TMI Blog2011 (10) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... e previous year in which the search and seizer action was conducted. In the return of income, the assessee claimed deduction under section 80IB(10) of the Act. The facts that are relevant for disposing off these cross appeals are that, the Assessing Officer restricted the claim of deduction under section 80IB(10), on the ground that the amount realised from sale of FSI, received as consideration for the rehabilitation project from MIDC, is in excess of the market rate prescribed in the Stamp Duty Ready Reckoner, issued by the State Government. In other words, the amount realised from sale of FSI in excess of the market rate prescribed in Stamp Duty Ready Reckoner was held as profits not eligible for deduction under section 80IB(10). This decision was taken on the projects (i) Buldg. 7A Pkt.5, (ii) Bldg. 2 Pkt. 9 and (iii) Bldg.1 Pkt.9. The Assessing Officer has accepted the fact that the assessee has complied with all other requirements for availing deduction under section 80IB(10). In the words of Commissioner (Appeals), these facts are brought out as follows:- 5.1 The A.O. has dealt with this issue in Para-4 running through pages-15 to 22 of the assessment order. The facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 57,59,678 respectively. On completion of Rehab Buildings, the value of FSI generated as per the stamp duty ready reckoner was taken by the assessee to determine the profit generated from the construction of such rehab buildings in the assessment year under consideration. The profits on the sale buildings was calculated by crediting the sales on account of the sale building projects, and by debiting the cost of construction and the cost of FSI utilized in constructing the same building. 5.1.2 In view of the above, the A.O. asked the assessee to explain the transaction regarding sale of FSI to Netzone. Explanation of the assessee was reproduced on the Page 16 and 18 of the assessment order. 5.1.3 As regard Pkt. 5 and 9, the A.O. allowed the claim of deduction under section 80IB(10) but the same was reduced by difference between sale values of FSI sold and stamp duty ready reckoner rate on the ground that abnormally high profit was claimed for projects at Pkt. 5 and Pkt. 9 in MIDC at the time of selling the FSI. In netshell, profit for Rehab Project in Pkt. 5 and 9 in MIDC was rewroked out taking stamp duty ready reckoner rate as sale consideration for F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Netzone and payment of stamp duty thereon; (c) details of payment received by the assessee from Netzone Developers on sale of FSI upto 31st March 2008; (d) copies of agreements regarding sale of FSI made to other parties, to support the market value rate of ₹ 7,000 per sq.ft. at which sale is made to Netzone Developers and at the same time that the C.I.T.(A) has not given the Assessing Officer an opportunity to examine these documents and offer his comments thereon. Thus he submits that not giving an opportunity to the Assessing Officer is bad-in-law and, hence, the issue should be restored to the file of Assessing Officer for adjudication afresh; and (iii) that the assessee was following a method of accounting wherein, the FSI in question was disclosed as stock-in-trade and this stock was valued at approved market rate for stamp duty purposes. He contends that there is a change in the method followed and sale is recorded at a much higher rate than the market value of stock. He relied on the order of the Assessing Officer. 6. On grounds no.5 and 6, learned Departmental Representative submitted that the Commissioner (Appeals) erred in deleting the addition of ₹ 20,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no requirement for confronting the Assessing Officer with documents/evidence entertained by the Commissioner (Appeals) at the first appellate stage. He also relied on the judgment of Hon'ble Jurisdictional High Court in Smt. Prabhavati S. Shah v/s CIT [1998] 231 ITR 001 (Bom.). He pointed out that the difference between sub-rule (1), (2) and (4) of Rule 46A. He relied on the order passed by the Commissioner (Appeals) and submitted that nothing turns on this point of admission of additional evidence as otherwise the assessee was entitled to claim deduction. 9. On the issue that exemption under section 80IB(10), cannot be restricted by artificially dividing sale consideration and on the method of accounting, he pointed out that as per the method of accounting followed by the assessee, project completion method is followed and that closing stock is valued at cost or stamp duty market valuation rate, whichever is lower. He submitted that there is no error in such valuation of stock and that there is no change in method of accounting. He pointed out that there is no allegation whatsoever that money has flown back to the buyer from the assessee. He emphasized that there are no co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its of the project were not disturbed or disputed by the Assessing Officer. The Assessing Officer adopted market valuation rate as given in the stamp duty ready reckoner of the State Government as notional sale consideration of the FSI sold to Netzone Developers, for notionally arriving at the profits of these projects, for the sole purpose of computing deduction under section 80IB(10). Nowhere in the assessment order, a conclusion has been drawn that the sale proceeds @7000/- per sq.ft.for FSI, do not pertain to the projects in question or is there a finding that sale consideration was partly received in for something else than FSI. In fact in case of project at Pkt. 4, this rate was accepted by the Assessing Officer as arms length rate and the sale consideration was taken at the actuals and no notional division was made and the profits were taxed without bifurcation. The agreement to sale FSI to Netzone Developers was registered with the stamp duty authorities on 22nd February 2008 and this document has not been disputed by the Revenue. The rate mentioned in this registered document is ₹ 7,000 per sq.ft. Certain amounts have been received by the assessee immediately on exec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might be connected parties. No details or information was called for or found. No investigation was done. The comment in the assessment order was without any basis and is just a doubt expressed by the Assessing Officer. In view of the above discussion we uphold the following findings of the Commissioner (Appeals) on this issue:- 5.11 I have considered the facts of the issue as well as the submissions made by the AR and find merit in them. 5.12 A perusal of the method of accounting in respect of FSI followed by the appellant indicates that FSI is stated at the rate prescribed in the stamp duty ready reckoner issued by the State Govt. for the year in which FSI is generated. This value is taken by the appellant to determine the profit generated from the construction of Rehab Building. The same stamp duty rates were applied for ascertaining the approximate sale value of FSI consumed for development of sale project. Clearly, when the FSI generated was not sold during the same year but was carried forward as inventory to be consumed, the same was valued at stamp duty rates. However, when FSI generated as a result of development of Rehab Project is sold in open market in the ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany has been acknowledged by the appellant in the deed of assignment dated 27.03.2007 which was filed before he AO. Also, the entire payment of ₹ 70 crores had been received by the appellant before 31.03.2005 i.e., much before the date of passing of the assessment order (30.12.208). There is also no basis for the contention of the A.O. that the assignee company appeared to be indirectly controlled by the appellant company. No basis for such premise has been given by the A.O. nor was an effort made by him to obtain the information regarding the shareholding pattern or directorship of these companies. The information called for during the appellate proceedings on these lines indicated the absence of any overlapping or commonality of ownership or directorship in these companies. 5.14 There is also no merit in the findings of the A.O. that the sale of FSI is equivalent to the assignment of vacant land. There is no merit in the submissions of the AR that the appellant only has the right of utilization of FSI on leasehold land belonging to MIDC which is a saleable commodity and that the appellant is not the owner of land and FSI is not embedded to the land. Hence, the non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the fact that the AR has been able to prove that the payments towards the amenities aggregating to Rs. 20 lakhs had been received by the appellant before May 2006. This also clearly means that the said income of Rs. 20 lakhs has already been offered by the appellant for taxation as claimed and the same cannot be taxed twice. In all probability, the two agreements are made by the appellant and the buyer with a view to save on the stamp duty expenditure which is leviable on the sale/purchase of immovable property. However, this has no tax connotations and hence this ground of appeal is allowed. 16. Learned Departmental Representative was not able to dispute these factual findings. Hence we agree with the conclusion of the Commissioner (Appeals). Consequently, grounds no.5 and 6 are dismissed. 17. On ground no.7, the Commissioner (Appeals), at para-9.4, held as follows:- 9.4 I have considered the facts of the issue and the submissions made by the A.R. It is true that the declared income is already inflated by Rs. 5,89,000 since the sale of flat figure has been shown in the books of account at Rs. 25,00,000 whereas the actual sale price as per the seized docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee under the head Income from Business. 2(b) Without prejudice to the above and without admitting on the facts and circumstances of the case and in law the CIT(A) erred in confirming the addition of entire alleged undisclosed sales of ₹ 18,15,000/- as against alternate plea of the assessee that, if at all, only gross profit can be added and not the entire alleged undisclosed sales. 3(a) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of ₹ 1,86,000/- being the expenses sourced from Director s personal withdrawals. 3(b) Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law learned Assessing Officer erred in not allowing telescoping of any addition in the nature of source against application of funds. 4(a) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of ₹ 14,50,000/- , being the difference between the price of ₹ 67,03,750/- at which flat at Akruti Erica was sold to Hemant Bhide without amenities and price of ₹ 81 ,53,750/- stated on the seized paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CBDT. 22. Before us, the learned Counsel for the assessee did not press the additional ground, as well as grounds no.3(a) and 3(b). Consequently, these grounds No.3(a) and(b) as well as the additional ground are dismissed as not pressed . 23. Insofar as the other grounds are concerned, the additions in question are based on certain seized documents found during the course of search. The assessee s submissions in brief are that, these documents are loose sheets of papers with certain hand written figures and scribbling on the same and that these documents are arithmetical workings and jottings and that these have no evidentiary value. It is argued that there is no name of any person, building or flat in most of the documents and they are unsigned and, hence, are dumb documents. It is argued that these are working papers/rough notings and without any corroborative evidence and examination of the purchases, it cannot be concluded that the figures mentioned therein is the unaccounted money of the assessee. Learned Counsel, in his note given in paper book Pages-4 and 5, relies on the following case laws:- Ashwani Kumar v/s ITO, (1991) 39 ITD 183 (Del.); N.K. Malha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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