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Judgment
PER AMITABH SHUKLA, AM,
This appeal by the assessee is directed against the order of National Faceless Appeal Centre/Ld. Commissioner of Income Tax(Appeals), New Delhi [hereinafter referred to as ‘ld. CIT(A)] dated 29.03.2025 arising out of assessment order dated 19.04.2021 passed under section 143(3) of the Income Tax Act, 1961, for the Assessment Year 2018-19. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1.On the facts and circumstances of the case, the Ld. CIT (A) erred in upholding and enhancing the disallowance of capital expenditure from Rs. 16,60,80,000/-to Rs. 35,86,55,032/- under Section 40A(2)(b) of IT Act for alleged excessive payment without appreciating that the transaction was commercially expedient, business-driven and based on market rates, circle rates and valuations, thereby misapplying a provision meant to curb abuse, not bona fide transactions.
2.On the facts and circumstances of the case, the Ld. CIT (A) erred in failed to appreciate that the La. AO wrongly compared the cost of additional FSI in 2018 with the cost paid in 2014 [the actual gap of more than 3.5 years (From 08-07-2018 to 01-01-2018)] and consequently adopted an ad-hoc and arbitrary method to determine the Fair Market Value without considering inflation, development progress, prevailing circle rates or the prescribed. valuation methods under Sections 92C or 55A of the IT Act:
3.On the facts and circumstances of the case, the Ld. CIT (A) erred in failed to appreciate that the transaction value of Rs. 22,416 per sq. mtr. as on 01-01-2018 was within 5% of the applicable government circle rate of Rs. 23,200 per sq. mtr., thereby falling within the tolerance band recognized under Section 50C of the IT Act.
4.The Ld. AO erred in determining FMV at Rs. 12,033/- per sq. mtr based solely on an earlier transaction without reference to circle rates or Section 92C methods, making the addition legally untenable and including an unjustified escalation of Rs. 4,000/- per sq. mtr.
5.On the facts and circumstances of the case, The Ld. CIT(A) erred in enhancing the disallowance Rs. 35,86,55,032/- while dismissing the Ld. AO's original disallowance Rs. 16,60,80,000/-, imposing a dual and punitive burden despite no new adverse material, and without providing any cogent reasoning, relying purely on conjecture, suspicion, and assumption.
6.On the facts and circumstances of the case, The Ld. CIT (A) erred in treating the transaction as unexplained due to the absence of third-party documents, ignoring the MOU, circle rates, valuation calculations, and evidence demonstrating its legitimate business purpose.
7.On the facts and circumstances of the case, the Ld. CIT(A) erred in law and on facts in failed to consider that the AO passed the final assessment order dated 19-04-2021 without taking into account the appellant's submission dated 15-04-2021 submitted in response to the SCN/draft assessment order dated 30-03-2021, thereby violating the principles of natural justice and procedural fairness.
8.On the facts and circumstances of the case, the Ld. AO erred in imposing penalty under Section 270A despite full disclosure, bona fide belief, and commercially justified disputed additions, ignoring natural justice, absence of tax evasion intent, and proportionality, making the penalty arbitrary and unjust.
The only issue that emanates from the grounds of appeal raised by the assessee is regarding the disallowance of an amount of Rs.16,60,80,000/- under section 40A(2)(b) of the Act. The ld. Counsel for the assessee drew our attention that the addition was made holding that the transactions of acquisition of additional floor space from related party namely Logix Infra Developers Pvt. Ltd. for Rs.35,86,55,032/- was against the provisions of the Act. The ld. Counsel further argued that the ld. CIT(A) merely reproduced the AO’s findings without any application of mind and consideration of appellants written submissions/supporting evidence. It was vehemently argued that the ld. CIT(A) enhanced the addition from Rs.16,60,80,000/- to Rs.35,86,55,032/- without any legal backing.
Having heard the rival parties and perused the material available on records, we are of the considered view that the lower authorities have not properly appreciated the facts of the case in the light of material available on records. We have noted that the ld. CIT(A) had committed the impugned enhancement holding that the appellant has not responded to his statutory notices and that the appellant had failed to adduce evidences for the FSI received of Rs.35,86,55,032/- from its holding company. He has proceeded to presume applicability of decision of Hon’ble Apex Court in the case of McDowel & Co. qua availability of colourable devices for tax planning. We have noted from the order of the ld. AO that the conclusions drawn in para-6 to 8 of his order are also prima facie based upon conjectures and surmises without any backing of demonstrative evidences. Be that as it may be, in the interest of justice, we deem it appropriate to set-aside the order of the lower authorities and direct the ld. AO to complete the assessment de novo, in accordance with law and by way of a speaking order. The assessee shall be bounden to comply the statutory notices issued by the ld. AO and shall be entitled to produce all or any evidence deemed necessary in its defence. The appeal of the assessee is therefore allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.