TaxTMI 
TaxTMI 
2015 (11) TMI 1210
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....ithout properly appreciating the facts of the case and the material brought on record by the AO. 1.2 In doing so, the Ld. CIT(A) has erred in law and on facts in not appreciating that, in view of the specific instances pointed out by the AO in the assessment order, the interest paid by the assessee @ 15% to four related persons was excessive. 2. The Ld.ClT(A)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 4,92,000/- made by the AO on account of under valuation of the closing stock, without properly appreciating the facts of the case and the material brought on record by the AO. 2.2 In doing so, the .Ld. CIT(A) has erred in law and on facts in not appreciating that during the course of assessment proceedings, the assessee failed to substantiate the valuation of the closing stock with supporting evidences and the Id. C1T(A) has based his decision on new evidences which were not furnished before the AO. 3. The Ld. CIT(A)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 61,33,566/- made by the AO on account of profit from Suryarath scheme, without property appreciating the facts of the case and the material brought on ....
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....re decided together. The ld.Sr.DR submitted that he ld.CIT(A) was not justified in deleting the additions. He submitted that the AO has given a finding that the assessee had paid interest to the related parties @15% on the deposits, whereas the assessee had paid interest to the non-related parties only @12% on the deposits. Therefore, the AO was justified in treating at 3% as excessive. 3.1. On the contrary, the ld.counsel for the assessee submitted that the AO was not justified in making the addition. He submitted that the AO failed to appreciate the fact that from the related parties the assessee had obtained long term basis and, on the contrary, the deposits from the nonrelated parties were accepted as short term basis. 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We are unable to accept the contention of the ld.counsel for the assessee that on short-term deposits, the assessee had paid at a lower rate of interest. The ld.CIT(A) deleted the addition on the basis that the Tribunal has allowed the interest even @18% and @ 24% respectively. We are of the view that the AO has to point out....
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....e from high quality bronze metals whereas in this year, it has shifted to impellers and neck-ring made from S.S. The perusal of the costing sheets submitted by the appellant both for opening and closing stock (P.32 to P.39), there is a vast difference in the value of neck-ring and impeller inasmuch as it has gone down to Rs. 35.10 ps. per item in the closing stock as against Rs. 169/- per unit in the opening stock on account of change in the product mix. It is further noticed from the aforesaid cost sheets that so far as the costing of other item included in the water pump, there is not much variation in the value. The significant change in the valuation is in respect of neck-ring and impeller. Even the product literature submitted by the appellant (P.40 to 43) also shows the change in the product mix. It is the contention of the appellant that in the competitive market and to satisfy the needs of the customers, it has to reduce its cost by changing the quality of the rawmaterial to a cheaper one. I am also inclined to accept the contention of the appellant that the valuation of items of stock would not be the same in both the years and the G.P. Rate is not an indicator of the incr....
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....lows Co-op. Housing Society Ltd. The agreement was executed on 2/9/2009 between Shri Gordhanbhai B. Patel, Prop of M/s Maniar Developers and Shri Devang Natwarlal Patel , Chairman of Suryarath Bunglows Co-operative Housing Society Ltd. The agreement is executed in Gujarat. The- salient features of important clauses of the development agreement dated 2/9/2009 are as under : Clause-B -The society does not intend to develop the land into the plots and therefore the work of development of the plots- and construction is given to M/s Maniar Developers. Caluse-1 - For completion of the scheme, M/s Maniar Developers is given the task of raising necessary finances, preparation of plans and its approval, plotting of the land and construction of flat / unit /shops . Clause-4- M/s Maniar Developers will introduce new members and collect land fees, development fees, legal fees and any other amount from the members so introduced at its discretion and M/s Maniar Developers will not take consent of the society in this regard and will not be bound by any suggestion of the society. Clause-5 - M/s Maniar Developer is entitled to allot /sale the plots/units to the members at the rate decid....
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....d the land into the plots, taken necessary statutory approvals, arranged for finances for construction of bunglows, carried out construction work of bunglows, allotted bunglows to new members, collected money from those members and has made payments to the contractors/ sub-contractors/ engineers, etc.. M/s Maniar Developers has not only exercised full control over development of the scheme but also has taken the risk of arranging finances and completion of the scheme. Thus, M/s Maniar Developers is not only a contractor but it is the developer of the scheme. Therefore what ever profit has been earned in the Suryarath Bunglows scheme are the profit of M/s Maniar Developers and not the profit of Suryarath Bunglows Co-operative Society Ltd. However, the assessee has not offered any profit earned from the scheme for taxation. Instead of showing profit from the Suryarath Bunglows scheme, the assessee has shown development charges @ 10%. In the development agreement, there is no mention of paying development fees @ 10% to M/s Maniar Developers by Suryarath Bunglows Co-operative Housing Society Ltd.It is not explained of what is 10% received as development fees. On perusal of P & L A/c fo....
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....and sold it to various member after collecting the sale consideration from them. All the payments related to construction of the bunglows have been made by M/s Maniar Developers . Therefore any profit arising out of the sale of bun glows/shops belong to M/s Maniar Developers. However, M/s Maniar Developers has shown development fees @10% in its books of account and has not disclosed the profit earned in this scheme. The assessee has not provided the year wise details of receipts from various members but it has provided the year wise payments made to Suryarath Cooperative Hosing Society Ltd.. In absence of the year wise details of receipts, it is difficult to arrive the exact profit earned by M/s Maniar Developers on the scheme. On comparison of the balance sheet as at 31/3/2006 and 31/3/2007 it is seen that M/s Maniar Developers has shown liability of Rs. 70,42,104/- as at 31/3/2006 and liability of Rs. 1,90,01,439 as at 31/3/2007. During the year, M/s Maniar Devlepoers has paid Rs. 2,00,000/- to Suryarath Bunglows Co-operative Housing Society Ltd. and there is liability of Rs. 1,90,01,439/- a on 31/3/07. Thus , during the year M/-s Maniar Developers has received Rs. 1,21,59,335/- ....
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....of income on this issue. ( Profit from Suryarath Scheme- Rs. 61,33,566/-)" 8.1. However, the ld.CIT(A) has considered the above finding of the AO and the submission made by the assessee and given findings in paras-6.2 to 6.6 of his order, which are in the following terms:- "6.2 I have considered the submissions made and the evidences produced by the appellant in light of the findings given by the AO in his assessment order. It is noticed that the AO has included the so-called profit from the said Scheme in the hands of the appellant mainly for the reason that the appellant exercised full managerial and financial control as regards the development and construction of the Scheme. However, the AO has failed to appreciate that the appellant was entrusted such control by virtue of a development agreement and unless the said arrangement is found to be sham or bogus, the appellant is nothing more than an agent of the Society so as to carry out the work or the activities entrusted to him by the Society. The development agreement simply does not transfer or vest title of the assets of the Society with the Developer. It only permits the Developer to carry out various activities as e....
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.... out any income by the AO. It is noticed from the details given by the AO on page 17 of the order that he has considered the aggregate receipts from the Members of Rs. 6,99,39,404/- for the purpose of working out income but it is not correct in view of the payments made by the Members towards various other items like, land, infrastructure development and cost, expenses, etc. Even the audited balance sheet of the said Society as on 31-03-07 shows that the land cost was Rs. 4,95,83,022/- and the building construction work was Rs. 3,87,61,227/- as against which land and building contribution from members was only Rs. 1,47,48,118/- and scheme deposits was Rs. 6,99,60,615/-. In short, the addition of Rs. 61,33,566/- worked out by the AO in relation to the entire Scheme which was carried out during A.Y. 2003-04 to 2006-07 is not justified. 6.4 In my view of the matter, even the development charges worked out by the AO at Rs. 12,59,933/- being 10% of this year's collection of Rs. 1,21,59,335/- is not correct because the said amount represents collection from various Members transferred by journal entry to the .account of the Society and thus, it has no relevance or bearing to the d....
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....me, as development charges, hence 10% of the total collection of Rs. 1,21,59,335/- from various members i.e., Rs. 12,15,933/-was treated as income of the appellant. This contention of the Assessing Officer is not correct because the appellant was entitled to development charges only on the construction cost as per the resolution of the society from time to time, it has no relevance with the collections from the members. This year, no construction was carried out by the appellant, 6.6 In view of the aforesaid facts and circumstances of the case, I hold that the AO was not justified in holding the development charges at 10% of the total receipts from the Members as well as making addition of the entire difference of Rs. 61,33,566/- as well as Rs. 12,15,933/- to the total income of the appellant in this year and hence, both the additions are hereby deleted." 8.2. The aforesaid findings of the ld.CIT(A) is not controverted by the Revenue by placing any material on record, therefore we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, ground Nos.3, 3.2, 4. & 4.2 of Revenue's appeal are rejected. 9. Rest of the grounds of appeal are....