TaxTMI 
TaxTMI 
2013 (11) TMI 571
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....tances of the case and in law, Ld. CIT(A) Central, Jaipur has erred in: I Upholding the rejection of books of account by the Assessing Officer u/s 145(3) of the Act. II Upholding the application of 'percentage completion method' of accounting for determining the business income of the appellant as against the completed project method regularly and consistently followed by the appellant. 3. Under the facts and circumstances of the case and in law, Ld. CIT(A), Central, Jaipur has erred in sustaining the addition to the extent of Rs. 25 lakhs in respect of alleged undisclosed payments made to the seller agriculturists for purchase of project land. 4. Under the facts and circumstances of the case and in law, Ld. CIT (A) has erred in:- I Confirming the addition to the extent of Rs. 29.95 crores by taking into account proportionate security deposit amounting to Rs. 41.94 crores in respect of first tranche land. II Upholding the observation of Ld. AO that Development Agreement dated 25.03.2008 is in the nature o....
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....l), Jaipur was justified in deleting the addition of Rs. 52.74 crores out of total addition of Rs. 82.69 crores on account of business income even after holding that the development agreement entered by the Assessee with M/s Uniqque Affordable Homes Pvt. Ltd. And M/s Rosewood Investment Limited was in fact an agreement to sale and ignoring the fact that the development agreement should be read as a whole for AY 2008-09. 3(ii) Whether on the facts and circumstances of the case the CIT(A) (Central), Jaipur has erred in law and on facts in dividing the DA in two parts ignoring the fact that once the DA was executed it was binding upon the parties concerned and revenue was to be recognized in full. 4(i) Whether on the facts and circumstances of the case the CIT(A) (Central), Jaipur was justified in deleting the addition of Rs. 19,28,401/- made by the AO on account of non-deduction of TDS as per the provisions of section 194J from the payments made to M/s Asipac Projects Pvt. Ltd. (Asipac) which were made in accordance with a service agreement liable for TDS. 5(i) Whether on the facts and circumstances of the case, the CIT(A) (Central), Jaipur w....
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....essee was asked to furnish the details of in respect of payments so made to Asipac. On perusal of the detailed filed by the assessee, it was noticed that the assessee had made payment amongst others, for marketing and sales of the residential/ commercial units of the project being developed by one of the Unique Group Concern viz. M/s. Unique Affordable Homes (P) Ltd. (hereinafter to be refereed in short ''UAHPL') at village Ramchandrapura, Jaipur, a substantial amount of Rs. 75.00 lacs was paid to Asipac as a fee @ 3% of the amount of Foreign Direct Investment (FDI) received by the assessee from M/s. Rosewood Investment Ltd. , Mauritius. The assessee debited in the book on 31-03-2008. That an amount of Rs. 62.95 lacs was finally paid vide cheque no. 276473 dated 07-04-208 after deducting TDS of Rs. 8.61 lacs. The AO has stated that in respect of said payment to Asipac, assessee was issued a show cause vide letter dated 06-12-2010. requiring the assessee inter alia to establish reasonableness of the payment so made with documentary evidence. The assessee was also asked to furnish copy of the contract / agreement signed between it and Asipac under whose terms and conditions the payme....
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..... 8.1 On behalf of the assessee, it was submitted that there was two independent professional fee/ expense payments by the assessee to Asipac for two independent services as per following details.(CITA's order page 9). A. Selling & marking services Amount Remarks AO (i) Professional fee 81,64,123/- Service agreement at page No. 397-409 of PB Vol. II Allowed (ii) Reimbursement of expenses 19,28,401/- All evidence on record Disallowed on account of non deduction of tax at source FDI facilitation services Professional fee 75,99,364/- Bill submitted as additional evidence, replies of WP Group Disallowed. 8.2 It was submitted that the AO issued show cause notices dated 16-02-2010, 21-09- 2010 and 6-12-2010 in which details of payments made to Asipac was asked alongwith justification for the same. The assessee submitted copies of service agreement and ledger account evidencing payment of professional fees for marketing and selling services supported by copies of bills issued by Asipac. Asipac was appointed as sole marketing and selling agency for the project 'My Haveli' vide service agreement dated 24-08-2007 looking to the size and magnitude of the project and its impo....
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....ntial sum of money was paid by the assessee firm when the FDI was received by Unique Affordable Homes (P) Ltd. (hereinafter to be referred as UAHPL) that the FDI was routed through UAHPL and the amount of FDI received was to be transferred to the assessee firm as security deposit for developing the land as agreed in the development agreemnt dated 25-03-2008. The said arrangement was intended to secure the interst of the assessee firm as land owner. The ultimate beneficiary was land owner i.e. the assessee firm itself. Moreover, UAHPL did not have any right to retain the amount of FDI as agreed to. Hence, the said payment of Rs. 75.99 lacs as fee for procuring FDI was made by assessee firm and not by UAHPL. It was contended that even otherwise the AO has no business to question the commercial wisdom of the assessee, the AO cannot sit into commercial wisdom of the assessee and advise as to how the business is to be carried out or a particular expense is to be incurred. 9.1 In view of the above submissions, the ld. CIT(A) sought remand report from the AO. The AO in the remand report dated 24-02-2012 objected the admission of the additional evidences and stated that they are in the fo....
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....ng FDI into the project in addition to their professional fees for publicity of the project which was allowed as business expenses by the AO. It was stated that the AO made disallowance of Rs. 75.99 lacs merely on the ground that the said payment does not figure in the service agreement dated 24-08-2007. It was stated that Asipac took over the responsibility of arranging private equity through FDI. The proposal for FDI into the project materialized in a series of transaction documents from 08-02-2008 to 25-03-2008. M/s. Asipac liaisioned with the New York based Warburg Pincus Group and convinced them about the investment opportunity in 'My Haveli' project. Since a sum of Rs. 56,89,31,300/- was agreed to be invested by the investor as private equity in two instalments - at the time of first closing and at the time of second closing, and only a sum of Rs. 22,54,46,900/- was agreed to be invested at the time of first closing which was released by the investor at the time of first closing, a sum of Rs. 75,99,364/- (being 3% of FDI i.e. Rs. 22,54,46,900/- plus 12.36% service tax) was paid in consideration of Asipac services in bringing in FDI into the project as per agreement between th....
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....tion with Warburg Pincus Group. In answer to Q No. 6 of submissions dated 07.01.2011 filed by Warburg Pincus Group, it was submitted that: " Q. No. 6. What was the basis- in terms of business prospects, returns on investment etc. on which the said fund/money was transferred by Warburg to RIL? Copies of documents etc. may be given. ASIPAC Projects Pvt. Ltd. ('Asipac'), having its address at 75, Residency Road, Bangalore had contacted WPIPL regarding a potential investment opportunity in Unique, Mr. Amit Bagaria of ASIPAC liaised with WPIPL on the above opportunity. WPIPL renders investment advisory services to WP LLC, which is the investment manager of WPRE. WPIPL had referred the aforesaid investment opportunity in Unique to WPLLC. WPPLLC, in turn, recommended this investment opportunity in Unique to WPRE and WPRE finance for their consideration. Thereafter, RIL, which is promoted, wholly owned and controlled by WPRE and WPRE finance decided to invest in Unique. Some of the correspondence between WPIPL and ASIPAC in connection with the investment opportunity in Unique has already been submitted vide our submissions dated March 9, 2009, a co....
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....artments, but Pearl's are more mid upper and upper end products. 13) Amongst local developers, only Narayan, Managalam and Unique have the financial muscle to undertake large projects (1 million SFT). Narayan has not delivered a single project till date and Managalam is more into plotting, plus their quality is pretty ordinary. 14) The only 2 other developers (part from Unique) who have the vision to do large projects and build good quality products are Mahima and ARG, but Mahima is just NOT interested in mass (affordable) housing. ARG, in our mind, will become the closest competitor in 2-3 years. Asipac has done its homework before choosing to partner with Unique. Let me know what else you want to know." ''8.3 Even thereafter, M/s Asipac made a detailed presentation about the Jaipur residential project and about Unique Group to the Warburg Pincus Group which is available as document titled" Investment Memo-15th November, 2007" as the enclosure to the letter dated 09.03.2009. The said detailed presentation about the project, about Unique Group, about Jaipur and about Jaipur homes market clearly reveal the continuous persuasion....
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....missioner of Income Tax Vs Padmini Packaging (P) Ltd. Reported at (2006) 155 Taxmann 268 (Del). In view of this, this ground of the appellant is allowed and disallowance of Rs. 75.00 Lakhs is hereby deleted.''' Hence, this appeal by the Department before the Tribunal. 10. The ld. DR submitted that the main issue involved is as to whether any service was rendered by Asipac to the assessee and if so whether the said payment is wholly and exclusively for the purpose of business of the assessee. The ld. DR submitted that Asipac was engaged in marketing and selling agency for the project 'My Haveli' vide service agreement dated 24th Aug. 2007 and in the said agreement there was no stipulation to pay any fee for arranging FDI by Asipac. He submitted that said FDI was received by UAHPL and not by the assessee and accordingly it could not be said that the said expenditure paid is incurred by the assessee wholly and exclusively for the purpose of its business. The ld. DR referred to the decision of Hon'ble Kerala High Court in the case of CIT v. Premier Breweries Ltd., 279 ITR 51 and submitted that the mere fact that the payment has been made is not conclusive that payment has been incurr....
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.... reversed by confirming the disallowance made by the AO. 11. On the other hand, the ld. AR supported the order of the ld. CIT(A) and submitted that assessee appointed Asipac an India's leading living spaces consultant as sole marketing and selling agent for the project 'My Haveli' vide service agreement dated 24-08-2007. In terms of the said agreement, Asipac was required to render marketing and selling services. While rendering such services, Asipac approached Warburg Pincus Group, a leading global real estate fund for investment in the project 'My Haveli'. The ld. AR submitted that it was decided to form the special purpose vehicle (SPV) to facilitate equity investment by Warburg Pincus Group through its investment arm vis. RIL, Mauritius Therefore, UAHPL was incorporated and RIL ,Mauritius made investment of Rs. 22,54,46,900/- as FDI for acquiring 75% of the equity of special purpose vehicle i.e. UAHPL. The ld. AR submitted that the main observation of the AO to doubt the genuineness of payment was that there was no mention of professional fee for arranging FDI in the service agreement but it was because of the fact that service agreement was executed on 24-08-2007 and the prop....
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....e genuineness of the said payment on the ground that there is no stipulation in such payment in the service agreement entered into by the assessee dated 24-08-2007 and there is no basis of payment @ 3% by assessee firm to Asipac. The AO further stated that FDI was not even received by the assessee but was received by UAHPL. We observe that the assessee firm filed its detailed submission before the Ld. CIT(A) and also filed certain additional documents in the form of information and the ld. CIT(A) sought a remand report from the AO. Not only this we observe that the AO also issued a notice u/s 133 (6) to Warburg Pincus Group and Warburg Pincus Group in its reply dated 7.1.2011 confirmed that Asipac was instrumental in arranging FDI into the project through its investment arm viz. RIL Mauritius. We also observe that ld. CIT(A) in para 8 of his order has also referred the details of the invoice received, submissions made by Warburg Pincus Group and has given a categorical finding on the basis of said correspondence that it is incorrect to say that no services were provided by Asipac in relation to arranging FDI. The ld. CIT(A) has also held that it is incorrect to say that services we....
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....FDI received by UAHPL is for the benefit of the assessee which has come to the assessee in the form of security deposit as land owner of the project 'My Haveli'. The cases cited by the ld. DR (supra), we are of the considered view, are not relevant to the facts of the case before us. In the case of CIT vs. Premier Breweries Ltd. (supra), the payment was disallowed which was claimed as liasoning work with the corporation after considering the fact that the firm to whom 'payment was made under an agreement as service charges for liasioning work was having two lady partners who in their sworn statement stated that they had absolutely no knowledge about the marketing of any product and they were not at all involved with the business activities of the firm and the business activities were being looked after by their husbands. In that context, it was held that mere existence of an agreement does give rise to claim for payment of commission and income tax authorities can go into the question whether the commission paid is properly deductible u/s 37 of the Act. Further, it was found on enquiries made by the AO that there was no liaison work carried on and the also found that no such paymen....
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....was adopted to minimize the tax liability and it was not genuine business arrangement and in those circumstances, the claim was disallowed, which is not case of the assessee before us. We also observe that the case of Jaipur Electro (P) Ltd. vs. CIT (supra) relied on by the ld. DR is also not applicable to the facts of the present case before us as in that case the Hon'ble High Court of Rajasthan held that Tribunal after considering all the relevant material on record came to the conclusion that work incentive paid only to some of the employees for the first time was not out of business expediency and therefore, the same was rightly disallowed. We also observe that the case of Brooke Bond India Ltd. vs. CIT (supra) on which ld. DR placed reliance is also not applicable to the facts of the case as in that case the expenditure was directly incurred for expansion of capital base of the assessee company and whereas in the case before us the said FDI had come to special purpose vehicle i.e. UAHPL for the purpose of giving security deposit to the assessee as land owner of the project . Hence, it cannot be said that expenditure has been incurred for expanding any capital base of the asses....
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....as to why a sum of Rs. 1.85 crores should not be treated as its unexplained expenditure. The assessee filed its reply vide letter dated 4-10-2010 wherein he submitted as under:- (Page 9 of AO) ''11.3 In response, the counsel of the Assessee furnished the reply vide letter dated 04.10.2010 wherein he submitted that "the land for project "My Haveli" admeasuring 52.874 bighas was purchased from Kalyan Sahay and Lallu Ram Yadav for which consideration was paid by cheque. The details in respect of land purchased and dates of registry with consideration thereof and enclosed herewith as "Annexure D". No payment has been made in case as alleged, to any of the persons mentioned in the notice. It has not been stated in the questionnaire as to what is the basis for alleging that certain payments were made in cash. Unless any such basis is confronted to the Assessee, no addition can be made on this account. Addition if any, made on this account will be on mere suspicion, conjectures and surmise and will be legally untenable. In case, there is any evidence with your goodself, kindly supply the same and afford an opportunity of cross examination to us." 17.2 The AO has sta....
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.... 12 of the assessment order ) has stated that during the course of statement of Shri Kalyan Sahai and other members of his family stated that they are having agricultural income. However, a perusal of the bank account did not show any substantial deposits in their accounts except during the period of sale of land. The AO has stated that they had very little balance in the bank account prior to the period when transaction relating to the sale of land took place. The AO has stated that those persons were asked to filed the copies of return of income and sources of deposits of cash in the bank accounts. In response to query raised, Shri Kalyan Sahay filed revised return on 06-03-2009 showing capital gains. They submitted that the source of cash deposits in the accounts of Shri Kalyan Sahai and Shri Kali Charan is on account of sale of some other land to Shri Babu Lal and others. In the case of ladies and other members of their families, the source of cash deposits is through gifts from Shri Kalyan Sahai and Shri Kali Charan. The AO has stated that the said persons failed to provide any documentary or supporting evidence in respect of their claim, therefore, explanation filed by the sa....
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.... assessee in reply to show cause notice dated 21-09-2010 submitted its reply on 04-10-2010 and stated that no such payment in cash was made and requested the AO to supply the copies of the evidences available with the Department and to afford an opportunity of cross examination. However, neither copies were made available to the assessee nor any opportunity of cross examination was provided. The assessee had no option but to press for the copies of statements recorded and the same were provided only after assessment order was passed. The AO had pre-conceived notion against assessee firm as far as impugned order is concerned. It was contended that on receipt of copies of statements which were provided to the assessee only after assessment were completed, were examined and it was observed that agriculturists (sellers) have mentioned receipt of Rs. 20 to Rs. 25 lacs in cash as Sai (token money). The assessee stated there is no truth in these facts in as much as no sum was paid in cash to these farmers either as token money/ advance or otherwise. It was contended that the AO has not accepted their statement in toto otherwise he would not have made the addition of an amount of more than....
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....s of agricultural land purchase by the appellant. These statements were recorded by the department on 28.01.2009 being the date of search in case of the appellant group at 11.30 am while the search in case of the appellant was going on. 11.1 Although no opportunity of cross examination was granted to the appellant but these statements appear to be independent particularly when statements of two persons were recorded by the department and both of them stated almost the same facts. Although, subsequently these persons retracted from their statements recorded on 28.01.2009 and stated before the department that they have received payment only through cheques but such retraction is not worthy of reliance in my view as there is a possibility of same being un afterthought. In my view, the evidentiary value of statements recorded on 28.01.2009 is very high. Therefore, this issue has to be decided on the basis of the statements of the sellers recorded on 28.01.2009 during the course of search at the premises of the appellant. 11.2 On careful examination of the two statements viz. the statement of Shri Kalyan Sahay Yadav and the statement of Shri Kalicharan Yadav ....
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....nd choose the inference from the same evidence only to the extent it favours one's case. This view was held by the Hon'ble ITAT, Mumbai Bench in the case of Manoj Kumar Gupta Vs. Deputy Commissioner of Income Tax (2006) 100 TTJ (Mumbai) 588 and Delhi Bench of ITAT in Bansal Strips (P) Ltd. Vs Assistant Commissioner of Income Tax (2006) 100 TTJ Dl 665 wherein it was held the AO has to accept the seized material as a whole or he has to reject it as a whole. He cannot adopt a pick and choose method in accepting a part of seized materials and rejecting the other part of the seized materials. If the AO disbelieves the statements of Mr. Kalicharan Yadav and Mr. Kalayan Sahay Yadav dated 28.01.2009, then no addition could have been made and when he believes these statements, the addition of Rs. 25,00,000/- only could have been made. For making this addition, reliance has to be placed on most reliable and independent evidence which according to me in the present case is the statement of the sellers. Accordingly, addition to the extent of Rs. 25 lakhs is sustained and balance addition is deleted. Hence, the Department as well as assessee are in appeals before the Tribunal 20. The ld. DR s....
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....f two persons namely Shri Kalyan Sahai and Shri Kalichran and on the basis of their statements, has restricted the addition to Rs. 25.00 lacs as against Rs. 1,84,60,000/- made by the AO on the basis of cash deposited in bank accounts of said persons and their family members. He submitted that the addition made by the AO may be confirmed. 21. On the other hand, the ld. AR filed a synopsis at the time of hearing of the appeal giving his submissions He submitted that assessee purchased land admeasuring 28.62 bigha @ Rs. 30 lacs per bigha and a total payment of Rs. 8,58,81,600/- was made to them in instalemnts as and when registries were done and the entire payment was made by cheques. The ld. AR referred to page 613 and 614 of the paper book filed by the assessee which is a copy of letter dated 4-10-2010 and denied vide said letter of making any cash payment to Shri Kalyan Sahai and Shri Kalicharan Yadav in cash for purchase of land. He further submitted that the assessee was not provided with copies of the statements on which AO as well as ld. CIT(A) have placed reliance despite making specific request. He submitted that the AO made available copies of the statement of aforesaid two....
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.... 290 wherein their lordships have held that legal effect of the statement behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving an opportunity to cross examination and the addition if made, the same is required to be deleted on the ground of violation of principles of natural justice. The ld. AR further submitted that when Section 69 is invoked against the assessee for alleged undisclosed investment, the onus lies on the Revenue to prove that impugned investment belonged to the assessee. He submitted that the addition made by the AO on the basis of deposits in bank account of third persons is not justified and cannot be basis for making such huge addition especially when no opportunity for cross examination was given and the copies of the statements of sellers were not provided to the assessee despite request. He further submitted that there is a contradiction in the statement of said persons and they should not have been believed without giving opportunity to cross examine them. However, the AO has justified the denial of opportunity to the assessee stating that cross examination is not necessary. The ld. AR submitted that the AO....
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....nts and considering the fact that said cash deposits were made in an around period when the land was sold by the above named two persons and their family members to the assessee, concluded that cash deposits in their bank accounts is cash payment received by them from the assessee towards purchase of land by the assessee from them. We observe that said two persons in their retracted statements stated that cash deposits in their bank accounts as also in the bank accounts of their family members was consisted of agricultural income, gifts from other family members and sale of land to Shri Babu Lal and others. We observe that the AO merely disbelieved said statements and without making any enquiry as to whether it is factually correct or not and whether there was any sale of land by aforesaid two persons to Shri Babu Lal and others in an around said period has made the addition in the hand of assessee of cash deposited in their bank accounts. We observe that the AO has gone merely on the basis of statement recorded on 28-01-2009 and the bank statements of said persons, without giving any opportunity to the assessee to confront those persons and/ or of providing opportunity to cross ex....
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....t justified to make the said addition of Rs. 1,84,60,000/- merely on the basis of the statements of Shri Kalyan Sahai and Shri Kalicharan Yadav dated 28-01- 2009 wherein they stated that they received Rs. 20-25 lacs in cash as token money for sale of their land, without giving copies of the statements to the assessee and without giving an opportunity to confront those persons on whose statements, an addition was made. Therefore, there is a violation of principles of natural justice and the cases cited hereinabove (supra) squarely apply to the facts of the case before us. Accordingly we are of the considered view that no addition can be made in the hands of the assessee alleging that there was cash payments made by the assessee to the sellers of the land. Therefore, we hold that the addition of Rs. 1,84,60,000/- made by the AO is not legal and unsustainable. Hence, we uphold the order of the ld. CIT(A) in deleting the addition of Rs. 1,59,60,000/- and also set aside the order of the ld. CIT(A) to sustain the addition of Rs. 25.00 lacs which is disputed by the assessee in its appeal. 24. In view of the above, we reject ground no. 2of the appeal taken by the Department and allow Grou....
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....he said DA, the developer was to deposit a sum of Rs. 105.85 crores with the assessee firm as security deposit as advance amount to secure the owners consideration amount and which would be payable by the developer to the owner i.e. the assessee firm as per the conditions laid down in para 7.3.1 to 7.3.5 of the said Development Agreement. Besides these there are several clauses in the said DA which not only restrict the rights of usage as well as the disposal of the land by the assessee firm, but also place restrictions in terms of the acts to be performed by the assessee firm such as those relating to singing of documents, handing over and keeping of original records pertaining to the land etc. thereby suggesting that the developer had acquired irrevocable and exclusive rights in respect of said land. A careful examination of the terms and conditions of the DA suggested that the DA was in fact agreement to sale in respect of the land for a consideration of Rs. 105.85 Crores to be paid by the developer to the assessee firm. 12.5 The assessee firm has talked of a supplemental agreement dated 11.06.2008 ("the SA") vide which the area of the proje....
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....eceivable by the assessee firm is actually owners consideration itself and not a security deposit.; 12.7 Therefore, this contention of the assessee is baseless because the mere wording of the DA cannot change the real nature of the transaction. The underlying fact of the transaction is that the assessee firm shall receive Rs. 105.85 crores in lieu of relinquishment on the rights of the land as stipulated in the various clauses of the DA. Even if it is to be treated as security deposit as contended by the assessee, it still remains a 'receipt'. 12.8 Thus the gist of the whole argument is that the document on which the assessee is relying has no locus standi for the elaborate discussion made above and therefore worth rejecting. Needless to mention that the assessee is relying upon the Sa as against the DA while the latter was not only notarized but also registered is stronger piece of evidence as compared to the former and the Assessee if chooses to rely on a different document superseding he original DA should know that the said SA should be a stronger document. On the contrary, the SA is on a weak footing a....
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....quality of the receipts and it would not prevent assessing authority from assessing it under the right head. It is the true nature and quality of the receipt and not the head under which it is entered in the books of account which is decisive. 12.11 A plain reading of the terms and conditions of the DA as discussed above makes it amply clear that the assessee vide agreement has granted an unqualified, uninterrupted and irrevocable right of possession to the developer and in lieu of which has received a consideration of Rs. 105.85 crores. In fact some of the terms of the agreement are so categorical in respect of cessation of the rights of the owner whether it is usage of land, sale proceeds, mode of construction and design of units, litigation, title deeds etc. that there is no reason to treat this agreement other than as AGREEMENT TO SALE. Further, from above it is also seen that the three conditions as stipulated in AS-9 also stand satisfied which have already been discussed elaborately in para 4.8 of the order. So once the conditions as stipulated in AS-9 stand satisfied, it entails revenue recognition w....
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.... any description which is made available to potential users and includes the provision of service in connection with business of any industrial or commercial nature such as accounting, banking communication, conveying of news or information, advertising, entertainment, amusement, education, financing, insurance, chit funds, real estate, construction, transport, storage, processing, supply of electrical or other energy, boarding and lodging." 12.13 The idea or the concept or the intention of the section 28(va) is that when a person receives any consideration in lieu of withdrawing it's rights/claim in relation to any business, he if compensated for the same by certain consideration, the said consideration is the business income of the assessee. In the instant case also the assessee on account of restriction placed on his rights in relation to the land in respect of usage/disposing off etc. has been compensated by the developer by being given a consideration of Rs. 105.85 Crores. So it is the business income of the assessee. Further, proviso 1 of the Section. 28 (va) states that this clause is not applicable ....
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....the agreement and not appreciated terms thereof. There is no justification /reasoning with the AO to term/ treat the development agreement as an agreement to sale. It was contended that by virtue of said agreement, the project in progress of the assessee firm at Ajmer Road, which was its stock in trade and a part of this stock was already agreed to be sold by way of booking of flats, was handed over for the purchase of development of the project to its group concern UAHPL. 27.2 The private equity contributor RIL, Mauritius became stake holder in this company with the contribution and commitment to contribute the development expenditure and the security deposit. As per the mutual negotiations, it was agreed that the assessee firm shall continue to be the owner of the project land, development work shall be carried out by the Developer Company UAHPL and both of them shall jointly sell the flats through a tripartite agreement (because assessee firm being the owner of project land and entitled to transfer the same and Developer Company being entitled to recover the cost of development). 27.3 It was submitted that out of consideration receivable from flats buyers, one part shall be re....
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...., it was contended that AO failed to appreciate whole transaction. The agreement has to be read as a whole and not in piecemeal to establish that it was an agreement to sale. The amount of Rs. 105.85 crores indeed to be received as security deposit to secure the owners consideration amount cannot by any stretch of imagination said to be sale consideration. Even the same was not received fully owing to subsequent modification. It was also contended that receipt of a certain sum of money is in itself not sufficient to levy of tax, it is only receipt of income which can attract levy of tax. That no income accrued to the assessee at the time of outsourcing the development work and the security deposit received against the development work is also a liability and cannot constitute income unless the security deposit is adjusted on sale of units in favour of buyers and transfer of proportionate interest in the land by the assessee. It was contended that only real income accrued to the assessee could be charged to tax and not the notional income. Since no consideration flowed from or to either party and no sale transaction took place, there is no question of any income accruing to the asse....
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....ransaction did not materialize completely. However, the AO has out rightly rejected the validity of supplementary agreement by holding that the same does not hold any validity since it was neither registered nor notorized. It was also contended that the AO has adopted contradictory stand in respect of the same transaction in the hands of the assessee and UAHPL. On the one hand, the AO has made addition of Rs. 82.69 crores treating security deposit of Rs. 105.85 crores as sale consideration in the hands of this assessee and on the other hand the AO has treated the consideration of Rs. 41,94,75,000/- payable by UAHPL to the assessee while applying percentage completion method in the hands of UAHPL According to the AO's own working of income under percentage of completion method, the maximum Revenue of the assessee from the project was only Rs. 41.94 crores (wrongly mentioned at page 41 of ld. CIT(A)'s order in para 13.15 as Rs. 41.94 lacs) and a very small portion of the project was completed during the year then how Rs. 105 crores was brought to taxation is not evident from the record of the assessment. It was contended that the on the one hand AO is taxing entire amount and on the ....
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....ble Delhi High Court in the case of CIT vs. Atam Prakash, 219 CTR 164. It was also contended that in view of initiation of acquisition proceedings of project land by the Govt. of Rajasthan vide Notification dated 07-05-2008, the project land got confined to first parcel of land admeasuring 11.985 acres and the amount of security deposit for such land got confined to Rs. 41.94 lacs being the proportionate amount referable to first parcel of land measuring around 11.985 acres. However, the assessee actually received only a sum of Rs. 39.55 crores out of Rs. 41.94 crores at the time of first closing in the month of April, 2008 and the same position remains uptill now and no further sum of money was received by the assessee. 28. The ld. CIT(A) considered the above submissions of the assessee and the materials placed on record and after considering the Development Agreement dated 25-03-2008, Supplementary Agreement dated 11-06-2008 and also subscription agreement has confirmed the addition to the extent of Rs. 29.95 lacs relating to first trench of the project and deleted the remaining addition of Rs. 52.74 lacs relating to second trench of the project. The ld. CIT(A) has observed at p....
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....d at the time of execution of Development Agreement, which is evident from Schedule 2 of the development agreement at page 96 of PB. For this reason, the transaction was divided into two parts and the transaction was kept pending for the second parcel of land. 14.1 The area of second parcel of land is around 18.26 acres but due to measurement difference on account of exclusion of certain khasra Nos., the same is shown as 17.89 acres in Schedule 2 of the Development Agreement. The conditions of second closing as per para 4.2.4 of Share Subscription Agreement dated 08.02.2008, which has been referred in the development agreement stipulates that before the second closing the appellant should have obtained the 'licence' for the purpose of development of second parcel of land. Further, the term 'licence' is defined in the Shares Subscription Agreement at page no. 175 of the PB as follows: "Licence" shall mean the lease deed executed by the Jaipur Development Authority in terms of Section 90B of the Rajasthan Land Revenue Act, 1956 and the rules made there under pursuant to which the project land or any part thereof can be used for purposes of construction and....
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....ious observations and findings of the A.O. and also considering the legal position, it is held that the appellant has earned profit on transfer of all his rights, control and interest in the first parcel of land by agreeing to receive consideration of Rs. 41.94 crores, on completion of all the conditions of first closing as per development agreement, which has already been completed (out of which Rs. 39.55 crores being actually received). The income in respect of this part of land is worked out as follows:- Consideration as per development agreement in respect of first parcel of land measuring around 11.985 acres Rs. 41.94 Crores Less-Cost of first parcel of land as per appellant's own record (PB page no. 55) Rs. 11.99 Crores Profit Rs. 29.95 Crores. 14.4 So far as the second parcel of land measuring around 18.26 acres is concerned, the conditions of second closing are mentioned in Para 4.2 of the Shares Subscription Agreement available at page No. 168 of PB which has been referred in the Development Agreement also. Clause 4.2.1, 4.2.2 and 4.2.4 are reproduced herein:- 4.2.1. Subject to the promoters and the company not being in breach of any warra....
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....projects and/or the investment by the investor in the company. 14.6 It is also evident from Schedule 2 of the Development Agreement that first parcel of land (Part A land) was ready for possession at the time of Development Agreement whereas second parcel of land was still agricultural land and change in land use as well as conversion were pending in respect thereof. Schedule 2 of the Development Agreement is reproduced herein: Schedule 2 Project Approvals 1. List of consents obtained with respect to the Project Sl.No. Consent Obtained Competent Authority Area of land in respect of which consent obtained 1. Conversion from agricultural to residential/ commercial use Jaipur Development Authority Part A of project land 2. Approval of project maps Building promotion cell of Jaipur Development Authority 20,000 sq. meters (Built up (comprised in Part A of the project land) 3. No Objection Certificate from the fire department Jaipur Nagar Nigam 20,000 sq meters (Built up) (comprised in "Part A of project land" shall mean land admeasuring 48519.55 sq meters (11.985 acres) forming part of the project land, bearing Khasra Nos. 66/3....
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....mentary agreement is not as authentic as development agreement because, same is not duly notarized. However, even without considering the supplementary agreement, from the perusal of various clause of development agreement, wherein conditions for second closing in respect of second parcel of the land are mentioned and considering the facts which remain uncontroverted that the various stipulated conditions have not been fulfilled in respect of second parcel of the land and moreover, the amount so receivable though as security deposit has not even approved and due as it would have been accrued and due on completion of stipulated conditions, which have not been complied with or completed. 14.8 It is evident that the transaction in relation to second parcel of land of 18.26 acres was ultimately dropped and could not be completed and the same position remains even up till now and therefore no money was received by the appellant up till now against the second parcel of land. Under these circumstances, in my view, it is unjustified to tax the profits in respect of second parcel of land in the hands of the appellant during year under consideration by presuming that income the....
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....nt agreement dated 25-03-2008 was for the entire land. He submitted that second trench of land could not be developed as there was an acquisition notification issued by the Govt. of Rajasthan u/s 4(1) of the Land Acquisiton Act. However, the Govt. of Rajasthan, subsequently issued a Notification releasing project land from acquisition. The ld. DR submitted that the assessee had entered into an agreement with Asipac vide Service Agreement dated 24th Aug. 2007 to market and to sell project being developed by the assessee. The ld. DR submitted that Tripartite Development Agreement dated 25-03-2008 entered into by the assessee as owner with another group concern UAHPL as Developer and RIL , Mauritius as Investor and under the said agreement the Developer was to deposit a sum of Rs. 105.85 crores with the assessee as owner of the land as security deposit as advance payment. The ld. DR submitted that the AO has rightly stated, after considering the clauses of the said Tripartite development agreement and particularly clause 4 and of clause 7.3.1 to 7.3.5 of the said agreement that said so called security deposit as advance payment is the sale consideration to the assessee. The ld. DR sub....
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.... usage of land, sale proceeds, mode of constructin and design of units. He submitted that the AO has rightly stated that this development agreement is nothing but an agreement to sell. The ld. DR submitted that for transfer of land, it is not necessary that there should be transfer of legal title. The ld. DR relied upon the following case laws. 1. CIT vs. Panipat Woollen & General Mills Co.ltd, 103 ITR 66 (SC) 2. Neorath Mills Ltd. vs. CIT , 166 ITR 418 (ker.) 3. Mysore Minerals Ltd. vs. CIT 239 ITR 775 (SC) 29.2 The ld. DR further submitted that the ld. CIT(A) has considered Supplemental Agreement dated 11-06-2008 and stated that second parcel of the land was not given to the developer and accordingly he considered the proportionate amount of Rs. 105.85 crores which comes to Rs. 41.94 lacs as sales consideration. Therefore, the ld. CIT(A) has considered the profit of Rs. 29.95 crores as against Rs. 82.69 crores considered by the AO. He refereed page 48 of the ld. CIT(A) vide which the ld. CIT(A) worked out the income in respect of first trench of land as under:- Consideration as per development agreement in respect of first parcel of lan....
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....idered as sale deed because at the time of registration the stamp duty paid is 1% and on the other hand on the sale deed, stamp duty payable is @ 11% The ld. AR at the time of hearing also filed the Schedule of Rajasthan Stamp Act, 1998 to substantiate his above submission. He further submitted that said development agreement was registered as agreement as per Article 5 (bbbb)and whereas the stamp duty payable on conveyance deed on immovable property is as per Article 21(1). He further submitted that as per said development agreement the assessee was to receive security deposit of Rs. 105.85 crores in respect of entire land in order to secure and ensure payent of consideration referable to the land from UAHPL. He submitted that as per provision of transaction documents there were in fact two independent contracts between the parties viz. Ist in respect of first trench land and second in respect of second trench land and the amount referable to each trench was mentioned separately in the transaction document and the sum referable to each trench was agreed to be invested in UAHPL by RIL, Mauritius. He submitted that in proportion, the amount of Rs. 22.54 crores was released by RIL, M....
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....nder:- "Sale" is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. He further submitted that it further defines how the sale is made and the same is as under:- ''Sale how made: Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.'' '' In the case of tangible immovable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.'' The ld. AR submitted that in view of the above, since development agreement dated 25- 03-2008 is not registered as a conveyance deed between the assessee and the developer for impugned land, there is no sale under Transfer of Property Act. That it is a development agreement simplicitor for the development of land and nothing more. Hence, the said amount received by the assessee as per development agreement is not a sale consideration. 30.4 The ld. AR further referred to clause 5.1 of the said development agreement and submitted that i....
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....o be executed by the owner and developer jointly. He submitted that until, unit is sold, the assessee i.e. owner of the land shall remain the owner of the land and developer shall remain the owner of the development of the land. He submitted that the said development agreement is only to develop land and not to buy land. He submitted that security deposit has wrongly been considered by the authorities below as sale consideration but the same is to protect assessee's interest during the period and on completion of the project to realize sale proceeds adjust against the security deposit and balance to be paid to the owner. He submitted that security deposit received by the assessee from the developer was a liability and the same was shown in the books of accounts of the assessee and not consideration for sale of land. He submitted that clause 6.6 of the agreement read with clause 12.3 thereof require the assessee to refund/ repay the security deposit to the developer by way of sale proceeds of land to be sold by the assessee with the developer permission. He submitted that irrevocable and exclusive license and permission to use project land was given by the assessee to the developer ....
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....lso be a party to the sale. At the time of execution of the said development agreement, the assessee was to receive a sum of Rs. 105.85 crores but the assessee received Rs. 39,55,95,900/- as security deposit. It is a fact that due to initiation of acquisition proceedings by the State Govt. of Rajasthan, in respect of land on which project My Haveli is to come up became subject to acquisition under Land Acquisition Act. Subsequently the Govt. of Rajastan released project land from acquisition on 29-09-2008 but in the meanwhile RIL, Mauritius restricted its investment to Rs. 22.50 crores which was already paid and thereafter no further investment came from Rosewood Investment ltd, Mauritius. Therefore, the project got confined to first trench land admeasuring 11.985 acres instead of entire project land admeasuring 29.847 acres. We observe that the AO by considering the said development agreement as agreement to sale of land and also considered entire amount of security deposit to be received by the assessee of Rs. 105.85 crores as sale consideration ignoring the fact that entire project execution did not materialize. The AO accordingly made addition of Rs. 82,69,66,103/- as business ....
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....said development agreement which amount to transfer of land particularly in view of clause 4.1 thereof as it gives an irrevocable and exclusive license and permission to use the project land to the developer. But we are of the considered view that said permission has been given to the developer for the limited purpose of development of the project and not with the intention to transfer of land. The above facts are fortified in the light of clause 5 of the development agreement which gives an option to the developer to purchase the land if they want @ Rs. 3.50 crores per acre. It is also a fact that assessee received a security deposit of an amount of Rs. 39,55,95,900/- and not the proportionate amount of Rs. 41,94,75,000/- which was not disputed by ld. DR at the time of hearing. The assessee has not received any additional amount over and above the amount as mentioned in the orders of the authorities below. We agree that the security deposit received by assessee and shown as liability is in order and same cannot be considered as sale consideration for transfer of land. 31.3 We also agree with the ld. AR that provision of Section 28(va) of the Act are not applicable to the case bef....
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....ed 6th Dec. 2010 filed on 10th Dec. 2010. It was also contended that clause 13 of service agreement dated 24-08-2007 also provides for reimbursement of the expenses. 34. The ld. CIT(A) after considering the submissions of the assessee observed that the AO has also not disputed the amount of expenses of reimbursement by the assessee to Asipac and details of such expense were on record which submitted before the AO to hold that TDS was not required to be deducted from such reimbursement. The ld. CIT(A) also stated that CBDT circular no. 715 dated 08-08-1995 which was considered by ITAT in the case of ITO vs. Dr,. Willmar Schwabe (2005) 3 SOT 71 held that TDS is not required to be deducted when reimbursement of expenses are separately claimed and are not part of consolidated / composite bill which may contain the amount on which TDS is deductible. Accordingly, the ld. CIT(A) deleted the addition of Rs. 19,28,401/-. Hence, the Department is in appeal before the Tribunal. 35. At the time of hearing, the ld. DR relied on the order of the AO. 36. On the other hand, the ld. AR made his submissions on the lines of the submissions made before the authorities below. 37. We have carefully ....
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....Group of which assessee is an important member. The members of M/s. Unique Group also surrendered their undisclosed income on the basis of such evidence of 'out of books, cash sales, and purchases/ expense. The AO stated that assessee firm did not maintain its books as required by law and that its books did not present true and fair picture of the accounts and financial transaction thereby contravening the accounting standards (AS-I) issued by Institute of Chartered Accountants of India (ICAI) as well . The assessee was asked to show cause as to why books of accounts for the relevant year should not be rejected by invoking the provision of Section 145(3) of the Act. 41. The assessee submitted that considering the nature of the trade as well as number of items of stock, it was not possible to maintain detailed qualitative cum quantitative stock register. The AO after considering the submissions of the assessee rejected the books of accounts by invoking the provisions of Section 145(3) of the Act. The AO has further stated that the assessee is engaged in the business of real estate including development and construction of residential / commercial building. The AO at page 40 of the ....
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.... compute the assessee's income. However, in regard to the addition of Rs. 46,69,928/- made by the AO, the ld. CIT(A) has stated vide para 20 of the impugned order that the assessee is land owner who has entered into agreement with UAHPL wherein the AO has held that the money given to the assessee is basically the consideration for the land though shown as security deposit and the AO has already added the profit by treating that the assessee has effectively sold the land to the developer. Thus the ld. CIT(A) has confirmed the profit earned on transfer of right, control and interest by the assessee to UAHPL in respect of first parcel of land. The ld. CIT(A) held that considering those facts, the AO was not justified in again including the proportionate profit earned on the project relatable to contribution of the land of the assessee when the AO has already taxed by making addition of the entire profit by treating the security deposit as effectively the sale consideration of the land. In view of the above the ld. CIT(A) has deleted said addition of Rs. 46,69,928/- relating to assessment year 2008-09. Hence, these appeals by the Department as well as by the assessee. 43. At the time ....
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....ok support from the judgment in the case of CIT vs. British Paints India Ltd. 188 ITR 44 (SC) and stated the principles laid therein as under :- a. " It is incorrect to say that the officer is bound to accept the system of accounting regularly employed by the assessee, the correctness of which had not been questioned in past. There is no estoppel in these matters and the officer is not bound by the method followed in earlier years. b. The A.O. has to consider the material placed before him/her and, if, upon such consideration, he/she is of the opinion that correct profits and gains could not be derived from the accounts, the A.O. would then be obliged to have recourse to the proviso to section 145, which provides that the opportunity shall be given by the A.O. by serving a notice for best judgement assessment. c. A particular method of accounting regularly employed by the Assessee is certainly subject to question. 5.5. The Assessing Officer then proceeded in making reference to the Guidance Note issued in June, 2006 by the Institute of Chartered Accountants of India in respect of guidelines to be followed by the Real Estate De....
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....ted bookings from the customers for its residential/commercial units because the assessee has acquired the right to receive the payment from the buyer and once the income has accrued, it is liable to be taxed. 5.7. He also rejected assessee's argument that income accrues to a builder only when the transaction is complete which means that the unit is ready for occupation and the possession is handed over since the assessee acquires the right to receive payment as per terms and conditions of agreement. He made further elaborate discussion on each and every issue raised by the assessee in assessment proceedings before him. In view of the elaborate discussion, the rejection of books of account of the assessee under section 145(3) was pressed because they failed to depict the complete picture of accounts and moreover do not follow the accounting standards as specified under section 145(2) of the Act. The Assessing Officer, therefore, was of the firm opinion that the change in method of accounting is necessary as the same is logical and in order to depicts true and correct picture of accounts percentage completion method was to be applied as against project completion metho....
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....d. The Tribunal vide its order dated 14th March, 2013 after considering the orders of the authorities below and submissions of Ld. representatives of both the parties and the other material placed on record in the said case has held that the Assessing Officer could not change method of regularly adopted by the assessee from project completing method to percentage completing method on irrelevant consideration. The Tribunal has held the provision of Section 145(3) are not attracted. It is further held by the Tribunal that the Ld. CIT(A) has also erred in upholding the decision of the Assessing Officer to invoke Section 145(3) of the Act and to make the assessment in the manner provided u/s 144 of the Act. We consider it prudent to reproduce the relevant paragraph of the said order of the Tribunal, which are as under:- 12. We have heard parties with reference to material on record. The rival submissions as well as case laws brought to our notice have duly been considered. The assessee is engaged in the business of construction as a builder/real estate developer. The appellant has maintained complete books of account which are duly audited by a qualified Chartered Account....
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.... respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144. 12.2. The first basis taken by the Assessing Authority in reaching a finding that the assessee's accounts do not depict correct and complete picture of its accounts is that the assessee has not maintained a detailed qualitative and quantitative stock register and failed to get the valuation of its closing stock verified with the detailed day-wise qualitative cum quantitative stock register. The appellant's case before the authorities below has, however, been that the assessee had kept both quantitative and qualitative details of material purchased by it as is evident from various ledger accounts related to construction material that were forming part of the seized material available with the assessing authority. All the expenses relating to the project i....
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....ssee-appellant conform to the commercially accepted accounting standards and true profits of assessee's business could be deduced therefrom. The findings reached by the Assessing Officer are thus not factually correct with respect to the lacuna pointed out by him on maintenance of stock record as well as valuation of inventory held by the assessee. 12.3. In the case of Pandit Brothers vs. CIT, 26 ITR 159, the Hon'ble Punjab & Haryana High Court has held that the mere fact that there is no stock register, it only cautions him against the falsity of the return made by the assessee. He cannot say that merely there is no stock register, the accounts book must be false. The Hon'ble Supreme Court took note of this judgment in the case of S.N. Namasivayam Chettiar vs. CIT, 38 ITR 570 (SC) and held that it is for the Income-tax authorities to consider the material which is placed before him and if after taking into account in any case the absence of stock register coupled with other material, are of the opinion that correct profits and gains could not be deduced then they would be justified in applying the proviso to section 13 of the IT Act, 1922. On the peculiar facts in th....
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....y" in the joint business carried with his separated brother Shri Ajit Singh and his son. The separation had occasioned in the year 2006 which is a date much prior to the date of action taken under section 132 of the Act on the appellant. From the record produced, we find that it is a correct fact that these two groups have separated from joint business in the year 2006 and thereafter carried business with no interest or involvement of the other brother. This fact, the appellant also disclosed by way of a foot note on the computation of income filed along with return of income. The statements given by Shri Ajit Singh and Shri Ravinder Singh during the course of search admittedly were with regard to receipt of extra money with respect to the flats sold by them. These sales were not of the projects done jointly with the appellant, its constituents or family members. The "on-money" so received by them has been disclosed and applied to explain the transactions of their independent business unrelated to the appellant and its constituents. The statements so taken, therefore, did not constitute a material or evidence for rejecting the books of account maintained by the assessee in saying t....
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....ethod to percentage completion method as against the project completion method regularly employed by the assessee. The admitted position and also the fact is that the appellant has regularly employed project completion method from year to year and the assessments prior to the date of search were also made by accepting project completion method. Both Project Completion method and the Percentage Completion method are recognized methods for assessment of correct income of the assessee under the IT Act, 1961. The choice of method of accounting, however, lies with the assessee. It is not open to the Assessing Officer to change his own opinion or change the method of accounting because he finds another method of accounting better than the one adopted regularly by the assessee and by rejecting his accounts substitute the same with another method of accounting without any just and reasonable cause. In the present case the exercise so undertaken being imaginary and rested on irrelevant considerations could not constitute a just or reasonable cause empowering the authority to change the method of accounting regularly adopted by the appellant. The revenue has also not been able to successfull....
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.... as basis to reject its accounts. 12.11. The Apex Court in the case of CIT vs. McMillan & Co. 33 ITR 182 (SC) = (2002-TII-52-SC-LB-INTL) at page 188 has also entertained this opinion which is evident from the following passage :- "The section enacts that for the purposes of section 10 (profits of business, profession or vocation) and section 12 (income from other sources) income, profits and gains must be computed in accordance with the method of accounting regularly employed by the assessee. The choice of the method of accounting lies with the assessee ; but the assessee must show that he has followed the method regularly for his own purposes. The section and the proviso read together clearly make such a method of accounting regularly employed by the assessee a compulsory basis of computation unless, in the opinion of the Income-tax Officer, the income, profits and gains cannot properly be deduced therefrom. If the true income, profits and gains cannot be ascertained on the basis of the assessee's method, or where no method of accounting has been regularly employed, the income must be computed upon such basis and in such manner a....
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....oss account the value of the stock-in-trade at the beginning and at the end of the accounting year at cost or market price, which-ever is the lower." The court further considered section 145 of the Act and observed that what is to be determined by the officer in exercise of the power is a question of fact, that is, whether or not income chargeable Under the Act can be properly deduced from the books of account and the question must be decided with reference to the relevant material and in accordance with the correct principles. The court also observed (page 52) : "Where the market value has fallen before the date of valuation and, on that date, the market value of the article is less than its actual cost, the assessee is entitled to value the articles at market value and thus anticipate the loss which he will probably incur at the time of the sale of the goods. Valuation of the stock-in-trade at cost or market value, whichever is the lower, is a matter entirely within the discretion of the assessee. But which-ever method he adopts, it should disclose a true picture of his profits and gains. If, on the other hand, he adopts a syste....
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....v. K. Doddabasappa [1964] 54 ITR 221 (Mys); and (iv) Juggilal Kamlapat, Bankers v. CIT [1975] 101 ITR 40 (All). These are all decisions which lend support to the proposition that the Department is bound by the assessee's choice of accounting regularly employed unless it can be said that the method of accounting followed by the assessee does not reflect the true income. The AAC, as well as the Income-tax Appellate Tribunal, after a careful scrutiny, came to the conclusion that the system of accounting employed by the assessee is consistent and regular and the ITO, therefore, is not entitled to interfere with the system of accounting followed by the assessee, unless it is possible for him to make out and bring the case within the terms of s. 145 of the I. T. Act. On this basic issue itself, the Department's contention that the dividend should be assessed in the hands of the assessee as and when it is received, in substitution of the method of accounting followed by the assessee, should fail. Even otherwise, we are not persuaded to accept the view that the system of accounting followed by the assessee is in any way defective."  ....
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....istently followed by the assessee, the assessing officer cannot change the method of accounting to the "percentage of completion method." 12.16. The Hon'ble Delhi High Court while dealing with the similar situation in the case of CIT vs. Manish Buildwell Pvt. Ltd. in ITA No. 928/2011 dated 15.11.2011 held that 'after the above judgement of Supreme Court in CIT vs. Bilahari Investment Pvt. Ltd., 299 ITR 1, it cannot be said that the project completion method followed by the assessee would result in deferment of the payment of taxes which are to be assessed annually under the Income-tax Act. Accounting Standard AS-7 issued by the Institute of Chartered Accountants of India also recognize the position that in the case of construction contracts, the assessee can follow either the project completion method or the percentage completion method. In view of the judgments of the Supreme Court (supra), the findings of CIT (A), upheld by the Tribunal does not give rise to any substantial question of law. Further, the Tribunal has also found that there was no justification on the part of the assessing officer to adopt the percentage completion method for one year on selective basi....
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....stead of 'project completion method' as adopted by the assessee by rejecting the books of account of the assessee are on similar lines. The Tribunal vide its order dated 14th March, 2013 in the said group concern of the assessee for the reasons mentioned hereinabove has reversed the orders of the authorities below in rejecting the books of account of the assessee and to apply 'percentage completion method' instead of 'project completion method' as adopted by the assessee. Respectfully following the said order of the Tribunal (supra), We reject the Ground No. 5 of the appeal taken by the Department for the reasons mentioned hereinabove and not for the reasons stated by the ld. CIT(A) in its order and also allow Ground No. 2 of the appeal taken by the assessee for the assessment year 2008-09 48. Now we take remaining grounds of appeal in assessee appeal viz. Ground No. 5 for the 2008-09 which relates to charging of interest u/s 234B and 234D of the Act. 49. Since the charging of interest under above sections is consequential and no specific adjudication is required. Accordingly, said Ground No. 5 of the appeal of the assessee is rejected. 50 Now we take up the cross appeals filed ....