Shri Gordhan Becharbhai Patel, Ahmedabad V. The ACIT.,Circle-12, Ahmedabad

CO 192/AHD/2010

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1368 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 2 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 19-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Fair market value; Corroborative evidences

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD - , , BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ I.T.A. NO.2176/AHD/2010 ( / ASSESSMENT YEAR : 2007-08) THE ASST.CIT CIRCLE-12 AHMEDABAD / VS. SHRI GORDHAN BECHARBHAI PATEL C/O.UNNATI INDUSTRIAL ESTATE D-61, DIAMOND PARK, GIDC NARODA, AHMEDABAD $ ./ ./ PAN/GIR NO. : AGUPP 9959 P ( $' / APPELLANT ) .. ( ()$' / RESPONDENT ) AND C.O. NO.192/AHD/2010 FOR A.Y. 2007-08 (IN ITA NO.2176/AHD/2010 FOR AY 2007-08) GORDHAN BECHARBHAI PATEL .. THE ACIT NARODA, AHMEDABAD CIRCLE-12, AHM EDABAD (CROSS OBJECTOR) VS. (RESPONDEN T) REVENUE B Y : SHRI ALBINUS TIRKEY, SR.DR ASSESSEE BY : SHRI S.N. DIVATIA, AR *+ , - / DATE OF HEARING 03/09/2015 ./ , - / DATE OF PRONOUNCEMENT 09/10/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD.C OMMISSIONER OF ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 2 - INCOME TAX(APPEALS)-XX, AHMEDABAD (CIT(A) IN SHORT) DATED 15/03/2010 PERTAINING TO ASSESSMENT YEAR (AY) 2007- 08. THE APPEAL AND THE CROSS OBJECTION ARE TAKEN UP TOGETHER AND A RE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE. 2. FIRST, WE TAKE UP THE APPEAL FILED BY THE REVENU E, I.E. ITA NO.2176/AHD/2010. THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL:- 1. THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW A ND ON FACTS IN DELETING THE ADDITION OF RS.3,19,859/- MADE BY THE AO U/S. 4 0A(2)(B) OF THE I.T. ACT, 1961, WITHOUT PROPERLY APPRECIATING THE FACTS OF TH E CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 1.2 IN DOING SO, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT, IN VIEW OF THE SPECIFIC INSTANCE S POINTED OUT BY THE AO IN THE ASSESSMENT ORDER, THE INTEREST PAID BY THE ASSESSEE @ 15% TO FOUR RELATED PERSONS WAS EXCESSIVE. 2. THE LD.CLT(A)-XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.4,92,000/- MADE BY THE AO ON ACC OUNT OF UNDER VALUATION OF THE CLOSING STOCK, WITHOUT PROPERLY APPRECIATING TH E FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 2.2 IN DOING SO, THE .LD. CIT(A) HAS ERRE D IN LAW AND ON FACTS IN NOT APPRECIATING THAT DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSEE FAILED TO SUBSTANTIATE THE VALUATION OF THE CLOSI NG STOCK WITH SUPPORTING EVIDENCES AND THE ID. C1T(A) HAS BASED HIS DECISION ON NEW EVIDENCES WHICH WERE NOT FURNISHED BEFORE THE AO. 3. THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.61,33,566/- MADE BY THE AO ON ACCOUNT OF PROFIT ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 3 - FROM SURYARATH SCHEME, WITHOUT PROPERTY APPRECIATIN G THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 3.2 IN DOING SO, THE LD. C1T(A) HAS ERRED IN LA W AND ON FACTS IN NOT APPRECIATING THAT AS PER THE AGREEMENT, M/S. MANIAR DEVELOPERS HAD EXERCISED FULL SUPERVISORY AND FINANCIAL CONTROL AS FAR AS TH E DEVELOPMENT AND CONSTRUCTION OF SURYARATH BUNGALOWS SCHEME WAS CONC ERNED AND THEREFORE THE AO HAD RIGHTLY HELD THAT M/S. MANIAR DEVELOPERS WAS NOT ONLY A CONTRACTOR BUT WAS THE DEVELOPER OF THE SCHEME AND WHATEVER PR OFIT HAD BEEN EARNED IN THE SAID SCHEME WAS THE PROFIT M/S. MANIAR DEVELOP ERS AND NOT THE PROFIT OF THE SAID COOPERATIVE HOUSING SOCIETY. 4. THE LD. C1T(A)-XX, AHMEDABAD HAS ERRED IN L AW AND ON FACTS IN DELETING THE ADDITION OF RS.12,15,933/- MADE BY THE AO AS PE R HIS ALTERNATIVE CONTENTION THAT M/S. MANIAR DEVELOPERS WAS ENTITLED TO 10% OF THE TOTAL RECEIPTS FROM SURYARATH SCHEME AS DEVELOPMENT CHARGES, WITHOUT P ROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECOR D BY THE AO. 4.2 IN DOING SO, THE LD. C!T(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE TERMS OF THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE ASSESSEE WITH SURYARATH BUNGALOWS CO-OPERATIVE HOUS ING SOCIETY. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 6. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) BESET ASIDE AND THAT OF A.O. BE RESTORED TO THE ABOVE EXTENT. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 30/11/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 4 - DISALLOWANCE OF INTEREST OF RS.3,19,859/- BEING EXC ESSIVE IN TERMS OF SECTION 40A(2)(B) OF THE ACT AND MADE ADDITION OF R S.4,92,000/- IN RESPECT OF UNDERVALUATION OF CLOSING STOCK. THE AO ALSO MADE ADDITION OF RS.61,33,566/- ON ACCOUNT THE PROFIT FROM SURYAR ATH SCHEME. AGAINST THE SAID ASSESSMENT ORDER, ASSESSEE PREFERR ED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE PARTLY ALLOWED THE APPEAL. WHILE ALLOWING THE ASSE SSEES APPEAL, THE LD.CIT(A) DELETED THE ADDITION(S) OF RS.3,19,859/-, RS.4,92,000/- AND RS.61,33,566/-. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 3. GROUND NOS.1 & 1.2 ARE INTER-CONNECTED AND, THER EFORE, THE SAME ARE DECIDED TOGETHER. THE LD.SR.DR SUBMITTED THAT HE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIONS. HE SUBMITTED THAT THE AO HAS GIVEN A FINDING THAT THE ASSESSEE HAD PAID INTEREST TO THE RELATED PARTIES @15% ON THE DEPOSITS, WHEREAS THE ASSESSEE HAD PAID INTERES T TO THE NON-RELATED PARTIES ONLY @12% ON THE DEPOSITS. THEREFORE, THE AO WAS JUSTIFIED IN TREATING AT 3% AS EXCESSIVE. 3.1. ON THE CONTRARY, THE LD.COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION. HE SU BMITTED THAT THE AO FAILED TO APPRECIATE THE FACT THAT FROM THE RELATED PARTIES THE ASSESSEE HAD ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 5 - OBTAINED LONG TERM BASIS AND, ON THE CONTRARY, THE DEPOSITS FROM THE NON- RELATED PARTIES WERE ACCEPTED AS SHORT TERM BASIS. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE LD.CO UNSEL FOR THE ASSESSEE THAT ON SHORT-TERM DEPOSITS, THE ASSESSEE HAD PAID AT A LOWER RATE OF INTEREST. THE LD.CIT(A) DELETED THE ADDITION ON TH E BASIS THAT THE TRIBUNAL HAS ALLOWED THE INTEREST EVEN @18% AND @ 2 4% RESPECTIVELY. WE ARE OF THE VIEW THAT THE AO HAS TO POINT OUT NOT MERELY ON THE BASIS OF INTER SE PAYMENT OF INTEREST, BUT THE PREVALENT MARKET RATE . AS PER PROVISIONS OF SECTION 40A(2)(A) OF THE ACT, THE DIS ALLOWANCE CAN BE MADE WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPE CT OF PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THIS SUB- SECTION, AND THE AO IS OF OPINION THAT SUCH EXPENDI TURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MAD E OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXP ENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE S HALL NOT BE ALLOWED AS A DEDUCTION. IN THE GIVEN CASE, THE AO HAS NO T GIVEN ANY FINDING IN RESPECT OF FAIR MARKET RATE OF INTEREST PAID BY THE ASSESSEE. UNDER THESE FACTS, WE DO NOT SEE ANY REASON TO INTERFERE WITH T HE ORDER OF THE ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 6 - LD.CIT(A), SAME IS HEREBY UPHELD. THUS, GROUND NOS .1 & 1.2 OF REVENUES APPEAL ARE REJECTED. 5. GROUND NOS.2 & 2.2 ARE INTER-CONNECTED AND, THER EFORE THE SAME ARE DECIDED TOGETHER. THE LD.SR.DR SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 5.1. ON THE CONTRARY, THE LD.COUNSEL FOR THE ASSESS EE SUPPORTED THE ORDER OF THE LD.CIT(A) AND SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THERE WAS VAST DIFFERENCE IN VALUATION OF OPENING STOCK A ND CLOSING STOCK OF V- 6 TYPE SB/12-5 WATER PUMP AND V-6 TYPE SB/12-6 WATE R PUMP. THE CONTENTION OF THE ASSESSEE IS THAT THE DIFFERENCE I N THE OPENING AND CLOSING STOCK WAS DUE TO CHANGE IN THE MATERIAL UTI LIZED FOR MANUFACTURING OF THE PUMP AND, THEREFORE, NATURALLY COST OF MANUFACTURE WOULD DECREASE. THE LD.CIT(A) HAS GIVEN A FINDING ON FACT IN PARA-5.2 OF HIS ORDER AS UNDER:- 5.2. I HAVE PERUSED THE RELEVANT MATERIAL PRODUCED BEFORE ME BY THE APPELLANT AS WELL AS HAVE GONE THROUGH ASSESSMENT O RDER PASSED BY THE AO. IT WAS CONTENDED BY THE APPELLANT THAT THE DIFFEREN CE IN THE VALUATION OF SAID TWO ITEMS OF WATER PUMPS WAS MAINLY ON ACCOUNT OF C HANGE IN THE PRODUCT MIX. EARLIER THE APPELLANT USED TO MANUFACTURE SUB MERSIBLE PUMPS WITH ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 7 - IMPELLERS MADE FROM HIGH QUALITY BRONZE METALS WHER EAS IN THIS YEAR, IT HAS SHIFTED TO IMPELLERS AND NECK-RING MADE FROM S.S. T HE PERUSAL OF THE COSTING SHEETS SUBMITTED BY THE APPELLANT BOTH FOR OPENING AND CLOSING STOCK (P.32 TO P.39), THERE IS A VAST DIFFERENCE IN THE VALUE OF N ECK-RING AND IMPELLER INASMUCH AS IT HAS GONE DOWN TO RS.35.10 PS. PER I TEM IN THE CLOSING STOCK AS AGAINST RS.169/- PER UNIT IN THE OPENING STOCK ON A CCOUNT OF CHANGE IN THE PRODUCT MIX. IT IS FURTHER NOTICED FROM THE AFORESA ID COST SHEETS THAT SO FAR AS THE COSTING OF OTHER ITEM INCLUDED IN THE WATER PUM P, THERE IS NOT MUCH VARIATION IN THE VALUE. THE SIGNIFICANT CHANGE IN T HE VALUATION IS IN RESPECT OF NECK-RING AND IMPELLER. EVEN THE PRODUCT LITERATURE SUBMITTED BY THE APPELLANT (P.40 TO 43) ALSO SHOWS THE CHANGE IN THE PRODUCT M IX. IT IS THE CONTENTION OF THE APPELLANT THAT IN THE COMPETITIVE MARKET AND TO SATISFY THE NEEDS OF THE CUSTOMERS, IT HAS TO REDUCE ITS COST BY CHANGING TH E QUALITY OF THE RAW- MATERIAL TO A CHEAPER ONE. I AM ALSO INCLINED TO AC CEPT THE CONTENTION OF THE APPELLANT THAT THE VALUATION OF ITEMS OF STOCK WOUL D NOT BE THE SAME IN BOTH THE YEARS AND THE G.P. RATE IS NOT AN INDICATOR OF THE INCREASE IN COST PRICE BECAUSE IT MAY BE OFFSET BY CORRESPONDING INCREASE IN THE SALE PRICE. THE APPELLANT HAS SUPPORTED THE VALUATION OF STOCK BY S UBMITTING THE XEROX COPIES OF PURCHASE BILLS AS POINTED OUT IN HIS REPLY DATED 27-11-09. EVEN OTHERWISE, THE APPELLANT IS ASSESSED TO TAX AT THE MAXIMUM MAR GINAL RATE YEAR AFTER YEAR AND THE INCREASE IN VALUATION OF CLOSING STOCK WOUL D BE REVENUE NEUTRAL BY CORRESPONDING INCREASE IN THE OPENING STOCK FOR THE NEXT YEAR BY SUCH AMOUNT. THE ASSESSING OFFICER HAS SIMPLY COMPARED THE VALUA TION OF ITEMS IN THE OPENING STOCK AND CLOSING STOCK WITHOUT APPRECIATIN G THE DIFFERENCE IN THE QUALITY OF RAW MATERIAL USED IN THE MANUFACTURE OF SUBMERSIBLE PUMPS WHICH WAS CHANGED FROM GUN METAL TO STAINLESS STEEL. IT S HOWS THAT THE ASSESSING OFFICER HAS NOT TAKEN INTO CONSIDERATION THE FULL F ACTS WITH REGARD TO VALUATION OF STOCK. UNDER THE CIRCUMSTANCES, THE ADDITION OF RS.4,92,000/- MADE BY THE AO TOWARDS UNDER-VALUATION OF TWO ITEMS OF WATER PU MPS IS HEREBY DELETED. THIS GROUND OF APPEAL, THUS STANDS ALLOWED. 6.1. THE ABOVE FINDING ON FACT OF THE LD.CIT(A) IS NOT CONTROVERTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON REC ORD. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER O F THE LD.CIT(A), THE SAME IS HEREBY UPHELD. THUS, GROUND NOS.2 & 2.2 OF REVENUES APPEAL ARE REJECTED. ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 8 - 7. GROUND NOS.3 & 3.2 AND 4 & 4.2 ARE INTER-CONNECT ED AND, THEREFORE, THE SAME ARE DECIDED TOGETHER. THE LD.S R.DR SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A) WA S NOT JUSTIFIED IN DELETING THE ADDITION OF RS.61,33,566/-. HE SUBMIT TED THAT THE AO HAS GIVEN AN ELABORATE FINDING IN THE ASSESSMENT ORDER ON THE ISSUE. 7.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT THE FINDING OF THE AO HAS BEEN DULY CONSIDERED BY THE L D.CIT(A) AND ARRIVED AT THE CONCLUSION THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO HAS MADE THE SAID ADDITION BY O BSERVING AS UNDER:- 4.2 THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED BUT IT IS NOT FOUND ACCEPTABLE. THE ASSESSEE HAS ENTERED INTO DEVELOPMENT AGREEMENT WITH SURYARATH BUNGLOWS CO- OPERATIVE HOUSING SOCIETY LTD. FOR DEVELOPMENT AND CONSTRUCTION OF BUNGLOWS/SHOPS ON THE LAND BELONGING TO SURYARATH BUNGLOWS CO-OP. HOUSING SOCIETY LTD. THE AGREEMENT WAS EXECUTED ON 2/9/2009 BETWEEN SHRI GOR DHANBHAI B. PATEL, PROP OF M/S MANIAR DEVELOPERS AND SHRI DEVANG NATWARLAL PAT EL , CHAIRMAN OF SURYARATH BUNGLOWS CO-OPERATIVE HOUSING SOCIETY LTD. THE AGRE EMENT IS EXECUTED IN GUJARAT. THE- SALIENT FEATURES OF IMPORTANT CLAUSES OF THE D EVELOPMENT AGREEMENT DATED 2/9/2009 ARE AS UNDER : CLAUSE-B -THE SOCIETY DOES NOT INTEND TO DEVELOP THE LAND IN TO THE PLOTS AND THEREFORE THE WORK OF DEVELOPMENT OF THE PLOTS- AND CONSTRUCT ION IS GIVEN TO M/S MANIAR DEVELOPERS. ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 9 - CALUSE-1 - FOR COMPLETION OF THE SCHEME, M/S MANIAR DEVELOPE RS IS GIVEN THE TASK OF RAISING NECESSARY FINANCES, PREPARATION OF PLANS AN D ITS APPROVAL, PLOTTING OF THE LAND AND CONSTRUCTION OF FLAT / UNIT /SHOPS . CLAUSE-4- M/S MANIAR DEVELOPERS WILL INTRODUCE NEW MEMBERS AN D COLLECT LAND FEES, DEVELOPMENT FEES, LEGAL FEES AND ANY OTHER AMOUNT F ROM THE MEMBERS SO INTRODUCED AT ITS DISCRETION AND M/S MANIAR DEVELOPERS WILL NOT T AKE CONSENT OF THE SOCIETY IN THIS REGARD AND WILL NOT BE BOUND BY ANY SUGGESTION OF T HE SOCIETY. CLAUSE-5 - M/S MANIAR DEVELOPER IS ENTITLED TO ALLOT /SALE T HE PLOTS/UNITS TO THE MEMBERS AT THE RATE DECIDED BY M/S MANIAR DEVELOPER . ALL THE FINANCIAL TRANSACTION WITH THE MEMBERS WILL BE CONDUCTED BY M/S MANIAR DE VELOPER AND IT WILL BE ENTITLED TO USE THE MONEY RECEIVED FROM THE MEMBER AS PER IT S WILL AND DISCRETION. SURYARATH BUNGLOWS CO-OP. HOUSING SOCTY. LTD. WILL NOT HAVE A NY SHARE HE MONEY SO RECEIVED FROM THE MEMBERS AND SOCIETY WILL NOT ASK FOR ANY A CCOUNTS OF MONEY SO RECEIVED. CLAUSE -8 - FOR BUILDING CONSTRUCTION, M/S MANIAR DEVELOPERS CAN GIVE CONTRACT OR SUB-CONTRACT TO ANY PERSON OR CONTRACTOR AT ITS DIS CRETION AND ALL THE FINANCIAL TRANSACTIONS WITH CONTRACTOR OR SUB-CONTRACTOR WILL BE DONE BY M/S MANIAR DEVELOPERS. FOR CONSTRUCTION M/S MANIAR DEVELOPERS CAN GIVE THE CONTRACT TO OTHER PERSONS ON LABOUR CONTRACT BASIS OR ON LABOUR WITH MATERIAL BASIS. CLAUSE -9- M/S MANIAR DEVELOPERS IS GIVEN THE AUTHORITY TO MAK E PAYMENTS TO CONTRACTORS, ENGINEERS AND STRUCTURAL ENGINEERS AND M/S MANIAR DEVELOPER WILL DO ALL THE FINANCIAL TRANSACTION WITH THEM. CLAUSE -10- M/S MANIAR DEVELOPERS HAS TO ARRANGE FOR THE FINANC ES FOR THE SCHEME AND IT WILL BE RESPONSIBLE FOR ALL THE FINANCIAL TR ANSACTION OF THE SCHEME. CLAUSE-11- M/S MANIAR DEVELOPERS HAS FULL AUTHORITY TO GIVE PO SSESSION TO THE MEMBERS ON RECEIPT OF FULL PAYMENT FROM THE MEMBERS . CLAUSE-14- M/S MANIAR DEVELOPERS CAN MAKE ADDITION/ALTERATIONS IN THE SCHEME AND CONSTRUCT THE BUILDING AS PER'THE REVISED SCHEME. FROM THE CLAUSES OF THE DEVELOPMENT AGREEMENT IT IS APPARENT THAT M/S MANIAR DEVELOPERS HAS BEEN GIVEN FULL AUTHORITY AND CONTROL REGARDING DEVELOPMENT OF LAND, PLOTTING- ON THE SAID LAND, CONSTRUCTION O F UNITS, INTRODUCING NEW MEMBERS IN THE SCHEME, ARRANGEMENT OF FINANCES FOR CONSTRUCTIO N, AWARDING CONTRACTS/ SUBCONTRACTS FOR CONSTRUCTION TO OTHERS, ALLOTMENT OF UNITS TO THE MEMBERS, RECEIPTS OF MONEY FROM THE MEMBERS, GIVING FINAL POSSESSION TO THE MEMBERS ON FULL PAYMENTS, MAKING ALTERATION/ADDITION IN THE SCHEME, ETC. FURT HER, IT IS AGREED BETWEEN-THE PARTIES THAT ALL THE FINANCIAL TRANSACTIONS WILL BE CARRIED OUT BY M/S MANIAR DEVELOPERS AND SURYARATH BUNGLOWS HOUSING CO-OPERAT IVE SOCIETY LTD WILL NOT ASK FOR ANY ACCOUNTS OF RECEIPTS AND PAYMENTS OF THE SC HEME. THUS, M/S MANIAR DEVELOPERS' 'HAS EXERCISED FULL MANAGERIAL AND FINA NCIAL CONTROL AS FAR AS THE ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 10 - DEVELOPMENT AND CONSTRUCTION OF SURYARATH BUNGLOWS SCHEME IS CONCERNED. M/S MANIAR DEVELOPERS HAS DEVELOPED THE LAND INTO THE P LOTS, TAKEN NECESSARY STATUTORY APPROVALS, ARRANGED FOR FINANCES FOR CONSTRUCTION O F BUNGLOWS, CARRIED OUT CONSTRUCTION WORK OF BUNGLOWS, ALLOTTED BUNGLOWS TO NEW MEMBERS, COLLECTED MONEY FROM THOSE MEMBERS AND HAS MADE PAYMENTS TO THE CON TRACTORS/ SUB-CONTRACTORS/ ENGINEERS, ETC.. M/S MANIAR DEVELOPERS HAS NOT ONLY EXERCISED FULL CONTROL OVER DEVELOPMENT OF THE SCHEME BUT ALSO HAS TAKEN THE RI SK OF ARRANGING FINANCES AND COMPLETION OF THE SCHEME. THUS, M/S MANIAR DEVELOPE RS IS NOT ONLY A CONTRACTOR BUT IT IS THE DEVELOPER OF THE SCHEME. THEREFORE WHAT E VER PROFIT HAS BEEN EARNED IN THE SURYARATH BUNGLOWS SCHEME ARE THE PROFIT OF M/S MAN IAR DEVELOPERS AND NOT THE PROFIT OF SURYARATH BUNGLOWS CO-OPERATIVE SOCIETY L TD. HOWEVER, THE ASSESSEE HAS NOT OFFERED ANY PROFIT EARNED FROM THE SCHEME FOR T AXATION. INSTEAD OF SHOWING PROFIT FROM THE SURYARATH BUNGLOWS SCHEME, THE ASSESSEE HA S SHOWN DEVELOPMENT CHARGES @ 10%. IN THE DEVELOPMENT AGREEMENT, THERE IS NO ME NTION OF PAYING DEVELOPMENT FEES @ 10% TO M/S MANIAR DEVELOPERS BY SURYARATH BU NGLOWS CO-OPERATIVE HOUSING SOCIETY LTD.IT IS NOT EXPLAINED OF WHAT IS 10% RECE IVED AS DEVELOPMENT FEES. ON PERUSAL OF P & L A/C FOR A.Y 2007-08, IT IS SEEN TH AT THE ASSESSEE HAS SHOWN INTEREST INCOME ONLY AND NO DEVELOPMENT FEES HAVE BEEN SHOWN AS SHOWN IN THE BOOKS OF ACCOUNTS. THE INTEREST INCOME IS RECEIVED FROM THE BANK ON DEPOSIT OF SCHEME DEPOSIT FEES AND MAINTENANCE FEES. VIDE LETTER DATED 27/11/2009, THE ASSESSEE HAS SUBM ITTED THAT IN SURYARATH BUNGLOWS SCHEME IT HAS CONSTRUCTED 107 UNITS INCLUD ING 79 BUNGLOWS AND 28 SHOPS. UPTO 31/03/2007, THE M/S MANIAR DEVELOPERS HAS COLL ECTED RS.6,99,39,404/- FROM THE MEMBERS TO WHOM BUNGLOWS/SHOPS HAVE BEEN SOLD. M/S MANIAR DEVELOPERS HAS MADE PAYMENT TO SURYARATH BUNGLOWS CO-OPERATIVE HOUSING SOCIETY LTD. AS UNDER : A.Y. PAYMENTS 2093-04 98,30,000 2004-05 2,64,50,000 2005-06 81,55,000 2006-07 2,00,000 4,46,35,000 M/S MANIAR DEVELOPERS HAS RECEIVED RS. 6,99,39,404/ - FROM THE MEMBERS OF THE SURYARATH CO-OPERATIVE HOUSING SOCIETY LTD. FOR SALE OF BUN GLOWS/SHOPS AND IT HAS PAID RS. 4,46,35,000/- TO SURYARATH CO-OPERATIV E HOSING SOCIETY LTD. THE ASSESSEE HAS NOT EXPLAINED WHY IT HAS MADE PAYMENT TO SURYARATH CO-OPERATIVE HOSING SOCIETY LTD. WHEN M/S MANIAR DEVELOPERS HAVE BEEN GIVEN ABSOLUTE AUTHORITY ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 11 - TO COLLECT THE AMOUNTS FROM THE MEMBERS OF THE SOCI ETY ON SALE OF BUNGLOWS AND TO MAKE PAYMENTS TO THE CONTRACTORS, SUB-CONTRACTORS A ND ARCHITECT 85 ENGINEERS. EVEN THOUGH THE ASSESSEE WAS SPECIFICALLY ASKED VIDE LET TER DATED 19/11/2009 TO PROVIDE THE DETAILS OF PAYMENT MADE TO CONTRACTOR/SUB-CONTRACTO RS, THE ASSESSEE HAS NOT PROVIDED ANY DETAILS REGARDING NAME AND ADDRESSES OF THE CON TRACTOR/SUB-CONTRACTOR AND PAYMENTS MADE TO THEM. THE DEVELOPMENT AGREEMENT D O NOT CONTAIN ANY CLAUSE THAT SHOWS M/S MANIAR DEVELOPERS WILL PAY ANY AMOUNT TO SURYARATH CO-OPERATIVE HOUSING SOCIETY LTD. IN RELATION TO CONSTRUCTION AN D SALE OF BUNGLOWS/SHOPS. IN FACT IT IS AGREED UPON BY BOTH THESE PARTIES THAT ALL THE F INANCES FOR DEVELOPMENT AND CONSTRUCTION OF THE SCHEME WILL BE ARRANGED BY M/S MANIAR DEVELOPERS ONLY AND SURYARATH CO-OPERATIVE HOUSING SOCIETY LTD. WILL NO T ASK FOR ANY FINANCIAL ACCOUNTS RELATED TO DEVELOPMENT AND CONSTRUCTION OF THE SCHE ME. THUS FROM THE COMPREHENSIVE READING OF THE DEVELOPMENT AGREEMENT AND THE CONDUC T OF BOTH THE PARTIES, IT IS EVIDENT THAT M/S MANIAR DEVELOPERS HAS DEVELOPED AN D CONSTRUCTED BUNGLOWS/SHOPS OF SURYARATH CO-OPERATIVE HOSING SOCIETY LTD. AND S OLD IT TO VARIOUS MEMBER AFTER COLLECTING THE SALE CONSIDERATION FROM THEM. ALL TH E PAYMENTS RELATED TO CONSTRUCTION OF THE BUNGLOWS HAVE BEEN MADE BY M/S MANIAR DEVELO PERS . THEREFORE ANY PROFIT ARISING OUT OF THE SALE OF BUN GLOWS/SHOPS BELONG T O M/S MANIAR DEVELOPERS. HOWEVER, M/S MANIAR DEVELOPERS HAS SHOWN DEVELOPMEN T FEES @10% IN ITS BOOKS OF ACCOUNT AND HAS NOT DISCLOSED THE PROFIT EARNED IN THIS SCHEME. THE ASSESSEE HAS NOT PROVIDED THE YEAR WISE DETAILS OF RECEIPTS FROM VAR IOUS MEMBERS BUT IT HAS PROVIDED THE YEAR WISE PAYMENTS MADE TO SURYARATH COOPERATIV E HOSING SOCIETY LTD.. IN ABSENCE OF THE YEAR WISE DETAILS OF RECEIPTS, IT IS DIFFICULT TO ARRIVE THE EXACT PROFIT EARNED BY M/S MANIAR DEVELOPERS ON THE SCHEME. ON C OMPARISON OF THE BALANCE SHEET AS AT 31/3/2006 AND 31/3/2007 IT IS SEEN THAT M/S MANIAR DEVELOPERS HAS SHOWN LIABILITY OF RS.70,42,104/- AS AT 31/3/2006 AND LIA BILITY OF RS.1,90,01,439 AS AT 31/3/2007. DURING THE YEAR, M/S MANIAR DEVLEPOERS H AS PAID RS. 2,00,000/- TO SURYARATH BUNGLOWS CO-OPERATIVE HOUSING SOCIETY LTD . AND THERE IS LIABILITY OF RS. 1,90,01,439/- A ON 31/3/07. THUS , DURING THE Y EAR M/-S MANIAR DEVELOPERS HAS RECEIVED RS. 1,21,59,335/- ( RS. 1,90,01,439 + RS. 2,00,000 - RS. 70,42,104) FROM VARIOUS MEMBERS ON SALE OF BUNGLOWS/SHOPS. IT IS SU BMITTED BY THE ASSESSEE THAT UPTO 31/3/2007 M/S MANIAR DEVELOPERS HAS PAID RS.4,46,35 ,000/- TO SURYARATH CO- OPERATIVE HOSING SOCIETY LTD. AND THERE IS LIABILIT Y OF RS. 1,90,01,439/- AS ON 31/3/2007. THUS THE TOTAL LIABILITY OF M/S MANIAR D EVELOPERS TO SURYARATH CO- OPERATIVE HOSING SOCIETY LTD. WILL BE RS. 6,36,36,4 39/- (RS. 4,46,35,000 + RS. 1,90,01,439). M/S MANIAR DEVELOPERS HAS SHOWN TOTAL RECEIPTS OF RS. 6,99,39,404/- UPTO 31/3/2007 FOR DEVELOPMENT AND SALE OF BUNGLOWS /SHOPS OF SURYARATH SCHEME . M/S MANIAR DEVELOPERS HAS EARNED PROFIT OF RS. 63,0 2,965/- FROM CONSTRUCTION AND SALE OF BUNGLOWS/SHOPS OF TO SURYARATH SCHEME. AS A GAINST THE PROFIT OF ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 12 - RS. 63,02,965/- M/S MANIAR DEVELOPERS HAS SHOWN PRO FIT OF RS. 55,990/-FOR A.Y 2005- 06, RS. 21,182/- FOR A.Y 2006-07 AND RS. 92,227/- FOR A.Y 2007-08 . THUS M/S MANIAR DEVELOPERS HAS SHOWN TOTAL PROFIT OF RS. 1,69,399/- ONLY FOR THE A.Y. 2005- 06,2006-07 & 2007-08. THEREFORE, PROFIT OF RS. 6 1,33,566/- ( RS. 63,02,965 - RS. 1,69,399) IS EARNED BY M/S. MANIAR DEVELOPERS ON CONSTRUCTION AND SALE OF SURYARATH BUNGLOWS/SHOPS, HOWEVER THE SAME HAS NOT BEEN SHOWN IN THE BOOKS OF ACCOUNT . THE PROFIT OF RS. 61,33,566/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. WITHOUT PREJUDICE TO THE ONGOING DISCUSSION , EVEN IF IT IS ASSUMED THAT M/S MANIAR DEVELOPERS-IS ENTITLED 10%O OF TOTAL RECEIPT S AS DEVELOPMENT CHARGES FROM SURYARATH CO-OPERATIVE HOSING SOCIETY LTD., THEN ON TOTAL RECEIPTS OF RS. 6,99,39,404/-M/S MANIAR DEVELOPERS IS ENTITLED FROM DEVELOPMENT CHARGES @10% AMOUNTING TO RS. 69,93,940/-. HOWEVER, M/S MANIAR D EVELOPERS HAS SHOWN DEVELOPMENT CHARGES OF RS. 18,10,721/- FOR A.Y 2005 -06, RS. 7,28,856/- FOR A.Y 2006- 07 AND RS. NIL FOR A.Y 2007-08. AGAINST THESE DEVEL OPMENT CHARGES THE ASSESSEE HAS DEBITED VARIOUS EXPENSES AND SHOWN THE N.P. OF RS. 55,990/- FOR A.Y 2005-06 AND RS. 21,182/- FOR A.Y 2006-07. DURING A.Y 2007-08, M/S M ANIAR DEVELOPERS.HAS NOT SHOWN ANY DEVELOPMENT CHARGES FROM SURYARATH CO-OPE RATIVE HOSING SOCIETY LTD. DURING THE YEAR M/S MANIAR DEVELOPERS HAS COLLECTED RS. 1,12,59,335/- FROM VARIOUS MEMBERS. SO IT IS ENTITLED FOR DEVELOPMENT CHARGES OF RS. 12,15,933/- I.E. 10% OF RS. 1,21,59,335/-. THE SAME IS ADDED TO TOTAL INCOM E OF ASSESSEE. PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT O F INCOME ON THIS ISSUE. ( PROFIT FROM SURYARATH SCHEME- RS. 61,33,566/-) 8.1. HOWEVER, THE LD.CIT(A) HAS CONSIDERED THE ABOV E FINDING OF THE AO AND THE SUBMISSION MADE BY THE ASSESSEE AND GIVE N FINDINGS IN PARAS- 6.2 TO 6.6 OF HIS ORDER, WHICH ARE IN THE FOLLOWING TERMS:- 6.2 I HAVE CONSIDERED THE SUBMISSIONS MADE AND THE EVIDENCES PRODUCED BY THE APPELLANT IN LIGHT OF THE FINDINGS GIVEN BY THE AO IN HIS ASSESSMENT ORDER. IT IS NOTICED THAT THE AO HAS INCLUDED THE SO-CALLED PROFIT FROM THE SAID SCHEME IN THE HANDS OF THE APPELLANT MAINLY FOR THE REASON THAT THE APPELLANT EXERCISED FULL MANAGERIAL AND FINANCIAL CONTROL AS REGARDS THE DEVELOPMENT AND CO NSTRUCTION OF THE SCHEME. HOWEVER, THE AO HAS FAILED TO APPRECIATE THAT THE A PPELLANT WAS ENTRUSTED SUCH ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 13 - CONTROL BY VIRTUE OF A DEVELOPMENT AGREEMENT AND UN LESS THE SAID ARRANGEMENT IS FOUND TO BE SHAM OR BOGUS, THE APPELLANT IS NOTHING MORE THAN AN AGENT OF THE SOCIETY SO AS TO CARRY OUT THE WORK OR THE ACTIVITIES ENTRU STED TO HIM BY THE SOCIETY. THE DEVELOPMENT AGREEMENT SIMPLY DOES NOT TRANSFER OR V EST TITLE OF THE ASSETS OF THE SOCIETY WITH THE DEVELOPER. IT ONLY PERMITS THE DEV ELOPER TO CARRY OUT VARIOUS ACTIVITIES AS ENUMERATED IN THE AGREEMENT. IT IS NO TICED FROM THE SAID DEVELOPMENT AGREEMENT THAT THE APPELLANT WAS SUPPOSED TO CARRY OUT VARIOUS ACTIVITIES IN F RELATION TO DEVELOPMENT OF SCHEME AND IN ORDER TO EFFECTIVEL Y AND EFFICIENTLY CARRY OUT THE SAID ACTIVITIES, HE WAS GIVEN VARIOUS POWERS BUT NO TITL E IN THE PROPERTY I.E. LAND OR BUNGLOWS/SHOPS CONSTRUCTED BY THE APPELLANT WAS TO VEST IN HIM. THE AO IS NOT CORRECT IN HOLDING THAT THE APPELLANT HAD SOLD BUNG LOWS/SHOPS CONSTRUCTED IN THE SCHEME BECAUSE NEITHER THE LAND NOR THE SUPER-STRUC TURE THEREON BY WAY OF BUNGLOWS/SHOPS BELONGED TO THE APPELLANT AND THEREF ORE, THE APPELLANT COULD NOT HAVE GIVEN A BETTER TITLE THAN WHAT HE HIMSELF HAS. IT W AS ONLY AN AUTHORITY OR POWER DELEGATED TO THE APPELLANT BY THE SOCIETY TO CARRY OUT THE WORK OF ALLOTMENT OF THE BUNGLOWS/SHOPS BUT SUCH DELEGATION OF POWER DID NOT CREATE TITLE IN HIM OR ENTITLE HIM TO THE SALE CONSIDERATION, MUCH LESS THE PROFIT OUT OF IT. THERE IS ALSO CONSIDERABLE FORCE IN THE CONTENTION OF THE APPELLANT THAT NO DE VELOPMENT WORK WAS CARRIED OUT IN THE YEAR UNDER APPEAL AND THIS IS ALSO EVIDENT FROM THE COPY OF THE P& L A/C. OF M/S. MANIAR DEVELOPERS FOR A.Y. 2.007-08, AND THE ANNUAL ACCOUNTS OF THE SAID SOCIETY. EVEN THE COPY OF B.U. PERMISSION GIVEN BY AHMEDABAD MUNICIPAL CORPORATION ALSO SHOWS THAT THE SCHEME WAS COMPLETED LATEST BY 27-06 -05. IT IS FURTHER NOTICED THAT DIFFERENT BUNGLOWS/SHOPS WERE COMPLETED FROM SEPTEM BER, 2004 TO JUNE, 2005 AS PER THE SAID B.U. PERMISSIONS WHICH ARE ON PAGE-69 TO 7 3 OF THE PAPER BOOK. THUS, WHEN THERE WAS ADMITTEDLY NO DEVELOPMENT WORK CARRIED OU T BY THE APPELLANT FOR .THE YEAR UNDER APPEAL, THERE WAS NO QUESTION OF ESTIMATING A NY INCOME THEREFROM IN THIS YEAR. THEREFORE, EVEN ON THIS GROUND, THE ADDITION MADE B Y THE AO COULD NOT BE SUSTAINED. 6.3 IT IS NOTICED THAT THE AO HAS ESTIMATED THE IN COME FROM DEVELOPMENT WORK AT 10% OF THE TOTAL RECEIPTS FROM THE MEMBERS OF THE S OCIETY BUT EVEN THIS METHOD OF WORKING OUT THE INCOME IS NOT JUSTIFIED IN VIEW OF THE FACT THAT THE MEMBERS WERE REQUIRED TO PAY NOT ONLY THE BUILDING CONSTRUCTION CONTRIBUTION BUT ALSO THE LAND CONTRIBUTION, DEVELOPMENT FEES, LEGAL FEES AND OTHE R EXPENSES AS STATED IN CLAUSE 4 OF THE SAID DEVELOPMENT AGREEMENT. THEREFORE, THE CONT RIBUTION RECEIVED FROM THE MEMBERS OTHER THAN BUILDING CONSTRUCTION COULD NOT BE CONSIDERED FOR THE PURPOSE OF WORKING OUT ANY INCOME BY THE AO. IT IS NOTICED FRO M THE DETAILS GIVEN BY THE AO ON PAGE 17 OF THE ORDER THAT HE HAS CONSIDERED THE AGG REGATE RECEIPTS FROM THE MEMBERS OF RS.6,99,39,404/- FOR THE PURPOSE OF WORKING OUT INCOME BUT IT IS NOT CORRECT IN VIEW OF THE PAYMENTS MADE BY THE MEMBERS TOWARDS VARIOUS OTHER ITEMS LIKE, LAND, ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 14 - INFRASTRUCTURE DEVELOPMENT AND COST, EXPENSES, ETC. EVEN THE AUDITED BALANCE SHEET OF THE SAID SOCIETY AS ON 31-03-07 SHOWS THAT THE LAND COST WAS RS.4,95,83,022/- AND THE BUILDING CONSTRUCTION WORK WAS RS.3,87,61,227/- AS AGAINST WHICH LAND AND BUILDING CONTRIBUTION FROM MEMBERS WAS ONLY RS.1,47,48,118/- AND SCHEME DEPOSITS WAS RS.6,99,60,615/-. IN SHORT, THE ADDITION OF RS.61,3 3,566/- WORKED OUT BY THE AO IN RELATION TO THE ENTIRE SCHEME WHICH WAS CARRIED OUT DURING A.Y. 2003-04 TO 2006-07 IS NOT JUSTIFIED. 6.4 IN MY VIEW OF THE MATTER, EVEN THE DEVELOPMENT CHARGES WORKED OUT BY THE AO AT RS.12,59,933/- BEING 10% OF THIS YEAR'S COLLECTION OF RS.1,21,59,335/- IS NOT CORRECT BECAUSE THE SAID AMOUNT REPRESENTS COLLECTION FROM VARIOUS MEMBERS TRANSFERRED BY JOURNAL ENTRY TO THE .ACCOUNT OF THE SOCIETY AND TH US, IT HAS NO RELEVANCE OR BEARING TO THE DEVELOPMENT ACTIVITY CARRIED OUT BY THE APPELLA NT SO AS TO ESTIMATE PROFIT OUT OF IT. THE PERUSAL OF LEDGER ACCOUNT OF THE SOCIETY FROM B OOKS OF M/S. MANIAR DEVELOPERS SHOWS THAT THE AO HAS TREATED THE DIFFERENCE BETWEE N THE TOTAL OF CREDIT IN THE ACCOUNTS (RS.1,92,01,439) AND THE OPENING BALANCE ( RS.70,42,104/-) AS RECEIPTS DURING THE YEAR FROM MEMBERS I.E. RS.1,21,59,335/-, BUT IT DOES NOT MEAN THAT THE SAID RECEIPTS ARE TOWARDS THE CONSTRUCTION WORK OR OTHER DEVELOPMENT WORK CARRIED OUT BY THE APPELLANT IN THE YEAR UNDER APPEAL. EVEN IN THE CONTEXT OF NO DEVELOPMENT WORK CARRIED OUT BY THE APPELLANT, THE RECEIPTS FROM THE MEMBERS. CANNOT BE CONSIDERED FOR WORKING OUT INCOME BY WAY OF DEVELOPMENT CHARGES IN THIS YEAR. 6.5 EVEN \F THE CONTENTION OF AO THAT PROFIT FROM C ONSTRUCTION ACTIVITY IS TO BE TAKEN AT 10% OF THE RECEIPTS IS ACCEPTED, IT HAS TO BE APPLI ED TO THE CONSTRUCTION EXPENSES DEBITED IN THE BOOKS OF THE SAID SOCIETY DURING F.Y . 2002-03 TO 2005-06. THE AUDITED ANNUAL ACCOUNTS OF THE SAID SOCIETY FOR THE AFORESA ID YEARS AND AS PER CHART GIVEN AT P.125 OF THE PAPER BOOK SHOWS THAT THE AGGREGATE CO NSTRUCTION EXPENSES WERE RS.3,02,74,285 AND THE PROFIT WOULD WORK OUT TO RS. 30,27,428, NOW, THE APPELLANT HAS ALREADY DISCLOSED IN THE BOOKS OF MANIAR DEVELOPERS , DEVELOPMENT CHARGES AGGREGATING TO RS.33,3L,176 FOR THESE YEARS AS UNDE R.- A.Y. DEVELOPMENT CHARGES (RS.) 2003-04 2,60,852 2004-05 5,30,747 2005-06 18,10,721 2006-07 7.28.856 33,31,176 THE DEVELOPMENT CHARGES OFFERED BY THE APPELLANT AR E EVIDENT FROM THE ANNUAL ACCOUNTS OF MANIAR DEVELOPERS AND THE SUMMARY OF P& L A/C. FOR THESE YEARS GIVEN ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 15 - BY THE APPELLANT. ON THE OTHER HAND, IT IS NOTICED FROM THE LAST PARA OF THE ASSTT. ORDER THAT AO HAS NOT TAKEN INTO CONSIDERATION THE DEVELO PMENT CHARGES RECEIVED BY THE APPELLANT FOR A.Y.2005-06 AND 2006-07, AGGREGATING TO RS.25,39,577 WHEREAS HE HAS FAILED TO TAKE INTO CONSIDERATION DEVELOPMENT CHARG ES FOR A.Y.2003-04 AND 2004-05 AGGREGATING TO RS. 7,91,599/- RECEIVED BY THE APPEL LANT. THUS, THE APPELLANT HAS ALREADY OFFERED MORE DEVELOPMENT CHARGES THAN IT MA Y WORK OUT AS PER THE CONTENTIONS OF THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS MADE ADDITION OF RS. 12,15,933/- AS PER HIS ALTERNATE CONTENTION THAT M/ S. MANIAR DEVELOPERS WAS ENTITLED TO 10% OF THE TOTAL RECEIPTS FROM SURYARATH SCHEME, AS DEVELOPMENT CHAR GES, HENCE 10% OF THE TOTAL COLLECTION OF RS.1,21,59,335/- FRO M VARIOUS MEMBERS I.E., RS.12,15,933/-WAS TREATED AS INCOME OF THE APPELLAN T. THIS CONTENTION OF THE ASSESSING OFFICER IS NOT CORRECT BECAUSE THE APPELL ANT WAS ENTITLED TO DEVELOPMENT CHARGES ONLY ON THE CONSTRUCTION COST AS PER THE RE SOLUTION OF THE SOCIETY FROM TIME TO TIME, IT HAS NO RELEVANCE WITH THE COLLECTIONS FROM THE MEMBERS. THIS YEAR, NO CONSTRUCTION WAS CARRIED OUT BY THE APPELLANT, 6.6 IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCE S OF THE CASE, I HOLD THAT THE AO WAS NOT JUSTIFIED IN HOLDING THE DEVELOPMENT CHARGE S AT 10% OF THE TOTAL RECEIPTS FROM THE MEMBERS AS WELL AS MAKING ADDITION OF THE ENTIR E DIFFERENCE OF RS.61,33,566/- AS WELL AS RS.12,15,933/- TO THE TOTAL INCOME OF THE APPELLANT IN THIS YEAR AND HENCE, BOTH THE ADDITIONS ARE HEREBY DELETED. 8.2. THE AFORESAID FINDINGS OF THE LD.CIT(A) IS NOT CONTROVERTED BY THE REVENUE BY PLACING ANY MATERIAL ON RECORD, THEREFOR E WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) , SAME IS HEREBY UPHELD. THUS, GROUND NOS.3, 3.2, 4. & 4.2 OF REVEN UES APPEAL ARE REJECTED. 9. REST OF THE GROUNDS OF APPEAL ARE GENERAL IN NAT URE, NEED NO SEPARATE ADJUDICATION. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 16 - 11. NOW, WE TAKE UP THE CROSS-OBJECTION NO.192/AHD/ 2010 FOR AY 2007-08 (ARISING OUT OF ITA NO.2176/AHD/2010 FOR AY 2007-08) FILED BY THE ASSESSEE. THE ASSESSEE HAS RAISED THE FOLLOWIN G GROUNDS IN THE CROSS- OBJECTION:- 1. THE LD.CIT(A) HAS ERRED IN NOT ADJUDICATING THE GR OUND OF APPEAL RELATING TO THE APPLICATION OF SEC.45(4) ON THE DEA TH OF ONE OF THE PARTNERS OF M/S.UNNATI INDL.CORPN. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E CIT(A) OUGHT TO HAVE ADJUDICATED UPON THE GROUND RELATING TO APPLIC ABILITY OF SEC.45(4) OF THE ACT. 11. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE DOES NOT WISH TO PRESS THE CROSS-OBJECTION FILED BY THE ASSESSEE. T HE LD.SR.DR HAS NO OBJECTION. IN VIEW OF THE STATEMENT MADE BY THE LD .COUNSEL FOR THE ASSESSEE, THE CROSS-OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND CROSS- OBJECTION FILED BY THE ASSESSEE IS ALSO DISMISSED A S NOT PRESSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 9 TH DAY OF OCTOBER, 2015 AT AHMEDABAD. SD/- SD/- ( ) ( ) ( MANISH BORAD ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 09/10/2015 3-.., *.../ T.C. NAIR, SR. PS ITA NO.2176/AHD/2010(BY REVENUE) AND CO NO.192/AHD/2010 (BY ASSESSEE ) ACIT VS. SHRI GORDHANBHAI BECHARBHAI PATEL. ASST.YEAR 2007-08 - 17 - !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ()$' / THE RESPONDENT. 3. 45 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-XX, AHMEDABAD 5. 7*8 (45 , - 45/ , / DR, ITAT, AHMEDABAD 6. 8:; <+ / GUARD FILE. ! / BY ORDER, )7 ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 21.9.2015 (DICTATION-PAD 10+ PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..23.9.2015 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.09.10.2015 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 09.10.2015 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER