Skyline Greathills Vs DCIT (ITAT Mumbai)
CIT(A) Cannot Enhance on New Issue; JDA Additions & U/s 2(22)(e) Deletions Upheld
In this cross-appeal, the ITAT dealt with three major issues—(i) enhancement by CIT(A), (ii) deemed dividend u/s 2(22)(e), and (iii) addition on JDA valuation.
1. Enhancement by CIT(A)- Held Invalid
The CIT(A) reduced WIP by ~₹11.97 crore on the ground that income disclosed during survey was neutralized by capitalization. However, the ITAT held that CIT(A) cannot enhance income by introducing a new issue/source not examined by the AO, as per settled law (Shapoorji Pallonji, Hardutroy Motilal). Since this issue was never considered during assessment, the enhancement was beyond jurisdiction and quashed.
2. Section 2(22)(e) – No Deemed Dividend
The addition on account of deemed dividend was deleted. The Tribunal reaffirmed that:
- The assessee firm was not a shareholder/beneficial shareholder, and
- Amount received as security deposit under JDA is a business receipt, not a loan/advance.
Following earlier decisions (including Bombay HC in assessee’s own case), no addition can be made u/s 2(22)(e).
3. JDA Addition – Stamp Duty Value Not Applicable
The AO substituted stamp duty value of land (₹42.41 crore) as consideration. The ITAT held this approach incorrect because:
- Assessee receives constructed area (FSI), not land value
- Land is stock-in-trade, not capital asset
- Income arises only when constructed units are sold, not at JDA stage
Accordingly, the addition of ₹17.66 crore was rightly deleted, and income offered by assessee based on FSI (₹24.75 crore) was accepted.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
