assessee's Authorised Representative as mentioned below:

Type Name of the Block Date of HUDA Date of LB Nagar approval Municipality approval Type-I Vrindavani Gandhar 07-07-1999 25-08-1999 Type-II New Malhar 07-07-1999 25-08-1999 07-07-1999 & 07-01-2004 25-06-2003 Type-III Malhar Bahar 07-07-1999 25-08-1999 A (West) 07-07-1999 & 25-08-1999 15-02-2002

Bahar B (West) 07-07-1999 & 25-08-1999 15-02-2002 Future Houses New Bahar A&B 07-07-1999 & 07-01-2004 Yaman 25-06-2003 07-07-1999 & 07-01-2004 25-06-2003 Plotted House Kalyani 07-07-1999 & 07-01-2004 25-06-2003

To find out whether the assessee had followed the eligibility criteria for claiming deduction under sec. 80IB (10) of IT Act and whether the project was built within the frame-work of this Section, the Inspector of this office was directed to visit the project site and verify the construction activity going on in the site. The Inspector physically inspected the project with the help of one Civil Engineer, Shri Balakrishna and submitted a detailed report which is reproduced below:

"As directed by the ACIT, Circle-5(1), Hyderabad, I have visited the site of M/s. Sahara States, Hyd. Sitated at Mansurabad Village, Ranga Reddy Dist., alongwith Shri Mudit Saxena on 20-03-2007.

For the AY. 2005-06 also the assessee has claimed exemption u/s. 80IB for the income earned on the sale of the following residential flats during the previous year relevant to the AY. 2004-05 as detailed below (Except in respect of Kalyani Project):

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Name of the No of Blocks Total No. of No. of units Block units as per sold during plan the AY. 05-06 Type-I Vrindavani 4 144 19 Type-II i) Gandhar 13 156 10 ii) New Malhar 13 156 81 16 Type-III Malhar 16 192 06 Plotted Kalyani Independent 80 11 Houses Bahar - 280 15 - Row A&B -do- (BA 9+BB 6) Future i) New Bahar -do- 38 7 Group Houses ii) Yaman -do- 17 2 Total sold 184

HUDA Original approval for construction of group houses dt. 07-07-1999 was produced for verification at the time of my visit (Copy of which is available on record).

During my visit, I had taken the help of Site engineer of Shara Group, Shri Balakrishna for physical verification/measurements of units sold at random in each type as it is impracticable to take the measurement of all the units sold during the relevant previous year 2003-04 under various types:

The are as per the measurement of each type/block is found as under:

Name of the Built - up area as per physical Block measurement taken Type-I Vrindavani 300 sq. ft. to 312 sq. ft. Type-II Gandhar 509 sq. ft. to 527 sq. ft. Type-II New Malhar 815 sq. ft. to 858 sq. ft. Type-III Malhar 768 sq. ft. to 779 sq. ft. Row Bahara - A Category I - 640 sq. ft. to 648 sq. ft. Houses (West) Alfa - 819 sq. ft. to 829 sq. ft. Beta - 940 sq. ft. to 951 sq. ft. Gama - 1460 sq. ft. to 1464 sq. ft. Future Yaman Type-I - 1130 sq. ft. to 1135 sq. ft. Group Type-II - 810 sq. ft. to 815 sq. ft. Houses New Bahar - 810 sq. ft. to 816 sq. ft. Kalyani Plotted 1508 sq. ft. to 1520 sq. ft. Houses No. of 30 shops shops sold :- 8 -: M/s. Sahara States

The assessee has taken separate approval for each Type of Block.

During the year, the assessee sold 30 commercial shops, which is verified from the sale deeds furnished. The assessee firm restricted its claim u/s. 80IB to the profits earned on sale of residential flats and offered income on commercial shops and Kalyani Project.

During the course of scrutiny proceedings, the expenditure claimed towards Booking Commission amounting to Rs. 35,23,018/- was verified with respect to the bills/vouchers produced by the assessee. It is observed that an expenditure amounting to Rs. 3,49,855/- is not properly supported by vouchers. Hence, the same is disallowed and added.

5.3.1. From the above, I find that complete details of the project were called for during assessment proceedings and examined. The eligibility criteria under section 80IB(10) were examined in detail. Even physical inspection of the site was carried out and help of the site engineer was also taken. Detailed investigations were made and lay out plans, sanction letters, approvals, valuations, physical measurements of various flats were made. After such detailed investigations on the same issue, the Assessing Officer opined that deduction under section 80IB(10) was allowable."

5.4 Keeping in view the above facts, it is clear that the issue of notice under section 148 was based on a change of opinion as no fresh information has come to the knowledge of the Assessing Officer which would help him to form a belief that income had escaped assessment. Moreover, the letter from the CBDT referred to by the Assessing Officer was never given or shown to the appellant inspite of specific requests. In any case, the letter referred to did not give information on tax evasion by the appellant".

4. While adjudicating the issue, the Ld.CIT(A) also relied on the following for various legal principles, ie. that the assessment cannot be reopened by a mere change of opinion or by drawing a different inference from the same facts as were earlier available :

(a) CIT Vs. Kelvinator of India Ltd., [320 ITR 561 (SC)] [256 ITR 1] [174 CTR (Del) (FB) 617;

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(b) Apollo Hospitals Enterprises Limited [287 ITR 25] (Hon'ble Madras High Court); and

(c) CIT Vs. Abdul Rahaman Sait [306 ITR 142] (Hon'ble Madras High Court).

5. Revenue is in appeal in three assessment years, in which CIT(A) did not approve the reopening of assessment whereas, assessee is in appeal in AY. 2006-07, wherein Ld.CIT(A) upheld AO's stand in denying the deduction u/s. 80IB(10).

6. Ld. DR vehemently submitted that there was no change of opinion as contended by assessee and accepted by the Ld.CIT(A) as assessee has not furnished 'Project Completion Certificate' nor furnished the complete details of AOP as pointed out by the AO. It was the submission that the original project has started way back in 1996 and therefore, it did not satisfy the conditions laid down u/s. 80IB(10). Ld. DR relied on the following:

(a) Hon'ble Supreme Court in the case of Rajesh Jhavery stock Brokers P. Ltd [291 ITR 500] (SC);

(b) Central Provinces Manganese ore Co Ltd Vs ITO [191 ITR 662]; for reopening and

(c) Co-ordinate bench decision in the case of Sainath Estates P. Ltd., vs. DCIT 08-02-2013 for the proposition that deduction was not allowable on failure to furnish completion certificate of housing project.

Detailed written submissions were also placed on record in support of the contentions.

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7. Ld. Counsel for the assessee however, countering the arguments of the DR submitted that land was acquired way back in 1996 on which there is no dispute. But, the AOP was constituted by the members contributing the land as their capital and referred to various findings by the AO at the time of original assessment that the various approvals have been obtained consequently and the project has started after 01- 10-1998. He referred to the Paper Book filed in this regard to submit that AO at the time of assessment u/s. 143(3) in respective assessment years not only examined in detail the eligibility of the assessee with reference to various permissions, projects, expenditures but also deputed his Inspector to verify the measurements of the various housing units being constructed. Since the AO examined in detail and found satisfied with the fulfilling of conditions for claiming deduction U/s 80IB(10) allowed the same. Without mentioning any non-furnishing of information by assessee, the assessments are reopened after end of four years for the AYs. 2003-04 and 2004-05. Even though, assessment for AY. 2005-06 was reopened within four years, as held by the Hon'ble Gujarat High Court in the case of Kalpataru Sthapatya (P) Ltd. Vs. ITO [346 ITR 371] and also Hon'ble Bombay High Court in the case of Prashant S. Joshi Vs. ITO & Anr. [324 ITR 154], there cannot be any reason to believe so as to reopen the assessment when assessee satisfied all the conditions and the deductions were allowed. Accordingly, he supported the order of the CIT(A) in cancelling the reopening of assessments.

8. Coming to the merits of the issue, it was submitted that there are only three conditions when the project has started which the assessee satisfied, therefore, the reopening on the basis of 'Project Completion Certificate' having not filed does not arise, as such condition came subsequently with the Finance Act, 2004 by an amendment to the Act :- 11 -: M/s. Sahara States

w.e.f. 01-04-2005. Since the project was approved prior to 01-04-2005, this condition of completion before 31-03-2008 was not specified at the time of starting the project and the same cannot be implemented or could not be visualized. For this proposition relied on the judgment of Hon'ble Supreme Court in the case of CIT-19, Mumbai Vs. M/s. Sarkar Builders in Civil Appeal No. 4476 of 2015 arising out of SLP (C) No. 24330 of 2011 dt. 15th May, 2015. Not only that Ld. Counsel also placed on record the correspondence with the local authorities for furnishing the completion certificate and evidence with reference to the fact that project was completed by 31-03-2008. It was the contention that AO cannot insist on 'Project Completion Certificate' based on subsequent amendment and cannot deny the deduction as relevant authorities are not issuing the certificate, even though assessee has indeed completed the project within the time limits, even contemplated by the amended provisions. However, the main contention of the Ld. Counsel is that assessee cannot be asked to fulfill the condition which was not there when the project was approved and the condition was not stipulated at the time of claiming the deduction.

9. We have considered the rival contentions and perused the records and Paper Book placed on record. As far as reopening of assessments u/s. 147/148 are concerned, we agree with the Ld.CIT(A) that this is a mere change of opinion. In fact, the AO at the time of completion of assessment has indeed taken pains in examining the eligibility and also deputed his inspector and allowed the deduction after due verification. There is also no dispute that the relevant provision of Secton 80IB(10) at the time of claim in AY. 2003-04 was as under:

"(10) The amount of profits in case of an undertaking developing and building housing projects approved before the 31st day of March, 2005 by a local authority, shall be hundred per cent of the profits derived in any :- 12 -: M/s. Sahara States

previous year relevant to any assessment year from such housing project if, -

(a) Such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998;

(b) The project is on the size of a plot of land which has a minimum area of one acre; and

(c) The residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place".

Thus, there are three conditions stipulated originally under the provisions of Section 80IB(10).

10. As far as chronological events of the housing projects are concerned, there is no dispute to the following facts:

(i) In the year 1996, M/s. Sahara India Housing Ltd., M/s. Sahara Financial India Corporation Ltd., M/s. Sahara States etc., and others acquired land admeasuring 44.63 acres from Sri Mayur Kunj & others.

(ii) Land use was changed from 'conservation to residential use' by Government of Andhra Pradesh. Variation in land use was published in Andhra Pradesh gazette on 19-03-1998.

(iii) The Housing project has seven blocks namely, Vrindavani, Gandhar, Mallhar, New Mallhar, Bahar, New Bahar and Yaman.

These block have flats as well as row houses ranging from 345.83 sq. ft to 1498 sq. ft.

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(iv) The Hyderabad Urban Development Authority (HUDA), sanctioned building plans in respect of blocks Vrindavani, Gandhar and Mallhar vide letter dated 07-07-1999 in respect of Bahar building plans were sanctioned on 15-02-2002 and building plan for remaining blocks were sanctioned on 25-06-2003.

(v) L B Nagar Municipality granted approval for entire land of 44.63 acres on 25-08-1999.

(vi) Development and construction of housing project was started w.e.f. 10-07-1999 i.e., immediately after sanction of building plans.

11. The above chronological events were not disputed by the either of the parties. It was only the contention of the later AO that since assessee has purchased the land as early as 1996, the project was to be deemed to have started then and the same was prior to 01-10-1998. Therefore, the assessee is not eligible for deduction. This contention cannot be accepted as the project was not even approved by the local authorities. Not even by 01-10-1998, as can be seen from the approvals stated above. Therefore, the project has started after 01-10-1998 and therefore, the contention of the AO that the project started before that date is not factually correct. Moreover, claim of assessee that assessee has entered into joint venture agreement and all the parties have started the project in their individual capacity. As per record, members contributed their land as capital, whereas the project was conceived and constructed by the AOP and the claim was accordingly made in the hands of the AOP. Since these aspects were examined by the AOs at the time of original assessment, the opinion of the subsequent AO that AOP continued the project cannot be accepted. Lastly, with reference to the 'project completion' which was one of the reasons for reopening :- 14 -: M/s. Sahara States

assessments and also for denying the deduction in AY. 2006-07 (which was upheld by the CIT(A)), this was on the basis of subsequent amendment to Sub-Section 10 of Section 80IB(10) w.e.f. 01-04-2005. Furnishing of 'Project Completion Certificate' was not even stipulated in AYs. 2003-04 and 2004-05, therefore, that cannot be the basis for reopening the assessments. Therefore, AO's stand on this regard cannot be accepted.

12. As far as AY. 2005-06 and 2006-07 are concerned, this condition has come up for the first time by the amendment to the Act for all the projects which are approved before 01-04-2004, but on or after 01-04- 1998. This issue of stipulation for completion of project by 31-03-2008 is subject matter of litigation, as various assessees have been denied deduction based on the amended provisions of the Act. The matter has ultimately reached Hon'ble Supreme Court and by the judgment in the case of CIT-19, Mumbai Vs. M/s. Sarkar Builders (supra), this issue was set at rest by the Hon'ble Supreme Court, while examining the amended provisions of the Section 80IB. (extracts)

"We are concerned with the amendment to the said sub-section carried out by Finance No.2, Act, 2004 w.e.f. 01-04-2005. In all these cases, though the housing projects were sanctioned much before the said amendment but have been completed after 01-04-2005 when amended provision has come into operation. It is also not in dispute that the amendment is prospective in nature. Interestingly, when the housing project was approved by a local authority, which is the requirement under sub-section (10) of Section 80IB, as on that date, the conditions stipulated in the said sub-section were met by the assessees. However, condition in clause (d) which was laid down for the first time by the amendment made effective from 01-04-2005 is not fulfilled. In this scenario, the question is as to whether the new conditions mentioned in the amended provision have also to be fulfilled only because the housing projects in question, though started before 01-04-2005, were completed after the said date. The question of law, that arises for discussion that needs to be answered is thus common in all these appeals and can be formulated as under:

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"Whether Section 80IB(10)(d) of the Income Tax Act, 1961 applies to a housing project approved before 31-03-2005 but completed on or after 01-04-2005?"

13. Even though the Hon'ble Supreme Court was mainly concerned with Clause - (d) of Section 80IB(10) as amended, the Hon'ble Supreme Court dealt with the entire provision and approved the Hon'ble Bombay High Court judgment in the case of CIT Vs. M/s. Brahma Associates [333 ITR 289]. Hon'ble Supreme Court vide para 12 has held as under:

"12. The issues dealt with from paras 21 to 25 by the High Court already stands approved by this Court. In para 29, the High Court has held that clause (d) has prospective operation, viz., with effect from 01-04-2005, and this legal position is not disputed by the Revenue before us. Wheat follows from the above is that prior to 01-04-2005, these developers/assessees who had got their projects sanctioned from the local authorities as 'housing projects' even with commercial user, though limited to the extent permitted under the DC Rules, were convinced that they would be getting the benefit of 100% deduction of their income from such projects under Section 80IB of the Act. Their projects were sanctioned much before 01-04-2005. As per the permissible commercial user on which the project was sanctioned, they started the projects and the date of commencing such project is also before 01-04-2005. All these assessees were made known of the provision by which these projects are to be completed as those dates have been specified from time to time by successive Finance Acts in the same provision Section 80IB. In these cases, completion dates were after 01-04-2005. Once they arrange their affairs in this manner, the Revenue cannot deny the benefit of this section applying the principle of retroactivity even when the provision has no retrospectivity. Take for example, a case where under the extant DC Rules, for shops and commercial activity construction permitted was, say, 10% and the project was also sanctioned allowing a particular assessee to construct 10% of the area for commercial purposes. The said developer started with its project much prior to 01-04-2005 with the aforesaid permissible use and the construction was at a very advanced stage as on 01-04-2005. Can it be argued by that Revenue that he is to demolish the extra coverage meant for commercial purpose and bring the same within the limits prescribed by the new provision if he wanted to avail the benefit of deduction under section 80IB(10) of the Act, only because of the reason that the project was not complete as on 01-04-2005? As in such a case he filed his return for an assessment year after 01-04-2005 and for the purpose of assessment of the said return, law prevailing as on that date :- 16 -: M/s. Sahara States

would be applicable? Answer has to be in the negative on the principle that with the aforesaid planning as per the law prevailing prior to 01-04- 2005, these assessees acted and acquired vested right thereby which cannot be taken away. It is ludicrous on the part of the Revenue authorities to expect the assessees to do something which is almost impossible".

Respectfully following the same, we are of the opinion that assessee cannot be compelled to comply with the condition or fulfill the condition which was not stipulated at the time of sanction of the project. The case law relied on by Ld. DR does not apply on facts and also in view of judgment of Hon'ble Supreme Court cited above..

14. Apart from the judicial principles as stated by the Hon'ble Supreme Court, even on facts also the deduction cannot be denied. Assessee has completed its project by 31-03-2008 and has requested the local authorities for approving the final project. If the local authorities did not issue the 'Project Completion Certificate' as requested by assessee, it is not possible to furnish the said certificate to the Revenue authorities. All the evidences on record do indicate that assessee has completed the project, therefore, just because assessee could not furnish the 'Project Completion Certificate', the deduction cannot be denied on that basis. the eligible deduction cannot be denied to the assessee.

15. In view of the above, we uphold the orders of the CIT(A) setting aside the reassessment proceedings in AYs. 2003-04, 2004-05 and 2005-06. Revenue appeals have no merit and accordingly they are dismissed.

16. As far as AY. 2006-07 is concerned, for the detailed discussion made above, assessee is eligible for deduction u/s. 80IB(10) and therefore, AO is directed to allow the same. Since the assessment is :- 17 -: M/s. Sahara States

completed u/s. 143(3), issue of reopening does not arise. Therefore, on merits, assessee's contentions are accepted and AO is directed to allow the deduction.

17. The cross appeals are in support of CIT(A)'s order. Since we have dismissed all the appeals of Revenue, all the Cross appeals have become academic in nature and considered as infructuous.

Penalty orders in ITA No. 1499/Hyd/2012, C.O.No. 160/Hyd/2012 (AY.2003-04) & 1501/Hyd/2012, C.O.No. 162/Hyd/2012 (AY.2004-05) :

18. The AO levied penalty u/s 271(1)(c) after the claim was disallowed. We have upheld the orders of CIT(A) setting aside the reopening of assessments. Consequently, there cannot be penalty in impugned years. The orders of the CIT(A) cancelling the penalty levied by the AO in reopening assessment proceedings are to be upheld. Revenue's appeals are accordingly dismissed. The cross objection in support of CIT(A) orders are accordingly dismissed as infructuous.

19. In the result, all the appeals of Revenue and cross objections of assessee are dismissed and assessee's appeal in ITA No. 1886/Hyd/2011 for the AY. 2006-07 is allowed.

Order pronounced in the open Court on 17th June, 2015

Sd/- Sd/-

(ASHA VIJAYARAGHAVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 17th June, 2015

TNMM :- 18 -: M/s. Sahara States

Copy to :

1. The Dy. Commissioner of Income Tax, Circle-5(1), Hyderabad.

2. The Asst. Commissioner of Income Tax, Circle-5(1), 6th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad.

3. M/s. Sahara States-Hyderabad, AOP (Joint Venture), Sahara States, Sahara Manzil, Saifabad, Hyderabad.

4. CIT(Appeals)-V, Hyderabad.

5. CIT-IV, Hyderabad.

6. D.R. ITAT, Hyderabad.

7. Guard file.