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Income Tax Appellate Tribunal, F BENCH, MUMBAI
Per contra, the Ld. Departmental Representative supported the 7. order passed by the PCIT under Section 263 of the Act and vehemently contended that admittedly no documents/details relating to stamp duty valuation of the flats/units were on record and therefore, the Assessing Officer did not have any basis to conclude that no addition was required to be made under Section 43CA of the Act. Ld. Departmental Representative further submitted that the details/information furnished by the Appellant itself showed that there was difference in the stamp duty value and the agreement value, and therefore, the Assessing Officer was duty bound to carry out further inquiry and investigation.
We have considered the rival submissions, perused the material on 8. record, and examine the position in law.
On perusal of the record, it emerges that the case before us is not 9. one where no inquiry/verification was carried out by the Assessing Officer. Though the Assessing Order does not record the specific submission/findings on the issue under consideration, we find that during the assessment proceedings specific queries were raised in relation thereto.
Vide notice, dated 14/01/2021, issued under Section 142(1) of the 10. (Assessment Year: 2018-19)
Act, the Appellant was called upon to furnish the following details:
"1. Furnish complete details of property sold/purchased during the year under consideration along with supporting evidence ie, copy of sale/purchase deed. Address Date of Purchase Stamp Details Payment of purchase/ sale/ Value of /Receipts Property sale consideration owner Schedule and with share date and of time of each payment owner /receipts
Furnishing details of capital gain computation on sale of property during the year under consideration.
Please state whether you have sold/purchased the property as per govt. circle rate. If not, please furnish justification and you are show caused why the difference of amount as per circle rate & as per stamp duty valuation/actual amount paid/received should not be added & covered u/s 50C/56(2)(vii)(b)/43CA of 1.T.Act 4. Please furnish computation of income. 5. Details of your Bank Accounts indicating names and complete postal address of the Bank Account No, type of Account and names of the persons authorized to operate the said accounts along with Bank reconciliation. Also furnish details of bank accounts as on date operative during FY 2017- 18."
10.1 In response the Appellant filed reply letter, dated 20/01/2021, furnishing, inter alia, explaining that the Appellant is engaged in the business of construction. During the relevant previous year, the Appellant was developing its Construction Project [i.e. Uday Building situated at Survey No. 124, Hissa No. 5, CTS No. 1130 at Mulund (East), Mumbai]. As on last day of the relevant previous year (i.e. (Assessment Year: 2018-19)
31/03/2018) the construction was completed only upto plinth level as the construction activity at the Construction Project had slowed down on account of financial problems faced by the Appellant at the relevant time. However, the ‘Agreement for Sale’ of flat/unit was executed by the Appellant with 7 customers/buyer who had given advances in the earlier years for the purchase of units/flats and the same were registered with the Stamp Authorities during the relevant previous year. Neither any sale of flat/unit was booked nor was possession of any flat/unit transferred by the Appellant during the relevant previous year. Thus, the Appellant did not earn any income from sale/transfer of flats/units of the Construction Project during the relevant previous year. Therefore, for the relevant previous year the Appellant booked gross construction profits of INR 9,55,688/- by following percentage completion method of accounting in relation to construction activity undertaken by the Appellant and offered to tax income of INR 1,16,980/- in the return of income which was accepted by the Appellant. The Appellant also provided brief summary of the construction account for the relevant previous year: Particulars Amount (INR) Amount (INR) Opening WIP as on 01.04.2017 3,85,96,706/- Add: Purchase and Expense for Construction Cement Concrete Purchase M S Flat Bar, TMT Bar & Bright Bar 9,76,998/- Purchase Contractor Fees 25,00,000 Testing & Survey Expenses 19,790 Water Pump Hire Charges 54,000 Pestcontrol expensesw 40,000 Other Miscellaneous expenses 1,92,580 60,97,606/- Add: Architect Fees 4,50,000/- Add: Construction Profit 9,55,688/- Closing WIP as on 31.03.2018 4,61,00,000/- 10.2. Further, vide reply letter, dated 20/01/2021, the Appellant also provided, in tabular form, the following details of the all (Assessment Year: 2018-19) customers/buyers (except Mrs. Bhavna Hemant Gada) who paid advance 5 to 6 years ago and along with the relevant extracts of the Agreement for Sale registered during the relevant as annexures thereto: Buyer details Proposed Area Agreement Advances Annexure Flat No. Value Received No. as per books till 31.03.2018 802 on 8th Mr. Mahadeo Vithoba 741 52,00,000 10,35,800 Masurakar Floor Sqft PAN:AFBPM5876J Address: Flat No E 14,Gurupushyamrut CHS Ltd, Vidyalaya Marg. Mulund East Mumbai-400081 1501, 15th Mr Sagar Ramchandra 760 48,43,800 11,82,814 I Parte Floor Sqft PAN: ANUPP2501Q Flat No A-4 Rajeshree CHS Ltd, Bhoir Nagar Vidyalaya Marg, Mulund (East), Mumbai-400081 1402, 14th Mr Shripad Nilkanth 741 47,00,000 40,00,000 II Deshmukh Floor Sqft PAN: AIWPD0482F C – 403, Ashakunj, Samarth Gardern, Datta Mandir Road, Bhandup West, Mumbai-400078 602, 6th Mr Suhas Yeshwant 741 62,51,000 18,13,000 III Sawant Floor, Sqft PAN: AFZPS3704F Flat No 2,Building No 2, ITA No.1357/Mum/2023 (Assessment Year: 2018-19)
L4, Vakratunda CHS Ltd, Kashish Park, LBS Marg, Opp Raheja Gardern, Thane West- 400604 1401, 14th Mr Parag Nilkanth 760 54,00,000 10,00,000 IV Deshmukh Floor Sqft PAN : AJIPD8137G C-403, Ashakunj Samarth Gardern, Datta Mandir Road, Bhandup West, Mumbai – 400078 603, 6th Mr. Mandar 579 43,50,000 10,72,000 V Floor Sqft Madhukar Sugdare 303, Viraj, Chaft 10.3. The Appellant also furnished the details of stamp duty value and the agreement value in the following format:
Name Buyer Date of Stamp duty Agreement/Allot Stamp duty Allotment of value on the ment Value of value on the Flat date of the flat date of allotment registering the (Rs.) flat in FY 17-18 Mr. Mahadeo 09-02-10 35,95,547/- 52,00,000/- 91,58,877/- Vithoba Masurkar Mr. Sagar 07-04-12 38,61,889/- 48,43,800/- 98,37,326/- Ramchandra Parte Mr. Shripad 26-07-12 51,76,457 47,00,000 95,95,571/- Deshmukh Mr. Suhas 12-03-10 35,95,547 62,51,000/- 91,59,408 Yeshwant Sawant (Assessment Year: 2018-19)
Mr. Parag 01-05-13 60,99,764 54,00,000/- 98,37,326/- Nilkanth Deshmukh Mr. Mandar 01-02-14 46-58-692 43,50,000/- 71,49,507/- Madhukar Sugdare
Since the Appellant failed to provide details of one of the customer/buyers executing Agreement for Sale (i.e. Mrs. Bhavna Hemant Gada), another notice dated 04/03/2021, issued under Section 142(1) of the Act was issued to the Appellant calling upon the Appellant to furnish relevant details/documents.
11.1. In response, the Appellant filed reply letter, dated 08/03/2021, furnishing the relevant details along with relevant extract of the Agreement for Sale, dated 09/10/2017.
Few days thereafter, another notice, dated 11/03/2021, was issued to the Appellant under Section 142(1) of the Act requiring the Appellant to furnish following information/document:
- Copy of allotment letter of each sale agreement alongwith receipts of advance - Copy of balance sheet and P&L a/c for F.Y. 2017-18 - Copy of Bank statement reflecting payment received for sale consideration - Documents related to booking of flats 12.1. In compliance with the above notice, dated 11/03/2021, the Appellant filed reply letter, dated 15/03/2021, providing necessary details and documents which included allotment letter and the relevant extract of the bank statement of the Appellant reflecting (Assessment Year: 2018-19) advance receipt from all the seven customers/buyers.
Thereafter, the Assessing Officer completed the assessment vide Final Assessment Order, dated 27/03/2021, passed under Section 143(3) read with Section 143(3A) and 143(3B) of the Act accepting the returned income as assessed income without making any addition/disallowance.
Thus, on perusal of the notices issued during the course of assessment proceedings, the replies filed by the Appellant in response thereto and the Assessment Order, all of which formed part of the ‘Record’ in terms of Explanation 1(b) to Section 263(1) of the Act, we find that in the present case relevant enquiry/verification was conducted by the Assessing Officer.
The Appellant had contended before the Assessing Officer that there was no sale/transfer of flat/unit in the Construction Project during the relevant year and therefore, the provisions of Section 43CA of the Act were not attracted. The aforesaid contention of the Appellant was accepted by the Assessing Officer and no addition was made. We find that the view taken by the Assessing Officer is a plausible view given the fact that material forming part of assessment record showed that only agreement for sale was executed/registered and there was no transfer of any asset, being flat/unit in Construction Project, during the relevant previous year. Therefore, the documents relating to the basis of the stamp duty valuation of the 7 flats/units were not necessary documents. Accordingly, in our view, the fact that the aforesaid documents were not placed before the Assessing Officer by the Appellant during the assessment proceedings or that the Assessing Officer had failed to inquire/verify the aspect of stamp duty valuation would not trigger 12 (Assessment Year: 2018-19) the provision of Explanation 2 to Section 263 of the Act. In our view, the PCIT had proceeded upon incorrect understanding of facts. While returning a finding in paragraph 5.4 of the order impugned that the Appellant had not provided agreement for sale and the bank statements. The finding returned by the PCIT is contrary to the material forming part of the assessment record. The findings returned by the PCIT in Paragraph 5.3 of the order impugned that the Appellant has not shown income as per percentage completion method is also factually incorrect. The PCIT had failed to appreciate that the summary of construction account filed by the Appellant vide reply letter, dated 20/01/2021, also contained the details of ‘Construction Profits’ of INR 9,55,688/-. The Appellant also provided brief summary of the construction account for the relevant previous year: Particulars Amount (INR) Amount (INR) Opening WIP as on 01.04.2017 3,85,96,706/- Add: xx xx 60,97,606/- Add: xx xx 4,50,000/- Add: Construction Profit 9,55,688/- Closing WIP as on 31.03.2018 4,61,00,000/- While the Appellant had disclosed ‘Nil’ revenue from operations in the Profit and Loss Account for the relevant previous year, the Appellant has recognized construction profits of INR 9,55,688/- following percentage completion method and offered net income of INR 1,16,980/- to tax which has been accepted by the Assessing Officer. We note that the averment made by the Appellant that the Construction Project was completed only at the plinth level has not been disputed by the PCIT. We have already concluded herein above that the assessing officer has taken a plausible view as regards non-applicability of provision of Section 43CA of the Act is concerned. (Assessment Year: 2018-19)
Therefore, in view of the above, we hold that the Ld. PCIT erred in exercising power of revision in the facts and circumstances of the present case. The order, dated 30/03/2023, passed by the PCIT under Section 263 of the Act is set aside and the Assessment Order, dated 27/03/2021, is reinstated. Ground No. 1 & 2 raised by the Appellant are allowed.
In result, the present appeal is allowed.
Order pronounced on 19.07.2023.