DCIT, CHENNAI V. Adroit Urban Developers Pvt Ltd., CHENNAI

ITA 999/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7828 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 15-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SIVA SRINIVAS
• Assessee Lawyers: S RAMACHANDRAN
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! ' . # , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.999/MDS/2016 ( / ASSESSMENT YEAR: 2010-11) THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(1) CHENNAI. VS M/S. ADROIT URBAN DEVELOPERS PVT.LTD., 1, BHEEMANNA GARDEN STREET, ALWARPET, CHENNAI-18. PAN: AAFCA9741A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. SIVA SRINIVAS, JCIT /RESPONDENT BY : MR. S.RAMACHANDRAN, C.A. /DATE OF HEARING : 3 RD NOVEMBER,2016 /DATE OF PRONOUNCEMENT : 26 TH DECEMBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 1, CHENNAI DATED 27.01.2016 IN ITA NEW NO.217/CIT(A )-1 PASSED UNDER SECTION 143(3) R.W.S. 250(6) OF THE AC T. 2. THE REVENUE HAS RAISED SEVERAL ELABORATE GROUN DS IN ITS APPEAL, HOWEVER, THE CRUX OF THE ISSUE IS AS FO LLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DIRECTING THE LEARNED ASSESSING OFFICER TO DELETE THE ADDITION OF ` 2,03,27,768/- MADE FOR SUPPRESSION OF SALE 2 ITA NO.999 /MDS/2016 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPMENT FIL ED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 15.10.2010 ADMITTING LOSS OF ` 58,85,493/- WHICH WAS SUBSEQUENTLY REVISED ON 31.03.2011 CLAIMING LOSS OF ` 36,09,239/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSESSEE ON 26.08.2011. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLE TED BY THE LEARNED ASSESSING OFFICER UNDER SECTION 143 (3) OF THE ACT ON 28.03.2013 WHEREIN HE MADE CERTAIN ADDITION/ DISALLOWANCES AMONGST WHICH ONE OF THE ADDITION WA S ` 2,03,27,768/- TOWARDS SUPPRESSION OF SALES. THE LE ARNED ASSESSING OFFICER HAD MADE THE AFORESAID ADDITION S INCE THE ASSESSEE HAD SOLD TWO APARTMENTS VIZ., APARTMENT NO . F4 AND G3 OF ITS PROJECT AURA ONE TO RELATED PARTIES AT LESSER THAN THE PRICE SOLD TO UNRELATED PARTIES THOUGH IN THE SALE AGREEMENT HIGHER AMOUNT WAS MENTIONED. THE DETAILS OF THE SALE OF FLATS ARE AS FOLLOWS:- SALE CONSIDERATION MENTIONED IN THE SALE AGREEMENT: APARTMENT NO. SQ.FT RATE IN ` TOTAL ` . F4 1901 9300 1,76,79,300 3 ITA NO.999 /MDS/2016 G3 1963 9500 1,86,48,500 TOTAL (A) 3,63,47,800 SALE CONSIDERATION STATED BEFORE THE REVENUE: APARTMENT NO. SQ.FT RATE IN ` TOTAL ` . F4 1901 4000 76,04,000 G3 1963 4129 81,05,227 TOTAL (B) 1.57,09,227 FOR THE AFORESAID REASONS, THE LEARNED ASSESSING OF FICER WAS OF THE VIEW THAT THE ASSESSEE HAD SUPPRESSED HIS IN COME AND MADE ADDITION BEING THE DIFFERENCE BETWEEN THE SALE CONSIDERATION MENTIONED IN THE SALE AGREEMENT AND S ALE CONSIDERATION SUBMITTED BEFORE THE REVENUE WHICH IS WORKED OUT AS FOLLOWS:- SUPPRESSED INCOME FROM TWO FLATS : ( ` 3,63,47,800 ` 1,57,09,227) = (A-B) : ` 2,06,38,573/- LESS: SERVICE TAX PAID ` 3,10,805 NET SUPPRESSED INCOME : ` 2,03,27,768 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) AFTER DELIBERATING THE ISSUE IN DETAIL DE CIDED THE MATTER IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UN DER:- 4 ITA NO.999 /MDS/2016 9. I HAVE GONE THROUGH THE FACTS IN ISSUE, ARGUMENTS ADVANCED BY THE APPELLANT AND MATERIAL ON RECORD. THE ISSUE WHICH ARISE FOR CONSIDERATION IS AS TO WHETHER THE DIFFERENTIAL PRI CE OF 2 FLATS SOLD TO RELATED PARTY, BEING SISTER CONCERN, WHICH HAVE BEEN THE PRICE APPLICABLE TO OTHER PROJECTS PURCHASED TANTAMOUNT SUPPRESSION OF SALES. IT IS ON RECORD THAT THE APPELLANT HAD UNDERTAKEN COMMISSIONING OF PROJECT 'AURO ONE' CONSISTING OF 19 UNITS WHERE TWO FLATS BEING G3 AND F4 WERE SOLD AT ` .4,129 AND ` .4,000/- PER SQ.FT RESPECTIVELY TO THE SISTER CONCERN AS AGAINST OTHER FLATS WHICH WERE BOOKED BY PURCHASER AT RS.8000 TO RS. 9000 PER SFT. THE TRANSFER OF THESE TWO FLATS WAS MADE TO ONE M/S.SIDDHARTH APPARELS P. LTD (SAPL) VIDE PURCHASE AGREEMENT DATED 6.7.2006 COMPENSATING IT FOR AN AMOUNT OF ADVANCE AT RS.1,60,00,000/- AVAILED BY THE APPELLANT TO FACILITATE THE SAID PROJECT: THE INFERENCE DRAWN BY THE AO WAS SUCH TRANSACTION RESULTED AS SUPPRESSION OF TAXABLE INCOME IN RESPONSE TO THE DIFFERENTIAL IN THE HANDS OF THE APPELLANT, TO DEMONSTRATE WHICH THE MATTER HAS BEEN DISCUSSED IN DETAIL IN ASSESSMENT ORDER. THE POINTS WHICH WAS UNDERSCORED IS THAT THE OWNERSHIP OF THE ABOVE FLATS WAS NOT HANDED TO SAPL, INSTEAD THEY ARE FINALLY TRANSFERRED TO ONE MR.D.RAVIKRISHNAN & R. SANDYA, MR. G.RAMPRASAD & MRS.R.MATHANGI. M/S.SAPL, A COMPANY INCORPORATED IN 1973, HAVING A CAPITAL OF RS.100 LAKHS AND ACCUMULATED PROFITS OF 450 LAKHS. THE APPELLANT IS A COMPANY INCORPORATED IN 2006 AND 'AURO ONE' IS THE FIRST JOINT VENTURE PROJECT OF THE COMPANY. IT IS ON CONSIDERATION OF BUSINESS EXIGENCIES THAT THE APPELLANT RECEIVED THE FUNDING FROM SAPL WHICH IS LEGAL, LEGITIMATE AND NORMAL IN THE COURSE OF REAL ESTATE BUSINESS. THE ADVANCE RECEIVED FROM SAPL WAS FREE OF INTEREST AND FURTHER THOUGH THERE WAS NO AGREEMENT WITH REGARD TO THE SHARE OF REVENUE 5 ITA NO.999 /MDS/2016 FROM THE REAL ESTATE DEVELOPMENT, IT IS IN CONSIDERATION OF THESE ADVANCE THAT THE APPELLANT HAD AGREED TO SELL TWO FLATS AT PRE- DETERMINED PRICE OF RS. 4000-PER SQ.FT OF SAPL. IT MAY BE STATED HERE THAT THE ADVANCE RECEIVED BY THE APPELLANT WAS PAID TO THE LAND OWNER ON 22.7.2006 I.E. WITHIN DAYS OF HAVING OBTAINED THE LOAN FROM SAPL. FURTHER DETAILS -WITH REGARD TO THE TRANSACTIONS ARE ALREADY DISCUSSED IN PARA 8 AS AVERRED BEFORE THE AO AS ALSO DURING THE APPELLATE STAGE AND HENCE NOT REPEATED. FROM THE APPRECIATION OF THE FACTS AS DELINEATED THEREIN, NO CASE IS MADE OUT TO SUPPORT THE ARGUMENT OF THE AO THAT THE TRANSACTION WAS SHAM AND WAS DESIRED TO BRING DOWN THE TAX LIABILITY OF THE APPELLANT BY ITS ACT OF SELLING 2 FLATS AT CONCESSIONAL RATE. ON THE CONTRARY, THE APPELLANT HAS FAIRLY STATED THAT IT WAS PURELY A COMMERCIAL CONSIDERATION TOWARDS WHICH IT RECEIVED AN ADVANCE OF RS. 1.60 CRORES TO MEET THE EXPENSES TOWARDS LANDS PURCHASED. THE CONCESSIONAL PRICE / RATES AT WHICH THE FLATS WERE AGREED TO BE SOLD TO SAPL WAS TO COMPENSATE IT FOR THE INTEREST FREE ADVANCE OF RS. 1.60 CRORES RECEIVED FOR PURCHASE OF LAND. IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED VIEW THAT THE ARGUMENTS ADVOCATED BY THE AO WITH REGARD TO THE TRANSACTIONS AS SHAM CANNOT BE UPHELD, HENCE THE PLEA MADE BY THE APPELLANT AGAINST THE SAME SUCCEEDS. 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE STOUTLY ARGUED BY STATING THAT THE ASSESSEE HAD DEL IBERATED ADJUSTED ITS SALE CONSIDERATION IN ORDER TO AVOID T AX. HE FURTHER ARGUED BY STATING THAT IT WAS A CASE OF SUP PRESSION OF SALE IN COLLUSION WITH THE RELATED PARTIES AND THER EBY A 6 ITA NO.999 /MDS/2016 COLOURABLE DEVICE TO DECEIT THE REVENUE. HENCE IT W AS PLEADED THAT THE ORDER OF THE LD.A.O MAY BE UPHELD. 6. THE LEARNED AUTHORIZED REPRESENTATIVE ON THE OTH ER HAND ARGUED IN SUPPORT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND FURTHER SU BMITTED THAT THE REASON FOR REDUCING THE PRICE WAS BECAUSE OF THE UPFRONT ADVANCE OF RS.1.06 CRORES RECEIVED BY THE A SSESSEE OTHERWISE THE PROJECT COULD NOT HAVE BEEN COMPLETED . HENCE, IT WAS PURELY A COMMERCIAL TRANSACTION. HE THEREFOR E PLEADED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) MAY BE UPHELD. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THERE WAS A VALID REASON FOR THE A SSESSEE TO REDUCE THE SALE PRICE OF THE FLATS TO RELATED PARTI ES BECAUSE THE ASSESSEE HAD RECEIVED ADVANCE OF RS.1.06 CRORES FOR EXECUTING ITS PROJECT FROM ITS RELATED PARTIES. MOR EOVER, THOUGH THE TRANSACTIONS ARE BETWEEN THE COMPANIES, ALL THE 7 ITA NO.999 /MDS/2016 SHAREHOLDERS IN THOSE COMPANIES ARE MEMBERS OF THE SAME FAMILY AND EFFECTIVELY THEY HAVE RETAINED TWO FLATS FROM THE PROJECT. MOREOVER, THE REASON FOR REDUCTION OF SALE CONSIDERATION IS ALSO GENUINE BECAUSE IF THE ASSESS EE HAD NOT RECEIVED SUCH ADVANCE FROM THE BUYER IT WOULD N OT HAVE BEEN POSSIBLE TO EXECUTE THE PROJECT. CONSIDERING THESE FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY DE CIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THEREFORE WE D O NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). HENCE WE HEREBY CONFIRM THE SAME. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 26 TH DECEMBER, 2016 SD/- SD/- ( ! ' . # ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 26 TH DECEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF