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DCIT vs Eskay Constrctions P.Ltd, Mumbai | ITAT Mumbai 2019 | BharatTax

DCIT CEN CIR 8(4), MUMBAI vs. ESKAY CONSTRCTIONS P.LTD, MUMBAI

ITA 3722/MUM/2016Status: DisposedITAT Mumbai10 July 2019AY 2010-1116 pages

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Cases cited in this judgment

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

K.P. Varghese v. ITO
131 ITR 597 · 1981 · SC
989 citing
Chainrup Sampatram v. CIT
24 ITR 481 · 1953 · SC
196 citing
227 ITR 172/93 Taxman 502 (SC); Sutlej Cotton Mills Ltd. v. CIT
106 Taxmann 601 · 1999 · SC
39 citing
Sony Ericson Mobile Communications India P Ltd. v. CIT
56 Taxmann.com 285 · 2015 · SC
6 citing

Income Tax Appellate Tribunal, “H”, BENCH

Before: SHRI M.BALAGANESH, AM & SHRI AMARJIT SINGH, JM

For Respondent: Shri S.C.Tiwari

Hearing: 18/06/2019Pronounced: 10/07/2019

आदेश / O R D E R PER M. BALAGANESH (A.M): These cross appeals in 3466/Mum/2016 & 3465/Mum/2016 for A.Y.2010-11 & 2011-12 arise out of the order by

1.

M/s.Eskay Construction Pvt. Ltd., the ld. Commissioner of Income Tax (Appeals)-50, Mumbai in appeal No.CIT(A)-50/IT-236/2013-14 dated 26/02/2016 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 28/03/2013 by the ld. Asst. Commissioner of Income Tax, Central Circle – 47, Mumbai (hereinafter referred to as ld. AO). Since identical issues are involved in these appeals, they were heard together and are being disposed off by this consolidate order, for the sake of convenience.

2.

The Ground No. 2 raised by the revenue and all the grounds of Asst Year 2010-11 raised by the assessee are identical in nature and hence they are taken up together for adjudication. They pertain to working of income from the real estate development project undertaken by the assessee at Cuffe Parade, Mumbai.

3.

The brief facts of this issue are that the assessee is a Builder and Developer. The ld AO observed in the order that the assessee company was incorporated with the sole objective of developing and constructing residential buildings. With this objective, the assessee stated that the company has taken up the development of property at Taraporewala Mansion, Cuffe Parade, Colaba, Mumbai and has continued its construction activity during the year under consideration. The ld AO observed that the assessee company follows percentage of completion method of accounting and the expenses incurred have been capitalized to work in progress (WIP) account. The ld AO observed in his order that the assessee filed a letter dated 21.3.2013 furnishing details of total saleable area, area sold, cost of construction, interest cost, expected cost of construction to complete the project , estimated profit / loss from the project and profit and loss recognized based ont eh percentage of work

M/s.Eskay Construction Pvt. Ltd., 4,00,00,000/- to the declared income by way of understatement of sale price of the flat to Mr. Bharat D. Shah. We find that the assessee had pleaded that the flats were sold to Mr Bharat and Gautam Daftary during the period of boom in the real estate market which was later followed by a crash in the property market. Moreover, the reliance placed by the ld AO on the co-ordinate bench decision of this tribunal in the case of Diamond Investments & Properties supra would not advance the case of the revenue as no one had appeared on behalf of the assessee before the tribunal and the decision was rendered based on the facts available in the assessment order in that case. Moreover, the said decision cannot be made applicable to the instant case as it is factually distinguishable. We hold that the ld AO had merely assumed that the price at which the flats were sold to Mr Bharat and Gautam Daftary was always available to the assessee and this assumption is based on no material at all. Apart from his suspicion, the ld AO has not brought an iota of material on record in support of the addition made by him. Furthermore, it is settled position in law that the addition on the ground of suppression of sale price or charging on money cannot be made without there being an evidence other than estimate of market value to show that the assessee had actually received more money from the buyer than as disclosed in his return of income. For this proposition, we find that the ld AR had rightly placed reliance on the decision of Hon’ble Supreme Court in the case of K. P. Varghese v. ITO reported in 131 ITR 597(SC) wherein it was held as under:- 13. Thus, it is not enough to attract the applicability of sub-section (2) that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeds the full value of the consideration declared in respect of the transfer by not less than 15 per cent of the value so declared, but it is furthermore necessary that the full value of the consideration in respect of the transfer is understated or, in other words, shown at a lesser figure than that actually received by the assessee. Sub-section (2) has no application in case of an honest and bonafide transaction where the consideration in respect of the transfer has been correctly declared or disclosed by the assessee, even if the M/s.Eskay Construction Pvt. Ltd., condition of 15 per cent difference between the fair market value of the capital asset as on the date of the transfer and die full value of the consideration declared by the assessee is satisfied. If, therefore, the revenue seeks to bring a case within sub-section (2), it must show not only that the fair market value of the capital asset as on the date of the transfer exceeds the full value of the consideration declared by the assessee by not less than 15 per cent of the value so declared, but also that the consideration has been understated and the assessee has actually received more than what is declared by him. There are two distinct conditions which have to be satisfied before sub-section (2) can be invoked by the revenue and the burden of showing that these two conditions are satisfied rests on the revenue. It is for the revenue to show that each of these two conditions is satisfied and the revenue cannot claim to have discharged this burden which lies upon it, by merely establishing that the fair market value of the capital asset as on the date of the transfer exceeds by 15 per cent or more the full value of the consideration declared in respect of the transfer and the first condition is therefore satisfied. The revenue must go further and prove that the second condition is also satisfied. Merely by showing that the first condition is satisfied, the revenue cannot ask the Court to presume that the second condition too is fulfilled, because even in a case where the first condition of 15 per cent difference is satisfied, the transaction may be a perfectly honest and bona fide transaction and there may be no understatement of the consideration. The fulfilment of the second condition has, therefore, to be established independently of the first condition and merely because the first condition is satisfied, no inference can necessarily follow that the second condition is also fulfilled. Each condition has got to be viewed and established independently before sub-section (2) can be invoked and the burden of doing so is clearly on the revenue. 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 second condition being as much a condition of taxability as the first, the burden lies on the revenue to show that there is understatement of the consideration and the second condition is fulfilled. Moreover, to throw the burden of showing that there is no under statement of the consideration on the assessee would be to cast an almost impossible burden upon him to establish a negative, namely, that he did not receive any consideration beyond that declared by him.