TMI Blog2013 (8) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015 and not before that. As the assessee in the present case is engaged in the business of selling of flats after construction, the income from which is chargeable under the head "Profits and gains of business or profession", the provisions of section 43CA cannot apply to substitute the actual sale consideration with the stamp value in the previous year relevant to assessment year 2009-2010 under consideration - Invoking the provisions of section 50C for sustaining the addition, has no legal legs to stand on – Decided in favor of Assessee. Application of section 56(2)(vii)(b)(ii) read with section 50C of the Income Tax Act – Commissioner(Appeals) sustained the addition at ₹ 8,53,79,819 by holding that market value of flats ought to have been considered instead of the actual sale consideration – Held that:- Both the above provisions are inapplicable on the facts and circumstances prevailing in the present appeal – Assessing officer did not bring any material on record to show that the assessee in fact received higher price than declared. Under such circumstances, the action of the authorities of the Income Tax in this regard cannot be justified. Valuation of Closing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is a builder and developer. It offered profit on the completion of building project called Orchid Towers' in the previous year relevant to the assessment year under consideration. Sales amounting to Rs.90.84 crore were credited to the profit and loss account giving net profit of Rs.3.63 crore. During the course of assessment proceedings, the assessee was asked to furnish party-wise details of flats sold with details of name and addresses of the buyers, area of flat sold, total sale consideration, date of agreement, date of first payment received etc. On the perusal of such details, the Assessing Officer observed that there were variations in price charged by the assessee from various customers to whom the flats were sold. On being called upon to justify such variation in the rate at which the flats were sold, the assessee gave details and reasons for such variation in sale rates. A flat-wise chart running into two pages has been drawn after page no. 2 of the assessment order, giving break up of price realized by the assessee from sale of flats; reasons given by the assessee for charging lower price in certain cases; comments of the Assessing Officer for not accepting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of section 48, the stamp value shall be considered as full value of consideration received or accruing as a result of such transfer. Section 48 with the caption : "Mode of computation", deals with the computation of the income chargeable under the head "Capital gains". A cursory look at the above provision fairly indicates that section 50C is applicable only in respect of income computed under Chapter IV-E i.e. the head "Capital gains". Since the assessee under consideration is a developer and income from the sale of flats has been computed under Chapter IV-D i.e. under the head "Profits and gains of business or profession", obviously the provisions of section 50C can have no application. 7. At this juncture, we want to accentuate that the Finance Act, 2013 has inserted section 43CA with effect from 01.04.2014 which is again a special provision for full value of consideration for transfer of assets other than capital asset in certain cases. Sub-section (1) of this section provides that where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than a capital asset) being land, building or both, is less than the value adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is as under:- "56 (1)..... (2)..... (vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009, - (a)..... (b) any immovable property, (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration." 9. Section 56 lies in the residual head of income, that is, "Income from other sources". Sub-section (1) which is a general provision, provides that income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income tax under this head, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. Sub-section (2) of section 56 deals with certain types of specific incomes which are chargeable under this residual head. Clause (vii), as reproduced above, provides that where an individual or Hindu undivided family receives any immova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plying rates of different flats which was eventually reduced to Rs.4.45 crore in the order passed u/s 154. Our disposal of this ground in the above terms has led to the reversal of the findings of the learned CIT(A) but the addition to the tune of Rs.4.45 crore still stands. The assessee has challenged the confirmation of entire addition being : "the difference between the sale value and the fair market value determined by stamp duty authorities of all the flats sold". As such we are required to adjudicate upon the sustenance of addition to the extent of Rs.4.45 crore as well. 12. It can be observed from the chart made by the A.O. after page no. 2 of the assessment order that he made addition by considering the rate of another flat sold by the assessee vis- -vis the rate at which flat under view was sold. For example, first item in the Table is Flat no.2501 with area of 2645 sq. feet and sale consideration at Rs.65.24 lakh. First payment for this flat was received by the assessee on 21.10.2004 and the sale rate is Rs.2467 per sq.ft. The Assessing Officer has compared this rate with the rate charged for flat No.2702 sold by the assessee at a price higher by Rs.649 per sq.ft. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue to prove under-statement of the consideration. The following observations of the Hon'ble Supreme Court from this case merit mention : Section 52(2) of the IT Act, 1961 can be invoked only where the consideration for the transfer of a capital asset has been understated by the assessee or in other words the full value of the consideration in respect of the transfer in shown at a lesser figure than that actually received by the assessee and the burden of proving understatement or concealment is on the Revenue; and the sub- section has no application in the case of bona fide transaction where the consideration received by the assessee has been correctly declared.'. The Hon'ble Kerala High Court in Commissioner of Agricultural IT VS M.J. Cherian (1979) 117 ITR 371 (Ker) has held that the ITO can not fix higher sales price without any evidence. The mere presumption that the excess price could have been charged has been held to be not a ground for coming to the conclusion that the assessee did charge a higher price. A survey of aforementioned judgments manifests that there is no law which obliges a trader to make the maximum profit on sales. 14. It is trite that the onus to clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81,944 on account of lower valuation of closing stock. Briefly stated the facts of this ground are that the Assessing Officer found total area of unsold flats at 31,414 sq.ft., the value of which was shown in the balance sheet at Rs.2.03 crore. This gave rate of Rs.647 per sq.ft. On the perusal of the profit and loss account, the Assessing Officer observed that the cost of construction was at Rs.4928 per sq.ft. The assessee was called upon to justify as to why the closing stock should not be valued at the rate of Rs.4,928 per sq.ft., being the cost of construction. It was submitted that a part of the constructed area was required to be handed over to MHADA as per the approved plan. A copy of letter dated 06.02.2007 from MHADA was filed in support of the contention that the assessee was required to hand over surplus area of 1797 sq.mtr. (19335.72 sq.ft.). The assessee explained that the cost incurred towards the flats to be surrendered to MHADA could not be considered in the valuation of closing stock as the redevelopment of property was given to the assessee subject to such terms and conditions including the handing over of this much built up area. It was explained that the possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee would "surrender the surplus built up area admeasuring 1797.25m2". It is thus vivid that the obligation to handover the built up area admeasuring 1797.25 sq.mtr. was on the assessee from the very beginning. At the end of the year, the built up area to such an extent could not have been considered as the assessee's stock in trade. 18. The contention of the learned Departmental Representative that at the most the liability to hand over such an area to MHADA could be considered as contingent liability, is wholly devoid of merit. It is obvious that the obligation to handover built up area admeasuring 1797 sq.mtr. did exist at the end of the relevant year. The assessee could, under no circumstance, claim itself as an owner of this much built up area. The fact that it was decided in 2012 that the assessee would handover so much area to MHADA in the same building or in any other building in the same ward, cannot obliterate the liability which came to be recognized since long and was existing at the year end. 19. Another contention was put forth by the ld. DR that there can be no reduction in the value of closing stock because even as per the assessee's contention, it accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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