Revenue's appeal dismissed, unrecorded profit deletion upheld by Tribunal. CIT(A) decision affirmed.

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order to delete the addition of Rs. 41,50,000 as unrecorded profit. The Tribunal found no merit in the AO's addition based on presumptions and surmises, confirming that the CIT(A) properly considered evidence and followed legal procedures. The appeal was dismissed, and the order was pronounced on November 10, 2015.

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Issues Involved:
1. Discrepancy in the sale prices of flats.
2. Addition of Rs. 41,50,000 as unrecorded profit.
3. Compliance with Tribunal's directions.
4. Admission of fresh evidence under Rule 46A.
5. Verification and enquiry by the Assessing Officer (AO).

Detailed Analysis:

1. Discrepancy in the Sale Prices of Flats:
The assessee company, engaged in building construction, declared a turnover of Rs. 46.50 lakhs and a net profit of Rs. 1.46 lakhs for the assessment year 2006-07. The AO questioned the variation in the sale prices of similar flats in the same building. The assessee explained that the higher price for the flat sold to Dr. Rajnish Juneja was due to its front-side location, additional alterations, and premium fittings. However, the AO rejected these explanations and adopted the highest sale price of Rs. 22 lakhs for all flats, leading to an addition of Rs. 41,50,000 as unreported profits.

2. Addition of Rs. 41,50,000 as Unrecorded Profit:
The AO added Rs. 41,50,000 to the assessee's income, assuming the sale prices of all flats should match the highest price of Rs. 22 lakhs. The AO's decision was based on the absence of substantial evidence to justify the price differences. The CIT(A) later deleted this addition, noting that the AO failed to appreciate the facts and legal documents, which indicated that the flat sold to Dr. Juneja included additional work and fittings.

3. Compliance with Tribunal's Directions:
In the first round of appeal, the Tribunal directed the AO to verify the cost incurred for each flat and any additional work undertaken. In the second round, the AO reconfirmed the addition without proper verification, citing non-compliance by the assessee. The CIT(A) observed that the AO did not undertake the exercise as directed by the Tribunal and passed the order mechanically.

4. Admission of Fresh Evidence under Rule 46A:
The revenue argued that the CIT(A) admitted fresh evidence without giving the AO an opportunity to comment, violating Rule 46A. However, the CIT(A) noted that the documents were already on record during the original assessment and were not new evidence. The Tribunal upheld this view, stating that the AO had the documents but did not consider them properly.

5. Verification and Enquiry by the AO:
The CIT(A) found that the AO did not verify or enquire with the parties who bought the flats at lower prices. There was no evidence of unrecorded profit or underhand consideration. The sale deeds disclosed the full value of consideration, and the AO's addition was based on presumption without specific evidence. The Tribunal agreed with the CIT(A), noting the lack of material evidence to support the AO's allegations and the failure to follow the Tribunal's directions for verification.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order to delete the addition of Rs. 41,50,000. The Tribunal found no merit in the AO's addition based on presumptions and surmises and confirmed that the CIT(A) properly considered the evidence and followed legal procedures. The appeal was dismissed, and the order was pronounced in open court on November 10, 2015.

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