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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI D.T. GARASIA & SHRI N.K. PRADHAN
Per D.T. GARASIA, Judicial Member:
The present appeal has been preferred by the Revenue against the order dated 28.08.2014 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.
The short facts of the case are that the assessee has filed the original return on 28.09.2010 declaring a total income of Rs.4,59,44,569/- and return was processed under section 143(3). The 2 M/s. Saroj Sales Organization assessee firm is engaged in business of real estate development. During the year under consideration the assessee has booked sale in respect of flat/shop of its three projects namely - building No.3, Eden Garden and TBC. The assessee booked sale of 41 flats from "Eden Garden" project in the financial year under consideration. The Assessing Officer (hereinafter referred to as the AO) has verified the booking amount for the wing 'A' and Wing "B' and the AO has verified the booking of 2 flats and rate of sale as per sq. ft. by observing as under: Wing-A Rate of sale of flat in A-wing in order Rate of sale of flat in A-wing in order of date of booking of flat number Flat No. Flat No. Date of Sl. Date of Rate of Sl. Rate of No. Booking No. Booking sale in sale in Rs. Per Rs. Per sq. ft. sq. ft. 1 A/902 16-Apr- 4370 1 A/201 03-Mar- 6518 07 09 2 A/401 21-Jun- 4725 2 A/202 11-Apr- 6223 07 09 3 A/402 21-Jun- 4694 3 A/301 27-Apr- 5279 07 09 4 A/1002 23-Jul- 4694 4 A/302 06-Apr- 5543 07 09 5 A/1001 27-Jul- 4725 5 A/401 21-Jun- 4725 07 07 6 A/602 26-Sep- 4856 6 A/402 21-Jun- 4694 07 07 7 A/701 22-Oct- 4888 7 A/501 30-Dec- 6191 07 08 8 A/802 23-Nov- 4694 8 A/502 26-Dec- 5180 07 08 9 A/601 26-Nov- 4888 9 A/601 26-Nov- 4888 07 07 10 A/702 14-Jan- 4856 10 A/602 26-Sep- 4856 08 07 11 A/1101 18-Jan- 4888 11 A/701 22-Oct- 4888 08 07 12 A/1102 01-Apr- 4069 12 A/702 14-Jan- 4856 08 08
3 M/s. Saroj Sales Organization 13 A/502 26-Dec- 5180 13 A/801 11- 4888 08 May-09 14 A/501 30-Dec- 6191 14 A/802 23-Nov- 4694 08 07 15 A/201 03-Mar- 6518 15 A/901 28-Apr- 5051 09 09 16 A/302 06-Apr- 5543 16 A/902 16-Apr- 4370 09 07 17 A/202 11-Apr- 6223 17 A/1001 27-Jul- 4725 09 07 18 A/301 27-Apr- 5279 18 A/1002 23-Jul- 4694 09 07 19 A/901 28-Apr- 5051 19 A/1101 18-Jan- 4888 09 08 20 A/801 11- 4888 20 A/1102 01-Apr- 4069 May-09 08 Wing-B Rate of sale of flat in B-wing in order Rate of sale of flat in A-wing in order of date of booking of flat number Flat No. Flat No. Sl. Date of Rate of Sl. Date of Rate of No. Booking No. Booking sale in sale in Rs. Per Rs. Per sq. ft. sq. ft. 1 B/1002 12-Feb - 4414 1 B/201 18- 5592 07 May-09 2 B/901 29-Mar- 4876 2 B/202 08- 4915 07 May-09 3 B/1101 01-Apr- 4388 3 B/301 18- 5202 07 May-09 4 B/1001 09-Apr- 4876 4 B/302 04- 6213 07 May-09 5 B/701 08-Jul- 4876 5 B/401 07-Apr- 5364 07 09 6 B/1102 14-Sep- 4905 6 B/402 07-Apr- 5395 07 09 7 B/802 01-Mar- 5216 7 B/501 06-Apr- 6014 09 09 8 B/702 02-Mar- 4905 8 B/502 17-Apr- 5026 09 09 9 B/902 21-Mar- 5115 9 B/601 27-Apr- 5933 09 09 10 B/801 24-Mar- 6014 10 B/602 06-Apr- 5775 09 09 11 B/602 06-Apr- 5775 11 B/701 08-Jul- 4876 09 07 12 B/401 07-Apr- 5364 12 B/702 02-Mar- 4905 09 09
4 M/s. Saroj Sales Organization 13 B/402 07-Apr- 5395 13 B/801 24-Mar- 6014 09 09 14 B/502 17-Apr- 5026 14 B/802 01-Mar- 5216 09 09 15 B/601 27-Apr- 5933 15 B/901 29-Mar- 4876 09 07 16 B/1202 04- 5316 16 B/902 21-Mar- 5115 May-09 09 17 B/302 04- 6213 17 B/1001 09-Apr- 4876 May-09 07 18 B/501 06- 6014 18 B/1002 12-Feb- 4414 May-09 07 19 B/202 08- 4915 19 B/1101 01-Apr- 4388 May-09 07 20 B/201 18- 5592 20 B/1102 14-Sep- 4905 May-09 07 21 B/301 18- 5202 21 B/1202 04- 5316 May-09 May-09
From the above analysis AO was of a view that there is a large variation in sale rate within short span of time in many cases. Consequently, rate of sale of flat in some floor varies a lot. In some cases the rate of sale is almost same even after expiry of two years. In some other cases rate variation is as large as 20% even though both flats are sold within few days and the rate of sale has no direct co-relation with date of booking. Show case notice was given to the assessee and after considering the reply of the assessee the AO was of a view that there is no reason for variation in rate of sale of flats with a small rate. Therefore, the AO was of a view that the assessee has unaccounted money of Rs.2,33,17,400/- and hence treated this amount as unaccounted income of the assessee in the financial year under consideration from the sale of flats.
5 M/s. Saroj Sales Organization 4. Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has allowed the claim by observing as under: “I have gone through the facts of the case and the arguments of the appellant in this regard. It is an undisputed fact that 41 flats have been sold during the year and it is also an undisputed fact that there is a considerable difference in the sale price of different flats. The AO has referred to the decision of M/s. Diamond Investment and Properties (referred supra) to justify his argument that onmoney must have exchanged hands since the appellant has not come forth with any cogent explanation to explain the difference in sale price of different flats. The appellant has tried to distinguish the said situation in his case by saying that in the case of M/s. Diamond Investment and Properties, sale was being made was to a related party. The explanation given by the appellant is that it is in the exigency of running business that the flats have been sold at sometimes lower rates, however none of the flats have been sold at the rate lower than the Stamp Duty Valuation of the area. The decision of the Hon'ble Mumbai ITAT in the case of Neel Kamal Realtors and Erectors (referred supra) squarely covers the case of the appellant. The Honble Tribunal in the said decision have made reference to the decision of the Apex Court in the case-of K.P.Verghese vs. ITO (198) 131 ITR 597 (SC) wherein it was held that subsection 2 of 52 can be invoked only where the consideration for the transfer has been understated by the assessee and the burden of proving such understatement is on the revenue. An identical view was reiterated in the case of CIT vs. Shivakami Co. Pvt. Ltd. 1986 159 ITR 71(SC) and again reiterated in the decision of CIT vs. Godavari Corp. Ltd. (1993)200 ITR 567 (SC). What then emerges is that some concrete evidence has to be brought forth by revenue and the explanation by the appellant cannot be rejected summarily and a hypothetical bais of calculation cannot be taken to recalculate the sale price to determine the real income. Therefore, in my considered view the addition needs to be deleted with reference to the decisions given above.”
The Ld. D.R. has vehemently argued that flat No.A/501 & A/502 booked in December 2008 within a span of 4 days but the rate of sale is 5180 and 6191 though these flats are on the same floor. The huge variation of approximately 28% within short period is beyond common business prudence. In some of the flats the rate of sale was 6158 and it is reduced in chronological order which gives the picture that the said rate of flat of both wings which is in abnormal variation from period 06.12.08 to 18.05.09. The AO has 6 M/s. Saroj Sales Organization also shown this variation by showing his chart. The similar issue had come up before ITAT Mumbai Bench in the case of Diamond Investment and Properties in ITA No.5537/M/09 wherein it is held that the addition on basis of comparable sale proceeds is justifiable even though there was no evidence of receipt of own money. The Ld. D.R. submitted that as per the decision of Mumbai Tribunal the addition is justified.
On the other hand, the Ld. A.R. submitted that the assessee is following project completion method. Moreover, the assessee has total net profit released in development of construction of Eden Garden is about Rs.275 lakhs. Therefore, net profit comes out to 11.30%. In the real estate business there is a variation in respect of rate of sale of each flat, the Ld. A.R. submitted that on registration the assessee has filed the complete details and assessee has recovered the amount not less than the value adopted by stamp duty authority on registration of agreement. The assessment has charged the rate of sale of flat is higher than the rate considered by the stamp duty authority. The mere variation in the rate of flat of sale is not realization of unaccounted components of self realization. The Ld. A.R. relied upon the decision of Neelkamal Realtors and Erectors India Pvt. Ltd. in wherein it is held that it is the Revenue to bring the evidence on record that assessee has received higher price than declared. Ld. A.R. also argued that in the case of CIT vs. Neelkamal Realtors and Erectors India Pvt. Ltd. the matter was travelled up to Hon’ble Bombay High Court and the 7 M/s. Saroj Sales Organization Hon’ble Bombay High Court has dismissed the appeal. The Ld. A.R. further submitted that section 43CA which is introduced from 01.04.2014 in respect of transfer of land and building but in that case it is the duty of Revenue to prove that sale price of land or building or both are understated. In the year under consideration, this may be not applicable but the intention of the legislation is to charge the income which is less than stamp duty authority.
We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, we find that the Ld. CIT(A) has considered the decision of Mumbai Tribunal in the case of Neelkamal Realtors and Erectors India Pvt. Ltd. in wherein the Tribunal considering the various provisions of law held that it is the duty of Revenue to bring the evidence that assessee has earned more income by suppressing the sale proceeds. The said judgment was also confirmed in the decision of Hon’ble Bombay High Court reported as 246 taxmann 274. We have gone through the order of the Ld. CIT(A) and the Ld. CIT(A), considering the decision of Hon’ble Bombay High Court and the decision of Tribunal, has dismissed the appeal of the assessee. We find that similar issue had come up before the Hon’ble Supreme Court in the case of CIT vs. Godavari Corporation 200 ITR 567 wherein it is held that burden of proof that consideration in respect of transport has been declared at lower figure than actually received by the assessee is on the Revenue. Respectfully following the decision, we dismiss the departmental appeal.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 15.02.2018.