2024 (5) TMI 481 - AT - Income Tax

Disallowance u/s 80IB - additional income earned by means of on-money - no evidence whatsoever, at least, to indicate that the amounts, admittedly received by the assessee, are received from only and only from the flat owners in lieu of the purchase of flats - HELD THAT - The assessee does not have any other business other than real estate development and in the impugned assessment year, the assessee had income being generated from the project Rushikesh . Hence, the income is earned from the said eligible business. The seized material found during the course of search showed that the additional income earned by means of on-money was from Rushikesh project, which was eligible for deduction u/s 80IB of the Act. Therefore, based on these facts and circumstances, the ld CIT(A) held that assessee is eligible for deduction u/s 80IB of the Act, and hence ld CIT(A) allowed the deduction correctly. Dismiss ground No.1 raised by the Revenue. Unexplained cash credit u/s 68 - During the course of search and later verification proceedings u/s 131 Loose Paper file was found and seized from partner of assessee firm related to cash amount received from various persons in the financial year 2008-09 for purchase of land - HELD THAT - We find merit in the submission of ld Counsel to the effect that the disputed land was brought into the books of the assessee - firm during the assessment year 2009-10 and not in the impugned assessment year, 2008-09. We note that the term 'Person' has been defined in clause 31 of section 2, to include seven categories of persons, all of which are independent and distinct from each other. A literal interpretation of the above provisions leads to the conclusion that only a right person as per the Act, is liable to pay tax on his income and no option is available to tax income in the hands of the person other than the one in whose hands it is taxable. The Hon'ble Supreme Court in case of ITO vs. Ch. Atchaiah 1995 (12) TMI 1 - SUPREME COURT has held that the assessing officer must tax the right person and right income, alone. Thus, the transaction in respect of disputed land, if any, may be taxable in the assessment year 2009-10 and not in the impugned assessment year, 2008-09. Thus, on this legal issue, we find that order passed by ld CIT(A) is correct. Loose papers on the basis of which this addition has been made was found in the residential premises of Shri Rajesh Vaghani, the partners of the Assessee firm - The loose papers showed receipt over a period of 3 assessment years namely 2008-09, 2009-10 and 2010-11. Out of the said amount, the two partners namely have admitted the undisclosed investment and offered the same in their returns, for AY 2009-10. The AO added the balance amount in the hands of the assessee- firm. In fact, as seen from the 'seized material, the amount ought to have been taxed in the impugned assessment year was Rs. 1,12,00,000/- as this amount was shown as received in AY 2008-09 and Rs. 3,60,60,000/- in AY 2009-10 and Rs. 92,90,000/- in AY 2010-11 as per the said seized loose sheets. However, the AO added the entire amount in the assessment year 2008-09. Thus such addition need to be deleted - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition on account of disallowance under section 80IB.
2. Addition on account of alleged unexplained cash credit under section 68.

Summary:

Issue 1: Deletion of Addition on Account of Disallowance under Section 80IB

The Revenue's appeal pertained to the deletion of an addition of Rs. 80,74,429/- by the CIT(A), which was made by the Assessing Officer (AO) on account of disallowance under section 80IB of the Income Tax Act. The case involved a search action under section 132 on the Vaishnodevi Group, including the assessee-firm, where various incriminating documents were found. The assessee-firm, engaged in the business of builders and developers, disclosed unaccounted income during the search, which included Rs. 80,74,429/- for the project "Rushikesh." The AO rejected the assessee's claim for deduction under section 80IB on this undisclosed income, treating it as "Income from other sources" under section 68, citing lack of evidence linking the income to the eligible project and referencing judgments that disallowed such deductions for 'on-money' receipts.

The CIT(A) deleted the addition, noting that the project "Rushikesh" fulfilled all conditions for claiming deduction under section 80IB, and the seized material confirmed higher profits from the project. The CIT(A) observed that the assessee had no other source of income and the additional income was part of the business income from the eligible project. The Tribunal upheld the CIT(A)'s decision, emphasizing that the seized documents were presumed correct under section 292C, and the additional income was indeed from the eligible project, thus eligible for deduction under section 80IB.

Issue 2: Addition on Account of Alleged Unexplained Cash Credit under Section 68

The Revenue also contested the deletion of an addition of Rs. 5,65,50,000/- made by the AO under section 68 for alleged unexplained cash credits. During the search, loose papers indicating cash receipts from various persons for land purchase were found at the residence of a partner. The AO added the entire amount as unexplained cash credit, rejecting the assessee's explanation.

The CIT(A) deleted the addition, noting discrepancies in the AO's approach. The land in question was purchased by Mr. Popatbhai Kakadia, who later became a partner, and the land was brought into the firm's books in the subsequent assessment year. The CIT(A) observed that the amounts noted in the seized papers did not match the firm's transactions for the impugned year and should be considered in the year the land was brought into the firm's books. The Tribunal upheld the CIT(A)'s decision, agreeing that the addition was not justified for the impugned assessment year as the land did not belong to the assessee-firm during that period.

Conclusion:

The Tribunal dismissed the Revenue's appeal on both grounds, upholding the CIT(A)'s decisions to delete the additions related to disallowance under section 80IB and unexplained cash credits under section 68. The Tribunal emphasized the correctness of the CIT(A)'s findings and the lack of evidence to support the AO's additions.