ACIT 25(2), MUMBAI V. SAROJ SALES ORGANISATION, MUMBAI

ITA 6864/MUM/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0244 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-09-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 11-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Capital asset; Income from undisclosed sources; Onus to prove
• Section: 43CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.6864/M/2014 ASSESSMENT YEAR: 2010-11 ACIT-25(2), ROOM NO.108, 1 ST FLOOR, BLDG. NO.C-11, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST) MUMBAI 400 051 VS. M/S. SAROJ SALES ORGANIZATION, B-202, THE BREEZY CORNER, 90FT. ROAD, MAHAVIR NAGAR, KANDIVALI (W), MUMBAI 400 067 PAN: AAMFS5193A (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : MS. ARATI VISSANJI, A.R. REVENUE BY : SHRI V. JUSTIN, D.R. DATE OF HEARING : 01.02.2018 DATE OF PRONOUNCEMENT : 15.02.2018 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 28.08.2014 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED THE ORIGINAL RETURN ON 28.09.2010 DECLARING A TOTAL INC OME OF RS.4,59,44,569/- AND RETURN WAS PROCESSED UNDER SEC TION 143(3). THE ITA NO.6864/M/2014 M/S. SAROJ SALES ORGANIZATION 2 ASSESSEE FIRM IS ENGAGED IN BUSINESS OF REAL ESTATE DEVELOPMENT. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HA S BOOKED SALE IN RESPECT OF FLAT/SHOP OF ITS THREE PROJECTS NAMELY - BUILDING NO.3, EDEN GARDEN AND TBC. THE ASSESSEE BOOKED SALE OF 41 FLAT S FROM 'EDEN GARDEN' PROJECT IN THE FINANCIAL YEAR UNDER CONSIDER ATION. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) HAS VERIFIED THE BOOKING AMOUNT FOR THE WING 'A' AND WING 'B' AND THE AO HAS VERIFIED THE BOOKING OF 2 FLATS AND RATE OF SALE AS PER SQ. FT. BY OBSERVING AS UNDER: WING-A RATE OF SALE OF FLAT IN A-WING IN ORDER OF DATE OF BOOKING RATE OF SALE OF FLAT IN A-WING IN ORDER OF FLAT NUMBER SL. NO. FLAT NO. DATE OF BOOKING RATE OF SALE IN RS. PER SQ. FT. SL. NO. FLAT NO. DATE OF BOOKING RATE OF SALE IN RS. PER SQ. FT. 1 A/902 16-APR- 07 4370 1 A/201 03-MAR- 09 6518 2 A/401 21 - JUN - 07 4725 2 A/202 11 - APR - 09 6223 3 A/402 21-JUN- 07 4694 3 A/301 27-APR- 09 5279 4 A/1002 23-JUL- 07 4694 4 A/302 06-APR- 09 5543 5 A/1001 27 - JUL - 07 4725 5 A/401 21 - JUN - 07 4725 6 A/602 26-SEP- 07 4856 6 A/402 21-JUN- 07 4694 7 A/701 22-OCT- 07 4888 7 A/501 30-DEC- 08 6191 8 A/802 23 - NOV - 07 4694 8 A/502 26 - DEC - 08 5180 9 A/601 26-NOV- 07 4888 9 A/601 26-NOV- 07 4888 10 A/702 14-JAN- 08 4856 10 A/602 26-SEP- 07 4856 11 A/1101 18 - JAN - 08 4888 11 A/701 22 - OCT - 07 4888 12 A/1102 01-APR- 08 4069 12 A/702 14-JAN- 08 4856 ITA NO.6864/M/2014 M/S. SAROJ SALES ORGANIZATION 3 13 A/502 26-DEC- 08 5180 13 A/801 11- MAY-09 4888 14 A/501 30 - DEC - 08 6191 14 A/802 23 - NOV - 07 4694 15 A/201 03-MAR- 09 6518 15 A/901 28-APR- 09 5051 16 A/302 06-APR- 09 5543 16 A/902 16-APR- 07 4370 17 A/202 11 - APR - 09 6223 17 A/1001 27 - JUL - 07 4725 18 A/301 27-APR- 09 5279 18 A/1002 23-JUL- 07 4694 19 A/901 28-APR- 09 5051 19 A/1101 18-JAN- 08 4888 20 A/801 11 - MAY-09 4888 20 A/1102 01 - APR - 08 4069 WING-B RATE OF SALE OF FLAT IN B-WING IN ORDER OF DATE OF BOOKING RATE OF SALE OF FLAT IN A-WING IN ORDER OF FLAT NUMBER SL. NO. FLAT NO. DATE OF BOOKING RATE OF SALE IN RS. PER SQ. FT. SL. NO. FLAT NO. DATE OF BOOKING RATE OF SALE IN RS. PER SQ. FT. 1 B/1002 12-FEB - 07 4414 1 B/201 18- MAY-09 5592 2 B/901 29-MAR- 07 4876 2 B/202 08- MAY-09 4915 3 B/1101 01-APR- 07 4388 3 B/301 18- MAY-09 5202 4 B/1001 09-APR- 07 4876 4 B/302 04- MAY-09 6213 5 B/701 08-JUL- 07 4876 5 B/401 07-APR- 09 5364 6 B/1102 14-SEP- 07 4905 6 B/402 07-APR- 09 5395 7 B/802 01-MAR- 09 5216 7 B/501 06-APR- 09 6014 8 B/702 02-MAR- 09 4905 8 B/502 17-APR- 09 5026 9 B/902 21-MAR- 09 5115 9 B/601 27-APR- 09 5933 10 B/801 24-MAR- 09 6014 10 B/602 06-APR- 09 5775 11 B/602 06 - APR - 09 5775 11 B/701 08 - JUL - 07 4876 12 B/401 07-APR- 09 5364 12 B/702 02-MAR- 09 4905 ITA NO.6864/M/2014 M/S. SAROJ SALES ORGANIZATION 4 13 B/402 07-APR- 09 5395 13 B/801 24-MAR- 09 6014 14 B/502 17 - APR - 09 5026 14 B/802 01 - MAR - 09 5216 15 B/601 27-APR- 09 5933 15 B/901 29-MAR- 07 4876 16 B/1202 04- MAY-09 5316 16 B/902 21-MAR- 09 5115 17 B/302 04 - MAY-09 6213 17 B/1001 0 9 - APR - 07 4876 18 B/501 06- MAY-09 6014 18 B/1002 12-FEB- 07 4414 1 9 B/202 08 - MAY-09 4915 19 B/1101 01 - APR - 07 4388 20 B/201 18- MAY-09 5592 20 B/1102 14-SEP- 07 4905 21 B/301 18- MAY-09 5202 21 B/1202 04- MAY-09 5316 3. FROM THE ABOVE ANALYSIS AO WAS OF A VIEW THAT TH ERE IS A LARGE VARIATION IN SALE RATE WITHIN SHORT SPAN OF TIME IN MANY CASES. CONSEQUENTLY, RATE OF SALE OF FLAT IN SOME FLOOR VA RIES A LOT. IN SOME CASES THE RATE OF SALE IS ALMOST SAME EVEN AFTER EX PIRY OF TWO YEARS. IN SOME OTHER CASES RATE VARIATION IS AS LARGE AS 2 0% EVEN THOUGH BOTH FLATS ARE SOLD WITHIN FEW DAYS AND THE RATE OF SALE HAS NO DIRECT CO-RELATION WITH DATE OF BOOKING. SHOW CASE NOTICE WAS GIVEN TO THE ASSESSEE AND AFTER CONSIDERING THE REPLY OF THE ASS ESSEE THE AO WAS OF A VIEW THAT THERE IS NO REASON FOR VARIATION IN RATE OF SALE OF FLATS WITH A SMALL RATE. THEREFORE, THE AO WAS OF A VIEW THAT THE ASSESSEE HAS UNACCOUNTED MONEY OF RS.2,33,17,400/- AND HENCE TREATED THIS AMOUNT AS UNACCOUNTED INCOME OF THE ASSESSEE IN THE FINANCIAL YEAR UNDER CONSIDERATION FROM THE SALE OF FLATS. ITA NO.6864/M/2014 M/S. SAROJ SALES ORGANIZATION 5 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE ARGUMENTS OF THE APPELLANT IN THIS REGARD. IT IS AN UNDISPUTED FACT THAT 41 FLATS HAVE BEEN SOLD DURING THE YEAR AND IT IS ALSO AN UNDISPUTED FACT T HAT THERE IS A CONSIDERABLE DIFFERENCE IN THE SALE PRICE OF DIFFERENT FLATS. TH E AO HAS REFERRED TO THE DECISION OF M/S. DIAMOND INVESTMENT AND PROPERTIES (REFERRED SUPRA) TO JUSTIFY HIS ARGUMENT THAT ONMONEY MUST HAVE EXCHANGED HANDS SINCE THE APPELLANT HAS NOT COME FORTH WITH ANY COGENT EXPLANATION TO EXPLA IN THE DIFFERENCE IN SALE PRICE OF DIFFERENT FLATS. THE APPELLANT HAS TR IED TO DISTINGUISH THE SAID SITUATION IN HIS CASE BY SAYING THAT IN THE CASE OF M/S. DIAMOND INVESTMENT AND PROPERTIES, SALE WAS BEING MADE WAS TO A RELATE D PARTY. THE EXPLANATION GIVEN BY THE APPELLANT IS THAT IT IS IN THE EXIGENC Y OF RUNNING BUSINESS THAT THE FLATS HAVE BEEN SOLD AT SOMETIMES LOWER RATES, HOWE VER NONE OF THE FLATS HAVE BEEN SOLD AT THE RATE LOWER THAN THE STAMP DUTY VAL UATION OF THE AREA. THE DECISION OF THE HON'BLE MUMBAI ITAT IN THE CASE OF NEEL KAMAL REALTORS AND ERECTORS (REFERRED SUPRA) SQUARELY COVERS THE CASE OF THE APPELLANT. THE HONBLE TRIBUNAL IN THE SAID DECISION HAVE MADE REFE RENCE TO THE DECISION OF THE APEX COURT IN THE CASE-OF K.P.VERGHESE VS. ITO (198) 131 ITR 597 (SC) WHEREIN IT WAS HELD THAT SUBSECTION 2 OF 52 CAN BE INVOKED ONLY WHERE THE CONSIDERATION FOR THE TRANSFER HAS BEEN UNDERSTATED BY THE ASSESSEE AND THE BURDEN OF PROVING SUCH UNDERSTATEMENT IS ON THE REV ENUE. AN IDENTICAL VIEW WAS REITERATED IN THE CASE OF CIT VS. SHIVAKAMI CO. PVT. LTD. 1986 159 ITR 71(SC) AND AGAIN REITERATED IN THE DECISION OF CIT VS. GODAVARI CORP. LTD. (1993)200 ITR 567 (SC). WHAT THEN EMERGES IS THAT S OME CONCRETE EVIDENCE HAS TO BE BROUGHT FORTH BY REVENUE AND THE EXPLANAT ION BY THE APPELLANT CANNOT BE REJECTED SUMMARILY AND A HYPOTHETICAL BAI S OF CALCULATION CANNOT BE TAKEN TO RECALCULATE THE SALE PRICE TO DETERMINE THE REAL INCOME. THEREFORE, IN MY CONSIDERED VIEW THE ADDITION NEEDS TO BE DELETED WITH REFERENCE TO THE DECISIONS GIVEN ABOVE. 5. THE LD. D.R. HAS VEHEMENTLY ARGUED THAT FLAT NO. A/501 & A/502 BOOKED IN DECEMBER 2008 WITHIN A SPAN OF 4 DA YS BUT THE RATE OF SALE IS 5180 AND 6191 THOUGH THESE FLATS ARE ON THE SAME FLOOR. THE HUGE VARIATION OF APPROXIMATELY 28% WITHIN SHOR T PERIOD IS BEYOND COMMON BUSINESS PRUDENCE. IN SOME OF THE FL ATS THE RATE OF SALE WAS 6158 AND IT IS REDUCED IN CHRONOLOGICAL OR DER WHICH GIVES THE PICTURE THAT THE SAID RATE OF FLAT OF BOTH WING S WHICH IS IN ABNORMAL VARIATION FROM PERIOD 06.12.08 TO 18.05.09 . THE AO HAS ITA NO.6864/M/2014 M/S. SAROJ SALES ORGANIZATION 6 ALSO SHOWN THIS VARIATION BY SHOWING HIS CHART. TH E SIMILAR ISSUE HAD COME UP BEFORE ITAT MUMBAI BENCH IN THE CASE OF DIA MOND INVESTMENT AND PROPERTIES IN ITA NO.5537/M/09 WHERE IN IT IS HELD THAT THE ADDITION ON BASIS OF COMPARABLE SALE PROCE EDS IS JUSTIFIABLE EVEN THOUGH THERE WAS NO EVIDENCE OF RECEIPT OF OWN MONEY. THE LD. D.R. SUBMITTED THAT AS PER THE DECISION OF MUMB AI TRIBUNAL THE ADDITION IS JUSTIFIED. 6. ON THE OTHER HAND, THE LD. A.R. SUBMITTED THAT T HE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD. MOREOVER, THE ASSESSEE HAS TOTAL NET PROFIT RELEASED IN DEVELOPMENT OF CONSTRU CTION OF EDEN GARDEN IS ABOUT RS.275 LAKHS. THEREFORE, NET PROFI T COMES OUT TO 11.30%. IN THE REAL ESTATE BUSINESS THERE IS A VAR IATION IN RESPECT OF RATE OF SALE OF EACH FLAT, THE LD. A.R. SUBMITTED T HAT ON REGISTRATION THE ASSESSEE HAS FILED THE COMPLETE DETAILS AND ASS ESSEE HAS RECOVERED THE AMOUNT NOT LESS THAN THE VALUE ADOPTED BY STAMP DUTY AUTHORITY ON REGISTRATION OF AGREEMENT. THE ASSESSMENT HAS C HARGED THE RATE OF SALE OF FLAT IS HIGHER THAN THE RATE CONSIDERED BY THE STAMP DUTY AUTHORITY. THE MERE VARIATION IN THE RATE OF FLAT OF SALE IS NOT REALIZATION OF UNACCOUNTED COMPONENTS OF SELF REALI ZATION. THE LD. A.R. RELIED UPON THE DECISION OF NEELKAMAL REALTORS AND ERECTORS INDIA PVT. LTD. IN ITA NO.1143/M/2013 WHEREIN IT IS HELD THAT IT IS THE REVENUE TO BRING THE EVIDENCE ON RECORD THAT AS SESSEE HAS RECEIVED HIGHER PRICE THAN DECLARED. LD. A.R. ALSO ARGUED THAT IN THE CASE OF CIT VS. NEELKAMAL REALTORS AND ERECTORS IND IA PVT. LTD. THE MATTER WAS TRAVELLED UP TO HONBLE BOMBAY HIGH COUR T AND THE ITA NO.6864/M/2014 M/S. SAROJ SALES ORGANIZATION 7 HONBLE BOMBAY HIGH COURT HAS DISMISSED THE APPEAL. THE LD. A.R. FURTHER SUBMITTED THAT SECTION 43CA WHICH IS I NTRODUCED FROM 01.04.2014 IN RESPECT OF TRANSFER OF LAND AND BUILD ING BUT IN THAT CASE IT IS THE DUTY OF REVENUE TO PROVE THAT SALE PRICE OF LAND OR BUILDING OR BOTH ARE UNDERSTATED. IN THE YEAR UNDER CONSIDE RATION, THIS MAY BE NOT APPLICABLE BUT THE INTENTION OF THE LEGISLATION IS TO CHARGE THE INCOME WHICH IS LESS THAN STAMP DUTY AUTHORITY. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE LD. CIT(A) HAS CONSIDERED THE DECISION OF MUMBAI TR IBUNAL IN THE CASE OF NEELKAMAL REALTORS AND ERECTORS INDIA PVT. LTD. IN ITA NO.1143/M/2013 WHEREIN THE TRIBUNAL CONSIDERING THE VARIOUS PROVISIONS OF LAW HELD THAT IT IS THE DUTY OF REVEN UE TO BRING THE EVIDENCE THAT ASSESSEE HAS EARNED MORE INCOME BY SU PPRESSING THE SALE PROCEEDS. THE SAID JUDGMENT WAS ALSO CONFIRMED IN THE DECISION OF HONBLE BOMBAY HIGH COURT REPORTED AS 246 TAXMAN N 274. WE HAVE GONE THROUGH THE ORDER OF THE LD. CIT(A) AND T HE LD. CIT(A), CONSIDERING THE DECISION OF HONBLE BOMBAY HIGH COU RT AND THE DECISION OF TRIBUNAL, HAS DISMISSED THE APPEAL OF T HE ASSESSEE. WE FIND THAT SIMILAR ISSUE HAD COME UP BEFORE THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. GODAVARI CORPORATION 2 00 ITR 567 WHEREIN IT IS HELD THAT BURDEN OF PROOF THAT CONSID ERATION IN RESPECT OF TRANSPORT HAS BEEN DECLARED AT LOWER FIGURE THAN AC TUALLY RECEIVED BY THE ASSESSEE IS ON THE REVENUE. RESPECTFULLY FOLLO WING THE DECISION, WE DISMISS THE DEPARTMENTAL APPEAL. ITA NO.6864/M/2014 M/S. SAROJ SALES ORGANIZATION 8 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 15.02.2018. SD/- SD/- (N.K. PRADHAN) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 15.02.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.