2024 (12) TMI 640 - AT - Income Tax

Revenue's appeal dismissed as additions of business income and capital gains deleted due to lack of evidence and consistent precedents

The DCIT, Central Circle-1 (1), Ahmedabad Versus Navratna Organisers And Developers Pvt. Ltd. And (Vice-Versa)

ITAT Ahmedabad dismissed Revenue's appeal regarding additions of business income and short-term capital gains. The tribunal deleted the business income ... Addition made of business income - HELD THAT:- The entire facts of assessee's case under consideration are identical with facts of the other assessment years and there is no change in the modus operation of the business of the assessee. Therefore, respectfully following decisions in subsequent Assessment Year in assessee's own case for A.Yrs. 2008-09, 2009-10 and 2012-13 [2019 (1) TMI 1953 - ITAT AHMEDABAD] entire addition made by the AO on account of business income is deleted. Thus the Ground no.1 raised by Revenue is devoid of merits and liable to be dismissed. Addition of Short Term Capital Gain on account of transfer of shares - assessee objected on addition on the ground that estimated sale value of project as determined by the AO is incorrect, hence such value cannot be considered - HELD THAT:- The entire addition made by the AO was only on presumption which is not sustainable in law and cannot be sustained without bringing on record evidences suggesting actual receipt of consideration over and above face value of shares. Considering the detailed discussion made by the CIT[A] held that entire addition made by the AO cannot be sustained. Thus the Ground no.2 raised by Revenue is devoid of merits and liable to be dismissed. Issues Involved:1. Deletion of the addition made on account of business income.2. Deletion of the addition of Short Term Capital Gain on account of transfer of shares.Detailed Analysis:Issue 1: Deletion of Addition on Account of Business IncomeThe Revenue challenged the deletion of an addition amounting to Rs. 9,42,29,188/- made by the Assessing Officer (AO) on account of business income. The AO had treated the assessee as the owner of the project, thereby taxing the income reported under 'liabilities' and estimating an 8% profit on Work-In-Progress (WIP) of Kings Square. The assessee argued that it was merely a developer, not the owner, and that similar additions had been deleted in previous years by the ITAT.The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, observing that the assessee was a developer providing services under development agreements and charging development fees. The CIT(A) noted that the assessee's role was limited to receiving development fees on project completion, with cooperative societies being the actual owners. The CIT(A) found the AO's addition to be based on a hypothetical basis and not supported by evidence, thereby deleting the addition. The Tribunal upheld this decision, finding no error in the CIT(A)'s order and noting that the AO's application of Accounting Standard-7 was inappropriate as it applies to contractors, not developers.Issue 2: Deletion of Addition of Short Term Capital Gain on Transfer of SharesThe Revenue also contested the deletion of an addition of Rs. 6,99,65,000/- made on account of Short Term Capital Gain from the transfer of shares. The AO had estimated the sale value of the project and deemed the value of shares sold, computing a capital gain based on these estimates. The assessee contended that the AO's estimation was incorrect and that there was no provision in the relevant year to substitute the sale value of shares.The CIT(A) deleted the addition, noting that the AO's estimation was based on presumption without evidence of actual receipt of consideration beyond the face value of shares. The CIT(A) observed that the AO could not replace the actual sale value with an estimated fair market value, as this was contrary to the provisions of the Act for the relevant assessment year. The Tribunal agreed with the CIT(A), finding that the addition was unsustainable in law without evidence of actual consideration received over the face value of shares.In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletions of the additions made by the AO on both issues. The Tribunal found the Revenue's grounds of appeal devoid of merit, aligning with previous decisions in similar cases. The cross-objection filed by the assessee was also dismissed as it supported the CIT(A)'s order.