ACIT CIR 28(3), NAVI MUMBAI vs. SAI SHIRDI CONSTRUCTIONS, NAVI MUMBAI

The Revenue in its appeal raised the following grounds: - (1) "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in stating that the rejection of the books of account u/s 145 of the Act and framing the assessment u/s 144 of the Act by the AO on the basis of the information, data and analysis was not adequate enough to come to the conclusion that the book results were not reliable.

Briefly stated the facts are that, the assessee is a builder and developer filed its return of income on 21.09.2011 declaring income of ₹.1,02,15,870/-. The assessment was completed u/s. 144 r.w.s. 145 of the Act on 27.03.2014 determining the income at ₹.9,89,94,780/-. While completing the assessment the Assessing Officer made addition of ₹.8,83,43,028/- towards unaccounted sale receipts on certain flats and addition of ₹.4,35,881/- u/s. 69C of the Act treating certain purchases as bogus purchases. The assessee constructed a housing project named “Sai Saakshat” in sector -6, Kharghar, Navi Mumbai having four wings with 15 floors each and the total number of flats are 232. In the course of Assessment Proceedings, the assessee was required to give name and particulars of the customers, Flat No, Area, agreement value, booking

However, the Assessing Officer not convinced with the replies and based on the chart and graph which is prepared by him came to the 5 ITA.No.5135/MUM/2015 (A.Y: 2011-12) M/s. Sai Shirdi Constructions conclusion that there is a large variation in the prices between flats which were booked in the period from 10.12.2009 to 12.07.2010. The total flats booked in this period were 88 and price varies from ₹.2,627/- per sq.ft to ₹.5,100/- per sq.ft. and according to him since assessee did not give any reason for variation in the prices despite several opportunities instead gave only a general reply, he concluded that the price variation is highly illogical and without any basis and indicates that the portion of sale proceeds in unaccounted form i.e. in cash. Assessing Officer also observed that the price trend in Kharghar is reflected by a reputed website and similar price trend is shown by almost all websites and the price trend give upper range of value, average range of value and lower range of value of the flats in different quarters in last six years which have consistently increased in the past six years where the prices have consistently increased and the price variant in different localities of Kharghar at a particular point of time was almost 5 to 15% and therefore he was of the view that since assessee has only one project at one plot there should not be much price variation in a short span of time. Assessing Officer further observing that assessee has not charged any extra prices for each floor rise and instances where flats at higher floors are sold at considerable low prices than the flats at lower floors and within the same floor flats were sold with substantial different rates, the flats have similar direction and orientation were sold in different wings for different

On appeal, the Ld.CIT(A) considered the detailed submissions made by the assessee with various evidences furnished before him deleted the addition observing that the Assessing Officer failed to make proper enquiries and there were no enquires made from the purchasers of the flats and the exercise was done merely on a guess work and based on an unreliable information displayed in the website www.magicbricks.com.

Before us, Ld.DR submitted that the assessee has not given any proper explanation, replies in the course of the Assessment Proceedings and the assessee provided various information and explanation before the Ld.CIT(A) to justify the huge variation in sale prices and therefore since all these information was not available before the Assessing Officer the matter may be restored to the file Assessing Officer for denovo assessment.

Ld. Counsel for the assessee further referring to Page No.67 to 72 of Paper Book submitted that detail explanation was given for each and every flat before the Ld.CIT(A) why there is a difference in sale prices as per the information submitted by the assessee on various flats. Ld. Counsel for the assessee referring to Page No.68 of the Paper Book submitted that additions were made by the Assessing Officer in respect of 8 ITA.No.5135/MUM/2015 (A.Y: 2011-12) M/s. Sai Shirdi Constructions the 59 flats out of 123 flats and out of 59 flats 49 flats have been sold by the assessee on shell basis only. It was submitted that these 49 flats cover the alleged difference of ₹.8,06,52,498/- out of total alleged difference of ₹.8,83,43,028/-. Learned Counsel for the assessee submitted that these flats were sold only with structure leaving considerable amount of remaining work like flooring, sanitary fittings, plastering, plumbing, Kitchen platform, air conditioning, wood work etc., to be carried out by the buyer himself. Therefore, Learned Counsel for the assessee submitted that since the flats were sold on Shell basis sale price is much less than the other flats which were sold with all these amenities.

Ld. Counsel for the assessee referring to Page No.116 of the Paper Book which is the copy of sample agreement for sale and particularly clause (X) at Page No.121, submitted that through this agreement the assessee sold “Shell Flat No. 304” admeasuring 953 sq.ft for ₹.60,17,200/- in “D" wing on 3rd floor on a shell basis. Learned Counsel for the assessee submitted that in clause (X) of the agreement it is clearly mentioned that the purchaser agreed to purchase the shell flat. Similarly Ld. Counsel for the assessee referring to Page No.176 of the Paper Book which is the copy of agreement for sale and referring to clause (X) at Page No.181, submitted that through this agreement assessee sold “flat No.504” in “D” wing on 5th floor admeasuring 953 sq.ft for ₹.78,03,000/-

Ld. Counsel for the assessee further placed reliance on the decision of the Hon'ble Supreme Court in the case of K.P. Varghese v. ITO [131 ITR 597] and submitted that the burden lies on the Revenue to show that there is understatement of consideration. Learned Counsel for the assessee submitted that in this case the Revenue has not discharged its burden by proving that there is understatement of consideration by bringing in cogent materials and the comparable instances or the statements from the buyers to prove that the assessee has understated its sale value.

Ld. Counsel for the assessee further referring to Page No.87 of the Paper Book particularly the disclaimer shown by the website submitted that the website itself has stated that they cannot be held responsible for the accuracy of the data displayed on the site and the information has 10 ITA.No.5135/MUM/2015 (A.Y: 2011-12) M/s. Sai Shirdi Constructions been compiled from the asking price of the database of properties listed on the site for the period and since the data is not of the actual transaction, the website does not give any guarantee and it is stated that the same should be verified independently. Ld. Counsel for the assessee therefore submitted that the data fed into the website www.magicbricks.com is not at all reliable and they themselves stated that the data fed into are not actual transactions. He submits that if the data is not of actual transactions it is merely on an assumption/guess work and price trends which are reflected are not based on any reliable data. Therefore, the Learned Counsel for the assessee submitted that the data in the website cannot be relied on to come to the conclusion that there is a huge difference in the sale prices between the actual sale consideration received by the assessee when compared to the sale prices reported in the website.

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 11 ITA.No.5135/MUM/2015 (A.Y: 2011-12) M/s. Sai Shirdi Constructions 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 12 ITA.No.5135/MUM/2015 (A.Y: 2011-12) M/s. Sai Shirdi Constructions 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.

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 is 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

In the case of K.P. Varghese v. ITO (supra) the 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.

In the case on hand the Revenue could not discharge its burden to show that there is an understatement of consideration by bringing

Coming to the addition made u/s. 69C of the Act in respect of bogus purchases. We observe that the Assessing Officer issued notice

On appeal the Ld.CIT(A) deleted the addition observing that as per the assessment records and the order sheet noting notice u/s. 133(6) was issued on 05.03.2014, inspector gave a report on 06.03.2014. However, in the notice and questioner issued to the assessee on 13.03.2014 the issue of genuineness of the purchases was not brought to the notice of the assessee. Therefore, since the addition was made without giving any opportunity to the assessee violating the principles of natural justice, Ld.CIT(A) deleted the addition.

Ld.DR vehemently supported the orders of the Assessing Officer and the Ld. Counsel for the assessee relied on the order of the Ld.CIT(A).

In the result, appeal of the Revenue is dismissed.