2014 (2) TMI 506 - AT - Income Tax

Addition made as suppressed sales AO noticed that the three flats in three different floors were sold at different prices - As per AO, assessee has earned more income from sale of flats than disclosed in sale agreement. - Held that - The assessee has furnished various details and from there AO noticed that the three flats in three different floors were sold at different prices - Prima facie the explanation of the assessee is a plausible explanation and as seen in the MOU, there is a good reason to obtain a different and higher price - Whatever may be the reason for paying higher amount, the assessee has accounted for the entire amount and if there is any understatement of sale price of flat, it is for the revenue to establish the understatement by separately examining the sale of these flats rather than basing the assessment on the fact that flat was sold at a higher price. The assessee has filed additional evidence in terms of Rule 18(4) of not only an affidavit by the partner, letter from Shri N.R. Murthy and from the other purchasers of flat 701 and 801 but also placed the MOU entered on 06/10/2005 between builder and Mrs. Sudha Murthy and copies of photoes indicating the view point from apartment - As the additional evidence is admitted, Assessing Officer has to examine these, as they are not placed before Assessing Officer in the course of assessment proceedings thus, the addition cannot be sustained on the basis of the reasoning taken by AO - Since the additional evidence was not placed before Assessing Officer, in the interest of justice, the order is set aside and the matter remitted back to the AO to consider the additional evidence and complete the assessment as per law and facts Decided in favour of Assessee.

Summary

Issues:
1. Addition of Rs.1.70 crores as allegedly suppressed sales.

Analysis:
The appeal was against the order of CIT(A)-26, Mumbai dated 30.08.2010 concerning the addition of Rs.1.70 crores as suppressed sales made by the Assessing Officer (AO). The assessee, a builder, had offered income based on the percentage completion method. The AO noticed a significant difference in the selling prices of three identical flats sold within a year, leading to the addition of Rs.1.70 crores as income. The assessee contended that all material evidence and sale prices were disclosed, challenging the arbitrary nature of the addition. The assessee argued against the applicability of section 50C, highlighting the higher sale prices compared to stamp duty valuation. The assessee emphasized real income over notional income and questioned the lack of evidence supporting the AO's claim of understated income.

The CIT(A) upheld the addition, citing the uniqueness of the project and rejecting the argument of special pricing for sentimental reasons. The CIT(A) compared prices in other cases and found them incomparable due to differing specifications and quality. The CIT(A) concluded that the difference in prices was justified. The assessee, however, provided additional evidence, including an affidavit, letters, and photographs, supporting the special pricing rationale. The Tribunal reviewed the case, noting the lack of detailed examination by the AO and CIT(A) regarding the additional evidence. The Tribunal found the AO's reasoning insufficient and set aside the order, directing the AO to re-examine the evidence and complete the assessment in accordance with the law and facts. The Tribunal emphasized the need for the AO to establish any understatement of income conclusively before making additions based solely on price differences.

In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes, setting aside the addition of Rs.1.70 crores and remanding the issue to the AO for further examination based on the additional evidence presented by the assessee.