TaxTMI 
TaxTMI 
2015 (4) TMI 1361
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....nbsp;''1. On the facts and in the circumstances of 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. C....
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.... on Recognition of Revenue by Real Estate Developers issued by the ICAI, New Delhi in Nov. 2011 which would be applicable on 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 ci....
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....ing the course of search assessments proceedings various issues were raised. Apropos the method of accounting - It was submitted by the assessees that they has been following mercantile system 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 ....
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....and consequent additions in both the case. Department has challenged holding of initial two years of projects below 25% of completion as accruing no income in changed WIP method and allowance of deduction u/s 80IB 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 af....
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....isions of section 145(3) of the Act as they failed to depict the complete picture of accounts and moreover do not follow the method of accounting standard as specified under section 145(2) of the Act. The Assessing Officer 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)....
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....arged to this account. The books of account stood seized as a result of search on assessee-appellant and the same were available with the Assessing Officer. The assessee had also produced requisite vouchers and other documents as were demanded by the Assessing 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....
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.... 12.9. There is also a feeble observation in the orders of the authorities below for rejecting the accounts that in the trade of real estates 'notorious trade practices' are prevailing. The Ld. Counsel for the assessee has placed reliance on the judgment by Hon'ble Apex Court in the case of Lalchand 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 Accountin....
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....-7. AS-7 issued by the Institute of Chartered Accountants of India, recognizes the position that in the case of construction contracts the assessee can follow either the project completion method or the Percentage completion method. The judgment by Hon'ble Delhi High Court in the case of CIT vs. Manish Buildwell (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 jurisdict....
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....be discarded only if, in the opinion of the taxing authorities, income of the trade cannot be properly deduced therefrom. Valuation of stock at cost is one of the recognized methods." 12.13. The Apex Court in the case of United Commercial Bank vs. CIT 1999 240 ITR 355 (SC) after considering the judgement in the case of British Paints India 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 discl....
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....12.14. The Hon'ble Andhra Pradesh High Court in the case of CIT vs. Margadarshi Chit Funds (P) Ltd., 155 ITR 442 (AP) did not find any justification in the entertainment of the view by the Assessing Officer that there could be a better system of accounting. This is no reason to the application of the provisions of section 145 of the Act. The relevant passage as 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 ....
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....proportion that costs incurred to date bears to the estimated total costs of contract. The Apex Court again in the case of CIT vs. Hyundai Heavy Industries Co. Ltd., 291 ITR 482 (SC) took the similar view and held at page 495 as under :- "Lastly, there is a concept in accounts which called the concept of contract accounts. Under that concept, two methods exist for ascertaining profit for contracts, namely, "completed 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....
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....ompletion Method on irrelevant considerations. We are, therefore, satisfied that provisions of section 145(3) are not attracted in this case. The Ld. CIT (A), is found to have erred in upholding the decision of Ld. Assessing Authority to invoke section 145(3) of the Act and making assessment in the manner provided under section 144 of the Act. We, therefore, set aside the decision in this regard and allow ground nos. 2 & 3 raised in appeal by the assessee 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 B....
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....asons and respectively following our decision for assessment year 2003-04, allow assessee's ground Nos. 2 & 3 in all these years in appeal whereas Revenue's grounds in appeal for assessment years 2004-05 to 06-07 and 09-10 become infructuous and stand rejected. Charting of interest under section 234B being mandatory and consequential, the assessing authority shall re-compute the same accordingly. 16. In the result, all the appeals by assessee stand partly allowed and that by 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 ....
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....e qualitative-cumquantitative stock register, therefore, valuation of closing stock was not possible as required under Accounting Standard - 2 (AS-2). ii. That, some vouchers relating to payment of direct expenses could not be verified. iii. That, during the course of search certain incriminating documents were found which contained noting of cash out of books by the members of Unique Group on the basis of which the members of the unique group had surrendered income. 2.5 Ld. AO gave these findings without appreciating the copious explanation and submissions 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 assess....
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.... support of these submissions, reliance is placed on the following case laws:- a) Das's Friends Buliders (P) Ltd. Vs. DCIT (2004) 88 TTJ (Agra) 651: that it was settled law that the books of accounts could be rejected on cogent reasons. The addition to trading results could be made only when the proviso to section 145(1) and provisions of section 145(3) are invoked. The only reasoning for invoking section 145(3) appearing to be non- maintenance of separate issue of stock register is not so grave to warrant rejection of books of accounts. b) Income Tax officer Vs Prakash Chand 2006 (100) TTJ(Jd) 639: that when the 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 s....
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....milar view was taken in the case of Pushpanjali Dyeing & Printing Mills Pvt. Ltd. Vs. J.C.I.T [72 TTJ 886 (Ahd)]. d) The Hon'ble Allahabad high Court held in the case of CIT vs. Mascot (India) Tools & Forgings (P) Ltd. (2010) 36 DTR 336 that in the absence of any specific instances of mistakes in the books of account and other records, the book result cannot be rejected on the basis of any hypothetical calculations based on erroneous presumptions. 20 It is submitted that the Ld. AO as well as Ld. CIT(A) erred in rejecting the books of account in leveling baseless allegations and unfounded observations. The rejection of books of account is based purely on the basis 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 ....
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....t only to specific provisions contained in the relevant statute conferring the power to make rule or regulation, but also to the object and purpose of the Act as can be gathered from the various provisions of the enactment. It would be wholly wrong for the court to substitute its own opinion as to what particular principle or policy would serve the objects and purposes of the Act; nor is it open to the court to sit in judgment over the wisdom, the effectiveness or otherwise of the policy, so as to declare a regulation to be ultra vires merely on the ground that, in the view of the court, the impugned provision will not help to carry through the object and purposes of the Act. c. 187 Taxman 242 CIT Vs. Rockman Cycle 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 ra....
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.... 601/240 ITR 355 (SC) it was held that: (1) for valuing the closing stock, it is open to the assessee to value it at cost or market value, whichever is lower, (2) in the balance sheet even if the securities and shares are valued at cost, from that no firm conclusion can be drawn; a taxpayers is free to employ for the purpose of his trade his own method of keeping accounts and, for that purpose, to value stock-in-trade either at cost or market price; (3) a method of accounting adopted by the taxpayers consistently and regularly cannot be discarded by the departmental authorities on the view that he should have adopted a different method of keeping accounts or of valuation; (4) whether the income has really accrued or arisen to the assessee must be judged in the light of the 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 accord....
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....reement for sales. Accordingly, the point of time at which all significant risks and rewards of ownership can be considered as transferred is required to be determined on the basis of the terms and conditions of the agreement for sale. ..." Thus, it can be seen that the Guidance note itself mentions that the point of time when all risks and rewards are transferred is required to be determined in accordance with the terms and conditions of the advance booking agreement for sale. Clause 4 of Agreement to Sale made by assessee is reproduced as under 4. Nothing contained in these presents shall be construed to confer upon the Purchaser any right, title or interest of any kind whatsoever in, to or over the said premises or common areas or common amenities. Such conferment shall take place only upon the execution of sale deed 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 ....
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....d on seized paper "A2 Page 51" which have been seized from the possession of a third person namely one "Shri Naveen Bhutani". Along with the search on the members of unique group on 28.01.2009, a search u/s 132 was simultaneously conducted at the residential premises of one 'Shri Naveen Bhutani', an ex-employee of the assessee. In terms of the panchnama drawn during the course of search at the said premises of Shri Naveen Bhutani, total 3 exhibits were found and seized which includes the following: a. Annexure A-1 : containing 9 loose papers, b. Annexure A-2 : being 2 computer CDs containing data downloaded from Laptop Soni Vio and Pen Drive of Shri Naveen Bhutani and; c. Annexure A-3 : containing data unloaded from Laptop HP Pavilion 2046 of Shri Gurusharan. 24. During the course of assessment proceedings, Ld. AO vide letter No. 48 supplied the photocopies 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 p....
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.... Bhutani were taken. Further in the statements recorded of Shri Naveen Bhutani on 28.01.2009, a question was asked to explain the nature of the data available in the said laptops, the relevant question No. 20 and answer thereof are reproduced herein below for ready reference: From the perusal of the answer, your goodself would observe that out of two laptops found, one was related to the person searched i.e. Shri Naveen Bhutani and the other one was related to Shri Gurusharan Sahni. Shri Naveen Bhutani further stated that the data available in the said laptops contained their personal information besides the information related to the sales and presentation of the projects of Unique Dream Builders and no specific information whatsoever was asked nor has been pointed out during the course of search. In your letter dated 22.09.2010, copies of two pages bearing No. A-2/108 and other pages having no number, 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, th....
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....alization at Rs. 10,50,00,000/- which is purely a hypothetical figure based on no actual basis. In the case of project Unique Sanghi Apartments, in one page the developer share has been mentioned at 56% as against the actual share of 54% based on the builder developer agreement already submitted before your goodself. Further the total receipts and the profits projected has been worked out on the basis of the total area constructed without being considering the fact that the assessee's share in the said project was only to the extent of 54% and the cost as incurred and recorded in the books of accounts based on the respective bills and vouchers has not been considered at all. Further the average sale rate has been mentioned at Rs. 1500/- sq. ft. in one page and in another page it is mentioned at Rs. 1800/- sq. ft. as against the actual yearly average rate of more than Rs. 2000/- per sq. ft. as recorded by the assessee in his books of accounts. It is 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 there....
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....lled income". It is thus submitted that the papers as referred by your goodself are mere rough working, thus no adverse inference on the basis of the papers is called for. Reliance is also placed on the following case laws: 1. 225 ITR 746 Godhara Electricity Co. Vs. CIT (SC) Income tax is a levy on income. No doubt, the Income Tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income, which does not materialize. 2. 170 Taxman 238 CIT Vs. Federal Bank Ltd. [2008] (Ker.) That only real income is assessable under the Act. 3. 207 ITR 364 CIT V/s S.M.S. Investment Corporation (P) Ltd. (Raj.) Calculation on a slip of paper could not be treated as the income of the assessee. 4. 39 ITD 183 Ashwani Kumar V/s ITO (Del.) Where the document found during the course of search did not indicate whether figures mentioned therein refer to quantities of money....
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....the DLC rates which fully commensurate and confirm the working presented by the assessee before the department. The example given above is not only a solitary case but would also match with other assertions in the above stated incriminating papers wherein if the second paper is referred the profit worked out in C-2 Plaza (commercial) is 3,55,55,00,000/- i.e. Three hundred fifty five crores and fifty five lacs on a constructed area of 11000 sq. ft. It may also be noticed that the figure of 3,55,55,00,000/- is only a profit figure and what may have possibly be the sale price should go into few thousand crores. Taking the other example on the same page in the Unique Sanghi Apartment project, a profit of Rs. 32,76,00,000/- has been worked out at a net realization figure of Rs. 7,10,00,000/- as against these projections the assessee has worked out and have offered the realistic incurrence of expenditure with entire details supported by vouchers coupled with the sale consideration arrived at from actual purchasers whose names and addresses are also available in the seized record in the same search. Further, both the papers as referred to in your above stated le....
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....809 7,10,00,000 30,89,80,011 4,84,90,00,000 41,52,96,226 Profit in Rs. 5,91,72,000 23,40,650 32,76,00,000 3,36,80,930 `,00,000 2,83,10,185 From the perusal of the aforesaid table your goodself would observe that the figures as found noted on the papers are not at all matching with the real figures as neither the land area nor the constructed area, the cost of construction, the sale price mentioned are not matching nor they are correct and actual figures as the same are fanciful and vague figures noted for the purpose best known to the person making the same as till date the department is not in a position to bring on record the person, who admitted the said papers prepared by whom and contained the entries based on the actual state of affai Rs. Your kind attention is invited to the events tabulated below which relates to the entirety of the incriminating papers stated to be related to the assessee M/s UDB group. Important status of the incriminating papers under question: Incriminating paper Whether signed by anybody from the assessee's side Whether signed by anybody from the department Seized from the person Vers....
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....VO reports are matching 95.7 to 100% with that of the figures recorded in the books of accounts of the assessee and offered / tendered for verification from time to time wherein no mistake as so far being pointed out. Though they may not be any statutory provision in the act that the assessee could force the department to purchase any property however, to relieve the pain in our heart we offer the entire property to the department on a valuation substantially lower than the values stated in these pape Rs. It will also not be out of place to mention that making such projections is nothing and unusual exercise and the error of few digits is also nothing uncommon, thus any reliance on such papers would be nothing but an overstretching of the things at the end of the department which is not legal. Although we are mindful that the assessments in hand are subject to the time barring limitations yet for any such limitation or other thing the justice cannot be murdered thus the service of show cause notice on every pointed issue and the cross examination is not only a legal right granted to the assessee by the Income Tax Act, 1961 and the constitution of India but it is also incum....
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.... was confined to total bed-rest under medical advice, this is mentioned in the statements recorded on 16.03.2009. 2) He was not in a position to move and on 16.03.2009, the ADIT namely Shri Jai Singh along with few other persons, visited his house carrying a bunch of papers and his statement was also recorded on 16.03.2009. 3) As per Shri Naveen Bhutani, the ADIT had brought a bunch of loose papers stating that these are the printouts taken from the CDs written during the course of search from the data contained in his laptop, however, no printout whatsoever was taken either in front of Shri Naveen Bhutani and he was never allowed to verify whether the data available in the CD is the same, thus the veracity of these papers is highly doubtful and questionable, they can't be relied against assessee as an evidence. 4) The books of accounts are fully reliable and cost of construction incurred ia supported by authentic third party bills and vouchers which have not been questioned. No independent enquiries were made to cross verify the genuineness of expenditure similarly none of the buyers were questioned about payment of any on money. Thus the entire exercise....
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....ecords seized from another person and statement made by such person without confronting assessment therewith and without conclusive supporting evidence to prove said transactions had to be deleted - Held, yes - Whether addition for alleged payment for acquiring tenancy right in metrocity without conclusive evidence of assessee having made such payment in face of denial by recipient of said sum, had to be deleted, Held, yes. 12) 211-ITR-178 CIT Vs. R.Y. Durlabhji (Raj.) [Page 189]- In Dhakeswari Cotton Mills Ltd. V. CIT (1954) 26 ITR 775 (SC), Omar Salay Mohamed Sait V. CIT (1959) 37 ITR 151 (SC) and Lalchand Bhagat Ambica Ram V. CIT (1959) 37 ITR 288 (SC), it has clearly been held by the apex court that there must be something more than mere suspicion in support of an assessment and mere suspicion cannot take the place of proof for the purpose of passing an order of assessment. 13). 99 ITD 183 Bansal Strips (P) Ltd. Vs. Asstt. CIT (Delhi) - There was force in the contention of the assessee that there was no provision of law under which the impugned addition could be made to the income declared by the assessee. It is trite law that if an income not admitted by an a....
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....arch and seizure - Presumption that goods seized belong to assessee - Scope of - Income from undisclosed sources - Seizure of primary gold and gold ornaments by customs authority - CEGAT finding assessee not owner of gold and released gold from confiscation - Assessing authority failing to establish ownership - Presumption of ownership cannot be drawn on possession - Necessity of nexus between conclusion and primary facts - Value of gold not taxable in hands of assessee. 17.) 308 ITR 230 CIT Vs. D.K. Gupta (Delhi) - Search and seizure - Presumption about notings and jottings in documents seized - Explanation by assessee alongwith documents, evidence and affidavit - Burden toprove assessee wrong on department - Finding of fact by Tribunal that no evidence to presume notings materialized into transactions - Assessee liable to tax only on receipts proved to be income of assessee - Income Tax Act, 1961, s. 132(4A). 18.) 287 ITR 209, 221 (SC) P.R. Metrani Vs. CIT - The presumption under sub-section (4A) would not be available for the purpose of framing a regular assessment. There is nothing either in section 132 or any other provision of the Act to indicate that the pr....
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....ection 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B [or fair market value of any property referred to in sub-section (2) of section 56] is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him. (2) The Valuation Officer to whom a reference is made under sub-section (1) shall, for the purposes of dealing with such reference, have all the powers that he has under section 38A of the Wealth-tax Act, 1957 (27 of 1957). (3) On receipt of the report from the Valuation Officer, the Assessing Officer may, after giving the assessee an opportunity of being heard, take into account such report in making such assessment or reassessment: Provided that nothing contained in this section shall apply in respect of an assessment made on or before the 30th day of September, 2004, and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153A. Explanation.- In this section, "Valu....
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....ter the reopening of the assessment. A reference to the Departmental Valuation Officer can be made only when a requirement is felt by the Assessing Officer for making such reference. The requirement would arise or could be felt only when there is some material with the Assessing Officer to show that whatever estimate the assessee had shown is not correct or not reliable. The use of the word "require" is not superfluous but signifies a definite meaning whereby some preliminary formation of mind by the Assessing Officer is necessary which requires him to make a reference to the Departmental Valuation Officer under section 142A of the Act. Therefore, it is apparent that a reference to the valuation cell under section 142A of the Act can be made during the course of assessment and reassessment and not for the purpose of initiating reassessment. These judgments were followed in the case of Gopi Apartments Vs. ACIT reported in [2010] 132 TTJ 249, by the Tribunal by observing as under: Income form undisclosed sources - Addition u/s 69 - Reference to Valuation Officer u/s 142A - Reference to valuation cell u/s 142A can be made only when the proceedings of assessment or reassess....
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....j) 209, holding as under: Common thread which runs through all these three provisions is that the assessee has made certain investments or expenditure or is found to be the owner of any billion, jewellery etc. and the same are not recorded in the books of account. The Valuer's report under section 142A of the Act is for the purpose of estimating value of such investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B of the Act. Unless, therefore, there is prima facie application of sections 69, 69A and 69B of the Act, reference to the valuer is simply not permissible. It is only when there is some material before the Assessing Officer to hold that in case of an assessee falls under sections 69, 69A and 69B as the case may be, that he can, to estimate the value of such unexplained investment or expenditure in bullion, jewellery etc., call for the report of the Valuer. Initial starting point for triggering a reference to the Valuer, therefore, has to be invocation of sections 69,69A or 69B of the Act. It is only when any of these provisions come into play that the As....
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....k the same becomes opening stock of the next assessment yea Rs. Further the ld. DVO erroneously adopted CPWD Rates against the prescribed State PWD which are reliable for valuation as held by the ITAT, Jaipur and also by the Jurisdictional High Court. This correction of 5.5% would bring the difference to NIL calling for no addition at all. The valuation as done by DVO in original report and in modified report and cost of construction disclosed by the assessee is tabulated as under:- (Amount in Rs. ) A.Y. Cost declared by assessee Valuation as per original report Valuation as per revised report Difference between declared cost and modified report 2007-08 6,35,83,428 8,16,82,723 6,71,34,855 35,51,427 (5.5%) 2008-09 9,56,41,365 12,28,88,108 10,09,75,758 53,34,393 (5.5%) 2009-10 4,39,16,411 5,62,59,402 4,63,62,779 24,46,368 (5.5%) The Ld. AO by considering the modified report made the addition of the difference between the cost declared by assessee and determined by DVO. It can be seen that the difference between the cost declared by assessee and the cost estimated in the revised valuation report is merely is on....
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....T 26 Tax World 288 (ITAT, Jaipur Bench) 196 Taxman 415 CIT Vs. Mahesh Kumar (Delhi) - Assessment year 2004-05 - Assessee had purchased two plots for Rs. 2 lacs and Rs. 3 lacs, respectively - A search operation was conducted on assessee's premises - No incriminating document or material was found or seized during search operation in respect of aforesaid two plots purchased by assessee - However, Assessing Officer referred those two plots for valuation under section 142A - On basis of valuation report submitted by DVO, Assessing Officer made certain addition to assessee's income - On appeal, Commissioner (Appeals) deleted a part of that addition - On second appeal, Tribunal finding that instances of sale taken into account by Valuation Officer were not comparable as they were situated for away from location of plots purchased by assessee, deleted entire addition - Whether primary burden of proof regarding under-statement or concealment of income is on revenue and it is only when such a burden is discharged that it would be permissible to rely upon valuation given by DVO - Held, yes - Whether since, in instant case, no evidence, much less incriminating evidence, was found as ....
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....sks and rewards of ownership are transferred at the time of advance booking agreement of sale is executed. It is pleaded that on execution of agreement to sale, handing over of allotment letter and payment of booking amount and/or installments the constructive ownership in the property in flat stands transferred to buyer. It is contended that constructive transfer of ownership has been held to be liable for capital gains by Hon'ble Supreme Court in the cases of Poddar Cement 226 ITR 625 and Mysore Minerals 239 ITR 775. Thus CIT(A) was right in holding that booking of flat with above documentation amounted to transfer of property. c. Ld. CIT(A) was right in observing that the decisions relied upon by the assessee were not applicable since they pertain to the period prior to the issuance of the guidance note. That, income needs to be determined on the basis of percentage of completion method in the manner explained in AS-7-Construction Contract. Besides 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. Besides in case of other firms of asses....
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....que group. With these observations and findings it is futile on the part of revenue to make out an unfounded case of recovery of any incriminating information qua the assesses. Thus the department relying on a third party statement, without affording cross examination has resorted to an estimate which is fantastic and bereft of any support. The arbitrariness and capriciousness of the estimate is writ large on the observations of authorities below and profoundly dispelled by the ITAT in above order. b. Guidance notes of the ICAI cannot override the statutory provisions; therefore, there is no merit in the department's reliance on case laws cited by assessee being prior to them. c. Apropos transfer in property on booking of flats it is contended that the edifice of department's logic is grossly contrary to settled legal position. Any documentation without transfer of possession to buyer cannot amount to transfer of property. The cases of Mysore Mineral and P{Odar Cement holds the facts of transfer of possession to be amounting to constructive possession. Thus under no circumstances income can be held to accrue merely at the time of booking of flat or receipt of mere....
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....adjudicate the issue if a claim is made by any party subject to satisfaction of prescribed rules, hence, even the Hon'ble Apex Court has not barred the assessee raise it's legal claim before Appellate authorities...." 2. In the case of CIT v. Jai Parabolic Springs Ltd. (2008) 306 ITR 42 (Delhi) the AO disallowed the claim of the assessee on the ground that "since the claim for the deferred revenue expenditure of Rs. 15,58,500/- was not claimed by the assessee in the return of income for the assessment year 1990-91, the same is not allowed". Their Lordships after considering the decision of the Hon'ble Apex Court in the case of Goetze (India) Ltd. has held (Head note) "Held, dismissing the appeal, that there was no prohibition on the powers of the Tribunal to entertain an additional ground which according to the Tribunal arose in the matter and for the just decision of the case. There was no infirmity in the order of the Tribunal". 3. In Kisan Discretionary Family Trust reported in 113 TTJ 918 (Ahd) it has been held that the assessee returning certain interest in the revised return on accrual basis is not precluded from claiming the same....
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....ct return and making eligible claims. 8. In the case of Essar Oil Ltd. (ITA No. 3661 & 2827/M/2000) the Tribunal after considering various CBDT Circulars and the decision of the Hon'ble Apex Court in the case of NTPC Ltd. (229 ITR 303); UCO Bank (237 ITR 889) and in the case of Shelly Products and Anr. (261 ITR 367) and various decisions and Circulars have held as under: - "Having regard to these decisions, in our view the order of the CIT(A) cannot be found fault with. The learned Departmental Representative to the query from the Bench has fairly admitted that there is nothing in Goetze (India) Ltd., which prevents the Tribunal from entertaining any fresh claim if the same can be entertained in the light of the available material on the face of the record. Anything to the contrary of the proposition will only negate the principle laid down by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra). We therefore confirm his order. It may be mentioned that we have taken this view after considering the fact that in all other years the department has accepted these expenses and allowed deduction as claimed by the assessee" 9. In the ....
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....pellate Tribunal - Duty of Tribunal - To prevent miscarriage of justice and correct grave and palpable errors- Duty to grant relief even when there is no plea in that regard 142 ITR 13 (MP) CIT Vs. K.N. Oil Industries - Held, on the facts of the case, that if it apparent from record that the assessee was entitled to relief admissible under sec. 35B, that relief can be granted to him by an order under s. 154 by rectifying the assessment even though relief under that section had not been claimed by the assessee in the original assessment proceedings. 301 ITR 304 (2008) CIT V/s Jindal Drilling & Industries Ltd (Delhi) - Assessment--Order on revision directing Assessing Officer to re-compute income--Claim of assessee for deduction--Assessing Officer holding deduction allowable in earlier year--Assessing Officer while re-computing income must consider claim in earlier year--Income-tax Act, 1961, s. 263. 234 ITR 541(1998) CIT V/s Geo Industries And Inseticides (I) P. Ltd. (Guj.) - Revision--Powers of Commissioner--Commissioner of Income-tax setting aside assessment order and directing ITO to make fresh assessment--Power of ITO to make assessment not confined or....
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....t the landowners and the assessee undertaking are two different entities does not make any difference - Though the assesee was obviously a contractor, it does not derogate it from being a developer as well - Term 'contractor' is not contradictory to the term 'developer' - Assessee is not working on remuneration for the landowners but is working for itself in order to exploit the potential of its business in its own interest - Deduction u/s 80IB is allowable to an undertaking developing and building housing project, whether it is developed by it as a contractor or as an owner - Thus is evident from sub-ss. (1) and (2) and also sub-s. (12) of s. 80IB - Even otherwise, assessee can also be said to be the owner of the land as it has made part payment to the landowners and taken possession of the land for development and building the housing project - Once the assessee has taken possession of the immovable property or retained it in part performance of a contract of a nature referred to in s. 53A of Transfer of Property Act, 1882, it amounts to transfer u/s 2(47)(v) - There is definitely a dominion of the assessee developer over the land to the exclusion of others inasmuch as possession....
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....valuation of stock in trade of assessee's business cannot be made u/s 142A. d. Whether on merits DVO's valuation report cannot be relied on as it suffers from various inconsistencies like - arbitrary adoption of CPWD rates instead of PWD rates, low rebate for self-supervision and self and bulk material procurement. Besides there is marginal 5.5% variation in the estimated valuation and cost of construction recorded in the books of accounts. 37. Revenues grounds pose consequential issues i.e. whether: (a) Ld. CIT(A) was right in holding that in initial years when less than 25% construction is done no revenue is generated at early construction stage and no income can be estimated in these yea Rs. This ground in real terms is practically revenue as when project goes beyond 25% the WIP will be taxable in that year, therefore, it is more academic in nature. (b) Ld. CIT(A) should not have allowed claim of deduction of income u/s 80IB as no such claim was made in the return as it brings the income of the assessee to NIL. 38. As already mentioned the main issues in question have already been considered by us and earlier bench the appeals of other group enti....
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.... 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 assesses conform to the commercially accepted accounting standards which enable determination of correct profits of assessee's business as done in past yea Rs. The findings reached by the lower authorities with respect to the deficiencies as pointed out for rejection of books as well, valuation of inventory, change of method of accounting to % Completion Method are neither factually correct nor grave enough to sustain them. Reliance placed on Pandit Brothers vs. CIT (supra) supports assessee's proposition that merely because stock register is not maintained, it cannot be said that the accounts book must be false. More so in these cases are adopting Project Completion Method and profits were ascertainable only at the completion of the respective project. Besides it had eligibility for deduction of all its project profits u/s 80IB. In these circumstances we are unable to infer that any valid and persuasive reasons existed for assesses to falsify their books of accounts. This exercise has no benefits rather it puts them i....
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....osition that the appellant were regularly following project completion method from year to year and the assessments prior to the date of search were also framed by accepting project completion method. As per ICAI guide lines real estate developer has an option to choose from Project Completion method or the Percentage Completion method as both are recognized methods for revenue recognition in such cases. Once the option is exercised by asssessee, it is not open to the Assessing Officer to substitute his own opinion to change the method of accounting because mid way it is found that other method of accounting better suits the revenue. It is the accounting principle, consistent following of method and its earlier adoption which decides the issue and not the suitability or revenue. 40. We have already mentioned that in any case assesssee's are eligible for deduction u/s 80IB against their income, in this eventuality, take this method or that, the result is NIL taxable profits after deduction. Thus in these cases the substitution of method to % Completion Method is based on surmises, unwarranted facts, irrelevant considerations and a fruitless exercise. Except making some academic a....
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....e assessee's as "Project Completion Method. The other judicial precedents cited by the assessee mentioned in ITAT orders as well as written submissions support our view. 41. Apropos Annexure A-2/51 as well as the statement of Shri Naveen Bhutani recorded on 28.01.2009 under section 132(4) of the Act regarding a print out taken from his laptop; he stated that it was in relation to Unique Dream Builders only and not the assessee entities. This person was not produced for cross examination by the appellants and AO himself admits that the print out inventorized as seized Annexure A-2/51 revealing net realization of Rs. 17.91 crores and a profit of Rs. 5.17 crores reflects only the estimates. The said document does not reveal the actual state of affairs of the projects done by the assessees. No corroborative evidence has been found as a result of search on him or from either side of separated group to support that figures written therein for the area constructed, sold or transferred nor about the net realization or profits earned in any such projects. The said excel sheet data was prepared for marketing of Unique Builder's projects products and could not be taken as a relevant and re....
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....dgements cited before us support the contentions of the assessee. Thus DVO reference is held to be invalid. We also find merit in the contention of the assessee that DVO ought to have applied the PWD rates in place of CPWD rates. Besides 2.5% rebate on account of self supervision and self bulk procurement of material is too meager. In our view this rebate ought to have been to at least to the scale of 5% as the assessees are the professional builders having their own engineering staff. Going by DVO valuation, the difference of valuation comes to 5.5% which amounts to nominal difference when viewed from the angle that its comparisons of two estimates which basically are two opinions. If the PWD rates are applied alongwith 5% rebate as mentioned above then it will leave no scope for any diferrence or addition on account of valuation report. Thus DVO's reference is bad in law being void ab initio besides it has no merit. Consequently, any addition in respect of valuation cannot be made under the assessee's case. 43. Apropos revenue appeal we have already upheld that Project Completion Method adopted by the assessee being proper; books of accounts have been upheld, Projections o....
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