Laxmi Shelters, Surat V. The Income Tax Officer, Ward-8(3), Surat

ITA 2300/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6217 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 11-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R N VEPARI
• Keywords: Business income; Business expenditure; Income from undisclosed sources
• Section: 143(3); 133A; 234B; 80IB; 37(1); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CAMP AT SURAT BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER LAXMI SHELTERS, LAXMI RESIDENCY, T.P. NO. 19, F.P. NO. 54, R.S. NO. 245, NEAR GAJERA VIDHYALAYA, KATARGAM, SURAT - 395004 PAN: AACFL7615E (APPELLANT) VS THE ITO, WARD 8(3), SURAT (RESPONDENT) REVENUE BY : MR. ASHISH POPHARE , SR. D . R. ASSESSEE BY: MR. R. N. VEPARI , A.R. DATE OF HEARING : 07 - 03 - 2 017 DATE OF PRONOUNCEMENT : 11 - 04 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2010 - 11 , AR IS ES FROM ORDER OF THE CIT(A) - V, SURAT DATED 24 - 07 - 2014 IN APPEAL NO. CAS/V / 11/2013 - 14 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 2300 / A HD/20 14 A SSESSMENT YEAR 2010 - 11 I.T.A NO. 2300 /AHD/20 14 A.Y. 2010 - 11 PAGE NO LAXMI SHELTERS VS. ITO 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - (1) ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND AS PER LAW, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT GRANTING DEDUCTION U/S.80 - IB(10) ON RS.1,01,00,000 DISCLOSED IN SURVEY AND WHICH INDISPUTABLY F ORMED PART OF THE BUSINESS INCOME AS PER THE STATEMENT RECORDED IN SURVEY. (2) THE APPELLANT SUBMITS THAT IN DENYING THIS RELIEF, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS RELIED ON JUDICIAL PRONOUNCEMENTS WHICH WERE TOTALLY UNRELATED TO T HE ISSUE IN APPEAL. (3) THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE DELETED INTEREST CHARGED U/S.234A, 234B AND 234C OF THE ACT. 3. BRIEF FACTS OF THE CASE IS THAT ASSESEE HAS FILED RETURN OF INCOME ON 30.09.2010 DECLARING TOTA L INCOM E OF RS. NIL. THE ASSESSEE FIRM WAS ENGAGED IN THE BUSINESS OF DEVELOPING AND CONSTRUCTION WORK. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE FIRM HAS CONSTRUCTED A PROJECT IN THE NAME AND STYLE OF LAXMI RESIDENTIAL AT KATARGRAM, SURAT. A SURV EY U/S. 133A OF THE ACT WAS CARRIED OUT ON 8 TH OCTOBER, 09 IN THE CASE OF THE ASSESSEE. THEREAFTER, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER COMPULSORY CATEGORY. SUBSEQUENTLY, A NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 24 TH AUGUST, 20 11. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE FIRM HAS SHOWN GROSS RECEIPT OF RS. 6 , 82 , 01 , 000 1/ - AND SHOWN PROFIT OF RS. 4 ,6 6 , 26 , 777/ - ON WHICH DEDUCTION U/S. 80IB(10) OF THE ACT WAS CLAIMED. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FA ILED TO PROVE THE GENUINENESS OF UNDISCLOSED INCOME OF RS . 1.1CRORES EARNED FROM 80IB PROJECTS DISCLOSED AT THE TIME OF SURVEY U/S.133A .THE ASSESSING OFFICER HAD TREATED THIS INCOME OF RS. 1.1CRORES I.T.A NO. 2300 /AHD/20 14 A.Y. 2010 - 11 PAGE NO LAXMI SHELTERS VS. ITO 3 DISCLOSED AT THE TIME OF SURVEY AS INCOME FROM OTHER SOURCES AND ADDED TO THE TOTAL INCOME . AGGRIEVED AGAINST THE IMPUGNED ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - 6.1 I HAVE CONSIDERE D THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE APPELLANT. THE GROUNDS OF APPEAL - GROUND NO. 1 TO 3 PERTAINS TO TREATING THE 'BUSINESS RECEIPTS' OF RS. 1.01 CRORE RECEIVED BY THE APPELLANT FIRM FROM THE BUSINESS OF DEVELOPING AND BUILDING HOUSING PROJECTS AND CATEGORICALLY DISCLOSED AS 'BUSINESS RECEIPTS' IN SURVEY AS INCOME FROM OTHER SOURCE', IN UTTER IGNORANCE OF THE STATEMENT RECORDED IN SURVEY AND NOT ALLOWING DEDUCTION U/S 80 - IB (10) OF THE ACT ON THE BUSINESS INCOME OF RS. 1.00 CRORE DISCLOS ED IN SURVEY. ON THE PERUSAL OF THE FACTS IT IS OBSERVED THAT DURING THE COURSE OF SURVEY U/S 133A OF THE ACT THE PARTNER OF THE FIRM SHRI VASANTBHAI H. GAJERA IN THE STATEMENT ON OATH HAD ADMITTED OF EARNING UNACCOUNTED INCOME OF RS. 1,01,00,000/ - FROM M/ S LAXMI RESIDENCY PROJECT. THE APPELLANT DID NOT FURNISH ANY DETAILS BEFORE THE AO REGARDING HIS CLAIM OF 80IB(10) DEDUCTION WHICH INCLUDED THE 'ON - MONEY' ADMITTED AS UNDISCLOSED INCOME DURING THE SURVEY OPERATION. THE APPELLANT DURING THE APPELLATE PROC EEDINGS SUBMITTED THAT THE APPELLANT HAS ONLY ONE SOURCE OF INCOME I. E. THE PROJECT OF M/S LAXMI RESIDENCY AND THEREFORE THE INCOME 'GENERATED FROM THE REAL ESTATE BUSINESS INCLUDED THE 'ON MONEY ' EARNED AND THEREFORE THIS INCOME WAS ELIGIBLE FOR DEDUCTIO N J/S 80IB(10). 6.1.1 HE R ELIED ON SEVERAL CASE LAWS BY THE APPELLANT HAVE BEEN PERUSED AND IT IS FOUND THAT THE FACT S AND CIRCUMSTANCES OF THE INSTANT CASE IS DIFFERENT AND THEREFO RE CASE LAWS ARE NOT APPLI CABLE IN THE INSTANT CASE. DURING THE SURVEY TH E STATEMENT ON OATH WAS RECORDED OF SHRI VA SANTBHAI H. GAJERA. THE IMPOUNDED DIARIES SHOWED THAT ON - MONEY' AMOUNT HAS BEEN R ECEIVED IN RESPECT OF BOOKING OF OUR FLATS OF LAXMI RESIDENCY IN CASH. ON THE PERUSAL OF THE RECORDS AND DETAILS IT IS EVIDENT THAT THE 'ON MONEY RECEIPTS' ARE NOT PART OF 'REGISTERED SALE AGREEMENT', AND THE SAME HAS BEEN TAXED UNDER SECTION 56 OF THE IT ACT AS 'INCOME FROM OTHER SOURCES' AS THE SAME WAS NOT FOUND ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS OF THE APPELLANT. THE AP PELLANT CONTENTED THAT THE AMOUNT RECEIVED AS 'ON MONEY' WAS SURRENDERED I.T.A NO. 2300 /AHD/20 14 A.Y. 2010 - 11 PAGE NO LAXMI SHELTERS VS. ITO 4 DURING THE SURVEY PROCEEDINGS AND IS A PART OF BUSINESS INCOME AND ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THE APPELLANT FAILED TO FURNISH ANY CONFIRMATORY LETTERS FROM THE PURCHA SERS REGARDING THE PAYMENT OF 'ON MONEY' FOR THE PURCHASE OF FLAT OVER AND ABOVE THE REGISTERED SALE VALUE. THE STAMP VALUE FOR THE REGISTRATION OF THE PROPERTY HAS ALSO NOT INCLUDED THIS 'ON MONEY'. THE APPELLANT WAS NOT ABLE TO ADDUCE ANY EVIDENCE TO SHO W THAT THE 'ON - MONEY' WAS UTILIZED IN THE BUSINESS. SINCE, NO EVIDENCE HAS BEEN PROVIDED REGARDING THE 'ON MONEY' BEING PART OF THE BUSINESS INCOME, THE RECEIPTS HAS BEEN RIGHTLY TAXED AS INCOME FROM OTHER SOURCES U/S 56 OF THE ACT. THIS AMOUNT HAS BEEN OB TAINED BY THE APPELLANT AND NO CONNECTION OR RELATION TO THE BUSINESS COULD BE PROVED. THE OBJECT OF SECTION 80IB(10) IS TO PROVIDE FOR 'AFFORDABLE HOUSING' TO THE PEOPLE AT A REASONABLE PRICE FOR WHICH TAX INCENTIVE HAS BEEN PROVIDED TO THE BUILDERS/DEVEL OPERS. THE APPELLANT HAS VIOLATED THE STATUTORY OBJECTIVE BY TAKING 'ON MONEY' ILLEGALLY FROM THE BUYERS WHICH IS NOT PART OF THE REGISTERED DOCUMENTS AND THUS NO STAMP DUTY PAID HAS BEEN PAID ON THIS AMOUNT WHICH IS AGAINST THE PUBLIC POLICY. 6.2.1 AS A M ATTER OF FACT, THE AMOUNT WAS RECEIVED BY THE APPELLANT AS 'ON MONEY' IS AGAINST THE PUBLIC POLICY AND LEADS TO THE LOSS OF REVENUE. INFRACTION OF LAW UNDER ANY PROVISIONS CANNOT BE ALLOWED AND THE NO ADVANTAGE CAN BE GIVEN FOR THE INFRACTION OF LAW TO THE LAW BREAKER . ALL THE EXPENDITURE/DEDUCTIONS WHICH CAN BE ALLOWED SHOULD BE LEGITIMATE AND NOT ILLEGAL. IN A SERIES OF DECISIONS, THE SUPREME COURT AS WELL AS HIGH COURTS HAVE TAKEN A CONSISTENT VIEW THAT THOUGH THE ILLEGAL TRANSACTION MIGHT HAVE RESUL TED IN PROFIT AND WHICH MAY BE TAXABLE, BUT NO DEDUCTION FOR SUCH UNLAWFUL MEANS EMPLOYED FOR SAID PURPOSE CAN BE GIVEN. IT IS TRUE THAT UNDER THE ACT, THE INCOME IS, OF COURSE, TAXED, BUT THE ILLEGAL WAYS AND MEANS EMPLOYED BY THE ASSESSEE FOR PROCURING SUCH ILLEGAL PROFIT CANNOT BE COUNTENANCED AND IT IS AGA INST THE PUBLIC POLICY. SIMILAR VIEW HAS BEEN EXPRESSED IN THE CASE OF SAUSER LIQUOR TRADERS, 222 ITR 33 (MP). 6 .2.2 EXPENSES WHICH ARE PERMITTED AS DEDUCTIONS ARE SUCH AS ARE MADE FOR THE PURPOSE OF CARR YING ON THE BUSINESS, I.E., TO ENABLE A PERSON TO CARRY ON AND EARN PROFIT IN THAT BUSINESS. IT I S NOT ENOUGH THAT THE DISBURSEMENTS ARE MADE IN THE COURSE OF OR ARISE OUT OF OR ARE CONCERNED WITH OR MADE OUT OF THE PROFITS OF THE BUSINESS BUT THEY MUST AL SO BE FOR THE PURPOSE OF EARNING THE PROFITS OF THE BUSINESS. IF A SUM IS PAID BY AN ASSESSEE CONDUCTING HIS BUSINESS, BECAUSE IN CONDUCTING IT HE HAS ACTED IN A MANNER WHICH HAS RENDERED HIM LIABLE TO PENALTY, IT CANNOT BE CLAIMED AS A DEDUCTIBLE I.T.A NO. 2300 /AHD/20 14 A.Y. 2010 - 11 PAGE NO LAXMI SHELTERS VS. ITO 5 EXPENSE. IT MUST BE A COMMERCIAL LOSS AND IN ITS NATURE MUST BE CONTEMPLABLE AS SUCH. SUCH PENALTIES WHICH ARE INCURRED BY AN ASSESSEE IN PROCEEDINGS LAUNCHED AGAINST HIM FOR AN INFRACTION OF THE LAW CANNOT BE CALLED COMMERCIAL LOSSES INCURRED BY AN ASSESSEE IN CA RRYING ON HIS BUSINESS. INFRACTION OF THE LAW IS NOT A NORMAL INCIDENT OF BUSINESS AND, THEREFORE, ONLY SUCH DISBURSEMENTS CAN BE DEDUCTED AS ARE REALLY INCIDENTAL TO THE BUSINESS ITSELF. THEY CANNOT BE DEDUCTED IF THEY FALL ON THE ASSESSEE IN SOME CHARACT ER OTHER THAN THAT OF A TRADER. THEREFORE, WHERE A PENALTY IS INCURRED FOR THE CONTRAVENTION OF ANY SPECIFIC STATUTORY PROVISION, IT CANNOT BE SAID TO BE A COMMERCIAL LOSS FALLING ON THE ASSESSEE AS A TRADER THE TEST BEING THAT THE EXPENSES WHICH ARE FOR T HE PURPOSE OF ENABLING A PERSON TO CARRY ON TRADE FOR MAKING PROFITS IN THE BUSINESS ARE PERMITTED BUT NOT IF THEY ARE MERELY CONNECTED WITH THE BUSINESS. NO EXPENSE WHICH IS PAID BY WAY OF PENALTY FOR A OREACH OF THE LAW CAN BE SAID TO BE AN AMOUNT WHOLLY AND EXCLU SIVELY LAID FOR THE PURPOSE OF T HE BUSINESS. THE DISTINCTION SOUGHT TO BE DRAWN BETWEEN A PERSONAL LIABILITY AND A LIABILITY OF THE KIND IN QUESTION WAS NOT SUSTAINABLE BECAUSE ANYTHING DONE WHICH IS AN INFRACTION OF THE LAW AND IS VISITED WITH A PENALTY CANNOT ON GROUNDS OF PUBLIC POLICY BE SAID TO BE A COMMERCIAL I EXPENSE FOR THE PURPOSE OF A BUSINESS OR A DISBURSEMENT MADE FOR THE PURPOSES OF EARNING THE PROFITS OF SUCH BUSINESS. SIMILAR VIEW HAS BEEN EXPRESSED IN THE CASE HAJI AZIZ AND ABDUL SHAKOOR BROS, 41 ITR 350 (SC) 6 .2.3 PAYMENTS TAINTED WITH ILLEGALITY CANNOT BE CLAIMED AS DEDUCTION UNDER THE ACT. MOREOVER, AN ASSESSEE IS PENALIZED UNDER ONE ACT, HE CANNOT CLAIM THAT AMOUNT TO BE SET OFF AGAINST HIS I N COME UNDER ANOTHER ACT, BECAUSE THA T WILL BE FRUSTRATING THE ENTIRE OBJECT OF IMPOSITION OF PE NALTY. ONE EXCEPTION TO THE RULE WHICH HAS BEEN RECOGNIZED BY THE COURTS IS WHERE THE ENTIRE BU SINESS OF THE ASSESSEE IS ILLEGAL AND THAT INCOME IS SOUGHT TO BE TAXED BY THE ITO THEN THE EX PENDITUR E INCURRED IN THE ILLEGAL ACTIVITIES WILL ALSO HAVE TO BE ALLOWED AS DEDUCTION. BUT IF THE B USINESS IS OTHERWISE LAWFUL AND THE ASSESSEE RESORTS TO UNLAWFUL MEANS TO AUGMENT HIS PROFITS OR REDUCE HIS LOSS, THEN THE EXPENDITURE INCURRED FOR THESE UNLAWFUL A CTIVITIES CANNOT BE A LLOWED TO BE DEDUCTED. EVEN IF THE ASSESSEE HAS TO PAY FINE OR PENALTY BECAUSE OF AN INADVERTENT INFRACTION OF LAW WHICH DOES NOT INVOLVE ANY MORAL OBLIQUITY, THE RESULT WILL BE THE SAME. EVEN IN SUCH CASES, DEDUCTION WILL NOT BE PERMI TTED OF THE AMOUNTS PAID AS PENALTY OR FINE OR THE VALUE OF THE GOODS CONFISCATED BY THE STATUTORY AUTHORITY AS EXPENDITURE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSES OF CARRYING ON THE TRADE. IT HAS I.T.A NO. 2300 /AHD/20 14 A.Y. 2010 - 11 PAGE NO LAXMI SHELTERS VS. ITO 6 BEEN CONSISTENTLY HELD BY THE ENGLISH COURTS THAT FINES OR PENALTIES PAYABLE FOR VIOLATION OF LAW CANNOT BE PERMITTED AS DEDUCTION UNDER THE ACT. THAT WILL BE AGAINST PUBLIC POLICY. EVEN THOUGH THE NEED FOR MAKING SUCH PAYMENTS HAS ARISEN OUT OF TRADING OPERATIONS, THE PAYMENTS ARE NOT WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF THE TRADE. ONE CAN CARRY ON HIS TRADE WITHOUT VIOLATING THE LAW. 6.2.4 SPUR OF LOSS COULD NOT BE A JUSTIFICATION FOR CONTRAVENTION OF LAW. THE APPELLANT WAS EXPECTED TO CARRY ON THE BUSINESS IN ACCORDANCE WITH LAW. IF THE ASSESSEE CO NTRAVENED THE PROVISIONS OF FERA TO CUT DOWN ITS LOSSES OR TO MAKE LARGER PROFITS WHILE CARRYING ON THE BUSINESS, IT WAS ONLY TO BE EXPECTED THAT PROCEEDINGS WOULD BE TAKEN AGAINST THE ASSESSEE FOR VIOLATION OF THE ACT. THE EXPENDITURE INCURRED FOR EVADING THE PROVISIONS OF THE ACT AND ALSO THE PENALTY LEVIED FOR SUCH EVASION COULD NOT BE ALLOWED AS DEDUCTION. MOREOVER, IT WILL BE AGAINST PUBLIC POLICY TO ALLOW THE BENEFIT OF DEDUCTION UNDER ONE STATUTE, OF ANY EXPENDITURE INCURRED IN VIOLATION OF THE PROVI SIONS OF ANOTHER STATUTE OR ANY PENALTY IMPOSED UNDER ANOTHER STATUTE. IT HAS TO BE BORNE IN MIND THAT EVASION OF LAW CANNOT BE A TRADE PURSUIT. THE EXPENDITURE IN THIS CASE COULD NOT, IN ANY WAY, BE ALLOWED AS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPO SE OF ASSESSEE'S BUSINESS. SIMILAR VIEW HAS BEEN EXPRESSED IN THE CASE MADDI VENKATARAMAN & CO. (P.) LTD.229 ITR 534 (SC) 6.2.5 IN ORDER TO CLAIM DEDUCTION OF A PARTICULAR AMOUNT UNDER SECTION 37(1) OF THE INCOME - TAX ACT, 1961, THE PAYMENT NEED NOT NECESSA RILY BE MANDATORY OR STATUTORY; EVEN A VOLUNTARY P AYMENT MADE, SO LONG AS IT IS MADE IN THE INTEREST OF THE ASSESSEE'S BUSINESS, IS ENTITLED TO BE DEDUCTED AS BUSINESS EXPENDITURE. HOWEVER, THE ASSESSEES WOULD NOT BE ENTITLED TO DEDUCTION OF CONTRIBUTIONS OR PAYMENTS MADE IN CONTRAVENTION OF LAW OR WHICH ARE OPPOSED TO PUBLIC P OLICY. INFRACTION OF LAW IS NOT A NORMAL INCIDENT OF THE BUSINESS. SIMILARLY, PAYMENTS WHTCRRARE' OPPOSED TO PUBLIC POLICY BEING IN THE NATURE OF UNLAWFUL CONSIDERATION FOR DISCHARGIN G AN OFFICIAL DUTY OTHERWISE THAN ACCORDING TO LAW, I.E., OTHERWISE THAN ON MERITS, CANNOT EQUALLY BE R ECOGNIZED. IT WOULD BE SHORTSIGHTED TO HOLD THAT BUSINESSME N ARE ENTITLED TO CONDUCT THEIR BUSINESS EVEN CONTRARY TO LAW AND CLAIM DEDUCTIONS OF PAYMENTS AS BUSINESS EXPENDITURE, NOTWITHSTANDING THAT SUCH PAYMENTS ARE ILLEGAL OR OP POSED TO PUBLIC POLICY, OR HAVE PERNICIOUS CONSEQUENCES TO THE NATION'S LIFE AS A WHOLE. SECTION 23 OF THE CONTRACT ACT EQUATES AN AGREEMENT OR CONTRACT OPPOSED TO PUBLIC POLICY, WITH AN AGREEMENT I.T.A NO. 2300 /AHD/20 14 A.Y. 2010 - 11 PAGE NO LAXMI SHELTERS VS. ITO 7 OR CONTRACT FORBIDDEN BY LAW. SIMILAR VIEW HAS BEEN EXPRESSED IN THE CASE CIT V. KODANDARAMA AND CO. [1983] 144 ITR 395 (AP) 6.2.6 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS EVIDENT THAT THE AO HAS RIGHTLY INCLUDED THE 'ON MONEY ' PAYMENT IN RESPECT OF ALL FLATS IN THIS RELEVANT ASSESSMENT YEAR AND TREATING THE ON MONEY PAYMENT AS INCOME FROM OTHER SOURCES. ALSO, THE AO HAS RIGHTLY RESTRICTED THE DEDUCTION U/S 80IB AND HAS NOT ALLOWED THE ON MONEY OF RS. 1,01,00,000/ - TO BE CLAIME D U/S 80IB. HENCE, THE GROUNDS OF APPEAL ARE DISMISSED. 6.3 THE GROUNDS OF APPEAL - GROUND NO. 4 PERTAINS TO CHARGING INTEREST U/S 234A, 234B AND 234C OF THE ACT. THE CHARGING OF INTEREST IS MANDATORY AS PER THE PROVISIONS OF THE ACT. THE ORDER OF THE AO FO R CHARGING OF INTEREST IN ORDER AND IS UPHELD. HENCE, THE GROUND OF APPEAL IS DISMISSED. 4. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL CONTENDED THAT THE LD. CIT(A) HAS ERRED IN NOT ALLOWING THE CLAIM OF DEDUCTION U/S. 80IB(10) ON RS. 1.1 CRORES DISCLOSED DURING SURVEY CARRIED ON THE ABOVE REFERRED PROJECT WHICH WAS ELIGIBLE FOR DEDUCTION U/S SEC.80IB(10 ) OF THE ACT. HE HAS ALSO SUBMITTED PAPER BOOK CONTAINING, CORRESPONDENCE MADE WITH THE LD. CIT(A) - V, COPY OF ACKNOWLEDGE MENT OF RETURN OF INCOME AND COPY OF COMPUTATION OF INCOME FOR ASSESSMENT YEAR 2010 - 11, COPY OF THE STATEMENT RECORDED IN SURVEY ON 09 - 10 - 2009, COPY OF AUDITED ACCOUNTS FOR THE PERIOD OF 31 - 03 - 2010, PARTICULARS OF JUDICIAL PRONOUNCEMENTS ETC . ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE FIN D THAT THE STATEMENT OF THE ASSESSEE WAS RECORDED ON 08/10/2009 DURING THE COURSE OF SURVEY ACTION CARRIED OUT AT THE I.T.A NO. 2300 /AHD/20 14 A.Y. 2010 - 11 PAGE NO LAXMI SHELTERS VS. ITO 8 PROJECT OF THE ASSESSEE LAXMI RESIDENCY. WE HAVE ALSO NOTICED FROM THE CONTENTS OF THE ASSESSMENT ORDER THAT DURING THE YEAR THE ASSESSEE FIRM HAS CONSTRUCTED A PROJECT CALLED LAXMI RESIDENCY AT KATARGAM,SURAT WHICH WAS ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOT DEMONSTRATED THAT APART FROM CONSTRUCTION OF LAXMI RESIDENCY THE ASSESSEE WAS INDULGED IN ANY OTHER ACTIVITIES . WE HAVE PERUSED THE JUDICIAL PRONOUNCEMENTS IN THE CASE OF THE CIT VS. SH E TH DEVELOPER PVT. LTD OF BOMBAY HIGH COURT IN WHICH IT WAS HELD THAT ASSESSEE WAS ENTITLED FOR CLAIM U/S. 80IB(10) ON THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD AS UNDISCLOSED INCOME WAS IN FACT RECEIVED BY THE ASSSESSEE IN THE CO URSE OF CARRYING OUT ITS BUSINESS ACTIVITY AS A BUILDER. ITA T PUNE IN THE CASE OF MALPANI ES TATE ITA 2296 TO2298 HELD THAT ASSESSEE ENGAGED IN DEVELOPING A HOUSING PROJECT WHICH WAS ELIGIBLE FOR DEDUCTION U/S. 80IB ON ACCOUNT OF ON MONEY RECEIVED FROM C USTOMER TO WHOM FLATS WERE SOLD . T HE SOURCE OF THE ADDITIONAL INCOME WAS THE SALE OF FLATS IN THE HOUSING PROJECT AND THEREFORE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S. 80IB(10). WE HAVE ALSO NOTICED THAT THE STATEMENT OF THE ASSESSEE WAS RECORDED ON 0 8/10/2009 DURING THE COUR SE OF SURVEY ACTION CARRIED OUT AT THE PROJECT OF THE ASSESSEE LAXMI RESIDENCY WHICH THE ASSESSING OFFICER STATED TO BE ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. THE RELEVANT PART OF THIS STATEMENT IS REPRODUCED AS UNDER: - ENGLISH TRANSLATION: Q.16 DURING SURVEY TODAY DIARY FLORAL NO. 1 WAS FOUND. ON PAGE 2 NONDH A - 701, SOME AMOUNT IS WRITTEN. FURTHER DIARY K.B. IS ALSO I.T.A NO. 2300 /AHD/20 14 A.Y. 2010 - 11 PAGE NO LAXMI SHELTERS VS. ITO 9 FOUND. ON PAGE NO.2 THEREOF IN NONDH E - 201 SOME AMOUNTS ARE WRITTEN. GIVE YOUR EXPLANATION ABOUT THESE N ONDH. A.16 EXPLANATION OF NONDH IN BOTH THE ABOVE TWO DIARIES IS AS UNDER: (1) FLOOR NO. 1: - A - 701 IS FLAT NUMBER (A MEANS TOWER A) AND 500 - 00 5 - 5 - 09 AND 200 - 00 1 - 6 - 09 MEANS 50,000 (RUPEES FIFTY THOUSAND ONLY) RECEIVED ON 5 - 5 - 09. IN THE SAME MANN ER, 20,000 (RUPEES TWENTY THOUSAND ONLY) WAS RECEIVED ON 1.6.09. (2) K.B.: - E - 201 IS FLAT NUMBER (E MEANS TOWER E) AND 300 - 00 8 - 7 - 09 AND 100 - 00 4 - 9 - 09 IS MENTIONED. THIS MEANS 30,000 (RUPEES THIRTY THOUSAND ONLY) WERE RECEIVED ON 8 - 7 - 09. IN THE SAME WAY, 1 0,000 (RUPEES TEN THOUSAND ONLY) RECEIVED ON 4 - 9 - 09. Q.I 7 GIVE DETAILS OF WHERE THE ABOVE AMOUNTS HAVE BEEN RECORDED IN THE BOOKS ? A.17 THESE AMOUNTS HAVE NOT BEE N RECORDED IN OUR BOOKS OF ACCOUNTS. THESE AMOUNTS HAVE BEEN RECEIVED AS 'ON MONEY' IN R ESPECT OF BOOKING OF ABOVE FLATS OF LAXMI RESIDENCY. THIS AMOUNT HAS BEEN RECEIVED BY US BY CASH. Q.18 ACCORDING TO WHAT YOU HAVE MENTIONED, YOU HAVE RECEIVED 'ON MONEY' IN YOUR PROJECT. THEN HOW MUCH AMOUNT HAS BEEN RECEIVED AS 'ON MONEY' IN THIS PROJE CT? A.18 TILL THIS DATE, WE HAVE RECEIVED ABOUT RS.1,00,00,000 FROM THIS PROJECT. Q.19 IN REPLY TO THE ABOVE QUESTION, YOU HAVE STATED THAT YOU HAVE RECEIVED FOR THIS PROJECT ON MONEY OF ABOUT RS.1,00,00,000. THEN WHAT HAVE YOU TO SAY ABOUT IT? A.19 THIS AMOUNT IS UNRECORDED INCOME OF LAXMI RESIDENCY FOR F.Y.2009 - 10 WHICH BY THIS STATEMENT I DECLARE AS 'UNACCOUNTED INCOME' RS.1,01,00,000 (RUPEES ONE CRORE ONE LAC ONLY) WE WILL PAY WHATEVER TAX IS LEGALLY PAYABLE ON THIS AMOUNT, WE WILL PAY. THE E XTRACTS OF THE STATEMENT INDICATE THAT THE DECLARED AMOUNT WAS EARNED FROM THE PROJECT LAXMI RESIDENCY WHICH WAS COVERED FOR SURVEY ACTION. IN THE STATEMENT AS SUPRA THE ASSESSEE HAD STATED THAT T HESE AMOUNTS HAVE BEEN RECEIVED AS 'ON MONEY' IN RESPECT OF BOOKING OF ABOVE FLATS OF LAXMI RESIDENC Y AND T HIS AMOUNT WAS UNRECORDED INCOME OF LAXMI RESIDENCY FOR F.Y.2009 - 10. THE I.T.A NO. 2300 /AHD/20 14 A.Y. 2010 - 11 PAGE NO LAXMI SHELTERS VS. ITO 10 AFFIRMATION OF THE ASSESSEE WAS NOT REBUTTED DURING THE TIME OF RECORDING HIS STATEMENT AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER WITH ANY COGENT MATERIAL TO PROVE THAT AMOUNT DECLARED WAS EARNED FROM ANY OTHER ACTIVITIES . IN VIEW OF THE ABOVE MENTIONED FACTS AND FINDINGS , WE CONSIDERED THAT THE INCOME DISCLOSED WAS INCOME OF THE ASSESSEE FROM THE BUSINESS A ND NOT FROM OTHER SOURCES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 11 - 04 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER AC COUNTANT MEMBER AHMEDABAD : DATED 1 1 /04 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,