DCIT Vs Parshwa Associates (ITAT Mumbai)
Conclusion: Addition under section 69A was not justified as AO had not brought on record any material in support of the addition made by him nor he provided any basis for arriving at the basis, particularly when all the 30 flats had not been sold during the year relevant to AY 2017-18, therefore, there was no basis for arriving at the conclusion that assessee had received any on-money.
Held: Assessee-firm was in the real estate business as a builder and developer. It filed a revised return of income declaring a total income of Rs. 79,89,053. Department had earlier carried out survey action under Section 133A in the hands of the assessee. During the course of survey, a statement was recorded in which assessee had agreed to surrender a sum of Rs.4.23 crores for taxation over and above regular profit. During the course of survey operations, it was noticed that there was difference of Rs. 11,33,21,965/- between MM Value (Value determined by for stamp duty purposes) and Sale value and the said difference was considered as “on money receipts”. Assessee had offered a sum of Rs.7,10,00,000/- under Income Disclosure Scheme of 2016. Accordingly, it was agreed by partner to surrender the balance amount of Rs.4,23,21,965/-. AO noticed that the assessee did not offer the above said amount as mentioned in the statement. Accordingly, AO held that assessee had sold thirty flats during the year under consideration after 1.4.2016 and there was difference in the sale consideration mentioned in the agreement and MM value. AO computed the said difference at Rs.3,40,69, 184/- relating to 30 flats. Accordingly, AO assessed the above said amount as unexplained income u/s 69A towards on money received by assessee. It was held that all the 30 flats had not been sold during the year relevant to AY 20 17-18, i.e., they had been sold in subsequent years also. We also noticed that there was mistake in the computation of alleged unaccounted receipts made by AO. According to assessee, it has sold 33 flats after the date of Survey operations, whereas AO had taken it as 30 flats. Further, AO had computed the addition in respect of unsold flats also, which was not in accordance with law. AO did not conduct any independent enquiry with the buyers of flats in order to ascertain the cash payments made by them. All these facts cumulatively prove that AO has made the impugned addition of Rs.3.40 crores without any basis. Even if an assessee surrendered any income in the Statement, yet it was possible for him to show that the said surrender was made under misconception. Assessee had, in fact, furnished details before AO stating that the actual sale consideration had been received equal to or more than the MM Value. AO had not verified those details at all. Thus, AO had made the impugned addition without any basis. When there was no basis for arriving at the conclusion that assessee had received any on-money, addition was not justified as held by Hon’ble Supreme Court in the case of PCIT vs. Nishant Construction (P) Ltd (2019)(101 taxmann.com 180) (SC).
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These cross appeals are directed against the order dated 7.7.2022 passed by the learned CIT(A), National Faceless Appeal Centre, Delhi and they relate to A.Y. 20 17-18. The assessee is aggrieved by the decision of learned CIT(A) in confirming the addition of Rs. 5.71 crores made by the Assessing Officer. The Revenue is in appeal assailing the decision of the learned CIT(A) in granting relief in respect of addition of Rs. 3.40 crores relating to receipt of on money on sale of flats.
2. We shall first take up the appeal filed by the revenue. The facts relating to the case are stated in brief. The assessee is a partnership firm and is engaged in the real estate business as builders and developers. The assessee filed revised return of income on 31.10.2017 declaring total income of Rs. 79,89,053/-. The Department had earlier carried out survey action under section 133A of the Act in the hands of the assessee on 30.8.2016. During the course of survey, a statement was recorded on oath from one of the partners named Shri Govind V. Vikmani. In the said statements, he had agreed to surrender a sum of Rs.4.23 crores for taxation over and above regular profit. The above said amount related to “on money” receipt on sale of The basis for arriving at the above said figure is explained in brief. During the course of survey operations, it was noticed that there was difference of Rs. 11,33,21,965/- between MM Value (Value determined by for stamp duty purposes) and Sale value and the said difference was considered as “on money receipts”. It was noticed that the assessee had offered a sum of Rs.7,10,00,000/- under Income Disclosure Scheme of 2016. Accordingly, it was agreed by the partner to surrender the balance amount of Rs.4,23,21,965/-. The Assessing Officer noticed that the assessee did not offer the above said amount as mentioned in the statement. Accordingly, during the course of scrutiny proceedings, the Assessing Officer asked the assessee to explain the same.
3. Before the Assessing Officer, the assessee filed a detailed reply stating that, during the year under consideration, it did not receive any “on money” from the flats sold by it. It was also submitted that the flats have been sold in all the subsequent years and hence the income relating to the flats sold during the year under consideration can be assessed to tax. In this regard the assessee filed a detail summary of sale of flats which contained sale value of flats, MM value (Manva Mandir Value) and difference between MM value and sale value. It was submitted that after survey operations/demonetization announced by GOI, the buyers of the flats did not pay anything in cash and accordingly, the flats were sold for actual sale consideration, which was more than the MM value. Accordingly, it was submitted that the difference in sale consideration of Rs.4.23 crores have already been included in the sale proceeds and offered to tax during the year under consideration and in the subsequent years. Accordingly, it was contended that no addition is called for during the year under consideration. The assessee also furnished a break up details for the amount of Rs. 4.23 crores referred to in the statement given by the partner as under:-
