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Facts
The assessee, a builder operating under presumptive taxation (Section 44AD), did not disclose a constructed flat valued at ₹30,14,000/- which was transferred to the land seller as part of property acquisition. The Assessing Officer treated this as undisclosed income and added it under "income from other sources" after issuing notices under Sections 148 and 142(1). The CIT(A) subsequently dismissed the assessee's appeal due to a 140-day delay in filing, without addressing the merits.
Held
The Tribunal found that the ₹30,14,000/- represented a component of the property purchase consideration and the cost incurred by the assessee to acquire the land, not a separate sale or undisclosed income. Consequently, the addition made by the Assessing Officer was directed to be deleted.
Key Issues
Whether a flat transferred as part of land purchase consideration constitutes undisclosed income; and the validity of dismissing an appeal based on delay without hearing merits.
Sections Cited
44AD, 148, 142(1), 249(3), 249(2), 5 of Limitation Act
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 24.03.2025 passed for A.Y. 2014-15. 2. The assessee has raised the following grounds of appeal:
“1. Your assesse requested to condone the delay 'in filling of appeal the delay was inadvertent and unawareness circumstances. 1 hereby requested to provide a genuine ground of natural justice to heard my sight prior to finalize and penalized for unearned income.
The honorable commissioner has erred and upheld the ground of settlement of liability in future is not an income, in fad the assesse ready to provide fiat worth of Rs. 30,14,000 in subsequent year against sale consideration of plot purchase, rather than considering the fact that assesse has not paid any liability or purchase any flats for sales. On account of above addition LAO levied penalty for not conducting audit. It is prayed that on factual ground kindly quashed the penalty order, Ground taken by appellant be accepted and penalty be deleted. Bhavesh K Shah vs. ITO Asst. Year –2014-15 - 2– 3. To the extent of above, the order of the honorable Commissioner of Income Tax is bad in law and is prayed to be quashed. Your appellant craves leave to add, to alter, to amend any of the grounds of appeal
or to take back the appeal at any stage of appeal”
3. The brief facts of the case are that the assessee filed his return of income for the assessment year 2014–15, declaring total income of ₹6,88,570/- under the head "income from business." The assessee is an individual and is engaged in the business of construction as a builder and he opted for presumptive taxation under section 44AD of the Income-tax Act, 1961 (Act), declaring gross receipts of ₹92,54,031/- from the sale of flats. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had purchased a property worth ₹1.35 crore and then demolished it and constructed new flats on the same site. Out of the total purchase consideration, the assessee made a payment of ₹1,04,86,000/- (including TDS of ₹1,35,000/-) and also transferred one of the newly constructed flats valued at ₹30,14,000/- to the seller of the land as part of the deal. This part of the transaction, however, was not disclosed by the assessee in his return of income, which as per the Assessing Officer led to understatement of gross receipts by ₹30,14,000/-. As per the Assessing Officer, the above income to the tune of ₹30,14,000/- of the assessee had escaped assessment, and accordingly a notice under section 148 of the Act was issued upon the assessee, but the assessee failed to respond to the said notice. Thereafter, multiple notices under section 142(1) of the Act were issued seeking details of the property, bank statements, investments, and sale of assets, however, the assessee did not furnish any replies or documents in response to any of these notices. In the absence of any explanation or supporting documents, and despite being given several chances, the Assessing Officer held that the assessee failed to disclose a sum of ₹30,14,000/- as income from the sale of a flat. Since the assessee did not reflect this amount in his return of income, the Bhavesh K Shah vs. ITO Asst. Year –2014-15 - 3– Assessing Officer treated this amount as “income from other sources” and added the same to the total income of the assessee.
4. In appeal, Ld. CIT(A) dismissed the appeal of the assessee on account of delay in filing of appeal by the assessee, with the following observations:
“5.6. In view of the above facts and circumstances/ the reasons advanced by the appellant for delay in filing the appeal are held to be insufficient, unsubstantiated, unreasonable and hence unacceptable. The appellant has failed to demonstrate reasonable cause or exceptional circumstances to warrant condoning the delay. Therefore, the condonation of delay in filing the appeal is denied in the interest of justice, equity, and procedural discipline.
Having regard to above discussion and legal position, the delay of 140 days in filing of appeal in this case is not condoned as no "sufficient cause" has been shown u/s 249(3) of the Income Tax Act, 1961 for the appellant's failure to file the appeal within the prescribed period of limitation u/s 249(2) of the Income Tax Act, 1961r.w.s.5 of Limitation Act and hence the appeal sought to be instituted belatedly is hereby rejected.”
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. We have heard the rival contentions and perused the material on record. The brief facts of the case are that the assessee, a builder by profession, had filed his return of income for the assessment year 2014–15 under the presumptive taxation scheme of section 44AD of the Act, declaring gross receipts of ₹92,54,031/- and taxable income of ₹6,88,570/-. The Assessing Officer, during reassessment proceedings, observed that the assessee had purchased a property for ₹1.35 crore, out of which a sum of ₹1,04,86,000/- (including TDS of ₹1,35,000/-) was paid in money terms, and the balance consideration of ₹30,14,000/- was discharged by way of allocation of one of the newly constructed flats to the seller of the land. The Assessing Officer treated the value of ₹30,14,000/- as undisclosed income (being undisclosed sale consideration) of the assessee and added the same under the head “income from other sources,” on the basis that the sale value of such flat Bhavesh K Shah vs. ITO Asst. Year –2014-15 - 4– was not reflected in the return of income as part of the total receipts by the assessee. In appeal, the Ld. CIT(A) dismissed the appeal without going into the merits, on account of delay in filing of appeal. Before us, the learned counsel for the assessee has placed on record the registered sale deed to show / support that the assessee had agreed to purchase the land in question partly by way of monetary payment and partly by offering one of the constructed flats as part of the total purchase consideration. On perusal of the sale deed and other documents placed on record, it is seen that the transfer of the flat valued at ₹30,14,000/- was in fact not a part of any separate sale by the assessee, but a mode of discharging the purchase consideration for the land on which the assessee subsequently constructed the flats. In our considered view, the amount of ₹30,14,000/- cannot be treated as income or sales receipt of the assessee merely because it was not separately shown in the return of income filed by the assessee. It is, in substance, a component of the property purchase consideration and in our view represents the cost incurred by the assessee to acquire the land from the seller. Accordingly, it cannot be said to be undisclosed income liable to be taxed under the head “income from other sources.” We therefore are of the view that looking into the instant facts, the amount of ₹30,14,000/- cannot be treated as undisclosed income of the assessee. The same is hereby directed to be deleted.