2023 (5) TMI 1310 - AT - Income Tax

Revision u/s 263 - Determination of sale consideration of plot - estimating selling price of plots - search assessment framed u/s 153A - extrapolation of sale price of one plot from one document and using it as basis and estimating the selling rate for other plots - as per CIT(A) AO ignoring the mandatory directions of the PCIT estimated selling price on the basis of one document, which is not correct - HELD THAT - As in the present case, there was an incriminating material found and seized during the course of search in the form of sale agreement which clearly establishs difference in selling price considered by the assessee for various plots sold during three assessment years. Therefore, we are of the considered view that there is no merit in the legal arguments taken by the assessee, and thus, the same is rejected for all AYs 2011-12 2012-13. Arguments of the assessee that in search assessment framed u/s.153A there cannot be any extrapolation based on documents found during the course of search for one assessment year and estimating income for other assessment years - We find that although, the AO was in possession of one sale agreement which pertains to assessment year 2011-12, but fact remains that said document pertains to business activity of the assessee of developing real estate residential layout and also in one particular project. Further, the said document clearly envisages higher selling price of plots in the same layout, whereas, the assessee has accounted very less sale consideration on the basis of registered document. Therefore, in our considered view, there is no error in the method followed by the AO and extrapolating information gathered during the course of search for estimating income for other two years, and thus, we reject arguments of the assessee on this aspect for all three assessment years Estimation of selling price of various plots sold in three assessment years based on sale agreement found and impounded during the course of search - Only possible way to settle the dispute between the assessee and the AO is to estimate selling price of plots based on evidences available on record, including purported sale agreement found during the course of search. The assessee has started selling plots right from AY 2010-11 onwards. The lowest selling price claimed to have been received by the assessee for sale of one plot on 06.04.2010 was at Rs.50.48 per sq.ft. The highest selling price that was received by the assessee for AY 2013-14 for selling number of plots was at Rs.406.51 per sq.ft. From the above, it is very clear that there is a huge difference between lowest selling price claimed to have been received by the assessee and higher selling price derived from selling of plots. Therefore, considering the fact that both the parties failed to justify their case, we deem it appropriate to adopt higher selling price received by the assessee during these three assessment years as basis for estimation of sale price for plots sold during AYs 2010-11, 2011-12 2012-13. Since, the assessee has received highest selling price of Rs.406.51/- per sq.ft., we direct the AO to adopt Rs.400/- per sq.ft. and extrapolate said rate to all plots sold during three assessment years and compute additions towards difference between selling price considered by the assessee in their books of accounts and actual selling price to be considered. Accordingly, we direct the AO to re-work additions towards income received on sale of plots for AYs 2010-11, 2011-12 2012-13.

Summary

Issues Involved:
1. Condonation of Delay
2. Jurisdiction and Validity of Assessment Orders
3. Material Evidence and On-Money Allegations
4. Co-Seller Proceedings and Buyers' Consideration
5. Pending Rectification Petition

Summary:

1. Condonation of Delay:
The Tribunal condoned the 20-day delay in filing the appeals due to the Covid-19 lockdown, referencing the Hon'ble Supreme Court's extension of the limitation period in Miscellaneous Petition No.21 of 2022 in Suo Motu Writ Petition (C) No.3 of 2020.

2. Jurisdiction and Validity of Assessment Orders:
The assessees challenged the validity of the assessment orders on several grounds, including the failure of the Assessing Officer (AO) to pass a consequential order following the directions of the Principal Commissioner of Income Tax (PCIT) under section 263. The Tribunal noted that the PCIT had directed the AO to redo the assessment with necessary enquiries and verification. The Tribunal found no merit in the assessees' arguments, upholding the jurisdiction and validity of the assessment orders.

3. Material Evidence and On-Money Allegations:
The AO had based the assessment on a seized sale agreement indicating a higher sale price of Rs.800 per sq. ft. compared to the recorded sale prices. The Tribunal rejected the assessees' argument that the addition based on extrapolation from one document was incorrect. The Tribunal found that the AO was justified in estimating the selling price for other plots based on the seized agreement. However, the Tribunal adjusted the AO's estimation, directing the AO to adopt Rs.400 per sq. ft. as the selling price for all plots sold during the relevant assessment years.

4. Co-Seller Proceedings and Buyers' Consideration:
The assessees argued that the assessment should consider the tax treatment of co-sellers and buyers. The Tribunal noted that the Commissioner of Income Tax (Appeals) [CIT(A)] had upheld the AO's assessment without adequately addressing these considerations. The Tribunal did not find merit in these arguments, emphasizing the importance of the seized document indicating the actual price.

5. Pending Rectification Petition:
The assessees had filed rectification petitions under section 154, which were dismissed by the CIT(A). The Tribunal found that these appeals became infructuous due to the directions given for re-working the income based on the revised selling price of Rs.400 per sq. ft.

Conclusion:
The Tribunal partly allowed the appeals regarding the estimation of the selling price, directing the AO to re-work the additions. The appeals against the CIT(A)'s order under section 154 were dismissed as infructuous.