ACIT 19(3), MUMBAI V. RUSTOM SOLI SETHNA, MUMBAI

ITA 5086/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0251 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 05-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VINITA J MENON
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 5086 / MUM/20 1 4 ( ASSESSMENT YEAR : 2010 - 11 ) ACIT 19(3), MUMBAI - 400012 VS. SHRI RUSTOM SOLI SETHNA PROP. M/S.KYRUS INDUSTRIES HILL CO URT, PALI HILL, BANDRA (WEST), MUMBAI 400 050 PAN/GIR NO. AADPS6622B APPELLANT ) .. RESPONDENT ) ASSESSEE BY SMT. VINITA J MENON REVENUE BY SHRI PERCY J PARDIWALA AND SHRI MADHUR AGARWAL DATE OF HEARING 03 / 04 /201 7 DATE OF PRONOUNCEME NT 22 / 06 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 30, MUMBAI DATED 30/05/2014 FOR THE A.Y.2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE: - (1) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS. 3,71,19,8881 - ON ACCOUNT OF SUPPRESSED SALE CONSIDERATION IN RESPECT OF 4 FLATS SOLD BY THE ASSESSEE AT A LOWER RATE THAN THE OTHER FLATS IN THE SAME BUILDING AND THE ASSESSEE FAILED TO JUSTIFY BEFORE THE ASSESSING OFFICER AS TO WHY THE AFORESAID FLATS WERE SOLD AT A LOWER PRICE?' (2) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE IN LAW, THE LEARNED CIT(A) SHOULD HAVE UPHELD THE ADDITION OF RS. 3,71,19,8881 - TOWARDS SUPPRESSED SALE CONSIDERATION WHEN THE HON'BLE ITAT VIDE ORDER DATED 15.06.2011 IN ITA NO. 55371MU/L2009 IN THE CASE OF ITO 19(3)(1), MUMBAI VS. DIAMOND INVESTMENT & PROPERTIES (A. Y. 2005 - ITA NO. 5086/MUM/2014 SHRI RUSTOM SOLI SETHNA 2 06) HAD UPHELD SIMILAR ADDITION OF SUPPRESSED SALE CONSIDERATION UNDER SIMILAR FACTS AND CIRCUMSTANCES WHICH WAS UPHELD BY HON'BLE BOMBAY HIGH COURT UNDER ORDER DATED 20.03.2014 IN ITA NO. 14 OF 2014?' (3) 'THE APPELLANT PRAYS THA T THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET SIDE AND THAT OF THE A O BE RESTORED.' (4) 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT ASSESSEE IS THE PROPRIETOR OF M/ S KYRUS INDUSTRIES, WHICH IS IN THE BUSINESS OF BUILDERS AND DEVELOPERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FROM THE DETAILS FILED BY THE ASSESSEE , THE AO FOUND THAT THERE WAS A DIFFERENCE IN RATES FOR THE FLAT NO. 701 AND OTHER FLATS SOLD BY THE A SSESSEE . THE AO FOUND THAT FLAT NO. 701 OF 1 , 387 SQ. FT. W AS SOLD @ 41,456/ - PER SQ. FT VIDE AGREEMENT DATED 26.03.2008 AND FIRST PAYM ENT OF THE SALE CONSIDERATION WAS RECEIVED ON 29.05.2009. FLA T NO. 702 OF AREA OF 710 SQ. FT. WAS BOOKED @ 29,577/ - VIDE AGREEMENT DATED 22.06.2009 AND DATE OF RECEIPT OF FIRST PAYMENT DURING THE FINANCIAL YEAR 2009 - 10 WAS 10.06.2009. SIMILARLY, FLATS NO. 892, 901 AND 902 OF THE AREA OF 730 SQ. FT., 1100.SQ. FT. AND 110 0 SQ. FT. WERE BOOKED @ OF RS. 26,712 / - , 26,636/ - AND 29,545/ - VIDE AGREEMENT DATED 11.12.009, 16.09.2009 AND 01.09.2009, FOR WHICH THE DATE OF RECEIPT OF FIRST PAYMENT DURING THE FINANCIAL YEAR 2009 - 10 IS 06.11.2009 , 13.08.2009 AND 12.08.2009 RESPECTI VELY. AO , THEREFORE, ASKED THE ASSESSEE TO EXPLAIN THE VARIATION IN THE SALE PRICE OF VARIOUS UNITS AND SHOW CAUSED HIM WHY THE RATE OF RS. 41,45 6/ - SHALL NOT BE TAKEN TO COMPUTE THE SALE PRICE OF ALL THE FLATS. THE A SSESSEE VIDE WRITTEN SUBMISSION FILED ON 29.11.2012 STATED THAT FLAT NO. 701 WAS SOLD IN SEPT' 2008, WHEN THE ITA NO. 5086/MUM/2014 SHRI RUSTOM SOLI SETHNA 3 REAL ESTATE MARKET IN MUMBAI WAS BOOMING AND HE DID NOT SELL ANY MORE FLAT THEN ON THE PRESUMPTION THAT THE PRICES WILL RISE FURTHER, HOWEVER, THERE BEING DOWNWARD PRICE CORRECTION IN EARLY 2009 AND THE LIQUIDITY POSITION GOT TIGHTENED, THE PRICE WAS LOWERED BY HIM TO ENCOURAGE SALES AND THE ONLY REASON THAT FLAT NO. 701 FETCHED THE HIGHER PRICE WAS THAT IT WAS SOLD AT THE TIME OF MARKET BUOYANCY, WHILE THE OTHER, FLATS WERE SOLD AT A T IME WHEN THE MARKET WAS DEPRESSED. THE A SSESSEE VIDE FURTHER WRITTEN SUBMISSION FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS STATED THAT SALE PRIC E OF ALL THE GOVERNMENT COMPUTATION AND, VIDE FURTHER SUBMISSION FILED ON 14.12.2012, STATED THAT THE FLA TS WERE SOLD TO PROFESSIONALS AND F IN ANCED BY BANKS/ FI N ANCIAL INSTITUTIONS, WHO WOULD HAVE RELEASED THE LOANS ONLY AFTER DUE DILIGENCE AND THOUGH THE REAL ESTATE PRICES DECREASED IN 2009 COMPARED TO 2008, THE MAHARASHTRA GOVT. KEPT READY RECKONER AND THE PRICES UNCHANGED IN 2009 AND HE WAS COMPELLED TO SELL THE FLATS AT REDUCED RATES. THE ASSESSEE , ON 19.12.2012, FURTHER SUBMITTED COPIES OF TWO IDENTICAL AFFIDAVITS SWORN BY MR. FARMAN SIDDIQUI, PURCHASER OF FLAT NO. 1001 AND AFFIDAVIT OF MR. BHANU KATOCH, PURCHASER OF FLAT NO. 1002 AND ANOTHER AFFIDAVIT BY MR. KAMAL BEHL, ESTATE AGENT FOR MS. ASHWINI YARDI, PURCHASER OF FLAT NO. 701 AND MS. MADHU R BEHL, PURCHASER OF FLAT NO. 702. THE FIRST TWO BUYERS EMPHASIZED THAT THE PROPERTY PRICES WERE VERY HIGH IN 20 08, SO THEY WERE UNABLE TO PURCHASE FLATS THEN AND WHEN THE PROPERTY MARKET CRASHED, THEY AGAIN APPROACHED THE APPELLANT FOR RENEGOTIATIONS AND AS THE FLATS WERE UNSOLD, THE APPELLANT AGREED TO SELL THE FLATS AT THE 'LOWERED PRICE, ACCORDINGLY, THEY ENTERE D INTO AGREEMENT FOR SALE IN SEPT' 2009. MR. KAMAL BEHL STATED THAT ITA NO. 5086/MUM/2014 SHRI RUSTOM SOLI SETHNA 4 MS ASHWINI YARDI WAS VERY MUCH INTERESTED IN BUYING THE APARTMENT AND SHE ENTERED INTO AGREEMENT FOR SALE ON 12.09.2008 FOR A CONSIDERATION OF RS. 5.75 CRORE AND, FURTHER WHEN MS. MADHU R BEHL APPROACHED HIM IN 2009 TO BUY A FLAT IN THE APPELLANT'S PROJECT, HE COULD CONVINCE THE APPELLANT TO CONCLUDE THE TRANSACTION AT A REALISTIC PRICE REFLECTING THE THEN CURRENT MARKET PRICE. ACCORDINGLY, MS MADHU R BEHL ENTERED INTO AGREEMENT FOR SALE WI TH THE APPELLANT FOR A TOTAL CONSIDERATION OF RS. 2,10,00,000/ - . THE A.O., HOWEVER, DID NOT ACCEPT THE ABOVE REPLY ON THE GROUND THAT THE PERIOD OF AGREEMENT AND PAYMENTS DOES NOT INDICATE VIDE VARIATION SO AS TO JUSTIFY THE WIDE FLUCTUATION IN RATES SHOWN AND THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THAT THERE WAS ACTUAL NEGOTIATION BETWEEN THE APPELLANT AND BUYER IN THIS REGARD. HE, THEREFORE, TOOK THE VIEW THAT THE COMPARABLE PRICE FOR DETERMINING THE SALE PRICE, WHICH IS PREVAILING IN INTERNATIONA L TRANSACTION FOR COMPARING AN UNCONTROLLED TRANSACTION, HAS TO BE ADOPTED FOR DETERMINING THE ANN'S LENGTH PRICE AND AS IDENTICAL ASSET COMMANDS IDENTICAL MARKET VALUE, THE SALE PRICE OF THE COMPAR ABLE CASE VIZ, MS ASHWINI YARDI, IS DEEMED TO BE THE SALE PRICE FOR OTHER FLATS. THE AO ALSO APPLIED THE RATIO OF DECISION OF THE MUMBAI ITAT 'D' BENCH, IN ITA NO. 5537/MUM/2009 IN THE CASE OF THE M/ S DIAMOND INVESTMENTS & PROPERTIES, MUMBAI, WHEREIN, THE ORDER OF THE AO WAS RESTORED BY THE ITAT. THE AO, THEREFO RE, BY APPLYING THE RATE OF RS. 41,456/- PER SQ. FT. TO THE REMAINING FLATS, VIS - A - VIS FLAT NOS 702, 802, 901 AND 902 MADE AN ADDITION OF RS. 3,71,19,888/ - TO THE INCOME OF THE APPELLANT, ON THE ABOVE ACCOUNT. ITA NO. 5086/MUM/2014 SHRI RUSTOM SOLI SETHNA 5 4. BY THE IMPUGNED ORDER, CIT(A) DELETED THE ADDITION AFTER OBSERVING AS UNDER: - 2.41 I HAVE DULY CONSIDERED THE ABOVE SUBMISSION OF THE APPELLANT AND FMD THAT THE AO HAS MADE ADDITION SIMPLY ON THE BASIS THAT FLAT NO. 701, VIDE AGREEMENT DATED 23.06.2008 WAS BOOKED @ 41,456/ - , WHEREAS, THE REMAININ G FLATS WHICH WERE BOOKED IN THE YEAR 2009. I.E. AFTER A Y EAR OR Y EAR AND HALF, IT WAS@ 29,577/ - OR 26,636/ - PR SQ. FT. THUS, OUT OF 5 FLATS SOLD BY TH E APPELLANT, THE VARIATION FOUND BY HIM WAS IN ONE FLAT ONLY, THAT IS 70 1, W HICH WAS ALMOST ONE AND HALF TIMES OF THE FLATS BOOKED IN THE YEAR 2 009. TO SUPPORT HIS ARGUMENT, THE AO HAS APPLIED COMPARABLE METHOD IN PRACTICE IN TRANSFER PRICING FOR DETERMINING ARM'S LENGTH PRICE AND THE RATIO OF THE DECISION OF THE I TAT IN THE CASE OF M/S DIAMOND INVESTMENTS PR OPERTIES. IN SO FAR AS THE APPLICATION OF COMPARABLE METHOD FOR DETERMINING THE SALE PRICE IS CONCERNED, IT IS SEEN THAT THE SAME WILL BE APPLICABLE IN CASE OF BUSINESS TRANSACTIONS BEING INTERNATIONAL TRANSACTIONS COVERED BY 'TRANSFER PRICING' PROVISIONS, SECTION 40A(2)(B) IS THE RELEVANT PROVISION IN CASE OF TRANSACTIONS WITH THE RELATED PARTIES. IN CASE OF UNRELATED PARTIES, COMPARABLE PRICE METHOD WITHOUT ANY EVIDENCE TO ESTABLISH THAT THERE HAS BEEN SUPPRESSION OF INCOME CANNOT BE MADE APPLICABLE TO TH E CASE OF THE APPELLANT. THE EVIDENCE FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN TH E FORM OF SWORN AFFIDAVIT OF M/ S KAMAL BEHL, ESTATE AGENT FOR ASHWINI YARDI FOR FLAT NO. 701 STATING THAT SHE ENTERED INTO THE AGREEMENT FOR SALE ON 12.09.200 8 FOR A CONSIDERATION OF RS. 5.75 CRORE AND ALSO SALE DEAL FOR MS MADHU BEHL FOR FLAT NO. 702 FOR A TOTAL CONSIDERATION OF RS. 2.10 CRORE, HAS NOT BEEN DISPUTED. THE AO HAS ALSO NOT EXAMINED SHRI KAMAL BEHL TO ESTABLISH THAT THE AFFIDAVIT GIVEN BY HIM CANNO T BE ACCEPTED. ON THE CONTRARY, THE APPELLANT HAS STATED THAT THE FIRST PAYMENT OF RS. 75 LAC WAS RECEIVED FROM MS ASHWINI YARDI ON 23.06.2008, THE SECOND PAYMENT OF RS 50 LAC WAS RECEIVED ON 12.09.2008 AND THE THIRD PAYMENT OF RS. 35 LAC WAS RECEIVED ON 2 2.01.2009, I.E. TOTAL OF RS. 1,60,00,000/ - WAS RECEIVED PRIOR TO 31.03.2009, AND, THIS FACT WAS INTIMATED TO THE AO VIDE LETTER DATED 12.12.2012, HOWEVER, THE AO HAS NOT CONSIDERED THE SAID SUBMISSION. 2.4.2 IT IS ALSO SEEN THAT THE DECISION OF THE ITAT, MUMBAI, IN THE CASE M/ S . DIAMOND INVESTMENT AND PROPERTIES RELIED UPON BY THE AO IS NOT APPLICABLE SINCE THE FACTS INVOLVED IN THE SAID CASE WAS DIFFERENT AS DIFFERENCE IN PRICE I N C ASE OF CERTAIN FLATS SOLD TO RELATED PARTIES WAS AT A MUCH LOWER PRICE AS COMPARED T O THE FLATS SOLD TO OTHER PERSONS. THE I TAT, THEREFORE, WAS BY THE VIEW THAT THE AO HAS DISCUSSED ABOUT THE EVIDENCE IN THE BODY OF ASSESSMENT ORDER THAT SOME FLATS IN THE SAME BUILDING HAVE BEEN SOLD TO OTHER PARTIES AT A HIGHER PRICE, WHEREAS, FLATS TO THE. RELATED PARTIES HAVE BEEN SOLD AT A MUCH LOWER PRICE. IN THE CASE OF THE 'APPELLANT ALL THE FLAT S HAVE BEEN SOLD TO UNRELATED PARTIES ITA NO. 5086/MUM/2014 SHRI RUSTOM SOLI SETHNA 6 AND PERSONS TO WHOM FLATS HAVE BEEN SOLD ARE PROFESSIONALS AND, OUT OF 5 FLATS SOLD, IN 4 CASES THE PURCHASE RS HAVE BEEN TAKEN LOANS FROM HDFC BANK, KOTAK MAHINDRA BANK AND STATE BANK OF INDIA, I.E. THE ABOVE BANKS HAVE CARRIED OUT DUE DILIGENCE AND THEN RELEASED THE LOAN. THIS FACT TOO WAS INTIMATED TO THE AO VIDE LETTER DATED 12.12.2012. HOWEVER, THE AO HAS NO T COMMENTED ON THIS. THE APPELLANT ALSO INFORMED THE AO THAT THE FLATS SOLD HAVE BEEN AT VALUES WHICH ARE SUBSTANTIALLY HIGHER THAN THE MARKET RATE COMPUTED BY THE STATE GOVT. OF MAHARASHTRA, HENCE, ONLY REASON WHY FLAT NO. 701 COMMANDED HIGHER PRICE COMP ARED TO OTHER FLATS IS THAT THE SAID TRANSACTION WAS ENTERED AT THE TIME OF MARKET BUOYANCY AND SALE OF THE REMAINING FLATS WAS TRANSACTED WHEN THE MARKET WAS DEPRESSED. IN THE LIGHT OF THE ABOVE FACTS, I FIND THAT THERE IS NO CASE MADE BY THE AO THAT THE SALE PRICE WAS BELOW THE PRICE DECLARED BY THE STATE GOVT. OF MAHARASHTRA OR BELOW THE MARKET PRICE. THE AO HAS SIMPLY APPLIED THE DIFFERENTIAL IN RATES FOR BOOKING OF FLAT NO. 701 AND OTHER FLATS FOR ARRIVING AT THE ACTUAL BOOKING RATE FOR ALL THE FLATS O THER THEN FLAT NO. 701. THE ADDITION MADE BY THE A O IS, THEREFORE, SIMPLY ON THE BASIS OF DIFFERENCE IN THE RATE IN BOOKING OF FLATS AT WHICH IT IS SOLD TO THE BUYERS. IN THIS REGARD, A RECENT ORDER DATED 16.08.2013 OF THE MUMBAI ITAT IN THE CASE OF N EELKA MAL REALTORS & ERECTORS INDIA (P) LTD REPORTED IN (2013) 38TAXMAN.COM 195(MUMBAI TRIB) IS VERY MUCH RELEVANT. THE FACTS OF THE CASE WERE VERY MUCH SIMILAR TO THE APPELLANT'S CASE. THE ISSUES BEFORE THE TRIBUNAL IN THE ABOVE CASE WAS WHETHER SINCE ASSESSEE TENDERED EXPLANATION IN SUPPORT OF CHARGING LOWER PRICE IN RESPECT OF SOME OF THE FLATS SOLD BY IT, WHICH AO FAILED TO CONTROVERT, ADDITION IS SUSTAINABLE. THE ITAT HELD THAT ADDITION IN ENTIRETY IS LIABLE TO BE DELETED. THE OPERATIVE PART OF THE ORDER IS AS FOLLOWS: - 'IT CAN BE OBSERVED FROM THE CHART MADE BY THE AO AFTER PAGE NO. 2 OF THE ASSESSMENT VI S - A - VI S THE RATE AT WHICH FLAT UNDER VIEW WAS SOLD. FOR EXAMPLE, FIRST ITEM IN THE TABLE IS FLAT NO. 2501 WITH AREA OF 2645 SQ. FEET AND SALE CONSIDERATIO N AT RS. 65.24 LAKH. FIRST PAYMENT FOR THIS FLAT WAS RECEIVED BY THE ASSESSEE ON RATE CHARGED FOR FLAT NO. 2702 SOLD BY THE ASSESSEE AT A PRICE HIGHER BY RS. 649 PER SQ. FT. THE ASSESSEE GAVE REASON FOR CHARGING LOW PRICE IN THE TERMS THAT THE BUYER OF FLA T NO. 2501 ASSISTED IN PROMOTING ASSESSEE IN RESPECT OF WHICH THE AO HAS MADE ADDITION BY COMPARING THE RATE CHARGED WITH THE HIGHER RATE CHARGED IN RESPECT OF OTHER SALE TRANSACTIONS. THE ASSESSEE GAVE JUSTIFICATION FOR LOWER RATE IN RESPECT OF EACH FLAT, SUCH AS, HIGHER DOWN PAYMENT; NO HARD BARGAIN BY THE BUYER; BUYER IS AN RI; PARTY WAS TENANT WHO HELPED IN SETTLEMENT WITH OTHER TENANTS; DIFFERENT AMENITY VALUES; DEMAND FOR A HIGHER OR LOWER FLAT; HIGHER OR LOWER CARPET AREA ETC. THE AO BRUSHED ASIDE T HESE 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 RATE OR FABRICATED REASONING ETC. SUCH REJECTION OF THE ASSEESSE'S EXPLANATION IN ITA NO. 5086/MUM/2014 SHRI RUSTOM SOLI SETHNA 7 ONE STROKE IS WHOLLY IMPERMISSIBLE. IF THE AO WAS NOT SATISFIED WITH THE ASSESSEE'S EXPLANATION FOR CHARGING A LOWER RATE IN COMPARISON WITH A HIGHER RATE OF OTHER FLATS, HE WAS REQUIRED TO BRING ON RECORD CERTAIN MATERIAL TO DEMONSTRATE THAT THE ASSESSEE, IN FACT, CHARGED SUCH HIGHER RATE. THE REJECTION OF ASSESSEE'S EXPLANATION FOR, CHARGING A LOWER SALE PRICE CANNOT BE JETTISONED WITHOUT POSITIVELY SHOWING THAT THE ASSESSEE RECEIVED A HIGHER SALE PRICE. THE HON'BLE SUPREME COURT, IN CONTEXT OF SECTION 52, IN K.P. VARGHESE V. ITO [198} 131 ITR 597/7 TAXMARI 13, HAS HELD THAT: SUB - S. (2) OF S. 52 CAN BE INVOKED ONLY WHERE THE CONSIDERATION FOR THE TRANSFER HAS BEEN UNDERSTATED BY THE ASSESSEE OR, IN OTHER WORDS, THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSESSEE IN MORE THAN IS DECLARED OR DISCLOSED BY HIM AND THE BURDEN OF PROVING SUCH AN UNDERSTATEMENT OR CONCEALMENT IS ON THE REVENUE. SUB - (2) HAS NO APPLICATION IN THE CASE OF AN HONEST AND BONA FIDE TRANSACTION WHERE THE CONSIDERATION RECEIVED BY THE A SSESSEE HAS BEEN CORRECTLY DECLARED WAS SUBSEQUENTLY REITERATED IN CIT V. SHIVAKAMI CO. (P) LTD {1986} 159 ITR 71/25 TAXMAN 80K (SC) SIMILAR VIEW HAS BEEN EXPRESSED BY THE HON'BLE SUPREME COURT IN CIT V. GODAVARI CORPN.LTD. {1993} 200 ITR567/68 TAXMAN 344 BY HOLDING THAT THE BURDEN IS ON THE REVENUE TO PROVE UNDER - STATEMENT OF THE CONSIDERATION. THE FOLLOWING OBSERVATIONS OF THE HON'BLE SUPREME COURT FROM THIS CASE MERIT MENTION: SECTION 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 AT A LESSER FIGURE THAN THAT ACTUALLY RECEIVED BY THE ASSESSEE AND THE BURDEN OF PROVING UNDE RSTATEMENT OR CONCEALMENT IS ON THE REVENUE; AND THE SUB - SECTION HAS NO APPLICATION IN THE CASE OF BONA FIDE TRANSACTION WHERE THE CONSIDERATION RECEIVED BY [1979} 117 ITR 371 HAS HELD THAT THE ITO CANNOT FIX HIGHER SALES PRICE WITHOUT ANY EVIDENCE. THE ME RE TO THE CONCLUSION THAT THE ASSESSEE DID CHARGE A HIGHER PRICE. A SURVEY OF AFOREMENTIONED JUDGMENTS MANIFESTS THAT THERE IS NO LOW WHICH OBLIGES A TRADER TO MAKE THE MAXIMUM PROFIT ON SALES. IT IS TRITE THAT THE ONUS TO CLAIM THAT THE APPARENT IS NOT R EAL 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 SIMPLY BY HOLDING THAT THIS EXPLAN ATION IS FANCIFUL. THERE MUST BE SOMETHING CONCRETE TO SHOW THAT THE VERSION GIVEN BY THE ASSESSEE IS INCORRECT. THE AO CANNOT SIMPLY MAKE ADDITION ON HYPOTHETICAL BASIS BY PRESUMING A HIGHER SALE PRICE BY SIMPLY REJECTING THE ASSESSEE'S EXPLANATION WITHOU T COGENT REASONS. IF THIS 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. ITA NO. 5086/MUM/2014 SHRI RUSTOM SOLI SETHNA 8 COMING BACK TO THE FACTS OF THE INSTANT C ASE, WE FIND THAT THE ASSESSEE TENDERED EXPLANATION IN SUPPORT OF CHARGING LOWER PRICE IN RESPECT OF SOME OF THE FLATS SOLD BY IT. THE A O NOT ONLY SIMPLY REFUSED TO ACCEPT SUCH EXPLANATION WITHOUT ANY CONVINCING REASON BUT ALSO DID NOT BRING ANY MATERIAL O N RECORD TO SHOW THAT THE ASSESSEE IN FACT RECEIVED HIGHER PRICE THAT DECLARED. UNDER SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE ACTION OF THE AUTHORITIES BELOW IN THIS REGARD CANNOT BE WITH EFFECT FROM 2014 - 15 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 BEEN DISCHARGED FROM THE BURDEN OF PROVING THAT THE SALE PRICE OF LAND, OR BUILDING OF BOTH IS UNDERSTAND. STRAIGHT WAY, THE DECL ARED SALE CONSIDERATION CAN BE SUBSTITUTED WITH THE STAMP DUTY VALUE, IF IT LESS. IN THE PERIOD ANTERIOR TO THE APPLICATION 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 RESPECT OF SOME OF THE FLATS SOLD, WHICH THE AA FAILED TO CONTROVERT. IN SUCH A SITUATION, THERE CAN BE NO REASON TO ME OF SUSTAIN ANY SUCH ADDITION . WE, THEREFORE, ORDER FOR THE DELETION OF THIS ADDITION IN ENTIRELY. THIS GROUND IS ALLOWED. ' 2.4.3 IN VIEW OF THE DISCUSSION MADE ABOVE, I HOLD THAT THE AO HAS NOT CONTROVERTED THE EXPLANATION FURNISHED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO EXPLAIN THE REASON FOR CHARGING LOWER PRICE IN RESPECT OF 4 FLATS SOLD VIS - A - VIS THE RATE/PRICE FOR FLAT NO. 701. I, THEREFORE, APPLYING THE RATIO OF THE DECISION OF THE ITAT IN THE ABOVE CASE DELETE THE ADDITION OF RS.3.71 CRORE AND ALLOW THE FIRST GROUND OF APPEAL. 5. AGAINST THE ABOVE ORDER OF CIT(A), REVENUE IS IN FURTHER APPEAL BEFORE US. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. FROM THE RECORD WE FOUND THAT AO HAS MADE ADDIT ION ON THE PLEA THAT VARIOUS FLATS BOOKED AND SOLD BY THE ASSESSEE WAS AT A DIFFERENT PRICE, EVEN THOUGH SITUATED IN THE SAME BUILDING. THE AO FOUND THAT FLAT NO.701 HAVING AREA OF 1387 SQ.FT WAS AGREED TO BE SOLD ON 23/06/2008 AND FOR WHICH PAYMENT WAS RE CEIVED BY THE ASSESSEE DURING THE F.Y.2009 - 10 WAS AT RS.41,456/ - PER.SQ.FT, WHEREAS FLAT NO.702 HAVING AREA OF 710 SQ.FT WHICH WAS AGREED TO BE ITA NO. 5086/MUM/2014 SHRI RUSTOM SOLI SETHNA 9 SOLD ON 22/06/2009 AT A RATE OF RS.29,577 PER SQ.FT. SIMILARLY OTHER FLATS ON THE 8 TH AND 9 TH FLOOR WAS SOLD BY THE ASSESSEE AT A LOWER PRICE. THE CIT(A) HAS GIVEN DUE JUSTIFICATION WITH REGARD TO THE PREVAILING RATE DURING THE F.Y. 2008 VIS - - VIS 2009. THE CIT(A) OBSERVED THAT SALES PRICE DECLINED BY THE ASSESSEE WAS NOT BELOW PRICE DECLARED BY THE STATE GOVERNMENT OF MAHARASHTRA OR BELOW THE MARKET PRICE. THE AO HAS SIMPLY APPLIED DEFERENTIAL IN THE RATES OF BOOKING OF FLAT NO.701 AND OTHER FLATS FOR ARRIVING AT THE ACTUAL BOOKING RATE FOR ALL THE FLATS OTHER THAN FALT NO.701. WE ALSO FOUND THAT THE DECISION OF THE TRIBUNAL IN CASE OF DIAMOND INVESTMENT AND PROPERTIES RELIED ON BY THE AO WAS ON DIFFERENT FACTS IN SO FAR AS IN THE CASE OF DIAMOND INVESTMENT FLATS WERE SOLD BY THE ASSESSEE TO THE RELATED PARTIES, HOWEVER, IN THE CASE OF ABOVE ALL THE FLATS WERE SOLD B Y THE ASSESSEE TO THE PARTIES NOT RELATED TO THE ASSESSEE. AFTER GIVING DETAILED JUSTIFICATION, THE CIT(A) HAS APPLIED THE PROPOSITION LAID DOWN BY ITAT MUMBAI BENCH IN CASE OF NEELKAMAL REALTORS & ERECTORS INDIA (P) LTD REPORTED IN (2013) 38TAXMAN.COM 195 . THE FACTS OF THE CASE WERE VERY MUCH SIMILAR TO THE A SSESSEE'S CASE. THE ISSUES BEFORE THE TRIBUNAL IN THE ABOVE CASE WAS WHETHER SINCE ASSESSEE TENDERED EXPLANATION IN SUPPORT OF CHARGING LOWER PRICE IN RESPECT OF SOME OF THE FLATS SOLD BY IT, WHICH AO FAILED TO CONTROVERT, ADDITION IS SUSTAINABLE. THE ITAT HELD THAT ADDITION IN ENTIRETY IS LIABLE TO BE DELETED. THE OPERATIVE PART OF THE ORDER IS AS FOLLOWS: - ITA NO. 5086/MUM/2014 SHRI RUSTOM SOLI SETHNA 10 'IT CAN BE OBSERVED FROM THE CHART MADE BY THE AO AFTER PAGE NO. 2 OF THE ASSESSMENT ORDER TH A T HE MADE ADDITION BY CONSIDERING THE RATE ANOTHER FLAT SOLD BY THE ASSESSEE VIS - A - V IS THE RATE AT WHICH FLAT UNDER VIEW WAS SOLD. FOR EXAMPLE, FIRST ITEM IN THE TABLE IS FLAT NO. 2501 WITH AREA OF 2645 SQ. FEET AND SALE CONSIDERATION AT RS. 65.24 LAKH. FI RST PAYMENT FOR THIS FLAT WAS RECEIVED BY THE ASSESSEE ON RATE CHARGED FOR FLAT NO. 2702 SOLD BY THE ASSESSEE AT A PRICE HIGHER BY RS. 649 PER SQ. FT. THE ASSESSEE GAVE REASON FOR CHARGING LOW PRICE IN THE TERMS THAT THE BUYER OF FLAT NO. 2501 ASSISTED IN PROMOTING ASSESSEE IN RESPECT OF WHICH THE A O HAS MADE ADDITION BY COMPARING THE RATE CHARGED WITH THE HIGHER RATE CHARGED IN RESPECT OF OTHER SALE TRANSACTIONS. THE ASSESSEE GAVE JUSTIFICATION FOR LOWER RATE IN RESPECT OF EACH FLAT, SUCH AS, HIGHER DOWN P AYMENT; NO HARD BARGAIN BY THE BUYER; BUYER IS AN RI; PARTY WAS TENANT WHO HELPED IN SETTLEMENT WITH OTHER TENANTS; DIFFERENT AMENITY VALUES; DEMAND FOR A HIGHER OR LOWER FLAT; HIGHER OR LOWER CARPET AR EA ETC. THE AO 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 RATE OR FABRICATED REASONING ETC. SUCH REJECTION OF THE ASSEESSE'S EXPLANATION IN ONE STROKE IS WHOLLY IMP ERMISSIBLE. IF THE AO WAS NOT SATISFIED WITH THE ASSESSEE'S EXPLANATION FOR CHARGING A LOWER RATE IN COMPARISON WITH A HIGHER RATE OF OTHER FLATS, HE WAS REQUIRED TO BRING ON RECORD CERTAIN MATERIAL TO DEMONSTRATE THAT THE ASSESSEE, IN FACT, CHARGED SUCH H IGHER RATE. THE REJECTION OF ASSESSEE'S EXPLANATION FOR CHARGING A LOWER SALE PRICE CANNOT BE JETTISONED WITHOUT POSITIVELY SHOWING THAT THE ASSESSEE RECEIVED A HIGHER SALE PRICE. THE HON'BLE SUPREME COURT, IN CONTEXT OF SECTION 52, IN K. P VARGHESE V. IT O [198] 131 ITR 597/7 TA XMAN 13, HAS HELD THAT: SUB - S. (2) OF S. 52 CAN BE INVOKED ONLY WHERE THE CONSIDERATION FOR THE TRANSFER HAS BEEN UNDERSTATED BY THE ASSESSEE OR, IN OTHER WORDS, THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSESSEE IN MORE THAN IS DEC LARED OR DISCLOSED BY HIM AND THE BURDEN OF PROVING SUCH AN UNDERSTATEMENT OR CONCEALMENT IS ON THE REVENUE. SUB - (2) HAS NO APPLICATION IN THE CASE OF AN HONEST AND BONA FIDE TRANSACTION WHERE THE CONSIDERATION RECEIVED BY THE ASSESSEE HAS BEEN CORRECTLY D ECLARED WAS SUBSEQ UENTLY REITERATED IN CIT V. SHIV AKAMI CO. (P) LTD {1986} 159 ITR 71/25 TAXMAN 80K (SC) SIMILAR VIEW HAS BEEN EXPRESSED BY THE HON'BLE SUPREME COURT IN CIT V. GODAUARI CORPN.LTD. {1993} 200 ITR567/68 TAXMAN 344BY HOLDING ITA NO. 5086/MUM/2014 SHRI RUSTOM SOLI SETHNA 11 THAT THE BURDEN IS ON THE REVENUE TO PROVE UNDER - STATEMENT OF THE CONSIDERATION. THE FOLLOWING OBSERVATIONS OF THE HON'BLE SUPREME COURT FROM THIS CASE MERIT MENTION SECTION 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 AT A LESSER FIGURE THAN THAT ACTUALLY RECEIVED BY THE ASSESSEE AND THE BURDEN OF PROVING UNDERSTATEMENT OR CONCEALMENT IS O N THE REVENUE; AND THE SUB - SECTION HAS NO APPLICATION IN THE CASE OF BONA FIDE TRANSACTION WHERE THE CONSIDERATION RECEIVED BY [1979] 117 ITR 371 HAS HELD THAT THE ITO CANNOT FIX HIGHER SALES PRICE WITHOUT ANY EVIDENCE. THE M ERE T O THE CONCLUSION THAT THE ASSESSEE DID CHARGE A HIGHER PRICE. A SURVEY OF AFOREMENTIONED JUDGMENTS MANIFESTS THAT THERE IS NO LOW WHICH OBLIGES A TRADER TO MAKE THE MAXIMUM PROFIT ON SALES. IT IS TRITE THAT THE ONUS TO CLAIM THAT THE APPARENT 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 SIMPLY BY HOLDING THAT THIS EXPLANATION IS FANCIFUL. THERE MUST B E SOMETHING CONCRETE TO SHOW THAT THE VERSION GIVEN BY THE ASSESSEE IS INCORRECT. THE AO CANNOT SIMPLY MAKE ADDITION ON HYPOTHETICAL BASIS BY PRESUMING A HIGHER SALE PRICE BY SIMPLY REJECTING THE ASSESSEE'S EXPLANATION WITHOUT COGENT REASONS. IF THIS PROCE DURE 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. COMING BACK TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE ASSESSEE T ENDERED EXPLANATION IN SUPPORT OF CHARGING LOWER PRICE IN RESPECT OF SOME OF THE FLATS SOLD BY IT. THE AO NOT ONLY SIMPLY REFUSED TO ACCEPT SUCH EXPLANATION WITHOUT ANY CONVINCING REASON BUT ALSO DID NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESS EE IN FACT RECEIVED HIGHER PRICE THAT DECLARED. UNDER SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE ACTION OF THE AUTHORITIES BELOW IN THIS REGARD CANNOT BE WITH EFFECT FROM 2014 - 15 IN RESPECT OF TRANSFER OF LAND OR BUILDING OR BOTH WHICH I S NOT A CAPITAL ASSET. IT IS ONLY DURING THE PREVALENCE OF THIS PROVISION THAT THE REVENUE HAS BEEN DISCHARGED FROM THE BURDEN OF PROVING THAT THE SALE PRICE OF LAND, OR BUILDING OF BOTH IS UNDERSTAND. STRAIGHT WAY, THE DECLARED SALE CONSIDERATION CAN BE SUBSTITUTED WITH THE STAMP DUTY VALUE, IF IT LESS. IN THE PERIOD ANTERIOR TO THE APPLICATION OF THIS PROVISION, THE BURDEN IS SQUARELY ON THE ITA NO. 5086/MUM/2014 SHRI RUSTOM SOLI SETHNA 12 REVENUE TO POSITIVELY SHOW THAT THE SALE PRICE CHARGED WAS ACTUALLY MORE THAN THAT DECLARED. WE ARE CONFRONTED WIT H A SITUATION IN WHICH THE ASSESSEE GAVE REASONS FOR CHARGING LOWER PRICE IN RESPECT OF SOME OF THE FLATS SOLD, WHICH THE AO FAILED TO CONTROVERT. IN SUCH A SITUATION, THERE CAN BE NO REASON TO ME OF SUSTAIN ANY SUCH ADDITION. WE, THEREFORE, ORDER FOR THE DELETION OF THIS ADDITION IN ENTIRELY. THIS GROUND IS ALLOWED. ' 7. THE DETAILED FINDING RECORDED BY CIT(A) HAS NOT BEEN CONTROVERTED BY LEARNED AR, ACCORDINGLY, WE DO NOT FIND ANY REASON TO INT ERFERE IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE ON ACCOUNT OF ESTIMATED SALES PRICE BY DISREGARDING THE ACTUAL SALE PRICE SHOWN BY THE ASSESSEE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 22 / 06 /2017 SD/ - ( RAVISH SOOD ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 22 / 06 /201 7 KARUNA SR. 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//