SHIVJI AMBA GAMI, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE, PANVEL

ITA 6651/MUM/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3779 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 26-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Assessee Lawyers: KHUSHIRAM JADHWANI
• Keywords: Business income
• Section: 43CA; 12

Judgement Text

1 I.T.A. NO.6651/MUM/2018 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) I.T.A. NO.6651/MUM/2018 (ASSESSMENT YEAR 2014 - 15) SHIVJI AMBA GAMI PLOT NO.64, GAMI NIWAS SECTOR - 18A, NERUL NAVI MUMBAI - 400 703 PAN : AFVPG2110D VS DEPUTY COMMISSIONER OF INCOME - TAX PANVEL CIRCLE, PANVEL APPELLANT RESPONDENT APPELLANT BY SHRI KHUSHIRAM JADHWANI, AR RESPONDENT BY MS. SMITA VERMA, DR DATE OF HEARING 04 - 02 - 2021 DATE OF PRONOUNCEMENT - 02 - 2021 O R D E R THIS IS AN APPEAL BY THE ASSESSEE AGAINST ORDER DATED 06 - 09 - 2018 OF LD.COMMISSIONER OF INCOME - TAX (APPEALS) - 2, THANE FOR THE ASSESSMENT YEAR 2014 - 15. 2. THE SOLITARY DISPUTE IN THE APPEAL IS CONCERNING THE ADDITION OF AN AMOUNT OF R.6,83,500/ - ON ACCOUNT OF UNDERSTATEMENT IN THE V ALUE OF A FLAT SOLD. 3. BRIEFLY, THE FACTS ARE, THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS AS BUILDER AND DEVELOPER. FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE FILED HIS RETURN OF INCOME ON 02 - 09 - 2014 DECLARING TOTAL INCOME OF RS.32 ,52,505/ - . IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER 2 I.T.A. NO.6651/MUM/2018 NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD EIGHT FLATS. FROM THE DETAILS FURNISHED BY THE ASSESSEE, HE FOUND THAT IN RESPECT OF FLAT NO.202 SOLD TO MOHAMMA D AZMI, THE DECLARED SALE CONSIDERATION WAS SHOWN AT RS.9,61,000/ - WHEREAS THE STAMP VALUATION AUTHORITIES FOR THE PURPOSE OF STAMP DUTY , HAS VALUED THE FLAT AT RS.16,44,500/ - . NOTICING THIS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN WHY T HE DIFFERENTIAL AMOUNT OFRS.6,83,500/ - BEING THE DIFFERENCE IN VALUE BETWEEN DECLARED SALE CONSIDERATION AND VALUE DETERMINED BY THE STAMP DUTY AUTHORITY SHOULD NOT BE ADDED U/S 43CA OF THE ACT. THOUGH THE ASSESSEE OBJECTED TO THE PROPOSED ADDITION; HOWEV ER, THE ASSESSING OFFICER, REJECTING THE OBJECTION OF THE ASSESSEE, ADDED BACK THE AMOUNT OF RS.6,83,500/ - U/S 43CA OF THE ACT. ASSESSEE CONTESTED AFORESAID ADDITION BEFORE THE FIRST APPELLATE AUTHORITY. 4. IN THE PROCEEDINGS BEFORE THE FIRST APPELLATE AU THORITY, THE ASSESSEE URGED A PRELIMINARY GROUND THAT TH PROVISIONS OF SECTION 43CA HAVING INTRODUCED INTO THE STATUTE BY FINANCE ACT, 2013 W.E.F. 01 - 04 - 2014 , WOULD NOT BE APPLICABLE TO THE TRANSACTION RELATING TO THE SALE OF A FLAT WHICH WAS CONCLUDED UP ON REGISTRATION ON 23 - 04 - 2013, I.E. MUCH BEFORE SECTION 43CA CAME INTO EFFECT. APPARENTLY, LD.COMMISSIONER OF INCOME - TAX (APPEALS) AGREED WITH THE ASSESSEE THAT SECTION 43CA WOULD NOT BE APPLICABLE TO TH TRANSACTION RELATING TO SALE OF FLAT BY THE ASSESSE E. HOWEVER, TO ASCERTAIN WHETHER THE SALE CONSIDERATION DECLARED BY THE ASSESSEE IS CORRECT AND HAS NOT BEEN UNDERSTATED, HE CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS OF SALE CONSIDERATION RECEIVED IN RESPECT OF OTHER FLATS IN EARLIER YEARS AND PROF IT DECLARED. AFTER PERUSING THE DETAILS FURNISHED BY THE ASSESSEE, LD.COMMISSIONER OF INCOME - TAX (APPEALS) FOUND THAT WHILE THE ASSESSEE HAS DECLARED OVERALL NET PROFIT AT RS.47,53,707/ - BEING 27.87% ON THE TOTAL SALES 3 I.T.A. NO.6651/MUM/2018 TURNOVER OF RS.1,70,55,000/ - SINCE T HE PERIOD MARCH,2012 TO MARCH, 2014; HOWEVER, FOR THE SALES TURNOVER OF RS.36,53,000/ - DECLARED FOR THE CURRENT YEAR, THE ASSESSEE HAS INCURRED NET LOSS OF RS.6,03,243/ - . WHEN THE ASSESSEE EXPLAINED THAT DUE TO COMPLETION OF THE PROJECT IN THE IMPUGNED AS SESSMENT YEAR, HE HAD TO INCUR A LOT OF EXPENSES RESULTING IN LOSS, LD.COMMISSIONER OF INCOME - TAX (APPEALS) WAS NOT CONVINCED AND WAS OF THE VIEW THAT DUE TO THE EXCESS EXPENDITURE CLAIMED UNDER VARIOUS HEADS INCLUDING LABOUR EXPENSES, EXPENSES OF RS.3,36, 235/ - THE ASSESSEE HAS SUFFERED LOSS. FURTHER, HE OBSERVED, SOME OF THE FLATS IN THE PROJECT WERE SOLD AT A HIGHER PRICE. THUS, FROM THE AFORESAID FACTS, LD.COMMISSIONER OF INCOME - TAX (APPEALS) CONCLUDED THAT THE ASSESSEE HAS UNDERSTATED THE SALE CONSID ERATION. THEREFORE, HE SUSTAINED THE ADDITION OF RS.6,83,500/ - MADE BY THE ASSESSING OFFICER. 5. LD.AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE, IN DETAIL, HAS EXPLAINED THE REASON OF DIFFERENCE BETWEEN THE VALUATION OF THE STAMP DUTY AUTHORITY AND THE DECLARED SALE CONSIDERATION. FURTHER, HE SUBMITTED, THE CONSIDERATION FOR SALE OF FLAT WAS MUTUALLY AGREED UPON AS PER THE MARKET VALUE PREVAILING AT THE TIME OF BOOKING OF THE FLAT, IN THE YEAR 2011 WHEREAS THE SALE DEED WAS REGISTERED IN 2013 AN D THE STAMP DUTY AUTHORITY HAS CONSIDERED THE MARKET VALUE AS PREVAILING IN 2013 WHICH RESULTED IN DIFFERENCE. THEREFORE, THERE CANNOT BE ANY ADDITION ON ACCOUNT OF ALLEGED UNDERSTATEMENT OF VALUE OF FLAT. FURTHER, HE SUBMITTED, ONCE LD.COMMISSIONER OF I NCOME - TAX (APPEALS) HAS ACCEPTED ASSESSEES CONTENTION THAT SECTION 43CA OF THE ACT IS NOT APPLICABLE TO THE SUBJECT SALE TRANSACTION, HE SHOULD HAVE DELETED THE ADDITION INSTEAD OF SUSTAINING THE ADDITION WITH HIS OWN REASONING OF UNDERSTATEMENT OF SALE CONSIDERATION. HE SUBMITTED, BY REFERRING TO THE EXPENSES INCURRED AND THE PROFIT 4 I.T.A. NO.6651/MUM/2018 RATIO DECLARED, LD.COMMISSIONER OF INCOME - TAX (APPEALS) CANNOT INTRODUCE A NEW SOURCE FOR DISALLOWANCE WHICH WAS NOT BEFORE TH E AO. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON NUMBER OF JUDICIAL PRECEDENTS, AS SUBMITTED IN THE PAPER BOOK. 6. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. UNDISPUTEDLY, THE DISPUTED ADDITION IS ON ACCOUNT OF SALE OF A FLAT BEIN G FLAT NO.202 SOLD TO ONE MOHAMMAD AZMI FOR A CONSIDERATION OF RS.9,61,000/ - . THE ASSESSING OFFICER, HAVING FOUND THAT THE STAMP DUTY AUTHORITY HAS FOLLOWED THE FLAT AT RS.16,44,500/ - FOR STAMP DUTY PURPOSES, ADDED BACK THE DIFFERENTIAL AMOUNT OF RS.6,83, 500/ - BY INVOKING THE PROVISIONS OF SECTION 43CA OF THE ACT. THOUGH LD.COMMISSIONER OF INCOME - TAX (APPEALS) WAS CONVINCED WITH PROVISIONS OF SECTION 43CA WOULD NOT BE APPLICABLE TO THE SUBJECT TRANSACTION, HOWEVER, INSTEAD OF DELETING THE ADDITION, HE INT RODUCED A NEW REASONING OF HIS OWN TO SUSTAIN THE DISALLOWANCE. AS COULD BE SEEN FROM THE IMPUGNED ORDER OF LD.COMMISSIONER OF INCOME - TAX (APPEALS), THE REASONS FOR WHICH HE SUSTAINED THE DISALLOWANCE MADE BY THE AO ARE AS UNDER: - (I) THE ASSESSEE HAS INC URRED LOSS OF RS.6,03,243/ - IN RESPECT OF HOUSING PROJECT IN THIS YEAR; (II) GENUINENESS OF VARIOUS EXPENDITURE CLAIMED BY THE ASSESSEE COULD NOT BE ASCERTAINED; AND (III) SOME OTHER FLATS IN THE SAM PROJECT HAVE BEEN SOLD FOR A HIGHER RATE. THUS, AS CAN BE SEE, LD.COMMISSIONER OF INCOME - TAX (APPEALS), WHILE SUSTAINING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 43CA OF THE ACT HAS GONE INTO COMPLETELY NEW ARENA WHICH WAS NEVER SUBJECT MATTER OF THE ASSESSMENT 5 I.T.A. NO.6651/MUM/2018 PROCEEDINGS. THUS, IN EFFECT, LD.COMMISSIONER OF INCOME - TAX (APPEALS) HAS INTRODUCED A NEW SOURCE OF DISALLOWANCE DURING THE APPELLATE PROCEEDINGS. THOUGH HE HAS DOUBTED THE GNUINENESS OF EXPENDITURE CLAIMED,HE HAS NOT MADE ANY DIRECT DISALLOWANCE OF EXPENDITURE. FURTHER, THE ALLEGA TION THAT SOME FLATS WERE SOLD AT HIGHER RATE IS VAGUE AND GENERAL IN NATURE WITHOUT BRINGING ON RECORD COGENT MATERIAL TO DEMONSTRATE WHETHER THESE FLATS SOLD BY TH ASSESSEE WERE IDENTICAL IN NATURE TO FLAT NO.2. MOREO ER, NO ENQUIRY HAS BEEN CONDUCTED W ITH THE BUYER OF THE FLAT TO ASCERTAIN WHETHER ANY ON - MONEY WAS PAID BY HIM FOR PURCHASING THE FLAT. WITHOUT MAKING ANY ENQUIRY OR BRINGING MATERIAL ON RECORD TO ESTABLISH THE FACT THAT THE ASSESSEE HAS RECEIVED ANY AMOUNT OVER AND ABOVE THE DECLARED SALE CONSIDERATION, NO ADDITION COULD HAVE BEEN MADE WHEN IT IS ACCEPTED THAT SECTION 43CA MEANT FOR SUCH DEEMED ADDITION, IS NOT APPLICABLE TO THE SUBJECT TRANSACTION. ONCE LD.COMMISSIONER OF INCOME - TAX (APPEALS) CONLCUDED THAT SECTION 43CA WAS NOT APPLICABL E TO THE SUBJECT TRANSACTION, THERE IS NO REASON FOR HIM TO SUTAIN THE ADDITION ON DIFFERENT REASONING. IN VIEW OF THE AFORESAID, I HAVE NO HESITATION IN DELETING THE ADDITION OFR.6,83,500/ - . GROUND RAISED IS ALLOWED. 7. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED ON _____/02/2021. SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DT : /02/2021 PAVANAN 6 I.T.A. NO.6651/MUM/2018 COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR, ITAT, MUMBAI 6. GUARD FILE /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI 1. DATE OF DICTATION 12 - 02 - 2021 SR PS 2. DRAFT PLACED BEFORE AUTHOR 16 - 02 - 2021 SR PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED / APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR PS / PS SR. PS 6. DATE OF PRONOUNCEMENT SR. PS 7. FILE SENT TO BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DESPATCH OF ORDER