TaxTMI 
TaxTMI 
2019 (6) TMI 1430
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....r: 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 07.09.2010 declaring total income of Rs. Nil and showing carried forward loss of Rs. 17....
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..... 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 Enterprises (P.) Ltd. (2015) 372 ITR 619 (Bom), it is argued by him that non-service of n....
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....ntire 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 not given any reasons for retaining 10% of the purchases by way of ad-hoc additions. The ....
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.... 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 the revenue read as under: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A)....
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....'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 the flats/shops sold by the assessee were held as stock in trade and not as capital assets. (d) The Ld. CIT(A) erred in law and facts in making the addition based on difference in law and facts in making the addition based on diff....
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....er 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 against the sale of flats/shops. Accordingly, in order to work out the addition on account of rate difference, the AO tabulated a chart date wise chronologically as indicated at para 4.2 (page 11-14) of the assessment order and applied the maximum rate on nearby dates....
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....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 on the following decisions, it is submitted by him that addition cannot be made of on-money received from sale of flats by applying the average rate of all the flats sold in the project without there being any evidence unearthed. 1. Neelkamal Realtors & Erectors India (P.) Ltd. v. DCIT (38 taxmann.com 195) (Mum); 2. M/s Runwal Projects Pvt. Ltd. v. ....
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....th 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 in the following cases : 1. Krishna Enterprises v. ACIT (Mum ITAT) 2. M/s John Fowler India P. Ltd. v. DCIT (Mum. ITAT) 3. SitabaiKhetan v. ITO (Jaipur ITAT) 4. LGW Limited v. ITO (Kolkata ITAT)- ITA No. 267/Kol/2013 5. ACIT v. S SuvarnaRekha (Hyd ITAT)- ITA No. 743/Hyd/2009 Finally, the Ld. counsel submits that even the AO has granted allowance of 15% of the total addi....
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....r, 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-firm received the differential amount of Rs. 8,76,70,801/- in cash from the buyers of flats/shops. The AO noticed that flats/shops were sold to different customers at varying rates. The assessee explained to the AO that it had invited booking of the flats from February 2007 onwards and due to recession in the real estate market in the financial year 2008-09 and 2009-10, attractive and competitive rates were offered to various customers. The average selli....
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....vindran 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 Khetan (supra), it is held that the fair market value of the property is to be adopted on the basis of comparable sale instances. 17.3 We find that section 50C of the Act is applicable if the following conditions are satisfied: (1) There is a transfer of land or building or both. The asset may be long-term capital asset or short-term capital asset. It may be depreciable or non-depreciable asset. (2) The sale consideration is less than value adopted by....
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....l 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 appeal by the Revenue in the case of M/s Triveni Realties for AY 201213; the grounds of appeal by the Revenue in the case of M/s Triveni Spaces for AY 2012-13; the grounds of appeal by the Revenue in M/s Triveni Homes for AY 2012-13; the grounds of appeal by the Revenue in M/s Triveni Properties for AY 2012-13. 20. To sum up: the appeal filed by the assessee for M/s Triveni Constructions for AY 2010-11 is allowed for statistical purposes. Similarly, the appeal filed by the Revenue in the cas....