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2014 (6) TMI 148 - AT - Income TaxAllowability of deduction u/s 80IB of the Act Held that - Assessee has not furnished any details of Built-up area before AO - AO has to obtain the sale deeds to ascertain the built-up area - CIT(A) without referring the issue on remand for verification of built up area, simply allowed the deduction, without verification of facts - Not only that he allowed proportionate deduction at sixty/sixty five flats in both years, without restricting to the actual profit on sale of flats - the CIT(A) erred in allowing the proportionate allowance without subjecting the details furnished to verification - The actual profit working of the project, excluding other real estate transactions is not on record as copy of 3CB reports were not placed in paper books - This also requires verification thus, the order is set aside and the matter is remitted back to the AO to examine the eligibility and determine the amount of profit, if assessee is found eligible for deduction u/s 80IB Decided in favour of Revenue. Addition of Rs.1.78 Crores Held that - The assessee s Managing Director was confronted with the statement of Mr. P. Shankara Rao and the assessee has admitted to have paid Rs. 1.78 crores vide statement dated 09.11.2006 whereas, search was conducted on 07.11.2006 - the statement of the assessee was recorded much after the search, thus, it cannot be said that the assessee was under the state of utter confusion or not in a proper state of mind while making the statement on account of pressure from the Department - the statement of the assessee was not even recorded during the course of search - it cannot be said that the statement was recorded under utter confusion as he has sufficient time to consult the professionals - Moreover the assessee has filed the affidavit retracting from his earlier statement there was no infirmity in the order of the CIT (A) who has rightly treated the receipt of on money Decided against Assessee.
Issues Involved:
1. Deduction under section 80IB for Assessment Years 2005-06 and 2006-07. 2. Addition of Rs.1.78 crores as unexplained investment. Issue-wise Detailed Analysis: 1. Deduction under section 80IB for Assessment Years 2005-06 and 2006-07: The assessee claimed deductions under section 80IB amounting to Rs.1,88,00,917/- for A.Y. 2005-06 and Rs.45,64,600/- for A.Y. 2006-07 for the residential complex 'Jayadarshini Residency'. The Assessing Officer (A.O.) denied the deduction, noting that the flats exceeded the prescribed 1500 sq. ft. limit. The assessee argued before the CIT(A) that only 5 out of 65 flats exceeded the limit and cited precedents for proportionate deduction. The CIT(A) accepted the assessee's argument and allowed proportionate deduction for the 60 compliant flats, referencing decisions from the Kolkata High Court and ITAT Nagpur Bench which supported proportionate allowance in similar cases. However, the Tribunal disagreed with the CIT(A), noting that the assessee did not provide necessary details to the A.O. and that the CIT(A) allowed the deduction without verification. The Tribunal highlighted discrepancies in the built-up area calculations and the need for verification of common areas and car parking spaces. Additionally, the profit figures in the P&L account did not match the claimed deductions, necessitating further scrutiny. The Tribunal set aside the CIT(A)'s orders and remanded the issue back to the A.O. for a fresh examination of the eligibility and determination of the correct profit amount for the deduction under section 80IB. 2. Addition of Rs.1.78 crores as unexplained investment: During a search operation, it was found that the assessee company purchased properties for a registered price of Rs.1.22 crores but allegedly paid an additional Rs.1.78 crores in cash, as admitted by the Managing Director during the search. The A.O. treated this amount as unexplained investment and added it to the income. The assessee later retracted the statement, claiming no additional payment was made and provided a confirmation from the seller. The CIT(A) upheld the A.O.'s addition, emphasizing the initial admissions by both parties involved in the transaction. The Tribunal supported the CIT(A)'s decision, noting that the Managing Director's admission during the search was voluntary and not retracted immediately. The Tribunal referenced a similar case where delayed retraction was deemed invalid. Given the corroborative evidence and the Managing Director's failure to retract promptly, the Tribunal confirmed the addition of Rs.1.78 crores as unexplained investment. Conclusion: The Tribunal dismissed the assessee's appeal regarding the addition of Rs.1.78 crores and allowed the Revenue's appeals for statistical purposes, remanding the section 80IB deduction issue back to the A.O. for further verification and determination. Order Pronounced: The order was pronounced in the open Court on 16.05.2014.
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