ITO 17(2)(1), MUMBAI vs. JAINAM CONSTRUCTIONS, MUMBAI

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ITA 5292/MUM/2016Status: DisposedITAT Mumbai13 November 2019AY 2012-1314 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that while the project was substantially completed and income should be brought to tax, the AO had not invoked Section 43CA or Section 50C. The Tribunal found that the AO had not brought on record any evidence that the assessee received a higher sale consideration than reflected in its books. However, the assessee failed to substantiate the agreement value as the fair market value of the inventory sold and did not offer income, postponing tax liability. The Tribunal noted that the residents had occupied the flats since 2006-07 and 2007-08, and the revenue should not be deprived of its dues. The Tribunal also observed that the CIT(A) had directed the deletion of the addition of Rs. 14,78,00,145/- by holding that Section 50C was not applicable. The Tribunal agreed with the AO regarding the disallowance of residual expenditure for subsequent years as it was not incurred in the present AY. Due to the lack of clarity on the correct income and expenditure, the matter was restored to the AO to ascertain the correct income and reframe the assessment after providing an opportunity to the assessee to substantiate its claims, including the reason for sale below stamp duty valuation. The appeal and cross-objections were allowed for statistical purposes.

What were the facts?

The assessee, M/s. Jainam Constructions, is a real estate developer. The appeal by the Revenue and cross-objections by the assessee pertain to Assessment Year 2012-13. The Revenue is aggrieved by the deletion of an addition of Rs. 14,78,00,145/- by the CIT(A), which arose from the difference between sale consideration and stamp duty valuation. The assessee's cross-objections challenge the disallowance of provisions for payments to MHADA and Collector's Office, and professional fees, aggregating Rs. 8,46,75,980/-, and the confirmation of disallowance of residual expenditure on the project. The project was completed and occupied by residents since 2006, but the assessee had not offered income due to pending disputes with statutory authorities.

What were the issues?

1. Whether the CIT(A) erred in directing the deletion of the addition of Rs. 14,78,00,145/- on the grounds that Section 50C of the Income Tax Act, 1961, is not applicable to a builder's stock-in-trade, and whether the assessee sufficiently substantiated the reason for selling units below stamp duty valuation? (Question of law and fact, concerning Section 50C). 2. Whether the CIT(A) erred in disallowing the provisions made towards payments to MHADA, Collector's Office, and professional fees, aggregating Rs. 8,46,75,980/-, which were allowed by the Assessing Officer (AO)? (Question of law and fact). 3. Whether the CIT(A) erred in confirming the disallowance of residual expenditure incurred on the project in FYs 2012-13, 2013-14, and 2014-15, aggregating Rs. 30,91,143/-? (Question of law and fact). Assessee's Contentions (for cross-objections): The amounts for MHADA, Collector's Office, and professional fees are allowable as deductions. The residual expenditure should also be allowed. Revenue's Contentions (for appeal): The CIT(A) erred in deleting the addition as the assessee failed to substantiate the reason for selling units below stamp duty valuation and did not prove selling at less than Fair Market Value (Stamp Duty Valuation), relying on Durga Prasad More (82 ITR 540 SC) and Sumati Dayal (1995 AIR 2109).

Which sections of the Income-tax Act were involved?

Section 50C,Section 43CA,Section 143(3),Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “F” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY, JM & SHRI MANOJ KUMAR AGGARWAL, AM

For Respondent: Shri Sushil Kumar Poddar-CIT-DR

Jainam Constructions Assessment Year-2012-13 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member): -

1.

Aforesaid matter is a recalled matter since the appeal as well as cross-objections were disposed-off vide order dated 18/05/2018. However, the order has been recalled vide order dated 15/02/2019 and accordingly, the appeal as well as cross-objection has come up afresh for hearing before this bench.

2.

When the appeal was called for hearing, none appeared for assessee. The perusal of order sheet entries revealed that the assessee has remained negligent to attend the hearing on several occasions. Left with no option, we proceed to dispose-off the same on the basis of material on record and after hearing Ld. CIT-DR. We have heard the arguments advanced by Ld. CIT-DR and perused the orders of lower authorities. 3. The aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2012-13 contest the order of Ld. Commissioner of Income-Tax (Appeals)-28, Mumbai [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-28/IT-253/ITO-17(2)(1)/2015-16 dated 03/06/2016 on certain grounds of appeal

. The revenue has filed revised grounds of appeal on 09/05/2018 along with Form No. 36, which read as under: -

1. On the facts and circumstances of the case and in law Ld.CIT(A) has erred in directing to delete the addition of Rs.14,78,00,145/- on the grounds that the addition emanating from the provisions of Sec.50C of the I.T.Act cannot be made in the case of a builder as the flats sold are their stock in trade and not Capital assets without appreciating the fact that the assessee firm has not substantiated with any documents, evidence and proof the reason for selling the residential/commercial units at less than stamp duty Authority Valuation including the reasons as to why the buyers of the residential/commercial units Jainam Constructions Assessment Year-2012-13 bought the said properties at less than the Value determined by the Sub

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