Nath Developers, Hyderabad, Hyderabad V. ITO, Ward-4(2), Hyderabad, Hyderabad

ITA 1481/HYD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1947 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-08-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 03-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Keywords: Unexplained investment; Principle of natural justice
• Section: 143(3)

Judgement Text

ITA NO 1481 OF 20 16 NATH DEVELOPERS HYDERABAD. PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1481/HYD/2016 (ASSESSMENT YEAR: 2009-10) M/S. NATH DEVELOPERS HYDERABAD PAN: AAD FN6645H VS INCOME TAX OFFICER WARD 4(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS FOR REVENUE : SHRI NIL ANJAN DEY, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2009-10 AGAIN ST THE ORDER OF THE CIT (A)-1, HYDERABAD, DATED 22.07. 2016. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUN DS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT (A)-I, IS BASED ON SURMISE, CAPRICE AND FULL OF CONJECTURES AND IS AGA INST THE PRINCIPLES OF EQUITY AND NATURAL JUSTICE. 2. THE LEARNED CIT (A)-I HAS COMPLETED ASSESSMENT BASED ON INFORMATION AVAILABLE ON RECORD AND ERRED IN DRAWING CONCLUSION CONTRARY TO RECORD PRODUCED WITH OUT STATING ANY REASON. 3. THE LEARNED CIT (A)-I ERRED IN RESORTING TO ESTI MATION OF SALES VALUE CONTRARY TO ACTUAL SALES VALUE AS PE R RECORDS WITHOUT ANY GROUND. 4. THE LEARNED CIT (A)-I ERRED IN CONFIRMING THE AD DITION OF RS.11,50,223/- REJECTING THE EXPLANATION OFFERED BY APPELLANT WITHOUT STATING ANY REASONS AND WITHOUT DATE OF HEARING: 08.08.2018 DATE OF PRONOUNCEMENT: . 0 8 .2018 ITA NO 1481 OF 20 16 NATH DEVELOPERS HYDERABAD. PAGE 2 OF 6 BRINGING ANY EVIDENCE FOR RECEIPT OF SUCH INCOME BY APPELLANT ON RECORD. 5. THE LEARNED CIT (A)-I ERRED IN ENHANCING THE ADD ITION TO INCOME OF RS.7,45,054 WITHOUT HAVING ANY EVIDENC E FOR SUCH RECEIPT OF INCOME AND WITHOUT STATING ANY BASIS FOR DISREGARDING THE HUGE EVIDENCE PRODUCED BY ASSESSEE AND WITHOUT OFFERING AN OPPORTUNITY TO THE APPELLANT TO THE REBUT 6. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM, ENGAGED IN THE BUSINESS OF CONSTRUCTION OF FLATS, F ILED ITS RETURN OF INCOME FOR THE A.Y 2009-10 ON 10.09.2009 DECLARING TOTAL INCOME OF RS.13,470/-. DURING THE ASSESSMENT PROCEEDINGS U /S 143(3) OF THE ACT, THE AO CALLED FOR CERTAIN INFORMATION WHIC H WAS FILED BY THE ASSESSEE FROM TIME TO TIME AND THE BOOKS OF ACC OUNT ALSO WERE PRODUCED FOR VERIFICATION. AFTER GOING THROUGH THE INFORMATION AVAILABLE ON RECORD, THE AO FOUND THAT DURING THE R ELEVANT FINANCIAL YEAR, THE ASSESSEE FIRM HAD SOLD 7 FLATS THAT HAVE FALLEN TO THE SHARE OF THE ASSESSEE THE DETAILS OF WHICH A RE AS UNDER: S.NO FLAT NO. NAME OF PURCHASER AREA (SFT) VALUE (IN LAKHS) RATE PER SFT.(RS.) 1 201 A.PRABHU 1140 15.00 1315.79 2 202 H.RAJESH KUMAR 1255 18.00 1434.26 3 203 A.SANJEEVA 1140 15.00 1315.79 4 204 A.PRABHU 1140 15.00 1315.79 5 205 SUSHIL GIDADHUBLI 1225 20.00 1593.63 6 GF ANITA, SHOBHA & VANITA DESHMUKH 2100 30.00 1428.57 7 401 DINKAR RAO.J 1140 20.00 1754.39 3. HE OBSERVED THAT ANOTHER FLAT NO.FF CONSISTING O F 2100 SFT WAS CONVERTED FROM WORK IN PROGRESS TO CURRENT ASSET AT A ITA NO 1481 OF 20 16 NATH DEVELOPERS HYDERABAD. PAGE 3 OF 6 VALUE OF RS.37.00 LAKHS AND WAS GIVEN ON RENT TO SB I AND THAT THE RENT WAS DECLARED. HE OBSERVED THAT IN THE LATER YE AR, THE SAME WAS SOLD TO ALL THE PARTNERS BY REGISTERED DEED DAT ED ON 3.11.2009 AT THE SAME VALUE I.E. RS.37.00 LAKHS, AND THAT THE ASSESSEE HAS DECLARED TOTAL RECEIPT OF RS.1,41,28,030. 4. TO VERIFY THE COST OF CONSTRUCTION OF THE ABOVE FLATS, THE AO ISSUED A LETTER TO THE ASSESSEE ON 20.12.2011 TO STATE REASONS AS TO WHY, THE SFT RATE OF RS.1761.9 WHICH WAS ADOP TED WHILE TRANSFERRING THE FLAT NO.FF MEASURING 2100 SFT, VAL UED AT RS.37.00 LAKHS WHILE CONVERTING IT FROM WORK IN PROGRESS TO CURRENT ASSET, SHOULD NOT BE ADOPTED FOR WORKING OUT THE COST OF C ONSTRUCTION. IN RESPONSE TO THE SAME, THE ASSESSEE, VIDE LETTER DAT ED 24.12.2011, EXPLAINED THAT THE FIRST FLAT WAS SOLD ON 5.7.2006 @ RS.1434/- PER SFT, 2 ND FLAT ON 30.12.2006, @ RS.1315/SFT, AND TWO FLATS I N THE MIDDLE OF 2007, ONE FLAT @ RS.1428 AND THE OTHER @ RS.1593/SFT, AND THE LAST FLAT WAS SOLD ON 3.11.2009 @ RS.1761/S FT. IT WAS SUBMITTED THAT SINCE THE FLATS WAS SOLD OVER A PERI OD OF 3 YEARS ON DIFFERENT DATES AND THAT THE MARKET PRICES WERE FLU CTUATING AND THAT THE RATE OF RS.1761 PER SQ.FEET RELATES TO COM MERCIAL PROPERTY WHICH CANNOT BE ADOPTED FOR RESIDENTIAL APARTMENTS AND THAT ALL THE INFORMATION, VOUCHERS, BILLS ETC., WERE PRODUCE D AND NO DISCREPANCIES WERE FOUND, THE VALUE DECLARED BY THE ASSESSEE SHOULD NOT BE DISTURBED. 5. THE AO, HOWEVER, OBSERVED THAT THE CONSTRUCTION WORK STARTED ONLY AFTER THE SUPPLEMENTARY DEVELOPMENT AG REEMENT WAS ENTERED INTO BY THE PARTNERS ON 21.04.2007 AND THAT THE ASSESSEE ITA NO 1481 OF 20 16 NATH DEVELOPERS HYDERABAD. PAGE 4 OF 6 HAS TAKEN ADVANCES FOR SALE OF FLATS EVEN BEFORE TH E START OF THE CONSTRUCTION. THE ASSESSEES CONTENTION TO ACCEPT T HE BOOK RESULTS WAS NOT ACCEPTED BY THE AO. 6. THE AO OBSERVED THAT THE ASSESSEE HAD FURNISHED THE DETAILS OF COST OF CONSTRUCTION WHICH WAS RS.1648 P ER SQ.FT AND THAT THE ASSESSEE HAD STATED THAT THE COMMERCIAL FL AT OF 2100 SFT WAS CONSTRUCTED FROM WORK-IN-PROGRESS TO CURRENT AS SET THAT THE COST OF CONSTRUCTION PER SFT WAS TAKEN AT RS.1762/- AND THAT THE ASSESSEE HAS OFFERED A GROSS PROFIT RATE OF 271 PER SFT. THEREFORE, HE WORKED OUT THE COST OF CONSTRUCTION AT RS.1491 I .E. (RS.1762- 271) AND APPLIED THE SAME RATE FOR THE ENTIRE AREA FALLEN TO THE SHARES OF THE ASSESSEE AND WORKED OUT THE DIFFERENC E BETWEEN THE RECEIPTS DECLARED BY THE ASSESSEE AND THE RECEIPTS ESTIMATED BY THE AO AT RS.12,70,670 AND TREATED IT AS UNEXPLAINE D INVESTMENT AND BROUGHT IT TO TAX. 7. FURTHER, HE ALSO OBSERVED THAT OUT OF THE FLATS SOLD BY THE ASSESSEE, 5 FLATS ARE ON THE SAME FLOOR BUT ARE SOLD FOR DIFFERENT PRICES. OBSERVING THAT ONE OF THE FLATS O N THE SAME FLOOR HAS BEEN SOLD AT RS.1593.63 PER SQ.FT AND THAT HE A DOPTED THE SAME RATE FOR THE OTHER FLATS ALSO AND ARRIVED AT T HE DIFFERENCE IN THE SALE VALUE AT RS.11,50,223 AND ADDED TO THE RET URNED INCOME OF THE ASSESSEE AND BROUGHT IT TO TAX. 8. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT (A), WHO PARTLY ALLOWED THE SAME BY DELETING TH E ADDITIONS MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT. AS REGAR DS THE ITA NO 1481 OF 20 16 NATH DEVELOPERS HYDERABAD. PAGE 5 OF 6 DIFFERENCE IN SALES OF RS.11,50,223, SHE HELD 4 FLA TS ON THE SAME FLOOR SOLD DURING THE SAME YEAR, WILL BE PRICED AT THE SAME RATE, AND THAT TWO TRANSACTION THAT OCCURRING DURING THE SAME YEAR 2007, SHOULD BE THE SAME. SHE ADOPTED THE HIGHEST C ONSIDERATION RECEIVED DURING THE RELEVANT YEAR AS THE SALE VALUE . THUS, SHE ARRIVED AT THE TOTAL SALE VALUE AT RS.1,20,51,793 A ND ENHANCED THE ASSESSED INCOME BY A FURTHER SUM OF RS.7,45,054. AG GRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 9. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW WHILE THE LEARNED DR SUPPORTED THE ORDERS OF THE AO AND THE CIT (A). 10. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ENHANCEMENT OF ASSESSED INCOME IS DUE TO THE CIT(A) ADOPTING THE HIGHEST PRICE OF SAL E CONSIDERATION OF THE FLAT SOLD DURING THE SAME YEAR AS THE PRICE OF ALL THE FLATS ON SECOND FLOOR AND BY ADOPTING THE PRICE OF THE FLAT IN THE GROUND FLOOR. HE ADOPTED THE HIGHEST PRICE BOOKED FOR FLAT NO.202 IN 2006 FOR THE FLAT IN THE GROUND FLOOR ALSO TO BE THE PRI CE FOR THE FLAT NO.205 ON THE 2 ND FLOOR, WHICH WAS SOLD IN 2007. THUS, WHILE THE AO SUBSTITUTED THE HIGHEST PRICE OF ALL THE FLATS, THE CIT (A) HAS TAKEN THE HIGHEST PRICE OF THE FLATS TO ALL THE FLA TS ON THE SAME FLOOR AND SOLD IN THE SAME PERIOD. THIS, IN OUR OPI NION IS NOT CORRECT. AS RIGHTLY POINTED OUT BY THE LEARNED COUN SEL, THE FLATS 201, 203 & 204 WERE SOLD ON THE SAME DAY I.E. 30.12 .2006 AND WERE OF LESSER AREA OF 1140 SFT AS AGAINST THE FLAT NO.202 WHICH WAS SOLD A LITTLE EARLIER ON 5.7.2006 CONSISTED OF A LARGER AREA OF ITA NO 1481 OF 20 16 NATH DEVELOPERS HYDERABAD. PAGE 6 OF 6 1255 SQ.FT. THEREFORE, THE DIFFERENCE IN THE RATE O F FLATS IS JUSTIFIED. SIMILARLY, THE FLAT NO.205 WHICH WAS SOLD ON 6.8.20 07, IS BIGGER IN SIZE AND WAS ALSO SOLD ON A SUBSEQUENTLY AND THE GR OUND FLOOR FLAT OF 2100 SFT WAS SOLD ON 21.04.2007 I.E. PRIOR TO THE SALE OF FLAT NO.205. THUS, THERE IS A CLEAR DIFFERENCE IN THE A REA OF THE FLATS AND THE DATES OF SALE AND THEREFORE, THE SAME PRICE CANNOT BE ADOPTED FOR ALL THE FLATS. THEREFORE, WE AGREE WITH THE CONTENTIONS OF THE ASSESSEE THAT THE HIGHER PRICE OF ONE FLAT C ANNOT BE ADOPTED AS A PRICE FOR ALL THE OTHER FLATS, HOWEVER, SIMILA RLY PLACED. THEREFORE, WE DIRECT THE AO TO ADOPT THE SALE PRICE DECLARED IN THE SALE DEEDS. 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2018. SD/- SD/- (INTURI RAMA RAO) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 31 ST AUGUST, 2018. VINODAN/SPS COPY TO: 1 NATH DEVELOPERS, 3-4-250 FLAT NO.101, MATHURA APA RTMENTS, KACHIGUDA, HYDERABAD 500027 2 ITO WARD 4(2) HYDERABAD 3 CIT (A) - 1, HYDERABAD 4 PR. CIT 1, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER