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DCIT 42 1 1 MUMBAI, MUMBAI vs DEVLEELA DEVELOPERS, MUMBAI | BharatTax

DCIT 42 1 1 MUMBAI, MUMBAI vs. DEVLEELA DEVELOPERS, MUMBAI

ITA 2097/MUM/2025Status: DisposedITAT Mumbai30 October 2025AY 2016-17Bench: HON’BLE SHRI SANDEEP GOSAIN (Judicial Member), SHRI GIRISH AGRAWAL (Accountant Member)1 pages

AI SummaryAllowed

Facts

The assessee, a developer, was found by the AO to have shown sales of Rs. 10,48,09,000/- from 22 persons, but the debtors list included 32 persons. The AO added Rs. 4,30,54,535/- for alleged under-reporting of sales from 8 additional parties.

Held

The Tribunal held that the AO had made the addition without complete inquiry and examination of documents. The amounts in question were either for existing flat owners purchasing additional area, or advances from new buyers where agreements were executed in subsequent years. These amounts were either already booked as sales in subsequent years or were correctly treated as debtors.

Key Issues

Whether the AO was justified in adding amounts from 8 debtor accounts as under-reported sales without proper inquiry and verification, especially when these amounts were either already booked in subsequent years or represented genuine advances/agreements for future sales.

Sections Cited

250, 142(1), 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH MUMBAI

Before: HON’BLE SHRI SANDEEP GOSAIN & SHRI GIRISH AGRAWAL

For Appellant: Shri Gunjan Kakkad, Adv

For Respondent: Shri Annavarn kosuri, Sr. DR

Hearing: 21.07.2025Pronounced: 17.10.2025

Date of Hearing 21.07.2025 Date of Pronouncement 17.10.2025 आदेश / ORDER PER SANDEEP GOSAIN, AM:

The present appeal has been filed by the assessee challenging the impugned order dt. 08.02.2025 passed under section 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2016-17.

2.

Brief facts are that during the course of assessment proceedings, the AO observed that the assessee was developing the project name ASHRA and it had shown Nil and it at for for had purchases opening stock Rs. 1,44,16,204/- and incurred direct expenses Rs.11,88,01,237/ which included IOD expenses, Ashra Preliminary Expenses, TDR Expenses and Compensation to Tenants, Corpus paid. On the income side the assessee had shown Rs. 10,48,09,000/- as sales and closing stock at Rs.1,44,16,204/- along with direct and indirect incomes. Further, the AO observed that the assessee sold Flats to 22 peoples amounting to Rs. 10,48,09,000/-, however, the list of sundry debtors reflects 32 including those 22 people reflected in sales account. The AO asked the assessee to reconcile and explain the above observation of the AO. In response, the assessee filed its reply but the AO was not satisfied by the same. Therefore, the AO passed the impugned assessment order making an addition of Rs. 4,30,54,535/ on account of under reporting of sales by the assessee.

3. Against the said order of AO, Assessee preferred appeal and Ld. CIT(A) after Considers the facts deleted the addition therefore aggrieved by the said order, Revenue has preferred the present appeal before us on the grounds mentioned herein above.

4. The sole ground raised by the revenue relates to challenging the order of Ld. CIT(A) in deleting the addition made by AO on account of ‘under reporting’ of sales made to 8 parties. In this regard Ld. DR relied upon the order of assessment and the same is reproduced herein below:

Re: a. Ld AO has added Sales only on the bases of suspicions, without further verification, without any corroborative evidence etc. b. AO has also not provided natural justice as books of accounts are audited and without rejecting books of account. Additions made as underreported sales as alleged on purely estimate basis and it is well- settled law that no addition could be made on estimated basis without rejecting books of account of assessee as held by various Courts. Addition made as under reported sales in trading account without rejecting books of accounts which was audited. c. Orders passed in casual manner by AO. The AO straight- away arrives at a finding and conclusion that the reply was considered but not satisfied as his own assumption and presumption with suspicions without any valid details and documents, without even giving any specific reasons. In his order the AO simply notes that the assessee furnished reply, has been considered and observed with his own way that means it was not satisfactory. What exactly was the reply, finds no mention in his assessment order, without even giving any valid specific reasons and basis for rejecting the same. Since Assessing Officer passed impugned order in complete disregard to details furnished by assessee, there was breach of principles of natural justice. d. AO has also not verified ledger account in which no such sales was booked (some of the ledger for existing flat owner and is without name of customer i.e ledger name with old flat number like Ashra chs A-302, B-204, Ashra Chs A-2, of old building which was redeveloped) and such amount received reflected in ledger as advances, nor verified any registered document for flat if prepared for 8 parties, also not verified that some (Four) of the ledger name is in the list of existing flat owners list as per development agreement. e. Ld. AO has not mentioned how and why Sales to be calculated and considered in the year under consideration when 4 ledger account for future buyer clearly shown as advances/ initial payment received from customers but final agreement executed in subsequent year as regarding new buyers, other 4 ledger reflect existing flat owner and they have only purchased additional area as per redevelopment project. Such huge amount was calculated by Ld AO in his own assumption f. AO has also not verified Quantity (flat/area) available with developers, AO has not doubted for other parties sales amount ONLY DOUBTED for Sales was not BOOKED in such 8 ledger created under debtors group also not considered explanation provided. g. It is nothing but taxation on same income twice. High pitched assessment order passed without giving natural justice.

6. Details of 8 ledgers with year of booking of Income on execution of agreement. During the appellate proceedings, the appellant has furnished the same documents along with detailed written submission. Perused and considered carefully the documents furnished by the finding of the AO. 7.3.3. The main observation of the AO is that the appellant has declared total turnover at Rs. 10,48,09,000/- received from 22 persons whereas the list of debtors comprises 32 persons. The AO further noticed that there are 8 persons reported in debtors list but not included in sales ledger. The appellant has submitted that out 8 persons 4 are old parties with whom the appellant had redevelopment agreements and these parties intended to purchase extra constructed area (over and above the area as per the redevelopment agreement) and remaining 4 parties are new -customers who had given advance during the year under reference but final payment and registration were pending. The appellant has treated both types of customers as 'Debtors with credit balance'. The appellant has submitted that it books sales when sales are registered. In its written submission the appellant has provided clarification for opening of the ledgers account under 'Debtors Group' which is reproduced as under: Generally, all existing flat owner in redevelopment project was intended to buy additional area with consideration was created under DEBTORS GROUP, in some of case it is created twice with little different name, as most of all are intended to purchase additional area with consideration, most of existing parties have already executed there agreement in AY 2016-17 (which was very much clear from sales details submitted, and Ld. AO has no objection for such sales) and some of existing member has executed there agreement in subsequent year/s with or without additional area. New buyers ledger also created under DEBTORS Group as some of them have given advances but agreement finally confirm and executed in subsequent year. The Development Agreement in respect of the said property was executed in the year 2009 and subsequently due to change in Development Plan, the Supplementary Agreement for Development then in the year 2015 and agreeing therein to allot free area and additional area to existing members at a specific rate and it was shown in the sales on execution of the Agreement except in case of Flat Nos. 1203 and 1503, as the allottee of Flat No.1203 being the occupant in Krishna Prasad, the Agreement was executed late and in respect of Flat No.1503 original occupant died before executing the Agreement along with her and subsequently the Agreement was executed after the settlement amongst the legal heirs. As regards Mrs. Chandrakala R. Mehta was originally occupying Flat No.A-302 and was subsequently allotted Flat No.403 in the constructed building and her Agreement was executed in A.Y. 2016-2017, whereas the ledger account in respect of her contribution was opened under two separate numbers and the AO has not verified the number of flats and erroneously considered Flat No.A-302 being the old flat considered as sale and similarly as regards Mr. Tansukh Joshi was originally occupying Flat No.B- 204 and was subsequently allotted Flat No.502 in the constructed building and her Agreement was executed in A.Υ. 2016-2017, whereas the ledger account in respect of her contribution was opened under two separate numbers and the AO has not verified the number of flats and erroneously considered Flat No.B-204 being the old flat considered as sale. The sale in respect of Flat Nos. 1001 and 1002 and 901 and 902, the transactions were concluded in the subsequent year and the Agreements were executed and sale was booked. The amount was received as an earnest money in A.Y. 2016-2017. Therefore, account reflected in the DEBTORS GROUP as credit balance. Therefore, from above, it is very much clear that appellant has already booked sales of above 8 alleged ledger shown in DEBTORS GROUP either in the year under consideration or in subsequent year/s during the project on execution of agreement. Ledger account under DEBTORS group is not automatic considered as SALES DURING THE YEAR UNDER CONSIDEREATION as sales is already booked in AY 2016-17 and also in subsequent year/s. Ledger account created under DEBTORS LEDGER as existing flat owner who desire additional area with agreed price and some of the existing flat owner has registered agreement in AY 2016-17 itself and some have registered in subsequent year/s. some of the new future buyer came for booking the flat with advances but deal was finalised in subsequent year/s and agreement executed in subsequent year. AO has not doubted in value of flat already sold but not verified the sales list with above alleged parties as for 2 ledgers sales to existing parties already booked. Year wise list of sales (which reflects above 8 alleged ledger) with copy of profit and loss a/c attached herewith for ready reference. As Ld AO has added Rs. 4,30,54,535 on account of 8 ledgers shown under DEBTORS GROUP on ad-hoc basis without any supporting and without any material on record, addition only on the basis of suspicion. Ld. AO has presumed and considered ad-hoc sales as under reported the sales of Rs, 4,30,54535 without any working, without any supporting document, without verified available details on online portal such as subsequent year sales executed as per SFT, 26AS of next year in which TDS reflected for sales to such parties as deduction of 1% TDS on payment for sale of flat, as per submitted books of account no such alleged sales value are reflected in these 8 ledger except in 2 ledger already sales booked for additional area to existing flat owner during the year under consideration, not verified sr. no. 2 and 4 for existing flat owner in redevelopment project sales already booked to existing flat owners for additional area purchased. 7.3.4. The appellant has furnished copies of ledger account in name of the above 8 persons for the financial year under reference and for the subsequent financial years 2016-17 and 2017-18 which shows that the amount of additions made by the AO has been declared under sales by the appellant in subsequent financial year when sale deeds were registered and final payments were made. The AO did not examine thoroughly the details and documents submitted by the appellant during the assessment proceedings. He had made the impugned addition only for the reason that the above parties were shown in the list of debtors. Since, the same amounts have been declared in the sales in subsequent years by the appellant, the addition made by the AO tantamount to double taxation. In this regard the appellant has submitted as under: "Ld AO Presumed and addition made as provisional Sales was not being treated as income during the year under consideration by ignoring the Section 199 of the Act read with Rule 37BA of the Rules. Admittedly there is no provision under the Act to tax the same income twice as done in the instant case. Contention of the appellant is that the impugned income has been offered to tax in the subsequent year/s has not been disregarded as per fact of the case. Therefore, if any addition is made in the year under consideration, then it will amount to double addition which is against the provision of law. The fact of the present case is as appellant has booked Income as sale in the year of execution of agreement of flat. It is because there will not be any change on the tax amount as the assessee is paying tax in subsequent year with b/forward loss as per provision of the act. If in case advances received by the appellant from customers and shown under DEBTORS GROUP, has been offered as income of subsequent financial years, then the same needs to be recognized as income as and when such income accrues to the appellant. Therefore, when the appellant has treated advances from customers as liability in the books of accounts pending recognition of income in subsequent financial years, it cannot be said that the assessee has under reported Sales, the Ld AO cannot make any adjustments to re-compute Sales as Income without considering the fact as above. Addition made only on imagination and on suspect without any supporting evidence or corroborative evidence. AO has also not mentioned how this sales amount derived for 8 ledgers under DEBTORS GROUP. The Ld. AO has overlooking the facts and circumstances of the case which clearly suggest that the appellant was not having such huge receipt in form of sales consideration as alleged by AO during the year under consideration and such facts can be possible with verification of third party such as from buyer, from stamp duty authority, from 26AS of previous year and subsequent year 26AS, List of existing members name in redevelopment agreement, scrutiny record of AY 26AS for which Ld. AO has already accepted such sales in AY 2016-17 etc.