TaxTMI 
TaxTMI 
2019 (8) TMI 1357
X X X X Extracts X X X X
X X X X Extracts X X X X
....unds of Asst Year 2010-11 raised by the assessee are identical in nature and hence they are taken up together for adjudication. They pertain to working of income from the real estate development project undertaken by the assessee at Cuffe Parade, Mumbai. 3. The brief facts of this issue are that the assessee is a Builder and Developer. The ld AO observed in the order that the assessee company was incorporated with the sole objective of developing and constructing residential buildings. With this objective, the assessee stated that the company has taken up the development of property at Taraporewala Mansion, Cuffe Parade, Colaba, Mumbai and has continued its construction activity during the year under consideration. The ld AO observed that the assessee company follows percentage of completion method of accounting and the expenses incurred have been capitalized to work in progress (WIP) account. The ld AO observed in his order that the assessee filed a letter dated 21.3.2013 furnishing details of total saleable area, area sold, cost of construction, interest cost, expected cost of construction to complete the project , estimated profit / loss from the project and profit and loss r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ognized by the assessee for the year under consideration as under:- % completed Revenue to be recognized Revenue recognized upto last year Revenue should be recognized 31.03.2010 Agreement Value 104.00 77.16% 80.24 45.17 Cr 35.07 Cr. Cost to be recognized 68.05 68.05 36.25 3 1.80 Cr Profit for the period 12.19 8.92 3.27 Cr. Assessee recognized profit as per working 0.88 Cr. Difference to be assessed as income 2.39 cr. 3.4. Accordingly, the ld AO made an addition of Rs. 2.39 crores to the total income of the assessee for the year under consideration. 4. Similarly, the ld AO also proceeded to examine the rate at which the flats were sold by the assessee during the year under consideration. From the first table reproduced above, the ld AO observed that the assessee was able to sell the flats D3 and D4 to Bharat Daftary and Gautam Daftary on 9.8.2007 at Rs. 33750 per sq.ft, whereas after a gap of 28 months, the assessee ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ITA No. 5537/Mum/2009 dated 29.7.2010 which was relied upon by the ld AO, to the facts of the case. The ld CITA observed that the tribunal did not decide any legal issue and the decision so rendered is factually distinguishable with that of the assessee. With these observations, the ld CITA deleted the addition of Rs. 4 crores made on account of suppressed sale of flat to Bharat D Shah. 5.1. The ld CITA observed that the assessee had disclosed the profit for the year from the project at Rs. 88,46,754/- worked out as under:- Description Unit Value Total area booked / sold A1 Sq.ft. 36,100 Balance saleable area B1 Sq. ft. 36,400 Area for the whole project C1 Sq.ft. 72,500 Total value of area booked / sold D1 Rs. 1,040,000,000 Average sale price of area sold E1=D1/A1 Rs, 28,808 Value of saleable area (as per appellant F1 Rs. 1,019,200,000 Value of whole project (Estimated) G1=D1+F1 Rs. 2,059,200,000 Cost of Land H1 Rs. 650,000,000 Interest cost incurred H1 Rs. 325,756,257 Estimated Interest cost in future J1 Rs. 126,491,929 Construction cost as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ft . Accordingly, the ld CITA computed the profits by taking the value of unsold flats at Rs. 28808 per sq.ft as under:- Description Unit Area (Sq. ft) Total area booked / sold A3 Sq. ft. 36100 Balance saleable area B 3 Sq. ft. 36400 Area for the whole project C3 Sq. ft. 72,500 Total value of area booked / sold D3 Rs. 1,040,000,000 Average sale price of area sold E3=D3/A3 Rs. 28,808 Value of saleable area F3=B3*E3 Rs. 1,048,611,200 Value of whole project(Estimated) G3=Ds+P3 Rs. 2,088,611,200 Cost of Land as per the appellant H3 Rs. 650,000,000 Interest cost incurred as per the appellant I3 Rs. 325,756,257 Estimated Interest cost in future as per the appellant J3 Rs. 126,491,929 Construction cost as per the appellant K3 Rs. 18,787,500 Others costs as per the appellant L3 Rs. 50,000,000 Cost of the project as per the appellant M3=H3-H3+J3+K3+L3 Rs. 1,771,035,686 Estimated Profit from the project N3=G3- M3 Rs. 317,575,514 Profit from the project as part of turnover'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e portion but by the acquisition of land itself, there is no work-in-progress. At the stage where land only is acquired, it cannot be said that the project has commenced but if the cost of land is included in the percentage of the project completion, then it would show that the project has been substantially completed say, to the extent of 50-60% at the beginning itself. Hence, for working out the stage of completion of the project land value should not be included. Hence we hold that the ld CITA is justified in excluding the value of land while working out the percentage of work completed. Moreover, we find that the ld AO had considered the sale area while determining the percentage of completion method as against the cost incurred upto 31.3.2010. Hence we hold that the percentage of work completed upto 31.3.2010 should be considered at 67.38% as determined by the assessee in the return of income. 7.1. The next aspect to be decided with regard to the addition of Rs. 2.39 crores is with regard to the valuation of unsold flats as on 31.3.2010. The assessee had valued the unsold flats the lower of cost or market value as on 31.3.2010, which is in accordance with generally accepted....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sale of flat to Mr. Bharat D. Shah to the extent of the difference between the consideration received from Mr Bharat and Gautam Daftary 28 months earlier and the consideration received from Mr. Bharat D. Shah. Accordingly, he made an addition of Rs. 4,00,00,000/- to the declared income by way of understatement of sale price of the flat to Mr. Bharat D. Shah. We find that the assessee had pleaded that the flats were sold to Mr Bharat and Gautam Daftary during the period of boom in the real estate market which was later followed by a crash in the property market. Moreover, the reliance placed by the ld AO on the co-ordinate bench decision of this tribunal in the case of Diamond Investments & Properties supra would not advance the case of the revenue as no one had appeared on behalf of the assessee before the tribunal and the decision was rendered based on the facts available in the assessment order in that case. Moreover, the said decision cannot be made applicable to the instant case as it is factually distinguishable. We hold that the ld AO had merely assumed that the price at which the flats were sold to Mr Bharat and Gautam Daftary was always available to the assessee and this a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on it, by merely establishing that the fair market value of the capital asset as on the date of the transfer exceeds by 15 per cent or more the full value of the consideration declared in respect of the transfer and the first condition is therefore satisfied. The revenue must go further and prove that the second condition is also satisfied. Merely by showing that the first condition is satisfied, the revenue cannot ask the Court to presume that the second condition too is fulfilled, because even in a case where the first condition of 15 per cent difference is satisfied, the transaction may be a perfectly honest and bona fide transaction and there may be no understatement of the consideration. The fulfilment of the second condition has, therefore, to be established independently of the first condition and merely because the first condition is satisfied, no inference can necessarily follow that the second condition is also fulfilled. Each condition has got to be viewed and established independently before sub-section (2) can be invoked and the burden of doing so is clearly on the revenue. It is a well-settled rule of law that the onus of establishing that the conditions of taxability....