ACIT 19(1), MUMBAI vs. GOVIND B BAJAJ, MUMBAI

आदेश / O R D E R Per Joginder Singh(Judicial Member) These two appeals are by the Revenue against the impugned orders dated 11/08/2014 (for Assessment Year 2010-11) and 18/03/2015 (for Assessment Year 2011-12) of the Ld. First Appellate Authority, Mumbai. In both the appeals, the Department has challenged the addition of Rs.2,06,61,988/- (Assessment Year 2011-12) and Rs.1,53,57,319(Assessment Year 2010-11), which was deleted by the Ld. Commissioner of Income Tax (Appeal) ignoring variation in the rates of flats, sold by the assessee and the anomaly in settling the prices adopted on a particular day for a particular flats to different persons.

2. During hearing, the ld. DR, Dr. Rajendra Kumar, defended the addition made by the Assessing Officer by contending that there was a vast difference of rates of sale in the same building and the onus was never discharged by the assessee. It was contended that any and every business man wants to maximize his profit, which was not substantiated by the assessee. The assessment order was defended, wherein, the Ld. Assessing Officer took the average of the sale rates as no plausible reasoning was adduced by the assessee. Our attention was invited to para 5.8 and 9 of the assessment order along with para 6.5.3 of page-22 for Assessment Year

ITA NO.3243/Mum/2015 Govind B. Bajaj 2010-11 of the impugned order. The crux of the argument is that under hand money exchange hands, therefore, the addition was rightly made by the Assessing Officer.

2.1. On the other hand, the ld. counsel for the assessee, contended that letter dated 18/03/2014 was filed by the assessee and the rates depends upon many factors as one flat may face nalla, whereas, the other flat may face road/park or better location. It was contended that no enquiry was made by the Assessing Officer from anybody and the Assessing Officer has not disputed the location, like nalla, etc. It was claimed that the explanation filed before the Assessing Officer was ignored by further contending that books of accounts were not rejected by the Ld. Commissioner of Income Tax (Appeal) and Department is not in appeal. Reliance was placed upon the decision in Neelkamal Realtors & Erectors India Pvt. Ltd. vs DCIT (2013) 145 ITD 217(Mum.), DCIT vs M/s Nariman Developers P. Ltd. (ITA No.3695/Mum/2009), order dated 20/05/2011 and DCIT vs M/s Sumer Ville Investments (ITA No.2657/Mum/2007), order dated 17/06/2011. In reply the ld. DR, invited our attention to the letter dated 18/03/2014, wherein, no explanation was filed by the assessee and even today no plausible reasoning/explanation was adduced. The huge variation in the sale rate was not explained by the assessee at any stage.

ITA NO.3243/Mum/2015 Govind B. Bajaj 2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is a builder and developer, declared income of Rs.74,10,350/- (Assessment Year 2011-12) on 30/09/2011, which was processed u/s 143(3) of the Act. Likewise, for Assessment Year 2010-11, the assessee declared income of Rs.52,91,780/- on 14/10/2010. This return was also processed u/s 143(1) of the Act. Both the cases were selected for scrutiny, therefore, notice u/s 143(2) of the Act was issued and served upon the assessee. Notice u/s 142(1) of the Act along with detailed questionnaire were also issued and served upon the assessee. In response to these notices, the assessee attended the proceedings. As per assessment order, the assessee was asked to produce the necessary details with respect to sundry creditors, advance received, working of projects, unsecured loans, etc. As pr the Revenue, in spite of several opportunities, provided to the assessee, the attitude of the assessee was indifferent and true details were not furnished with respect to genuineness of the claim of the assessee. As per the tax audit report, submitted along with the return, it was found that the assessee was following mercantile system of accounting as per which the income and expenditure is accounted for on accrual basis. The assessee follows percentage completion method for accounting the profits of the projects. During the relevant period, the assessee showed income of Rs.52,91,780/- (Assessment Year 2010-11) whereas, profit

ITA NO.3243/Mum/2015 Govind B. Bajaj of business was Rs.37,01,141/-. So far as, the issue in hand is concerned, the assessee furnished the details of sale of flats i.e. name and addresses of the party to whom flats were sold, which are summarized as under:-

ITA NO.3243/Mum/2015 Govind B. Bajaj

From the aforesaid details, it was notice by the Assessing Officer that there was a huge variation of rates of sale per sq. feet ranging from Rs.3519 to Rs.8657. The assessee was asked to reconcile and explained the huge variation. The assessee was asked as to why the selling rate may not be decided as per the decision of the Tribunal in the case of diamond investment. As per the Revenue, neither any reply was filed by the assessee nor was any satisfactory explanation adduced. The Ld. Assessing Officer ultimately summarized/noted the following facts:-

ITA NO.3243/Mum/2015 Govind B. Bajaj is vast difference of sale rates of the same projects, which is generally not possible. The Ld. DR quoted some flats, where, there was a vast difference. Considering the totality of facts and following the decision of the Tribunal in the case of M/s Diamond Investment and Properties (ITA No.5537/Mum/2009) order dated 29/07/2010 made the addition. The Ld. Assessing Officer was of the view that additional sales income amounting to Rs.1,53,57,319/-, being earned by the assessee, was not offered for taxation, thus, he worked out the difference as indicated in both the appeals.

2.4. On appeal before the Ld. Commissioner of Income Tax (Appeal), the assessee took the plea that due to location advantages/disadvantages like the flats facing the park, nalla, road side, etc. and considering various decisions, it was held that the explanation furnished by the assessee was not considered and therefore, the addition was deleted. The Revenue is aggrieved and is in appeal before this Tribunal.

2.5. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, there is no dispute to the fact that the assessee booked the flats in different rates in different years, wherein, there is a vast difference in the sale rates of flats. Admittedly, such a vast difference is practically

ITA NO.3243/Mum/2015 Govind B. Bajaj not possible in the real estate in a similar project at the same place. At the same time, this is also an admitted position that due to different reasons like park facing flat, road facing flat, sea facing flat, nalla facing flat, Jhuggi cluster facing flat, there may be minor variation in the building. However, we note that the Assessing Officer has not examined the issue in the correct perspective and merely made the addition solely by taking highest sale rates for different years which was not the correct approach. The assessee was in possession of sales agreement with the various buyers and confirmation in this regard could have been obtained by the Assessing Officer from the respective buyers, which has not been done so. The First Appellate Authority has also not contradicted the observation made by the Assessing Officer in right perspective and ignored the factual matrix. At the same time, the Ld. Assessing Officer has not quoted sale instances either from the same building or from the adjoining buildings, therefore, without delving much deeper into the issue and considering the factual matrix, we deem it appropriate to remand both these appeals to the file of the Assessing Officer to bring cogent material to substantiate his observation. The assessee is also directed to substantiate his claim with the help of documentary evidences. The Assessing Officer is directed to examine the claim of the assessee after affording due opportunity to the assessee, thus, both these appeals of the Revenue are allowed for statistical purposes only.

ITA NO.3243/Mum/2015 Govind B. Bajaj Finally, both the appeals of the Revenue are allowed for statistical purposes. This Order was pronounced in the open court on 05/04/2017.

Sd/- Sd/- (Manoj Kumar Aggarwal) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य /JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 05/04/2017 f{x~{tÜ? P.S/.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant (Respective assessee) 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai, 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.