2014 (2) TMI 944 - AT - Income Tax

Nature of Income Whether the income falls under any of the heads of income as described u/s 14 of the I.T. Act Held that - The income is nothing but unaccounted money received by the assessee from customers on account of sale of flats of its housing project, The Crest at Pimple Saudagar, Pune - the source of the additional income is the sale of flats in the housing project, The Crest thus, once the source of income is established the assessability has to follow - The nature of income has to be treated as business income , the same was not accounted for in the account books. Deduction u/s 80IB(10) of the Act Search conducted u/s 132(1) of the Act Held that - Having regard to the expression all other provisions of this Act shall apply to the assessment made under this section in Explanation (i) of section 153A of the Act, it clearly implies that in assessing or reassessing the total income for the assessment years specified in section 153A(1)(b) of the Act, the import of section 80A(1) of the Act comes into play, and there shall be allowed the deductions specified in Chapter VIA of the Act, of course subject to fulfillment of the respective conditions - the phraseology of section 153A r.w. Explanation (i) does not support the premise arrived at by the CIT(A) thus, the 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. 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 thus, Relying CIT vs. Sheth Developers (P) Ltd. 2012 (8) TMI 159 - BOMBAY HIGH COURT the claim of the assessee is justified thus, assessee is eligible for deduction u/s 80IB(10) of the Act in relation to additional income offered in a statement u/s 132(4) of the Act in the course of search and subsequently declared in the return filed in response to notice u/s 153A(1)(a) of the Act Decided in favour of Assessee.

Issues Involved:
1. Deduction claim under Section 80IB(10) of the Income-tax Act, 1961.
2. Treatment of additional income declared during a search under Section 132(1) of the Act.
3. Applicability of deductions under Chapter VIA in assessments made under Section 153A of the Act.
4. Classification of income as 'business income' or 'income from other sources'.

Issue-wise Detailed Analysis:

1. Deduction Claim Under Section 80IB(10):
The core issue in these appeals is the assessee's claim for deduction under Section 80IB(10) of the Income-tax Act, 1961. The assessee, a partnership firm engaged in the construction business, was subject to a search under Section 132(1) on 06.10.2009. During the search, the partner admitted certain undisclosed income related to a housing project. The assessee included this additional income in its returns and claimed a deduction under Section 80IB(10). The Assessing Officer and the CIT(A) denied this claim, arguing that the additional income was not 'business income' and that deductions under Chapter VIA were not applicable in assessments under Section 153A.

2. Treatment of Additional Income Declared During a Search:
The additional income in question was derived from on-money received from customers on the sale of flats in the housing project 'The Crest' at Pimple Saudagar, Pune. The Assessing Officer accepted the additional income as part of the total income but did not classify it as 'business income', thereby denying the deduction under Section 80IB(10). The CIT(A) upheld this view, classifying the additional income as 'income from other sources'.

3. Applicability of Deductions Under Chapter VIA in Assessments Made Under Section 153A:
The Tribunal examined whether deductions under Chapter VIA, including Section 80IB(10), apply to assessments made under Section 153A. It was concluded that all provisions of the Act, including deductions under Chapter VIA, apply to assessments made under Section 153A, as per Explanation (i) below Section 153A. Therefore, the Tribunal rejected the CIT(A)'s view that Chapter VIA benefits are not applicable in such assessments.

4. Classification of Income as 'Business Income' or 'Income From Other Sources':
The Tribunal found that the additional income was indeed derived from the housing project and should be classified as 'business income'. The material seized during the search and the statements made by the assessee's partner supported this classification. The Tribunal disagreed with the Assessing Officer and the CIT(A), who classified the income as 'income from other sources'.

Conclusion and Judgment:
The Tribunal allowed the assessee's appeals, directing the Assessing Officer to allow the deduction under Section 80IB(10) for the additional income declared. The Tribunal emphasized that the additional income was part of the business income from the eligible housing project and thus qualified for the deduction. The Tribunal's decision applied to all the assessment years under appeal, including the year 2010-11, where the return was filed under Section 139.

Order Pronounced:
The Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to allow the deduction under Section 80IB(10) for the assessment years in question. The appeals were allowed, and the order was pronounced in open court on 30th January 2014.

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