M/s Sri Sai Constructions, Vijayawada V. THE ITO, Vijayawada

ITA 197/VIZ/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6446 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 21-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRIK C DAS
• Assessee Lawyers: SHRI GVN HARI
• Keywords: Rejection of books of accounts
• Section: 143(3); 80IB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI D.MANMOHAN, VICE PRESIDENT & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO . 1 9 7 / VIZ / 201 5 ( / ASSESSMENT YEAR: 20 1 1 - 1 2 ) M/S SRI SAI CONSTRUCTIONS D.NO.76 - 9 - 22/2, 1 ST CROSS AKULA RAJA RAO STREET BHAVANIPURAM VIJA Y AWADA VS. INCOME TAX OFFICER WARD - 1(2) VIJA Y AWADA ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRIG.V.N.HARI, AR / RESPONDENT BY : SHRIK.C.DAS, DR / DATE OF HEARING : 0 7 . 1 2 .2017 / DATE OF PRONOUNCEMENT : 20 . 1 2 .2017 / O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER : TH IS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) [CIT(A)], VI JAYAWADA VIDE ITA NO.1 71 / CIT(A) /V JA /201 4 - 1 5 DATED 30 .0 3 .201 5 FOR THE A.Y. 20 1 1 - 1 2 . 2 ITA NO . 1 9 7 /VIZ/201 5 M/S SRI SAI CONSTRUCTIONS, VIJAYAWADA 2 . THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.NIL ON 29. 0 9.2011 FOR THE A.Y.2011 - 12. THE ASSESSEE IS CARRYING ON THE BUSINESS OF CONSTRUCTION. FOR THE A.Y. 2011 - 12, THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T.ACT ON TOTAL INCOME OF RS.25,65,600/ - . DURING THE ASSES SMENT PROCEEDINGS, THE ASSESSING OFFICER(AO) FOUND THAT THE ASSESSEE MADE TURNOVER OF RS.3,20,70,000/ - AND THE EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOUNT UNDER VARIOUS HEADS IS NOT CAPABLE OF VERIFICATION SINCE THE EXPENSES WERE INCURRED ON SELF - MA DE VOUCHERS AND PAID IN CASH. THE QUANTUM OF SUCH EXPENDITURE WAS RS.1,23,01,622/ - WHICH WORKS OUT TO 60.59% OF THE TOTAL EXPENDITURE. FURTHER, THE AO OBSERVED THAT THE ASSESSEE HAS NOT SUBMITTED ANY DOCUMENT OF VALUATION FROM AN Y STATUTORY AUTHORITY CERT IFYING THE VALUE OF UNFINISHED OR SEMI FINISHED STRUCTURES. THEREFORE, THE AO REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME @8% ON TOTAL TURNOVER OF RS.3,20,70,000/ - AND BROUGHT TO TAX A SUM OF RS.25,65,600/ - . 3. THE ASSESSEE HAD CLAIMED THE DEDUCTION U/S 80IB OF THE ACT TO THE EXTENT OF RS.13,29,116/ - AND THE AO HAS OBSERVED THAT THE ASSESSEE HAD NOT SATISFIED THE CONDITIONS LAID DOWN IN 80IB(10) OF THE I.T. ACT, PARTICULARLY WITH REGARD TO DEVELOPMENT OF PROJECT IN ONE ACRE OF LAND AND THE A LLOTMENT 3 ITA NO . 1 9 7 /VIZ/201 5 M/S SRI SAI CONSTRUCTIONS, VIJAYAWADA OF FLA T, MORE THAN ONE RESIDENTIAL FLA T TO ANY INDIVIDUAL , THEREFORE, THE AO DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IB AND COMPLETED THE ASSESSMENT. 4 . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT (A ) AND THE LD.CIT(A) CONFIRMED THE ESTIMATION MADE BY THE AO AND ALSO THE DEDU CTION CLAIMED BY THE ASSESSEE U/S 80IB OF I.T. ACT FOR VIOLATION OF THE PROVISIONS U/S 80IB(10) . 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE U S. D URING THE APPEAL HEARING, THE LD.AR ARGUED THAT THE AO IS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS TO MAKE THE ESTIMATION OF INCOME @8% OF GROSS RECEIPTS. SIMILARLY, THE LD.AR FURTHER CONTENDED THAT THE CIT (A) WOULD HAVE SCALED DOWN THE PERC ENTAGE OF PROFIT ESTIMATED BY THE AO SINCE THE ESTIMATION OF INCOME @8% IS VERY HIGH. FURTHER, THE LD.AR ARGUED THAT THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO U/S 80IB(10) OF I.T. ACT. 6 . ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 4 ITA NO . 1 9 7 /VIZ/201 5 M/S SRI SAI CONSTRUCTIONS, VIJAYAWADA 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THIS CASE, AS EVIDENT FROM THE ASSESSMENT ORDER, THE ASSESSEE HA D INCURRED HUGE CASH EXPENSES ON SELF - MADE VOUCHERS AMOUNTING TO RS.1,23,01,622/ - . THE ENTIRE EXPENSES WE RE NOT CAPABLE OF VERIFICATION. HENCE GENUINENESS OF THE EXPENDITURE INCURRED WITH SELF - MADE VOUCHERS CANNOT BE RELIED UPON AND NOT POSSIBLE TO MAKE CROSS VERIFICATIONS . THE LD.CIT(A) AGREED WITH THE AO AND CONFI RMED THE ADDITION ESTIMATING THE INCOME @8%. THE LD AR DID NOT BRING ANY OTHER MATERIAL TO CONTROVERT FINDING OF THE AO AND THE LD. CIT(A). THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) AND THE SAME IS UPHELD. 8 . WITH REGARD TO THE DEDUCTION U/S 80IB(10) OF I.T. ACT, THE AO HAS DISALLOWED THE DEDUCTION U/S 80IB ON TWO GROUNDS I.E. THE ASSESSEE HAS NOT SATISFIED THE CONDITIONS LAID DOWN U/S 80IB(10) OF I.T. ACT IN RESPECT OF SIZE OF THE PLOT WHICH SHOULD BE MORE THAN ONE ACRE TO BE ELIGIBLE FOR DEDUCTION U/S 80IB. IN THE ASSESSEES CASE THE ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT ON 6.9.2007 WITH KOMATI GROUP OF FAMILY MEMBERS FOR CONSTRUCTION OF 100 FLATS IN A LAND HELD BY THEM AND MEASURIN G ONE ACRE. AS PER WHICH THE KOMATI GROUP WILL GET 39 FLATS WITH UNDIVIDED SHARE OF LAND OF 1766.55 SQ.YDS. OF LAND AND THE ASSESSEE WILL GET 61 FLATS WITH UNDIVIDED 5 ITA NO . 1 9 7 /VIZ/201 5 M/S SRI SAI CONSTRUCTIONS, VIJAYAWADA SHARE OF LAND OF 2754.96 SQ.YDS. OF LAND. ACCORDING TO THE A.O. THOUGH THE SIZE OF PLOT WAS 4522.26 SQ YARDS THE ASSESSEES SHARE WAS 2754.96 SQUARE YARDS , WHICH IS LESS THA N ONE ACRE OF PLOT AFTER EXCLUDING THE LAND OWNERS SHARE. HENCE THE AO CONTENDED THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80IB. S IMILARLY , THE LAND OWNERS O F THE PROJECT THE KOMATI GROUP FAMILY MEMBERS WAS ALLOTTED 39 FLATS AND THE EACH INDIVIDUAL GOT MORE THAN ONE FLAT IN VIOLATION OF THE CONDITIONS IN THE SECTION 80(10) OF INCOME TAX ACT. THUS THE AO CONCLUDED THAT THE ASSESSEE HAS NOT SATISFIED THE CON DITIONS FOR GRANTING THE DEDUCTION U/S 80IB ACCORDINGLY DISALLOWED THE SAME. THE LD.CIT (A) CONFIRMED THE DISALLOWANCE MADE BY THE AO AND AGGRIEVED BY THE ORDER OF THE LD.CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 9 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THIS CASE, ONE OF THE REASON FOR DISALLOWANCE OF THE DEDUCTION U/S 80IB WAS NOT SATISFYING THE CONDITIONS LAID DOWN U/S 80IB(10) OF I.T. ACT I.E ALLOTMENT OF MORE THAN ONE FLAT TO THE SAME INDIVIDUAL OR TO THE FAMILY MEMBERS OF THE SAME INDIVIDUAL AND THE SIZE OF PLOT . THE FAMILY MEM BERS OF KOMATI GROUP WHO HAS GIVEN THE LAND ON DEVELOPMENT TO THE ASSESSEE GOT THEIR SHARE OF 39 FLATS AND IN THE PROCESS THE LAND OWNERS GOT MOR E THAN ONE FLAT FOR EACH FAMILY . THE ALLOTMENT OF 39 FLATS TO THE LAND OWNERS AND 6 ITA NO . 1 9 7 /VIZ/201 5 M/S SRI SAI CONSTRUCTIONS, VIJAYAWADA ALLOTMENT OF 61 FLATS TO THE ASSESSEE IS APPORTIONMENT OF THEIR SHARES ACCORDING TO THE AGREEMENT OF CONSTRUCTED AREA BETWEEN THE LAND OWNERS AND THE BUILDER AND THE SA ME CANNOT BE HIND RANCE FOR ALLOWING THE DEDUCTION U/S 80IB, UNLESS IT IS ESTABLISHED THAT IN THE PROJECT ANY INDIVIDUAL GOT ALLOTTED MORE THAN ONE FLAT. TH E AO DID NOT CAUSE ANY ENQUIRY WITH THE ERSTWHILE OWNERS OF LAND TO ASCERTAIN HOW MANY FLATS ACQUIRED BY THE M WERE S OLD AND HOW MANY APARTMENTS WERE RETAINED BY THEM ETC. THE A.O. SHOULD VERIFY THE ABOVE FACT BEFORE DECIDING THE ISSUE WITH REGARD TO THE DISALLOWANCE OF CLAIM U/S 80IB. FURTHER, THE ELIGIBILITY CRITERIA FOR DEDUCTION U/S 80IB IS ORIENTED TOWARDS A PROJE CT AS A WHOLE AND NOT WITH REFERENCE TO THE ASSESSEES SHARE OF UNDIVIDED LAND AND THE LAND OWNERS SHARE OF UNDIVIDED LAND. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD DEVELOPED MORE THAN ONE ACRE OF LAND AND THE PROJECT AS A WHOLE IS ELIGIBLE FOR CLAIMIN G DEDUCTION U/S 80IB. IN THE SUBSEQUENT YEAR THE LD. CIT(A) ALLOWED THE DEDUCTION U/S 80IB ON THE SAME FACTS. ONLY ISSUE REQUIRE VERIFICATION IS WHETHER ANY INDIVIDUAL IS ALLOTTED MORE THAN ONE FLAT IN THE PROJECT. AS STATED EARLIER, THE A.O. ALSO DID N OT CAUSE ENQUIRIES WITH REGARD TO SALE AND RETENTION OF FLATS OF THE LAND OWNERS. THE DEDUCTION U/S 80IB IS ALLOWED ON THE PROJECT AS A WHOLE SUBJECT TO SATISFACTION OF THE CONDITIONS OF SECTION 80IB WITH REGARD TO SIZE OF PLOT, SIZE OF FLAT, CARPET 7 ITA NO . 1 9 7 /VIZ/201 5 M/S SRI SAI CONSTRUCTIONS, VIJAYAWADA AREA, DATE OF APPROVAL, DATE OF COMPLETION AND SUBMISSION OF COMPLETION OF CERTIFICATE, ETC. THOUGH THE A.O. DISCUSSED THE CONDITIONS OF SECTION 80IB(10) BUT NOT FURNISHED THE FACTUAL DETAILS OF THE PROJECT. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE SHOULD BE REMITTED BACK TO THE FILE OF THE A.O. TO CAUSE NECESSARY ENQUIRIE S AND TO ASCERTAIN THE FACTS OF THE CASE AND DECIDE THE ISSUE AFRESH ON MERITS. THE A.O. SHOULD ALLOW THE DEDUCTION U/S 80IB SUBJECT TO SATISFACTION OF CONDITION U/S 80IB (10) . ACCORDINGLY, THE ISSUE IS REMITTED BACK TO THE FILE OF A.O. FOR DE - NOVO CONSID ERATION. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. THE ABOVE ORDER WAS PRONOUNCED ON 20 TH DEC 2017. SD/ - SD/ - ( . ) ( . . ) ( D. MANMOHAN ) ( D.S. SUNDER SINGH ) / VICE PRESIDENT / ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 20 .12.2017 L. RAMA, SPS 8 ITA NO . 1 9 7 /VIZ/201 5 M/S SRI SAI CONSTRUCTIONS, VIJAYAWADA / COPY OF THE ORDER FORWARDED TO: - 1. / THE APPELLANT - M/S SRI SAI CONSTRUCTIONS, D.NO.76 - 9 - 22/2, 1 ST CROSS, AKULA RAJA RAO STREET, BHAVANIPURAM, VIJAYAWADA 2 . / THE RESPONDENT INCOME TAX OFFICER, WARD - 1(2), VIJAYAWADA 3. THE PR. COMMISSIONER OF INCOME TAX , VI JAYAWADA 4 . THE COMMISSIONER OF INCOME TAX (APPEALS) , VI JAYAWADA 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM