DCIT, New Delhi V. M/s. Puri Constructions, New Delhi

ITA 1628/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3515 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 05-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 19-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: SHAILE
• Keywords: Business income; Principle of natural justice; Rule of consistency; Tax effect
• Section: 143(3); 131; 145; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES F : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA.NO.1628/DEL./2014 ASSESSMENT YEAR 2009-2010 THE DCIT, CENTRAL CIRCLE - 18, ROOM NO.327, 3 RD FLOOR, ARA CENTRE, E-2, JHANDEWALAN EXTN., NEW DELHI. VS. PURI CONSTRUCTIONS, W-82A, GREATER KAILASH-II, NEW DELHI. PAN AAKFP5888M (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. PARAMITA TRIPATHY, CIT - D.R. FOR ASSESSEE : SHRI SALIL AGGARWAL, ADVOCATE AND SHRI SHAILESH GUPTA, C.A. DATE OF HEARING : 01.02.2018 DATE OF PRONOUNCEMENT : 1 6 .02.2018 ORDER PER BHAVNESH SAINI, J.M. THIS APPEAL BY REVENUE HAS BEEN DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-XII, NEW DELHI, DATED 30 TH DECEMBER, 2013, FOR THE A.Y. 2009-2010 ON THE FOLLOWING GROUNDS : 2 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE AG AINST THE REJECTION OF AUDITED ACCOUNTS OF THE ASSESSEE U/S 1 45 OF THE I. T. ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN TAKING THE TOTAL INCOME OF RS.36,73,67 ,205/- INSTEAD OF RS.78,30,00,000/- AS TAKEN BY THE AO. TH E CIT(A) DID NOT APPRECIATE THE FACT THAT EMAAR MGF AND THE ASSESSEE ARE ENGAGED IN A 50:50 JOINT VENTURE PROJECT AND EM AAR MGF IS REALIZING THE REVENUE WHEN THE PROJECT IS COMPLE TE BY 30% WHEREAS THE ASSESSEE ARE REALIZING THE REVENUE WHEN THE PROJECT IS COMPLETE BY 40% RESULTING IN REDUCING IT S INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN ALLOWING THE TOTAL EXPENDITURE OF RS.30,33,03,154/- AGAINST TOTAL EXPENDITURE OF RS.8,38,92,365/- AS TAKEN BY THE ASSESSING OFFICER. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 3. THE FACTS OF THE CASE ARE THAT ORIGINALLY THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 30 TH SEPTEMBER, 2009 DECLARING NET TAXABLE INCOME OF RS.32,19,61,004. THE RETURN W AS REVISED ON 3 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 30 TH SEPTEMBER, 2010 DECLARING NET TAXABLE INCOME OF RS.36,73,67,205. SEARCH UNDER SECTION 132 WAS CONDU CTED ON PURI GROUP OF CASES AND ALSO ON TDI GROUP OF CASES ON 05 TH JANUARY, 2009. DURING THE COURSE OF SEARCH, IT CAME TO THE N OTICE THAT ONE OF THE COMPANIES OF PURI GROUP M/S. PURI CONSTRUCTIONS HAS ENTERED INTO JOINT COLLABORATION WITH EMMAR MGF GROUP (IN S HORT EMGF) FOR DEVELOPMENT OF REAL ESTATE PROJECT IN SECTOR-54 , GURGAON. IT WAS ALSO NOTICED THAT WHEREAS EMGF HAS SHOWN THE PROFIT ON PROJECT, BUT, PURI GROUP WHO IS RUNNING BUSINESS IN THE NAME OF M/S. PURI CONSTRUCTIONS HAS SO FAR NOT BOOKED THE PROFIT ON T HE SAME PROJECT. THE ISSUE WAS CONFRONTED DURING THE COURSE OF SEARC H TO THE MANAGING DIRECTOR OF THE COMPANY AND THE COMPANY OF FERED TO RECOGNIZED REVENUE ON THE BASIS OF EMGF GROUP AND F URNISHED A DECLARATION IN THIS REGARD. SUBSEQUENTLY, THE ENTIR E STOCK OF THIS COMPANY ALONG WITH THE BUSINESS OF THE OTHER FIVE E NTITIES MENTIONED IN THE ASSESSMENT ORDER WERE TRANSFERRED TO PARTNERSHIP FIRM AND THE REVENUE WAS RECOGNIZED IN THE HANDS OF PARTNERSHIP FIRM AND A PROFIT OF RS.36,73,67,205/- WAS DECLARED IN THE HANDS OF THE FIRM. IT IS, THEREFORE, NOTED IN THE IMPUGNED O RDER THAT ASSESSEE 4 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. DERIVED INCOME FROM DEVELOPMENT OF REAL ESTATE PROJ ECT IN SECTOR-54, GURGAON. THE A.O. OBSERVED THAT ASSESSEE ENTERED IN TO A JOINT COLLABORATION WITH M/S. EMGF LAND LIMITED - THE TWO GROUP HAVING 50-50 SHARE. THE PROJECT IS AN INTEGRATED HOUSING P ROJECT UNDER THE NAME OF PALM SPRINGS. THE ENTIRE PROJECT WAS DIVI DED INTO THREE SEPARATE CATEGORIES VIZ., APARTMENTS, VILLAS AND PL AZAS. DURING THE YEAR UNDER CONSIDERATION, ALL THESE PROJECTS/CATEGO RIES WERE COMPLETED TO A VARYING EXTENT. THE REVENUE IS RECOG NIZED BY THE ASSESSEE ON THE BASIS OF PERCENTAGE COMPLETION METH OD, THE SAME BEING RECOGNIZED ONLY ON REACHING THE PERCENTAGE CO MPLETION OF MORE THAN 40%. AS THE PROJECT RELATING TO APARTMENT S ONLY REACHED COMPLETION PERCENTAGE OF MORE THAN 40% DURING THE Y EAR UNDER CONSIDERATION, REVENUE OF THIS PROJECT ALONE WAS RE COGNIZED AND THE REMAINING TWO PROJECTS NAMELY PALM SPRINGS VILLA AN D PALM SPRINGS PLAZA, HAVE NOT REACHED THE SAID PERCENTAGE, THEREF ORE, ITS REVENUE WAS NOT RECOGNIZED AND THIS FACT HAS BEEN ACCEPTED BY THE A.O. AS PER THE ARRANGEMENT BETWEEN THE TWO JOINT VENTURE P ARTIES, EMGF IS REQUIRED TO MAINTAIN BOOKS OF ACCOUNT, INVENTORY RECORDS, VOUCHERS AND THEIR RECORDS RELATING TO JOINT VENTUR E PROJECT. THE 5 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. REVENUE WAS RECOGNIZED BY THE ASSESSEE ON THE BASIS OF CONFIRMATION/CERTIFICATE GIVEN BY EMGF. 3.1. THOUGH THE RETURN OF INCOME IN RESPECT OF JO INT VENTURE PROJECT WAS FILED ON THE BASIS OF CONFIRMATION/CERT IFICATE GIVEN BY EMGF (WHICH WAS BASED ON AUDITED BOOKS OF ACCOUNT O F EMGF), THE A.O. WHILE FRAMING THE ASSESSMENT RELIED UPON CERTA IN INFORMATION GATHERED BY DIRECTORATE IN APRIL, 2009 DURING POST- SEARCH INVESTIGATION PURSUANT TO THE SEARCH CONDUCTED UNDE R SECTION 132 OF THE I.T. ACT ON PURI GROUP OF CASES ON 5 TH AND 6 TH JANUARY, 2009. THE INFORMATION GATHERED IS REFERRED TO BELOW : (1) THE INFORMATION WHICH WAS GATHERED BY THE DIRECTORATE, BY ISSUE OF SUMMONS UNDER SECTION 131 OF THE I.T. ACT DATED 16 TH APRIL, 2009 ISSUED TO EMGF (PRIOR TO THE AUDIT OF THEIR BOOKS), IS REPRODUCED BY THE A.O. IN PARAS 11 AND 12 OF THE ASSESSMENT ORDER AS UNDER : '11. IN ORDER TO ASCERTAIN ACTUAL FIGURES/AMOUNTS OF RECEIPTS AND EXPENSES FOR THE PALM SPRING PROJECT , IN THE COURSE OF POST SEARCH PROCEEDINGS; ACTION U/S 131 OF THE IT ACT 1961 WAS 6 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. UNDERTAKEN. IT WOULD BE APPROPRIATE TO MENTION HERE THAT THE BOOKS OF ACCOUNT OF THE PALM SPRINGS PROJECT ARE MAINTAINED BY EMAAR MGF LAND LTD. PURI GROUP RECEIVES THE RELEVANT DATA OF THE PROJEC T ON FORTNIGHTLY BASIS FROM EMAAR MGF LAND LTD. AS MENTIONED IN THE COLLABORATION AGREEMENT BETWEEN THE PARTIES. THE ABOVE REFERRED ACTION U/S 131 OF THE IT ACT 1961 WAS TAKEN ON 16/04/2009. AS PER THE DATA GATHERED FROM EMAAR MGF LAND LTD. THE SUMMARY OF GROSS MARGIN IS AS UNDER : EMAAR MGF LAND LTD. SUMMARY OF GROSS MARGIN AS ON 31-MAR-09 S.NO. EMFG TOTAL ESTIMATED FOR THE PROJECT (RS. MN.) TOTAL COST INCURRED TILL 31- MAR-09 (PTD) TOTAL RECOGNIZED FOR THE PROJECT (PTD) (RS. MN) POC BUYER AGREEMENT EXECUTED % (BAE) REVENUE COST REVENUE COST 1. THE PALM SPRINGS APPTS (50%) 3,020 1,956 1,344 1,759 1,150 67.77% 86.17% 2. THE PALM SPRINGS VILLAS (50%) 1,853 863 492 803 374 57.05% 76.64% 3. THE PALM PLAZA 1,260 709 323 258 146 45.56% 45.10% TOTAL FOR NCR 6,133 3,528 2,159 2,820 1,670 7 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. S.NO. PCL TOTAL ESTIMATED FOR THE PROJECT (RS. MN) TOTAL COST INCURRED TILL 31- MAR-09 (PTD) TOTAL RECOGNISED FOR THE PROJECT (PTD) (RS.MN) POC% REVENUE COST REVENUE COST 1 THE PALM SPRINGS APPTS (50%) 3,020 1,339 726 1,409 626 54.26% 2. THE PALM SPRINGS VILLAS (50%) 1,853 528 158 420 121 29.84% 3. THE PALM PLAZA 1,260 514 128 142 58 24.90% TOTAL FOR NCR 6,133 2,381 1,012 1,971 805 THESE FIGURES ARE PART OF TOTAL SALES CONSIDERATION DERIVED ON THE BASIS OF APPLICATION OF PERCENTAGE OF COMPLETION ME THOD OF ACCOUNTING AN APPOINTED OUT OF ADVANCES FROM CUSTOM ERS. IT WAS FURTHER CLARIFIED BY THE EMMAR MGF LAND LTD. , WE WISH TO INFORM YOU THAT OUR COMPANY IS EXECUTIN G THE SUBJECT PROJECT AND MAINTAINING THE BOOKS OF ACCOUNT FOR TH IS PROJECT. IT IS HEREBY CLARIFIED THAT IN THE FIGURES PROVIDED THE F IGURES OF PROVISION OF EXPENSES / LIABILITIES ARE NOT INCLUDE D. ALL OTHER FIGURES LIKE RECEIPTS AND EXPENSES, ETC. ARE ASCERT AINED FIGURES AS ON 31/03/2009. 8 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 12. AS PER THE FIGURES PROVIDED BY EMAAR MGF LAND LTD. WHO IS MAINTAINING BOOKS OF ACCOUNTS OF THE PALM SP RINGS PROJECT, THE PROFIT FROM THE ABOVE PROJECT IN THE HANDS OF P URI CONSTRUCTIONS LTD. IS AS FOLLOWS : S.NO. TYPE OF PROJECT TOTAL RECOGNIZED FOR THE PROJECT (PTD) (RS. MN). POC % PROFIT (RS. MN.) REVENUE COST 1. THE PALM SPRING APPTS. 1409 626 54.26% 783 2. THE PALM SPRING VILLAS 420 121 29.84% 299 3. THE PALM PLAZA 142 58 24.90% 84 TOTAL 1166 THE DOCUMENTS GATHERED FROM EMMAR MGF LAND LTD., UNDER SUMMONS DATED 16/04/2009. II) YET ANOTHER INFORMATION WAS THE ONE, ALSO GATHE RED BY THE DIRECTORATE FROM PURI CONSTRUCTIONS, VIDE SUMMONS IS SUED U/S.131 OF THE ACT ISSUED TO THEM ON 21.04.2009 AND FURNISHED VIDE LETTER DATED 23/4/2009 (FURNISHED BEFORE THE AUDIT OF THEIR BOOKS AND IS REPRODUCED IN PARA 10 OF THE ASSESSMENT ORDER AS UNDER : 9 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. S.NO. ADMINISTRATIVE EXPENSES & OTHER EXPENSES TOTAL GROUP EXP. PURI CONSTRUCTIONS 1. SALARY 27459926 2. ELECTRICITY & WATER CHARGES 798892 3. STAFF 3242318 4. TELEPHONE AND INTERNET EXPENSES. 1927702 5. PRINTING & STATIONERY 9069961 6. RENT, RATES & TAXES 8611379 7. BUSINESS MEETING EXPENSES 92451 8. REPAIR & MAINT. PLANT & MACHINERY 143329 9. REPAIR & MAINT. BUILDING 3132868 10. REPAIR & MAINT. OTHERS 3165027 11. LAND PURCHASED BROKERAGE & COMMISSION. 500000 12. BOOKS & PERIODICALS 44473 13. LEGAL & CONSULTANCY CHARGES 7803587 14. BANK CHARGES, INTEREST & COMMISSION. 16113766 15. AUDITOR REMUNERATION 0 16. TOUR & TRAVELLING & CONVEYANCE 6877254 17. DIWALI EXPENSES 412057 18. DONATION 10000 19. ADVERTISEMENT 768540 20. SECURITY GUARD EXPENSES 1322789 21. MISC. EXPENSES 559016 TOTAL 83892365 ON THE BASIS OF THE AFORESAID INFORMATION GATHERED B Y THE DIRECTORATE, THE ASSESSING OFFICER ISSUED A QUESTION NAIRE DATED 29/10/2010, RAISING FOLLOWING QUERY : 33. AS PER MY INFORMATION, IN RESPECT OF APARTMEN TS IN PALM SPRING PROJECT, THERE WAS 54% COMPLETION TILL 31.3. 2009. THEREFORE, PLEASE SHOW CAUSE WHY ADVANCES FROM CUST OMERS TO THIS EXTENT SHOULD NOT BE ASSESSED AND INCLUDED IN YOUR INCOME. 10 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. ` LATER IN QUESTIONNAIRE DATED 3/12/2010 THE ASSESSING OFFICER RAISED MORE SPECIFIC QUERY IN THIS REGARD (REPRODUCED BELOW) : 1. VERIFICATION OF THE ACCOUNTS OF M/S. EMAAR MGF LAND LTD., RELATING TO PALM SPRINGS PROJECT WERE MADE DU RING POST SEARCH INQUIRIES. FROM THE INQUIRIES, IT WAS FOUND THAT THE ENTIRE PROJECT WERE DIVIDED INTO THREE SUB-CATEGORIES NAME LY APARTMENT, VILLAS AND PLAZA AND EACH OF THESE CATEGORIES, M/S. EMAAR MGF HAVE SHOWN A DIFFERENT FIGURE OF PERCENTAGE COMPLET ION. ACCORDINGLY, FROM THE BASIS OF THE PERCENTAGE COMPL ETION, THEY HAVE REALIZED THE REVENUE FOR THE YEAR ENDING 31/3/2009. ON THE SAME ANALOGY, YOUR COMPLETION IS TO BE WORKED OUT AND AT LEAST IN THE APARTMENTS, THERE IS 54% COMPLETION DURING THE F. Y . 2008- 09 WHICH WOULD MAKE YOUR REALIZATION OF PROFIT TO THE FIGURE OF RS.78.03 CR INSTEAD OF RS.45 CR ACCEPTED BY YOURGRO UP DURING SEARCH PROCEEDINGS. YOU ARE REQUIRED TO RECONCILE T HE ACTUAL FIGURES OF INCOME AND PROFIT FROM THIS PROJECT AS DECLARED BY YOU. IN CASE NO SATISFACTORY REPLY IS RECEIVED FROM YOU, APPROPR IATE VIEW WILL BE TAKEN WHILE COMPLETING THE ASSESSMENT PROCEEDINGS. 11 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 3.2. THE ASSESSEE FILED REPLY BEFORE A.O. I N WHICH IT WAS SUBMITTED AS UNDER : 2.4. IT WAS SUBMITTED THAT THE QUERIES RAISED BY THE ASSESSING OFFICER WERE BASED ON FIGURES FURNISHED BY EMGF PRIOR TO THE AUDIT OF THEIR BOOKS AND THEREFORE THE PERCENTAGE OF COMPLETION BASED ON SUCH FIGURE AT 54% COULD NOT BE APPLIED. ON THE CONTRARY IT WAS GIVEN OUT THAT THE REVENUE WAS RECOGNIZED BY THE APPELLANT BASED ON THE PERCENTAGE OF COMPLETION AS FURNISHED BY EMGF AS PER THEIR AUDITED ACCOUNTS, A COPY OF WHICH WAS FILED. IT WAS POINTED OUT THAT THE APPELLANT IN FAC T HAD SHOWN THE PERCENTAGE COMPLETION OF 60% IN RESPECT OF CONSTRUCTION OF APARTMENTS IN THE FINANCIAL YEAR 2008-09. IT WAS ALSO EXPLAINED THAT WHILE EMGF HAD SHOWN PERCENTAGE OF COMPLETION OF 71.83% FOR THE CONSTRUCTION OF APARTMENTS, THE PERCENTAGE OF COMPLETION IN THE CASE OF THE 12 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. APPELLANT WAS 60%. EXPLAINING THE DIFFERENCE BETWEEN THE TWO PERCENTAGE IT WAS SUBMITTED THAT WHILE ALL FIGURES OF COSTS, EXPENSES, SALES, ETC. WERE TAKEN EXACTLY THE SAME IN BOTH CALCULATIONS THE VALUE OF LAND (I.E. THE VALUE OF ASSIGNMENT RIGHTS AT WHICH THE EMGF HAD TAKEN FROM SSP PROPERTIES PVT LTD) IN THE HAND OF EMGF WAS HIGHER BY RS.82 CRORES AS COMPARED TO THE VALUE OF LAND REFLECTED IN THE HANDS OF THE APPELLANT. THIS WAS THE REASON THAT PERCENTAGE OF COMPLETION OF THE APPELLANT DIFFERED FROM THAT OF EMGF. BASED ON THIS CLARIFICATION THE PERCENTAGE OF COMPLETION IN THE HANDS OF THE APPELLANT WERE WORKED OUT OF 60%FOR APARTMENT AS COMPARED TO 71.83% IN THE CASE OF EMGF. THE COMPARISON TABLE WAS GIVEN IN THIS REPLY AS UNDER: - COMPARISON OF COST OF PALM SPRING PROJECT BETWEEN PCL & EMMAR MGF FINANCIAL YEAR 2008-2009. 13 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. PARTICULAR APARTMENT VILLAS PLAZA 1 BUDGETED COST A LAND COST 620761521 326477691 192971083 B GOVT FEE 14335704 7539590 90569810 C SOFT COST 28364306 14917666 9716321 D HARD COST 1368236175 484859026 385637549 E ALLOCATED OVERHEAD 38527931 20263031 11976865 TOTAL - X 2070225637 854057004 690871628 2 ACTUAL COST A LAND COST 620761521 326477691 192971083 B GOVT FEE 11107829 5841951 83453510 C SOFT COST 23661774 12148924 4788547 D HARD COST 814327443 113412863 19537270 E ALLOCATED OVERHEAD 17115260 9001445 5320481 TOTAL - P 1486973827 466882874 306070891 % OF COMPLETION (P/X) 71.83 54.67 44.30 AS PER PURI CONSTRUCTIONS FIRM PARTICULAR APARTMENT VILLAS PLAZA 1 BUDGETED COST A LAND COST 8554191 4498914 2659172 B GOVT FEE 14335704 7539590 90569810 C SOFT COST 28364306 14917666 9716321 D HARD COST 1368236175 484859026 385637549 E ALLOCATED OVERHEAD 38527931 20263031 11976865 TOTAL - X 1458018307 532078227 500559717 2 ACTUAL COST A LAND COST 8554191 4498914 2659172 B GOVT FEE 11107829 5841951 83453510 C SOFT COST 23661774 12148924 4788547 D HARD COST 814327443 113412863 19537270 E ALLOCATED OVERHEAD 17115260 9001445 5320481 TOTAL P 874766497 144904097 115758980 % OF COMPLETION (P/X) 60.00 27.23 23.13 14 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 2.5. THE APPELLANT ALSO ENCLOSED WITH THE SAID RE PLY THE CERTIFIED STATEMENT RECEIVED FROM EMGF. IT WAS CONC LUDED THAT NEITHER IN THE MATTER OF SHOWING THE PERCENTAGE OF COMPLETION NOR PROFIT ARISING THEREOF WAS ANY DEFECT IN THE BO OKS OF ACCOUNT AND THEREFORE IT WAS PLEADED THAT THE INCOME REFERR ED TO AS DISCLOSED FROM THE SAID PROJECT BE ACCEPTED. 3.3. IN THE MATTER OF EXPENSES, THE A.O. HAS RAISE D THE FOLLOWING QUERIES IN HIS LETTER DATED 29 TH OCTOBER, 2010 WHICH READS AS UNDER: 42. IN RESPECT OF COST OF SALES SHOWN AS PER SCHEDULE 6 TO THE P&L ACCOUNT, PLEASE FURNISH THE FOLLOWING DETAILS:- B. NATURE OF LOSS OF RS. 15.57 CR. DUE TO NON CONV ERSION OF LAND USE. 43. PLEASE FURNISH DETAILS OF FOLLOWING EXPENSES:- A. OFFICE AND ADMINISTRATIVE EXPENSES - RS.4.15 CR. B. EMPLOYEE COST RS.1.61 CR. C. REPAIR AND MAINTENANCE RS.11.33 LACS D. SELLING AND DISTRIBUTION EXPENSES - RS.10.79 CR. E. LEGAL AND PROFESSIONAL CHARGES - RS.40.83 LACS. 15 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 3.4. THE ASSESSEE FILED REPLY BEFORE A.O. WHICH READS AS UNDER 42. . IN RESPECT OF LOSS OF RS. 15.57 CR., IT IS SUBMITTED THAT LAND ADMEASURING 12.743 ACRES VALUED AT RS. 16.58CR IN VILLAGE ULLAHAWAS, TEHSIL GURGAON ASSESSING OFFICER, HARYAN A WAS INTRODUCED AS CAPITAL CONTRIBUTION BY ONE OF THE PA RTNER M/S PURI CONSTRUCTION PVT. LTD ON 1 ST APRIL, 2008 IN THE SHAPE OF COLLABORATION AGREEMENT DATED 24 TH OCT., 2006 FOR LAND ADMEASURING 10.643 ACRES WITH VARIOUS LAND OWNERS A ND SALE AGREEMENT DATED 11 TH JAN., 2007 FOR LAND ADMEASURING 2.1 ACRES WITH SMT ILA JAIN. COPIES OF BOTH THESE COLLA BORATION AND SALE AGREEMENTS ARE ATTACHED HEREWITH. APPLICATION ALONG-WITH FEES WAS SUBMITTED WITH THE HUDA FOR CONVERSION OF LAND USE TO RESIDENTIAL GROUP HOUSING OF ULLAHWAS LAND HELD AS STOCK IN TRADE. 2.7. BEFORE THE COMPLETION OF STATUTORY AUDIT AND FINALI ZATION OF FINAL ACCOUNTS OF THE FIRM FOR THE FINANCIAL YEA R 2008- 09, HUDA DECLINED TO CONVERT THIS END USE OF LAND FROM AGRICULTURAL TO RESIDENTIAL ON THE GROUND OF NON-AVAILABILITY OF LICENSES IN THIS SECTOR. DUE TO NON-AVAILABILITY OF LICENSE, VALUE O F LAND HAS 16 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. DRASTICALLY REDUCED. FURTHER, HUDA ISSUED NOTICES U /S 4 OF THE LAND ACQUISITION ACT, TO ACQUIRE THE LAND AT CIRCLE RATES, THE SAID COMPENSATION WOULD ALSO GO ENTIRELY TO THE ORIGINAL LAND OWNER AND NOT THE FIRM. COPIES OF REJECTION LETTER FROM D TCP, HARYANA AND NOTIFICATION FOR ACQUISITION OF LAND IN VILLAGE ULLAHWAS, GURGAON ASSESSING OFFICER ISSUED BY THE HARYANA GOV ERNMENT ON 2.6.09 ARE ATTACHED. THIS IS REGULAR BUSINESS PR ACTICE IN REAL ESTATE BUSINESS WHEREIN DAY TO DAY BUSINESS TRANSAC TION OF PURCHASE/COLLABORATION OF LAND FROM/WITH THE VILLAG ERS IS ENTERED AND ALSO DONE BY THE FIRM AND IN THIS TRANSACTION T HE FIRM HAD MADE UNEXPECTED LOSS DUE TO REJECTION OF CONVERSION OF END USE OF LAND OF VILLAGERS. AT THE TIME OF FINALIZATION OF B ALANCE SHEET AND ON THE BASIS OF ACCOUNTING POLICY ON THE VALUATION OF REAL ESTATE INVENTORY (AS STATED AT ACCOUNTING POLICY NO. 10 ON INVENTORY OF SCHEDULE 7 FORMING PART OF AUDITED BALANCE SHEET OF THE FIRM FOR THE FINANCIAL YEAR ENDED 31.3.09) FOLLOWED BY T HE FIRM, VALUE OF INVENTORY OF REAL ESTATE WAS REDUCED TO ITS REAL IZABLE CIRCLE RATE VALUE OF RS.1,00,50,000/-ACCOUNTING POLICY NO. 10 O N INVENTORIES IS REPRODUCED AS BELOW: - 17 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. INVENTORY COMPRISES COMPLETED PROPERTY FOR SALE, PRO JECT IN PROGRESS AND LAND. I. COMPLETED UNSOLD INVENTORY IS VALUED AT LOWER OF CO ST OR NET REALIZABLE VALUE. COST IS DETERMINED BY INCLUDING C OST OF LAND, MATERIALS, DEVICES AND OTHER RELATED OVERHEADS. II. PROJECT IN PROGRESS IS VALUED AT LOWER OF COST OR N ET REALIZABLE VALUE. COST INCLUDES COST OF LAND, MATERIALS, SERVICES AND OTHER CONSTRUCTION RELATED OVERHEADS. III. LAND IS VALUED AT LOWER OF COST OR NET REALIZABLE V ALUE. IV. COSTS OF BUILDING MATERIAL AND CONSUMABLE STORES AR E VALUED AT COST, WHICH IS DETERMINED ON THE BASIS OF FIRST IN FIRST OUT METHOD. 2.8. THE REASONS AND IMPACT OF THIS VALUATION ON THE VAL UE OF LAND AT ULLAHWAS IS ALSO REFLECTED IN THE NOTE NO. 13 OF SCHEDULE 7 OF AUDITED BALANCE SHEET OF THE FIRM FOR FINANC IAL YEAR 2008- 09. NOTE NO 13 IS REPRODUCED AS BELOW:- VALUE OF LAND AT ULLAHWAS IS VALUED ON THE BASIS O F REJECTION OF HUDA FOR NON CONVERSION OF LAND USE.' THUS, RS.15.57CR LOSS DUE TO NON CONVERSION OF LAND USE HAD ARISEN TO THE FIRM AND THE SAME WAS ADJUSTED IN THE VALUATION OF THE CLOSING STOCK OF REAL ESTATE OF TH E FIRM. WE HOPE YOUR GOOD-SELF WILL AGREE WITH OUR SUBMISSI ONS IN THIS REGARD. ACCORDINGLY, THERE IS NO ADVERSE INFER ENCE CAN BE 18 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. DRAWN. IN CASE YOUR GOOD SELF DOES NOT AGREE WITH A NY OF THE SUBMISSIONS, OPPORTUNITY TO EXPLAIN MAY BEGIVEN. 3.5. IN REPLY TO THE QUERY, NECESSARY DETAILS WERE FURNISHED OF THE VARIOUS ACCOUNTS. HOWEVER, THE A.O. REJECTED TH E EXPLANATIONS/SUBMISSIONS OF THE ASSESSEE AND FOR TH E REASONS GIVEN IN PARAS 14 AND 15 OF THE ASSESSMENT ORDER THAT DET AILS FURNISHED BY EMGF ARE NOT OBJECTED, REJECTED THE BOOKS OF ACCOUN T UNDER SECTION 145 OF THE I.T. ACT, 1961 AND COMPUTED THE TOTAL IN COME OF PALM SPRINGS APARTMENTS AT RS.69,91,07,635 AS AGAINST IN COME RETURNED AT RS.36,73,67,205. 4. THE ASSESSEE CHALLENGED THE FINDINGS OF THE A.O. AND THE ABOVE ADDITION BEFORE LD. CIT(A). THE ASSESSEE MADE OBJECTIONS AGAINST THE COMPUTATION OF GROSS PROFIT (BEFORE ADM INISTRATION AND OVERHEAD EXPENSES) AT RS.78,30,00,000 AGAINST ALLOW ING DEDUCTION OF OVERHEAD/ADMINISTRATION EXPENSES AT RS.8,38,92,305 AS AGAINST RS.30,33,03,154 AS CLAIMED. THE OBJECTIONS OF THE A SSESSEE WERE FILED VIDE SUBMISSIONS DATED 30 TH JUNE, 2011, 19 TH JULY, 2011, 05 TH AUGUST, 2011. THE SAME ARE REPRODUCED IN THE APPELL ATE ORDER IN WHICH THE ASSESSEE BRIEFLY OBJECTED TO THESE ADDITI ONS AND SUBMITTED 19 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. THAT THE PROFIT FROM PALM SPRINTS APARTMENTS HAVE B EEN WORKED OUT AT RS.78.30 CRORES BY THE A.O. AS PER DETAILS GATHE RED FROM EMGF. HOWEVER, SUCH DETAILS WERE NOT CONFRONTED TO THE AS SESSEE. THEREFORE, THE SAME CANNOT BE READ IN EVIDENCE AGAI NST THE ASSESSEE. THE A.O. IS WRONG IN NOTING THAT ASSESSEE HAS NOT O BJECTED TO FIGURES SUPPLIED BY EMGF BECAUSE ASSESSEE IN THEIR REPLY OB JECTED TO SAME. EMGF THEMSELVES, HAVE CLARIFIED THAT INFORMATION SU PPLIED WAS PROVISIONAL AND NOT AUDITED. EMGF SUBSEQUENTLY SUPP LIED NECESSARY FIGURES OF REVENUE AND EXPENDITURE UNDER THEIR CERT IFICATE WHICH WAS ADOPTED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AND WHICH ALSO BECOME SUBJECT TO STATUTORY AUDIT AND TAX AUDIT. NO DEFECTS OR DEFICIENCIES WERE FOUND IN SUCH CERTIFICATE/AUDITED FIGURES BY THE A.O. IT WAS SUBMITTED THAT THE FIGURES GATHERED PRI OR TO THE CLOSURE OF BOOKS AND AUDIT ARE PROVISIONAL AND TENTATIVE AND U NCERTIFIED. THEREFORE, CANNOT BE GIVEN PREFERENCE OVER THE CERT IFIED FIGURES FROM THE JOINT VENTURE PARTY I.E, EMGF. THEREFORE, SAME CANNOT BE BASIS FOR MAKING THE ASSESSMENT. THE CERTIFIED FIGURES RE CEIVED FROM JOINT VENTURE PARTY WERE INCORPORATED IN THE ACCOUNTS OF THE ASSESSEE AND THERE WAS NO RE-GROUPING AS ALLEGED BY THE A.O. THE STATEMENT OF 20 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. MAHENDER PURI RECORDED UNDER SECTION 132(4) IN THE COURSE OF SEARCH ON 06.01.2009 OF PURI CONSTRUCTION PVT. LTD., AGAIN IS A NON-ISSUE BECAUSE HE WAS QUESTIONED ABOUT THE PROFITABILITY O F THE PROJECT. EVIDENTLY AT THE RELEVANT TIME THE PREVIOUS YEAR HA D NOT YET CLOSED AND SO THE PROFITABILITY FOR THE PREVIOUS YEAR ENDI NG 31 ST MARCH, 2009 CAN ONLY BE ESTIMATED. WHATEVER FIGURES WERE GIVEN, WERE ALL TENTATIVE/ADHOC AND ESTIMATED FIGURES. THEREFORE, T HE SAME CANNOT BE USED, WHILE BOOKS OF ACCOUNTS WERE CLOSED ON END OF THE FINANCIAL YEAR. AS REGARDS THE EXPENDITURE, IT WAS POINTED OU T THAT THE FIGURES DID NOT INCLUDE AMOUNT OF PROVISIONS/LIABILITIES AN D THE EXPENSES MENTIONED WERE SUBJECTED TO AUDIT WHICH TOOK PLACE ONLY ON 04 TH SEPTEMBER, 2009. THE SAME HAVE NOT BEEN DISPUTED BY THE A.O. THEREFORE, THERE WERE NO BASIS TO REJECT THE BOOKS OF ACCOUNTS OF THE ASSESSEE UNDER SECTION 145(3) OF THE I.T. ACT. THE EXPENDITURE INCURRED BY ASSESSEE AS PER BOOKS OF ACCOUNT SHOULD HAVE BEEN ALLOWED. SINCE NO SPECIFIC DEFECTS HAVE BEEN POINTE D IN MAINTENANCE OF THE BOOKS OF ACCOUNT. THEREFORE, REJECTION OF TH E SAME IS WHOLLY UNJUSTIFIED. 21 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 5. ALL THE WRITTEN SUBMISSIONS OF THE ASSESSEE WER E FORWARDED TO THE A.O. FOR FILING THE REMAND REPORT. THE A.O. FILED REMAND REPORTS WHICH ARE REPRODUCED IN THE APPELLATE ORDER IN WHICH THE A.O. REITERATED THE FACTS STATED IN THE ASSESSMENT ORDER. THE ASSESSEE HAS TAKEN FIGURES OF RECEIPTS AND DIRECT E XPENSES FROM EMGF BOOKS OF ACCOUNT AND FIGURES ON OVERHEADS FROM ITS OWN BOOKS AND USED THEM IN A MANNER SO AS TO REDUCE THE PROFI T. THE ASSESSEE ALSO FILED REJOINDER TO THE REMAND REPORT EXPLAININ G THE SAME FACTS. THE ASSESSEE IN THEIR FURTHER SUBMISSIONS REITERATE D THAT REVENUE RECOGNITION WAS BASED ON THE CERTIFICATES AND OTHER PARTICULARS FURNISHED BY EMGF. THE DETAILS EARLIER PROVIDED WER E INCOMPLETE AND FURNISHED BEFORE AUDIT. THEREFORE, SHOULD NOT BE RE LIED UPON BY A.O. THEREFORE, ALL EXPENSES INCURRED BY ASSESSEE SHOULD HAVE BEEN ALLOWED AS DEDUCTION. IT WAS SUBMITTED THAT SINCE E XPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THEREFORE, REASONABLENESS OF THE EXPENDITURE HAS TO BE JUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT OF REV ENUE. THE ASSESSEE RELIED UPON SEVERAL DECISIONS IN SUPPORT O F THE SUBMISSIONS. THE ASSESSEE ALSO EXPLAINED THE LOSS DUE TO NON-ISS UANCE OF LICENCE. 22 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. THE ASSESSEE RELIED UPON SEVERAL DECISIONS IN SUPPO RT OF THE CONTENTION THAT AS TO HOW THE AGREEMENTS SHALL HAVE TO BE INTERPRETED. THE A.O. FURTHER FIND REMAND REPORT TO THE SUBMISSIONS OF THE ASSESSEE. 6. THE LD. CIT(A) CONSIDERING THE FACTS OF THE CAS E, MATERIAL ON RECORD IN THE LIGHT OF SUBMISSIONS OF THE ASSESS EE AND REMAND REPORTS FILED BY THE A.O. ACCEPTED THE EXPLANATION OF ASSESSEE AND DELETED THE ENTIRE ADDITION. THE APPEAL OF ASSESSEE WAS ACCORDINGLY ALLOWED. THE FINDINGS OF THE LD. CIT(A) IN PARAS 2. 22 TO 2.36 ARE REPRODUCED AS UNDER : 2.22. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS FILED BY THE APPELLANT, INCLUDING REJOINDERS TO THE TWO REMA ND REPORTS, WHICH HAVE BEEN REFERRED TO CHRONOLOGICALLY ABOVE A ND HAVE ALSO GONE THROUGH THE ORDER OF ASSESSMENT. 2.23. IN THIS APPEAL THE APPELLANT HAS OBJECTED AG AINST THE COMPUTATION OF THE INCOME FROM PALM SPRINGS PROJECT . WHILE TIRE APPELLANT HAD DISCLOSED NET PROFIT AT RS. 36,73,67, 205/- (AS PER COMPUTATION OF INCOME AT PAGE 17 OF PAPER BOOK NO. 1) THE ASSESSING OFFICER HAS COMPUTED THE INCOME AT RS. 23 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 69,91,07,635/- (AS PER PAGE 19 OF THE ASSESSMENT OR DER) AS UNDER : PROFIT (BEFORE ADMINISTRATION AND OVERHEAD EXPENSES) RS.78,30,00,000/- LESS: ADMINISTRATION & OVERHEAD EXPENSES RS 8,38,92,365/- NET PROFIT RS.69,91,67,635/- 2.24 THE OBJECTIONS OF THE APPELLANT ARE TWO FOLD VIZ. (A) AGAINST COMPUTATION OF PROFIT (BEFORE ADMINISTRATION AND OV ERHEAD EXPENSES) AT RS. 78,30,00,000/- AND (B) AGAINST ALL OWING DEDUCTION OF OVERHEAD / ADMINISTRATION EXPENSES AT RS. 8,38,92,365/- AS AGAINST RS. 30,33,03,154/- AS CLAI MED. 2.25 WITH REGARD TO THE COMPUTATION OF PROFIT AT RS.78,30,00,000/-, THE BASIC OBJECTIONS OF THE APPE LLANT ARE - I) IN COMPUTING THE INCOME OF THE PROJECT (BEFORE ADMINISTRATION/OVERHEAD EXPENSES) AT RS. 78,30,00,0 00/-, THE ASSESSING OFFICER ERRED IN DISREGARDING THE COMPUTA TION OF INCOME AS FURNISHED BY TLIE~APPELLANT, 'WHICH WAS B ASED ON CERTIFIED FIGURES OF INCOME AND EXPENDITURE OF THE PROJECT, AS 24 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. FURNISHED BY 'EMGF~(AS PER THEIR AUDITED ACCOUNTS) AND INSTEAD COMPUTING THE INCOME BASED ON CERTAIN INFORMATION G ATHERED FROM EMAAR MGF IN THE MONTH OF APRIL, 2009 IN THE COURSE OF POST SEARCH ENQUIRY MADE BY THE DIRECTORATE. THIS BASIS OF COMPUTATION BY THE ASSESSING OFFICER WAS PRIMA FACI E WRONG AND INCORRECT IN AS MUCH AS WHILE FURNISHING THE INFORM ATION, EMAAR MGF HAD CLARIFIED THAT THE DATA BEING SUPPLIED WAS NOT COMPLETE AS IN THE FIGURES PROVIDED, THE FIGURES OF PROVISIO NS OF EXPENSES/LIABILITIES WERE NOT INCLUDED. II) EVEN THE MATERIAL REFERRED TO IN PARAS 11 & 12 OF THE ASSESSMENT ORDER OBTAINED FROM EMGF, ON THE BASIS O F WHICH THE GROSS INCOME HAS BEEN COMPUTED AT RS. 78,30,00,000/ - WAS COLLECTED BEHIND THE BACK OF THE APPELLANT AND THE APPELLANT WAS NOT CONFRONTED WITH IT IN THE COURSE OF ASSESSMENT. IT WAS ONLY ON THE RECEIPT OF THE ASSESSMENT ORDER THAT THE APPELL ANT BECAME AWARE OF SUCH MATERIAL. LEGAL OBJECTION IN THIS REG ARD WAS TAKEN IN PARA 7 OF THE SUBMISSIONS FILED ON 30/6/2011 VIZ . THAT THE ASSESSMENT BASED ON UTILIZATION OF SUCH MATERIAL CA NNOT BE 25 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. SUSTAINED. FOLLOWING JUDGMENTS WERE CITED IN SUPPOR T OF THE AFORESAID PROPOSITION - A) M/S. KISHINCHAND CHELLARAM VS. CIT 125 ITR 713 (SC) B) M.A. JACKSON VS. COLLECTOR OF CUSTOMS 109 STC 3 89 (SC) C) CIT V. DHARAM PAL PREM CHAND (2007) 295 ITR 105 (DELHI) D) CIT V. RY DURLABHJI 21 ITR 178 (RAJ.) 2.26. THE PITH AND SUBSTANCE OF THE ARGUMENT OF THE APPELLANT IS THAT THE THREE TABLES REPRODUCED IN PA RAS 11 & 12 OF THE ASSESSMENT ORDER, ON WHICH THE ASSESSING OFFICE R BASED THE COMPUTATION OF INCOME AT RS.78,30,0, 000/-, HAVING NOT BEEN CONFRONTED TO THE APPELLANT IN THE COURSE OF ASSESS MENT PROCEEDINGS, THE APPELLANT WAS HANDICAPPED IN MAKIN G ANY REPLY WHATSOEVER ON THE VERACITY OF THESE FIGURES; THERE WAS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. III) EVEN THE FIGURES AS SUPPLIED BY EMGF IN APRIL, 2009 AND REPRODUCED IN PARAS 11 & 12 OF THE ASSESSMENT Y EAR, WERE NOT ULTIMATELY ADOPTED BY EMAAR MGF THEMSELVES , AS AT THE TIME OF FURNISHING THEM THEY WERE INCOMPLETE AND UNAUDITED. THIS WAS EVIDENT FROM THE FACT THAT WHIL E POC FOR THE APPELLANT HAS BEEN SHOWN IN THESE TABLES AT 54.26%, THE APPELLANT ITSELF HAS SHOWN THE POC AT 60%, ON T HE BASIS 26 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. OF AUDITED CERTIFIED FIGURES LATER SUPPLIED BY EMGF (REFERENCE PAGE 17 OF THE ASSESSMENT ORDER). THERE WAS NO JUSTIFICATION FOR ADOPTION OF THE FIGURES SUPPLIED IN APRIL, 2009 BY EMGF; ADOPTING THE APRIL, 2009 FIGURES, INS TEAD OF AUDITED CERTIFIED FIGURES ON WHICH THE RETURN IS BA SED, IT WAS SUBMITTED, WOULD BE LIKE COMPARING CHALK WITH C HEESE. IV) THE ASSESSING OFFICER IN PARA 14 OF THE ASSESS MENT ORDER HAS REMARKED TO QUOTE, ASSESSEE HAS REGROUPE D THE EXPENDITURE SHOWN BY EMGF AND THAT WAY IT HAS REDUC ED THE EXTENT OF COMPLETION. THIS OBSERVATION WAS OBJ ECTED TO BY THE APPELLANT IN PARA 7(V) OF THE SUBMISSIONS FI LED ON 30/6/2011 AND IN PARA 5 OF THE REJOINDER FILED 17/11/2011. V) IT WAS CONTENDED THAT THE ASSESSING OFFICER, HAV ING NOT POINTED OUT ANY MISTAKE/DISCREPANCY/ OMISSION I N ANNUAL ACCOUNTS DULY AUDITED AND TAX AUDITED, HAS E RRED IN REJECTING THE ACCOUNTS. THE ASSESSING OFFICER BESID ES NOT ESTABLISHING THAT HE WAS NOT SATISFIED ABOUT THE CO RRECTNESS OR COMPLETENESS OF THE ACCOUNTS, HAS NOT GIVEN ANY FINDING THAT METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION ( 1) OF SECTION 145 OR ACCOUNTING STANDARD AS NOTIFIED IN S UB- SECTION (2) THEREOF HAVE NOT BEEN REGULARLY FOLLOWE D BY THE APPELLANT, AND THUS HAS ERRED IN REJECTING THE ACCO UNTS (REFERENCE PARA 7 (VII) OF THE LETTER FILED ON 30/6 /2011). 27 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 2.27. I FIND FORCE IN THE CONTENTIONS RAISED BY TH E APPELLANT AGAINST THE COMPUTATION OF PROFIT (BEFORE ADMINISTRATION/OVERHEAD EXPENSES) AT RS. 78.3 CRORE S. THE APPELLANT DERIVED INCOME FROM THE DEVELOPMENT OF A PROJECT IN SECTOR 54, GURGAON ASSESSING OFFICER IN JOINT COLLABORATION WITH EMGF - THE TWO GROUPS HAVING EQU AL SHARE OF 50:50. THE REVENUE IS RECOGNIZED BY THE AP PELLANT ON THE BASIS OF PERCENTAGE OF COMPLETION METHOD; TH E REVENUE TO BE RECOGNIZED ONLY ON REACHING THE PERCE NTAGE OF COMPLETION OF MORE THAN 40%. SINCE THE PERCENTAGE R EACHED MORE THAN 40% FOR. THE FIRST TIME DURING THE YEAR U NDER CONSIDERATION, THE INCOME FROM THIS PROJECT WAS REC OGNIZED FOR THE FIRST TIME. THE TWO JOINT VENTURE PARTIES D ECIDED THAT EMGF WOULD MAINTAIN BOOKS OF ACCOUNT, INVENTORY REC ORDS, VOUCHERS AND OTHER RECORDS FOR THE JOINT VENTURE. T HIS BEING SO, THE REVENUE WAS TO BE RECOGNIZED BY THE APPELLA NT ON THE BASIS OF CONFIRMATION/CERTIFICATION GIVEN BY EM GF. 2.28. IN THE RETURN FILED BY THE APPELLANT, THE RE VENUE WAS RECOGNIZED BASED ON THE CONFIRMATION/ CERTIFICA TION 28 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. GIVEN BY EMGF, BASED ON THEIR AUDITED ACCOUNTS. AT PAGE 17 OF THE PAPER BOOK NO. 1, FILED ON 30/6/2011 ARE GIVEN DETAILS OF THE WORKING OF THE REVENUE RECOGNITION. THE ACCOMPANYING DOCUMENTS INCLUDING THE CERTIFICATES/ DOCUMENTS AS FURNISHED BY EMGF ARE AT PAGES 18 TO 3 5 OF PAPER BOOK NO. 1. THIS WORKING ALONG WITH ACCOMPANY ING DOCUMENTS WAS FURNISHED TO THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS. 2.29. WHILE THE DETAILS OF REVENUE RECOGNITION AND ITS WORKING BASED ON ACCOMPANYING DOCUMENTS WERE FURNIS HED IN THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER INSTEAD BASED THE COMPUTATION OF PROFIT ON THE INFORMATION GATHERED FROM EMGF IN THE COURSE OF POST-SEARCH ENQUIRIES MA DE BY THE DIRECTORATE U/S 131 OF THE ACT. THESE POST-SEAR CH ENQUIRIES WERE MADE PURSUANT TO THE SEARCH U/S 132 ON 5TH & 6TH JANUARY, 2009 IN THE CASE OF PURI CONSTRUCTIO N PVT. LTD. THE SAID INFORMATION IS STATED IN THE FORM OF THREE TABLES IN PARAS 11 & 12 OF THE ASSESSMENT ORDER. IT IS THIS 29 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. ACTION OF THE ASSESSING OFFICER, WHICH IS CHALLENGE D BY THE APPELLANT. 2.30. THE ACTION OF THE ASSESSING OFFICER IN NOT ACCEPTING THE REVENUE RECOGNIZED BASED ON THE CONFIRMATION/CERTIFICATION BY EMGF AND INSTEAD RELY ING ON THE AFORESAID INFORMATION GATHERED IN THE COURSE OF POST- SEARCH ENQUIRIES CANNOT BE SUSTAINED FOR MORE THAN ONE REASON. 1. THE MATERIAL GATHERED BY THE DIRECTORATE IN THE COURSE OF POST-SEARCH ENQUIRIES WAS FURNISHED BY EMGF IN T HE MONTH OF APRIL, 2009 WHEN THEIR BOOKS OF ACCOUNT WE RE NOT CLOSED AND WERE NOT AUDITED. IN FACT, WHILE FURNISH ING THE INFORMATION EMGF QUALIFIED THE FIGURES BY STATING T HAT IN THE FIGURES PROVIDED, THE FIGURES OF PROVISION OF EXPENSES/LIABILITIES ARE NOT INCLUDED. ADMITTEDLY IT WAS BASICALLY WRONG ON THE PART OF THE ASSESSING OFFICE R TO HAVE USED THE INCOMPLETE/UN-AUDITED DATA PROVIDED BY EMG F AND DISREGARDING THE FIGURES FURNISHED BY THEM TO T HE APPELLANT AFTER THE AUDIT OF THEIR BOOKS FOR RECORD ING THE INCOME IN THEIR BOOKS OF ACCOUNT BASED ON SUCH CERT IFICATES. 30 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 2. EMGF ITSELF DID NOT RELY ON THE DATA FURNISHED I N APRIL, 2009 IS EVIDENT FROM THE FACT THAT IN THE INFORMATI ON SUPPLIED BY THEM AFTER AUDIT, THE CORRECT POC IN TH EIR OWN CASE CHANGED FROM 67.77% TO 71.83%. LIKEWISE, THE P OC IN THE CASE OF THE APPELLANT ALSO CHANGED FROM 54.26% TO 60% IN THE AUDITED FIGURES. 3. THE WORKING OF REVENUE RECOGNITION, AS FURNISHED BY THE APPELLANT BASED ON THE CONFIRMATION/ CERTIFICAT ION GIVEN BY EMGF WAS EXPLAINED BY THE APPELLANT IN PARA 2 OF THE WRITTEN SUBMISSIONS FILED ON 19/7/2011 AND PARA 6 O F THE SUBMISSIONS FILED ON 25/11/2011. BOTH THESE SUBMISS IONS WERE FORWARDED TO THE ASSESSING OFFICER FOR REPORT. IN NONE OF THE TWO REMAND REPORTS (REPRODUCED ABOVE), THE ASSESSING OFFICER HAS POINTED OUT ANY MISTAKE / DISCREPANCY THEREIN. 4. IN PARA 14 OF THE ASSESSMENT ORDER, THE ASSESSIN G OFFICER HAS GIVEN THE REASON FOR NOT ACCEPTING THE REVENUE RECOGNITION OF THE APPELLANT, TO QUOTE WHAT HE HA S DONE IS THAT HE HAS REGROUPED THE EXPENDITURE SHOWN BY EMAA R MGF AND THAT WAY IT HAS REDUCED THE EXTENT OF COMPL ETION. THIS ALLEGATION WAS MET BY THE APPELLANT VIDE PARA 7 (V) OF THE SUBMISSIONS DATED 30/6/2011 AND VIDE PARA 2 (II I) OF THE SUBMISSIONS DATED 5/8/2011. IT WAS EXPLAINED TH AT THE FIGURES TAKEN BY THE APPELLANT IN ARRIVING AT THE P ERCENTAGE OF COMPLETION IN RESPECT OF BUDGETED COST AND ACTUA L COST, 31 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. WERE THE SAME AS CERTIFIED BY EMGF, EXCEPT WITH THE ONLY DIFFERENCE THAT THE COST OF LAND OF RS. 61.21 CRORE S WAS EXCLUDED FROM THE BUDGETED AND ACTUAL COST BY THE APPELLANT, AS THE SAME WAS NOT PART OF COMMON JOINT VENTURE COST, AND WAS PAID AND CLAIMED BY EMGF ONLY . THE APPELLANTS EXPLANATION WAS FORWARDED TO THE ASSESS ING OFFICER WHICH HAS NOT BEEN CONTROVERTED ON FACTS AS EXPLAINED BY THE APPELLANT. 5. THE APPELLANT IS ALSO RIGHT IN STATING THAT THE MATERIAL COLLECTED BY THE DIRECTORATE BEHIND THE BACK OF THE APPELLANT WAS UTILIZED WITHOUT CONFRONTING IT TO THE APPELLAN T AND THERE WAS VIOLATION OF THE PRINCIPLE OF NATURAL JUS TICE. 6. THE ASSESSING OFFICER HAS ALSO NOT ESTABLISHED T HAT HE WAS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETE NESS OF THE ACCOUNTS. HE HAS NOT GIVEN ANY FINDING THAT THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OF SECTIO N 145 OR ACCOUNTING STANDARD AS NOTIFIED IN SUB-SECTION (2) THEREOF HAVE NOT BEEN REGULARLY FOLLOWED BY THE APPELLANT. THE ASSESSING OFFICER HAS THUS ERRED IN REJECTING THE A CCOUNTS OF THE APPELLANT. 2.31 FROM THE AFORESAID IT IS CONCLUDED THAT THE ACTION OF THE ASSESSING OFFICER IN COMPUTING THE INCOME BA SED ON THE INFORMATION GATHERED FROM EMGF IN APRIL, 2009 C ANNOT BE JUSTIFIED. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY 32 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. DEFECT/DISCREPANCY IN THE WORKING OF THE REVENUE RECOGNITION, BASED ON THE CERTIFIED/AUDITED FIGURES SUPPLIED BY EMGF. THE ALLEGATION OF REGROUPING IN THE FIGURE S SUPPLIED BY EMGF HAS NO FORCE. NO CASE HAS BEEN MAD E OUT TO REJECT THE BOOKS OF ACCOUNT U/S 145 OF THE ACT. UNDER THESE CIRCUMSTANCES THE COMPUTATION OF PROFIT, AS F URNISHED BY THE APPELLANT IS ACCEPTED. 2.32. THE NEXT OBJECTION OF THE APPELLANT IS AGAIN ST THE ACTION OF THE ASSESSING OFFICER WHEREBY HE HAS REST RICTED THE DEDUCTION OF ADMINISTRATION/OVERHEAD EXPENSES T O RS.8,38.92,363/- AS AGAINST EXPENSES CLAIMED AT RS. 30,33,02,154/-. 2.33. THE APPELLANTS BASIC OBJECTION IS THAT THE ASSESSING OFFICER ERRED IN DISREGARDING THE CLAIM O F EXPENDITURE MADE AS PER AUDITED BOOKS OF ACCOUNT NA MELY, RS.30,33,02,154/- AND INSTEAD ADOPTING THE FIGURES SUPPLIED BY THE APPELLANT VIDE LETTER DATED 23/4/20 09 TO THE DIRECTORATE NAMELY, RS.8,38,92,363/-. WHILE FUR NISHING THIS FIGURE IT WAS COMMUNICATED THAT THE DETAILS WE RE NOT 33 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. COMPLETE, AS THEY DID NOT INCLUDE THE AMOUNT OF PROVISIONS/LIABILITIES AND WERE UNAUDITED. THE AUDI T TOOK PLACE ONLY ON 4/9/2009. DETAILED SUBMISSIONS WERE M ADE ON THE ADMISSIBILITY OF THE CLAIM OF RS.30,33,02,15 4/-. 2.34. THE CORE OBJECTION OF THE APPELLANT IS THAT THE DEDUCTION WAS ALLOWED BY THE ASSESSING OFFICER BASE D ON ESTIMATED DETAILS FURNISHED IGNORING THE AUDITED BO OKS OF ACCOUNT. IT WAS POINTED OUT THAT WHILE FURNISHING T HE FIGURES ON 23/4/2009, IT WAS SPECIFICALLY CLARIFIED THAT TH E DETAILS WERE NOT COMPLETE, AS THEY DID NOT INCLUDE THE AMOU NT OF PROVISION/LIABILITY AND WERE SUBJECT TO AUDIT. BESI DES THE DETAILS FURNISHED WERE THE TOTAL GROUP EXPENSES OF PURI CONSTRUCTIONS. NECESSARY DETAILS WERE DULY FURNISHE D IN THE COURSE OF ASSESSMENT, IN RESPONSE TO QUERY NO. 42 & 43 OF THE QUESTIONNAIRE DATED 29/10/2010. 3.35. THE RELEVANT LETTERS AND THE TWO REMAND REPO RTS AND THE REJOINDERS THERETO ARE EXTRACTED SUPRA. 34 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 3.36. I HAVE CONSIDERED THE SUBMISSIONS MADE BY TH E APPELLANT AND THE REMAND REPORTS AND THE REJOINDERS THERETO. IT IS EVIDENT FROM THE RECORD ITSELF THAT THE DETAILS GATHERED BY THE DIRECTORATE, WHICH WERE FURNISHED B Y THE APPELLANT BY THEIR LETTER DATED 23/4/2009 WERE FURN ISHED PRIOR TO THE AUDIT OF THE BOOKS OF ACCOUNT OF THE A PPELLANT. IN THEIR LETTER DATED 23/4/2009 THE APPELLANT HAD CLAR IFIED THAT THE DETAILS WERE NOT COMPLETE, AS THEY DID NOT INCLUDE THE AMOUNT OF PROVISION/LIABILITIES AND WERE SUBJEC T TO AUDIT. THE DETAILS FURNISHED AS PER THE TABLE REPRO DUCED IN THE ASSESSMENT ORDER, ITSELF SHOW THAT THE EXPENSES ARE TOTAL GROUP EXP. PURI CONSTRUCTIONS. UNDER THESE CIRCUMSTANCES AXIOMATICALLY, THE ASSESSING OFFICER SHOULD NOT HAVE CONSIDERED EXPENSES FOR ALLOWANCE, AS FURN ISHED ON 23/4/2009, WHICH WERE INCOMPLETE AND UN-AUDITED. THE ASSESSING OFFICER WAS THEREFORE NOT JUSTIFIED IN AD OPTING THE FIGURE OF EXPENDITURE OF RS. 8.38 CRORES FOR ALLOWI NG THE DEDUCTION. THE SAME DESERVES TO BE DELETED AND THE CLAIM OF THE ASSESSEE AS PER THE COMPUTATION IS ALLOWED. 35 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 2.36. I HAVE CONSIDERED THE SUBMISSIONS MADE BY TH E APPELLANT, THE REMAND REPORT OF THE ASSESSING OFFIC ER AND THE REJOINDER THERETO. THE ASSESSING OFFICER HAS NO T COMMENTED ON THE MERITS OF THE SUBMISSION ON THE GR OUND THAT THE ACCOUNTS WERE REJECTED U/S 145 OF ACT. A F INDING HAS BEEN GIVEN EARLIER THAT NO CASE WAS MADE OUT FO R REJECTION OF ACCOUNTS U/S 145. IN HIS REMAND REPORT ASSESSING OFFICER HAS NOT COMMENTED ON THE MERITS O F THE SUBMISSIONS. ACCORDINGLY, THE MATTER IS DECIDED ON THE SUBMISSIONS MADE BY THE APPELLANT. 7. THE LD. D.R. RELIED UPON THE ORDERS OF THE A.O. AND SUBMITTED THAT ASSESSEE ENTERED INTO JOINT VENTURE AGREEMENT WITH EMGF. EMGF WAS REQUIRED TO MAINTAIN ACCOUNTS. THE A CCOUNTING STANDARD ADOPTED BY THE ASSESSEE WERE DIFFERENT FRO M THAT OF EMGF. THERE IS A DIFFERENCE IN ACCOUNTS OF BOTH THE PARTI ES. THE LD. CIT(A) HAS NOT CONSIDERED THE FIGURES BEFORE DELETING THE ADDITION AND HAS NOT CONSIDERED THE FIGURES GIVEN FOR BOTH THE PARTI ES. 8. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSE SSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND 36 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. SUBMITTED THAT ASSESSEE RECOGNISED THE REVENUE ON T HE BASIS OF PERCENTAGE COMPLETION OF METHOD I.E., THE SAME BEIN G RECOGNISED ONLY ON REACHING THE PERCENTAGE OF COMPLETION OF MORE TH AN 40%. AS THE PROJECT RELATING TO APARTMENTS ONLY REACHED COMPLET ION PERCENTAGE OF MORE THAN 40% DURING THE YEAR UNDER CONSIDERATION, REVENUE OF THIS PROJECT ALONE WAS RECOGNISED. FOR THE REMAINING TWO PROJECTS VIZ., PALM SPRINGS VILLA AND PALM SPRING PLAZA HAVE NOT R EACHED THE SAID PERCENTAGE, THEREFORE, THEIR REVENUE WAS NOT RECOGN ISED AND HAVE NOT BEEN DOUBTED BY THE A.O. HE HAS SUBMITTED THAT ASSE SSEE FOLLOWED THE SAME METHOD OF ACCOUNTING REGULARLY. THE ACCOUN TS OF THE ASSESSEE ARE AUDITED AND NO SPECIFIC DEFECTS HAVE B EEN POINTED OUT IN MAINTENANCE OF THE BOOKS OF ACCOUNTS. THE ASSESSEE AND EMGF HAVE FOLLOWED DIFFERENT PERCENTAGE OF COMPLETION TO RECO GNISE THE REVENUE. THEREFORE, THE SAME CANNOT BE COMPARED WITH EACH OT HER. WHATEVER FIGURES HAVE BEEN GIVEN BY EMGF ON THE BASIS OF THE IR CONFIRMATION AND CERTIFICATE, HAVE BEEN ENTERED INTO THE BOOKS O F ACCOUNT OF THE ASSESSEE. THE SAME ACCOUNTING SYSTEM HAVE BEEN ACCE PTED BY THE A.O. IN SUBSEQUENT ASSESSMENT YEARS UNDER SECTION 1 43(3) OF THE I.T. ACT. HE HAS FILED ASSESSMENT ORDER OF THE FIRM OF M /S. PURI 37 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. CONSTRUCTION DATED 18 TH MARCH, 2013, UNDER SECTION 143(3) FOR A.Y. 2010-2011 IN WHICH THE A.O. HAS MENTIONED THAT ASSE SSEE-FIRM WAS SUCCEEDED BY PRIVATE LIMITED COMPANY M/S. FULLMARK PROMOTERS AND DEVELOPERS PVT. LTD., THROUGH A BUSINESS TRANSF ER AGREEMENT EXECUTED ON 15 TH APRIL, 2009. ALL THE ASSETS AND LIABILITIES OF THE ASSESSEE-FIRM WERE TAKEN-OVER BY M/S. FULLMARK PROM OTERS AND DEVELOPERS PVT. LTD. AS PER THE SUBMISSIONS FILED B Y THE ASSESSEE, ALL THE EXISTING PARTNERS OF THE ASSESSEE-FIRM HAVE BEE N ISSUED SHARES IN PROPORTION IN WHICH THEIR CAPITAL ACCOUNT STOOD IN THE BOOKS OF ACCOUNT OF THE ASSESSEE-FIRM ON THE DATE OF SUCCESS ION. THE RETURN OF INCOME AT NIL WAS ACCEPTED BY THE A.O. LEARNED COUN SEL FOR THE ASSESSEE SUBMITTED THAT THE SUCCESSOR COMPANY M/S. FULLMARK PROMOTERS AND DEVELOPERS PVT. LTD., ADOPTED THE SAM E PERCENTAGE OF WORK COMPLETED FOR PALM SPRING APARTMENTS IN SUBSEQ UENT YEAR, WHICH HAVE BEEN ACCEPTED BY THE A.O. IN THE ASSESSM ENT ORDERS PASSED UNDER SECTION 143(3) OF THE I.T. ACT. THE CH ART OF THE ASSESSEE AND THE SUCCESSIVE COMPANY OF THE SAME PROJECT IS F ILED WHICH READS AS UNDER : 38 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. M/S PURI CONSTRUCTION CHART SHOWING PERCENTAGE OF WORK COMPLETED, REVENUE DECLARED AND TR EATMENT ACCORDED BY REVENUE IN ASSESSMENT PROCEEDINGS. FULLMARK PROMOTERS & DEVELOPERS PVT. LTD. S. NO. ASSESSMENT YEAR PERCENTAGE OF WORK COMPLETED - PALM SPRING APARTMENTS SALES TURNOVER DECLARED BY ASSESSEE (IN RS) INCOME AS PER ITR DECLARED BY ASSESSE(IN RS) STATUS OF ASSESSMENT U/S 143(3) OR 143(1) (ALONG WITH ORDERS OF ASSESSMENT) 1 - I 2010 - 11 88.85% 2633398585/ - 75089138/ - ASSESSED U/S 143 (3) ON 22.03.2013 2.. I 2011 - 12 89.09% 584515633/ - (86360661/ - ) ASSESSED U/S 143 (3) ON 31.01.2014 I I J ' I 2012 - 13 95.51% 804054911/ - 51340923/ - ASSESSED U/S 143 (3) ON 28.03.2014 4. 2013 - 14 97.97% 374641006/ - 50784416/ - ASSESSED U/S 143 (3) ON 22.02.2016 5. 2014 - 15 98.47% 332013531/ - 42909999/ - ASSESSED U/S 143 (3) ON 11.05.2016 6. 2015 - 16 99.47% 267973725/ - 38335368/ - ASSESSED U/S 143 (1) ON 01.03.2016 COPIES OF ASSESSMENT ORDERS ABOVE ARE ATTACHED WITH THIS CHART. S. NO. ASSESSMENT YEAR PERCENTAGE OF WORK COMPLETED - PALM SPRING APARTMENTS SALES TURNOVER DECLARED BY ASSESSEE (IN RS) INCOME AS PER ITR DECLARED BY ASSESSE(IN RS) STATUS OF ASSESSMENT U/S 143(3) OR 143(1) (ALONG WITH ORDERS OF ASSESSMENT) 1. 2009-10 60% 1350920286/- 367367204/- 39 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 9. LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT ON THE SAME ACCOUNTING STANDARD ADOPTED BY THE ASSE SSEE REGULARLY, THE PROFIT HAVE BEEN DECLARED IN SUBSEQUENT YEARS A ND THE TAX RATE IS SAME, THEREFORE, IT IS ONLY A TAX NEUTRAL. IN SUPPO RT OF THE CONTENTION, HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD., 358 ITR 295. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT EVEN IF THE ADDITIO N IS MADE BY THE A.O. IN ASSESSMENT YEAR UNDER APPEAL, DISTURBING TH E BOOKS OF ACCOUNT OF THE ASSESSEE, WITHOUT ANY REASONS, BUT N O CORRESPONDING BENEFIT HAVE BEEN GIVEN IN THE REMAINING YEARS, BY FOLLOWING THE SAME ACCOUNTING STANDARD. HE HAS SUBMITTED THAT SINCE AS SESSEE AND EMGF ARE TWO DIFFERENT ENTITIES, THEREFORE, THERE I S NO REASON TO ASK THE ASSESSEE TO ACCEPT THE SAME PERCENTAGE OF COMPL ETION METHOD BY THE ASSESSEE, WHICH IS FOLLOWED BY OTHERS. NO ERROR HAVE BEEN POINTED OUT IN THE ACCOUNTS AND AUDIT REPORT OF THE ASSESSE E. THE EXPENDITURE RELATED TO BUSINESS HAVE BEEN CORRECTLY ALLOWED. THE A.O. MADE ADDITION MERELY ON PROVISIONAL ACCOUNTS. THEREFORE, THE LD. CIT(A) CORRECTLY DELETED THE ENTIRE ADDITION. 40 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT ASSES SEE DERIVED INCOME FROM DEVELOPMENT OF REAL ESTATE PROJECT AT GURGAON IN JOINT COLLABORATION WITH EMGF. THIS PROJECT IS AN INTEGRA TED HOUSING PROJECT UNDER THE NAME OF PALM SPRINGS. THE ENTIRE PROJECT WAS DIVIDED INTO THREE SEPARATE CATEGORIES I.E., APARTM ENTS, VILLAS AND PLAZA AND DURING THE YEAR UNDER CONSIDERATION, EACH OF THESE CATEGORIES WERE COMPLETED TO A VARYING EXTENT. THE REVENUE WAS RECOGNISED BY THE ASSESSEE ON THE BASIS OF PERCENTA GE OF COMPLETION METHOD I.E, THE SAME BEING RECOGNISED ONLY ON REACH ING THE PERCENTAGE OF COMPLETION OF MORE THAN 40%. AS THE P ROJECT RELATING TO APARTMENTS ONLY REACHED COMPLETION PERCENTAGE OF MO RE THAN 40% DURING THE ASSESSMENT YEAR UNDER APPEAL, THEREFORE, REVENUE OF THIS PROJECT ALONE WAS RECOGNISED. THE A.O. CONSIDERED T HE PALM SPRING APARTMENTS FOR THE PURPOSE OF MAKING ADDITION AGAIN ST THE ASSESSEE. THE A.O. DID NOT DISPUTE THE EXPLANATION OF ASSESSE E REGARDING REMAINING TWO PROJECTS I.E., VILLAS AND PLAZAS AS T HE SAME HAVE NOT REACHED THE SAID PERCENTAGE AND THEREFORE, REVENUE WAS NOT RECOGNISED. IT IS, THEREFORE, CLEAR THAT A.O. WITH RESPECT TO THE SAME 41 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. PROJECT HAS TAKEN CONTRADICTORY STAND BECAUSE A.O. REJECTED THE EXPLANATION OF ASSESSEE WITH REGARD TO PALM SPRING APARTMENTS FOR THE PURPOSE OF RECOGNISING REVENUE ON THE BASIS OF PERCENTAGE OF COMPLETION METHOD ADOPTED BY ASSESSEE BUT FOR OTHER REMAINING TWO CATEGORIES OF SAME PROJECTS, THOUGH THE ASSESSEE MA INTAINED THE SAME ACCOUNTING STANDARD AND REVENUE WAS RECOGNISED BY THE ASSESSEE ON THE BASIS OF PERCENTAGE OF COMPLETION M ETHOD, A.O. DID NOT DOUBT THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE EXPLAINED BEFORE LD. CIT(A) THAT IT HAS CHALLENGED THE DETAILS SO FURNISHED BY EMGF IN THEIR REPLIES FILED BEFORE A.O . BECAUSE THIS INFORMATION WAS GATHERED FROM EMGF BY ISSUING SUMMO NS UNDER SECTION 131 AND EMGF THEMSELVES HAVE CLARIFIED THAT INFORMATION SUPPLIED WAS PROVISIONAL AND NOT AUDITED. THE ASSES SEE FURTHER EXPLAINED THAT EMGF SUBSEQUENTLY SUPPLIED THE NECES SARY FIGURES OF REVENUE AND EXPENDITURE UNDER THEIR CERTIFICATE WHI CH HAVE BEEN ADOPTED BY THE ASSESSEE IN THEIR BOOKS OF ACCOUNT, WHICH WERE SUBJECT TO STATUTORY AUDIT AND TAX AUDIT, IN WHICH NO DEFECTS HAVE BEEN POINTED OUT BY THE A.O. IT IS, THEREFORE, CLEA R THAT A.O. BELIEVED THE TENTATIVE AND PROVISIONAL FIGURES ONLY AS AGAIN ST THE CERTIFIED 42 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. FIGURES GIVEN BY THE JOINT VENTURE PARTY ITSELF. TH EREFORE, THE WHOLE OF THE FINDINGS OF THE A.O. ARE BASED ON PROVISIONAL A ND TENTATIVE FIGURES WHICH WAS WHOLLY UNJUSTIFIED. THE ASSESSEE ALSO EXP LAINED THAT IT HAS ADOPTED CERTIFIED FIGURES GIVEN BY JOINT VENTURE PA RTY. THEREFORE, THERE WERE NO RE-GROUPING AS ALLEGED BY THE A.O. TH E ASSESSEE ALSO EXPLAINED THAT STATEMENT OF SHRI MAHINDER PURI WAS NOT RELEVANT BECAUSE THE PREVIOUS YEAR HAD NOT BEEN CLOSED ON TH E DAY OF RECORDING OF HIS STATEMENT. THEREFORE, WHATEVER EST IMATED OR ADHOC FIGURE WAS GIVEN BY SHRI MAHINDER PURI WAS NOT RELE VANT. THIS FACT IS NOT REBUTTED BY THE A.O. IN ANY MANNER. ASSESSEE AL SO EXPLAINED THAT THE FIGURES OF THE EXPENDITURE GIVEN BY THE A.O. DI D NOT INCLUDE THE AMOUNT OF PROVISION/LIABILITY AS PER ACCOUNTING STA NDARD AND LATER ON WHEN ACCOUNTS WERE AUDITED ON 04 TH SEPTEMBER, 2009, THE ENTIRE FIGURES HAVE BEEN TAKEN IN THE AUDITED ACCOUNTS WHI CH WERE ADOPTED BY THE ASSESSEE AS WELL. HOWEVER, THESE SUBMISSIONS ALSO HAVE NOT BEEN REBUTTED BY THE A.O. IN ANY MANNER. IT IS, THE REFORE, CLEAR THAT THE FIGURES OBTAINED BY THE A.O. FROM EMGF WERE PRI OR TO THE AUDIT OF THEIR BOOKS OF ACCOUNTS. THEREFORE, PERCENTAGE O F COMPLETION OF METHOD BASED ON SUCH FIGURE AT 54% COULD NOT BE APP LIED. THE 43 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. REVENUE WAS RECOGNISED BY THE ASSESSEE BASED ON THE PERCENTAGE OF COMPLETION ON THE BASIS OF DETAILS FURNISHED BY EMG F AS PER THEIR AUDITED ACCOUNTS, COPIES OF WHICH, WERE ALSO FILED BEFORE A.O. THE PERCENTAGE OF COMPLETION METHOD OF THE ASSESSEE AND EMGF ARE TOTALLY DIFFERENT. BOTH ARE TWO DIFFERENT ENTITIES. THEREFORE, A.O. CANNOT DIRECT THE ASSESSEE TO ADOPT THE PERCENTAGE OF COMPLETION METHOD AS ADOPTED BY A DIFFERENT LEGAL ENTITY. NO R EASONS HAVE ALSO BEEN ASSIGNED BY THE A.O. AS TO HOW ASSESSEE IS DEV IATING FROM METHOD OF ACCOUNTING REGULARLY EMPLOYED. IN POST-SE ARCH ENQUIRY, EMGF SUPPLIED SOME INFORMATION IN APRIL, 2009, WHIC H WERE INCORRECT AS EMGF CLARIFIED THAT DATA GIVEN BY THEM IS NOT COMPLETE AS THE FIGURES PROVIDED DID NOT HAVE PROVISION OF E XPENSES/LIABILITY. EVEN THOSE FIGURES HAVE NOT BEEN ADOPTED BY EMGF AL SO. THE ASSESSEE EXPLAINED THE REASONS THAT PERCENTAGE OF C OMPLETION OF THE ASSESSEE DIFFER FROM THAT OF EMGF. THE FIGURES MENT IONED BY THE A.O. IN PARAS 11 AND 12 OF THE ASSESSMENT ORDER WERE ADM ITTEDLY COLLECTED AT THE BACK OF THE ASSESSEE AND HAVE NOT BEEN CONFR ONTED TO THE ASSESSEE. THEREFORE, SUCH EVIDENCE COLLECTED AT THE BACK OF ASSESSEE AND WITHOUT CONFRONTING THE SAME TO THE ASSESSEE CO ULD NOT BE READ 44 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. IN EVIDENCE AGAINST THE ASSESSEE. WE RELY UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KISHANCHAND CH ELARAM 125 ITR 713. SINCE REVENUE RECOGNISED BY THE ASSESSEE W AS BASED ON CONFIRMATION/CERTIFICATE GIVEN BY EMGF BASED ON THE IR AUDITED ACCOUNTS WAS RELEVANT AND SAME WAS ALSO SUPPORTED B Y NECESSARY EVIDENCE. THEREFORE, A.O. SHOULD NOT HAVE DOUBTED T HE ACCOUNTS OF THE ASSESSEE. THUS, THE PROVISIONAL FIGURES TAKEN B Y THE A.O. WITHOUT AUDITED ACCOUNTS, COULD NOT BE THE BASIS FOR MAKING THE ADDITION AGAINST THE ASSESSEE. THE FIGURES OF ASSESSEE, SUPP LIED BY EMGF, QUALIFIED THE FIGURES BY SAYING THAT THE SAME DID N OT INCLUDE PROVISION OF EXPENSES/LIABILITY AND ULTIMATELY PROV IDED THE COMPLETE DATA TO THE A.O, WOULD CLEARLY REVEAL THAT A.O. HAS USED INCOMPLETE AND UN-AUDITED DATA PROVIDED BY EMGF INITIALLY, WHI CH ITSELF WAS REBUTTED BY EMGF BY SUPPLYING THE AUDITED FIGURES O N CLOSURE OF THE BOOKS OF ACCOUNT AND THEIR AUDIT. THE SUBMISSIONS O F THE ASSESSEE AND MATERIAL PRODUCED BY THE ASSESSEE IN SUPPORT OF THE CONTENTION WERE FORWARDED TO THE A.O. FOR FILING REMAND REPORT . HOWEVER, THE A.O. HAS NOT POINTED OUT ANY MISTAKE OR DISCREPANCY IN THE SAME. THE ASSESSEE ALSO EXPLAINED THAT WHATEVER EXPENDITU RE WAS INCURRED 45 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. BY ASSESSEE HAVE BEEN BOOKED IN THE BOOKS OF ACCOUN T WHICH WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND EVEN CERTIFIED BY EMGF IN THEIR FIGURES SUPPLIED TO THE ASSESSEE. THESE SUBMISSIONS OF THE ASSESSEE HAVE ALSO NOT BEEN CONT ROVERTED BY THE A.O. IN THE REMAND REPORT. THEREFORE, WHATEVER INFO RMATION WAS GATHERED IN THE COURSE OF POST-SEARCH ENQUIRY COULD NOT BE THE BASIS FOR MAKING THE ADDITION AGAINST THE ASSESSEE. THE A .O. HAS NOT ESTABLISHED THAT HE WAS NOT SATISFIED ABOUT THE COR RECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. HE HA S NOT GIVEN ANY FINDING THAT METHOD OF ACCOUNTING PROVIDED IN SUB-S ECTION (1) OF SECTION 145 OR ACCOUNTING STANDARD AS NOTIFIED IN S UB-SECTION (2) THEREOF, HAVE NOT BEEN REGULARLY FOLLOWED BY THE AS SESSEE. SINCE EMGF IN ITS LETTER HAS CLARIFIED THAT THE FIGURES E ARLIER SUPPLIED DID NOT INCLUDE AMOUNTS OF PROVISIONS/LIABILITIES AND W ERE NOT AUDITED AND LATER ON THE BOOKS ARE AUDITED, THEREFORE, THE A.O. ON MERE ASSUMPTION REJECTED THE BOOKS OF ACCOUNT OF THE ASS ESSEE AS WELL AS DISALLOWED THE EXPENDITURE CLAIMED BY ASSESSEE IN T HE BOOKS OF ACCOUNT. 46 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. 11. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF ABOVE DISCUSSION, IT IS CLEAR THAT BOOKS OF ACCOUNT OF TH E ASSESSEE WERE PROPERLY MAINTAINED AND AUDITED, NO SPECIFIC DEFECT S IN THE MAINTENANCE OF BOOKS OF ACCOUNT HAVE BEEN POINTED O UT BY THE A.O. SINCE THE ASSESSEE FOLLOWED THE SAME METHOD OF ACCOUNTING REGULARLY. THEREFORE, A.O. WAS NOT JUSTIFIED IN REJ ECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE UNDER SECTION 145 OF THE I.T. ACT, 1961. 12. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO FILED CHART SHOWING PERCENTAGE OF WORK COMPLETED FOR PALM SPRING APARTMENT, REVENUE DECLARED AND TREATMENT ACCEPTED BY THE REVENUE IN SEVERAL YEARS IN THE CASE OF THE ASSESSE E AND ITS SUCCESSOR COMPANY. THE DETAILS ARE REPRODUCED ABOVE SUPPORTED BY ASSESSMENT ORDER WHICH CLEARLY SUPPORTS THE EXPL ANATION OF ASSESSEE AND ITS SUCCESSOR THAT PERCENTAGE OF WORK COMPLETED FOR PALM SPRINGS APARTMENTS HAVE BEEN REGULARLY FOL LOWED BY ASSESSEE/ITS SUCCESSOR IN SUBSEQUENT ASSESSMENT YEA RS, WHICH HAVE BEEN ACCEPTED BY THE REVENUE IN THE ASSESSMENT ORDERS 47 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. PASSED UNDER SECTION 143(3). THEREFORE, WHEN ON IDE NTICAL FACTS, SAME ADDITION HAVE NOT BEEN MADE, REVENUE CANNOT TA KE DIFFERENT VIEW IN ASSESSMENT YEAR UNDER APPEAL. IT IS WELL SETTLED LAW THAT RULE OF CONSISTENCY DO APPLY TO THE INCOME TAX PROCEEDINGS. SINCE, FOLLOWING THE SAME ACCOUNTING S YSTEM THE DEPARTMENT ACCEPTED THE BOOKS OF ACCOUNT OF SUCCESS OR COMPANY OF THE ASSESSEE IN RESPECT OF THE SAME PROJ ECT I.E., PALM SPRINGS APARTMENTS AND AS SUCH, THERE WAS NO BASIS FOR MAKING THE ADDITION AGAINST THE ASSESSEE. IT MAY ALSO BE N OTED HERE THAT WHEN A.O. REJECTED THE BOOKS OF ACCOUNT IN ASSESSME NT YEAR UNDER APPEAL AND ENHANCED THE INCOME OF THE ASSESSE E IN RESPECT OF PALM SPRINGS APARTMENTS, NOTHING IS BROU GHT ON RECORD, IF CORRESPONDING BENEFIT HAVE BEEN GIVEN TO THE SUCCESSOR OF THE ASSESSEE IN SUBSEQUENT YEARS BY REDUCING THE INCOME OF THE ASSESSEE. SINCE NOTHING IS BROUGHT ON RECORD IN THIS REGARD, THEREFORE, THIS ITSELF IS SUFFICIENT FOR LD. CIT(A) TO HAVE DELETED THE ADDITION. LEARNED COUNSEL FOR THE ASSESSEE RIGH TLY SUBMITTED THAT SINCE THE INCOME IS DECLARED ON THE BASIS OF P ERCENTAGE OF 48 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. THE COMPLETION METHOD REGULARLY SUBMITTED BY ASSESS EE AND ITS SUCCESSOR IN ASSESSMENT YEAR UNDER APPEAL AS WELL A S SUBSEQUENT YEAR AND RATE OF IS THE SAME, THEREFORE, THE WHOLE EXERCISE IS TAX NEUTRAL AND IT WOULD NOT MAKE ANY D IFFERENCE FOR THE REVENUE BECAUSE IT IS NOT A CASE AS IF THE REVE NUE HAS BEEN DEPRIVED OF ANY TAX. THE HONBLE SUPREME COURT IN T HE CASE OF CIT VS. EXCEL INDUSTRIES LIMITED 358 ITR 295 HELD T HAT THERE IS NO DISPUTE THAT IN SUBSEQUENT ACCOUNTING YEAR, THE ASSESSEE DID MAKE IMPORT AND DID DERIVE BENEFITS UNDER THE ADVAN CE LICENSE AND DUTIES ENTITLEMENT PASSBOOK AND PAID TAX, THERE FORE, IT IS NOT AS IF THE REVENUE HAS BEEN DEPRIVED OF ANY TAX. WE ARE TOLD THAT RATE OF TAX REMAINED THE SAME IN PRESENT ASSESSMENT YEAR AS WELL AS IN SUBSEQUENT ASSESSMENT YEAR. THEREFORE, THE DI SPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC OR AT THE BEST, MAY FOR MINOR TAX EFFECT. 13. THE HONBLE SUPREME COURT IN THE CASE OF CIT V S. REALEST BUILDERS AND SERVICES LTD., 307 ITR 202 HEL D THAT A.O. MUST GIVE FACTS AND FIGURES THAT THE IMPUGNED METHO D OF 49 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. ACCOUNTING ADOPTED BY THE ASSESSEE RESULTS IN UNDER -ESTIMATION OF PROFITS FOR CHANGING THE METHOD OF ACCOUNTING UNDER SECTION 145 OF THE I.T. ACT, OTHERWISE, IT WILL BE PRESUMED THAT E NTIRE EXERCISE IS TAX NEUTRAL. 14. SINCE THE A.O. IN THE REMAND REPORT DID NOT C ONTROVERT TO THE CONTENTION RAISED BY ASSESSEE, THEREFORE, LD . CIT(A) RIGHTLY APPRECIATED THE FACTS OF THE CASE FOR THE PURPOSE O F DELETING THE ADDITION. IT MAY BE STATED THAT A.O. HAS GONE AGAIN ST THE ASSESSEE ON THE BASIS OF FIGURES PROVISIONALLY SUPP LIED BY EMGF BUT WERE NOT ADOPTED BY THEM IN THEIR AUDITED ACCOU NTS, THEREFORE, MERE COMPARISON OF FIGURES AND COMPLETIO N METHOD OF TWO DIFFERENT LEGAL ENTITY PROMPTED THE A.O. TO MAK E THE ADDITIONS AGAINST THE ASSESSEE WITHOUT ANY JUSTIFIC ATION. THE ASSESSEE ALSO EXPLAINED THAT EXPENDITURE WERE BOOKE D AS WERE CERTIFIED BY THE JOINT VENTURE PARTY AS PER THEIR A UDITED ACCOUNTS AND ALL THE EXPENDITURE WERE INCURRED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THEREFORE, THE LD. CIT(A) ON PROPER APPRECIATION OF FACTS AND MATERIAL ON REC ORD, CORRECTLY 50 ITA.NO.1628/DEL./2014 M/S. PURI CONSTRUCTIONS, NEW DELHI. HELD THAT THERE WERE NO BASIS FOR REJECTION OF THE BOOKS OF ACCOUNT UNDER SECTION 145 OF THE I.T. ACT OR TO MAK E THE ABOVE ADDITIONS. NO ERROR HAVE BEEN POINTED OUT IN THE OR DER OF THE LD. CIT(A) IN DELETING THE ENTIRE ADDITIONS. WE, THEREF ORE, CONFIRM THE FINDINGS OF THE LD. CIT(A) IN SETTING ASIDE THE ORD ERS OF THE A.O. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL AND THE SAME IS ACCORDINGLY DIS MISSED. 15. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (L.P. SAHU) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI, DATED 16 TH FEBRUARY, 2018 VBP/- COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT F BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DE LHI.