Bakeri Engineers & Industries Ltd., Ahmedabad V. The Dy.CIT.,Circle-1, Ahmedabad

ITA 189/AHD/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0825 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-07-2016
• Assessment Year: 1996-1997
• Appeal Filed On: 24-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.187, 188 AND 189/AHD/2011 / ASSTT. YEAR: 1994-95, 1995-96 AND 1996-97 BAKERI ENGINEERS & INDUSTRIES LTD. 1 ST FLOOR, SANSKRUT NR. GUJARAT HIGH COURT NAVRANGPURA AHMEDABAD. PAN : AAACB 6170 F. VS DCIT, CIR.1 AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI BHARAT SHAH, AR REVENUE BY : SHRI SATISH SOLANKI, SR.DR / DATE OF HEARING : 27/07/2016 / DATE OF PRONOUNCEMENT: 08/08/2016 $%/ O R D E R PRESENT THREE APPEALS ARE DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST SEPARATE ORDERS OF EVEN DATED I.E. 15.11.2010 PASSE D BY THE LD.CIT(A)-VI, AHMEDABAD IN THE ASSTT.YEARS 1994-95 TO 1996-97. 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH THE RULE 8 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES , 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIE F THE GRIEVANCE OF THE ASSESSEE IS THAT LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITIONS OF RS.8,86,754/-, RS.12,46,000/- AND RS.10,33,096/- IN THE ASSTT.YEARS 1994-95 TO 1996-97 RESPECTIVELY. ITA NO.187 TO 189/AHD/2011 2 3. THE FACTS ON ALL VITAL POINTS ARE COMMON IN ALL THREE YEARS. THEREFORE, FOR THE FACILITY OF REFERENCE, I TAKE FACTS FROM TH E ASSTT.YEAR 1994-95. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 31.10.19 94 DECLARING TOTAL INCOME AT RS.15,70,260/-. AN ASSESSMENT ORDER WAS PASSED UND ER SECTION 143(3) OF THE INCOME TAX ACT, ON 25.3.1997, WHEREBY THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.26,19,700/-. THE ASSESSEE DURING THESE YEARS WAS ENGAGED IN CONSTRUCTION AND DEVELOPMENT OF VARIOUS COMMERCI AL COMPLEXES, VIZ. SAKAR-I, SAKAR-II, SAKAR-III, SAMPADA AND SURAMYA. THESE PROJECTS WERE IN THE NAME OF VARIOUS NON-TRADING CORPORATION (NTC FOR SHORT) AND THE ASSESSEE WAS INVOLVED IN VARIOUS ACTIVITIES INCLUDI NG CONSTRUCTION AND FINANCE ETC. THE ASSESSEE HAD ENTERED AN AGREEMENT WITH CO MPETENT AUTHORITY/PERSONS OF THESE PROJECTS FOR PROVIDING CONSULTANCY SERVICE S AND ALL OTHER ANCILLARY SERVICES. COPY OF THE AGREEMENT ENTERED WITH SAMPAD A SCHEME DATED 31.5.1991 IS AVAILABLE AT PAGE NO.9 TO 15 OF THE PA PER BOOK. AS PER THE AGREEMENT, THE ASSESSEE WAS ENTITLED FOR A FEE OF 2 0% OF THE TOTAL CONSTRUCTION COST. THE ASSESSEE HAS BEEN OFFERING INCOME FROM T HESE PROJECTS ON RECEIPT BASIS. THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTANCY. THEREFORE, IT SH OULD HAVE OFFERED THE INCOME AT THE RATE OF 20% OF THE COST OF CONSTRUCTI ON ON ACCRUAL BASIS. ACCORDINGLY, HE MADE ADDITION. IN ORDER TO APPRECI ATE THE CONTROVERSY IN MORE SCIENTIFIC WAY, LET ME TAKE NOTE OF THE DETAIL S SUBMITTED BY THE ASSESSEE TO THE AO, AND WHICH ARE AVAILABLE AT PAGE NO.300 O F PAPER BOOK-1 AS WELL AS PAGE NOS.5 TO 7 AT PAPER BOOK-2. THESE DETAILS REA D AS UNDER: ASSESSMENT YEAR 1994-95 SCHEME (1) CONSTRUCTION AMOUNT (2) % (3) AS PER AGREEMENT (4)=(2*3)/100 ACTUAL RECEIPT (5) ADDITIONAL (6)=(4-5) SAKAR 1 9,204,000 20 1,840,800 4,500,000 NIL SAKARLL 7,164,000 20 1,467,800* 1,000,000 467800 ITA NO.187 TO 189/AHD/2011 3 SAKAR III 4,067,000 20 833,400* 600,000 233400 SURAMYA II 1,052,000 20 210,554* 25,000 185554 SAMPADA 5,618,000 20 1,123,600 1,625,000 NIL TOTAL 5,476,154 7,750,000 886,754 NOTES:- (1) RECEIPT SHOWN AT RS. 77,50,000 INSTEAD OF AS PE R AGREEMENT TO BE SHOWN AT RS. 54,76,154 . SO EXCESS INCOME OF RS. 22,74,246 IS SH OWN . (2) INSPITE OF EXCESS INCOME, A.O. NEEDS ADDITION O F RS. 8,86,754. *AS PER ASSESSING OFFICER ASSESSMENT YEAR -1995-96 SCHEME (1) CONSTRUCTION AMOUNT (2) % (3) AS PER AGREEMENT (4)=(2*3)/100 ACTUAL RECEIPT (5) ADDITIONAL (6)=(4-5) SAKAR 1 1,600,000 20 320,000 1,000,000 NIL SAKAR II 35,000,000 20 7,000,000 6,100,000 900000 SAKAR III 13,500,000 20 2,700,000 2,450,000 250000 SURAMYA II 950,000 20 190,000 900,000 NIL SAMPADA 750,000 20 150,000 200,000 NIL TOTAL 10,360,000 10,650,000 1150000 NOTES:- (1) RECEIPT SHOWN AT RS. 1,06,50,000 INSTEAD OF AS PER AGREEMENT TO BE SHOWN AT RS. 1,03,60,000 . SO EXCESS INCOME OF RS. 2,90,000 IS SHOWN. (2) INSPITE OF EXCESS INCOME A.O. NEEDS ADDITION OF RS. 12,40,000. (3) THERE IS WORKING ERROR MADE BY A.O. OF RS. 9000 0. ACCORDINGLY ADDITION IS MADE OF RS. 12,40.000 (1150000+900001 4. ON PERUSAL OF THE ABOVE DETAILS WOULD INDICATE T HAT IN RESPECT OF SAKAR- I, COST OF CONSTRUCTION IN THE ASSTT.YEAR 1994-95 W AS RS.92 LAKHS. FEES OF THE ASSESSEE AS PER THE AGREEMENT SHOULD BE RS.18,40,80 0/-. BUT THE ASSESSEE HAS SHOWN ACTUAL FEE OF RS.45,00,000/-. THE LD.AO DID NOT MAKE ANY ADDITION ON THIS COUNT. HOWEVER, WITH REGARD TO SAKAR-2 FEES, ACCORDING TO THE CALCULATION OF THE AO, WAS SHORT BY RS.14,67,800/-. THEREFORE, ON THE BASIS OF ACCRUAL ITA NO.187 TO 189/AHD/2011 4 SYSTEM OF ACCOUNTANCY, HE MADE AN ADDITION OF THIS AMOUNT. THE DISPUTE TRAVELLED TO THE TRIBUNAL. IN THE FIRST ROUND OF L ITIGATION, THE TRIBUNAL HAS SET ASIDE THE MATTER TO THE AO WITH THE FOLLOWING DIREC TIONS: 6. THE NEXT COMMON ISSUE IN THESE THREE APPEALS OF REVENUE IS AS REGARDS TO THE DELETION OF BY THE CIT(A) OF UNACCOU NTED INCOME FROM CONSTRUCTION ACTIVITY. AFTER HEARING THE ID DEPARTM ENTAL REPRESENTATIVE AND GOING THROUGH THE CASE RECORDS, IT IS NOTICED T HAT THE CIT(A) HAS DELETED THE ADDITION ON THE BASIS THAT THE ASSESSEE HAS BEEN SHOWING THE RECEIPT ON CASH BASIS AND NOT ON MERCANTILE BASIS AND THE ACCOUNTING SYSTEM OF CASH BASIS IS FOLLOWED BY THE ASSESSEE SI NCE LAST MANY YEARS. THE CIT(A) DELETED THE ADDITION, BY GIVING HIS FIND ING IN PARA 6.3 AT PAGE 66, WHICH READS AS UNDER:- 'I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SU BMISSIONS MADE ON BEHALF OF THE APPELLANT. IT IS SEEN THAT TH E APPELLANT HAS BEEN SHOWING THE RECEIPT ON CASH BASIS AND NOT ON M ERCANTILE BASIS. THIS PRACTICE/SYSTEM HAS BEEN ADOPTED BY THE APPELLANT SINCE LAST MANY YEARS AND HAS BEEN ACCEPTED BY THE DEPARTMENT. IF THE ASSESSING OFFICER WANTS TO CHANGE THE METHOD OF ACCOUNTING, HE CAN CHOSE EITHER THE CASH SYSTEM OR MERCANTILE SYSTEM, WHEREAS HE HAS TAXED SOME PROJECTS ON CASH SYSTEM AND SOME PROJECTS ON MERCANTILE SYSTEM. IT IS SEEN T HAT IN SOME PROJECTS WHERE THE RECEIPTS WERE LESS HE HAS TAXED O MERCANTILE SYSTEM AND IN SOME PROJECTS WHERE THE RECEIPTS WERE MORE HE HAS TAXED ON CASH-SYSTEM. THE ASSESSING OFFICER IS NOT FREE TO CHOOSE HIS OWN SYSTEM. HE SHOULD ADOPT EITHER THE CASH SYS TEM OR MERCANTILE SYSTEM FOR ALL THE PROJECTS. IN FACT THE DEPARTMENT IS BENEFICIAL, IF THE APPELLANT IS TAXED ON CASH SYSTE M AN IN FACT, THE APPELLANT HAS SHOWN MORE RECEIPTS ON CASH SYSTEM. I , THEREFORE, HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED I N MAKING THE ADDITION IN SOME PROJECTS ON THE ADDITIONS OF RS.8 ,86,754/ AND RS.12,40,000/ MADE ASSESSING OFFICER FOR THE ASSESS MENT YEARS 1994-95 AND 1995-96 ARE DIRECTED TO BE DELETED.' 7. FROM THE ORDER OF CIT(A), IT IS SEEN THAT AT ONE STAGE THE CIT(A) HAS DISCUSSED THAT THE ASSESSEE HAS RECEIVED FEE ON THE BASIS OF COMPLETION OF PROJECTS. IT SEEMS THAT THE ASSESSEE HAS ESTIMATED ITS INCOME ON THE BASIS OF ACTUAL PERFORMANCE BUT IT IS NOT CLEAR WHETHER THE ASSESSEE HAS POSTPONED OR DEFERRED THE RECEIPTS AND THE ASSESSEE HAS ACTUALLY FOLLOWED CASH SYSTEM. THIS FACT IS NOT BROUGHT OUT ON ITA NO.187 TO 189/AHD/2011 5 RECORD BY THE ASSESSEE HAS A CASE AND IF THE ASSESS EE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THEN THIS AMOUNT WI LL BE ADDED TO THE INCOME OF THE ASSESSEE. ACCORDINGLY, TO VERIFY TH IS FACT, WE REMIT THIS ISSUE TO THE FILE OF ASSESSING OFFICER WITH THE DIR ECTION TO FIND OUT WHETHER THE ASSESSEE IS FOLLOWING CASH SYSTEM OF AC COUNTING OR MERCANTILE SYSTEM-OF ACCOUNTING AND DECIDE THE ISSU E ACCORDINGLY. 5. IN THE SECOND ROUND OF LITIGATION, THE LD.AO HAS RECORDED A FINDING THAT THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM O F ACCOUNTANCY, AND THEREOF, IT SHOULD HAVE SHOWN INCOME IN THESE PROJE CTS AT 20% OF THE COST OF CONSTRUCTION ON ACCRUAL BASIS. ACCORDINGLY, HE MAD E ADDITION. 6. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. THE LD.CIT(A) HAS OBSERVED THAT THE ITAT HAS RESTORED T HIS ISSUE FOR LIMITED PURPOSE I.E. TO FIND OUT WHETHER THE ASSESSEE HAS B EEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTANCY OR CASH SYSTEM OF ACCOUNTANCY . ACCORDING TO THE LD.CIT(A), THE ASSESSEE HAS BEEN FOLLOWING MERCANTI LE SYSTEM OF ACCOUNTANCY, AND THEREFORE, THIS INCOME HAS ACCRUED TO THE ASSES SEE. THE LD.CIT(A) HAS CONFIRMED THE ADDITION. 7. BEFORE ME, THE LD.COUNSEL FOR THE ASSESSEE CONTE NDED THAT BOTH THE REVENUE AUTHORITIES HAVE FAILED TO APPRECIATE THAT THESE ARE ASSESSMENT YEARS PRIOR TO 1.4.1997. UPTO 1.4.1997 THE ASSESSEES WER E ENTITLED TO ADOPT A HYBRID SYSTEM OF ACCOUNTANCY. THE ASSESSEE HAS BEEN FOLLO WING CASH SYSTEM OF ACCOUNTANCY FOR RECOGNIZING THE INCOME FROM THESE P ROJECTS. THE ASSESSEE HAS ALWAYS SHOWN THE INCOME ON RECEIPT BASIS. IN O RDER TO BUTTRESS THIS CONTENTION, HE TOOK ME THROUGH PAGE NOS.302 AND 303 OF THE PAPER, FROM WHERE, HE POINTED OUT THAT RIGHT FROM 1989-90, THE ASSESSEE HAS BEEN FOLLOWING THIS SYSTEM OF ACCOUNTANCY. THE AO HAS N OT ASSIGNED ANY REASON AS TO WHY THE ASSESSEE SHOULD NOT BE PERMITTED TO FOLL OW THIS METHOD. HE FURTHER CONTENDED THAT AS FAR AS TAX RATE IS CONCERNED, THE ASSESSEE IS ASSESSABLE ON THE SAME RATE OF TAX IN ALL THESE YEARS. OVERALL DISCL OSURE OF INCOME BY THE ITA NO.187 TO 189/AHD/2011 6 ASSESSEE FROM THESE CONTRACTS IS MORE THAN 20%. HE FURTHER CONTENDED THAT BASICALLY ITAT HAS NOT GIVEN ANY DIRECTION TO THE A O. THE ITAT HAS JUST REPRODUCED THE FINDING OF THE LD.CIT(A), AND THEREA FTER ITS INABILITY TO ARRIVE AT AN FIRM CONCLUSION, WHETHER THE ASSESSEE HAS BEEN F OLLOWING CASH SYSTEM OF ACCOUNTANCY WITH REGARD TO THESE CONTRACTS. THE PA RAGRAPH REFERRED BY THE LD.CIT(A) IS AN OBSERVATION AND NOT A DIRECTION. H E FURTHER CONTENDED THAT RIGHT TO RECEIVE WOULD ACCRUE TO THE ASSESSEE FROM THE EXECUTION OF THE AGREEMENT. HE DREW MY ATTENTION TOWARDS COPY OF TH E AGREEMENT EXECUTED WITH SAMPADA AND SUBMITTED THAT CLAUSES WITH REGARD OTHER PROJECTS ARE ALSO IDENTICAL. ON THE STRENGTH OF CLAUSE A01 AND A02, HE POINTED OUT THAT RIGHT TO RECEIVE WOULD ACCRUE TO THE ASSESSEE BASICALLY ON C OMPLETION OF PROJECTS, AND THAT IS WHY, THE ASSESSEE HAS BEEN SHOWING THE INCO ME FROM THESE CONTRACTS ON RECEIPT BASIS. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 8. I HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. BEFORE ADVERTING TO THE IMPUGNED ORDERS , I DEEM IT APPROPRIATE TO TAKE NOTE OF THE RELEVANT CLAUSES OF THE AGREEMENT WHICH HAS GIVEN RIGHT TO THE ASSESSEE TO RECEIVE RECEIPTS. THE RELEVANT CLAUSES FROM THE AGREEMENT WITH SAMPADA READ AS UNDER: AND WHEREAS THE EMPLOYERS HAD EARLIER REQUESTED TH E PARTY OF THE SECOND PART TO ACT FOR THE ENTIRE PROJECT - COM PLEX (THE PARTY OF THE SECOND PART HAVE ALREADY RENDERED SOME OF THE S ERVICES MENTIONED HEREINUNDER) UPON AND SUBJECT TO SUCH CONDITIONS SE T FORTH HEREINBELOW FOR PROFESSIONAL FEES AMOUNTING TO TWENTY PERCENT,( 20%) OF THE TOTAL CONSTRUCTION COST OF THE ENTIRE PROJECT (INCLUSIVE OF ALL INFRASTRUCTURE FACILITIES, SERVICES, LIFT, ANCILLIARY STRUCTURE BU ILDING, EXTERNAL WATER SUPPLY AND DRAINAGE SYSTEM, EXTERNAL ELECTRIFICATIO N INCLUDING SUPPLY CABLE AND GENERAL AMENITIES ETC., ETC., I.E. THE GR OSS COST OF THE PROJECT BUT EXCLUSIVE OF LAND COST, STAMP DUTIES AND OTHER ADMINISTRATIVE COSTS), HEREINAFTER REFERRED TO AS 'THE FEES'. ITA NO.187 TO 189/AHD/2011 7 . (A) SERVICES AS PROJECT CONSULTANTS, ETC. A01. THE CONSULTANTS SHALL WORK OUT THE FINANCI AL DETAILS OF THE SCHEME WITH THE CONSENT OF THE EMPLOYERS. THE EMPLO YERS SHALL HAVE THE RIGHTS TO CHANGE AND/OR REVISE ALTOGETHER THE E NTIRE SCHEME OR PART THEREOF OR ANY DETAILS THEREIN WITH THE PRIOR APPRO VAL AND CONSENT OF THE CONSULTANTS. THE CONSULTANTS SHALL EVALUATE THE PREVAILING MARKET CONDITIONS FROM TIME TO TIME AND SHALL RECOMMEND IF ANY CHANGES ARE REQUIRED TO BE MADE IN THE SCHEME; THE FINANCIAL DETAILS, TERMS-CONDITIONS AND THE RUL ES-REGULATIONS ETC. OF THE SCHEME ARE AS PER VARIOUS RESOLUTIONS OF THE EM PLOYERS AND ALSO AS PER THE MEMBERSHIP - ENROLMENT FORMALITIES-SETS, BROCHURES, SALIENT FEATURES SHEETS, POSSESSION FORMALITIES-SET S ETC., ETC., DRAFTS OF WHICH WERE ALREADY PREPARED AND/OR ARE TO BE PREPAR ED AS REQUIRED IN FUTURE FROM TIME TO TIME; AND THE CONSULTANTS HAVE EXAMINED, ANALYSED AND APPRO VED ALL THE ABOVE REFERRED AND AS DETAILED HEREINAFTER THE C ONSULTANTS ARE PRIMARILY RESPONSIBLE FOR THE COMPLETION OF THE SCH EME WITHIN THE COST STIPULATED FROM TIME TO TIME AS MUTUALLY AGREE D BETWEEN BOTH THE PARTIES. THIS CLEARLY MEANS THAT IF THE FINAL COST EXCEEDS, THEN THE CONSULTANTS WILL HAVE TO BEAR SUCH ADDITIONAL COST OR THEY SHALL BE PAID THAT MUC H LESS AMOUNT AS FEES AND IF THERE IS ANY SURPLUS IN THE SCHEME, THE CONSULTANTS SHALL BE PAID THAT AMOUNT BY THE EMPLOYERS AS ADDITONAL FEES. . 2. THE EMPLOYERS SHALL PAY THE CONSULTANTS THE FEE S AMOUNTING TO TWENTY PERCENT(20%) OF THE TOTAL CONSTRUCTION COST OF THE ENTIRE PROJECT(INCLUSIVE OF ALL INFRASTRUCTURE FACILIT IES, SERVICES, LIFT, ANCILLIARY STRUCTURE - BUILDING, EXTERNAL WATER S UPPLY AND DRAINAGE SYSTEM, EXTERNAL ELECTRIFICATION INCLUDING SUPPLY C ABLE AND GENERAL AMENITIES ETC., ' ETC., I.E. THE GROSS COST OF TH E PROJECT BUT EXCLUSIVE OF LAND COST, STAMP DUTIES AND OTHER ADMINISTRATIVE C OSTS). SUCH FEES SHALL BE PAID BY THE EMPLOYERS TO THE CONSULTANTS A LWAYS SUBJECT TO THE HEREINABOVE MENTIONED CLAUSE NO.'1.(A) A01,' AND ALSO IN PARTS, AS MUTUALLY CONVENIENT AND NECES SARY. ITA NO.187 TO 189/AHD/2011 8 9. SECTION 145 OF THE INCOME TAX ACT PROVIDES THAT INCOME CHARGEABLE UNDER THE HEADS PROFITS AND GAINS OF BUSINESS OR P ROFESSION OR INCOME FROM OTHER SOURCES SHALL SUBJECT TO THE PROVISIONS OF SUB-SECTION 2 BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTI LE SYSTEM REGULARLY EMPLOYED BY THE ASSESSEE. THE DISCRETION WITH THE ASSESSEE TO FOLLOW A HYBRID SYSTEM OF ACCOUNTANCY HAS BEEN ELIMINATED BY AMENDM ENT CARRIED OUT IN SECTION 145(1) BY FINANCE ACT, 1995. PRIOR TO THAT , THE ASSESSEES WERE AT LIBERTY TO ADOPT A HYBRID SYSTEM OF ACCOUNTANCY. T HESE ARE THE ASSESSMENT YEARS BEFORE THE AMENDMENT CARRIED OUT IN SECTION 1 45 OF THE ACT. THE CASE OF THE ASSESSEE BEFORE THE AO IS THAT, IT HAS BEEN FOL LOWING MIXED SYSTEM OF ACCOUNTANCY. FOR THIS CONTRACT RECEIPTS, IT HAS BE EN FOLLOWING CASH SYSTEM. THIS PLEA HAS BEEN REJECTED WITHOUT RECORDING ANY S PECIFIC FINDING. A PERUSAL OF DIFFERENT CLAUSES OF THE AGREEMENT WOULD REVEAL THAT RECEIPT OF THE ASSESSEE WOULD NOT ACCRUE AUTOMATICALLY, RATHER, THEY ARE DE PENDED ON THE HAPPENING OF CERTAIN CIRCUMSTANCES. IN CLAUSE A.01, IT HAS B EEN PROVIDED THAT IF THE FINAL COSTS EXCEEDS, THEN THE CONSULTANT WILL HAVE TO BEA R SUCH ADDITIONAL COST OR THEY SHALL BE PAID THAT MUCH LESS AMOUNT AS FEES AN D IF THERE IS ANY SURPLUS IN THE SCHEME, THE CONSULTANTS SHALL BE PAID THAT AMOU NT BY THE EMPLOYERS AS ADDITIONAL FEES. THIS CLAUSE WOULD SPECIFICALLY IN DICATE THAT CALCULATION OF THE INCOME FROM THESE PROJECTS IS NOT CONFINED TO 20% O NLY. IT IS ONLY A GAUGE TO MEASURE I.E. QUANTIFYING THE RECEIPTS ON ADHOC BASIS. THE LD.AO THOUGHT THAT AS IF IT IS A STRAIGHT JACKET FORMULA VIZ. WHENEVER ANY COST OF CONSTRUCTION WAS INCURRED BY ANY EMPLOYER, THE ASSESSEE HAS TO ACCOU NT 20% AS INCOME. NEITHER OF THE AUTHORITIES HAVE GONE THROUGH THESE DIFFERENT CLAUSES OF AGREEMENT FOR REJECTING THE CLAIM OF THE ASSESSEE. 10. AS FAR AS OBSERVATION OF THE LD.CIT(A) THAT ITA T HAS RESTORED THIS APPEAL FOR LIMITED PURPOSES, VIZ. TO IDENTIFY AS TO WHAT SYSTEM OF ACCOUNTANCY IS BEING FOLLOWED BY THE ASSESSEE IS CONCERNED, I A M OF THE VIEW THAT THE ITA NO.187 TO 189/AHD/2011 9 FOLLOWING OBSERVATIONS IF THE ASSESSEE IS FOLLOWING THE CASH SYSTEM, THEN THE ASSESSEE HAS A CASE AND IF THE ASSESSEE IS FOLLOWIN G MERCANTILE SYSTEM OF ACCOUNTING THEN THIS AMOUNT WILL BE ADDED TO THE IN COME OF THE ASSESSEE WAS AN OBSERVATION ONLY. THE AO HAS TO VERIFY THE RECO RD AND TO IDENTIFY WHAT SORT OF ACCOUNTING SYSTEM WAS BEING FOLLOWED BY THE ASSESSEE, AND WHETHER THESE RECEIPTS CAN BE TAXED ON ACCRUAL SYSTEM OF AC COUNTANCY OR NOT. THE ITAT HAS NOT DEALT WITH THIS ISSUE ON MERIT AND EXP RESSED ITS INABILITY IN THE ABSENCE OF COMPLETE FACTS. THIS IS CLEAR FROM EARL IER PARAGRAPHS. THE TRIBUNAL HAS JUST PRODUCED THE FINDING OF THE LD.CI T(A), AND THEREAFTER EXPRESSED ITS INABILITY TO DEAL WITH THE ISSUE. TH IS WAS THE REASON TO SET ASIDE TO THE FILE OF THE LD.AO. THE LD.REVENUE AUTHORITIE S INSTEAD OF GOING THROUGH THE DETAILS, CONSTRUED AS IF THEY HAVE TO ONLY IDEN TIFY THE SYSTEM OF ACCOUNTANCY. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE VIEW THAT IMPUGNED ADDITIONS ARE NOT SUSTAINABLE. THEY ARE D ELETED IN ALL THREE YEARS. 11. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 8 TH AUGUST, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 08/08/2016