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2024 (7) TMI 577 - AT - Income TaxDeemed income taxable u/s 69 to 69D to be taxed @ 30% - excess work in progress as detected in the course of survey action on the basis of documents impounded was accepted by the assessee in the course of survey - assessee submitted that it has claimed the excess stock offered to tax as part of the closing stock which is being claimed as an opening stock of the subsequent assessment year i.e. 2016-17 and therefore, the same would be allowed as deduction while computing the income for the succeeding assessment year HELD THAT - We find merit in the arguments of assessee that although as per proviso to section 69C of the Act such unexplained expenditure which shall be deemed to be the income of the assessee was not to be allowed as deduction under any head of the income, however such type of wording is not available in the provisions of section 69B of the Act. Since the assessee in the instant case has declared the additional income on the basis of impounded documents showing higher calculation of work in progress and there is no evidence on record that the assessee has incurred any such expenditure which has not been recorded in the books of account and since the assessee has not claimed any deduction of expenditure or allowance against the income offered u/s 69B of the Act and has paid the tax on the deemed income, therefore, we are of the considered opinion that the income so declared as additional work in progress will form part of the closing work in progress and cannot be taxed u/s 115BBE of the Act. We hold and direct accordingly. The grounds raised by the assessee on this issue are accordingly allowed. Computation of income of next AY - As additional income so declared during the course of survey shall form part of the closing stock, therefore, such closing stock as on 31.03.2015 shall be the opening stock of assessment year 2016-17. Therefore, the assessee is justified in claiming the same as deduction while computing the income for the assessment year 2016-17. We hold and direct accordingly. The grounds raised by the assessee on this issue are accordingly allowed. Deduction u/s 80IA - treatment of each unit as a separate undertaking - assessee firm is engaged in the business of wind power generation - AO rejected the claim of the assessee holding that the deduction u/s 80IA of the Act is to be worked out by considering all the windmills as part of one undertaking - HELD THAT - We find the CBDT vide Circular No.1 of 2016 dated 15.02.2016 has clarified that the initial assessment year would mean the year in which the assessee has claimed the deduction for the first time and not the year in which the windmill is installed. Further, the Tribunal in assessee s own case for assessment years 2012-13 to 2014-15 has held that each windmill is to be considered as a separate undertaking. Since the Tribunal in assessee s own case for the immediately preceding assessment years i.e. 2012-13 to 2014-15 2019 (8) TMI 1900 - ITAT PUNE has already decided the issue in favour of the assessee by dismissing the appeals filed by the Revenue.
Issues Involved:
1. Taxability of additional income declared during survey under Section 69B of the Income Tax Act, 1961. 2. Treatment of excess work in progress (WIP) declared during survey as part of closing WIP and its availability as opening WIP in the subsequent year. 3. Eligibility and computation of deduction under Section 80IA(4) of the Income Tax Act for windmills. Detailed Analysis: 1. Taxability of Additional Income Declared During Survey Under Section 69B: Facts and Arguments: - The assessee, a partnership firm engaged in civil construction and power generation, declared additional income of Rs. 3,11,76,525/- during a survey conducted under Section 133A. - The Assessing Officer (AO) added this amount as unexplained investment under Section 69B, citing that the excess stock was not accounted for in regular books. - The AO held that no deduction is allowable against deemed income taxable under Sections 69 to 69D, as per Section 115BBE. - The CIT(A) upheld the AO's decision, emphasizing that the onus of explaining the source of undisclosed income is on the assessee. Tribunal's Decision: - The Tribunal found merit in the assessee's argument that the additional income declared was based on impounded documents showing higher work in progress and no unaccounted expenditure was found. - It noted that Section 69B does not explicitly prohibit considering such declared income as part of closing stock. - The Tribunal held that the additional income declared as excess work in progress should form part of the closing stock and cannot be taxed under Section 115BBE. - Consequently, the grounds raised by the assessee on this issue were allowed. 2. Treatment of Excess Work in Progress (WIP) Declared During Survey: Facts and Arguments: - The assessee claimed the excess WIP declared during the survey as part of the closing WIP for the assessment year 2015-16 and as opening WIP for 2016-17. - The AO and CIT(A) rejected this claim, stating that allowing this would contradict Section 115BBE(2), which prohibits deductions against deemed income. Tribunal's Decision: - The Tribunal agreed with the assessee that the excess WIP declared should be considered as part of the closing WIP for 2015-16 and thus as opening WIP for 2016-17. - It emphasized that the assessee did not claim any deduction or expenditure against the additional income declared. - The Tribunal directed that the closing stock as on 31.03.2015 should be the opening stock for 2016-17, allowing the assessee's claim for deduction in the subsequent year. 3. Eligibility and Computation of Deduction Under Section 80IA(4) for Windmills: Facts and Arguments: - The assessee claimed deduction under Section 80IA(4) for profits derived from windmills. - The AO denied the claim, arguing that all windmills should be considered as a single undertaking and that notional brought forward losses should be set off against the profits. - The CIT(A) allowed the claim, following previous Tribunal decisions that each windmill should be treated as a separate undertaking. Tribunal's Decision: - The Tribunal upheld the CIT(A)'s decision, reiterating that each windmill should be considered a separate undertaking for the purpose of Section 80IA(4). - It referenced multiple Tribunal and High Court decisions supporting this view, including the CBDT Circular No.1 of 2016, which clarified that the initial assessment year is when the deduction is first claimed. - The Tribunal dismissed the Revenue's appeals, affirming that the assessee's windmills should be treated as separate units for deduction purposes. Conclusion: The Tribunal allowed the assessee's appeals regarding the treatment of additional income declared during the survey and the excess WIP, and upheld the CIT(A)'s decision on the eligibility and computation of deduction under Section 80IA(4) for windmills. The Revenue's appeals were dismissed.
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