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TMI Blog2014 (6) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds:- 1. On the facts and in the circumstances of the case and in law, the Ld.CIT (Appeals) erred in rejecting the books of account on the basis of peculiarity of the method adopted by the assessee and in estimating the profit @ 12% on the total receipts. The Id.CIT(Appeals) erred in not appreciating the fact that the addition of Rs 69,42,515/- was rightly made u/s.41(l) of the Incometax Act towards members contribution since the members were allotted and given possession of the property long back, all the dues were cleared at that point of time and thus, the revenue was recognized long back although the sale deed was affected in the F.Y.2007-08. 2. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT (Appeals) erred in deleting the addition of Rs. 30,59,301/- being credit under the building construction account on the ground that separate addition on closing stock cannot be made since a percentage has already been applied to total receipts for working out income. The Id.CIT (Appeals) erred in not appreciating the fact that the Assessing Officer has rightly made the addition on account of building construction account balance as revenue since the members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.3. I have given careful consideration to the submission made, assessment order and also facts on record. In respect of method of accounting followed for showing income, it has been argued that the appellant received money from the prospective customer at the time of booking of units in various installments. The amount so received is utilized for the construction and also for the advance payment for land. It is stated that at the end of the year the appellant obtains certificate from an Architect regarding construction work completed and the account certified by the Architect along with land development charges is recognized as revenue in the profit and loss account. The appellant has also given the accounting entries passed in this regard which is reproduced at page-3 of this order. Having given careful consideration of the submissions made I find that the so called accounting method followed by the appellant defiles all cannon of established accounting principles. Admittedly receipts are not accounted on the basis of booking amount. Admittedly also receipts are not accounted on the basis of actual sale made in the form of possession given and proceed realized. It is stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wise there is no reason for it to manipulate the accounts the way it has been done. One way to bring income to tax is to apply percentage to this years' receipt. However, looking into peculiarity of the method adopted by the appellant and as pointed out by the Assessing Officer receipt taken on the basis of Architect's certificate has no sanctity, the proper method would be to take into consideration total receipt since inception of project and apply percentage on that and from the resultant profit credit should be given of profit shown hitherto. The balance amount should be the taxable income of the year. This is worked out as under:- Total receipts shown so far:- Financial Year Receipt (Rs.) 2003-04 1,43,88,922 2004-05 1,60,94,104 2005-06 1,39,46,495 2006-07 2,41,41,000 Total 6,85,70,521 Total income shown year wise. Assessment Year Profit after considering the value of closing inventories as per P & L A/c but before partner's salary & interest. 2003-04 1,85,750 2004-05 8,62,836 2005-06 9,14,270 2006-07 9,43,344 2007-08 14,59,918 Total 43,66,118 This income is shown in the Return of Income upto 31.03.2007 is Rs. 21,48,288/-. 12% net profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on the ground that since project has been completed and possession has been given the entire building construction account of Rs.75,50,913/- is a Revenue receipt. However, apparently the Assessing Officer has misdirected herself on this account. The appellant has rightly pointed out when the source (the receipts) already has been considered for the purpose of taxable income the application of the source again cannot be brought to tax. Thus the closing stock is balance of building construction account. This is an expenditure account met out with receipt from sale. It can be seen that this amount is included in the receipt which has already been considered for the purpose of working out the income. In any case it has been already held earlier that the method adopted by the appellant is absolutely improper and therefore the book entries are not reliable. Since a percentage has already been applied to total receipts for working out income, closing stock cannot be added separately. This ground is allowed. 7. Aggrieved by the order of CIT(A), the Revenue is now in appeal before us. 8. Before us, the ld. D.R. took us through the order of A.O and the observations of A.O and submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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