TaxTMI 
TaxTMI 
2019 (6) TMI 1430
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.... appeal filed by the assessee read as under: 1. The Ld. CIT(A) erred in facts and law in disallowing and reducing a sum of Rs. 75,78,066/- from the closing WIP in respect of certain purchases alleged as bogus by the Assessing Officer without appreciating the evidences placed on record. 2. The Ld. CIT(A) and Assessing Officer erred in facts and law in not appreciating that the appellant had duly discharged its onus of establishing the genuineness of purchases and utilization thereof in the business of the appellant and accordingly no disallowance was warranted. 3. The Ld. CIT(A) and Assessing Officer erred in facts and law in relying upon the statement of certain persons without appreciating the defects pointed out therein and without affording the appellant any opportunity of crossexamination of these parties. 4. The appellant prays that - (a) WIP as shown in return of income be restored and disallowance of Rs. 75,78,066/- be deleted; (b) Any other relief, as may be deemed fit. 3. Briefly stated, the facts are that the assessee, a builder and developer filed its return of income for the assessment year (AY) 201011 on 07.09.20....
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....irected the AO to delete the addition of Rs. 8,96,98,723/- made in the current year. 5. Before us, the Ld. counsel of the assessee submits that the Sales Tax Department has mentioned the above referred parties as suspicious dealers and not bogus dealers which in itself goes to suggest that the investigation is still on and there is no clinching conclusive evidence thereof even by the Sales Tax Department. Further, it is stated by him that the assessee filed during the assessment and appellate proceedings evidence like (i) Copy of ledger of the dealer for the period 01.04.2009 to 31.03.2010, (ii) Copies of tax invoices which bear the TIN of the dealer, (iii) Copies of delivery challan, (iv) Copies of confirmation received from the suppliers, (v) Copies of Bank statement highlighting the payment in cheque to the dealer, (vi) Copy of Architect's certificate certifying consumption of materials, (vii) Copy of quantitative details of materials purchased. Thus it is stated that no negative observation/finding is brought on record in relation to the said evidences. Referring to the decision in CIT v. Orissa Corporation P. Ltd. (1986) 159 ITR 78 (SC) and CIT v. Nikunj Eximp Ente....
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....lied to the assessee, and therefore, the purchases were bogus. He, therefore, added the entire sum in the hands of the assessee as its additional income. The assessee carried the matter in appeal before the CIT(A), who accepted the factum of purchases being bogus. However, he compared the purchases and sales statements of the assessee and observed that the Department had accepted the sale, and therefore, there was no reason to reject the purchases, because without purchases there cannot be sales. He, therefore, held that under these circumstances the AO was not correct in adding the entire amount of purchases as the assessee's income. He, therefore, deleted the addition refreshing it to 10% of the purchase amount. He also directed the AO to make addition to the extent of difference between the gross profit rate as per the books of accounts on undisputed purchases and gross profit on sales relating to the purchases made from the said three parties. The assessee carried the matter before the Tribunal. The Revenue also carried the issue before the Tribunal. The Tribunal allowed the appeal of the assessee partly and dismissed that of the Revenue. The Tribunal noted that the CIT(A) had ....
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....f 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66 %. Therefore, considering 5.66 % of Rs. 3,70,78,125/- which comes to Rs. 20,98,621.88 we think it fit to direct the revenue to add Rs. 20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue." We find that the facts in the instant case are similar to the above decision. Following the same, we set aside the order of the Ld. CIT(A) and direct the AO to restrict the additions limited to the extent of bringing the G.P. rate on disputed purchases at the same rate of other genuine purchases. As the above matter is restored to the AO, we are not adverting to the case-laws relied on by both sides. 7. In the result, the appeal filed by the assessee is allowed for statistical purposes. ITA No. 4357/MUM/2017 Assessment Year: 2010-11 (M/s Triveni Constructions -Revenue's Appeal) 8. The grounds of appeal filed by t....
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....12-13 (M/s Triveni Constructions -Assessee's Appeal) & ITA No. 4457MUM/2017 Assessment Year: 2012-13 (M/s Triveni Constructions -Revenue's Appeal) 10. The 1st ground of the assessee in ITA No. 3779/Mum/2017 of the assessee and the 1st, 2nd, 3rd and 4th ground of appeal of the revenue are interrelated. Therefore, these are discussed together below. 11. The 1st ground of appeal in ITA No. 3779/Mum/2017 1. (a) The Ld. CIT(A) erred in facts and law in upholding the addition to the tune of Rs. 84,85,259/- on account of difference in rate per sq. ft. charged to various customers vis-à-vis the market rates per sq. ft. on the date of booking by these customers. (b) the Ld. CIT(A) erred in facts and law in sustaining the addition on account of rate difference without appreciating the explanations placed on record and that no evidence of any on-money receipt by the appellant was brought on record by the Assessing Officer. (c) The Ld. CIT(A) erred in facts and law in applying the amended provisions of sec. 50C by Finance Act, 2016 retrospectively without even appreciating that th....
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....rnished flats. After inquiries with those flat buyers, the Inspector reported that in some cases there is change of ownership and hence inquires could not be done by him, whereas some of the buyers told the Inspector that they purchased normal flat only and further clarified that no extra work like tiling, painting, kitchen platform etc. were carried out by them after buying the flat. The AO vide letter dated 23.03.2015 asked the assessee to be present for spot verification on 27.03.2015 of all such flats. In response to it, the AR of the assessee along with the partner attended the hearing before the AO on 27.03.2015 and submitted copies of certain agreements. The assessee submitted before the AO that there was no intention about unfurnished or extra-furnished flats being sold to the buyers. The AO noted that the assessee had not volunteered to accompany the Inspector for spot verification. The AO held that as the assessee had sold some flats at abnormally lower price than even the price on the date of project launching, it clearly indicates that the assessee had received cash against sales. The AO thus concluded that onmoney in the form of cash were received by the assessee again....
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....; Total Rs. 84,85,259/- The total difference between stamp duty valuation on the date of booking and the agreement value worked out to Rs. 84,85,259/-, which was accordingly confirmed to that extent. Through the counsel, the assessee requested that in view of the settled legal position as laid down by the Hon'ble Supreme Court in the case of C.V. Gautam v. UoI 199 ITR 530, 15% difference in the valuation and actual consideration was acceptable and even allowance to the extent of 15% had also been allowed by the AO. However, the Ld. CIT(A) was not convinced with the above explanation of the assessee as in the instant case, the matter relates to sale below the stamp duty valuation or market value and it is not the reference to the purchase/investment where such tolerance band has been pressed. Further, the Ld. CIT(A) made it clear that such a difference, cannot, by any stretch of imagination be labeled as "onmoney" or "undisclosed receipts". 15. Before us, the Ld. counsel of the assessee submits that the AO has made a wild guess work in estimating the on-money receipts by the assessee, merely on the basis of difference in rates offered to various customers. Relying ....
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....and K.P. Varghese v. ITO 131 ITR 597 (SC). Finally, the Ld. counsel submits that in the present case, the additions made are on surmises and conjectures without any corroborative/cogent evidence at all. However, it is submitted by him that in order to buy peace of mind and avoid protracted litigation, the market value or the stamp duty value may be considered as the bench mark with an allowance of tolerance band/variation to the extent of 15% of such market value. In this regard, reliance is placed by him on the decision in C.B. Gautam (supra). It is stated by him that the Ld. CIT(A) has summarily rejected this proposition stating that the said decision pertains to purchase transaction and not sale consideration. The same is disagreed by the Ld. counsel because the price at which a particular stock is purchased would be the same as the price at which it is sold and hence there cannot be any two different price for sale and corresponding purchase transaction. It is further stated by him that this ratio of the above decision by the Hon'ble Supreme Court has been followed in the context of section 50C, accepting the tolerance/variation in the range of about 10% as may be seen....
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....011 at lesser rate than the cost. The AO accordingly worked out rate difference of Rs. 10,31,42,122/- which was held to be undisclosed receipts of the assessee-firm. The Ld. DR submits that the above rate difference was worked out by the AO on the basis of relevant factors such as suppression of income by varying selling rates of flats in Kamothe area, very low income shown by the assessee, the assessee's justification for rate variation etc. However, the AO allowed relief to the extent of 15% for likely market conditions and considering other exigencies. Thus the AO made a net addition of Rs. 8,76,70,801/- to the income of the assessee-firm. The Ld. DR thus concludes that the above addition made by the AO being reasonable and based on facts and circumstances of the case be restored. 17. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decision are given below. In the instant case, the AO has proceeded to make an addition of Rs. 8,76,70,801/- allegedly on account of on-money receipts without brining any cogent evidence/material on record. There is no evidence whatsoever with the AO to demonstrate that the assessee-fir....
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.... that addition made of on-money received from sale of flats cannot be quantified by applying average rate for all flats sold in the project without there being any evidence unearthed during search operations. Similar is the ratio laid down in Shri Rustam Soli Sethna (supra), M/s Shah Realtors (supra) and K.S. Constructions (supra). 17.2 In Krishna Enterprise (supra), following the decision of Hon'ble Madras High Court in the case of SuganthaRavindran 353 ITR 488, it is held that since transfer was made prior to the amendment of section 50C w.e.f. 01.10.2009, the provisions of section 50C would not be applicable. In M/s John Fowler (India) Pvt. Ltd. (supra), since the value of sale consideration reported by the assessee was less than the value as per the stamp duty authority, the difference between the two amounting to Rs. 33,48,684/- was proposed to be added back to the income of the assessee. In the above case, as the difference between the valuation adopted by the stamp valuation authority and the one declared by the assessee was less than 10%, therefore, the Tribunal directed the AO to adopt the value as declared by the assessee. In Smt. Sita Bai Kh....
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....ed and the appeal filed by the revenue is dismissed. 19. Facts being identical, our above decisions apply mutatis mutandis to other appeals. It is relevant to mention here the similar grounds of appeal of the assessee and Revenue in the above group of cases. The 1st, 2nd, 3rd and 4th ground of appeal by the assessee in M/s Triveni Constructions for AY 2010-11 is similar to the 2nd ground of appeal by the assessee in M/s Triveni Realties for AY 2012-13; 2nd ground of appeal by the assessee in M/s Triveni Spaces for AY 2012-13; 2nd ground of appeal by the assessee in M/s Triveni Homes for AY 2012-13. The 1st ground of appeal by the assessee in in M/s Triveni Constructions for AY 2012-13 is similar to the 1st ground of appeal by the assessee in M/s Triveni Realties for AY 2012-13; the 1st ground of appeal by the assessee in M/s Triveni Spaces for AY 2012-13; the 1st ground of appeal by the assessee in M/s Triveni Homes for AY 2012-13; the 1st ground of appeal by the assessee in M/s Triveni Properties for AY 2012-13. The grounds of appeal filed by the Revenue in the case of M/s Triveni Constructions for AY 2012-13 are similar to the grounds of app....