ITO, MANGALORE vs. PRITHVI DEVELOPERS AND BUILDERS, MANGALORE

This appeal filed by the revenue is directed against the order of the learned Commissioner of Income Tax (Appeals), Panaji dated 01-02-2016 for the assessment year 2010-11.

The revenue raised the following two grounds of appeal:

The learned CIT(Appeals) erred in fact and in law in directing

Briefly the facts of the case are the respondent assessee is a firm engaged in the business of buying and selling of land and real estate agency. The return of income for the assessment year 2010-11 was filed on 31.03.2011 declaring a total income of Rs.71,37,825/-. Against the said return of income, the assessment was completed at a total income of Rs.7,13,78,250/- after making addition of Rs.6,42,40,425/- in respect of income from business. The Assessing Officer made addition of Rs.6,42,40,425/- on the ground that the assessee firm has made profit in the transactions of purchase and sale of the properties and the margin in the given cases was 83.6% and therefore, the Assessing Officer had proceeded to estimate the profit @ 50% of the sales, as no books of accounts were maintained and accordingly, the estimating profit at 50% of the sales made, the assessment was completed. On appeal before the Page 3 of 4 CIT(A), the CIT(A) estimated profit at 12.5% and the balance addition was deleted.

Being aggrieved, the revenue is in appeal before us. On the date of hearing, none appeared before us on behalf of the assessee. We find from the perusal of the record that though the assessee is engaged in the business of purchase and sale of deeds and he is not engaged in the business of execution of civil contracts or in the business of construction. The difference between the purchase cost and the sale price after deducting the expenditure incurred thereon, has to be treated as income and brought to tax. The whole approach of CIT(A) in treating the appellant as a civil contractor is contrary to the evidence on record. Therefore, we quash the order of the CIT(A) on this ground and set aside the assessment order to the AO to compute the profit based on the actual sale consideration received during the year, after deducting the cost of acquisition and the incidental expenses thereon.

In the result, the appeal filed by the revenue is partly allowed.