2015 (7) TMI 992 - AT - Income Tax

Disallowance of deduction claimed u/s 80IB(10) - Held that - Assessee has demonstrated with supportive documentary evidence that it is eligible for the claim of deduction u/s. 80IB(10) of the Act and the same is allowable not only on the profit disclosed in the pre-search returns of income filed u/s. 139(1) but also on the entire profit including the one disclosed additionally subsequent to the search proceeding u/s. 132 of the Act and disclosed in the return of income filed u/s. 153A of the Act. Even otherwise based on the rule of consistency if the eligible project undertaken remains the same and the conditions are satisfied and if deduction is allowable in the first assessment year (which is A.Y. 2006-07 in the assessee s case) then the same has to be allowed in the subsequent assessment years. - Decided in favour of assessee. Additional claim of deduction u/s. 80IB(10) claimed on the basis of seized document and statement u/s. 132(4) - Held that - Assessee is entitled for claim of deduction in respect of additional income detected consequent to search is entitled to claim of deduction u/s. 80IB(10) of Act which is part of sale proceeds of flats of the project in question including cost of land totaling to ₹ 2.75 crore detected as result of search. This view is fortified by decision of Hon ble Gujarat High Court in case of CIT Vs. Suman Paper Boards Ltd. 2009 (2) TMI 66 - GUJARAT HIGH COURT wherein held the assessee will be eligible for deduction u/s. 801/80IA of the Act in respect of undisclosed income under the block period, by holding that the assessee can t be denied the deduction u/s.80IA. As assessee firm has already submitted special audited report u/s. 80IB of the Act (Form No. 10 CCB) P.B. 183 wherein at column 24 of the referred audited report, it is clearly stated that the assessee firm has no other business activities (i.e. other then developing a building housing projects as defined 80IB(10) of the Act). In the said report, the assessee has claimed special deductions u/s. 80IB(10) of the Act. Accordingly, assessee is eligible to claim deduction u/s.80IB(10) of the Act as discussed above.- Decided in favour of assessee.

Issues Involved:
1. Non-consideration of appellant's submissions by CIT(A).
2. Legitimacy of deduction under section 80IB(10) of the Income-tax Act.
3. Charging of interest under sections 234A, 234B, 234C, and 234D.
4. Initiation of penalty proceedings under sections 271(1)(c) and 271AAA.
5. Additional claim of deduction under section 80IB(10) based on seized records.
6. Addition of Rs. 2,75,00,000/- as not related to profit of the housing project.

Detailed Analysis:

1. Non-consideration of Appellant's Submissions by CIT(A):
The appellant argued that the CIT(A) did not consider their submissions, which was against the principle of natural justice. The tribunal noted that the CIT(A) had indeed reviewed the submissions but upheld the Assessing Officer's (AO) decisions. The tribunal found no merit in the appellant's claim that their submissions were ignored.

2. Legitimacy of Deduction under Section 80IB(10):
The primary issue was whether the assessee was eligible for deductions under section 80IB(10) given that they did not own the land. The AO considered the assessee as a contractor rather than a developer. The tribunal analyzed the conditions stipulated under section 80IB(10) and found that the assessee fulfilled all necessary conditions, including the completion of the housing project within the stipulated time. The tribunal referenced the decision in the case of Radhe Developers, which supported the assessee's claim as a developer. Thus, the tribunal directed the AO to allow the deduction under section 80IB(10).

3. Charging of Interest under Sections 234A, 234B, 234C, and 234D:
The tribunal noted that the charging of interest under these sections is consequential and directed the AO to recalculate the interest based on the revised income assessments.

4. Initiation of Penalty Proceedings under Sections 271(1)(c) and 271AAA:
The tribunal found that the initiation of penalty proceedings was premature. Therefore, it dismissed the grounds related to penalty proceedings as premature.

5. Additional Claim of Deduction under Section 80IB(10) Based on Seized Records:
The assessee claimed additional deductions based on "on money" receipts disclosed during the search. The tribunal referenced several decisions, including those of the Hon'ble Gujarat High Court and ITAT Ahmedabad, which supported the inclusion of "on money" as part of business income eligible for deduction under section 80IB(10). The tribunal directed the AO to allow the additional claim of deduction.

6. Addition of Rs. 2,75,00,000/- as Not Related to Profit of the Housing Project:
The tribunal found that the "on money" component was part of the business income and should be considered for deduction under section 80IB(10). It held that the CIT(A) erred in not considering the "on money" as part of the regular books of accounts. The tribunal directed the AO to allow the deduction on the additional income of Rs. 2,75,00,000/-.

Conclusion:
The tribunal partly allowed the appeals, directing the AO to grant deductions under section 80IB(10) for all three years, recalculate the interest under sections 234A, 234B, 234C, and 234D, and dismissed the penalty proceedings as premature. The decision emphasized the importance of considering the entire income, including "on money," as part of the business income eligible for deductions under section 80IB(10).

← Previous Next →