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TMI Blog2021 (12) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... firm engaged in the business of builders and developers. Search action u/s 132 of the Act was carried out at the business premises of the assessee firm on 29.01.2014. Subsequently notice u/s 153A of the Act was served upon the assessee for A.Ys. 2008-09 to 2013-14 and u/s 143(2) of the Act for A.Y. 2014-15. In response return of income were filed and the details are mentioned in the following table: A.Y. Date of filing of return u/s 139(1) Returned income (in Rs.) Date of filing of return by the assessee against notice u/s 153A Income declared in Return u/s 153A(in Rs.) Additional income offered by the assessee(in Rs.) 2008-09 26.09.2008 NIL 30.11.2015 NIL NIL 2009-10 29.09.2009 NIL 30.11.2015 NIL NIL 2010-11 14.10.2010 NIL 30.11.2015 NIL NIL 2011-12 29.09.2011 1,44,81,040/- 30.11.2015 1,44,81,040/- NIL 2012-13 30.09.2012 NIL 30.11.2015 NIL NIL 2013-14 01.10.2013 70,72,070/- 30.11.2015 70,72,070/- NIL 2014-15 30.11.2014 38520/- 30.11.2015 NIL NIL 4. During the course of assessment proceedings and while framing the assessment order, Ld. AO mentioned that no incriminating material was found duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erations nor any documentary or other evidence is placed on record by the Learned Assessing Officer. The grounds essential to warrant the issue of notice vx ] s 153A did not exist in the case of the assessee; the search is therefore vitiated and the Impugned Assessment Order deserves to be quashed on this ground alone. Thus in the facts and circumstances of the case the Commissioner of Income Tax (Appeals) was not justified in holding the search as justified. 2. That the Impugned Assessment Order passed by the Learned Assessing Officer is void ab initio as no incriminating documents, whatsoever, were recovered from the assessee as a result of the search. The Impugned Assessment Order deserves to be quashed on this ground. It was incumbent on the Commissioner of Income Tax (Appeals) to examine the assessment record s to verify the truth in the statement made by the Appellant Assessee. In view of the fact that there was no addition which can be attributed to the so called seized documents the Commissioner of Income Tax (Appeals) is not justified in holding that there were incriminating documents were found in search and which were duly handed over to the Appellant assessee and addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be sustained merely on the basis of the statement. There has to be some material corroborating contents of the statements. The A.O. failed to correlate the disclosure made in the statement with the incriminating material gathered during the search. Therefore, no addition can be made on this account. In view of the above it is humbly prayed that the disallowance made for the claim u/s 80-IB is bad in law and hence the same may please be allowed. 10. Per contra Ld. DR vehemently argued supporting the orders of both lower authorities. 11. We have heard the rival submissions, perused the materials available before us and carefully gone through the decisions referred and relied by the Ld. Counsel for the assessee. Through this legal ground assessee has challenged the finding of Ld. CIT(A) confirming the addition and denying the deduction u/s 80IB(10) of the Act on the ground that no incriminating material was found during the course of search and additions were purely made on the basis of information called during the course of assessment proceedings. 12. We note that the search was conducted at the assessee business premises on 29.01.2014. The assessee has been filing regular r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business premises of the assessee on 29.1.2014 and therefore the time limit for issue of notice u/s 143(2) of the Act is lapsed. All the assessment years from 2008-09 to 2012-13 are concluded and non abated assessments. The A.O. cannot reopen the assessments u/s 153A of the Act. In so far as the above submission is concerned from the assessment order and even from the Ld. CIT(A)'s order, there is nothing on the record which says that the additions made by the A.O. are based on any incriminating material. Even when the same was pointed out to Ld. D.R., she is not able to establish the fact that additions are based on any incriminating material, therefore we find that the additions made by the A.O. for all the years are not based on any incriminating material found during the course of search. It is only based on subsequent search by issue of notice u/s 153A of the Act calling for the various documents from the assessee additions are made. In so far as the arguments of the Ld. Counsel for the assessee in respect of concluded assessments cannot be reopened, we find that in all the assessment years from 2008-09 to 2012-13, there is no scope for the A.O to issue a notice u/s 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man.com 412 (Del.), the Hon'ble Delhi High Court has considered the scope of section 132 of the Act and 153A(1) observed as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(I) will have to be mandatorily issued to the person searched requiring him to file returns for six A Y s immediately preceding the previous year relevant to the A Y in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such A Ys will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant A Y in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial, the concluded/non abated assessments cannot be disturbed again u/s 153A of the Act. 19. In so far as Kerala High Court decision in the case of E.N. Gopakumar (supra) the Hon'ble Kerala High Court has held that even without there being any incriminating material, the A.O. is empowered to make an addition u/s 153A of the Act. The same view has been expressed by the Hon'ble Karnataka High Court in the case of Canara Housing Development Company (supra). 20. In the above circumstances, whether the decision of the Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products (supra) has to be applied or not. The Ld. D.R. has submitted that the decision held in CIT Vs. Vegetable Products (supra) cannot be applied in each and every case in the light of the decision of CCV Dilip Kumar (supra). In the present case, the assessee has filed all the returns before conducting the search and the time limit to issue notice u/s 143(2) of the Act already lapsed and a search is conducted and no incriminating material is found. The A.O. called for books of accounts and other relevant documents and assessment is completed u/s 153A r.w.s. 143(3) of the Act. 21. There are many ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act expires, no addition can be made u/s 153A of the Act. For the sake of convenience relevant portion of the order is extracted hereunder: "8. We observe that the assessee has filed regular return of income u/s 139 of the Act for Assessment Year 2008-09 to 2010-11 on 30.9.08, 31.3.2010 and 12.10.2010 after claiming deduction u/s 80IB(10) at Rs. 8,92,452/-, Rs. 2,66,948/- and Rs. 2,44,417/- respectively. The time limit for issuance of notices u/s 143(2) of the Act stood expired in relation to the assessment year 2008-09 to 2010-11 much before the date of conducting the search i.e. 29.1.2014 and therefore these three assessment years falls under the category of unabated/non abated assessments. Now in the given facts Ld. Counsel for the assessee has relied few judgments and Ld. Departmental Representative has relied to few judgments in its favour. However, the Hon'ble Apex Court in the case of CIT V/s Vegetable Products Ltd 88 ITR 192 has "held that if two reasonable construction of a taxing provisions are possible, then that construction which favours the assessee must be adopted". In the light of above judgment of Hon'ble Apex Court we have gone through the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions and held that exemption provisions has to be considered strictly and in a case of ambiguity view which favours the revenue must be adopted. Therefore, the above decision relied by the Ld. D.R. has no application to the ratio laid down by the Hon'ble Supreme Court in the case of Vegetable Products (supra). Therefore, argument of the Ld. D.R. is rejected. 15. On examining the facts of the instant case in light of the above decision of this tribunal in case of Omprakash Gupta (supra) wherein various other judgments and decisions have been referred, 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. We, thus, set aside the finding of ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as sold the open plot and handed over the possession . The assessee has received the remaining amount from the customer on account of construction of the bunglow, as such the assessee has not sold the bunglow and simply acted as a contractor. It is submitted that the assessee is a developer and is a registered owner of the land on which the project has come up. The assessee holds the Colonisers license and the project is approved by the appropriate authority. The assessee has developed the group housing project. The assessee has entered into the agreement for the sale of the developed premises. However for the sake of convenience of the buyers to get the loan facilities the assessee agrees to sale the plots keeping the possession with him for the constructions of the houses. ( Pg. 102 of PB) Clause 13 of the said agreement clearly provides that the assessee would do all the acts to get the property registered in the name and in the state as requested by the said party. However, the builder shall continue to have the possession of the property till the completion of the agreement. Under these circumstances the builder is a developer and not a contractor. The Hon'ble Indore Bench i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tractor and not a developer. 24. We observe that the assessee has developed housing project namely 'Palace Orchard' at Bhopal. Before the date of search the assessee had already filed the returns for A.Ys. 2008-09 to 2013-14 and has consistently claimed deduction u/s 80IB(10) of the Act on furnished necessary report as prescribed under the Act to claim this deduction and after obtaining necessary approval and completion certificate as provided under the provision of section 80IB(10) of the Act. 25. It has been contended before us that the assessee holds the colonisers license and the project is approved by the appropriate authority. The project Palace Orchard is a group housing project. Aassessee entered into the agreement for the sale of developed premises. It was also contended that for the sake of convenience the buyers and in order to facilitate them to take housing loan the assessee agreed to sale the plots without giving the possession and after the construction of house used to hand over the possession. This submission by the Ld. counsel for the assessee has sufficient weightage as this condition is already provided in clause 13 of the agreement entered into between assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 of 2012 order dated 12.11.2013 has allowed the deduction to assessee by holding as under:- Sr. No. Decision in the case of Reported in... 1. DCIT vs. SMR Builders P.)Ltd. (2012)24 Taxman.com 194(Hyd.) 2 Sky Builders & Developers vs. ITO (2011) 14 Taxman.com 78(Indore) 3 M/s. Vardhman Builders and Developers vs. ITO Income-tax Act, 1961. No.559/Ind/2010 dated 09.05.2012 4 Raghava Estates Vs. Dy.CIT Income-tax Act, 1961. Nos. 248 & 49/Vizag/2009 dated 04.08.2011 4.2. In addition to above two objections, the Id.CIT (A) has raised one more objection that the assessee has sold the land to the Unit holders separately and has done the construction of units under separate agreement/contract and, therefore, the assessee is not eligible for deduction u/s.80-IB(10) of the Act because as per ld.CIT(A), profit earned by the assessee in respect of sale of land is not eligible for deduction u/s.80-IB(10) of the Act and similarly, the profit earned by the assessee for construction activities is not eligible for deduction u/s.80-IB(10) because the assessee is doing the construction as a contractor for a work and not as a builder or developer and, therefore, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee for deduction u/s.80-IB(10) of the Act. It was also held by the Tribunal that the entire work from the stage of the commencement to the stage of making the residential unit habitable have been carried out by the assessee only and, therefore, assessee is eligible for deduction u/s.80-IB(l 0) of the Act. 9.2. Now we take up the third and last objection of Id.CIT (A) that the assesse had sold the land separately and undertook the construction work as per a separate agreement and, therefore the assessee is not a builder or a developer but a land dealer and contractor. In this regard, in our considered opinion, the issue involved is squarely covered in favour of assessee by the decision of ITAT Indore Bench rendered in the case of M/s.Vardhman Builders and Developers vs. ITO (supra). It is noted by the Tribunal in that case that the assessee had entered into an agreement for a sale of land and a separate agreement for construction of the house on the land and, therefore, the facts are similar. Under these facts, it was held by the Tribunal in that case that the claim of the assessee for deduction u/s.80-IB (10) of the Act cannot be declined if other conditions are being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see u/s. 80IB(10) of the Act. Hence, we direct the A.O to grant the deduction to the assessee u/s. 80IB(10) of the Act. 9. Before us, the Revenue could did not place any contrary decision on record nor could distinguish the facts of the case which was relied by the Assessee. In view of the aforesaid facts, we respectfully following the aforesaid decision of the co-ordinate Bench of the Tribunal, in the case of Satsang Developers (supra) hold that Assessee is eligible for deduction u/s 80IB(10). Thus this ground of Assessee is allowed. 8. We find that in the case of Narayan Reality Ltd. (supra) the Co-ordinate Bench of Tribunal, after placing reliance on the various decisions cited therein decided the issue in favour of assessee. Before us, revenue could not point out any distinguishing feature of the present case with that of Narayan Reality Ltd. (supra) nor has brought any contrary binding decision on record in its support. In view of the aforesaid facts, we respectfully following the decision of the coordinate bench of tribunal in the case of Narayan Reality (supra) hold that the assessee is eligible for deduction u/s 80IB(10). Thus, this ground of assesse is allowed. 27. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot registered in name of the customers and there after constructed the house their own, that itself makes it clear that the assessee has acted as mere contractor for the customers and not as a developer of the housing project. Thus, the A.O. rejected the claim on these grounds. However, the Ld. CIT(A) allowed the claim by observing as under: "Ground No.2:- Through this ground of appeal the appellant has challenged the disallowance of Rs. 2,53,19,8252/- on account of rejection of claim u/s 80IB(10). The A.O. disallowed the claim of the appellant on the ground that the audit report in Form No.10CCB, dated 15.9.2009 mentions the profit from the eligible business at Rs. 3,81,46,910/-, whereas the appellant declared the net profit as per audited profit and loss account at Rs. 2,53,19,825/-. The A.O. also mentioned that the appellant has not furnished the completion certificate. The A.O. also mentioned that the appellant worked as a mere contractor rather than developer of the housing project. 4.2.1 The appellant submitted that as per audit report in the Form No.10CCB the deductible profit was at Rs. 3,81,46,910/- due to typographical error. The appellant has obtained a certificate i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n essential condition of finance, the banks need the equitable mortgage of the house before the release of the loan amount. Therefore, for the mutual convenience of the seller and the buyer a sale deed is executed in respect of the plot with the construction thereon, in the state it is at that time: without which the bank would not entertain the loan proposal. Thereafter, the bank releases the instalments and each time it does so, it obtains a certificate from its architect as to the stage of construction. Hence the sale deed executed during the course of construction is only to facilitate the sanctioning of loan as mandatory condition of the Banks. 4.2.6 It may also be obser5ved that the loan amounts are released by the bank to the Developer/builder directly on the basis of the Agreement/ Acceptance letter and submission of sale deed and not to the customer; however, if the case was that of sale and subsequent construction by the appellant for an on behalf of the customer, as contended by the Assessing Officer the loan would have been disbursed to the individual customer and not to the builder. It was never the intention of the Appellant Assessee to sell the developed plot. Doin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011 14 Taxmann.com 78) is not applicable to the issue at hand as the facts and circumstances of the ctwo cases are entirely different. The sky Builders' case has been decided on the issue of non-granting of completion certificate with in the financial year which is not the case of the appellant. Furthermore, the same bench of ITAT Indore has come out clearly on the identical issue in favour of the assessee in the case of M/s. Vardhman Builders and Developers Vs. ITO in ITA No.559/Ind/2010 dated 9.5.2012. 4.2.9 The following cases wherein the Honble ITAT's have opined in favour of the appellant in identical issues referred to them: a) Green Associates Vs. ITO Wd.5(2), Baroda: ITA No.822/AHD/2013. b) Satsang Developers ITA No.1011, 2498 and 1221 of 2012 order dated 12.11.2013. c) DCIT SMR Builders (P) Ltd (2012) 24 Taxmann.com 194 (Hyd) d) ITO Vs. Meghal Developers ITA No.296/Ahd/2013 e) M/s. Nagma Developers, Baroda Vs. ITO Wd 2(5) Baroda ITA No.2385/Ahd/2012 f) Narayan Realty Vs. DCIT in ITA No.2293/Ahd/2012 and 2095/Ahd/2013 vide order dated 2.5.2014 Thus, it is proved beyond doubt that the appellant has acted as a builder and developer and not a contractor of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank statement which proves that the payment has been made through account payee cheque. The A.O. is not justified in treating the above creditors as bogus. Therefore, the addition made by the A.O. amounting to Rs. 16,74,394/- is deleted. The appeal on these grounds is allowed." 9. We do not see any reason to interfere in this finding of the Ld. CIT(A) as the findings are based upon the evidences furnished by the assessee. Moreover, the assessee has filed affidavits of the creditors, their bank account and also the supporting bills. This ground of the revenue's appeal is dismissed. 28. The above finding of this tribunal pertaining to the assessee is for the same project i.e. 'Palace Orchard' for which the alleged deduction u/s 80IB(10) of the Act has been claimed for A.Y. 2008- 09 to 2014-15 and it clearly establishes that the assessee has duly complied to provisions of u/s 80IB(10) of the Act and is eligible for deduction under this section in the capacity of developer of housing project. 29. We, therefore, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicator 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. 35. We, therefore, in the given facts and circumstances of the case, are of the considered view that 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. Finding of Ld. CIT(A) is set aside and ground no.4 for A.Y. 2010-11 is allowed. 36. Now we take up revenue's appeal for A.Y. 2010-11 in IT(SS)ANO.14/Ind/2019, in which the revenue has raised following grounds of appeal: 1. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments on record, it is very clear that appellant himself has shown profit on unsold units and has credited to the profit and loss account. Further it is important to note that profit from sale of units is exempted u/s 80IB(10) of the Act. Therefore, the AO was not justified in assuming sale price of Rs. 50,00,000/- and profit of Rs. 25,40,000/- arising over it. Thus, the addition made by the AO on account of profit from sale of unsold unit of Rs. 25,40,000/- is deleted. Therefore, appeal on this ground is allowed." 39. From perusal of the above finding of Ld. CIT(A) and facts placed on record we find that 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. 40. In the result, Appeals of the assessee in IT(SS)ANo.304 to 308/Ind/2017 for A.Y. 2008-09 to 2012-13 are allowed and in ITANo.705/Ind/2017 & IT(SS)No.309/Ind/2017 for A.Y. 2013-14 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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