ACIT, V. Gopalan Enterprises,

ITA 241/BANG/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6088 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 26-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L V BHASKAR REDDY JT
• Assessee Lawyers: B K MANJUNATH
• Keywords: Bogus purchase; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 80IB; 147; 148; 263; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.241/BANG/2103 ASSESSMENT YEAR : 2004-05 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1), BANGALORE. VS. M/S. GOPALAN ENTERPRISES, NO.5, RICHMOND ROAD, BANGALORE 560 025. PAN : AABFG 0682M APPELLANT RESPONDENT CO NO.88/BANG/2013 (IN ITA NO.241/BANG/2103) ASSESSMENT YEAR : 2004- 05 M/S. GOPALAN ENTERPRISES, NO.5, RICHMOND ROAD, BANGALORE 560 025. PAN : AABFG 0682M VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1), BANGALORE. CROSS OBJECTOR RESPONDENT APPELLANT BY : SHRI L.V. BHASKAR REDDY, JT. CIT(DR) RESPONDENT BY : SHRI B.K. MANJUNATH, C.A. DATE OF HEARING : 03.06.2014 DATE OF PRONOUNCEMENT : 13.06.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER ITA 241/B/13 IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 30.11.2012 OF CIT(APPEALS)-I, BANGALORE RELATING TO ASSESSMENT YEAR 2004- ITA NO.241/BANG/2013 & CO 88/BANG/2013 PAGE 2 OF 12 05. THE ASSESSEE HAS FILED CROSS OBJECTION AGAINS T THE VERY SAME ORDER OF THE CIT(APPEALS). 2. THE ASSESSEE IS A PARTNERSHIP FIRM. IT IS ENGAG ED IN THE BUSINESS OF PROPERTY DEVELOPMENT. FOR THE A.Y. 2004-05, ASSESS MENT WAS COMPLETED BY THE AO ASSESSING TOTAL INCOME AT RS.1,22,88,070 BY ORDER DATED 26.12.2006 U/S. 143(3) OF THE ACT. THE AFORESAID O RDER OF ASSESSMENT WAS SUBJECT MATTER OF PROCEEDINGS U/S. 263 OF THE ACT A ND CONSEQUENT TO THE ORDER PASSED BY THE CIT DATED 6.3.2009 U/S. 263 OF THE ACT, THE ORDER OF ASSESSMENT WAS PASSED ON 29.12.2009 U/S. 143(3) R.W .S. 263 OF THE ACT ASSESSING TOTAL INCOME OF THE ASSESSEE AT RS.4,98,3 6,220. THE ORDER U/S. 263 OF THE ACT WAS SET ASIDE BY THE TRIBUNAL BY ITS ORDER DATED 10.2.2010 AND THEREFORE THE INCOME DETERMINED U/S. 143(3) OF THE ACT BY ORDER DATED 26.12.2006 STOOD RESTORED. 3. THEREAFTER, THE ASSESSING OFFICER RECEIVED INFOR MATION FROM THE AO, VIZ., ACIT, CIRCLE 11(3), BANGALORE OF M/S. GOPALAN ENTERPRISES PVT. LTD. WHICH IS A SISTER CONCERN OF THE ASSESSEE FIRM HERE IN (GOPALAN ENTERPRISES), THAT DURING THE COURSE OF SCRUTINY PR OCEEDINGS IN THE CASE OF COMPANY FICTITIOUS PURCHASE TO THE EXTENT OF RS.1,6 6,41,525 RELATING TO THE ASSESSEE FIRM HAVE BEEN FOUND OUT AFTER INVESTIGATI ON. AS THERE WAS REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, THE CASE WAS REOPENED U/S. 147 OF THE A CT AND NOTICE U/S. 148 WAS ISSUED ON 26.3.2010. ITA NO.241/BANG/2013 & CO 88/BANG/2013 PAGE 3 OF 12 4. THE ASSESSEE RAISED OBJECTIONS REGARDING THE VAL IDITY OF SERVICE OF NOTICE U/S.148 OF THE ACT AND NON-FURNISHING OF REA SONS RECORDED. THE ASSESSEE WAS FURNISHED WITH THE REASONS RECORDED BY THE AO ON 24.12.2010. THE CASE WAS POSTED ON 29.12.2010 BY I SSUE OF NOTICE U/S. 143(2) AND 142(1) OF THE ACT. THE ASSESSEE DID NOT PARTICIPATE IN THE PROCEEDINGS AND THEREFORE THE ASSESSMENT WAS COMPLE TED U/S. 144 OF THE ACT. THE AO AFTER DISCUSSING ABOUT THE FICTITIOUS PURCHASE FOUND IN THE CASE OF SISTER CONCERN OF THE ASSESSEE, CAME TO THE FOLLOWING CONCLUSION:- IN VIEW OF THE ABOVE FACTS IT IS CLEAR THAT FICTI TIOUS PURCHASES WERE SHOWN BY THE GROUP TO THE EXTENT OF RS.2,03,72,352/- OUT OF WHICH FICTITIOUS PURCHASES TO THE TUNE OF RS.1,66,41,525/- WERE TRANSFERRED TO THE ASSESSEE F IRM. THE COMPANY HAS ALSO AGREED FOR THE ADDITION OF RS.37,3 0.827/- THE PORTION OF FICTITIOUS PURCHASES RELATED TO IT. SINC E THE ASSESSEE HAS NOT COME UP WITH ANY EXPLANATION AND REPLIED THE NO TICE U/S 143(2) & 142(1) ISSUED IN THE PROCEEDINGS UNDER CON SIDERATION, IT IS TO BE CONCLUDED THAT THE ASSESSEE HAS MADE THE F ICTITIOUS CLAIM OF PURCHASE TO THE EXTENT OF RS.1,66,41,525/-. IN T HE ABSENCE OF REPLY FROM THE ASSESSEE, THE FICTITIOUS PURCHASES A RE ALSO TREATED AS DEBITED TO THE REVENUE/INCOME FOR WHICH SECT.80IB A RE NOT APPLICABLE. HENCE, THE EXPENDITURE OF RS.1,66,41,52 5/- IS DISALLOWED AND ADDED TO THE INCOME AS PER THE MODIF ICATION ORDER DATED 25.06.2010. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED APPEAL BEFORE THE CIT(APPEALS) CONTENDING THAT THE AO HAS NOT BROUGHT ON RECORD ANY NEW MATERIAL OR CORROBORATED WITH ANY EVIDENCE TO ALLEGE THAT THE PURCHASES ARE NOT GENUINE AND NOT FOR THE PURPOSES OF THE BUSINESS. THE ASSESSEE SUBMITTED THAT ALL THE PURCHASES ARE FOR T HE PURPOSES OF BUSINESS ITA NO.241/BANG/2013 & CO 88/BANG/2013 PAGE 4 OF 12 AND THAT THE EXPENDITURE SHOULD BE ALLOWED. WITHOU T PREJUDICE TO THE ABOVE, THE ASSESSEE SUBMITTED THAT THE AO OUGHT TO HAVE ALLOWED DEDUCTION U/S 80IB(10) OF THE ACT ON THE ENHANCED P ROFIT CONSEQUENT TO THE DISALLOWANCE MADE BY HIM. IN THIS REGARD THE APPELL ANT RELIED ON THE DECISION OF THE HONBLE ITAT IN THE CASE OF S B BUILDERS & DEVELOPERS VS ITO 45 SOT 335 , WHEREIN IT WAS HELD THAT CONSEQUENT TO ANY DISALLOWANCE OF EXPENSES IF THERE IS INCREASE THE P ROFITS OF ELIGIBLE BUSINESS U/S.80IB(10) OF THE ACT, THEN THE DEDUCTION UNDER T HAT SECTION SHOULD BE ALLOWED ON SUCH ENHANCED PROFITS. THE ASSESSEE ACC ORDINGLY PRAYED THAT TO ALLOW DEDUCTION ON THE ENHANCED PROFIT/INCOME D ETERMINED. 6. THE CIT(APPEALS) HELD AS FOLLOWS:- 4.5 I HAVE CAREFULLY CONSIDERED THE APPELLANTS S UBMISSIONS AND THE REASONS GIVEN BY THE AO IN THE ASSESSMENT O RDER. THE A.O IN HIS ASSESSMENT ORDER CONCLUSIVELY PROVED THA T THE APPELLANT INCREASED THE EXPENDITURE BY DEBITING FIC TITIOUS PURCHASES OF RS. 1,66,41,525/- ON RECEIVING THE DEB IT NOTE FROM THE SISTER CONCERN OF M/S GOPALAN ENTERPRISES PVT. LTD. DURING THE ASSESSMENT PROCEEDINGS AS THE APPELLANT DID NOT COMPLY WITH THE NOTICES ISSUED U/S 142(1) AND 143(2) OF THE ACT . THE A.O ADDED THIS AMOUNT OF RS. 1,66,41,525/- AS INCOME OF THE APPELLANT. THE ASSESSEE HAS NOT COME UP WITH ANY VA LID EXPLANATION REGARDING THESE FICTITIOUS PURCHASE EVE N DURING THE APPEAL PROCEEDINGS WITH NECESSARY EVIDENCE EXCEPT C HALLENGING THE REOPENING OF THE ASSESSMENT. THE ASSESSEE ALSO FAILED TO GIVE ANY EXPLANATION EVEN BEFORE THE A.O IN THIS REGARD. THEREFORE, I AM SATISFIED THAT THE ASSESSEE DOES NOT HAVE ANY RE ASONABLE/VALID EXPLANATION REGARDING THE FICTITIOUS PURCHASE DEBIT ED IN THE PROFIT AND LOSS ACCOUNT DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-05. IN VIEW OF THIS I UPHOLD T HE ACTION OF THE A.O AND CONFIRM THE ADDITION OF FICTITIOUS PURC HASES. THE ITA NO.241/BANG/2013 & CO 88/BANG/2013 PAGE 5 OF 12 APPELLANT IN THEIR SUBMISSION MADE AN ALTERNATIVE C LAIM FOR HIGHER DEDUCTION U/S 80IB(10) OF THE ACT IN RESPECT OF THE ENHANCED PROFITS COMPUTED AFTER THE DISALLOWANCE OF THE SAID PURCHASES. THE APPELLANT RELIED ON THE DECISION IN THE CASE OF REGARD S B BUILDERS AND DEVELOPERS VS ITO (45 SOT 335)(MUMBAI) . IT IS SEEN THAT THE APPELLANT CLAIMED DEDUCTION U/S 80IB( 10) OF THE ACT IN RESPECT OF MILLENNIUM HABITAT PROJECT AND IT IS THE CONTENTION OF THE APPELLANT THAT THERE CAN BE NO TAX LIABILITY NOR ESCAPEMENT OF INCOME AS THE DISALLOWANCE OF PURCHASES ENHANCED THE PROFITS IN RESPECT OF THE SAID PROJECT. THE ALTERNATIVE CLA IM OF THE APPELLANT IS JUSTIFIABLE IN VIEW OF THEIR SUBMISSIO NS AND THE A.O IS DIRECTED TO VERIFY AND ALLOW THE DEDUCTION U/S 80IB (10) OF THE ACT IN RESPECT OF THE ENHANCED PROFITS / INCOME OF THE APPELLANT IN ACCORDANCE WITH THE SAID PROVISIONS OF THE ACT. 7. AS CAN BE SEEN FROM THE ORDER OF THE CIT(A), THE DISALLOWANCE OF BOGUS PURCHASES HAS BEEN UPHELD BUT THE ALTERNATIVE CLAIM OF THE ASSESSEE TO ALLOW THE DEDUCTION U/S 80IB(10) OF THE ACT IN RESPECT OF THE ENHANCED PROFITS / INCOME OF THE ASSESSEE IN ACCORD ANCE WITH THE SAID PROVISIONS OF THE ACT HAS BEEN UPHELD. AGGRIEVED B Y THE ORDER OF THE CIT(APPEALS) DIRECTING THE AO TO ALLOW DEDUCTION U/ S. 80BI(10) OF THE ACT IN RESPECT OF ENHANCE PROFITS CONSEQUENT TO DISALLOWAN CE OF FICTITIOUS EXPENSES, REVENUE HAS PREFERRED THE APPEAL BEFORE T HE TRIBUNAL. 8. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS) IN RE JECTING THE CONTENTION OF THE ASSESSEE THAT THE INITIATION OF R EASSESSMENT PROCEEDINGS U/S. 148 WAS NOT IN ACCORDANCE WITH LAW AND THEREFO RE ORDER OF REASSESSMENT SHOULD BE ANNULLED, THE ASSESSEE HAS F ILED THE CROSS OBJECTION. ITA NO.241/BANG/2013 & CO 88/BANG/2013 PAGE 6 OF 12 9. THE PRINCIPAL CONTENTION OF THE LD. DR BEFORE US WAS THAT THE AO IN THE ORDER OF ASSESSMENT HAS VERY CATEGORICALLY GIVE N A FINDING THAT THE FICTITIOUS PURCHASES WERE NOT CLAIMED AS A DEDUCTIO N IN THE ORIGINAL ASSESSMENT PROCEEDINGS AGAINST RECEIPTS, WHICH WERE ELIGIBLE FOR DEDUCTION U/S. 80IB(10) OF THE ACT. HE FURTHER FILED BEFORE US COPY OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. SUN ENGINEERING WORKS PVT. LTD., 198 ITR 297 (SC) AND SUBMITTED THAT THE HONBLE SUPREME COURT IN THE AFORESAID DECISION HAS VERY CL EARLY LAID DOWN THAT THE PROCEEDINGS FOR REASSESSMENT ARE FOR THE BENEFIT OF REVENUE AND ASSESSEE CANNOT MAKE ANY CLAIM IN SUCH REASSESSMENT PROCEEDI NGS WHICH WILL HAVE THE EFFECT OF REDUCING THE QUANTUM OF ESCAPED INCOM E TO BE BROUGHT TO TAX. OUR ATTENTION WAS DRAWN TO THE FOLLOWING OBSERVATIO NS OF THE HONBLE SUPREME COURT:- THE ASSESSEE CANNOT CLAIM RECOMPUTATION OF THE I NCOME OR REDOING OF AN ASSESSMENT AND BE ALLOWED A CLAIM WHI CH HE EITHER FAILED TO MAKE OR WHICH WAS OTHERWISE REJECTED AT T HE TIME OF ORIGINAL ASSESSMENT, WHICH HAS SINCE ACQUIRED FINAL ITY. OF COURSE, IN THE REASSESSMENT PROCEEDINGS IT IS OPEN TO AN AS SESSEE TO SHOW THAT THE INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT HAS IN TRUTH AND IN FACT NOT ESCAPED ASSESSMENT AND THAT THE SAM E HAD BEEN SHOWN UNDER SOME INAPPROPRIATE HEAD IN THE ORIGINAL RETURN, BUT TO READ THE JUDGMENT IN V. JAGANMOHAN RAOS CASE (SUPRA) AS IF LAYING DOWN THAT REASSESSMENT WIPES OUT THE ORIGINAL ASSES SMENT AND THAT REASSESSMENT IS NOT ONLY CONFINED TO ESCA PED ASSESSMENT OR UNDER-ASSESSMENT BUT TO THE ENTIRE ASSESSMENT FOR THE YEAR AND START THE ASSESSMENT PROCEEDINGS D E NOVO GIVING RIGHT TO AN ASSESSEE TO REAGITATE MATTERS WHICH HE HAD LOST DURING THE ORIGINAL ASSESSMENT PROCEEDING, WHICH HAD ACQUI RED FINALITY, IS NOT ONLY ERRONEOUS BUT ALSO AGAINST THE PHRASEOL OGY OF SECTION 147 AND THE OBJECT OF REASSESSMENT PROCEEDINGS. SU CH AN ITA NO.241/BANG/2013 & CO 88/BANG/2013 PAGE 7 OF 12 INTERPRETATION WOULD BE READING THAT JUDGMENT TOTAL LY OUT OF CONTEXT IN WHICH THE QUESTIONS AROSE FOR DECISION I N THAT CASE. .. SECTION 147, ALTHOUGH PART OF A TAXING STATUTE, IMP OSES NO CHARGE ON THE SUBJECT BUT DEALS MERELY WITH THE MACHINERY OF ASSESSMENT AND IN INTERPRETING A PROVISION OF THAT KIND, THE R ULE IS THAT CONSTRUCTION SHOULD BE PREFERRED WHICH MAKES THE MA CHINERY WORKABLE. SINCE THE PROCEEDINGS UNDER SECTION 147 ARE FOR THE BENEFIT OF THE REVENUE AND NOT AN ASSESSEE AND ARE AIMED AT GATHERING THE ESCAPED INCOME OF AN ASSESSEE, THE SAME CANNOT BE ALLOWED TO BE CONVERTED AS REVISIONAL OR REVI EW PROCEEDINGS AT THE INSTANCE OF THE ASSESSEE, THEREB Y MAKING THE MACHINERY UNWORKABLE. 10. ACCORDING TO THE LD. DR, THE DIRECTIONS OF THE CIT(APPEALS) TO VERIFY AND ALLOW DEDUCTION U/S. 80IB(10) OF THE ACT IN RES PECT OF ENHANCED PROFITS WAS CONTRARY TO THE LAW LAID DOWN BY THE HONBLE SU PREME COURT AS ABOVE. 11. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THE MATTERS WHICH WERE CONNECTED WITH ESCAPEMENT OF INCOME HAVE TO BE ADJUDICATED AND APPROPRIATE RELIEF ALLOWED TO THE A SSESSEE AND THIS ASPECT HAS BEEN VERY CLEARLY ACCEPTED BY THE HONBLE SUPRE ME COURT IN THE CASE OF SUN ENGINEERING WORKS PVT. LTD. (SUPRA) . IN THIS REGARD, HE DREW OUR ATTENTION TO THE FOLLOWING OBSERVATIONS OF THE HONBLE SUPREME COURT:- INDEED, IN THE REASSESSMENT PROCEEDINGS FOR BRING ING TO TAX ITEMS WHICH HAD ESCAPED ASSESSMENT, IT WOULD BE OPE N TO AN ASSESSEE TO PUT FORWARD CLAIMS FOR DEDUCTION OF ANY EXPENDITURE IN RESPECT OF THAT INCOME OR THE NON-TAXABILITY OF THE ITEMS AT ALL. KEEPING IN VIEW THE OBJECT AND PURPOSE OF THE PROCE EDINGS UNDER SECTION 147 WHICH ARE FOR THE BENEFIT OF THE REVENU E AND NOT AN ITA NO.241/BANG/2013 & CO 88/BANG/2013 PAGE 8 OF 12 ASSESSEE, AN ASSESSEE CANNOT BE PERMITTED TO CONVER T THE REASSESSMENT PROCEEDINGS ON HIS APPEAL OR REVISION, IN DISGUISE, AND SEEK RELIEF IN RESPECT OF ITEMS EARLIER REJECTE D OR CLAIM RELIEF IN RESPECT OF ITEMS NOT CLAIMED IN THE ORIGINAL ASS ESSMENT PROCEEDINGS, UNLESS RELATABLE TO ESCAPED INCOME, AND REAGITATE THE CONCLUDED MATTERS. EVEN IN CASES WHERE THE CLA IMS OF THE ASSESSEE DURING THE COURSE OF REASSESSMENT PROCEEDI NGS RELATING TO THE ESCAPED ASSESSMENT ARE ACCEPTED, STILL THE A LLOWANCE OF SUCH CLAIMS HAS TO BE LIMITED TO THE EXTENT TO WHIC H THEY REDUCE THE INCOME TO THAT ORIGINALLY ASSESSED. THE INCOME FOR PURPOSES OF REASSESSMENT CANNOT BE REDUCED BEYOND THE INCOME ORIGINALLY ASSESSED. 12. OUR ATTENTION WAS ALSO DRAWN TO THE PROVISIONS OF SECTION 152(2) OF THE ACT WHICH PROVIDES FOR DROPPING OF PROCEEDINGS U/S. 147 OF THE ACT, IF THE ASSESSEE SHOWS THAT HE HAD BEEN ASSESSED ON AN AMOUNT NOT LOWER THAN WHAT HE WOULD BE RIGHTLY LIABLE FOR, EVEN IF T HE INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT HAD BEEN TAKEN INTO ACCOUNT. AC CORDING TO HIM, THE ABOVE PROVISIONS ONLY SHOW THAT IN REASSESSMENT PRO CEEDINGS, CLAIMS WHICH ARE RELATED TO ESCAPED INCOME CAN BE CONSIDER ED. 13. APART FROM THE ABOVE, THE LD. COUNSEL FOR THE A SSESSEE ALSO DREW OUR ATTENTION TO THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF S.B. BUILDERS & DEVELOPERS V. ITO (2011) 45 SOT 335 WHEREIN THE TRIBUNAL HELD THAT, WHERE THERE IS AN ADDITION ON A CCOUNT OF DISALLOWANCE UNDER S. 40(A)(IA) OF THE ACT BY DISALLOWING CERTAI N PAYMENTS RELATING TO THE COST OF CONSTRUCTION, RCC CONSULTANCY, ARCHITECTS FEES, COMMISSION AND PROFESSIONAL CHARGES AGGREGATING TO RS. 4,50,12,485 AS THE ASSESSEE HAD ITA NO.241/BANG/2013 & CO 88/BANG/2013 PAGE 9 OF 12 NOT DEDUCTED TAX AT SOURCE AS STIPULATED IN S. 40(A )(IA) AND CONSEQUENTLY THERE IS ENHANCED GROSS TOTAL INCOME AT RS. 8,26,90 ,888 WAS ARRIVED AT BY AO DEDUCTION U/S.80-IB(10) OF THE ACT CANNOT BE RES TRICTED TO ORIGINAL PROFIT OF RS. 3,76,78,403 DECLARED. THE TRIBUNAL FURTHER HELD THAT UNDER S. 8OAB OF THE ACT INCOME THAT IS DERIVED FROM THE ELIGIBL E BUSINESS MUST BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SS. 3 0 TO 43D, AS PROVIDED IN S. 29 AND THAT U/S.29 INCOME CHARGEABLE TO TAX U NDER THE HEAD PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORD ANCE WITH THE PROVISIONS CONTAINED IN SS. 30 TO 43D. UNQUESTIO NABLY, S. 40(A)(IA) IS A SECTION FALLING BETWEEN SS. 30 TO 43D AND THEREFORE EFFECT MUST BE GIVEN TO THE SAME IN COMPUTING THE PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINESS, WHICH IN THIS CASE IS A HOUSING PROJECT. THE TRIBUNAL FURTHER HELD THAT WHILE GIVING EFFECT TO THE COMPUTATION PROVIS IONS CONTAINED IN SS. 30 TO 43D ONE SHOULD NOT BE BOGGED DOWN BY THE THEORY THA T THE DISALLOWED EXPENDITURE CANNOT BE CONSIDERED AS PROFITS DERIVE D FROM THE HOUSING PROJECT OR AS OPERATIONAL PROFITS. 14. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. IN OUR VIEW, THE ORDER OF THE CIT(APPEALS) DOES NOT CALL FOR ANY INTERFERENCE. IT IS CLEAR FROM THE ORDER OF ASSESSMENT THAT THE A O CAME TO THE CONCLUSION THAT THE FICTITIOUS CLAIM OF PURCHASE TO THE EXTENT OF RS.1,66,41,525 WAS CONSIDERED AS NOT RELATABLE TO THE RECEIPTS WHICH A RE ELIGIBLE FOR DEDUCTION U/S. 80IB(10) OF THE ACT BECAUSE THE ASSESSEE DID N OT GIVE ANY REPLY OR PARTICIPATE IN THE REASSESSMENT PROCEEDINGS. IN OU R VIEW, SUCH CONCLUSION ITA NO.241/BANG/2013 & CO 88/BANG/2013 PAGE 10 OF 12 BY THE AO WAS WITHOUT ANY BASIS. THE AO OUGHT TO H AVE IDENTIFIED IT WITH REFERENCE TO THE EVIDENCE AVAILABLE ON RECORD AS TO WHETHER FICTITIOUS PURCHASES ARE RELATABLE TO THE RECEIPTS WHICH ARE E LIGIBLE FOR DEDUCTION U/S. 80IB(10) OF THE ACT. 15. BE THAT AS IT MAY, IN THE PROCEEDINGS BEFORE TH E CIT(APPEALS), THE ASSESSEE HAS CATEGORICALLY MADE A CLAIM THAT THE FI CTITIOUS EXPENSES ARE RELATABLE TO THE RECEIPTS WHICH ARE ELIGIBLE FOR DE DUCTION U/S. 80IB(10) OF THE ACT. THE CIT(A), IN OUR VIEW, HAS ONLY DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE AND IF IT IS FOUND CORRECT TO ALLOW DEDUCT ION U/S. 80IB(10) OF THE ACT IN RESPECT OF THE ENHANCED INCOME. IN OUR VIEW , THE CLAIM MADE BY THE ASSESSEE WAS THAT THE EXPENSES DISALLOWED WERE INEX TRICABLY LINKED WITH PROFITS ON WHICH THE CLAIM FOR DEDUCTION U/S. 80IB( 10) OF THE ACT WAS MADE. AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR THE A SSESSEE, THE HONBLE SUPREME COURT IN ITS DECISION HAS VISUALIZED A SITU ATION WHERE THE ASSESSEE CANNOT BE PERMITTED TO CHALLENGE REASSESSM ENT PROCEEDINGS AT AN APPELLATE OR REVISIONAL PROCEEDING AND SEEK RELI EF IN RESPECT OF ITEMS EARLIER REJECTED OR CLAIMED RELIEF IN RESPECT OF IT EMS NOT CLAIMED IN THE ORIGINAL ASSESSMENT PROCEEDINGS. THE HONBLE COURT HAS, HOWEVER, GIVEN A RIDER THAT IF SUCH CLAIMS ARE RELATABLE TO ESCAPE D INCOME, THE SAME CAN BE AGITATED. IN OUR VIEW, THE CLAIM FOR FICTITIOUS PURCHASES IF IT IS RELATABLE TO PROFITS/RECEIPTS WHICH ARE ELIGIBLE FOR DEDUCTION U /S. 80IB(10) OF THE ACT, THE DISALLOWANCE OF SUCH EXPENSES WILL GO TO ENHANCE TH E INCOME/PROFITS ELIGIBLE FOR DEDUCTION U/S. 80IB(10) OF THE ACT ON WHICH THE ASSESSEE WILL BE ITA NO.241/BANG/2013 & CO 88/BANG/2013 PAGE 11 OF 12 ENTITLED TO CLAIM DEDUCTION U/S. 80IB(10) OF THE AC T. IT CANNOT BE SAID THAT THE DISALLOWED EXPENDITURE CANNOT BE CONSIDERED AS PROFITS DERIVED FROM THE HOUSING PROJECT OR AS OPERATIONAL PROFIT. THE DECISION OF THE MUMBAI BENCH OF THE ITAT ON WHICH THE LD. CIT(APPEALS) HAS PLACED RELIANCE VIZ., S.B. BUILDERS & DEVELOPERS (SUPRA) CLEARLY SUPPORTS THE STAND OF THE ASSESSEE AND THE VIEW TAKEN BY THE CIT(A). WE ARE THEREFORE OF THE VIEW THAT THE DIRECTIONS CONTAINED IN THE ORDER OF THE C IT(A) ARE PROPER AND DO NOT CALL FOR ANY INTERFERENCE. IN VIEW OF THE DECI SION ON THE APPEAL OF THE REVENUE, WE ACCEPT THE PRAYER OF THE LD. COUNSEL FO R THE ASSESSEE THAT THE GROUNDS IN THE CROSS OBJECTION NEED NOT BE ADJUDICA TED. 16. CONSEQUENTLY, THE APPEAL BY THE REVENUE AS WELL AS THE CROSS OBJECTION BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF JUNE , 2014 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 13 TH JUNE , 2014 . /D S/ ITA NO.241/BANG/2013 & CO 88/BANG/2013 PAGE 12 OF 12 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.