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TMI Blog2018 (1) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... the vouchers properly and some of the vouchers made were misplaced. The A.O., considering the facts of the case held that assessee failed to substantiate expenses, accordingly estimated the income @ 12.5% on construction activity and 8% on sale of plots clear of all the expenditure and depreciation. Secondly, the A.O. treated the interest income of Rs. 7,43,76,762/- as income from other sources and assessed separately. Thirdly, the A.O. found during the course of scrutiny of balance sheet that there was a decrease in the current liabilities to the extent of Rs. 155.96 crores with regard to the venture advances transferred to the sister company of the assessee M/s. Agri Gold Farm Estates India Pvt. Ltd. The assessee has transferred the liability along with collected amount on the corresponding expenses. The assessing officer treated the transferred amount of venture advances as deemed sales and estimated the income @ 8% on Rs. 155.96 crores, which worked out to Rs. 12,47,68,000/-. Similarly, the A.O. found that the assessee company has refunded Rs. 184.08 crores to the customers who have opted out or due to breach of contract from ventures. The A.O. treated the refund of amounts to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised the following grounds of appeal: 1. The order of the learned Commissioner of income-Tax(Appeals), Vijayawada is erred both in law and on the facts of the case. 2.On the facts and circumstances briefly submitted in the statement of facts, the decision of the learned CIT(A) to assess the income from construction work (c) 8% & on the sale of plots (c) S% as against @ 12.5% & 8% as adopted by the AO, respectively, is neither based on any material nor on valid base and hence her decision is unjustified 3. On the facts and circumstances of the case, the Ld.CIT(A) is unjustified in holding that the principle of consistency is to be adopted in this case since the facts and circumstances vary from year to year and this issue is being contested before superior appellate authorities! court. 4. The ld.CIT(A), on the facts and circumstances briefly submitted in the statement of facts, has not taken relevant material factors for determining the rate of profit on each of the above sources. 5. The Id. CIT(A) has wrongly applied the ratio of a decision rendered by the Hon'ble ITAT on issues covered u/s.263 which is not justified on the facts and circumstances of this case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. has noticed the defects such as expenses under the heads gravel, sand purchase, metal chip purchases and labour charges, etc. were incurred on self-made vouchers or there were no bills and vouchers in some cases. The quantum of amount of the expenditure incurred under the relevant heads and the quantum of expenditure for which the expenditure was incurred on self-made vouchers and the amount of expenditure for which no details, was made available and was not quantified by the A.O. In the earlier years the A.O. has accepted the estimation of income @ 8% on construction contracts and 5% on sale of plots, and the same is evidenced by the Ld. CIT(A)'s order. The A.O. has not brought on record any major changes in the expenditure incurred by the assessee and any suspicious nature of expenditure, or inflation of expenditure. The assessee has maintained the regular books of accounts and the books of accounts were duly audited by the qualified Chartered Accountants. Though rule of resjudicata does not apply to the Income Tax proceedings, the rule of consistency does apply to the income tax proceedings. This view is supported by the Hon'ble Supreme Court judgement in the case of Kanmu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of surplus money out of advances received by it from intending purchases is business income and cannot be assessed as income from other sources." 6.7 The Hon'ble Kolkata High Court in the case of Eveready Industries India Ltd. (supra) has held as follows: "AO was right in treating the interest income earned by the assessee by investing surplus fund of the business in short term deposits as business income in accordance with sub r (1) of r 8 of IT rules." 6.8 Thus, the issue whether interest income on deposits made out of surplus money from advance raised for purchase is assessable under the head "income from business" or not has been adjudicated in favour of the assessee by those two High Courts. Hence the view taken by the Assessing Officer is a possible view. Under the circumstances, the learned CIT cannot substitute the possible view of the Assessing Officer with his own view in an order passed u/s 263 of the Act as held by various High Courts as well as the Hon'ble Supreme Court. Thus, we uphold the contentions of the assessee and cancel the order OF the CIT." 11. Respectfully following the view taken by the ITAT and following order of the Hon'ble Bombay High Court a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonable or permissible compensation. The relevant clauses were included in the application form being issued by the assessee to its customers. According to the terms and conditions, the assessee has refunded the advances so received to the customers for breach of contract. Since the amounts received were refunded to the customers along with some suitable compensation, there is no case for any profit element and the same cannot be treated as deemed sales. From verification of the balance sheet, the CIT(A) observed the decrease in liabilities as well as corresponding assets. The revenue has not brought on record any evidence to show that there was a sale involved in the transaction of refunds or advances and transfer of venture to the group companies. Therefore, we hold that CIT(A) has rightly deleted the addition relating to deemed sales. In addition to the above, once the A.O. has resorted for estimation of income on sales as held by Hon'ble A.P. High Court in the case of Indwell Constructions 232 ITR 776 (AP) and in the case of Dabros Industrial Co. Pvt. Ltd., Hon'ble Kolkata High Court judgement 108 ITR 424 (Cal) no other addition required to be made. Therefore, we uphold the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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