2016 (8) TMI 1483 - AT - Income Tax

Suppressed sale consideration in respect of flat sold by the assessee at a lower rate that the other flats in the same building - addition as assessee failed to justify before the Assessing Officer as to why the aforesaid flats were sold at a lower price - sale price was below the price declared by the State Government of Maharashtra or below the market price. HELD THAT - It is not a case of transaction between related parties. Assessee also informed the Assessing Officer that unit no. 302 sold at a value which was substantially higher than the market rate computed by the state Government of Maharashtra hence only reason why flat no. 101 commanded higher price compared to other flats was that the said unit had locational advantage of entire floor suitable for a car show room compared to unit no. 302. In the light of the above facts CIT(A) observed that there was no case made out by Assessing Officer that the sale price was below the price declared by the State Government of Maharashtra or below the market price. Assessing Officer had simply applied the differential in rates for booking of unit no. 101 and 302A for arriving at the actual booking rate for unit no.302. The addition made by Assessing Officer was therefore simply on the basis of difference in the rate in booking of unit no.101. CIT(A) relied on the decision of Mumbai ITAT in case of Nelkamal Realtors erectors India (P) Ltd. ( 2013 (8) TMI 557 - ITAT MUMBAI ) and held that Assessing Officer has not controverted the explanation furnished by assessee during course of assessment proceedings to explain the reasons for charging lower price in respect of unit no.302 sold vis- -vis rate/price for unit no.101. In view of above CIT(A) rightly deleted the addition - Decided against revenue.

Summary

Issues:
1. Addition of suppressed sale consideration.
2. Justification for selling a flat at a lower rate compared to other flats in the same building.

Issue 1: Addition of suppressed sale consideration
The appeal was filed by the Revenue against the order of the Commissioner of Income-Tax (Appeals) for the assessment year 2010-11. The Revenue contested the deletion of an addition of Rs. 4,16,70,874 on account of suppressed sale consideration by the assessee. The Assessing Officer had added this amount to the income of the assessee, a builder and developer, based on discrepancies in the sale prices of units in a commercial complex. The Assessing Officer concluded that the sale price of one unit was much lower than similar units in the same building, indicating underhand transactions. The First Appellate Authority granted relief to the assessee, and the Revenue challenged this decision, arguing that the addition should have been upheld. The ITAT found that the Assessing Officer failed to provide evidence to refute the assessee's explanation for the lower sale price of the unit in question. The ITAT upheld the CIT(A)'s decision to delete the addition, citing the absence of proof of underhand transactions and the reasonable explanation provided by the assessee for the pricing difference.

Issue 2: Justification for selling a flat at a lower rate
The Assessing Officer had questioned the rationale behind selling one flat at a lower rate compared to others in the same building. The assessee explained that the lower price was due to locational disadvantages of the unit, making it suitable for a different purpose. The CIT(A) accepted this explanation, noting that the sale price was not below the market price or the price declared by the State Government of Maharashtra. The CIT(A) also highlighted that the Assessing Officer's addition was solely based on the rate difference between two units and did not disprove the assessee's explanation. The CIT(A) referenced a Mumbai ITAT decision to support the deletion of the addition. The ITAT concurred with the CIT(A)'s findings, emphasizing that the transaction was in line with the valuation of the State department, and upheld the deletion of the addition. The appeal filed by the Revenue was dismissed based on these considerations.

This detailed analysis of the judgment highlights the key issues of suppressed sale consideration and justification for pricing differences, along with the respective arguments and decisions made by the authorities involved.