2024 (5) TMI 1119 - AT - Income Tax

Disallowance made u/s. 80IA - assessee has not claimed deduction u/s. 80IA in response to the return filed u/s. 153A -. AO rejected the explanation and held that bogus purchases are to be added -HELD THAT - Here in this case addition has been confirmed by the ld. CIT(A) however, he has given relief by holding that all the additions / disallowances on account of purchases are related to business activity and therefore, deduction u/s. 80IA would be allowed in line with the CBDT Circular No.37 of 2016. AO with regard to purchases made from one party has applied gross profit rate and with regard to other party has treated the entire transaction of purchase as bogus . All these have lead to enhancement of business income only which otherwise is eligible for deduction u/s. 80IA, because even ld. AO has also assessed under the head business income . Accordingly, in view of the CBDT Circular and the past precedents in case of the assessee, we do not find any infirmity in the order of the ld. CIT(A) and same is confirmed. Decided against revenue.

Summary

Issues Involved:
1. Deletion of disallowance made u/s 80IA.
2. Eligibility for deduction u/s 80IA for a work contractor.
3. Treatment of bogus purchases.

Summary:

Issue 1: Deletion of Disallowance Made u/s 80IA
The Revenue challenged the CIT(A)'s decision to delete the disallowance made u/s 80IA, arguing that the assessee did not claim the deduction in the return filed u/s 153A. The CIT(A) had allowed the deduction based on past precedents and CBDT Circular No. 37 of 2016, which permitted deductions on enhanced income/additions. The Tribunal upheld the CIT(A)'s decision, noting that the assessee was consistently allowed the deduction in previous years, and there was no change in facts or circumstances.

Issue 2: Eligibility for Deduction u/s 80IA for a Work Contractor
The Revenue contended that the assessee was merely a work contractor and not a developer, thus not eligible for deduction u/s 80IA. The CIT(A) and Tribunal referred to earlier decisions, including those of the ITAT and CIT(A), which had consistently held that the assessee was eligible for the deduction. The Tribunal confirmed that the assessee's status as a developer had been established in previous rulings, and there were no new facts to warrant a different conclusion.

Issue 3: Treatment of Bogus Purchases
The AO had treated purchases from M/s. Pankaj Metal Centre Pvt. Ltd. as bogus, leading to an addition to the assessee's income. The CIT(A) confirmed the addition on merits but allowed the deduction u/s 80IA on the enhanced income, following the CBDT Circular and past precedents. The Tribunal agreed, noting that the additions were related to business activity and thus eligible for the deduction. The Tribunal found no infirmity in the CIT(A)'s order and confirmed it.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s decision to allow the deduction u/s 80IA on the enhanced income, in line with past precedents and the CBDT Circular. The order was pronounced on 21st May, 2024.