On-money from flat sales is taxable only in the year of actual sale, and remand directions cannot be expanded.
In set-aside proceedings, the Assessing Officer must remain within the limited remand directions and cannot enlarge the scope of enquiry by examining unrelated flats or broader record deficiencies. The Tribunal held that the remand was confined to verifying whether the identified flats were sold in the relevant year and determining the correct year of taxability, so the expanded inquiry was impermissible. On the taxability of alleged on-money, the evidence showed that the relevant flats were sold in subsequent years or remained unsold inventory, and the relied-upon statement reflected project-wise receipts rather than a year-specific receipt for the year under appeal. The addition was therefore deleted.
Issues: (i) Whether the Assessing Officer, in the set-aside proceedings, travelled beyond the limited directions issued by the Tribunal and enlarged the scope of enquiry. (ii) Whether the alleged on-money could be brought to tax in the year under consideration when the corresponding flats were not sold in that year.
Issue (i): Whether the Assessing Officer, in the set-aside proceedings, travelled beyond the limited directions issued by the Tribunal and enlarged the scope of enquiry.
Analysis: The remand was confined to examining whether the identified flats were sold during the relevant year, considering the sale deeds and other supporting evidence, and then determining the correct year of taxability. Instead of restricting the enquiry to those flats, the Assessing Officer called for details of all 44 flats and relied on alleged deficiencies in the broader record. Such an approach was beyond the mandate of the remand and did not comply with the appellate directions.
Conclusion: The Assessing Officer exceeded the scope of the remand directions, and the partial sustenance of the addition by the first appellate authority was unsustainable.
Issue (ii): Whether the alleged on-money could be brought to tax in the year under consideration when the corresponding flats were not sold in that year.
Analysis: The evidence on record, including registered agreements, Index-II copies and property-related documents, showed that three flats were sold in subsequent years and the remaining two flats continued to remain unsold inventory. The statement relied upon by the Revenue reflected consolidated project-wise and year-wise receipts, not a year-specific receipt attributable to the year under appeal. Since the foundational fact of sale during the relevant previous year was absent, the alleged cash component could not be taxed in that year. Cash receipts linked to flat sales are taxable in the year in which the flats are actually sold.
Conclusion: The addition on account of alleged on-money could not be sustained in the year under consideration and was liable to be deleted.
Final Conclusion: The impugned addition was deleted in full, and the assessee obtained complete relief for the year under appeal.
Ratio Decidendi: In set-aside proceedings, the authority is bound by the specific remand directions, and where on-money is linked to sale of flats, it is taxable only in the year in which the corresponding sale actually takes place.
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AI Drafter ✕
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