MITKAR CONSTRUCTION, NAVI MUMBAI V. ITO 22(3)2, NAVI MUMBAI

ITA 1995/MUM/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3732 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 12-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN VARMA
• Keywords: Opportunity of being heard; Avoidance of tax

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , !'#$ , % & BEFORE SHRI B.R. MITTAL, JM AND SHRI N.K. BILLAIYA , AM ./I.T.A. NO. 1995/MUM/2013 ( ' ' ' ' / ASSESSMENT YEAR :2009-2010 MITKAR CONSTRUCTION, OFFICE NO. 9, PLOT NO. 120, ORIOR BLDG., SECTOR 50E, SEAWOODS, NERUL, NAVI MUMBAI-400 706 / VS. THE ITO 22(3)2, NAVI MUMBAI ( % ./ )* ./PAN/GIR NO. :AALFM 1336Q ( (+ /APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . / APPELLANT BY: SHRI PRAKASH PANDIT ,-(+ / . / RESPONDENT BY : SHRI PRAVIN VARMA / 01% / DATE OF HEARING : 29.4.2013 23' / 01% / DATE OF PRONOUNCEMENT : 08.05.2013 4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)-33, MUMBAI DT.19.2.2013 PERTAINING TO A.Y. 2009-10. 2. THE ASSESSEE HAS RAISED THREE SUBSTANTIVE GROUND S OF APPEAL. THE SUM AND SUBSTANCE OF THE FIRST TWO GROUNDS ARE THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 2,39,86,375/- OUT OF THE TOTAL ADDITION MADE AT RS. 2,51,95,170/-. ITA NO. 1995/M/2013 2 3. FACTS GIVING RISE TO THIS GRIEVANCE SHOW THAT TH E ASSESSEE IS A BUILDER AND DEVELOPER. DURING THE YEAR UNDER CONSI DERATION, THE ASSESSEE HAS CONSTRUCTED 34 FLATS OUT OF WHICH IT SOLD 17 FL ATS AND THE TOTAL SALE CONSIDERATION RECEIVED WERE AT RS. 4,91,42,000/-. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN ADVANCES RECEIVED FROM 14 PE RSONS AMOUNTING TO RS. 3,22,24,800/-. THE AO FURTHER OBSERVED THAT TH E ASSESSEE HAS RECEIVED OCCUPATION CERTIFICATE FROM MUNICIPAL CORP ORATION, NAVI MUMBAI ON 19.9.2008. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS SOLD 17 FLATS I.E. 50% OF THE TOTAL PROJECT OF 34 F LATS. THE AO WAS OF THE FIRM BELIEF THAT HAVING SOLD 50% OF THE TOTAL PROJE CT AND HAVING RECEIVED THE ENTIRE SALE CONSIDERATION IN RESPECT OF OTHER 1 2 FLATS, THE PROJECT WAS COMPLETED, THEREFORE THE ENTIRE PROFIT FROM THE PRO JECT SHOULD BE TAXED IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE WAS GIV EN AN OPPORTUNITY TO EXPLAIN ITS CASE. THE ASSESSEE VIDE LETTER DT. 8.7 .2011 SUBMITTED THAT ADVANCES AGAINST SALE OF FLATS SHOULD NOT BE TREATE D AS A PROFIT IN THE SAME YEAR AS THE REGISTRATION OF SUCH FLATS WERE PENDING AND WERE DONE IN THE SUBSEQUENT YEAR. THIS SUBMISSION MADE BY THE ASSES SEE DID NOT FIND ANY FAVOUR FROM THE AO WHO WAS OF THE FIRM BELIEF THAT SINCE THE ASSESSEE HAS RECEIVED THE ENTIRE SALE PROCEEDINGS AND HAS SH OWN THEM AS ADVANCES, IT IS NOTHING BUT AVOIDANCE OF TAX LIABILITY FOR TH E YEAR UNDER CONSIDERATION. THE AO RELIED UPON THE DECISION OF T HE TRIBUNAL IN THE CASE OF CHAMPION CONSTRUCTION CO. VS FIRST INCOME TAX OFFICER 5 ITD 495 AND WENT ON TO COMPUTE THE PROFIT ON THE PROJEC T WHICH WORKED OUT TO BE AT RS. 2,59,13,790/-. 3. AGGRIEVED BY THIS FINDING OF THE AO, THE ASSESSE E CARRIED THE MATTER BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A ), THE ASSESSEE ITA NO. 1995/M/2013 3 REITERATED ITS STAND THAT IT IS FOLLOWING PERCENTAG E COMPLETION METHOD OF ACCOUNTING AND SINCE THE PROJECT WAS NOT COMPLETED DURING THE YEAR THEREFORE IT HAS NOT BOOKED ENTIRE PROFIT. IT WAS FURTHER EXPLAINED THAT BUILDING OCCUPATION CERTIFICATE IS A MERE FORMALITY IN ORDER TO GET WATER CONNECTION, ELECTRIC CONNECTION, DRAINAGE CONNECTIO N ETC. WHICH CANNOT BE MADE A BASIS TO SAY THAT THE ASSESSEE HAS COMPLETED ITS PROJECT. IT WAS THE CONTENTION OF THE ASSESSEE THAT IT HAS GIVEN DETAI LED COST OF THE MATERIAL AND CONSTRUCTION EXPENSES TO SHOW THAT THE BUILDING CONTINUED ITS CONSTRUCTION ACTIVITIES DURING A.YR 2010-11 AND A.Y . 2011-12 AND THE ASSESSEE HAS DULY DISCLOSED THE PROFIT ON PERCENTAG E COMPLETION METHOD WHICH THE ASSESSEE HAS CONSISTENTLY FOLLOWED IN EAR LIER YEARS IN RESPECT OF OTHER PROJECTS. THE ASSESSEE FILED DETAILED CHART EXPLAINING THAT THE PROFIT IN RESPECT OF THE REMAINING 17 FLATS HAS BEEN OFFER ED FOR TAXATION IN A.Y. 2010-11 AND A.Y. 2011-12. THE ASSESSEE EXPLAINED T HAT THOUGH TECHNICAL OCCUPATION CERTIFICATES WERE GIVEN BY MUNICIPAL COR PORATION, NAVI MUMBAI ON 29.9.2008, BUILDING WAS INCOMPLETE AND W AS COMPLETED IN ALL RESPECT ONLY IN A.Y 2011-12. DISTINGUISHING THE FA CTS OF ITS CASE FROM THE DECISION OF THE TRIBUNAL IN CHAMPION CONSTRUCTION C O. (SUPRA), THE ASSESSEE EXPLAINED THAT IN THAT CASE THE ASSESSEE W AS DISCLOSING THE PROFIT ON PROJECT COMPLETION METHOD, EVEN IF THE RATIO OF THE SAID DECISION IS ACCEPTED, THE ASSESSEE CONTENDED THAT THE PROBABLE EXPENDITURE FOR COMPLETION OF PROJECT HAS TO BE ALLOWED. THE ASSES SEE REITERATED THAT IT IS RECOGNIZING THE REVENUE AS PER AS-9 ISSUED BY ICAI WHICH RELATES TO PERCE NTAGE COMPLETION METHOD OF RECOGNIZING REVENUE. TH EREAFTER THE ASSESSEE RELIED UPON CERTAIN JUDICIAL DECISIONS BEFORE THE LD. CIT(A). 3.1. AFTER CONSIDERING THE FACTS AND SUBMISSIONS MA DE BY THE ASSESSEE, THE LD. CIT(A) OBSERVED THAT THE OCCUPATION CERTIFI CATE IS CONSEQUENT TO ARCHITECT COMPLETION CERTIFICATION DT. 16.9.2007 AN D 18.12.2007 GIVEN BY ITA NO. 1995/M/2013 4 THE ARCHITECT OF THE ASSESSEE ON THE BASIS OF WHICH THE MUNICIPAL CORPORATION, NAVI MUMBAI ISSUED OCCUPATION CERTIFIC ATE. THE LD. CIT(A) FURTHER OBSERVED THAT OUT OF THE 14 FLATS OF WHICH AGREEMENTS REGISTERED SUBSEQUENTLY TO THE YEAR UNDER CONSIDERATION, THE A SSESSEE HAS RECEIVED 100% OF SALE CONSIDERATION DURING THE FINANCIAL YEA R UNDER CONSIDERATION. THE LD. CIT(A) WAS OF THE FIRM BELIEF THAT IN ALL T HESE CASES WHERE FULL AMOUNT HAS BEEN RECEIVED AND AGREEMENT OF SALE HAS BEEN ENTERED, THE FLAT HAS TO BE TAKEN AS COMPLETED IN ALL RESPECT. THE L D. CIT(A) ALSO CONSIDERED THE AGREEMENT FOR SALE AND OBSERVED THAT IN THOSE DOCUMENTS, SCHEDULE OF PAYMENT IS AVAILABLE AND IT HAS BEEN PR OVIDED THAT POSSESSION IS TO BE GIVEN AFTER MAKING 100% PAYMENT ONLY. THIS ACCORDING TO THE LD. CIT(A) CONFIRMS THE FACT THAT WHEREVER 100% PAYMENT S HAVE BEEN RECEIVED, EFFECTIVE POSSESSION HAS BEEN GIVEN TO TH E PARTIES AS PER THE AGREEMENT FOR SALE ENTERED. THE LD. CIT(A) WAS CON VINCED WITH THE FINDINGS OF THE AO THAT THE ADVANCES RECEIVED HAVE TO BE TAKEN AS SALES INSTEAD OF SHOWING THESE COMPLETED FLATS AS UNSOLD CLOSING STOCK AS THE TOTAL ADVANCES RECEIVED WERE TAKEN AT RS. 3,22,22,8 00/-. THE LD. CIT(A) DEDUCTED THE AMOUNT OF ADVANCES OF WHICH THE ASSESS EE HAS ALREADY BOOKED SALE AND COMPUTED THE NET FIGURE OF SALES AT RS. 3,02,18,800/-. WHILE COMPUTING THIS SALES FIGURE, THE LD. CIT(A) H AS DEDUCTED RS,5,87,000/- BEING SALE BOOKED IN THE NAME OF ALI NAQVI AND RS. 4,50,000/- IN THE NAME OF M.K. DEEPA TOTALING TO RS . 10,37,000/-, ACCORDINGLY, WORKING OF PROFIT FOR A.Y. 2009-10 DON E BY THE AO AT RS. 2,59,13,790/- WAS REDUCED BY RS. 10,37,000/- AND FU RTHER BY RS. 8,90,415/- BEING ALLEGED ADDITIONS MADE FOR AMENITI ES BY THE AO AND WENT ON TO RESTRICT THE ADDITION MADE BY THE AO AT RS. 2,59,13,790/- TO RS. 2,39,86,375/-. ITA NO. 1995/M/2013 5 4. AGGRIEVED BY THIS FINDING, THE ASSESSEE IS BEFOR E US. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THAT THE PROFIT HAS BEEN DISCLOSED ON PERCENTAGE COMPLETION METHOD AS PER THE GUIDELINES ISSUED BY ICAI. IT IS THE SAY OF THE COUNSEL THAT THE REVENUE AUTHORIT IES HAVE MADE ADJUSTMENTS TO THE PROFITS DISCLOSED BY THE ASSESSE E ONLY ON THE GROUND THAT SALE CONSIDERATION HAS BEEN RECEIVED AND OCCUP ATION CERTIFICATE IS OBTAINED DURING THE YEAR UNDER CONSIDERATION. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT FOR SUBSEQUENT ASSE SSMENT YEAR I.E. 2010- 11, THE AO HAS ACCEPTED BOOK RESULT ACCEPTING THE S AME METHOD OF ACCOUNTING. THE LD. COUNSEL FOR THE ASSESSEE VEHEM ENTLY SUBMITTED THAT THE ENTIRE EXERCISE OF THE REVENUE AUTHORITIES OF M AKING ADDITION IN THE YEAR UNDER CONSIDERATION IS A REVENUE NEUTRAL AS TH E PROFITS ARE DISCLOSED PROPERLY IN SUBSEQUENT ASSESSMENT YEARS. IT IS THE SAY OF THE COUNSEL THAT THE REVENUE AUTHORITIES HAVE GROSSLY FAILED TO TAKE INTO CONSIDERATION THE AMOUNT SPENT IN SUBSEQUENT ASSESSMENT YEAR ON THE P ROJECT. 5. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. IT IS NOT IN DISPUTE THA T OUT OF 34 FLATS, THE ASSESSEE HAS SOLD 17 FLATS DURING THE YEAR UNDER CO NSIDERATION. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS RECEIVED ADVANCES IN RESPECT OF 14 FLATS TO THE TUNE OF RS. 3,22,22,800/-. IT IS THE CONTENTIO N OF THE ASSESSEE THAT IT IS FOLLOWING PERCENTAGE COMPLETION METHOD WHICH IS LIN E WITH AS-9 ISSUED BY ICAI. REAL ESTATE ACTIVITIES AND TRANSACTIONS T AKE DIVERSE FORMS. WHILE SOME ARE FOR SALE OF LAND (DEVELOPED OR UNDEV ELOPED), OTHERS ARE FOR CONSTRUCTION, DEVELOPMENT OR SALE OF UNITS THAT ARE NOT COMPLETE AT THE TIME OF ENTERING INTO AGREEMENTS FOR CONSTRUCTION, DEVELOPMENT OR SALE. ITA NO. 1995/M/2013 6 REAL ESTATE TAKES PLACE IN A VARIETY OF WAYS AND MA Y BE SUBJECT TO DIFFERENT TERMS AND CONDITIONS AS SPECIFIED IN THE AGREEMENT FOR SALE. ACCORDINGLY, THE POINT OF TIME AT WHICH ALL SIGNIFI CANT RISKS AND REWARDS OF OWNERSHIP CAN BE CONSIDERED AS TRANSFERRED, IS R EQUIRED TO BE DETERMINED ON THE BASIS OF THE TERMS AND CONDITIONS OF THE AGREEMENT FOR SALE. IN CASE OF REAL ESTATE SALES, THE SELLER USU ALLY ENTERS INTO AN AGREEMENT FOR SALE WITH THE BUYER AT INITIAL STAGES OF CONSTRUCTION. THIS AGREEMENT FOR SALE IS ALSO CONSIDERED TO HAVE THE E FFECT OF TRANSFERRING ALL SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP TO THE B UYER PROVIDED THE AGREEMENT IS LEGALLY ENFORCEABLE AND SUBJECT TO THE SATISFACTION OF CONDITIONS WHICH SIGNIFY TRANSFERRING OF SIGNIFICAN T RISKS AND REWARDS EVEN THOUGH THE LEGAL TITLE IS NOT TRANSFERRED OR T HE POSSESSION OF THE REAL ESTATE IS NOT GIVEN TO THE BUYER. ONCE THE SELLER HAS TRANSFERRED ALL THE SIGNIFICANT RISKS AND REWARDS TO THE BUYER, ANY ACT S ON THE REAL ESTATE PERFORMED BY THE SELLER ARE, IN SUBSTANCE, PERFORME D ON BEHALF OF THE BUYER IN THE MANNER SIMILAR TO A CONTRACTOR. THE CO MPLETION OF THE REVENUE RECOGNITION PROCESS IS USUALLY IDENTIFIED W HEN THE FOLLOWING CONDITIONS ARE SATISFIED. A. THE SELLER HAS TRANSFERRED TO THE BUYER ALL SIGNIFI CANT RISKS AND REWARDS OF OWNERSHIP AND THE SELLER RETAINS NO EFFE CTIVE CONTROL OF THE REAL ESTATE TO A DEGREE USUALLY ASSOCIATED W ITH OWNERSHIP. B. THE SELLER HAS EFFECTIVELY HANDED OVER POSSESSION O F THE REAL ESTATE UNIT TO THE BUYER FORMING PART OF THE TRANSA CTION. C. NO SIGNIFICANT UNCENTAINTY EXISTS REGARDING THE AM OUNT OF CONSIDERATION THAT WILL BE DERIVED FROM THE REAL ES TATE SALES; AND D. IT IS NOT UNREASONABLE TO EXPECT ULTIMATE COLLECTIO N OF REVENUE FROM BUYERS. ITA NO. 1995/M/2013 7 7. LET US NOW CONSIDER THE FACTS OF THE CASE IN THE LIGHT OF THE AFOREMENTIONED OBSERVATIONS TAKEN FROM AS-9. A PER USAL OF THE AGREEMENT FOR SALE SHOW THAT THE SAME HAS BEEN ENTE RED ONLY AFTER RECEIVING SALE CONSIDERATION IN FULL WHICH MEANS TH AT THE SELLER HAS TRANSFERRED TO THE BUYER ALL SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP. SINCE 100% CONSIDERATION HAS BEEN RECEIVED, THEIR R EMAINS NO SIGNIFICANT UNCERTAINTY. REGARDING THE AMOUNT OF CONSIDERATION , FOLLOWING CHART WILL SHOW THAT THE ASSESSEE HAS RECEIVED THE ENTIRE SALE CONSIDERATION IN RESPECT OF 14 FLATS. SR. NO. NAME OF THE PARTY FLT NO. AMOUNT RECD IN F.Y. 2008- 09 SALE CONSIDERATION AS PER AGREEMENT REGISTERED DATE OF REGISTRATION PURCHASE ARE AS PER THE REGISTERED AGREEMENT BOOKED SALES IN A.Y. 2009- 10 1 JOYAB Y.UJJAINWALA 703 19,02,500 17,85,00 04/05/2011 SAME 2 K.MOHAN 701 5,87,000 -- 8/11/2008 ALI NAQVI YES 3 MABLE JOSEPH 402 4,50,000 34,00,000 -- M.K.DEEPA YES 4 MOHD. SHAFI MURSHEDKAR 103 18,78,000 19,00,000 25/7/2008 SAME 5 MUKUNDAN NAIR 202 20,00,000 20,00,000 24/11/2009 SAME 6 SAJID PAWNE 502 18,54,500 18,54,500 15/05/2008 SAME 7 SANTOSH S.SINGH 601 26,87,000 26,75,000 02/11/2007 SAME 8 SOORAJ PALAKKIVETTI 602 25,87,875 24,31,000 27/04/2007 SAME 9 SUNIL KURUP 301 26,37,300 35,82,000 25/02/2008 SAME 10 SUNITA M.NAIR 201 26,50,000 26,50,000 16/02/2009 SAME 11 VARGHESE T.KARAKAT 402 31,33,625 28,51,715 05/09/2007 SAME 12 WAZIR BAAZ KHAN 101 20,00,000 20,00,000 20/06/2008 SAME 13 VELIYATHE K.THOMAS 202 29,75,000 ? 14 YASIN & SHEHNAZ MANEKIA 401 38,50,000 35,00,000 04/04/2008 KAMLESH LONDHE YEARS TOTAL 3,22,22,800 3,06,29,215 ITA NO. 1995/M/2013 8 8. AFTER CONSIDERING THESE PECULIAR FACTS OF THE CA SE, IN OUR CONSIDERATE VIEW, THE ENTIRE AMOUNT OF RS. 3,22,22, 800/- WHICH HAS BEEN SHOWN AS ADVANCES HAS TO BE TREATED AS PART OF THE SALE CONSIDERATION FOR THE YEAR UNDER CONSIDERATION. THEREFORE, WE DO NOT FIND ANY INFIRMITY OR ERROR IN THE FINDINGS OF THE LD. CIT(A). EVEN ASSUM ING THAT PERCENTAGE COMPLETION METHOD IS TO BE APPLIED, UNDISPUTED FACT S OF THE CASE SHOW THAT OUT OF 34 FLATS ASSESSEE HAS SOLD 17 FLATS AND FOR THE BALANCE FLATS HAVE RECEIVED 100 % SALE CONSIDERATION IN RESPECT OF 14 FLATS WHICH MEANS THAT THE ASSESSEE HAS RECEIVED FULL SALE CONSIDERATION I N RESPECT OF 31 FLATS OUT OF TOTAL 34 FLATS MAKING THE ENTIRE PROJECT 91.17 % COMPLETE. THEREFORE THE ASSESSEE OUGHT TO BE TAXED FOR THE 91.17 % OF T HE PROJECT IN THE YEAR UNDER CONSIDERATION. THEREFORE , IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE DIRECT THE AO TO RE-COMPUTE THE PROFIT FOR THE YEAR UNDER CONSIDERATION AFTER TAKING INTO CONSIDERATION THE ENTIRE AMOUNT O F ADVANCES AS PART OF SALES DURING THE YEAR AFTER GIVING REASONABLE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. 9. WHILE CONFIRMING THE FINDINGS OF THE LD. CIT(A), THE MATTER IS RESTORED BACK ONLY FOR THIS LIMITED PURPOSE. GROUN D NO. 1 & 2 ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES FOR LI MITED PURPOSE ONLY. 10. BEFORE CLOSING, THE ASSESSEE HAS RELIED UPON TH E FOLLOWING DECISIONS: 1) ACIT CIR 2(2) VS NATIONAL BUILDERS 0 137 ITD 277 ( AHM) 2) CIT VS ADVANCE CONSTRUCTION CO. P. LTD. 275 ITR 3 0 (GUJ) 3) ACIT VS DHARTI ESTATE 129 ITD 01 (MUM) 4) AVDHESH BUILDERS VS ITO 37 SOT 122 (MUM) ITA NO. 1995/M/2013 9 5) CIT VS REALEST BUILDERS & SERVICES LTD 307 ITR 20 2 (SC) 6) CIT VS BRITISH PAINTS INDIA LTD 188 ITR 44 SINCE WE HAVE DECIDED THIS ISSUE IN THE LIGHT OF TH E PECULIAR FACTS OF THE CASE, WE DO NOT PROPOSE TO DISCUSS THESE JUDICI AL DECISIONS AS THE ENTIRE CASE HAS BEEN DECIDED ON THE PECULIARITY OF THE FACTS OF THE CASE. 11. BEFORE PARTING, IT WOULD BE PERTINENT TO DISCUS S THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS REALEST BUILDERS AND SERVICES LTD. (SUPRA) WHEREIN THE HONBLE SUPR EME COURT HAS OBSERVED AS UNDER: IN CASES WHERE THE DEPARTMENT WANT TO TAX AN ASSES SEE ON THE GROUND OF LIABILITY ARISING IN A PARTICULAR YEA R, IT SHOULD ALWAYS ASCERTAIN THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IN THE PAST AND WHETHER THE CHANGE IN THE METHOD OF ACCOUN TING WAS WARRANTED ON THE GROUND THAT PROFIT IS BEING UNDER- ESTIMATED UNDER THE IMPUGNED METHOD OF ACCOUNTING. IF THE AO COMES TO THE CONCLUSION THAT THERE IS UNDER-ESTIMATION OF PROFIT S, HE MUST GIVE FACTS AND FIGURES IN THAT REGARD TO DEMONSTRATE THA T THE IMPUGNED METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE RESULT S IN UNDER ESTIMATION OF PROFITS AND IS THEREFORE REJECTED. O THERWISE THE PRESUMPTION WOULD BE THAT THE ENTIRE EXERCISE IS RE VENUE NEUTRAL. 12. TAKING A LEAF OUT OF THE AFORESAID OBSERVATION, WE FIND THAT IN THE INSTANT CASE, THE REVENUE AUTHORITIES HAVE CLEARLY DEMONSTRATED BY FACTS AND FIGURES THAT THERE IS UNDER ESTIMATION OF PROFI T. WE, THEREFORE RESPECTFULLY FOLLOW THE GUIDELINES GIVEN BY HONBLE SUPREME COURT AS MENTIONED HEREIN ABOVE. 13. GROUND NO. 3 RELATES TO CONFIRMATION OF THE ADD ITION OF RS.12,07,680/- MADE BY THE AO IN RESPECT OF OUTSTAN DING SUNDRY CREDITORS FOR EXPENSES. ITA NO. 1995/M/2013 10 14. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PR OCEEDINGS, IT WAS NOTICED THAT THERE WERE SMALL SUNDRY CREDITORS OUTS TANDING FOR THE MATERIAL SUPPLIED BY THEM AMOUNTING TO RS.12,07,680 /-, IT WAS THE CLAIM OF THE ASSESSEE THAT THE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEAR I.E. A.Y. 2010-11. THE AO ASKED THE ASSESSEE TO PRODUCE THE VOUCHERS OF THE SUBSEQUENT ASSESSMENT YEAR. ON RECEIVING NO RESPONSE, THE AO ADDED THE ENTIRE AMOU NT BEING NON- GENUINE LIABILITY OF THE BUSINESS. 15. THE ASSESSEE AGITATED THIS MATTER BEFORE THE LD . CIT(A) AND REITERATED THAT THE CREDITORS RELATE TO BUILDING MA TERIALS, CEMENT STEEL ETC. AND PAYMENTS HAVE BEEN MADE IN THE SUBSEQUENT ASSES SMENT YEAR. HOWEVER, THE LD. CIT(A) WAS OF THE FIRM BELIEF THAT THE VOUCHERS FOR EXPENSES FOR WHICH THESE SUNDRY CREDITORS ARE SHOWN IN THE BOOKS WERE FOUND NOT ADMISSIBLE , THEREFORE , CONFIRMED THE A DDITION OF RS. 12,07,680/-. 16. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REI TERATED THAT THESE ARE SMALL SUNDRY CREDITORS OUTSTANDING FOR THE MATERIAL SUPPLIED BY THEM. THE LD. COUNSEL FURTHER SUBMITTED THAT THE VOUCHERS COU LD NOT BE MADE AVAILABLE TO THE LOWER AUTHORITIES AS THEY WERE LYI NG IN THE OFFICE OF THE C.A. THE LD. COUNSEL DREW OUR ATTENTION TO PAGE-31 2 TO 475 OF THE PAPER BOOK AND EXPLAINED THAT THESE ARE VOUCHERS OF PAYME NT TO THE CREDITOR IN THE SUBSEQUENT YEAR. AFTER CONSIDERING THE FACTS A ND THE ORDERS OF THE LOWER AUTHORITIES, IN OUR CONSIDERATE VIEW, THIS IS SUE NEEDS RE-VERIFICATION AT THE ASSESSMENT STAGE. WE, THEREFORE, RESTORE TH IS ISSUE BACK TO THE FILE OF THE AO. THE ASSESSEE IS DIRECTED TO PRODUCE ALL RELEVANT BILLS AND VOUCHERS IN SUPPORT OF ITS CLAIM OF PAYMENTS TO SUN DRY CREDITORS. THE AO ITA NO. 1995/M/2013 11 IS DIRECTED TO VERIFY THE SAME AND DECIDE THE ISSUE AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5 06 50 / 7 8/ 9:; <0 / )0 =# ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH MAY, 2013 . 4 / 3' % 7 >6 8.5.2013 3 / ? SD/- SD/- (B.R. MITTAL ) (N. K. BILLAIYA ) /JUDICIAL MEMBER % / ACCOUNTANT MEMBER MUMBAI; > DATED 08/05 /2013 . . ./ RJ , SR. PS 4 4 4 4 / // / ,0! ,0! ,0! ,0! @ @ @ @!'0 !'0!'0 !'0 / COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. A ( ) / THE CIT(A)- 4. A / CIT 5. !B? ,0 , , / DR, ITAT, MUMBAI 6. ?C D / GUARD FILE. 4 4 4 4 / BY ORDER, -!0 ,0 //TRUE COPY// 9 99 9 / = = = = ) ) ) ) (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI