2022 (3) TMI 1063 - AT - Income Tax

Assessment u/s 153A - Deduction u/s 80IB(10) - HELD THAT - As during the course of search proceedings no incriminating material was found which could question the genuineness of claim u/s 80IB (10) of the Act made by the assessee - Accordingly, grounds regarding deduction u/s 80IB(10) raised in assessee s appeals stand allowed. Claim of deduction u/s 80IB(10) for A.Y.2009-10 to 2011-12 - CIT(A) after taking into consideration the permission granted by the local authority and completion certificate obtained by the assessee within the prescribed time limit has allowed the claim - HELD THAT - We find that the Revenue could not controvert the factual findings recorded by the learned CIT(A) by bringing any contrary material on record. We find that the Ld. CIT(A) rightly allowed the deduction u/s 80-IB(10) on the ground that the completion certificate was obtained by the assessee within the prescribed time and all other conditions were satisfied and as such, the assessee is entitled to the said deduction. Thus, we do not find any reason to interfere with the findings of the learned CIT(A). We confirm the order of CIT(A) on this point. Accordingly, grounds regarding issue of deduction u/s 80IB(10) raised in the departmental appeals for the Assessment Years 2009- 10 to 2011-12 stand dismissed. Disallowance of payment to sub-contractor - CIT disallowed the whole payment on the ground that the identity of the sub-contractors has not been proved - HELD THAT - We find forced in the contention of the Learned Counsel for the assessee submitted that the payments are genuine and no disallowance should have been made. Regarding the bills, bank statements of the contractors found at the premises of the assesse, we find that some of the contractors were illiterate and the bills were given by them after part completion of the work, therefore, the blank letter heads and the vouchers were available at the premises of the assessee. Thus, the presence of these documents at the premises of the assessee should have not been considered as bogus payments as these contractors have the PAN and also operating their bank accounts which proved the identities. Therefore, the disallowance on this point was not justified. Regarding the disallowance of 10% from the other payments, we find that the contractors had worked and the TDS was made from the payments but the Assessing Officer unjustifiably disallowed these payments on the ground that the source of the expenditure is not satisfactorily explained. However, the Assessing Officer failed to consider the fact that it was not an undisclosed expenditure but the amounts were debited in the books of the assessee and the source was proved and verifiable from the books of accounts. Thus we decide the issue in favour of the assessee as TDS wherever applicable were made, the payments were genuine, the assessee explained the presence of documents in question and source of the expenditure was also satisfactorily explained as the said amounts were debited in the books of the assesse. Accordingly, grounds raised in the appeals of the assessee.

Summary

Issues Involved:
1. Deduction under Section 80IB(10) of the Income Tax Act.
2. Disallowance of alleged bogus payments to sub-contractors.

Issue-wise Detailed Analysis:

Issue No.1 – Deduction under Section 80IB(10):

The primary issue revolves around the eligibility of the assessee for deductions under Section 80IB(10) of the Income Tax Act for various assessment years (A.Y. 2006-07 to 2012-13). The assessee claimed deductions on the profits earned from three housing projects: "Sagar Estates," "Sagar Green Estates," and "Sagar Avenue." The Revenue Authorities disallowed these deductions on the grounds that the projects did not meet the conditions stipulated under Section 80IB(10), particularly regarding the timely completion of the projects and the issuance of completion certificates.

The Tribunal noted that for A.Y. 2006-07 to 2008-09, the assessee's claim for deduction was initially disallowed because the completion certificates were not obtained by the prescribed date (31.03.2008). The assessee argued that the projects were completed in time and that the completion certificates were delayed due to procedural issues with the local authorities. The Tribunal found that there was no incriminating material found during the search that questioned the genuineness of the claim under Section 80IB(10). Moreover, the Tribunal had previously allowed the assessee's claims for earlier years, and these decisions were pending before higher courts.

For A.Y. 2009-10 to 2012-13, the Tribunal upheld the CIT(A)'s decision, which allowed the deductions, noting that the completion certificates were obtained within the prescribed time limit and all other conditions were satisfied. The Tribunal confirmed that the assessee was entitled to the deductions as the conditions laid down in Section 80IB(10) were met.

Issue No.2 – Disallowance of Alleged Bogus Payments to Sub-contractors:

The second issue concerns the disallowance of expenses claimed by the assessee for payments made to sub-contractors. During a search, certain documents and statements suggested that some of these payments were bogus. The Assessing Officer (AO) disallowed the entire expenses, while the CIT(A) partially upheld the disallowance, bifurcating the payments into different categories based on the availability of PAN, identity, and other details of the sub-contractors.

The Tribunal examined the nature of the payments and the evidence provided by the assessee. It was noted that for the development of large housing projects, various contractors, including small ones, were engaged. The assessee had made TDS wherever applicable and provided necessary details for most payments. The Tribunal found that the presence of blank letterheads and vouchers at the assessee's premises did not necessarily indicate bogus payments, as some contractors were illiterate and left such documents for convenience.

The Tribunal also referred to a similar case (Agrawal Technical Education) where it was held that disallowances based on unrelated papers and statements were not justified. It was concluded that the payments were genuine, the TDS was made, and the source of expenditure was satisfactorily explained. Therefore, the Tribunal allowed the assessee's appeals on this issue and dismissed the departmental appeals.

Conclusion:

The Tribunal allowed the appeals filed by the assessee for A.Y. 2006-07 to 2012-13, granting the deductions under Section 80IB(10) and deleting the disallowances of payments to sub-contractors. The departmental appeals for A.Y. 2009-10 to 2012-13 were dismissed. The order was pronounced on 27.01.2022.