2016 (4) TMI 421 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on Section 80IB(10) disallowances

The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s decision to delete disallowances under Section 80IB(10) for flats exceeding 1000 sq. ... Disallowance u/s 801B(10) - Held that:- The statement given by one of the partners stating during survey proceedings that there is wrong claim made u/s. 80IB of the Act and offering the same for taxation has no evidentiary value unless there is corroborative evidence on record suggesting that the claim of the assessee is wrong. In the absence of any evidence on record, these statements cannot be a conclusive piece of evidence for withdrawing the deduction. In so far as the disallowance u/s. 80IB(10) of the Act in respect of Bldg. No. 23 & 24 of Samartha Angan is concerned, the Addl CIT directed the AO to disallow the claim solely on the basis of the statement of Shri Abhiram Bhattacharjee, one of the buyer who gave statement at the time of survey, who bought the residential unit in 2007. This statement was also retracted later on by Mr. Abhiram Bhattacharjee stating that the statement was taken in the course of survey was on a spur of moment when he visited the builders office for personal work. The statement was given under tension on account of office related work. By letter dated 23.12.2007, Shri Abhiram Bhattacharjee alongwith his wife Sucharita Bhattacharjee and Shri Ajit Bhattacharjee have stated that they have purchased three different residential flats bearing flat Nos. 1407, 1408 & 1409 from the assessee in the year 2007. The flat was purchased in the joined names. It was stated that three flats were purchased by separate sale deeds and was registered separately as separate residential unit. It was stated that the three units were purchased by the family members in joint names and possession was taken as per sale deeds separately in respect of flats. They have further stated that three units were amalgamated and joined together after their purchase. We find that except the statement given by Mr.Abhiram Bhattacharjee in the course of survey that he had purchased the residential unit having more than 1000 Sq. ft, there is nothing on record to suggest that assessee has sold flats with built-up area of more than 1000 Sq. ft. Mr.Abhiram Bhattacharjee himself later on said that the flats were purchased by separate sale deeds and subsequently they have joined the flats on their own at their own cost. There is no evidence on record to suggest that the builder has constructed the residential unit with a built-up area of more than 1000 Sq. ft. in violation of the master plan and sold to the purchasers. There is no dispute infact that as per the approved plans built up area of each residential unit is less than 1000 Sq. ft, and the residential units were sold by executing separate sale deeds. In such circumstances, merely because the purchaser has joined the flats and the built-up area of the flat is exceeded more than 1000 Sq. ft., the assessee cannot be denied benefit u/s. 80IB(10) of the Act. Thus we uphold the order of the Ld. CIT(A) in deleting the disallowance made u/s. 80IB(10) of the Act both in respect of Bldg. No. 23 & 24 of Samartha Angan and Samartha Krupa. - Decided in favour of assessee. Issues Involved:1. Deletion of addition representing disallowance under Section 80IB(10) due to the area of flat exceeding 1000 sq. ft.2. Deletion of addition representing disallowance of deduction under Section 80IB(10) due to the area of the plot being less than one acre.3. Admission of additional evidence/retraction statements by the CIT(A) in violation of Rule 46A of the Income Tax Rules.Issue-wise Detailed Analysis:1. Deletion of Addition Representing Disallowance under Section 80IB(10) Due to the Area of Flat Exceeding 1000 Sq. Ft.:The Revenue argued that the CIT(A) erred in deleting the addition of Rs. 1,80,79,839/- under Section 80IB(10) on the grounds that the area of the flat exceeded 1000 sq. ft. The Revenue's contention was based on a statement made by a flat purchaser during a survey, which was later retracted. The CIT(A) accepted the retraction, which the Revenue claimed was in violation of Rule 46A.The Tribunal noted that the statement made by the partner of the assessee firm and the statements made by the buyers were part of the survey or assessment proceedings and thus could not be considered additional evidence. The Tribunal held that the CIT(A) did not violate Rule 46A by admitting these retraction statements.During the survey, one of the partners admitted to a wrong claim of deduction under Section 80IB(10) and offered Rs. 150 crores for taxation, which was later retracted. The AO's assessment was based on the directions of the Addl. CIT, who relied on the statement of a flat buyer, Mr. Abhiram Bhattacharjee, who also retracted his statement later. The Tribunal observed that the Inspector's report confirmed that the flats were sold as per approved plans, and any modifications were made by the buyers post-purchase.The Tribunal cited the case of Haware Constructions (P) Ltd. vs. I.T.O. and Emgeen Holdings (P) Ltd. vs. DCIT, which held that the deduction under Section 80IB(10) cannot be denied merely because the purchasers combined flats post-purchase. The Tribunal concluded that there was no evidence to suggest that the builder sold flats exceeding 1000 sq. ft. and upheld the CIT(A)'s order.2. Deletion of Addition Representing Disallowance of Deduction under Section 80IB(10) Due to the Area of the Plot Being Less than One Acre:The Revenue argued that the CIT(A) erred in deleting the addition of Rs. 56,55,861/- under Section 80IB(10) on the grounds that the area of the plot was less than one acre. The CIT(A) found that the building 'Samartha Krupa' was part of a larger project with a total plot area exceeding one acre, and thus the deduction was justified.The Tribunal referred to the case of CIT vs. Vandana Properties, which held that the area of the entire project should be considered for the deduction under Section 80IB(10). The Tribunal agreed with the CIT(A) that the project 'Samartha Krupa' was part of a larger sanctioned project and upheld the deletion of the disallowance.3. Admission of Additional Evidence/Retraction Statements by the CIT(A) in Violation of Rule 46A of the Income Tax Rules:The Revenue contended that the CIT(A) admitted additional evidence in violation of Rule 46A by considering retraction statements that were not presented during the assessment proceedings. The Tribunal examined the records and found that the retraction statements were part of the survey or assessment proceedings and thus could not be considered additional evidence. The Tribunal dismissed the Revenue's contention and upheld the CIT(A)'s decision to admit the retraction statements.Conclusion:The Tribunal dismissed the appeals filed by the Revenue, upholding the CIT(A)'s order in deleting the disallowances under Section 80IB(10) for both the area of the flat exceeding 1000 sq. ft. and the area of the plot being less than one acre. The Tribunal also held that the CIT(A) did not violate Rule 46A by admitting the retraction statements as they were part of the survey or assessment proceedings.Order Pronounced:The appeals filed by the Revenue are dismissed. Order pronounced in the open court on 9th March 2016.