2011 (5) TMI 958 - AT - Income Tax

Deduction under section 80-IB(10) - Statements Based on Survey Operations - In the original assessment, the AO declined the assessee s claim for deduction u/s 80-IB(10) on account of violation of the conditions as specified in the said section - Matter remitted back for allowing deduction - As per Assessee, AO did not verify the area-wise calculation and simply proceeded on the basis of declaration made during the survey proceedings HELD THAT - AO was required to verify the area-wise calculation done during the course of survey operation. He clearly proceeded to take the declaration made during survey proceedings as gospel truth and did not bother to verify the same. In appeal, the CIT(A) has confirmed this action of the AO, this approach, in our opinion, is a very superficial way of looking at things. Once the CIT(A) in the original quantum proceedings specifically directed the AO that deduction u/s.80IB(10) has to be allowed subject to verification it is not open to the AO to proceed to adopt the calculation made during survey operation without further verification. We, therefore, deem it fit and proper to remit the matter back to the file of the AO with specific direction to verify the area-wise calculation of all ineligible flats and allow deduction u/s.80IB(10) on pro-rata basis in respect of flats which are found to be eligible for deduction irrespective whatever statement may have made by the assessee during the survey operation. It is only elementary that the statements made in the course of survey proceedings u/s 133A have no evidentiary value and when the assessee can demonstrate that the statement so made is at variance with actual facts, such statement cannot, by any stretch of logic, be used against the assessee.The area-wise calculation of flat size, which is basis for ascertaining eligible for deduction, needs to be verified and the Assessing officer must do so while giving effect to the order - Matter restored back

Summary

Issues:
- Disallowance of deduction under section 80-IB(10) by AO
- CIT(A) direction to allow deduction on pro-rata basis
- AO's failure to verify area-wise calculation during survey
- Appeal against CIT(A) decision

Issue 1: Disallowance of deduction under section 80-IB(10) by AO
The assessee, engaged in construction and property development, had its claim for deduction under section 80-IB(10) denied by the AO initially. This denial was based on the AO's view that the conditions specified in the section were violated.

Issue 2: CIT(A) direction to allow deduction on pro-rata basis
Upon appeal, the CIT(A) directed the AO to allow the deduction under section 80-IB(10) on a pro-rata basis for eligible flats, citing various judgments supporting a liberal interpretation of the provisions. The directive was for the AO to verify the area-wise calculation during a survey operation.

Issue 3: AO's failure to verify area-wise calculation during survey
The AO, while giving effect to the CIT(A)'s direction, did not verify the area-wise calculation as instructed. Instead, the AO re-computed the deduction based on the assessee's statement during the survey proceedings, leading to a revised total income.

Issue 4: Appeal against CIT(A) decision
The assessee was dissatisfied with the AO's approach and appealed to the CIT(A), arguing that the area-wise calculation was not verified as directed. The CIT(A), despite acknowledging the need for verification, upheld the AO's decision based on the survey operation's declaration. The matter was then brought before the Appellate Tribunal.

The Tribunal, after considering the contentions and the factual matrix, found the AO's failure to verify the area-wise calculation unacceptable. The Tribunal emphasized the importance of verifying the eligibility of flats for deduction under section 80-IB(10) and directed the AO to conduct the necessary verification. The Tribunal highlighted that statements made during survey proceedings hold no evidentiary value and should not be solely relied upon. The decision was to remit the matter back to the AO for proper verification and allowance of deduction on a pro-rata basis for eligible flats.

In conclusion, the appeal was allowed for statistical purposes, and the matter was remitted to the AO for compliance with the Tribunal's directions.