The ITAT Mumbai Bench “F”, Mumbai by a judgment passed on13 th August 2014 in the case of ACIT vs. M/s. Veena Developers (having PAN: AA EF V3 871C), being ITA Nos. 5820, 5821 and 5822/Mum/2012, relating to the Assessment Years 2004-05, 2005-06 & 2006-07, held that issue decided in assessments cannot be reconsidered unless fresh material is found during the search.
The aforesaid appeals were preferred by the Revenue against the order of the Commissioner of Income Tax (Appeals) dated 28.06.2012 relating to the Assessment Years 2004-05, 2005-06 and 2006-07. As the facts and issues involved in both the appeals were identical, they were taken together for disposal by a common order.
The appeals were heard by the bench consisting of Shri R.C. Sharma, Accountant Member and Shri Sanjay Garg, Judicial Member on 27.06.2014. The appellant was represented by Shri Rajesh Ranjan Prasad (CITDR), V. Anandarajan [CIT (A)] Pune & Omanakuttan (DCIT). On the other hand the Respondent was represented by Shri Ajay Singh & Neelam Jadhav.
Brief facts of the case:
The assessee firm was engaged in the business of building and development. For the relevant Assessment Year, the assessee filed its return of income declaring its total income at Rs.38,190/- after claiming deduction under section 80IB(10) for housing projects “Veena Sur” and “Veena Sarang” of Rs.18,74,410/- and Rs.96,72,540/- respectively. The assessee firm had also started another housing project under the name and style “Veena Santoor” eligible for deduction as per 80IB(10) of the Act, for which no deduction was claimed by the assessee firm.
The Assessing Officer in the proceedings under section 143(3) of the Act disallowed the claim made by the assessee under section 80IB (10) of the Act. Being aggrieved by the said disallowance, the assessee preferred an appeal before the CIT (A) who allowed certain relief to the assessee as proportionate deduction for the income out of the residential area.
Against the order of the CIT (A), both the Department and the assessee filed appeals before the Tribunal which allowed the appeal of the assessee and allowed total deduction under section 80IB(10) which was claimed by the assessee firm.
The department filed another appeal before the Hon’ble Bombay High Court which was dismissed. The decision of the Tribunal was upheld.
Thereafter, a search and seizure operation was conducted at the premises of Sanghavi Group, of which the assessee was a group member, on 10.07.2009. Subsequently, a notice under section 153A was issued by the Assessing officer to the assessee to file its return for the pending six Assessment Years starting from 2004-05 to 2009-10.
In response of the afore said notice, the assessee firm filed its return for the Assessment Years 2004-05 & 2005-06 declaring the same total income of Rs.38,190/- which was declared in the original one.
The Assessing officer passed similar orders in the Assessment Years 2004-05 & 2005-06 on 28.12.2011 under section 143(3) of the Act disallowing the claim made under section 80IB (10) only on the ground that the department did not accept the order of the Hon’ble High Court and preferred an appeal before the Hon’ble Apex Court which was pending before the Hon’ble Apex Court.
The assessee, being aggrieved by the aforesaid order, filed an appeal before the CIT (A). The ld. CIT (A) after going through the facts of the case held that the disallowance in assessment proceedings under section 153A was not justified only as the department had preferred an appeal before the Supreme Court for the additions made in original assessment order. The appeal was allowed.
The Revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals).
Grounds of appeal filed by the Revenue:
The Revenue took the following grounds of appeal amongst others:
1. The ld. CIT(A) was wrong in allowing deduction under section 801B(10) of Rs.18,74,410/- without considering the fact that the area of the commercial premises occupied by “Veena Sur” project was 1488 sq.ft which violated the conditions of 801B(10) of the Luxury Tax Act.
2. The Ld CIT(A) was wrong in allowing deduction under section 801B(10) of Rs.96,72,540/- without considering the fact that the area occupied in respect of “Veena Sarang” Project was 4637 sq.ft out of a total area of 8040 sq. meters which violated the conditions of 80IB(10) of the Luxury Tax Act.
3. The Ld. CIT (A) was wrong in holding that the deduction u/s 80IB (10) was available to the assessee for the profits on shops built and sold in its “housing projects.”
4. The order of the CIT (A) should be vacated and the order of the Assessing Officer should be restored.
After carefully considering the facts involved in the case and submissions of the ld. Counsels of both the sides, it was noticed that no new material were found or seized during the search in respect of claim of deduction made by the assessee under section 80IB(10) of the Act.
The Assessing officer disallowed the claim of the assessee for reason that the issue involved was under litigation owing to the pendency of the appeal before Hon’ble Supreme Court.
It was also observed that the issue of disallowance of deduction under section 80IB (10) on the ground of Commercial area was allowed in the favour of appellant, as such the claim under section 80IB (10) should allowed.
It was observed that the Hon’ble Allahabad High Court in CIT (central), Kanpur vs. Smt. Shaila Agarwal (2011) 16 Taxmann.com 232 (All.) held that the issue decided in assessments cannot be reconsidered unless fresh material is found during the search in relation to such issue.
It was held that the disallowance of deduction under section 80IB (10) was not in accordance with law and hence the deduction under section 80IB (10) should be allowed. The Assessing officer was directed to adopt the income determined after appeal subject to the decisions of Hon’ble Supreme Court and High Court.
The appeals filed the Revenue were thereby dismissed and the appeals were decided in favour of the assessee.