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TMI Blog2017 (6) TMI 1283X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT MUMBAI]. The facts of the case were very much similar to the assessee's case. The issues before the Tribunal in the above case was whether since assessee tendered explanation in support of charging lower price in respect of some of the flats sold by it, which AO failed to controvert, addition is sustainable. ITAT held that addition in entirety is liable to be deleted - No reason to interfere in the order of CIT(A) for deleting the addition made on account of estimated sales price by disregarding the actual sale price shown by the assessee. - Decided against revenue - ITA No.5086/Mum/2014 - - - Dated:- 22-6-2017 - SHRI R.C.SHARMA, AM SHRI RAVISH SOOD, JM For the Appellant : Smt. Vinita J Menon For the Respondent : Shri Percy J Pardiwala and Shri Madhur Agarwal ORDER PER R.C.SHARMA (A.M): This is an appeal filed by the Revenue against the order of CIT(A)-30, Mumbai dated 30/05/2014 for the A.Y.2010-11 in the matter of order passed u/s.143(3) of the IT Act wherein following grounds have been taken by the Revenue:- (1) On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in deleting the addition of ₹ 3,71, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion filed on 29.11.2012 stated that flat no. 701 was sold in Sept' 2008, when the real estate market in Mumbai was booming and he did not sell any more flat then on the presumption that the prices will rise further, however, there being downward price correction in early 2009 and the liquidity position got tightened, the price was lowered by him to encourage sales and the only reason that flat no. 701 fetched the higher price was that it was sold at the time of market buoyancy, while the other, flats were sold at a time when the market was depressed. The assessee vide further written submission filed during the course of assessment proceedings stated that sale price of all the Government computation and, vide further submission filed on 14.12.2012, stated that the flats were sold to professionals and financed by banks/ financial institutions, who would have released the loans only after due diligence and though the real estate prices decreased in 2009 compared to 2008, the Maharashtra Govt. kept ready reckoner and the prices unchanged in 2009 and he was compelled to sell the flats at reduced rates. The assessee, on 19.12.2012, further submitted copies of two identical affidav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned order, CIT(A) deleted the addition after observing as under:- 2.41 I have duly considered the above submission of the appellant and fmd that the AO has made addition simply on the basis that flat no. 701, vide agreement dated 23.06.2008 was booked @ 41,456/-, whereas, the Remaining flats which were booked in the year 2009. i.e. after a year or year and half, it was@ 29,577/- or 26,636/- pr sq. ft. Thus, out of 5 flats sold by the appellant, the variation found by him was in one flat only, that is 701, which was almost one and half times of the flats booked in the year 2009. To support his argument, the AO has applied comparable method in practice in transfer pricing for determining Arm's length price and the ratio of the decision of the ITAT in the case of M/s Diamond Investments Properties. In so far as the application of comparable method for determining the sale price is concerned, it is seen that the same will be applicable in case of business transactions being international transactions covered by 'transfer pricing' provisions, section 40A(2)(b) is the relevant provision in case of transactions with the related parties. In case of unrelated parties, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra, hence, only reason why flat no. 701 commanded higher price compared to other flats is that the said transaction was entered at the time of market buoyancy and sale of the remaining flats was transacted when the market was depressed. In the light of the above facts, I find that there is no case made by the AO that the sale price was below the price declared by the State Govt. of Maharashtra or below the market price. The AO has simply applied the differential in rates for booking of flat no. 701 and other flats for arriving at the actual booking rate for all the flats other then flat no. 701. The addition made by the AO is, therefore, simply on the basis of difference in the rate in booking of flats at which it is sold to the buyers. In this regard, a recent order dated 16.08.2013 of the Mumbai ITAT in the case of Neelkamal Realtors Erectors India (P) Ltd reported In (2013) 38taxman.com 195(Mumbai Trib) is very much relevant. The facts of the case were very much similar to the appellant's case. The issues before the Tribunal in the above case was whether since assessee tendered explanation in support of charging lower price in respect of some of the flats sold by it, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared was subsequently reiterated in CIT v. Shivakami Co. (P) Ltd {1986} 159 ITR 71/25 Taxman 80K (SC) Similar view has been expressed by the Hon'ble Supreme Court in CIT v. Godavari Corpn.Ltd. {1993} 200 ITR567/68 Taxman 344 by holding that the burden is on the Revenue to prove under-statement of the consideration. The following observations of the Hon'ble Supreme Court from this case merit mention: Section 52(2) of the IT Act, 1961 can be invoked only where the consideration for the transfer of a capital asset has been understated by the assessee or in other words the full value of the consideration in respect of the transfer in shown at a lesser figure than that actually received by the assessee and the burden of proving understatement or concealment is on the Revenue; and the sub-section has no application in the case of bona fide transaction where the consideration received by [1979} 117 ITR 371 has held that the ITO cannot fix higher sales price without any evidence. The mere to the conclusion that the assessee did charge a higher price. A survey of afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not controverted the explanation furnished by the appellant during the course of assessment proceedings to explain the reason for charging lower price in respect of 4 flats sold vis-a-vis the rate/price for flat no. 701. I, therefore, applying the ratio of the decision of the ITAT in the above case delete the addition of ₹ 3.71 crore and allow the first ground of appeal. 5. Against the above order of CIT(A), revenue is in further appeal before us. 6. We have considered rival contentions and carefully gone through the orders of authorities below. From the record we found that AO has made addition on the plea that various flats booked and sold by the assessee was at a different price, even though situated in the same building. The AO found that flat No.701 having area of 1387 sq.ft was agreed to be sold on 23/06/2008 and for which payment was received by the assessee during the F.Y.2009-10 was at ₹ 41,456/- per.sq.ft, whereas flat No.702 having area of 710 sq.ft which was agreed to be sold on 22/06/2009 at a rate of ₹ 29,577 per sq.ft. Similarly other flats on the 8th and 9th floor was sold by the assessee at a lower price. The CIT(A) has given due just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand for a higher or lower flat; higher or lower carpet area etc. The AO brushed aside these explanations given by the-assessee qua each flat sold at a lower rate by simply mentioning that such reduction was not justifiable or there was no explanation for lower rate or fabricated reasoning etc. Such rejection of the asseesse's explanation in one stroke is wholly impermissible. If the AO was not satisfied with the assessee's explanation for charging a lower rate in comparison with a higher rate of other flats, he was required to bring on record certain material to demonstrate that the assessee, in fact, charged such higher rate. The rejection of assessee's explanation for charging a lower sale price cannot be jettisoned without positively showing that the assessee received a higher sale price. The Hon'ble Supreme Court, in context of section 52, in K.P Varghese v. ITO [198] 131 ITR 597/7 Taxman 13, has held that: Sub-s. (2) of s. 52 can be invoked only where the consideration for the transfer has been understated by the assessee or, in other words, the consideration actually received by the assessee in more than is declared or disclosed by him and the burden o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to accept such explanation without any convincing reason but also did not bring any material on record to show that the assessee in fact received higher price that declared. Under such circumstances, we are of the considered opinion that the action of the authorities below in this regard cannot be with effect from 2014-15 in respect of transfer of land or building or both which is not a capital asset. It is only during the prevalence of this provision that the Revenue has been discharged from the burden of proving that the sale price of land, or building of both is understand. Straight way, the declared sale consideration can be substituted with the stamp duty value, if it less. In the period anterior to the application of this provision, the burden is squarely on the Revenue to positively show that the sale price charged was actually more than that declared. We are confronted with a situation in which the assessee gave reasons for charging lower price in respect of some of the flats sold, which the AO failed to controvert. In such a situation, there can be no reason to me of sustain any such addition. We, therefore, order for the deletion of this addition in entirely. This gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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