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IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
. . , ,
BEFORE SHRI B. R. BASKARAN, AM AND SHRI SANJAY GARG, JM
./I.T.A. No. 6588/Mum/2010
( / Assessment Year: 2007-08)
Income Tax Officer-25(1)(3), Neeleshear Developers
Room No. 306, 3rd Floor, Shop No. C-4, Saishakti Complex,
Bldg. C-10, Pratyakshakar Bhavan, / H. Joshi Marg, Dahisar (E),
Bandra Kurla Complex, Bandra (E), Vs. Mumbai-400 067
Mumbai-400 051
. / . /PAN/GIR No. AADFN 9153 A
( /Appellant) : ( / Respondent)
/ Appellant by : Shri Asghar Zain
/Respondent by : Dr. K. Shivaram &
Ms. Neelam Jadhav
/ : 13.01.2015
Date of Hearing
/
: 11.03.2015
Date of Pronouncement
/ O R D E R
Per Sanjay Garg, Judicial Member :
The present appeal has been preferred by the assessee against the order of the ld.
CIT(A) dated 28.06.2010. The Revenue has agitated the action of the ld. CIT(A) in
deleting the addition of Rs.61,53,000/- which was made by the A.O. on account of
alleged receipt of on-money on sale of flats.
2. The brief facts of the case are that the assessee firm is engaged in the business of
builder and developer. A survey action u/s.133A was conducted in the business premises
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ITA No. 6588/Mum/2010 (A.Y. 2007-08)
ITO vs. Neeleshear Developers
of the assessee on 07.02.2008. It was found from the entries contained in the blue colour
long note book that the assessee had transferred the flats booked for old customers to new
customers and in the process the assessee had earned the profit of Rs.39,39,300/- during
the financial year 2007-08. The partner of the assessee firm accepted to surrender
Rs.39,39,300/- as additional income for A.Y. 2008-09. Based on the above, the A.O.
presumed that the assessee might have earned profit during the assessment year under
consideration also, by way of rebooking of flats to new customers. He further noted from
the impounded blue colour long note book that Rs.4,250/- was mentioned on the top of
the page in respect of Flat No. 202, whereas the assessee had agreed to sell the same @
Rs.3,500/- per sq. ft. The A.O. also noted from the impounded note book that the assessee
had cancelled and rebooked four flats during the year. He also noted that the assessee
booked four new flats during the year. The A.O. further noted that as per AIR
information, the assessee executed registered agreements to sell the flats at an aggregate
rate of Rs.2,800/- to Rs.3,500/- per sq. ft., whereas the market value adopted by the stamp
duty authority was higher. The assessee contended before the A.O. that Flat No. 202 was
not transferred to new customer but the allottee had informed the assessee that if anybody
would offer price of Rs.4,250/- per sq. ft., the same could be resold. It was also contended
that the project was stopped and there was no further commencement certificate above
10th floor that during the course of survey, a declaration was made to the effect that on
receipt of approval for transfer from the original allottee to the new allottee, transfer
charges were received due to receipt of additional CC upto 12th Floor. The assessee also
enclosed an affidavit cum request form from four transferees who declared that they had
not paid any amount in cash for transfer fee or as consideration of such transfer. It was
further contended that only because there were some entries for receipt of amount during
the period relevant to A.Y. 2008-09, the assessee admitted additional income, whereas,
there was no such entry of any transaction evidencing any receipt of transfer charges or
extra amount upto 30.03.2007 in the impounded note book. The A.O., however, did not
agree with the contention of the assessee and observed that in the real estate business it is
the open secret that cash element is involved and further that as per section 50C of the
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ITA No. 6588/Mum/2010 (A.Y. 2007-08)
ITO vs. Neeleshear Developers
Income Tax Act, while computing capital gain, the market value as per stamp value
authorities has to be adopted. Since in the case of the assessee, there was difference
between the agreement value and the market value as per the stamp duty authorities, he
rejected the affidavit of four customers and held that the assessee would have transferred
or sold the flat @ Rs.3,750/-, i.e., at the market value adopted by the stamp duty
authorities and taxed the difference between the agreement value and the stamp duty
value which was arrived at Rs.61,53,500/-, treating the same as on-money received in
respect of booked and rebooked flats.
3. In appeal, the ld. CIT(A) deleted the additions so made by the A.O. observing that
no incriminating material was found against the assessee showing receipt of any on-
money by the assessee. The relevant part of the findings of the ld. CIT(A) is reproduced
as under:
"3.6 I have considered the submissions of the representative and the stand taken
by the A.O. A perusal of the assessment order shows that the AO, was under the
impression that the appellant transferred four flats to new clients during this year
and further booked four new flats to the original clients during this year as per
page 3 of the assessment order. As far as booking of new flats during this year is
concerned, the AO has not referred to any, impounded material from which it
could be gathered that the appellant actually received "on-money". The A. O. has
not referred to any such impounded material and unless the A.O. proves that the
appellant actually received "on-money", no addition could be made merely based
on assumption. As contended by the representative, section 50C cannot be applied
while computing income under the head "business" and it is seen that the AO. was
guided by the AIR information as per which there was difference between the sale
value and the market value. In the absence of any evidence, the AO is not justified
in adopting higher sale value than what was stated in the registered agreements
unless there is specific provision in the Act to this effect like section 50C while
computing the capital gains. The contents of the registered documents shall be
taken as true and correct unless proved otherwise and it is for the person who
alleges so to prove the contrary. The AO has not proved that the contents of the
registered documents were incorrect and the appellant actually received extra
money and, therefore, the addition in respect of new flats booked during the year
cannot be sustained. I accept the plea of the representative that the addition has
been made merely based on suspicion and assumption without bringing any
material on record. Further, the appellant has filed the affidavits from all the
customers stating that they have not paid any cash to the appellant but the AO
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ITA No. 6588/Mum/2010 (A.Y. 2007-08)
ITO vs. Neeleshear Developers
rejected the same on the ground that they were identical in nature and contained
similar language. If the apellant has prepared the affidavit and got it signed by the
customers, the same has to be identical and in similar language which would not
prove that the affidavits are false. The AO is not justified in making addition and
the same is deleted.
3.7 Regarding four flats which the AO has taken as transferred to new allottees
during this year, it is seen that the flat no. 202 was not at all resold to new person.
This is evident from the entries contained in the impounded material itself for flat
no.1603 and 702 in which the names of the new allottees have been written at the
bottom of the page with the rate offered by the new customer whereas in respect of
flat no.202 there is no such entry regarding the name of new person. Thus merely
because on the top of the page, a sum of Rs.4,250 was written, the AO cannot
assume that the same was transferred to some unknown person @ Rs.4,250. The
plea of the representative that the original allottee was ready to transfer the flat to
any new person @ Rs.4,250 has to be accepted by comparing the entries in the
impounded material. The explanation offered by the appellant was reasonable and
acceptable whereas the AO rejected the same without comparing the entries
related to flat no. 1603 and 702. Regarding flat no. 702 and 1603, it is seen that the
appellant transferred these flats to new persons and the name of the person, his
mobile number and new rate are entered in the same page and further it is evident
from the impounded material that the extra amount was paid to the original
allottee. As contended by the representative for flat no. 1603, the appellant
received Rs.8 lac from the original allottee @ Rs.3,000/- per. sq. ft. whereas when
the same was transferred to the new person @ Rs.3,100/- the appellant paid
Rs.9,09,000/- by cheque no.0252360 and difference of Rs.1,09,000/- represents
the difference in the rate at Rs. 100 per sq.ft. for 1,090 sq.ft. Thus there are entries
in the impounded material itself to show that whatever extra amount received from
the new allottee was paid to· the original allottee. Similarly, there are entries for
payment of extra amount of Rs.1,66,500/- in respect of flat no.702. Regarding flat
no.703, it is seen that the old rate was Rs.3,350/- per sq.ft. whereas it was
transferred @ Rs.3,000/- per sq.ft. and, therefore, it cannot be said that there was
any profit by transferring the flat to the new person. Thus evidences available in
the impounded material clearly indicate that the appellant did not receive any extra
amount as contended before the AO. I find that the AO merely based on suspicion,
doubt and assumption made estimated addition which is not correct. The appellant
contended before the AO that no extra amount was received during this year and
there are no entries for receipt of such extra money in the impounded material and
the AO has not brought on record the exact nature of entry which would prove that
the appellant actually received extra amount in the absence of which the addition
cannot be sustained. In view of the above discussion, I accept the plea of the
representative that there are no entries in the impounded material to prove that the
appellant actually received any extra amount while booking/rebooking flats as
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ITA No. 6588/Mum/2010 (A.Y. 2007-08)
ITO vs. Neeleshear Developers
mentioned by the AO. As the addition has been made purely on the basis of
assumption, the same is deleted. Thus the AO shall delete the addition of
Rs.61,53,500/-."
4. We have heard the rival contentions and have also gone through the material on
record. A perusal of the above reproduced findings of the ld. CIT(A) reveals that the ld.
CIT(A) has given a categorical finding that no evidence or material was found during the
survey action to show that the assessee had received any on-money in respect of flats
booked during the financial year under consideration. The assessee had also explained the
figures and the entries made in the impounded blue colour long note book. The ld.
CIT(A) has observed that the entries in the impounded blue colour long note book
showed that whatever extra amount was received from the new allottees, the same was
paid to the original allottees. It has also been observed by the ld. CIT(A) that the A.O.
had not brought on record any material evidence which would prove that the assessee had
received any extra money in addition to what had been disclosed in the blue colour long
note book. He, therefore, held that the addition cannot be made by the A.O. merely on the
basis of assumptions and presumptions. The ld. DR could not bring before us any new
fact or evidence to point out any defect in the well reasoned observations made by the ld.
CIT(A). We, therefore, do not find any infirmity in the order of the ld. CIT(A) and the
same is, therefore, upheld.
5. In the result, the appeal of the Revenues is dismissed.
Order pronounced in the open court on March 11, 2015
Sd/- Sd/-
(B. R. Baskaran) (Sanjay Garg)
/ Accountant Member / Judicial Member
Mumbai; Dated : 11.03.2015
. ../Roshani, Sr. PS
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ITA No. 6588/Mum/2010 (A.Y. 2007-08)
ITO vs. Neeleshear Developers
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent
3. () / The CIT(A)
4. / CIT - concerned
5. , , / DR, ITAT, Mumbai
6. / Guard File
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai
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