Assessee's appeal dismissed, Revenue's appeals allowed. Section 80IB deduction issue remanded for verification.

The Tribunal dismissed the assessee's appeal on the addition of Rs.1.78 crores as unexplained investment. The Revenue's appeals were allowed for statistical purposes. The issue of deduction under section 80IB for Assessment Years 2005-06 and 2006-07 was remanded back to the Assessing Officer for further verification and determination of the correct profit amount.

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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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