MADHUSUDAN B GILDA, MUMBAI V. JCIT RG 14(2), MUMBAI

ITA 4794/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8392 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 17-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Onus to prove
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4794/MUM/2014 ASSESSMENT YEAR 2011-12 MADHUSUDAN B. GILDA (PROP OF MADHU DEVELOPERS) 3 RD FLOOR, 312, KALBADEVI ROAD, MUMBAI 400002 VS. JCIT, RANGE - 14(2), EARNEST HOUSE, 3 RD FLOOR, NARIMAN POINT,MUMBAI- 400021 PANNO. ADEPG 1626 K APPELLANT ) .. RESPONDENT ) DATE OF HEARING: 16/11/2 016 DATE OF PRONOUNCEMENT: 13/02 /2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2011-12. IT IS DIRECTED AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-25, MUMBAI AND ARISES OUT O F THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. LEARNED CIT(A) 25 ERRED ON FACTS AND IN LAW IN CONF IRMING THE ADDITION OF RS.11346464/- MADE BY JCIT 14(2) AS UNDISCLOSED INC OME OF THE APPELLANT. 2. THAT THE LEARNED CIT(A)25 ERRED IN CONFIRMING T HE SAID ADDITION MADE BY AO WITHOUT BRINGING ON RECORDS ANY EVIDENCE TO SHOW THAT THE ASSESSEE RECEIVED CASH OR OTHERWISE, BEING CONSIDERATION MON EY MORE THAN THE APPELLANT BY: DR. K. SHIVARAM SR. ADVOCATE RESPONDENT BY: SHRI SUSHIL KUMAR PODDAR, SR.DR ITA NO. 4794/MUM/2014 2 AMOUNT AS PER AGREEMENTS PRODUCED, AND FAILED TO CO NFRONT WITH THE FLAT BUYERS AS PRAYED BY THE APPELLANT. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING, THE ADD ITION MADE BY AO WITHOUT DISCHARGING BURDEN TO PROVE CHARGE MADE ON THE APPE LLANT, AND ALSO ERRED IN RELYING ON THE CASE LAWS WHICH ARE DIFFERENT ON FACTS AND IN LAW FROM THAT OF THE ASSESSEE AND IGNORING THE CASE LAWS REL IED BY APPELLANT. 4. THAT THE LEARNED CIT(A) 25 ERRED IN CONFIRMING THE ADDITION MADE BY AO CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE APPE LLANT WITHOUT ANY CORROBORATIVE EVIDENCE TO SUBSTANTIATE ADDITIONS MA DE BY AO. 5. THAT THE LEARNED CIT(A) 25 ERRED IN CONFIRMING T HE SAID ADDITION OF RS.11346464/- WHICH IS MADE BY AO NEITHER AS BUSINE SS INCOME NOR AS INCOME FROM OTHER SOURCES AND WITHOUT QUOTING THE S ECTION UNDER WHICH THE SAID ADDITION IS MADE. 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 28.09.20 11 SHOWING A TOTAL INCOME AT RS. 1,08,95,999/-. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT I.E. CONSTRUCTI ON OF BUILDING UNDER THE PROPRIETY CONCERN M/S. MADHU DEVELOPERS ON PROJECT COMPLETION METHOD. DURING THE YEAR THE ASSESSEE COM PLETED ITS PROJECT MADHU KUTIR AT CTS NO. 121, 121/1, 121/2, 121/3 OF VILLAGE PAHADI, GOREGAON (W), MUMBAI. IN THE SAID PROJECT T HE ASSESSEE CONSTRUCTED ONE BUILDING CONSISTING OF 7 FLOORS .TW O FLATS ON EACH FLOOR UPTO 6 TH FLOOR (2 BHK & 3 BHK) AND ONE FLAT ON 7 TH FLOOR . THUS THERE WERE 13 TOTAL FLATS. THE CARPET AREA OF 2 BHK FLAT WAS SHOWN AT 573 SQ. FT.; THAT OF 3 BHK FLAT AT 726 SQ. FT. THE CARPET AREA OF 7 TH FLOOR FLAT WAS SHOWN AT 848 SQ. FT. THE ASSESSING OFFICER (AO), AFTER MENTIONING THE DETAILS OF CONSTRUCTED FLATS AND ITS PURCHASERS WORKED OUT THE DECLARED AND ADOPTED VALUE OF THE SAME. HE OBSERVED FROM THE DATA REGARDING SALE CONSIDERATION ON ACCOUNT OF SALE OF DIFFERENT FLATS ADJACENTLY LOCATED AND SOLD AT SHORT INTERVAL THAT THERE WAS A BIG DIFFERENCE BETWEEN THE SALE CONSIDERATIONS. THE AO THEN ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE HIGHEST SALE C ONSIDERATION ITA NO. 4794/MUM/2014 3 RECEIVED BY THE ASSESSEE BASED ON THE RATE PER SQ. FT. SHOULD NOT BE ADOPTED BASED ON THE FACT THAT SALE WAS EFFECTED WI THIN A SHORT PERIOD AND THE BUSINESS PRUDENCE DEMANDS THAT THE ASSESSEE MUST HAVE NEGOTIATED AT THE HIGHEST PRICE IN ORDER TO GET MAX IMUM GAINS. THE ASSESSEE FILED A REPLY BEFORE THE AO. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SAME. AS PER HIM, 2 BHK AND 3 BH K ARE LOCATED ON THE SAME FLOOR ADJACENTLY AND THERE CANNOT BE ANY R EASON FOR SHARP VARIATION IN THE SALE CONSIDERATION AS THESE ARE HA VING SAME QUALITY OF CONSTRUCTION AND KIND OF FACILITY. THE AO FOUND IT PECULIAR THAT THE RATE FOR FLAT NO 101 WORKED OUT TO RS. 8722/- PER S Q. FT. (2 BHK) WHEREAS THE RATE OF FLAT NO 102 WAS RS.11019/- (3 B HK) APPROXIMATELY, WHICH ARE LOCATED ON THE SAME FLOOR AND SOLD WITHIN A INTERVAL OF 2 DAYS. SIMILAR IS THE CASE IN OTHER FL ATS SUCH AS 301 & 302, 601 & 602. THE AO CONSIDERED THE NORMAL PRACTICE PR EVAILING IN PROPERTY MARKET IN MUMBAI DURING THE IMPUGNED ASSES SMENT YEAR I.E. (I) HIGHER RATE IS CHARGED AS THE FLOOR GETS HIGHER , (II) THE RATE CHARGED IN JULY WILL BE HIGHER THAN THAT IN MAY SINCE IN TH AT PERIOD THERE WAS RISING TREND IN THE PROPERTY PRICES. THE AO ADOPTED THE AVERAGE SALEABLE RATE @ RS. 10,431/- AND WORKED OUT THE DIF FERENCE WHICH COMES TO RS. 1,13,46,464/-. HE MADE AN ADDITION OF THE ABOVE SUM TREATING IT AS UNDISCLOSED INCOME FOR THE YEAR UNDE R CONSIDERATION. 4. THE ASSESSEE PREFERRED AN APPEAL AGAINST THE ORD ER OF THE AO BEFORE THE LEARNED CIT(A). THE ASSESSEE FILED A WRI TTEN SUBMISSION BEFORE THE LEARNED CIT(A) WHICH HAS BEEN EXTRACTED AT PAGE 4 13 OF THE APPELLATE ORDER. THE LEARNED CIT(A) OBSERVED TH AT THE DIFFERENCE BETWEEN THE 1 ST SLAB AND 7 TH SLAB STAGE WAS ONLY OF 5 MONTHS (FEBRUARY TO JULY, 2010) BETWEEN WHICH THE PRICES W ERE INCREASED BY THE ASSESSEE FROM RS. 7710/- TO RS. 9945/- I.E. AN INCREASE IN RATES OF AROUND 29%, WHICH SEEMS HIGHLY UNLIKELY IN REALITY. ITA NO. 4794/MUM/2014 4 AS REGARDS THE CONTENTION OF THE ASSESSEE THAT HE C HARGED HIGHER RATE FOR LOWER BOOKING AMOUNT AND SLOWER PAY MENT SCHEDULE, THE LEARNED CIT(A) FOUND THAT THE ASSESSEE HAD SOLD FLAT NO 301 & 101 IN MAY 2010 @ RS. 10,470/- PER SQ. FT. AND JUNE 201 0 @ RS. 11,020/- PER SQ. FT. WITH BOOKING AMOUNT OF 3% AND 5% RESPEC TIVELY AND BALANCE BY BANK FINANCE. AT THE SAME TIME, IN MAY 2 010, THE FLAT NO 501 WAS BOOKED @ RS. 8,725/- PER SQ. FT. FOR FAST P AYMENT I.E. 25% ON BOOKING AND 60% WITHIN 2 MONTHS. HE FOUND THAT THE ASSESSEE HAD NOT GIVEN FULL DETAILS AS TO THE SCHEDULE OF PAYMEN T IN CASE OF BANK FINANCE TO BE LONG ENOUGH TO JUSTIFY THE VAST VARIA TIONS IN RATES. IN ANY CASE, NO PRUDENT BUSINESSMAN WOULD SELL THE PROPERT Y AT SUCH HUGE DISCOUNT JUST FOR FASTER PAYMENT BY FEW MONTHS. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE FAILED TO PROVE HIS CONT ENTION BY GIVING COMPLETE DETAILS IN THIS RESPECT. THE ASSESSEE SUBMITTED THAT THERE WAS NO TAKER FOR FLAT NO 101 (2 BHK) AT 1 ST FLOOR, WHICH WAS BOOKED @ RS. 8,725/- PER SQ. FT. ON 29.07.2010. HOWEVER THE LEARNED CIT(A) FOUND THAT T HE ADJOINING FLAT NO 102 (3 BHK) AT THE VERY SAME FLOOR WAS ALREADY B OOKED @ RS. 11,020/- ON 10.06.2010. HENCE THE ASSESSEES CONTEN TION SEEMS TO BE AN ATTEMPT TO SOMEHOW JUSTIFY THE SALE AT DISCOUNTE D RATE. AS REGARDS THE SALE OF FLAT NO 502 @ RS. 7990/- IN AUGUST 2010, THE ASSESSEE STATED THAT THE FLAT WAS ORIGINALLY SO LD IN MAY 2010 AND ADVANCE PAYMENT OF RS. 23.50 LAKHS WAS RECEIVED, WH ICH BOOKING WAS CANCELLED BY THE BUYER AND TO RETURN THE ADVANCE PA YMENT RECEIVED, IT WAS NECESSARY TO SALE THE FLAT TO THE OTHER PARTY A T DISCOUNTED RATE. THE LEARNED CIT(A) WAS NOT CONVINCED WITH THE ABOVE EXPLANATION OF THE ASSESSEE SINCE THIS WAS THE LAST FLAT SOLD AT V ERY DISCOUNTED PRICE. THE ASSESSEE HAVING SOLD ALL OTHER FLATS WOULD NOT BE IN SUCH FINANCIAL ITA NO. 4794/MUM/2014 5 DIFFICULTY THAT JUST FOR RETURNING A SUM OF RS. 23. 50 LAKHS, IT WOULD SELL THE FLAT AT SUCH A DISCOUNTED RATE. IN VIEW OF THE ABOVE, THE LEARNED CIT(A) DID NOT F IND ANY INFIRMITY IN THE ORDER OF THE AO IN BRINGING TO TAX THE UNDISCLOSED INCOME OF RS. 1,13,46,464/- AND THUS DISMISSED THE APPEAL FILED BY THE ASSESSEE. 5. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE S UBMITS THAT MADHU KUTIR (THE IMPUGNED PROJECT) IS THE FIRST P ROJECT OF THE ASSESSEE. IT IS STATED THAT THE ASSESSEE SOLD 13 FL ATS DURING THE YEAR AT DIFFERENT STAGES OF CONSTRUCTION AND ON DIFFERENT P AYMENT TERMS TO DIFFERENT UNRELATED BUYERS. THEREFORE, THE CONSIDER ATION AGREED WITH EACH OF THEM WAS DIFFERENT. IT IS STATED THAT THE A O OBSERVED THAT THERE WAS DIFFERENCE IN PRICES AT WHICH FLATS WERE SOLD AND CONJECTURED THAT THE ASSESSEE WOULD HAVE RECEIVED U NACCOUNTED CASH. IT IS STATED BY HIM THAT THE AO ADMITTED THAT HE WA S NOT HAVING ANY EVIDENCE TO SUPPORT HIS CONTENTION BUT INVOKED THE PREPONDERANCE OF PROBABILITY THEORY. THE AO HAS APPLIED THE PRI CE PER SQ. FT. OF FLAT NO 301 TO ALL FLATS AND COMPUTED NOTIONAL SALE CONS IDERATION AND MADE AN ADDITION OF RS. 1,13,46,464/-. 5.1 THE LEARNED COUNSEL SUBMITS THAT THE CONSIDERAT ION OFFERED BY THE ASSESSEE IS THE ACTUAL ONE, AND NO AMOUNT OVER AND ABOVE THE SAME HAS BEEN RECEIVED IN RESPECT OF ANY FLAT. THE IMPUGNED PROJECT WAS ASSESSEES FIRST PROJECT AND THE PRICE AT WHICH A FLAT WAS ACTUALLY SOLD DEPENDED ON NEGOTIATIONS, PAYMENT TERMS, STAGE OF CONSTRUCTION, LIQUIDITY POSITION OF THE ASSESSEE AT THAT TIME ETC . IT IS STATED THAT THE JUSTIFICATIONS / REASONS FOR DIFFERENCE IN SALE CON SIDERATION HAD BEEN GIVEN BEFORE THE AO AND CIT(A). THE CONSIDERATION R ECEIVED BY THE ASSESSEE IS HIGHER THAN THE GOVERNMENT APPROVED STA MP VALUE IN ALL ITA NO. 4794/MUM/2014 6 CASES. THEREFORE, THERE CANNOT BE ANY ALLEGATION OF ON-MONEY IN ABSENCE OF ANY EVIDENCE WHATSOEVER WHEN THE SALE CO NSIDERATION IS HIGHER THAN GOVERNMENT APPROVED VALUATION. IT IS ST ATED THAT THE AO DID NOT ISSUE SUMMONS TO BUYERS TO CONFIRM THE SALE CONSIDERATION IN SPITE OF THE ASSESSEES SPECIFIC REQUEST. NO EVIDEN CE HAS BEEN REDUCED BY THE AO AND CIT(A) AND ALL THEIR OBSERVATIONS ARE BASED ON CONJECTURES. THE LEARNED COUNSEL REFERS TO THE RELE VANT PAGES OF THE PAPER BOOK FILED BY HIM IN SUPPORT OF HIS ABOVE CON TENTIONS. THUS IT IS SUBMITTED THAT THE ADDITION OF RS. 1,13,46,464/- CO NFIRMED BY THE LEARNED CIT(A) BE DELETED. 6. PER CONTRA , THE LEARNED DR REFERS TO PAGE 13 OF THE ORDER OF THE LEARNED CIT(A), WHEREIN THE CONTENTION AS REGARDS T HE SLAB STAGE OF BUILDING VIS-A-VIS THE RATES CHARGED HAVE BEEN TABULATED IN ASCENDING ORDER FLAT SOLD AT SLAB STAGE DATE OF BOOKING FLAT NO. RATE PER SQ. FT. PLINTH STAGE 02-FEB-10 201 8900 1 ST SLAB STAGE 20-FEB-10 602 7710 2 ND -3 RD SLAB STAGE 15-MAR-10 702 8020 3 RD SLAB STAGE 31-MAR-10 401 9250 4 TH SLAB STAGE 13-APR-10 302 8950 5 TH -6 TH SLAB STAGE 3-JUN-10 402 9640 5 TH -6 TH SLAB STAGE 14-JUN-10 202 9640 7 TH SLAB STAGE 23-JUN-10 601 9945 REFERRING TO THE ABOVE TABLE, THE LEARNED DR STRON GLY SUPPORTS THE ORDER PASSED BY THE LEARNED CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE IN RE SPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE AO HAS SUBMITTED THAT HE HAS GIVEN THE ADDRESS OF THE PARTIES EARLIER AND THE AO MAY CONFI RM WITH THE PARTIES BY USING THE POWER VESTED IN THE ACT. THIS HAS BEEN ITA NO. 4794/MUM/2014 7 MENTIONED BY THE AO AT PARA 9.3 (PAGE 4-5) OF THE A SSESSMENT ORDER. IT IS ALSO FOUND THAT THE ASSESSEE VIDE WRITTEN SUB MISSION DATED 29.04.2014 HAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE NAME AND ADDRESS OF THE FLAT BUYERS WERE GIVEN TO THE AO AS REQUIRED [PAGE 5 OF THE ORDER OF THE CIT(A)] AND AT THE REPEATED R EQUEST OF THE ASSESSEE, THE AO DID NOT CONFRONT WITH THE FLAT BUY ERS THAT THEY HAD PAID CASH TO THE ASSESSEE, OVER AND ABOVE THE AGREE MENT VALUE [PAGE 11 OF THE ORDER OF THE CIT(A)]. BEFORE US, THE LEAR NED COUNSEL OF THE ASSESSEE SUBMITTED THAT SPECIFIC REQUEST WAS MADE T O THE AO TO ISSUE SUMMONS TO THE PURCHASERS. 7.1 IN STATE OF KERALA VS. K.T. SHADULI GROCERY DEALER AIR 1977 SC 1627 , THE HON'BLE SUPREME COURT RECOGNISED THE IMPORTAN CE OF ORAL EVIDENCE BY HOLDING THAT THE OPPORTUNITY TO PR OVE THE CORRECTNESS OR COMPLETENESS OF THE RETURN NECESSARI LY CARRY WITH IT THE RIGHT TO EXAMINE THE WITNESSES AND THAT INCLUDE S EQUALLY THE RIGHT TO CROSS EXAMINE WITNESSES. IN THE CASE OF ITO VS. M. PIRAI CHOODI [2012] 20 TAXMANN.COM 733 (SC) , THE HON'BLE HIGH COURT HAS SET ASIDE THE ORDER OF ASSESSMENT ON THE GROUND THAT NO OPPORTUNITY TO CROSS EXAMINE WAS GRANTED, AS SOUGHT BY THE ASSES SEE. THE HON'BLE SUPREME COURT HELD : WE ARE OF THE VIEW THAT THE HIGH COURT SHOULD NOT HAVE SET ASIDE THE ENTIRE ASSESSMENT ORDER. AT THE HIGHEST, THE HIGH C OURT SHOULD HAVE DIRECTED THE ASSESSING OFFICER TO GRANT AN OPPORTUN ITY TO THE ASSESSEE TO CROSS-EXAMINE THE CONCERNED WITNESS. 7.2 THE CONTENTIOUS ISSUES IN THE INSTANT APPEAL AS DELINEATED AT PARA 3 TO 6 HERE-IN-ABOVE CAN BE RESOLVED BY EXAMIN ING THE FLAT BUYERS AND GRANTING AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THEM. THEREFORE, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THE SAME TO THE FILE OF THE AO T O MAKE A FRESH ITA NO. 4794/MUM/2014 8 ASSESSMENT AS PER THE PROVISIONS OF THE ACT AFTER E XAMINING THE FLAT BUYERS AND GRANTING AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THEM. NEEDLESS TO SAY, THE AO IS DIRECTED T O GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE F INALISING THE ASSESSMENT ORDER. THE ASSESSEE IS DIRECTED TO FILE THE RELEVANT DETAILS BEFORE THE AO. 7.3 IN VIEW OF THE ABOVE FACTS, WE HAVE NOT ADVERTE D TO THE CASE LAWS CITED BY THE LEARNED COUNSEL OF THE ASSESSEE A ND THE LEARNED DR. 8. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 13/02/2017 SD/- SD/- (JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI; DATED: 13/02/2017 BISWAJIT, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI