M/S VIKRAM DEVELOPERS PRIVATE LIMITED, MUMBAI V. PRINCIPLE COMMISSIONER OF INCOME TAX-8, MUMBAI

ITA 1357/MUM/2023

AI Insights

The case involves M/s Vikram Developers Private Ltd., which appealed against the order of the Principal Commissioner of Income Tax, Mumbai-8, setting aside the assessment order for the Assessment Year 2018-19. The original assessment was completed under Sections 143(3), 143(3A), and 143(3B) of the Income Tax Act, 1961, without any additions or disallowances. The PCIT later found the assessment order to be erroneous and prejudicial to the interest of the Revenue, leading to a revision under Section 263. The Tribunal examined whether the PCIT was justified in setting aside the original assessment order, focusing on the adequacy of the inquiries made by the Assessing Officer and the application of Section 43CA concerning the stamp duty and agreement values of certain flats.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113481 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 20-06-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 11-05-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Revision of order; Corroborative evidences; Set aside
• Section: 263; 43CA; 143(3); 142(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI SHRI B.R. BASKARAN, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 1357/MUM/2023 (Assessment Year: 2018-19) M/s Vikram Developers Private Ltd., 2 nd Floor, Pragji Bhavan (Vikaram Bhavan), Ranade Road, Dadar, Mumbai - 400028 [PAN: AABCV3480H] Principal Commissioner of Income tax, Mumbai – 8, 611, Aaykar Bhavan, Mumbai - 400020 ............... Vs ................ Appellant Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri Navin B Gandhi Shri Ankush Kapoor Date Conclusion of hearing Pronouncement of order : : 21.06.2023 19.07.2023 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant has challenged the order, dated 30/03/2023, passed by the Ld. Principal Commissioner of Income Tax- Mumbai-8 [hereinafter referred to as ‘the PCIT’] under Section 263 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] pertaining to the Assessment Year 2018-19, whereby the PCIT had set aside the Assessment Order dated 27/03/2021, passed under Section 143(3) read with Sections 143(3A) & 143(3B) of the Act holding the same to be erroneous in so far as prejudicial to the interest of the Revenue. 2. The Appellant has raised the following effective grounds of appeal: ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 2 Ground 1 The revision proceedings and the revision order u/s 263 dated 30-03- 2023 is invalid and bad in law because, a) Hon'ble PCIT-8 has invoked revisional jurisdiction without satisfying the essential condition precedent as required under section 263 of the Act. b) The assessment order u/s 143(3) r.ws 143(3A) and 143(3B) dated 27-03-2021 passed by the Ld AO is neither erroneous/ unsustainable in law. c) The hon'ble PCIT -8 has set aside the assessment order passed u/s 143(3) dated 27-03-2021 with instruction to make due verification of the facts which the Ld AO had already verified during the original assessment proceedings u/s 143(3). The said original assessment order is passed not on assumption but with due application of mind and after making adequate enquiries as investigator. d) The hon'ble PCIT -8 has set aside the original assessment order without making any fresh/ adequate enquiries/ verification but merely on the basis of assumption/ surmise and conjunction. Relief Claimed The appellant company humbly request your honor to set aside the revision order u/s 263 dated 30-03-2023. Ground 2 The Hon'ble PCIT, Mumbai -8 has erred in setting aside the compulsory complete scrutiny assessment order dated 27-03-2021 passed u/s 143(3) r.w.s 143(3A) & 143(3B) by Ld AO (NEAC) on the ground that the same order is erroneous and prejudicial to the interest of the revenue. The appellant company submits that the said assessment order is neither erroneous nor prejudicial to the interest of the revenue. a) The Ld AO vide his notice u/s 143(2) dated 28-09-2019 had informed the appellant company that the return of income for AY 2018-19 was selected for complete scrutiny for the following reason, ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 3 "Specific Information pointing tax evasion has been received from other agency" b) The Ld AO has called for vide his notice u/s 142(1) dated 14-01- 2021, 04-03- 2021 and 11-03-2021 perused and consider all the relevant documents such as, i) Registered Agreement for Sale along with letter of allotment and relevant extract of bank statement of all the seven agreement of sale registered during the year under appeal. ii) Stamp duty value of each registered agreement for sale on the date of registration as well as on the date of allotment letter. iii)Final Accounts for FY 2017-18. iv) Justification and show cause for why difference in agreement value and stamp duty value should not be added u/s 43CA. c) After going through the written submission e furnished by the appellant company on 20-01-2021,08-03-2021 and 15-03-2021the Ld AO was satisfied that no addition u/s 43CA warranted. In the said order there is no incorrect assumption of facts or incorrect application of law and is made after taking all the relevant documents, justification, inquiries/verification into consideration and does not warrant any revision u/s 263. Relief Claimed The revision order dated 30-03-2023 passed u/s 263 setting aside the assessment order dated 27-03-2021 is not warranted and may please be set aside. Ground 3 The appellant company prays for your leave to add, alter & amend the above ground of appeal, if necessary.” 3. The relevant facts in brief are that the Appellant, a company incorporated under the Companies Act, 1956 and engaged in the business of construction and development of immovable property, filed return of income for the Assessment Year 2018-19 on ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 4 22/03/2019 declaring total income from business and profession of INR 1,16,980/-. The aforesaid return was processed under Section 143(1)(a) of the Act on 13/11/2019 without any adjustments. Subsequently, the return filed by the Appellant was selected for scrutiny and notice, dated 28/09/2019, was issued to the Appellant under Section 143(2) of the Act for the following reason – ‘specific information pointing tax evasion has been received from other agency’. The Assessing Officer completed assessment vide Assessment Order, dated 27/03/2021 passed under Section 143(3) read with Section 143(3A) and 143(3B) of the Act without making any addition/disallowance. 4. Subsequently, the PCIT on perusal of record found a view that the Assessment Order was erroneous in so far as prejudicial to the interest of Revenue and therefore, issued notice under Section 263(1) of the Act. The PCIT noted that during the relevant previous year, the Appellant was engaged in the business of construction and was developing project namely Uday Building at Mulund (East), Mumbai [hereinafter referred to as ‘the Construction Project’]. The Appellant had entered into Agreement for Sale of Flat in relation to 7 units/flats in the Construction Project and had got the same registered during the relevant previous year. As per the details filed by the Appellant during the assessment proceedings, the stamp duty value, as on the date of allotment, of 3 flats/units out of the aforesaid 7 flats/units in respect of which agreement for sale was registered during the relevant previous year was less than the agreement value and therefore, provisions of Section 43CA of the Act were attracted. Therefore, the PCIT formed a view that the aggregate difference of INR 14,84,903/- in the stamp duty valuation and the agreement value of the 3 flats/units should have been ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 5 added to the total income of the Appellant. Since the Assessing Officer failed to make the aforesaid addition, the Assessment Order, dated 27/03/2021, passed by the Assessing Officer was erroneous. Further, the PCIT formed a view that the Assessment Order has been passed without proper enquiry/verification as the relevant supporting documents were not on record. In response, the Appellant filed submissions supporting the Assessment Order and reiterating submission made before the Assessing Officer. However, the PCIT was not convinced and invoked provisions of Explanation 2(a) and 2(c) to Section 263(1) of the Act to set aside the Assessment Order, dated 27/03/2021 and issued directions the Assessing Officer to pass Assessment Order afresh after giving the Appellant an opportunity of being heard vide order dated 30/03/2023 passed under Section 263 of the Act. 5. Being aggrieved, the Appellant has preferred the present appeal before the Tribunal on the grounds reproduced in paragraph 2 above. All the grounds are directed against the order of revision passed by the PCIT under Section 263 of the Act and are therefore, taken up together hereinafter. 6. The Ld. Authorized Representative for the Appellant reiterated the submissions made before the Assessing Officer and the PCIT. The thrust of the submissions of the Ld. Authorized Representative for the Appellant was on the fact the Assessment Order was passed after due enquiry/verification of the transactions with the customers/buyers by the Assessing Officer. The PCIT erred in concluding that the relevant material was not on record as all the relevant documents/details were placed before the Assessing Officer during the course of assessment proceedings. In this regard, he ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 6 took us through the notices issued during the course of assessment proceedings and the response furnished by the Appellant forming part of the paper-book. He further submitted that the PCIT was incorrect in invoking provisions of Explanation 2 to Section 263 of the Act. Since there was no transfer/sale of flats/units during the relevant previous year, the provisions of Section 43CA of the Act were not attracted. 7. Per contra, the Ld. Departmental Representative supported the order passed by the PCIT under Section 263 of the Act and vehemently contended that admittedly no documents/details relating to stamp duty valuation of the flats/units were on record and therefore, the Assessing Officer did not have any basis to conclude that no addition was required to be made under Section 43CA of the Act. Ld. Departmental Representative further submitted that the details/information furnished by the Appellant itself showed that there was difference in the stamp duty value and the agreement value, and therefore, the Assessing Officer was duty bound to carry out further inquiry and investigation. 8. We have considered the rival submissions, perused the material on record, and examine the position in law. 9. On perusal of the record, it emerges that the case before us is not one where no inquiry/verification was carried out by the Assessing Officer. Though the Assessing Order does not record the specific submission/findings on the issue under consideration, we find that during the assessment proceedings specific queries were raised in relation thereto. 10. Vide notice, dated 14/01/2021, issued under Section 142(1) of the ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 7 Act, the Appellant was called upon to furnish the following details: "1. Furnish complete details of property sold/purchased during the year under consideration along with supporting evidence ie, copy of sale/purchase deed. Address of Property Date of purchase/ sale Purchase sale/ consideration Stamp Value Details of owner and share of each owner Payment /Receipts Schedule with date and time of payment /receipts 2. Furnishing details of capital gain computation on sale of property during the year under consideration. 3. Please state whether you have sold/purchased the property as per govt. circle rate. If not, please furnish justification and you are show caused why the difference of amount as per circle rate & as per stamp duty valuation/actual amount paid/received should not be added & covered u/s 50C/56(2)(vii)(b)/43CA of 1.T.Act 4. Please furnish computation of income. 5. Details of your Bank Accounts indicating names and complete postal address of the Bank Account No, type of Account and names of the persons authorized to operate the said accounts along with Bank reconciliation. Also furnish details of bank accounts as on date operative during FY 2017- 18." 10.1 In response the Appellant filed reply letter, dated 20/01/2021, furnishing, inter alia, explaining that the Appellant is engaged in the business of construction. During the relevant previous year, the Appellant was developing its Construction Project [i.e. Uday Building situated at Survey No. 124, Hissa No. 5, CTS No. 1130 at Mulund (East), Mumbai]. As on last day of the relevant previous year (i.e. ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 8 31/03/2018) the construction was completed only upto plinth level as the construction activity at the Construction Project had slowed down on account of financial problems faced by the Appellant at the relevant time. However, the ‘Agreement for Sale’ of flat/unit was executed by the Appellant with 7 customers/buyer who had given advances in the earlier years for the purchase of units/flats and the same were registered with the Stamp Authorities during the relevant previous year. Neither any sale of flat/unit was booked nor was possession of any flat/unit transferred by the Appellant during the relevant previous year. Thus, the Appellant did not earn any income from sale/transfer of flats/units of the Construction Project during the relevant previous year. Therefore, for the relevant previous year the Appellant booked gross construction profits of INR 9,55,688/- by following percentage completion method of accounting in relation to construction activity undertaken by the Appellant and offered to tax income of INR 1,16,980/- in the return of income which was accepted by the Appellant. The Appellant also provided brief summary of the construction account for the relevant previous year: Particulars Amount (INR) Amount (INR) Opening WIP as on 01.04.2017 3,85,96,706/- Add: Purchase and Expense for Construction Cement Concrete Purchase M S Flat Bar, TMT Bar & Bright Bar Purchase 9,76,998/- Contractor Fees 25,00,000 Testing & Survey Expenses 19,790 Water Pump Hire Charges 54,000 Pestcontrol expensesw 40,000 Other Miscellaneous expenses 1,92,580 60,97,606/- Add: Architect Fees 4,50,000/- Add: Construction Profit 9,55,688/- Closing WIP as on 31.03.2018 4,61,00,000/- 10.2. Further, vide reply letter, dated 20/01/2021, the Appellant also provided, in tabular form, the following details of the all ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 9 customers/buyers (except Mrs. Bhavna Hemant Gada) who paid advance 5 to 6 years ago and along with the relevant extracts of the Agreement for Sale registered during the relevant as annexures thereto: Buyer details Proposed Flat No. Area Agreement Value Advances Received as per books till 31.03.2018 Annexure No. Mr. Mahadeo Vithoba Masurakar PAN:AFBPM5876J Address: Flat No E 14,Gurupushyamrut CHS Ltd, Vidyalaya Marg. Mulund East Mumbai-400081 802 on 8 th Floor 741 Sqft 52,00,000 10,35,800 Mr Sagar Ramchandra Parte PAN: ANUPP2501Q Flat No A-4 Rajeshree CHS Ltd, Bhoir Nagar Vidyalaya Marg, Mulund (East), Mumbai-400081 1501, 15 th Floor 760 Sqft 48,43,800 11,82,814 I Mr Shripad Nilkanth Deshmukh PAN: AIWPD0482F C – 403, Ashakunj, Samarth Gardern, Datta Mandir Road, Bhandup West, Mumbai-400078 1402, 14 th Floor 741 Sqft 47,00,000 40,00,000 II Mr Suhas Yeshwant Sawant PAN: AFZPS3704F Flat No 2,Building No 2, 602, 6 th Floor, 741 Sqft 62,51,000 18,13,000 III ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 10 L4, Vakratunda CHS Ltd, Kashish Park, LBS Marg, Opp Raheja Gardern, Thane West- 400604 Mr Parag Nilkanth Deshmukh PAN : AJIPD8137G C-403, Ashakunj Samarth Gardern, Datta Mandir Road, Bhandup West, Mumbai – 400078 1401, 14 th Floor 760 Sqft 54,00,000 10,00,000 IV Mr. Mandar Madhukar Sugdare 303, Viraj, Chaft 603, 6 th Floor 579 Sqft 43,50,000 10,72,000 V 10.3. The Appellant also furnished the details of stamp duty value and the agreement value in the following format: Name Buyer Date of Allotment of Flat Stamp duty value on the date of allotment (Rs.) Agreement/Allot ment Value of the flat Stamp duty value on the date of registering the flat in FY 17-18 Mr. Mahadeo Vithoba Masurkar 09-02-10 35,95,547/- 52,00,000/- 91,58,877/- Mr. Sagar Ramchandra Parte 07-04-12 38,61,889/- 48,43,800/- 98,37,326/- Mr. Shripad Deshmukh 26-07-12 51,76,457 47,00,000 95,95,571/- Mr. Suhas Yeshwant Sawant 12-03-10 35,95,547 62,51,000/- 91,59,408 ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 11 Mr. Parag Nilkanth Deshmukh 01-05-13 60,99,764 54,00,000/- 98,37,326/- Mr. Mandar Madhukar Sugdare 01-02-14 46-58-692 43,50,000/- 71,49,507/- 11. Since the Appellant failed to provide details of one of the customer/buyers executing Agreement for Sale (i.e. Mrs. Bhavna Hemant Gada), another notice dated 04/03/2021, issued under Section 142(1) of the Act was issued to the Appellant calling upon the Appellant to furnish relevant details/documents. 11.1. In response, the Appellant filed reply letter, dated 08/03/2021, furnishing the relevant details along with relevant extract of the Agreement for Sale, dated 09/10/2017. 12. Few days thereafter, another notice, dated 11/03/2021, was issued to the Appellant under Section 142(1) of the Act requiring the Appellant to furnish following information/document: - Copy of allotment letter of each sale agreement alongwith receipts of advance - Copy of balance sheet and P&L a/c for F.Y. 2017-18 - Copy of Bank statement reflecting payment received for sale consideration - Documents related to booking of flats 12.1. In compliance with the above notice, dated 11/03/2021, the Appellant filed reply letter, dated 15/03/2021, providing necessary details and documents which included allotment letter and the relevant extract of the bank statement of the Appellant reflecting ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 12 advance receipt from all the seven customers/buyers. 13. Thereafter, the Assessing Officer completed the assessment vide Final Assessment Order, dated 27/03/2021, passed under Section 143(3) read with Section 143(3A) and 143(3B) of the Act accepting the returned income as assessed income without making any addition/disallowance. 14. Thus, on perusal of the notices issued during the course of assessment proceedings, the replies filed by the Appellant in response thereto and the Assessment Order, all of which formed part of the ‘Record’ in terms of Explanation 1(b) to Section 263(1) of the Act, we find that in the present case relevant enquiry/verification was conducted by the Assessing Officer. 15. The Appellant had contended before the Assessing Officer that there was no sale/transfer of flat/unit in the Construction Project during the relevant year and therefore, the provisions of Section 43CA of the Act were not attracted. The aforesaid contention of the Appellant was accepted by the Assessing Officer and no addition was made. We find that the view taken by the Assessing Officer is a plausible view given the fact that material forming part of assessment record showed that only agreement for sale was executed/registered and there was no transfer of any asset, being flat/unit in Construction Project, during the relevant previous year. Therefore, the documents relating to the basis of the stamp duty valuation of the 7 flats/units were not necessary documents. Accordingly, in our view, the fact that the aforesaid documents were not placed before the Assessing Officer by the Appellant during the assessment proceedings or that the Assessing Officer had failed to inquire/verify the aspect of stamp duty valuation would not trigger ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 13 the provision of Explanation 2 to Section 263 of the Act. In our view, the PCIT had proceeded upon incorrect understanding of facts. While returning a finding in paragraph 5.4 of the order impugned that the Appellant had not provided agreement for sale and the bank statements. The finding returned by the PCIT is contrary to the material forming part of the assessment record. The findings returned by the PCIT in Paragraph 5.3 of the order impugned that the Appellant has not shown income as per percentage completion method is also factually incorrect. The PCIT had failed to appreciate that the summary of construction account filed by the Appellant vide reply letter, dated 20/01/2021, also contained the details of ‘Construction Profits’ of INR 9,55,688/-. The Appellant also provided brief summary of the construction account for the relevant previous year: Particulars Amount (INR) Amount (INR) Opening WIP as on 01.04.2017 3,85,96,706/- Add: xx xx 60,97,606/- Add: xx xx 4,50,000/- Add: Construction Profit 9,55,688/- Closing WIP as on 31.03.2018 4,61,00,000/- While the Appellant had disclosed ‘Nil’ revenue from operations in the Profit and Loss Account for the relevant previous year, the Appellant has recognized construction profits of INR 9,55,688/- following percentage completion method and offered net income of INR 1,16,980/- to tax which has been accepted by the Assessing Officer. We note that the averment made by the Appellant that the Construction Project was completed only at the plinth level has not been disputed by the PCIT. We have already concluded herein above that the assessing officer has taken a plausible view as regards non-applicability of provision of Section 43CA of the Act is concerned. ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 14 16. Therefore, in view of the above, we hold that the Ld. PCIT erred in exercising power of revision in the facts and circumstances of the present case. The order, dated 30/03/2023, passed by the PCIT under Section 263 of the Act is set aside and the Assessment Order, dated 27/03/2021, is reinstated. Ground No. 1 & 2 raised by the Appellant are allowed. 17. In result, the present appeal is allowed. Order pronounced on 19.07.2023. Sd/- Sd/- (B.R. Baskaran) Accountant Member (Rahul Chaudhary) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 19.07.2023 Alindra, PS ITA No.1357/Mum/2023 (Assessment Year: 2018-19) 15 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध, आयकर अपीलीय अदधकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदधकरण, म ुंबई / ITAT, Mumbai