AUM SHIV ENTERPRISES, MUMBAI V. ASST CIT CIR 15(2), MUMBAI

ITA 6985/MUM/2010

• Counselvise Citation: 698519914 RSA 2010
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 07-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K VED; T D SINGH
• Assessee Lawyers: J D MISTRY
• Keywords: Sale consideration of property below Jantri Value; Additional evidence
• Section: 50C; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 6985/MUM/2010 ASSESSMENT YEAR : 2007-08 AUM SHIV ENTERPRISES 701, SIDRAH BUILDING, CORNER OF S.V. ROAD AND 8 TH ROAD, OPP. KHAR POLICE,KHAR(W) MUMBAI-400 052. PAN NO.AAJFA 1109 K VS. THE ASSTT. COMM. OF INCOME TAX CIRCLE -15(2) AAYAKAT BHAVAN, MAHARSHI KARVE MARG MUMBAI-20. (APPELLANT) (RESPONDE NT) ASSESSEE BY : SHRI J.D. MISTRY REVENUE BY : SHRI K.K. VED & SHRI T.D. SINGH DATE OF HEARING : 11/06/2013 DATE OF PRONOUNCEMENT : 14 /08/2013 O R D E R PER B. RAMAKOTAIAH, AM: THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A)-26, MUMBAI DATED 30.08.2010. THE ASSESSEE RAISED THE FO LLOWING GROUND :- 1. RE: ADDITION OF RS.1.70 CRORES AS ALLEGEDLY SUP PRESSED SALES: 1.1 THE CIT(A) HAS ERRED IN CONFIRMING THE VIEW OF AO THAT THE APPELLANT HAD UNDERSTATED THE SELLING PRICE OF THE TWO FLATS IN QUESTION SOLD BY IT DURING THE YEAR AND IN THEREBY CONFIRMING THE ADDITION OF RS.1.70 CRORES MADE BY AO. 1.2 THE APPELLANT SUBMITS THAT CONSIDERING THAT FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW PREVAILING ON THE SUBJECT IT CAN NOT BE SAID THAT THERE IS AN UNDERSTATEMENT OF THE SELLING PRICE ITA NO.6985/M/10 A.Y.07-08 AUM SHIV ENTERPRISES 2 AND THE STAND TAKEN BY AO IN THIS REGARD IS INCORRE CT, ILLEGAL AND ERRONEOUS AND THE CIT(A) OUGHT TO HAVE HELD AS SUCH . 1.3 THE APPELLANT SUBMITS THAT AO BE DIRECTED TO DELETE THE ADDITION SO MADE BY HIM AND TO RECOMPUTED ITS TOTAL INCOME ACCORDINGLY. 2. BRIEFLY STATED, THE ASSESSEE IS A BUILDER AND DE VELOPER AND HAS OFFERED INCOME AT RS.33,92,948/- ON THE BASIS OF PE RCENTAGE COMPLETION METHOD. IN THE YEAR UNDER CONSIDERATION ENTIRE PROF IT OF THE PROJECT WAS WORKED OUT AND DEFERENTIAL PROFIT WAS OFFERED FOR T AXATION. IN THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESS EE HAS SOLD THREE IDENTICAL FLATS 701, 901 AND 801 WITHIN A YEAR. WHE REAS FLAT 901 WAS BOOKED ON 8.10.2005 FOR RS.3,23,50,000/-, FLAT NO.7 01 WAS SOLD ON 20/03/2006 FOR RS.2.37 CRORES AND FLAT NO.801 AT RS .2.40 CRORES. CONSIDERING THAT THERE IS A VAST DIFFERENCE IN SELL ING PRICE OF IDENTICAL FLATS, AO MADE ADDITION OF RS.1.70 CRORES AS INCOME OF THE ASSESSEE. 3. IN APPEAL BEFORE LD CIT(A), IT WAS CONTENDED THA T AO MADE ADDITION OF RS.1.70 CRORES FOR DIFFERENCE IN SALE P RICE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD DISCLOSED ALL THE MA TERIAL EVIDENCE AND SALE PRICE CHARGED FROM EACH OF THE CUSTOMERS, HENC E MERELY ON THE BASIS OF ASSUMPTIONS AND PRESUMPTIONS NO SUCH ADDITION CA N BE MADE. IT WAS ARGUED THAT THE ASSESSEE IS A BUILDER, THEREFORE, P ROVISION OF SECTION 50C IS NOT APPLICABLE. FURTHER IT WAS SUBMITTED THAT SA LE PRICE CHARGED FROM THE CUSTOMERS ARE MUCH HIGHER THAN STAMP DUTY VALUA TION DONE BY REGISTERING AUTHORITY. THEREFORE, SUCH ADDITION MAD E BY AO IS ARBITRARY. FURTHER, IT WAS ARGUED THAT FLAT NO.901 ON 9 TH FLOOR WAS SOLD OUT TO SHRI N.R. MURTHY OF INFOSYS LTD, SETTLED IN BANGALORE AN D THEY HAD TO VISIT HIM AT BANGALORE, THEREFORE, EXTRA CONSIDERATION WAS CH ARGED TO THE SAID PARTY WHO WAS WILLING TO ANY PRICE FOR SENTIMENTAL REASONS, WHICH COULD NOT BE THE BASIS FOR ADOPTING THE SALE PRICE FOR AL L THE OTHER FLATS. IT WAS FURTHER, A ARGUED THAT INCOME TAX IS ALWAYS ON REAL INCOME AND NOT NOTIONAL OR HYPOTHETICAL INCOME, BUT ON ACTUALLY EA RNED INCOME BY THE ITA NO.6985/M/10 A.Y.07-08 AUM SHIV ENTERPRISES 3 ASSESSEE. THERE IS NO IOTA OF EVIDENCE OF ANY SORT WITH AO WHICH SUGGESTS REMOTELY THAT THE ASSESSEE HAS EARNED MORE INCOME F ROM SALE OF FLATS THAN DISCLOSED IN SALE AGREEMENT. FURTHER, IT WAS C ONTENDED THAT THE ASSESSEE FOLLOWS PERCENTAGE COMPLETION METHOD, WHER EBY PROFIT WAS OFFERED ACCORDING TO THE PERCENTAGE OF WORK COMPLET ED IN THE YEAR AND SINCE PROJECT WAS NOT COMPLETE, NO SUCH ADDITION CA N BE MADE ON ACCOUNT OF DIFFERENCE OF SALE PRICE. IN SUPPORT OF THE CONTENTION LD.AR HAS PLACED HIS RELIANCE IN THE CASE OF K.P. VARGHESE VS. ITO (131 ITR 597(SC); CIT VS. SHOORJI VALLABHDAS & CO.(1962) (46 ITR 144) (SC); GODHRA ELECTRICITY CO. LTD. VS. CIT (1997) (225 ITR 746)(S C); INDIA FINANCE & CONTRUCTION CO. PVT. LTD. VS. B.N. PANDA DC, (1993) (200 ITR 710)(BOM.); UMACHARAN SHAW & BROS. (37 ITR 271(SC) AND CIT VS. SIVAKAMI CO. P. LTD.(1986) (159 ITR 71)(SC). FURTHER BY LETTER DATED 23.08.2010 IT WAS SUBMITTED THAT THERE WAS A SURVEY U/S. 133A ON THE PREMISES OF RELATED CONCERN OF THE ASSESSEE ON 20.02.2009 WHEREIN THE A SSESSEES PREMISES WAS ALSO THERE AND NOTHING WAS FOUND IN THE COURSE OF SURVEY. NOR WAS ANY EXCESS CASH OR WERE ANY DOCUMENTS OR PAPER EVID ENCING EXTRA SALE CONSIDERATION CHARGED FOUND. THEREFORE, THERE WAS NO REASON FOR MAKING SUCH ADDITION OF RS.1.70 CRORES TO THE INCOME OF AS SESSEE. 4. THE LD. CIT(A) HOWEVER, DID NOT AGREE WITH THE C ONTENTIONS OF THE ASSESSEE AND VIDE HIS DETAILED ORDER IN PARA-8 FROM PAGE-8 TO 12, HE SUSTAINED THE ENTIRE ADDITION. HIS ARGUMENTS IN COM ING TO THE CONCLUSION WAS THAT PROJECT WAS ENTIRELY NEW PROJECT AND BETTE R FACILITIES WERE GIVEN AND THERE CANNOT BE VARIATION IN THE PRICES BETWEEN THE THREE APARTMENTS ON THREE FLOORS. HE ALSO COMPARED THE PRICES IN OTH ER REFERRED CASES AND REJECTED THE SAME THAT THEY DO NOT MATCH THE SPECIF ICATIONS, SPECIFIC QUALITY OF CONSTRUCTION AND SUITABILITY OF SURROUND ING AREAS. EVEN THOUGH THE LD. CIT(A) ACCEPTS THAT EACH APARTMENT HAS ITS OWN TECHNICALITY AND SUITABILITY TO THE BUYER, HE DID NOT AGREE TO THE A SSESSEES CONTENTIONS THAT ASSESSEE GOT SPECIAL PRICE BY SELLING IT TO SH RI N.R. MURTHY, WHO HAS SPECIAL ATTACHMENT TO THE ERSTWHILE APARTMENT AND H AS AGREED TO PAY ITA NO.6985/M/10 A.Y.07-08 AUM SHIV ENTERPRISES 4 WHATEVER PRICE DEMANDED BY THE ASSESSEE. IN VIEW OF THAT, HE CONCLUDED THAT DIFFERENCE IN PRICE AS ADOPTED BY AO IS CORREC T. 5. DRAWING OUR ATTENTION TO THE PAPER BOOK AN D ADDITIONAL EVIDENCE PLACED ON RECORD IN TERMS OF RULE 18(4) OF THE ITAT RULES, THE LD. COUNSEL SUBMITTED THAT SHRI N.R. MURTHY HAS A SENTIMENTAL A SSOCIATION TO THIS APARTMENT AND SO HE WAS NOT INCLINED TO ACCEPT THE DEVELOPMENT PROPOSAL IN THE FIRST INSTANCE. THEREFORE, THE BUIL DER HAD TO SEPARATELY NEGOTIATE WITH SHRI N.R. MURTHY AND ACCEPT HIS TERM S WHICH INCLUDED COMPLETION WITHIN ONE YEAR AND PENAL CLAUSES IF IT GETS DELAYED. IN VIEW OF SPECIFIC REQUIREMENT/REQUISITION, STANDARD OF QUALI TY AND REQUIREMENTS WHICH WERE DEMANDED AND AGREED UPON BY THE BUILDER, THE PROJECT CAME INTO EXISTENCE AND REFERRED TO THE DATE OF AGREEMEN T WHICH IS EVEN BEFORE THE DATE OF COMMENCEMENT OF THE BUILDING. IT WAS F URTHER SUBMITTED THAT THE ASSESSEE QUOTED HIGHER PRICE AS THEY WENT TO BA NGALORE TO NEGOTIATE AND THERE WERE STIFF CONDITIONS PLACED BEFORE ENTER ING INTO THE AGREEMENT. IN VIEW OF THIS, THE PRICE OBTAINED BY THE ASSESSEE FROM THAT PARTICULAR SALE WAS HIGHER AND CANNOT BE MATCHED WITH THE NORM AL PRICING OF THE OTHER APARTMENTS. IT WAS FURTHER SUBMITTED THAT WHA TEVER THE ASSESSEE HAS BEEN CHARGED HAS BEEN ACCOUNTED FOR AND ASSESS ING OFFICER WAS NOT CORRECT IN TAKING THE DIFFERENCE AS SUPPRESSED RECE IPTS WITHOUT ESTABLISHING ANYTHING FROM HIS SIDE. HE ALSO REFERR ED TO THE ORDER OF CIT(A) TO SUBMIT THAT CIT(A) WRONGLY CONSIDERED THA T ASSESSING OFFICER DISCHARGED THE BURDEN OF PROVING THE AMOUNT RECEIVE D OVER AND ABOVE WHAT WAS ACCOUNTED FOR, WHEREAS IT IS ASSESSEE WHO SUBMITTED THE ENTIRE INFORMATION AND WITHOUT ANY BASIS AO CONSIDERED THE DIFFERENCE IN PRICE AS UNACCOUNTED RECEIPT. HE ALSO REFERRED TO THE ADD ITIONAL EVIDENCE PLACED ON RECORD TO SUBMIT THAT THERE IS AN AFFIDAV IT BY THE PARTNER OF THE FIRM ABOUT MOU ENTERED BY SHRI N.R. MURTHY AND SPEC IAL PRICE WAS OBTAINED AND CONFIRMATIONS FROM SHRI N.R. MURTHY AN D ALSO STATEMENTS FROM OTHER OWNERS OF THE FLAT 701 AND 801 AND PHOTO GRAPHS PLACED ON ITA NO.6985/M/10 A.Y.07-08 AUM SHIV ENTERPRISES 5 RECORD TO SUBMIT WHY SPECIAL PRICE WAS OBTAINED FOR SELLING FLAT NO.901 WHICH HAS A CLEAR VIEW OVER THE OTHERS. 6. THE LD. DR HOWEVER, RELIEF ON THE ORDERS OF AO A ND LD. CIT(A) TO SUBMIT THE FACTS. 7. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE PA PER BOOK PLACED ON RECORD AND ADDITIONAL EVIDENCE. AS SEEN FROM AO S ORDER AO HAS ARRIVED AT THE DIFFERENCE IN PRICE BY HIS BRIEF ORD ER WHICH IS AS UNDER :- 6. ON PERUSAL OF VARIOUS DETAILS FILED, IT IS NOTI CED THAT THE FIRM HAS SOLD THREE IDENTICAL FLATS AT VARIOUS RATES THE DET AILS OF WHICH ARE MENTIONED HEREIN IN THE TABLE BELOW. THE AUTHORISED REPRESENTATIVE WAS ASKED TO EXPLAIN WHY THE SAME IDENTICAL FLATS W ERE SOLD AT DIFFERENT RATES AND WAS ALSO ASKED TO SHOW CAUSE WH Y THE MAXIMUM RATE AT WHICH THE FLAT HAVE BEEN SOLD SHALL NOT BE APPLIED TO THE OTHER TWO FLATS. THE DETAILS OF THE SAID FLA TS ARE AS UNDER: NAME OF THE BUYER FLAT NO. AREA SOLD SALE VALUE (RS.) DATE OF BOOKING INDER BHATIA 701 1991 SQ. FEET 2,37,00,000/ - 20.03.2006 N R MURTHY 901 1991 SQ. FEET 3,23,50,000/ - 08.10.2005 SHABBIR TAMBAWALA 801 1991 SQ. FEET 2,40,00,000/ - 07.11.2005 IN RESPONSE TO THE SAME THE AUTHORISED REPRESENTATI VE FILED ITS REPLY VIDE LETTER DATED 29.10.2009 WHEREIN HE HAS EXPLAIN ED THE REASONS FOR THE DIFFERENT SALE PRICE FOR THE THREE IDENTICA L FLATS. THE EXPLANATION FILED BY THE AUTHORISED REPRESENTATIVE IS NOT ACCEPTABLE ON THE GROUND THAT THE IN THE SAME BUILDING NO TWO IDENTICAL FLATS THAT TOO ON HIGHER FLOORS CAN BE SOLD AT THE LOWER RATE. HENCE, THE MAXIMUM RATE AT WHICH ONE OF THE THREE IDENTICAL FL ATS HAS BEEN SOLD IS TO BE APPLIED TO THE OTHER TWO FLATS. THUS THE D IFFERENCE IN THE SALE PRICES TOTALING TO RS. 1,70,00,000/- IS BEING ADDE D TO THE TOTAL INCOME OF THE ASSESSEE THE DETAILS OF WHICH ARE MEN TIONED HEREIN IN THE ABOVE TABLE. THUS THERE IS CONCEALMENT OF INCOM E OF RS. 1,70,00,000/- BY SUPPRESSING THE SALE PRICE OF THE FLATS. HENCE PENALTY PROCEEDINGS ARE BEING INITIATED U/S. 271(1) (C). 8. AS CAN BE SEEN FROM THE ABOVE, THE ASSESSEE HAS FURNISHED VARIOUS DETAILS AND FROM THERE AO NOTICED THAT THE THREE FL ATS IN THREE DIFFERENT FLOORS WERE SOLD AT DIFFERENT PRICES. FLAT NO.701 A ND 801 ARE SOLD AT MORE ITA NO.6985/M/10 A.Y.07-08 AUM SHIV ENTERPRISES 6 OR LESS SAME PRICE WHEREAS FLAT 901 WAS SOLD AT A H IGHER PRICE. PRIMA FACIE THE EXPLANATION OF THE ASSESSEE IS A PLAUSIBLE EXPL ANATION AND AS SEEN IN THE MOU, THERE IS A GOOD REASON TO OBTAIN A DIFFERENT AND HIGHER PRICE. THERE WAS A A CLEAR VIEW FROM THE APARTMENT BEING HIGHER IN ELEVATION ALL AROUND. NOT ONLY THAT, AS CAN BE SEEN FROM THE MOU AND OTHER DOCUMENTS PLACED ON RECORD, THE AGREEMENT WAS ENTERED MUCH BEFORE THE PROJECT HAS STARTED AND TERMS ARE SUCH T HAT THERE ARE STIFF CONDITIONS ON THE BUILDER FOR COMPLETION WITH PENAL TY CLAUSES. THEREFORE, IT CAN BE SAFELY CONSIDERED THAT PRICE PAID BY SHRI N.R. MURTHY IS SPECIAL PRICE, NOT ONLY FOR THE FLOOR WHICH HE HAS SELECTED BUT ALSO FOR ALL THE FACILITIES PROVIDED TO HIM. IT WAS ALSO SUBMITTED I N THE COURSE OF ARGUMENT THAT THIS FLAT WAS KEPT FOR SENTIMENTAL RE ASONS AND THIS APARTMENT WAS HARDLY OCCUPIED BY SHRI N.R. MURTHY E VEN AS OF NOW. WHATEVER MAY BE THE REASON FOR PAYING HIGHER AMOUNT , THE ASSESSEE HAS ACCOUNTED FOR THE ENTIRE AMOUNT AND IF THERE IS AN Y UNDERSTATEMENT OF SALE PRICE OF FLAT 701 AND 801, IT IS FOR THE REVEN UE TO ESTABLISH THE UNDERSTATEMENT BY SEPARATELY EXAMINING THE SALE OF THESE FLATS RATHER THAN BASING THE ASSESSMENT ON THE FACT THAT FLAT 90 1 WAS SOLD AT A HIGHER PRICE. THE ASSESSEE ALSO PLACED ON RECORD LOT OF IN FORMATION ABOUT THE PRICE AT WHICH SIMILAR APARTMENTS WERE SOLD IN THE AREA AND WE DO NOT FIND THAT THIS ASPECT WERE EVEN EXAMINED BY AO AND CIT(A). PRIMA FACIE WE ARE OF THE OPINION THAT AO WAS NOT CORRECT IN MA KING THE ADDITION SIMPLY ON THE BASIS THAT FLAT 901 WAS SOLD AT A HIG HER PRICE. LD COUNSEL HAS PLACED RELIANCE ON VARIOUS CASE LAW TO SUPPORT CONTENTIONS WHICH WE DO NOT INTEND TO REFER HERE FOR THE REASON THAT AO DID NOT ESTABLISH ANYTHING WHILE MAKING ADDITION AND LD CIT(A) WRONGL Y CONSIDERED THAT PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT I N THE CASE OF K P VERGHESE VS ITO 131 ITR 597 WERE FULFILLED WHEN AO DID NOT DO ANY THING TO ESTABLISH, AS STATED ABOVE. ITA NO.6985/M/10 A.Y.07-08 AUM SHIV ENTERPRISES 7 9. THE ASSESSEE HAS FILED ADDITIONAL EVIDENCE IN T ERMS OF RULE 18(4) OF NOT ONLY AN AFFIDAVIT BY THE PARTNER, LETTER FROM S HRI N.R. MURTHY AND FROM THE OTHER PURCHASERS OF FLAT 701 AND 801 BUT A LSO PLACED THE MOU ENTERED ON 06/10/2005 BETWEEN BUILDER AND MRS. SUDH A MURTHY (ON BEHALF OF SHRI N.R. MURTHY) AND COPIES OF PHOTOES INDICATING THE VIEW POINT FROM APARTMENT 901, 801 AND 701. AS THIS ADDI TIONAL EVIDENCE IS ADMITTED, ASSESSING OFFICER HAS TO EXAMINE THESE, A S THEY ARE NOT PLACED BEFORE ASSESSING OFFICER IN THE COURSE OF ASSESSMEN T PROCEEDINGS. FURTHER, ASSESSEES CONTENTIONS WERE ALSO NOT EXAMI NED AS CAN BE SEEN FROM THE ORDER OF ASSESSING OFFICER WHICH IS VERY B RIEF AND CURSORY. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THE ADDITI ON CAN NOT BE SUSTAINED ON THE BASIS OF THE REASONING TAKEN BY AO. SINCE TH E ADDITIONAL EVIDENCE WAS NOT PLACED BEFORE ASSESSING OFFICER, IN THE INT EREST OF JUSTICE, WE SET ASIDE THE ORDER AND RESTORE THE ISSUE TO THE FILE O F ASSESSING OFFICER TO CONSIDER THE ABOVE ADDITIONAL EVIDENCE AND COMPLETE THE ASSESSMENT AS PER LAW AND FACTS. WE MAKE IT CLEAR THAT IT IS FOR AO TO ESTABLISH THAT THERE IS UNDER STATEMENT OF INCOME AND NO ADDITION CAN BE SIMPLY MADE JUST BECAUSE ONE OF THE FLATS WAS SOLD AT A HIGHER PRICE. WITH THESE OBSERVATIONS, MATTER IS SET ASIDE TO THE FILE OF AO . ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY. GROUNDS ARE TREATED AS ALLOW ED ACCORDINGLY. 10. IN THE RESULT, ASSESSEE APPEAL IS ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH AUG. 2013. SD/- SD/- (DR. S.T.M. PAVALAN ) JUDICIAL MEMBER (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER MUMBAI, DATED: 14 TH AUG. 2013. JV. ITA NO.6985/M/10 A.Y.07-08 AUM SHIV ENTERPRISES 8 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.