TaxTMI 
TaxTMI 
2025 (1) TMI 1664
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.... of facts and the assessee is also challenging the additions made by the AO in all the five years. 3. The facts relating to the case are discussed in brief. The assessee is a builder and developer. It developed an apartment complex titled as "Bhoomi Colossa" in Airoli Area of Navi Mumbai. The project consisted of 96 residential flats and 30 shops. The commencement certificate for the project was obtained on 13-09-2007 and occupation certificate was received on 24-10-2011. The assessee has sold the residential and commercial units during the financial years relevant to AYs.2008-09 to 2014-15. The construction took place from FY.2008-09 to FY.2012-13. The aggregate amount of construction cost was shown as Rs. 52.83 crores by the assessee. The total area constructed in this project was 69912.65 sq. ft. Hence, the average cost of construction worked out to Rs. 7557/- per sq.ft. The assessee had followed percentage completion method for offering profit from the above said project. 4. The status of assessments of various years is detailed below:- (a) The return of income filed by the assessee earlier for AY 2008-09 was processed u/s 143(1) of the Act. The AO has reopened t....
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.... rate per sq.ft on some basis. Accordingly, the difference between the probable standard selling rate and the actual rate was considered by the AO as suppressed sale receipts, which have been received in cash and remained unaccounted. The AO determined unaccounted sale receipts at Rs. 3,59,74,546/- in AY 2011-12 and added the same to the total income of the assessee in that year. 6. Based upon the observations made in AY.2011-12, the AO took the view that the income chargeable to tax has escaped assessment in AYs. 2008-09 to 2010-11 also. Accordingly, he issued notices u/s.148 of the Act in the Financial Year 2016 and reopened the assessments of those years. The assessee, vide its letter dated 26-07-2016, requested the AO to provide the reasons for reopening of assessments, which was supplied by the AO. The assessee filed objections to the reopening of assessments and the same was rejected by the AO. Thereafter, he rejected the books of the accounts also, as according to him, they do not reflect correct income. Accordingly, in each of these three years, the AO determined the probable standard sale rate and accordingly computed the unaccounted cash receipts as under:- AY.2008-....
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....,289/- has been shown before interest to partners' capital for AYs 2008-09 to AY 2014-15. However, it is seen that this cumulative profit of Rs. 5,62,05,289/- includes indirect incomes by way of interest etc amounting to Rs. 2,25,05,707/- which are not related to the construction and sale of flats/shops. The actual profit pertaining to the project, therefore, comes to Rs. 3,36,99,582/- which translates into a GP rate of 6.48% only. I am of the considered opinion that the GP rate disclosed by the appellant is too low considering the appellant's line and scale of business. The assessing officer is therefore directed to adopt the GP rate of 12% of the total sales which should reasonably cover the undisclosed income on account of unjustified variation in sale. This works out to Rs. 6,24,00,781/-. Since the appellant has already disclosed profit of Rs. 3,36,99,582/- (Rs. 5,62,05,289 - 2,25,05,707) from the project in various assessment years, the differential amount of Rs. 2,87,01,199/- is to be added back as the appellant's income from the project. The appellant is stated to be following percentage completion method. This addition of Rs. 2,87,01,199/- is to be apportioned in the ratio ....
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.... we refer to the appellate order passed by the Ld.CIT(A) in Asst. Year 2011-12, the Ld.CIT(A) has given a finding that the addition made by the assessing officer in that year included the alleged cash receipts in respect of flats sold/booked for the entire project, i.e., the addition made by the AO in AY 2011-12 has already included the alleged cash receipts in respect of entire project, I.e., including that related to the flats sold during the AY 2008-09 to 2010-11. In that case, we are unable to understand as to how that AO could entertain a belief that there was any escapement of income in the years relevant to AYs.2008-09 to 2010-11. The fact that the AO could not have entertained such a belief is further fortified by the fact that the AO himself has made addition only on protective basis in these three years in the reopened assessments. Thus, in our view, it is very well established that the assessing officer did not entertain belief that there was escapement of income in these three years. In the absence of any reason to believe that there was escapement of income, we are of the view that the reopening of assessments of these three years is bad in law. Accordingly, we quash t....
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....ts by the assessee. Accordingly, she submitted that the entire addition made in these two years should be deleted. 15. Without prejudice to the above contentions, the Ld A.R also challenged the estimate made by the Ld.CIT(A). She submitted that the Ld.CIT(A) has adopted the profit rate @ 12%, while, in various decisions of Tribunal and Hon'ble High Courts, profit rate of 8% has been considered to be appropriate in case of construction businesses. Further, the Ld.CIT(A) has excluded interest and miscellaneous income from the business profits without properly appreciating the facts relating to the same. If the rate of profit is reduced to 8% and further the interest & miscellaneous income are treated as part of business profits, then no addition is warranted in these two years. 16. On the contrary, the Ld D.R submitted that the Ld.CIT(A) has determined the profit element involved in the unaccounted cash receipts in AY.2011-12 and the same has been directed to be apportioned between the assessment years 2008-09 to 2013-14 by taking remedial measures. The decision so rendered by the Ld.CIT(A) in AY.2011-12 has been upheld by the Tribunal in its order dated 27-09-2019 passed by th....
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....mpany/opportunity available with the company to invest the sale proceeds in some other projects. (ii) Funding availability of the company from banks/financial institutions/friends and relatives etc. (iii) Various market conditions related to real estate industry, overall demand and supply in the real estate industry. (iv) Economic development, i.e., recession in the market. (v) Funding norms/restrictions declared by various regulatory authorities with respect to funding of housing projects. Besides the above, the assessee has furnished specific reasons in respect of certain flats, where the variation in sale price was more than 25%. Those reasons have been extracted by Ld CIT(A) in his order passed for AY 2012-13 at pages 3 to 5 of his order. Those flats are flat nos. 2003, 2401, 2201, 1504, 2104, 2103, 2402, 1403, 1104, 2102, 2702, 301, 2404, 1304. 19. Thus, we notice that the assessee has given credible explanations for the variation in sale prices. Apart from explaining general factors influencing the sale price, the assessee has also given specific explanations with regard to certain flats. None of these explanations was found to be inc....
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....ng point of an investigation but cannot, at the final stage of assessment, take the place of relevant facts, particularly when deeming provision is sought to be invoked. "........The revenue cannot draw an inference based upon suspicion or doubt or perceptions of culpability or on the quantum of the amount, involved. Any ambiguity or any ifs and buts in the material collected by the Assessing Officer must necessarily be read in favour of the assessee, particularly when the question is one of taxation, under a deeming provision. Thus, neither suspicion/doubt, nor the quantum shall determine the exercise of jurisdiction by the Assessing Officer....... It is true that inferences and presumptions are integral to an adjudicatory process but cannot by themselves be raised to the status of substantial evidence or evidence sufficient to raise an inference. A deeming provision, thus, enable the revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions." In the instant case, the reasons cited by the AO to disbelieve the sale value disclosed by the assessee are that there are huge variations in the sal....
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...., while the normal rate of profit estimated in construction business is 8%. Further, he had excluded interest and miscellaneous income of Rs. 2,25,05,707/- while computing business profits from the project without appreciating the fact that they form part of business profits. Accordingly, the Ld.CIT(A) has arrived at the suppressed profit at Rs. 2,87,01,199/-. It was submitted that the Ld. CIT(A) has omitted to consider the fact that the assessee has parked surplus funds on temporary basis with banks and earned interest income. Some deposits were made on some legal requirements. Hence the interest income and miscellaneous income should have been considered as business income only and the rate of profit should have been adopted @ 8%. In that case, the profit declared by the assessee would be more than 8% and hence no addition is warranted. 24. We notice from the order passed by the Tribunal for AY.2011-12 that there is no clarity as to whether the above said contentions were raised by the assessee before the Tribunal in that year. The order passed by the Tribunal in AY.2011-12 does not refer to any of the above said contentions. Since the assessee has raised various contentions b....