2017 (10) TMI 678 - AT - Income Tax

Tribunal quashes assessment orders, remands deduction issue, upholds appeal, and allows cross objections.

The Assistant Commissioner of Income-tax, Central Circle 2 (2), Bangalore Versus M/s. Cornerstone Properties Private Limited

The Assistant Commissioner of Income-tax, Central Circle 2 (2), Bangalore Versus M/s. Cornerstone Properties Private Limited - Tmi Issues Involved:1. Validity of assessment under Section 153A of the Income Tax Act, 1961.2. Allowability of deduction under Section 80IB(10) of the Income Tax Act, 1961.3. Admissibility of the assessee's appeal despite voluntary withdrawal of the claim.Detailed Analysis:1. Validity of Assessment under Section 153A:The assessee contended that the assessment made under Section 153A was beyond its scope as no incriminating materials were found during the search. The CIT(A) upheld the assessment relying on a statement, which was challenged by the assessee. The assessee cited the Karnataka High Court's judgment in CIT Vs. Lancy Constructions, which held that reassessment based on search without incriminating material is not permissible. The Tribunal agreed with the assessee, noting that no incriminating material was found during the search, and the original assessment had already considered the relevant documents. Consequently, the Tribunal quashed the assessment orders for the years 2006-07, 2007-08, and 2008-09.2. Allowability of Deduction under Section 80IB(10):For the assessment year 2009-10, the revenue challenged the CIT(A)'s decision to allow the deduction under Section 80IB(10). The revenue argued that the assessee, being merely a landowner, did not qualify for the deduction. The CIT(A) had relied on the Karnataka High Court's decision in Shravanee Constructions, which allowed such deductions if the landowner was involved in development activities. The Tribunal found that the CIT(A) had not sufficiently verified the factual involvement of the assessee in the construction. Therefore, the Tribunal remanded the matter back to the AO to verify if the assessee was indeed involved in the supervision and development activities as claimed.3. Admissibility of the Assessee's Appeal:The revenue raised additional grounds, arguing that the assessee's appeal should not have been admitted as the assessee had voluntarily agreed to withdraw the claim. The Tribunal, however, upheld the CIT(A)'s decision to admit the appeal, citing a precedent that allowed appeals on legal grounds even if the claim was initially withdrawn voluntarily.Conclusion:- The Tribunal quashed the assessment orders for the years 2006-07, 2007-08, and 2008-09 due to the absence of incriminating material found during the search.- The Tribunal remanded the issue of deduction under Section 80IB(10) for the year 2009-10 back to the AO for factual verification of the assessee's involvement in development activities.- The Tribunal upheld the CIT(A)'s decision to admit the assessee's appeal despite the initial voluntary withdrawal of the claim.Outcome:- The cross objections of the assessee for the years 2006-07 to 2008-09 were allowed.- The revenue's appeals for the years 2006-07 to 2008-09 were dismissed.- The revenue's appeal for the year 2009-10 was partly allowed for statistical purposes, with the matter remanded for further verification.