Monday, November 19, 2012

My First Survey as an Authorised Officer

I conducted my first survey as an Authorised Officer in Nov'12. - Scintillating Experience..

I was very apprehensive in the beginning as anyone else would be. In the very first place, i wasn't knowing as to how to prepare a Sat Note. Then i called up some of the senior Officials whom i met during 2nd OJT. Everyone reiterated the same fact again and again that - "Move out of the office and visit your jurisdictional area". That was the time i decided to move out and went for the recce. The case related a big builder in Mumbai. I visited their site offices in Thane and also the Corporate office in Mumbai disguising my identity (as Jasbir Singh, Inderjeet Singh etc etc....).
Howver, on the date of survey, i realised that my recce was misdirected. During recce, i was basically looking for 'on money' transactions. I had infact visited and talked to one of the Property dealer also about this group whether they take any cash or not. But everywhere i was posted with the fact that they do business totally in white. All payment shave to be made in cheque only, no cash component at all. That was very disappointing. But, on the day of survey, in the morning, we totally changed our direction of investigation. The assessee was claiming deduction u/s 80IB(10) for one of its housing project. We decided to target this particular section only. That morning, we studied the entire section from the act, also read some of the articles from the web and took the decision that we will confront the assessee point by point. The strike time was 4.15pm on 06.11.2012. This lasted for 27 hours. And finally, we were able to prove that the assessee was not eligible to claim deduction u/s 80IB(10). Although they were fulfilling the 1000 sq ft. and more than 1 acre conditions. But we caught them on the issue of completion of the project which should be within 5 years from the end of financial year in which they obtained the commencement certificate from the local authority. Here, 5 years came to an end on 31.03.2012, but they received the completion certificate from the Thane Municipal Corporation on 27.09.2012. This was the catch. Moreover, they had been claiming deduction on 4 of their towers. But one of these towers ('VARUNA') was still under construction as was reflected by field verification and also by architect's certificate. In addition , the assesse was having certain 80IB and non 80IB towers. This concept itself appeared to be ridiculous. We relied on the Bombay High Court judgement in the case of BRAHMA ASSOCIATES. which specifically states that 80IB deduction cannot be given to any part of the housing project. This deduction is to be given for the entire housing project as a whole.
Also, the assessee was claiming deduction u/s 80IA(4)(iii), in one of its another premise which is developed as an Industrial Park. However, for claiming this deduction, the asssessee has to obtain a notification form CBDT, which was still pending in this case. Their auditor in the audit report had also stated that 'we are hopeful of getting a positive response from CBDT in the near future'. Our contention was that - WHAT IF CBDT REJECTS YOUR PLEA ?? We could not have allowed the deduction merely on the basis of presumption. Hence, this was also disallowed.
The assessee has agreed to pay the taxes over the surrendered amount. It turns out to be approx Rs.70 crores.

Total Deduction to be disallowed :

Deduction u/s 80IB(10)     : Rs.178,85,37,405/-
Deduction u/s 80IA(4)(iii)  : Rs.24,29,37,504/-

GRAND TOTAL : Rs.203,14,68,909/-