2016 (3) TMI 408 - AT - Income Tax

Inadmissibility of deduction u/s 80IB(10) - surrender made on account of undisclosed income (on money found during search proceedings) - Whether the assessee is a developer or a works contractor? - Held that - As examined the financial statement of the assessee and find that in the audited balance sheet as on 31.3.2006 assessee has shown sundry debtor of ₹ 1,99,21,445/-, the list of which includes 42 parties including Shri Madhav Co-op. Housing Society Ltd. being a sundry debtor of ₹ 8,87,166/- and the remaining amount of debtor i.e. ₹ 1,90,34,279/- are being debit balance in the names of various flat owners from whom the assessee had yet to receive the amount which it has spent for the housing project. This shows that assessee was not working only as a work contractor on behalf of Shree Madhav Co-op. Housing Society Ltd. else the assessee would have been showing the complete outstanding balance in the name of Shree Madhav Co-op. Housing Society Ltd. This fact has not been controverted by the revenue at any stage below and, therefore, looking to the terms and conditions of the development agreement and audited financial statement of the assessee, we are of the view that assessee comes under the category of developer and not of works contractor and, therefore, comes within the definition of developer as referred in the provisions of section 80IB(10) of the Act. Relying on the above decision of the co-ordinate bench in the case of Golden Developer vs. ITO (OSD), Range-9, Ahmedabad (2015 (9) TMI 645 - ITAT AHMEDABAD ) and looking to the facts of the case of assessee and applying the ratio of consistency, we find that assessee has successfully been able to fulfill all the requisite conditions for getting deduction u/s 80IB(10) of the Act. Even in the situation if the assessee is not the owner of the land, nor approval for construction received from the local authority is in its name but still assessee being a developer and fulfilling all the conditions embedded in the provisions of section 80IB(10) of the Act assessee is eligible for deduction under section 80IB(10) of the Act. Respectfully applying the judgment of co-ordinate bench in the case of Madhav Corporation (2015 (7) TMI 992 - ITAT AHMEDABAD ), we are of the view that assessee is eligible to claim deduction u/s 80IB(10) of the Act for the undisclosed income surrendered during search/survey action in a situation when assessee has been assessed in previous years and has been allowed deduction u/s 80IB(10) of the Act as well as there is no other source of income of the assessee other than the business of developing housing projects. - Decided in favour of assessee

Issues Involved:

1. Non-consideration of submissions and principles of natural justice.
2. Inadmissibility of deduction under Section 80IB(10) of the Income-tax Act.
3. Disallowance of additional deduction under Section 80IB(10) based on seized records.
4. Charging of interest under Sections 234A, 234B, 234C, and 234D.
5. Initiation of penalty proceedings under Section 271(1)(c).

Detailed Analysis:

Issue 1: Non-consideration of Submissions and Principles of Natural Justice

The first ground raised by the assessee was dismissed as it was not pressed.

Issue 2: Inadmissibility of Deduction under Section 80IB(10)

The assessee claimed a deduction of Rs. 1,32,19,672 under Section 80IB(10) for the AY 2006-07, which was initially allowed in the original assessment. However, during the reassessment following a search, the Assessing Officer denied this deduction, arguing that the assessee was not both a developer and builder as required by the provisions of Section 80IB(10). The CIT(A) upheld this view, noting that similar claims by other firms in the same group had been rejected in the past. The Tribunal, however, found that the assessee had consistently been allowed such deductions in previous years and that the assessee fulfilled all conditions of Section 80IB(10). The Tribunal emphasized the principle of consistency and ruled in favor of the assessee, allowing the deduction.

Issue 3: Disallowance of Additional Deduction Based on Seized Records

The assessee claimed an additional deduction of Rs. 2,34,39,999 based on undisclosed income found during search proceedings. The Assessing Officer denied this, citing non-fulfillment of conditions under Sections 80IA(5) and 80IA(7). The CIT(A) upheld the denial, stating that the additional income was not part of the regular books of accounts. The Tribunal, however, noted that the undisclosed income was part of the business income and was related to the same housing project. Citing consistency and previous judicial decisions, the Tribunal allowed the additional deduction under Section 80IB(10).

Issue 4: Charging of Interest under Sections 234A, 234B, 234C, and 234D

This ground was noted as consequential and did not require separate adjudication.

Issue 5: Initiation of Penalty Proceedings under Section 271(1)(c)

This ground was considered premature and did not require adjudication.

Conclusion:

The Tribunal allowed the appeal in part, granting the deductions under Section 80IB(10) for both the originally claimed amount and the additional amount based on undisclosed income. The principles of consistency and adherence to past judicial decisions played a crucial role in the Tribunal's decision.

← Previous Next →