ACIT Vs Atul Properties (ITAT Mumbai)
Held that as the assessee had complied sufficiently the requirement of law as stipulated in section 80IB(10) of the Act and as per the said provision it was bound to complete the building project before 31.03.2012. Deduction u/s 80IB(10) allowed.
Facts-
The assessee firm filed original ROI declaring total income of Rs.29,75,430/- after claiming deduction u/s 80IB(10) of Rs. 23,561/-. The assessee filed revised return withdrawing its claim for deduction u/s 80IB(10) and offering total income Rs. 23,62,14,994/- for taxation.
AO completed scrutiny assessment based on original ROI and made addition of Rs. 23,32,39,561/- and Rs. 30,62,424/- made on account of disallowance of claim of deduction u/s. 80IB(10) and bogus purchases respectively.
AO noted that assessee had claimed deduction u/s 80IB (10) of the Act for having developed housing project (Blue Meadows) which according to it has fulfilled the requisite conditions prescribed therein u/s 80IB (10) of the Act.
CIT(A) allowed the claims of the assessee. Being aggrieved, the Revenue is in appeal before the Tribunal.
Conclusion-
Held that as per the principle of ‘substantial compliance’ enunciated by the Constitution Bench of the Hon’ble Supreme Court in Harichand case, we note that the grant of deduction/incentives depends upon the facts and circumstances of the each case and keeping in mind the purpose and object to be achieved by the grant of deduction/exemption as meant by the Legislature/Parliament it has to be seen whether ‘substantial compliance’ has been made by the assessee for claiming the exemption/deduction.
Applying the principle of ‘substantial compliance’ in the facts of this case it can be seen that the assessee had complied sufficiently the requirement of law as stipulated in section 80IB(10) of the Act and as per the said provision it was bound to complete the building project before 31.03.2012.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These are appeal preferred by revenue against the order of the Ld. CIT(A)-36, Mumbai dated 29.12.2017 for A.Y.2010-11 & 201112 respectively.
2. Both parties agreed that the grounds of appeals are similar and the result of the lead case for A.Y.2010-11 will be followed for A.Y.2011-12. The original grounds of appeal raised by revenue are as under: –
“1. “Whether on facts and circumstances of the case and in law, the Ld, CIT(A) was justified in disallowing only 12.5% of the total bogus purchase of Rs. 30,02,434/- in the case of the assessee who was engaged in the business of construction activities and could not prove that such bogus purchases were actually reflected in the sales turnover.
2. “Whether on facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing deduction of Rs. 23,32,39,561/ – u/s. 801B(10) of the Income Tax Act, 1961, notwithstanding that the assessee had suo moto withdrawn claim of exemption under the aforesaid section by filing revised return, on the ground that its project could not be completed within the stipulated date.”
3. “Whether on facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the deduction u/s. 801B(10) of the Income Tax Act, 1961 relying on the decision of the Hon’ble Bombay High Court in the case of CIT v/s. Hindustan Samuh Awas Ltd. (2015) 62 com 175 notwithstanding that the facts of the aforesaid case are clearly distinguishable from our instant case.”
3. And the additional grounds of appeal raised by the revenue which are supplementing ground nos. 2 to 3 of original grounds reads as under: –
“1. “Whether on the facts and circumstances of the appellant’s case and in law the ld. CIT(A) was Justified in allowing deduction of Rs 23,32,39,561/- u/s 80 IB(10) of the Income Tax Act 1961, notwithstanding that the project Blue Meadows was not complete, part OC application of the assessee was rejected by BMC and Hon’ble Bombay High court had also agree certain compliances were still not made by the assessee towards meeting the criteria for granting the OC”.
2. “Whether on the facts and circumstances of the appellant’s case and in law the ld. CIT(A) was justified in allowing deduction of Rs 23,32,39,561/- u/s 80 1B(10) of the Income Tax Act 1961, notwithstanding that the assessee withheld crucial information – regarding rejection of OC by BMC which have a clear adverse impact of the assessee’s claim for the said deduction”.
3. “The appellant craves leave to amend or alter any ground or to submit additional new ground which may be necessary”.
4. Ground No. 1 of Revenue is against the action of the Ld. CIT(A) disallowing for A.Y.2010-11 the total bogus purchases of Rs.30,02,434/-. The brief facts of the case as noted that the Ld. CIT(A) is as under: –
“4.2.1 In support of his claim of purchases the assessee submitted before the AO copies of purchase bill and ledger A/c issued by the parties. The AO stated in his order at Para 4 that the bills submitted are only photocopies and they have not been accompanied by relevant supporting evidence such as lorry receipts/ delivery challans etc. The AO issued notices w/s. 133(6) for the second time in the later, half of 2012 which was again returned unserved. The AO held that the assessee has obtained accommodation entries from these parties and that the onus which was on the assessee to prove the genuineness of the purchases made by producing these sellers to the AO or providing the latest addresses of these parties could not be satisfactorily discharged by the assessee.”
5. Therefore on the aforesaid facts, the AO was pleased to add the entire purchases of Rs.30,02,434/-. Aggrieved the assessee preferred an appeal before the CIT(A) who noted that though the AO has held purchases to the tune of Rs.30,02,434/- to be non-genuine and made additions, but the AO has accepted the books of accounts maintained by the assessee. Meaning thereby that AO has accepted the sales booked by the assessee in this regard. In other words, even though AO was of the opinion that some purchases made by assessee was non-genuine, he did not reject the books of the assessee which means that AO has not disturbed the sales closing stock which means the AO having accepted the sales figures shown by the assessee, the only inference that can be drawn in such circumstances is that the assessee has made the purchases in question from the grey market at a cheaper rate without genuine bills. Therefore, the Ld. CIT(A) held that only the profit embedded in respect of the sale on the purchases in question (bogus) should be brought to tax and not the entire purchases as done by the AO. Therefore, he relied on the ratio of the decision of the Hon’ble Gujarat High Court in the case of CIT Vs. P. Simit Sheth in ITA. No.553 of 2012 wherein a similar case the Hon’ble High Court has held that the entire purchases cannot be added, but only the profit element embedded in such questionable purchases should be added to the income of the assessee. Therefore, the Ld. CIT(A) has restricted the addition to 12.5% of the bogus purchases of Rs.30,02,434/- which comes to Rs.3,82,804/-. This decision of the Ld. CIT(A), we note on the undisputed facts as discussed is in line with the judicial precedents on subject. Therefore, we do not find any error in the order of the Ld. CIT(A). So we confirm the same and dismiss the revenue’s ground of appeal.
6. Now coming to ground no. 2, 3 and additional grounds 1 & 2 which deals with the same issue i.e. relating to the claim of the assessee for the claim u/s 80IB (10) of the Income Tax Act, 1961 (hereinafter ‘the Act’) for A.Y.2010-11 wherein the assessee had claimed deduction of Rs.23,32,39,561/-. The assessee’s claim has been allowed by Ld. CIT(A) against which action the revenue is before us by raising the grounds of appeal/additional grounds of appeal. Brief fact of the case is that the AO notes that the assessee firm is engaged in the business of building of development of real estate. The original return of income declaring total income of Rs.29,75,430/- was filed on 14.10.2010. Later, the case was selected for scrutiny and notice u/s 143(2) was issued on 24.08.2011 and thereafter notice u/s 142(1) was issued on 13.01.2012 directing the assessee to file basic details such as copy of the return of income, copy of audited profit & loss account and balance-sheet along with the relevant papers. Pursuant to which the assessee filed the details as called for by the AO. The AO noted that assessee had claimed deduction u/s 80IB (10) of the Act for having developed housing project (Blue Meadows) which according to it has fulfilled the requisite conditions prescribed therein u/s 80IB (10) of the Act as given below: –
