The ACIT, Circle-3, Baroda V. Ravi Enterprises, Baroda

ITA 1105/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76709 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Income from undisclosed sources
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 1105 /AHD/2011 (ASSESSMENT YE AR: 2007-08) THE ACIT CIRCLE-3, BARODA V/S RAVI ENTERPRISES F-66, UMIYA NAGAR DUPLES-1, CHANAKYAPURI CHAR RASTA, NEW SAMA ROAD, BARODA (APPELLANT) (RESPONDENT) PAN: AAFFR 9425B APPELLANT BY : SHRI P.L. KUREEL, SR. D.R . RESPONDENT BY : SHRI MUKUND BAKSHI ( )/ ORDER DATE OF HEARING : 08-05-2014 DATE OF PRONOUNCEMENT : 16 -05-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A)-II, BARODA DATED 20.01.2011 FOR A.Y. 2007-08. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A FIRM STATED TO BE ENGAGED IN THE BUSI NESS OF CIVIL CONSTRUCTION. ASSESSEE FILED ITS RETURN OF INCOME F OR A.Y. 07-08 ON 31.10.2007 DECLARING TOTAL INCOME OF RS. 7,61,890/- . THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 30.12.2009 AND THE TOTAL INCOME WAS ITA NO 1105/ AHD/2011 . A.Y. 2007- 08 2 DETERMINED AT RS. 1,07,08,378/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) V IDE ORDER DATED 20.01.2011 GRANTED SUBSTANTIAL RELIEF TO THE ASSESS EE. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFOR E US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT (APPEALS) ERRED IN REJECTING THE BOOKS OF ACCOUNT ON THE BASIS OF PECU LIARITY OF THE METHOD ADOPTED BY THE ASSESSEE AND IN ESTIMATING THE PROFIT @ 12% ON THE TOTAL REC EIPTS. THE ID.CIT(APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE ADDITION OF RS 69,42 ,515/- WAS RIGHTLY MADE U/S.41(L) OF THE INCOME- TAX ACT TOWARDS MEMBERS CONTRIBUTION SINCE THE MEMB ERS WERE ALLOTTED AND GIVEN POSSESSION OF THE PROPERTY LONG BACK, ALL THE DUES WERE CLEARED A T THAT POINT OF TIME AND THUS, THE REVENUE WAS RECOGNIZED LONG BACK ALTHOUGH THE SALE DEED WAS AFF ECTED IN THE F.Y.2007-08. 2. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT (APPEALS) ERRED IN DELETING THE ADDITION OF RS. 30,59,301/- BEING CRED IT UNDER THE BUILDING CONSTRUCTION ACCOUNT ON THE GROUND THAT SEPARATE ADDITION ON CLOSING STOCK CANNOT BE MADE SINCE A PERCENTAGE HAS ALREADY BEEN APPLIED TO TOTAL RECEIPTS FOR WORKING OUT INCO ME. THE ID.CIT (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HA S RIGHTLY MADE THE ADDITION ON ACCOUNT OF BUILDING CONSTRUCTION ACCOUNT BALANCE AS REVENUE SI NCE THE MEMBERS WERE ALLOTTED AND GIVEN POSSESSION OF THE PROPERTY LONG BACK, ALL THE DUES WERE CLEARED AT THAT POINT OF TIME. 4. GROUND NO. 1 & 2 ARE INTERCONNECTED AND THEREFORE D ECIDED TOGETHER. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE WAS SHOWING MEMBERS CONTRIBUTION ON THE LIABILITY SIDE WHICH WAS BALANCED BY BUILDING CONSTRUCTION ACCOUNT, ADVANCES IN LAND AND CASH BALANCES. A.O WAS OF THE VIEW THAT SINCE THE PROJEC T WAS IN THE COMPLETION STAGE THE ADVANCES FOR LAND WERE INTRIGU ING. A.O ASKED THE ASSESSEE TO EXPLAIN THE OUTSTANDING MEMBERS CONTRI BUTION TO WHICH THE ASSESSEE INTERALIA SUBMITTED THAT IT REPRESENTS THE AMOUNT RECEIVED FROM PROSPECTIVE PLOT HOLDERS WHO WERE INTERESTED TO BY THE LAND THROUGH THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE AMOUNT RECEIVED FROM THE MEMBERS WAS SHOWN AS CONTRIBUTION FROM MEMBERS AND IT WAS ADJUSTED ON EXECUTION OF LAND SALES BETWEEN PLOT HOLDERS AND LAND OWNERS THROUGH THE ASSESSEE. THE SUBMISSION OF THE ASSESSEE WAS NO T FOUND ACCEPTABLE ITA NO 1105/ AHD/2011 . A.Y. 2007- 08 3 TO THE A.O. A.O NOTED THAT ASSESSEE HAD NOT FURNISH ED ANY PROOF TO DEMONSTRATE THAT THE ADVANCES AND LIABILITY OF MEMB ERS CONTRIBUTION WHICH EXISTED ON 31.03.2007 AND THAT ASSESSEE HAD N OT PROVED THAT THE MEMBERS CONTRIBUTION EXISTED ON THE LAST DATE OF T HE YEAR. HE THEREFORE CONCLUDED THAT ASSESSEE HAD FAILED TO ESTABLISH THE IDENTITY, GENUINENESS AND CREDITWORTHINESS AND THAT THE ASSESSEE WAS CREA TING ASSETS FROM HIS OWN UNDISCLOSED INCOME AND CONSISTENTLY CARRYING ME MBERS CONTRIBUTION IN THE ACCOUNTS. HE FURTHER NOTED THAT ASSESSEE HAD NOT FURNISHED ANY CONFIRMATION OR PROOF LIKE BANK TRANS ACTION. HE THEREFORE CONSIDERED THE BALANCE OF RS. 69,42,515/- AS APPEAR ING IN THE BALANCE SHEET AS ON 31.03.2007 AS INCOME FROM UNDISCLOSED S OURCES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6. A.O. ALSO NOTICED THAT ASSESSEE HAD SHOWN RS. 30,59 ,301/- IN THE BUILDING CONSTRUCTION ACCOUNT. HE NOTICED THAT ONL Y BRICKS, KAPCHI, SAND, CEMENT LEFT HAS BEEN RECOGNIZED HAS CLOSING STOCK B Y THE ASSESSEE WHEREAS THE FINISHED PROJECTS FOR WHICH THE DOCUMEN TS HAVE NOT BEEN EXECUTED WERE NOT CONSIDERED AS PART OF CLOSING STO CK. HE ACCORDINGLY WORKED OUT THE CLOSING STOCK AT RS. 30,59,301/- AN D ADDED TO THE INCOME OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF A.O, ASS ESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- 3.3. I HAVE GIVEN CAREFUL CONSIDERATION TO THE SUBM ISSION MADE, ASSESSMENT ORDER AND ALSO FACTS ON RECORD. IN RESPECT OF METHOD OF ACCOUNTING FOLLOWED FOR SHOWING INCOME, IT HAS BEEN ARGUED THAT THE APPELLANT RECEIVED MONEY FROM THE P ROSPECTIVE CUSTOMER AT THE TIME OF BOOKING OF UNITS IN VARIOUS INSTALLMENTS. THE AMOUN T SO RECEIVED IS UTILIZED FOR THE CONSTRUCTION AND ALSO FOR THE ADVANCE PAYMENT FOR L AND. IT IS STATED THAT AT THE END OF THE YEAR THE APPELLANT OBTAINS CERTIFICATE FROM AN ARCHITECT REGARDING CONSTRUCTION WORK COMPLETED AND THE ACCOUNT CERTIFIED BY THE ARCHITECT ALONG WITH L AND DEVELOPMENT CHARGES IS RECOGNIZED AS REVENUE IN THE PROFIT AND LOSS ACCOUNT. THE APPELLA NT HAS ALSO GIVEN THE ACCOUNTING ENTRIES PASSED IN THIS REGARD WHICH IS REPRODUCED AT PAGE-3 OF THIS ORDER. HAVING GIVEN CAREFUL CONSIDERATION OF THE SUBMISSIONS MADE I FIND THAT T HE SO CALLED ACCOUNTING METHOD FOLLOWED ITA NO 1105/ AHD/2011 . A.Y. 2007- 08 4 BY THE APPELLANT DEFILES ALL CANNON OF ESTABLISHED ACCOUNTING PRINCIPLES. ADMITTEDLY RECEIPTS ARE NOT ACCOUNTED ON THE BASIS OF BOOKING AMOUNT. A DMITTEDLY ALSO RECEIPTS ARE NOT ACCOUNTED ON THE BASIS OF ACTUAL SALE MADE IN THE F ORM OF POSSESSION GIVEN AND PROCEED REALIZED. IT IS STATED THAT RECEIPT IS ACCOUNTED ON THE BASIS OF AN ARCHITECT'S CERTIFICATE REGARDING CONSTRUCTION COMPLETED DURING THE YEAR. T HIS CONTENTION IS NOT SUPPORTED BY THE FACTS ON RECORD BECAUSE THE ENQUIRY MADE BY THE ASS ESSING OFFICER HAS ESTABLISHED THAT EVEN WHEN UNITS WERE CONSTRUCTED AND POSSESSIONS WERE GI VEN THEY WERE NOT RECORDED AS COMPLETED CONSTRUCTION. I HAVE ALSO SEEN THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET AND I FIND THAT THE SO CALLED MEMBER'S CONTRIBUTION IS FIRST TAKEN TO THE BALANCE SHEET RATHER THAN TO THE PROFIT AND LOSS ACCOUNT. THERE IS NO LO GIC FOR NOT SHOWING RECEIPT IN THE PROFIT AND LOSS ACCOUNT ON THE BASIS OF ACTUAL SALES MADE. IN FACT IT HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER THAT EVEN THOUGH POSSESSION HAS B EEN GIVEN AND PROCEED HAS BEEN REALIZED LONG BACK FORMAL DOCUMENTATION HAS NOT BEE N ENTERED INTO AND THEREFORE THE AMOUNT RECEIVED WAS SHOWN AS LIABILITY UNDER THE HEAD MEMB ER'S CONTRIBUTION RATHER THAN SHOWING AS SALE PROCEED. LOOKING INTO TOTALITY OF FACT IT IS A PPARENT THAT ACCOUNTING METHOD FOLLOWED BY THE APPELLANT IS NOT PROPER AND IT IS IMPOSSIBLE TO WORK OUT TRUE PROFIT ON THE BASIS OF THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS AND THEREFORE IT HAS TO BE HELD THAT THE ACCOUNT OF THE APPELLANT IS NOT CORRECT OR COMPLETE. THE ASSESSING OFFICER HAS MADE ADDITION ON THIS AMO UNT AS INCOME FROM UNDISCLOSED SOURCES. HOWEVER, AS NOTED ABOVE THE BOOKS MAINTAIN ED BY THE APPELLANT HAS NO SANCTITY AND THERE ARE NO CONFORMITY WITH ANY ESTABLISHED AC COUNTING PRACTICE. IT IS ALSO APPARENT THAT TRUE AND CORRECT PROFIT CANNOT BE WORKED OUT FOLLOW ING THE METHOD ADOPTED BY THE APPELLANT. ON THE OTHER HAND THE WHOLE AMOUNT SHOWN AS MEMBER' S CONTRIBUTION CANNOT BE CONSIDERED AS INCOME BECAUSE MEMBER'S CONTRIBUTIONS ARE SALE P ROCEEDS. HOWEVER, THE WHOLE SALE PROCEEDS CANNOT BE TAXABLE INCOME. LOOKING INTO TOT ALITY OF THE FACTS THE PROPER COURSE WOULD BE TO REJECT THE BOOKS OF ACCOUNTS AND ESTIMATE INC OME. DURING THE YEAR THE APPELLANT HAS SHOWN MEMBER'S CONTRIBUTION TO THE EXTENT OF RS.2,4 1,41,000/-. APPARENTLY THIS RECEIPT HAS NOT BEEN SHOWN IN THE EARLIER YEAR AND THEREFORE TH EY HAVE TO BE HELD AS RECEIPT OF THE CURRENT YEAR. REGARDING PERCENTAGE OF PROFIT APPLIED TO THE RECEI PT, IT IS APPARENT THAT THE APPELLANT HAS RESTORED TO SUCH METHOD APPARENTLY BECAUSE IT IS EA RNING MORE THAN THE NORMAL PROFIT OTHERWISE THERE IS NO REASON FOR IT TO MANIPULATE T HE ACCOUNTS THE WAY IT HAS BEEN DONE. ONE WAY TO BRING INCOME TO TAX IS TO APPLY PERCENTAGE T O THIS YEARS' RECEIPT. HOWEVER, LOOKING INTO PECULIARITY OF THE METHOD ADOPTED BY THE APPELLANT AND AS POINTED OUT BY THE ASSESSING OFFICER RECEIPT TAKEN ON THE BASIS OF ARCHITECT'S C ERTIFICATE HAS NO SANCTITY, THE PROPER METHOD WOULD BE TO TAKE INTO CONSIDERATION TOTAL RECEIPT S INCE INCEPTION OF PROJECT AND APPLY PERCENTAGE ON THAT AND FROM THE RESULTANT PROFIT CR EDIT SHOULD BE GIVEN OF PROFIT SHOWN HITHERTO. THE BALANCE AMOUNT SHOULD BE THE TAXABLE INCOME OF THE YEAR. THIS IS WORKED OUT AS UNDER:- TOTAL RECEIPTS SHOWN SO FAR:- FINANCIAL YEAR RECEIPT (RS.) 2003-04 1,43,88,922 2004-05 1,60,94,104 2005-06 1,39,46,495 2006-07 2,41,41,000 TOTAL 6,85,70,521 ITA NO 1105/ AHD/2011 . A.Y. 2007- 08 5 TOTAL INCOME SHOWN YEAR WISE. ASSESSMENT YEAR PROFIT AFTER CONSIDERING THE VALUE OF CLOSING INVENTORIES AS PER P & L A/C BUT BEFORE PARTNER'S SALARY & INTEREST. 2003-04 1,85,750 2004-05 8,62,836 2005-06 9,14,270 2006-07 9,43,344 2007-08 14,59,918 TOTAL 43,66,118 THIS INCOME IS SHOWN IN THE RETURN OF INCOME UPTO 3 1.03.2007 IS RS. 21,48,288/-. 12% NET PROFIT RATE IS APPLIED TO THE RECEIPT OF RS.6,85,70,521/- WHICH COMES TO RS. 82,28,462/-. AFTER DEDUCTING INCOME SHOWN AT RS. 43 ,66,118/- AS ABOVE, AN AMOUNT OF RS. 38,62,344/- IS CONSIDERED TAXABLE INCOME OF THE YEAR. 4. THE THIRD GROUND OF APPEAL IS THAT THE LEARNED A SSESSING OFFICER HAS ERRED IN LAW AND IN FACTS IN MAKING AN ADDITION OF RS.30,59,301/- TOWAR DS BUILDING CONSTRUCTION ON THE GROUND THAT IT IS THE CLOSING STOCK. 4.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER NOTED THAT THE VALUE OF INVENTORY REFLECTED IN THE ACCOUNTS BY THE APPELLANT WAS TO BE HELD AS INCOME AND, THEREFORE, LIABLE TO BE TAXED. 4.2. BEFORE ME THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT 'WITH HUMILITY, THE APPELLANT SUBMITS TO YOUR HONOU R THAT THE BASIS OF THE ADDITION IS NOT COMPREHENDED BY THE APPELLANT. THE FACT RELATING TO THE ISSUE ARE THAT IN THE ACCOUNTS / BALANCE SHEET, THE APPELLANT HAS ON THE ASSET SIDE DISCLOSED A BALANCE OF RS. 30,59,301/- (REFER PAGE NO. 38 OF THE PAPER BOOK. THIS AMOUNT I S DERIVED AS UNDER: BUILDING CONSTRUCTION A/C: RS. AS PER LAST BALANCE SHEET 14,570,510 ADD: ADDITION DURING THE YEAR 13,522 ,100 28,092,601 LESS; DOCUMENTS DURING THE YEAR 25,033,300 30,59,301 THE ID, A.O. APPARENTLY IS OF THE VIEW THAT SUCH AM OUNT SHOULD BE RECOGNIZED AS REVENUE AND, THEREFORE, AN ADDITION OF SUCH AMOUNT IS MADE. AS EXPLAINED ABOVE, THE METHOD OF ACCOUNTING ADOPTE D BY THE APPELLANT IS THAT THE BUILDING UNDER CONSTRUCTION ACCOUNT IS DEBITED (ASS ET) AND CORRESPONDINGLY CONSTRUCTION INCOME (INCOME) IS CREDITED. AS AND WHEN THE DASTAV EZ ARE EXECUTED, THE SAID ACCOUNT IS CREDITED AND SET OFF BY ADJUSTMENT (DEBIT) TO ME MBERS' CONTRIBUTION ACCOUNT. MOREOVER, THE ADDITION OF THE BALANCE IN THE BUILDING CONSTRU CTION ACCOUNT WOULD AMOUNT TO DOUBLE ADDITION AS THE ID. A.O. HERSELF HAS ADDED THE RECE IPT / OUTSTANDING IN THE MEMBERS' CONTRIBUTION ACCOUNT WHICH IS APPLIED FOR BUILDING CONSTRUCTION EXPENSE AND, THEREFORE, BY TAXING THE SOURCE OF RECEIPT, THE ENTIRE AMOUNT IS SUBJECTED TO TAX AND, THEREFORE, TAXATION OF ITS APPLICATION WOULD AMOUNT TO DOUBLE TAXATION. RESPECTFULLY CONSIDERING THE ABOVE FACTUAL SUBMISSI ONS, THE ADDITION MAY KINDLY BE DIRECTED TO BE DELETED.' 4.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. THE ASSESSING OFFIC ER HAS MADE THIS ADDITION ON THE ITA NO 1105/ AHD/2011 . A.Y. 2007- 08 6 GROUND THAT SINCE PROJECT HAS BEEN COMPLETED AND PO SSESSION HAS BEEN GIVEN THE ENTIRE BUILDING CONSTRUCTION ACCOUNT OF RS.75,50,913/- IS A REVENUE RECEIPT. HOWEVER, APPARENTLY THE ASSESSING OFFICER HAS MISDIRECTED HE RSELF ON THIS ACCOUNT. THE APPELLANT HAS RIGHTLY POINTED OUT WHEN THE SOURCE (THE RECEIP TS) ALREADY HAS BEEN CONSIDERED FOR THE PURPOSE OF TAXABLE INCOME THE APPLICATION OF TH E SOURCE AGAIN CANNOT BE BROUGHT TO TAX. THUS THE CLOSING STOCK IS BALANCE OF BUILDING CONST RUCTION ACCOUNT. THIS IS AN EXPENDITURE ACCOUNT MET OUT WITH RECEIPT FROM SALE. IT CAN BE S EEN THAT THIS AMOUNT IS INCLUDED IN THE RECEIPT WHICH HAS ALREADY BEEN CONSIDERED FOR THE P URPOSE OF WORKING OUT THE INCOME. IN ANY CASE IT HAS BEEN ALREADY HELD EARLIER THAT THE METHOD ADOPTED BY THE APPELLANT IS ABSOLUTELY IMPROPER AND THEREFORE THE BOOK ENTRIES ARE NOT RELIABLE. SINCE A PERCENTAGE HAS ALREADY BEEN APPLIED TO TOTAL RECEIPTS FOR WORK ING OUT INCOME, CLOSING STOCK CANNOT BE ADDED SEPARATELY. THIS GROUND IS ALLOWED. 7. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NO W IN APPEAL BEFORE US. 8. BEFORE US, THE LD. D.R. TOOK US THROUGH THE ORDER O F A.O AND THE OBSERVATIONS OF A.O AND SUBMITTED THAT IN VIEW OF T HE OBSERVATION OF A.O, THE ORDER OF A.O NEEDS TO BE UPHELD AND THUS S TRONGLY SUPPORTED HIS ORDER. THE LD. A.R. ON THE OTHER HAND SUBMITTED THA T CIT(A) HAS RIGHTLY HELD THAT NO ADDITION COULD BE MADE U/S. 41(1) OF T HE ACT TOWARDS MEMBERS CONTRIBUTION. HE ALSO RELIED ON THE DECIS ION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NITIN GAR G (2012) 22 TAXMAN. COM. 59 (GUJ) AND CIT VS. BHOGILAL RAMJIBHAI ATARA (2014) 43 TAXMAN. COM. 55 (GUJ). HE THUS SUPPORTED THE ORDER OF CIT(A ). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABOUT THE TAXABILI TY OF MEMBERS CONTRIBUTION AND THE CLOSING STOCK. WE FIND THAT CI T(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAS NOTED THAT THE ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE WAS NOT AS PER THE ESTABLI SHED ACCOUNTING PRINCIPLES AS THE ASSESSEE HAD NOT ACCOUNTED THE RE CEIPTS ON THE BASIS OF ITA NO 1105/ AHD/2011 . A.Y. 2007- 08 7 BOOKING AMOUNT AND NOR THE RECEIPTS WERE ACCOUNTED ON THE BASIS OF ACTUAL SALES MADE WHEN THE POSSESSION WAS GIVEN AND PROCEEDS REALIZED BUT HAD STATED TO HAVE ACCOUNTED ON THE BASIS OF AR CHITECTS CERTIFICATE REGARDING CONSTRUCTION COMPLETED DURING THE YEAR. C IT(A) HAS FURTHER NOTED THAT ASSESSEE SUBMISSION THAT THE RECEIPTS WE RE ACCOUNTED ON THE BASIS OF ARCHITECT CERTIFICATE WAS NOT SUPPORTED BY THE FACTS ON RECORD. CONSIDERING THE ENTIRTY OF FACTS, HE HAS GIVEN A FI NDING THAT THE ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE WAS NOT PROPER AND IT WAS IMPOSSIBLE TO WORK OUT TRUE PROFIT ON THE BASIS OF ENTRIES MADE IN THE BOOKS OF ACCOUNTS AND THEREFORE HELD THE ACCOUNTS O F THE ASSESSEE AS NOT CORRECT OR COMPLETE AND THEREFORE THE PROPER COURSE WOULD BE TO REJECT THE BOOKS OF ACCOUNTS AND ESTIMATE THE PROFITS. HE ALSO NOTED THAT ASSESSEE HAD SHOWN MEMBERS CONTRIBUTION OF RS. 2,41,41,000/- WHICH WAS NOT SHOWN IN EARLIER YEARS. HE THEREAFTER ON THE BASIS OF THE TOTAL RECEIPTS WORKED OUT THE NET PROFIT RECEIVED SINCE INCEPTION OF THE PROJECT AND APPLYING THE PROFIT RATE OF 12% AND AFTER GIVING TH E CREDIT OF THE AMOUNT SHOWN BY THE ASSESSEE, HELD THE BALANCE AMOUNT OF R S. 38,62,344/- AS THE INCOME OF THE ASSESSEE. HE FURTHER HELD THAT SINCE THE ACCOUNTS OF THE ASSESSEE HAS BEEN FOUND TO BE INCORRECT AND THE MET HOD ADOPTED TO BE IMPROPER AND THE BOOK ENTRIES TO BE NOT RELIABLE AN D SINCE THE PERCENTAGE OF THE TOTAL RECEIPTS WAS ALREADY ADDED FOR WORKING OUT THE INCOME, NO ADDITION SEPARATELY ON ACCOUNT OF CLOSING STOCK COU LD BE ADDED. 10. BEFORE US, THE REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A). WE THEREFORE FIN D NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THESE G ROUNDS OF REVENUE ARE DISMISSED. ITA NO 1105/ AHD/2011 . A.Y. 2007- 08 8 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 05 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD