2017 (10) TMI 922 - AT - Income Tax

Non granting deduction u/s.80-IB(10) - unrecorded income towards on money - income disclosed was income of the assessee from the business or from other sources - assessee failed to prove the genuineness of undisclosed income of ₹ 1.1 crores earned from 80IB projects disclosed at the time of survey u/s.133A - Held that - We find that the statement of the assessee was recorded on 08/10/2009 during the course of survey action carried out at the project of the assessee Laxmi Residency. We have also noticed from the contents of the assessment order that during the year the assessee firm has constructed a project called Laxmi Residency at Katargam,surat which was eligible for deduction u/s 80IB(10) of the act. In the assessment order the assessing officer has not demonstrated that apart from construction of Laxmi Residency the assessee was indulged in any other activities. The extracts of the statement indicate that the declared amount was earned from the project Laxmi Residency which was covered for survey action. In the statement as supra the assessee had stated that these amounts have been received as on money in respect of booking of above flats of Laxmi Residency and this amount was unrecorded income of Laxmi Residency for F.Y.2009-10. The affirmation of the assessee was not rebutted during the time of recording his statement and during the course of assessment proceedings by the assessing officer with any cogent material to prove that amount declared was earned from any other activities. In view of the above mentioned facts and findings, we considered that the income disclosed was income of the assessee from the business and not from other sources. - Decided in favour of assessee.

Summary

Issues Involved:

1. Deduction under Section 80-IB(10) of the Income Tax Act, 1961.
2. Treatment of income disclosed during the survey as "Income from Other Sources."
3. Charging of interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deduction under Section 80-IB(10) of the Income Tax Act, 1961:
The primary issue in this case was whether the assessee was entitled to a deduction under Section 80-IB(10) on ?1,01,00,000 disclosed during the survey, which was claimed to be part of the business income. The assessee argued that this amount was earned from the business of developing and constructing housing projects and thus should be eligible for the deduction. The CIT(A) denied this claim, stating that the amount was received as "on money" and was not part of the registered sale agreements, thus treating it as "Income from Other Sources." The Tribunal, however, found that the amount was indeed part of the business income earned from the Laxmi Residency project, which was eligible for deduction under Section 80-IB(10). The Tribunal relied on judicial pronouncements, including the case of CIT vs. Sheth Developer Pvt. Ltd., where it was held that undisclosed income received in the course of business activity as a builder is eligible for deduction under Section 80-IB(10).

2. Treatment of Income Disclosed During the Survey as "Income from Other Sources":
The CIT(A) had treated the ?1,01,00,000 disclosed during the survey as "Income from Other Sources" under Section 56 of the Act, arguing that the "on money" received was not accounted for in the regular books of accounts and was not part of the registered sale agreements. The Tribunal disagreed, noting that the statement recorded during the survey indicated that the amount was received as "on money" for the booking of flats in the Laxmi Residency project. The Tribunal emphasized that the declared amount was business income and not income from other sources, as it was earned from the project eligible for deduction under Section 80-IB(10).

3. Charging of Interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961:
The assessee also contested the charging of interest under Sections 234A, 234B, and 234C. The CIT(A) upheld the charging of interest, stating it was mandatory as per the provisions of the Act. The Tribunal did not provide a separate analysis on this issue, implicitly upholding the CIT(A)'s decision regarding the interest charges.

Conclusion:
The Tribunal allowed the appeal of the assessee, concluding that the ?1,01,00,000 disclosed during the survey was part of the business income from the Laxmi Residency project and was eligible for deduction under Section 80-IB(10) of the Income Tax Act, 1961. The Tribunal found that the CIT(A) had erred in treating this amount as "Income from Other Sources." The charging of interest under Sections 234A, 234B, and 234C was upheld as mandatory by the CIT(A) and implicitly by the Tribunal. The appeal was pronounced in favor of the assessee on 11-04-2017.