Tribunal allows sub-contract payments, upholds deduction claim under sec 80IA, and validates returns under sec 153A.

The Tribunal partly allowed the assessee's appeals on the disallowance of sub-contract payments, directing the AO to disallow 5% of the total cash withdrawn by the sub-contractors with the assessee's help. The Tribunal upheld the CIT(A)'s decision to allow the deduction claim under section 80IA, instructing the AO to assess the contractor's credentials. It was agreed that the returns filed in response to notice under section 153A were valid for assessment. The Tribunal allowed appeals against penalties for AYs 2008-09 to 2010-11 but upheld the penalty for AY 2011-12 due to the failure to maintain proper books of account.

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Issues Involved:
1. Disallowance of expenditure claimed as payments to sub-contractors.
2. Rejection of claim of deduction under section 80IA.
3. Validity of returns filed in response to notice under section 153A.
4. Penalty under section 271B for failure to get accounts audited.

Detailed Analysis:

1. Disallowance of Expenditure Claimed as Payments to Sub-Contractors:
The assessee recorded expenditures claimed to be payments to sub-contractors. The Assessing Officer (AO) identified significant improbabilities in these expenditures, noting that the sub-contractors lacked the credentials to execute the work. The AO disallowed the payments made to various entities, concluding that the transactions were not genuine. The assessee argued that the sub-contractors executed the work, acknowledged the receipts in their returns, and that the payments were made through banking channels with tax deducted at source (TDS). The CIT(A) upheld the AO's disallowance, noting that the employees of the assessee company withdrew the cash from the bank accounts of the sub-contractors, which cast doubt on the genuineness of the transactions.

2. Rejection of Claim of Deduction Under Section 80IA:
The AO rejected the assessee's claim for deduction under section 80IA, stating that the claim was made for the first time in the revised returns filed in response to notice under section 153A, which was not permissible. The CIT(A) allowed the claim, directing the AO to evaluate the credentials of the contractor as a developer with reference to the specific facts of each contract. The CIT(A) noted that some agreements were not with the government or statutory bodies, thus not qualifying for the deduction.

3. Validity of Returns Filed in Response to Notice Under Section 153A:
The AO held that the returns filed in response to notice under section 153A were invalid as they were filed belatedly. The CIT(A) disagreed, stating that the returns filed beyond the prescribed time could still be considered valid for assessment purposes, though the assessee might face consequences such as interest, penalty, and prosecution for the delay. The Tribunal upheld this view, stating that the returns filed in response to notice under section 153A should be treated as returns filed under section 139(1).

4. Penalty Under Section 271B for Failure to Get Accounts Audited:
The AO levied penalties under section 271B for the assessee's failure to get its accounts audited as required under section 44AB. The assessee argued that the audit reports were obtained and filed along with the returns, though belatedly. The CIT(A) upheld the penalties, noting that the audit reports were not furnished to the AO by the prescribed date, thus constituting non-compliance with section 44AB. For AY 2011-12, the CIT(A) found no credible explanation for the failure to maintain proper books of account.

Conclusion:
- The Tribunal partly allowed the assessee's appeals regarding the disallowance of sub-contract payments, directing the AO to disallow 5% of the total cash withdrawn by the sub-contractors with the assistance of the assessee.
- The Tribunal upheld the CIT(A)'s decision to allow the claim of deduction under section 80IA, directing the AO to evaluate the credentials of the contractor.
- The Tribunal agreed with the CIT(A) that the returns filed in response to notice under section 153A were valid for assessment purposes.
- The Tribunal allowed the assessee's appeals against the penalties for AYs 2008-09 to 2010-11, noting that the audit reports were obtained before the due date, but upheld the penalty for AY 2011-12 due to the failure to maintain proper books of account.

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