ITO 19(3)(3), MUMBAI vs. SHILESH P DHAIIRYAWAN, MUMBAI

order of the CIT(A)-30,Mumbai,dated-03.11.2014, the Assessing Officer(AO) has filed the present appeal.Assessee-an individual,filed his return of income on 01/10/2010,declaring total income at Rs.7.77 lakhs.The AO completed the assessment,on 28/03/2013, u/s.143 (3) of the Act,determining his income at Rs.1.54 crores.

2.Effective ground of appeal is about deleting the addition of Rs. 53.05 lakhs made on account of rate difference in flats sold by the assessee. During the assessment proceedings,the AO found that one of the projects of the assessee namely Jai Milind was completed during the year,that there was variation in the rates of the flats sold by the assessee in the project.He directed the assessee to explain the reasons for the variation in the sale prices of the flats. After considering the submission of the assessee, the AO observed that there was variation in the rate of sales per Sq.ft. ranging from Rs. 10,478/- to Rs. 10, 970/-. He asked the assessee as to why the selling rate should not been determined as per the Tribunal order in the case of Diamond Investment. As per the AO,no satisfactory explanation was filed by the assessee in that regard. He held that the assessee had sold flat number 201 @ 14, 970/-per Sq.ft. and flat number 101 @ 12,500/-,that flat number 202 and 601 were sold @ 14,890/- and at 10, 478/- respectively, that the assessee had booked the flats at different rates, that the assessee had taken on money in cash for booking the flats, that the onus was on the assessee to establish that negotiation had occurred because of which there was difference in selling rate, that he had failed to discharge the onus, that inference had to be drawn on the basis of circumstancial

823/M/15(10-11) Shailesh P. Dhairyawan evidences.He worked the difference of the project at the higher side of booking rate i.e.at Rs.14,970/- per Sq.ft..Accordingly,the additional sales income amounting to Rs.53.05 lakhs,being earned by the assessee,but not offered for taxation, was added to his total income.

3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Before him,the assessee made submissions with regard the difference in sale prices recovered from the customers. After considering the order of the AO and the submissions of the assessee, the FAA held that the AO had not brought on record any evidence to show that on money had passed from the hands of the purchaser to the seller at the time of booking flats or later on, that he had not carried out any enquiry in the case of buyer of the seller to find out as to whether any on money had been taken by the assessee for booking the flats,that no circumstantial evidences were brought on record to suggest that benefit of under-rate had been given to some of the purchaser for extraneous reasons for consideration.Referring to the order of the Tribunal in the case of Diamond Investment,relied upon by the AO, he held that facts of that case were totally different,that in that matter difference in price in case of certain flats sold to related parties was at a much lower price as compared to the flats sold to other persons,that the assessee had sold all the flats to unrelated parties, that the AO had not brought on record to prove that the flats were sold below market price, that he had simply applied the differential rates for booking of unit number 201 and 101, 202 and 601 for arriving at the actual booking rate for the above units. He referred to the case of Neelkamal Realtors and Erectors India Private Ltd. (38 taxman.com. 195) and held that the AO had not controverted the explanation furnished by the assessee during the course of assessment proceeding for charging lower price in respect of 3 units sold vis a vis the rate/price flat number 201. Finally, he deleted the addition made by the AO relying upon the above order of the Tribunal.

4.Before us,the Departmental Representative(DR)supported the order of the AO. None appeared on behalf of the assessee,as stated earlier.From the perusal of the available material, one thing is clear that the AO has not made any enquiry about the rate difference.He compared the rate of one flat with the other flats and applied that particular rate in a mechanical way.Businesses is not carried out on principles of arithmetic additions/ subtractions/multiplications.It is a dynamic activity.There could be several reasons for charging different rates for different flats.Size of the flat,its location and directional advantages are some of the factors for deciding the rates.Now a days was to compliance also 823/M/15(10-11) Shailesh P. Dhairyawan plays a role in deciding the price to be paid by the buyers. Generally the flats at lower floors would command lower price than the upper floor flats. Flats having larger area generally fetch lesser price as compared to the flats of smaller areas. There can be several such reasons for variation in the prices. The AO has not considered any of such factors and had applied a mathematical formula.We do not know how he had arrived at the conclusion that on money was charged by the assessee.If an AO wants to tax a particular income,it is his duty to bring on record some evidence to prove that the amount in question was part of the income that had accrued or arisen to an assessee.In the case under consideration, the AO has not carried out any exercise in that regard.He has made an allegation without any supporting evidence. The assessee had stated that two of the flats were sold to existing members of the old building and that additional concessions to the existing members had to be given for the redevelopment of the project.The AO had not taken this vital fact into consideration.We find that the FAA has clearly held that facts of the case relied upon by the AO were totally different from the facts of the case under consideration.In that case, it was established that flats sold by the assessee to his relatives were sold at lower prices as compared to the flats sold to other buyers. Considering,those peculiar facts of the case the Tribunal had upheld the addition made by the AO.In our opinion,the case relied upon the AO is of no help to him. In these circumstances, we hold that order of the FAA does not suffer from any legal or factual infirmity.Confirming the same, we decide the effective ground of appeal against the AO. Before parting,we would like to mention that it is a case that falls under the category of frivolous and unnecessary litigation. We are unable to understand as to how the authorities processing and authorising the filing of second appeal have endorsed the view of the AO for challenging the order of the FAA.It appears that appeal was filed without application of mind and in a routine matter. We hope that in future such frivolous appeals would not be filed. A result, appeal filed by the AO stands dismissed. फलतः िनधा�रती अिधकारी �ारा दािखल क� गई अपील नामंजूर क� जाती है. Order pronounced in the open court on 24th March , 2017. आदेश क� घोषणा खुले �यायालय म� दनांक 24 माच� 2017, को क� गई । Sd/- Sd/- (अमरजीत �सह / Amarjit Singh ) (राजे�� / Rajendra) �याियक सद�य / JUDICIAL MEMBER लेखा लेखा सद�य सद�य / ACCOUNTANT MEMBER लेखा लेखा सद�य सद�य मुंबई Mumbai; �दनांक/Dated : 24.03.2017. Jv.Sr.PS. आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत 1.Appellant /अपीलाथ�

2. Respondent /��यथ� 3.The concerned CIT(A)/संब� अपीलीय आयकर आयु�, 4.The concerned CIT /संब� आयकर आयु� 5.DR “ ” Bench, ITAT, Mumbai /िवभागीय �ितिनिध, खंडपीठ,आ.अ.�याया.मुंबई 3

823/M/15(10-11) Shailesh P. Dhairyawan