ASSISTANT COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE-3,, SURAT vs. M/S DIANCO, , MUMBAI

Brief facts of the case are that the assessee is a firm, engaged in the business of buying and selling of real estate properties. The assessee filed its return of income for A.Y. 2018-19 on 24/09/2018 declaring NIL income. The case was selected for scrutiny. During the assessment, the Assessing Officer noted that the assessee has purchased two flats i.e. flat No. 103 and 307 in Sunstone Project at Shastri Nagar, Bandra (E), Mumbai. The Assessing Officer asked certain details about such flats i.e. area, date of purchase, rate of purchase and other details. The assessee filed its reply dated 22/03/2021 and submitted that they have made booking @ Rs. 11,000/- per square feet in May 2011. The Assessing ACIT Vs M/s Dianco Officer on the basis of area of flats worked out the cost and was of the view that the assessee has made excess payment against both the flats in the following manner: Sr. Flat Actual payment Amount @ rate of Excess No. No. made (Rs) 11000/- per square feet payment made (Rs.) 1. 103 2,46,40,000 1,96,02,966 50,37,034 2. 307 1,76,88,000 1,41,52,830 35,35,170 Total 4,23,28,000 3,37,55,796 85,72,204 The Assessing Officer worked out the difference of alleged excess payment of Rs. 85,72,204/-.

The Assessing Officer further noted that at the time of execution of transfer deed, there was a difference in the value adopted by Stamp Valuation Officer and the value declared by the assessee with regard to both the flats in the following manner: Sr. Flat No. Stamp Value/Market Purchased value Difference No. Value (Rs.) Rs. Rs. 1. 103 4,18,82,500 2,66,37,226 1,52,45,274 2. 307 3,05,87,000 1,96,84,759 1,09,02,241 Total 7,24,69,500 4,63,21,985 2,61,47,515 4. On the basis of aforesaid observation, the Assessing Officer issued detailed show cause notice as to why additions of Rs. 85,72,204/- and of Rs. 2,61,47,515/- be not made in the income of assessee. In response to show cause notice, the assessee filed its detailed reply dated 16/04/2021. Some of the contents of reply of assessee is recorded in para 3.4 of assessment order. The assessee in its reply, submitted that they have paid purchased consideration after discussing floor plan, ACIT Vs M/s Dianco construction period and other facilities and agreed to pay Rs. 11,000/- per square feet based on super built up area. Such terms and conditions were finalized in May, 2011, in the allotment letter and total sale consideration of Rs. 1,96,84,754/- was paid for flat No. 307 and Rs. 2,66,37,266/- for flat No.

Final agreement was entered after passing of substantial period of time. The assessee submitted that the Assessing Officer has applied flat rate of Rs. 11,000/- per square feet on built up area and as a result thereof, a difference of Rs. 35,35,170/- and Rs. 50,37,034/- was calculated. Final consideration is based on super built up area. The assessee has paid consideration as per super built up area. Consideration paid by assessee is also corroborative with the stamp duty valuation which is on higher side.

The reply of assessee was not accepted by Assessing Officer by taking a view that the assessee has contended that the payment was made for super built up area whereas the difference was worked out on built up area as mentioned in the purchase deed. Such fact is not true as built up area is taken into consideration at the time of registration of document with Sub-Registrar and that the assessee has made extra payments of Rs. 85,72,204/-. On the other proposed addition under Section 56(2)(x) of the Income Tax Act, 1961 (in short, the Act), the assessee submitted that they have made booking prior to insertion of clause (x) in Section 56(2) and the First Proviso thereto states that the ACIT Vs M/s Dianco date of original agreement fixing the date of consideration and the date of registration are not same, the stamp valuation as on the date of agreement shall be considered. The assessee had agreed to purchase the flat No. 103 and 307 vide allotment letter dated May, 2011 and based on mutual understanding, the payment of consideration was made in accordance with mode prescribed in allotment letter. Thus, the date of allotment letter shall be considered for the purpose of this Section and not otherwise. The reply of assessee was not accepted by the Assessing Officer by taking a view that in the month of May, land was in the possession of Akruti Niraman Ltd. who entered into joint venture with Sunstone Developers in December, 2011 as reflected in the sale deed dated 21/04/2017 (sale deed executed in favour of assessee about such flats). The project was started on 11/07/2011 and on that date Sunstone Developers was not in picture. The assesse has produced allotment letter but no proof of payment was furnished. Thus, the plea of assessee was not accepted and the Assessing Officer brought the difference of Rs. 2.61 crore vis a vis the value determined by Stamp Valuation Officer with regard to both the flats.

Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed detailed written submission. Submission of assessee with regard to addition of Rs. 85,72,204/- is recoded in para 6.1 of order of ld. CIT(A)

The ld. CIT(A) after considering the assessment order, submission of assessee held that the assessee purchased 17 flats from builder, out of 17, 8 flats were sold by way of tripartite agreement in earlier years. Out of remaining nine flats, 7 flats were sold in A.Y. 2017-18 and 2 flats bearing No. 103 and 307 were sold during the year under consideration. The assessee has paid total cost of these two flats to builder aggregating of Rs. 4.23 crores. The payment was made as per allotment ACIT Vs M/s Dianco letter and other charges charged by builder and the stamp duty paid. The addition made by Assessing Officer is totally on wrong footing and was not warranted. The Assessing Officer applied Rs. 11,000/- per square feet as a sacrosanct cost and treated the amount paid in addition to Rs. 11,000/- per square feet as excess amount and made addition. During the assessment, the assessee explained basic cost of flat and the other many extra amount for water connection, electricity connection, society charges, club house charges which are in addition to basic cost. The Assessing Officer has not gone into such basic details and made addition in a casual manner without understanding the nature whether such addition could really be made and deleted the addition.

On the addition under Section 56(2)(x) of the Act, the assessee submitted that they made booking of flats in F.Y. 2011-12 and made payment through cheques. The provisions of Section 56(2)(x) were inserted w.e.f. 01/04/2017 and have prospective effect. Further as per first Proviso to such Section, make it clear that where the date of agreement fixing the amount of consideration for the transfer of immovable property and date of registration are not same, the value on date of agreement may be taken for the purpose of this sub-clause. Further as per second proviso, it is made clear that first proviso shall apply only in case where the amount of consideration referred therein or part thereof has been paid by way of account payee cheque or ACIT Vs M/s Dianco account payee cheque/draft or electronic mode on or before the date of agreement for transfer of such immovable property. The assessee agreed to purchase the flats by way of allotment letter dated may, 2011 and made payment by way of banking channel, thus the condition laid down in Section 56(2)(x) of the Act and the proviso attached thereto, no addition is to be made.

The ld. CIT(A) after considering the contents of assessment order and the submission of assessee held that the assessee entered into agreement for purchase of these two flats in May, 2011 which is evident from the allotment letter issued by the builder and the payment made by assessee was through banking channel. Thus, the assessee entered into agreement fixing the amount of consideration for transfer of immovable property. In the present case, the first proviso to Section 56(2)(x) would apply. As per the said proviso, where the date of agreement fixing the amount of consideration for transfer of immovable property and the date of registration are not same, the stamp duty value on the date of agreement may be taken for the purpose of said sub- clause. The ld. CIT(A) examined the ready reckoner rate applicable for the CTS where the property situated were examined. As per such rates, the value of property in question comes to Rs. 2,82,19,052/- against which the assessee has made payment of Rs. 4,63,21,985/- which is more than the ready reckoner rates. Thus, the addition under Section ACIT Vs M/s Dianco 56(2)(x) of the Act is not warranted. Aggrieved by the order of ld. CIT(A), the revenue has filed present appeal before the Tribunal.

We have heard the rival contentions of the learned Commissioner of Income Tax-Departmental Representative (ld. CIT-DR) for the revenue and the learned Authorised Representative (ld. AR) of the assessee and the and have perused the orders of the lower authorities carefully. Ground No. 1 of the appeal relates to deleting the addition of Rs. 85,72,204/-. The ld. CIT-DR for the revenue submits that the assessee simply took the plea that they made payment on super built up area whereas the payment of difference was worked out on built up area mentioned in the purchase deed. On the basis of agreed rate of Rs. 11,000/- per square feet, the difference in the sale consideration worked out on the basis of agreed rate and the actual payment is nothing but an extra payment besides the agreed upon the consideration.

On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR of the assessee submit that the Assessing Officer failed to appreciate that final cost comprise of various amenities and the ultimate cost incurred by the developer. Admittedly, the assessee has made payment of consideration of more than the prevalent ready reckoner rate/jantri rate at the time of making payment. The Assessing ACIT Vs M/s Dianco Officer made addition on illogical basis which was appreciated by the ld. CIT(A) while deleting the addition.

We have considered the rival submissions of both the parties and perused the orders of the lower authorities carefully. As recorded above, the Assessing Officer made addition of Rs. 85,72,204/- by taking a view that the assessee has disclosed the rates of flat @ Rs. 11,000/- per square feet, however, the assessee has actually made much more payment than the agreed amount. The Assessing Officer worked out the difference as recorded in para- 3 of the assessment order. Before the ld. CIT(A), the assessee filed detailed written submission. The ld. CIT(A) after considering the submissions of assessee held that that the assessee purchased 17 flats from builder, out of 17, 8 flats were sold by way of tripartite agreement in earlier years. Out of remaining nine flats, 7 flats in A.Y. 2017-18 and 2 flats bearing No. 103 and 307 were sold during the year under consideration. The assessee has paid total cost of these two flats to builder aggregating of Rs. 4.23 crores. The payment was made as per allotment letter and other charges charged by builder and the stamp duty paid. The addition made by Assessing Officer is totally on wrong footing and was not warranted. The Assessing Officer applied Rs. 11,000/- per square feet as a sacrosanct cost and treated the amount paid in addition to Rs. 11,000/- per square feet as excess amount and made addition. During the assessment, the ACIT Vs M/s Dianco assessee explained basic cost of flat and the other many extra amount for water connection, electricity connection, society charges, club house charges which are in addition to basic cost. The Assessing Officer has not gone into such basic details and made addition in a casual manner without understanding the nature whether such addition could really be made and deleted the addition. We find that the ld. CIT(A) appreciated the facts of the case in a proper perspective. The Assessing Officer while making the addition has not considered the payments made on account of various amenities like electricity connection, water connection, common facilities of various amenities provider by the builder/developer.

We find that the ld. CIT(A) deleted the addition by appreciating the facts in proper way and by taking a correct view, therefore, we do not find any illegality or infirmity in the order passed by the ld. CIT(A) and we uphold the same qua ground No. 1 of appeal. In the result, ground No. 1 of the appeal is dismissed.

Ground No. 2 of the appeal relates to addition of Rs. 2.61 crores under Section 56(2)(x) of the Act. The ld. CIT-DR for the revenue submits that the ld. CIT(A) granted relief to the assessee on the basis of first and second proviso to Section 56(2)(x) of the Act. The benefit of first and second proviso can only be extended on the basis of agreement. There is no agreement between the assessee and developer. The ACIT Vs M/s Dianco assessee merely relied on allotment letter cannot be considered as agreement. In the submission before the ld. CIT(A), the assessee itself prayed to the ld. CIT(A) to refer the matter to the DVO for estimation of fair market value on the date of registration. The matter should have been referred to the DVO instead of granting relief to the assessee on the basis of allotment letter. The ld. CIT(A) has not examined the basic cost of flats. The ld. CIT-DR prayed to restore this ground of appeal