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Income Tax Appellate Tribunal, MUMBAI “A” BENCH, MUMBAI
Before: SHRI SHAILENDRA KUMAR YADAV, JUDICIAL & SHRI RAJESH KUMAR.
PAN: AAHFK1106E अपीलाथ� की ओर से/By Appellant : Shri Vijay Kumar Bora, D.R. ��यथ� क� ओर से/By Respondent : Ms. Arati Vissanji, A.R. सुनवाई क� तार�ख/Date of Hearing : 10.08.2016 घोषणा क� तार�ख/Date of Pronouncement : 12.08.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M:
This appeal has been filed by Revenue against the order of Commissioner of Income-Tax (Appeals)-30, Mumbai, dated 31.10.2014 for A.Y. 2010-11 on following grounds:
“1. On the facts and in circumstances of the case and in law, the Learned CIT(A) erred in deleting the addition of Rs.4,16,70,874/- on account of suppressed sale A.Y. 10-11 [ACIT vs. K. S. Constructions) Page 2 consideration in respect of flat sold by the assessee at a lower rate that the other flats in the same building even after the assessee failed to justify before the Assessing Officer as to why the aforesaid flats were sold at a lower price?
2. On the facts and in circumstances of the case and in law, the Learned CIT(A) should have upheld the addition of Rs.4,16,70,874/- towards suppressed sale consideration when the Hon’ble ITAT vide order dated 15.06.2011 in in the case of ITO 19(3)(1), Mumbai vs. Diamond Investment & Properties (A.Y.2005-06) had upheld similar addition of suppressed sale consideration under similar facts and circumstances which was upheld by Hon’ble Bombay High Court order dated 20.03.2014 in ITA No.14 of 2012.”
The facts of the case are that addition of Rs.4.16 crore was made to the income of assessee. Assessee firm is builder and developer and engaged in the activity of buildings and redevelopment of real estate projects. Assessee during the year has declared income from business and other sources. During assessment proceedings, assessee has shown income from sale of commercial units located in a commercial complex, namely, K. K. Square. He also noticed that during year 6 units in the said complex have been sold, out of which, sale deeds in 5 were registered during F.Y.2009-10. The date of registration of sale deed in the remaining one unit was in F.Y.2005-06 relevant A.Y.2006-07. He also noticed that unit no.101, date of agreement in which case was 18.12.2009, has been sold @ Rs. 2,94,485.29/- per sq. mtr. and on the same date another agreement has been entered for sale of unit no. 301, which has been sold @ Rs.34,870.97/- per sq. mtr. Date of first payment A.Y. 10-11 [ACIT vs. K. S. Constructions) Page 3 in case of unit no. 301, however, was 07.02.2006 as compared to 12.08.2009 in case of unit no.101 sold to M/s. JMD Auto India Pvt. Ltd. He further noticed that unit no. 302, date of registration in which case was 01.11.2009, has been sold@ Rs. 78,327.62/- per sq. mtr. and the first payment for the same has been made on 04.10.2009. However, unit no. 303 has been sold to one Mr. Ashok Mehra, vide registration deed dated 03.03.2006 @ 33,333.33/- and the date of first payment for the same was 30.12.2005. The last two units being 4th and 5th floor, have been sold to Overseas Infrastructure India Alliance Pvt. Ltd. vide deed of registration dated 18.11.2009 @ 2,38,576.17/- per sq. mtr. The date of first payment in this case was 13.07.2009. Assessing Officer called for reasons for variation in the sale rate per sq. mtr. in respect of above units and after considering the assessee's explanation, concluded that assessee has claimed that market value, as assessed by the stamp duty registering authority in the case of unit no. 302 was Rs.1,44,58,500/-, as against agreement price of Rs.1.51 crore, which is higher than the market value assessed by the stamp duty registering authority, whereas, Assessing Officer observed that the issue at hand was that the sale price of unit no.302 was much less than the price at which similar commercial units had been sold to other buyers in the same building during the similar time period, therefore, the claim of assessee that sale price of unit 302 was higher than the stamp duty is not relevant. Assessing Officer also rejected the submission of assessee that unit no. 302 suffers from design disadvantages and it could not get any customers to purchase ITA No.7660/Mum/14 A.Y. 10-11 [ACIT vs. K. S. Constructions) Page 4 the premises of unit no. 302, therefore, the same was in the nature of personal sale. He accordingly held that there is no convincing reason for charging lesser rates from one particular buyer compared to others in respect of similar/identical premises and it indicated that actual transaction for premises no. 302 must have been at prevailing rates, which were in the range of Rs. 2,38,576/- to Rs. 2,94,485/- per sq. mtr. and assessee has been unable to give convincing explanation for such un-natural variation in rates despite availing opportunities to do so. Assessing Officer further observed that as is the prevalent practice in real estate dealings, underhand transactions of on money in this case cannot be denied, especially when the prevalent market rates in same building were more than three times higher than the rate at which premises no. 302 was sold by assessee. He, therefore, held that there was a difference of 48 days in registration of premises no. 302 and 301 (01.11.2009 and 18.12.2009 respectively). Assessing Officer came to conclusion that in respect of unit no. 302, Mr. Paresh P. Shah was asked to submit details of transaction with assessee and from the said details submitted by him, it was found that first payment in case of unit no. 302 was made on 04.10.2009 and the entire payment was made on 24.11.2009 and in case of M/s. JMD Auto India Pvt. Ltd. to whom premises no. 101, has been sold, first payment came on 19.08.2009 and the entire payment was made on 04.11.2009. He, therefore, held that two transactions are comparable, in view case of almost identical timing and since assessee could not provide plausible reason for such vide variation in rates, he A.Y. 10-11 [ACIT vs. K. S. Constructions) Page 5 applied the rate at which first floor (premises no. 101), has been sold, for the purpose of determining the actual sale rate for unit no.
302. Accordingly, rate of 2,94,485.29/- per sq. mtr., was adopted by him for computing the sale price of unit no. 302 (192.78 sq. mtr.) and difference of Rs. 4,16,70,874/- was treated by him as unaccounted income of assessee from sale of unit no. 302, and added same to the income of assessee.
2.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) granted relief to assessee.
2.2 Same has been opposed before us on behalf of Revenue inter alia submitted that CIT(A) erred in deleting the addition of Rs.4,16,70,874/- on account of suppressed sale consideration in respect of flat sold by assessee at a lower rate that the other flats in the same building even after assessee failed to justify before the Assessing Officer as to why the aforesaid flats were sold at a lower price? In the facts and circumstances of the case, CIT(A) should have upheld the addition of Rs. 4,16,70,874/- towards suppressed sale consideration. Accordingly, order of CIT(A) be set aside and that of Assessing Officer be restored. On the other hand, ld. Authorized Representative supported the order of CIT(A).
2.3 After going through rival submissions and perused the material on record, we find that issue before us is with regard A.Y. 10-11 [ACIT vs. K. S. Constructions) Page 6 to addition of Rs.4,16,70,874/-. It is not in dispute that sale price of unit no.302 is higher than the stamp duty valuation. He also accepted the variation in rates for sale of unit nos. 301, 302 and 4th & 5th floor, vis-à-vis sale rate of unit no.101. As discussed earlier, besides unit no.302, the date of agreement for unit no.301 and 4th & 5th floor was also falling in F.Y.2009- 10 relevant to A.Y. 2010-11. Assessing Officer observed that as is a prevalent practice in real-estate dealings, underhand transactions of on money in this case cannot be denied, especially when the prevalent market rates in the same building were more than three times higher than the rate at which premises no. 302 was shown to be sold by assessee. However, Assessing Officer has not brought any evidence on record to show as to how the explanation of assessee that there is locational disadvantages in the case of unit no.302, which has been duly recorded by him, was not correct. Assessing Officer has not brought any evidence to establish that there has been on money transaction for sale of said unit no.
It is not a case of transaction between related parties. Assessee also informed the Assessing Officer that unit no. 302 sold at a value which was substantially higher than the market rate computed by the state Government of Maharashtra, hence, only reason why flat no. 101 commanded higher price compared to other flats was that the said unit had locational advantage of entire floor suitable for a car show room compared to unit no.
302. In the light of the above facts, CIT(A) observed that there was no case made out by Assessing Officer that the sale price was below the price declared by the ITA No.7660/Mum/14 A.Y. 10-11 [ACIT vs. K. S. Constructions) Page 7 State Government of Maharashtra or below the market price. Assessing Officer had simply applied the differential in rates for booking of unit no. 101 and 302A for arriving at the actual booking rate for unit no.302. The addition made by Assessing Officer was therefore simply on the basis of difference in the rate in booking of unit no.101. CIT(A) relied on the decision of Mumbai ITAT in case of Nelkamal Realtors & erectors India (P) Ltd. reported in (2013) 38 taxman.com 195 (Mumbai Trib) and held that Assessing Officer has not controverted the explanation furnished by assessee during course of assessment proceedings to explain the reasons for charging lower price in respect of unit no.302 sold vis-à-vis rate/price for unit no.101. In view of above, CIT(A) rightly deleted the addition of Rs.4,16,70,874/-. This reasoned factual finding of CIT(A) needs no interference from our side because transaction in question is as per same valuation of the concerned State department. Same is upheld.
In the result, the appeal filed by Revenue is dismissed.
Pronounced in the open Court on this the 12th day of August, 2016.