NEELKAMAL REALTORS AND ERECTORS INDIA P.LTD, MUMBAI V. DCIT 5(2), MUMBAI

ITA 2589/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1244 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 17-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: B V JHAVERI
• Keywords: Bogus purchase; Sale consideration of property below Jantri Value; Capital asset; Fair market value; Corroborative evidences
• Section: 43CA; 143(3); 50C; 56(2); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.2589/MUM/2014 (ASSESSMENT YEAR- 2010-11) M/S NEELKAMAL REALTORS AND ERECTORS INDIA PVT. LTD., GROUND FLOOR, 265-E, BELLASIS ROAD, MU MBAI CENTRAL, MUMBAI-400008 PAN: AABCN9254D VS. DCIT -5(1), AAYAKAR BHAVAN, MUMBAI-400020 (APPELLANT) (RESPONDENT) ITA NO.3494/MUM/2014 (ASSESSMENT YEAR- 2010-11) DCIT -5(1), AAYAKAR BHAVAN, MUMBAI-400020 VS. M/S NEELKAMAL REALTORS AND ERECTORS INDIA PVT. LTD., GROUND FLOOR, 265-E, BELLASIS ROAD, MIMBAI CENTRAL, MUMBAI-400008 PAN: AABCN9254D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B.V. JHAVERI (AR) REVENUE BY : SHRI SUMAN KUMAR (DR) DATE OF HEARING : 11.04.2017 DATE OF PRONOUNCEMENT : 21.04.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THESE TWO CROSS APPEAL ARE DIRECTED AGAINST THE ORD ER OF LD. CIT(A)-9, MUMBAI DATED 27.03.2014 FOR ASSESSMENT YEAR 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS A BUSINESS OF BUILDER AND DEVELOPER, FILED RETURN OF INCOME FOR RELEVANT ASSE SSMENT YEAR ON 24.09.2010 ITA NOS.2589 & 3494/M/2014- M/S. NEELKAMAL REALTORS & ERECTORS IN DIA PVT. LTD. 2 DECLARING TOTAL INCOME OF RS. 2,91,38,550/-. THE AS SESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 26.02.2013. THE ASSESSING OFFI CER WHILE PASSING THE ASSESSMENT ORDER MADE THE ADDITION OF RS. 73,88,911 /- ON ACCOUNT OF VARIATIONS OF RATES IN SALE OF FLATS AND DISALLOWED RS. 54,76,46 7/- ON ACCOUNT OF BOGUS PURCHASES. ON APPEAL BEFORE THE LD. CIT(A), THE ADD ITION ON ACCOUNT OF VARIATION OF RATE IN SALE OF FLATS WAS DELETED AND THE DISALLOWA NCE ON ACCOUNT OF BOGUS PURCHASES WAS RESTRICTED TO RS. 23,64,227/-. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE APPEAL FOR CHALL ENGING THE SUSTAINING THE PARTIAL DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES. SIMILAR LY, THE REVENUE HAS CHALLENGED THE PARTIAL DELETION OF DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES AND DELETING THE ADDITION OF RS. 73,88,911/- FOR VARIA TION IN SALE PRICE. 3. THE ASSESSEE IN ITS APPEAL ITA NO2589/M/2014 HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL: '1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN LAW AND ON FACTS IN TREATING THE PURCHASES MADE FROM CERTAIN P ARTIES AS BOGUS AND CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS. 23 ,64,227/- AS APPEARING IN THE BOOKS OF ACCOUNTS OF THE APPELLANT, WITHOUT APP RECIATING THE DOCUMENTARY/SUPPORTING EVIDENCE PRODUCED BY APPELLA NT TO JUSTIFY THE GENUINENESS OF THE TRANSACTION. THE REVENUE IN ITS APPEAL NO. 3494/M/2014 HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. (CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.73 ,88,991/- ON ACCOUNT OF WIDE VARIATION IN SALE PRICE? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. (CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 7 3,88,991/- WITHOUT APPRECIATING THE FACTS OF THE CASE? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF BOGUS PURCHASE OF RS. 54,76,437/- TO RS. 23,64,227/-? 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE/AD DITION OF BOGUS PURCHASES WITHOUT APPRECIATING THE FACT THAT THE ADDITION ON ACCOUNT OF BOGUS PURCHASE WAS MADE ON THE BASIS OF SPECIFIC INFORMATION RECEI VED FROM THE SALES TAX AUTHORITIES WHICH THE ASSESSEE DID NOT SUBSTANTIATE AT THE TIME OF ASSESSMENT AS WELL AS REMAND PROCEEDINGS? ITA NOS.2589 & 3494/M/2014- M/S. NEELKAMAL REALTORS & ERECTORS IN DIA PVT. LTD. 3 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRST WE SHALL TAKE UP THE GRO UND OF APPEAL RAISED BY ASSESSEE IN ITA NO. 2589/M/2014 AND THE GROUND NO. 3 & 4 RA ISED BY REVENUE IN ITS CROSS APPEAL. THE LD. AR OF THE ASSESSEE ARGUED THAT DURI NG THE RELEVANT YEAR, THE ASSESSEE COMPLETED THE BUILDING PROJECT KNOWN AS OR CHID TOWER. THE ASSESSEE PURCHASED MATERIAL FROM DIFFERENT PARTIES AGGREGATI NG TO RS. 54,76,467/-. DURING THE ASSESSMENT, THE AO OBSERVED THAT THE SALE TAX D EPARTMENT MADE ENQUIRY WHICH REVEALS THAT THE PARTIES FROM WHOM THE ASSESS EE PURCHASED THE MATERIAL HAD ISSUED BOGUS BILL. THE ASSESSEE WAS ASKED TO EXPLAI N THE GENUINENESS OF PURCHASES AND SUBMITTED ALL THE DETAILS OF PURCHASES, INVOICE S, DELIVERY CHALLAN, DELIVERY RECEIPT, BANK STATEMENT AND LEDGER ACCOUNT OF THESE FOUR PARTIES FROM ITS BOOKS OF ACCOUNT, THE ASSESSEE IS SPECIFICALLY SUBMITTED BEF ORE THE AO THAT ASSESSEES TOTAL PURCHASE FROM THESE FOUR PARITIES WERE AGGREGATING TO RS. 23,64,227/-. THE ASSESSING OFFICER MADE THE DISALLOWANCE WITHOUT APP RECIATING THE REPLY AND EVIDENCES FILED BY THE ASSESSEE. THE AO MADE THE AD DITION OF RS. 54,76,467/- TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE ONCE AGAIN BEFORE THE LD. CIT(A) FILED SUCH EVIDENCES WHICH WERE FILED BEFORE THE AO . THE LD. CIT(A) WITHOUT CONSIDERING THE ALL SUBMISSIONS MADE BEFORE HIM. AC CEPTED THE CONTENTION OF THE ASSESSEE THAT ASSESSEE PURCHASED ONLY OF RS. 23,64, 227/- AND RESTRICTED THE DISALLOWANCE TO RS. 23,64,227/-. IT WAS FURTHER ARG UED THAT THE AO HAS NOT BROUGHT ON RECORD THAT PURCHASES WERE NOT GENUINE. THE AO R ELIED ON THE INFORMATION OF SALE TAX DEPARTMENT. THE ASSESSEE HAS ADDUCED THE C OMPLETE EVIDENCE TO SUBSTANTIATE THE GENUINENESS OF PURCHASES. IN SUPPO RT OF HIS SUBMISSION, LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF TRIBUNAL I N CASE OF RAJEEV G. KALATHIL IN ITA NO. 6727/MUM/2012 DATED 20.08.2014, DCIT V/S SH AAN LUBE EQUIPMENT IN ITA NO. 625/MUM/2015 DATED 29.02.2017 AND IN RATNAG IRI STAINLESS PVT. LTD. V/S ITO IN ITA NO. 4463/MUM/2016 DATED 04.04.2017. ON T HE OTHER HAND, LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AO. LD. DR FOR T HE REVENUE FURTHER ARGUED THAT THE PARTIES FROM WHOM THE ASSESSEE HAS MADE TH E PURCHASES WERE ENGAGED ITA NOS.2589 & 3494/M/2014- M/S. NEELKAMAL REALTORS & ERECTORS IN DIA PVT. LTD. 4 ONLY IN PROVIDING ACCOMMODATION ENTRY. IT WAS FURTH ER ARGUED THAT LD. CIT(A) WRONGLY DELETED THE PARTIAL DISALLOWANCE. 5. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT THE AO OBSERVED THAT THE ASSESSEE HAD PURCHASED MATERIAL FROM FOUR PARTIES A GGREGATING OF RS. 54,76,467/-. THE AO FURTHER OBSERVED THAT INFORMATION WAS RECEIV ED FROM THE DGIT(INVESTIGATION), MUMBAI THAT THESE PARTIES WERE INVOLVED IN ISSUING BOGUS BILLS. THE INFORMATION RECEIVED FROM THE DGIT(INVES ) WAS CONFRONTED WITH THE ASSESSEE. THE ASSESSEE FILED ITS REPLY. IN THE REPL Y THE ASSESSEE CONTENDED THAT FROM THESE FOUR PARTIES THEY HAD PURCHASED MATERIAL OF R S. 23,64,227/- ONLY. THE AO INSTEAD OF DISCUSSING THE REPLY OF ASSESSEE DISALLO WED THE ENTIRE PURCHASES OF RS.54,76,467/-. THE LD CIT(A) WHILE CONSIDERING THI S GROUND OF APPEAL OBSERVED THAT THE ASSESSEE DURING THE ASSESSMENT COULD NOT P ROVIDE DOCUMENTARY EVIDENCE ABOUT THE DELIVERY OF THE MATERIAL PURCHASED FROM F OUR IMPUGNED PARTIES. HOWEVER, THE LD CIT(A) OBSERVED THAT THE ASSESSEE I N ITS P&L HAS SHOWN PURCHASES OF RS. 23,64,227/-. THUS, THE LD CIT(A) CONFIRMED THE DISALLOWANCE OF RS. 23,64,227/-. WE HAVE SEEN THAT THE LOWER AUTHOR ITIES NEITHER DISCUSSED THE CONTENTS OF THE REPLY NOR ABOUT THE DOCUMENTARY EVI DENCES FILED BY ASSESSEE. THE LOWER AUTHORITY NOT DISPUTED THE CONSUMPTION OF THE MATERIAL NOR REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. AFTER CONSIDERING THE FACTUAL MATRIX OF THE CASE AND THE SUBMISSIONS OF THE LD REPRESENTATIVES OF TH E PARTIES, WE ARE OF THE VIEW THAT UNDER INCOME TAX ACT ONLY REAL INCOME CAN BE TAXED BY THE REVENUE. WE MAY FURTHER CONCLUDE THAT EVEN IF THE TRANSACTION IS NO T VERIFIABLE, THE ONLY TAXABLE IS THE TAXABLE INCOME COMPONENT AND NOT THE ENTIRE TRANSAC TION. THUS, WE ARE OF THE OPINION THAT IN ORDER TO FULFILL THE GAP OF REVENUE LEAKAGE THE DISALLOWANCE OF REASONABLE PERCENTAGE OF DISPUTED PURCHASES WOULD MEET THE END OF JUSTICE. WE HAVE SEEN THE ASSESSEE THROUGHOUT THE PROCEEDINGS B EFORE THE LOWER AUTHORITIES CONTENDED THAT THE ASSESSEE PURCHASED THE MATERIAL OF RS. 23,64,227/-. THE AO HAS NOT BROUGHT ON RECORD AS TO HOW HE ARRIVED ON THE F IGURE OF RS. 54,76,467/-AS THE COST OF MATERIAL PURCHASED. THE LD CIT(A) EXTRACTED THE FIGURE OF RS.23,64,227/- ITA NOS.2589 & 3494/M/2014- M/S. NEELKAMAL REALTORS & ERECTORS IN DIA PVT. LTD. 5 WHICH HAS BEEN SHOWN/ CLAIMED BY ASSESSEE IN ITS P& L ACCOUNT ON ACCOUNT OF PURCHASES. CONSIDERING THE ENTIRETY OF THE FACTS, W E ARE OF THE OPINION THAT IN ORDER TO FULFILL THE GAP OF REVENUE LEAKAGE THE DISALLOWA NCE OF 10% OF RS.23,64,227/- WOULD MEET THE END OF JUSTICE. SIMILAR VIEW WAS TAK EN BY COORDINATE BENCH IN DCIT V/S SHAAN LUBE EQUIPMENT (SUPRA) RELIED BY LD AR FOR THE ASSESSEE. THUS, THE GROUND NO.1 OF ASSESSES APPEAL IS PARTLY ALLOWE D AND THE GROUND NO.3&4 OF REVENUES APPEAL ARE DISMISSED. 6. IN THE RESULT THE ASSESSES APPEAL IS PARTLY ALLOWED . 7. NOW WE SHALL TAKE UP THE GROUND NO. 1&2 RAISED IN R EVENUES APPEAL ITA NO. 3494/ M /2014.GROUND NO. 1& 2 RELATES TO DELETING T HE ADDITION OF RS.73,88,991/- ON ACCOUNT OF VARIATION IN SALE PRIC E. 8. AT THE OUTSET THE LD AR FOR THE ASSESSEE ARGUED THA T THESE GROUNDS OF APPEAL ARE COVERED IN FAVOUR OF ASSESSEE, IN ASSESSEES OWN CA SE BY THE DECISION OF THE TRIBUNAL FOR AY 2009-10 IN ITA NO.1143/M/2013 DATED 16.08.2013. ON THE OTHER HAND THE LD DR FOR THE REVENUE ARGUED THAT WHILE DE CIDING THE CASE OF ASSESSEE FOR AY 2009-10 THE TRIBUNAL HAS NOT CONSIDERED THE EA RLIER DECISION IN ITO VS DIAMOND INVESTMENTS IN ITA NO. 5537/M/2009 DATED 29 .07.2007. WE HAVE PERUSED THE ORDER OF TRIBUNAL IN DIAMOND INVESTMENT S (SUPRA). WE HAVE OBSERVED THAT THE SAID ORDER WAS PASSED EX-PARTE BY THE TRIB UNAL. ON OUR SPECIFIC QUARRY TO THE LD DR FOR REVENUE, IF THE ORDER WAS BROUGHT IN THE NOTICE OF THE TRIBUNAL BY THE REVENUE AND FURTHER THE ORDER IS STILL SUBSIST OR R ECALLED ON SUBSEQUENT MISCELLANEOUS APPLICATION OR NOT. THE LD DR IN HIS FAIRNESS SHOWN HIS INABILITY TO EXPRESS HIS VIEWS ON BOTH THE QUARRIES. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND SEEN THAT THE SIMILAR DISALLOWANCE WAS MADE AGAINST THE ASSESSEE FOR AY 2 009-10 FOR VARIATION IN COST OF SALE OF FLATS. THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL AND THE ADDITIONS WAS DELETED BY THE TRIBUNAL IN ITA NO. 1143/M/2013 HOLD ING AS UNDER: 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS AN UNDISPUTED POSITION THAT THE ASSES SEE IS A BUILDER AND DEVELOPER. IT FOLLOWED THE PROJECT COMPLETION METHOD TO DECLARE I NCOME. THE PROJECT IN QUESTION WAS COMPLETED DURING THE PREVIOUS YEAR REL EVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION WHICH WAS SOLD AND INCOME WAS O FFERED FROM SALE OF 131 FLATS. THE FIRST QUESTION FOR OUR CONSIDERATION IS AS TO WHETHER THE PROVISIONS OF ITA NOS.2589 & 3494/M/2014- M/S. NEELKAMAL REALTORS & ERECTORS IN DIA PVT. LTD. 6 SECTION 50C ARE APPLICABLE TO THE FACTS AND CIRCUMS TANCES OF THE INSTANT CASE. IN THIS REGARD, IT WOULD BE RELEVANT TO CONSIDER THE P RESCRIPTION OF SECTION 50C WHICH IS A SPECIAL PROVISION FOR FULL VALUE OF CONSIDERAT ION IN CERTAIN CASES. SUB-SECTION (1) OF SECTION 50C PROVIDES AS UNDER:- SEC. 50C(1) WHERE THE CONSIDERATION RECEIVED OR ACC RUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING L AND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSAB LE] BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRE D TO AS THE 'STAMP VALUATION AUTHORITY') FOR THE PURPOSE OF PAYMENT OF STAMP DUT Y IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED OR ASSES SABLE SHALL, FOR THE PURPOSES OF SECTION 48, BE DEEMED TO BE THE FULL VA LUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER . 6. A BARE PERUSAL OF THIS PROVISION IN DICATES THAT WHERE THE CONSIDERATION RECEIVED ON TRANSFER OF A CAPITAL ASSET, BEING LAND OR BUILD ING OR BOTH, IS LESS THAN THE STAMP VALUE, THEN FOR THE PURPOSES OF SECTION 48, THE STA MP VALUE SHALL BE CONSIDERED AS FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. SECTION 48 WITH THE CAPTION : MODE OF COMPUTATION , DEALS WITH THE COMPUTATION OF THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GA INS. A CURSORY LOOK AT THE ABOVE PROVISION FAIRLY INDICATES THAT SECTION 50C I S APPLICABLE ONLY IN RESPECT OF INCOME COMPUTED UNDER CHAPTER IV-E I.E. THE HEAD C APITAL GAINS. SINCE THE ASSESSEE UNDER CONSIDERATION IS A DEVELOPER AND INC OME FROM THE SALE OF FLATS HAS BEEN COMPUTED UNDER CHAPTER IV-D I.E. UNDER THE HEA D PROFITS AND GAINS OF BUSINESS OR PROFESSION, OBVIOUSLY THE PROVISIONS O F SECTION 50C CAN HAVE NO APPLICATION. 7. AT THIS JUNCTURE, WE WANT TO ACCENT UATE THAT THE FINANCE ACT, 2013 HAS INSERTED SECTION 43CA WITH EFFECT FROM 01.04.2014 WHICH IS A GAIN A SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION FOR TRANSFER OF ASSETS OTHER THAN CAPITAL ASSET IN CERTAIN CASES. SUB-SECTION (1) OF THIS SECTION PROVIDES THA T WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF AN ASSET (OTHER THAN A CAPITAL ASSET) BEING LAND, BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY ANY AUTHORITY OF A STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABLE SHALL, FOR THE PURPOSE OF CO MPUTING PROFITS AND GAINS FROM TRANSFER OF SUCH ASSETS, BE DEEMED TO BE THE FULL V ALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. SUB-SECTION (2) MAKES IT CLEAR THAT THE PROVISIONS OF SUB-SECTIONS (2) AND (3) OF SECTI ON 50C SHALL BE APPLIED IN RELATION TO THE DETERMINATION OF THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE UNDER SUB-SECTION (1). ON A CIRCUMSPECTION OF SUB-SECTION (1) OF SECTION 43CA, IT BECOMES MANIFEST THAT THE PROVISIONS FOR SUBSTITUTI NG STAMP VALUE FOR THE ACTUAL SALE CONSIDERATION ON TRANSFER OF THE LAND, BUILDIN G OR BOTH, WHICH WERE EARLIER RESTRICTED TO THE `CAPITAL ASSET UNDER HEAD CAPIT AL GAINS HAVE NOW BEEN EXTENDED TO `OTHER THAN A CAPITAL ASSETS UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS WELL. THE REFERENCE TO T HE WORDS OTHER THAN A CAPITAL ASSET AND THE PLACEMENT OF SECTION 43CA IN CHAPTER IV-D INDICATE THAT THE STAMP VALUE IN RESPECT OF BUILDING OR LAND OR BOTH SOLD B Y A PERSON ENGAGED IN SUCH BUSINESS SHALL BE SUBSTITUTED WITH THE ACTUAL CONSI DERATION RECEIVED AS A RESULT OF TRANSFER, IF THE LATTER IS LOWER THAN THE FORMER. T HE INSERTION OF THIS PROVISION BY THE FINANCE ACT, 2013 WITH EFFECT FROM 01.04.2014 MAKES IT ABUNDANTLY CLEAR THAT THE MANDATE OF SECTION 43CA SHALL APPLY ONLY WITH EFFEC T FROM ASSESSMENT YEAR 2014- 2015 AND NOT BEFORE THAT. AS THE ASSESSEE IN THE PR ESENT CASE IS ENGAGED IN THE BUSINESS OF SELLING OF FLATS AFTER CONSTRUCTION, TH E INCOME FROM WHICH IS CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION, THE PROVISIONS OF ITA NOS.2589 & 3494/M/2014- M/S. NEELKAMAL REALTORS & ERECTORS IN DIA PVT. LTD. 7 SECTION 43CA CANNOT APPLY TO SUBSTITUTE THE ACTUAL SALE CONSIDERATION WITH THE STAMP VALUE IN THE PREVIOUS YEAR RELEVANT TO ASSESS MENT YEAR 2009-2010 UNDER CONSIDERATION. WE, THEREFORE, HOLD THAT THE CONCLUS ION DRAWN BY THE LEARNED CIT(A) IN INVOKING THE PROVISIONS OF SECTION 50C FO R SUSTAINING THE ADDITION, HAS NO LEGAL LEGS TO STAND ON. 8. THE LEARNED CIT(A) HAS ALSO PRESSED SECTION 56(2)(VII)(B)(II) INTO SERVICE FOR SUSTAINING THE ADDITION ON THE BASIS OF FAIR MARKET PRICE DETERMINED BY THE STAMP DUTY OFFICER. BEFORE PROCEEDING FURTHER, IT WOULD B E APT TO NOTE THE MANDATE OF THE RELEVANT PART OF ABOVE PROVISION, WHICH IS AS UNDER :- 56 (1).. (2).. (VII) WHERE AN INDIVIDUAL OR A HINDU UNDI VIDED FAMILY RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON OR PERSONS ON OR AFT ER THE 1ST DAY OF OCTOBER, 2009, - (A).. (B) ANY IMMOVABLE PROPERTY , (I) WITHOUT CONSIDERATION, THE STAMP DUTY VALUE OF WHICH EXCEEDS FIFTY THOUSAND RUPEES, THE STAMP DUTY VALUE OF SUCH PROPE RTY; (II) FOR A CONSIDERATION WHICH IS LESS TH AN THE STAMP DUTY VALUE OF THE PROPERTY BY AN AMOUNT EXCEEDING FIFTY THOUSAND RUPE ES, THE STAMP DUTY VALUE OF SUCH PROPERTY AS EXCEEDS SUCH CONSIDE RATION. 9. SECTION 56 LIES IN THE RESIDUAL HEAD OF INCOME, THAT IS, INCOME FROM OTHER SOURCES. SUB-SECTION (1) WHICH IS A GENERAL PROVIS ION, PROVIDES THAT INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOT AL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME TAX UNDER THIS HEAD, IF IT IS NOT CHARGEABLE TO INCOME-TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITE MS A TO E. SUB-SECTION (2) OF SECTION 56 DEALS WITH CERTAIN TYPES OF SPECIFIC INC OMES WHICH ARE CHARGEABLE UNDER THIS RESIDUAL HEAD. CLAUSE (VII), AS REPRODUCED ABO VE, PROVIDES THAT WHERE AN INDIVIDUAL OR HINDU UNDIVIDED FAMILY RECEIVES ANY I MMOVABLE PROPERTY FOR NO CONSIDERATION OR A CONSIDERATION WHICH IS LESS THAN THE STAMP DUTY VALUE OF THE PROPERTY BY AN AMOUNT EXCEEDING RUPEES FIFTY THOUSA ND, THE STAMP DUTY VALUE OF SUCH PROPERTY (IN CASE OF RECEIPT OF PROPERTY WITHO UT CONSIDERATION) OR THE STAMP DUTY VALUE AS EXCEEDS SUCH CONSIDERATION (IN CASE O F RECEIPT OF PROPERTY AT LOWER CONSIDERATION) SHALL BE CONSIDERED AS INCOME UNDER THIS HEAD. WHEN WE ADVERT TO THE FACTS OF THE EXTANT CASE, WE FIND THAT THIS PRO VISION HAS NO APPLICATION FOR THE FOLLOWING REASONS:- (I) IT PROVIDES THAT WHERE AN IMMOVABLE PROPERTY IS ACQ UIRED WITHOUT CONSIDERATION OR FOR A CONSIDERATION WHICH IS LESS THAN THE STAMP DUTY VALUE, THEN THE STAMP DUTY VALUE OR EXCESS OF SUCH VALUE OVER CONSIDERATION SHALL BE CONSIDERED AS INCOME UNDER T HIS PROVISION. THUS, IT IS CLEAR THAT IT HAS APPLICATION ONLY TO THE TRANSF EREE OR THE ACQUIRER OF PROPERTY FOR NO CONSIDERATION OR CONSIDERATION LESS THAN THE STAMP DUTY VALUE. AS THE ASSESSEE IN QUESTION IS A TRANSFEROR OR SELLER OF FLATS AND NOT AN ACQUIRER OR TRANSFEREE, THIS PROVISION CAN HAVE NO APPLICATION. (II) CLAUSE (VII) OF SECTION 56(2) WAS INSERTED BY THE F INANCE (NO.2) ACT, 2009 WITH EFFECT FROM 01.10.2009. THE ASSESSMENT YEAR UN DER CONSIDERATION IS 2009-2010 WHICH IS RELEVANT FOR THE PREVIOUS YEAR E NDING 31.03.2009. AS THIS PROVISION IS APPLICABLE IN RESPECT OF AN IMMOV ABLE PROPERTY ACQUIRED ON OR AFTER THE 1ST DAY OF OCTOBER, 2009, IT CAN NA TURALLY HAVE NO APPLICATION IN RELATION TO THE TRANSACTIONS HAVING TAKEN PLACE PRIOR TO THAT DATE IN THE ASSESSMENT YEAR 2009-2010 UNDER CONSIDE RATION. ITA NOS.2589 & 3494/M/2014- M/S. NEELKAMAL REALTORS & ERECTORS IN DIA PVT. LTD. 8 (III) THIS PROVISION APPLIES ONLY TO AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY. AS THE ASSESSEE UNDER CONSIDERATION IS A P RIVATE LIMITED COMPANY, IT CAN HAVE NO RELEVANCE HERE. 10. IN VIEW OF THE FOREGOING REASONS, WE ARE OF THE CONSIDERED OPINION THAT SECTION 56(2)(VII)(B)(II) CANNOT BE APPLIED TO THE FACTS IN QUESTION. 11. IT IS OBSERVED THAT THE LEARNED CIT(A) SUSTAINE D THE ADDITION TO THE EXTENT OF `8.53 CRORE BY APPLYING SECTIONS 50C AND 56(2)(VII) (B)(II). BOTH THE ABOVE PROVISIONS HAVE BEEN FOUND TO BE INAPPLICABLE ON TH E FACTS AND CIRCUMSTANCES PREVAILING IN THE PRESENT APPEAL. WE, THEREFORE, HO LD THAT THE SUSTENANCE OF ADDITION OF `8.53 CRORE IS NOT APPROPRIATE. HOWEVER , IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER INITIALLY MADE ADDITION OF `15.22 CRORE BY APPLYING RATES OF DIFFERENT FLATS WHICH WAS EVENTUALLY REDUCED TO `4. 45 CRORE IN THE ORDER PASSED U/S 154. OUR DISPOSAL OF THIS GROUND IN THE ABOVE TERMS HAS LED TO THE REVERSAL OF THE FINDINGS OF THE LEARNED CIT(A) BUT THE ADDITION TO THE TUNE OF `4.45 CRORE STILL STANDS. THE ASSESSEE HAS CHALLENGED THE CONFIRMATIO N OF ENTIRE ADDITION BEING : THE DIFFERENCE BETWEEN THE SALE VALUE AND THE FAIR MARKET VALUE DETERMINED BY STAMP DUTY AUTHORITIES OF ALL THE FLATS SOLD . AS SUCH WE ARE REQUIRED TO ADJUDICATE UPON THE SUSTENANCE OF ADDITION TO THE EXTENT OF `4 .45 CRORE AS WELL. 12. IT CAN BE OBSERVED FROM THE CHART MADE BY THE A .O. AFTER PAGE NO. 2 OF THE ASSESSMENT ORDER THAT HE MADE ADDITION BY CONSIDERI NG THE RATE OF ANOTHER FLAT SOLD BY THE ASSESSEE VIS--VIS THE RATE AT WHICH FLAT UN DER VIEW WAS SOLD. FOR EXAMPLE, FIRST ITEM IN THE TABLE IS FLAT NO.2501 WITH AREA O F 2645 SQ. FEET AND SALE CONSIDERATION AT `65.24 LAKH. FIRST PAYMENT FOR THI S FLAT WAS RECEIVED BY THE ASSESSEE ON 21.10.2004 AND THE SALE RATE IS `2467 P ER SQ.FT. THE ASSESSING OFFICER HAS COMPARED THIS RATE WITH THE RATE CHARGED FOR FL AT NO.2702 SOLD BY THE ASSESSEE AT A PRICE HIGHER BY `649 PER SQ.FT. THE ASSESSEE G AVE REASON FOR CHARGING LOW PRICE IN THE TERMS THAT THE BUYER OF FLAT NO.2501 ASSISTE D IN PROMOTING BUSINESS AND HENCE DISCOUNT WAS OFFERED TO HIM. SIMILAR IS THE P OSITION REGARDING OTHER FLATS SOLD BY THE ASSESSEE IN RESPECT OF WHICH THE ASSESS ING OFFICER HAS MADE ADDITION BY COMPARING THE RATE CHARGED WITH THE HIGHER RATE CHARGED IN RESPECT OF OTHER SALE TRANSACTIONS. THE ASSESSEE GAVE JUSTIFICATION FOR L OWER RATE IN RESPECT OF EACH FLAT, SUCH AS, HIGHER DOWN PAYMENT; NO HARD BARGAIN BY TH E BUYER; BUYER IS AN NRI; PARTY WAS TENANT WHO HELPED IN SETTLEMENT WITH OTHE R TENANTS; DIFFERENT AMENITY VALUES; DEMAND FOR A HIGHER OR LOWER FLAT; HIGHER O R LOWER CARPET AREA ETC. THE ASSESSING OFFICER BRUSHED ASIDE THESE EXPLANATIONS GIVEN BY THE ASSESSEE QUA EACH FLAT SOLD AT A LOWER RATE BY SIMPLY MENTIONING THAT SUCH REDUCTION WAS NOT JUSTIFIABLE OR THERE WAS NO EXPLANATION FOR LOWER R ATE OR FABRICATED REASONING ETC. SUCH REJECTION OF THE ASSESSEES EXPLANATION IN ONE STROKE IS WHOLLY IMPERMISSIBLE. IF THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE ASSESSEES EXPLANATION FOR CHARGING A LOWER RATE IN COMPARISON WITH A HIGHER R ATE OF OTHER FLATS, HE WAS REQUIRED TO BRING ON RECORD CERTAIN MATERIAL TO DEM ONSTRATE THAT THE ASSESSEE, IN FACT, CHARGED SUCH HIGHER RATE. THE REJECTION OF AS SESSEES EXPLANATION FOR CHARGING A LOWER SALE PRICE CANNOT BE JETTISONED WITHOUT POS ITIVELY SHOWING THAT THE ASSESSEE RECEIVED A HIGHER SALE PRICE. 13. THE HONBLE SUPREME COURT, IN THE CONTEXT OF SE CTION 52, IN K.P. VERGHESE VS ITO (1981) 131 ITR 597 (SC) , HAS HELD THAT :`SUBS. (2) OF S. 52 CAN BE INVOKED ONLY WHERE THE CONSIDERATION FOR THE TRANSFER HAS B EEN UNDERSTATED BY THE ASSESSEE OR, IN OTHER WORDS, THE CONSIDERATION ACTUALLY RECE IVED BY THE ASSESSEE IS MORE THAN IS DECLARED OR DISCLOSED BY HIM AND THE BURDEN OF P ROVING SUCH AN UNDERSTATEMENT OR CONCEALMENT IS ON THE REVENUE. SUB-S. (2) HAS NO APPLICATION IN THE CASE OF AN ITA NOS.2589 & 3494/M/2014- M/S. NEELKAMAL REALTORS & ERECTORS IN DIA PVT. LTD. 9 HONEST AND BONA FIDE TRANSACTION WHERE THE CONSIDER ATION RECEIVED BY THE ASSESSEE HAS BEEN CORRECTLY DECLARED OR DISCLOSED BY HIM, AN D THERE IS NO CONCEALMENT OR SUPPRESSION OF THE CONSIDERATION.. IDENTICAL VIEW WAS SUBSEQUENTLY REITERATED IN CIT VS. SHIVAKAMI CO. P. LTD. (1986) 159 ITR 71 (SC ). SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE SUPREME COURT IN CIT VS. G ODAVARI CORP LTD. (1993) 200 ITR 567 (SC) BY HOLDING THAT THE BURDEN IS ON T HE REVENUE TO PROVE UNDER- STATEMENT OF THE CONSIDERATION. THE FOLLOWING OBSER VATIONS OF THE HONBLE SUPREME COURT FROM THIS CASE MERIT MENTION :` SECTI ON 52(2) OF THE IT ACT, 1961 CAN BE INVOKED ONLY WHERE THE CONSIDERATION FOR THE TRANSFER OF A CAPITAL ASSET HAS BEEN UNDERSTATED BY THE ASSESSEE OR IN OTHER WORDS THE FULL VALUE OF THE CONSIDERATION IN RESPECT OF THE TRANSFER IN SHOWN A T A LESSER FIGURE THAN THAT ACTUALLY RECEIVED BY THE ASSESSEE AND THE BURDEN OF PROVING UNDERSTATEMENT OR CONCEALMENT IS ON THE REVENUE; AND THE SUBSECTION H AS NO APPLICATION IN THE CASE OF BONA FIDE TRANSACTION WHERE THE CONSIDERATION RE CEIVED BY THE ASSESSEE HAS BEEN CORRECTLY DECLARED.. THE HONBLE KERALA HIGH COURT IN COMMISSIONER OF AGRICULTURAL IT VS M.J. CHERIAN (1979) 117 ITR 371 (KER) HAS HELD THAT THE ITO CAN NOT FIX HIGHER SALES PRICE WITHOUT ANY EVIDENCE . THE MERE PRESUMPTION THAT THE EXCESS PRICE COULD HAVE BEEN CHARGED HAS BEEN HELD TO BE NOT A GROUND FOR COMING TO THE CONCLUSION THAT THE ASSESSEE DID CHARGE A HI GHER PRICE. A SURVEY OF AFOREMENTIONED JUDGMENTS MANIFESTS THAT THERE IS NO LAW WHICH OBLIGES A TRADER TO MAKE THE MAXIMUM PROFIT ON SALES. 14. IT IS TRITE THAT THE ONUS TO CLAIM THAT THE APP ARENT IS NOT REAL IS ONE WHO SO CLAIMS. WHERE THE REVENUE REQUIRES THE ASSESSEE TO SHOW AS TO WHY THERE IS A DIFFERENCE IN THE PRICE CHARGED FROM TWO CUSTOMERS AND THE ASSESSEE OFFERS SOME PLAUSIBLE EXPLANATION, NO ADDITION CAN BE MADE SIMP LY BY HOLDING THAT THIS EXPLANATION IS FANCIFUL. THERE MUST BE SOMETHING CO NCRETE TO SHOW THAT THE VERSION GIVEN BY THE ASSESSEE IS INCORRECT. THE AO CANNOT S IMPLY MAKE ADDITION ON HYPOTHETICAL BASIS BY PRESUMING A HIGHER SALE PRICE BY SIMPLY REJECTING THE ASSESSEES EXPLANATION WITHOUT COGENT REASONS. IF T HIS PROCEDURE IS RESORTED, THEN IT WOULD AMOUNT TO TAXING HYPOTHETICAL INCOME INSTEAD OF REAL INCOME, WHICH IS OBVIOUSLY IMPERMISSIBLE UNLESS AN EXPRESS PROVISION IS ENSHRINED IN THIS REGARD. 15. COMING BACK TO THE FACTS OF THE INSTANT CASE, W E FIND THAT THE ASSESSEE TENDERED EXPLANATION IN SUPPORT OF CHARGING LOWER PRICE IN R ESPECT OF SOME OF THE FLATS SOLD BY IT. THE AO NOT ONLY SIMPLY REFUSED TO ACCEPT SUC H EXPLANATION WITHOUT ANY CONVINCING REASON BUT ALSO DID NOT BRING ANY MATERI AL ON RECORD TO SHOW THAT THE ASSESSEE IN FACT RECEIVED HIGHER PRICE THAN DECLARE D. UNDER SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE ACTION OF TH E AUTHORITIES BELOW IN THIS REGARD CANNOT BE JUSTIFIED. AT THE COST OF REPETITION, WE MENTION THAT THE PROVISIONS OF SECTION 43CA HAVE BEEN INSERTED WITH EFFECT FROM 20 14-2015 IN RESPECT OF TRANSFER OF LAND OR BUILDING OR BOTH WHICH IS NOT A CAPITAL ASSET. IT IS ONLY DURING THE PREVALENCE OF THIS PROVISION THAT THE REVENUE HAS B EEN DISCHARGED FROM THE BURDEN OF PROVING THAT THE SALE PRICE OF LAND, OR BUILDING OR BOTH IS UNDERSTATED. STRAIGHT WAY, THE DECLARED SALE CONSIDERATION CAN BE SUBSTIT UTED WITH THE STAMP DUTY VALUE, IF IT LESS. IN THE PERIOD ANTERIOR TO THE APPLICATI ON OF THIS PROVISION, THE BURDEN IS SQUARELY ON THE REVENUE TO POSITIVELY SHOW THAT THE SALE PRICE CHARGED WAS ACTUALLY MORE THAN THAT DECLARED. WE ARE CONFRONTED WITH A SITUATION IN WHICH THE ASSESSEE GAVE REASONS FOR CHARGING LOWER PRICE IN R ESPECT OF SOME OF THE FLATS SOLD, WHICH THE AO FAILED TO CONTROVERT. IN SUCH A SITUAT ION, THERE CAN BE NO REASON TO MAKE OR SUSTAIN ANY SUCH ADDITION. WE, THEREFORE, O RDER FOR THE DELETION OF THIS ADDITION IN ENTIRETY. THIS GROUND IS ALLOWED. ITA NOS.2589 & 3494/M/2014- M/S. NEELKAMAL REALTORS & ERECTORS IN DIA PVT. LTD. 10 10. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSES OW N CASE FOR AY 2009-10, WHEREIN THE IDENTICAL ISSUES WAS DECIDED IN FAVOUR OF ASSESSEE HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH FINDING OF THE LD .CIT(A). HENCE, THE GROUND NO.1&2 RAISED BY THE REVENUE ARE DISMISSED. 11. IN THE RESULT APPEAL FILED BY ASSESSEE IS PARTLY AL LOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF APRIL 2017. SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 21/04/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/