Search and seizure: Block assessment: S/s. 69A, 80-IB(10) and 158BB: Block Period 1-4- 1995 to 21-2-2002: Assessee in construction business eligible for deduction u/s. 80-IB(10): Disclosure of construction income: Assessee is entitled to deduction u/s. 80-IB(10):

The assessee carried on business as a builder and was entitled to deduction u/s. 80-IB(10). In the course of the search action u/s. 132 of the Act, on 21/02/2002, the assessee had made a declaration of undisclosed income of Rs. 7 crore. In the block return, the assessee offered undisclosed income of Rs. 3.5 crore. The assessee claimed that at the time of making the statement, the director of the assessee was unaware of the deduction u/s. 80-IB of the Act. The Assessing Officer did not allow the claim for deduction u/s. 80-IB(10) of the Act and computed the undisclosed income at Rs. 7.68 crore. CIT(A) and the Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“i) Consequent to the amendment by the Finance Act, 2002 with retrospective effect from 1-7-1995, the total income or loss has to be computed in accordance with the provisions of the Act. Consequently, w.e.f. 1-7-1995, the total income/ loss for the block period has to be computed in accordance with the provisions of the Act and the same would include Chapter VI-A. Section 80-IB is a part of Chapter VI-A. In view of the above, while computing the undisclosed income for the block period, the respondent assessee is entitled to claim deduction from its income u/s. 80-IB.

ii) It is not the case of the Revenue that the money found in possession of the assessee could not be explained and/or its source could not be explained to the satisfaction of the Assessing Officer. In the present case, undisclosed income found in the form of cash was explained as having been acquired while carrying on business as builder and this explanation was accepted by the Assessing officer by having assessed the undisclosed income for the block period as income from profits and gains of business or profession.

iii) In the present case, no question of application of sections 68, 69, 69A, 69B and 69C arises as the same has not been invoked by the Department. It is an admitted position between the parties as reflected even in the order of the Assessing Officer that undisclosed income was in fact received by the assessee in the course of carrying out its business activities as a builder. In view of the above, the order of the Tribunal cannot be faulted.”