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Before: SHRI AMIT SHUKLA & SHRI PRABHASH SHANKAR
PER PRABHASH SHANKAR [A.Μ.] :- The present appeal arising from the appellate order dated 24.01.2025 is filed by the Revenue against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)"] pertaining to assessment order passed u/s 144 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 28.03.2014 for the Assessment Year [A.Y.] 2011-12. Page 2 Α.Υ. 2011-12 Varsha Enterprises
The grounds of appeal are as under:- (i) On the facts and circumstances of the case and in law, the CIT(NFAC) has erred in not following the direction of the ITAT to decide the issue of addition of Rs.2.41,26,879/- being unaccounted sale received by the assessee, afresh after controverting the findings recorded by AO. (ii) On the facts and circumstances of the case and in law, the CIT(NFAC) has erred in deciding the issue of addition of Rs.2,41,26,879/- being unaccounted sale received by the assessee, relying on case laws pronounced by various judicial authorities relating to provisions of Section 52(2) without appreciating the fact that provisions of section 52(2) have been omitted from the IT Act w.e.f. 01.04.1988, and were not applicable in current year i.e. AY 2011-12. (iii) On the facts and circumstances of the case and in law, the CIT(NFAC) has erred in not following detailed direction given by Hon'ble ITAT while setting aside the issue to the file of Ld CIT(A).
The present appeal is second round of litigation consequent to the order passed by the hon'ble ITAT for A.Y. 2011-2012 dated 23 November 2016 in this case. In that appeal which was filed by the Revenue, there were two issues for adjudication. One was related to the method of accounting and the year in which income should have been offered to tax and another one relating to difference in the rates for flats sold over a period of time.
1 As regards the first issue, the ld. AO held that the year of accrual of income was A.Y. 2011-2012 and not A.Y. 2012-2013 as declared by the assessee. As per the assessee the entire income was taxable in A.Y. 2012-2013. The ITAT upheld the appellate order holding that a clear finding to this effect has also been recorded by CIT(A) In Page 3 Α.Υ. 2011-12 Varsha Enterprises view of this finding, CIT(A) and he was justified in deleting the addition of Rs.58,97,073/- on account of flat sold in Balaji Avenues. Due to above finding no income can be taxed in this year. This needs to be considered while deciding the issue of price variation.
In respect of the other issue which is the subject matter of present appeal, in the original appellate order, the ld.CIT(A) by the impugned order CIT(A) deleted the addition observing as under: “5.5 I have gone through the assessment order and submissions made by the appellant in this behalf. It is undisputed fact that the addition is made by AO on account of variation in prices of sale of flats and the basis of such addition was also information available to AO on a private website. Apart from this AO did not bring on record any material showing that assessee did receive cash from its customers. This act of the AO in estimating income cannot be justified on one more ground. If for the time being information on the private website is held to be sacrosanct, it should have been applied in all the cases. Wherever AO found that actual price received by the appellant is more than price shown by the appellant, such price has been conveniently ignored by him under the style “aberration”. The approach of the AO is akin to saying "Head / win, Tail you loose". Such an approach does not find place in the assessment provisions framed under the Income Tax Act. On the contrary it has been consistently held by the judicial courts that it is the duty of the AO to establish with cogent evidence that assessee has done some clandestine sale. It is undisputed fact that no such material is brought on record by the AO in the instant case. Much reliance on the website information indicates that AO presumed that these are the actual sale price of flats sold by the appellant. Thus, the addition is based on the presumption or opinion or feeling of a third person rather than concrete evidence or fact demonstrating clearly actual-handing over cash consideration by the owners of the flat to the appellant. The AO has a right to make all kinds of presumptions but while making an addition, if any, or best judgment, must be based on some M/s. Varsha Enterprises reasonable evidence. AO has not found any unexplained cash or investment of whatever sort in the hands of the assessee.” Page 4 Α.Υ. 2011-12 Varsha Enterprises
1 In the appeal before us, the only ground pertains to the addition made on account of variations in sale price of various flats the hon'ble ITAT had remanded to the ld.CIT(A) as per page 11 para 19 of the order as under:- "We have considered rival contentions and carefully gone through the orders of the lower authorities and found that AO has made detailed working to find out cash component of sale price not accounted for. The AO has drawn Annexure-II and Annexure-III to find out sale price on the basis of date of booking of flat, flat number, area, agreement value, booking date, advanced received etc. However, without controverting all these findings of the AO, CIT (A) after giving general observation deleted the addition. We do not find any merit in the order of CIT (A). Accordingly, the same is set aside and matter is restored back to him for deciding afresh after controverting the findings recorded by AO as discussed above.”
2 Consequently, in the ld.CIT(A) after due consideration of all the issues involved, passed the impugned order afresh, again deleting the addition made against which the Revenue is before us. The facts in brief are that the assessee is a builder and developer. It filed return of income declaring total income of Nil. Later the AO completed the assessment u/s 143(3)/ 144 r.w.s.145 of the Act by assessing total income at Rs.2,73,62,240/-.During the year under consideration, the assessee completed project “Balaji Avenue” at Kamothe Navi Mumbai. The project was started in year 2008. During the course of assessment proceedings for the earlier A.Y 2011-12, the AO found that the project “Balaji Avenue” at Kamothe Navi Mumbai was completed to the extent of 95.83% as on 31.03.2011. The profit from the project was calculated at Page 5 Α.Υ. 2011-12 Varsha Enterprises Rs.58,97,073/- in A.Y 2011-12 by the AO as against nil income offered by assessee firm for the year. This addition stands deleted and is not the ground before us. Rather, the ground before us relates to the addition of Rs.2.41,26,879/- in respect of 11 flats/shops on the basis of price variation comparing sale value of flat, area in sq ft. date of booking and rate per sq ft. Reference has also been taken from website of www.magicbricks.com for making the addition. As per the assessment order, the assessee submitted the details in respect of 11 flats/shops which formed the basis of addition as unaccounted sale and along with Index no. II in respect of all 11 flats/shops registered in year under consideration. On perusal of details, it was observed by him that flat/shop no. 403,905,1202 were registered at price higher than the stamp duty valuation Further, the flat/shop No 103,302,303, 406,802, 803, 902,1304 were booked in earlier date in which the stamp duty valuation was less than agreement value. The assessee furnished reasons in details in the cases where the shops/flats were sold at lesser price than market valuation. The ld.AO rejected the books of account u/s 145 of the Act and worked out unaccounted sales at Rs 2,41,26,879/- ,making reference to the rates as per the portal Magicbricks.com, which was added to the income. Page 6 Α.Υ. 2011-12 Varsha Enterprises
The ld.CIT(A) in the order has taken on record a detailed submission made by the assessee explaining the reasons for variation in prices in units. It was submitted that, "it was their first project and needed funds and bookings to complete the project and establish oneself in the line as a builder needs to be considered at first stage. Commencement certificate was received on 09-01-2008. Thereby till the commencement certificate was not received in order to meet the financial requirement had gone for the sale based on the purchasers who were offering reasonable price and making available the funds. With this background that the commencement certificate was received only in the month of January 2008 the rates need to be compared keeping in mind this vital fact. Further purchasers cannot put faith when a new venture is undertaken. Simultaneously the new builder who has less experience in the entire business would like to establish oneself by showing more sale and completing the project. They had to bow down to certain dictates of the purchasers. When a purchaser approached for booking of more than one flat they allowed huge concession per their dictates. Serial numbers 1 to 3, and 14. Flats 805,806, 903 and 906 (serial no. 1, 2, 3 and 14) are booked by Singhavi family. This is a group booking and that too before receipt of commencement certificate. First payment was received on 26-02-2007. These are the flats that were booked prior to receipt of the commencement certificate. Serial nos.11 and 31, flat no's 1002 and 1003 purchased by a single person Ms Krishna N. Mallick. First payment was received on 10-01- 2008. This was on the very next day of obtaining commencement certificate.
Discussion was going on since long and we had promised to give at that price provided she books two flats together. Thus, the consideration was purchase of two flats together. Applying rate of Rs.3944/- against the agreed booking price for two flats together and that too price agreed before receipt of the commencement certificate is not correct. Even the market price cannot be considered in such circumstances. The size of the flats in the project was of 456 square feet and 721 square feet.m Smaller flats had higher rates due to compact size and smaller flats are affordable to even middle income group of buyers. Normally, builders do not make 1 BHK flats in building tower of 13 floors. Hence, it was privilege to be in our building with all facilities of tower of 13 floors. Hence, buyers were willing to pay comparatively higher rate for 1 BHK flat. Rates of Rs.3944 taken for certain flats by AO was based on the Page 7 Α.Υ. 2011-12 Varsha Enterprises rate for a flat ad measuring 456 square feet. This rate is considered even for flats measuring 721 square feet. Records show that the smaller sized flats have fetched higher rate. This fundamental difference in the valuation is to be noted to arrive at the basis reason for the variations in the rates. Various factors affect the price variation in sale price like, position of the flat, payment terms, need of booking on part of buyer, finance requirement of builders, fluctuation in demand in real market, rumour in the market regarding slackness or inflationary trend in the market, personal likings of the buyers, situation of flats, like ground floor, top floor, internal arrangement of rooms, vaastu sastra compliance, etc. Rumours of new airport near Kamothe and its so called cancellation due to problem of environment clearance etc also caused price variation in selling rates of the flats in the project. When the project was started, it was all marshy land with water logging around the project. The project was last in line and very much away from main road without having connecting road and street light and other facilities. It naturally affected the rates of sales in project of the appellant. Stamp Duty Authority fixed rates at Rs.33000/- per square metre in 2008 as compared to Rs.15,000/- per square metre [more than double] in 2007. Further, the appellant stated that after considering group booking, booking before commencement certificate and size of flats, the rates need to be considered when the first payment by account payee cheques was received and not on the date of registration of the agreements. After negotiations both the parties arrive at the final rate and it is confirmed by receipt of first payment by account payee cheque. The table is worked out based on the first payment receipts by account payee cheque. The market price can be ascertained from the stamp duty reckoner rate prevalent at the time when the letter of allotment is issued on receipt of first payment. Purchasers may opt to enter into registered documents later on for various reasons including payment of stamp duty, taxes etc. Important event is fixation of rates after negotiation and payment of first instalment. Serial no's 12,13, 28, 32, 34, 38, 42, 44, 47, 48, 49, 51, 52, 53, 57, 58 This relates to flat no's.401, 404, 204, 305, 604, 102, 502, 1101, 605, 606, 901, 1103, 1001, 504, 1005, 206. These are the cases wherein market value as determined by stamp duty ready reckoner rate is lower than the agreement value. As the new builder, purchasers would bargain to get the flats at the rate even lower than the Stamp Duty Ready Reckoner rates. Cases wherein there is difference of less than 10% as compared the Stamp duty value are at serial numbers 16, 30, 35 and 54. Flat numbers are 304, 904, 1105 and 503. In any case variations upto 15% is to be accepted. This was held by the Honourable Supreme Court in the case of C. B. Page 8 Α.Υ. 2011-12 Varsha Enterprises Gautam vs. UOI, (1993) 199 ITR 530/[1992] 65 Taxman 440. Further the Act now also provides for acceptable variance upto 10%. Courts have held that such variations upto 10% should be applied retrospectively. Further, cases wherein the variations are more than 10%. They are at serial numbers 5, 18, 22, 25 and 37. Flat numbers are 705, 301, 501, 603 and 101. Details are given at pages 113 to 124. As explained earlier various factors are to be considered from the point of a businessman.”
1 It was further intimated by the assessee that in AY 2012- 13 also similar addition was made on account of large variation in sale of flats. The matter also had travelled to hon'ble ITAT which has sent back to the AO. Vide order dated 28-12-2018 passed u/s.254 r.w.s 143(3) of hon'ble Tribunal, in turn deleted similar addition in the case of the builder by placing heavy reliance on the hon'ble Supreme Court in the case of K. P. Varghese v. ΙΤΟ (1981) 131 ITR 597.It was inter alia observed that merely because of the reason of difference in the sale price of two different properties on two different times having differing locational advantages, in absence of any incriminating evidence cannot be compared and then result into the hands of the assessee as addition Page 9 Α.Υ. 2011-12 Varsha Enterprises on account of 'on- money'. In the result, it directed the AO to delete the addition made in the hands of the assessee after extensively quoting the excerpts of hon'ble Supreme Court of India in the case of K.P. Varghese vs The Income Tax Officer(supra) wherein it was held that sub-section (2) of section 52 of Act, could be invoked only where the consideration for the transfer has been understated by the assessee or in other words, the consideration actually received by the assessee is more than what is declared or disclosed by him. Sub-section (2) has no application in case of an honest and bonafide transaction where the consideration received by the assessee has been correctly declared or disclosed by him and there is no concealment or suppression of the consideration. The burden of proving an understatement or concealment is on the Revenue, which may be discharged by it by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is understatement or concealment of the consideration in respect of the transfer.............AO cannot fix higher sales price without any evidence. The mere presumption that the excess price could have been charged is not a ground for coming to the conclusion that the appellant charged a higher price. Α.Υ. 2011-12 Varsha Enterprises
1 The ld.DR has vehemently argued that the ld.CIT(A) was not justified in deleting the addition made and fully relied on the assessment order. Per contra the ld.AR has heavily relied on the appellate order.
We have carefully considered all the relevant facts of the case, rival contentions and find that the addition made by the AO lacks any cogent evidence to support the adverse conclusion drawn by him in making the impugned addition. Rather, it has been made in a mechanical basis without bringing on record any independent finding or fact to buttress the inference. We find that the assessee has adduced all relevant facts and figure which completely demolish the case of the Revenue. The AO was also not justified in making the impugned addition on certain information available on a particular real estate website to arrive at a conclusion that the sales were understated, without realising that the prices quoted thereon are not conclusive of the actual ground reality. It is undisputed fact that no such material is brought on record by the AO in the instant case. Too much reliance on the website information indicates that AO presumed that these are the actual sale price of flats sold by the assessee. Thus, we are of the considered opinion that the addition is based on the presumption or opinion of a third party rather than on concrete evidence or fact demonstrating clearly actual any on- money transaction involved. In this connection, it is worthwhile to make a reference to the decision of the coordinate bench of Mumbai ITAT in ITA.No.5135/MUM/2015 (A.Y: 2011-12) in the case of M/s. Sai Shirdi Constructions wherein on similar facts and circumstances, identical addition did not find favour with ITAT. Relevant portions of the order are reproduced as below for ready reference:
“12. We have heard the rival submissions, perused the orders of the authorities below. In this case the Assessing Officer noticed from the information submitted by the assessee, as well as from the information obtained by him from the website www.magicbricks.com that there is a huge variation in sale prices of the flats constructed by the assessee within the wing and also within the floor of the residential project constructed by assessee. The Assessing Officer after making his own analysis and relying on the data furnished in the website concluded that there is a huge variation in sale prices. On a query by the Assessing Officer that there is a huge variation of sale prices of different flats, the assessee submitted that it had always tried to sell at the maximum prices that it can be able to get and its transactions are at arm's length and assessee has accounted what it had received from the buyers. Assessee requested the Assessing Officer to specify the transactions where there is a price variation at almost 100% within the gap of its sale, so that assessee could submit its reply. It was also contended that unless there is evidence and receiving cash other than the actual sale price, addition cannot be made on a guess work. It was also contended that the website www.magicbricks.com cannot be relied at all as the data shown in the website is not authentic and without any basis. The assessee also contended that the Books of Accounts of the assessee cannot be rejected under provisions of section 145(3) of the Act and should not be attracted to the assessee as it had disclosed correct sale prices and sale proceeds and not a paisa received by it over and above what is disclosed in its Books of Accounts. It was contended that transactions are at the market value prevailing at the material at that point of time, and on opinion basis, on mere guess work, recording market prices is not adequate material in the absence of evidence to the fact that the actually assessee received more than consideration that of record in its Books of Accounts. The submissions of the assessee were ignored by the Assessing Officer and he proceeded to reject the Books of Accounts based on his own analysis and also relying on the data in the website www.magicbricks.com. Α.Υ. 2011-12 Varsha Enterprises
We find that the Assessing Officer did not ask for variation in sale prices with regard to any particular flat though the assessee requested that the explanation can be furnished once it is known in respect to a particular flat the information is to be submitted. The Assessing Officer made general statement that there is a variation in sale prices in sale of flats. The information relied on by the Assessing Officer in the website www.magicbricks.com also cannot be an authentic information which can be used against the assessee as the disclaimer of the website makes very clear that the data in the website is not actual transaction based and the website does not give any guarantee and it should be verified independently. When the website itself makes it clear that the data fed is not on the basis of actual transactions and should be verified independently, we are unable to understand how the Assessing Officer placed reliance on this data. We are also at loss to understand why the Assessing Officer has not made any efforts to issue notices to the purchasers and find out from them whether any on-money was paid and what is the actual sale consideration paid in these transactions. No such enquiries have been made by the Assessing Officer. The conclusions arrived at in the Assessment Order that there is huge difference in sale price is merely on a guess work. We also find from the information furnished before us and also the finding of the Ld.CIT(A) that many of the flats sold were in "Shell condition" and only few flats were sold after completion of the flat with amenities and in which case, it is bound to be a variation in sale prices. The Assessing Officer rejected the Books of Accounts of the assessee on a mere guess work and surmises without any cogent material to show that there is real variation in sale prices. We also find that the conclusions drawn by the Assessing Officer in the Assessment Order were never put to the assessee for its rebuttal.
In the case of K. P. Varghese v. ITO (1981) 131 ITR 597the Hon'ble Supreme Court held that it is a well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the Revenue and the burden lies on the Revenue to show that there is an understatement of the consideration. It was also held that, to throw the burden of showing that there is no understatement of the consideration on the assessee would be to cast an almost impossible burden upon the assessee to establish the negative that the assessee did not receive any consideration beyond that declared by him.”
The ground of the revenue that the decisions of hon'ble Supreme court being inapplicable to the issue involved in this case, we find that the ratio of the decision clearly applies to the facts and the circumstances of the case. The coordinate Bench of ITAT, Delhi in the case of Rakesh Narang in ITA No.4137/Del/2011 in AY: 2008- 09 inter alia observed that the Hon'ble Supreme Court in the case of "the onus of establishing that the conditions of taxability are fulfilled, is ITA No.4137/Del/2011 11 and Shivakami Co. P. Ltd. (supra) would apply leaving no scope for making addition in the circumstances as are prevailing in the instant case. We, therefore, uphold the view taken by the ld. CIT(A) on this issue.”
In view of the factual matrix of the case, legal position emerging from the decisions referred above and the ratio decidendi of the hon'ble Supreme Court, we hold that the ld.CIT(A) has rightly deleted the addition which was made on mere conjectures and surmises only. Accordingly, all the grounds of appeal are dismissed. Α.Υ. 2011-12 Varsha Enterprises
In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 19.05.2025. AMIT SHUKLA (न्यायिक सदस्य /JUDICIAL MEMBER) Place: मुंबई/Mumbai दिनांक / Date 19.05.2025 Lubhna Shaikh / Steno PRABHASH SHANKAR (लेखाकार सदस्य/ACCOUNTANT MEMBER) आदेश की प्रतिलिपि अग्रेषित/