AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2012 (3) TMI 32
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....r 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 creditworthiness of depositors were not proved. ITA No.1400/Ahd/2009 Asst. Year 2003-04 (Assessee's appeal): 3. The assessee has raised the following grounds in this appeal:- (1) The ld. CIT(A)-IV, Baroda has erred in law and in facts in confirming the action of the ld. AO in rejecting the books of accounts of the appellant u/s 145(3) ignoring the fact that the books of accounts and other records maintained by the appellant are sufficient in determining the taxable income and, therefore, there is no justification in rejecting the books of accounts in estimation of the profit. Therefore, your honour is prayed to direct the ld. AO to accept the books of accounts as correct and assess the income on the basis of such accounts. (2) The ld. CIT(A)-IV, Baroda has erred in law and in facts in directing the ld. AO to adopt Rs.19,99,455/- as total income instea....
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....ditions 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 decision of Hon'ble Punjab and Haryana High Court in the case of CIT vs. Aggarwal Engg. Co. (2008) 302 ITR 246 (P &H) submitted that once the books of accounts of the assessee are rejected and income of the assessee has been estimated, no other additions can be made and, therefore, the additions sustained by the learned CIT(A) deserve to be deleted. We find no merit in the arguments advanced by the ld. counsel as in this case though the AO has rejected the books of account but no addition was made by him on this account and the additions were made separately on merit as is clear from the following observations of the AO:- "I am not satisfied about the correctness of the accounts of the assessee. Hence, the book results are rejected u/s 145(3) of the Act and I proceed further to make assessment on the basis of material evidences collected to the best of ....
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....n 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 purchases and direct expenses separately for the period upto the survey and after the survey at Rs.1,14,591/- and Rs.4,85,747/- respectively. After adding these two figures and by further adding book loss figure of Rs.3,36,785/- for pre-survey period, profit of Rs.9,37,123/- was computed, to which further additions/subtractions as per para 11 of the assessment order were made. 7. Before ld. CIT(A) assessee submitted that it was engaged in the business of construction and during the period under consideration, was developing and constructing a multi-storeyed building, known as Vrajlila at Anand Vidyanagar Road. Assessee submitted that determination of profit by the AO at Rs.9,37,123/- @ 8% of expenses, ignoring the amount of Rs.25 lakh included in the profit and loss account based on survey, thereby determining loss of Rs.15,62,877/- and makin....
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....reas 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. The appellant claims to have followed section 44AD in AYs 1999-2000 and 2000-01. However, section 44AD does not envisage estimation of profits @ 8% on incremental WIP. Also, there was no basis for taking profits to be 5.4% of incremental WIP in AY 2001-02. Further, since the commencement of project in FY 1998-99, appellant has valued the WIP for the year by adding a profit percentage to the direct costs of the year, i.e. purchases plus direct expenses as adjusted by difference between closing and opening stock of material. The profit percentage used to load direct cost to arrive at WIP has been varying without any basis and in fact, in Asst. Year 2003-04 the loading is negative, as explained henceforth. Profit percentage added to direct cost during FY 1998-99 to 2001-02 is as under :- F.Y. Incremental direct cost @ Rs. Work-in-progress for the ye....
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....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 results in Asst. Year 2003-04 are not acceptable due to inconsistent method of accounting followed. In a case like this, as held by various benches of ITAT in several cases, net profit on sales booked can be taken as income for each year. Appellant claims to have already shown substantial profits, i.e. @ 22.5% of sales till this year. It would be appropriate to apply net profit rate of 12% on total sales shown by the appellant since beginning of the project and allow set off for the net profit (after adding back partners' interest and remuneration) shown in the returns upto Asst. Year 2003-04. The difference so arrived would be appellant's reasonable regular net profit before partners' remuneration and interest for Asst. Year 2003-04. To such net profit, the unaccounted net income of rs.25 lackh invested in excess stock found during survey should be added. This working would be as under : Total sales (1.4.98 to 31.3.03) ....
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....r addition of book loss for presurvey period as per para 10 of the assessment order, resulting into income figure of Rs.9,37,123/- is cancelled." 9 After hearing both the parties and perusing the records, we find that the learned CIT(A) has given the above findings 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 ev....
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....nstalled during the year was proved by the expenses incurred on electricity used in the operation of the lift. The assessee had a separate meter connection for the operation of the lift and electricity expenses were paid for this operation as supported by copy of electricity 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 prop....
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.... partners, who were brothers. Cheques were issued in the names of individual recipients by banker's cheques out of NRE account No.70699 and were deposited in the individual accounts of the respective recipients with Andhra Bank. However, the same were directly 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 unexplai....
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....ich was taken for the purpose of determination of gross profit as well as net profit. It was further submitted that sale of any shops had not been made during the year and the shops were included in the unsold stock and there was no reason to estimate 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 understandingwi....