TaxTMI 
TaxTMI 
2011 (10) TMI 688
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....ncluded assessee also. This assessment year is relevant to the previous year in which the search and seizer action was conducted. In the return of income, the assessee claimed deduction under section 80IB(10) of the Act. The facts that are relevant for disposing off these cross appeals are that, the Assessing Officer restricted the claim of deduction under section 80IB(10), on the ground that the amount realised from sale of FSI, received as consideration for the rehabilitation project from MIDC, is in excess of the market rate prescribed in the Stamp Duty Ready Reckoner, issued by the State Government. In other words, the amount realised from sale of FSI in excess of the market rate prescribed in Stamp Duty Ready Reckoner was held as profits not eligible for deduction under section 80IB(10). This decision was taken on the projects - (i) Buldg. 7A Pkt.5, (ii) Bldg. 2 Pkt. 9 and (iii) Bldg.1 Pkt.9. The Assessing Officer has accepted the fact that the assessee has complied with all other requirements for availing deduction under section 80IB(10). In the words of Commissioner (Appeals), these facts are brought out as follows:- "5.1 The A.O. has dealt with this issue in Para-4....
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...., and by debiting the cost of construction and the cost of FSI utilized in constructing the same building. 5.1.2 In view of the above, the A.O. asked the assessee to explain the transaction regarding sale of FSI to Netzone. Explanation of the assessee was reproduced on the Page 16 and 18 of the assessment order. 5.1.3 As regard Pkt. 5 and 9, the A.O. allowed the claim of deduction under section 80IB(10) but the same was reduced by difference between sale values of FSI sold and stamp duty ready reckoner rate on the ground that abnormally high profit was claimed for projects at Pkt. 5 and Pkt. 9 in MIDC at the time of selling the FSI. In netshell, profit for Rehab Project in Pkt. 5 and 9 in MIDC was rewroked out taking stamp duty ready reckoner rate as sale consideration for FSI sold instead of actual sale value realised by the appellant for reasons stated in detail in the assessment order." 3. The other facts which are relevant for disposing off these appeals are that, the certain additions was made by the assessing officer on the basis of certain loose papers and documents seized during the course of search by coming to a conclusion that these are undisclosed s....
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....r an opportunity to examine these documents and offer his comments thereon. Thus he submits that not giving an opportunity to the Assessing Officer is bad-in-law and, hence, the issue should be restored to the file of Assessing Officer for adjudication afresh; and (iii) that the assessee was following a method of accounting wherein, the FSI in question was disclosed as stock-in-trade and this stock was valued at approved market rate for stamp duty purposes. He contends that there is a change in the method followed and sale is recorded at a much higher rate than the market value of stock. He relied on the order of the Assessing Officer. 6. On grounds no.5 and 6, learned Departmental Representative submitted that the Commissioner (Appeals) erred in deleting the addition of Rs. 20,00,000/- on account of undisclosed sales in respect of Flat no.503. He took this bench to Para-8/Page-31 of the Commissioner (Appeals)'s order and thereafter relied on the findings in the assessment order. 7. Similarly, on ground no.7, the learned Departmental Representative relied on the order of the Assessing Officer and had not made any submissions. 8. Learned Counsel for the assessee, Mr. Vijay ....
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....r (Appeals) and submitted that nothing turns on this point of admission of additional evidence as otherwise the assessee was entitled to claim deduction. 9. On the issue that exemption under section 80IB(10), cannot be restricted by artificially dividing sale consideration and on the method of accounting, he pointed out that as per the method of accounting followed by the assessee, project completion method is followed and that closing stock is valued at cost or stamp duty market valuation rate, whichever is lower. He submitted that there is no error in such valuation of stock and that there is no change in method of accounting. He pointed out that there is no allegation whatsoever that money has flown back to the buyer from the assessee. He emphasized that there are no common share holders or directors in the Assessee Company and Netzone Developers and the allegation of the Assessing Officer that there may be indirect control, is without any basis or evidence and is only a surmise and conjecture. He filed a paper book running into 199 pages and pointed out Page-5 which is an agreement entered by the assessee with Netzone Developers and argued that none of these documents have b....
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....onclusion has been drawn that the sale proceeds @7000/- per sq.ft.for FSI, do not pertain to the projects in question or is there a finding that sale consideration was partly received in for something else than FSI. In fact in case of project at Pkt. 4, this rate was accepted by the Assessing Officer as arms length rate and the sale consideration was taken at the actuals and no notional division was made and the profits were taxed without bifurcation. The agreement to sale FSI to Netzone Developers was registered with the stamp duty authorities on 22nd February 2008 and this document has not been disputed by the Revenue. The rate mentioned in this registered document is Rs. 7,000 per sq.ft. Certain amounts have been received by the assessee immediately on execution of deed of assignment. There is no material with the Assessing Officer to come to a conclusion that the sale consideration of the project was actually much lesser than what was depicted in the registered document as well as in the books of account. There is no allegation that money flowed back in cash from the assessee to the buyer. In the absence of any investigation or unearthing of any evidence that, the sale consider....
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.... AR and find merit in them. 5.12 A perusal of the method of accounting in respect of FSI followed by the appellant indicates that FSI is stated at the rate prescribed in the stamp duty ready reckoner issued by the State Govt. for the year in which FSI is generated. This value is taken by the appellant to determine the profit generated from the construction of Rehab Building. The same stamp duty rates were applied for ascertaining the approximate sale value of FSI consumed for development of sale project. Clearly, when the FSI generated was not sold during the same year but was carried forward as inventory to be consumed, the same was valued at stamp duty rates. However, when FSI generated as a result of development of Rehab Project is sold in open market in the very year of generation, the actual sale value of the FSI is considered for calculation of profit. This is also in consonance with the accounting standard AS-9, issued by the Institute of Chartered Accountants of India on revenue recognition. The appellant had to recognize in its books of account actual revenue generated through sale of FSI. Thus, the contention of the A.O. that the policy of recording revenue on FS....
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....pellant company. No basis for such premise has been given by the A.O. nor was an effort made by him to obtain the information regarding the shareholding pattern or directorship of these companies. The information called for during the appellate proceedings on these lines indicated the absence of any overlapping or commonality of ownership or directorship in these companies. 5.14 There is also no merit in the findings of the A.O. that the sale of FSI is equivalent to the assignment of vacant land. There is no merit in the submissions of the AR that the appellant only has the right of utilization of FSI on leasehold land belonging to MIDC which is a saleable commodity and that the appellant is not the owner of land and FSI is not embedded to the land. Hence, the non registration of the Deed of Assignment could not be a sufficient reason to deny the benefit of section 80IB(10) to the appellant. 5.15 Regarding the remark of the A.O. that FSI realised has been valued as per ready reckoner rates for other projects "completed" in the year consideration, there is merit in the submissions of the AR that completion of projects and valuation of FSI has no connection. The A.O....
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....e buyer with a view to save on the stamp duty expenditure which is leviable on the sale/purchase of immovable property. However, this has no tax connotations and hence this ground of appeal is allowed." 16. Learned Departmental Representative was not able to dispute these factual findings. Hence we agree with the conclusion of the Commissioner (Appeals). Consequently, grounds no.5 and 6 are dismissed. 17. On ground no.7, the Commissioner (Appeals), at para-9.4, held as follows:- "9.4 I have considered the facts of the issue and the submissions made by the A.R. It is true that the declared income is already inflated by Rs. 5,89,000 since the sale of flat figure has been shown in the books of account at Rs. 25,00,000 whereas the actual sale price as per the seized documents was Rs. 19,11,000. Thus the addition of Rs. 5,89,000 (Rs. 25,00,000 minus Rs. 19,11,000) made under section 69C, if confirmed, would tantamount to confirmation of double addition. Hence, the addition to the extent of Rs. 5,89,000 is deleted. However, regarding the balance amount of Rs. 1,86,000 claimed to have been paid by the Directors, the explanation is clearly an afterthought. The expenses of th....
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....cumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs. 1,86,000/- being the expenses sourced from Director's personal withdrawals. 3(b) Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law learned Assessing Officer erred in not allowing telescoping of any addition in the nature of source against application of funds. 4(a) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs. 14,50,000/- , being the difference between the price of Rs. 67,03,750/- at which flat at "Akruti Erica' was sold to Hemant Bhide without amenities and price of Rs. 81 ,53,750/- stated on the seized paper no.44 of Ann exure I as alleged undisclosed sales of the assessee under the head "Income from Business". 4(b) Without prejudice to the above and without admitting on the facts and circumstances of the case and in law the CIT (A) erred in confirming the addition of entire alleged undisclosed sales of Rs. 14,50,000/- as against alternate plea of the assessee that, if at all, only gross profit can be added and not the entire alleged und....
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....se sheets of papers with certain hand written figures and scribbling on the same and that these documents are arithmetical workings and jottings and that these have no evidentiary value. It is argued that there is no name of any person, building or flat in most of the documents and they are unsigned and, hence, are dumb documents. It is argued that these are working papers/rough notings and without any corroborative evidence and examination of the purchases, it cannot be concluded that the figures mentioned therein is the unaccounted money of the assessee. Learned Counsel, in his note given in paper book Pages-4 and 5, relies on the following case laws:- * Ashwani Kumar v/s ITO, (1991) 39 ITD 183 (Del.); * N.K. Malhan v/s DCIT, (2004) 91 TTJ 938 (Del.); and * CIT v/s Girish Chaudhary (2008) 296 ITR 619 (Del.) 24. Learned Counsel requested that the issues may be restored to the file of Assessing Officer for fresh adjudication after examining the purchasers of the properties so that the correct position of fact is arrived at. He submitted that without such examination, no inference can be drawn on these documents. 25. Learned Departmental Representati....