DCIT CEN CIR 36, MUMBAI V. AKRUTI CITY LTD, MUMBAI

ITA 4913/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55683 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 04-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 26-08-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Loose papers; Document seized; Additional evidence; Revised return; Documents seized
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO. 4875/MUM./2009 (ASSESSMENT YEAR : 2007-08 ) M/S. ACKRUTI CITY LTD. (FORMERLY KNOWN AS AKRUTI CITY LTD.), AKRUTI TRADE CENTRE ROAD NO.7, MAROL, MIDC ANDHERI (E), MUMBAI 400 093 PAN AAACA6101D .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE-36, AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... RESPONDENT ITA NO. 4913/MUM./2009 (ASSESSMENT YEAR : 2007-08 ) DY. COMMISSIONER OF INCOME TAX CIRCLE-36, AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. APPELLANT V/S M/S. ACKRUTI CITY LTD. (FORMERLY KNOWN AS AKRUTI CITY LTD.), AKRUTI TRADE CENTRE ROAD NO.7, MAROL, MIDC ANDHERI (E), MUMBAI 400 093 PAN AAACA6101D .... RESPONDENT ASSESSEE BY : MR. VIJAY MEHTA REVENUE BY : MR. PAWAN VED DATE OF HEARING 04.10.2011 DATE OF ORDER 21.10.2011 M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 2 O R D E R PER J. SUDHAKAR REDDY, A.M. THESE CROSS APPEALS ARE DIRECTED AGAINST THE IMPUG NED ORDER DATED 23 RD JUNE 2009, PASSED BY THE COMMISSIONER (APPEALS)-VI, MUMBAI, FOR ASSESSMENT YEAR 2007-08. FACTS IN BRIEF:- 2. THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUS INESS OF REAL ESTATE DEVELOPMENT AND SLUM REHABILITATION. THE ORI GINAL RETURN OF INCOME WAS FILED ON 15 TH NOVEMBER 2007, DECLARING TOTAL INCOME OF ` 3,32,22,900. LATER, THE ASSESSEE FILED REVISED RETURN OF INCOME ON 4 TH AUGUST 2008, DECLARING INCOME OF ` 5,13,97,000. ON 10 TH AUGUST 2006, A SEARCH AND SEIZER OPERATION UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) WAS CONDUCTED ON ACKRUTI GROUP OF COMPANIES WHICH INCLUDED ASSESSEE ALSO. THIS ASSESSMENT YEAR IS RELEVANT TO THE PREVI OUS YEAR IN WHICH THE SEARCH AND SEIZER ACTION WAS CONDUCTED. IN THE RETU RN OF INCOME, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IB(10) O F THE ACT. THE FACTS THAT ARE RELEVANT FOR DISPOSING OFF THESE CROSS APPEALS ARE THAT, THE ASSESSING OFFICER RESTRICTED THE CLAIM OF DEDUCTION UNDER SEC TION 80IB(10), ON THE GROUND THAT THE AMOUNT REALISED FROM SALE OF FSI, R ECEIVED AS CONSIDERATION FOR THE REHABILITATION PROJECT FROM MIDC, IS IN EXC ESS OF THE MARKET RATE PRESCRIBED IN THE STAMP DUTY READY RECKONER, ISSUED BY THE STATE GOVERNMENT. IN OTHER WORDS, THE AMOUNT REALISED FRO M SALE OF FSI IN EXCESS OF THE MARKET RATE PRESCRIBED IN STAMP DUTY READY R ECKONER WAS HELD AS PROFITS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB(10). THIS DECISION WAS TAKEN ON THE PROJECTS (I) BULDG. 7A PKT.5, (II) B LDG. 2 PKT. 9 AND (III) BLDG.1 PKT.9. THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT THE ASSESSEE HAS COMPLIED WITH ALL OTHER REQUIREMENTS FOR AVAILING D EDUCTION UNDER SECTION 80IB(10). IN THE WORDS OF COMMISSIONER (APPEALS), T HESE FACTS ARE BROUGHT OUT AS FOLLOWS:- M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 3 5.1 THE A.O. HAS DEALT WITH THIS ISSUE IN PARA-4 RUNNIN G THROUGH PAGES-15 TO 22 OF THE ASSESSMENT ORDER. THE FACTS O F THE ISSUE AS BROUGHT OUT BY THE APPELLANT ARE AS FOLLOWS:- (I) THE PROJECTS UNDERTAKEN BY THE ASSESSEE AT MIDC , MAROL ARE COVERED UNDER THE SRA SCHEME OF THE GOVERNMENT OF M AHARASHTRA. (II) AS A RESULT OF DEVELOPMENT OF REHAB PROJECT, T HE APPELLANT IS ENTITLED TO UTILISE THE FSI GENERATED FOR THE DEVEL OPMENT OF SALE PROJECT ON THE SAME PLOT OF LAND OR IT CAN SELL THE FSI IN THE OPEN MARKET. (III) THE REHABILITATION PART IS A HOUSING PROJECT AS PER THE CRETIFICATE FROM MIDC. (IV) DURING THE YEAR UNDER APPEAL, THE APPELLANT CO MPLETED REHAB BUILDING AT POCKET 9 AND SOLD THE FSI GENERATED FRO M SLUM REHABILITATION PROJECT AWARDED BY MIDC RESPECT OF P KT.5, PKT. 5 AND PKT. 9. (V) THE COMPANY HAS SOLD FSI (DEVELOPMENT RIGHTS) O F 1,00,000 SQ.FT. GENERATED BY IT FROM ITS MIDC PROJECT FOR ` 70 CRORES TO NETZONE DEVELOPERS PVT. LTD. (HEREINAFTER REFERRED AS NETZ ONE). (VI) PROFIT FROM SALE OF FSI IS CALCULATED AS DIFFE RENCE BETWEEN THE ACTUAL SALE VALUES OF THE FSI AND ACTUAL COST OF CO NSTRUCTION OF REHAB HOUSING. 5.1.1 THE APPELLANT HAS CLAIMED DEDUCTION UNDER SEC TION 80IB(10) IN RESPECT OF PROFIT EARNED FROM SALE OF FSI GENERATED OUT OF SLUM REHABILITATION PROJECT AWARDED BY MIDC AS ALL THE C ONDITIONS OF SECTION 80IB(10) STOOD FULFILLED. THE DETAILS OF CLAIM MADE BY THE APPELLANT ARE AS UNDER:- REHAB BLDG. AREA RATE PER SQ.FT AMOUNT COST PROFIT POCKET-4 12,188.37 7,000 8,53,18,000 1,93,09,775 6, 60,08,225 POCKET-5 2,120.00 7,000 1,48,40,000 21,13,137 1,27, 26,863 POCKET-9 85,691.78 7,000 59,98,42,000 10,41,74,221 49,56,67,779 TOTAL 1,00,000 70,00,00,000 12,55,97,133 57,44,02,867 THE A.O. NOTED THAT IN RESPECT OF THE PORTIONS OF P KT.4 AND PKT.8 AT MIDC, COMPLETED IN THE SAME YEAR, THE PROFIT WAS MUCH LOWER AT ` 6,60,08,815 AND ` 57,59,678 RESPECTIVELY. ON COMPLETION OF REHAB BUILDINGS, THE VALUE OF FSI GENERATED AS PER THE STAMP DUTY READY RECKONER WAS TAKEN BY THE ASSESSEE TO DETERMINE THE PROFIT GENERATED FROM THE CONSTRUC TION OF SUCH REHAB BUILDINGS IN THE ASSESSMENT YEAR UNDER CONSID ERATION. M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 4 THE PROFITS ON THE SALE BUILDINGS WAS CALCULATED BY CREDITING THE SALES ON ACCOUNT OF THE SALE BUILDING PROJECTS, AND BY DEBITING THE COST OF CONSTRUCTION AND THE COST OF FSI UTILIZ ED IN CONSTRUCTING THE SAME BUILDING. 5.1.2 IN VIEW OF THE ABOVE, THE A.O. ASKED THE ASSE SSEE TO EXPLAIN THE TRANSACTION REGARDING SALE OF FSI TO NE TZONE. EXPLANATION OF THE ASSESSEE WAS REPRODUCED ON THE P AGE 16 AND 18 OF THE ASSESSMENT ORDER. 5.1.3 AS REGARD PKT. 5 AND 9, THE A.O. ALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) BUT THE SAME WAS R EDUCED BY DIFFERENCE BETWEEN SALE VALUES OF FSI SOLD AND STAM P DUTY READY RECKONER RATE ON THE GROUND THAT ABNORMALLY HIGH PR OFIT WAS CLAIMED FOR PROJECTS AT PKT. 5 AND PKT. 9 IN MIDC A T THE TIME OF SELLING THE FSI. IN NETSHELL, PROFIT FOR REHAB PROJ ECT IN PKT. 5 AND 9 IN MIDC WAS REWROKED OUT TAKING STAMP DUTY READY RE CKONER RATE AS SALE CONSIDERATION FOR FSI SOLD INSTEAD OF ACTUA L SALE VALUE REALISED BY THE APPELLANT FOR REASONS STATED IN DET AIL IN THE ASSESSMENT ORDER. 3. THE OTHER FACTS WHICH ARE RELEVANT FOR DISPOSING OF F THESE APPEALS ARE THAT, THE CERTAIN ADDITIONS WAS MADE BY THE ASSESSI NG OFFICER ON THE BASIS OF CERTAIN LOOSE PAPERS AND DOCUMENTS SEIZED DURING TH E COURSE OF SEARCH BY COMING TO A CONCLUSION THAT THESE ARE UNDISCLOSED S ALES. THE COMMISSIONER (APPEALS) DELETED CERTAIN ADDITIONS AND HAD ALSO DI RECTED THE ASSESSING OFFICER TO GRANT DEDUCTION CLAIMED UNDER SECTION 80 IB(10) TO THE EXTENT CLAIMED ON THE GROUND THAT THE ACTUAL SALE PROCEEDS HAVE TO BE TAKEN INTO CONSIDERATION AS IT IS NOT CORRECT TO RESTRICT THE SALE CONSIDERATION UPTO THE MARKET VALUE SPECIFIED IN THE STAMP DUTY READY RECK ONER, FOR THE PURPOSE OF GRANT DEDUCTION UNDER SECTION 80IB(10). HE ALSO CONFIRMED CERTAIN ADDITIONS AS UNRECORDED SALES BASED ON CERTAIN LOOS E PAPERS SEIZED DURING THE COURSE OF SEARCH. AGGRIEVED, THE REVENUE IS IN APPEAL ON THE ISSUES WHERE COMMISSIONER (APPEALS) GRANTED RELIEF AND WHE REAS THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL WHERE THE ASSESSEES CLA IM WAS REJECTED BY THE COMMISSIONER (APPEALS). 4. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE, MR. PAWAN VED, ON BEHALF OF THE REVENUE, SUBMITTED THAT GROUNDS NO .1 TO 4 OF REVENUES APPEAL WERE ON THE ISSUE OF QUANTIFICATION OF DEDUC TION UNDER SECTION 80IB(10). HE SUBMITTED THAT THE ASSESSEE WAS GRANTE D FLOOR SPACE INDEX M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 5 (FSI) AS CONSIDERATION FOR UNDERTAKING THE REHABILI TATION PROJECT AND IT SOLD FSI AT A MUCH HIGHER PRICE THAN THAT WHICH WAS SPEC IFIED AS MARKET VALUE BY THE SUB-REGISTRAR OFFICE GIVING RAISE TO ABNORMAL P ROFITS AND THOSE SUCH EXCESS PROFITS HAVE TO BE EXCLUDED FOR COMPUTING DE DUCTION U/S/80IB (10). 5. LEARNED DEPARTMENTAL REPRESENTATIVE RAISED ONLY THR EE ARGUMENTS FOR CONSIDERATION BEFORE THE BENCH AND THOSE ARE (I) TH E FSI WAS SOLD AT A RATE, WHICH WAS MUCH HIGHER THAN THE MARKET VALUE GUIDELI NE RATE, PRESCRIBED BY THE STAMP DUTY AUTHORITIES. THIS RESULTED IN INFLAT ION OF PROFIT RESULTING IN EXCESSIVE RELIEF CLAIMED UNDER SECTION 80IB(10) BY THE ASSESSEE AND HENCE RESTRICTION OF THE RELIEF IS JUSTIFIED; (II) THE CO MMISSIONER (APPEALS) HAS CALLED FOR ADDITIONAL EVIDENCE IN THE FORM OF (A) LIST O F DIRECTORS AND SHAREHOLDERS OF NETZONE DEVELOPERS AND ACKRUTI CITY LIMITED; (B) EVIDENCE OF REGISTRATION OF AGREEMENT WITH NETZONE AND PAYMENT OF STAMP DUTY THEREON; (C) DETAILS OF PAYMENT RECEIVED BY THE ASSESSEE FROM NETZONE DE VELOPERS ON SALE OF FSI UPTO 31 ST MARCH 2008; (D) COPIES OF AGREEMENTS REGARDING SAL E OF FSI MADE TO OTHER PARTIES, TO SUPPORT THE MARKET VALUE RATE OF ` 7,000 PER SQ.FT. AT WHICH SALE IS MADE TO NETZONE DEVELOPERS AND AT THE SAME TIME THAT THE C.I.T.(A) HAS NOT GIVEN THE ASSESSING OFFICER AN O PPORTUNITY TO EXAMINE THESE DOCUMENTS AND OFFER HIS COMMENTS THEREON. THU S HE SUBMITS THAT NOT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER IS B AD-IN-LAW AND, HENCE, THE ISSUE SHOULD BE RESTORED TO THE FILE OF ASSESSING O FFICER FOR ADJUDICATION AFRESH; AND (III) THAT THE ASSESSEE WAS FOLLOWING A METHOD OF ACCOUNTING WHEREIN, THE FSI IN QUESTION WAS DISCLOSED AS STOCK -IN-TRADE AND THIS STOCK WAS VALUED AT APPROVED MARKET RATE FOR STAMP DUTY P URPOSES. HE CONTENDS THAT THERE IS A CHANGE IN THE METHOD FOLLOWED AND S ALE IS RECORDED AT A MUCH HIGHER RATE THAN THE MARKET VALUE OF STOCK. HE RELI ED ON THE ORDER OF THE ASSESSING OFFICER. 6. ON GROUNDS NO.5 AND 6, LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT THE COMMISSIONER (APPEALS) ERRED IN DELETING THE ADDITION OF ` 20,00,000/- ON ACCOUNT OF UNDISCLOSED SALES IN RES PECT OF FLAT NO.503. HE M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 6 TOOK THIS BENCH TO PARA-8/PAGE-31 OF THE COMMISSION ER (APPEALS)S ORDER AND THEREAFTER RELIED ON THE FINDINGS IN THE ASSESS MENT ORDER. 7. SIMILARLY, ON GROUND NO.7, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER AND HA D NOT MADE ANY SUBMISSIONS. 8. LEARNED COUNSEL FOR THE ASSESSEE, MR. VIJAY MEHTA, ON THE OTHER HAND, SUBMITTED THAT THE FSI HAS BEEN GRANTED TO THE ASSE SSEE BY MIDC AS CONSIDERATION FOR THE COST INCURRED BY THE ASSESSEE FOR REHABILITATION PROJECTS FOR PKT. 4, PKT. 5, PKT.8 AND PKT. 9, AND THAT THE FSI WAS SOLD @ ` 7,000 PER SQ.FT. TO NETZONE DEVELOPERS, AND THE PROCEEDS WERE INCOME OF THESE PROJECTS AND AFTER MEETING THE COSTS OF CONSTRUCTIO N, THE BALANCE WAS PROFIT OF THE PROJECT. HE SUBMITTED THAT THE ASSESSING OFF ICER HAD NOT REDUCED THE PROFITS OF PKT. 4 THOUGH THE SALE OF FSI WAS MADE A T THE SAME RATE OF ` 7,000 WHICH IS HIGHER THAN THE SPECIFIED MARKET VALUE IN STAMP DUTY READY RECKONER. EVEN IN THE CASE OF PKT. 5 AND PKT. 9, TH E LEARNED COUNSEL POINTED OUT THAT THE ASSESSING OFFICER HAS NOT REDUCED THE PROFITS EARNED BY THESE PROJECTS. IN FACT THE PROFITS WERE ACCEPTED. HE SUB MITTED THAT ONLY THE PROFITS EARNED BY THOSE PARTICULAR PROJECTS WERE NOTIONALLY DIVIDED, I) AS PROFITS EARNED UPTO THE MARKET RATES SPECIFIED IN THE STAMP DUTY READY RECKONER AND II) ABNORMAL PROFITS. HE SUBMITTED THAT THE AC T DOES NOT PROVIDE FOR SUCH NOTIONAL SEGREGATION. THUS, HE ARGUED THAT INDEPEND ENT OF THE ADDITIONAL EVIDENCE CALLED FOR BY THE COMMISSIONER (APPEALS) U NDER SECTION RULE 46A (4), NO DISALLOWANCE WAS WARRANTED ON THE CLAIM MAD E UNDER SECTION 80IB(10), AS EXEMPTION CANNOT BE RESTRICTED IN THE MANNER DONE BY THE ASSESSING OFFICER. HE ARGUED THAT THE ENTIRE PROFIT S OF THE PROJECT HAVE TO BE EXEMPTED UNDER SECTION 80IB(10). ON THE ADDITIONAL EVIDENCE FILED BEFORE THE COMMISSIONER (APPEALS) THE LEARNED COUNSEL POIN TED OUT THAT THE COMMISSIONER (APPEALS) HAS MADE IT CLEAR THAT IT WA S UNDER RULE-46A(4) THAT HE CALLED FOR FILING OF CERTAIN DOCUMENTS AS E VIDENCE. HE RELIED ON THE DECISION OF THE TRIBUNAL IN DY. DIRECTOR OF INCOME- TAX (INTERNATIONAL TAXATION) V/S THORESEN CHARTERING SINGAPORE (PTE.) LTD, [2009] 118 ITD M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 7 0416 (MUM.) FOR THE PROPOSITION THAT WHEN THE COMMI SSIONER (APPEALS) INVOKES HIS POWERS UNDER RULE 46A(4), THERE IS NO R EQUIREMENT FOR CONFRONTING THE ASSESSING OFFICER WITH DOCUMENTS / EVIDENCE ENTERTAINED BY THE COMMISSIONER (APPEALS) AT THE FIRST APPELLATE S TAGE. HE ALSO RELIED ON THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN SM T. PRABHAVATI S. SHAH V/S CIT [1998] 231 ITR 001 (BOM.). HE POINTED OUT THAT THE DIFFERENCE BETWEEN SUB-RULE (1), (2) AND (4) OF RULE 46A. HE RELIED ON THE ORDER PASSED BY THE COMMISSIONER (APPEALS) AND SUBMITTED THAT NOTHING T URNS ON THIS POINT OF ADMISSION OF ADDITIONAL EVIDENCE AS OTHERWISE THE A SSESSEE WAS ENTITLED TO CLAIM DEDUCTION. 9. ON THE ISSUE THAT EXEMPTION UNDER SECTION 80IB(10), CANNOT BE RESTRICTED BY ARTIFICIALLY DIVIDING SALE CONSIDERAT ION AND ON THE METHOD OF ACCOUNTING, HE POINTED OUT THAT AS PER THE METHOD O F ACCOUNTING FOLLOWED BY THE ASSESSEE, PROJECT COMPLETION METHOD IS FOLLOWED AND THAT CLOSING STOCK IS VALUED AT COST OR STAMP DUTY MARKET VALUATION RATE, WHICHEVER IS LOWER. HE SUBMITTED THAT THERE IS NO ERROR IN SUCH VALUATION OF STOCK AND THAT THERE IS NO CHANGE IN METHOD OF ACCOUNTING. HE POINTED OUT T HAT THERE IS NO ALLEGATION WHATSOEVER THAT MONEY HAS FLOWN BACK TO THE BUYER FROM THE ASSESSEE. HE EMPHASIZED THAT THERE ARE NO COMMON SH ARE HOLDERS OR DIRECTORS IN THE ASSESSEE COMPANY AND NETZONE DEVEL OPERS AND THE ALLEGATION OF THE ASSESSING OFFICER THAT THERE MAY BE INDIRECT CONTROL, IS WITHOUT ANY BASIS OR EVIDENCE AND IS ONLY A SURMISE AND CONJECTURE. HE FILED A PAPER BOOK RUNNING INTO 199 PAGES AND POINTED OUT PAGE-5 WHICH IS AN AGREEMENT ENTERED BY THE ASSESSEE WITH NETZONE DEVE LOPERS AND ARGUED THAT NONE OF THESE DOCUMENTS HAVE BEEN FOUND FAULT WITH BY THE ASSESSING OFFICER. ON THE RATE OF ` 7,000, LEARNED COUNSEL SUBMITTED THAT COMPARABLE CASES HAVE BEEN FURNISHED AT THE DIRECTION OF THE C OMMISSIONER (APPEALS) AND THESE COMPARABLE CASES OF SALE OF FSI PROVE THA T THE SALE RATE IS NOT EXCESSIVE. FURTHER IN THE CASE OF ASSESSEE, THE LE ARNED COUNSEL SUBMITTED THAT THE FSI INCLUDED THE VALUE OF LAND FOR THE REA SON THAT THE CONSTRUCTION IS MADE ON A SEPARATE PLOT OF LAND PROVIDED BY THE MID C AND THAT SALE OF FSI IN FACT INCLUDED SALE OF RIGHTS IN LAND. HE EXPLAINED THE ACCOUNTING PROCESS M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 8 FOLLOWED BY THE ASSESSEE AND SUBMITTED THAT THE ORD ER OF THE COMMISSIONER (APPEALS) ON THIS ISSUE BE UPHELD. 10. ON GROUNDS NO.5, 6 AND 7, THE LEARNED COUNSEL RELIE D ON THE ORDER OF THE COMMISSIONER (APPEALS). HE SUBMITTED THAT THE F ACTUAL FINDING IS NOT CONTRADICTED BY THE LD.C.I.T(DR) 11. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD, AS WELL AS THE CASE LAWS CITED BEFORE US, WE HOLD AS FOLLOWS:- 12. THE UNDISPUTED FACTS IN THIS CASE IS THAT, THE ASSE SSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) ON THE INCOME FROM PROJECTS SITUATED IN PKT. 5 AND PKG. 9, OF SLUM REHABILITATION PROJECTS AWARDED BY MIDC. THE ISSUE BEFORE US IS WHETHER THE ASSESSING OFFICER WA S CORRECT IN RESTRICTING THE DEDUCTION CLAIMED UNDER SECTION 80IB(10) ON THE GRO UND THAT THE FSI IN QUESTION WAS SOLD TO NETZONE DEVELOPERS AT A RATE, HIGHER THAN THE MARKET VALUE SPECIFIED IN THE STAMP DUTY READY RECKONER OF THE STATE GOVERNMENT. THE FACT IS THAT, THE ASSESSEE HAS SOLD FSI @ ` 7,000 PER SQ.FT. AND THIS WAS CONSIDERED AS INCOME OF THE PROJECTS AT PKT.5 AND P KT. 9. THE PROFITS OF THESE PROJECTS WERE COMPUTED BY CONSIDERING THE SALE CONS IDERATION OF FSI @ ` 7,000 PER SQ.FT.AND DEDUCTING EXPENDITURE ON CONSTR UCTION, ADMINISTRATION ETC. THERE FROM. THIS WAS ACCEPTED BY THE ASSESSING OFFICER. IN OTHER WORDS, PROFITS OF THE PROJECT WERE NOT DISTURBED OR DISPUT ED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER ADOPTED MARKET VALUATION RATE AS GIVEN IN THE STAMP DUTY READY RECKONER OF THE STATE GOVERNMENT AS NOTI ONAL SALE CONSIDERATION OF THE FSI SOLD TO NETZONE DEVELOPERS, FOR NOTIONAL LY ARRIVING AT THE PROFITS OF THESE PROJECTS, FOR THE SOLE PURPOSE OF COMPUTING D EDUCTION UNDER SECTION 80IB(10). NOWHERE IN THE ASSESSMENT ORDER, A CONCLU SION HAS BEEN DRAWN THAT THE SALE PROCEEDS @7000/- PER SQ.FT.FOR FSI, D O NOT PERTAIN TO THE PROJECTS IN QUESTION OR IS THERE A FINDING THAT SAL E CONSIDERATION WAS PARTLY RECEIVED IN FOR SOMETHING ELSE THAN FSI. IN FACT IN CASE OF PROJECT AT PKT. 4, THIS RATE WAS ACCEPTED BY THE ASSESSING OFFICER AS ARMS LENGTH RATE AND THE SALE CONSIDERATION WAS TAKEN AT THE ACTUALS AND NO NOTIONAL DIVISION WAS M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 9 MADE AND THE PROFITS WERE TAXED WITHOUT BIFURCATION . THE AGREEMENT TO SALE FSI TO NETZONE DEVELOPERS WAS REGISTERED WITH THE STAMP DUTY AUTHORITIES ON 22 ND FEBRUARY 2008 AND THIS DOCUMENT HAS NOT BEEN DISPU TED BY THE REVENUE. THE RATE MENTIONED IN THIS REGISTERED DOCU MENT IS ` 7,000 PER SQ.FT. CERTAIN AMOUNTS HAVE BEEN RECEIVED BY THE AS SESSEE IMMEDIATELY ON EXECUTION OF DEED OF ASSIGNMENT. THERE IS NO MATERI AL WITH THE ASSESSING OFFICER TO COME TO A CONCLUSION THAT THE SALE CONSI DERATION OF THE PROJECT WAS ACTUALLY MUCH LESSER THAN WHAT WAS DEPICTED IN THE REGISTERED DOCUMENT AS WELL AS IN THE BOOKS OF ACCOUNT. THERE IS NO ALLEGA TION THAT MONEY FLOWED BACK IN CASH FROM THE ASSESSEE TO THE BUYER. IN THE ABSENCE OF ANY INVESTIGATION OR UNEARTHING OF ANY EVIDENCE THAT, T HE SALE CONSIDERATION WAS INFLATED OR OVERSTATED, IT IS ERRONEOUS ON THE PART OF THE ASSESSING OFFICER TO NOTIONALLY SEGREGATE THE PROFITS OF THE PROJECTS AT PKT. 5 AND PKT. 9 INTO TWO PARTS I.E., (I) PROFIT TO THE EXTENT WHERE THE SALE REALIZATION IS TAKEN AT THE MARKET RATE GIVEN IN THE STAMP DUTY READY RECKONER AND (II) THE BALANCE OF PROFITS. THERE IS NO LOGIC OR LEGAL BASIS FOR SUCH SEGREGATION. SUCH ARTIFICIAL BIFURCATION IS NOT PERMITTED IN LAW. THUS, FOR THES E REASONS ALONE, WE HAVE TO NECESSARILY UPHOLD THE FINDINGS OF THE COMMISSIONER (APPEALS). 13. COMING TO THE COMMISSIONER (APPEALS) CALLING FOR FU RTHER EVIDENCE UNDER RULE 46A(4), THE MUMBAI OF THE TRIBUNAL IN TH ORESEN CHARTERING SINGAPORE (PTE.) LTD. (SUPRA), HELD AS FOLLOWS:- SECTION 251 OF THE INCOME-TAX ACT, 1961, READ WITH RULE 46A OF THE INCOME-TAX RULES, 1962 - COMMISSIONER (APPEALS) - P OWERS OF - ASSESSMENT YEAR 2001-02 - WHETHER WHERE ASSESSEE VO LUNTARILY FILES ADDITIONAL EVIDENCE BEFORE COMMISSIONER (APPEALS), LATTER IS OBLIGED TO ALLOW ASSESSING OFFICER A REASONABLE OPPORTUNITY BE FORE ADMITTING ADDITIONAL EVIDENCE - HELD, YES - WHETHER WHERE ASS ESSEE UNDER DIRECTIONS OF COMMISSIONER (APPEALS) FILES ADDITION AL EVIDENCE BEFORE HIM, THERE IS NO REQUIREMENT FOR CONFRONTING ASSESS ING OFFICER WITH DOCUMENTS/EVIDENCE ENTERTAINED BY COMMISSIONER (APP EALS) AT FIRST APPELLATE STAGE HELD, YES. 14. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THERE IS NO REQUIREMENT IN LAW, ON THE PART OF THE C.I.T (A) OF CALLING FOR A REMAND REPORT FROM THE ASSESSING OFFICER IN THIS CASE. IT IS NOT THE REQU IREMENT OF THE SECTION. EVEN M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 10 OTHERWISE, THE EVIDENCE REGARDING REGISTRATION OF A GREEMENT, DETAILS OF PAYMENTS RECEIVED FROM NETZONE DEVELOPERS UP TO 31 ST MARCH 2008, WERE FACTUAL MATTERS AVAILABLE ON RECORD AND IN THE BOOK S AND WERE EXAMINED BY THE COMMISSIONER (APPEALS). WE ALSO OBSERVE THAT TH E ASSESSING OFFICER HAD NO BASIS TO EXPRESS A DOUT THAT NETZONE DEVELOPERS AND ACKRUTI CITY LTD. MIGHT BE CONNECTED PARTIES. NO DETAILS OR INFORMATI ON WAS CALLED FOR OR FOUND. NO INVESTIGATION WAS DONE. THE COMMENT IN T HE ASSESSMENT ORDER WAS WITHOUT ANY BASIS AND IS JUST A DOUBT EXPRESSED BY THE ASSESSING OFFICER. IN VIEW OF THE ABOVE DISCUSSION WE UPHOLD THE FOLLOWING FINDINGS OF THE COMMISSIONER (APPEALS) ON THIS ISSUE:- 5.11 I HAVE CONSIDERED THE FACTS OF THE ISSUE AS W ELL AS THE SUBMISSIONS MADE BY THE AR AND FIND MERIT IN THEM. 5.12 A PERUSAL OF THE METHOD OF ACCOUNTING IN RESPE CT OF FSI FOLLOWED BY THE APPELLANT INDICATES THAT FSI IS STATED AT TH E RATE PRESCRIBED IN THE STAMP DUTY READY RECKONER ISSUED BY THE STATE G OVT. FOR THE YEAR IN WHICH FSI IS GENERATED. THIS VALUE IS TAKEN BY T HE APPELLANT TO DETERMINE THE PROFIT GENERATED FROM THE CONSTRUCTIO N OF REHAB BUILDING. THE SAME STAMP DUTY RATES WERE APPLIED FO R ASCERTAINING THE APPROXIMATE SALE VALUE OF FSI CONSUMED FOR DEVELOPM ENT OF SALE PROJECT. CLEARLY, WHEN THE FSI GENERATED WAS NOT SO LD DURING THE SAME YEAR BUT WAS CARRIED FORWARD AS INVENTORY TO BE CON SUMED, THE SAME WAS VALUED AT STAMP DUTY RATES. HOWEVER, WHEN FSI G ENERATED AS A RESULT OF DEVELOPMENT OF REHAB PROJECT IS SOLD IN O PEN MARKET IN THE VERY YEAR OF GENERATION, THE ACTUAL SALE VALUE OF T HE FSI IS CONSIDERED FOR CALCULATION OF PROFIT. THIS IS ALSO IN CONSONAN CE WITH THE ACCOUNTING STANDARD AS-9, ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA ON REVENUE RECOGNITION. THE APPELLANT HAD TO RECOGNIZE IN ITS BOOKS OF ACCOUNT ACTUAL REVENUE GENERATED THROUGH S ALE OF FSI. THUS, THE CONTENTION OF THE A.O. THAT THE POLICY OF RECOR DING REVENUE ON FSI HELD IN STOCK-IN-TRADE WILL APPLY TO A TRANSACTION WHERE FSI IS ACTUALLY SOLD IN THE OPEN MARKET IS UNWARRANTED. SINCE THE F SI IS NOT UTILIZED FOR THE DEVELOPMENT OF SALE COMPONENT OF SCHEME, THE PROFIT ON ITS SALE CANNOT OBVIOUSLY FORM PART OF SUCH SALE COMPO NENT. THE FSI HAVING BEEN GENERATED FROM AN ELIGIBLE SLUM HOUSING PROJECT AND ALL THE CONDITIONS OF SEC. 80IB(10) HAVING ADMITTEDLY B EEN FULFILLED, THE APPELLANTS CLAIM UNDER SECTION 80IB(10) SEEMS JUST IFIED. THE A.O. ALSO OMITTED TO TAKE NOTE OF THE FACT THAT FSI HAD BEEN SOLD IN THE OPEN MARKET FOR THE FIRST TIME. THE A.O. CLEARLY MISDIRE CTED HIMSELF IN HOLDING THAT ANY PROFIT FROM THE REALIZED FSI OVER AND ABOVE THE STAMP DUTY READY RECKONER RATE ACTUALLY PERTAINED TO THE SALE COMPONENT OF THE SCHEME. THE A.O. FAILED TO TAKE INTO ACCOUNT TH E FACT THAT COST OF FSI FORMED PART OF THE COST OF CONSTRUCTION OF SALE COMPONENT OF THE SCHEME DUE TO THE FACT THAT FSI WAS UTILISED FOR IT . WHEN FSI WAS NOT SO UTILIZED FOR DEVELOPMENT OF SALE COMPONENT, PR OFITS FROM SALE OF SUCH FSI COULD NOT FORM PART OF SALE COMPONENT OF THE SCHEME. IN M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 11 THE PRESENT CONTEXT, WHEN THE SALE COMPONENT WAS NO T CONSTRUCTED / DEVELOPED BY THE APPELLANT, HOW COULD PROFITS BE AT TRIBUTED TO THAT COMPONENT? ALL THAT THE APPELLANT UNDER TOOK WAS TH E REHAB COMPONENT OF THE SCHEME AND THEREFORE WHATSOEVER P ROFITS WERE EARNED INCLUDING THOSE SALE OF FSI HAVE TO RELATE T O THE REHAB COMPONENT ONLY. 5.13 THE AGREEMENT WITH THE NETZONE DEVELOPERS HAVI NG BEEN FULLY REGISTERED AND STAMP DUTY HAVING BEEN PAID AND THER E BEING NO CORRELATION BETWEEN THE SHAREHOLDERS AND DIRECTORS OF THE APPELLANT AND THE ASSIGNEE OF PSI, NETZONE DEVELOPERS PVT. LT D. ARE FAIR INDICATORS OF THE FACT THAT IT WAS AN UN-RELATED PA RTY TRANSACTION. ALSO, THE ALLEGATION OF THE AO THAT THE SALES PROCEEDS HA D NOT BEEN RECEIVED BY THE APPELLANT, HAS BEEN FOUND TO BE FACTUALLY IN CORRECT. THE RECEIPT OF A SUM OF RS.3.50 CRORES FROM THE ASSIGNEE COMPAN Y HAS BEEN ACKNOWLEDGED BY THE APPELLANT IN THE DEED OF ASSIGN MENT DATED 27.03.2007 WHICH WAS FILED BEFORE HE AO. ALSO, THE ENTIRE PAYMENT OF RS.70 CRORES HAD BEEN RECEIVED BY THE APPELLANT BEF ORE 31.03.2005 I.E., MUCH BEFORE THE DATE OF PASSING OF THE ASSESS MENT ORDER (30.12.208). THERE IS ALSO NO BASIS FOR THE CONTENT ION OF THE A.O. THAT THE ASSIGNEE COMPANY APPEARED TO BE INDIRECTLY CO NTROLLED BY THE APPELLANT COMPANY. NO BASIS FOR SUCH PREMISE HAS BE EN GIVEN BY THE A.O. NOR WAS AN EFFORT MADE BY HIM TO OBTAIN THE IN FORMATION REGARDING THE SHAREHOLDING PATTERN OR DIRECTORSHIP OF THESE COMPANIES. THE INFORMATION CALLED FOR DURING THE APPELLATE PRO CEEDINGS ON THESE LINES INDICATED THE ABSENCE OF ANY OVERLAPPING OR C OMMONALITY OF OWNERSHIP OR DIRECTORSHIP IN THESE COMPANIES. 5.14 THERE IS ALSO NO MERIT IN THE FINDINGS OF THE A.O. THAT THE SALE OF FSI IS EQUIVALENT TO THE ASSIGNMENT OF VACANT LAND. THERE IS NO MERIT IN THE SUBMISSIONS OF THE AR THAT THE APPELLANT ONLY H AS THE RIGHT OF UTILIZATION OF FSI ON LEASEHOLD LAND BELONGING TO M IDC WHICH IS A SALEABLE COMMODITY AND THAT THE APPELLANT IS NOT TH E OWNER OF LAND AND FSI IS NOT EMBEDDED TO THE LAND. HENCE, THE NON REGISTRATION OF THE DEED OF ASSIGNMENT COULD NOT BE A SUFFICIENT RE ASON TO DENY THE BENEFIT OF SECTION 80IB(10) TO THE APPELLANT. 5.15 REGARDING THE REMARK OF THE A.O. THAT FSI REAL ISED HAS BEEN VALUED AS PER READY RECKONER RATES FOR OTHER PROJEC TS COMPLETED IN THE YEAR CONSIDERATION, THERE IS MERIT IN THE SUBMI SSIONS OF THE AR THAT COMPLETION OF PROJECTS AND VALUATION OF FSI HAS NO CONNECTION. THE A.O. FAILED TO APPRECIATE THAT FSI REALISED AND NOT ASSIGNED WAS VALUED AT STAMP DUTY RATE SINCE THE BEGINNING AND BY DOING SO IN THE CURRENT YEAR, APPELLANT CONTINUED TO FOLLOW METHOD OF ACCOU NTING CONSISTENTLY FOLLOWED BY IT. REGARDING THE A.OS CONTENTION THAT WHY DURING THE YEAR UNDER CONSIDERATION THE PORTION OF FSI GENERAT ED ON PKT. 5 AND 9 WHICH WAS NOT SOLD TO NETZONE DEVELOPERS WAS NOT VA LUED AT MARKET RATE, I FIND MERIT IN THE SUBMISSIONS OF THE AR THA T THE PORTION OF FSI WHICH WAS NOT SOLD COULD NOT BE ASSURED TO BE SOLD AT THE SAME RATE UNLESS IT WAS ACTUALLY SOLD. THEREFORE, FOLLOWING T HE AS-9 ON REVENUE RECOGNITION, THE FSI WHICH WAS SOLD IN THE OPEN MAR KET HAD TO BE VALUED AT THE ACTUAL SALE RATE AND AS PER AS-2 IN I NVENTORY VALUATION, M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 12 FSI WHICH WAS HELD IN STOCK IN TRADE OUGHT TO BE VA LUED AS PER STAMP DUTY READY RECKONER RATE. 5.16 A COMPARISON OF THE RATE AT WHICH FSI HAS BEEN SOLD BY THE APPELLANT WITH THE OTHER SALE INSTANCES IN THE SAME LOCATION AT A MUCH HIGHER PRICE FURTHER SUPPORTS THE CLAIM OF THE APPE LLANT THAT THE SALE OF FSI TO THE ASSIGNEE COMPANY WAS A THIRD PARTY TRANS ACTION AT THE PREVAILING MARKET PRICE. HENCE, THE A.O. HAS NOT BE EN ESTABLISHED THAT THE IMPUGNED DEED OF ASSIGNMENT WAS A COLOURABLE DE VICE. 5.17 IN VIEW OF THE REASONS DISCUSSED IN THE FORGOI NG SUB-PARAS, THIS GROUND OF APPEAL IS ALLOWED. IN THE RESULT GROUNDS NO.1 TO 4 ARE DISMISSED. 15. COMING TO GROUNDS NO.5 AND 6, THE COMMISSIONER (APP EALS) HAS, AT PARA-8.4/PAGE-31, HELD AS FOLLOWS:- 8.4 I HAVE CONSIDERED THE FACTS OF THE ISSUE AS WEL L AS THE SUBMISSIONS MADE BY THE AR AND FIND MERIT IN THEM. THE AR HAS BEEN ABLE TO ESTABLISH THAT IN RESPECT OF THE IMPUGNED A MOUNT OF ` 20.00 LAKHS, ANOTHER AGREEMENT HAD BEEN ENTERED INTO ALON G WITH THE SALE AGREEMENT. IT CANNOT BE AN AFTERTHOUGHT SINCE THE A MENITIES AGREEMENT CARRIES FRANKING STAMP DATED 29.12.2005, WHICH RULES OUT THE ALLEGATION OF AFTER THOUGHT. THIS VIEW IS FURTH ER STRENGTHENED BY THE FACT THAT THE AR HAS BEEN ABLE TO PROVE THAT TH E PAYMENTS TOWARDS THE AMENITIES AGGREGATING TO ` 20 LAKHS HAD BEEN RECEIVED BY THE APPELLANT BEFORE MAY 2006. THIS ALSO CLEARLY MEANS THAT THE SAID INCOME OF ` 20 LAKHS HAS ALREADY BEEN OFFERED BY THE APPELLANT FOR TAXATION AS CLAIMED AND THE SAME CANNOT BE TAXED TW ICE. IN ALL PROBABILITY, THE TWO AGREEMENTS ARE MADE BY THE APP ELLANT AND THE BUYER WITH A VIEW TO SAVE ON THE STAMP DUTY EXPENDI TURE WHICH IS LEVIABLE ON THE SALE / PURCHASE OF IMMOVABLE PROPER TY. HOWEVER, THIS HAS NO TAX CONNOTATIONS AND HENCE THIS GROUND OF AP PEAL IS ALLOWED. 16. LEARNED DEPARTMENTAL REPRESENTATIVE WAS NOT ABLE TO DISPUTE THESE FACTUAL FINDINGS. HENCE WE AGREE WITH THE CONCLUSIO N OF THE COMMISSIONER (APPEALS). CONSEQUENTLY, GROUNDS NO.5 AND 6 ARE DIS MISSED. 17. ON GROUND NO.7, THE COMMISSIONER (APPEALS), AT PARA -9.4, HELD AS FOLLOWS:- 9.4 I HAVE CONSIDERED THE FACTS OF THE ISSUE AND TH E SUBMISSIONS MADE BY THE A.R. IT IS TRUE THAT THE DECLARED INCOM E IS ALREADY INFLATED BY ` 5,89,000 SINCE THE SALE OF FLAT FIGURE HAS BEEN SH OWN IN THE BOOKS OF ACCOUNT AT ` 25,00,000 WHEREAS THE ACTUAL SALE PRICE AS PER THE M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 13 SEIZED DOCUMENTS WAS ` 19,11,000. THUS THE ADDITION OF ` 5,89,000 ( ` 25,00,000 MINUS ` 19,11,000) MADE UNDER SECTION 69C, IF CONFIRMED, WOULD TANTAMOUNT TO CONFIRMATION OF DOUBLE ADDITION . HENCE, THE ADDITION TO THE EXTENT OF ` 5,89,000 IS DELETED. HOWEVER, REGARDING THE BALANCE AMOUNT OF ` 1,86,000 CLAIMED TO HAVE BEEN PAID BY THE DIRECTORS, THE EXPLANATION IS CLEARLY AN AFTERTHOUG HT. THE EXPENSES OF THE COMPANY ARE NORMALLY NOT PAID FOR THE DIRECTORS AND IT IS THE OTHER WAY ROUND. ALSO, THE WITHDRAWALS SHOWN BY THE INDIV IDUAL DIRECTORS ARE NOT SUFFICIENT TO WARRANT SUCH AN ASSUMPTION. HENCE , THE ADDITION TO THE EXTENT OF ` 1,86,000 MADE BY THE A.O. IS CONFIRMED. 18. WE FIND NO INFIRMITY IN THESE FINDINGS, AS THE LEAR NED DEPARTMENTAL REPRESENTATIVE WAS NOT ABLE TO DISPUTE THE SAME. CO NSEQUENTLY, GROUND NO.7 IS DISMISSED. 19. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 20. WE NOW TAKE UP ASSESSEES APPEAL. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE:- BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS), CENTRAL VI, MUMBAI, THIS APPEAL PETI TION IS SUBMITTED ON THE FOLLOWING GROUNDS WHICH IT IS PRAYED MAY BE CON SIDERED INDEPENDENTLY WITHOUT PREJUDICE TO ONE ANOTHER. 1(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.19OO,000/- , BEING THE DIFFERENCE BETWEEN THE PRICE OF RS.46,75, 000/- AT WHICH FLAT NO.403 OF AKRUTI ERICA WAS ACTUALLY SOLD AND OFFE R PRICE OF RS.65,75,000/- STATED ON THE SEIZED PAPER AS ALLEGE D UNDISCLOSED SALES OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINES S. 1(B) WITHOUT PREJUDICE TO THE ABOVE AND WITHOUT ADM ITTING ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT (A) ERRED IN CONFIRMING THE ADDITION OF ENTIRE ALLEGED UNDISCLOS ED SALES OF RS.19,00,000/- AS AGAINST ALTERNATE PLEA OF THE ASS ESSEE THAT, IF AT ALL, ONLY GROSS PROFIT CAN BE ADDED AND NOT THE ENTIRE A LLEGED UNDISCLOSED SALES. 2(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.18,15,000/- , BEING THE DIFFERENCE BETWEEN THE PRICE OF RS.40,59, 000/- AT WHICH OFFICE NO.402 OF AKRUTI ORION WAS ACTUALLY SOLD W ITHOUT AMENITIES AND PRICE OF RS.59,25,000/- STATED ON THE SEIZED PAPER AS ALLEGED UNDISCLOSED SALES OF THE ASSESSEE UNDER THE HEAD I NCOME FROM BUSINESS. M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 14 2(B) WITHOUT PREJUDICE TO THE ABOVE AND WITHOUT ADM ITTING ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF ENTIRE ALLEGED UNDISCLOS ED SALES OF RS.18,15,000/- AS AGAINST ALTERNATE PLEA OF THE ASS ESSEE THAT, IF AT ALL, ONLY GROSS PROFIT CAN BE ADDED AND NOT THE ENTIRE A LLEGED UNDISCLOSED SALES. 3(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.1,86,000/- BEING THE EXPENSES SOURCED FROM DIRECTORS PERSONAL WITHD RAWALS. 3(B) WITHOUT PREJUDICE TO THE ABOVE AND WITHOUT ADM ITTING, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LEAR NED ASSESSING OFFICER ERRED IN NOT ALLOWING TELESCOPING OF ANY AD DITION IN THE NATURE OF SOURCE AGAINST APPLICATION OF FUNDS. 4(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.14,50,000/- , BEING THE DIFFERENCE BETWEEN THE PRICE OF RS.67,03, 750/- AT WHICH FLAT AT AKRUTI ERICA WAS SOLD TO HEMANT BHIDE WITHOUT AMENITIES AND PRICE OF RS.81 ,53,750/- STATED ON THE SEIZED PAPER NO.44 OF ANN EXURE I AS ALLEGED UNDISCLOSED SALES OF THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS. 4(B) WITHOUT PREJUDICE TO THE ABOVE AND WITHOUT ADM ITTING ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT (A ) ERRED IN CONFIRMING THE ADDITION OF ENTIRE ALLEGED UNDISCLOS ED SALES OF RS.14,50,000/- AS AGAINST ALTERNATE PLEA OF THE ASS ESSEE THAT, IF AT ALL, ONLY GROSS PROFIT CAN BE ADDED AND NOT THE ENTIRE A LLEGED UNDISCLOSED SALES. 5(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.37,50,000/- AS UNDISCLOSED SALES MADE BY THE APPELLANT ON THE BASI S OF THE SEIZED PAGE NO.46 OF ANNEXURE I AND HOLDING THAT THE ASSES EE HAD SOLD SOME FLAT OF AKRUTI ERICA/AKRUTI ORION AT RS.1,07,50,0 00/- AGAINST THE AGREEMENT VALUE OF RS.70,00,000/- AND HAD RECEIVED RS.17,50,000/- AS DOWN PAYMENT IN CASH. 5(B) WITHOUT PREJUDICE TO THE ABOVE AND WITHOUT ADM ITTING ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT (A) ERRED IN CONFIRMING THE ADDITION OF ENTIRE ALLEGED UNDISCLOS ED SALES OF RS.37,50,000/- AS AGAINST ALTERNATE PLEA OF THE ASS ESSEE THAT, IF AT ALL, ONLY GROSS PROFIT CAN BE ADDED AND NOT THE ENTIRE A LLEGED UNDISCLOSED SALES. 6(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.39,00,000/- AS UNDISCLOSED SALES OF THE ASSESSEE UNDER THE HEAD I NCOME FROM BUSINESS THAT WAS MADE BY THE LAO RELYING ON THE S EIZED PAGE NO.48 M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 15 OF ANNEXURE I AND HOLDING THAT THE ASSESSEE HAD SOL D SOME FLAT OF AKRUTI ERICA AT RS.1,02,51,000/- AGAINST THE AGRE EMENT VALUE OF RS.63,51,000/- AND HAD RECEIVED RS.20,11,000/- IN C ASH. 6(B) WITHOUT PREJUDICE TO THE ABOVE AND WITHOUT ADM ITTING ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT (A ) ERRED IN CONFIRMING THE ADDITION OF ENTIRE ALLEGED UNDISCLOS ED SALES OF RS.39,00,000/- AS AGAINST ALTERNATE PLEA OF THE ASS ESSEE THAT, IF AT ALL, ONLY GROSS PROFIT CAN BE ADDED AND NOT THE ENTIRE A LLEGED UNDISCLOSED SALES. 21. THE ASSESSEE HAS ALSO RAISED AN ADDITION GROUND WHI CH READS AS FOLLOWS:- THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACT IN CONFIRMING THE DISALLOWANCE OF DEDUCTION U/S 80IB(10) OF THE ACT I N RESPECT OF POCKET-8 AT MIDC, ANDHERI WHICH IS A SLUM REHABIL ITATION PROJECT APPROVED BY THE CBDT. 22. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE DI D NOT PRESS THE ADDITIONAL GROUND, AS WELL AS GROUNDS NO.3(A) AND 3 (B). CONSEQUENTLY, THESE GROUNDS NO.3(A) AND(B) AS WELL AS THE ADDITIONAL GR OUND ARE DISMISSED AS NOT PRESSED . 23. INSOFAR AS THE OTHER GROUNDS ARE CONCERNED, THE AD DITIONS IN QUESTION ARE BASED ON CERTAIN SEIZED DOCUMENTS FOUND DURING THE COURSE OF SEARCH. THE ASSESSEES SUBMISSIONS IN BRIEF ARE THAT, THESE DOCUMENTS ARE LOOSE SHEETS OF PAPERS WITH CERTAIN HAND WRITTEN FIGURES AND SCRIBBLING ON THE SAME AND THAT THESE DOCUMENTS ARE ARITHMETICAL WORKINGS AND JOTTINGS AND THAT THESE HAVE NO EVIDENTIARY VALUE. IT IS ARGUED THAT THERE IS NO NAME OF ANY PERSON, BUILDING OR FLAT IN MOST OF THE DOCUMENTS A ND THEY ARE UNSIGNED AND, HENCE, ARE DUMB DOCUMENTS. IT IS ARGUED THAT THESE ARE WORKING PAPERS/ROUGH NOTINGS AND WITHOUT ANY CORROBORATIVE EVIDENCE AND EXAMINATION OF THE PURCHASES, IT CANNOT BE CONCLUDE D THAT THE FIGURES MENTIONED THEREIN IS THE UNACCOUNTED MONEY OF THE A SSESSEE. LEARNED COUNSEL, IN HIS NOTE GIVEN IN PAPER BOOK PAGES-4 AN D 5, RELIES ON THE FOLLOWING CASE LAWS:- ASHWANI KUMAR V/S ITO, (1991) 39 ITD 183 (DEL.); M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 16 N.K. MALHAN V/S DCIT, (2004) 91 TTJ 938 (DEL.); AND CIT V/S GIRISH CHAUDHARY (2008) 296 ITR 619 (DEL.) 24. LEARNED COUNSEL REQUESTED THAT THE ISSUES MAY BE RE STORED TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER E XAMINING THE PURCHASERS OF THE PROPERTIES SO THAT THE CORRECT POSITION OF FACT IS ARRIVED AT. HE SUBMITTED THAT WITHOUT SUCH EXAMINATION, NO INFERENCE CAN BE DRAWN ON THESE DOCUMENTS. 25. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. ON A QUERY FROM TH E BENCH, HE SUBMITTED THAT THE PURCHASER WAS ASKED ANY QUESTIONS ON THESE LOOSE PAPERS,SEIZED DOCUMENTS ETC.AND THAT THE INFERENCES DRAWN ON THES E NOTINGS ARE NOT BASED ON ANY CORROBORATIVE EVIDENCE. HE HAD NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICA TION AFTER EXAMINATION OF ALL THE WITNESSES. 26. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT THE S EIZED DOCUMENTS IN QUESTION, ON WHICH THESE ADDITIONS ARE MADE, ARE TH E PAPERS CONTAINING MERE ARITHMETICAL ROUGH WORKINGS AND JOTTINGS. FOR E.G., AT PAGE-1 OF THE PAPER BOOK-4, WHICH IS PAGE-46 OF SEIZED PAPERS ANNEXURE- A(1), ONLY SOME FIGURES APPEAR AND NO NAME OR DATE IS WRITTEN. IT IS NOT CL EAR AS TO WHO HAD WRITTEN THE PAPER AND WHICH IS THE TRANSACTION THAT CAN BE CONNECTED WITH THIS SHEET OF PAPER. THIS IS NOTHING BUT A DUMB PAPER. NO INFE RENCE CAN BE DRAWN BASED ON THIS MATERIAL DOCUMENT. UNLESS THE ASSESSING OFF ICER GATHERS CORROBORATIVE EVIDENCE BY WAY OF EXAMINING THE PURC HASER, NO ADDITION CAN BE MADE ON THIS ACCOUNT. SIMILARLY, PAGE-48 OF ANNE XURE-A (1) CONTAINS CERTAIN JOTTINGS WITHOUT ANY NARRATION. IN OUR OPIN ION, THE ASSESSING OFFICER OUGHT TO HAVE CONFRONTED THE ASSESSEE AS WELL AS TH E PURCHASER WITH THESE SEIZED DOCUMENTS. HE SHOULD HAVE EXAMINED THE PURCH ASER OF THE PROPERTY AND DRAW INFERENCES ONLY THEREAFTER. IT IS WELL SET TLED THAT NO ADDITION WHATSOEVER CAN BE MADE BASED MEARLY ON ARITHMETIC W ORKINGS, JOTTINGS, NOTINGS, ETC.ON SOME PAPERS WITHOUT ANY CORROBORATI VE MATERIAL. IN ANY EVENT,AS BOTH PARTIES HAVE AGREED THAT THESE GROUND S MAY BE SET ASIDE TO M/S. ACKRUTI CITY LTD . ITA NO. 4875/MUM./2009 ITA NO. 4913/MUM./2009 17 THE ASSESSING OFFICER FOR FRESH ADJUDICATION, AFTER EXAMINING THE PURCHASERS OF THE PROPERTIES, AND OTHER ENQUIRES ETC. WE DO NO T GO INTO THE MERITS OF THE ADDITIONS. 27. IN VIEW OF THE SUBMISSIONS MADE BY BOTH THE PARTIES FOR SETTING ASIDE OF THE GROUNDS NO.1, 2, 4, 5 AND 6, WE SET ASIDE G ROUND NO.1, 2, 4, 5 AND 6 OF THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (A PPEALS) AND RESTORE THESE ISSUE BACK TO THE FILE OF ASSESSING OFFICER F OR DENOVO ADJUDICATION, IN ACCORDANCE WITH LAW. 28. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER 2011. SD/- N.V. VASUDEVAN JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 21 ST OCTOBER 2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, G BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI