ITAT deletes deemed profit addition on work-in-progress land transfer lacking evidence of actual sale

The ITAT Delhi ruled against the revenue in a case involving deemed profit on transfer of work-in-progress land measuring 47.01 bigha. The assessee company maintained the land as WIP in its books and denied any sale. The AO failed to provide evidence supporting the alleged sale of 3600 sq. yards or receipt of consideration. The tribunal found no material basis for the estimated addition made by the AO, noting that another entity had confirmed the sales in its own books. The addition was deleted.

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Issues Involved:
1. Restriction of addition on account of deemed profit on transfer of WIP.
2. Deletion of addition regarding sale of land.

Summary:

Issue 1: Restriction of Addition on Account of Deemed Profit on Transfer of WIP

The Revenue contested the CIT(A)'s decision to restrict the addition of Rs. 58,78,13,030/- to Rs. 78,510/-. The Assessing Officer (AO) noted that the assessee, a company engaged in real estate, had not offered any revenue from business operations and had shown the opening Work in Progress (WIP) as transferred to a developer company, resulting in nil WIP by the end of the year. The AO argued that the assessee, being the legal owner of the land, should account for the transaction in its books and compute tax liability accordingly. The assessee claimed that all rights related to the land were transferred to M/s. Parsvnath Developers Ltd., and the income from the sale of land was accounted for in the developer's books. The CIT(A) upheld this view, relying on previous assessments where it was determined that M/s. Parsvnath Developers Ltd. was the real owner of the land. The Tribunal found no material difference in the factual position and upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

Issue 2: Deletion of Addition Regarding Sale of Land

The AO made an addition of Rs. 16,10,237/- for the sale of land measuring 370 sq. yds., claiming that the assessee was the registered owner. The CIT(A) found that the sale and profit were booked by M/s. Parsvnath Developers Ltd., which held all rights to the land. The CIT(A) noted that the land was continuously shown as WIP in the assessee's books until the assessment year 2012-13, and the sales were reflected in the developer's accounts. The Tribunal, respecting the decision of the Co-ordinate Bench, upheld the CIT(A)'s order, dismissing the Revenue's grounds related to this issue as well.

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to restrict the addition on deemed profit and delete the addition regarding the sale of land, based on consistent findings from previous assessments and the factual position presented.

Order Pronounced:

The appeal filed by the Revenue is dismissed. Order pronounced in the open court on 25.10.2023.

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