DCIT, Pune V. M/S Syndicate Realtors, Pune

ITA 1132/PUN/2012

• Counselvise Citation: 113224514 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 31-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V L JAIN
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1132/PN/2012 (ASSESSMENT YEAR 2008-09) DY.CIT, CIRCLE-3, PUNE .. APPELLANT VS. M/S. SYNDICATE REALTORS, 6,SUSHEELA APARTMENTS, INCOME TAX LANE, PRABHAT ROAD, PUNE -411004 PAN NO.ABEFS 4866P .. RESPONDENT APPELLANT BY : SHRI RAJESH DAMOR RESPONDENT BY : SHRI V.L. JAIN DATE OF HEARING : 18-09-2013 DATE OF PRONOUNCEMENT : 27-09-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 30-01-2012 OF THE CIT(A)-II, PUNE RELATING TO ASSES SMENT YEAR 2008-09. 2. FACTS OF THE CASE, IN BRIEF ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTIONS, LAN D AND DEVELOPMENT OF ESTATE AGENT. IT FILED ITS RETURN OF INCOME FOR TH E IMPUGNED ASSESSMENT YEAR ON 26-09-2008 DECLARING TOTAL INCOME OF RS.61, 70,51,710/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE FIRM HAS ENTERED INTO A SINGLE SALE TRANSA CTION OF TRANSFER OF PROPERTY SITUATED AT SURVEY NO. 169/1+2+3, 169/4, 1 70/2B, 170/3, 170/4B, 170/7, 170/5A, 170/8/1, 170/8/2 AND 170/5B AT HADAP SAR, PUNE. THE GROUPING OF THE SALES AS PER SUBMISSION OF THE ASSE SSEE WAS AS UNDER : 2 SR.NO. NAME OF THE PURCHASER AMOUNT RS. 1 VASCON ENGINEERS PVT. LTD. 65,00,00,000/- 2 TUPE BABAN & OTHERS 169/4 10,00,000/- 3 TUPE GOPINATH 180/8/2 10,00,000/- 4 TUPE PRAHALLAD LAXMAN 7,50,000/- 5 TUPE SHIVAJIRAO RAMBHOU-170 10,000/- 6 TOTAL 65,37,50,000/- 2.1 FROM THE VARIOUS DETAILS FURNISHED BY THE ASSES SEE THE ASSESSING OFFICER NOTED THAT THE SAID PROPERTY WAS PURCHASED BY THE ASSESSEE VIDE AGREEMENT DATED 31-01-2004 FROM VARIOUS FAMILY MEMB ERS OF THE TUPE GROUP. SUBSEQUENTLY, THE SALE WAS DONE WITH M/S. V ASCON HADAPSAR VENTURES ON 05-06-2006 BY WHICH ASSESSEE HAS RECEIV ED AN AMOUNT OF RS.5 CRORE AS SECURITY DEPOSIT. SUBSEQUENTLY, A SUPPLEM ENTARY AGREEMENT WAS EXECUTED ON 28-04-2007 THROUGH WHICH THE SALE OF TH E PROPERTY WAS EXECUTED FOR RS.65 CRORES TO M/S. VASCON HADAPSAR V ENTURES. IN THE AGREEMENT DATED 05-06-2006 AND SUPPLEMENTARY AGREEM ENT DATED 28-04- 2007 THERE IS MENTION ABOUT CARVING OUT PLOTS TO TH E ORIGINAL OWNERS. AT CLAUSE NO.2 OF THE SUPPLEMENTARY AGREEMENT DATED 28 -04-2007 IT HAS BEEN MENTIONED AS UNDER: IN TERMS THE SAID SINGLE JOINT VENTURE AGREEMENT D ATED 05-06-2006 AN AREA OF 15000 SQ.FT. OF LAND HAS TO BE CARVED OUT FROM THE SAID PROPERTY FOR ALLOTMENT TO THE ORIGINAL OWNERS. IT IS MUTUALLY AGREED THAT SU CH AREA OF 15000 SQ.FT. LAND SHALL BE ALLOTTED TO THE FOLLOWING PERSONS FROM AMO NG THE OWNERS AS REFERRED TO THE SAID AGREEMENT : SR.NO. NAME OF THE OWNER AREA (SQ.FT.) 1 SHRI TUPE PRAHALLAD LAXMAN 4000 2 SHRI GOPINATH LAXMAN TUPE 4000 3 SHRI SHIVAJI RAMBHAU TUPE 4000 4 SHRI RAJENDRA BABAN TUPE 3000 TOTAL 15000 THE PROPERTY SO ALLOTTED AS AFORESAID SHALL BE HAND ED OVER TO THE AFORESAID OWNERS ON 30-06-2007. 5.3 MEANWHILE MEMORANDUM OF UNDERSTANDINGS HAVE BEE N SIGNED BY THE ASSESSEE FIRM THROUGH ITS PARTNER SHRI SANDEEP MANI KRAO JAGDHANE AND THE AFORESAID FOUR PERSON ON 12-07-2005 TO THE EFFECT T HAT THE AFORESAID FOUR PERSONS WOULD BE GIVEN FOUR DEVELOPED PLOTS (DETAILS OF WHI CH HAVE BEEN MENTIONED AT PARA 5.2 ABOVE) AT THE PRICE OF RS.250/- PER SQ.FT. 3 2.2 THE ASSESSING OFFICER, THEREFORE, ASKED THE ASS ESSEE TO EXPLAIN AS TO WHY THE DIFFERENTIAL PRICE CHARGED TO THE 4 PERSONS , VIS-A-VIS THE PRICE CHARGED TO VASCON HADAPSAR VENTURES SHOULD NOT BE A DDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE IN ITS RESPON SE TO THE SAME REPLIED AS UNDER WHICH HAS BEEN INCORPORATED IN THE BODY OF TH E ASSESSMENT ORDER AT PARA 5.4 AND 5.5 WHICH IS REPRODUCED AS UNDER : 'IN SO FAR AS THE SALES TO TUPE FAMILY ARE CONCERNE D VIS-A-VIS THE SALE TO VASCON HADAPSAR VENTURES, WE HAVE ALREADY PROVIDED A NOTE IN TERMS OF ANNEXURE 2 TO OUR SUBMISSION DATED 29.10.2010 FILED WITH YOU ON 08.11.2010. IT IS TRUE THAT THE ORIGINAL PURCHASE BY WAY OF THE DEVELOPMENT AGREEMENT DATED 30.01.2004 (PROVIDED AS ANNEXURE 1 TO OUR SUB MISSION DATED 19.10.2010) DID NOT CONTEMPLATE THE TRANSFER OF PLO TS CUMULATIVELY ADMEASURING 15,000 SQ. FTS. TO EITHER OF THE LAND O WNERS. HOWEVER, IT IS EQUALLY TRUE THAT THE MEMORANDUM OF UNDERSTANDING E XECUTED ON 12.07.2005 EVIDENCES THE AGREED SALE OF PLOTS AT A CONCESSIONA L PRICE OF RS.250/- PER SQ. FT. THE FACTUAL POSITION OF THE TRANSACTIONS HAS NOT ON LY BEEN EXPLAINED BUT ALSO SUPPORTED BY DOCUMENTS WHICH HAS ALREADY BEEN FILED WITH YOU.' 5.5 THE ANNEXURE 2 OF THE SUBMISSION DATED 29.10.2 010 REFERRED TO BY THE ASSESSEE IN ITS REPLY DATED 08.11.2010 IS REPRO DUCED AS UNDER: COMPARATIVE TABLE OF THE AREA VIS-A-VIS SALE CONSID ERATION OF SALES EFFECTED SALES TO DATE AREA CONSIDERATION (RS.) EFFECTIVE RATE (RS.) VASCON HADAPSAR VENTURES 28/4/2007 4,82,544 SQ. FT. 65,00,00,000/- 1,347/- TUPE FAMILY MEMBERS 12/7/2005 15,000 SQ.FT. 37,50,000 SQ. FT. 250/- NOTE: SHIVAJIRAO TAPE AND THE THREE OTHER MEMBERS O F THE FAMILY ARE THE PART OF THE LAND OWNERS WHO HAD TRANSFERRED THEIR PROPER TY TO SYNDICATE REALTORS ORIGINALLY BY AGREEMENT DATED 31/01/2004. IN TERMS OF THE MOU EXECUTED ON 12/7/2005, THE SAID SHRI SHIVAJIRAO TUPE AND OTHERS HAD AGREED TO BUY THE PLOTS IN THE LAYOU T TO BE PREPARED BY SYNDICATE REALTORS IN THE SAID PROPERTY AT A PRICE OF RS.250/ - PER SQ. FT. ACCORDINGLY, SHRI SHIVAJIRAO TUPE, SHRI GOPINATH TUPE AND SHRI B ABAN TUPE AGREED TO BUY THE PLOTS ADMEASURING 4000 SQ. FT. EACH AT A PRICE OF RS.10,00,000/- EACH AND SHRI PRALHAD TUPE AGREED TO BUY PLOT OF 3000 SQ. FT. AT A PRICE OF RS.75,00,000/-. ACCORDINGLY, THE SALE OF 15000 SQ. FT. OF PLOT AREA HAS BEEN REFLECTED AS SALE AT A CONSIDERATION OF RS.37,50,000/-. THIS SALE CANNOT BE COMPARED WITH THE SALE OF PROPE RTY TO VASCON HADPSAR VENTURES FOR MORE THAN ONE REASON. FIRSTLY, THE SAL E TO TUPE FAMILY MEMBERS IS A PART OF SALE TO THE ORIGINAL LAND OWNERS. SECONDL Y, THESE LAND OWNERS HAD DECIDED TO BUY THE PLOTS AT THE TIME OF SALE OF THE ENTIRE LAND BY THEM, THE MOUS FOR SUCH SALE WAS EXECUTED ON 12/07/2005. IN C OMPARISON, THE SALE TO 4 VASCON HADPSAR VENTURES WAS DONE IN THE PREVIOUS YE AR RELEVANT TO A.Y. 2008-09. THE SALE TO TOPES' WAS A PART OF THE UNDER STANDING AT THE TIME OF PURCHASE OF THE PROPERTY UNLIKE THE SALE TO VASCON HADPSAR VENTURES WHICH IS AN INDEPENDENT TRANSACTION. THE SALE TO THE TUPE FA MILY MEMBERS IS ALSO INCORPORATED AS A PART OF THE AGREEMENT WITH VASCON HADPSAR VENTURES. THUS, THE TWO TRANSACTIONS OF SALES ARE NOT ONLY DI STANCED IN TIME BUT ARE ALSO IN A DIFFERENT CONTEXT AND SETTINGS AND THEREFORE, ARE NOT COMPARABLE.' 3. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO HI M THOUGH THERE ARE MEMORANDUM OF UNDERSTANDING EXECUTED ON 12-07-2005 FOR THE LAND TO BE ALLOTTED/SOLD TO THE 4 PERSONS, HOWEVER, THE LAND H AS BEEN SOLD TO THEM IN THE YEAR 2007-08 AND IT FINDS ITS FINALITY IN CLAUS E (2) OF THE SUPPLEMENTARY AGREEMENT WHERE IT WAS MENTIONED THAT THE POSSESSIO N OF THE DEVELOPED LAND SHALL BE GIVEN TO THE AFORESAID PERSONS BY 30- 06-2007. ACCORDING TO THE ASSESSING OFFICER WHAT THE 4 PERSONS GET BY THE DEAL IS DEVELOPED PLOTS OF MEASURED SIZES WHEREAS VASCON HADAPSAR VENTURE G ETS THE ENTIRE LAND AS ON WHERE IS BASIS AND IT IS VASCON HADAPSAR VENTURE S WHO HAS TO DEVELOP THE LAND, INCUR COST FOR THE SAME AND FURTHER LOSE OUT ON THE OPEN SPACES, ROADS, SEWER LINES ETC. THUS, THE COST OF DEVELOPE D LAND FOR M/S. VASCON WOULD BE MUCH HIGHER THAN THE PER SQ.FT. COST OF AC QUISITION OF UNDEVELOPED LAND. HE NOTED THAT IN THE ORIGINAL PURCHASE AGREE MENT THROUGH WHICH THE LAND HAS BEEN ACQUIRED BY THE ASSESSEE, THERE IS NO ENCUMBRANCE/LIABILITY MENTIONED IN RESPECT OF PLOTS TO BE GIVEN TO THE LA ND OWNERS. ACCORDINGLY THE AMOUNT CORRESPONDING TO DIFFERENTIAL RATE OF PR ICES CHARGED TO THE SO- CALLED LAND OWNERS WOULD NOT IN ANY WAY FORM COST O F ACQUISITION IN THE HANDS OF THE ASSESSEE. HE WAS OF THE OPINION THAT THE ASSESSEE WAS IN NO WAY LIABLE TO SELL THE PLOTS TO THE 4 PERSONS AT TH E CONCESSIONAL RATE OF RS.250/- PER SQ.FT. FURTHER, THE ASSESSEE HAS GIVE N THE PLOT OF LAND AT CONCESSIONAL RATE TO 4 PERSONS WHEREAS THERE ARE AS MANY AS 45 ORIGINAL 5 LAND OWNERS. THEREFORE, SUCH TRANSFER OF PLOTS TO SELECT 4 PERSONS CANNOT BE HELD AS ON ACCOUNT OF ANY LIABILITY OF THE ASSESSEE TOWARDS THE OWNERS. SINCE THE SALE TO THE 4 PERSONS AND TO THE VASCON H ADAPSAR VENTURES WERE UNDERTAKEN SIMULTANEOUSLY AND THERE IS WIDE DIFFERE NCE BETWEEN THE PRICE CHARGED FROM THE 4 PERSONS AND THE PRICE CHARGED FR OM M/S.VASCON, THE AO CAME TO THE CONCLUSION THAT THE DIFFERENCE BETWE EN THE ABOVE SHOULD BE ADDED TO THE INCOME OF THE ASSESSEE U/S.28 OF THE I NCOME TAX ACT. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE HE OB SERVED THAT THE RATE PER SQ.FT. CHARGED TO VASCON HADAPSAR VENTURE IS RS.134 7/- PER SQ.FT. WHEREAS THE RATE CHARGES TO THE 4 PERSONS IS @ RS.250/- PER SQ.FT. THEREFORE, THE AO DETERMINED THE DIFFERENTIAL VALUE OF 15000 SFT. AT RS.1,64,55,000/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEFORE CIT(A) THE ASSESSEE MADE ELABORATE SUBMIS SIONS AND RELIED ON VARIOUS DECISIONS. BASED ON THE ARGUMENTS ADVAN CED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER : 3.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND ALSO PERUSED MATERIAL ON RECORD. THE APPELLANT HAS RAISED TWO GR OUNDS OF APPEAL AND IN GROUND NO. 1, THE APPELLANT HAS CONTESTED THE ADDIT ION MADE BY THE A.O. OF RS.1,64,55,000/- UNDER SEC.28 OF THE I.T. ACT 1961. DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE APPELLANT FIR M HAD ENTERED INTO A SINGLE SALE TRANSACTION OF TRANSFER OF PROPERTY SITUATED A T HADAPSAR, PUNE. THE DETAILS OF THE SALES ARE AS UNDER: THE AFORESAID PROPERTY WAS PURCHASED BY THE APPELLA NT BY AN AGREEMENT DATED 31.1.2004. THEREAFTER, A MEMORANDUM OF UNDERSTANDIN G WAS EXECUTED ON 12.7.2005 WHICH EVIDENCES THE AGREED SALE OF PLOTS AT A CONCESSIONAL PRICE OF RS.250 PER SQ.FT. SUBSEQUENTLY, AN AGREEMENT TO SAL E WAS ENTERED INTO BY THE SR.NO. NAME OF THE PURCHASER AMOUNT 1. VASCON ENGINEERS P. LTD 65,00,00,000/- 2 TUPE BABAN & OTHERS 169/4 10,00,000/ - 3. TUPE GOPINATH 170/8/2 10,00,000/- 4 TUPE PRAHALLAD LAXMAN 7,50,000/- 5 TUPE SHIVAJIRAO RAMBHOU -170 10,00,000/- 65,37,50,000/- 6 APPELLANT FOR THE AFORESAID LAND WITH M/S VASCON HA DAPSAR VENTURES. ON 5.6.2006 BY WHICH THE APPELLANT RECEIVED AN AMOUNT OF RS.5,00,00,000/- AS SECURITY DEPOSIT AND, THEREAFTER, A SUPPLEMENTARY A GREEMENT WAS EXECUTED ON 28.4.2007, THROUGH WHICH THE SALE OF PROPERTY WAS E XECUTED FOR RS. 65 CRORES TO VASCON HADAPSAR VENTURES. IN BOTH THE AGREEMENTS WI TH M/S VASCON VENTURES I.E. 5 TH JUNE 2006 AS WELL AS 28 TH APRIL 2007, THERE WAS MENTION ABOUT CARVING OUT PLOTS TO THE ORIGINAL OWNERS AT A CONCESSIONAL RATE . IN FACT AS PER CLAUSE 2 OF THE SUPPLEMENTARY AGREEMENT DATED 28.4.2007 CONTAINED T HE FOLLOWING: 'IN TERMS THE SINGLE JOINT VENTURE AGREEMENT DATED 05.06.2006 AN AREA OF 15000/- SQ.FT OF LAND HAS TO BE CARVED OUT FROM THE SAID PROPERTY FOR ALLOTMENT TO THE ORIGINAL OWNERS. IT I S MUTUALLY AGREED THAT SUCH AREA OF 15000 SQ.FT. LAND SHALL BE ALLOTT ED TO THE FOLLOWING PERSONS FROM AMONG THE OWNERS AS REFERRED TO THE SA ID AGREEMENT. THE PROPERTY SO ALLOTTED SHALL BE HANDED OVER TO TH E AFORESAID OWNERS BY 30.06.2007'. THE CLAIM OF THE APPELLANT CONTEMPLATING TRANSFER O F PLOTS CUMULATIVELY ADMEASURING 15000 SQ.FT TO THE AFORESAID FOUR LANDO WNERS HAS BEEN BY WAY OF A MEMORANDUM OF UNDERSTANDING EXECUTED ON 12.7.2005 B Y THE APPELLANT FIRM THROUGH ITS PARTNER SANDEEP MANIKRAO JAGDHANE AND T HE AFORESAID 4 LANDOWNERS, REGARDING THE SALE OF PLOTS AT A CONCESSIONAL RATE OF RS.250 PER SQ.FT. THUS THE SALES EFFECTED BY THE APPELLANT IS AS UNDER WHICH A LSO INDICATES THE COMPARATIVE AREA AND THE RATES EFFECTED BY WAY OF SALES. SALES TO DATE AREA CONSIDERATION RS. EFFECTIVE RATE RS VASCON HADAPSAR VENTURES 28.4.2007 4,82,544 SQ.FT. 65,00,00,000/- 1 ,347- TUPE FAMILY 12.7.2005 15000SQ.FT . 37,50,000 SQ.FT 250/ - 3.4 THE A.O., HOWEVER, DID NOT FIND THE CONTENTION RAISED BY THE APPELLANT TO BE ACCEPTABLE IN RESPECT OF THE CONCESSIONAL SALE O F LAND TO THE FOUR PERSONS AT THE RATE OF RS.250/- PER SQ.FT. BECAUSE OF THE FOLL OWING REASONS: (1) A LARGE CHUNK OF LAND (4,82,544 SQ.FT.) SO LD TO VASCON HADAPSAR VENTURES, THE EFFECTIVE RATE CHARGED PER SQ.FT. AT RS. 1347/-. (2) IT WAS THROUGH THE SAME DEVELOPMENT AGREEM ENT DATED 5.6.2006 AND SUPPLEMENTARY AGREEMENT DATED 28.7.2007 THAT LA ND HAD BEEN SOLD TO VASCON VENTURES AND ALSO TO THE FOUR LANDOWNERS AND THE RATE CHARGED WAS ONLY 250 PER SQ.FT (3) THE TOTAL NUMBER OF ORIGINAL LAND OWNERS W HO HAD SOLD THEIR HOLDINGS WERE 45 AND THE SALE OF PLOTS AT CONCESSIO NAL RATE HAD BEEN MADE ONLY TO 4 PERSONS. (4) THE RULING RATE AROUND THAT OF THE COMPARA BLE PROPERTY WAS IN THE RANGE OF RS.1200 TO 1300 PER SQ.FT. AND THAT A MUCH LARGER PIECE OF LAND HAD BEEN ABLE TO GET A PRICE OF 1347 PER SQ.FT. THU S HELD BY THE A.O. THAT SALE OF PLOTS TO THE 4 PERSONS WAS AT A HIGHLY CONC ESSIONAL RATE OF RS. 250/- AND THE ASSESSEE WAS AWARE OF IT. THE A.O. HAS DISCUSSED THIS ISSUE AT PARA 5.6 OF TH E ASSESSMENT ORDER. THE A.O. HAS, THEREFORE, INFERRED THAT NO REASONABL E BASIS FOR SALE OF LAND AT CONCESSIONAL RATE OF RS. 250/- PER SQ.FT. IN COM PARISON TO THE RATES AT WHICH LAND HAD BEEN SOLD TO VASCON HADAPSAR VENTURE S AND THUS THE DIFFERENCE IN RATES CHARGED BETWEEN THE TWO OF RS.1 097 (1347-250) PER 7 SQ.FT WAS APPLIED BY THE A.O. FOR SALE OF LAND ADME ASURING 15000 SQ.FT TO THE FOUR PERSONS AT RS.1,64,55,000/- WHICH WAS ADDE D TO THE INCOME U/S 28 OF THE IT. ACT 1961. 3.5 DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS CONTENDED THAT THE PLOTS SOLD AT LOWER PRICE WERE SOLD TO THE LANDLORD S FROM WHOM THE PURCHASE OF THE BIGGER PROPERTY WAS DONE AND THE AGREEMENT TO S ELL THE PLOTS WAS DONE IN MAY 2005 WHEREAS THE ENTIRE PROPERTY HAD BEEN NEGOT IATED AND SOLD IN APRIL 2007. IT HAS FURTHER BEEN SUBMITTED THAT IT IS NOT THE CASE OF THE A.O. THAT THE DIFFERENCE IN SALES PRICE HAS BEEN SEPARATELY RECEI VED FROM THE PLOT PURCHASERS AND THEREFORE, IT HAS ALSO BEEN CONTENDED THAT THE A.O. CANNOT SIT IN JUDGMENT ON THE COMMERCIAL DECISION OF THE APPELLANT IN PROPOSI NG AS TO WHAT THE SALE PRICE COULD BE. IT HAS ALSO BEEN STATED THAT THE A.O. HAS ERRED IN CONCLUDING THAT THE DATE OF SALE IS THE DAY WHEN ACCOUNTING OF SALES IS DONE IGNORING THE FACT THAT THE SALES WERE AGREED AT A MUCH EARLIER DATE. THE APPEL LANT HAS ALSO CONTESTED THE ADDITION MADE BY THE A.O. U/S 28 AS IT HAS BEEN STA TED THAT IT DOES NOT CONTAIN ANY SUCH PROVISION FOR TAXING THE INCOME. THUS THE APPELLANT CONTENDS THAT THE ADDITION MADE BY THE A.O. IS WITHOUT ANY BASIS AND IS PURELY ON SPECULATION AND GUESSWORK HAVING NO REGARD TO THE REFERENCE OF FACT S. THE APPELLANT HAS ALSO FILED THE RELEVANT DOCUMENTS IN THE FORM OF MEMORAN DUM OF UNDERSTANDING, THE AGREEMENT WITH LANDOWNERS AND THE SUPPLEMENTARY AGR EEMENT WITH THE PURCHASER. THE APPELLANT HAS RELIED ON THE FOLLOWIN G JUDICIAL DECISIONS. 1 . ACIT VS DHARTI ESTATE (201 1) 51 DTK 28 (MUM) (TM) 2. MORAL TRADING & INVESTMENTS LTD VS DCIT (2010) 127 ITD 127 (DEL) 3. GAYATRI DAIRY PRODUCTS PVT. LTD VS ACIT (2010) 42 DTR (GUJ) 19 4. CIT VS. SMT. POONAM RANI (201 0)326 ITR 223 (DE L) 3.6 IN THE CASE OF ACIT VS. DHARTI ESTATE CITED SUPRA, IT HAS BEEN HELD THAT NO ADDITION CAN BE MADE WITHOUT CORROBORATIVE MATERIAL TO PROVE THAT THE ASSESSEE HAS SOLD THE FLATS AT A PRICE HIGHER THAN THE PRICE RECORDED IN THE BOOKS OF ACCOUNT. IN THE PRESENT CASE ALSO THE A.O. HAS NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT THE APPELLANT HAS SOLD THE LAND ADMEA SURING 15000 SQ.FT AT A PRICE HIGHER THAN RS.250/- PER SQ.FT AS CONTAINED IN THE MEMORANDUM OF UNDERSTANDING DT. 12.7.2005 AND WHICH HAS BEEN ALSO FOLLOWED IN T HE SUBSEQUENT AGREEMENTS ENTERED INTO BY THE APPELLANT WITH M/S VASCON HADAP SAR VENTURES. THE INCOME TAX ACT PURPORTS TO TAX IS BUSINESS PROFITS AND BUS INESS PROFITS ARE THE TRUE PROFITS OF A BUSINESS ASCERTAINED ACCORDING TO COMMERCIAL P RINCIPLES. THERE MAY BE AN EXPENDITURE OR THERE MAY BE A LOSS WHICH MAY NOT BE AN ADMISSIBLE LOSS UNDER ANY OF THE SPECIFIC PROVISIONS OF THE STATUTE AND Y ET SUCH AN EXPENDITURE OR LOSS WOULD HAVE TO BE ALLOWED IN ORDER TO DETERMINE WHAT ARE THE TRUE PROFITS OF A BUSINESS AND IT IS THE DUTY OF EVERYONE WHO HAS ANY THING TO DO WITH TAXING BUSINESS PEOPLE TO UNDERSTAND WHAT ARE THE PRINCIPL ES OF COMMERCIAL EXPEDIENCY. UNLESS ONE UNDERSTAND THESE PRINCIPLES IT IS DIFFIC ULT TO MAKE A PROPER ASSESSMENT, ON A BUSINESS OR ON A BUSINESSMAN, IT W AS SO HELD BY THE BOMBAY HIGH COURT IN THE CASE OF ARUNA MILLS LTD VS CIT (1 957) 31 ITR 153,163 (BOM). IN ORDER TO DETERMINE THE PROFITS AND GAINS OF BUSINESS, THE EXPENSES OR THE OBLIGATIONS WHICH HAVE BEEN INCURRED HAVE TO BE SET OFF AGAINST THE RECEIPTS, AS THE PROFITS OR GAINS OF A TRADE OR BUSINESS ARE THE SURPLUS BY WHICH THE RECEIPT FROM THE TRADE OR BUSINESS EXCEED THE EXPENDITURE N ECESSARY FOR THE PURPOSE OF EARNING SUCH PROFITS OR GAINS. IN THE APPELLANT'S C ASE, THE LIABILITY TO SELL THE LAND AT A CONCESSIONAL RATE HAD ALREADY ACCRUED WHEN THE MOD WAS SIGNED ON 12.7.2005 AND THAT CONTRACTUAL OBLIGATION WAS DISCH ARGED SUBSEQUENTLY WHEN THE FINAL SALE OF THE SAID LAND TOOK PLACE ON 28.04.200 7. THE A.O. HAS NOT DOUBTED THE BONA FIDE OF THE AGREEMENT ENTERED INTO BY THE APPELLANT AT ANY POINT OF TIME DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AP PELLANT IN THE GIVEN FACT AND 8 CIRCUMSTANCES WAS UNDER A DEFINITE OBLIGATION TO PR OVIDE LAND AT A CONCESSIONAL RATE OF RS.250 PER SQ.FT. TO THE 4 LAND OWNERS AS P ER THE MOD SIGNED BETWEEN THEM. THE A.O. HAS NOT GONE INTO THE GENUINENESS OF THE MEMORANDUM OF UNDERSTANDING AND HAS ALSO NOT QUESTIONED ITS CONTE NT. THE ASSESSING OFFICER HAS ADOPTED THE SALE CONSIDERATION AT 1347 PER SQ.FT. A S AGAINST 250 PER SQ. FT. DECLARED BY THE ASSESSEE. IN THE ABSENCE OF ANY PRO OF OR EVIDENCE THAT HIGHER CONSIDERATION HAS BEEN PASSED ON TO THE APPELLANT, NO ADDITION CAN BE MADE AND THE A.O. HAS ALSO NOT BROUGHT ON RECORD ANY SUCH EV IDENCE WARRANTING ADDITION. IT IS ALSO RELEVANT TO POINT OUT THAT THE MOU WAS S IGNED BY THE APPELLANT WITH THE LANDOWNERS NEARLY 2 YEARS BEFORE THE ACTUAL SALE TO OK PLACE TO M/S.VASCON HADAPSAR VENTURES WHEN THE SAID LAND WAS YET TO BE DEVELOPED. THE APPELLANT'S CONTENTION AND REASONS FOR SALE ON A CONCESSIONAL R ATE HAS ALSO NOT BEEN DISPUTED BY THE A.O. IN THE CASE OF DEVAGHI BEVERAGES LTD (2 008) 296 ITR 41 (DEL) IT WAS HELD, IN RELATION TO DISCOUNT GRANTED BY THE AS SESSEE IN BUSINESS AND CLAIMED AS A DEDUCTION THAT REASONABLENESS COULD BE GONE IN TO FOR THE PURPOSE OF DETERMINING WHETHER THAT AMOUNT WAS ACTUALLY SPENT OR NOT, BUT IF IT IS FOUND THAT THERE IS NEXUS BETWEEN EXPENDITURE AND PURPOSE OF B USINESS, DEPARTMENT CANNOT BE ALLOWED TO SUBSTITUTE ITS OPINION FOR THAT OF AS SESSEE AS IF DEPARTMENT WERE ITSELF RUNNING THE BUSINESS. 3.7 THE A.O. HAS SIMPLY ADOPTED THE DIFFERENCE BET WEEN THE RATE OF LAND SOLD TO VASCON HADAPSAR VENTURES AND THE 4 LANDOWNERS WH ILE MAKING THE ADDITION, HOWEVER, WHILE DOING SO HAS NOT BROUGHT ON RECORD A NY EVIDENCE WHICH WAS CONTRARY TO THE DETAILS AND SUBMISSIONS FILED BY TH E APPELLANT. THE COMPARISON OF THE SALES AS DONE BY THE A.O. BETWEEN VASCON HADAPS AR VENTURES AND THE 4 LANDOWNERS OF THE TUPE FAMILY IS ALSO NOT CORRECT B ECAUSE OF THE FACT THAT MOU FOR THE SALE OF 15000 SQ. FT. OF LAND WITH TUPE FAM ILY WAS EXECUTED ON 12.07.2005, FALLING IN F.Y. 2005-06 AND THE SALE TO VASCON HADAPSAR VENTURES WAS DONE IN THE F.Y. 2007-08 ON 28.04.2007, WHICH I S DISTANCED IN TIME AND ARE INDEPENDENT TRANSACTIONS AND WHICH WOULD TO SOME EX TENT JUSTIFY THE LOWER RATE CHARGED BY THE APPELLANT FROM THE LANDOWNERS. FURTH ER, THE APPELLANT HAD PURCHASED THE LAND ADMEASURING 5,85,344 SQ. FT. ARE A FROM THE LANDOWNERS FOR A TOTAL CONSIDERATION OF RS.4,76,00,000/- ON 29.01.20 04 AND THE COST PER SQ.FT. AREA WORKS OUT TO AROUND RS. 81.32 PER SQ.FT. THE MOU SI GNED WITH THE 4 LANDOWNERS WAS EXECUTED ON 12.07.2005 WHEN THE RATE CHARGED WA S 250 PER SQ. FT. WHICH INDICATES THAT WITHIN A SPAN OF A YEAR AND HALF THE LAND COST HAD INCREASED THREE TIMES SINCE THE TIME IT WAS PURCHASED. THE TIMING O F THE AGREEMENT WHICH HAS BEEN ENTERED INTO BY THE APPELLANT ALSO FALLS IN TH E PERIOD WHEN THE ECONOMIC SCENARIO OF THE CITY WAS CHANGING AND THE PRICES HA D STARTED ESCALATING. THOUGH THIS ASPECT HAS NOT BEEN EXAMINED OR CONSIDERED AT THE ASSESSMENT STAGE, BUT AT THE SAME TIME THIS FACTOR CANNOT BE OVERLOOKED ALTO GETHER ESPECIALLY WHILE EVALUATING THE RATE OF THE LAND. 3.8 IN THE CASE OF CIT VS SMT. POONAM RANI CITED SUPRA, THE DELHI HIGH COURT IN A CASE WHERE THE ACCOUNTS OF THE ASSESSEE WAS REJECTED BY THE A.O., HELD THAT WHEN FULL PARTICULARS HAVE BEEN PROVIDED BY THE ASSESSEE AND NO DISCREPANCY IS POINTED OUT BY THE A.O. IN THE BOOKS OF ACCOUNTS, THERE CAN BE NO GROUND FOR REJECTION OF BOOK RESULTS. THE A.O. IN T HE PRESENT CASE HAS NOT POINTED OUT ANY MISTAKE IN THE MATERIAL BROUGHT ON RECORD BY THE APPELLANT, HOWEVER ON THE BASIS OF A CALCULATION BASED ON PRES UMPTION HAS ADOPTED THE DIFFERENTIAL RATE IN ARRIVING AT AN AMOUNT OF RS.1, 64,55,000/- WHICH PRIMA FACIE IS NOT CORRECT. 3.9 IN VIEW OF THE ABOVE FACT AND THE RATIO OF THE JUDICIAL DECISIONS THE ADDITION MADE BY THE AO IS DIRECTED TO BE DELETED A ND GROUND NO.1 RAISED BY THE APPELLANT IS LIABLE TO BE ALLOWED. 9 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E-TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CA SE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN ALLOWING THE ASSESSEE'S APPEAL INSTEAD OF CONFIRMIN G THE ADDITION OF RS.1,64,55,000/- MADE BY THE ASSESSING OFFICER U/S 28 OF THE INCOME-TAX ACT, 1961. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN GIVING UNDUE CREDENCE TO THE FACT THAT THE LAND SOLD TO TH E FOUR PERSONS AT RS. 250/- WAS PURCHASED @ RS. 81.32 PER SQ. FT. JUST ONE AND HALF YEAR AGO WITHOUT APPRECIATING THE CORRESPONDING FACT THAT THE LAND SOLD TO M/S VA SCON HADAPSAR VENTURES WAS ALSO PURCHASED AT THE SAME TIME AND STILL WAS SOLD TO M/S VASCON HADAPSAR VENTURES @ 1,347/- PER SQ. FT. AND THAT TOO WITHOUT CARRYING OUT ANY DEVELOPMENT WORK. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN FAILING TO APPRECIATE THAT IN THE ORIGINAL PURCHASE AGREEME NT ENTERED INTO BY THE ASSESSEE WITH THE FOUR PERSONS, THERE WAS NO CONDIT ION THAT REQUIRED THE ASSESSEE TO SELL THE DEVELOPED PLOTS TO THESE FOUR PERSONS I N FUTURE. 5. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGE D AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT (APPEALS) MAY BE VACATED A ND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OR ALL THE GROUNDS OF APPEAL. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT TH E ASSESSEE HAD ENTERED INTO A SINGLE SALE TRANSACTION FOR TRANSFER OF PROPERTY AT HADAPSAR, PUNE TO M/S. VASCON HADAPSAR VENTURES AND 4 MEMBERS OF THE TUPE FAMILY, THE DETAILS OF WHICH ARE ALREADY MENTIONED AT PARA 3.3 OF THE C IT(A)S ORDER WHICH HAS BEEN REPRODUCED AT PARA 4 OF THIS ORDER. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE AFORESAID PROPERTY WAS PURCHASED BY THE AS SESSEE VIDE AGREEMENT DATED 31-01-2004 FROM THE MEMBERS OF THE TUPE FAMIL Y. THERE IS ALSO NO DISPUTE TO THE FACT THAT A MEMORANDUM OF UNDERSTAND ING WAS EXECUTED ON 10 12-07-2005 AGREEING TO SELL THE PLOTS AT A CONCESSI ONAL RATE OF RS.250/- PER SQ.FT. TO 4 MEMBERS OF THE TUPE FAMILY. THERE IS A LSO NO DISPUTE TO THE FACT THAT AGREEMENT FOR SALE WAS ENTERED INTO BY THE ASS ESSEE FOR THE AFORESAID LAND WITH M/S. VASCON HADAPSAR VENTURES ON 05-06-20 06. THERE IS ALSO NO DISPUTE TO THE FACT THAT A SUPPLEMENTARY AGREEMENT WAS EXECUTED ON 28-04- 2007 THROUGH WHICH THE PROPERTY WAS SOLD TO VASCON HADAPSAR VENTURES FOR A CONSIDERATION OF RS.65 CRORES. THERE IS ALSO NO DISPUTE TO THE FACT THAT IN BOTH THE AGREEMENTS WITH VASCON HADAPSAR VENTURE S, I.E. 05-06-2006 AS WELL AS 28-04-2007 ASSESSEE MENTIONED ABOUT CARVING OUT PLOTS TO THE ORIGINAL OWNERS AT A CONCESSIONAL RATE. THE ASSESS ING OFFICER HAS NOT DISPUTED THE GENUINENESS OF THE MEMORANDUM OF UNDER STANDINGS AND HAS ALSO NOT QUESTIONED ITS CONTENTS. 6.1 WE FIND THE GRIEVANCE OF THE REVENUE IS THAT TH E ASSESSEE HAS SOLD THE LAND TO VASCON HADAPSAR VENTURES AT AN EFFECTIVE RA TE OF RS.1,347 PER SQ.FT. AND THEREFORE THE ASSESSEE SHOULD HAVE REALISED THE SAME PRICE FROM TUPE FAMILY MEMBERS TOWARDS THE SALE OF THE LAND INSTEAD OF RS.250 PER SQ.FT. SINCE THE ASSESSEE HAS RECEIVED RS.250/- PER SQ.FT. , THEREFORE THE DIFFERENTIAL VALUE OF RS.1,64,55,000/- HAS BEEN RIGHTLY ADDED BY THE ASSESSING OFFICER U/S.28 OF THE INCOME TAX ACT. THE OTHER GRIEVANCE OF THE REVENUE IS THAT ALTHOUGH THERE WERE ABOUT 45 NUMBER OF ORIGINAL LAN D OWNERS, HOWEVER, THE ASSESSEE HAS SOLD LAND AT CONCESSIONAL RATE TO 4 PE RSONS AND THEREFORE THERE WAS NO REASONABLE BASIS FOR SALE OF LAND AT CONCESS IONAL RATE TO THE 4 ERSTWHILE LAND OWNERS. 6.2 AS MENTIONED EARLIER, THE GENUINENESS OF THE AG REEMENT AS WELL AS SUPPLEMENTARY AGREEMENT TO SELL THE LAND AT A CONCE SSIONAL RATE TO THE 4 11 MEMBERS OF THE TUPE FAMILY HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THERE IS NOTHING ON RECORD TO SUGGEST THA T THE TUPE FAMILY MEMBERS HAD PAID HIGHER AMOUNT THAN THE AMOUNT AGRE ED UPON AS PER THE MOU WHICH HAS NOT BEEN ACCOUNTED FOR BY THE ASSESSE E. WE FURTHER FIND THE LD.CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE LIABILITY TO SELL THE LAND AT A CONCESSIONAL RATE HAD ALREADY ACCRUED WHE N THE MOU WAS SIGNED ON 12-07-2005 AND THAT CONTRACTUAL OBLIGATION WAS D ISCHARGED SUBSEQUENTLY WHEN THE FINAL SALE OF THE SAID LAND TOOK PLACE ON 28-04-2007. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO COULD NOT CONTROVE RT THE FINDINGS GIVEN BY THE LD.CIT(A) THAT THE MOU WAS SIGNED BY THE ASS ESSEE WITH THE LAND OWNERS NEARLY 2 YEARS BEFORE THE ACTUAL SALE TOOK P LACE TO VASCON HADAPSAR VENTURES WHEN THE SAID LAND WAS YET TO BE DEVELOPED . FURTHER, THE CONTENTION OF THE ASSESSEE AND REASONS FOR SALE OF LAND AT A CONCESSIONAL RATE HAS ALSO NOT BEEN DISPUTED BY THE ASSESSING OFFICER . 6.3 WE FIND THE ORDER OF THE CIT(A) ON THIS ISSUE I S VERY EXHAUSTIVE AND IS BASED ON SOUND LEGAL PRINCIPLES WHEREIN HE HAS R ELIED ON VARIOUS JUDICIAL DECISIONS. THE LD. DEPARTMENTAL REPRESENTATIVE COU LD NOT CONTROVERT THE FINDINGS GIVEN BY THE LD.CIT(A), WHICH IN OUR OPINI ON IS A REASONED ONE. MERELY BECAUSE THE ASSESSEE HAS SOLD THE LAND AT CO NCESSIONAL RATE TO THE ORIGINAL OWNERS AS PER THE MOU SIGNED, THE ASSESSIN G OFFICER, IN OUR OPINION, IS NOT JUSTIFIED IN BRINGING TO TAX THE AM OUNT WHICH ACCORDING TO HIM IS THE DIFFERENTIAL PRICE HAD THE LAND BEEN SOL D AT HIGHER PRICE AT WHICH IT WAS SOLD TO M/S. VASCON HADAPSAR VENTURES. AS A LREADY MENTIONED EARLIER, NEITHER THE ASSESSING OFFICER HAS DOUBTED THE GENUINENESS OF THE AGREEMENTS/MOUS NOR BROUGHT ANYTHING ON RECORD TO S UGGEST THAT SOMETHING MORE THAN WHAT HAS BEEN RECEIVED BEING @ RS.250/- PER SQ.FT. BY 12 THE ASSESSEE HAS BEEN PAID BY THE 4 PERSONS. IN TH IS VIEW OF THE MATTER AND IN VIEW OF THE DETAILED REASONINGS GIVEN BY THE LD. CIT(A) WE FIND NO INFIRMITY IN HIS ORDER. ACCORDINGLY, THE SAME IS U PHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF SEPTEMBER 2013 SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. P ANDA) JUDICIAL MEMBER ACCOU NTANT MEMBER PUNE DATED: 27 TH SEPTEMBER 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II, PUNE 4 CIT-II, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY I TAT, PUNE BENCHES, PUNE