2014 (1) TMI 1361 - AT - Income Tax

Acceptance of additional evidences - Held that - The assessee could not submit any document to substantiate that the assessee had commenced the project after 1st October 1998 - The learned Commissioner (Appeals), on a perusal of the audited Balance Sheet and Profit & Loss account for the assessment year 2000-01, has given a finding that the project had started after 1st April 1999 i.e., much after 1st October 1998, therefore, benefit of section 80IB(10) cannot be denied - On a perusal of these audited Balance Sheet for the assessment years 1999-2000 and 2000-01, which were filed for the first time before the learned Commissioner (Appeals), it is seen that prima-facie it cannot be inferred that there was no opening work-in- progress with regard to these particular project as apparently there is no clear cut demarcation of work-in-progress of old and new projects - Profit & Loss account shows that there is an opening work-in- progress of 2,48,50,382 - Without any bifurcation, it is very difficult to infer about the conclusion drawn by the learned Commissioner (Appeals) - It does constitute additional evidence which requires opportunity for verification and examination by the Assessing Officer The issue has been restored for fresh adjudication. Whether the assessee be treated as developer for deduction u/s 80IB(10) Held that - The assessee has got substantial right for developing the land as a developer and there is entire transfer of right to the assessee for development of the property - The assessee is also substantially entitled to sell the entire units and will also appropriate all the sale proceeds - Out of the said sale proceeds, the assessee was entitled for 95% of the receipts Decision in case of CIT v/s Radhe Developers 2011 (12) TMI 248 - GUJARAT HIGH COURT followed - The assessee need not be a land owner but should have substantial right to develop the property with all the risk and responsibility - The assessee can be held to be a developer for the purpose of claiming deduction under section 80IB(10) Decided against Revenue.

Issues Involved:
1. Admission of additional evidence by the CIT(A).
2. Compliance with Rule 46A of the I.T. Rules, 1962.
3. Eligibility of the assessee for deduction under section 80IB(10) of the Income Tax Act, 1961.
4. Determination of whether the assessee is a developer or a contractor.
5. Commencement date of the housing project.

Detailed Analysis:

1. Admission of Additional Evidence by the CIT(A):
The Revenue argued that the CIT(A) erred in admitting additional evidence in the form of the profit and loss account for the year 1999-2000, which was not produced before the Assessing Officer (AO) during the assessment proceedings. The CIT(A) accepted the additional evidence to conclude that the project commenced after 1st October 1998. The Tribunal noted that the CIT(A)'s findings were based on the audited balance sheet and profit & loss account for the assessment year 2000-01. However, the Tribunal found that there was no clear demarcation of work-in-progress for old and new projects, necessitating further examination by the AO. Thus, the Tribunal directed the AO to re-examine the evidence, treating the Revenue's ground as allowed for statistical purposes.

2. Compliance with Rule 46A of the I.T. Rules, 1962:
The Revenue contended that the CIT(A) admitted additional evidence in contravention of Rule 46A, which mandates certain conditions for admitting new evidence. The Tribunal agreed that the additional evidence submitted by the assessee before the CIT(A) required verification by the AO. Therefore, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the AO for proper examination, allowing the Revenue's ground for statistical purposes.

3. Eligibility for Deduction under Section 80IB(10):
The assessee claimed a deduction under section 80IB(10) for a housing project, which the AO disallowed on the grounds that the project did not commence after 1st October 1998 and that the assessee was not the landowner. The CIT(A) held that the project commenced after 1st April 1999 based on the profit & loss account and balance sheet, and thus, the assessee was eligible for the deduction. The Tribunal, however, found that the evidence required further verification by the AO. Consequently, the Tribunal remanded the issue back to the AO for re-examination, treating the Revenue's ground as allowed for statistical purposes.

4. Determination of Developer or Contractor:
The AO argued that the assessee was merely a contractor and not a developer, as the land was owned by another party. The CIT(A) held that the assessee had substantial rights to sell the flats and appropriate the sale proceeds, making the assessee a developer eligible for the deduction under section 80IB(10). The Tribunal upheld the CIT(A)'s finding, noting that the assessee had substantial rights and responsibilities akin to a developer, supported by the decision in CIT v/s Radhe Developers. Thus, the Tribunal dismissed the Revenue's ground on this issue.

5. Commencement Date of the Housing Project:
The AO contended that the project commenced before 1st October 1998, while the assessee claimed it started after this date. The CIT(A) concluded that the project commenced after 1st April 1999 based on the profit & loss account and balance sheet. The Tribunal found that the evidence required further verification by the AO and remanded the issue for re-examination, treating the Revenue's ground as allowed for statistical purposes.

Conclusion:
The Tribunal partly allowed the Revenue's appeal for statistical purposes, remanding the issues related to the admission of additional evidence and the commencement date of the project back to the AO for further examination. The Tribunal upheld the CIT(A)'s finding that the assessee was a developer and eligible for the deduction under section 80IB(10), dismissing the Revenue's ground on this issue. The order was pronounced in open Court on 15th January 2014.

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