2019 (8) TMI 47 - AT - Income Tax

Tribunal denies section 80IB(10) deduction for undisclosed receipts, assessees fail to prove compliance

The Tribunal upheld the decisions of the Assessing Officer (A.O.) and the Commissioner of Income Tax (Appeals) [CIT(A)], denying the deduction under ... Deduction u/s 80IB(10) - undisclosed receipts/income surrendered during the course of survey - business income OR income from other sources - HELD THAT:- There could be no presumption that surrendered amount would represent business income of the assessees. Unless and until assessees satisfies the authorities below that assessees have complied with the conditions of Section 80IB910) while earning the impugned undisclosed income, assessee would not be entitled for such benefit as per Law. Authorities below have rightly concluded that impugned undisclosed income is income from other sources. Since assessee failed to prove through any evidence or material on record that undisclosed income has any nexus with any housing project of the assessee therefore, assessee would not be entitled for deduction under section 80IB(10). No error in the Orders of the authorities below in denying the deduction under section 80IB(10) on the undisclosed receipts so surrendered for taxation during the course of survey. There is no merit in both the appeals of the assessee. Appeals of the Assessee are dismissed. Issues Involved:1. Validity of the additions of Rs. 1,03,50,000/- and Rs. 58,50,000/- as undisclosed income.2. Eligibility for deduction under section 80IB(10) of the Income Tax Act on the undisclosed income.3. Classification of undisclosed income as business income or income from other sources.Detailed Analysis:1. Validity of the Additions as Undisclosed Income:The case revolves around a survey conducted under section 133A of the Income Tax Act on the business premises of the assessee group, which led to the disclosure of Rs. 1.81 crores as undisclosed income by a key person of the group. The assessees admitted that this income was not recorded in the regular books of the firms. Consequently, the Assessing Officer (A.O.) noticed that the assessees included these disclosures in their total turnover and claimed deductions under section 80IB(10), resulting in no tax being paid on the undisclosed income. The A.O. disallowed the deductions and treated the undisclosed amounts as income from other sources due to the lack of supporting evidence.2. Eligibility for Deduction under Section 80IB(10):The assessees argued that the undisclosed receipts should qualify for deduction under section 80IB(10) as they were business receipts from developing and building residential housing projects. However, the A.O. and the Commissioner of Income Tax (Appeals) [CIT(A)] held that the assessees failed to provide necessary details such as names, addresses, PAN numbers, and dates of receipt, which were crucial to prove that these were business receipts from eligible projects. The CIT(A) emphasized that the beneficial provisions of the Act are meant for assessees who comply with the provisions voluntarily and disclose their income correctly. The CIT(A) concluded that the assessees acted in defiance of legal provisions and thus, were not entitled to the deduction under section 80IB(10).3. Classification of Undisclosed Income:The A.O. treated the undisclosed amounts as income from other sources, not as business income, due to the lack of specific details linking these receipts to the eligible projects. The CIT(A) supported this view, stating that without the necessary details, it was impossible to verify the claim that these were business receipts. The Tribunal agreed with the authorities below, noting that the assessees failed to prove that the conditions of section 80IB(10) were satisfied. The Tribunal cited the case of National Legguard Works vs. CIT(A) & Another, where it was held that the burden to prove eligibility for special deductions lies on the assessee.Conclusion:The Tribunal upheld the decisions of the A.O. and the CIT(A), denying the deduction under section 80IB(10) on the undisclosed receipts. The Tribunal emphasized that the assessees did not provide sufficient evidence to prove that the undisclosed income was earned from the development of housing projects. Consequently, the undisclosed income was classified as income from other sources, and the appeals of the assessees were dismissed. The Tribunal concluded that there was no error in the orders of the authorities below in denying the deduction under section 80IB(10) on the undisclosed receipts.