M/s. True Zone Buildwell Pvt. Ltd., New Delhi V. ACIT, New Delhi

CO 248/DEL/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8236 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 29-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 10-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SUSHMA SINGH
• Assessee Lawyers: MAYANK GOYAL; ABHISHEK VERMA S
• Keywords: Rejection of books of accounts; Search and seizure; Loose papers; Additional evidence; Question of law; Difference of opinion; Change of opinion
• Section: 69C; 143(3); 153A; 145; 132; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H : NEW DELHI) SHRI R.P. TOLANI, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.1695/DEL./2012 (ASSESSMENT YEAR : 2008-09) ACIT, CENTRAL CIRCLE 12, VS. M/S. TRUE ZONE BUILDW ELL PVT. LTD., NEW DELHI. 12, RING ROAD, LAJPAT NAGAR IV, NEW DELHI. (PAN : AABCT9812B) CO NO.248/DEL/2012 (IN ITA NO.1695/DEL./2012) (ASSESSMENT YEAR : 2008-09) M/S. TRUE ZONE BUILDWELL PVT. LTD., VS. ACIT, CENT RAL CIRCLE 12, 12, RING ROAD, LAJPAT NAGAR IV, NEW DELHI. NEW DELHI. (PAN : AABCT9812B) ITA NO.2093/DEL./2012 (ASSESSMENT YEAR : 2008-09) M/S. TRUE ZONE BUILDWELL PVT. LTD., VS. ACIT, CENT RAL CIRCLE 12, 12, RING ROAD, LAJPAT NAGAR IV, NEW DELHI. NEW DELHI. (PAN : AABCT9812B) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI RAJIV SAXENA & ABHISHEK VERMA, ADVOCATES AND SHRI MAYANK GOYAL, CA REVENUE BY : MRS. SUSHMA SINGH, CIT DR ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 2 ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THE REVENUE HAS FILED ITA NO.1695/DEL/2012 AND THE ASSESSEE HAS PREFERRED CROSS OBJECTION NO.248/DEL/2012 AGAINST T HIS APPEAL. THE ASSESSEE HAS ALSO FILED ITA NO.2093/DEL/2012 ON CERTAIN ISSU ES AGAINST THE ORDER OF CIT (A) DATED 31.01.2012. THE GROUNDS OF APPEAL TA KEN IN THESE THREE MATTERS ARE AS UNDER :- ITA NO.1695/DEL/2012 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE A DDITION OF RS.2,72,21,668/- OUT OF THE TOTAL ADDITION OF RS.4, 62,09,068/- MADE BY THE ASSESSING OFFICER IN RESPECT OF DISALLOWANCE OF COMMISSION BY ADMITTING EVIDENCE IN CONTRAVENTION OF RULE 46A OF INCOME TAX RULES, 1962. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT(A) HAS ERRED IN HOLDING THAT THE ESTIMATION OF PROFIT AMOUNTING TO RS.3,89,49,700/- IN PLACE TOTAL TAXABLE INCOME DECL ARED BY THE ASSESSEE OF RS.1,81,84,890/- INCLUDING PROFIT ON PE RCENTAGE COMPLETION METHOD IS NOT ACCEPTED. 4. THE ORDER OF LD CIT(A) IS PERVERSE IN LAW AND ON FACTS. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HE ARING OF THE APPEAL. CO NO.248/DEL/2012 1. THAT THE LD AO HAS ERRED IN LAW AS WELL AS ON F ACTS IN RAISING GROUND NO.2 ON ADMITTING ADDITIONAL EVIDENCE: ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 3 A) BECAUSE THE EVIDENCE RELIED UPON BY THE CIT(A) W AS AMOUNT OF THE SEIZED MATERIAL ALREADY IN POSSESSION OF THE AO AND NOT FRESH EVIDENCE B) BECAUSE AO HAS ERRED IN APPRAISING PART EVIDENCE FOR MAKING DISALLOWANCE, IGNORING THE OTHER SEIZED MATERIAL AL READY IN POSSESSION WITHOUT RAISING ANY QUERY ON THE DOUBTS IN HIS MINDS. C) BECAUSE RULE 46A IS APPLICABLE ONLY ADMISSION OF ADDITIONAL EVIDENCE NOT PRODUCED BEFORE THE AO BUT NOT ON THE EVIDENCE IN POSSESSION OF THE AO. 2. THAT LD. ACIT HAS ERRED IN LAW AS WELL AS ON FAC TS IN RAISING GROUND NO.3 IN DELEING THE ADDITION OF RS.38949700/ - MADE BY THE AO ON ACCOUNT OF ESTIMATING THE PROFIT UNDER PE RCENTAGE COMPLETION METHOD BECAUSE CIT(A) HAS APPRECIATED WH ICH AO IGNORED THAT : A) THE AO HAS NOT MADE ANY ADDITION BUT ESTIMATED T HE PROFITS. B) THE AO HAS REJECTED THE BOOKS OF ACCOUNTS U/S 14 5(3) WITHOUT ANY VALID REASONS. C) THE AO HAS APPLIED METHOD OF ACCOUNTING NOT RELE VANT TO THE ASSESSEE'S BUSINESS WHILE ASSESSEE HAS ADOPTED AND OPTED STANDARD METHOD OF ACCOUNTING APPROVED BY ACCOUNTIN G STANDARDS OF ICAI AND HELD TO BE STANDARD METHOD BY THE HON'BLE SUPREME COURT AND RECENTLY DELHI HIGH COURT IN MANISH BUILDWELL'S CASE. D) THE AO HAS FAILED TO APPRECIATE THAT ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF CONSTRUCTION OF BUILDING OR STRUCTU RES BUT ENGAGED IN THE BUSINESS OF DEVELOPMENT OF LAND/SELL ING OF PLOTS OF LAND. E) THE AO HAS ALSO FAILED TO APPRECIATE THAT SALE O F PLOT OF LAND IS MADE BY REGISTERED DOCUMENTS BY HANDING OVER THE PL OT AND NO OWNERSHIP VEST IN THE PROPERTY BEFORE FINAL PAYMENT IS MADE WHILE IN CONSTRUCTION ACTIVITIES BUILDING IS MADE B Y THE BUYER BY MAKING PART PAYMENTS ON CONSTRUCTION BASIS. 3. THE RESPONDENT CRAVES LEAVE FOR ADDITION, MODIFI CATION, ALTERATION, AMENDMENT OF ANY OF THE CROSS OBJECTION . ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 4 ITA NO.2094/DEL/2012 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A)-XXXI IS CORRECT IN UPHOLDING THE ASSESSMENT FRAMED OUTSIDE THE SEARCH MATERIAL AND AFTER THE CHANGE OF OPINION ? 2. THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE LD. CIT(A)- XXXI ERRED IN CONFIRMING THE ADDITION OF RS.1,89,87 ,400/- BEING THE AMOUNT OF OUT OF BOOKS COMMISSION PAID BY THE ASSES SEE COMPANY U/S 69C OF THE INCOME TAX ACT, 1961. 3. THE ASSESSEE CRAVES FOR THE ADDITION, MODIFICATI ON AND DELETION OF THE GROUNDS OF APPEAL. 2. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT U /S 132 OF THE INCOME- TAX ACT, 1961 ALONG WITH OTHER GROUP CASES ON 31.07 .2008. THE SEARCH WAS ALSO CARRIED OUT AT THE RESIDENCE OF THE DIRECTOR, SHRI RAKESH KUMAR GARG WHERE CERTAIN DOCUMENTS RELATING TO THE ASSESSEE WE RE FOUND AND SEIZED. 3. GROUND NOS.1, 4 & 5 OF REVENUES APPEAL (ITA NO. 1695/DEL/2012), GROUND NO.3 OF CROSS OBJECTION AND GROUND NO.3 OF A SSESSEES APPEAL (ITA NO.2093/DEL/2012) ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION, HENCE THE SAME ARE DISMISSED. 4. FIRST OF ALL, WE CONSIDER GROUND NO.1 OF ASSESSE ES APPEAL WHERE THE ASSESSEE HAS RAISED THE ISSUE THAT THE ASSESSMENT H AS BEEN FRAMED OUTSIDE THE SEARCH MATERIAL AND AFTER THE CHANGE OF OPINION. 5. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE H AVE ALREADY UPHELD THE ASSESSMENT ON THE BASIS OF SIMILAR FACTS AND CIRCUM STANCES IN ASSESSEES OWN ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 5 CASE IN ITA NO.2092/DEL/2012 FOR ASSESSMENT YEAR 20 07-08 VIDE ORDER DATED 04.01.2013. THE RELEVANT PARA OF THE SAID ORDER I S REPRODUCED AS UNDER:- 5. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE HAVE UPHELD THE ASSESSMENT ON THE BASIS OF SIMILAR FACTS AND CIRCUMSTANCES IN ASSESSEES OWN CASE IN ITA NO.2091 /DEL/2012 FOR ASSESSMENT YEAR 2006-07 VIDE ORDER DATED 31.12. 2012. THE RELEVANT PARA OF THE SAID ORDER IS REPRODUCED AS UN DER:- 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON THE ISS UE AND HAS GONE THROUGH THE MATERIAL ON RECORD AND REL EVANT PAGES OF THE PAPER BOOK. IN OUR CONSIDERED VIEW, T HERE WAS A SEIZED MATERIAL FOUND AT THE RESIDENCE OF THE DIRECTOR WHICH HAS TO BE CONSIDERED FOR MAKING THE ASSESSMENT U/S 153A IN THE CASE OF ASSESSEE COMPANY AND ON THE BASIS OF SUCH SEIZED MATERIAL AS FAR AS IT R ELATES TO THE UNDISCLOSED INCOME OF THE ASSESSEE THE ADDITION IS REQUIRED TO BE MADE. IT IS NOT THE MATERIAL, WHETH ER THE SEIZED MATERIAL WAS FOUND AT THE PREMISES OF THE AS SESSEE OR AT THE RESIDENCE OF THE DIRECTOR. THE COMPANY I S REPRESENTED THROUGH ITS DIRECTORS, THEREFORE, MATER IAL FOUND AT THE RESIDENCE OF THE DIRECTOR IS RELEVANT AND HAS TO BE CONSIDERED FOR MAKING THE ASSESSMENTS U/S 153 A. AS FAR AS THE SCOPE OF THE ASSESSMENT IS CONCERNED, WE HOLD THAT WHEREVER THE ISSUES HAVE BEEN CONSIDERED U/S 1 43(3) AND THE ASSESSMENT HAS BEEN CONCLUDED PRIOR TO THE INITIATION OF THE SEARCH THE SCOPE OF ASSESSMENT RE MAINS LIMITED TO THE SEARCH MATERIAL AND OTHER ISSUES NOT CONSIDERED AT THE TIME OF MAKING THE ASSESSMENT U/S 143(3) OF THE ACT. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE ARE UNABLE TO AGREE WITH THE CONT ENTION OF THE ASSESSEE THAT ASSESSMENT U/S 153A HAS BEEN M ADE ON THE BASIS OF OUTSIDE THE SEARCH MATERIAL AND AFT ER THE CHANGE OF OPINION. MOREOVER, IN THIS YEAR, THE ASSESSMENT WAS MADE U/S 144 OF THE INCOME-TAX ACT, 1961 ON 09.12.2009. THE SAME WAS H ELD INVALID AS THERE WAS A SEARCH OPERATION AT THE PREM ISES OF THE ASSESSEE ON 31.07.2008. IN VIEW OF THE PROVISIONS OF SECTION 153A, THE PENDING ASSESSMENTS ABATE. THE ORDER PAS SED U/S 144 ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 6 WAS AGAINST THE LAW. CONSIDERING ALL THE RELEVANT FACTS, WE DISMISS THIS GROUND OF ASSESSEES APPEAL. CONSIDERING ALL THESE FACTS, WE DISMISS THIS GROUND . 6. GROUND NO.2 IN THE REVENUES APPEAL AND GROUND N O.2 IN ASSESSEES APPEAL ARE AGAINST THE DELETING/SUSTAINING OF ADDIT ION ON THE ISSUE OF DISALLOWANCE OF COMMISSION. THE ISSUE REGARDING R ULE 46A WAS ALSO RAISED IN GROUND NO.1 OF CROSS OBJECTION. 7. THE TOTAL ADDITION MADE BY THE ASSESSING OFFICER WAS RS.4,62,09,068/-. CIT (A) DELETED THE ADDITION OF RS.2,72,21,668/- AG AINST WHICH THE REVENUE IS IN APPEAL AND CIT (A) SUSTAINED THE ADDITION OF RS. 1,89,87,400/- AGAINST WHICH THE ASSESSEE IS IN APPEAL. 8. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE CIT (A) DELETED THE ADDITION BY HOLDING AS UNDER :- 6.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION, PE RUSED THE ORDER OF ASSESSMENT AND, EVIDENCE ON RECORD. THE DISPUTE, AS RAISED BY THE APPELLANT, PERTAINS TO THE ADDITIONS OF RS.4,62,09,068/- MADE BY THE AO ON ACCOUNT OF COMMISSION PAID OUT OF BOOKS U/S 69C OF THE INCOME TAX ACT. AS PER THE AO, AMOUNT PAID FOR COMMISSION DURING THE YEAR IS L ESS THAN THE AMOUNT OF BILLS OF COMMISSION SEIZED BY THE DEPARTMENT AT THE TIME OF SEARCH AND THEREFORE AN ADDITION OF DIFFERENCE AMOUNT WAS MADE BY THE AO. IN CONTENTION TO THAT AR HAS SUBMITTED DETAILED EXPLAN ATION PARTY WISE AND ALSO SUBMITTED THE RECONCILIATION FOR THE DIFFERENC E AMOUNT. AFTER CONSIDERING THE SUBMISSION AND ARGUMENTS OF T HE AR OF THE APPELLANT, I FIND THAT THE AO HAS NOT TAKEN DUE CARE IN MAKING ADDITIONS BASED ON SEIZED RECORD. AS A RESULT IF SAME PAPER OR A COPY IS APPEARING AT DIFFERENT PLACES IN THE SEIZED ANNEXURE, THE ADDITIONS ALSO M ULTIPLIED. FURTHER, AN ATTEMPT HAS NOT BEEN MADE FROM THE BROKER'S ACCOUNT IN THE BOOKS OF APPELLANT COMPANY TO LINK THE PAYMENT WHICH WERE TH ROUGH BANKING CHANNEL. THE ADDITION CHART APPEARING IN THE ASSESS MENT ORDER CLEARLY ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 7 REVEALS DUPLICITY OF ADDITION VIZ. THE NAME OF THE PARTY AND SAME AMOUNT APPEARING AT DIFFERENT PLACE. A) AFTER CONSIDERING THE SUBMISSIONS MADE AND DOCUM ENTS SUBMITTED, I AM OF THE CONSIDERED OPINION THAT AN ADDITION OF RS .9,93,262/- IS TO BE RETAINED AGAINST RS.16,75,762/- OF VARDHAMAN ASSOCI ATES PVT. LTD. THE WORKING IS AS UNDER- VARDHAMAN ASSOCIATES PVT. LTD. S.NO. ANNEXURE NO./PAGE DATE PARTICULARS AMOUNT AS PER PARTY A-1 (IN RS.) 1 A-1/16 06.07.2006 VARDHAMAN ASSOCIATES PVT. LTD. 9,93,262/- 2. A-2/70 VARDHAMAN ASSOCIATES PVT. LTD. 6,82,500/- REGARDING A BILL AMOUNT OF RS.9,93,262/- NO EXPLANA TION COULD BE OFFERED BY THE APPELLANT HENCE CONFIRMED. IN RESPECT OF SEC OND AMOUNT THE AO HAS MADE ADDITION ON ACCOUNT OF SEARCH MATERIAL ANNEXUR E NO. A-2/70 OF RS.6,82,500/- IN THIS YEAR THE APPELLANT HAS BROUGH T ATTENTION TO S.NO.6 ANNEXURE NO. A-2/70 BILL DATED 20.09.2006 OF THIS P ARTY AMOUNTING TO RS.6,82,500/- WHICH HAS BEEN ADDED PER PG NO.3 OF T HE ASSESSMENT ORDER OF THE AY 2007-08 . THIS HAS BEEN CONFIRMED IN MY ORDE R DATED 31.01.2012 TO THE EXTENT OF RS.5,75,879/- AFTER GIVING THE CREDIT OF TRANSACTIONS APPEARING IN THE BOOKS. SINCE THIS HAS BEEN AGAIN ADDED HERE UNDER THE SAME ANNEXURE, THERE IS A DUPLICITY AND HENCE LIABLE TO BE DELETED. THUS THE AMOUNT OF 9,93,262/- IS CONFIRMED. B) CONCERNING ACCOUNTS OF M/S UNISON ESTATES PVT. L TD., THERE ARE THREE ENTRIES OF ADDITION AS UNDER.- UNISON ESTATES PVT. LTD. S.NO. ANNEXURE NO./PAGE DATE PARTICULARS AMOUNT AS PER PARTY A-1 (IN RS.) 2. A-1/36 15.01.2007 UNISON ESTATES PVT. LTD. 10,15,997/- 4. A-2/1 29.05.2007 UNISON ESTATES PVT. LTD. 3,00,000/- 15. A-2/35 25.05.2007 UNISON ESTATES PVT. LTD. 9,42,470/- ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 8 AR HAS SUBMITTED THAT THERE IS AN ENTRY AS PER SEIZ ED MATERIAL ANNEXURE NO. A-1/36 DATED 15.01.2007 OF AN AMOUNT OF RS.10,15,99 7/-, BUT THE SAME IS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE APPELL ANT COMPANY IN THE F.Y 2006-07 ON 01.12.2006. THE ORIGINAL CLAIM IN THE BI LL WAS FOR RS.20,11,340/- WHICH WAS SETTLED FOR RS.10,15,997/- IN ADDITION TO OPENING BALANCE OF RS.3,00,000/-. HOWEVER, AN ADDITION OF A N AMOUNT OF RS.10,15,997/- WAS MADE BY THE AG. IT HAS BEEN HELD BY ME IN THE APPEAL OF AY 2007-2008 AS UNDER:- 'IN THE CASE OF M/S. UNISON ESTATES PVT. LTD. THE A MOUNT OF RS.20,11,340/- IS FINALLY SETTLED FOR 10,15,997/- AS EVIDENT FROM THE SEIZED RECORDS ITSELF AND THE PAYMENT OF THIS AMOUNT HAS BEEN SHOWN IN TH E BOOKS. HOWEVER FROM THE BILL OF RS.3,23,251 OF THE SAME PARTY, THE PAYMENT IN THE BOOKS IS SHOWN AT RS.3,00,000 THUS THE DIFFERENCE OF RS.23,2 51/- IS LIABLE TO BE CONFIRMED.' SINCE THE MATTER HAS BEEN DEALT WITH IN THE A.Y 200 7-2008 AND THE SAME ENTRIES ARE APPEARING IN THIS ASSESSMENT YEAR, NO C OGNIZANCE OF THE SAME CAN BE TAKEN. THE ADDITIONS MADE PER S.NO.4 ANNEXURE NO. A-2/1 DA TED 29.05.2007 AMOUNTING TO RS3,00,000/-, IS THE PAYMENT MADE BY T HE COMPANY TO THE BROKER VIDE CHEQUES NO. 678772 DATED 17.08.2005 OF I.O.B. THE SAME IS ALREADY ENTERED IN THE BOOKS OF ACCOUNT OF THE APPE LLANT COMPANY. APPELLANT HAS SUBMITTED THE BANK STATEMENT FOR THE VERIFICATION OF THE TRANSACTION. AR OF THE APPELLANT ALSO REFER THE S.N O.3 ANNEXURE A-1144 DATED 20.10.2006 OF RS.3,23,251/- WHICH PERTAINS OF THE PREVIOUS ASSESSMENT YEAR I.E. A.Y 2007-08, WHEREBY, BASED ON THIS ACCOUNT ADDITION OF RS.23,251/- HAS BEEN MADE. SEARCH MATERIAL ANNEXURE NO. A-2/35 DATED 25.05.200 7 OF RS.9,42,470/-, THE SAME WAS THE COMMISSION BILL RAISED BY THE BROKER F OR DEMAND OF MONEY IN RESPECT OF BOOKING OF AGRA PROJECT. LEDGER ACCOUNT OF THIS PARTY IN THE BOOKS OF THE APPELLANT, WHEREBY ON 25.05.2007 THE B OOKING OF COMMISSION EXPENSES FOR AGRA AND KARNAL PROJECT OF RS.12,42,47 0/- (9,42,470/- + 3,00,000/-) HAS BEEN MADE IS INCLUSIVE OF THIS AMOU NT OF RS.9,42,470/- THIS HAS BEEN ACCOUNTED FOR IN THE BOOKS AND ACCOUNTS OF THE APPELLANT AS SUCH THE ADDITION IS LIABLE TO BE DELETED. C) CONCERNING THE ACCOUNT OF M/S RAJNANDINI ESTATES PVT. LTD. THERE IS AN ADDITION OF RS.33,83,811/- BASED ON ANNEXURE A-2 /2. THE AO HAS MADE ADDITION OF RS.30,11.580/- I.E. RS.33,83,811 - RS.3 ,72,231 (APPEARING AS PAYMENTS IN THE BOOKS). THE APPELLANT HAS STATED TH AT THE BILLS OF RS.33,83,811/- HAS BEEN CREDITED IN THE BOOKS OF AC COUNT FOR THE RELEVANT PERIOD WHICH HAS BEEN COMPLETELY DISREGARDED BY THE AO. I FIND THE CONTENTION CORRECT ON THE BASIS OF ACCOUNTS AND DOC UMENTS PRODUCED BEFORE ME. THUS, THIS ADDITION IS DELETED. ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 9 D) REGARDING THE ADDITION OF RS.2,50,200/- ON ACCOU NT OF UNEXPLAINED PAYMENT TO BROKER M/S RAHUL ASSOCIATES, IT IS NOTIC ED FROM THE SEIZED PAPER THAT IT WAS A CONFIRMATION OF PAYMENT RECEIVED FOR RS.2,50,200/-. THIS HAS BEEN FOUND IN THE LEDGER ACCOUNT WITH THE BREAKUP R S.2,36,164 + TDS @ 5.61% I.E. RS.14,036/-. THEREFORE NO ADDITION IS CA LLED FOR, HENCE, DELETED. E) WITH REGARD TO COMMISSION PAID TO M/S OMWAY BUIL DESTATE PVT. LTD. (INADVERTENTLY MENTIONED AS OMWAY BUILDERS PVT . LTD. BY THE AO IN HIS ORDER), IT IS FOUND FROM THE FOLLOWING CHART TH AT THREE ADDITIONS WERE MADE:- OMWAY BUILDESTATE PVT. LTD. S.NO. ANNEXURE NO./PAGE DATE PARTICULARS AMOUNT AS PER PARTY A-1 (IN RS.) 6. A-2/7 25.06.2007 OMWAY BUILDESTATE PVT. LTD. 12,55,688/- 16. A-2/37 25.05.2007 OMWAY BUILDESTATE PVT. LTD. 11,22,634/- 18. A-2/42 20.09.2007 OMWAY BUILDESTATE PVT. LTD. 2,74,938/- THE AR HAS SUBMITTED THAT FROM THE PERUSAL OF SEIZE D MATERIAL ANNEXURE NO. A-2/7 DATED 25.06.2007 OF RS.12,55,688/- IT WIL L BE OBSERVED THAT THE SAME IS THE STATEMENT OF ACCOUNTS ADDRESSED BY THE APPELLANT COMPANY TO THE BROKER AGAINST HIS TOTAL BILL OF RS.58,85,444.7 0 AS PER SEIZED ANNEXURE NO. A-1/42 AND THE SAME HAS BEEN MENTIONED BY THE A O AT S.NO.1 AS ANNEXURE A-1/42 DATED 31.10.2006 IN THE ASSESSMENT ORDER PASSED FOR THE AY 2007-08. THE APPELLANT COMPANY HAS MENTIONED THA T AGAINST THE TOTAL BOOKINGS OF 99 PLOTS THE COMMISSION PAYABLE TO THIS BROKER WORKS OUT AT RS.27,55,688/-BECAUSE OF SOME CANCELLATION, SOME BU Y BACKS AND SOME NON-CANCELLED PLOTS. AGAINST THIS BROKERAGE, THE CO MPANY HAS PAID RS.15,00,000/- WHICH IS REFLECTED IN THE STATEMENT OF ACCOUNTS AND BILLS OF THIS PARTY AS APPEARING IN THE BOOKS OF THE APPELLA NT COMPANY IN THE F.Y 2006-07 RELEVANT TO THE A.Y 2007-08. AGAINST THE F INAL SETTLED AMOUNT OF RS.27,55,688/- AN AMOUNT OF RS.22,65,146/- HAS ALRE ADY BEEN SHOWN BOOKED IN THE BOOKS OF ACCOUNTS. SUBSEQUENTLY THROU GH A COMMUNICATION AS PER ANNEXURE A-2/7 THE BROKER WAS INFORMED BY TH E APPELLANT COMPANY THAT OUT OF THE BALANCE AMOUNT OF RS.4,90,452/-, AN AMOUNT OF RS.2,92,500/- IS NOT DUE AS COMMISSION BECAUSE THE PAYMENTS AGAINST THE PLOTS BOOKED IS OUTSTANDING AND NOT RECEIVED. HENCE , AS PER THE ANALYSIS OF THE SEIZED MATERIAL THE AMOUNT WHICH IS UNEXPLA INED IS RS.(4,90,452 - RS,2,92,500 = RS.1,98,042/-) AND THIS IS CONFIRMED. ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 10 ANNEXURE NO. A-2/37 FOR THE AMOUNT OF RS.11,22,634/ - IS ALSO THE PART OF THE FINAL SETTLED AMOUNT OF RS.27,55,688/- THIS IS EVIDENT FROM THE SEIZED ANNEXURE BECAUSE ALL THESE PAPERS RELATES TO BOOKIN G OF 99 PLOTS DONE BY THE SAME BROKER FOR 25,500 SQ. YARD OF AGRA PROJECT . SINCE, FINAL SETTLED AMOUNT OF RS.27,55,688/- HAS BEEN CONSIDERE D ABOVE THE OTHER AMOUNT OF RS.11 ,22,634/- WHICH IS THE INITIAL BILL RAISED BY THE BROKER AT THE START OF THE PROJECT IS IN THE NATURE OF ADVANC E COMMISSION @ 1% IS TO BE IGNORED TO AVOID DUPLICITY. HENCE THIS ADDITION OF RS.11,22,634/- IS ORDERED TO BE DELETED. REGARDING THE THIRD AMOUNT AS PER ANNEXURE NO.A-2/4 2 FOR RS.2,74,938/-, IT IS FOUND THAT THIS AMOUNT HAS BEEN ADDED TWICE B ECAUSE IT WAS APPEARING IN A COVERING LETTER OF THE BROKER DATED 03.11.2007 AT ANNEXURE NO. A-2/72. THIS AMOUNT WAS IN FACT PART OF THE FIN AL SETTLEMENT AMOUNT OF RS.27,55,688/- WHICH IS EVIDENT FROM THE ANNEXUR E A-2/7. SINCE THIS HAS ALREADY BEEN CONSIDERED IN THE PRECEDING PARA, NO ADVERSE INFERENCE SHOULD BE DRAWN AND THEREFORE, BOTH THE AMOUNT APPE ARING AT ANNEXURE A- 2/42 AND A-2/72 IS REQUIRED TO BE DELETED. F) IN THE CASE OF THE BROKER M/S SHUBHAM PROJECTS P VT. LTD. THE FOLLOWING AMOUNT HAS BEEN ADDED:- S.NO. ANNEXURE NO./PAGE DATE PARTICULARS AMOUNT AS PER PARTY A-1 (IN RS.) 7. A-2/9 03.08.2007 SHUBHAM PROJECTS PVT. LTD. 12,22,547/- THE AR OF THE APPELLANT HAS SUBMITTED THAT FROM THE PERUSAL OF THE SEARCH MATERIAL ANNEXURE NO. A-2/9, IT WILL BE FOUND THAT THAT A THANKSGIVING AND NO DUES LETTER OF RS.12,22,547/- (RS.10,50,627 OF K AMAL PROJECT PH-I AND RS.1,71,920 OF KAMAL PROJECT PH-II) WAS GIVEN BY TH E BROKER TO THE COMPANY WHICH HAS ALREADY BEEN ACCOUNTED FOR IN THE BOOKS AND ACCOUNT OF THE APPELLANT. THE PAYMENT FOR RS.1,71,9201- HAS BE EN MADE TO THE PARTY ON 02.06.2005 AFTER DEDUCTION OF THE TDS AND WHEREAS F OR THE BOOKING OF KAMAL PROJECT PH-I, PAYMENT HAS BEEN MADE TO THIS B ROKER ON 04.04.2005 VIDE CHQ. NO. 2809 OF J&K BANK AMOUNTING TO RS.4,98 ,902/- WHICH HAS BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE AY 2006-07. AGAIN PAYMENT OF RS.5,28,554/- WAS MADE THROUGH CHQ. NO. 402989 ON 01.03.2007 IN THE F.Y 2006-07 AFTER DEDUCTION OF TH E TDS RELEVANT TO THE A.Y 2007-08. THEREFORE THE WHOLE OF THE AMOUNT OF R S.10,27,456/- HAS BEEN ACCOUNTED FOR IN THE BOOKS OF THE COMPANY IN A Y 2006-07 AND 2007- 08 THEREFORE, THE ADDITION MADE OF RS.12,22,547/- I S ILLEGAL AND UNCALLED FOR. ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 11 AFTER GOING THROUGH THE SEIZED DOCUMENT, LEDGER ACC OUNT AND PAYMENT DETAILS AS POINTED OUT BY THE AR OF THE APPELLANT I FIND IT SATISFACTORY AND THEREFORE, THIS ADDITION IS DELETED. G) IN THE CASE OF THE BROKER M/S SURAJ BHAN ESTATES PVT. LTD. THE FOLLOWING ADDITIONS WERE MADE:- S.NO. ANNEXURE NO./PAGE DATE PARTICULARS AMOUNT AS PER PARTY A-1 (IN RS.) 8. A-2/10 24.07.2007 SURAJ BHAN ESTATES PVT. LTD. 5,51,819/- 17. A-2/41 21.05.2007 SURAJ BHAN ESTATES PVT. LTD. 1,69,000/- ACCORDING TO SEIZED ANNEXURE NO.A-2/10 DATED 24.07. 2007 THERE IS A CONFIRMATION FOR RECEIPT OF AMOUNT OF RS.5,51,819/- , WHICH INCLUDED RS.1,69,000/- ADDED SEPARATELY BY THE AO. THE BREAKUP OF RS.5,51,819/- IS RS.2,41,700 + RS.1, 69,000 + RS.1,41,119 RECEIVED BY THE BROKER AND THE SAME WAS ACCOUNTED F OR IN THE BOOKS OF ACCOUNT OF THE APPELLANT COMPANY IN THE F.Y 2005-06 FOR AMOUNT OF RS.5,23,730/- AFTER DEDUCTING TS @ 5.61%. WHEN THI S IS GROSSED UP, THE AMOUNT IS APPROXIMATELY THE SAME. IN VIEW OF THIS TOTAL ADDITION OF RS.7,20,819/- IS DELETED. H) WITH REGARD TO COMMISSION PAID TO M/S RAJ PROPER TIES TWO ADDITION OF SAME AMOUNT OF RS.68,400/- EACH HAS BEEN MADE BA SED ON SEIZED ANNEXURE A-2/11 AND A-2/44. THE AO DID NOT EVEN CAR E TO LOOK INTO THE CONTENTS OF BOTH ANNEXURES WHICH ARE EXACTLY SAME. THEREFORE, ONE OF THE ADDITION OF RS.68,400/- IS DELETED AND OTHER SAME A MOUNT OF RS.68,400/- IS CONFIRMED IN ABSENCE OF ANY EXPLANATION. THERE IS A N ANOTHER ENTRY OF RS.5,00,719/- AT S.NO.25 OF THE AO ORDER FOR WHICH THE APPELLANT COULD NOT GIVE ANY PLAUSIBLE EXPLANATION, HENCE, CONFIRMED. I) REGARDING COMMISSION PAYMENT TO M/S JYOTI ESTATE S FOR RS.46,83,990/- AS DETAILED BELOW, AT THE OUTSET IT IS TO MENTION THAT THE AO HAS MADE DUPLICATE ADDITIONS ONE ON THE BASIS OF TH E CONTENTS OF THE LETTER AND OTHER ON THE BASIS OF THE COVERING LETTER APPEA RING AT ANNEXURE A-2/12 AND A-2/33 RESPECTIVELY AT S.NO.10 AND 14. S.NO. ANNEXURE NO./PAGE DATE PARTICULARS AMOUNT AS PER PARTY A-1 (IN RS.) 10. A-2/12 03.05.2007 JYOTI ESTATES 23,41,995/- ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 12 14. A-2/33 03.05.2007 JYOTI ESTATES 23,41,995/- THE AR MENTIONED THAT. ANNEXURE NO.A-2/33 OR A-2/12 IS AN OUTSTANDING AMOUNT OF RS.2,57,628/- OUT OF COMMISSION BILL OF R S.23,41,995/- THE BROKER HAS DEMANDED AN AMOUNT OF RS.2,57,628/- THRO UGH THIS COVERING LETTER. THE DOCUMENT IS SELF SPEAKING WHICH IS DETA ILED BELOW:- BILL AMOUNT 23,41,995 LESS: RECEIVED AMOUNT 05.09.2005 CH.NO.678761 10,27,638* + TDS RS.56,7 29 *ACCOUNTED FOR IN THE F.Y 2005-06 15.01.2007 CH.NO.141770 4,71,950# + TDS RS.28,05 0/- 07.02.2007 CH.NO.102884 4,71,950# + TDS RS.28,05 0/- # ACCOUNTED FOR IN THE F.Y 2006-07 AND THE BALANCE OF RS.2,57,628/- AS MENTIONED IN AN NEXURE NO.A-2/33 HAS BEEN PAID ON 04.08.2007 BOOKED IN A.Y 2008-09. THE ACCOUNT HAS BEEN FOUND FULLY RECONCILED AND ALL THE ENTRIES WERE APP EARING IN THE BOOKS OF ACCOUNT OF THE APPELLANT COMPANY. THEREFORE, THE AD DITION MADE ON THIS ACCOUNT OF RS.23,41,995 + RS.23,41,995/- IS LIABLE TO BE DELETED. HOWEVER, SINCE AO HAS ALREADY GIVEN CREDIT FOR THE PAYMENT O F RS.10,44,148, THE APPELLANT WILL GET RELIEF OF RS.36,39,842/-. J) CONCERNING PAYMENT OF COMMISSION OF RS.80,70,257 /- APPEARING AT ANNEXURE A-2/15 AND RS.40,95,522/- AT ANNEXURE A-2/ 18 (S.NO.11 AND 13 OF THE AO'S ORDER) THE APPELLANT COULD NOT GIVE ANY EXPLANATION, HENCE, IN VIEW OF PRESUMPTION U/S 132 (4A) OF THE I.T ACT THE CONTENTS THEREON IS TREATED AS CORRECT AS HAVING PAID BY THE APPELLANT COMPANY TO THE BROKER. THEREFORE, THE ADDITION OF BOTH THE ABOVE AMOUNTS A RE CONFIRMED. K) REGARDING COMMISSION PAID TO BROKER M/S UMANG ES TATES THE FOLLOWING ADDITIONS HAVE BEEN MADE:- S.NO. ANNEXURE NO./PAGE DATE PARTICULARS AMOUNT AS PER PARTY A-1 (IN RS.) 23. A-2/51 10.08.2007 UMANG ESTATES 35,83,834/- 28. A-2/76 03.11.2007 UMANG ESTATES 4,23,484/- 30. A-2/78 03.11.2007 UMANG ESTATES 28,77,539/- THE AR HAS SUBMITTED THAT FROM THE PERUSAL OF SEIZE D MATERIAL ANNEXURE NO A-2/51 OF RS.35,83,834/-, ANNEXURE NO.A-2/76 OF RS.4,23,484/- AND ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 13 ANNEXURE NO.A-2/78 OF RS.28,77,539/-, IT WILL BE OB SERVED THAT THE SAME WERE THE BILLS ISSUED BY THE BROKER IN DEMAND OF TH E MONEY AND NONE OF THEM IS BEARING THE DATES THEREON. HOWEVER, THE APP ELLANT HAS ACCOUNTED FOR THE ACCOUNT OF THE BROKER FOR THE F.Y 2005-06, 2006-07 AND 2007 -08 AND TOTAL PAYMENT WAS MADE AS UNDER :- S.NO. F.Y. AMOUNT 1. 2005-06 19,97,363/- (RS.18,85,311 + TDS @ 5.61% OF RS.1,12,052) 2. 2006-07 RS.23,96,463/- 3. 2007-08 RS.52,07,146/- LESS : ALREADY ADJUSTED BY THE ASSESSING OFFICER IN HIS ORDER RS.13,320/- BALANCE RS.51,93,826/- THE TOTAL ADDITION MADE ON THE BASIS OF SEIZED MATE RIAL WAS RS.68,84,857/- WHEREAS, THE APPELLANT COULD EXPLAIN ONLY TO THE EX TENT OF RS.51,93,826/-. HENCE, THE DIFFERENCE OF ADDITION OF RS.16,91,031/- IS CONFIRMED. L) WITH REGARD TO PAYMENT OF RS.5,58,500/- MADE TO THE BROKER M/S UTTARANCHAL REALTORS PVT. LTD. A-2/66 (AT S.NO.24 O F THE AO'S ORDER) THE APPELLANT COULD NOT GIVE ANY EXPLANATION FOR THIS PAYMENT. TH EREFORE, THE ADDITION OF THIS AMOUNT IS CONFIRMED M) CONCERNING ALLEGED PAYMENTS TO BROKERS WHERE NO PARTY NAME IS WRITTEN OR EVIDENT FROM THE SEIZED MATERIAL IT IS FOUND FROM T HE DETAILS AND CONTENTS OF THE SEIZED PAPERS THAT THERE IS DUPLICITY THE DETAILS O F PAYMENTS WHICH HAVE BEEN ADDED BY THE AO ARE AS UNDER- S.NO. ANNEXURE NO./PAGE DATE PARTICULARS AMOUNT AS PER PARTY A-1 (IN RS.) 21. A-2/49 10.08.2007 NO PARTY NAME 17,15,440/- 29. A-2/76 03.11.2007 NO PARTY NAME 27,53,381/- 31. A-2/79 03.11.2007 NO PARTY NAME 58,286/- 32. A-2/82 03.11.2007 NO PARTY NAME 35,83,834/- 1. ANNEXURE A-2/49 AT S.NO.21 FOR AN AMOUNT OF RS.1 7,15,440/-. SEIZED MATERIAL NO. A-2/50 DATED 10.08.2007 OF M/S SHUBHAM AGENCIES, WHEREBY, THE CONTENTS OF A-2/50 ARE SIMILAR TO THAT OF A-2/4 9 (NO PARTY NAME MENTIONED). EXCEPT FOR ONE ITEM OF KAMAL PH-II THE BROKERAGE CA LCULATION I.E. RATES, TOTAL SQ. YARDS AND PERCENTAGE OF COMMISSION RELATING TO KAMA L PH-I AND PH-II, AGRA AND JAIPUR PROJECT, ALL OTHER DETAILS MATCH WITH THE BI LL OF M/S SHUBHAM AGENCIES. THEREFORE, THIS IS PRIMA FACIE A DUPLICITY. SINCE M /S SHUBHAM AGENCIES HAVE ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 14 ALREADY BEEN CONSIDERED NO ADVERSE INFERENCE CAN BE DRAWN. THEREFORE, THIS ADDITION IS DELETED. 2. ANNEXURE A-2/82 DATED 03.11.2007 AT S.NO.32 FOR AN AMOUNT OF RS.35,83,834/- . SEIZED MATERIAL NO. A-2/51 DATED 10.08.2007 OF M/S UMANG ESTATES, WHEREBY, THE CONTENTS AND DETAILS OF CUSTOMERS OF A-2/51 ARE EXA CTLY THE SAME AS THAT OF A-2/82 AND WHEREAS, THE SAME HAS BEEN EXPLAINED WHILE EXPL AINING THE SEIZED MATERIAL A- 2/51 DATED 10.08.2007 UNDER THE HEAD UMANG ESTATES ' ABOVE. AS SUCH THE ADDITION MADE ON ACCOUNT OF THIS PAPER IS NOTHING B UT THE DUPLICITY OF THE SEIZED MATERIAL A-2/51, HENCE, DELETED. 3. ANNEXURE A-2/76 DATED 03.11.2007 AT S.NO.29 FOR AN AMOUNT OF RS.27,53,381/- AND ANNEXURE A-2/79 DATED 03.11.2007 AT S.NO.31 FOR AN AMOUNT OF RS.58,286/- . THE APPELLANT HAS STATED THAT THE ANNEXURE MENTIONE D ABOVE WHEREBY NO NAME OF ANY BROKER WAS MENTIONED IN THE BILL, WAS STRAY NOT ING WHICH CAN NEVER FORM THE PART OF THE ASSESSMENT AS THE SAME IS NOT JUSTIFIED . AS SUCH THE ADDITION MADE ON THIS GROUND IS ILLEGAL AND UNCALLED FOR AND THE SAM E IS LIABLE TO BE DELETED. I DO NOT AGREE WITH THE CONTENTION OF THE APPELLANT BECAUSE THERE IS A VALID PRESUMPTION U/S 132(4A) ABOUT TRUTHFULNESS OF THE DOCUMENTS FOUND A ND SEIZED DURING THE COURSE OF SEARCH. THE ONUS IS ON THE APPELLANT TO EXPLAIN THAT WHAT IT RELATES TO. IF IT IS ASSERTED TO BE A STRAY AND DUMB DOCUMENTS, THE APPE LLANT HAS TO PROVE THAT THIS DOES NOT LEAD TO ANY TRANSACTION, WHICH HAS NOT BEE N DISCHARGED. HENCE THE AMOUNT OF ADDITIONS OF RS.27,53,381/- AND RS.58,286 /- ARE THUS CONFIRMED. THUS OUT OF TOTAL ADDITION OF RS.4,62,09,068/- ON A CCOUNT OF BROKERAGE FOR COMMISSION PAID OUT OF BOOKS, AN AMOUNT OF RS.1,89, 87,400/- IS CONFIRMED AND BALANCE IS DELETED. WE HAVE ALSO PERUSED THE ORDER OF CIT (A) AND MATER IAL AVAILABLE ON RECORD. WE FIND THAT THE CIT (A) HAS GRANTED PART RELIEF BY DELETING THE ADDITION OF RS.2,72,21,668/-. THERE WAS MISTAKE IN ADDITION BY WAY OF DUPLICATION OF SAME AMOUNT ON ACCOUNT OF VARIOUS SEIZED PAPERS. T HERE WAS ALSO OVERLAPPING OF ADDITION AMONG VARIOUS FINANCIAL YEA RS. CIT (A) HAD CONSIDERED ALL THESE ASPECTS AND DEALT WITH EACH AN D EVERY ANGLE WHILE DELETING/SUSTAINING ADDITION. REVENUES PLEA THAT THERE IS VIOLATION OF RULE 46A IS ALSO NOT CORRECT. THE MATERIAL WHICH CIT (A ) HAS ANALYSED AND CONSIDERED FOR DELETING PART ADDITION WAS AVAILABLE WITH ASSESSING OFFICER AS SEIZED MATERIAL. NO FRESH EVIDENCE WAS FILED. ASS ESSING OFFICER HAD FAILED TO CONSIDER THE SEIZED MATERIAL IN ITS ENTIRETY. WE A LSO FIND THAT ASSESSEE HAS ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 15 FAILED TO EXPLAIN THE REASONABLE EXPLANATION WITH R EGARD TO THE COMMISSION, THEREFORE, WE FIND NO FAULT IN THE ORDER OF THE CIT (A) AND WE SUSTAIN THE SAME. THUS, GROUND NO.2 OF REVENUES APPEAL AND GR OUND NO.2 OF ASSESSEES APPEAL ARE DISMISSED. THE GROUND NO.1 IN CROSS OBJ ECTION IS ALLOWED. 9. IN THE GROUND NO.3, THE REVENUE HAS RAISED THE I SSUE OF ESTIMATION OF THE PROFIT AMOUNTING TO RS.3,89,49,700/- IN PLACE OF TO TAL TAXABLE INCOME DECLARED BY THE ASSESSEE OF RS.1,81,84,890/- INCLUDING PROFI T ON PERCENTAGE COMPLETION METHOD. IN THE CROSS OBJECTION, THE ASSESSEE HAS S UPPORTED THE ORDER OF CIT (A) ON THE BASIS THAT ASSESSING OFFICER HAS NOT MAD E ANY ADDITION BUT ESTIMATED THE PROFITS. THE ASSESSING OFFICER HAS R EJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE WITHOUT ANY REASON. THE A SSESSING OFFICER HAS APPLIED THE METHOD OF ACCOUNTING NOT RELEVANT TO TH E ASSESSEES BUSINESS. THE ASSESSEE HAS ADOPTED AND OPTED STANDARD METHOD OF A CCOUNTING APPROVED BY ACCOUNTING STANDARDS OF ICAI AND ALSO BY HON'BLE SU PREME COURT AND HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MA NISH BUILDWELL. THE ASSESSEE HAS ALSO PLEADED THAT ASSESSING OFFICER HA S FAILED TO APPRECIATE THAT ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF BUILDING OR STRUCTURES BUT ENGAGED IN THE BUSINESS OF DEVELOPMENT OF LAND AND SELLING OF PLOTS OF LAND. THE ASSESSEE HAS ALSO PLEADED THAT ASSESSING OFFICER HA S FAILED TO APPRECIATE THE FACT THAT SALE OF PLOT OF LAND IS MADE BY REGISTERE D DOCUMENTS BY HANDING OVER THE PLOT AND NO OWNERSHIP IS TRANSFERRED PRIOR TO T HE FINAL PAYMENT RECEIVED IN RESPECT OF THE SALE OF THE PLOT OF LAND. WHILE IN CONSTRUCTION ACTIVITIES THE ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 16 PAYMENTS ARE MADE ON THE CONSTRUCTION BASIS. THERE FORE, THE PERCENTAGE COMPLETION METHOD IS NOT APPLICABLE TO THE FACTS OF ASSESSEES CASE. 10. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE ASSESSEE HAS RECOGNIZED THE SALES OF THE PLOT WHEN THE POSSESSIO N OF THE PLOT IS TRANSFERRED TO THE CUSTOMER AND FULL CONSIDERATION FOR THE PLO T HAD BEEN RECEIVED. THE ASSESSEE WAS FOLLOWING THE PROJECT COMPLETION METHO D WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE EARLIER YEARS. T HE CIT (A) HAS GRANTED THE RELIEF TO THE ASSESSEE BY HOLDING AS UNDER :- 7.1.1 THE AO HAS NOTICED FROM THE NOTE MENTIONED WITH THE BALANCE SHEET, THAT THE ASSESSEE HAS RECOGNIZED THE SALES, WHEN POSSESSION OF PLOT HAS BEEN TRANSFERRED TO THE CUSTOMERS AND FULL CONSIDERATION OF THAT PLOT HAS BEEN RECEIV ED. AS THE ASSESSEE WAS NOT FOLLOWING THE PERCENTAGE COMPLETIO N METHOD, THEREFORE, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE PROFIT FOR THE ASSESSMENT YEAR SHOULD NOT BE COMPUT ED BY FOLLOWING THE PERCENTAGE COMPLETION METHOD. 7.1.2 THE AR OF THE APPELLANT HAS SUBMITTED THAT T HE ASSESSEE HAS BEEN FOLLOWING THE PROJECT COMPLETION METHOD OF ACCOUNTING AND THE SAME HAS BEEN ACCEPTED BY THE DE PARTMENT ALSO WHILE MAKING ASSESSMENT U/S 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2005-06. THE DEPARTMENT HAS ACCEPTE D THE METHOD OF ACCOUNTING AND NOT ONLY THEY HELD IT THE RIGHT AND APPROPRIATE METHOD BUT ALSO WERE CONVINCED AS NOT H AVING DEFERRED THE TAX LIABILITY AND WERE PLEASED TO FOLL OW THE SAME FOR THE A.Y 2006-2007. THE AR ALSO SUBMITTED THE COPY O F ASSESSMENT ORDERS AND SUBMITTED THAT IF SAME HAS BE EN ACCEPTED BY THE DEPARTMENT EARLIER ALSO, THEN HOW THE SAME C AN BE HELD AS AN INAPPROPRIATE METHOD TO COMPUTE THE INCOME AS PE R PROJECT COMPLETION METHOD WHICH THE ASSESSEE HAS FOLLOWED. ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 17 AGAIN, AR HAS BROUGHT THE ATTENTION THAT EVEN THE I NCOME TAX ACT, 1961 HAS NOT MADE IT MANDATORY TO FOLLOW AS SE CTION 145 AND 145A OF THE ACT, WHICH IS INSCRIBED AS UNDER :- 'SECTION 145:- (1) INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OR 'INCOME FRO M OTHER SOURCES', SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTI LE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. (2) THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFICI AL GAZETTE FROM TIME TO TIME ACCOUNTING STANDARDS TO BE FOLLOW ED BY ANY CLASS OF ASSESSEE OR IN RESPECT OF ANY CLASS OF INC OME. (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED AB OUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECT ION (1) OR ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB-SECTION (2) HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, THE ASSESS ING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SE CTION 144. SECTION 145A NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 145.- (A) THE VALUATION OF PURCHASE OR SALE OF GOODS AND INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEAB LE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' SHALL BE- (I) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE; AND (II) FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED} ACTUALL Y PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON TH E DATE OF VALUATION. EXPLANATION.- FOR THE PURPOSE OF THIS SECTION, ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) UNDER ANY LAW FOR THE TIME ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 18 BEING IN FORCE, SHALL INCLUDE ALL SUCH PAYMENTS NOT WITHSTANDING ANY RIGHT ARISING AS A CONSEQUENCE TO SUCH PAYMENT; (B) INTEREST RECEIVED BY AN ASSESSEE ON COMPENSATIO N OR ENHANCED COMPENSATION, AS THE CASE MAY BE, SHALL BE DEEMED OF BE THE INCOME OF THE YEAR IN WHICH IT IS RECEIVED. AS PER INCOME TAX ACT PROVISIONS, ONLY TWO ACCOUNTI NG STANDARDS ARE MANDATORY IN NATURE WHICH ARE ELABORA TED BELOW AND OTHER STANDARDS ARE RECOMMENDATORY. OFFICIAL GAZETTE: AS PER NOTIFICATION NO. SO 69(E), DATED 25-1- 1996 FOR NOTIFIED ACCOUNTING STANDARDS, NOTIFIED ST ANDARDS IS AS UNDER: A. ACCOUNTING STANDARD I RELATING TO DISCLOSER OF A CCOUNTING POLICIES. B. ACCOUNTING STANDARD II RELATING TO DISCLOSER OF PRIOR PERIOD ITEMS AND EXTRA ORDINARY ITEMS AND CHANGES IN ACCOU NTING POLICIES. IN ACCORDANCE TO THAT THE ASSESSEE IS NOT FOLLOWING PERCENTAGE COMPLETION METHOD WHICH FALLS UNDER ACCOUNTING STAN DARD -7, I.E. ACCOUNTING FOR CONSTRUCTION CONTRACTS. THEY ARE FOL LOWING PROJECT COMPLETION METHOD. MOREOVER, THIS STANDARD DEALS WI TH THE ACCOUNTING FOR THE CONSTRUCTION CONTRACTS AND NOT W ITH THE TAXATION MATTERS. HOWEVER, ACCOUNTING STANDARD-7 STATES THAT THERE AR E TWO METHODS OF ACCOUNTING FOR CONTRACTS COMMONLY FOLLOW ED BY CONTRACTORS ARE THE PERCENTAGE OF COMPLETION METHOD AND THE COMPLETED CONTRACT METHOD. A) UNDER THE PERCENTAGE OF COMPLETION METHOD, REVEN UE IS RECOGNIZED AS THE CONTRACT ACTIVITY PROGRESSES BASE D ON THE STAGE OF COMPLETION REACHED. THE COSTS INCURRED IN REACHING THE STAGE OF COMPLETION ARE MATCHED WITH T HIS REVENUE, RESULTING IN THE REPORTING OF RESULTS WHIC H CAN BE ATTRIBUTED TO THE PROPORTION OF WORK COMPLETED. ALT HOUGH ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 19 (AS PER THE PRINCIPLE OF 'PRUDENCE') REVENUE IS REC OGNIZED ONLY WHEN REALIZED, UNDER THIS METHOD, THE REVENUE IS RECOGNIZED AS THE ACTIVITY PROGRESSES EVEN THOUGH I N CERTAIN CIRCUMSTANCES IT MAY NOT BE REALIZED. B) UNDER THE COMPLETED CONTRACT METHOD, REVENUE IS RECOGNIZED ONLY WHEN THE CONTRACT IS COMPLETED OR SUBSTANTIALLY COMPLETED; THAT IS, WHEN ONLY MINOR W ORK IS EXPECTED OTHER THAN WARRANTY OBLIGATION. COSTS AND PROGRESS PAYMENTS RECEIVED ARE ACCUMULATED DURING T HE COURSE OF THE CONTRACT BUT REVENUE IS NOT RECOGNIZE D UNTIL THE CONTRACT ACTIVITY IS SUBSTANTIALLY COMPLETED. THE PRINCIPAL ADVANTAGE OF THE COMPLETED CONTRACT M ETHOD IS THAT IT IS BASED ON RESULTS AS DETERMINED WHEN THE CONTR ACT IS COMPLETED OR SUBSTANTIALLY COMPLETED RATHER THAN ON ESTIMATES WHICH MAY REQUIRE SUBSEQUENT ADJUSTMENT AS A RESULT OF UNFORESEEN COSTS AND POSSIBLE LOSSES THE RISK OF RE COGNIZING PROFITS THAT MAY NOT HAVE BEEN EARNED IS THEREFORE MINIMIZED. THE AR OF THE APPELLANT INFERRED THAT THE INCOME TA X ACT HAS NOT PRESCRIBED ANY METHOD OF ACCOUNTING AS PER SECT ION 145 OR 145A OF THE ACT, FOR THE BUILDERS AND REAL ESTATE; THEREFORE, THE OBSERVATION OF THE AO IS ERRONEOUS. THE AR HAS INSCRIBED THAT ASSESSEE HAS THE CHOICE O N METHOD, BUT SUCH METHOD SHOULD BE SHOWN AS REGULARLY FOLLOW ED. DEPARTMENT CANNOT COMPEL TO CHOSE A PARTICULAR METH OD AND IN SUPPORT OF THAT HAS PLACED THE FOLLOWING CASE LAWS TO DEFEND HIS CONTENTION. A) CIT V. MCMILLAN & CO. [1958] 33 ITR 182 (SC). B) INVESTMENTS LTD V. CIT [1970] 77 ITR 533 (SC) C) MKB ASIA (P) LTD. V. CIT [2008] 167 TAXMAN 256 (GAU.). D) CIT VS. HYUNDAI HEAVY INDUSTRIES CO. LTD. (2007) 210 CTR (SC) 178 . (2007) 291 ITR 482 (SC) E) CIT VS. BILAHARI INVESTMENT (P) LTD. (2008) 215 CTR (SC) 201 : (2008) 3 DTR (SC) 329 : (2008) 299 ITR 1 (SC) ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 20 F) JUGGILAL KAMLAPAT BANKERS V. CIT [1975] 101 ITR 40 (ALL.) G) CIT V. SMT. VIMLA O. SON WANE [1994] 75 TAXMAN 3 35 (BOM.) H) AWADHESH BUILDERS VS. ITO (2010) 37 SOT 122 I) VASTUKAR VS ITO (ITAT CUTTAK) J) FORT PROJECTS (P) LTD. V. DEPUTY COMMISSIONER OF INCOME TAX (2011) 63 DTR (KOL)(TRIB) 145 7.2.1 THE AO HAS DISCUSSED THE LEGAL POSITION OF T HE ACCOUNTING PRINCIPLES TO BE FOLLOWED IN THE CASE OF THE REAL ESTATE DEVELOPERS. AS PER THE AO THE PROJECT TAKES NORMALLY 4-5 YEARS BEFORE IT IS COMPLETED. THE DEVELOPER RECEIVE S ADVANCES RIGHT FROM THE BEGINNING RATHER PRIOR TO WORK OF CO NSTRUCTION COMMENCES AND CONTINUES TAKING INSTALLMENTS REGULAR LY FROM THE BUYERS AS THE CONSTRUCTION PROGRESSES. THEREFORE, Q UESTION ARISES THAT WHEN INCOME BECOMES TAXABLE IN SUCH CASES. IS IT THE YEAR OF COMPLETION OF THE PROJECT OR SHOULD THE INCOME BE O FFERED ON A YEAR TO YEAR BASIS. IF THE INCOME IS TO BE OFFERED ON A YEAR TO YEAR BASIS SHOULD IT BE COMPUTED ON PERCENTAGE OF COMPLE TION METHOD OR SHOULD IT BE ESTIMATED? 7.2.2 THE AR HAS SUBMITTED THAT THE ASSESSEE HAS C ARRIED OUT THE BUSINESS OF REAL ESTATE DEVELOPERS BY DEVEL OPING LAND AND THEN PLOTTING IT. THE LAND HAS BEEN DEVELOPED IN TH E EARLIER YEAR AND THE PLOTS ARE BEING SOLD ON PAYMENT BASIS WHICH IS VARYING FROM 45 DAYS TO 6 MONTHS. THERE IS NO PERIOD OF 4-5 YEARS IS INVOLVED AS HAS BEEN ENVISAGED BY THE AO IN HIS ASS ESSMENT ORDER. THE OBSERVATION OF THE AO IS HIS OWN OBSERVA TION AND HAS GOT NOTHING TO DO WITH THE BUSINESS OF THE ASSESSEE AS THE ASSESSEE HAVE NOT CARRIED OUT THE CONSTRUCTION WORK S AND HAS RECEIVED INSTALLMENTS AS THE CONSTRUCTION PROGRESSE S. AR STATED THAT THE OBSERVATION OF AO IS NOT RELATED WITH THE BUSINESS OF THE ASSESSEE, AS SUCH, THE SAME CANNOT BE THE BASIS FOR CONVERTING THE PROJECT COMPLETION METHOD TO PERCENTAGE COMPLETION METHOD. THE ASSESSEE HAS ACCOUNTED FOR ITS INCOME ON THE BA SIS OF THE SALE OF THE PLOTS AS AND WHEN THE FULL PAYMENT OF T HE PLOT HAS BEEN RECEIVED THE INCOME HAS BEEN RECOGNIZED IN THA T VERY YEAR AND NO DEFERMENT HAS BEEN MADE AS ALLEGED BY THE AO . ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 21 7.3.1 THE AO HAS INFERRED THAT IT IS A WELL SETTLE D PRINCIPLE THAT FOR THE PURPOSE OF INCOME TAX, INCOM E HAS TO BE DETERMINED ON A YEAR TO YEAR BASIS. THIS WAS SO DEC IDED BY THE SUPREME COURT IN THE CASE OF P.M. MOHAMMED VS. CIT (1969) 73 ITR 735. THEREFORE, IN THE CASE OF REAL ESTATE D EVELOPERS ALSO, THE INCOME IS TO BE OFFERED ON A YEAR TO YEAR BASIS. 7.3.2 THE AR IN HIS REPLY SUBMITTED THAT THE FACTS OF THE CASE AS QUOTED BY THE AO ARE TOTALLY DIFFERENT WITH THE FACTS OF THE APPELLANT AND THE DISTINGUISHMENT OF THE FACTS IS AS UNDER : DIFFERENTIATION AND DISTINGUISHMENT :- THE FACTS OF THE CASE ARE ALTOGETHER DIFFERENT THAN THE FACTS OF THE ASSESSEE. IN THE CASE CITED BY THE LD AO, IT HAS BEEN HELD:- BUSINESS-ADVENTURE IN THE NATURE OF TRADE-AGREEMENT FOR PURCHASE OF VAST AREAS OF LAND - DIVISION OF AREA I NTO 23 PLOTS-SALE OF 22 PLOTS TO OTHERS AND 23RD RETAINED BY THE ASSESSEE-WHETHER TRANSACTIONS IN THE NATURE OF TRAD E- PROFITS FROM TRANSACTION HOW ASCERTAINED- VALUE OF PLOT RETAINED BY ASSESSEE, WHETHER TO BE TAKEN INTO ACCO UNT. IN THE CASE OF THE ASSESSEE, NO SUCH SITUATION FOR PURCHASE OF VAST AREA OF LAND, DIVISION OF THE AREA INTO 23 PLOTS AND ONE PLOT RETAINED BY THE ASSESSEE HIMSELF, AND WHET HER THE VALUE OF PLOT RETAINED BY THE ASSESSEE IS TO BE TAK EN INTO ACCOUNT WAS PRESENT RATHER THERE HAS BEEN A SUBSTAN TIAL QUESTION OF LAW AS HAS BEEN RAISED BY THE AO THAT W HETHER, THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE F ORM THE PAST SO MANY YEARS AND ACCEPTED BY THE DEPARTME NT AS THE CORRECT METHOD OF DEDUCING PROFITS IS LIABLE TO BE CONVERTED INTO PROJECT COMPLETION METHOD TO PERCENT AGE COMPLETION METHOD. THE FACTS OF THE CASE AND THE SUBSTANTIAL QUESTION RAISED BY THE AO ARE NOWHERE COVERED, AS SUCH, THE SAME IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE COMPANY AND IS NOT TO BE RELIED UPON. 7.4.1 THE AO HAS OBSERVED THAT IT IS A WELL SETTLE D PRINCIPLE AS TO IF NO SPECIFIC METHOD OF RECOGNIZIN G REVENUE HAS ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 22 BEEN PRESCRIBED IN THE INCOME TAX ACT, IN THAT CASE THE USUALLY ACCEPTED METHODS OR PRINCIPLES SHOULD BE ADOPTED. I N THIS CONNECTION IT IS STATED THAT THE COUNCIL OF THE INS TITUTE OF CHARTERED ACCOUNTANTS OF INDIA HAD ISSUED A GUIDANC E NOTE IN THE YEAR 2006, RECOMMENDING THE PRINCIPLES FOR RECO GNITION OF REVENUES ARISING FROM REAL ESTATE SALES BY THE ENTE RPRISES ENGAGED IN SUCH ACTIVITIES (COMMONLY REFERRED TO AS 'REAL ESTATE DEVELOPERS', 'BUILDERS' OR 'PROPERTY DEVELOPERS'). AS PER THE GUIDANCE NOTE REVENUE IN THE CASE OF REAL ESTATE SA LES SHOULD BE RECOGNIZED WHEN THE FOLLOWING CONDITIONS ARE SATISF IED: 1. THE SELLER HAS TRANSFERRED TO THE BUYER ALL SIGN IFICANT RISKS AND REWARDS OF OWNERSHIP AND THE SELLER RETAINS NO EFFECTIVE CONTROL OF THE REAL ESTATE TO A DEGREE US UALLY ASSOCIATED WITH OWNERSHIP; 2. NO SIGNIFICANT UNCERTAINTY EXISTS REGARDING THE AMOUNT OF THE CONSIDERATION THAT WILL BE DERIVED FROM THE REA L ESTATE SALE; AND 3. IT IS NOT UNREASONABLE TO EXPECT ULTIMATE COLLEC TION. IT IS ALSO PROVIDED IN THE GUIDANCE NOTE THAT IN TH E CASE OF REAL ESTATE SALE, ALL SIGNIFICANT RISKS AND REWARDS OF O WNERSHIP ARE NORMALLY CONSIDERED TO BE TRANSFERRED WHEN LEGAL TI TLE PASSES TO THE BUYER (E.G., AT THE TIME OF THE REGISTRATION, W ITH THE RELEVANT AUTHORITIES, OF THE REAL ESTATE IN THE NAME OF THE BUYER) OR WHEN THE SELLERS ENTERS INTO AN AGREEMENT FOR SALE. ALL SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP ARE ALSO CONSIDERED TO BE TRANSFERRED, IF THE SELLER HAS ENTERED INTO A LEGALLY ENFORCEABL E AGREEMENT FOR SALE WITH THE BUYER EVEN THOUGH THE LEGAL TITLE IS NOT PASSED OR THE POSSESSION OF THE REAL ESTATE IS NOT GIVEN TO T HE BUYER. WHEN THE SELLER HAS TRANSFERRED TO THE BUYER ALL TH E SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP, IT WOULD BE APPROPR IATE TO RECOGNIZE REVENUE AT THAT STAGE. HOWEVER, IN CASE T HE SELLER IS OBLIGED TO PERFORM ANY SUBSTANTIAL ACTS AFTER THE T RANSFER OF ALL SIGNIFICANT RISKS AND REWARDS OF THE OWNERSHIP, REV ENUE SHOULD BE RECOGNIZED ON THE PROPORTIONATE BASIS AS THE ACT S ARE PERFORMED, I.E., BY APPLYING THE PERCENTAGE OF COMP LETION METHOD IN THE MANNER EXPLAINED IN ACCOUNTING STANDA RD (AS) 7, ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 23 CONSTRUCTION CONTRACTS. THEREFORE, IN THE CASE OF R EAL ESTATE DEVELOPERS ALSO, THE INCOME IS TO BE OFFERED ON A Y EAR TO YEAR BASIS. 7.4.2 THE AR HAS SUBMITTED THAT THE GUIDANCE NOTES ISSUED BY THE ICAI IN 2006 HAS BEEN WITHDRAWN AND I S NOT APPLICABLE. AS PER ACCOUNTING STANDARD PRESCRIBED W HAT HAS BEEN HELD AS MANDATORY IS REPRODUCED BELOW :- IN ACCOUNTING FOR CONSTRUCTIONS CONTRACTS IN FINANC IAL STATEMENTS, EITHER THE PERCENTAGE OF COMPLETION METHOD OR THE C OMPLETED CONTRACT METHOD MAY BE USED. WHEN A CONTRACTOR USES A PARTICULAR METHOD OF ACCOUNTING FOR A CONTRACT THEN THE SAME METHOD SHOULD BE ADOPTED FOR ALL OTHER CONTRACTS WH ICH MEET SIMILAR CRITERIA. THEREFORE, THE OBSERVATION MADE BY THE AO ARE NOTHI NG BUT A DISTORTED INFERENCE MADE BY HIM. THEREFORE, THE SAM E ARE NOT LIABLE TO BE CONSIDERED AND THE CONSEQUENT ADDITION S MADE, BASED THEREON IS LIABLE TO BE DELETED. THE AR HAS P ROVIDE THE RECENT JUDGMENT OF HON'BLE DELHI HIGH COURT CIT VS. MANISH BUILD WELL (P) LTD. (DEL.) (HC) (2011) 63 DTR 369 W HICH HAS ENDORSED THE SUBMISSION OF THE APPELLANT. 7.5 I HAVE CAREFULLY CONSIDERED THE SUBMISSION, PE RUSED THE ORDER OF ASSESSMENT AND EVIDENCE ON RECORD. THE DISPUTE, AS RAISED BY THE APPELLANT, PERTAINS TO THE ESTIMATION OF THE PROFIT BY THE AO ON PERCENTAGE COMPLETION METHOD INSTEAD OF P ROJECT COMPLETION METHOD. THE AO HAS THE CONTENTION THAT P ROJECT OF THE APPELLANT TAKES NORMALLY 4-5 YEARS BEFORE IT IS COMPLETED. THE ASSESSEE RECEIVES ADVANCES PRIOR TO COMMENCEMEN T OF THE CONSTRUCTION WORK AND CONTINUES TAKING INSTALLMENTS REGULARLY FROM THE BUYERS AS THE CONSTRUCTION PROGRESSES. THE REFORE, INCOME SHOULD BE TAXABLE ON YEAR TO YEAR BASIS ON P ERCENTAGE OF COMPLETION OF THE PROJECT. AGAINST THE CONTENTION O F THE AO, AR HAS SUBMITTED THAT PLOTS ARE BEING SOLD ON PAYMENT BASIS WHICH IS VARYING FROM 45 DAYS TO 6 MONTHS. THE AR HAS ALS O STATED THAT DEPARTMENT CANNOT COMPEL THE APPELLANT TO FOLL OW ANY PARTICULAR METHOD. INCOME TAX ACT DOES NOT FORCE AN YONE TO FOLLOW ANY PARTICULAR ACCOUNTING STANDARD. THE APPE LLANT WAS FOLLOWING PROJECT COMPLETION METHOD WHICH IS IN ACC ORDANCE OF ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 24 THE EXISTING LAW AND THE SAME HAS ALSO BEEN ACCEPTE D BY THE INCOME TAX DEPARTMENT DURING ASSESSMENT DONE EARLIE R U/S 143(3) AND IT IS THE SETTLED LAW THAT IF ONE METHOD IS EMPLOYED, IT SHOULD REGULARLY BE EMPLOYED. AFTER CONSIDERING THE ARGUMENT OF BOTH AND IN VIEW OF THE JUDGEMENT ANNOUNCED BY THE HON'BLE DELHI HIGH COURT IN CASE OF CIT VS. MANISH BUILD WE LL (P) LTD. (DEL.) (HC) (2011) 63 DTR 369, I AM OF THE CONSIDER ED OPINION THAT NO EVIDENCES WAS FOUND DURING THE COURSE OF SE ARCH TO SHOW THAT THE BOOKS OF ACCOUNT ARE NOT PROPERLY MAINTAIN ED BY THE APPELLANT. THE MAIN THRUST OF THE AO WHILE MAKING T HE ADDITION IS THAT THE APPELLANT IS DEFERRING THE PAYMENT OF T AXES. HOWEVER, THIS ALLEGATION OF THE AO IS DEVOID OF MERITS AND C ANNOT BE ACCEPTED BECAUSE THE APPELLANT IS CONSISTENTLY FOLL OWING A METHOD OF ACCOUNTING WHICH IS RECOGNIZED IN REAL ES TATE DEVELOPMENT BUSINESS. IT CANNOT BE SAID THAT THE PR OJECT COMPLETION METHOD COULD RESULT IN DEFERMENT OF PAYM ENT OF TAXES. IT HAS BEEN HELD BY THE HON'BLE HIGH COURT, DELHI IN ABOVE CASE THAT AS-7 ISSUED BY ICAI ALSO RECOGNIZES THE POSITION THAT IN CASE OF CONSTRUCTION CONTRACTS THE ASSESSEE CAN FOLLOW EITHER OF THE TWO METHODS. THIS PROJECT COMP LETION METHOD HAS BEEN ACCEPTED BY THE A.O IN EARLIER YEAR S, HENCE, ARGUMENTS OF THE AR OF THE APPELLANT HAS A STRONG A CCEPTANCE THUS, ESTIMATION OF PROFIT AMOUNTING TO RS.3,89,49, 700/- IN PLACE OF PROFIT DECLARED BY THE APPELLANT OF RS.1,8 1,84,890/- ON PERCENTAGE COMPLETION METHOD IS NOT ACCEPTED. THIS GROUND OF APPEAL IS ALLOWED. WE HAVE CAREFULLY GONE THROUGH THE FACTS OF THE CAS E AND CONSIDERED SUBMISSIONS OF THE CASE AND HAS ALSO CONSIDERED THE EVIDENCES ON RECORD. THE ONLY DISPUTE IS REGARDING THE ESTIMATION OF PROFIT. THE ASSESSING OFFICER ADOPTED PERCENTAGE COMPLETION METHOD WHILE ASSESSEE IS ADOPTING PROJECT COMPLETION METHOD. AS PER ASSESSING OFFICER, THE P ROJECT TAKES 4 5 YEARS TO BE COMPLETED, THEREFORE, THE INCOME SHOULD BE TAXED YEAR TO YEAR BASIS ON PERCENTAGE COMPLETION METHOD OF THE PROJECT. IN AS SESSEES CASE, THE PLOTS ARE ITA NO.1695/DEL/2012 CO NO.248/DEL/2012 ITA NO.2093/DEL/2012 25 BEING SOLD AND THE PAYMENT IS BEING RECEIVED WITHIN A PERIOD OF 45 DAYS TO SIX MONTHS. THE ASSESSEE IS ADOPTING PROJECT COMPLETI ON METHOD REGULARLY. THE ONLY PRESUMPTION OF THE ASSESSING OFFICER IS DIFFER ING THE PAYMENT OF TAXES AND ON THAT BASIS, THE ASSESSING OFFICER HAS ADOPTE D THE PERCENTAGE COMPLETION METHOD. IN OUR CONSIDERED VIEW, THERE W AS NO SUFFICIENT MATERIAL WITH THE ASSESSING OFFICER WHICH COULD ESTABLISH TH AT THE ASSESSEE WAS DIFFERING THE PAYMENT OF TAXES BY ADOPTING THE PROJ ECT COMPLETION METHOD. ASSESSEE WAS CONSISTENTLY FOLLOWING THIS METHOD WHI CH IS A RECOGNIZED METHOD OF ACCOUNTING INCOME IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. CONSIDERING TOTALITY OF THESE FACTS, WE FIND NO FAU LT IN THE ORDER OF CIT (A) AND WE DISMISS THIS GROUND OF REVENUES APPEAL AND ALLOW THE CROSS OBJECTION FILED BY THE ASSESSEE. 11. IN THE RESULT, THE APPEAL OF THE REVENUE AND AP PEAL OF THE ASSESSEE ARE DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSE SSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 24 TH DAY OF JANUARY, 2013. SD/- SD/- (R.P. TOLANI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 24 TH DAY OF JANUARY, 2013/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.