The assessee firm carried on business as builders and developers. During the year under consideration it had declared income from business and income under the head other sources. In the course of assessment proceedings the Assessing Officer (AO) noticed that the assessee had offered profits in respect of 6 commercial units sold during the year. Of the six units sold the sale deeds in respect of the 5 units were registered in the financial year 2009-10.
The AO asked the assessee to explain the difference in rate charged for unit no. 302 as compared to that charged for unit no. 101. The assessee explained that the unit no. 302 suffered from design disadvantages and therefore it could not get customers to purchase unit no. 302 whereas the unit no. 101 commanded a price higher than the other units because it had a locational advantage of entire floor suitable for car show room as compared to unit no. 302.
The AO considering the date of first payment as well as date by which total payment was received by the assessee in respect of unit no. 101 and 302 held that the two transactions are comparable. He observed that it is a prevalent practice in real estate dealings; underhand transactions of on money cannot be denied specially in view of the fact that the difference in rate was more than three times. He applied the rate at which the first floor premises were sold for the purposes of determining the actual sale rate for unit no. 302. He, accordingly, added Rs. 4,16,70,874 to the total income of the assessee as unaccounted income from sale of unit no. 302.
Aggrieved, the assessee preferred an appeal to CIT(A) who granted relief to the assessee.
Aggrieved, the revenue preferred an appeal to the Tribunal.
HELD:
The Tribunal observed that
(i) apart from Unit No. 302, date of agreement of unit no. 301 and that of units on 4th & 5th floors also fell in the same financial year;
(i) the sale price of unit no. 302 is higher than its stamp duty valuation;
(ii) the AO had accepted the variation in rates for sale of unit nos. 301, 302 and 4th & 5th floor vis-à-vis the rates for sale of unit no. 101.
(iii) the AO has not brought any evidence on record to show as to how the explanation of the assessee that there are locational disadvantages in case of Unit no. 302 is not correct;
(iv) the AO has not brought any evidence to establish that there has been on money transaction for sale of said Unit no. 302;
(v) it is not the case of the AO that the transaction is between related parties.
In the light of the above factual position, it observed that the addition made by the AO was simply on the basis of difference in booking of unit no. 101. It noted that CIT(A) had relied on the decision of Mumbai Bench of ITAT in the case of Neelkamal Realtors & Erectors India(P.) Ltd (2013) 38 taxman.com 195 (Mum-Trib) and held that AO had not controverted the explanation furnished by the assessee during the course of assessment proceedings to explain the reasons for charging lower price in respect of unit no. 302 sold vis-à-vis rate / price for unit no. 101.
The Tribunal held that the CIT(A) had rightly deleted the addition of Rs. 4,16,70,874.
The appeal filed by the revenue was dismissed.
