2023 (11) TMI 1064 - AT - Income Tax

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

ITO, Ward-25 (3), New Delhi Versus Time Bound Contracts Pvt. Ltd.

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 ... Accrual of income - income from sale of land - Deemed profit on transfer of WIP (i.e. land measuring 47.01 bigha) - assessee company is the only registered owner of the land which has been sold during the year and as per the statutory provisions of law, it is only the assessee company which is liable to show the said transaction in its books of accounts and compute the tax liability accordingly. Merely by entering into the private arrangement by virtue of agreement, substantive provisions of law cannot be forfeited - HELD THAT:- As decided in assessee own case [2021 (12) TMI 926 - ITAT DELHI] appellant has reiterated that it has not sold any part of the land admeasuring 47.01 bighas which continued to be shown as WIP in the books of the appellant till the AY 2012-13. AO has evidently failed to bring on record any evidence in support of his contention that the appellant had actually sold land of 3600 sq. yards and received the consideration - Further, the AO has again made addition in the Assessment Year 2013-14 as mentioned above by considering the said land of 47.01 bighas as the stock held by the appellant. On the other hand, M/s Parsvnath Developers Ltd. has [confirmed that these sales are reflected in its books of account. In view of all the above facts, I find no material basis for the estimated addition made by the AO. Decided against revenue. 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 WIPThe 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 LandThe 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.