TMI Blog2019 (1) TMI 1637X X X X Extracts X X X X X X X X Extracts X X X X ..... with the order of the CIT(A). Disallowance of claim u/s 80-IB(10) in respect of project Sai Sagar Heights - HELD THAT:- During the course of search proceedings and post search investigation, the DDIT (Inv) noticed that the assessee-company violated the provisions of section 80-IB by constructing the flats where the built up area of almost every flat exceeded the prescribed limit of 1500 sft. A.O. observed that the assessee-company has constructed four residential complexes viz., Manasarovar Heights-I, II and III at Hasmatpet Village and IVth one at Sai Sagar Heights at Begumpet, Secunderabad. As far as the deduction with regard to the project at Sai Sagar Heights is concerned, the A.O. observed that the assessee has been claiming deduction on the profits derived from this housing project in the earlier assessment years and the same has been denied on the ground that the assessee did not fulfil the mandatory condition of having minimum 1 Acre of land for the development of housing project. The CIT(A) confirmed the disallowance of deduction u/s 80-IB and brought it to tax against which, the assessee is now in second appeal before us. Since the deduction u/s 80-IB with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d-hoc disallowance of 10% of the total expenditure. DR supported the assessment order while the Learned Counsel for the Assessee supported the order of the CIT(A). We find that except relying upon the order of the A.O., Ld DR has not been able to rebut the findings of the CIT(A) that the expenditure which has been disallowed during this A.Y. is the expenditure of same project which was considered and allowed in the earlier assessment years as well. Therefore, we see no reason to interfere with the order of the CIT(A) on this issue and therefore, the Revenue s grounds of appeal are rejected. Even otherwise, in view of the CBDT Circular No. 37/2016 (supra) the disallowances which enhanced the business income ought to be allowed as deduction under Chapter VI-A of the Act and the assessee is eligible for deduction in respect of the said project. Therefore, the Revenue does not benefit even if the ground is allowed. Disallowance of claim u/s 80IB(10) - A.O. observed that the area of most of the flats sold, exceeded 1500 sft. A.O. therefore carried out further investigations from the flat owners and some of them deposed that the builder himself sold flats exceeding 1500 sft t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee on this property during the year under consideration. To reach this conclusion, CIT (A) followed the coordinate Bench decision of the ITAT for the AYs 2002-03, 2003-04 and 2005-06 - ITA. No.1254/Hyd/2012, ITA. No.1255/Hyd/2012, ITA. No.1256/Hyd/2012, ITA. Nos. 1363/H/2012, ITA. Nos. 1364/H/2012, ITA. Nos. 1365/H/2012, 1103 and 1104/H/2016, 1567/H/2012 - - - Dated:- 11-1-2019 - Smt. P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member For Assessee : Shri A.V. Raghuram and T. Chaitanya Kumar For Revenue : Shri C. Srinivas Reddy, DR ORDER Smt. P. Madhavi Devi, All the above appeals are cross appeals of the assessee-company as well as the Revenue for the A.Ys 2007-08, 2008-09 and 2009-10, while for the A.Y. 2010-11 and 2011-12 only Revenue is in appeal. However, for the assessment year 2009-10, ITA No. 1567/H/2012 is the Revenue s appeal against the order of the CIT(A)-1, Hyderabad dated 21/08/2012 deleting the addition of ₹ 3 Crs made u/s 69A of the Act in the hands of the individual assessee Sri KRV Uday Charan Rao which is being taken up first alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... updated as on the date of search and that the cash balance as per the books of account as on 10.3.2009 was ₹ 3,04,22,553/-. He also observed that during the course of search proceedings, it was noticed that a cash deposit of ₹ 1 Cr was made on 16.03.2009 in the bank account No. 30181010004411 of M/s. Sainath Estates Pvt Ltd with Syndicate Bank and that during the course of search proceedings on 16.03.2009, a physical cash of ₹ 1,00,62,250/- was also found in the office of M/s. Sainath Estates Pvt Ltd in addition to ₹ 3 Crs found on the person of Sri KRV Uday Charan Rao and Sri Harish Kumar Kundra. When confrontred, Sri K. Premsagar Rao submitted that there were some omissions and commissions in the books of account of M/s. Sainath Estates Pvt Ltd and that he is unable to explain the sources for the cash aggregating to ₹ 4,00,62,250/- and he admitted an amount of ₹ 4 Crs as the undisclosed income of M/s. Sainath Estates Pvt Ltd for the Financial Year 2008-09 relevant to the assessment year 2009-10. The same was confirmed by Sri K. Premsagar Rao during his sworn statements recorded on 18.03.2009 and 12.05.2009. Similarly, the individual assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, has been confirmed by the CIT(A) and therefore, the protective addition in the hands of the individual has been rightly deleted by the CIT(A). Therefore, the Revenue s appeal in ITA No. 1567/H/2012 is dismissed. 8. As regards the company s plea that the addition made on account of cash found in the hands of the assessee should not have been held as unexplained money, the relevant Ground no.4 is as under:- 4. The appellant submits that CIT(A) having taken on record the evidence with respect to the availability of cash with the appellant should not have sustained the addition and should not have held that the cash is unexplained money. 9. During the assessment proceedings, the company has tried to explain the sources for the cash of ₹ 4,00,62,250/- found during the course of search both at the business premises of the company as well as in the possession of Sri KRV Uday Charan Rao as the cash withdrawn from its bank account. Since the Assessing Officer did not accept the assessee s contention, substantive addition was made in the hands of the company against which the assessee filed the appeal before the CIT(A). The CIT(A) peruse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not updated on the day of search and the statements were also recorded, before the books of accounts were completed. The A.O. and the CIT(A) have verified the cash balances available and found that there were huge cash withdrawals by the assessee by way of cheques. The reason for not accepting the assessee s contention by the authorities is that, the assessee has failed to explain as to why on a particular date the assessee had to withdraw cash by way of four cheques when it could have done by one cheque and that the assessee has also failed to establish the link between the cash withdrawn and the cash found at the time of search. Since both the A.O. and the CIT(A) have verified the cash and bank statements and have come to the conclusion that the assessee could not explain the sources for the cash found at the time of search, and even before us, the assessee could not establish the live link, we see no reason to interfere with the order of the CIT(A). Thus, Ground no.4 raised by the assessee-company is accordingly rejected. 13. Ground No.2 raised by the assessee is as follows: 2. The appellant submits that, a mere shortfall of 48 sq. yards cannot be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee-company was asked to furnish evidences in support of such expenditure but the assessee could not furnish any evidence. The A.O. observed that since the assessee failed to respond and furnish any evidences in support of its claim, 10% of the expenditure under both the heads is to be disallowed. He accordingly added it to the returned income of the assessee and brought it tax, against which, the assessee preferred an appeal before the CIT(A) explaining that the payments were actually made in cheques in the first place but since the cheques were returned by the bankers, the same amount aggregating to ₹ 3.20 Crs was paid in cash to different persons for settlement of dispute pertaining to land purchases and the Assessing Officer disallowed the same u/s 40A(3) of the Act. The appellant submitted that the receipts acknowledging the cash payments are part of the seized material. It was also submitted that the original payments in respect of the land litigation etc., were made by way of crossed cheques. CIT(A) did not accept the assessee s contention and held that repeated issuance of cheques proves that the assessee resorted to issue of cheques initially without suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition u/s 40A(3), the relief under this ground is NIL. 22. In the result, assessee s appeal ITA No.1256/H/2012 is partly allowed. ITA No. 1365/H/2012 (A.Y. 2009-10) (By Revenue against the company) 23. This is Revenue s appeal for the assessment year 2009-10. Revenue has raised the following grounds of appeal:- 1. The order of the CIT(A) is erroneous both on facts and in law. 2. The Ld. CIT(A) is not justified in deleting the addition made on account of disallowance of 10% of direct and indirect expenditure in the absence of any evidence filed by the assessee for incurring such expenditure. 3. The CIT(A) has erred in deleting the addition stating that there was no finding of the Assessing Officer that his decision was based on any material found in the course of action u/s 132(1) since the insertion of section 158BI of the IT Act, 1961 the Assessing Officer can take into consideration the material other than what was available during the course of search and seizure operation. 24. Brief facts of the case are that the Assessing Officer had disallowed 10% of the direct and indirect expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unicipal tax assessments pertaining to individual units in Mana Sarovar Heights II ought to have held that the project complies with conditions laid down by Sec. 80IB(10) and should have allowed the claim of the appellant u/s 80IB(10). 3. The appellant submits that, a mere shortfall of 48 sq yds cannot be a reason for disallowance of claim u/s 80IB(10) in respect of project Sai Sagar Heights. The appellant submits that the Ld. CIT(A) should have observed that there is substantial compliance of the provisions of this section and therefore should not have disallowed the claim u/s 80IB(10). 4. The appellant submits that the Ld. CIT(A) erred in law in sustaining the addition u/s 40A(3) despite taking on record the compelling reasons and circumstances under which the payment was made in cash. 5. On the basis of the above submissions and further submission if any that may be permitted to be made in the course of further appellate proceedings, the appellant prays that: a. the claim of appellant u/s 80IB(10) in respect of Manasa Sarovar Heights-II and Sai Sagar Heights be allowed. b. The addition on account of disallowance u/s 40A(3) sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sai Sagar Heights was built only on 4800 sq yds, the area available was more than One Acre and therefore, the project is eligible for deduction u/s 80IB(10) of the Act. Except for stating so, the assessee has not been able to produce any evidence in support of its contention. Since the registered area on which the Sai Sagar Heights project has been constructed is less than One Acre, we find that the project is not eligible for deduction u/s 80IB(10). Therefore, we see no reason to interfere with the orders of the authorities below on this issue. Accordingly, Ground no.3 is rejected. 31. As regards Ground No.2 is concerned, we find that the Assessing Officer has disallowed the claim of deduction u/s 80IB(10) with regard to the project Manasarovar Heights II, on the ground that the assessee has constructed flats whose area exceeded 1500 sft. Learned Counsel for the Assessee submitted that the A.O. has disallowed the deduction with regard to entire project, whereas the assessee is eligible at least for the proportionate deduction. In respect of this contention, he relied upon various case law. 32. Learned Departmental Representative, however, submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition made on account of income from house property and also against the deletion of addition made by disallowing 10% of the direct and indirect expenditure. In the Revenue s appeal for A.Y. 2009-10, we have upheld the order of the CIT(A) on similar grounds. Therefore, the order of the CIT(A) for this Assessment Year also needs no interference. Even otherwise, in view of CBDT Circular No.37/2016 (supra), it would have to be allowed as a deduction u/s 80IB(10) of the Act. Therefore, this ground of appeal is rejected. 39. As regards Ground no.3, brief facts are that the assessee-company has disclosed house property income of ₹ 5,95,000/- on account of property leased out to M/s. Bhagyanagar Hotel Pvt Ltd for ₹ 12,00,000/- per year. After claiming the deduction u/s 24 and Municipal Taxes, the balance sum of ₹ 5,95,000/- was offered under the head income from house property . During the assessment proceedings, A.O. observed that the income admitted by the assessee in its return of income was meagre. He observed that the property consists of 14940 sq yds of land and that the net annual value as per section 23 of the IT Act, 1961 was determined by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at: a. The claim of the appellant u/s 80IB(10) in respect of Sai Sagar Heights be allowed. b. The addition on account of disallowance u/s 40A(3) be deleted. 44. In this appeal, the assessee is aggrieved by the disallowance of deduction u/s 80IB(10) of the Act in respect of Sai Sagar Heights and also the disallowance of the expenditure u/s 40A(3) of the Act. We find that both the issues had come up for our consideration in the earlier assessment year 2007-08 and the for the detailed reasons given therein, Grounds no. 2 and 3 raised by the assessee are rejected and Ground No.4 is allowed. Grounds no.1 and 5 are general in nature and therefore, no specific adjudication is needed. 45. In the result, assessee s appeal is partly allowed. 46. In respect of Revenue s appeal (ITA No.1363/H/2012) the Revenue has raised the following grounds of appeal: 1. The order of the CIT(A) is erroneous both on facts and in law. 2. The Ld. CIT(A) is not justified in deleting the addition made on account of disallowance of 10% of direct and indirect expenditure in the absence of any evidence filed by the assessee for incurrin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the A.Y. 201011 (ITA No.1103/H/16), Revenue has raised 6 Grounds of appeal against the allowing of proportionate deduction u/s 80IB(10) of the Act in respect of Manasarovar Heights-II and III which has been disallowed by the A.O. on the ground that the assessee has not completed the project within the due date ie., 31.3.2009. Learned Counsel for the Assessee submitted that the assessee has now got the completion certification and the CIT(A) has taken the same into consideration for allowing the deduction. On perusal of the material placed on record as well as the orders of the authorities below, we find that the CIT(A) at page 10 of his order has taken into consideration the GHMC certificated dated 16.03.2013 to allow the deduction to the assessee. Therefore, we see no reason to interfere with the order of the CIT(A) and the Revenue s appeal is rejected. 51. In the result, Revenue s appeal is dismissed. 52. In respect of the appeal for the A.Y. 2011-12 (ITA No.1104/H/2016) is concerned, the Revenue is aggrieved by the direction of the CIT(A) to allow 80IB deduction in preparation of turnover of eligible flats to the total turnover of the assessee by takin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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