2017 (4) TMI 295 - AT - Income Tax

Assessee's Appeal Dismissed for AY 2006-07: Deductions Allowed for Project Completion

The assessee's appeal for the assessment year 2006-07 challenging the order under section 153C r.w.s. 143(3) was dismissed. For the entitlement to ... Eligibility to claim the deduction under section 80IB(10) -whether the assessee can claim such deduction in the return of income filed under section 153C - Held that:- DVO during the course of appellate proceedings has given physical report of various flats constructed by the assessee and it has been reported that 33 flats out of total 156 flats have, after merger were beyond area of 1000 sq.ft. Accordingly, the assessee is not entitled to claim the deduction under section 80IB(10) of the Act in respect of such merged 33 flats. Since the assessee is not entitled to the benefit of deduction under section 80IB(10) of the Act in respect of such flats, the additional income, if any, offered on account of on-money in respect of said 33 flats is to be brought to tax in the hands of assessee, and the assessee is not entitled to claim the deduction under section 80IB(10) of the Act in respect of such on-money on 33 flats. The amendment brought in by insertion of 80IB(14) of the Act is w.e.f. 01.04.2005 and accordingly, is applicable for such projects which are approved after 01.04.2005. The project of the assessee was approved on 24.03.2005 and consequently, the amendment brought in on 01.04.2005 is not applicable to the project of assessee. Where the assessee has received sanction on 24.03.2005 and the local authority has even issued the completion certificate on 08.06.2007 for construction of the said flats, then in order to determine the built up area of the flats, the area of balcony and terrace is to be excluded and since in respect of balance flats after such exclusion, the area is less than 1000 sq.ft., the assessee is entitled to prorata deduction under section 80IB(10) of the Act. Further, the assessee is also entitled to prorata deduction under section 80IB(10) of the Act in respect of on- money received on such flats which are entitled to the claim of deduction The search was carried out against the assessee on 16.10.2008 and the assessee had filed the original return of income on 14.09.2008, hence as per provisions of section 153C r.w.s. 153A of the Act , the proceedings relevant to the year under consideration would abate. Hence, the assessee while filing the return of income in response to notice issued under section 153C r.w.s. 153A of the Act is entitled to make a fresh claim of such deduction and the same is to be allowed in the hands of assessee, if in accordance with law. Accordingly, we hold so. Relying on the ratio laid down in Malpani Estates Vs. ACIT (2014 (2) TMI 944 - ITAT PUNE), we hold that the assessee could make the claim under section 80IB(10) of the Act with regard to enhanced income which was well within the scope and ambit of assessments under section 153A of the Act. The additional income when received during the course of carrying on the business activity of developing housing project is derived from the housing project, which is eligible for claiming deduction under section 80IB(10) of the Act, hence the assessee is eligible to claim the deduction on such additional income. Following the same parity of reasoning, we hold that the assessee is entitled to claim the deduction under section 80IB(10) of the Act on such additional income which is in relation to the project which is entitled to the aforesaid deduction. However, in respect of 33 flats, the assessee is not entitled to claim the deduction under section 80IB(10) of the Act and hence, is not eligible to claim the deduction under section 80IB(10) of the Act in respect of additional income arising from sale of such 33 flats. Issues Involved:1. Legality of the order passed under section 153C r.w.s. 143(3) of the Income-tax Act, 1961.2. Entitlement to deduction under section 80IB(10) of the Act.3. Alleged bogus purchases.4. Unrecorded expenses.5. Unaccounted cash receipts.Detailed Analysis:1. Legality of the Order Passed Under Section 153C r.w.s. 143(3) of the Income-tax Act, 1961:- The assessee's appeal for the assessment year 2006-07 challenging the legality of the order under section 153C r.w.s. 143(3) was dismissed as not pressed.2. Entitlement to Deduction Under Section 80IB(10) of the Act:- Completion of Project: The project was approved on 24.03.2005 and the completion certificate was issued on 08.06.2007. The CIT(A) held that the project was completed within the stipulated time frame, and the construction of two servant toilets later did not affect the eligibility for deduction.- Built-up Area of Flats: The assessee's project included flats exceeding 1000 sq.ft., which violated section 80IB(10). The CIT(A) allowed prorata deduction for flats within the 1000 sq.ft. limit, excluding the area of balcony and terrace as per the pre-01.04.2005 approval.- Additional Income: The CIT(A) allowed the deduction on additional income declared during the search as it was derived from the housing project.- Revenue's Appeal: The Revenue's appeal against prorata deduction and the completion date was dismissed. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee was entitled to prorata deduction for compliant flats and additional income derived from the project.3. Alleged Bogus Purchases:- The CIT(A) upheld the addition of Rs. 90,42,218/- for unproved purchases from M/s. Ellora Trading Company. The assessee failed to provide confirmation from the said party, and the denial of expenditure resulted in enhanced income eligible for proportionate deduction under section 80IB(10).4. Unrecorded Expenses:- The CIT(A) noted that the assessee had considered unsigned voucher entries as genuine. The Assessing Officer was directed to verify the date of expenditure, and if related to earlier years, no addition was to be made in the current year.5. Unaccounted Cash Receipts:- The CIT(A) upheld the addition of Rs. 7,78,900/- out of Rs. 8,13,250/- for unaccounted cash receipts. However, the additional receipts were considered eligible for proportionate deduction under section 80IB(10).Conclusion:- The assessee's appeal for the assessment year 2006-07 was dismissed. Appeals for assessment years 2008-09 and 2009-10 were partly allowed. The Revenue's appeals for assessment years 2008-09 and 2009-10 were dismissed. The Tribunal upheld the prorata deduction for compliant flats and additional income derived from the project while denying the deduction for flats exceeding the 1000 sq.ft. limit.