TaxTMI 
TaxTMI 
2015 (4) TMI 1361
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.... the case, the Ld. CIT(A) has grossly erred in a. Upholding the rejection of books of accounts by applying provisions of section 145(3) of the Income Tax Act, 1961 without appreciating the material on record b. Upholding "Percentage Completion Method" in place of "Project Completion Method" regularly followed by appellants which has been accepted by department in past. c. Holding the flat booking advances as income, ignoring the fact that receipts were only advances against flat bookings and actual sale had not take place. Ld. CIT(A) erred in drawing an untenable conclusion that the ownership of property gets transferred on receipt of booking itself which is contrary to provisions of the Transfer of Property Act. d. Drawing adverse inference from the contents of 'Annexure A Exhibit 2'in respect of laptop of third party Shri Navin Bhutani and using it against the assessee while making impugned additions. 2. Unique Builders and Developers ( AJIT) in AYs 07-08 to 09-10 - Regarding reference of under construction projects held as stock in trade to DVO u/s 142A; Grounds :- a. That the Ld. CIT(A) has further erred in upholding the action of the Ld. AO in making a reference to ....
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.... or after 01.04.2012 and also on Discussion paper on tax accounting standards published by the CBDT in Oct. 2011 which has not yet been made applicable. b. In holding that less than 25% of the stage of completion was to be treated as early stage of completion when revenue could not be reliably estimated and profit was to be taken as NIL despite the fact that there was no such provision in AS-7. 2a Ld. CIT(A) Central, Jaipur has erred in law and facts in directing the AO to allow deduction u/s 80IB of the Act on the profits and gains of the business finally computed after modification even though no such claim was made in the return of income filed. 2b Ld. CIT(A) Central, Jaipur has erred in law and on facts in admitting additional evidences u/r 46A in support of the assessee's claim of deduction u/s 80IB of the Act even though ample opportunities were provided by the AO and no such evidences were filed. 4. Remaining ground i.e. Ground No. 1(i) of the revenue for A.Y. 2006-07 is as under:- Whether on the facts and circumstances of the case the CIT(A) Central, Jaipur has erred in law as well as on facts in deleting the addition of Rs. 37,05,428/- (correct figure 34,00,....
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....em of accounting on the basis of 'Project Completion Method'. The books of accounts of assessee are subject to audit and the auditor has endorsed the adoption of 'Project Completion Method', veracity of books and declared profits. All the purchases and construction expenses are duly vouched and supported by requisite record. They were produced before the Ld. AO as and when required from time to time which were examined by AO, no specific or material defects in the books or adoption of project completion method were found. According to assessee ld. AO objected to Project Completion Method; assessee filed detailed explanations and justifications which were rejected on hypothetical considerations. AO without proper justification truncated some of minor and irrelevant issues as defects in the audited books and rejected them u/s 145(3). Additionally AO substituted the method of accounting to Percentage Completion Method. Beside estimation of income was made by relying on the laptop contents of third party Mr. Navin Bhutani and extrapolating the same. In case of Ajit under construction projects held as stock in trade were illegally referred by ADIT to DVO u/s 142A for estimating the cost....
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....B in the years of profitability. 13. At the outset ld. Counsel for the assesse contends that Unique group as originally constituted was bifurcated into two branches due to some disputes amongst the stake holde Rs. The search operations were carried out in all the entities of both divisions. All of the entities were following 'Project Completion Method" as their method of accounting; department has been accepting their method of accounting as recognized and approved method; assessments were made accordingly. Similar issues i.e. method of accounting and estimation of income consequent to same search of other Unique group cases reached to the level of ITAT Jaipur Bench. Consequently most of the grounds of assesse and revenue in these appeals are squarely covered by the decision of ITAT, Jaipur vide consolidated order dated 14.03.2013 in ITA No. 73/JP/2012 and 211/JP/2012 in the cases of M/s Unique Builders & Developers and M/s Unique Builders & Developers (Krishna). ITAT after considering similar facts, circumstances and judicial precedents held that "Project Completion Method" is a recognized, accepted by department and is an appropriate method for computing the income in these case....
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....r has drawn support from few judgments rendered by the Appellate Tribunal and also by the judgment in the case of Kachwala Gems vs. JCIT, 288 ITR 10 (SC) for invoking provisions of section 145(3) of the Act. 12.1. Section 145 as is relevant in the year under appeal is reproduced as under:- Sec. 145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in 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 Authorit....
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....sing Officer from time to time. It was, therefore, his own duty to verify quantity of each quality of goods purchased by the assessee and correctness of valuation disclosed in the accounts. For the remissness on the part of the Assessing Officer, assessee cannot be blamed. The Assessing Officer also appears to have casually stated that as per AS-2 it is essential that the details of both quality as well as quantity of different items of stocks including details of direct expenses and costs are required to be maintained meticulously. In fact, the AS-2 notified by the CBDT relates to disclosure of prior period and extra ordinary items and change of accounting policies. The accounts maintained by the assessee-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 t....
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....nd Bhagat Ambica Ram vs. CIT, 37 ITR 288 (SC) and also by Hon'ble Delhi High Court in the case of CIT vs. Discovery Estate Pvt. Ltd. 2013-TIOL-139-High Court-DEL-IT in which the practice of making additions in the assessment on mere suspicions and surmises or by taking note of the 'notorious trade practices' prevailing in trade circles has been disapproved. Having considered the aforesaid view, the finding of "on-money transactions" in the appellant's case by the authorities below is found without any basis and found perverse on facts. It, therefore, could not be a reason for rejecting the books of account maintained by the assessee in regular course of business. 12.10. The last reasoning taken by the assessing authority as also stood confirmed by the Ld. CIT (A) is that the assessee has not followed Accounting Standards 9 & 7 which tantamount to not following Accounting Standard-1 as prescribed under section 145(2) of the Act in view of the exercise undertaken by the Assessing Authority to apply percentage of project method that gave a different and positive results revealing more profits taxable in the years under consideration. The Assessing Officer, therefore, changed the....
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....dwell (P) Ltd. in ITA No. 928/2011 dated 15.11.2011 is relevant. Neither the revised Guidance Notes 2012 issued by Institute of Chartered Accountants of India nor the Exposure Draft for Guidance Note on Recognition of Revenue issued by the Institute of Chartered Accounts of India in 2011 are mandatory. The completed contract method followed by the appellant, therefore, could not be faulted with by the revenue and the assumptions made by the Assessing Officer that by not following AS-9 & 7 the same tantamount to not following prescribed AS-1 under section 145(2) of the Act are found misplaced, unnecessary and uncalled for besides being contrary to principles of interpretation of the statutory provisions. The same, therefore, could not be taken a valid basis for change of method regularly employed by the appellant. The Income-tax Authority, therefore, has no option or jurisdiction to meddle in the matter either by directing the assessee to maintain its account in a particular manner or adopting a different method for valuing work-in-progress. It also cannot re-compute income by adopting any method other than that regularly employed by the assesseeappellant in a case like this nor mak....
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....dia Ltd. 188 ITR 44 (SC) which is also relied upon by the authorities below against the appellant before us is found to have entertained a view that a method of accounting adopted by the tax payer consistently and regularly cannot be discarded by the departmental authorities on the view that he should have adopted a different method of keeping of accounts or of valuation. The Revenue's reliance upon the decision in CIT vs. British Paints India Ltd. (supra) in no way advanced the case of the revenue. The Apex court while dealing with the contention of the assessee in that case for valuation of the raw material without taking into account any portion of the cost of manufacture, held that:- "the question of fact which the Assessing Officer must necessarily decide is whether or not the method of accounting followed by the assessee discloses the true income and observed thus) : "It is a wellrecognised principle of commercial accounting to enter in the profit and loss 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 wha....
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....contained at page 447 of the report is reproduced as under :- "The ITO's view that there could be a better system of accounting is no reason to the application of the provisions of s. 145 of the I. T. Act, especially in view of the fact that this system of accounting is followed by the assessee uniformly and regularly for the past several years, and was accepted by the Department without quarrel. It is not open to the ITO to intervene and substitute a system of accounting different from the one which is followed by the assessee, on the ground that the system which commends to the ITO is better. Attention may be invited to the decisions in: (i) CIT & EPT v. Chari and Rant [1949] 17 ITR I (Mad) ; (ii) CIT v. Srimati Singari Bai [ 1945] 13 ITR 224 (All) ; (iii) CIT 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....
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....leted contract method" and "percentage of completion method". To know the results of his operations, the contractor prepares what is called a contract account which is debited with various costs and which is credited with revenue associated with a particular contract. However, the rules of recognition of cost and revenue depend on the method of accounting. Two methods are prescribed in Accounting Standard No. 7. They are "completed contract method" and "percentage of completion method". Thus, as both the methods of accounting are recognized methods of accounting, the assessee is at liberty to choose any of the above and if any one of the method of accounting is consistently 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 th....
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....ssessee in assessment year 2003-04". 14. Further this judgment has been followed by this very bench in one of the other group concern M/s Unique Builders (Rama) Vs. DCIT, Circle-2, Jaipur, ITA No. 649/JP/12 & 650/JP/12 for AYs 2008-09 & 2009-10 vide order dtd. 16-1-15. ITAT reversed the action of AO in rejecting the books of account u/s 145(3) and applying percentage of completion method. Post minor rectification u/s 254(2) by the ITAT vide order dated 13.02.2015 in M.A. No. 12 & 13/JP/2015, reads as under:- ''2.1 The ld. Counsel for the assessee at the outset contends that the issue in question is squarely covered by ITAT Jaipur Bench consolidated order dated 14-03-2013 in the assessee's own group cases i.e. M/s. Unique Builders & Developers vs. DCIT (ITA Nos. 73 to 77/JP/12, 689 to 690/JP/12 for assessment year 2003-04 to 2006-07, 2009-10, 2007-08 & 2008-09) and Unique Builders & Developers (Krishna) (ITA No. 78 to 80/JP/12 for the assessment year 2007-08 to 2009-10) wherein the rejection of books of account u/s 145(3) of the Act have been held to be not proper and assessee's method of accounting i.e. project completion method has been upheld by following observations ....
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....revenue stand dismissed. '' 2.2 The ld. DR is heard. ''2.3 We have heard the rival contentions and perused the materials available on record. The facts and circumstances of the assessee's case and its other group cases are similar. Thus in view thereof and respectfully following the consolidated ITAT order referred to above, we uphold the books of account of the assessee and also uphold method of accounting of project completion method as followed by this Bench of ITAT in assessee's group of cases. Thus in the entirety of the facts and circumstances, the additions are deleted and the appeals of the assessee are allowed. '' 15. It is thus vehemently argued that in the cases of both separated group entities of Unique group involving identical set of facts and circumstances, the action of AO in rejecting books of account, changing the "percentage of completion method" in place of "project completion method" and the estimated additions stand squarely deleted by above detailed ITAT orde Rs. 16. To reiterate the similarity of facts and issues it is contended that: a. The grounds for rejection of books of account u/s 145(3) were identical as under: i. That, the ass....
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....ions filed in support of the method of accounting and absence of any defects in the books. Ld. CIT(A) also in a summary manner upheld the AOs rejection of method of accounting by making following observations: i. The income need to be determined on the basis of percentage of completion method in the manner explained in AS-7-Construction Contract. ii. That, other firms of the assessee's group had received on money on sale of flats which were allegedly found noted in the loose papers / documents found and seized during the course of search iii. That, in case of other firms of assessee's group including assessee the recorded sale price of different flats on different locations and different projects showed variation. It is contended by ld. Counsel that AOs allegation of non-maintenance of stock register and consequent non-compliance with AS-2 is without any basis or merit. In the Project Completion Method the stock consists of capitalized value of land and other expenditures towards construction and development of project. Since no question has been raised about expenditure the day to day capitalized value represents the day to day stock. Complete records thereof are maintained....
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....AO had not pointed any specific defect in the books of account and had also not found out any inflated purchases or suppressed sales. The mere non-maintenance of stock register would not warrant rejection of books of account. c) The Hon'ble Rajasthan High Court in the case of Gotan Lime Khanij Udyog resorted in 256 ITR 243 has held that mere non maintenance of stock records does not leads to the addition. 18. Apropos AO's allegation of non-verification of certain vouchers pertaining to direct expenses, ld. Counsel referred to various written submissions filed with AO showing that all the vouchers, including vouchers relating to direct expenses were produced. Besides books of accounts and records were seized and in the remained in the custody of ld. AO. Therefore, this finding of the ld. AO is not correct and adverse inference drawn to reject books of accounts on this score is also not tenable. The finding is contrary to the facts on record and based on surmises and conjectures. 19. Apropos the allegations about admission of income by group members as a result of search and seizure of some incriminating papers the same are claimed to be incorrect and contrary to record. It is co....
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....asis of assumptions, presumption, conjectures and contradictory findings and the action is unsustainable in the eyes of law. It is prayed that the action of Ld. AO and Ld. CIT(A) in making / upholding the rejection of books of accounts deserves to be held as bad in law and liable to be reversed. 21. Apropos the application of Percentage of Completion method by Ld. AO in order to compute the income of assessee, it is submitted that, for the purpose of accounting the income from construction business, two methods have been suggested by the Institute of Chartered Accountants of India (ICAI) - (1) Project Completion Method (2) Percentage of Completion Method Both are recognized methods for maintaining the books of accounts in respect to the construction business. Thus, the project completion method regularly followed by assessee's entities could not be disturbed merely by observing that it does not result into significant income for a particular assessment year; it has been lost sight of a crucial fact that in project completion method, the entire income is computed and offered to tax in the year when the project is substantially completed. Thus, by choosing either of the methods....
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.... Industries (P) Ltd. (Punj. & Har.) Interest on borrowed capital - Assessment year 1986-87 - Whether though tax planning is permissible even if it results in avoidance of tax, yet legitimacy of claim for deduction has still to be made out on principles of business expediency - Held, yes - Assessee borrowed money from its sister concern on interest at rate of 18 per cent per annum and purchased shares from other sister concern which carried dividend at rate of 4 per cent - Assessing Officer held that there was no justification to borrow funds at rate of 18 per cent interest for making investment in shares, which would give a dividend of 4 per cent only and having regard to fact that borrowing was made from sister concern and investment was also in another sister concern, claim for interest was to be disallowed - Commissioner (Appeals) upheld order of Assessing Officer - However, on second appeal, Tribunal allowed assessee's claim holding that it could not be prevented from making investment only because return from shares was low; and that it was in wisdom of assessee to have entered into transactions even if such transactions were not prudent - Whether since Tribunal, while takin....
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....he reality of the situation; (5) under section 145 of the Income Tax Act, 1961, in a case where accounts are correct and complete but the method employed is such that in the opinion of the ITO the income cannot be properly deduced there-from, the computation shall be made in such manner and on such basis as the ITO may determine, Preparation of the balance sheet in accordance with the statutory provision would not disentitle the assessee in submitting the income tax return on the real taxable income in accordance with the method of accounting adopted by the assessee consistently and regularly. That could not be discarded by the departmental authorities, on the ground that the assessee was maintaining balance sheet in the statutory form on the basis of cost of the investments. In such cases, there is no question of following two different methods for valuing its stock-in-trade (investments). 22. Ld. CIT(A) failed to appreciate that guidance notes issued by ICAI are merely recommendatory in nature and assessee has a legal option to opt one of them a fact has been acknowledged by the ICAI. The guidance note cannot be considered to override a legislation so as to assume that it can ....
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....d in favour of the Purchaser. It is clear that in the advance booking agreement to sale relied by the Ld. AO and Ld. CIT(A), the parties specifically agreed that no right, title or interest of any kind shall be conferred upon the buyer until the sale deed is executed in favour of the purchaser. Therefore, the allegation of the Ld. AO and CIT(A) that as per the Guidance note the risks and rewards of ownership are transferred at the time of advance booking agreement of sale is executed is self-contradictory, baseless, unfounded and any adverse inference drawn in this behalf has no legs to stand. Ld. AO has failed to appreciate the vital fact that merely by making advance booking of a flat it cannot be assumed that any income has arisen to the assessee. The advance received remain a liability till the sale transaction is completed by delivering possession and sale deed is executed. That is the precise reason that the amount of advance received by builder is recorded in the liability side of the Balance Sheet; accordingly there is no element of accrual of income these circumstances. Since the assessee does not transfer the title or ownership to proposed buyer at the time of booking by....
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....copies of two pages, one page bearing No. A-2/108 and other bearing no number and the same were claimed to be the copies of printouts taken from the data recorded in the CDs downloaded from laptop and Pen Drive of Sh. Naveen Bhutani during the course of search at his residential premises. None of the two pages bear signature or initials of the person from whose possession they were allegedly seized. It has been claimed by Ld. AO that, on being confronted with these papers by ADIT on 16.03.2009, Shri Naveen Bhutani allegedly accepted that the said papers are the print outs taken from the CDs prepared during the course of search at his residence. The relevant question No. 7 of the statements recorded on 16.03.2009 has been reproduced at page 36 of the assessment order, however, no copies of the said statements were ever supplied to assessee in spite of the specific requests made by assessee. In reply to Q. No. 7, a reference to the total number of pages i.e. 215 was made however, these copies were never provided even though the said papers as well as the statements have been used against the assessee. 25. During the assessment proceedings, assessee furnished following replies: -Firs....
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....mber, have been supplied stating that the same were the print outs taken from the CDs prepared during the course of search at the residential premises of Shri Naveen Bhutani containing the data available in the computer laptops. As has been submitted earlier, the said papers were never shown to the assessee nor the copies of the same were ever supplied, and it is further submitted that none of the paper supplied by your goodself contained signature of any of the partner / employee or the person from whose possession the papers as alleged have been found, thus no cognizance of the paper could be made and accordingly no adverse inference be drawn based on these pape Rs. Without in any manner admitting the papers relating to the assessee, it is submitted as under: From the perusal of the papers containing No. A-2/108 your goodself would observe that it is a projection of various projects computed after 01.04.2001 and the precise details of the entries contained therein could not be submitted as Shri Naveen Bhutani was presently not in service of the assessee and therefore we are unable to understand the nature of entries from him. The paper contains the projection of the cost ....
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.... further submitted that as on the date of search the project was under construction and approximately 75% of the work was completed and since the assessee has followed the project completion method for recognize its revenue therefore, the entire expenses has been claimed as work-in-progress. With regard to the third project "Southern Heights", it is submitted that as on the date of search less than 50% work was completed and as such no profits whatsoever could be ascertained, since neither the sale has been effected nor the possession was given as not a single flat was completed and ready to delivery. In the circumstances it is submitted that the details contained in the said papers are merely the projected workings made in a normal course of business and has no bearing on the assessee more particularly when the person from whom possession the same were seized has also deposed in his statements that the data contains in the computer laptop are merely related to the representation and personal work. The method as adopted by the assessee is a recognized method and since the sales in the case of assessee has taken place when the physical delivery of flat / office constructed is ....
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....here the document found during the course of search did not indicate whether figures mentioned therein refer to quantities of money or quantities of goods it was a dumb document and therefore, no addition could be made on the basis of such a document. 5. 67 TTJ 838 Jagdamba Rice Mills V/s ACIT (Chd.) Documents seized during search not being as to whether item were payments or receipts or some other calculations, so no additions could be made on the basis of such a dumb document. 6. 71 ITD 245 Chander Mohan Mehta V/s ACIT (Pune) Since the loose papers did not indicate name of assessee, from list of persons given in loose papers it could not be inferred that either any loan or any advance was given to or received from those persons, and since total amount on those loose sheets indicated a very small amount, those loose papers alone would have to be considered as dumb papers having no evidentiary value and no addition could be sustained on the basis of them. 7. 21 TW 125 Chandalal Kalayanmal V/s ACIT (ITAT, Jaipur) 233 ITR 588 Jayantilal Patel and Dr. Balvir Singh Tomar V/s ACIT & Ot Rs. (Raj.) 25 Tax World 87 (Raj. High Court) Where seized paper are not found from the pos....
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....ur above stated letter does not reconcile with each other which is evident from the following examples: 1. In page titled as A-2/108 in column No. 1 details of project of Royal Paradise are mentioned wherein the cost of the project is mentioned as 1.389 crore as against this the cost based on the figures mentioned in another page in the same project, if calculated comes to Rs. 3.5150 crores [(1500 x 10000) + (31000 x 650)]. Further the average sale rate is mentioned at Rs. 756/- per sq. ft. as against the selling rate of Rs. 1,200/- per sq. ft. mentioned on the other paper for the same project. Likewise the project revenue is mentioned at Rs. 2.31 crore with G.P. of Rs. 0.9548 crore in one page as against the figure of sale at Rs. 40.50 crore with profit of Rs. 53,50,000/- in another page for the same project. Similar type of errors as mentioned in point No. 1 above are appearing in the other projects also which clearly establish that both the papers contained different figures for a single project therefore, neither these two papers could be read together nor their contents could be considered as authentic in any manner and be verified with records based on which any adverse i....
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.... and / or Shri Gurusharan Examination of Shri Naveen Bhutani and Shri Gurusharan in post search enquiries, if any A-2/108 No No Not known as to whether it is seized from Naveen Bhutani or Gurusharan Q.No. 20 of the statements dated 28.01.2009 as reproduced in our submission of even date No version available Not informed to us inspite of request Not informed to us inspite of request Un-numbered photocopy of a paper No No Not known as to whether it is seized from Naveen Bhutani or Gurusharan Q.No. 20 of the statements dated 28.01.2009 as reproduced in our submission of even date No version available Not informed to us inspite of request Not informed to us inspite of request From the perusal of the above table your goodself would observe that the department has miserably failed to establish the fact that the figures as found noted in the said papers are in anyway be the actual figures based on some authentic or logical material either found as a result of search or brought on record in post search inquiries or even at the stage of assessment proceedings in progress. We therefore once again humbly pray that these papers on law as well as on merit deserves to be dis....
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....preciate the fact that the entries found noted on the seized papers are nothing but some projective figures compiled probably by the person from whose possession they were stated to have been found / seized for some presentation purposes. The entries are full of errors / omissions / guess work and are totally imaginary having no logical impact as they are absolutely unmatchable to the real state of any project or actual transactions. Ld. AO failed to appreciate the settled legal preposition that presumption u/s 132(4) is rebuttable. Besides the material was not seized from the assessee against whom it is used. More importantly there is no indication or evidence that they ever prepared under instructions / knowledge of the assessee. Nevertheless assessee rebutted the presumption if any which can be attributed to it by proper explanation; in this eventuality the burden was on ld AO to prove with cogent and corroborative material that the entries are in fact that they were made at the instance of the assessee and are relatable to its business. The additions have been made by fastening burden of wrong presumptions on assessee, without controverting its rebuttal and by bringing on recor....
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.... the evidence, explanations, legal provisions, judicial precedents and verification of relevant aspects. 5) It is contended that the alleged papers are neither found in the possession of the assessee nor any entry is co related to assessee's books in any manner. Cost of construction is an allowable expenditure and no prudent builder will deliberately reduce the cost as has been assumed by the AO. Assessee has duly discharged its onus which if at all lay upon it about the alleged contents from Mr. Bhutani's laptop. They have been demonstrated to be some theoretical projections of ex employee Mr. Bhutani in respect of some other project which is not at all related to the assessee. No entry therefrom has been ever correlated to assessee's books. A duly sworn affidavit of Shri Naveen Bhutani confirming these details, facts was submitted before Ld. CIT(A) which also remains wholly uncontroverted. 6) Thus the thoratical projections attributable to third party Mr. Bhutani, for which assessee has discharged its onus which not effectively controverted by ld. AO or CIT(A) cannot be used against assessee for any addition. Besides ITAT has already held this view and cannot be changed in as....
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....to 69D have provided for certain deeming provisions, where an assumption of income is raised in the absence of satisfactory explanation from the assessee. As these are deeming provisions, the conditions precedent for invoking such provisions are required to be strictly construed. The facts and circumstances giving rise to the presumption have to be established with reasonable certainty. The Assessing Officer cannot first make certain conjectures and surmises and thereafter apply the deeming provisions based on such conjectures and surmises. In the absence of adequate material as to the nature and ownership of the transaction, undisclosed income could not be assessed in the hands of the assessee merely by arithmetically totaling various figures jotted down on the loose documents. In other words, for the purpose of resorting to deeming provisions, dumb documents or documents with no certainty have no evidentiary value. After consideration of the matter, the contentions of the assessee had to be agreed with. The impugned addition had been made by the Assessing Officer on grossly inadequate material. The same was, therefore, directed to be deleted. [ Para 36] 14) 34 TW 226 Jai Kumar ....
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....at where during the course of any search under section 132, any money, bullion, jewellery or other valuable articles or things or any books of account etc. are tendered by the prosecution in evidence against the person concerned, then the provisions of sub-section (4A) of section 132 shall, so far as may be, apply in relation to such assets or books of account or other documents. This clearly spell out the intention of the Legislature that wherever the Legislature intended to continue the presumption under sub-section (4A) of section 132, it has provided so. It has not been provided that the presumption available under section 132 (4A) would be available for framing the regular assessment under section 143 as well. It is thus prayed that the additions having been made in untenable manner and without cogent material deserve to be deleted. 27. Apropos ground of Appeal No. 04 for A.Y. 2007-08 to 2009-10 in case of AJIT assessee has challenged the action of Ld. CIT(A) in upholding the reference made u/s 142A to the DVO. A reference was made to the DVO by the ADIT, Inv.-1, Jaipur, vide letter dated 13.05.2009 for estimation of value of investment made by the Unique Group in constructi....
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.... which clearly shows that a reference u/s 142A to DVO can be made by the Assessing Officer only when assessment / reassessment proceedings are pending before the him. When no such proceedings are pending, no reference to DVO can be made u/s 142A. This contention of assessee is supported by the judgment of Hon'ble Gujarat High Court in the case of CIT Vs. Umiya Co-op. Housing Society Ltd. reported in (2009) 314 ITR 272 (Guj) wherein, the Hon'ble Court has observed as under: Reassessment - Cost of construction - Reference to valuation officer - No assessment proceeding pending before Assessing Officer - Assessing Officer has no jurisdiction to refer property for valuation to Valuation Officer - Income Tax Act, 1961, S. 147. In the opening part of section 142A the words used are "for the purposes of making an assessment or reassessment under the Act". The intent of the legislation is that the matter can be referred to the Valuation Officer only when the proceedings of assessment or reassessment are pending before the Assessing Officer. When no such proceedings are pending, the Assessing Officer has no jurisdiction to refer any property for assessment. Further, in the case of ITO ....
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....ch the estimate of investment was called for, was not specified therein - Hence, the DVO's report could not have been made the basis for making the addition. In the present case, no assessment / reassessment proceeding was pending either before ADIT (Inv.)-1, Jaipur as on the date of making reference i.e. 13.05.2009 or even the Assessing Officer i.e. DCIT, Central Circle-2, Jaipur since the notice u/s 153A was served upon assessee on 18.07.2009. Thus ld. ADIT(Inv)1, Jaipur, who was neither the Assessing Officer, nor before whom any assessment proceeding was pending on the date of making reference, therefore, the same is illegal in terms of sec u/s 142A, this is a settled legal position in view of the judicial precedents enumerated above. b. Section 142A empowers only the Assessing Officer as authorized to make reference to DVO u/s 142A as the term specifically used in the provision is "Assessing Officer" and not any other officer including ADI. consequently the section being clear and unambiguous word of law cannot be misinterpreted by forcibly applying external aids of construction. c. bare perusal of the section would reveal that reference to DVO for estimation of value u/s ....
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....ew of the clear legal position, it is submitted that there being no reference to the any of such section i.e. section 69, 69A, 69B or 56(2), there was no occasion for the ADIT(Inv.)-1, Jaipur to invoke the provisions of section 142A and for DVO to make such estimate, who is also an authority under the Act. Hence, it is prayed that the action of ADIT (Inv.)-1, Jaipur in making reference to DVO u/s 142A may be held as bad in law. Further reliance is placed on the following case laws: 304 ITR 354 Smt. Saraswati Devi Gehlot Vs. ITO (Jodhpur) Appellate Tribunal Supplement - Assessment - Enquiry before assessment - Sale of shops - Cost of construction - Reference under section 142A to valuation cell on premise that lower cost of acquisition of shops sold by assessee - Section 142 NOT CONTEMPLATING SUCH A SITUATION - Reference to valuation cell void ab initio - No dispute about cost of construction shown by assessee - Cost of construction declared by assessee warrants no interference - Income Tax Act, 1961, S. 142A. 307 ITR 244 Tej Pratap Singh Vs. Asst. CIT (Delhi) Assessment - Powers of income tax authorities - Power to issue commission - Condition precedent - Existe....
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....ment of their salary is included in the construction cost reflected in books. Further, Shri Ajit Singh and Shri Ravinder Pal Singh, partners of the assessee firm are qualified engineers and Shri Ajit Singh is having experience of more than 40 years of working. If the proper rebate of self supervision is allowed and State PWD rates are applied, the resultant estimated valuation will lead to no addition at all. In this regard a detailed reply was made before the Ld. AO during the course of assessment proceedings, which is reproduced at page 38 of the assessment order wherein the decisions of binding nature, reproduced below, were relied upon but Ld. AO without appreciating and by simply observing that the facts are different, opted not to follow them which is a serious disrespect to the orders of higher appellate forum. Reliance is placed on: Commissioner of Income Tax Vs. Hotel Joshi 242 ITR 478 (Rajasthan) - The Assessing Officer made an addition of Rs. 6,30,807/- as unexplained investment in the hotel on the basis of the valuation made by the District Valuation Officer. On appeal the Tribunal held that if the books of account kept by the assessee did not show any infirmity they ....
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....e valuation officer in certain specified cases. These would be the cases wherein an estimate of the value of any investment referred in section 69 or 69B or the value of any bullion, jewellery or any other valuable articles referred in section 69A or 69B is required. There is no mention about S. 69C. Thus the AO cannot refer matter regarding cost of construction of project to DVO u/s 142A and then make addition u/s 69C on that basis because there is no mention of S. 69C in S. 142A. 188 Taxman 39 CIT Vs. Aar Pee Apartments (P) Ltd. (Delhi) - Assessment - Estimate by valuation officer in certain cases - Assessment year 1998-99 - Whether powers under section 142A extend to estimating amount of unexplained expenditure referred to in section 69C - Held, no - Whether, therefore, Assessing Officer was not justified in exercising powers under section 142A for purpose of getting himself satisfied about cost of construction claimed by assessee as revenue expenditure - Held, yes. 30. Ld. CIT(DR) in reply relied on the orders of AO and contends that: a. Incriminating documents indicating suppression and postponement of income were seized during the search proceedings. AO in order to make ....
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....at once books are rejected and method of accounting is changed to WIP method, estimation of percentage of profit is inevitable. It is trite law that estimate requires some element of guess work and shouldn't be interfered with unless it is shown to be arbitrary or capricious. The estimate of income has been made on the basis of projections of the print out of the lap top of Shri Butani only, the same cannot be termed as capricious or arbitrary. Therefore, there is no basis to interfere with the estimate. f. Apropos applicability of ITAT orders in other cases, it is pleaded that each entity was working in different fashion and facts of each of them are different, consequently ITAT judgment is not squarely applicable. 31. In rejoinder ld. Counsel for assessee contends that:- a. Except making some vague and generalized observations, no incriminating document has been specifically referred by authorities below to impinge on assessee, ld DR also has not pointed to any such documents. The print out of excel sheet recovered from Mr. Navin Bhutani has been held by ITAT in detailed manner to be related to a third party document. Besides even if these projection figures are considered t....
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.... allowed deduction u/s 80IB which is appealed by department. 33. Ld. CIT(DR) submitted that the Hon'ble Apex Court in the case of Goetz (India) Ltd. 284 ITR 323 has held that the no fresh claim could be made by assessee, otherwise than by way of a valid revised return. Therefore, ld. CIT(A) erred in allowing the claim of the assessee u/s 80IB. Orders of ld. AO are relied on. 34. Ld. Counsel for the assessee contends that Hon'ble Supreme Court in same judgment has further clarified that the limitation of revised return is applicable to the power of the assessing authority and does not impinge on the powers of appellate authorities to allow any consequential claim due to assessee in accordance with law. It is submitted that the revenue ground based on the Hon'ble Apex Court rather supports the assessee's case. In this case, fresh claim was consequential to changing of the method of accounting by AO, there is no challenge the eligibility of the assessee for availing the deduction. Revenue is in appeal under mistaken interpretation of Goetze judgment, it rather elaborates that the appellate authorities which includes the CIT (Appeal) can entertain and adjudicate upon any new or conse....
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....n to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income tax(Appeals). Both the assessee was well as the Department have a right to file an appeal/cross objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier". 5. In the case of CIT v. Ramco International (2011) 332 ITR 306 (P&H) Their Lordships after considering the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd., (2006) 284 ITR 323(SC) has held (head note) "Held, dismissing the appeal, that the Tribunal had considered that issue and found that according to Form 10CCB filed during the assessment proceedings, the claim of the assessee was admissible. The assessee was not making any fresh claim and had duly furnished and submitted the Form for the claim under section 80-IB, there was no requirement of filing any revised return". 6. The CBDT as back as in 1955 issued a circular No. 14(XL35),dated 11th April, 1955 wherein the Board has recognized the fact that responsibility for claiming refunds and....
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....e case before us the claim was disallowed not merely because the agreement was terminated in the financial year 200001, but it was disallowed because it was held to be capital in nature and that the issue is still pending for adjudication as pointed out by the learned counsel for the assessee before the Learned CIT(A). Therefore, the interest of the assessee is not affected. 35. It is vehemently contended that several courts have held that Income Tax proceedings are not adversarial in nature; ld. AO by CBDT circulars is expected to frame a proper assessment in judicious manner. Courts based on CBDT circulars have held that any lawful claim eligible to assessee and even though not claimed in return, is to be brought to the notice of the assessee by AO and adjudicated upon. AO has to assess and collect proper amount of tax from assessee and not fleece it. Thus the CBDT circulars and catena of judgment enjoin on the AO to suo-motu allow the lawful claims eligible to assessee.. In this regard reliance is also placed on following judicial pronouncements: - 105 ITR 212 CIT Vs. Simon Carves Ltd. (SC) -The taxing authorities exercise quasi judicial powers and in doing so they must act i....
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....4 of the Income Tax Act, 1961- Appellate Tribunal - Power of - Whether setting aside an ex parte order on ground that assessee for valid reasons could not attend hearing of the case would not amount to review at all - Held, Yes Further in case of percentage completion method, allow ability of deduction u/s 80IB has also been approved by the CBDT vide its instruction No. 4 of 2009 dated 30.06.2009, copy is placed on the record. As the assessee firm is engaged in the business of construction and development of commercial / residential buildings, the provisions of section 80IB(10) assessee is squarely eligible for deduction. Revenue has not challenged the assessees' eligibility for claim u/s 80IB, as the claim was allowed by ld. CIT(A) on the basis of a proper remand report from AO. The necessary permission was granted by the competent authority prior to 31.03.2008. Reliance is placed on the following judgments for 80IB eligibility: 1. 113 TTJ 300 Radhe Developers & O Rs. Vs. ITO & O Rs. (Ahd 'A') Deduction u/s 80IB - Income from developing and building housing project - Land not registered in assessee's name - Contention of the Revenue that in order to claim deduction u/s 80IB(1....
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....ditions for and has claimed deduction u/s 80IB of the Income Tax Act, 1961. In the circumstances, it is contended that there is no infirmity in the order of ld.CIT(A) in allowing the deduction u/s 80IB after considering remand report from Ld. AO and verification of relevant provisions. 36. We have heard the rival contentions, perused the material available on record, ITAT orders in the appeals of other entities of the same group and other judicial precedents cited by the assessee. The main issues as considered in other cases posed before us are:- a. Whether the authorities below are justified in changing the recognized method of revenue generation based from Project Completion to % Completion Method. b. Whether the authorities below are justified in rejecting the books of accounts of the assessee u/s 145(3) by holding that they are defective and thereafter resorting to estimation of income based on: a. Whether authorities below are justified in using the laptop contents of third party Mr. Navin Bhutani and extrapolation thereof to justify their estimates. b. Holding that property in flats stood transferred at the booking level and thus revenue was generated at the flat bo....
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....ure is charged to Profit & Loss account as they were under construction and the relevant construction expenses were capitalized. The quantity so issued to the sites/projects is recorded in separate records maintained for each item of building material used therein. There was thus no practical need to maintain a detailed quality-wise quantitative register by the appellant more so when the valuation on cost basis could be accurately made from the ledge Rs. It is neither the case of the Assessing Officer that there have been omission or failure to record any purchases or direct expenses to the project in process nor even a case that the assessees inflated the cost of such stock which is basically capitalized cost of construction in the ledge Rs. The accounts are duly audited by a qualified Chartered Accountant as per past accounting practices, policies and revenue recognition method on approved method i.e. Project Completion Method. The books of account were seized and the same were available with the Assessing Officer. The assesses claim to have also produced requisite vouchers and record as required by the Assessing Officer from time to time. The Assessing Officer also appears to ha....
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....ng in such practices when all the profits were deductible u/s 80IB. Besides the entire evidence and material has not been considered to come to a justiciable conclusion to reject the books of regularly audited accounts. A generalized observation about the 'notorious trade practices' in real estate business cannot be a reason for rejecting the books of accounts. Hon'ble Apex Court in the case of Lalchand Bhagat Ambica Ram (supra) and Hon'ble Delhi High Court in the case of CIT vs. Discovery Estate Pvt. Ltd. (supra) held that practice of making additions on mere suspicions and surmises or by taking note of the 'notorious trade practices' prevailing in trade circles cannot be relied for making additions. Consequently and finding of "on-money transactions" based on assumption and in the absence of any incriminating material or examination of buyers is without any basis and justification. These observations, therefore, cannot be valid reasons for rejecting the audited books of account maintained by the assessee in regular course of its business as per past practices and accounting policies. 39. Apropos substituting the method of accounting from Project Completion to % Completio....
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....Note on Recognition of Revenue issued by the Institute of Chartered Accounts of India in 2011 are mandatory or override the statutory provisions. Ld. CIT(A) has also taken contradictory stand; on one hand it is held that there can be no revenue recognition unless 25% project is complete, rightly so as no builder can earn from plinth or pillars on other hand it is held that the property in flats stands transferred by booking amount. This clearly implies completion of sale and revenue generation. We may hasten to add that the stubborn stand of authorities below has lead to unimaginable contradictions and anomalies. Whereas the assessee's method does not lead to any such eventualities as it was regularly followed and accepted by department besides being one of the well followed method among real estate builde Rs. The project completion method followed by the appellants, therefore, could not be faulted with by the revenue. The assumptions made by the authorities below that by not following AS-9 & 7 the same tantamount to not following prescribed AS-1 under section 145(2) of the Act is profoundly misplaced, unnecessary and uncalled for besides being contrary to principles of accountancy....
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.... they lack in credibility being based on irrelevant considerations and pure conjectures. Looking at the gamut of inconsistencies and infirmities in the projections of department vis a vis laptop found from Mr. Bhutani, therefore, could not be a reason sufficient to endorse that the accounts maintained by the assessee are unreliable or they were not verifiable. Consequently assesses ground in this behalf deserve to be allowed. On these facts the ITAT Jaipur in similar group cases have already decided these issues in favor of the assessee, which we respectfully follow. 42. Adverting to the issue of reference u/s 142A by the ADIT to DVO, the relevant provisions have been mentioned above. It is clear that this Section empowers only the Assessing Officer as authorized officer to make reference to the DVO u/s 142A of the Act. This Section does not use any term like ADIT being an authorized officer. Further it has not been disputed that what has been referred to for valuation of stock in trade of the assessee and not any investment referred u/s 69A or 69B; buillion, jewellery or any other valuable article referred to in Section 69A or 69B; is not a property referred u/s 56(2) of the Act.....