Tribunal grants deductions for on-money income under section 80IB(10)

The Tribunal allowed the appellant's claim for deductions under section 80IB(10) for additional income from on-money related to the same project, rejecting the disallowance by the assessing officer. The Tribunal emphasized that the additional income enhanced business income from the eligible project, qualifying for deductions under section 80IB(10). The Tribunal distinguished the case law cited by the departmental representative, supporting the appellant's position. The appeals were allowed, and the order was pronounced on 12/11/2021.

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Issues Involved:
1. Disallowance of deduction claimed under section 80IB(10) of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Disallowance of Deduction under Section 80IB(10)

The appellant, a partnership firm engaged in the business of builders and developers, filed returns for the assessment years 2010-11, 2011-12, and 2012-13. A search and seizure operation under section 132 of the Act was conducted on 31-07-2014 in the case of Ameya group, leading to proceedings under section 153C against the appellant. Incriminating materials found indicated that the appellant received on-money from property sales, which was offered as additional income in the returns filed in response to section 153C notices. The appellant claimed deductions under section 80IB(10) for this additional income, which the assessing officer disallowed, citing section 80A(5) and the nature of search proceedings aimed at unearthing undisclosed income.

The Commissioner of Income Tax (Appeals) upheld the disallowance but allowed expenditures to the extent of 54% against the undisclosed income, estimating the net profit at 46%. The appellant argued that the additional income from on-money related to the same project for which deductions under section 80IB(10) were already allowed in the original returns. Therefore, the appellant contended they were eligible for the same deductions on the additional income.

The departmental representative opposed, stating that the assessments had not abated and the additional income was undisclosed, discovered only due to the search. The representative argued that section 153A and 153C proceedings are not for the appellant's benefit but to assess undisclosed income, relying on the Supreme Court's decision in Sun Engineering Works (198 ITR 297).

Upon review, the Tribunal noted that the additional income from on-money was part of the same project for which deductions under section 80IB(10) were previously allowed. The Tribunal referenced the co-ordinate bench decision in Malpani Estates vs ACIT (2014) 44 taxman.com 242, which supported the appellant's claim for deductions on additional income derived from the same housing project. The Tribunal emphasized that the additional income enhances the business income from the eligible project, thus qualifying for deductions under section 80IB(10).

Furthermore, the Tribunal dismissed the departmental representative's argument based on the Supreme Court's decision in Sun Engineering Works, clarifying that the case pertained to set-off losses against escaped income, not applicable to the present scenario where the additional income is connected to the original claim. The Tribunal also cited the Bombay High Court's decision in Sheth Developers (P) Ltd., which upheld deductions under section 80IB(10) for undisclosed income from an eligible housing project.

Conclusively, the Tribunal allowed the appellant's claim for deductions under section 80IB(10) for the additional income, aligning with the co-ordinate bench's decision and the legal framework. The appeals were allowed, and the order was pronounced on 12/11/2021.

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