ITO Vs Ambience Developments (ITAT Pune)
The Income Tax Appellate Tribunal (ITAT) Pune dismissed the Revenue’s appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi, which had deleted an addition of ₹5.82 crore to the income of Ambience Developments for the Assessment Year 2013-14. The Assessing Officer (AO) had estimated a profit of ₹5.82 crore on the total sale of ₹15.22 crore for the ‘Ambience Greendale’ project, arriving at a profit margin of 38.26%. This estimation was based on a comparison with the 64% profit margin disclosed by a sister concern eligible for deduction under section 80IB(10) of the Income Tax Act, 1961, and a selling rate of ₹10,850 per square foot quoted by the appellant’s site office. The AO had not rejected the books of account of Ambience Developments but proceeded to estimate the profit, citing low profitability compared to the sister concern and discrepancies noted during a site visit and in the cash book.
In its order, the ITAT upheld the NFAC’s decision, emphasizing that the AO had erred in estimating the income without rejecting the assessee’s regularly maintained and audited books of account. The Tribunal noted that the AO’s comparison with the sister concern’s profit margin was flawed as it did not consider the differences in project location, timelines, and the impact of interest paid to partners in the ‘Ambience Greendale’ project. The ITAT also found that the AO’s reliance on information gathered during a site visit lacked evidentiary value as no formal inquiry was conducted or statements recorded. Furthermore, the discrepancy noted in the cash book was clarified by the assessee. The Tribunal concluded that the AO’s estimation of profit was based on surmises and conjectures rather than any tangible evidence or discrepancies found in the books of account. Consequently, the ITAT dismissed the Revenue’s appeal, affirming the deletion of the ₹5.82 crore addition.
