TaxTMI 
TaxTMI 
2014 (4) TMI 1254
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the basis of the seized material that the purchasers and the flat units purchased by them were clearly identifiable and the sale consideration was quantified, against which advances were received and agreements were made despite the fact that the assessee did not even provide basic details of books to the AO. 3. The appellant craves the right to amend, alter or add to any of the grounds of appeal given above." 2 From the above grounds, it is clear that the only grievance of the department relates to the deletion of trading addition made by the Assessing Officer by adopting percentage completion method and rejecting the books of accounts. 3. Facts of the case, in brief, are that the assessee filed the return of income on 29/09/2010 declaring an income of Rs. 2,07,340/-. In this case, a search and seizure proceedings were carried out at the residential and business premises of the assessee group namely Shanti Lal Maroo on 10/03/2010. Simultaneously, survey proceedings under section 133A of the I.T. Act, 1961 (hereinafter referred to as 'the Act' in short) were carried out at the business premises of this group on 10/03/2010. The assessee was involved in the business o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rch the name and addresses of persons who have booked the flat though the assessee was requested time and again but only part information was provided. ii) As per books of account of M/s Ankit Chirag Developers Pvt. Ltd. the advances on account of booking of flats should be at Rs. 30084999/- as on 08/03/2010. However, the details in respect of number of flats that have been booked, names and addresses of the persons in whose name they have been booked were not provided by the assessee in spite of repeated opportunities. As per records of M/s Chirag Developers Pvt. Ltd. and the statement of different member of group the assessee has not booked any sales as on date of search and all the receipts against flats have been shown as advances. iii) The Assessing Officer has also referred to seized documents as per page 8 to 10 of Annex. AS, Exhibit 4 found and seized from the office of company 54, 55 Rajdeep Near Sukharia Circle, Udaipur and reference of page no. 4 has been made on which some calculation was done by multiplying 1666 with 1600 resulting into 2665600 and to this amount Rs. 40000+1% has been added giving a total of Rs. 2732656/-. Out of this amount Rs. 6 Lac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed above but in the books of accounts the assessee had shown sale of such flats at Rs. 12,46,000/- and Rs. 14,00,000/- respectively. The Assessing Officer had taken the cost of construction/expenditure as declared by the assessee in the books of accounts and shown as work in progress at Rs. 10,86,89,817 /-. The said figure was given by the assessee to the DVO for valuation of the project. 4. The Assessing Officer also pointed out that the assessee did not furnish the details of structural and architectural drawings to the DVO. Therefore, in the absence of detailed measurement of all hidden items partly submitted by the assessee, the DVO was left with no option, but to prepare the report considering the cost index of relevant period and station. The Assessing Officer also pointed out that during the course of search proceedings, on the basis of incomplete books of accounts, the assessee itself offered undisclosed cash of Rs. 2,07,000/- for taxation. Therefore, the project was partly completed as the assessee had received booking amount advances from customers, but had not disclosed its profit in the return of income filed. The Assessing Officer, accordingly, invoked the provis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....int out any defect in the books of accounts which were duly examined and that the Assessing Officer applied very high net profit rate of 20% on closing work in progress on the basis of other case which has not been confronted to the assessee. It was stated that application of net profit rate on work in progress/stock was absolutely wrong because the net profit rate is always applied on the receipts/turnover not on work in progress/stock. Reliance was placed on the following case laws:- 1) Madnani Construction (P) Ltd. Vs. CIT 296 ITR 45 (Gau.) 2) Haridash Parikh Vs. ITO 113 TTJ 274 (Jd.) 3) Malani Ram Jivan Jagannath Vs. ACIT (2007) 207 CTR 19 (Raj.) 4) CIT Vs. G.H.I. Polymers 192 CTR 477 (P & H) 5) CIT Vs. Om Overseas 315 ITR 185 ( P& H) 6) CIT Vs. Smt. Poonam Rani 326 ITR 223 (Del.) 7) CIT Vs. Mascot (India) Tools & Forgings (P) Ltd. 320 ITR 116 (All) 8) CIT Vs. Patiala Distt. Co-op. Milk Producer's Union Ltd. 328 ITR 615 (P & H) 9) Shree Ambikaji Rice Mills Vs. CIT 192 ITR 189 (Pat) 10) ACIT Vs. National Builders (2012)137 ITD 277 (Ahd) 7. The assessee submitted that the Assessing Office....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unting standard AS-7 and AS-9 applied by the AO are justified or not is to be examined. There is no dispute that the assessee is in the business of construction of flats and selling the same to the retail purchasers and not in the business of contractorship. As per AO, as per ICAI guidelines laid down in AS-7 and AS-9 the assessee should have followed percentage completion method and as the percentage completion method was not followed the AO treated such books of accounts as defective and applied provisions of sec. 145(3) of IT Act. The AO also referred that the assessee actually entered into sale agreements with various buyers as also that the sale consideration of whole of the project "Amar Villas was ascertainable. But the appellant has disputed such finding of the AO and contended that not a single sale agreement has been executed or that whatever amount was received was on account of advance against booking of flats, as also that no sale deed or any legally enforceable sale document was executed. In this background it is to be examined whether the accounting Standard AS-7 and As-9 are mandatory or not in respect of appellant. As per opinion of expert advisory committee of Ins....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsideration that will be derived from the sale of the good." On perusal of clause 10 & 11 of AS-9 it is noted that in the appellant's case the retractions involving of sale of good, the performance can be regarded as achieved when conditions laid down in clause 11 are fulfilled. In this connection it may be noted that the appellant has not transferred to the buyers the property i.e. flats in as much as significant risk and rewards of ownership have not been transferred. No sale deeds of sale of flats or any legally enforceable documents have been executed by the appellant. Though the AO has mentioned in the assessment order that sale agreements were executed but such findings appear to be factually incorrect in as much as in assessment order or in subsequent remand report there is no reference of any sales agreement. The appellant has also denied to have executed any sale agreement for sale of flat. It may also be noted that the appellant during assessment proceedings, vide written submission dated 8.1.2011 (para 2) also brought to the notice of the AO that no sales was made during the A.Y. under consideration as also that even during search proceedings, no sale agreem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ima facie rejection of books of accounts by application of provisions of sec. 145(3) was not justified. For the above finding of rejection of application of provisions of sec. 145(3) and adoption of AS-7 and AS-9, reliance is placed on the following case laws:- 1) Haware Constructions (P) Ltd. Vs. ITO, Mumbai (2011) 64 DTR 251 (Mun-Trib.) 2) CIT Vs. Manish Buildwell (P) Ltd. Delhi 245 CTR 397 (Delhi) 3) Prestige Estate Projects (P) Ltd Vs. DCIT 129 TTJ 680 (Bang.) 4) Awadhesh Builders Vs. ITO 37 SOT 122 (Mum) 5) DCIT Vs. Malibu Estate Pvt. Ltd. 32 CCH 262/52 SOT 54 (Del-Trib.)" The Ld. CIT(A) further observed as under:- "vi) It may also be mentioned that in the similar facts and circumstances the Hon. Jurisdictional ITAT in the case of M/s Unique Builders and Developers vs. DCIT, CC-2, Jaipur in ITAs No. 73 to77/JPR/2Ol2, 689 to 690/JP/l2 and 208 to 215/Jp/12 vide order dated 14.3.2O 13 deleted the addition made by the AO by rejecting the stand of the AO adopting percentage completion method and rejection of books of accounts u/s 145(3) of IT Act. vii) The Hon. ITAT, Jodhpur in similar facts and circumstances in the ....