2021 (12) TMI 537 - AT - Income Tax

Disallowance of deduction claimed u/s 80IB(10) - assessee had offered additional income in the proceedings initiated under section 153C of the Act - Restriction on claim of deduction in view of provisions contained in section 80A(5) - receipt of on-money has also been accepted by the assessee as would be evident from additional income offered by the assessee in the returns of income filed in pursuance to notices issued under 153C - whether against the receipt of such on-money, the assessee can claim deduction under section 80IB(10)? - HELD THAT - The departmental authorities have not disputed the fact that the receipt of on-money is in respect of the very same project from which the assessee has not only declared income in the original return of income but has also claimed deduction under section 80IB(10) - assessee s claim of deduction under section 80IB(10) in respect of the very same project has been allowed in the original assessment proceedings. Therefore, the deduction claimed under section 80IB(10) of the Act in the returns filed under section 153C of the Act is in continuation to the claim made in the original returns of income. The prohibitory conditions of section 80A(5) would not be applicable. In any case of the matter, the revenue does not dispute the fact that the assessee is otherwise eligible to claim deduction under section 80IB(10) of the Act in respect of the profit earned from the subject project. The additional income offered by the assessee because of receipt of on-money, undoubtedly, forms part of the profit earned from the subject housing project. Therefore, merely because the additional income is offered in a search related assessment proceeding under section 153C of the Act, assessee s claim of deduction cannot be disallowed. See Malpani Estates vs ACIT 2014 (2) TMI 944 - ITAT PUNE Since the additional income offered by the assessee goes to enhance the business income derived from the eligible housing project, the assessee would be entitled for deduction under section 80IB(10) - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of deduction claimed under section 80IB(10) of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Disallowance of Deduction under Section 80IB(10)

The appellant, a partnership firm engaged in the business of builders and developers, filed returns for the assessment years 2010-11, 2011-12, and 2012-13. A search and seizure operation under section 132 of the Act was conducted on 31-07-2014 in the case of Ameya group, leading to proceedings under section 153C against the appellant. Incriminating materials found indicated that the appellant received on-money from property sales, which was offered as additional income in the returns filed in response to section 153C notices. The appellant claimed deductions under section 80IB(10) for this additional income, which the assessing officer disallowed, citing section 80A(5) and the nature of search proceedings aimed at unearthing undisclosed income.

The Commissioner of Income Tax (Appeals) upheld the disallowance but allowed expenditures to the extent of 54% against the undisclosed income, estimating the net profit at 46%. The appellant argued that the additional income from on-money related to the same project for which deductions under section 80IB(10) were already allowed in the original returns. Therefore, the appellant contended they were eligible for the same deductions on the additional income.

The departmental representative opposed, stating that the assessments had not abated and the additional income was undisclosed, discovered only due to the search. The representative argued that section 153A and 153C proceedings are not for the appellant's benefit but to assess undisclosed income, relying on the Supreme Court's decision in Sun Engineering Works (198 ITR 297).

Upon review, the Tribunal noted that the additional income from on-money was part of the same project for which deductions under section 80IB(10) were previously allowed. The Tribunal referenced the co-ordinate bench decision in Malpani Estates vs ACIT (2014) 44 taxman.com 242, which supported the appellant's claim for deductions on additional income derived from the same housing project. The Tribunal emphasized that the additional income enhances the business income from the eligible project, thus qualifying for deductions under section 80IB(10).

Furthermore, the Tribunal dismissed the departmental representative's argument based on the Supreme Court's decision in Sun Engineering Works, clarifying that the case pertained to set-off losses against escaped income, not applicable to the present scenario where the additional income is connected to the original claim. The Tribunal also cited the Bombay High Court's decision in Sheth Developers (P) Ltd., which upheld deductions under section 80IB(10) for undisclosed income from an eligible housing project.

Conclusively, the Tribunal allowed the appellant's claim for deductions under section 80IB(10) for the additional income, aligning with the co-ordinate bench's decision and the legal framework. The appeals were allowed, and the order was pronounced on 12/11/2021.