(Prayer: TAX CASE (APPEAL) filed under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal Madras 'A' Bench dated 19.1.2007 in I.T.A.No.1612/Mds/2002 for the assessment year 1995-96.)
P.P.S. Janarthana Raja, J.
This appeal is filed by the revenue against the order of the Income Tax Appellate Tribunal Madras 'A' Bench dated 19.1.2007 in I.T.A.No.1612/Mds/2002 raising the following substantial question of law.
"Whether in the facts and circumstances of the case, the Tribunal was right in deleting the addition made by the assessing officer on the income of the 3 flat complexes promoted by the assessee?
2. The brief facts are as follows:-
The assessee is one of the popular flat promoters in Chennai. The relevant assessment year is 1995-96 and the corresponding accounting year ended on 31.03.1995. The original assessment was completed on 23.02.1998 on the total income of Rs.2,45,80,050/-. On appeal, the Commissioner of Income-tax (Appeals) has set aside the order of assessment with a direction to re-do the assessment. After giving an opportunity to the assessee, the Assessing Officer has passed an Assessment order under Section 143(3) of the Income Tax Act and determined the total income at Rs.75,99,585/-. While completing the assessment, the Assessing Officer has made an addition of Rs.31,53,887/- in respect of Lloyds Road Project, Dwaraka Colony, Mylapore, and Burkit Road, T.Nagar project on the ground that there was difference in the profits of the projects, by comparing with the other promoter viz., Alacrity Housing Limited. Aggrieved by that order, the assessee has filed an appeal to the Commissioner of Income Tax (Appeals)-III, Chennai. On consideration, the said authority has accepted the contention of the assessee and allowed the appeal, setting aside the order of assessment. Aggrieved by that order, the revenue has filed an appeal in ITA.No.1612(MDS)/2002. The Appellate Tribunal has dismissed the appeal and confirmed the order of the CIT(Appeals). Hence, the Revenue has filed the above appeal.
3. Learned Senior Standing counsel appearing for the revenue vehemently contended that the Tribunal is wrong in deleting the addition made by the assessing officer to the income from three flat complexes promoted by the assessee and also contended that the Tribunal has failed to see that the assessee had admitted certain discrepancies in the sale price. He further contended that the Tribunal has failed to see that the assessing officer has made addition of projects to the extent of Rs.31,53,887/- by comparing the other promoter and hence, the order passed by the Tribunal is not in accordance with law and the same has to be set aside.
4. Heard the learned counsel for the revenue. During the relevant period, the assessee has completed three housing projects viz., (1) 224, Lloyds Road, (2) 20/21, Dwaraka Colony, Royapettah High Road, Mylapore, and (3) 65, Burket Road, T.Nagar and the Assessing Officer made additions in respect of the above projects and held as follows:
"LLOYDS ROAD PROJECT:
Alacrity Housing Limited had done a project in No.199, 200 Lloyds Road. The project commenced in February 1993/March 1993 and was delivered in May 1994 to June 1994. The average rate of sale was Rs.885 per sq.ft.
In the same area (ie)224 Lloyds Road, the assessee has sold around the same time at an average rate of Rs.812/- sq.ft. As already explained there is no reason for the assessee to sell lower than the market rate. Therefore, the rate of Rs.885/- sq.ft. is applied as the average rate of sale to arrive at the correct sale proceeds. Here for comparison only the construction cost and land cost per sq.ft of built up area has been taken. Registration cost has not been included. Total area sold as shown in the books.
Sale value of 885 sq.ft 78,17,205/- 8833 sq.ft.
Cost of area sold as per books
books of the assessee 57,60,063/-
Gross profit as admitted by 14,42,132/-
Difference added to return of 6,15,010/-
income as correct sale proceeds ---------------
DWARAKA COLONY, MYLAPORE.
Alacrity Housing Ltd has sold a project in No.45, I Main Road, No.11, III Cross Street, CIT Colony, Mylapore, this project was done between the period August 1992 to March 1994. The sale value per sq.ft in the above project, after excluding the cost of registration, was Rs.822/- per sq.ft whereas the assessee company also has sold the Dwaraka Colony Project, Mylapore in the period November 1992 to September 1994 and the average rate of sale per sq.ft was Rs.727/-. Again as explained before there is no reason why the assessee should sell less than the market rate. Therefore, correct sale proceeds are arrived at by applying sale rate of Rs.822/- per sq.ft.
Sale value of 12896 sq.ft at Rs.822 per sq.ft 1,06,00,512/-
Total cost as per books of the assessee 75,15,108/-
Gross profit 30,85,404/-
Gross profit admitted by the assessee 18,65,381/-
Difference added to returned income 12,20,023/-
BURKIT ROAD, T.NAGAR, PROJECT:
In this project the land cost has been directly borne by the buyers. The assessee company has charged them only construction cost. The project has been sold between the periods June 1992 to July 1994. The average rate of sale per sq.ft was Rs.389/- per sq.ft. This has been compared with the project of Alacrity Housing Ltd in Venkat Narayana Road done during the same period (ie) June 1993 to January 1995. The Alacrity Housing Ltd has split the sale value into land cost, construction cost and registration charges. As the assessee has not incurred land cost, only construction value has been compared which was Rs.493 sq.ft for Alacrity Housing Ltd. The same has been applied to the total area sold by the assessee during this year.
Sale value at Rs.493 per sq.ft for Rs.
12692 sq.ft 62,58,156
less:Cost as per the assessee 45,17,737
Gross profit 17,39,419
Gross profit admitted by the assessee 4,20,565
Difference added to returned income 13,18,854
This total difference in sale proceeds added to the income of the assessee.
Lloyds Road Project 6,15,010/-
Dwaraka Colony, Mylapore Project 12,20,023/-
Burkit Road Project 13,18,854/-
Total difference in sale proceeds 31,53,887/-
The assessing officer has fixed the rate of average value by comparing with Alacrity. The said addition was made by comparing with M/s Alacrity Housing Limited. The reason for making this addition is that the contractors of Alacrity Housing Limited has admitted the sale of flats for more consideration and such practice should also prevail invariably with all the other promoters. Based on the estimation, the assessing officer has made the addition above. In this case, there is no proof to show that the assessee has received on money and the revenue also has not even examined the flat buyers to verify the same. The Commissioner of Income Tax (Appeals) considering the details submitted by the assessee held as follows:-
".... Coming to the factual position I am of the considered opinion that the appellant's representative has made out a strong case, that how they were forced to sell the flats at a lower rate than that of the flats promoted by M/s. Alacrity Housing Ltd. The location of the property environment availability of amenities. Of the deciding factors for the sale price of the flats. The appellant has established is in respect of 3 property promoted that they were located in a disadvantageous position than those projects promoted by Alacrity Housing Ltd. These facts had not been controverted by the assessing officer.
The appellant's quality of construction design and execution is no comparison to M/s. Alacrity Housing Ltd. Perhaps the latter company is No.1 in the field in Chennai. Further even payment made to the executives and staffs are perhaps highest in Chennai. The appellant has rightly said that he caters only to the middle class whereas M/s. Alacrity caters to the mostly to the non resident Indians and upper class of the society. This is common knowledge in the business. Hence I am convinced that these two are not comparable cases and hence the adoption of the sale rate of Alacrity Housing Ltd was erroneous....
The above decision still holds the field and unless the assessing officer had established that unaccounted consideration for the flats has passed to the appellant the question of addition does not arise. It is settled law that an assessment or addition cannot be made on surmises and conjectures but only on proven facts and evidence. That on money could have been received just like 'Alacrity is obviously a surmise. The assessing officer has not recorded a statement from any flat buyers that they have paid on money. No other evidence has been gathered from any other source not there is any proof that the appellant had made unaccounted investment or credits etc."
5. From a reading of the above it is clear that no evidence was gathered by the revenue to show that the assessee has received higher value and the additions were made only on presumption. The Appellate Tribunal has also considered the factual position and held as follows:-
"The Commissioner (Appeals) also discussed the factual details. The assessee explained as to under what circumstances they proposed to sell the flats at a lower rate than that of the flats promoted by M/s Alacrity Housing Limited. He also considered the location of the property, environment and amenities. It was found that the properties promoted by the assessee were located at different places and comparing to the projects promoted by M/s Alacrity Housing Limited the location was disadvantageous. The quality of construction, design and execution were also beyond comparison. The assessee constructed the flats to cater the needs of middle class, whereas it was noted that M/s Alacrity Housing Limited caters the needs mainly of non resident Indians and upper class of the society. Before making the addition the Assessing Officer did not consider all these aspects. Comparison is possible within equals and not between unequal. Since the addition was
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based purely on surmise and conjectures, the Commissioner (Appeals) deleted the same. We have perused the impugned order. Even before us the department could not produce any evidence justifying the addition. As such we find no reason to interfere with the order of the Commissioner (Appeals). We, therefore, uphold the same." 6. Both the authorities have given concurrent finding that additions were made only by comparing with the project of M/s Alacrity Housing Limited and that assessment could not be made on surmises and conjectures. The findings given by both the authorities are that the revenue did not prove that the assessee has collected on money on the sale of flats and also there is no proof that the assessee had made unaccounted investments or credits etc. Therefore, it is clear that the concurrent findings are based on valid material and evidence. It is a question of fact and not a perverse order. The learned counsel appearing for the revenue is also unable to produce any material evidence to take a contrary view. Hence, we do not find any error or infirmity in the order of the Tribunal warranting interference and the order of the Tribunal is in accordance with law and the same is confirmed. In these circumstances, no substantial question of law arises out of the order of the Tribunal and the Tax Case (Appeal) is liable to be dismissed and accordingly it is dismissed.