2021 (12) TMI 133 - AT - Income Tax

Validity of Assessment u/s 153A - denying deduction u/s 80IB(10) - whether no incriminating material were found during the course of search? - HELD THAT - We find that in the case of assessee, assessment years 2008-09 to 2012-13 comes under the category of non-abated/completed assessment and the additions made by the ld. AO towards denying the benefit of deduction u/s 80IB(10) of the Act as well as taxing Long Term Capital Gain on sale of land as business income are not supported by any incriminating material found during the course of search and therefore, assessee succeeds on this legal ground and the addition made for A.Y. 2008-09 to A.Y. 2012-13 are deleted and deduction u/s 80IB(10) of the Act claimed by the assessee is accepted. Deduction u/s 80IB - AO denied the claim observing that the assessee worked in the capacity as contractor and not a developer as the assessee used to sale of vacant plot through a registered deed and thereafter construct the house and thus did not comply to the provision of section 80IB(10) - HELD THAT - As in the given facts and circumstances of the case and respectfully following the judgments referred hereinabove and the decision of this Tribunal in assessee s own case for A.Y. 2009- 10 2018 (9) TMI 2064 - ITAT INDORE and in absence of any contrary binding decisions placed before us by the Revenue, are of the considered view that the assessee has rightly claimed deduction u/s 80IB(10) of the Act for A.Y. 2008-09 to 2014-15 and the same needs to be allowed as claimed in the return of income. Thus the finding of Ld. CIT(A) is set aside and grounds raised on merit pertaining to claim of deduction u/s 80IB(10) of the Act for A.Y. 2008-09 to 2014-15 are allowed. Correct head of Income - gain from sale of land - LTCG or business income - HELD THAT - We find that assessee has not shown these plots of land as stock-in-trade in the profit and loss account. As it is judicial settled that the accounting treatment is in the books of accounts regularly maintained by the assessee is one of the main indicator of intent of the assessee and the nature of the outlay. The land in question on which assessee has shown Long Term Capital Gain pursuant to their sale, have been shown in the balance sheet as an asset and never shown them as part of stock-in-trade. The cost of the said land is shown as an investment in fixed asset in the balance sheet of the assessee since the year ended March 2007 till the year ended when these were sold. The copies of the balance sheet and profit and loss account for the relevant period showing that the land in questions has not been shown as stock-in-trade but as an assets directly in the balance sheet stands failed before both the lower authorities and before us. Thus the alleged gain from sale of land shown as assets in the balance sheet has been rightly shown as long term capital gain and it cannot be taxed as business income. Addition on account of profit from unsold units - CIT-A deleted the addition - HELD THAT - As the assessee has itself shown the profit on unsold unit and has credited the profit and loss account. Even otherwise since the unit is eligible for deduction u/s 80IB(10) of the Act as held by us in the preceding paras, there remains no justification on the part of the Ld.AO to assume the sale price and make addition for unsold units. Thus, we find no merit in the ground no.2 raised by the revenue.

Issues Involved:
1. Legality of search and assessment proceedings.
2. Denial of deduction under Section 80IB(10) of the Income Tax Act.
3. Treatment of Long Term Capital Gain as business income.
4. Profit from sale of unsold units.

Detailed Analysis:

1. Legality of Search and Assessment Proceedings:
The assessee argued that the search was conducted under a mistaken belief of association with the Signature Group, and no incriminating material was found during the search. The assessee contended that the assessments for the years 2008-09 to 2012-13 were non-abated/completed assessments, and any additions should be based on incriminating material found during the search. The Tribunal referred to several judicial precedents, including CIT vs. Kabul Chawla, PCIT vs. Meeta Gutgutia, and others, which held that additions for non-abated assessments can only be made based on incriminating material found during the search. The Tribunal concluded that since no incriminating material was found, the additions made for the years 2008-09 to 2012-13 were not justified and were deleted.

2. Denial of Deduction under Section 80IB(10):
The AO denied the deduction under Section 80IB(10) on the grounds that the assessee acted as a contractor rather than a developer. The assessee argued that it developed a housing project named "Palace Orchard" and complied with all the provisions of Section 80IB(10), including obtaining necessary approvals and completion certificates. The Tribunal noted that the assessee had consistently claimed the deduction in the original returns and had provided all necessary documentation. The Tribunal referred to its own decision in the assessee's case for the year 2009-10, where the deduction was allowed, and other judicial precedents supporting the assessee's claim. The Tribunal concluded that the assessee was eligible for the deduction under Section 80IB(10) for the years 2008-09 to 2014-15.

3. Treatment of Long Term Capital Gain as Business Income:
For the year 2011-12, the AO treated the Long Term Capital Gain on the sale of land as business income, arguing that the assessee incurred development expenses on the land. The assessee contended that the development expenses were minimal and the land was shown as an asset in the balance sheet, not as stock-in-trade. The Tribunal observed that the land was consistently shown as an asset in the balance sheet and not as stock-in-trade, indicating the assessee's intent to treat it as an investment. The Tribunal concluded that the gain from the sale of land should be treated as Long Term Capital Gain and not as business income.

4. Profit from Sale of Unsold Units:
For the year 2010-11, the AO made an addition of ?25,40,000 on account of profit from unsold units, assuming a sale value of ?50,00,000. The assessee argued that the sale price of the units was already included in the value of sales credited to the profit and loss account. The Tribunal noted that the assessee had already shown the profit from the sale of units in the profit and loss account and that the units were eligible for deduction under Section 80IB(10). The Tribunal found no justification for the AO's assumption and deleted the addition.

Conclusion:
The Tribunal allowed the assessee's appeals for the years 2008-09 to 2012-13, partly allowed the appeals for 2013-14 and 2014-15, and dismissed the revenue's appeal for 2010-11. The Tribunal held that the additions made by the AO were not justified in the absence of incriminating material found during the search and that the assessee was eligible for the deduction under Section 80IB(10).

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