ACIT, Bangalore V. M/s Narayan Enterprises, Bangalore

ITA 1077/BANG/2011

• Counselvise Citation: 107721114 RSA 2011
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 14-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SARAVANAN B JT
• Assessee Lawyers: C RAMESH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1077/BANG/2011 ASSESSMENT YEAR : 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6(1), BANGALORE. VS. M/S. NARAYAN ENTERPRISES, NO.104, BRIGADE LINKS, IST MAIN ROAD, SESHADRIPURAM, BANGALORE 560 003. PAN: AAGFK 4916K APPELLANT RESPONDENT APPELLANT BY : SHRI SARAVANAN, B., JT. CIT(DR) RESPONDENT BY : SHRI C. RAMESH, C.A. DATE OF HEARING : 24.08.2012 DATE OF PRONOUNCEMENT : 07.09.2012 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER D ATED 25.08.2011OF THE CIT(APPEALS)-III, BANGALORE RELATING TO ASSESSM ENT YEAR 2007-08. 2. THE GROUNDS OF APPEAL OF THE REVENUE READS AS UN DER:- 1. THE ORDER OF THE LEARNED CIT(A) IN SO FAR AS I T RELATES TO THE FOLLOWING GROUNDS IS OPPOSED TO LAW AND FACTS O F THE CASE. ITA NO.1077/BANG/11 PAGE 2 OF 6 2. THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.40,53,328/- MADE BY THE AO ON ACCOUNT OF SUPPRES SION IN SALES TURNOVER WITHOUT APPRECIATING THE FACTS AND C IRCUMSTANCES OF CASE BROUGHT OUT IN THE ASSESSMENT ORDER TO COME TO THE CONCLUSION THAT THE ASSESSEE HAS SUPPRESSED THE SAL ES TURNOVER OF VARIOUS PROJECTS.. 3. THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT U NLIKE IN CRIMINAL PROCEEDINGS WHERE THE CHARGES ARE TO BE PR OVED BEYOND DOUBT, IN INCOMETAX PROCEEDINGS BEING CIVIL IN NATU RE, THE AO CAN ASSESS INCOME ON THE BASIS OF MATERIAL ON RECOR D, SURROUNDING CIRCUMSTANCES AND PREPONDERANCE OF PROBABILITY AND, THEREFORE, THE AO WAS JUSTIFIED IN MAKING THE ADDITION OF RS.4 0,53,328/- TOWARDS SUPPRESSED TURNOVER. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT( A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND TH AT OF THE ASSESSING OFFICER MAY BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 3. THE ASSESSEE IS A PARTNERSHIP FIRM WHICH CARRIES ON THE BUSINESS AS BUILDERS AND PROPERTY DEVELOPERS. FOR THE A.Y. 200 7-08, THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF Q 69,40,810. DURING THE PREVIOUS YEAR, THE ASSESSEE HAD COMPLETED THREE PRO JECTS VIZ., NE SHRIRAJ, NE VIRGO AND NE AMOR. THE ASSESSING OFFICER NOTIC ED THAT THERE WAS A VARIATION IN THE PRICE AT WHICH FLATS WERE SOLD TO DIFFERENT CUSTOMERS. IN THIS REGARD, THE AO HAS GIVEN A CHART DEPICTING THE VARI ATION IN THE RATES IN PARA 4.3 OF HIS ORDER FOR THE PROJECT NE AMOR. HIS CONC LUSIONS ON THE BASIS OF SOME OF THE SALE INSTANCES OF FLAT IN THE AFORESAID PROJECT WAS THAT THE DATES ON WHICH THE AGREEMENTS WERE ENTERED INTO FOR SALE OF FLATS WAS 21.09.03 TO 02.04.05 AND THE RATES AT WHICH THEY WERE SOLD, ESP ECIALLY IN CITY LIKE BANGALORE, WAS UNBELIEVABLE. HE CONCLUDED THAT THE RE WAS A VARIATION IN ITA NO.1077/BANG/11 PAGE 3 OF 6 THE RATES @ Q 500/SQ.FT. FOR FLATS SOLD IN THE SAME YEAR. ACCOR DING TO THE AO, SUCH A COURSE OF ACTION WAS UNACCEPTABLE AND TH E ASSESSEE HAS SUPPRESSED THE REAL SALE VALUE OF SOME OF THE FLATS . HE CAME TO THE CONCLUSION THAT THE AVERAGE SALE VALUE OF FLATS IN THE PROJECT NE AMOR SHOULD BE Q 1000/SQ.FT. SIMILARLY FOR THE PROJECT NE VIRGO AN D NE SHRIRAJ, THE AO HAS GIVEN THE DETAILS OF SALE PRICE OF FLATS IN THOSE PROJECTS IN PARA 4.5 AND PARA 4.7 RESPECTIVELY. THE AO ON THE BASIS OF THE SAME REASONS AS GIVEN EARLIER, CAME TO THE CONCLUSION THAT THE S ALE RATE OF THE FLATS IN THE PROJECT NE VIRGO HAD AN AVERAGE SHOULD BE AT Q 1300/SQ.FT. AND FOR THE PROJECT NE SHRIRAJ AT Q 1500/SQ.FT. THEREAFTER THE AO IDENTIFIED THE FLAT S IN THE VARIOUS PROJECTS WHICH WERE SOLD AT LESS THAN T HE AVERAGE PRICE ARRIVED AT BY HIM AND ADDED THE DIFFERENCE BETWEEN THE AVER AGE PRICE AND THE PRICE AT WHICH THOSE FLATS WERE SOLD BY THE ASSESSE E, TO THE TOTAL INCOME OF THE ASSESSEE. THE COMPUTATION OF AO IN THIS REGARD IS GIVEN IN PARA 4.9 OF HIS ORDER. THE AO THUS MADE AN ADDITION OF Q 40,53,328 TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEFORE THE CIT(APPEALS), THE ASSESSEE POINTED OU T THAT THE RATES AT WHICH THE FLATS WERE SOLD DEPENDS ON SEVERAL FACTOR S VIZ., THE POINT OF TIME AT WHICH SALE IS MADE I.E., AT THE INITIAL STAGES O F THE PROJECT LOWER PRICE IS CHARGED THAN THE STAGE AT WHICH THE PROJECT HAS REA CHED SUBSTANTIAL COMPLETION. BESIDES THE ABOVE, THE REQUIREMENT OF FUNDS OF THE ASSESSEE MAY ALSO NECESSITATE BARGAINING A PARTICULAR PRICE FROM A PARTICULAR CUSTOMER. THE ASSESSEE POINTED OUT THAT THERE CANN OT BE A THUMB RULE TO DECIDE THE PRICE AT WHICH THE FLATS HAVE TO BE SOLD BY A BUILDER. THE ASSESSEE ALSO POINTED OUT THAT THE AO HAS NOT BROUG HT ANY EVIDENCE ON ITA NO.1077/BANG/11 PAGE 4 OF 6 RECORD TO SHOW THAT THE ASSESSEE RECEIVED MUCH MORE THAN WHAT IS DISCLOSED AS SALE CONSIDERATION IN THE BOOKS OF ACC OUNTS. THE ASSESSEE ALSO POINTED OUT THAT THE LEGAL POSITION AS LAID DO WN IN SEVERAL DECIDED CASES TO THE EFFECT THAT THE AO CANNOT MAKE AN ASSE SSMENT WITHOUT MATERIAL ON RECORD PURELY ON THE BASIS OF SURMISES. THE ASSESSEE IN THIS REGARD HAD RELIED ON THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF DHAKESHWARI COTTON MILLS LTD. V. CIT 26 ITR 775 . 5. AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE, THE CIT(APPEALS) WAS OF THE FOLLOWING VIEW:- 6.3. UNDER LAW THE ASSESSING OFFICER IS EMPOWERED TO DETERMINE THE INCOME OF THE ASSESSEE AFTER EXAMININ G THE BOOKS OF ACCOUNTS PRODUCED AND ALSO THE EVIDENCES IN HIS POSSESSION. THE LAW EMPOWERS THE ASSESSING OFFICER TO MAKE AN A DDITION TO THE TURNOVER IF THERE ARE EVIDENCES IN REGARD TO .T HE SUPPRESSION OF SALE PROCEEDS. IN THE CASE OF THE APPELLANT THE ASS ESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCES TO PROVE TH AT THE APPELLANT HAS IN FACT COLLECTED MORE PRICE FOR EACH OF THE FLATS, THAN WHAT WAS DECLARED IN THE RETURN. THE ASSESSING OFFICER HAS NOT PROVED THAT THE APPELLANT HAS IN FACT RECEIVED MORE PROCEEDS THAN WHAT WAS DECLARED. IT IS ALSO NOT THE CASE THA T THE ASSESSING OFFICER HAS FOUND THE APPELLANT IN POSSESSION OF UN DISCLOSED INCOME. THOUGH UNDER LAW, THE ASSESSING OFFICER HAS POWERS TO MAKE SUCH ADDITION, THE SAME ARE TO BE SUPPORTED BY EVIDENCES. IN THE ABSENCE OF EVIDENCES, THE ASSESSING OFFICER COULD NOT HAVE MADE AN ADDITION TO THE TURNOVER ON AN ESTIMATE BAS IS. THE FACT REMAINS THAT ALL THE FLATS ARE REGISTERED BEFORE SU B-REGISTRAR AND THE PROCEEDS DECLARED ARE SUPPORTED BY REGISTERED D EEDS. PRIMA FADE ON FACTS, THE ASSESSING OFFICER HAS NOT MADE O UT A CASE FOR ADDITION. 6.4. FROM THE ASSESSMENT ORDER, I ALSO OBSERVE THA T IT IS NOT THE CASE OF THE AO THAT THE APPELLANT HAS SUPPRESSE D ITS SALES OR HAS REALIZED MORE THAN WHAT IT HAS ACCOUNTED IN ITS BOOKS. THE AO HAS PROCEEDED ON THE ASSUMPTION THAT SOMETHING I S AMISS, ONLY BECAUSE THE APPELLANT HAS OFFERED FLATS TO DIF FERENT CUSTOMERS AT DIFFERENT RATES, WHICH IN MY OPINION C ANNOT BE JUSTIFIED. I ALSO FIND THE ARGUMENT PUT FORTH BY TH E AR THAT THE TRANSACTIONS BETWEEN THE APPELLANT AND THE CUSTOMER S IS GENUINE ITA NO.1077/BANG/11 PAGE 5 OF 6 AND SUPPORTED BY REGISTERED DOCUMENTS IS CONVINCING . FURTHER, IN THIS LINE OF BUSINESS CUSTOMERS BOOKING THE FLATS A T THE BEGINNING OF THE PROJECT DEFINITELY GETS THE BENEFITS OF DISC OUNTED PRICE. THIS IS ALSO FACT IN THIS CASE. THE VARIOUS DECISIONS RE LIED UPON BY THE APPELLANT WOULD ALSO CLEARLY SHOW THAT IN THE ABSEN CE OF A SPECIFIC FINDING BY THE AO THAT THE TRANSACTIONS WE RE ENTERED INTO TO DEFRAUD THE REVENUE, THE AO CANNOT MAKE ADDITION S ON THE BASIS OF MERE SUSPICION AND ASSUMPTIONS WITHOUT ANY EVIDENCE OR MATERIAL. THUS THE ADDITION MADE BY THE AO WAS DELETED BY THE LD. CIT(APPEALS). 6. AGGRIEVED BY THE ORDER OF THE CIT(A), REVENUE H AS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE SUBM ISSIONS OF THE LD. DR, WHO REITERATED THE STAND OF THE REVENUE AS REFLECTE D IN THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDE R OF THE CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NO DOUBT TRUE THAT THERE WERE VARIATIONS IN THE PRICE AT WHICH THE FLA TS WERE SOLD IN THE VARIOUS PROJECTS DEVELOPED BY THE ASSESSE. IT IS ALSO TRUE THAT IN SOME CASES, FLATS WERE SOLD AT A LESSER PRICE AT A PARTICULAR DATE, W HEN SIMILAR FLATS IN THE SAME PROJECT HAD BEEN SOLD AT A HIGHER PRICE EVEN O N AN EARLIER DATE. IN OUR VIEW, THIS FACT ALONE WOULD NOT BE SUFFICIENT T O COME TO THE CONCLUSION THAT THE ACTUAL SALE CONSIDERATION REFLECTED IN THE DOCUMENT IS NOT CORRECT AND THAT THE ASSESSEE HAS IN FACT RECEIVED CONSIDER ATION OVER AND ABOVE WHAT IS STATED IN THE DOCUMENT. IN FACT, THERE HAS BEEN NO EVIDENCE BROUGHT ON RECORD BY THE AO IN THIS REGARD. THE AO HAD ALL THE POWERS TO EXAMINE THE PURCHASES. EVEN THIS, THE AO DID NOT CH OOSE TO DO. THE AO HAS MADE THE ADDITION PURELY ON SURMISES. IN OUR V IEW, SUCH ADDITION CANNOT BE SUSTAINED IN THE EYE OF LAW. THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF DHAKESHWARI COTTON MILLS LTD. (SUPRA) ITA NO.1077/BANG/11 PAGE 6 OF 6 CLEARLY SUPPORTS THE PLEA OF THE ASSESSEE. IN THE C IRCUMSTANCES, WE ARE OF THE VIEW THAT THE CONCLUSIONS DRAWN BY THE LD. CIT( A) DO NOT CALL FOR ANY INTERFERENCE. CONSEQUENTLY, THE ORDER OF THE LD. C IT(A) IS CONFIRMED AND THE APPEAL BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF SEPTEMBER, 2012. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 7 TH SEPTEMBER , 2012. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.