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TMI Blog2013 (3) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... ies/ submissions. The power of the AO to raise valid queries on the basis of the facts or unusual features noticed by him must be conceded. The features noticed by him in the assessees’ business certainly constitute a starting point of inquiry. They are, however, not to be taken as evidence or material showing any suppression or understatement of the sale price. If on further probe, AO was able to unearth any evidence or material on the basis of which actual suppression of the sale price could be found, then the additions made on that basis would be valid. It is not open to AO merely on the basis of what he perceives to be the market conditions, to make additions to the sale price or the profits, without any evidence of understatement. These principles have been kept in mind by the Tribunal and, therefore, its order cannot be faulted or branded as perverse in holding that the sale consideration disclosed by the assessee on sale of shops should be accepted. Also there is no other provision in the Act permitting the AO to enhance the profits or the sale price except section 50C and section 92BA. Section 50C does not apply to the present case as it applies only to a case of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA 18/1999. 4. So far as the other two substantial questions of law are concerned, they are connected with each other. The brief facts in this connection may be noticed. We are taking up first the facts in ITA No.1089/2011. The assessee is engaged in the business of construction of commercial complexes. In the accounting year ended on 31.03.2006 relevant to the assessment year 2006-07, it had constructed 67081 sq. ft. area of a shopping mall called City Square Mall. The construction cost including the land cost amounted to Rs.5,456/- per sq. ft. The shops in the complex were sold. In respect of 7 shops, the Assessing Officer noticed that the assessee had booked sales at Rs.6,000/- per sq. ft. in the ground floor in the year 2003 whereas in the year 2005, shops in the same floor were booked at the rate of Rs.3,390/- per sq. ft. One of the shops was even found to have been sold at the rate of Rs.2,300/- per sq. ft. which was even less than the land cost of Rs.2,332/- per sq. ft. The AO further noted that even in respect of the same floor, different rates were being charged from different customers. The following table sets out the relevant details:- Date of agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as of a large area and, therefore, could fetch only Rs.2,300/- per sq. ft. (d) By December, 2005, the project was completed and the cost was known to the assessee and, therefore, a shop of a small size in the ground floor was able to fetch Rs.5,438/- pr sq. ft. which is equal to the cost of land and construction. (e) After December 2005 till March 2006, there was no sale of shops which shows that the demand for shopping space could widely fluctuate. (f) There was no evidence brought on record to establish any understatement of sale consideration. No independent inquiries were made by the Assessing Officer to bring in comparable cases of sale at higher prices. (g) The Assessing Officer, if he had suspected the declared sale prices, ought to have raised queries but he did not do so. 7. On consideration of the above submissions, the CIT (Appeals) held that there was no justification for disallowing the loss on the sale of shops. He accordingly directed the Assessing Officer to allow the loss. 8. The Revenue carried the matter in appeal before the Income Tax Appellate Tribunal in ITA No.3617/DEL/2009. The Tribunal took up the appeals of the Revenue in the case of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (Appeals). It may be noted that since the CIT (Appeals) had deleted the additions in all the three cases, the Tribunal upheld the decision of the CIT (Appeals) in all the three appeals filed by the Revenue for identical reasons. 9. For the sake of completeness, we may notice the facts relating to the assessment year 2007-08 in the case of M/s. Discovery Estates Pvt. Ltd. in ITA No.1090/2011 and in the case of M/s. Discovery Holdings Pvt. Ltd. in ITA No.1097/2011. In the case of Discovery Estates Pvt. Ltd., the Assessing Officer, on a scrutiny of the sale agreements filed before him and the copy of the accounts noted that though the total cost of construction, including the land cost, came to Rs.5,456/- per sq. ft., the assessee had booked sales in the first floor at Rs.5,000/- per sq. ft and sold the third floor shop to M/s. Vatika Hospitality Pvt. Ltd. at Rs.5,412/- per sq. ft. From these figures, he drew the inference that the assessee had suppressed the sale price. According to him, it was not acceptable that the shops could be sold at the rates which are less than the total cost of construction. Moreover, some of the shops sold by the assessee were to a company by name M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64 3001 22,17,000 27,69,900 SF-09 738.64 3001 22,17,000 27,69,900 SF-15 813.35 3074 25,00,000 30,49,612 10996520 14129512 Difference Rs.31,32,992/- = It will be noticed from the above table that the Assessing Officer adopted the sale price of Rs.3,750/- per sq. ft. as against the declared sale consideration and arrived at the addition. As noted earlier, the addition was deleted by the CIT (Appeals), whose decision was confirmed by the Tribunal. 11. The main contention taken up on behalf of the Revenue was that the CIT (Appeals) as well as the Tribunal did not examine the assessment orders in the manner expected of them and both these authorities have deleted the additions made by the Assessing Officer without proper reasons. It was submitted that there was no satisfactory answer to the query raised by the Assessing Officer as to why and how the properties could be sold at a price which was lesser than the cost of construction (including land cost). It was further submitted that a part of the shops in the City Square Mall was sold by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, the assessing officer has not invoked section 145 (3). It is this sub-section that empowers him, where he is not satisfied about the correctness or completeness or the accounts of the assessee, to make an assessment to the best of his judgment in the manner provided in section 144. Therefore, there is no option to the assessing officer except to accept the book results. It is, however, conceded that if there is evidence to show suppression of the sale price, in that case the assessing officer can very well invoke the aforesaid provision of the Act, reject the books of the assessee as being incorrect and proceed to estimate the sale price. It is, however, pointed out that there is no such evidence in the present case. It is further contended that this is the basis of the order of the Tribunal which can hardly be characterised as perverse. 14. On a careful consideration of the matter we are inclined to accept the submissions of the learned counsel for the assessee and agree with him that the findings recorded by the Tribunal are not perverse. It is not correct to say that the assessee did not satisfactorily answer the queries raised by the assessing officer on noticing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of any evidence to show either that the sales were sham transactions or that the market prices were in fact paid by the purchasers, the mere fact that goods were sold at a concessional rate would not entitle the income tax department to assess the difference between the market price and the price paid by the purchaser as profit of the assessee. In CIT v. A. Raman Co.: (1968) 67 ITR 11 the Supreme Court held that the law does not oblige a trader to make the maximum profit that he can out of his trading transactions. Income which actually accrues is taxable, but income which the assessee could have, but has not in fact earned, is not made taxable. These two judgments were approvingly noticed and applied by the Supreme Court in CIT v. Calcutta Discount Co. Ltd.: (1973) 91 ITR 8. These judgments apply to the present case in favour of the assessee. 16. A Division Bench of this Court was examining a converse case in CIT vs. Dinesh Jain HUF: (2012) 211 Taxman 23. There the question arose under section 69B of the Act as to what was the correct investment made by the assessee in an immoveable property. The income tax authorities relied on the fair market value of the property calcu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed as under: Adverting to the various probabilities which weighed with the Income-tax Officer we may observe that the notoriety for smuggling food grains and other commodities to Bengal by country boats acquired by Sahibgunj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant could not be tarred with the same brush as every arhatdar and grain merchant who might have been indulging in smuggling operations, without an iota of evidence in that behalf. 18. The Tribunal cannot be said to have taken into account irrelevant material or ignored relevant material in arriving at its decision. It seems to have applied the right principles in support of its decision. Its order cannot therefore be termed as perverse. 19. For the aforesaid reasons we answer the second substantial question of law in the affirmative, in favour of the assessee and against the revenue. The third substantial question of law is answered in the negative, in favour of the assessee and against the revenue. 20. In the result the appeals filed by the revenue are partly allowed. - - TaxTMI - TMITax - Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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