2020 (5) TMI 253 - AT - Income Tax

Unexplained expenditure u/s 69C - assessee has incurred an expense without recording the same in the books of accounts - HELD THAT - In the present case there is no iota of evidence available before the AO suggesting that the assessee has incurred any expense which were not disclosed in the books of accounts except the value of the Jantri determined by the superintendent of stamps. There was the survey operations carried out under section 133A of the Act and no details was found during the survey operation suggesting that there was the expenses incurred by the assessee outside the books of accounts. In the absence of any information, we do not find any infirmity in the order of the learned CIT (A). Hence the ground of appeal of the Revenue is dismissed. Deduction u/s 80IB - certificate issued by the competent authority for the completion of the entire projec - HELD THAT - Completion certificate has been issued by the competent authority on the different occasions. First certificate was issued for part completion of the project dated 27 September 2011, the 2nd certificate was issued for part completion of the project dated 15th of December 2011 and the final certificate for the completion of the project was issued dated 22 March 2012. Thus from the final certificate issued by the competent authority for the completion of the entire project, it is established that there was the no violation of the provisions of law as specified under the provisions of section 80IB(10) of the Act. At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). No reason to interfere in the order of the learned CIT (A). Thus the ground of appeal of the Revenue is dismissed. Treating the income from regular business holding that the same is eligible for deduction under section 80IB(10) - HELD THAT - Admittedly, the assessee is not engaged in any activity other than the construction activity as discussed above. Moreover, the revenue has not brought anything on record evidencing that such income disclosed during the survey proceedings is not arising from its construction activity. As such the onus was upon the revenue to disprove the contention of the assessee based on the documentary evidence. But the revenue has failed to do so - disclosure of income made during the survey proceedings does not mean that the income is to be treated as income from other sources. Accordingly, we are of the view that such income in the absence of contrary evidences is arising from the business activities of the assessee. Hence we do not find any infirmity in the order of CIT (A). Hence, the ground of appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition made by the AO for ?10,20,62,695/- on account of unexplained expenditure under section 69C of the Act.
2. Deletion of addition made by the AO by withdrawing the deduction under section 80IB of the Act for ?6,82,21,445/-.
3. Treatment of income of ?75 lakhs as income from regular business and eligibility for deduction under section 80IB(10) of the Act.

Detailed Analysis:

Issue 1: Deletion of Addition for Unexplained Expenditure under Section 69C
The Revenue contested the deletion of an addition of ?10,20,62,695/- made by the AO under section 69C of the Act. The AO's addition was based on the Jantri rate issued by the superintendent of stamps, suggesting a higher construction cost of ?1,253/- per square foot compared to the assessee's reported cost of ?490/- per square foot. The AO concluded that the difference of ?763/- per square foot indicated unaccounted expenditure.

The CIT(A) deleted the addition, observing that the AO had verified the assessee's complete books and supporting documents without finding any unaccounted expenditure. The CIT(A) emphasized that the Jantri rates are intended for stamp duty purposes and are not applicable for estimating construction costs. The CIT(A) also noted that the Jantri rates used by the AO were from 2011, whereas the land was purchased in 2005, making the comparison inappropriate.

Upon review, the Tribunal upheld the CIT(A)'s decision, noting the absence of evidence suggesting unaccounted expenses and the irrelevance of Jantri rates for determining construction costs. The Tribunal dismissed the Revenue's appeal on this ground, affirming that the AO's estimation lacked a valid basis.

Issue 2: Deletion of Addition by Withdrawing Deduction under Section 80IB
The AO disallowed the assessee's deduction claim of ?6,82,21,445/- under section 80IB, arguing that the project was not completed within the prescribed time. The AO based this on the fact that the assessee obtained completion certificates on different dates, suggesting incomplete project status by 31 March 2012.

The CIT(A) allowed the deduction, noting that the completion certificates were issued before the deadline, with the final certificate dated 22 March 2012. The CIT(A) referenced a clarificatory letter from the local authority confirming the project's completion.

The Tribunal reviewed the completion certificates and found no violation of section 80IB(10). The Tribunal noted that the Revenue did not provide contrary evidence and upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

Issue 3: Treatment of ?75 Lakhs as Regular Business Income
During survey proceedings, the assessee disclosed ?75 lakhs, which the AO did not treat as regular business income, thus disallowing the deduction under section 80IB(10).

The CIT(A) directed the AO to treat the disclosed amount as regular business income, noting that the assessee was solely engaged in construction activities, and the Revenue failed to prove otherwise.

The Tribunal agreed with the CIT(A), stating that the Revenue did not provide evidence to classify the disclosed income as non-business income. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

Conclusion:
The Tribunal dismissed the Revenue's appeal on all grounds, affirming the CIT(A)'s decisions regarding the deletion of the addition under section 69C, the allowance of the deduction under section 80IB, and the treatment of the ?75 lakhs as regular business income eligible for deduction under section 80IB(10).