M/s Developers, Vijayawada V. The DCIT Central Circle Vijayawada, Vijayawada

ITA 268/VIZ/2011

• Counselvise Citation: 26825314 RSA 2011
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-12-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 08-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Business income; Income from undisclosed sources; Document seized; Condonation of delay; Documents seized
• Section: 44AD; 153A

Judgement Text

ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO S . 264 /VIZAG/ 20 1 1 ASSESSMENT YEAR : 2005 - 06 DCIT, CENTRAL CIRC LE VIJAYAWADA VS. M/S. DEVELOPERS VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO.AAEFD 2707K ITA NO.268/VIZAG/2011 ASSESSMENT YEARS : 2005 - 06 M/S. DEVELOPERS VIJAYAWADA VS. DCIT, CENTRAL CIRCLE VIJAYAWADA (APPELLANT) (RESPONDENT) ITA NOS.269 TO 272/VIZAG/2011 ASSESSMENT YEARS : 2006 - 07 TO 2009 - 10 RESPECTIVELY M/S. DEVELOPERS VIJAYAWADA VS. DCIT, CENTRAL CIRCLE VIJAYAWADA (APPELLANT) (RESPONDENT) A SSESSEE B Y: SHRI V. RAGHAVENDRA RAO, ADVOCATE REVENUE BY : SHRI K.V.N. CHARYA, CIT(DR ) DATE OF HEARING : 09.12.2013 DATE OF PRONOUNCEMENT : 13 .12.2013 ORDER PER B. RAMAKOTAIAH:- THESE ARE MAINLY ASSESSEES APPEALS FROM ASSESSMEN T YEARS 2005-06 TO 2009-10. CROSS APPEAL BY THE REVENUE IS FOR ASS ESSMENT YEAR 2005-06. SINCE COMMON ISSUES ARE INVOLVED, THESE ARE CONSIDE RED TOGETHER AND DECIDED BY THIS COMMON ORDER. 2. THERE IS A DELAY OF 3 DAYS IN FILING THE APPEALS BY ASSESSEE AND ASSESSEE HAS FILED AN AFFIDAVIT EXPLAINING THE DELA Y AND AN APPLICATION FOR ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA 2 CONDONATION OF DELAY ALONG WITH THE APPEALS. AFTER CONSIDERING THE RIVAL CONTENTIONS, THE DELAY IN FILING THE APPEALS HAS BE EN CONDONED. 3. BRIEFLY STATED FACTS ARE THAT THERE WAS SEARCH & SEIZURE OPERATIONS CONDUCTED IN THE GROUP CASES OF M/S. DEVELOPERS GRO UP, VIJAYAWADA ON 23.04.2008. CONSEQUENT TO SEIZURE OF CERTAIN PAPER S VIDE A/PO/GR/1, THE ASSESSING OFFICER ISSUED NOTICES U/S 153C OF THE IN COME-TAX ACT R.W.S. 153A OF THE ACT AND COMPLETED PROCEEDINGS IN ALL THE YEARS. THE ADDITIONAL INCOMES WERE ADMITTED BY ASSESSEE CONSEQUENT TO THE SEARCH PROCEEDINGS AND ALSO ADDITIONS MADE BY THE ASSESSING OFFICER IN THESE YE ARS. BASICALLY ASSESSEE BEING A BUILDER, THE DISCREPANCIES AROSE IN ACCOUNT ING VARIOUS AMOUNTS ON COMPLETION OF WORKS STATED TO BE AT THE REQUEST OF THE RESPECTIVE OWNERS WHO PURCHASED APARTMENTS FROM ASSESSEE AND IN THIS REG ARD ADDITIONAL INCOMES WERE OFFERED AS INCOME ON SUCH WORKS. THE ASSESSIN G OFFICER ON FURTHER ENQUIRY AND VERIFICATION MADE THE ADDITION OF THE E NTIRE AMOUNT OF DISCREPANCY FOUND IN VARIOUS TRANSACTIONS. IN FIRST APPEAL LD. CIT(A) GAVE RELIEF AND ESTIMATED PROFITS ON SUCH TRANSACTIONS/T URNOVER, WHILE HOWEVER CONFIRMING SOME OF THE ADDITIONS MADE BY THE A.O. 4. ONE COMMON GROUND RAISED IN ALL THE ASSESSEES A PPEALS IS WITH REFERENCE TO THE JURISDICTION U/S 153C OF THE ACT. EVEN THOUGH THE ASSESSING OFFICER REFERRED TO SEIZURE OF CERTAIN DOCUMENTS IN ANNEXURE A/PO/GR/1, PARTICULARLY PAGES 127, 128 & 129 OF THE BUNDLE, IT WAS THE CONTENTION OF THE LD. COUNSEL THAT NO MATERIAL RELATING TO ASSESSEE I S CONTAINED IN SUCH ANNEXURE. IT WAS FURTHER CONTENDED THAT THE RATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESHW ARI VS. ACIT 289 ITR 341 ON THE VALIDITY OF PROCEEDINGS U/S 158 BD OF TH E ACT I.E. SATISFACTION TO BE RECORDED WHILE ISSUING NOTICES, WILL APPLY EQUALLY TO THE PROCEEDINGS U/S 153C OF THE ACT. IN THIS REGARD, IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS NOT REFERRED TO ANY OF THE PARTICULAR ENTRIES IN THE PA GES WHILE MAKING THE ADDITIONS. IT WAS SUBMITTED THAT JURISDICTION TO I NITIATE PROCEEDINGS U/S 153C OF THE ACT IS LACKING. RELIANCE IS PLACED ON THE F OLLOWING DECISIONS. I. NEW DELHI AUTO FINANCE LIMITED VS. JCIT (300 IT R 83) (DEL) II. CIT VS. RADHEY SHYAM BANSAL & OTHERS (337 ITR 217) (DEL) III. MANOJ AGGARWAL VS. DCIT (113 ITD 377) ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA 3 IV. P. SRINIVASA NAYAK VS. ACIT (117 ITD 20) V. INGRAM MICRO (INDIA) EXPORTS PVT. LIMITED VS. DD IT (MUM) (ITATONLINE.ORG, DATED 25.12.12) VI. ACIT VS. M/S. GLOBAL ESTATES (AGRA) (ITATONLINE .ORG, DATED 3.12.12) VII. SINGHAD EDUCATIONAL SOCIETY 5. THE LD. D.R. IN REPLY SUBMITTED THAT THE SEARCH HAS OCCURRED AT THE RESIDENCE OF THE MANAGING PARTNER AND IN COURSE OF SEARCH PROCEEDINGS, THE MANAGING PARTNER ADMITTED ADDITIONAL INCOMES IN THE HANDS OF ASSESSEE FIRM ONLY. ACCORDINGLY, ASSESSEE ALSO FILED RETURNS ADM ITTING INCOME TO THE EXTENT OF ` .27.25 LAKHS. LATER, THE D.R. ALSO REFERRED TO PAG E NOS.127, 128 & 129 OF THE ANNEXURE TO SUBMIT THAT THE REFERENCE TO THE TR ANSACTIONS IN OFFICE PAGES WERE PERTAINING TO THE TWO PROJECTS UNDERTAKEN BY A SSESSEE AND INVESTIGATIONS WERE MADE WITH REFERENCE TO THE INVE STMENT MADE BY THE RESPECTIVE PROPERTIES WHICH ARE SUBJECT MATTER OF A PPEALS. 6. IT WAS FURTHER SUBMITTED THAT ASSESSEE WAS ASSES SED BY THE SAME ASSESSING OFFICER HAVING JURISDICTION OVER THE OTHE R GROUP CASES AND FOLLOWING THE PRINCIPLES LAID DOWN BY THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. PANCHAJANYA MANAGING AGENCIES & SERVICES 333 IT R 281THERE IS NO NEED FOR RECORDING IN THE SATISFACTION WHEN SUCH RECORDS AND DOCUMENTS AND MATERIALS REVEALING UNDISCLOSED INCOME WERE ASSESSE D BY THE SAME ASSESSING OFFICER AND THERE IS NO NEED TO TRANSFER THE FILES AFTER RECORDING THE SATISFACTION. 7. WE HAVE PERUSED THE CONTENTIONS AND THE RIVAL AR GUMENTS. AS SEEN FROM THE SEIZED DOCUMENTS PLACED ON THE PAPER BOOK, THERE IS NO DOUBT THAT THE TRANSACTIONS NOTED DOWN IN THE PAPERS DO PERTAI N TO THE TWO PROJECTS NIRMAL & DHOOM UNDERTAKEN BY ASSESSEE. IT IS ALSO SEEN THAT THE TRANSACTIONS PERTAIN TO THE RECEIPTS FROM BUYERS A ND ASSESSEE HAS ADMITTED ADDITIONAL INCOMES IN COURSE OF STATEMENTS RECORDED , CONSEQUENT TO THE ENQUIRY. IN VIEW OF THE ABOVE, WE ARE OF THE OPINIO N THAT THE CONTENTIONS RAISED BY ASSESSEE HAVE NO MERIT. MOREOVER, IN THE COURSE OF STATEMENT RECORDED U/S 132(4) OF THE ACT ITSELF WHEN PARTICUL AR REFERENCE WAS MADE TO THE SAID DOCUMENTS (STATEMENT WAS PLACED ON RECORD BY ASSESSEE), THE MANAGING PARTNER SHRI RAJLING ADMITTED ADDITIONAL I NCOMES IN THE HANDS OF ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA 4 THE FIRM ONLY. IT IS ALSO ADMITTED THAT ASSESSEE H AS OFFERED ADDITIONAL INCOME IN THE COURSE OF POST SEARCH PROCEEDINGS AS UNDER: ASSESSMENT YEAR INCOME AS PER ORIGINAL RETURN BEFORE SURVEY ( ` .) INCOME RETURNED U/S 153C OF THE ACT ( ` .) EXTRA INCOME OFFERED AFTER SEARCH ( ` .) 2005 - 06 4,73,119/ - 7,39,080/ - 2,65,961/ - 2006 - 07 NIL 9,88,275/ - 9,88,275/ - 2007 - 08 13,14,840/ - 20,14,836/ - 7,00,000/ - 8. SINCE THERE WERE UNACCOUNTED INCOMES UNEARTHED I N THE COURSE OF SEARCH PROCEEDINGS ITSELF AND AS ASSESSEES MANAGIN G PARTNER ADMITTED THE ADDITIONAL INCOMES BASED ON THE DOCUMENTS/ENQUIRIES CAUSED, WE ARE OF THE OPINION THAT ASSESSING OFFICER CORRECTLY EXERCISED THE JURISDICTION TO INITIATE PROCEEDINGS U/S 153C OF THE ACT AND AS RIGHTLY HELD BY THE HONBLE KERALA HIGH COURT SINCE THE SAME ASSESSING OFFICER IS COMP LETING ASSESSMENT ON ALL THE CASES, REQUIREMENT OF SEPARATE RECORDING OF SAT ISFACTION FOR TRANSFER OF RECORD/ DOCUMENTS ETC DOES NOT ARISE. WE ARE OF TH E OPINION THAT THERE IS NO MERIT IN ASSESSEES CONTENTIONS AND ACCORDINGLY THE GROUNDS RAISED ON JURISDICTION ISSUES IN ALL THE APPEALS RAISED BY AS SESSEE STAND REJECTED. 9. WITH REFERENCE TO THE MERITS OF THE ADDITIONS, T HESE ARE CONSIDERED YEAR WISE AS UNDER. A.Y. 2005-06: 10. IN THIS ASSESSMENT YEAR ASSESSEE AS WELL AS REV ENUE HAVE FILED CROSS APPEALS. SINCE ISSUES ARE COMMON, THE GROUNDS ARE CONSIDERED TOGETHER. 11. IN THE COURSE OF SEARCH PROCEEDINGS, THE DEPART MENT HAS COME ACROSS CERTAIN PAPERS INDICATING RECEIPT OF MONIES FROM SO ME PARTIES. ON THE BASIS OF ENQUIRIES, IT WAS FOUND OUT THAT ASSESSEE FIRM S OLD TO ONE SMT. R. MRUNALINI ( RENUKA ENCLAVE) FOR RS.14 LAKHS AND TO SMT. K. RA DHIKA (PIKACHU) FOR RS.15 LAKHS. ON VERIFICATION OF THE AMOUNTS RECORDED BY ASSESSEE IN THE BOOKS OF ACCOUNTS, THE ASSESSING OFFICER HAS ARRIVED AT A DI FFERENCE AMOUNT OF ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA 5 RS.12,68,000/-. IT WAS ADMITTED THAT ASSESSEE WAS SELLING SEMI-FINISHED APARTMENTS AND THOSE PARTIES HAVE PAID ADDITIONAL A MOUNT FOR COMPLETION OF THE APARTMENT. THE ASSESSING OFFICER MADE THE ADDI TION OF ENTIRE AMOUNT RECEIVED AS UNACCOUNTED INCOME/SURPLUS TURNOVER, WH EREAS LD. CIT(A) CONSIDERING THAT ASSESSEE HAD TO SPEND AMOUNT FOR C OMPLETING THE APARTMENT RESTRICTED THE ESTIMATION TO THE SAME PROFIT RATE A DOPTED BY THE ASSESSEE IN THE PROJECT AND CONFIRMED THE ADDITION TO AN EXTENT OF RS.2,18,350/-. ASSESSEE IS CONTESTING THAT THE ABOVE ADDITION SHOU LD BE TELESCOPED TO THE ADMITTED INCOMES MADE IN OTHER YEARS I.E. A.Y. 2007 -08 AND 2008-09, WHICH ARE NOTHING BUT AMOUNTS DISCLOSED ON THE DISCREPANC IES BETWEEN THE FIGURES NOTICED IN THE COURSE OF POST SEARCH ENQUIRES AND T HE SALES RECORDED. THIS CONTENTION WAS NOT ACCEPTED BY THE CIT(A). THE REV ENUE IS AGGRIEVED ON THE DELETION OF BALANCE OF SUPPRESSED TURNOVER. 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND EX AMINED THE FACTS AS PLACED ON RECORD. WITH REFERENCE TO TELESCOPING OF AMOUNTS DISCLOSED LATER WE CAN NOT ACCEPT THE CONTENTION. EVEN THOUGH CERTA IN DISCREPANCIES HAVE BEEN FOUND OUT, IT IS NOT POSSIBLE TO CORRELATE THA T THE AMOUNT SUSTAINED BY THE LD. CIT(A) IN A.Y. 2005-06 IS IN FACT PERTAININ G TO THE AMOUNTS DISCLOSED IN THE LATER YEARS. EVEN AFTER PERUSAL OF THE STAT EMENTS, IT CANNOT BE STATED THAT THE AMOUNTS DISCLOSED PERTAIN TO SAME TRANSACT IONS. AS FAR AS THESE TWO SALES ARE CONCERNED, ONE OF THE CONTENTION RAISED B Y ASSESSEE WAS THAT EVEN THOUGH THE REGISTRATION WAS DONE IN THIS YEAR, THE ACTUAL WORK WAS UNDERTAKEN IN A LATER YEAR. CONSIDERING THAT THE DI SCLOSURE WAS MADE FOR ASSESSMENT YEARS 2007-08 AND 2008-09, WHERE AS THE IMPUGNED ASSESSMENT YEAR IS AY 2005-06 AND THERE COULD NOT HAVE BEEN SO MUCH GAP BETWEEN THE SALE OF FLAT AND COMPLETION OF WORK (IN FACT A.Y. 2 006-07 WAS ALSO IN BETWEEN), WE CANNOT ACCEDE TO THE CONTENTION OF TEL ESCOPING THE ABOVE INCOME TO THE INCOMES DECLARED IN A LATER YEAR. CO NSEQUENTLY, ASSESSEES CONTENTIONS ON THE ABOVE AMOUNT TO BE TELESCOPED TO THE EXTENT OF PROFIT RECEIVED ON ADDITIONAL TURNOVER ARE REJECTED. 13. COMING TO THE REVENUES APPEAL, EVEN THOUGH THE RE ARE VARIATIONS IN SALES RECORDED IN THE BOOKS AND ACTUAL AMOUNTS PAID BY THE ABOVE TWO ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA 6 PARTIES, IT IS EVIDENT ON RECORD THAT THOSE TWO PAR TIES HAVE PAID THE AMOUNT FOR THE ADDITIONAL WORK UNDERTAKEN BY ASSESSEE. SIN CE THERE IS NO DISPUTE ON THIS FACT, ORDER OF THE CIT(A) IN CONSIDERING THE P ROFIT ONLY AS THE INCOME OF ASSESSEE IS CORRECT ON THE FACTS OF THE CASE, AS AS SESSEE COULD HAVE SPENT ON THE WORK. ACCORDINGLY, THE REVENUES GROUNDS ON TH IS ISSUE ARE CORRESPONDINGLY REJECTED. 14. ONE MORE ISSUE PERTAINING TO THIS ASSESSMENT YE AR IN ASSESSEES APPEAL IS ADDITION OF RS.50,000/- MADE ON ACCOUNT O F SALE OF PLOT TO SRI SRINIVAS KUMAR. THE ASSESSING OFFICER NOTICED DIS CREPANCY OF RS.59,000/- BETWEEN THE AMOUNT STATED TO HAVE BEEN PAID BY SRI SRINIVAS KUMAR AND THE AMOUNT RECORDED BY ASSESSEE IN THE BOOKS OF ACCOUNT S. ASSESSEE EXPLAINED TO THE ASSESSING OFFICER THAT AN AMOUNT OF RS.50,00 0/- WAS DIRECTLY PAID TO THE OWNERS WHICH WAS ALSO ACKNOWLEDGED BY THEM AS S TATED IN THE REGISTERED SALE DEED. THE ASSESSING OFFICER HOWEVER DID NOT A GREE. ASSESSEE HOWEVER, ACCEPTED THE MISTAKE OF RS.9,000/- AND CONTESTED TH E AMOUNT OF RS.50,000/- BEFORE CIT(A) IN THE SAME ISSUE. LD. CIT(A) HOWEVE R, REJECTED THE CONTENTIONS. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE SALE DEED PLACED IN PAGE 53 OF THE PAPER BOOK, WE AGREE WITH ASSESSEES CONTENTIONS. IN FACT THE SALE CONSIDERATION SHOWN IN THE DOCUMEN TS WAS RS.4,20,000/-, WHEREAS ASSESSING OFFICER IN THE ASSESSMENT ORDER R EPORTED IT AT RS.14,20,000/-. LIKEWISE, THE AMOUNT RECORDED BY A SSESSEE IS RS.3,61,000/-, WHEREAS IT WAS ALSO TYPED AS RS.13,61,000/-. BE TH AT AS IT MAY, THE DISCREPANCY WORKED OUT BY THE A.O. WAS ONLY RS.59,0 00/-, OUT OF WHICH RS.50,000/- WAS DIRECTLY PAID TO THE VENDORS WHICH WAS ACKNOWLEDGED IN THE DOCUMENT ITSELF. THEREFORE, ASSESSEES CONTENTIONS THAT THIS AMOUNT OF RS.50,000/- WAS NOT TAKEN AS SALE PROCEEDS IN ASSES SEES BOOKS OF ACCOUNTS IS TO BE ACCEPTED. EVEN IF THE AMOUNT IS TAKEN AS SALE PROCEEDS, THE CORRESPONDING EXPENDITURE OF RS.50,000/- REQUIRED T O BE ALLOWED TO ASSESSEE. LOOKING AT EITHER WAY, THERE IS NO NEED FOR CONSIDE RING THE AMOUNT OF RS.50,000/- AS AN ADDITION IN THIS YEAR. ACCORDING LY, THE A.O. IS DIRECTED TO DELETE THE SAME. ASSESSEES GROUND NO.8 ON THIS IS SUE IS ALLOWED. ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA 7 16. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED AND REVENUES APPEAL IS DISMISSED. A.Y. 2006-07: 17. THIS IS AN ASSESSEES APPEAL ON THE CONFIRMATIO N OF AN AMOUNT OF RS.53,932/- BEING 19.4% OF THE UNACCOUNTED RECEIPT OF RS.2,78,000/- ADDED BY THE A.O. THIS ISSUE IS SIMILAR TO THE ISSUE CON SIDERED IN A.Y. 2005-06 ON THE SUPPRESSION OF THE CONSIDERATION ON A FLAT SOLD TO R. RAVI RAM. FOR THE REASONS STATED IN A.Y. 2005-06, THE LD. CIT(A) REST RICTED THE ADDITION TO THE GROSS PROFIT PERCENTAGE DECLARED BY ASSESSEE FOR TH E YEAR UNDER CONSIDERATION. 18. ASSESSEE HAS RAISED SIMILAR GROUND ON THE SAME ISSUE AS IN A.Y. 2005- 06. FOR THE REASONS STATED ABOVE IN A.Y. 2005-06, WE ARE UNABLE TO CONSIDER ASSESSEES GROUNDS FOR TELESCOPING THE PROFIT SUSTA INED IN THIS YEAR TO THE DISCLOSURES MADE BY ASSESSEE IN LATER TWO YEARS. A CCORDINGLY, THE GROUNDS ARE REJECTED. 19. ONE MORE ISSUE WHICH IS CONTESTED BY ASSESSEE I S UPHOLDING AN ADDITION OF RS.1,65,000/- MADE ON ACCOUNT OF DISCRE PANCY ON EXAMINATION OF SALE DOCUMENTS. WHILE THE ASSESSING OFFICER MADE A N ADDITION OF RS.2,45,000/- WHICH ASSESSEE CONTESTED BEFORE THE C IT(A) IS LESS. IN THE STATEMENT OF FACTS BEFORE THE CIT(A), ASSESSEE SUBM ITTED THAT IN THE CASE OF SRI RAMESH WHO IS A PURCHASER OF FLAT IN VENTURE G AHANA, THERE IS SHORTFALL OF RS.80,000/- IN THE BOOKS. FURTHER, THERE IS A SHOR TFALL OF RS.5,000/- ONLY IN THE CASE OF I.P. MAHESHWARI AND NOT RS.55,000/- AS RECORDED BY THE A.O. WITH REFERENCE TO THE OTHER 3 PURCHASERS REPORTED B Y THE A.O., THERE IS NO SHORTFALL IN THE BOOKS OF ACCOUNT AS THE SHORTFALL RECORDED BY THE AO WAS WITH REFERENCE TO RS.50,000/- EACH PAID TO THE VENDORS DIRECTLY BY THE PURCHASERS, WHICH WAS NOT RECEIVED BY ASSESSEE. ACCORDINGLY, I T WAS SUBMITTED THAT THE ADDITION MADE BY THE AO IS NOT JUSTIFIED. THE LD. CIT(A) HOWEVER NOTICED THAT IN THE WRITTEN SUBMISSIONS, IT WAS SUBMITTED T O BE AT RS.45,000/- ONLY. ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA 8 THEREFORE, FOLLOWING THE STAND TAKEN BY THE CIT(A) IN EARLIER YEAR, THE ADDITION OF RS.2,45,000/- WAS CONFIRMED. ASSESSEE IS CONTESTING AN AMOUNT OF RS.1,65,000/- ONLY BEFORE US. NO RECONCILIATIO N OF THE AMOUNTS WAS SUBMITTED, EXCEPT INDICATING THAT THE LAND OWNERS H AVE BEEN PAID RS.50,000/- DIRECTLY BY THE PURCHASERS. FOR THE REASONS STATED IN AY 2005-06, WE ARE NOT IN A POSITION TO UPHOLD THE ADDITION MADE BY THE A. O. ON THE DISCREPANCIES PERTAINING TO THE PAYMENTS MADE TO THE OWNER-VENDOR S. HOWEVER, THE AMOUNTS SHOWN IN THE TABLE AT PARA-12 OF THE ASSESS ING OFFICER (EXCEPT THE FIRST ITEM OF RAMESH AND GAHANA, WHICH WAS ACCEPTED TO BE A DISCREPANCY RAISED) REQUIRE RECONCILIATION BY THE ASSESSING OF FICER. HE SHOULD RECONCILE THE AMOUNTS AND DELETE THE AMOUNTS AFTER GIVING DUE OPPORTUNITY TO ASSESSEE. ACCORDINGLY, THE GROUND NO.8 IN THIS APP EAL IS ALLOWED FOR STATISTICAL PURPOSES. 20. IN THE RESULT, APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. A.Y. 2007-08: 21. THE ISSUE CONTESTED IN THIS APPEAL IS WITH REFE RENCE TO THE REDUCTION OF RS.7 LAKHS DISCLOSED BY ASSESSEE, CONSEQUENT TO THE ADDITIONS MADE IN EARLIER YEARS. AS WE HAVE ALREADY HELD THAT THERE IS NO COR RELATION BETWEEN AMOUNTS DISCLOSED IN THIS YEAR WITH THAT OF PROFITS DISCLOS ED IN EARLIER YEARS, WE ARE UNABLE TO ACCEPT ASSESSEES CONTENTIONS. ACCORDING LY, THE GROUNDS ON THIS ISSUE ARE REJECTED. A.YS 2008-09 & 2009-10: 22. ASSESSEE HAS RAISED GROUNDS IN AY 2008-09 WITH REFERENCE TO THE ADMITTED INCOME WHICH REQUIRE TO BE REDUCED BY THE AMOUNTS BROUGHT TO TAX AS PROFIT IN A.Y. 2005-06 AND 2006-07. THIS CANNOT BE ACCEPTED IN VIEW OF THE ADMISSION BY ASSESSEE IN THE RESPECTIVE ASSESSM ENT YEARS AND THERE IS NO CORRELATION TO THE INCOMES DISCLOSED. THEREFORE, T HE GROUNDS RAISED ON THIS ISSUE ARE REJECTED. ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA 9 23. THE OTHER ISSUE CONTESTED IN THE YEAR AY 2008-0 9 AS WELL AS IN LATER YEAR IS WITH REFERENCE TO THE ADDITION OF RS.29,80, 000/- IN A.Y. 2008-09 AND CORRESPONDING ADJUSTMENTS MADE TO THE EXPENDITURE C LAIMED IN A.Y. 2009-10. 24. THE ISSUE AROSE AS UNDER. ASSESSEE HAS ENTERE D INTO A DEVELOPMENT AGREEMENT WITH VENDORS/LAND OWNERS FOR DEVELOPING A COMPLEX KNOWN AS DHOOM COMPLEX. BY THE YEAR 2008, ASSESSEE HAS SO LD MOST OF THE FLATS EXCEPT TWO AND THE VENTURE WAIS COMING TO CLOSE. A CCORDINGLY, IN ORDER TO GET THE TITLE ON THE LAND/PROPERTY, A DEED WAS REGI STERED ON 31.1.2008 SIGNED BY THE LAND OWNERS AND ASSESSEE FIRM AND WAS SOLD T O ASSESSEE FIRM ONLY. IT WAS SUBMITTED THAT THIS PROPERTY WAS SEMI-FINISHED AND ASSESSEE MADE FURTHER INVESTMENT/EXPENDITURE ON THE PROPERTY AND IN THE LATER YEAR RELEVANT FOR 2009-10, THE STOCK IN TRADE WAS TRANSFERRED TO BUILDING ACCOUNT AT A COST OF RS.29,80,000/-. ASSESSEE IN ITS TOTAL SALES FOR THE YEAR 2009-10 HAS SHOWN THE SALES TO OUTSIDERS AS WELL AS VALUE OF THIS TRA NSFER OF ASSET AT RS.29,80,000/- IN ITS P&L ACCOUNT AND CLAIMED CORRE SPONDING EXPENDITURE. THE ASSESSING OFFICER ON NOTICING THAT THE DOCUMENT WAS REGISTERED ON 31.1.2008 BROUGHT THE VALUE OF RS.29,80,000/- AS SU PPRESSED SALE VALUE IN THIS YEAR AND IN THE LATER YEAR ON THE REASON THAT ASSESSEE COULD NOT HAVE INVESTED ANY AMOUNTS IN THE APARTMENT, ESTIMATED TH E INCOME ON THE SALES REPORTED TO OUTSIDERS, THEREBY REDUCING THE CORRESP ONDING CLAIM OF EXPENDITURE. ASSESSEES SUBMISSIONS ON THIS ISSUE ARE SIMILAR IN BOTH THE YEARS. ACCORDINGLY, AS THE ISSUE IS SPREAD OVER TW O YEARS, ALL THE GROUNDS ARE CONSIDERED TOGETHER. IT WAS SUBMITTED BY ASSESSEE IN WRITTEN SUBMISSIONS AS UNDER: IT IS SUBMITTED THAT THE LEARNED AO AND CIT(A) ARE NOT JUSTIFIED IN INSISTING THAT THE AMOUNT OF RS. 29,80 ,000/- SHOULD BE TAKEN AS RECEIPTS IN THIS YEAR RATHER THA N IN THE NEXT YEAR AS SHOWN BY THE ASSESSEE IN THE ACCOUNTS. THIS IS BECAUSE ON THE TRANSFER DEED EXECUTED BY THE OWNERS OF LAND OF DHOOM COMPLETED ON 31-01-2008 THE ASSESSEE DID NOT RECEIVE ANY CONSIDERATION. THE TRANSFER DEED WA S EXECUTED BY THE OWNERS ONLY TO REGULARIZE THE UNREG ISTERED MOU AND TO CONFIRM THE TITLE OF THE ASSESSEE TO THE FLATS AS THEY WERE CONSTRUCTED ON THE LAND BELONGING TO THEM . THE DATE OF EXECUTION OF THIS DOCUMENT IS ONLY A MATTER OF CHOICE. NOTHING TURNED UPON THE DOCUMENT. A PROFIT DID NOT ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA 10 RESULT OR ANY MONEY RECEIVED OR PAID BY THE PARTIES TO THE TRANSFER DEED. THEREFORE THE REGISTRATION WAS ONLY TO SET AT REST ANY POSSIBLE LITIGATION LATER IF THE REGISTRAT ION IS NOT MADE IN FAVOR OF THE ASSESSEE. THEREFORE IT IS SUBM ITTED BEFORE THE HONBLE BENCH THAT THE DATE OF REGISTRAT ION SHOULD NOT BE A CRITERION FOR DECIDING THE YEAR OF INCOME. IT IS SUBMITTED THAT THE ACCOUNT TRANSFER AND NOT T HE REGISTRATION DOCUMENT SHOULD BE TAKEN AS A CRITERIO N FOR DECIDING THE YEAR OF RECEIPT OF THE INCOME. IT IS FURTHER SUBMITTED THAT THE CONSTRUCTION OF TH E FLATS WAS INDEED NOT COMPLETE. IT WENT INTO THE NEXT YEAR ALSO. THE AO HAS HERSELF OBSERVED THAT EXPENDITURE WAS INCURRED IN ASSESSMENT YEAR 2009-10 ON THE FLATS SO LD IN EARLIER YEARS. BUT SHE STATES THERE THAT INCOME REL ATING TO THOSE 'EXTRA WORKS' WAS NOT OFFERED. SHE IGNORED TH E AMOUNT OF RS. 29,80,000/- OFFERED TO TAX IN THE EAR LIER YEAR, THAT IS ASSESSMENT YEAR 2008-09 WHILE SHE HAS NO EVIDENCE THAT PAYMENT WAS RECEIVED FOR THE SUSPECTE D 'EXTRA WORKS'. THE ASSESSEE HAS BEEN IN THE REAL ESTATE V ENTURE AND HE HAS BUILT SEVERAL COMPLEXES KNOWN AS I. RENUKA II. GEHANA III. PIKACHO IV. ABHI V. DHOOM VI. NIRMALA ETC IT IS THEREFORE NOT CORRECT TO SAY AS AT POINT 2 A BOVE THAT THE FINISHING IS OVER ANY COMPLEX BY 31 SL MARCH EXACTLY. THEREFORE THE CLOSING STOCK CANNOT BE ASSUMED AS WA S DONE BY THE AO TO BE ONLY OF A PARTICULAR COMPLEX. THIS IS SO BECAUSE THE CONSTRUCTION WORK GOES ON SIMULTANEOUSL Y IN MORE THAN ONE COMPLEX AS AT THE END OF THE PREVI OUS YEAR. THE LEARNED AO IS NOT CORRECT IN HER OBSERVATI ON AND THERE IS NO PROOF THAT THERE IS NO CLOSING STOCK RE LATING TO DHOOM ON 31-03-2008 OR THERE IS ADMISSION BY THE ASSESSEE THAT THE DHOOM COMPLEX WAS COMPLETED IN ALL RESPECTS. WHAT WAS COMPLETE WAS ONLY THE REGISTRATION PART ON THE SEMI CONSTRUCTED FLATS. THIS IS ALL ADMITT ED BY THE AO IN THE ORDER FOR 2009-10 AS STATED ABOVE. IN T HESE CIRCUMSTANCES IF THE AMOUNT OF RS. 29,80,000/- IS T O BE CONSIDERED AS IN THE REGISTERED TRANSFER DEED (PAGES 122 TO 136) THEN THE EXPENDITURE TOWARDS THE UNFINISHED COST OF CONSTRUCTION IN RESPECT OF THESE FLATS AS WELL AS IN R ESPECT OF THE OTHER UNFINISHED FLATS IN DHOOM COMPLEX SHOULD BE ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA 11 ALLOWED IN THIS YEAR. IT WOULD BE IN CONSONANCE WIT H THE PRINCIPLES OF ACCOUNTING AS DECIDED BY THE SUPREME COURT IN THE CASE OF CALCUTTA COMPANY (37 ITR 1). IN THAT CASE, THE HONBLE SUPREME COURT HELD THAT THE EXPENDITURE TO BE INCURRED IN FUTURE YEARS FOR THE PURPOSE OF DEVELOP MENT OF PLOTS, THE SALES OF WHICH HAVE TAKEN PLACE IN THE C URRENT YEAR IS AN ALLOWABLE EXPENDITURE IN THE CURRENT YEA R. ON THIS BASIS EXPENDITURE MUST BE ALLOWED IN 2008-09. IN THE IMMEDIATELY FOLLOWING YEAR I.E. 2009-10 THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE WAS TO THE TUN E OF RS. 67,86,911/-. THE ENTIRE EXPENDITURE DOES NOT RE LATE ONLY TO THE NIRMALA APARTMENTS. THIS DEFINITELY INC LUDED THE EXPENDITURE RELATING TO DHOOM COMPLEX. THE MOU BETWEEN THE OWNERS AND THE ASSESSEE WAS ENTERED INT O ON 28-12-2006. WITHIN THE PERIOD OF JUST 13 MONTHS, DH OOM COMPLEX COULD NOT HAVE BEEN COMPLETE IN ALL RESPECT S. IT IS QUITE EVIDENT THAT A PRETTY GOOD DEAL OF WORK WOULD HAVE TAKEN PLACE IN THE FINANCIAL YEAR 2008-09. THEREFOR E IT IS SUBMITTED THAT THE EXPENDITURE INCURRED IN FINANCIA L YEAR 2008-09 SHOULD BE ALLOWED IN ASSESSMENT YEAR 2009-1 0. AS THERE COULD BE NO PROFIT FROM ONE'S OWN PROPERTY, I T IS SUBMITTED THAT THE ENTIRE AMOUNT OF RS. 29,80,OOO/- BE ALLOWED AS EXPENDITURE INCURRED ON CONSTRUCTION FRO M OUT OF RS. 7,45,000/- (CLOSING STOCK OF 2008-09) AND RS . 67,86,911/- INCURRED IN THE IMMEDIATELY FOLLOWING Y EAR. THIS WOULD BE IN ACCORDANCE WITH THE RATIO OF THE JUDGEM ENT OF SUPREME COURT IN CALCUTTA CO(37 ITR 1). 25. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND EX AMINED THE FACTS AS PLACED ON RECORD. THERE IS NO DISPUTE WITH REFEREN CE TO THE FACT THAT ASSESSEE HAS TRANSFERRED ITS STOCK IN TRADE TO TH E BUILDING ACCOUNT IN THE YEAR RELEVANT FOR THE ASSESSMENT YEAR 2009-10. WE WERE ALSO INFORMED THAT THESE TWO FLATS WERE GIVEN ON LEASE AND RENTAL INCO MES WERE OFFERED BY THE FIRM IN LATER YEARS. AS OF NOW, ASSESSEE SOLD THE FLATS THEREBY OFFERING CAPITAL GAINS ALSO. ON SEEING THE FACTS OF THE CASE, WE AR E OF THE OPINION THAT ASSESSING OFFICER MISTOOK THE TRANSFER TO BUILDING ACCOUNT AS A SALE BY ASSESSEE. AS SEEN FROM THE DOCUMENTS DATED 31.1.20 08, THIS IS A REGISTRATION UNDER TAKEN BY THE LAND OWNERS AND THE FIRM IN THE SAME MANNER AS WAS DONE TO OUTSIDERS, EXCEPT THAT ASSESSEE IS THE BUYE R. THIS WAS ONLY TO CONFIRM THE TITLE AS THE PROJECT IS COMING TO CLOSE AND TWO FLATS HAVE BEEN LEFT UNSOLD. IF THIS TRANSACTION OF REGISTRATION WAS NO T DONE, IT WOULD BE DIFFICULT FOR ASSESSEE TO LOCATE THE LAND OWNERS FOR SELLING THE UNDIVIDED SHARE OF THE LAND TO THIRD PARTY, WHEN THE FLATS ARE BEING SOLD. THEREFORE, IN ORDER TO KEEP ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA 12 THE BUSINESS INTEREST, ASSESSEE UNDERTOOK TO REGIST ER THE FLATS IN ITS NAME AND IT, BEING A DEVELOPER, ALSO SIGNED AS A SELLING PA RTY. HOWEVER, THERE COULD BE NO PROFIT ARISING IN THIS TRANSACTION AS THE CONSID ERATION PAID TO LAND OWNERS WAS AGREED UPON EARLY AND WAS ALREADY PAID. THERE CAN ALSO BE NO PROFIT ON DEVELOPING OF SUCH APARTMENTS AS ASSESSEE IS BOTH D EVELOPER AS WELL AS PURCHASER. 26. AS SEEN FROM THE STATEMENTS MADE AND THE ORDERS OF THE AUTHORITIES, THERE IS NO DISPUTE THAT ASSESSEE HAS INVESTED AMOU NTS IN THE YEAR AY 2009- 10 IN ALL THE PROJECTS AND IT WOULD BE DIFFICULT TO PIN POINT WHERE THE EXPENDITURE WAS SPENT UNLESS A DEEP ENQUIRY WAS MAD E IN EXAMINING VOUCHER BY VOUCHER. THIS EXERCISE WAS NOT DONE BY THE AO B UT SIMPLY ESTIMATED THE INCOME IN THE A.Y. 2009-10 BY DISALLOWING THE EXPEN DITURE CLAIMED IN THAT YEAR. AS SEEN FROM ALL THE ASSESSMENT ORDERS, THER E IS NO REJECTION OF BOOKS OF ACCOUNTS IN ANY OF THE EARLIER YEARS, NOR THERE IS ANY ESTIMATION OF INCOME. ALL THE RECEIPTS AND PAYMENTS HAVE BEEN ACCEPTED AS SUCH. THEREFORE, WE DO NOT SEE ANY REASON IN DEVIATING FROM THE EARLIER Y EARS ORDERS BY THE A.O., EXCEPT TO DISALLOW THE EXPENDITURE CLAIMED BY ASSES SEE IN THE P&L ACCOUNT. WE ALSO NOTICE THAT THE VALUE OF TWO FLATS WERE TAK EN BY ASSESSEE AS RS.29,80,000/- AND SHOWN IN P&L ACCOUNT AS SALES EV EN THOUGH THE SAME WAS A TRANSFER ENTRY FROM STOCK IN TRADE TO ASSET A CCOUNT. IN THESE CIRCUMSTANCES, WE ARE UNABLE TO APPROVE THE ORDER O F THE AUTHORITIES IN TAKING THE SALE CONSIDERATION AS RS.29,80,000/- WHEN ACTUA LLY THERE IS NO SALE. AS SUBMITTED IT IS ONLY CONFIRMING THE TITLE OF TWO SE MI-FINISHED FLATS WHICH ARE IN POSITION OF ASSESSEE ITSELF. SHIFTING OF SO CALLED SALE PRICE FROM A.Y. 2009-10 TO A.Y. 2008-09 DOES NOT ARISE AT ALL AND CERTAINLY THERE IS NO PROFIT INVOLVED IN THIS TRANSACTION. THEREFORE, THE ADDITION OF RS .29,80,000/- MADE IN A.Y. 2008-09 STANDS DELETED. CORRESPONDINGLY, THE A.O. IS DIRECTED TO CONSIDER THE P&L ACCOUNT AS SUCH AND ALLOW THE EXPENDITURE CLAIM ED BY ASSESSEE IN THE YEAR RELEVANT FOR AY 2009-10. 27. IN THE COURSE OF ARGUMENTS, LD. COUNSEL SUBMITT ED THAT THE ACTUAL SALE BEING LESS THAN RS.40 LAKHS, PROVISIONS OF SECTION 44AD OF THE ACT WILL APPLY AND A.O. COULD HAVE ESTIMATED INCOME AS PER THOSE PROVISIONS. WE ARE ITA NO.264, 268 TO 272/VIZAG/2011 M/S. DEVELOPERS, VJA 13 UNABLE TO ACCEPT THIS CONTENTION AS ASSESSEES BOOK S OF ACCOUNTS WERE MAINTAINED AND EXCEPT CERTAIN DISCREPANCIES IN SALE AMOUNTS, THERE WAS NO REASON TO REJECT THE BOOKS OF ACCOUNTS. FURTHER, A S THE TURNOVER REPORTED BY ASSESSEE EXCEEDS RS.40 LAKHS, QUESTION OF ESTIMATIO N UNDER THE PROVISIONS DOES NOT ARISE. FOR THE REASONS STATED ABOVE, WE ALLOW THE GROUNDS RAISED BY ASSESSEE ON THE ISSUE OF ADDITION OF RS.29,80,0 00/- IN A.Y. 2008-09 WITH A DIRECTION TO THE A.O. TO DELETE THE ADDITION MADE I N THIS ASSESSMENT YEAR AND ALLOWANCE OF EXPENDITURE AS CLAIMED IN A.Y. 2009-10 BY TAKING THE ABOVE AMOUNT IN THAT YEAR. ACCORDINGLY ESTIMATION MADE B Y THE AO AND CONFIRMED BY THE CIT(A) STANDS DELETED. THE ASSESSING OFFICE R IS DIRECTED TO ACCEPT THE P&L ACCOUNT AS SUCH. 28. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.270/ VIZAG/2011 AND REVENUES APPEAL IN ITA NO.264/VIZAG/2011 ARE DISMI SSED. ASSESSEES APPEAL IN ITA NO.269, 271 & 272/VIZAG/2011 ARE PART LY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 13 TH DEC13 SD/ - SD/ - ( SAKTIJIT DEY ) ( B. RAMAKOTAIAH ) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM, DATED 13 TH DECEMBER, 2013 COPY TO 1 DCIT, CENTRAL CIRCLE, VIJAYAWADA 2 M/S. DEVELOPERS, D.NO.40 - 1 - 26/1A, JUHI APARTMENTS, ADA RSHA ROAD, VIJAYAWADA 3 THE CI T, VIJAYAWADA 4 THE CIT (A) , VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM