TaxTMI 
TaxTMI 
2025 (2) TMI 1916
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....ceived can be construed as a discounted sale? 3. Whether the Ld. CIT(A), in the facts and circumstances of the case, is correct in adopting the correct comparable market rate for construction of villa and also for purchase of site cost, which were duly considered by the Assessing Officer while arriving the rate per sq.ft. of Villa? 4. Whether the Ld. CIT(A), in the facts and circumstances of the case, is correct in adopting the same value of Rs. 1,550/- per sq.ft uniformly for all villas with different specifications including luxurious villas? 3. The brief facts of the case are that the appellant filed its return of income for AY 2018-19 on 19.07.2018 admitting total loss of Rs. 64,33,701/-. A Survey operation u/s. 133A was carried out in the case of the appellant on 13.02.2020, in connection with the Search and seizure operations u/s. 132 of the Act in the case of M/s. Lotus Farms, Bengaluru. During the course of the Survey, certain incriminating material was impounded. When the same was confronted to the partner of the firm, Sri Kondala Rao, he had admitted the undisclosed consideration of Rs. 4,09,39,850/- and Rs. 1,47,65,209/- in the hands of the appellant....
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....related to partners of the appellant firm or the firm got benefited from the persons for sales. The details of the villas and reasons thereof for discounted sales, as furnished by the partner during the survey was as under: S. No Villa No. Name of Purchaser Sale Price/ sg.ft Explanations for low sale value 1 199 Jnana Deva Reddy Nalla 927 He facilitated the land deal and helped in getting the land for development 2 190 E. Venkatesh 930 He facilitated the land deal and helped in getting the land for development 3 217 M Kondal Rao 1113 He is one of the partners, hence sold for lesser value. 4 270 M. Surekha 952 She is the wife of one of the partners; shri. Damodar Reddy. Hence, sold for lesser price 5 202 M Arun Madhav 1020 He is son of the partners; shri. Damodar Reddy. Hence, sold for lesser price 6 175 Nagaraju 1124 He helps is getting sales from his friends and relatives. Hence, sold for lesser price 7 118 Lavudya Karuna 1440 She helps is getting sales from her friends and relatives. Hence, sold for lesser price 8 115 Danturi Sireesha 1533 She bei....
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.... 1,52,83,168 The above was confronted with Mr. P. Koteshwar Rao, executive partner of the appellant firm in his sworn statement recorded during the post-survey proceedings. The partner, Sri P. Koteshwar Rao has accepted the difference amount of Rs. 1,52,83,168/- as additional income of the appellant firm in similar lines to the earlier admission given during the Survey. Out of Rs. 1,52,83,168/-, the amount of Rs. 1,47,65,209/- pertains to the present assessment year AY 2018-19 and Rs. 5,17,959/- pertains to AY 2019-20. Thus, for AY 2018-19, the total additional income, as admitted by the partners of the firm during the survey and post survey proceedings, cumulate to Rs. 5,57,05,059/-. The villa wise additional income is summed up as under: Sr No Name of the Buyer Date of Booking Villa No. Total SFT Sale price per SFT (in Rs.) Marke t price per Difference adopted by AO for addition Amount of addition 1 Lavudya Karuna 29.09.2017 118 4156 1,440 2,350 910 37,81,960 2 Danturi Sireesha 05.10.2017 155 4800 1,533 2,350 817 39,21,600 3 E Venkatesh 27.11.2017 90 4156 ....
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....de by the partner of the appellant firm when difference in sale prices were confronted to him. Even in the statement of the partners of the appellant firm, they have admitted additional income on account of lower rate in certain villas but it is necessary to note that they have not stated anywhere that the additional consideration was received. Therefore, there is no primary evidence of receipt of unaccounted consideration by the appellant found during the Survey nor it was stated by partners of the appellant firm. Further, with regard to these villas, the villa wise details of receipts of consideration submitted by the appellant during the appeal proceedings is brought out as under: ***** It is seen that certain part of the advances were received post survey operation, in respect of the villa Nos. 118, 270 and 175, which were not considered by the AO as part of the consideration while arriving at the cost of the respective villa and the same are considered in the present adjudication. The relevant ledger account copies of these villas as submitted by the appellant is as under: ***** It is seen that the project got completed only subsequ....
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.... 225 513 958 1,423 2,176 Cost incurred in the year (Cumulative.) Thus, the cost of the project is Rs. 2176 per Sq.ft and not Rs. 2350 per Sq.ft. Further, the time value of advances or the cost of construction is considered when substantial advance was received from these villa owners, the same works out to be as under: FY 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Discounting the cost of construction @,1Z,Y,0 1,235 1,383 1,549 1,735 1,943 2,176 It is seen that 68% advance was received in FY 2017-18 and the same increased to 84% in FY 2018-19. If one considers that all the advance was received in FY 2018-19, the cost of construction discounted on interest works out to be Rs. 1549 per Sq.ft and let that be considered at Rs. 1550 per Sq.ft as a round figure. The reason for benchmarking the rate to Rs. 1550 per Sq.ft is because 16% of the advance was yet to be received and 68% advance has already been received in the earlier year i.e. FY 2017-18. Therefore, approximately Rs. 1550 per Sq.ft is a fair benchmarking considering time value of money and otherwise. Now, it is also important to con....
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....alue if commensurate to rendering of service would get disallowed as per Sec. 40(a)(ia) and become income of the appellant itself. Anyways, no substantiation of service has been proved and the related parties have been sold in certain cases at a value lower than the time value of money also. Therefore, the same needs to be taxed accordingly. Therefore, considering the benchmarking of cost of construction at Rs. 1550/- per Sq.ft, the difference in sale consideration is worked out for these villas as under: Sr No Name of the Buyer Villa No. Total are of villa in sq.ft. Amount received by the appellant excluding GST Sale price per sq.ft (in Rs.) Difference Amount of addition 1 Lavudya Karuna 118 4156 77,08,884 1855 1550 - Danturi Sireesha 155 4800 73,67,217 1535 1550 15 72783 3 E Venlcatesh 90 4156 39,23,810 944 1550 606 2517990 4 M Kondal Rao 21.7 3727 41,48,309 1113 1550 437 1628541 5 M Sureka 270 4004 80,36,286 2007 1550 6 M Arun Madhav 202 3770 38,47,619 ....
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....ain benefits received in connection with the project. Furthermore, during the post-survey proceedings, additional villas were identified as being sold below the average price, further reinforcing the AO's stand that the assessee had earned unaccounted income. 7. The Ld.DR further submitted that LD.CIT(A) while reducing the addition, did not fully appreciate the fact that no independent third-party valuation was submitted by the assessee to justify its claims of lower sale prices. The benchmarking at Rs. 1,550 per sq. ft. by the CIT(A) was, according to the DR, arbitrary and lacked a sound basis. The AO had considered multiple factors, including cost of construction, market trends, and project specifications, and arrived at Rs. 2,350 per sq. ft., which should have been upheld in full. The DR urged that the order of the AO be reinstated. 7.1 Per contra, LD.AR submitted that the benchmarking adopted by the AO was excessive and did not reflect the commercial reality of the real estate market. It was argued that the assessee, being a developer, had to adopt a pricing strategy that ensured continuous cash flow, and as part of this strategy, certain villas were sold at discounted ra....