1990 (2) TMI 83 - AT - Income Tax

Appellate Tribunal allows appeal, cancels income addition by tax authorities, except for one flat sale profit.

MOHAN LAND CORPORATION. Versus INCOME TAX OFFICER.

MOHAN LAND CORPORATION. Versus INCOME TAX OFFICER. - TTJ 037, 262, Issues:1. Addition of income by the ITO based on possession of flats.2. Confirmation of the addition by the Commissioner.3. Interpretation of taxable event and transfer of property in relation to business profits.4. Discrepancy between the ITO and Commissioner's basis for the addition.5. Decision of the Appellate Tribunal regarding the addition.Analysis:1. The ITO made an addition of Rs. 4,42,667 to the assessee's income for the assessment year 1984-85, based on the assumption that possession of flats was handed over during that period. The ITO noted that the assessee, a builder, had not shown any profits despite constructing flats in previous years. The ITO's decision was primarily influenced by the lack of response from the assessee regarding the possession of flats during the relevant period.2. The Commissioner upheld the addition made by the ITO, emphasizing that 90% of the payment for the flats had been received by the assessee by the end of the accounting year 1983-84. The Commissioner distinguished a previous case where the timing of the sale deed registration was crucial, stating that in the present case, the transfer of property was significant for business profits, not capital gains. The Commissioner relied on legal precedents to support the decision.3. The assessee's counsel argued that no taxable event had occurred during the relevant period for the assessment year 1984-85, as possession was not transferred, except for one sale deed. The counsel provided detailed information on the execution of banakhats, registration of sale deeds, and payments received. The Departmental Representative defended the ITO and Commissioner's orders, highlighting the differences in the nature of transactions compared to the legal precedents cited.4. The Appellate Tribunal analyzed the basis of the ITO and Commissioner's decisions. The ITO focused on possession of flats, while the Commissioner emphasized the substantial payments received by the assessee by a certain date. The Tribunal found discrepancies in the reasoning behind the addition and concluded that the possession of only one flat had been transferred during the relevant period. The Tribunal canceled the addition, except for the profit related to that specific flat.5. The Appellate Tribunal partly allowed the appeal for statistical purposes, canceling the addition made by the ITO and Commissioner, except for the profit from the sale of one specific flat. The Tribunal's decision was based on the lack of valid legal basis for the addition and the detailed information provided by the assessee's counsel regarding possession and transactions during the relevant period.