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Before: SHRI PAWAN SINGH & SHRI PRABHASH SHANKAR
PER PRABHASH SHANKAR [A.M.] :- The present appeal preferred by the Revenue and Cross Objections of the assessee emanate from the appellate order dated 12.11.2024 as passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to the assessment order passed u/s. 143(3) r.w.s. 254 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 28.03.2024 for the Assessment Year [A.Y.] 2013-14.We take up Revenue’s appeal in first.
2. The grounds of appeal as revised by the Revenue are as under: 1. “Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in allowing the cash expenses at 67.5% of the on-money without appreciating the fact that had the survey action not conducted on assessee the on-money would not have been offered to tax.” 2. “Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) was justified in allowing the claim of deduction u/s.801B(10) of the Act, without appreciating the fact that assessee had failed to claim the deduction u/s.801B(10) of the Act in original return of income filed u/s. 139(1).” 3. “Whether on facts and the circumstances of the case and in law the Ld. CIT(A) was right in restricting the addition of on-money receipts amounting to Rs 15,25,67,382/- made u/s of 69A of the Act to Rs. 11,97,98,708/-.” 4. “Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was right in holding that the assessee is entitled to claim deduction us 801B(10) of the Act against the on-money received on the sale of flats.”
1. CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited 5. “Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was right in holding that the assessee is entitled to claim 801B(10) of the Act despite that the undertaking has 10 residential units having built-up area exceeding 1,000 sq. ft. and thus condition prescribed in section 801B(10)(c) of the Act is not fulfilled.” 6. “Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was right in holding that the assessee is entitled to claim deduction u/s 801B(10) of the Act despite that the undertaking has 15 residential units which have been sold to relatives of individual who have already purchased as residential flat in the project and thus condition prescribed in section 801B(10) (f) of the Act is not fulfilled.”
3. It may be stated here at the outset that the instant appeal is the second round of litigation before the Bench. In this case survey u/s 133A of the Act was conducted on 18.10.2013.The assessee filed application before the hon’ble Settlement Commission, Mumbai which was rejected on 09.08.2016 against which it filed writ petition before hon’ble Bombay High Court which was also dismissed. Subsequently, assessment order was passed on 07.08.2017 u/s 143(3) of the Act which was upheld by the ld.CIT(A). However, pursuant to further appeal by the assessee, the ITAT, Mumbai set aside the for de novo adjudication. The assessment order was again passed retaining the additions. However, the ld.CIT(A) in the impugned order allowed its appeal which is now being agitated before us by the Revenue with cross objection filed separately by the assessee.
4. The assessee is engaged in the business of Real estate as a builder who completed a Slum Rehabilitation project in Mumbai. The CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited construction and sale of the building ‘Rashmi Heights’ was undertaken by the assessee jointly with Reliance Construction Company and R.C.Developers. Under the terms of agreement, the assessee was entitled to 64 flats out of total 130 flats. Assessee following Project Completion method of accounting of its income and expenditure, filed original return of income declaring total income of Rs. 60,12,040/-. Survey conducted u/s 133A of the Act revealed that the assessee had received substantial amount as ‘On-money’ in cash from various purchasers of flats sold to them by the assessee. Before completion of assessment, it filed a Revised return u/s 139(5) of the Act of income declaring total income of Rs. Nil after claiming deduction u/s 80-IB(10) of the Rs. 60,12,040/-which was not claimed in the original return. Assessment order u/s 143(3) of the Act was passed, by the AO after detailed discussion determining total income at Rs. 15,40,17,729/- making addition of Rs. 15,25,67,382/- on account of On- money received on sale of flats and also of Rs. 14,50,347/- in respect of claim of provision of expenditure made in accounts treated as unexplained expenditure u/s 69C of the Act. He denied it the benefit of deduction u/s 80IB(10) on the ground that no claim of such deduction was made in the original return but by way of revised return. Besides, he made separate addition of on CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited money receipt on enhanced amount over and above the amount disclosed and admitted by the assessee.
5. The assessee preferred appeal yet again before the first appellate authority contesting the action of the AO on above aspects of the case. The ld.CIT(A) has discussed the entire issue in detail which is reproduced as below for ready reference and brevity:
“The present appeal lies against this order.
8. Ground No. 1, challenging the addition u/s 69A of Rs. 15,25,67,382/-: In Ground No. 1, the appellant has challenged the addition u/s 69A of Rs. 15,25,67,382/- on account of receipt of on-money. During appellate proceedings, the appellant has filed written submission along with compilation. I have looked into the facts of the case, assessment order, and the submissions of the appellant.
9. The appellant is entitled to 64 flats in the project, of which 61 flats have been sold till end of relevant FY 2012-13 (AY 2013-14). The Assessing Officer has observed that the on-money (actual) in respect of 18 flats on the basis of incriminating material found during the survey is at Rs. 5,24,80,860/-, which constitutes 53.35% of Agreement Value of such flats of 9,83,75,140/-. On this basis, the Assessing Officer has extrapolated the on- money on remaining 46 flats @53.35% of their agreement value, i.e. at 11,19,36,090/-. Accordingly, the total on-money has been arrived at Rs. 16,44,16,950/- for 64 flats, of which proportionate on-money has been arrived at Rs. 15,25,67,382/- for 61 flats sold during A.Y. 2013-14 under appeal.
10. The appellant has contended that the findings of the survey cannot be extrapolated to say that all the transactions relating to sale of flats are tainted. In support of such contention, the appellant has relied upon some judicial pronouncements. I am agreeable to such contention of the appellant, as the on-money can be brought to tax only on basis of incriminating material found during survey action for those particular flats, and no addition is justified on remaining flats merely on presumption and surmises. It is a settled position that suspicion however strong cannot take place of evidence, hence CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited addition cannot be sustained in regard to such remaining flats for which no incriminating material was found during Survey action.
11. I find that the Assessing Officer has not provided flat-wise list of on- money of Rs. 5,24,80,860/-, in the assessment order. 1, however, note from the Statement dated 19.10.2013 [Page 552-563 of compilation] that Shri Uma Shankar Saha, director of the appellant company was questioned about some incriminating evidences about on-money amounting to Rs. 7,49,69,700/- in respect of certain flats, which was admitted by him subject to stating that all these notings do not depict merely cash receipts against sale of flats, as few of them could also be mere estimates. Thereafter, Shri Uma Shankar Saha has executed an affidavit on 28.10.2014 to clarify the statement given on 19.10.2013, whereby he retracted his statement made. The appellant company has subsequently admitted to have received on-money of a much higher sum of Rs. 11,97,98,708/- before the Hon'ble Settlement Commission. In support of the same, the appellant has submitted the party/ flat wise details of receipt of on- money received along with the reconciliation with the on-money admitted in the survey proceedings. The appellant submitted details of parties along with PAN and Address and a sample copy of agreement executed with a buyer. In above back-ground, I am of an opinion that the on-money admitted by the appellant at Rs. 11,97,98,708/-, being higher than the Assessing Officer's estimate, should be considered for the purpose of taxation.
12. The appellant has made two claims: Out of the on-money received of Rs 11,97,98,708/-, the appellant has claimed cash expenses out of such on-money of Rs 10,48,23,870/-, being 87.50% of the on-money; Deduction under section 80-IB(10) of the Act of Rs 6,83,02,765/ restricted to total income of Rs. 2,09,34,870/-.
The question covered under this ground of appeal
is whether the appellant is allowed cash expenses out of on-money received.
14. The appellant submitted that it has incurred various cash expenditure out of the on-money received which are unrecorded. Such expenditure included:- Payment to slum dwellers illegally holding the area; Payment to owners of slum who were not allotted alternate accommodation as someone else was occupying their slums on rentals; Shifting expenses and rental payments to slum dwellers; Speed money for getting clearances; Expenses incurred for security and protection; Construction expenses on material etc. for construction of rehabbuilding.
CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited 15. The appellant has relied upon several judicial pronouncements in support of contention that expenditure out of on-money is allowable, including the judgment by Hon'ble High Court of Bombay in the case of CIT vs. Hariram Bhambhani (ITA 313 of 2013). I have gone through said Judgment and find that in said case, in a survey conducted under Section 133A, it was noticed that the assessee has not accounted some of the sales in the total turnover. In the statement recorded at the time of survey, the Director of the assessee declared a sum of Rs.35 lakhs should be offered to tax. However, thereafter, the assessee explained the statement on the basis that the director was not aware of the intricacies and implications of the statement made by him. The AO rejected the assessee's explanation and assessed Rs.35 lakhs. On appeal the CIT(A) held that the entire Rs. 35 lakhs cannot be assessed as income but only 4% thereof, being the profit earned on sales of Rs.35 lakhs, could be added to the net profit. This was upheld by the Tribunal. Before the Hon'ble High Court, the department argued that the entire amount of undisclosed sales had to be brought to tax. The Hon'ble High Court observed held as under: “In any view of the matter, the CIT(A) and Tribunal have came concurrent finding that the purchases have been recorded and only some of the sales are unaccounted. Thus, in the above view, both the authorities held that it is not the entire sales consideration which is to be brought to tax but only the profit attributable on the total unrecorded sales consideration which alone can be subject to income tax. The view taken by the authorities is a reasonable and a possible view. Thus, no substantial question of law arises for our consideration.”
Respectfully following the said judgment of jurisdictional Hon'ble High Court of Bombay, I hold that only the profit element in the on-money can be brought to tax. Hence, the appellant is entitled to claim expenditure out of on-money.
17. Now coming to quantum of such allowable expenditure, the appellant has claimed cash expenditure of Rs. 10,48,23,870/-, being 87.50% of on- money admitted to have received of Rs. 11,97,98,708/-. While the cash expenditure having incurred out of on-money cannot be denied, the claim of the appellant appears to be on higher side. Considering, the nature of project, cash expenses to the extent of 67.50% is allowed and the balance claim is denied. Accordingly, the working of profit would be as under: Particulars Amount (in Rs.) Carpet Area 69,831 Sales 305,837,352 Cost 300,379,462 Add / (Less): specific expenditures /income 502,142 Profit 5,960,032 Other Income 52,013 CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited Total Income before On Money 6,012,045 On Money 119,798,708 Total Profit including on money 125,758,740 Less: Unaccounted Cash Expenses (80,864,128) Total Profit 44,894,612
Accordingly, out of total cash expenses claimed of Rs. 10,48,23,870/- the cash expenses of Rs. 8,08,64,128/- is allowed and remaining expenses of Rs. 2,39,59,742/- is denied. Therefore, the ground no. 1 of appeal is partly allowed.
Ground No. 2, challenging the denial of deduction u/s 80-IB(10) of the Act: In Ground no. 2, the appellant has challenged the denial of deduction u/s 80- IB(10) of the Act on profits and gains derived from flats sold in eligible housing project. The Assessing Officer noted that requirement of limiting built-up area to an extent of 1000 sq.ft. has not been complied and as such the assessee is ineligible for deduction u/s 80-IB(10).
The Assessing Officer further noted that the claim of deduction u/s 80-IB(10) was not made in original return filed u/s 139(1), but in revised return filed. He noted that such claim made in revised return is not tenable as a report in Form 10CCB has to be filed with the return of income filed on or before the due date specified u/s 139(1) of the Act, implying thereby that the claim for deduction must necessarily be made in the return filed u/s 139(1) of the Act, as supported by an audit report in Form 10CCB indicating the computation of the quantum of deduction u/s 80-1B of the Act. 21. During appellate proceedings, the appellant has filed written submission along with compilation. I have perused the facts of the case, assessment order, and the submissions of the appellant. The appellant has claimed deduction u/s80-IB(10) of the Act in the revised return filed, restricted to total income declared in said return of income. During assessment proceedings, the appellant through its submission had made a claim for deduction under section 80-IB(10) of the Act of Rs. 6,83,02,765/- restricted to total income of Rs. 2,09,34,870/- computed by it after considering on-money (net of expenditure). 22. At the outset, it is to be seen whether the conditions for claiming the said deduction have been fulfilled, as under:
CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited 1. Commences development and construction of the housing project on or after 01.10.1998 and completes within 5 years from the end of the financial year in which the housing project is approved by the local authority, where such approval is taken on or after 01.04.2005.
1. The size of the plot of land should be minimum of 1 acre These two conditions are not applicable to SRA projects in view of CBDT vide Notification No. 67 dated 03.08.2010 and Notification No. 5 dated 05.01.2011.
1. The project should be approved by a local authority before 31.03.2008- The project has been approved by SRA, the relevant local authority, on 29.07.2002 and duly revised on 28.12.2004. The building plan of the project was approved by SRA on 11.08.2005. The approval has been found to be in order.
The build-up area of each of each residential unit is not more than 1,000 sq. ft. and where a residential unit is allotted to any individual, no other unit to given to such individual or his/her spouse, minor children or HUF or person representing them. The assessee has restricted its claim of deduction under section 80- IB(10) only on the units below 1000 sq ft. and excluding units where one residential unit in the housing project is allotted to an individual and another unit is given such individual or his/her spouse, minor children or HUF or person representing them. 3. the built-up area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate built-up area of the housing project or five thousand square feet, whichever is higher: There are no commercial establishment in the project.
Not more than one residential unit in the housing project is allotted to any person not being an individual All flats have been sold / allotted to individuals. Accordingly, the conditions for claiming deduction u/s 80-IB(10) of the Act are satisfied. The working of claim for deduction u/s 80-IB(10) of the Act at Rs. 6,83,02,765/-, restricted to revised total income computed by it at Rs. 2,09,34,870/- is given as under:-
Α.Υ. 2013-14 Working of Deduction u/s. 80-IB of the Income Tax Act, 1961 Particulars RC Ineligible Eligible Closing Total Developers Flats Flats Stock Carpet Area 14212 23304 29277 3038 69831 Sales 7953562 99539852 186438890 11905048 305837352 Cost 61133206 100242628 127098580 11905048 300379462 Add/Less Specific 2112474 (713702) 896630 502142 expenditure/income Profit (51067170) (1416478) 58443680 5960032 Other income 52013 Total income before 6012045 on Money On money 40926028 78872680 119798708 Total profit (51067170) 39509550 137316360 125758740 including on money Less: Unaccounted (35810275) 69013595 104823870 Cash Expenses Total Profit (51067170) 3699275 68302765 20934870 The appellant has filed revised Form 10CCB in support of its claim, at page 539-543 of compilation. In the instant case, the appellant has accepted on-money of Rs. 11,97,98,708/- from sale of residential flats and has offered it as business income. The appellant has contended that it is entitled to claim deduction u/s 80-IB(10) on the on-money received from eligible units of the projects which are not recorded in the books of accounts. The appellant has relied upon various judicial pronouncements in this regard, including by Hon'ble High Court of Bombay in the case of CIT Vs. Sheth Developers (P) Ltd (25 taxmann.com 173), wherein it is held that builders receiving undisclosed income in course of its business, is entitled to benefit of deduction under section 80-IB of the Act. The appellant has also relied upon similar judgment by Hon'ble Karnataka High Court in the case of CIT Vs. Mandavi Builders, Mangalore (121 taxmann.com 36). whereby the SLP against the said judgment has been dismissed by the Hon'ble Supreme Court in 133 taxmann.com 112. Hence, respectfully following the above judgments, including by jurisdictional High Court of Bombay, I hold that the appellant is entitled to claim deduction u/s 80-IB(10) of the Act, even against the on- money received on sale of flats. Further, the Assessing Officer has stated that deduction u/s 80-IB(10) can be claimed only in the original return filed u/s 139(1) of the Act, and not later. Per contra, the appellant has referred to the provision of Section 80AC of the Act, which stipulates that deduction u/s 80-IA/ 80-IAB/80-IB/80-IC/80- ID/80-IE shall not be allowed unless the assessee furnishes a return of his income. The appellant contended that section 80AC only requires filing return of income within due date u/s 139(1), and that it does not mandate the claim of deduction in such return, unlike section 80A(5) which mandates that a claim of deduction is to be made in return of income. According to appellant, there is no bar in claim of deduction u/s 80-IB for the first time in revised return filed. In this regard, the appellant has relied upon some judicial pronouncements, including by Hon'ble ITAT, Mumbai in the case of ACIT vs. Monarch Innovative Technologies (P.) Ltd. (91 taxmann.com 267). Respectfully following said judgment, I hold that the deduction u/s 80-IB(10) is allowable to the appellant even if claimed for the first time in revised return filed u/s 139(5) of the Act. In view of Ground No. 1 above, the modified claim for deduction u/s 80-IB of the Act would work out to Rs. 8,40,77,301/-, as detailed below:
Particulars RC Ineligible Eligible Closing Total Developers Flats Flats Stock Carpet Area 14,212 23,304 29,277 3,038 69,831 Sales 7,953,562 99,539,852 186,438,890 11,905,04 305,837,352 8 Cost 61,133,206 100,242,628 127,098,580 11,905,04 300,379,462 8 Add/(Less) 2,112,474 (713,702) (896,630) 502,142 specific expenditues income Profit (51,067,170 (1,416,478) 58,443,680 5,960,032 Other 52,013 Income Total 6,012,045 Income before On Money On Money 40,926,028 78,872,680 119,798,708 Total Profit (51,067,170 39,509,550 137,316,360 125,758,740 including on money Less. (27,625,069) (53,239,059 (80,864,128 Unaccounte d Cash Expenses Total (51,067,170 11,884,431 84,077,301 44,894,612 Profit The appellant has submitted Computation of Income as per revised return, at Page 14 of compilation. Considering the same, and in view of the above, the total income is re-computed as under.
CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited Particulars Amount (in Rs.) Amount (in Rs.) Profit before Tax 4,48,94,612 Add: Prior Period Expenses 79,884 Depreciation as per companies act 7,99,638 Less: Depreciation as per IT Act (5,32,258) Profits and Gains from Business or 4,52,41,876 Profession Gross Total Income 4,52,41,876 Less Deduction u/s 80-IB(10) of 8,40,77,301 the Act Restricted to (4,52,41,876) Total Income NIL Therefore, ground no. 2 of appeal is allowed.”
Before us, ld.CIT(DR) has vehemently argued in support of the grounds of appeal raised by the Revenue. It is contented that the ld.CIT(A) was not justified in allowing deduction to the extent of 67% of on money admitted by the assessee as it lacks any basis. It is submitted that the ld.CIT(A) allowed enhanced deduction u/s 80IB.He also drew attention to the fact that many of the units were exceeding stipulated criteria of 1000sq.ft. Besides, certain units were sold to the same family which is in violation of the prescribed conditions. It is also submitted that the deduction could not be allowed by way of revised return and the decisions relied on by the assessee were distinguishable. It is also contented that there is wide variation in the sale amounts of the flats. No purchaser was examined by the AO to examine actual cost of flats. He justified extrapolation of on money based on admission of the assessee itself. It is stated that such facts were not examined by the AO.
CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited Accordingly, it was requested that the whole issue may be sent back to him for examination.
The ld.AR in counter arguments argued that the assessee is eligible for deduction u/s 80IB claimed by way of revised return and he supported his contention by relying on various case laws including those of jurisdictional High Court. It is contented that section 80AC prescribing for return to be filed u/s 139(1) is not applicable to deduction claimed u/s 80IB.With regard to the variation in the cost of flats as pointed out by the ld.DR, it is stated that the project was substantially delayed. Consequently, the sale price of flat booked at different times is liable to vary. Further, he has relied on detailed written submissions made before the lower authorities on all aspects of the case also on various judicial decisions submitted by way of factual and legal Paper books containing pages-1 to 106 and 1 to 241 respectively before us.
We have considered all the relevant facts of the case, rival submissions and contents of the orders passed by the authorities below as also the judicial decisions relied upon. As regards Ground no.1,in the instant case, the assessee has accepted receiving on-money of Rs. 11,97,98,708/- from sale of residential flats and has offered it as CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited business income. Against it, the assessee claimed set off/deduction of out of books expenditure to the extent of 87.5% which has been reduced to 67.5% by the ld.CIT(A). Action of the appellate authority cannot be considered as unreasonable seen in the light of the fact that the assessee categorically admitted that it had to incur certain expenses by way of cash only, a fact which has not been disputed by department. Therefore, the stand of the Revenue cannot be considered to be fair in ignoring such claim considering the nature of business activities carried on by the assessee. This ground therefore, fails.
Ground no.2-In so far as the contention that no deduction could have been allowed to the assessee as no such claim was made in the original return, we find that the issue has been dealt with various courts of law including in coordinate bench decisions wherein it has been consistently held that such claim made u/s 139(5) by way of revised return could not be denied. In this regard, the ld.CIT(A) has relied on the coordinate bench of Mumbai decision in case of ACIT vs. Monarch Innovative Technologies (P.) Ltd. (91 taxmann.com 267)while holding that the deduction u/s 80-IB(10) is allowable to the assessee even if claimed for the first time in revised return filed u/s 139(5) of the Act. We find that as per the section 80AC, the assessee cannot claim a CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited deduction unless the original return u/s 139(1) is filed within the time. Therefore, assessee complied with the requirement of section 80AC of the Act which is to file return u/s 139(1) within stipulated time limit. Section 80AC of the Act read as under :
" Section 80AC: Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80- IA or section 80-IAB or section 80-IB or section 80- IC 47 [or section 80-ID or section 80-IE], no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub- section (1) of section 139.)" 9.1 In this case, it is not in dispute that the assessee filed its return under section 139(1) wherein deduction was not claimed under section 80-IB.Subsequently, assessee filed revised return under section 139(5) wherein claim for deduction was raised. Provisions of section 80AC do not lay down condition that deduction under section 80- IB must be claimed in return of income filed under section 139(1). Even otherwise, since assessee filed revised return under section 139(5) within stipulated time along with audit report and certificate in Form No.10CCB, there was sufficient compliance for claiming deduction under section 80-IB read with section 80AC and, thus, assessee's claim for deduction is to be allowed. We would like to place reliance on the CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited decision in the case of Monarch Innovative Technologies (P.) Ltd v ACIT [2018] 91 taxmann.com 267 (Mumbai - Trib.)wherein it was held that for claiming deduction under section 80-IB, only condition is that original return should be filed in time. Said claim need not necessarily be made in original return and it can be made subsequent thereto also, even before appellate authority as held inParmeshwar Cold Storage (P.) Ltd. v. Assistant Commissioner of Income-tax [2011] 8 ITR (T) 172 / 49 SOT 67 (Ahmedabad)(URO),DCIT v Kamdhenu Builders and Developers / dated-27/01/2016 (ITAT)(Mum),DIC Fine Chemicals (P.) Ltd. v. DCIT, Circle- 11(1), [2019] 177 ITD 672 (Kolkata -Trib.),Rajendra Pal Verma, v. ACIT (2019) 176 ITD 211 (Mum) (Trib.),ITO v. Nilima Abhijit Tannu. (2019) 177 ITD 308 (Mum) (Trib.) etc.
9.2 Therefore, in the background of above decisions and facts of the case, the denial of claim of deduction of the assessee made through revised return of income during the course of assessment proceedings and well before the passing of assessment order, is not tenable in the eye of law. Further, it has been not disputed by the AO that assessee has fulfilled all the conditions laid down u/s. 80IB(10) which make it eligible CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited for deduction in respect of profit derived from the housing project. Therefore, this ground does not succeed.
Ground no.3 pertains to the ld.CIT(A)restricting the addition of on-money receipts amounting to Rs 15,25,67,382/- made u/s of 69A of the Act to Rs. 11,97,98,708/-.
10.1 This aspect has been dealt with by the ld.CIT(A) in detail. The assessee is entitled to 64 flats in the project, of which 61 flats have been sold during the year. The AO observed that the on-money in respect of 18 flats on the basis of incriminating material found during the survey was at Rs. 5,24,80,860/-(although the assessee subsequently admitted to have received on-money of a much higher sum of Rs. 11,97,98,708/- before the Hon'ble Settlement Commission), which constituted 53.35% of Agreement Value of such flats of 9,83,75,140/-. On this basis, the he extrapolated the on-money on remaining 46 flats @53.35% of their agreement value, i.e. at 11,19,36,090/-. Accordingly, the total on-money was arrived at Rs. 16,44,16,950/- for 64 flats, of which proportionate on-money had been arrived at Rs. 15,25,67,382/- for 61 flats sold during A.Y. 2013-14 under appeal.
CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited 10.2 The assessee in the appellate proceedings claimed that findings of the survey cannot be extrapolated by concluding that all the transactions relating to sale of flats were tainted. The ld.CIT(A) accepted the contention holding that as the on-money can be brought to tax only on basis of incriminating materials found during survey action for those particular flats, no addition was justified on remaining flats merely on presumption and surmises. We find the reasoning given by the ld.CIT(A) acceptable as the estimation lacks any substance. For remaining flats, there being no incriminating material, such addition based on conjectures only has been rightly deleted. The ground in this regard is dismissed.
Ground no.4 pertains to the claim of deduction us 801B(10) of the Act against the on-money received on the sale of flats. We find that the assessee has admitted on-money of Rs. 11,97,98,708/- from sale of residential flats and offered it as business income and has claimed that it is entitled to claim deduction u/s 80-IB(10) on the on-money received from eligible units of the projects which are not recorded in the books of accounts. The assessee relied upon various judicial pronouncements in this regard, including by Hon'ble High Court of Bombay in the case of CIT Vs. Sheth Developers (P) Ltd (25 taxmann.com 173), wherein it is held that builder receiving CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited undisclosed income in course of its business, is entitled to benefit of deduction under section 80-IB of the Act. We note that the CIT(A) has granted benefit of Section 80IB(10) of the Act to the assessee. It is admitted position that on-money/cash receipts pertain to project eligible for deduction under Section 80IB(10) of the Act. The additional income on account of on-money receipts enhances the business income derived by the assessee from the eligible projects and therefore it is entitled to claim deduction in respect of the same. The Hon'ble Bombay High Court in the case of CIT vs. Sheth Developers Private Limited(supra) held that while computing undisclosed income for block period as per Section 69A read with Section 158BB of the Act the assessee was entitled to claim deduction from its income under section 80-IB of the Act. The aforesaid judgment was also relied upon by the Mumbai Bench of the Tribunal while allowing deduction under Section 80IB(10) of the Act in the case of Jupiter Construction vs. ACIT, Circle-3, Thane [ITA No. 6620- 6622/Mum/2019, dated 12.11.2021 holding as below: "6. We have considered rival submissions in the light of decisions relied upon and perused materials on record. Undisputedly, in course of search and seizure operation conducted in case of some other assessee incriminating material was found and seized indicating that the assessee had received on- money in cash towards sale consideration of the project. The receipt of on- money has also been accepted by the assessee as would be evident from additional income offered by the assessee in the returns of income filed in CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited pursuance to notices issued under 153C of the Act. The issue arising for consideration is, whether against the receipt of such on-money, the assessee can claim deduction under section 80IB(10) of the Act. The departmental authorities have not disputed the fact that the receipt of on-money is in respect of the very same project from which the assessee has not only declared income in the original return of income but has also claimed deduction under section 80IB(10) of the Act. It is also a fact on record that assessee's claim of deduction under section 80IB(10) in respect of the very same project has been allowed in the original assessment proceedings. Therefore, the deduction claimed under section 80IB(10) of the Act in the returns filed under section 153C of the Act is in continuation to the claim made in the original returns of income. Therefore, in our considered opinion, the prohibitory conditions of section 80A(5) would not be applicable. In any case of the matter, the revenue does not dispute the fact that the assessee is otherwise eligible to claim deduction under section 80IB(10) of the Act in respect of the profit earned from the subject project. The additional income offered by the assessee because of receipt of on-money, undoubtedly, forms part of the profit earned from the subject housing project. Therefore, merely because the additional income is offered in a search related assessment proceeding under section 153C of the Act, assessee's claim of deduction cannot be disallowed. This view of ours is fortified by the decision of the co- ordinate bench in case of Malpani Estates vs ACIT (supra).………………….”
We do not find any reason to deviate from above findings and decisions which are squarely applicable to the facts of the case. Respectfully following the above rulings and more specifically the ratio laid down in the case of Sheth Developers P.Ltd(supra),we do not find any infirmity in the conclusion drawn by the ld.CIT(A) which is upheld. Consequently, the ground of the Revenue fails.
13. In the ground no.5 and 6,the Revenue has submitted that the assessee had violated certain prescribed conditions of section 80IB in as much as many flats were not eligible or were sold to the same CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited family members. It is found that the ld.CIT(A) has examined the issue and observed that the assessee has restricted its claim of deduction under section 80-IB(10) only on the units below 1000 sq ft. and excluding units where one residential unit in the housing project is allotted to an individual and another unit is given such individual or his/her spouse, minor children or HUF or person representing them.Before us also ,the ld.AR has duly demonstrated that there was no violation of the provisions of above section in as much the assessee has not considered such instances for working out the quantum of deduction which has been worked out on proportionate basis. Claim of the assessee finds support from a plethora of decisions of various coordinate benches of ITAT and courts where such proportionate claim has been upheld. In this regard, we may refer to the decision of the coordinate bench of ITAT, Mumbai in Vijay Grihnirman P.Ltd, Mumbai vs ACIT Cc 15 & 16, Mumbai in similar issue has been decided in favour of the assessee involving similar facts. Relevant paras are reproduced as below:
“14. On the facts admitted by the Revenue, in the projects "Agrini" and "Vajra", there are number of flats which are below 1500 sq.ft., and the relevant built-up area requirement is specified under Section 80IB(10)(c) of the Income Tax Act. Thus, the built-up area in some of the flats in both these projects are in excess of 1500 sq.ft., i.e., 32 flats in Agrini and only one flat in Vajra and that the assessee had not claimed any deduction on this. We hold that the Tribunal is not correct in its view, that by reason of these Units being in excess of 1500 sq.ft., the entire claim of the assessee in CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited respect of these two projects would stand rejected under Section 80IB(10) of the Income Tax Act. Thus, going by the definition of "housing project" under Explanation to Section 80HHBA of the Act as referred to above as the construction of "any building" and the wordings in Section 80IB(10) of the Act, the question of rejection in entirety of the project on account of any one of the blocks not complying with the conditions, does not arise. Even in the case of each one of the blocks, wherever there are flats which satisfied the conditions particularly of the nature stated under Section 80IB(10)(c) of the Act, we have already upheld the case of the assessee in T.C. Nos.1348 and 1349 of 2007 dated 10.10.2012 for grant of relief under Section 80IB(10) of the Act on a proportionate basis, by following the decision of the Bombay High Court in CIT v. Brahma Associates [2011] 333 ITR 289/ 197 Taxman 459 / 9 taxmann.com 289. Thus applying the decision of this Court in T.C. Nos. 1348 and 1349 of 2007 dated 10.10.2012, we hold that the assessee is entitled to succeed both on the principle of proportionality as well as by reason of the construction on the meaning of the expression "housing project" as referring to construction of any building and the wordings in Section 80IB(10) of the Act. In the circumstances, we hold that the mere fact that one of the blocks have units exceeding built-up area of 1500 sq.ft, per se, would not result in nullifying the claim of the assessee for the entire projects. Consequently, in respect of each of the blocks, the assessee is entitled to have the benefit of deduction in respect of residential units satisfying the requirement under Section 80IB(10)(c) of the Act. In so holding, we also agree with the decision of the Bombay High Court in CIT v. Vandana Properties [2012] 206 Taxman 584/ 19 taxmann.com 316, which was decided by the Bombay High Court on similar lines as in the assessee's case before us.” 13.1 Respectfully following the above decision and also in the light of jurisdictional High Court decisions quoted in the above order, we do not find any infirmity in the appellate order which is affirmed and ground no. 5 and 6 of the Revenue are dismissed.
Consequently, all the grounds of the Revenue are dismissed.
C.O. No.15/MUM/2025(Assessee) ‘Without prejudice to the judgment of the Commissioner of Income-tax (Appeals), the Respondent raises the following cross-objections: Disallowance of expenses of Rs. 2,39,59,742/- The Commissioner of Income-tax (Appeals) erred in disallowing expenditure of Rs. 2,39,59,742/-, out of the total claim for expenditure of Rs. 10,48,23,870/- incurred from the on-money earned.”
CO No. 15/Mum/2025 A.Y. 2013-14 Rashmi Infrastructure Developers Limited 16. The ld.AR before us pleaded that the cross appeal may be treated as not pressed if Revenue’s appeal does not succeed. Since revenue’s appeal is already dismissed, this CO does not survive being not pressed and is dismissed.
In the result, both the Revenue’s appeal and Cross Objection are dismissed.
Order pronounced in the open court on 07.07.2025.