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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 ..... er giving the credit of the amount shown by the Assessee, held the balance amount as the income of the Assessee - the accounts of the Assessee has been found to be incorrect and the method adopted to be improper and the book entries to be not reliable and the percentage of the total receipts was already added for working out the income, no addition separately on account of closing stock could be added - Revenue has not brought any material on record to controvert the findings of CIT(A) – thus, there was no reason to interfere in the order of CIT(A) – Decided against Revenue. - I.T. A. No. 1105 /AHD/2011 - - - Dated:- 16-5-2014 - Shri G. C. Gupta And Shri Anil Chaturvedi, A.M.,JJ. For the Appellant : Shri P. L. Kureel, Sr. D.R. For the Respondent : Shri Mukund Bakshi ORDER Per Shri Anil Chaturvedi,A.M. 1. This appeal is filed by the Revenue against the order of CIT(A)-II, Baroda dated 20.01.2011 for A.Y. 2007-08. 2. The facts as culled out from the material on record are as under. 3. Assessee is a firm stated to be engaged in the business of civil construction. Assessee filed its return of income for A.Y. 07-08 on 31.10.2007 declaring total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the Assessee. It was further submitted that the amount received from the member s was shown as contribution from members and it was adjusted on execution of land sales between plot holders and land owners through the Assessee. The submission of the Assessee was not found acceptable to the A.O. A.O noted that Assessee had not furnished any proof to demonstrate that the advances and liability of members contribution which existed on 31.03.2007 and that Assessee had not proved that the member s contribution existed on the last date of the year. He therefore concluded that Assessee had failed to establish the identity, genuineness and creditworthiness and that the Assessee was creating assets from his own undisclosed income and consistently carrying member s contribution in the accounts. He further noted that Assessee had not furnished any confirmation or proof like bank transaction. He therefore considered the balance of Rs. 69,42,515/- as appearing in the balance sheet as on 31.03.2007 as income from undisclosed sources and added to the total income of the Assessee. 6. A.O. also noticed that Assessee had shown Rs. 30,59,301/- in the building construction account. He noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that even though possession has been given and proceed has been realized long back formal documentation has not been entered into and therefore the amount received was shown as liability under the head member's contribution rather than showing as sale proceed. Looking into totality of fact it is apparent that accounting method followed by the appellant is not proper and it is impossible to work out true profit on the basis of the entries made in the books of accounts and therefore it has to be held that the account of the appellant is not correct or complete. The Assessing Officer has made addition on this amount as income from undisclosed sources. However, as noted above the books maintained by the appellant has no sanctity and there are no conformity with any established accounting practice. It is also apparent that true and correct profit cannot be worked out following the method adopted by the appellant. On the other hand the whole amount shown as member's contribution cannot be considered as income because member's contributions are sale proceeds. However, the whole sale proceeds cannot be taxable income. Looking into totality of the facts the proper course woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal is that the learned Assessing Officer has erred in law and in facts in making an addition of Rs.30,59,301/- towards building construction on the ground that it is the closing stock. 4.1. During the course of assessment proceedings, the Assessing Officer noted that the value of inventory reflected in the accounts by the appellant was to be held as income and, therefore, liable to be taxed. 4.2. Before me the Learned Authorized Representative submitted that With humility, the appellant submits to your honour that the basis of the addition is not comprehended by the appellant. The fact relating to the issue are that in the accounts / balance sheet, the appellant has on the asset side disclosed a balance of Rs. 30,59,301/- (refer page no. 38 of the Paper Book. This amount is derived as under: Building Construction A/c: Rs. As per last Balance Sheet 14,570,510 Add: Addition during the year 13,522,100 28,092,601 Less; Documents during the year 25,033,300 30,59,301 The Id, A.O. apparently is of the view that such amount should be recognized as revenue and, therefore, an addition of such amount is made. As explained above, the method of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion could be made u/s. 41(1) of the Act towards member s contribution. He also relied on the decision of Hon ble Gujarat High Court in the case of CIT vs. Nitin Garg (2012) 22 Taxman. Com. 59 (Guj) and CIT vs. Bhogilal Ramjibhai Atara (2014) 43 Taxman. Com. 55 (Guj). He thus supported the order of CIT(A). 9. We have heard the rival submissions and perused the material on record. The issue in the present case is about the taxability of members contribution and the closing stock. We find that CIT(A) after considering the submissions of the Assessee has noted that the accounting method followed by the Assessee was not as per the established accounting principles as the Assessee had not accounted the receipts on the basis of booking amount and nor the receipts were accounted on the basis of actual sales made when the possession was given and proceeds realized but had stated to have accounted on the basis of Architects Certificate regarding construction completed during the year. CIT(A) has further noted that Assessee submission that the receipts were accounted on the basis of Architect Certificate was not supported by the facts on record. Considering the entirty of facts, he has giv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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