2014 (12) TMI 928 - AT - Income Tax

Deduction u/s 80IB Income disclosed during survey treated as income from other sources Held that - A survey operation u/s 133A of the Act was conducted on 27.08.2009 - during the course of survey, loose documents marked as BF-44 was found - assessee explained that in the file there are expense vouchers along with receipts of amounts received which is already recorded in the books of accounts - the only business of the assessee was of developing and building of housing project styled Nilkanth Heights Project - no material has been brought to show that the assessee was engaged in any other activity - during the course of survey, the assessee has categorically stated that the amounts mentioned in loose documents marked as BF- 44 represents additional income of the said business - only on the basis of this declaration of the assessee, the income of the assessee of ₹ 1,25,00,000/- was accepted by the survey officials in the hands of the assessee and was assessed in the hands of the assessee - as per provisions of Section 80IB, deduction is allowable in respect of income derived from the eligible housing project - the business of the assessee of developing and building residential project in the name and style of Nilkanth Heights Project was eligible housing project u/s 80IB, statutorily allowable deduction to the assessee cannot be denied Decided in favour of assessee.

Issues Involved:
1. Whether the CIT(A) erred in confirming the action of the Assessing Officer in disallowing deduction under section 80IB on income of Rs. 1,25,00,000 disclosed during the survey by treating this income as income from other sources.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80IB:

The sole issue in this appeal is whether the CIT(A) was correct in confirming the action of the Assessing Officer in disallowing the deduction under section 80IB on the income of Rs. 1,25,00,000 disclosed during the survey. The assessee, engaged in the development and building of housing projects, had a survey conducted under section 133A at its business premises. During the survey, the partner of the assessee firm admitted to having unaccounted income of Rs. 1,25,00,000 based on entries found in documents during the survey. He initially stated that deduction under section 80IB(10) would not be claimed on this unaccounted income. However, the assessee later claimed this income as a deduction under section 80IB(10) in its return of income, asserting that it was business income from the project undertaken by the assessee.

During the assessment, the assessee could not provide details such as names, addresses, amounts received, PANs, and dates of payments. Consequently, the Assessing Officer treated the receipts as income from other sources and disallowed the deduction under section 80IB(10).

On appeal, the CIT(A) observed that the disclosure of Rs. 1,25,00,000 was made on account of undisclosed receipts from the project, which were not recorded in the regular books of account. The CIT(A) opined that the beneficial provisions of the Act are intended for assessees who comply with the provisions voluntarily and disclose their income truthfully. The CIT(A) further noted that the assessee had acted in defiance of legal provisions and only disclosed the income when confronted by the Department during the survey. The CIT(A) referenced the Delhi High Court's decision in CIT Vs. Usha International Ltd., which held that when an assessee is cornered by evidence collected by the Revenue Authorities, they cannot gain from filing a revised return and are liable for penal provisions under section 271(1)(c).

The CIT(A) concluded that the intention of the Act is not to give benefits to assessees who hide their income and act dishonestly. The CIT(A) confirmed the action of the Assessing Officer in disallowing the deduction on the undisclosed receipts of Rs. 1,25,00,000.

2. Arguments by the Assessee:

The AR of the assessee argued that the undisclosed income was from the "Nilkanth Heights Project," the only project started during the year under consideration. The additional income disclosed pertained to this project and should be allowable as a deduction under section 80IB(10). The AR cited several judicial decisions to support the claim that the additional income should be treated as business income and eligible for deduction under section 80IB(10).

3. Tribunal's Analysis and Decision:

The Tribunal noted that the only business of the assessee was the development and building of the "Nilkanth Heights Project." No evidence was presented to show that the assessee was engaged in any other activity. During the survey, the assessee had stated that the amounts mentioned in the loose documents represented additional income from the business. This declaration was accepted by the survey officials, and the income was assessed in the hands of the assessee.

The Tribunal referenced its own decision in the case of CIT v. M/s. Shree Padmavati Developers, where it was held that the disclosed amount had a direct and proximate connection with the business activity and was eligible for deduction under section 80IB(10). The Tribunal concluded that the statutorily allowable deduction could not be denied to the assessee, given the facts and circumstances of the case.

Conclusion:

The Tribunal allowed the appeal of the assessee, holding that the additional income disclosed during the survey was business income from the eligible housing project and was entitled to deduction under section 80IB(10) of the Act. The appeal was allowed, and the order was pronounced in the Court on December 19, 2014, at Ahmedabad.

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