Sri Swarna Developers, Visakhapatnam V. The ITO, Ward-3(1), Visakhapatnam, Visakhapatnam

ITA 47/VIZ/2012

• Counselvise Citation: 4725314 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 24-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D MANOJ KUMAR
• Assessee Lawyers: C R HEMANT KUMAR
• Keywords: Unexplained investment
• Section: 143(3); 133A

Judgement Text

ITA NO.47/VIZAG/2012 SRI SWARNA DEVELOPERS, VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 47 /VIZAG/ 2012 ASSESSMENT YEAR : 2008-09 SRI SWARNA DEVELOPERS VISAKHAPATNAM VS. ITO WARD-3(1) VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AARFS 9254K ASSESSEE BY: SHRI C.R. HEMANT KUMAR, CA REVENUE BY: SHRI D. MANOJ KUMAR, ADDL. CIT DATE OF HEARING : 09.07.2014 DATE OF PRONOUNCEMENT : 30.07.2014 ORDER PER BENCH:- THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE CIT (A), VISAKHAPATNAM DATED 16.11.2011 FOR THE ASSESSMENT YEAR 2008-09. 2. FACTS IN BRIEF. THE ASSESSEE IS A PARTNERSHIP F IRM AND IS IN THE BUSINESS OF CONSTRUCTION OF RESIDENTIAL FLATS. IT F ILED ITS RETURN OF INCOME ON 6.3.2009 ADMITTING THE NET INCOME ON RS.36,619/-. A SURVEY WAS CONDUCTED U/S 133A OF THE INCOME-TAX ACT ON 21.1.2009. THE A SSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER U/S 143(3) OF TH E ACT ON 23.12.2010 DETERMINING TOTAL TAXABLE INCOME AT RS.15,90,970/-. 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APP EAL. THE MAIN ISSUE THAT IS IN DISPUTE WAS THE CLAIM OF THE ASSESSEE TH AT IT ENTERED INTO A DEVELOPMENT AGREEMENT WITH THE LAND OWNERS FOR CONS TRUCTION OF APARTMENTS ON 15.1.2008 IN PURSUANCE OF WHICH, HE WAS TO CONST RUCT AND HAND OVER TO THE LAND LORDS TWO APARTMENTS OF 1920 SQ.FT. AS AGA INST THE LAND LORDS HANDING OVER 240 SQ.YDS. TO THE BUILDER. THIS DEVELOPMENT AGREEMENT WAS NOT ITA NO.47/VIZAG/2012 SRI SWARNA DEVELOPERS, VSKP 2 REGISTERED. GPA CUM SALE AGREEMENT WAS REGISTERED VIDE DOCUMENT NO.254/2008 ON 29.1.2008, WHEREIN 240 SQ.YDS. WAS P ROPOSED TO BE TRANSFERRED TO THE ASSESSEE AGAINST A CONSIDERATION OF 14,40,000/-. THE ASSESSING OFFICER CONCLUDED THAT THE RECITALS IN TH E REGISTERED SALE AGREEMENT DEMONSTRATES THAT THE ASSESSEE HAS PAID RS.14,40,00 0/- IN CASH FOR ACQUISITION OF 240 SQ.YDS. AND AS THIS AMOUNT IS NO T RECORDED IN THE ASSESSEES BOOKS, THE SAME WAS ADDED AS UNEXPLAINED INVESTMENT. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL. 5. THE FIRST APPELLATE AUTHORITY CONFIRMED THE ORDE R OF THE ASSESSING OFFICER. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 7. WE HAVE HEARD MR. C. HEMANTH KUMAR, THE LD. COUN SEL FOR THE ASSESSEE AND MR. D. MANOJ KUMAR, THE LD. SENIOR D.R . ON BEHALF OF THE REVENUE. ON A CAREFUL CONSIDERATION OF THE FACTS A ND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE PAPERS ON RECORD AND T HE ORDERS OF THE AUTHORITIES BELOW, WE HOLD AS FOLLOWS. 8. THE SOLE ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE UNREGISTERED DEVELOPMENT AGREEMENT OR THE REGISTERE D AGREEMENT OR SALE CUM GPA SHOULD BE CONSIDERED FOR TAXATION? THERE I S NO GAIN SAYING THAT ONLY THE REAL INCOME OF THE ASSESSEE HAS TO BE TAXE D. 9. THE DEVELOPMENT AGREEMENT CUM GENERAL POWER OF A TTORNEY DATED 15.1.2008 PROVIDES THAT THE ASSESSEE SHALL RETAIN 6 0% OF THE DEVELOPED AREA AND DELIVER 40% OF THE TOTAL BUILT UP AREA TO THE L AND LORDS. IN PURSUANCE TO THIS DEVELOPMENT AGREEMENT, THE ASSESSEE CONSTRUCTE D AND HANDED OVER TWO APARTMENTS EACH MEASURING 1920 SQ.FT. TOTALING TO 3 840 SQ.FT. TO THE LAND LORDS. THE COST OF CONSTRUCTION OF THE PROPERTY, IF TAKEN AT RS.600/- PER SQ.FT., WOULD RESULT IN CONSIDERATION OF RS.23,04,000/- HAV ING BEEN PAID BY THE ITA NO.47/VIZAG/2012 SRI SWARNA DEVELOPERS, VSKP 3 ASSESSEE TO THE LAND LORDS. THE CONSTRUCTION AND H ANDING OVER OF THE PROPERTY IS NOT IN DISPUTE. WHILE SO TO COME TO A CONCLUSION THAT THE FURTHER AMOUNT OF RS.14,40,000/- HAS BEEN PAID BY THE ASSES SEE TO THE LAND LORDS BASED ON THE AGREEMENT TO SALE WITH GPA WOULD NOT B E REALISTIC KEEPING IN VIEW THE FACT THAT THE MARKET VALUE OF THE PROPERTY AS ON THAT DATE WAS RS. 14,40,000/-. IN THE REGISTERED AGREEMENT CUM GPA, T HE AMOUNT OF RS.14,40,000/- IS SHOWN AS BEING PAID WHICH IS THE MARKET VALUE OF 240 SQ.YDS. THE 9.1 ONE LAND OWNER HAS FILED THE FOLLOWING AFFIDAVI T. AFFIDAVIT I, V. VENKATA RAMANA RAO, S/O LATE SURYANARAYANA AGE D ABOUT 72 YEARS RESIDENT OF #20-107-18, CHANGALARAO PET, VISAKHAPAT NAM, DO HEREBY SOLEMNLY AFFIRM AND STATE THE FOLLOWING: 1. THAT I OWN A PLOT MEASURING 200 SQ.YDS. COVERED BY TS NO.308/1, 309/4, 309/5, 310/3, 310/4, PLOT NO.104 S ITUATED IN MADHURAWADA. 2. THAT I ALONG WITH SRI K. TRIMURTHULU WHO ALSO OWNED A PLOT OF SAME SIZE ADJACENT TO MY PLOT, ENTERED INTO AN AGRE EMENT WITH SRI SWARNA DEVELOPERS FOR DEVELOPMENT OF RESIDENTIA L FLATS ON 15.1.2008. 3. THAT AS PER THE AGREEMENT ENTERED INTO WITH US, THE BUILDER NAMELY SRI SWARNA DEVELOPERS ARE TO DEVELOP THE LAN D BY CONSTRUCTING A MULTI-STORIED RESIDENTIAL BUILDING A ND OF THE CONSTRUCTED AREA THE DEVELOPER HAS TO GIVE US 40% A ND RETAIN 60% TOWARDS HIS SHARE AND IN TURN WE HAVE TO TRANSF ER 60% OF OUR LAND AREA TO HIM. 4. THAT ON 15.1.2008 OUR AGREEMENT WAS PUT IN WRITING INTO A DEVELOPMENT CUM GENERAL POWER OF ATTORNEY FOR REGIS TRATION. 5. THAT WE WERE INFORMED THAT THE SAID DEVELOPMENT AGR EEMENT CUM GENERAL POWER OF ATTORNEY EXECUTED BY US COULD NOT BE REGISTERED FOR TECHNICAL REASONS. 6. THAT IT WAS SUGGESTED BY THE DOCUMENT WRITER, IN OR DER TO GIVE AUTHORITY TO THE BUILDER, TO GET THE PLANS APPROVED , A SALE CUM GPA COULD BE EXECUTED IN FAVOUR OF THE BUILDER. 7. THAT AS SUGGESTED BY THE DOCUMENT WRITER WE EXECUTE D AN AGREEMENT TO SELL COUPLED WITH GENERAL POWER OF ATT ORNEY ON 29.1.2008. ITA NO.47/VIZAG/2012 SRI SWARNA DEVELOPERS, VSKP 4 8. THAT IN RESPECT OF THE SAID AGREEMENT TO SELL COUPL ED WITH GPA I DID NOT RECEIVE ANY MONEY AS MENTIONED IN THE SAID DOCUMENT AT THE TIME OF REGISTRATION OR ANY TIME ON AFTER. 9. THAT IN THE SAID AGREEMENT IT WAS STATED THAT THE C ONSIDERATION OF RS.14,40,000/- WAS PAID TO US BUT NO SUCH PAYMEN T WAS MADE TO US NOR WAS RECEIVED BY US. AS PER OUR UNDE RSTANDING THE CONSIDERATION WAS TO BE GIVEN TO US IN THE FORM OF CONSTRUCTED AREA AS MENTIONED ABOVE. 10. THAT SUBSEQUENT TO GETTING THE PLAN APPROVED BY THE DEVELOPER IT WAS SPECIFICALLY UNDERSTOOD BETWEEN US THAT FLAT NO.3 IN THE FIRST FLOOR AND FLAT NO.2 IN THE SECOND FLOOR SHALL BE GIVEN TO ME IN CONSIDERATION OF LAND OF 120 SQ.YDS. FOR WHICH T HE AGREEMENT TO SELL WITH GPA WAS EXECUTED IN FAVOUR OF THE DEVE LOPER. 11. THAT WHAT IS STATED ABOVE IS TRUE TO THE BEST OF MY KNOWLEDGE AND INFORMATION. DEPONENT 10. IN OUR CONSIDERED VIEW, THE SUBMISSIONS OF THE A SSESSEE HAVE TO BE ACCEPTED IN VIEW OF THE SPECIFIC AVERMENTS IN THE A FFIDAVIT. IT WOULD BE UNREALISTIC TO HOLD OTHERWISE AND UNDER THE FACTS A ND CIRCUMSTANCES OF THE CASE SPECIFICALLY IN THE LIGHT OF THE AFFIDAVIT SUB MITTED BY V. VENKATA RAMANA RAO ONE OF THE LAND LORDS. IF THE REVENUES STAND IS ACCEPTED THEN, THE CONSIDERATION FOR THE PROPERTY HAS TO BE TAKEN AS R S. 14,40,000/- + RS. 23,04,000/- TOTALING TO RS. 37,44,000/- WHICH WOULD BE A PERVERSE CONCLUSION. WHEN BOTH PARTIES SUBMIT BEFORE THE REVENUE AUTHORI TIES THAT CASH HAS NOT BEEN ACTUALLY PAID OR RECEIVED, AND THERE IS NO OTH ER EVIDENCES FOUND OR GATHERED BY THE REVENUE AND WHEN IN FACT A DEVELOPM ENT AGREEMENT HAS BEEN ENTERED INTO AND HAS BEEN ACTED UPON, THE QUES TION OF INFERRING OTHERWISE DOES NOT ARISE. IN VIEW OF THE ABOVE FAC TUAL FINDINGS, WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOU NCED IN THE OPEN COURT ON 30 TH JULY14 SD/- SD/- (SAKTIJIT DEY) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM, DATED 30 TH JULY, 2014 ITA NO.47/VIZAG/2012 SRI SWARNA DEVELOPERS, VSKP 5 COPY TO 1 SRI SWARNA DEVELOPERS, FLAT NO.3, 4 TH FLOOR, MIG-72, SWARNA ENCLAVE, SEETHAMMADHARA NORTH EXTENSION, VISAKHAPATNAM-530 0 13. 2 ITO WARD-3(1), VISAKHAPATNAM. 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM. 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM