ITO, MANGALORE vs. PRITHVI DEVELOPERS AND BUILDERS, MANGALORE

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ITA 732/BANG/2016Status: DisposedITAT Bangalore07 March 2017AY 2010-114 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the assessee is engaged in the business of purchase and sale of deeds, not civil contracts or construction. Therefore, the profit should be computed based on the actual sale consideration minus the cost of acquisition and incidental expenses.

What were the facts?

The assessee, a firm engaged in buying and selling land and real estate agency, filed its return declaring a certain income. The Assessing Officer completed the assessment at a much higher income, making additions based on an estimated profit margin of 50% of sales due to lack of maintained books of accounts.

What were the issues?

Whether the CIT(A) erred in estimating the profit at 12.5% of turnover for a real estate business, and whether the AO's estimation of 50% was appropriate.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH : BANGALORE

Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO

For Respondent: Shri. M. K. Biju, JCIT
Hearing: 08.12.2016Pronounced: 7.03.2017

Per Inturi Rama Rao, Accountant Member

1.

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.

2.

The revenue raised the following two grounds of appeal:

1.

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

the Assessing Officer to calculate the income @ 12.5% of the turnover as against @ 50% of the turnover computed by the Assessing Officer.

2. The learned CIT(Appeals) erred in fact and in law in estimating

of the income @ Rs.1,78,44,562/- after giving relief of Rs.5,35,33,688/-.

3.

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.

4.

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.

5.

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

Pronounced in the open court on this 07th day of March, 2017.

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