2024 (6) TMI 1365 - AT - Income Tax

Addition due to difference in sale consideration and stamp duty - assessee sold 3 flats out of which there was a difference in sale consideration stamp value stated - AR on this issue stated that the first proviso to section 43C of the Act wherein leverage of 10% has been allowable - HELD THAT - As perusing the material available on record find that the first proviso to section 43C of the Act wherein leverage of 10% is allowed by the statute and in the present case a difference of value of property of only 2.5%. Therefore alleged addition made in the hands of assessee is not sustainable. Accordingly the addition made in the hands of assessee is hereby deleted. Addition as entire sale value of two flats - assessee submitted that the assessee has included the sale consideration of both the flats in the next year in its books of account which fact is not in dispute - as argued when the income was duly included in the next year the addition during the year will be taxed neutral - HELD THAT - We after hearing the rival submissions of the parties and perusing the material available on record find that tax neutrality is essential to prevent double addition and ensure that income is tax fairly and equitable. In the context of Income-tax Act this principle is applying law consistent rules adhering to judicial precedent and ensuring that income is added to the total income only once double addition is generally contrary to the principles of equity in taxation. The tax authorities must ensure that the same income is not taxed in different hands or periods. From the facts as stated by the parties we find that assessee had shown the alleged income the next financial year as the income of assessee. Therefore applying the principle of neutrality the addition cannot be sustained in the hands of assessee. Accordingly we direct the AO to delete the alleged addition in the hands of assessee since assessee has already shown the alleged income in the next financial year for the purpose of calculating tax applying the analogy has held in the case of Realest Builders Services Ltd. 2008 (5) TMI 6 - SUPREME COURT that when the addition is tax neutral than no double addition should be made. Accordingly instant ground is allowed directing the AO to delete the addition in the hands of assessee. Appeal of the assessee is allowed.

Summary

Issues:
1. Addition of Rs. 93,300 due to difference in sale consideration and stamp duty.
2. Addition of Rs. 1,27,85,800 as entire sale value of two flats.

Analysis:

Issue 1: Addition of Rs. 93,300
The appeal was against the order of the National Faceless Appeal Centre for the Assessment Year 2015-16. The assessee, a property development company, sold flats during the year but faced a difference in sale consideration and stamp duty for one flat. The Assessing Officer (AO) added the entire sale proceeds to the assessee's income, disregarding the explanation provided. The first proviso to section 43C of the Income Tax Act, which allows a 10% leverage, was invoked by the assessee to challenge the addition. The Tribunal found that the difference in property value was only 2.5%, making the addition unsustainable. Consequently, the addition of Rs. 93,300 was deleted in favor of the assessee.

Issue 2: Addition of Rs. 1,27,85,800
The second ground of appeal related to the addition of Rs. 1,27,85,800 as the entire sale value of two flats. The assessee had included the sale consideration of both flats in the subsequent year's accounts, where the profit was declared after deducting the cost of construction. The Tribunal noted that the principle of tax neutrality is crucial to prevent double taxation and ensure fair taxation. Referring to a Supreme Court case, it was established that when an addition is tax-neutral, no double addition should occur. As the assessee had already shown the income in the following financial year, the Tribunal directed the AO to delete the alleged addition. The appeal was allowed in favor of the assessee, emphasizing the importance of tax neutrality and avoiding double taxation.

In conclusion, the Tribunal ruled in favor of the assessee, deleting both additions and allowing the appeal. The judgment highlighted the significance of applying tax neutrality principles to prevent double taxation and ensure fair and equitable taxation practices.