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TMI Blog2012 (3) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... AR Revenue by:- Shri D V Singh, Sr. DR O R D E R PER D K TYAGI (JM):- These are two cross appeals one filed by the Revenue and the other by the assessee against the order of ld. CIT(A), dated 18.02.2009 for Asst. Year 2003-04. ITA No.1347/Ahd/2009 Asst. Year 2003-04 (Revenue s appeal) :- 2. The Revenue has raised the following grounds in this appeal :- (1) On the facts and in the circumstances of the case, the CIT(A) has erred in scaling down the addition from Rs.937123/- to Rs.298812/- and allowing the relief of Rs.6,38,311/- overlooking the fact that no consistent rate of profit was adopted to recognize the profit every year on the basis of project completion method. (2) On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs.6,10,000/- being unexplained purchase of the elevator overlooking the fact that purchase of elevator was not substantiated with evidence. (3) On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs.5,25,000/- being unexplained cash credit overlooking the fact that identity of person, genuineness of transaction and creditwo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equirement of sec.44AB of the IT Act , 1961 which included trading, profit loss account, balance sheet, partners capital accounts. The return was processed u/s 143(1) of the Act on 31.03.2004 and refund of Rs.22,750/- was issued to the assessee firm. The case of the assessee was selected for scrutiny and notices u/s 143(2) and 142(1) were issued and served upon the assessee. The assessment was completed u/s 143(3) on 27.03.2006 determining total income at Rs.27,93,144/- rejecting the books of account u/s 145(3) of the Act. The assessee went in appeal before the learned CIT(A) against the additions made by the AO. The learned CIT(A) gave part relief to the assessee. However, he upheld the action of AO in rejecting books of account of the assessee. 4.1 Now both the parties are in appeal before us. The assessee has filed the appeal against confirmation of additions by the learned CIT(A) while the Revenue has filed the appeal against deletion of additions made by the AO. 5. At the time of hearing, at the outset the ld. counsel of the assessee placing reliance on decision of Hon ble Allahabad High Court in the case of CIT vs. Banwarilal Bansidhar (1998) 229 ITR 229 (All) and the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esults did not reflect correct state of affairs and proposed to reject the books of accounts u/s 145(3). The AO also noted that if the survey disclosure was excluded, assessee had returned loss of Rs.17,69,255/-. The AO also proposed to apply the ratio of Gujarat High Court decision in the case of Fakir Mohd. Haji Hassan 247 ITR 290 and tax the disclosure made during the survey separately. In response to show cause notice of AO assessee stated that business of construction was started during F.Y.1998-99 and the cumulative profit declared on cumulative sales worked out to 22.5%. It was also submitted that decision in the case of Fakir Mohd. Haji Hassan was not applicable to assessee s case. The AO tabulated net profit shown by the assessee since FY 1998-99 to FY 2002-03 and held that the percentage of net profit shown by the assessee was much lower than its claim. Books of accounts were rejected u/s 145(3) by the AO as he was not satisfied with the correctness of the accounts. However, no separate addition was made on this ground. On the ground that assessee had adopted value of work-in-progress @ 8% of the purchases and direct expenses for FY 2002-03, AO worked out 8% net profit on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rstly due to excess stock found during the survey and secondly due to there being a net loss after excluding survey disclosure from the returned income. The AO also observed that since FY 1998-99 to FY 2003-03, net profit shown by the appellant was ranging between 0.07% to 1.97% during FY 1998-99 to FY 2001-02 and it was 10.3% in FY 2002-03, only after including survey disclosure of Rs.25 lakh. AO also observed that appellant s contention of taking 8% of WIP as income in some of the years was not correct, as provisions of section 44AD were not applicable to the appellant. Ongoing through the returns of income of the appellant since AYs 1999-2000 to Asst. Year 2002-03, I find that appellant s method of accounting is not consistent. In Asst. Year 1999-2000 and 2002-03, appellant had offered income for taxation @ 8% of the incremental value of WIP, whereas in Asst. Year 2001-02 income was returned on estimated basis at 5.4% of incremental value of work-inprogress. In Asst. Year 2002-03, income is claimed to be returned on the basis of profit loss account. As per section 145, income is to be computed by following a method of accounting regularly. However, the same has not been done. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs.1,14,501/ is fundamentally wrong. If at all the AO wanted to adopt 8% of direct expenses plus purchases as profit, the profit figure for the year would be Rs.1,14,591/- (presurvey) plus Rs.4,85,747/- (post survey), i.e Rs.6,00,338/- and not Rs.9,37,123/-. Adoption of 8% of direct expenses plus purchases as profits appears to be on the basis of AYs 1999-2000 to 2000-01, where appellant had itself taken the taxable net profit on presumptive basis to be 8% of incremental WIP. However, in AYs 2001-02 2002-03, appellant followed a different method. Moreover, if the AO had adopted profits on presumptive basis, there could not be further disallowance of actual expenses such as for elevator from the presumptive profit. It is also not clear whether the presumptive profit computed was before allowing partners remuneration and interest or after allowing the same. AO has not allowed partners remuneration and interest from the presumptive profit of 8% computed by him, though appellant deducted the same from 8% profits in AYs 1999-200 and 2000-01. For these reasons, working done by the AO in para 10 of the assessment order cannot be upheld. However, at the same time appellant s book res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after properly analyzing the facts of this case and has passed a well reasoned speaking order. Nothing substantial was argued by either party to deviate us from the view taken by the learned CIT(A). In view of this, we are not inclined to interfere with the order passed by him and the same is hereby upheld. Thus, Ground no.1 of the Revenue s appeal and Ground nos.1 and 2 of the assessee s appeal are dismissed. 10. The issue raised in ground No.2 of Revenue s appeal and ground No.4 of assessee s appeal is common which relates to disallowance of expenditure of Rs.6,10,000 for purchase of elevator. The AO had asked the assessee to furnish bill in respect of purchase of elevator, in response to which, the assessee had furnished copy of letter dated 25.5.2000 from Nikon Elevators titled proposal for two elevators Vrajlila Associates . AO s observation was that letter received from Nikon Elevators was a proposal only and evidence whether elevators were actually acquired or not, had not been furnished by the assessee. Moreover, letter furnished by the assessee was dated 25.5.2000. Since the assessee had not produced any evidence in support of purchase of elevators, it was held by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectricity bills. 13 The learned CIT(A) after considering the facts of the case and the submissions of the assessee, confirmed the disallowance of expenditure incurred for installation of lift of Rs.6,10,000/- made by the AO. He, however, further observed that since the income of the assessee has been arrived at by applying the net profit rate on sales, no separate addition was called for. 14 The assessee has challenged the findings of the learned CIT(A) and placing reliance on the submissions made by him before the learned CIT(A), which we have already reproduced hereinabove, argued that the disallowance deserves to be deleted on merit itself. 15 The learned DR, on the other hand, placing reliance on the order of the AO, submitted that the findings of the learned CIT(A) that no separate addition is called for in view of the fact that the income has been arrived at by applying the net profit rate on sales, was not proper and the addition made by the AO should have been retained by the learned CIT(A). 16. After hearing the rival submissions and going through the material on record, we find that it is an undisputed fact that the lift was installed and put to use with the appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y credited in the account of the assessee firm with the consent of individual lenders and confirmation/clarification to this effect from the bankers, M/s Andhra Bank through their letter dated 31.5.2002 was filed before the AO. The AO disregarded explanation in respect of source of deposits merely on the ground that NRE cheques were directly deposited in the account of M/s Vrajlila Associates and furnishing of confirmation itself cannot be treated as evidence. It was submitted that the assessee not only gave confirmation of the depositors but also gave further evidence to show source of such deposits, which was not doubted by the AO. The fact that cheques were directly deposited in the account of the assessee was an inadvertent action of the bankers, as confirmed by them. Since the assessee had established identity, creditworthiness and genuineness of the transactions, receipt of such amounts could not be considered as unexplained. Reliance was also placed on the following decisions:- i) Dy.CIT vs. Rohini Builders 256 ITR 360 ii) CIT vs. Orissa Corporation 159 ITR 78 (SC) The ld. CIT(A) after considering the facts of the case and submissions of the assessee decided the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit thereupon. The assessee referred to the chart filed before the AO from which it was clearly stated that shops on the ground floor had not been sold. Regarding six flats in respect of which profit was estimated by the AO, it was submitted that flat No.10A and 7C were sold to the partners Shri Devendrakumar R. Patel and Shri Harikrishna R. Patel, Flat No.9a was sold to Shri Himansu Patel with whom there was no relationship. Flat Nos.8A, 3C and 5C were sold to Shri Madhusudan R. Patel, Shri Ravjibhai V. Patel and Shri Satishchandra V. Patel, land owners, on whose land residential project Vrajlila was developed. It was submitted that partners and the firm being the same persons except for taxation law, assessee firm could not have made profit from the partners. Likewse, the land owners, who had given the land for development since two years prior to the flat being allotted to them were not paid any amount as per the understandingwith them and it was out of commercial and business prudence that the assessee gave flats at concessional rate to them. If this concession was not given assessee would have been required to pay interest for not making payment towards consideration of lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On basis of flat No. 3C Rs.53,640/- 3A 5C Rs.53,640/- 5A 7C Rs.53,640/- 7A 8A Rs.53,640/- 8C 9A Rs.53,640/ 9C 10A Rs.36,699/- 10B average rate Rs.334.6 per sq.ft Rs.3,04,899/- Thus, it is clear that sale consideration for 6 flats was lower by Rs.3,04,899/- vis- -vis market price in respect of 6 flats. The addition made by the AO could not have exceeded Rs.3,04,899/- in any case. However, since while working out the income in para 2.2 above, sale of 6 flats to partners etc., i.e. Rs.40,81,800/- is already included in total sale of Rs.1.17 crore, no separate addition is required to be made. Addition of Rs.7,06,021/- is deleted. 23 We have considered the rival submissions and perused the facts of the case. We have also gone through the orders of the lower authorities. We find that the learned CIT(A) has properly appreciated the facts of the case and has passed a well reasoned order. We, therefore, do not find any infirmity in the order of the learned CIT(A). The same is upheld accordingly. Thus, the ground raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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