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2018 (12) TMI 1562 - AT - Income TaxRectification order passed u/s 154 - Admissibility of deduction claimed u/s 80IB(10) - return of income filed beyond the due date prescribed u/s 139(1) claiming deduction u/s 80IB(10) - Held that - Since the income has already been taxed, it is the contention of the assessee, that the same would result in double taxation, if the claim of application is rejected. Even though the Ld CIT(A) has expressed the view that this issue may fall outside the scope of sec.154 of the Act, he has not given any specific direction to the AO. The assessee, in the alternative contended that where an expenditure is disallowed, it will go to increase the profits eligible for deduction u/s 80IB(10) of the Act. - AO has not considered the binding decision of the jurisdicitonal High Court 2015 (9) TMI 806 - BOMBAY HIGH COURT and the same constitutes mistake apparent from record. Accordingly we direct the AO to allow deduction u/s 80IB(10) of the Act on the disallowance of ₹ 9.00 crores made by him. Validity of Cross Objection (CO) filed by the Revenue - Held that - What cannot be achieved directly cannot be achieved indirectly. In the instant case, the revenue has fairly admitted that the time limit for reopening of assessment has already expired, meaning thereby, the AO could not disturb the assessment order already passed by him, even if any wrong is found therein. By filing this CO before the Tribunal, that too in an appeal proceeding challenging the rectification order passed u/s 154, the revenue is trying to achieve its objectives, which could not be achieved by it directly. The said objectives are sought to be achieved indirectly on the basis of allegation of fraud, since the AO could not take direct action due to expiry of limitation period. A.R also submitted that the assessee has filed its return of income for AY 2012-13 also beyond the due date prescribed u/s 139(1) of the Act claiming deduction u/s 80IB(10) of the Act. It was submitted that the AO has allowed the said deduction in AY 2012-13. Accordingly, it was submitted by Ld A.R that there is no merit in the allegation of fraud, if any, committed by the assessee, as the AO himself has allowed deduction in the succeeding year on the basis of belated return of income. In view of the foregoing discussions, we are convinced that the the CO filed by the revenue is not maintainable. Accordingly we reject the same. Absence of approval of Principal Commissioner or Commissioner - Held that - We have earlier noticed that the revenue has furnished sanction of Ld CIT only in respect of original grounds of appeal filed by it. The approval in respect of revised grounds of appeal was not placed before us. The provisions of sec.253(2) mandates that the AO should file appeal on the direction of the Principal Commissioner or Commissioner, as the case may be. We notice that the practice followed by the revenue is to furnish a copy of approval granted by Ld Pr. CIT or CIT to the grounds urged by the assessing officer. Accordingly, in the absence of approval of Principal Commissioner or Commissioner, the reframed grounds of the revenue are liable to be rejected on this ground also.
Issues Involved:
1. Eligibility of the assessee to claim deduction under section 80IB(10) of the Income Tax Act. 2. Classification of additional income admitted during search proceedings. 3. Rectification of assessment order under section 154 of the Act. 4. Double taxation of scrap sales. 5. Disallowance of construction costs and bogus purchases. 6. Cross-objection by the revenue regarding the validity of the return filed and the claim of deduction under section 80IB(10). Detailed Analysis: 1. Eligibility of the Assessee to Claim Deduction Under Section 80IB(10): The assessee, engaged in the development and construction of buildings, claimed a deduction under section 80IB(10) of the Income Tax Act on income derived from the Chandivali Project, an SRA project. The project was completed during the year under consideration, and the income included sale proceeds of TDR. The AO initially allowed the deduction but later revised it, excluding additional income admitted during search proceedings, treating it as "Income from Other Sources." 2. Classification of Additional Income Admitted During Search Proceedings: During search proceedings, the assessee admitted additional income of ?60.91 crores, which included cash receipts on the sale of TDRs and sale of scrap. The assessee claimed this as business income and sought a deduction under section 80IB(10). The AO, however, treated this as "Income from Other Sources," thereby reducing the deduction. The Tribunal noted that the seized documents and statements recorded during the search clearly indicated that the receipts were related to the business activity of the assessee, thus constituting business income eligible for deduction under section 80IB(10). 3. Rectification of Assessment Order Under Section 154: The assessee filed a rectification petition under section 154, seeking correction of the assessment order, particularly the classification of additional income and disallowances affecting the deduction under section 80IB(10). The AO rejected the petition, stating that the issues raised did not constitute "mistakes apparent from the record." The Tribunal, however, found that the AO had not considered all relevant materials and judicial precedents, constituting a mistake apparent from the record. Consequently, the Tribunal directed the AO to assess the additional income as business income and allow the corresponding deduction. 4. Double Taxation of Scrap Sales: The assessee contended that the reduction of ?2.00 crores relating to scrap sales of AY 2009-10 resulted in double taxation. The Tribunal accepted this contention, directing the AO not to assess the amount in the current year, as it had already been taxed in AY 2009-10. 5. Disallowance of Construction Costs and Bogus Purchases: The AO disallowed ?9.00 crores claimed as additional WIP costs and ?29.92 lakhs as bogus purchases, reducing the deduction under section 80IB(10). The Tribunal noted that the AO did not consider the binding decision of the jurisdictional High Court, which constitutes a mistake apparent from the record. The Tribunal directed the AO to allow the deduction on these disallowances. 6. Cross-Objection by the Revenue: The revenue filed a cross-objection, raising legal contentions about the validity of the return filed by the assessee and the claim of deduction under section 80IB(10). The revenue argued that the return purportedly filed on 30-09-2011 was fraudulent and that the actual return was filed on 29-02-2012, beyond the due date prescribed under section 139(1). The Tribunal noted that the cross-objection was filed after the conclusion of the hearing and was barred by limitation. Moreover, the Tribunal found that the assessing officer cannot challenge his own order by filing an appeal in the form of a cross-objection. The Tribunal dismissed the cross-objection, emphasizing that the revenue should pursue other legal avenues if it believes the deduction was wrongly granted. Conclusion: The Tribunal allowed the appeal filed by the assessee, directing the AO to assess the additional income as business income and allow the corresponding deduction under section 80IB(10). The cross-objection filed by the revenue was dismissed as not maintainable, and the Tribunal emphasized the need for the AO to follow prescribed legal procedures to address any alleged fraud or misrepresentation by the assessee.
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