MADHUCON PROJECTS LIMITED, HYDERABAD,HYDERABAD V. DCIT, CENTRAL CIRCLE-3, HYD, HYDERABAD

ITA 1328/HYD/2017

AI Insights

The case involves multiple appeals by Madhucon Projects Ltd and the Revenue concerning various assessment years. The primary issues revolved around the validity of additions made under sections 14A and 43B of the Income Tax Act, 1961, and the eligibility of the assessee to claim deductions under section 80IA on enhanced business income resulting from these disallowances. The Tribunal examined the legal provisions, previous rulings, and the specific circumstances of each assessment year to arrive at its decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470421 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2008-2009
• Other Referred Cases: Pr. CIT vs. Abhisar Buildwell (P) Ltd, GVPR Engineers, Kabul Chawla, Saumya Construction, Religare Securities Ltd, PJB Engineering Pvt Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Condonation of delay; Set aside; Business income; Opportunity of being heard; Additional evidence; Reassessment proceedings; Business expenditure; Income from undisclosed sources; Rule of consistency; Period of limitation; Principle of natural justice; Search and seizure; Block assessment; Earning of tax free income; Rule 8D
• Section: 143(3); 48; 153; 132; 153A; 43; 22; 13; 40A(3); 14A; 43B; 37(1); 80IA; 260A; 20

Judgement Text

"ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 1 of 48 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad Before Shri Vijay Pal Rao, Vice-President A N D Shri Madhusudan Sawdia, Accountant Member S.No ITA No Appellant Respondent A Y 1 1328/Hyd/2017 Madhucon Projects Ltd, Hyderabad PAN:AABCM4757 Dy. CIT Central Circle 3 Hyderabad 2008-09 2 12/Hyd/2020 ACIT Central Circle 2(1) Hyderabad Madhucon Projects Ltd, Hyderabad PAN:AABCM757 2009-10 3 13/Hyd/2020 -do- -do- 2010-11 4 14/Hyd/2020 -do- -do- 2011-12 5 723/Hyd/2020 ACIT Central Circle 2(1) Hyderabad Madhucon Projects Ltd, Hyderabad PAN:AABCM757 2013-14 6 761/Hyd/2020 Madhucon Projects Ltd, Hyderabad PAN:AABCM4757 Dy. CIT, Central Circle 2(1) Hyderabad 2013-14 7 762/Hyd/2020 -do- -do- 2014-15 िनधाŊįरती Ȫारा/Assessee by: Shri P Murali Mohan Rao, CA राज̾ व Ȫारा/Revenue by:: Shri B. Balakrishna, CIT(DR) सुनवाई की तारीख/Date of hearing: 15/01/2025, 21/01/2025 & 22/01/2025 घोषणा की तारीख/Pronouncement: 04/02/2025 ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 2 of 48 आदेश/ORDER Per Bench: These are appeals filed by the assessee for the A.Ys 2008-09, 2010-11, 2011-12, 2013-14 and 2014-15 and cross appeals by the Revenue for the A.Ys 2009-10, 2011-12 arising from the assessment orders passed u/s 153A of the I.T. Act, 1961. Since common issues are involved arising from the assessment framed pursuant to the search & seizure action in these appeals, therefore, for the sake of convenience, all these appeals were clubbed together for hearing and are being disposed of by this consolidated order. ITA No.1328/Hyd/2017 – A.Y 2008-09 2. This appeal by the assessee is directed against the order dated 30/01/2015 of the learned CIT (A) -12 Hyderabad for the A.Y 2008-09 arising from the assessment order passed u/s 143(3) r.w.s. 153A of the I.T. Act, 1961. The assessee has raised the following grounds of appeal: “1. The order of the Ld. CIT (A)-12, Hyderabad is erroneous both on facts and in law. 2. The Ld. CIT(A) ought to have appreciated the fact that the u/s assessment framed 143(3) rws 153A of the Act is invalid assessment as there is no incriminating material found during the course of search. 3. The Ld. CIT(A) ought to have appreciated the fact that items of regular additions cannot be made in a search ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 3 of 48 assessment without there being any incrementing material found during the course of search proceedings. 4. The Ld. CIT(A) erred in Tot adjudicating the ground no 6-11 filed before him relating to inflated expenditure on which addition of Rs. 4,40,00,000/- was made on the merits. 5. The Ld. CIT(A) erred in treating the amount of Rs. 4,40,00,000/- withdrawn from the bank accounts of the assessee's sub-contractors as inflated expenditure of the assessee and adding the same to the total income. 6. The Ld. CIT(A) ought to have appreciated the fact that amount of Rs.4,40,00,000/- represents part of the turnover of the sub-contractors of the assessee which is already subjected to income tax in the hands of the contractors. 7. The Ld. CIT(A) erred in relying on the withdrawals from bank accounts of third parties i.e., the assessee's subcontractors and making the addition under the head \"Inflated Expenditure\" in the hands of the assessee. 8. The Ld. CIT(A) ought to have appreciated the fact that the amount withdrawn from the bank accounts of the sub- contractors is used to meet the expenditure of the sub-contractors. 9. The Ld. CIT(A) erred in sustaining the addition of Rs. 1,18,07,320/- to the income of the assessee being unexplained cash payments. l0. The Learned CIT (A) erred in sustaining the addition of Rs, 60,22,916/- to the income of the assessee being unexplained cash payments. 11. The learned CIT(A) erred in enhancing the income of the assessee without providing any opportunity of being heard which is against the principles of natural justice. 12. Without prejudice to the above grounds, the Ld. CIT(A) ought to have appreciated the fact that both the addition of Rs. 5,00,00,000/- made in original assessment as well as the addition of Rs. 440,00,000/- made in search assessment are towards excess cash payment. 13 Without prejudice to the above grounds, the Ld CIT(A) ought to have appreciated the fact that the addition of Rs. ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 4 of 48 4.40.00,000/- was not made by the assessee as already an addition of Rs. 5,00,00,000/- was made in original assessment which was of similar nature and once again making an addition of Rs.4,40,00,000/- would result in double taxation. 14 The Ld. CIT(A) ought to have appreciated the fact that addition of Rs.4,40,00,000/-was not made by the AO while computing the total income to avoid double taxation of income and not based on principle of telescoping. 15. The Learned CTA) ought to have appreciated the fact that entire amount of Rs.4,00,00,000/- was available before AO to telescope against unexplained income/ investment. 16. The Ld. CIT(A) ought to have appreciated the fact that any addition made to the income of the assessee would enhance the claim of deduction made u/s S01A of the Act 17.The assessee may add, alter or modify or substitute any other point to the Grounds of appeal at any time before or at the time of hearing of the appeal. 3. Ground Nos 1 to 3 are regarding validity of the addition made by the Assessing Officer in the absence any incriminating material found during the course of search & seizure action. The learned AR of the assessee has submitted that the search & seizure operation u/s 132 of the I.T. Act, 1961 was carried out in case of the assessee on 4/3/2011 and therefore, as on the date of search, the assessment for the year under consideration was not pending rather the assessment was already completed u/s 143(3) which was also subjected to the appeal before this Tribunal and vide order dated 28/12/2012, this Tribunal finally disposed of the appeal of the assessee for the A.Y under consideration. In the order passed u/s 153A, the Assessing Officer has not made any addition but has disallowed the claim of ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 5 of 48 deduction u/s 80IA of the I.T. Act, 1961 which is already covered by the decision of this Tribunal in assessee’s own case for the A.Ys 2007-08 and 2008-09 as well as for the A.Ys 2012-13 & 2013-14. Thus, the learned AR has submitted that the disallowance made by the Assessing Officer u/s 80IA is not based on any incriminating material found during the course of search & seizure action but since the Department has not accepted the order of this Tribunal and filed an appeal before the Hon'ble jurisdictional High Court in case of GVPR Engineers, the Assessing Officer has made this disallowance to keep this issue above. In this regard he has relied upon the decision of the Hon'ble Supreme Court in the case of Pr. CIT vs. Abhisar Buildwell (P) Ltd reported in (2023) 454 ITR 212, dated APRIL 24, 2023. The learned AR has referred to the order of this Tribunal in assessee’s own case in the appeal filed against the order passed u/s 143(3) of the Act for the A.Y under consideration as well as for the A.Y s 2012-13 & 2013-14 and submitted that this Tribunal has already decided the issue that the disallowance of expenditure will enhance the eligible business income of the assessee for deduction u/s 80IA of the I.T. Act, 1961. 4. On the other hand, the learned DR has submitted that the Assessing Officer has made reference to the statement of Shri Raju Mangulkar recorded on 12/05/2011 wherein it was admitted that the withdrawal of the amount from the Bank Account of the Sub-Contractor of the assessee was handed over to the assessee company as he used to keep the money in cash ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 6 of 48 section of the assessee company which was distributed to various persons as per the directions of the management of the assessee company. The Assessing Officer also reexamined Shri Raju Mangulkar on 9/1/2013 to reaffirm the earlier statement. Thus, the learned DR has submitted that the statement of Shri Raju Mangulkar disclosing the fact of withdrawal of money from the Bank Account of the sub-contractor and then handed over the same to the assessee company is an incriminating material. He has further contended that the learned CIT (A) has also corrected the arithmetic mistake in the order of the Assessing Officer and therefore, the decision of the Hon'ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P) Ltd (Supra) is not applicable to the facts of the present case. He has further contended that the CBDT vide circular No.37/2016 clarified the position in respect of the disallowance made u/s 32, 40(a)(ia), 40A(3), 43B etc., of the I.T. Act, 1961 and therefore, the provisions of “ejusdem genris” will be applicable in respect of other disallowances which would result in enhancement of the business income eligible for deduction u/s 80IA of the Act. He further contended that when the assessee was found indulged in the activity of inflating the expenditure and siphoning of the fund through the sub- contractor/sister concern, then the benefit of section 80IA of the Act cannot be allowed to the assessee in respect of disallowances made by the Assessing Officer. He has relied upon the orders of the Assessing Officer as well as the learned CIT (A). ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 7 of 48 5. We have considered the rival submissions as well as the relevant material available on record. It is pertinent to note that in the statement recorded by the Assessing Officer on 9/1/2013, Shri Raju Mangulkar has denied all the allegations about the withdrawal of the money from the sub-contractor and handing over the same to the assessee but stated in the said statement that the money withdrawn from the bank account of the sub-contractor was given to the representative of the sub- contractor and not to the assessee company. In any case, the Assessing Officer has not made any separate disallowances based on the said statement of Shri Raju Mangulkar. Even otherwise, nothing was found which is not recorded in the books of account of the assessee or in the books of the sub-contractor but all the transactions were part of the bank account statement of the sub- contractor which is also sister concern of the assessee and therefore, the withdrawal from the bank account of the sub- contractor cannot be considered as an incriminating material as it was already part of the books of account as well as the bank account of the sub-contractor company. The Assessing Officer has finally held in para 14 to 15.2 of his order as under: ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 8 of 48 ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 9 of 48 ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 10 of 48 6. Though as it is evident from the assessment order that no separate addition was made but the Assessing Officer has proceeded to disallow the claim of deduction u/s 80IA of the I.T. Act, 1961. The Assessing Officer has also recorded the fact that this Tribunal in assessee’s own case has allowed the claim of deduction u/s 80IA in respect of the income got enhanced as a result of disallowance of expenses. Therefore, the issue of disallowance of claim of deduction u/s 80IA was already a matter of dispute in the original assessment u/s 143(3) and travelled up to the stage of 2nd appeal before this Tribunal and hence, the impugned disallowance is not based on any incriminating material found during the course of search & seizure action. Thus, the said addition made by the Assessing Officer by disallowing deduction u/s 80IA of the I.T. Act, 1961 in the absence of any incriminating material is not sustainable in law. The Hon'ble Supreme Court in case of PCIT vs. Abhisar Buildwell (P) Ltd (Supra) has held in Para 10 to 14 as under: “10. On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Section 153A of the Act reads as under: \"153A. Assessment in case of search or requisition - (1) Notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 11 of 48 section 132-A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132-A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside Explanation.—For the removal of doubts, it is hereby declared that,— ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 12 of 48 (i) save as otherwise provided in this section, section 153-B and section 153-C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.\" 11. As per the provisions of Section 153A, in case of a search under section 132 or requisition under section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 13 of 48 the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law. 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 14 of 48 of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 14. In view of the above and for the reasons stated above, it is concluded as under: (i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs” 7. In view of the facts and circumstances as discussed above as well as by following the judgement of the Hon'ble Supreme Court in the case of Pr. CIT vs. Abhisar Buildwell (P) Ltd ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 15 of 48 (Supra), the disallowance made by the Assessing Officer u/.s 80IA is accordingly deleted. Even on merits of the issue, we find that this Tribunal in assessee’s own case for the A.Y 2007-08 to 2009- 10 and 2011-12 vide order dated 6/1/2022 has considered an identical issue in para 9 to 9.3 as under: “9. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. We observe that search was conducted on the assessee and its group cases on 04/03/2011 and further search was conducted on 07/03/2011 as per para No. 6 of the assessment order and the statements recorded by the search team, which have been recorded by the AO in his order. For deciding the issue before us, first we have to see the assessment order on the basis of which the additions made by the AO as per para 11, which is reproduced below for the sake of clarity: \"11. During the previous year relevant to the AY 2007- 08, it is observed that an amount of Rs. 50 lakhs was withdrawn from the bank account of M/s Maa Highways maintained at Axis Bank, Begumpet, Greenlands by Sri Raju Magrulkar vide Instrument No. 914303. In light of the detailed narrations in the preceding paragraphs, this amount of Rs. 50 lakhs is treated as inflated expenditure by way of subcontract payments. Accordingly, the same is added.\" 9.1 The basis for making the addition as noted above, the AO has made the addition only on the basis of inflated expenditure by way of subcontract payments, which is in the nature of disallowance u/s 37(1) of the Act. On the above order of the AO, we find that nowhere mentioned that it is other than the business expenditure of the assessee. We observe from the arguments and paper book submitted by the assessee quoted supra, the amounts received by the sub-contractors have been offered as their turnover and the turnovers had been accepted by the revenue authorities. Therefore, it clearly shows that the payments made by the assessee to sub-contractors is a business expenditure of the assessee. “9.2 We accept the arguments advanced by the ld. AR of the assessee that the Board's Circular No. 37/2016 dated ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 16 of 48 02/11/2016 is applicable to the case of the assessee. For the sake of clarity, we reproduce the contents in the Circular as under: ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 17 of 48 9.3 On perusal of the said Circular, it is clear that at times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. The assessee is also eligible to claim for deduction u/s 80IA on the profit earned from its business. The issue before us is also regarding the enhancement of the profit of the assessee which is covered by the said Circular quoted supra and, therefore, the assessee is eligible to claim deduction u/s 80IA of the Act. Considering the totality of the facts and circumstances of the case, we set aside the order of the CIT(A) and direct the AO to allow the assessee's claim of deduction u/s 80IA of the Act on the enhanced expenditure towards the payment to sub- contractors, which was disallowed by the AO and confirmed by the CIT(A) in all the appeals under consideration. All other grounds raised by the assessee in all the appeals, were not pressed before us, therefore, the same are dismissed as not pressed. 9.3 In view of our above observations, we allow the grounds raised by the assessee with regard to inflated expenditure by way of sub-contract payments in all the appeals under consideration.” ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 18 of 48 8. Further, an identical issue has again been considered by this Tribunal in assessee’s own case for the A.Ys 2012-13 & 2013-14 in ITA Nos. 635 and 636/Hyd/2020 dated 11/01/2022 in para 20 to 23 as under: “21. The facts as taken from AY 2012-13 that the assessee claimed deduction to the tune of Rs. 47,66,23,2235/ -. The AO disallowed the same on the ground that the assessee failed to produce supporting to details. 22. The CIT(A) allowed the assessee's claim by observing as under: \"6.5 I have carefully considered the submissions of the appellant, the order of the Assessing Officer, the additional grounds raised as well as the comments of the Assessing Officer thereon. As far as the claim of deduction u/s. 80lA is concerned, it is an undisputed fact that the claim has been allowed for the AYs 2007 - 08 and 2008-09, and also, subsequently, for AY 2013-14. The then CIT(A)-12, my predecessor, while adjudicating the appeal for Asst. Year 2009-10, 2010-11 and 2011-12 held that the appellant company is eligible to claim the deduction u/s. 80lA of the Act. The facts of the case for the appeal under consideration are identical to the preceding years and the claim of deduction u/s. 8 0lA of the Act is made on the same infrastructural projects which were claimed and allowed in the preceding and succeeding years. Nothing has been brought on record to establish that the projects undertaken by the appellant during the AY under consideration were different from the projects undertaken in preceding or succeeding years. Nothing to this effect has been brought out by the AO during remand proceedings also.\" 23. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The CIT(A) allowed the claim of the assessee following the decision of his predecessor in assessee's own case for earlier AYs. Before us, the ld. DR has not brought any contrary decision in this regard. Therefore, we uphold the order of CIT(A) and dismiss the ground raised by the revenue on this issue in both the appeals under consideration.” 9. Accordingly, ground Nos 4 to 8 and 12 to 16 of assessee’s appeal are allowed. ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 19 of 48 10. The next issue involved in Ground No.9 is regarding the addition of Rs.1,18,07,320/- made by the learned CIT (A) by enhancing the assessment. The learned AR has submitted that the enhancement made by the learned CIT (A) is not sustainable in law as no show-cause notice was given by the learned CIT (A) as required u/s 251(2) of the I.T. Act, 1961. In support of his contention, he has relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Shapoorji Pallonji Mistry reported in (1962) 44 ITR 891 (S.C) as well as the decision of the Hon'ble Gujarat High Court in the case of Saheli Synthetics (P) Ltd reported in 302 ITR 126. Thus, the learned AR has submitted that the enhancement made by the learned CIT (A) is not sustainable and liable to be deleted. 11. On the other hand, the learned DR has submitted that the learned CIT (A) has pointed out the arithmetic mistake in the calculation made by the Assessing Officer and accordingly directed the Assessing Officer to consider the income of Rs.1,18,30,236/- while giving effect to the order of the learned CIT (A). 12. We have considered the rival submissions as well as the relevant material available on record. The learned CIT (A) has directed the Assessing Officer to make an addition of the said amount in Para 3.3 as under: “3.3 There is a mistake in the action of the Assessing Officer ,because set off of Rs.4.4 crores is given ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 20 of 48 against Rs.5 crores assessed earlier, the balance available is only Rs.60 lakhs. Even if the Assessing Officer were to give further telescoping now it cannot exceed Rs.60 lakhs in spite of telescoping to the tune of Rs.1,78,30,236/-. Accordingly, an addition of Rs.1,18,30,236 is required to be made and the Assessing Officer is accordingly directed to consider income of Rs.1,18,30,236/- while giving effect to this order”. 13. Thus, when the Assessing Officer has not made any addition while passing the assessment order u/s 153A but only disallowance of deduction u/s 80IA, then the addition as directed by the learned CIT (A) would certainly amount to enhancement of the assessment. There is no quarrel on the point that the learned CIT (A) is having co-terminus power that of the Assessing Officer but the said power can be exercised subject to the condition that the assessee be given an appropriate opportunity of showing cause against such enhancement as per sub section (2) of section 251 which reads as under: “(2)The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation. - In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant.” 14. Therefore, passing an order resulting an enhancement of the assessment without giving a show-cause notice to the assessee or reasonable opportunity is not permissible as per the ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 21 of 48 provisions of the Act. Accordingly, the enhancement of assessment without satisfying the mandatory conditions provided in section 251(2) of the I.T. Act, 1961 is not sustainable in law and the same is set aside. 15. The assessee has also raised various additional grounds; however, these grounds are not emanating from the assessment order passed by the Assessing Officer u/s 153A of the Act but these grounds were raised by the assessee which were already subject matter of the appeal filed against the assessment order passed u/s 143(3) of the I.T. Act, 1961. Further, in view of the issue of eligibility of section 80IA on the enhanced eligible business income of the assessee, these additional grounds became infructuous and stands dismissed. 16. In the result, appeal of the assessee is partly allowed. ITA Nos.12 to 14/Hyd/2020 - Revenue 17. These 3 appeals filed by the Revenue are directed against three separate orders, all dated 11/10/2019 of the learned CIT (A)-12, Hyderabad relating to A.Ys.2009-10 to 2011- 12 respectively. Since common issues are involved in these 3 appeals, therefore, for the sake of convenience, they were heard together and are being disposed of by this common order. ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 22 of 48 18. The Revenue has raised the following grounds of appeal in ITA No.12/Hyd/2020 for the A.Y 2009-10: “1. The learned CIT(A) erred both in law and on facts of the case in allowing relief to the assessee. 2. The learned CIT(A) erred in deleting the addition of Rs. 3 crores on the ground that identical addition was made in the hands of Madhucon Land Developers Ltd., ignoring the fact that the addition made was annulled by the learned CIT(A) vide order dated 06.07.2017 on the legal ground of non-recording of satisfaction. 3. The of learned CIT(A) erred in deleting the addition of Rs. 47,85,90,697/- towards disallowance has, 801A on the ground that the issue which is already adjudicated by the Hon'ble’ ITAT and to the therefore, attained finality cannot be revisited by the AO in the absence of any findings assessee's contrary, own ignoring the fact that the department has filed appeal u/s 260A on the case on the order of the ITAT for the AYs 2007-08 and 2008-09. 4. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary.” 19. Ground No.1 is general in nature and does not require any specific adjudication. 20. Ground No.2 is regarding the addition of Rs.3 crores made by the Assessing Officer on account of cash withdrawal from the bank account of M/s. Madhucon Land Developers Ltd, a sister concern of the assessee and was disbursed to various persons relating to the assessee and therefore, treated as siphoning of the fund by the assessee by using the sister concern as a conduit. An identical addition was also made by the Assessing Officer in the hand of M/s. Madhucon Land Developers Ltd, the sister concern of the assessee. ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 23 of 48 21. On appeal, the learned CIT (A) has deleted the said addition. 22. Being aggrieved by the order of the learned CIT (A), the Revenue has filed the present appeals before the Tribunal. 23. The learned DR has submitted that the Assessing Officer has made a reference of the statement of Shri Ravi Kant Trivedi recorded u/s 132(4) of the I.T. Act, 1961 on 13/05/2011 wherein he has explained the details recorded in the diary seized as annexure-A/RKT/2 as how these amounts have been disbursed to the various persons. The Assessing Officer has given the details of the withdrawals of Rs.25 crores out of which Rs.22 crores were not related to the year under consideration and therefore, the addition of Rs.3 crores has been made by the Assessing Officer on this account. The learned DR has further submitted that since the sister concern is used as a conduit for siphoning off of the funds by the assessee, therefore, the addition is rightly made by the Assessing Officer. The learned DR has relied upon the order of the Assessing Officer. 24. On the other land, the learned AR of the assessee has referred to the findings of the learned CIT (A) in para 7.4 and submitted that once an identical addition has been made in the hand of the sister concern Madhucon Land Developers Ltd as these transactions are of withdrawal from bank account of Madhucon Land Developers Ltd, then the addition made in the ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 24 of 48 hands of the assessee is otherwise not sustainable and rightly deleted by the learned CIT (A). He has further contended that the Assessing Officer has made the addition on the basis of the withdrawal made from the bank account of the sister concern without bringing anything on record to show that these withdrawals are unaccounted income of the assessee. 25. We have considered the rival submissions as well as perused the relevant material available on record. The Assessing Officer has made the addition of Rs.3 crores in para 11.1 to 11.4 as under: ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 25 of 48 26. Thus, the addition is made on the basis of the details of the withdrawals of money from bank account of M/s. Madhucon Land Developers Ltd, a sister concern of the assessee. The Assessing Officer has then given the details as found during the course of search and seizure action recorded in the seized material which is a diary wherein the transactions of disbursement of various amounts are recorded. Except one transaction i.e. dated 27/09/2008 of Rs.1 crore, allegedly mentioned in the said diary/note book, all other transactions do not pertain to the A.Y under consideration. Even there is no record to suggest that the alleged Rs.3 crores has withdrawn from the bank account of the sister concern is an unaccounted or undisclosed income of the assessee. The Assessing Officer has not ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 26 of 48 pointed out that the assessee has made any claim of expenditure of the said amount of Rs.3 crores. Therefore, the Assessing Officer has not made any addition by making disallowance of the claim of expenditure or deduction in the books of the assessee but the addition is simply made on the basis of the withdrawal of money from the bank account of the sister concern. 27. On appeal, the learned CIT (A) has deleted the addition by giving a finding in para 7.4 as under: “7.4 I have carefully considered the submissions of the appellant, the order of the Assessing Officer, the evidence filed by the appellant's AR, as well as the comments of the Assessing Officer thereon. It is seen that the amount in question was withdrawn from the account of M/s. Madhucon Land Developers Ltd. The AO has made the addition alleging that M/s. Madhucon Land Developers was used by the assessee company for siphoning its funds, and that the amount in question was withdrawn in cash, and routed back to the management of the assessee company. The AR of the appellant, on the other hand, has contended that M/s. Madhucon Land Developers Ltd. 0s an independent assessee, and that the amount in question was included in the turnover of the said company, and has been already added in its assessment completed u/s. 143(3) r.w.s. 153C. These facts have not been controverted by the AO. On verification of records, it is seen that identical addition has been made by the AO in the case of M/s. Madhucon Land Developers Ltd. Therefore, since the amount in question has already been considered while making the assessment in the case of M/s. Madhucon Land Developers Ltd., there is no rationale for making the same addition in the hands of the assessee/ appellant here. The addition made is therefore ordered to be deleted, and the grounds related to this issue are ALLOWED.” 28. Thus, it is clear that when it is not a claim of expenditure in the books of the assessee, then the addition made by the Assessing Officer on the presumption that the assessee has ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 27 of 48 siphoned off the fund by using the sister concern as conduit is not sustainable. The learned CIT (A) has clearly mentioned that since the amount in question was part of the turnover of sister concern and has already added in the assessment in the case of M/s. Madhucon Land Developers Ltd, then the same cannot be added in the hands of the assessee. Accordingly, we do not find any error or illegality in the impugned order of the learned CIT (A) and the same is upheld. 29. Ground No.3 is regarding the addition made by the Assessing Officer towards disallowance of deduction u/s 80IA deleted by the learned CIT (A). The learned DR has submitted that the learned CIT (A) has deleted the addition made by the Assessing Officer by following the decision of this Tribunal which were not accepted by the Department as an appeal has been filed before the Hon'ble jurisdictional High Court. Thus, he has contended to keep the issue alive, the Assessing Officer has made the addition. He has relied upon the order of the Assessing Officer. He has further contended that since the assessee is found indulged in unaccounted activities, therefore, the deduction u/s 80IA cannot be allowed to the extent of the activities found during the course of search & seizure action not part of the books of account of the assessee. 30. On the other hand, the learned AR of the assessee submitted that this issue has already been considered by the Tribunal in assessee’s own case for the A.Ys 2012-13 & 2013-14 ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 28 of 48 in ITA Nos. 635 & 636/Hyd/2020 vide order dated 11/01/2022. The learned CIT (A) has deleted the addition by following the decision of this Tribunal in assessee’s own case. 31. We have considered the rival submissions as well as perused the relevant material available on record. The learned CIT (A) has deleted the addition made by the Assessing Officer on account of disallowance of deduction u/s 80IA in Para 8.5 of the impugned order as under: “8.5 I have carefully considered the submissions of the appellant, the order of the Assessing Officer, the additional grounds raised as well as the comments of the Assessing Officer thereon. As far as the claim of deduction u/s.801A is concerned, it is an undisputed fact that the claim has been allowed for the AYs 2007-08 and 2008-09, and also, subsequently, for AY 2013-14. This has been confirmed by the Assessing Officer herself in the remand report reproduced in Para 8.3 above. Further, from the assessment order reproduced in Para 8.1 above, it can be seen that the claim has been disallowed by the Assessing Officer, merely stating that the decision of ITAT in case of M/s. GVPR Engineers, has not been accepted by the Department. In fact, the Assessing Officer has himself stated that the Hon'ble ITAT, 0n the assessee's own case for AY 2007 08 and 2008-09, has opined that the assessee company is eligible for deduction u/s.80IA. The issue which is already adjudicated by the Hon'ble ITAT and has therefore attained finality cannot be revisited by the Assessing Officer in the absence of any findings to the contrary. Nothing has been brought on record to establish that the projects undertaken by the appellant during the AY under consideration were different in any manner from the projects undertaken in proceeding or subsequent years. Nothing to this effect has been brought out by the A.O. during remand proceedings also. In view thereof, there is no justification for disallowing the deduction u/s.801A claimed by the appellant. The Assessing Officer is therefore directed to allow the same, and the addition made is deleted. ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 29 of 48 The grounds of appeal related to this issue are ALLOWED.” 32. Thus, it is clear that the Assessing Officer has made the addition by giving reasons that the order of this Tribunal in case of M/s. GVPR Engineers has not been accepted by the Department. The Assessing Officer himself has not disputed this fact that this Tribunal in assessee’s own case for the A.Ys 2007- 08 & 2008-09 has already allowed the claim of deduction u/s 80IA of the Act. The learned DR has not disputed this fact that this issue is covered by the decision of the Tribunal in assessee’s own case. We further note that for the A.Ys 2012-13 & 2013-014, the Tribunal vide order dated 11/1/2022 in ITA Nos.635 & 636/Hyd/2020 has again considered this issue in paras 21 to 23 as under: “21. The facts as taken from A.Y 2012-13 that the assessee claimed deduction to the tune of Rs.478,66,23,2235/-. The Assessing Officer disallowed the same on the ground that the assessee failed to produce supporting details. 22. The CIT (A) allowed the assessee’s claim by observing as under: \"6.5 1 have carefully considered the submissions of the appellant, the order of the Assessing Officer, the additional grounds raised as well as the comments of the Assessing Officer thereon. As far as the claim of deduction u/s. 8OIA is concerned, it is an undisputed fact that the claim has been allowed for the AYs 2007 08 and 2008-09, and also, subsequently, for AY 2013-14. The then CIT(A)-12, my predecessor, while adjudicating the appeal for Asst. Year 2009-10, 2010-11 and 2011-12 held that the appellant company is eligible to claim the deduction u/s. 8OIA of the Act. The facts of the case for the appeal under consideration are identical to the preceding years and the claim of deduction u/s. 801A of the Act is made on the same infrastructural projects which were claimed and allowed in the preceding and succeeding years. Nothing has been ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 30 of 48 brought on record to establish that the projects undertaken by the appellant during the AY under consideration were different from the projects undertaken in preceding or succeeding years. Nothing to this effect has been brought out by the Assessing Officer during the remand proceedings also”. 23. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities, The CIT(A) allowed the claim of the assessee following the decision of his predecessor in assessee's own case for earlier AYs. Before us, the ld. DR has not brought any contrary decision in this regard. Therefore, we uphold the order of CIT(A) and dismiss the ground raised by the revenue on this issue in both the appeals under consideration\". 33. Accordingly, in view of the fact that this Tribunal has taken a consistent view on this issue in assessee’s own case which has been followed by the learned CIT (A) while deleting the addition in question and allowing the claim of the assessee u/s 80IA of the I.T. Act, 1961, we do not find any error or illegality in the impugned order of the learned CIT (A) qua this issue. 34. For the A.Y 2010-11, the Revenue has raised similar grounds of appeal except quantum amount. 35. Ground No.1 is general in nature and does not require any specific adjudication. 36. Ground No.2 is regarding the addition made on account of withdrawals made from the bank account of Madhucon Land Developers Ltd, a sister concern of the assessee. This issue is identical to the issue involved in Ground No.2 for the ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 31 of 48 A.Y 2009-10. The learned CIT (A) has deleted the said addition on the similar reasoning that once the addition has been made in the hand of the sister concern, no addition is called for in the hand of the assessee as this transaction is only a withdrawal from the Bank account of the sister concern of the assessee. Accordingly, in view of our finding on this issue for the A.Y 2009-10, we do not find any error or illegality in the impugned order of the learned CIT (A) for the A.Y 2010-11. 37. Ground No.3 is regarding the addition made by the Assessing Officer towards disallowance of claim of deduction u/s 80IA which was deleted by the learned CIT (A). This issue is identical to the issue involved in Ground No.3 for the A.Y 2009- 10. Accordingly, in view of our findings on this issue for the A.Y 2009-10 and the same is decided by us against the Revenue and in favour of the assessee and consequently, the impugned order of the learned CIT (A) is upheld. 38. For the A.Y 2011-12, the Revenue has raised more or less similar grounds of appeal except quantum amount. 39. Ground No.1 is general in nature and does not require any specific adjudication. 40. Ground No.2 is regarding the addition made by the Assessing Officer on account of disallowance of claim of deduction u/s 80IA. This issue is common and identical to the issues ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 32 of 48 involved in Ground No.3 for the A.Y 2009-10. In view of our findings on this issue for the A.Y 2009-10, this ground of revenue appeal stands dismissed and the impugned order of the learned CIT(A) qua this issue is upheld., 41. In the result, all the 3 appeals filed by the Revenue are dismissed. ITA Nos. 723 and 761/Hyd/2020 – A.Y 2013-14 42. These cross appeals are directed against the order dated 15/09/2020 of the learned CIT (A) for the A.Y 2013-14. The assessee as well as Revenue has raised the following grounds of appeal: ITA No.761/Hyd/2020 (Assessee) 43. The assessee has raised the following grounds: ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 33 of 48 ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 34 of 48 ITA No.723/Hyd/2020 (Revenue) 44. The Revenue has raised the following grounds of appeal: ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 35 of 48 45. At the outset, it is seen that there is a delay of 23 days in filing the appeal by the assessee. The assessee has filed an application for condonation of delay which is supported by an affidavit. 46. We have heard the learned AR and the learned DR on the condonation of delay and carefully perused the reasons explained by the assessee. At the outset, it is noted that the impugned order was passed during the Covid Pandemic period and the Hon'ble Supreme Court while taking suo motto cognizance for extension of limitation in writ petition in Miscellaneous Appeal No.21/2022 extending the period of limitation up to 28/02/2022 and also granted further time of 90 days. Therefore, in view of the judgment of the Hon'ble Supreme Court (Supra), the appeal filed by the assessee is treated as within the period of limitation. 47. Ground No.1 by the assessee is general in nature and does not require any specific adjudication. 48. Ground of appeal 2, 3 and 5 are regarding the disallowance made by the Assessing Officer and sustained by the learned CIT (A) towards advance written off. The learned AR has submitted that without going into the merits of the disallowance made by the Assessing Officer and confirmed by the learned CIT (A), the assessee is pressing only the issue that enhanced business income is eligible for deduction u/s 80IA of the I.T. Act, ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 36 of 48 1961 and therefore, the same may be allowed. In support of his contention, he has relied upon the decisions of this Tribunal in assessee’s own case in ITA No.635 & 636/Hyd/2020 dated 11/01/2022. 49. On the other hand, the learned DR has relied upon the orders of the Assessing Officer. 50. Having considered the rival submission, it is noted that this issue of allowability of deduction u/s 80IA on the enhanced income by virtue of disallowance of expenses has been considered by us in assessee’s own case for the A.Ys 2008-09 & 2009-10. Accordingly, in view of our finding on this issue in assessee’s own case, this issue is decided in favour of the assessee and consequently, the Assessing Officer is directed to allow deduction u/s 80IA on the enhanced income due to disallowance made on account of advances written off as raised in Grounds 2 & 3 of this appeal. 51. Ground No.4 is regarding disallowance sustained by the learned CIT (A) u/s 14A of the I.T. Act, 1961 52. We have heard the learned AR and learned DR and considered the relevant material available on record. The Assessing Officer has made disallowance u/s 14A @ 0.5% of the average investment provided in Rule 8D of the I.T Rules, 1963. On appeal, the learned CIT (A) has restricted the disallowance to the ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 37 of 48 exempt income of the assessee at Rs.45,100/-. It is pertinent to note that this issue has been now settled in view of various judgments of the Hon'ble High Courts as well as the orders of this Tribunal. The assessee has relied upon the following decisions: i) ITAT Hyderabad in the case of Madhucon Projects Ltd in ITA No.635 & 635/Hyd/2020 ii) ITAT Delhi Benches in the case of Religare Securities Ltd in ITA No.230/Del/2017 iii) ITAT Bangalore Benches in the case of PJB Engineering Pvt Ltd in ITA No.2081/Bang/2017. 53. At the outset, we note that this Tribunal in assessee’s own case for the A.Y 2011-12 to 2013-14 in ITA No.635 and 636/Hyd/2020 vide order dated 11/01/22 has considered this issue in Para 10 to 12 as under: “10. With regard to the issue of disallowance u/s 14A, which is raised as ground No. 11, the AO noticed from the balance sheet of the assessee that the assessee had made investments in equity shares for an amount of Rs. 1,14,423.26 lakhs in the subsidiary companies. Further, he noticed that the assessee had given long term loans/advances to group companies which total upto Rs. 14,543.59 lakhs. Further, the assessee had given another loan of Rs. 2385.39 lakhs to M/s Madhucon Granites Ltd. From the details submitted by the assessee, the AO observed that most of the loans/advances given to the group companies are interest free loans, against interest bearing loans of Rs. 384151.93 lakhs taken from various banks and non-banking financial institutions. Besides there were short term borrowings from various banks amounting to Rs. 38227.18 lakhs. Considering all the facts, the AO asked the assessee to explain as to why the provisions of section 14A should not applicable to the assessee. After considering the assessee's reply and relying on various case laws, the ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 38 of 48 AO disallowed an amount of Rs. 50,26,69,200/ - u/s 14A of the Act. 11. The CIT(A) after relying on various cases of ITAT as well as High Courts and Supreme Court, held that disallowance u/s 14A read with rule 8D cannot exceed the exempt income claimed by the assessee. He, therefore restricted the disallowance to the extent of dividend received by the assessee i.e. Rs. 1,48,970/- and directed the AO to delete the balance amount of Rs. 50,25,20,230/ -. 12. After hearing both the parties and perusing the material on record as well as the orders of revenue authorities, we do not find any infirmity in the order of the CIT(A) in restricting the disallowance and, therefore, upholding the order of CIT(A), we dismiss the g round raised by the assessee on this issue.” 54. Accordingly, in view of the decision of this Tribunal in assessee’s own case as referred above, we do not find any error or illegality in the impugned order of the learned CIT (A) in restricting the disallowance u/s 14A of the Act to the amount of dividend income/exempt income. Consequently, ground No.4 of assessee’s appeal stands dismissed. 55. Ground No.1 raised by the Revenue is general in nature and does not require any specific adjudication. 56. Ground Nos.2 to 5 of the Revenue’s appeals are regarding the addition made by the Assessing Officer on account of advance written off and bad debt written off which was deleted by the learned CIT (A). The learned DR has submitted that the learned CIT (A) has deleted the addition by considering the additional evidence without giving an opportunity to the Assessing ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 39 of 48 Officer which is in violation of the provisions of Rule 46A of the I.T. Rules, 1963. He has referred to the remand report and submitted that the details were not filed before the Assessing Officer either during the assessement proceedings or during the remand proceedings, but the same were considered by the learned CIT (A) while granting the relief. He has relied upon the order of the Assessing Officer. 57. On the other hand, the learned AR has submitted that the learned CIT (A) has considered each and every item and has given a finding based on the facts emerging from the record. Alternatively, the learned AR has submitted that the disallowance made by the Assessing Officer has resulted enhanced income of eligible business for deduction u/s 80IA and therefore, in view of the decision of this Tribunal as well as the CBDT Circular No.37/2016, the deduction u/s 80IA shall be allowed on the enhanced income. In rejoinder, the learned DR has submitted that the CBDT Circular cannot be applied to all the disallowances but it has given a specific disallowance made u/s 32, 40(a)(ia), 40A(3) and 43B etc., and therefore, the principle of ejusdem genris will apply which means the other expenditure which are in the nature of specific disallowances referred in the said circular would be eligible for deduction u/s 80IA. 58. We have considered the rival submissions as well as the relevant material available on record. Without going into the merits of the disallowance made by the Assessing Officer, we ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 40 of 48 consider the alternative plea of the assessee that the disallowance made by the Assessing Officer would result in the enhancement of the profits of the eligible business and therefore, the deduction u/s 80IA is admissible on the said profit. The CBDT in Circular No.37/2016 has clarified this issue in para 3 as under: 59. Thus, the matter before the CBDT was regarding the disallowances pertaining to Section 32, 40(a)(ia), 40A(3) and 43B etc., of the I.T. Act, 1961 which are compliance provisions and therefore, the deduction u/s 80IA allowed on the enhanced profit of eligible business as a result of disallowance made under these provisions may amount to circumventing the provisions or making those provisions may redundant. However, the CBDT has clarified that disallowance made for compliance resulting enhancement of the eligible business profit would also eligible under Chapter VIA. As we have already considered this issue in assessee’s own case for A.Y 2008-09 which is part of this composite order, accordingly, to maintain the rule of consistency, we allow the alternative plea of the assessee and direct the Assessing Officer to allow the deduction u/s 80IA of the I.T. Act, 1961 on the enhanced business income due to the disallowance ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 41 of 48 made by the Assessing Officer which were deleted by the learned CIT (A) and challenged by the Revenue in the present appeal. Accordingly, we do not find any reason to disturb the impugned order of the learned CIT (A). Consequently, the appeal of the Revenue stands dismissed and the appeal of the assessee is allowed. ITA No.762/Hyd/2020 A.Y 2014-15 60. This appeal filed by the assessee is directed against the order dated 15/09/2020 of the learned CIT (A)-12, Hyderabad, relating to A.Y.2014-15. 61. The assessee has raised various grounds of appeal. However, at the time of hearing, the learned AR of the assessee has submitted that the effective grounds are only Ground Nos.3, 4 and 7 which are as under: “3(a) The learned CIT (A) erred in confirming the addition of work contract tax to the extent of Rs.1,11,54,020/- made u/s 43B of the Act. (b) The learned CIT (A) ought to have considered the payments made till 30.11.2014 for the purpose of application of the provisions of section 43B of the Act and to have deleted the amount of Rs.1,11,54,020/- also out of the total addition made of Rs.1,14,54,020/- 4 (a) The learned CIT (A) erred in making an addition of Rs.79,950/- u/s 14A of the Act instead of deleting the entire addition of Rs.51,69,28,402/-. (b) The learned CIT (A) ought to have appreciated the fact that the investments were made out of the internal accruals ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 42 of 48 and funds available with the company are more than the investments made. (c) The learned CIT (A) ought to have appreciated the fact that assessee has not debited any expenditure relating to the investments made. (d) The learned CIT (A) ought to have appreciated the fact that the assessee has not incurred any expenditure directly or indirectly connected with the investments made. (e) The learned CIT (A) ought to have appreciated that the Assessing Officer has erred in not following the Rule 8D of the Income Tax Rules for calculation of disallowance u/s 14A of the Act as there was no expenditure directly related to investments. (f) Without prejudice, the disallowance, if any to be made, has to be done on the average value of investments on which dividend income is earned. 7. The learned CIT (A) ought to have appreciated that it is an established position of law that every assessee who is qualified for deduction u/s 80IA of the Act is eligible for the deduction not only from the business income admitted in its return of income but also from the business income which has been enhanced on account of additions made in the assessment by the Assessing Officer.” 62. Ground Nos 3 & 7 are relating to the disallowance of expenditure u/s 43B and consequently not allowing deduction u/s 80IA on enhanced business profit of the assessee. The learned AR of the assessee has submitted that the Assessing Officer has made disallowance of Rs.1,11,54,020/- u/s 43B which has resulted an enhancement of business income of the assessee which is eligible for deduction u/s 80IA of the Act, therefore, without contesting the disallowance of the expenditure, the assessee pressed its appeal only for the limited purpose that enhanced business income on account of disallowance u/s 43B ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 43 of 48 is eligible for deduction u/s 80IA. He has also relied upon the CBDT Circular No.37 of 2016 dated 2/11/2016 and submitted that the CBDT has also clarified that the disallowance made u/s 40(a)(ia) and 40(a)(iii) and 43B etc., and other specific disallowances relating to the business activity resulting in enhancement of the profit of the eligible business for claim of deduction under Chapter VIA which is permissible on profits so enhances by the disallowances. He has further submitted that an identical issue has been considered by this Tribunal in assessee’s own case for the A.Ys 2007-08, 2009-10 to 2011-12 vide order dated 6/01/2022 in ITA No.1872 to 1875/Hyd/2019. 63. On the other hand, the learned DR has not disputed the fact that an identical issue has been considered and decided by this Tribunal in assessee’s own case for the A.Y 2007-08 to 2011-12. However, he has relied upon the impugned order of the learned CIT (A). 64. We have considered the rival submissions and perused the relevant material available on record. At the outset, we note that an identical issue has been considered by this Tribunal in assessee’s own case for the A.Y 2007-08, 2009-10 to 2011-12 in ITA Nos. 1872/Hyd/1875 vide order dated 6/1/2022 in para 9 to 9.3 as under: “9. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. We observe that search was ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 44 of 48 conducted on the assessee and its group cases on 04/03/2011 and further search was conducted on 07/03/2011 as per para No. 6 of the assessment order and the statements recorded by the search team, which have been recorded by the AO in his order. For deciding the issue before us, first we have to see the assessment order on the basis of which the additions made by the AO as per para 11, which is reproduced below for the sake of clarity: \"11. During the previous year relevant to the AY 2007- 08, it is observed that an amount of Rs. 50 lakhs was withdrawn from the bank account of M/s Maa Highways maintained at Axis Bank, Begumpet, Greenlands by Sri Raju Magrulkar vide Instrument No. 914303. In light of the detailed narrations in the preceding paragraphs, this amount of Rs. 50 lakhs is treated as inflated expenditure by way of subcontract payments. Accordingly, the same is added.\" 9.1 The basis for making the addition as noted above, the AO has made the addition only on the basis of inflated expenditure by way of subcontract payments, which is in the nature of disallowance u/s 37(1) of the Act. On the above order of the AO, we find that nowhere mentioned that it is other than the business expenditure of the assessee. We observe from the arguments and paper book submitted by the assessee quoted supra, the amounts received by the sub-contractors have been offered as their turnover and the turnovers had been accepted by the revenue authorities. Therefore, it clearly shows that the payments made by the assessee to sub-contractors is a business expenditure of the assessee. “9.2 We accept the arguments advanced by the ld. AR of the assessee that the Board's Circular No. 37/2016 dated 02/11/2016 is applicable to the case of the assessee. For the sake of clarity, we reproduce the contents in the Circular as under: ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 45 of 48 ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 46 of 48 9.3 On perusal of the said Circular, it is clear that at times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. The assessee is also eligible to claim for deduction u/s 80IA on the profit earned from its business. The issue before us is also regarding the enhancement of the profit of the assessee which is covered by the said Circular quoted supra and, therefore, the assessee is eligible to claim deduction u/s 80IA of the Act. Considering the totality of the facts and circumstances of the case, we set aside the order of the CIT(A) and direct the AO to allow the assessee's claim of deduction u/s 80IA of the Act on the enhanced expenditure towards the payment to sub- contractors, which was disallowed by the AO and confirmed by the CIT(A) in all the appeals under consideration. All other grounds raised by the assessee in all the appeals, were not pressed before us, therefore, the same are dismissed as not pressed. 9.3 In view of our above observations, we allow the grounds raised by the assessee with regard to inflated expenditure by way of sub-contract payments in all the appeals under consideration.” ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 47 of 48 65. Thus, by considering the CBDT Circular No.37/2016, the Tribunal has allowed the claim of deduction u/s 80IA on the enhanced business profit of the assessee in consequence of disallowance of expenditure made u/s 43B of the I.T. Act, 1961. To maintain the rule of consistency and following the earlier order of this Tribunal, the claim of deduction u/s 80IA on the enhanced business income as a result of the disallowance made u/s 43B of the I.T. Act, 1961 is allowed. 66. Ground No.4 is regarding the disallowance made by the Assessing Officer u/s 14A of the I.T. Act, 1961 for Rs.51,69,28,402/- which was restricted by the learned CIT (A) to Rs.79,950/-. At the time of hearing, the learned AR of the assessee has submitted that the learned CIT (A) has restricted disallowance u/s 14A to the total exempted income i.e. dividend income earned by the assessee during the year under consideration at Rs.79,950/-. The learned AR has further submitted that without admitting the disallowance made by the learned CIT (A), in view of the smallness of the addition, the assessee does not press this ground of appeal and the same may be dismissed as not pressed. 67. The learned DR has raised no objection, if the ground No.4 of the assessee’s appeal is dismissed as not pressed. 68. Accordingly, ground No,.4 of the assessee is dismissed being not pressed. ITA Nos.1238 of 2019, 12 to 14 of 2020 723, 761 & 762 of 2020 Madhucon Projects Ltd Page 48 of 48 69. As regards the other grounds raised by the assessee in the present appeal, the learned AR stated at Bar that the assessee does not press the other ground except Ground No.3 & 7 and the same may be dismissed as not pressed. Accordingly, the remaining grounds raised by the assessee in ITA No.762/Hyd/2020 are dismissed as not pressed., 70. In the result, appeal filed by the assessee is partly allowed. 71. To sum up, Appeals filed by the assessee are partly allowed and the appeals filed by the Revenue are dismissed. Order pronounced in the Open Court on 4th February, 2025. Sd/- Sd/- (MADHUSUDAN SAWDIA) ACCOUNTANT MEMBER (VIJAY PAL RAO) VICE-PRESIDENT Hyderabad, dated 4th February,2025 Vinodan/sps Copy to: S.No Addresses 1 Madhucon Projects Ltd c/o P Murali & Co. CAs, 6-3-655/2/3 Somajiguda, Hyderabad 500082 2 Dy. CIT, Central Circle-3 and Central Circle 2(1) Hyderabad 3 Pr. CIT – Central, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order "