TaxTMI 
TaxTMI 
2024 (1) TMI 695
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....commenced a project, namely Twin Towers for construction of 42 residential flats and 6 penthouses at Sewasi, Vadodara. The assessee firm follows mercantile system of accounting and offers construction income based on "percentage of completion method" at the end of each year. There was a survey action under Section 133A of the Act in the business premise of the assessee on 30.08.2013, during which, certain documents were found and impounded. In the survey proceeding, certain booking slips relating to Mr. Sunil Sarangpani one of the buyer of the flat was found and seized, in which cost of the flat was mentioned at Rs. 43,75,000/-. The Ld. AO issued summons to the various purchasers including Sunil Sarangpani and recorded the statements on oath under Section 131(1) of the Act. All the purchasers of the flats confirmed the booking of flats, price, payment details and other details before the Ld. AO. Thereafter project site was examined by the Inspector attached with the Ld. AO on 04.11.2015. On verification of the said flats and the prevailing prices at which the project is being sold was found to be Rs. 2500/- per sq.ft. Thus, the Inspector reported to the A.O. that the flats were sol....
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....anding and credibility whereas the Inspector's report has no real worth. The report of the Inspector does not have any sanction of the Income-tax Act and acceptance of the Court that it can be sole basis for any adverse inference and for making any addition to the total income. 8.1 From the assessment order and the appellant's submission it is seen that the facts of the case in relation to the flats are same as those for the A.Y. 2013-14, that no incriminating evidence has been brought on record by the AO in spite of the survey conducted and some of the customers examined on the oath and that the addition is based on only Inspector's report. Following the decision made before for A.Y. 2013-14, the addition made by the AO for A.Y. 2014-15 also cannot be upheld. Though it is not material, it is also noted that flat No.A-302 against which an addition of Rs. 14,00,000/- (Rs.42,00,000/- (-) Rs. 28,00,000/-) was sold in F.Y. 2014-15 related A.Y. 2015-16 and therefore it does not pertain to A.Y. 2014-15. The AO is directed to delete the addition of Rs. 4,51,00,000/-. The ground succeeds. 3.1. Regarding the addition on account of sale of pent houses of Rs. 1,46,12,5....
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....sion, geographical location, which in the present case is Sevasi, which was a backward area and away from main city of Vadodara. Price also depends on relationship of seller and buyer and terms of negotiation. Thus, there are many factors that influence the price of a product in the market. Thus it is apparently clear that there is no underlying rule that the flats/ penthouses in a particular building should be sold for a uniform price. The Ld. ΑΟ, without any fact-finding and without a detailed appreciation of the facts, and purely on the basis of assumptions, considered the mean price of all pent houses at Rs 78,82,500/- and extrapolated all the pent houses at the same value and made a bogus addition in the hands of the appellant firm. E. Confirmations from the members in respect of which addition has been made - We are enclosing herewith copy of confirmations, PAN Card/ Aadhar Card, copy of basic quotation agreed with member at the time of booking, break up of construction cost, counter signed by 5 members in respect of whom the addition has been made in the A.Y.2014-15. Refer Annexure - 10- In the said year, the Ld. AO added the....
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.... in the books of the appellant. For the A.Y. 2013-14, it has been held that the report of the Inspector cannot at all be relied upon for the purpose of drawing adverse inference and making addition on account of suppression of sale consideration. A stray loose paper like Page 3 of Annexure Al without specific finding and linking with the appellant cannot be basis for making addition on account of suppression of sale consideration. 9.3 Under the facts and circumstances, the addition of Rs. 1,46,12,500/- made by the AO on account of unaccounted profit from the 5 penthouses during the A.Y. 2014-15 cannot be sustained. The AO is directed to delete the addition. The ground succeeds." 4. Aggrieved against the appellate order, the Revenue is in appeal before us raising the following grounds of appeal: "1. On the facts and in the circumstances of the case and in law, the id. CIT(A) erred in deleting the addition of Rs. 4,51,00,000/ on account of Unaccounted profit from business without appreciating that the above addition was made by the Assessing officer on the basis of impounded material, statement given by certain purchasers and field enquiry. 2. On the fac....
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....s. Further when the A.O. summoned the various purchasers of the flats and recorded their statements u/s. 131 of the Act, None of the purchasers having said to have paid on-money to the developer/assessee, except to having agreed the prices entered with the developer. The Assessing Officer do not find any infirmity in the books of account maintained by the assessee, thereby he has not rejected the books of account. Thus in the absence of any incriminating evidence found during the course of survey, the additions made by the Ld. A.O. based only on Inspector's report is not sustainable in law. Therefore the addition made by the Assessing Officer on this count is liable to be rejected and we do not find any infirmity in the order passed by the Ld. CIT(A). Thus Ground No. 1 raised by the Revenue is liable to be rejected. 6. Similarly addition of Rs. 1.46 crores on account of sale of Duplex Pent Houses merely based on Inspector's report. During the course of survey, there is no unaccounted money found and seized by the Authorities in the business premises of the assessee. The assessee submitted confirmation of accounts from various buyers and the Ld. A.O. could not find any defect in ....
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.... of previous Assessment Year 2004-05, it was held by the Tribunal that the addition for On-money, made in the said year was not proper inasmuch as such addition could have been made only in respect of the flat in respect of which the evidence of On-money was found at the time of search. The said decision dated 31.03.2011 of ITAT, Ahmedabad was relied on, on behalf of the assessee. 5.1 Even as for the year 2004-05 also, the addition on account of On money was held to be on the basis of guess work and extrapolation, again in the next year 2005-06 being year under consideration the addition of Rs. 1,52,53,128/- was made repeating the same story. When in respect of previous Assessment Year 2004-05 also the Tribunal had dismissed the Department's appeal on the ground that the addition in that year also was based on extrapolation, it emerged beyond pale of doubt that for the addition made for the year 2005-06 there was no evidence whatsoever and the same was presumptive in nature. 6. In above view, the findings recorded by the Tribunal were proper and legal flowing logically from the facts on record. The Tribunal has not committed any error in passing the impugned order....