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2016 (12) TMI 1696 - AT - Income TaxAddition for suppression of sale - Held that - It is apparent that there was a valid reason for the assessee to reduce the sale price of the flats to related parties because the assessee had received advance of ₹ 1.06 crores for executing its project from its related parties. Moreover, though the transactions are between the companies, all the shareholders in those companies are members of the same family and effectively they have retained two flats from the project. Moreover, the reason for reduction of sale consideration is also genuine because if the assessee had not received such advance from the buyer it would not have been possible to execute the project. Commissioner of Income Tax (Appeals) has rightly decided the issue in favour of the assessee.
Issues:
- Appeal against the order of the Commissioner of Income Tax (Appeals) regarding the addition made for suppression of sale. Analysis: 1. Background: The appellant, a property development company, filed its income tax return for the assessment year 2010-11, initially admitting a loss which was later revised. The assessment was completed by the Assessing Officer under section 143(3) of the Act, making various additions, including a substantial amount towards suppression of sales. 2. Suppression of Sales: The core issue revolved around the addition of ?2,03,27,768 towards suppression of sales, based on the sale of two apartments to related parties at lower prices than those mentioned in the sale agreement. The Assessing Officer calculated the suppressed income by the difference in sale considerations, leading to the addition. 3. Commissioner's Decision: Upon appeal, the Commissioner of Income Tax (Appeals) analyzed the case in detail. The Commissioner noted that the reduced prices were due to an advance received from the related party to facilitate the project. The Commissioner found no evidence of sham transactions or tax evasion, concluding that the reduced sale prices were a commercial consideration for the advance received. 4. Arguments and Conclusion: During the appeal, the Departmental Representative argued that the adjustment in sale consideration was a tactic to evade tax. In contrast, the Authorized Representative supported the Commissioner's decision, emphasizing the necessity of the advance for project completion. The Tribunal upheld the Commissioner's decision, considering the genuine reasons for the price reduction and the necessity of the advance for project execution. 5. Final Verdict: The Tribunal dismissed the Revenue's appeal, confirming the Commissioner's decision in favor of the assessee. The judgment highlighted the genuine commercial considerations behind the reduced sale prices and the necessity of the advance for project completion. This detailed analysis of the judgment showcases the key aspects of the case, including the background, the issue of suppression of sales, the Commissioner's decision, arguments presented, and the final verdict of the Tribunal.
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