Direct Taxation

Held I:

• The documents relied upon by the Assessing Officer were nothing but dumb documents as these loose sheets did not contain details of buyers, date of receipt of alleged on money, signature of buyer or agreement to sale. Therefore, the contention of the assessee that these loose papers were just quotations/offer price only cannot be brushed aside. Moreover, as noted by the Assessing Officer, in the relevant column of these seized documents, it was mentioned a ‘Offer Rate’. It is agreed with the contentions of the assessee that in the real estate business, offer rates are always on the higher side and are subject to negotiation. There is no evidence in the file that any transaction actually materialized at the rates in the relevant assessment year as depicted in the alleged seized documents. The assessee has also explained that the Assessing Officer has wrongly assumed/interpreted the various short words/abbreviations to his convenience and linked the same to assume higher sale rates of the units. He has also demonstrated that the Assessing Officer found notes saying ‘1P=’4L” and assumed this meant ‘1 Parking Spot = Rs. 4 Lakhs in cash. ‘The assessee, however, explained that ‘P’ actually stood for ‘Painting’ (interior finishing works like painting and panelling), which is an optional service. This type of abbreviations, can be well explained by the person who has written these abbreviations or the person in whose possession these documents were found. If such a person gives the explanation/full form of these abbreviations and the same are found convincing, looking into the facts and circumstances of the case, then the other interpretation done by the Assessing Officer to assume a higher sale price would not be justified, especially when there is no corroborative evidence to such assumptions. In this case, even the Assessing Officer did not verify his assumptions as no buyers were questioned to confirm if they paid any cash over and above the sale price mentioned in the deed. Even the Assessing Officer used internal Excel files containing budget projections to calculate the project cost of Rs. 5,000 per sq. ft. The Assessing Officer then assumed that any unit sold below this rate implies that the difference was collected in cash. However, the case of the assessee is that these Excel sheets were internal estimates and budgets, not actual sales. Moreover, neither any unaccounted cash in the possession of the assessee, nor any ‘cash book’ or informal ledger recording on-money receipts or any other evidence of the utilization of such alleged cash (e.g., unexplained investments or expenses) or any day-to-day cash trail was found or noticed during the search action. The Assessing Officer did not make any inquiries with the purchasers by issuing notices under section 133(6). Conversely, the assessee voluntarily filed affidavits from the buyers, who categorically denied paying any amount in cash over the registered value. The Assessing Officer has not referred to any single corroborative evidences containing date-wise cash receipts from any member or loose material bearing the signature of buyer confirming cash payment or other evidences which clearly bifurcates the negotiated deal into ‘cash component’ and ‘cheque component’. That even there was a timing mismatch as the units in question were booked during the years 2014-2016 at lower market rates, which were compared with a cost average calculated years later in 2021-22. Even, force is found in the contention of the assessee that the prices quoted in the loose papers/chats found from the broker would have been the resale offer/negotiation price offered by the first buyer, as these documents/chats were of a later period, even after the booking of the flats by the assessee. [Para 10.1]
• Even the adoption of a uniform rate of Rs. 6,500 by the Commissioner (Appeals) for all units sold is purely based on assumptions and presumptions. The Commissioner (Appeals), on the one hand, has rejected the methodology and assumptions made by the Assessing Officer, on the basis of seized loose papers and held that these documents did not prove that the assessee had sold the units at the price mentioned in those documents, as those documents were dumb documents and were not corroborated with any evidence as observed above. On the other hand, the Commissioner (Appeals) himself proceeded to firstly calculate the construction cost, then applied such construction cost to all the units irrespective of their size, location and the amenities offered therein. The assessee has demonstrated that the value of a unit is determined by its floor level, direction (Vaastu), proximity to amenities, and the time of booking (early bird v. final phase). Therefore, the action of the Commissioner (Appeals) in assuming a flat rate for all units and without there being any corroborative evidence and merely on an assumption basis, cannot be held to be justified. [Para 10.2]