Appeal details
Counselvise Citation
269620514 RSA 2000
Assessee PAN
Bench
Appeal Number
Duration Of Justice
11 year(s) 2 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-02-2012
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Next Hearing Date
01-12-2011
Assessment Year
1995-1996
Appeal Filed On
20-12-2000
Judgement Text
, , . .. . . .. . , , , , !' ! !' ! !' ! !' !. .. .#$ '#$ #$ '#$ #$ '#$ #$ '#$ , %& ' %& ' %& ' %& ' % % % % IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD BEFORE SHRI G.C.GUPTA, HONBLE V.P. & SHRI A.MOHAN ALANKAMONY, HONBLE A.M.) ITA NO. 2696/AHD/2000 : ASSESSMENT YEAR 1995-1996 STERLING ENTERPRISES LTD., ABAD -VS- ACIT, CO M.CIRCLE-7(3), ABAD ( () /APPELLANT) ( *+() /RESPONDENT ) ITA NO. 144/AHD/2001 : ASSESSMENT YEAR 1995-1996 DCIT, COM.CIRCLE-7(6), ABAD -VS- STERLING EN TERPRISES LTD., ABAD ( () /APPELLANT) ( *+() /RESPONDENT ) ITA NO. 806/AHD/2004 : ASSESSMENT YEAR 1995-1996 ACIT, CIRCLE-8, ABAD -VS- STERL ING ENTERPRISES LTD., ABAD ( () /APPELLANT) ( *+() /RESPONDENT ) ITA NO. 1633/AHD/2002 : ASSESSMENT YEAR 1997-1998 STERLING ENTERPRISES LTD., ABAD -VS- DCIT, COM.CIRCLE-7(6), ABAD ( () /APPELLANT) ( *+() /RESPONDENT ) ITA NO. 2137/AHD/2002 : ASSESSMENT YEAR 1997-1998 ACIT, CIRCLE-8, ABAD -VS- STER LING ENTERPRISES LTD., ABAD ( () /APPELLANT) ( *+() /RESPONDENT ) ITA NO. 2163/AHD/2005 : ASSESSMENT YEAR 2001-2002 ACIT (OSD), RANGE-8, ABAD -VS- STERLING E NTERPRISES LTD., ABAD ( () /APPELLANT) ( *+() /RESPONDENT ) ITA NO. 2164/AHD/2005 : ASSESSMENT YEAR 2002-2003 ACIT (OSD), RANGE-8, ABAD -VS- STERLING E NTERPRISES LTD., ABAD ( () /APPELLANT) ( *+() /RESPONDENT ) $ ,- . / % / APPELLANT BY : SHRI S.N.SOPARKAR, A.R. ' . / % / RESPONDENT BY : SHRI S.K.GUPTA, CIT.D.R. $0 . -1& / DATE OF HEARING : 09/12/2011 2#3 . -1& / DATE OF PRONOUNCEMENT : 28/02/2012 %4 %4 %4 %4 / ORDER ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 2 PER SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER : THESE ARE SEVEN APPEALS (I) TWO APPEALS OF THE AS SESSEE AND THE REMAINING (II) FIVE APPEALS BY THE REVENUE ARE DI RECTED AGAINST THE IMPUGNED ORDERS OF THE LD.CSIT (A) IN: (I) APPEAL N O.CIT(A)IX/7(3)/302/98- 99 DT: 16.10.2000 FOR A.Y. 1995-96; (II)APPL. NO.CI T(A)IX/ACIT C-8/32/02- 03 DT:12.12.2003 FOR A.Y.1995-96 (AGAINST U/S.143( 3) R.W.S.250 OF THE ACT) ; (III) APPEAL NO. CIT(A)XIV/DCIT 7(6)/144/00- 01 DT.26.3.02 FOR A.Y.1997-98; (IV) APPEAL NO.CIT(A)XIV/ACIT 8/99/04- 05 DATED 1.7.05 FOR A.Y. 2001-02; (V) APPEAL NO.CIT(A)XIV/W 8(2)/213/04 -05 DATED 1.7.05 FOR A.Y. 2002-03 IN THE CASE OF M/S. STERLING ENTERPRIS ES LIMITED, AHMEDABAD RESPECTIVELY. I. ITA NO.2696/A/2000 A.Y. 1995-96 BY THE ASSESSEE : 2. THE ASSESSEE HAD ORIGINALLY RAISED SIX GROUNDS I N AN ILLUSTRATIVE AND NARRATIVE MANNER, SUBSEQUENTLY, CAME UP WITH REVISE D GROUNDS DT.20.2.2006 AND YET AGAIN ON 2.8.2006 AND FINALLY SETTLED DOWN WITH FIVE CONCISE GROUNDS OF APPEAL WHICH ARE AS UNDER: (1) THE CIT (A) HAD ERRED IN CONFIRMING THE ADDITI ON OF RS.1,07,78,293/- MADE BY THE AO BY REJECTING THE ME THOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE; - THE CIT (A) ERRED IN DISAPPROVING THE AOS REJECTIO N OF METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE, BUT, HOLDING TH AT THE ADDITION WOULD BE RS.1.32 CRORES IN STEAD OF RS.1.07 CRORES MADE BY THE AO; (2) ALSO ERRED IN CONFIRMING THE ADDITION OF RS.56 ,46,500/- MADE DESIGNATED AS SCHEME ACIT AND ALSO ERRED IN SETTI NG ASIDE THE SUBJECT AND REMITTING BACK TO THE FILE OF AO; (3) THE CIT (A) ERRED IN CONFIRMING THE ADDITION O F RS.22,96,764/- BEING CONTRIBUTION TO DEVELOPMENT FUNDS COLLECTED F ROM THE MEMBERS; ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 3 (4) AND ALSO ERRED IN CONFIRMING THE ADDITION OF R S.44,98,586/- BEING CONTRIBUTION FROM THE MEMBERS TOWARDS DEVELOPMENT EXPENSES AND, FURTHER, ERRED IN REMITTING BACK THE ISSUE TO THE FILE OF AO. II. ITA NO.144/A/2001 AY 1995-96 BY THE REVENUE: 2.1. THE ISSUES AGITATED BY THE REVENUE ARE AS UNDE R: (1) THE LD. CIT (A) HAD ERRED IN DELETING - (I) DELETING THE MAINTENANCE CONTRIBUTION OF RS.7,56,894/-; (II) DIRECTING TO VERIFY AND RESTRICT THE DEVE LOPMENT EXPENDITURE OF RS.44,98,586/- TO THE EXTENT OF THE DIFFERENCE ONLY; & (III) DELETING INTEREST DISALLOWANCE OF RS.6,3 9,353/- III. ITA NO.806/A/2004 A.Y. 1995-96 BY THE REVENUE: 2.2. SOLITARY GROUND RAISED BY THE REVENUE IS THAT THE CIT (A) HAD ERRED IN DELETING THE ADDITION OF RS.54,46,500/- MADE ON ACCOUNT OF CLAIM OF SCHEME ACIT. IV. ITA NO.1633/A/2002 AY 1997-98 BY THE ASSESSEE: 2.3. SOLITARY GROUND RAISED BY THE ASSESSEE IS THAT THE CIT (A) HAD ERRED IN UPHOLDING A PART OF THE ADDITION OF RS.11, 84,598/- BEING 15% OF RS.78,97,322/- TRANSFERRED BY THE ASSESSEE TO THE D EVELOPMENT FUND. V. ITA NO.2137/A/2002 A.Y. 1997-98 BY THE REVE NUE: 2.4. THE ISSUES AGITATED BY THE REVENUE ARE AS UNDE R: THE LD. CIT (A) HAD ERRED IN (1) DELETING THE ADDITION OF RS.35,37,585/- OUT OF RECE IPTS ON ACCOUNT OF MAINTENANCE CONTRIBUTION AND ADDITION OF RS.25,75,000/- OUT OF RECEIPTS ON ACCOUNT OF ELECTR ICITY CHARGES; ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 4 (2) GIVING RELIEF OF RS.67,12,724/- BY DIRECTING THAT O NLY 15% OF THE TOTAL RECEIPTS OF RS.78,97,322/- RECEIVED BY THE AS SESSEE ON ACCOUNT OF DEVELOPMENT FUNDS SHOULD BE TREATED AS A SSESSEES INCOME; (3) DELETING THE ADDITION OF RS.2,36,91,967/- OUT OF TH E TOTAL RECEIPTS RECEIVED UNDER THE HEAD DEVELOPMENT EXPENSES; (4) DELETING THE DISALLOWANCE OF RS.6,35,935/- OUT OF T HE TOTAL INTEREST EXPENSES CLAIMED BY THE ASSESSEE; (5) DELETING THE INTEREST CHARGED U/S 234B AND 34C OF T HE ACT. SINCE CHARGING OF INTEREST U/S 234B AND 234C IS MAN DATORY AND CONSEQUENTIAL IN NATURE AS RULED BY THE HONBLE SUP REME COURT AND, THUS, THIS GROUND DOESNT QUALIFY FOR ADJUDICA TION ; & (6) GROUND NOS.6 AND 7 BEING GENERAL IN NATURE AND NO S PECIFIC ISSUES INVOLVED, THEY HAVE BECOME INCONSEQUENTIAL. VI. ITA NO.2163/A/2005 A.Y. 2001-02 BY THE REVENUE: 2.5. THE ISSUES AGITATED BY THE REVENUE ARE AS UNDE R: THE LD. CIT (A) HAD ERRED IN (1) DELETING THE ADDITION OF RS.35,65,084/- MADE AFTER DEDUCTING INCOME SHOWN AT RS.73,75,015/- OUT OF RECEIPTS ON A CCOUNT OF MAINTENANCE, ELECTRICITY CONTRIBUTIONS ETC., AGGREG ATING TO RS.1.09 CRORES; (2) DELETING DISALLOWANCE OF RS.17,48,904/- OUT OF INTE REST EXPENSES; & (3) GROUND NOS.3 AND 4 BEING GENERAL IN NATURE AND NO S PECIFIC ISSUES INVOLVED, THEY HAVE BECOME REDUNDANT. VII . ITA NO.2164/A/2005 A.Y. 2002-03 BY THE REVENUE: (1) THE LD. CIT (A) HAD ERRED IN DELETING THE DISA LLOWANCE OF RS.17,01,787/- OUT OF INTEREST EXPENSES CLAIMED; (2) GROUND NOS.2 AND 3 BEING GENERAL IN NATURE AND NO SPECIFIC ISSUES INVOLVED, THEY DO NOT SURVIVE FOR ADJUDICATI ON. ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 5 3. AS THE ISSUES RAISED BY THE RIVAL PARTIES BEING INTER-LINKED AND PERTAINING TO THE SAME ASSESSEE, THESE APPEALS WERE HEARD, CONSIDERED TOGETHER AND DISPOSED OFF, FOR THE SAKE OF CONVENIE NCE AND CLARITY, IN THIS COMMON ORDER. I. ITA NO.2696/A/2000 A.Y. 1995-96 BY THE ASSESSEE : 4. THE FACTS OF THE ISSUES, IN BRIEF, ARE THAT THE ASSESSEE, A LIMITED COMPANY [THE ASSESSEE HENCE-FORTH] ENGAGED IN THE BUSINESS OF DEVELOPING PROPERTIES FOR CERTAIN CO-OPERATIVE SOCI ETIES FOR WHICH IT HAS ENROLLED MEMBERS AND COLLECTED CONTRIBUTIONS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, IT HAD FURNISHED A RETURN OF I NCOME ADMITTING A TOTAL INCOME OF RS.2,58,754/-, THE ASSESSMENT OF WHICH W AS CONCLUDED, DETERMINING A TOTAL INCOME OF RS.1,17,87,400/- FOR THE DETAILED REASONS RECORDED IN THE IMPUGNED ASSESSMENT ORDER. 4.1. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUES, AM ONG OTHERS, WITH THE CIT (A) FOR RELIEF. THE ISSUES DEALT BY THE AUTHOR ITIES BELOW ARE DETAILED, ON ISSUE BASIS-WISE, AS UNDER: ADDITION OF RS.1,07,78,293/- : 4.2. DURING THE YEAR UNDER CONSIDERATION, IT WAS OB SERVED BY THE AO THAT THE ASSESSEE HAD RECEIVED BY WAY OF SALE PROCEEDS O F RS.2,16,64,908/- WHICH WERE ALLOCATED UNDER VARIOUS HEADS, MAINLY, S ALE BILLS, CLUB FEES, MAINTENANCE CONTRIBUTION, LOAN CONTRIBUTION, LAND F UND, DEVELOPMENT EXPENSES, PROFESSIONAL FEES, SCHEME ACIT ETC., THE CLUB FEE, LOAN CONTRIBUTION AND PROFESSIONAL FEES HAD ALREADY BEEN CREDITED IN THE REVENUE ACCOUNT AND BALANCED OF RS.1,07,78,293/- WA S TAKEN AS THE INCOME OF THE ASSESSEE. WHILE DOING SO, THE AO HAD OBSERVED THAT THE ASSESSEE HAD CLAIMED HAVING TAKEN THE DEVELOPMENT W ORK FOR NON-TRADING ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 6 CORPORATIONS [NTCS] AND CO-OPERATIVE SOCIETY, BUT, REALLY THE ASSESSEE WAS INVOLVED IN PURCHASE AND DEVELOPMENT OF LAND, D ESIGNING LAYOUT AND SELLING OF PLOTS AND THE WHOLE SALE PROCEEDS HAVE B EEN RECEIVED BY THE ASSESSEE IN THE GUISE OF NTCS AND CO-OPERATIVE SOCI ETIES AS THEY HAVE BEEN INVOLVED JUST TO CREATE ONE MORE LEGAL ENTITY ETC., 4.3. THIS HAS BEEN OBJECTED TO BY THE ASSESSEE. AF TER ELABORATELY EXPLAINING THE NATURE OF BUSINESS, METHOD OF ACCOUN TING FOLLOWED FOR BOOKING OF RECEIPTS, EXPENSES INCURRED FOR DEVELOPM ENT, PAYMENT OF INTERESTS ON LAND MAINTENANCE DEPOSIT ACCOUNTS ETC. , AS EXTENSIVELY RECORDED IN THE IMPUGNED ORDER OF THE LD.CIT (A) UN DER DISPUTE, THE FOLLOWING ISSUES EMERGE, NAMELY: (I) THE METHOD OF ACCOUNTING FOLLOWED IN ALL DIVISI ONS FOR BOOKING THE RECEIPTS; (II) GENUINENESS OF EXPENSES, HUGE LIABILITY UNDER THE HEAD SUNDRY CREDITORS AND EXPENSES; (III) PAYMENT OF INTEREST ON LAND MAINTENANCE DEPOS IT ACCOUNT; (IV) ONE TIME ENTRANCE FEES TAKEN FROM THE MEMBERS OF STERLING CLUB; (V) WHETHER THE ARTIFICIAL ALLOCATION OF PROCEEDS O N SALE OF PLOTS WAS TO DEFER ITS TAXABILITY IN THE YEAR OF ACCRUAL ETC. , (VI) WHEN THE ASSESSEE HAD HUGE FUNDS IN ITS DISPOS AL, THE BORROWINGS MADE WERE NOT FOR BUSINESS PURPOSES AND THUS, INTEREST PAYMENTS ON SUCH BORROWAL ARE ALLOWABLE? (VII) WHETHER THE NTCS/SOCIETIES WERE GENUINE AS MA JORITY OF LANDS EXIST IN THE NAMES OF DIRECTORS AND THE FUNDS FOR P URCHASE OF LANDS WERE ALSO PROVIDED BY THE ASSESSEE? (VIII) NTCS/SOCIETIES WERE NOT SUPPOSED TO CARRY ON THE BU SINESS . 4.4 AFTER ANALYZING THE PROS AND CONS OF THE ISSUE, THE LD.AO HAD MAINTAINED THAT: ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 7 [PARA 39 OF LD.CIT(A)S ORDER] THE ASSESSEE HAD CLAIMED EXPENSES ON ACCRUAL BASIS AND DUE TO THIS REASON TH ERE WAS HUGE LIABILITY SHOWN IN THE BALANCE SHEET UNDER THE HEAD SUNDRY CREDITORS FOR GOODS AND EXPENSES AND OTHER LIABILIT IES. FROM THE ANALYSIS OF PROFIT AND LOSS ACCOUNT, IT WAS QUITE C LEAR THAT THE RECEIPTS WERE SHOWN IN SUCH A MANNER SO THAT THERE WAS NO EXISTENCE OF TAX LIABILITY. IN THE NAME OF DEVELOP MENT EXPENSES THE ASSESSEE HAD SHOWN HUGE EXPENSES, BUT, THE SITE INSPECTION REPORT CLEARLY INDICATED THAT SUCH EXPENSES HAD BEE N INCURRED. DURING THE YEAR, THE ASSESSEE HAD RECEIVED A SUM OF RS.2,16,64,908/-. IN THIS CASE, THE MAJOR ISSUE WA S DETERMINATION OF INCOME UNDER THE HEAD LAND AND DEVELOPMENT ACTI VITIES. AS EXPLAINED EARLIER IN THE REMAND REPORT, THE ASSESSE E HAD PURCHASED HUGE LAND RUNNING INTO THOUSANDS OF ACRES . THEREAFTER, THE LAND HAD BEEN DEVELOPED AND SOLD. THE SALE PROCEEDS RECEIVED FROM THE CUSTOMERS WERE ALLOCATED UNDER DIFFERENT HEAD IN SUCH A FASHION SO THAT MAJOR PART OF SALE PROCEEDS WERE NOT TAKEN INTO PROFIT AND LOSS ACCOUN T. SINCE THE ASSESSEE HAD DEVELOPED THE LAND AND THEREAFTER SOLD THE PLOT, IT WAS POSSIBLE TO DETERMINE PROPERLY EXPENSES WHICH T HE ASSESSEE WAS GOING TO INCUR IN RESPECT OF EACH SCHEME AND IT WAS POSSIBLE TO WORK OUT THE COST OF ONE SQ. YARD AND THEREAFTER HE COULD VERY WELL CALCULATE THE PROFIT ARISING ON THE SALE OF PL OT. AN ATTEMPT WAS MADE TO COLLECT THE DETAILS TO WORK OUT LAND CO ST PER SQ. YARD BUT THE DETAILS WERE NOT SUBMITTED IN THE MANNER AS KED FOR. THE ASSESSEE HAD SHOWN REVENUE RECEIPTS UNDER THE PRETEXT THAT THERE WERE SO MANY UNCERTAINTIES INVOL VED IN THE DEVELOPMENT OF THE PLOTS. THESE UNCERTAINTIES WER E SUCH WHICH ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 8 COULD NOT BE MEASURED IN TERMS OF VALUE. THEREFORE , THE METHOD OF ACCOUNTING FOLLOWED IN RESPECT OF BOOKING RECEIP TS FROM THE LAND DEVELOPMENT WERE REQUIRED TO BE REJECTED. IN THE FACTS OF THE CASE IT WAS NECESSARY TO DETERMINE THE COST PER SQ. YARD WITH REFERENCE TO THAT COST THE PROFITS ON THE SALE OF T HE PLOT COULD BE WORKED OUT. IN CASE, THE ASSESSEE DID NOT SUBMIT T HESE DETAILS, THEN AFTER EXCLUDING THE LAND COST, CLUB FEES, MAIN TENANCE CONTRIBUTION, ELECTRICITY CHARGES FROM THE SALE PRO CEEDS AND THE NET AMOUNT MAY BE TAKEN AS THE PROFIT OF THE ASSESS EE AND FROM THIS PROFIT ON ACCOUNT OF LAND DEVELOPMENT, 10% MA Y BE ALLOWED IN VIEW OF THE SITE INSPECTION REPORT. THE ASSESSI NG OFFICER FURTHER REITERATED THAT DURING THE ASSESSMENT PROCEEDINGS T HE ASSESSEE DID NOT ALLOW THE ASSESSING OFFICER TO UNDERSTAND F ULL FACTS OF THE ASSESSEE. SINCE THERE WAS AN ACCOUNTING JUGGLERY H ENCE UNLESS THE ASSESSEE EXPLAINED ALL THE ASPECTS OF THE CASE CLEARLY, IT WAS DIFFICULT FOR THE ASSESSING OFFICER TO UNDERSTAND T HE FACTS OF THE CASE. IN VIEW OF THE ABOVE, IT WAS STRONGLY CONTEN DED THAT THE ADDITIONS MADE IN ASSESSEES TOTAL INCOME AMOUNTING TO RS.1,07,78,293/- DESERVE TO BE RETAINED AND THE CON TENTION OF THE APPELLANT REJECTED. 4.5 AFTER DUE CONSIDERATION OF THE SUBMISSIONS PUT- FORTH BY THE ASSESSEE AND ALSO PERUSAL OF THE ASSESSMENT RECORDS , THE LD.CIT(A) HAD RECORDED HIS FINDINGS WHICH ARE EXTRACTED AS UNDER: 40 THE ONLY REASON FOR MAKING THE ADDITION APPEARS TO BE THE CONSIDERATION THAT THE LAND MEASURING 1500 ACRE S HAD BEEN PURCHASED IN THE NAMES OF NTCS/SOCIETIES OR ADVANCE S HAD BEEN GIVEN FOR THE PURCHASE OF THIS LAND. THE SAID LAND WAS BEING DEVELOPED BY WAY OF VARIOUS SCHEMES. SOME OF THE LAND HAD BEEN PURCHASED IN 1984 WHICH WAS BEING SOLD IN DIFFERENT ASSESSMENT YEARS AT A HIGHER PRICE, BUT, NO CAPITAL GAINS OR BUSINESS PROFIT HAD BEEN RETURNED BY THE ASSESSEE. FURTHER, IN ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 9 STEAD OF BOOKING PROFITS, THE ASSESSEE BY FOLLOWING AN ACCOUNTING METHOD HAD BEEN SHOWING DEPOSITS AND FUNDS TO THE T UNE OF RS.3,24,71,748/-.THIS WAS THE CLOSING BALANCE OF TH E DEVELOPMENT FUND. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE LAND HAD BEEN PURCHASED IN 1984 AND IT WAS DIFFICUL T TO ACCEPT THAT 75 TO 80% OF THE SALE PROCEEDS WOULD GO IN THE DEVELOPMENT OF THE PLOT OF THE LAND. THE ASSESSING OFFICER ON THAT BASIS HELD THAT THE ENTIRE RECEIPTS RECEIVED DURING THE YEAR A FTER DEDUCTING THE RECEIPTS BOOKED IN THE REVENUE SHOWN BY THE ASS ESSEE REQUIRED TO BE TAXED AS REVENUE RECEIPTS. IN OTHER WORDS, THE ASSESSING, WITHOUT ESTABLISHING THE APPLICABILITY O F SECTION 145, WITHOUT EXAMINING THE METHOD OF ACCOUNT FOLLOWED BY THE ASSESSEE, DUE TO TIME CONSTRAINT HAD HELD THAT THE ENTIRE RECEIPTS OF THE ASSESSEE WERE TO BE TAXED AS INCOME IN VIEW OF THE FACT THAT THE LAND HAD BEEN PURCHASED IN 1984 AND THE AS SESSEE HAD NOT SHOWN CAPITAL GAINS. IN OTHER WORDS, THE ADDIT ION HAD BEEN MADE WITHOUT CONSIDERING THE METHOD OF ACCOUNTING F OLLOWED BY THE ASSESSEE OR THE ACCOUNTING PRINCIPLES ADOPTED B Y THE ASSESSEE. DURING THE YEAR, THE ASSESSEE HAD RECEIV ED TOTAL SALE PROCEEDS OF RS.2,16,64,908/- . OUT OF THESE RECEIP TS THE ASSESSEE ALREADY SHOWN IN ITS PROFIT AND LOSS ACCOU NT RECEIPTS BY WAY OF CLUB FEES OF RS.26,57,143/-, LAND CONTRIBUTI ON OF RS.53,65,470/- AND PROFESSIONAL FEES OF RS.28,64,00 2/-. THE ABOVE ADDITION HAD BEEN MADE WITHOUT EXAMINING THE ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE AND WITHOUT EXAMINI NG IN DETAIL THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. F ROM THE FACTS DISCUSSED EARLIER AND THE AUDITORS REPORT, T HERE IS NO DOUBT THAT THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYS TEM OF ACCOUNTING WHICH HAS BEEN REITERATED BY HIM ON NUMB ER OF OCCASIONS. THE ONLY EXCEPTION TO THIS SYSTEM OF AC COUNTING IS GRATUITY EXPENSES AND DIVIDEND INCOME. GRATUITY EX PENSES HAD BEEN ACCOUNTED ON PAYMENT BASIS AND THE DIVIDEND IN COME HAD BEEN ACCOUNTED ON RECEIPT BASIS. IN SCHEDULE 21, THE SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY THE APP ELLANT COMPANY HAVE BEEN ELABORATED. IT CLEARLY STATES THAT THE R ESORT MEMBERSHIP IS SOLD FOR 10 YEARS/99 YEARS PERIOD. A SUM EQUAL TO 25% OF THE NET SALE VALUE OF THE MEMBERSHIP IS RECO GNIZED AS INCOME IN THE PROFITS AND LOSS ACCOUNT IN THE YEAR OF SALE. 1/10 TH OR 1/99 TH OF THE BALANCE RECOGNIZED AS RECEIPTS TOWARDS PR OVIDING CONTINUOUS CUSTOMER FACILITIES FOR 10/99 YEARS. CO UNTRY CLUB MEMBERSHIP WAS EITHER LIFE TIME OR ORDINARY. THE AN NUAL SUBSCRIPTION AMOUNTS PAYABLE BY LIFE MEMBERS OVER AND ABOVE THE PAYMENT MADE BY THE ORDINARY MEMBERS WAS RECOG NIZED AS ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 10 INCOME IN THE PROFIT & LOSS ACCOUNT. THE MAINTENANC E EXPENDITURE OF SCHEME OF PLOT DEVELOPMENT WAS MET F ROM LIFE TIME OR PERIODICAL MAINTENANCE FEES PAYABLE BY BENE FICIARIES/PLOT OWNERS. THE PERIODICAL MAINTENANCE DUE WERE RECOGN IZED IN THE PROFIT & LOSS ACCOUNT AS INCOME. LIFE TIME MAINTENA NCE DEPOSITS WERE CREDITED WITH YEARLY INTEREST @ 12% AND PRORAT E EXPENSES ALLOCABLE TO THE PLOTS ON LIFE TIME MAINTENANCE WAS DEBITED TO THE MAINTENANCE DEPOSITS FROM THE PROFIT & LOSS ACCOUNT THE AMOUNT RECEIVABLE FROM THE ALLOTTEES OF THE PLOTS WERE REC OVERABLE IN INSTALLMENTS WHICH SPLIT OVER TO 2 ND , 3 RD FINANCIAL YEARS. OUT OF THESE AMOUNTS, ONLY SUCH AMOUNTS WHICH WERE DUE IN THE RESPECTIVE YEARS WERE ENTERED INTO THE ACCOUNTS. T HIS CLARIFIES THAT THE ASSESSEE HAD BEEN ACCOUNTING FOR RECEIPTS ON ACCRUAL BASIS. THE LAND DEVELOPMENT INCOME WAS CONSIDERED IN PROFIT & LOSS ACCOUNT ON COST PLUS PROFIT BASIS. 41. THE ABOVE STATED METHOD OF ACCOUNTING AND THE POLICY OF THE ASSESSEE HAS BEEN EXAMINED CRITICALLY FROM THE BOOK S OF ACCOUNTS; THE BASIS OF ASSESSEES TRADING RECEIPTS IS THE STANDARD AGREEMENT WHICH HAS BEEN SIGNED BETWEEN TH E PURCHASER AND THE APPELLANT WHO HAS BEEN DEFINED T HE DEVELOPER. CLAUSE 1 OF THE AGREEMENT CLEARLY STAT ES THAT THE DEVELOPER HAD PURCHASED THROUGH BANAKHAT/BANACHITHI /SALE DEED ETC., CERTAIN LAND FROM LAND OWNERS IN THEIR FAVOU R OR THEIR NOMINEES AND OR PROPOSED HOUSING SOCITIES/NTC ETC. AS PER THE ABOVE AGREEMENT, THE ASSESSEE AS A DEVELOPER HAD AC QUIRED CERTAIN LAND IN THE NAME OF NTCS/CO-OPERATIVE SOCIE TIES WHICH WAS BEING SOLD FOR CERTAIN PRICE. THE PAYMENT OF T HE ABOVE PRICE WAS TO BE MADE IN ACCORDANCE WITH CLAUSE 2C OF THE AGREEMENT WHICH DIVIDED THE ABOVE COST INTO LAND COST, CONTRI BUTION FOR ELECTRIC CONNECTION, LUMP SUM MAINTENANCE CONTRIBUT ION AND CONTRIBUTION FOR LIFE MEMBERSHIP OF STERLING COUNTR Y CLUB. THE LAND COST ALSO INCLUDED DEVELOPMENT CHARGES. THE AG REEMENT ALSO DEFINED THE COMPONENTS OF LAND COST AND DEVELO PMENT COST IN DETAIL WHICH HAD ALREADY BEEN DISCUSSED IN EARLI ER. THE PROPOSED AGREEMENT BETWEEN THE DEVELOPER AND THE PU RCHASER ESTABLISHES BEYOND ANY DOUBT THAT WHATEVER SALE CON SIDERATION WAS RECEIVED BY THE APPELLANT BY VIRTUE OF THIS AGR EEMENT WAS IN THE NATURE OF TRADING RECEIPTS WHICH REQUIRED TO BE CREDITED IN THE PROFIT & LOSS ACCOUNT ON ACCRUAL BASIS. IT IS SEEN FROM THE DISCUSSION MADE EARLIER THAT OUT OF THE TOTAL SALE PROCEEDS THE ASSESSEE HAS CREDITED IN THE PROFIT AND LOSS ACCOUN T LAND COST, CLUB FREES AND PROFESSIONAL CHARGES ONLY. THE MAIN TENANCE ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 11 CONTRIBUTION, ELECTRICITY CHARGES, DEVELOPMENT FUND AND DEVELOPMENT EXPENSES HAVE NOT BEEN CREDITED IN THE PROFIT & LOSS ACCOUNT, BUT HAVE BEEN DIRECTLY TAKEN TO THE BALANC E SHEET AS DEPOSITS. THIS IS A CLEAR DEVIATION IN THE ACCEPTE D ACCOUNTING POLICY AND THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE. SINCE BY VIRTUE OF THE AGREEMENT, THESE ITEMS FORME D INTEGRAL PART OF SALE PROCEEDS, THEY ARE IN THE NATURE OF TRADING RECEIPTS AND SHOULD HAVE BEEN CREDITED TO THE PROFIT & LOSS ACCO UNT. TO THAT EXTENT ASSESSEES METHOD OF ACCOUNTING HAS SUFFERED FROM BASIC DEFECT AND IT MAKES DETERMINATION OF ASSESSEES INC OME RATHER COMPLEX IF NOT ALTOGETHER IMPOSSIBLE PROPOSITION. THE RECEIPTS OF ACCOUNT OF SCHEME ACIT ARE ON A DIFFERENT FOOTING B ECAUSE THEY ARE REALLY THE SALE PROCEEDS OF LAKEVIEW VILLA CONS TRUCTION SCHEME. THE EXPENDITURE ON THE SCHEME HAS BEEN SHO WN AS WORK-IN-PROGRESS ON THE ASSET SIDE OF THE BALANCE S HEET. AS PER THE SCHEDULE, THE SAID SCHEME IS GOING TO BE COMPLE TED IN ACCOUNTING YEAR 1997-98. THE ASSESSING OFFICER HAS INCLUDED THE ENTIRE RECEIPTS INTO THE INCOME WITHOUT CONSIDERING THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE ABOVE. THIS IS NOT CORRECT BECAUSE WHAT HAS TO BE TAXED IS THE PROFIT EARNED BY THE ASSESSEE ON THE ABOVE SALES AND NOT THE ENTIRE REC EIPTS AND THAT TOO IN THE YEAR OF ACCRUAL OF THE INCOME. THIS ASP ECT HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER. IT HAS ALS O BEEN CONTENDED THAT IN RESPECT OF ABOVE SCHEME, THE ASSE SSEE HAS ALREADY OFFERED PROFIT IN THE EARLIER YEARS. SINCE , THE ADDITION HAS BEEN MADE WITHOUT EXAMINING THE ISSUE AT ALL, THE M ATTER RELATED TO SCHEME ACIT IS SET ASIDE. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE TOTAL RECEIPTS OF RS.54,46,500/- ON ACC OUNT OF SCHEME ACIT FROM THE ACCOUNTS OF DIFFERENT YEAR IN WHICH THE EXPENSES HAVE BEEN SHOWN ASND DETERMINED THE PROFIT ACCORDINGLY. IT IS CLEAR FROM THE ABOVE THAT OUT OF TOTAL SALE P ROCEEDS EARNED BY THE ASSESSEE, A PORTION OF THESE RECEIPTS IN RESPEC T OF MAINTENANCE CONTRIBUTION OF RS.7,56,894/-, ELECTRIC AL CHARGES OF RS.2,60,000, DEVELOPMENT FUND OF RS.22,96,764/-, D EVELOPMENT EXPENSES OF RS.44,98,586/- HAVE NOT BEEN SHOWN IN T HE PROFIT & LOSS ACCOUNT. THE ASSESSEE HAS GIVEN A DIFFERENT TR EATMENT WHICH HAS TO BE EXAMINED BEFORE THE INCOME ARISING OUT OF THESE RECEIPTS IS CLEARLY DETERMINED. FROM THE AGREEMEN T ITSELF IT IS SEEN THAT THE ASSESSEE HAS ALLOCATED SALE PROCEEDS OF THE PLOT INTO DEVELOPMENT FUND DEPOSIT, DEVELOPMENT WORK AND PROFESSIONAL CHARGES AT CERTAIN FIXED PERCENTAGE. IT IS FURTHER ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 12 SEEN FROM THE AGREEMENT THAT FROM THE TOTAL CONTRIB UTION RECEIVED FROM THE PURCHASERS THE ASSESSEE HAD SET APART CERT AIN AMOUNT TOWARDS CONTRIBUTION FOR ELECTRICITY CONNECTION, LU MP SUM ONE TIME MAINTENANCE CONTRIBUTION AND CONTRIBUTION FOR LIFE MEMBERSHIP OF STERLING COUNTRY CLUB. OUT OF THE BALANCE, LAND COS T WAS DETERMINED AS ACTUAL PAYABLE BY THE NTC OR PROPOSED CO- OPERATIVE SOCIETY TO THE VENDOR INCLUSIVE OF LEGAL EXPENSES, STAMP, AND REGISTRATION EXPENSES AND OUT OF POCKET EXPENSES. THE ASSESSEES CLAIM IS THAT THERE IS NO PROFIT ELE MENT INVOLVED AS FAR AS THE LAND COST IS CONCERNED. HOWEVER, THE AS SESSEE HAS NOT BEEN CLARIFIED AS TO WHAT IS THE ACTUAL COST OF THE LAND WHICH HAD BEEN SOLD DURING THE YEAR. FROM THE DETAILS FU RNISHED BY THE ASSESSEE IN RESPECT OF THE LAND, IN SOME OF THE CAS E LAND HAD STILL NOT BEEN TRANSFERRED TO THE NTC. FOR INSTANCE, LAN D PURCHASE STATEMENT DOCUMENT 14 OF THE PAPER BOOK IN RESPECT OF GARDEN CITY IV, SCHEME VILLAGE DHANTALI, BLOCK 20 IS FOR 69283 SQ. YARDS OF THE LAND. THE ABOVE LAND IS IN THE JOINT NAMES OF SMT. KUSUM B PARMER, MOOTA BASANT KUMAR AND S.S.RINGWALA . THE PURCHASE PRICE OF THE ABOVE LAND IS MENTIONED AT RS .37,80,200/- AND TOTAL COST OF THE LAND AT RS.44,29,880/-. THE ABOVE EXAMPLE HAS BEEN POINTED OUT TO SHOW THAT NEITHER THE STATU S OF THE NTCS HAS BEEN DETERMINED NOR THE ACTUAL COST OF THE LAND TO THE SOCIETIES/NTCS HAS YET BEEN FINALIZED. THEREFORE, THE CLAIM OF THE ASSESSEE THAT THE LAND COST REPRESENTS THE ACTU AL COST OF THE LAND IS NOT VERY ACCURATE. IT IS FURTHER SEEN FROM THE SALE AGREEMENT THAT AFTER REDUCING THE LAND COST, THE BA LANCE AMOUNT HAD BEEN ALLOCATED AT THE RATE OF 20% TO DEVELOPMEN T FUND DEPOSIT, 60% TO DEVELOPMENT WORK AND 20% FOR PROFES SIONAL AND ORGANIZING FEES. THEREFORE, WHILE 20% OF THIS AMO UNT BEING PROFESSIONAL AND ORGANIZING FEES HAS ADMITTEDLY BEE N CREDITED SAND ACCOUNTED FOR IN THE PROFIT AND LOSS ACCOUNT, 20% OF DEVELOPMENT FUND DEPOSIT AND 60% OF DEVELOPMENT WOR K EXPENSES HAVE NOT BEEN CREDITED IN THE PROFIT AND L OSS ACCOUNT, BUT, TAKEN STRAIGHT TO THE BALANCE SHEET. THIS AGA IN IS A VARIATION IN THE ACCEPTED PRINCIPLES OF MERCANTILE SYSTEM OF ACCOUNTING WHICH MAKES THE DETERMINATION OF INCOME A DIFFICULT PROPOSITION. HOWEVER, IN ORDER TO ADJUDICATE THE ISSUE, THE TAXA BILITY OF RECEIPTS ACCOUNTED FOR UNDER MAINTENANCE CONTRIBUTI ON, ELECTRICITY CHARGES, DEVELOPMENT FUND AND DEVELOPMENT EXPENSE I S BEING EXAMINED HERE AND NOW. 42. THE ASSESSEE HAD SHOWN IN THE INCOME-TAX RETURN INCOME AT RS.2,58,754/-. AS PER THE STATEMENT OF TOTAL INC OME WHICH ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 13 SHOWED WORKING WITH REFERENCE TO PROFIT AND LOSS AC COUNT. NET PROFIT AS PER PROFIT AND LOSS ACCOUNT HAD BEEN TAKE N AT RS.37,34,422/-. TO IT HAD BEEN ADDED DISALLOWANCE O N DEPRECIATION ETC., AT RS.11,64,165/- AND DEDUCTION HAD BEEN CLAIMED FOR UNPAID BONUS OF RS.50,000/-, DEPRECIATI ON ALLOWABLE AT RS.39,23,924/-. PROFIT & GINS OF BUSINESS WERE TAKE N AT RS.9,24,663/- WHICH WAS, FURTHER, REDUCED BY BROUGH T FORWARD LOSS OF RS.6,52,290/- AND DEDUCTION U/S 80G AT RS.3,609/ -. THE INCOME RETURNED WAS RS.2,58,754/-.THE ASSESSING OFF ICER ADOPTED AN INDEPENDENT COMPUTATION AFTER REJECTING TRADING RESULTS. SALE PROCEEDS WERE ADOPTED AT RS.2,16,64,908/- WITH ALLO CATION OF INCOME UNDER DIFFERENT HEADS. THE CHART HAD BEEN S UPPLIED BY THE ASSESSEE. THE ALLOCATION OF THE SALE PROCEEDS AS PER THE CHART CORRECTLY TOTALED TO RS.2,41,45,361/- AND NOT RS.2,16,64,908/- AS SHOWN IN COLUMN NO.4 OF THE CHA RT AND ADOPTED BY THE ASSESSEE AND ASSESSING OFFICER. SUB SEQUENTLY, THE ASSESSEE FILED A RECONCILIATION DURING THE COUR SE OF APPELLATE PROCEEDINGS WHICH CLARIFIED THAT THIS COLUMN OF SAL E PROCEEDS SHOWING TOTAL OF RS.2,16,64,908/- DID NOT INCLUDE F OLLOWING RECEIPTS: 1. TOTAL ERROR PERTAINING TO SALE UNDER LAKEVIEW VI LLA SCHEME, AMOUNT SHOWN WAS RS.54,72,390/- WHICH SHOULD HAVE B EEN TAKEN AT RS.51,48,309/-, RESULTING INTO DIFFERENCE OF RS.2,98,110 2. PROFESSIONAL FEES OF SADBHAVANA SCHEME RS.3,4 0,000 3.PROFESSIONAL FEE FOR ABU RESORT RS.7,00,000 4. DIRECT CLUB MEMBERS SUBSCRIPTION (THOSE WHO ARE NOT PLOT HOLDERS) RS.6,22,343 5. ABU RESORT & SADBHAVANA DESIGN FEES RS.5 ,20,000 24,80,453 FURTHER, IF THE ABOVE AMOUNT WAS ADDED, THE CORRECT TOTAL OF SALE PROCEEDS WORKS OUT TO RS.2,4,45,362/-. THE ASSESSI NG OFFICER HAD TAKEN THE SALE BILL AT RS.2,16,64,908/- FROM WH ICH IT HAD REDUCED THREE ITEMS AS HAVING BEEN CREDITED IN THE PROFIT AND LOSS ACCOUNT. THESE WERE THE CLUB FEES OF RS.26,57,146/ -, LAND CONTRIBUTION R.53,65,470/- AND PROFESSIONAL CHARGES RS.28,64,003/-. THE TOTAL OF THESE THREE ITEMS WOR KS OUT TO ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 14 RS.1,08,86,617/-. THE DIFFERENCE BETWEEN RS.2,16,6 4,908/- & RS.1,08,86,617/- AMOUNTING TO RS.1,07,78,291/- HAS BEEN ADDED BY THE ASSESSING OFFICER IN ASSESSEES TOTAL INCOME ON PAGE 5, ITEM NO.2. 43. FURTHER, IF THE ITEMS ADDED BY THE ASSESSIN G OFFICER OUT OF THE BREAK-UP OF THE SALE BILLS ARE CONSIDERED, THE TOTAL ADDITION DOES NOT MATCH WITH THE FIGURE ADOPTED BY THE ASSES SING OFFICER. THE ITEMS CONSIDERED FOR ADDITION AND BREAK-UP OF A DDITION IS AS UNDER:- (1) MAINTENANCE CONTRIBUTION RS. 7,56,894 (2)ELECTRIC CHARGES RS. 2,60,000 (3)DEVELOPMENT FUND RS. 22,96,764 (4)DEVELOPMENT EXPENSES RS. 44,9 8,586 (5)SCHEME ACIT RS. 54,46,500 RS.1,32,58,744 AS AGAINST ABOVE AMOUNT, ADDITION HAS BEEN MADE ONL Y OF RS.1,07,78,293/- WHICH REFLECTS A TOTALING ERROR ON THE PART OF THE ASSESSING OFFICER. THEREFORE, IF OUT OF SALE BILLS OF RS.2,41,45,361/- , THE ADDITION IS CONSIDERED AFTER EXCLUDING RS.1,0 8,86,617/-, THE CORRECT ADDITION WOULD BE RS.1,32,58,744/- 4.6. AGGRIEVED BY THE STAND OF THE LD.CIT (A), THE ASSESSEE CAME UP WITH THE PRESENT APPEAL. DURING THE COURSE OF HEAR ING, THE LD. A R HAD SUBMITTED THE METHOD OF ACCOUNTING AND OTHER ASPECT S IN AN ELABORATE AND EXHAUSTIVE MANNER WHICH ARE SUMMARIZED AS BELOW : (I) THOUGH THE CIT (A) HAD HELD THAT THE REJECTION OF THE ASSESSEES METHOD OF ACCOUNTING WAS JUSTIFIED [IN PARA 40 OF H IS IMPUGNED ORDER], HE OUGHT TO HAVE ORDERED FOR THE DELETION O F THE ADDITION OF RS.1.07 CRORES ESPECIALLY WHEN THE AO HAD ADMITT ED IN HIS ASSESSMENT ORDER; (II) WITHOUT PREJUDICE, THE LD.CIT (A) OUGHT TO HAV E APPRECIATED AS ELABORATELY EXPLAINED BY THE ASSESSEE IN ITS SUBMIS SION DATED 8.3.2000 THAT THE METHOD OF ACCOUNTING WHICH WAS AD MITTEDLY ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 15 CONSISTENTLY FOLLOWED BY THE ASSESSEE FROM INCEPTIO N COULD NOT BE FAULTED AND REGARDED AS SUCH FROM WHICH INCOME C OULD NOT PROPERLY BE DEDUCED AND, THEREFORE, THERE WAS NO RE ASON FOR REJECTING THE ASSESSEES METHOD OF ACCOUNTING AND O N THAT BASIS TO MAKE THE ADDITION OF RS.1,07,78,293/- OR TO SUS TAIN ANY PART THEREOF; (III) THAT EVEN AFTER DISAPPROVING OF THE ASSESSING OFFICERS REJECTION OF THE ASSESSEES METHOD OF ACCOUNTING AS OBSERVED BY THE CIT (A) (SUPRA), THE CIT (A) ERRED IN SUSTAINING THE STAND OF THE AO AND, SUBSEQUENTLY DETERMINED THE ADDITION AT RS.1,32,58 ,744/- AS AGAINST RS.1,07,78,293/- DETERMINED BY THE AO; (IV) THAT THERE WAS NO BASIS FOR ASSUMING THAT THE AGGREGATE AMOUNT OF THE SALE BILLS WAS RS.2,41,45,361/-; AND THAT TH E CORRECT AMOUNT UNDER THE HEAD SCHEME ACIT WAS ONLY RS.51, 48,390/- AND NOT RS.54,46,500/- AS ATTRIBUTED BY THE CIT (A) . (V) THAT THE CIT (A) ERRED IN NOT DELETING THE ADDI TION OF RS.54,46,500/- DESIGNATED AS SCHEME ACIT AND FORM ING PART OF THE AGGREGATE AMOUNT OF ADDITION OF RS.1.32 CRORES , IN STEAD, SET ASIDE THE ISSUE WITH A DIRECTION TO THE AO TO D EAL WITH THE ISSUE AS DIRECTED IN HIS IMPUGNED ORDER; (VI) THAT THE CIT (A) ERRED IN SUSTAINING THE ADDIT ION OF RS.22,96,764/- (FORMING PART OF RS.1.32 CRORES ADDITION) COLLECTED BY THE ASSESSEE FROM THE MEMBERS BY WAY OF CONTRIBUTION FO R DEVELOPMENT FUND (VII) THAT THE CIT (A) ERRED IN REMITTING BACK THE ISSUE OF ADDITION OF RS.44,98,586/- (FORMING PART OF RS.1.32 CRORES) COL LECTED FROM ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 16 THE MEMBERS BY WAY OF CONTRIBUTION FOR DEVELOPMENT EXPENSES FOR FRESH CONSIDERATION AS PER HIS DIRECTIONS GIVEN IN HIS ORDER; WITH REGARD TO THE ACCOUNTING POLICY ADOPTED BY THE ASSESSEE, IT WAS SUBMITTED THAT: (VIII) THE ASSESSEE HAD ACCOUNTED THE LAND BOOKINGS ON ACCRUAL BASIS; THAT THE AMOUNT WHICH THE ASSESSEE RECEIVES FROM TH E MEMBER ON LAND BOOKINGS, DEBITS TO THE RESPECTIVE MEMBERS ACCOUNT AND CREDITS THE VARIOUS HEADS, NAMELY, CLUB FEES, M AINTENANCE CONTRIBUTION, LAND CONTRIBUTION, DEVELOPMENT FUND, ETC. AS PER THE AGREEMENT, MEMBERS ARE PAYING LAND CONTRIBUTION, CL UB FEES ETC., IMMEDIATELY AT THE TIME OF SIGNING THE AGREEMENT AN D BALANCE AMOUNT FOR THE DEVELOPMENT FUND, DEVELOPMENT EXPENS ES ETC., WERE PAID IN INSTALLMENT. THE ASSESSEE HAD MADE C OMMITMENTS FOR VARIOUS DEVELOPMENTS SUCH AS ROADS, LAND LEVELI NG, WATER SUPPLY, DRAINAGE SYSTEM ETC., AND THESE COMMITMENTS WERE FULFILLED IN PHASE MANNER BECAUSE THE LOCATION OF T HE LAND WAS LITTLE INTERIOR AND THE ASSESSEE HAD LONG TERM PLAN NING FOR THE DEVELOPMENTS; - THAT AS PER THE AGREEMENT BETWEEN THE MEMBERS AND SOCIETY, THE ASSESSEES CHARGES DOUBLE THE AMOUNT ACTUALLY SPENT ON DEVELOPMENT AND MAINTENANCE; AND THAT THE ASSESSEE RECOGNIZES THE INCOME IN THE YEAR OF ACTUAL DEVELOPMENT EXECUT ION; - THAT AT THE TIME OF BOOKING THE PLOTS, THE ASSESS EE CREDITS ONLY CERTAIN INCOME SUCH AS CLUB FEES, PROFESSIONAL FEES ETC., IN THE YEAR OF BOOKING AND DEBITS THE DEVELOPMENT EXPENSES, DEV ELOPMENT FUNDS AND MAINTENANCE DEPOSITS WITH THE LIABILITIES AND CARRY FORWARDS IN THE BALANCE SHEET AND THAT IN THE YEAR OF ACTUAL ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 17 DEVELOPMENTS IT TRANSFERS FROM RESPECTIVE FUNDS TO THE PROFIT AND LOSS ACCOUNT AND, THUS, THE ASSESSEE WAS ACCOUNTING THE INCOME IN THE YEAR OF ACTUAL EXPENDITURE INCURRED FOR THE DEV ELOPMENT/ MAINTENANCE. 4.7. IN CONCLUSION, IT WAS FORCEFULLY ADVOCATED TH AT IN THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE, THE CIT (A) H AD FAILED WHILE DEALING WITH THIS ITEM FOR THE ASSESSMENT YEAR UNDE R CONSIDERATION IN ISOLATION WITH DISREGARD TO THE FACT THAT THE ASSES SEE HAD BEEN CONSISTENTLY FOLLOWING A PARTICULAR METHOD OF ACCOU NTING SINCE ITS INCEPTION FOR THIS PARTICULAR ITEM AS WELL. IT WAS, THEREFOR E, VEHEMENTLY ARGUED THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER WHICH W ERE SUBSEQUENTLY SUSTAINED BY THE LD. CIT (A) WITH CERTAIN MODIFICAT IONS REQUIRE TO BE DELETED. TO SUBSTANTIATE HIS CLAIM, THE LD A R HAD RELIED ON VARIOUS CASE LAWS AND ALSO FURNISHED VOLUMINOUS PAPER BOOKS RUNN ING INTO HUNDREDS OF PAGES CONTAINING, AMONG OTHERS, COPIES OF (I) CORRE SPONDENCES WITH THE AUTHORITIES; (II) REMAND REPORT OF THE AO AND REJOI NDER TO SUCH REPORT; (III) NOTE ON HOLIDAY SCHEME OF THE ASSESSEE. 4.8. ON THE OTHER HAND, THE LD. D R CAME UP WITH S PIRITED ARGUMENTS, THE SUM AND SUBSTANCE OF WHICH, ARE DETA ILED AS UNDER: (I) THAT THE ASSESSEE BEING A LAND DEVELOPER/ORGANI ZER OWNING LANDS TO THE EXTENT OF 1500 ACRES AND DERIVED INCOME FROM SALE OF PLOTS FROM VARIOUS SCHEMES ORGANIZED, THE DETAILS OF RECE IPTS AND EXPENSES OF EACH SCHEME WERE CALLED FOR VERIFICATIO N DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH HAVE NOT BEE N FURNISHED BY THE ASSESSEE; ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 18 (II) THAT THE AO, FOR THE REASONS RECORDED IN HIS A SSESSMENT ORDER, HAD MADE THE ADDITION TO THE EXTENT OF RS.1.07 CROR ES WHICH WAS MODIFIED BY THE CIT (A) AT RS.1.32 CRORES; (III) THE AUTHORITIES BELOW COULD NOT BE IN A POSIT ION TO EXAMINE THE ISSUE(S) IN PROPER PERSPECTIVE IN THE ABSENCE OF RE QUIRED DETAILS; THAT EVEN THOUGH THE AO HAD FURNISHED ALL THE DETAI LS AT HIS POSSESSION THROUGH HIS REMAND REPORTS, THE CIT (A) HAD NOT PROPERLY CONSIDERED THE SAME WHICH CULMINATE IN DEL ETING CERTAIN ADDITIONS MADE BY THE AO; (IV) AS THE ASSESSEE HAS BEEN MAINTAINING ITS ACCOU NTS ON MERCANTILE SYSTEM OF ACCOUNTING, THE CIT (A) OUGHT TO HAVE CON SIDERED THAT THE INCOME ACCRUES OR ARISES AS SOON AS IT BECOMES LEGALLY DUE AND EVEN BEFORE IT IS ACTUALLY RECEIVED WHICH SIMIL ARLY BRINGS INTO DEBIT THE AMOUNT FOR WHICH A LEGAL LIABILITY HAS BE EN INCURRED BEFORE IT IS ACTUALLY DISBURSED; RELIES ON: 534 ITR 114 (SC) & 37 ITR 1 (SC) (V) THAT THE CIT (A) HAD NOT CONSIDERED THE SETTLED POSITION OF LAW THAT ACCORDING TO S.4, THE INCOME-TAX IS CHARGEABLE IN RESPECT OF THE TOTAL INCOME OF EACH PREVIOUS YEAR AND AS A COR OLLARY, THE INCOME ACCRUING IN ONE YEAR CANNOT BE DEFERRED TO F UTURE YEARS BY ADOPTING AN INCORRECT METHOD OF ACCOUNTING WITH A VIEW TO POSTPONE THE TAX LIABILITY; AND THAT ONCE INCOME HA S ACCRUED TO AN ASSESSEE IN A PARTICULAR YEAR, IT HAS TO BE ASSE SSED IN THAT YEAR IRRESPECTIVE OF THE METHOD OF ACCOUNTING ADOPT ED BY THE ASSESSEE; RELIES ON: 79 ITD 595 (DEL) & 103 ITD 15 (DEL) (VI) WITH REGARD DEVELOPMENT EXPENDITURE OF RS.44.9 8 LAKHS, THOUGH THE CIT (A) HELD THAT THE SAID EXPENSES REPRESENTS ASSESSEES ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 19 TRADING RECEIPTS WHICH SHOULD HAVE BEEN CREDITED IN ITS P & L ACCOUNT, IT WAS ARGUED, THAT THERE WAS NO NEED TO R EMIT THE ISSUE AND RESTRICT THE ADDITION TO THE DIFFERENCE OF RS.4 4.98 LAKHS AND THE AMOUNT CREDITED IN THE P & L ACCOUNT; AND THAT THERE WAS CONTRADICTION IN THE ACCOUNTS OF THE ASSESSEE THAT IT SEEMED TO HAVE CREDITED RS.34.11 LAKHS AND CLAIMED EXPENSES O F RS.20.43 LAKHS AS PER SCHEDULE 15 OF P & L ACCOUNT AND, THUS , THE ACTUAL CREDIT REMAINS ONLY FOR RS.13.67 LAKHS; & (VII) THAT THE ASSUMPTION OF ASSESSEES DOUBLE CRED IT OF EXPENSES DOES NOT SEEM TO BE CORRECT WHICH HAD BEEN EXAMINED NEITHER BY THE CIT (A) NOR BY THE AO; THAT THE ASSESSEE WAS BOOKING THE EXPENSES OF ONE SCHEME AGAINST THE OTHER SCHEME AND , THUS, CLAIMING THAT DEVELOPMENT WORK WAS GOING ON, THOUGH NO DETAILS AS CALLED FOR DURING THE COURSE OF ASSESSMENT PROCE EDINGS HAVE BEEN FURNISHED; AND THAT THIS ASPECT HAS NOT BEEN C ONSIDERED BY THE CIT (A) BEFORE REMITTING THE ISSUE TO THE AO 4.9 IN CONCLUSION, IT WAS VEHEMENTLY URGED THAT SI NCE THE FINDINGS OF THE LD.CIT (A) ARE REQUIRED TO BE MODIF IED. 4.10 WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS, CAREFULLY PERUSED THE RELEVANT CASE RECORDS, THE VOLUMINOUS D OCUMENTARY EVIDENCES PRODUCED BY THE LD. A R IN THE SHAPES OF PAPER BOOKS AND ALSO VARIOUS CASE LAWS ON SIMILAR ISSUE RELIED UPON BY THE EITHER SIDE 4.11 ON A CAREFUL PERUSAL OF THE ASSESSMENT ORDER U NDER CONSIDERATION, IT HAS BEEN OBSERVED THAT THE ASSESS EE WAS A SOLE ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 20 ORGANIZER FOR THE FOLLOWING SCHEMES ON BEHALF OF VA RIOUS ASSOCIATIONS AND CO-OPERATIVE SOCIETIES: (I) GARDEN CITY I/GARDEN CITY II/GREENWOODS PLOTS A SCHEME OF RESIDENTIAL PLOTS ORGANIZED BY THE ASSESSEE ON B EHALF OF OGNAJ PARK PLOT OWNERS ASSOCIATION; (II) LSSKM FARM PLOTS ON BEHALF OF LILAPUR SAMUDAIK KHETI MANDALI; (III) OSSKM FARM PLOTS ON BEHALF OF OGNAJ SAMUDAYIK KHETI MANDALI; (IV) GARDEN CITY PHASE 3 SCHEME (A SCHEME OF RESIDE NTIAL PLOTS ON BEHALF OF PANCHJYOTI PLOT OWNERS ASSOCIATION) 4.12. IN ADDITION TO THE ABOVE, THE ASSESSEE ALSO HAD OTHER DIVISIONS KNOWN AS STERLING CLUB AND STERLING RESOR T. IN STERLING RESORT SCHEME, THERE IS GREENWOOD FLEXIPLAN MEMBERS HIP SCHEME. IT IS STATED THAT THIS IS A TIME SHARING SCHEME WHERE FOUR DIFFERENT TYPES OF ACCOMMODATIONS UNDER FOUR DIFFERENT OPTIONS ARE BEI NG MARKETED THROUGH THE ASSESSEES NETWORK OF PROGRESS AS WELL AS THEIR OWN FIELD SALES STAFF. IT WAS, FURTHER, OBSERVED THAT AS PER THE ACCOUNTING PURPOSES FINALIZED BY THE ASSESSEES BOARD OF DIREC TORS, A CERTAIN FIXED AMOUNT WAS TRANSFERRED TO THE P & L ACCOUNT EVERY Y EAR DURING THE YEARS OF BOOKING OF MEMBERSHIPS AND, SUBSEQUENTLY, BALANCE AMOUNT WAS BEING TRANSFERRED IN SUBSEQUENT YEAR (EITHER 10 YEARS OR 99 YEARS BY EQUAL YEARLY INSTALLMENTS DIVIDED ACCORDINGLY DE PENDING ON THE TYPE OF SCHEME). UNDER THE STERLING CLUB, THE ASSESSEE HAD MADE THE MEMBERS. ON FURTHER PERUSAL, IT WAS ALSO NOTICED T HAT THE LD.AO HAD STATED THAT DUE TO TIME CONSTRAINTS, VARIOUS TYPES OF SCHEMES FLOATED BY THE ASSESSEE, ITS METHOD OF ACCOUNTING, THE ACCOUNT ING PRINCIPLES FOLLOWED FOR TREATING THE RECEIPT AS REVENUE OR CAP ITAL COULD NOT BE ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 21 EXAMINED IN DETAIL, THAT THOSE ASPECTS WILL HAVE TO BE EXAMINED IN DETAIL IN THE ASSESSMENT YEAR 1997-98; THAT IT WAS SEEN THAT THE ASSESSEE HAD ACQUIRED AROUND 1500 ACRES OF LANDS EI THER IN THE NAMES OF NTCS/SOCIETIES OR ADVANCES HAVE BEEN GIVEN FOR PURCHASE OF LAND; AND THAT THOSE LANDS WERE BEING DEVELOPED IN PHASES AND WERE BEING SOLD AFTER DEVELOPMENT ETC., IT WAS, FURTHER , STATED BY THE LD.AO THAT THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAI LS OF RECEIPTS AND EXPENSES IN RESPECT OF EACH SCHEME AND IN THE ABSEN CE SUCH DETAILS; AND ALSO THAT THE ASSESSEE HAS BEEN BOOKING THE EXP ENSES OF ONE SCHEME AGAINST THE RECEIPT OF ANOTHER SCHEME AND, T HUS, CLAIMING THAT THE DEVELOPMENT WAS STILL GOING ON. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER ASSERTED THAT EACH SCHEME SHOULD HAVE BEEN TAKEN AS ONE AND COMPLETE PROJECT FOR THE PURPOSE OF BOOKING OF PROF IT AND, ACCORDINGLY, THE PROFIT SHOULD HAVE BEEN BOOKED ETC., 4.13. AS COULD BE SEEN FROM THE ABOVE, IT CAN SAFE LY BE ARRIVED AT A CONCLUSION THAT MOST OF THE ISSUES, AS THE LD. D R HAD CONCEDED DURING THE COURSE OF HEARING BEFORE THIS BENCH, HAV E NOT BEEN THOROUGHLY EXAMINED SUCH AS VARIOUS TYPES OF SCHEME S FLOATED BY THE ASSESSEE, THE METHOD OF ACCOUNTING ADOPTED BY THE A SSESSEE, THE ACCOUNTING PRINCIPLES BEING FOLLOWED IN TREATING TH E RECEIPTS AS REVENUE OR CAPITAL AND MAGNANIMOUSLY ADMITTED BY THE LD.AO HIMSELF IN HIS IMPUGNED ORDER THAT DUE TO TIME CONSTRAINTS THESE A SPECTS HAVE NOT BEEN GONE THROUGH IN DETAIL. ON HIS PART, THE LD.C IT (A) IN HIS IMPUGNED ORDER UNDER CHALLENGE HAD CATEGORICALLY OBSERVED TH US: 40 BUT IT APPEARS THAT DUE TO TIME CONSTRAINTS VARIOUS TYPES OF SCHEMES BEING FOLLOWED BY THE ASSESSEE, THE METH OD OF ACCOUNTING AND ACCOUNTING PRINCIPLES FOLLOWED FOR T REATING THE RECEIPT AS REVENUE OR CAPITAL COULD NOT BE EXAMINED IN DETAIL. THE ASSESSING OFFICER WANTED TO EXAMINE THIS ASPECT IN DETAIL IN ASSESSMENT HEAR 1997-98. THEREFORE, IT IS STRANGE THAT THE ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 22 METHOD OF ACCOUNTING AND THE TRADING RESULT HAVE BE EN REJECTED WITHOUT EXAMINING THE SAME IN DETAIL.. 4.14. HOWEVER, AFTER ANALYZING THE ISSUES IN HIS O WN WAY AS RECORDED IN HIS IMPUGNED ORDER, THE LD. CIT (A) HAD ARRIVED AT THE ADDITION AT RS.1,32,58,744/- AS AGAINST RS.1,07,78, 293/- DETERMINED BY THE LD.AO [PARA 43 OF THE LD.CIT (A)S ORDER]. 4.15. WE HAVE, HOWEVER, NOTICED THAT THERE WERE SO ME GLARING CONTRADICTIONS AND LACK OF CLARITY OF THE LD.CIT (A )S OBSERVATIONS, A FEW OF WHICH, ARE HIGHLIGHTED AS BELOW: (I) IN THE ITEM IN RESPECT OF RS.54,46,500/- UNDER SCHE ME ACIT, OUT OF FIVE ITEMS WHICH CONSIDERED TO BE THE ADDITI ON AGGREGATING TO RS.1.32 CORES, THE CIT (A) HAD DIREC TED THE AO TO EXCLUDE THE ABOVE AMOUNT FROM THE INCOME OF THE ASSESSEE AND WORK OUT THE CORRECT INCOME BY REDUCIN G FROM THE ABOVE RECEIPTS THE EXPENSES INCURRED BY THE ASS ESSEE AND SHOWN BY WAY OF WORK-IN-PROGRESS. THE AO WILL ALSO CONSIDER THE AMOUNT OF INCOME ALREADY DISCLOSED BY THE ASSESSEE IN THE EARLIER YEAR WHICH WILL BE EXCLUDED FROM THE ADDITION. FOR THIS PURPOSE, THE ASSESSEE IS SET AS IDE ON LIMITED ISSUE; (II) RS.7,56,894/- BEING MAINTENANCE CONTRIBUTION WAS IN CLUDED IN THE TOTAL ADDITION OF RS.1.32 CRORES. HOWEVER, FOR THE REASONS RECORDED IN PARA 45 OF HIS ORDER, THE CIT (A), DIRE CTED THAT THIS ADDITION WAS TO BE DELETED. THIS OBSERVATION OF THE LD.CIT (A), IN OUR VIEW, IS CONTRARY TO HIS STAND TAKEN AT PARA 43 (OF HIS ORDER) AND RATHER CO NFUSING. (III) LIKEWISE UNDER THE HEAD DEVELOPMENT EXPENDIT URE OF RS.44,98,856/- THE REASONS RECORDED IN PARAS 50 & 51, OF THE LD.CIT (A) ARE AS UNDER: 51.(ON PAGE 58)..THERE IS A CREDIT OF RS.34,11,05 0/- ON ACCOUNT OF LAND SCHEME MAINTENANCE AND DEVELOPMENT INCOME. ON THE OTHER HAND, THE ASSESSEE HAS DEBITED RS.20,43,973/- AS ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 23 EXPENDITURE UNDER THE SAME HEAD, THE DETAILS OF WHI CH HAVE BEEN GIVEN IN SCHEDULE-15 OF THE PROFIT & LOSS ACCOUNT. DEVELOPMENT EXPENSES HAVE BEEN SHOWN AT RS.16,20,217/-. IN OTH ER WORDS, THE ASSESSEE HAS INCURRED EXPENDITURE ON DEVELOPMENT EX PENSES SCHEMES TO THE EXTENT OF RS.16,20,217/-. AGAINST W HICH IT HAS CREDITED IN ITS ACCOUNT RS.34,11,050/-. HOWEVER, T HE CORRECT AMOUNT CREDITED OUT OF DEVELOPMENT EXPENSES TAKEN I NTO BALANCE SHEET HAS TO BE ASCERTAINED. THE BALANCE, IF ANY, REMAINING BETWEEN TOTAL AMOUNT OF RS.44,98,586/- AND THE AMOU NT CREDITED IN THE PROFIT & LOSS ACCOUNT HAS TO BE VIEWED IN THE L IGHT OF DEVELOPMENT WORK ACTUALLY CARRIED OUT BY THE ASSESS EE. THE ASSESSING OFFICER WILL, THEREFORE, VERIFY THE ACCOU NTS AND RESTRICT THE ADDITION TO THE DIFFERENCE ONLY. SUBJECT TO ABOVE DIRECTIONS, THIS GROUND IS PARTLY ALLOWED TO THE ASSESSEE. 4.16. TO TOWERING THEM ALL, THE LD.AO HAD CONCEDED THAT DUE TO TIME CONSTRAINTS, VARIOUS TYPES OF SCHEMES FLOATED BY TH E ASSESSEE, ITS METHOD OF ACCOUNTING, THE ACCOUNTING PRINCIPLES FOLLOWED F OR TREATING THE RECEIPTS AS REVENUE OR AS CAPITAL HAVE NOT BEEN EXAMINED THR EADBARE WITH REFERENCE TO EACH AND EVERY SCHEME INTRODUCED BY TH E ASSESSEE. 4.17. TAKING ALL THESE ASPECTS INTO CONSIDERATION AND ALSO THE ENTIRE GAMUT OF THE ISSUES REQUIRE THOROUGH VERIFICATION A ND INVESTIGATION AT THE ASSESSING AUTHORITYS LEVEL AND IN THE INTERESTS OF PRINCIPLES OF NATURAL JUSTICE AND FAIRNESS, THE IMPUGNED ORDER OF THE LD. CIT (A ) IS SET-ASIDE AND THE ENTIRE ISSUES ARE RESTORED TO THE FILE OF T HE LD.AO WITH SPECIFIC DIRECTIONS TO GO INTO THE BOTTOM OF SUCH SCHEMES WH ICH HAVE BEEN FLOATED AND THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSE E, ANALYZE THE CLAIMS OF THE ASSESSEE UNDER VARIOUS HEADS IN ITEM- WISE AND THEN ARRIVE AT AN APPROPRIATE CONCLUSION IN ACCORDANCE WITH PRO VISIONS OF THE ACT PREVAILED AT THAT RELEVANT TIME. WHILE DOING SO, T HE ASSESSEE SHALL BE AFFORDED REASONABLE OPPORTUNITY TO PUT-FORTH ITS PO INTS OF VIEW ON THE ISSUES. IN THE MEANWHILE, THE ASSESSEE, THROUGH IT S LD. COUNSEL, IS ADVISED TO PLACE ALL RELEVANT PARTICULARS AT ITS PO SSESSION BEFORE THE LD.AO ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 24 IN ONE GO WHICH WILL FACILITATE THE LD.AO TO CARRY OUT THE ABOVE DIRECTIONS OF THIS BENCH EXPEDITIOUSLY. IT IS ORDERED ACCORDINGL Y. II. & III ITA NOS.144/2001 & 806/2004 AY 1995-96 BY THE REVENUE: 5. AT THE OUTSET, WE WOULD LIKE TO CLARIFY THAT THE IMPUGNED ORDER OF THE LD. CIT (A) HAS SINCE BEEN SET-ASIDE IN TOTO AND DI RECTED THE LD.AO TO LOOK INTO THE ISSUES THOROUGHLY AND FRAME THE ASSESSMENT ORDER AFRESH IN THE ASSESSEES APPEAL (SUPRA), THESE APPEALS OF THE REV ENUE HAVE BECOME REDUNDANT. IV. ITA NO.1633/A/2002 A.Y. 1997-98 BY THE ASSESSEE : 6. THE SOLITARY GRIEVANCE OF THE ASSESSEE BEING THA T THE LD.CIT (A) ERRED IN UPHOLDING THE PART OF ADDITION OF RS.11,84 ,598/- BEING 15% OF RS.78,,97,322/- TRANSFERRED BY THE ASSESSEE TO THE DEVELOPMENT FUND. 6.1. IT WAS SUBMITTED BY THE ASSESSEE DURING THE CO URSE OF HEARING THAT THE LD. CIT (A), HAVING ACCEPTED THE MAIN PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CALCUTTA COMPA NY LTD V. CIT [37 ITR 1 (SC), CAN SAFELY APPLY TO THE FACTS OF THE AS SESSEES CASE AND HAVING FURTHER ACCEPTED THAT THE AMOUNT TRANSFERRED BY THE ASSESSEE TO THE DEVELOPMENT FUND DURING THE YEAR WAS SO RECEIVE D FROM THE MEMBERS FOR PROVIDING VARIOUS FACILITY ON A FUTURE DATE AND NOT THE SALE CONSIDERATION AS SUCH AND HAVING FOUND DURING THE A CCOUNTING YEAR, NO EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR PROVID ING SUCH FACILITIES, IT WAS ARGUED THAT, HE OUGHT TO HAVE APPRECIATED THAT NO PROFIT ACCRUED OR AROSE TO THE ASSESSEE DURING THE ACCOUNTING YEAR FR OM PROVIDING SUCH DEVELOPMENT FACILITIES. IT WAS, FURTHER, SUBMITTED THAT THERE WAS NO JUSTIFICATION IN BRINGING TO TAX THE ESTIMATED PROF IT OF 15% THAT THE ASSESSEE MAY EARN (OR MAY NOT EARN) ON SOME FUTURE DATE FOR THE SIMPLE ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 25 REASON THAT THE REVENUE CANNOT BE KEPT WAITING FOR THE ASSESSEE TO EARN THE INCOME. 6.2. HOWEVER, THE LD.CIT (A), AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE AS RECORDED IN HIS ORDER AND ALSO EXTENSIV ELY QUOTING THE RULING OF THE HONBLE APEX COURT IN THE CASE OF CALCUTTA C OMPANY LTD V. CIT CITED SUPRA, WAS OF THE VIEW THAT: (ON PAGE 31) THOUGH THE FACTS OF THE APPELLANTS C ASE ARE NOT EXACTLY IDENTICAL TO THE FACTS CITED SUPRA, THE MAI N PRINCIPLE WHICH THE HONBLE COURT HAS LAID DOWN CAN BE SAFELY APPLI ED TO THE FACTS OF THE INSTANT CASE. WHEN THERE IS NO TIME FRAME T O RAISE THE PARTICULAR AMENITIES AS AGREED UPON THE MEMBERS, TH E MOST SUITABLE THING WILL BE TO ESTIMATE THE EXPENDITURE LIKELY TO BE INVOLVED ON THE INTENDED FACILITIES AND TAX THE BAL ANCE OF RECEIPTS AS PROFIT ARISING OUT OF SUCH RECEIPTS. IN MY VIEW , THE TOTAL RECEIPTS TRANSFERRED UNDER THE HEAD DEVELOPMENT FU ND CANNOT CONSTITUTE THE PROFIT, RATHER SOME ELEMENT OF PROFI T IS IN BUILT IN THE RECEIPTS AND AFTER THE RECEIPTS ARE TAKEN FROM THE MEMBERS, THE REVENUE CANNOT KEPT IN WAITING. IN THE CIRCUMSTANC ES, I ESTIMATE 85% OF THE RECEIPTS TO BE SPENT IN MEETING INTENDED FACILITIES TO BE PROVIDED FOR IN FUTURE AND 15% OF THE RECEIPTS A RE TO BE TAKEN AS NET PROFIT TO BE TAXED DURING THE YEAR UNDER CON SIDERATION. THE RECEIPTS FOR THE YEAR UNDER THE HEAD DEVELOPMENT F UND COMES TO RS.78,97,322/-, 15% OF WHICH IS TAKEN THE NET PROFI T WHICH WILL BE TAXABLE DURING THE YEAR AND 85% OF THE RECEIPTS SHO WN UNDER THE HEAD DEVELOPMENT FUND ARE TO BE TREATED AS THE EX PENDITURE TO BE INCURRED BY THE APPELLANT IN FUTURE. THE AO WHI LE PASSING THE ORDER HAS MADE AN ADDITION OF RS.23,28,084/- ON ACC OUNT OF DEVELOPMENT FUND. HOWEVER, IN THE BODY OF THE ASSE SSMENT ORDER VIDE PARA 4, THE AO HAS STATED THE ASSESSEE HAS CREATED A DEVELOPMENT FUND OF RS.78,97,322/- DURING THE YEAR THEREFORE, THE CLAIM DEVELOPMENT FUND OF RS.23,28,0 84/- IS REJECTED. FROM THE ABOVE, IT IS CLEAR THAT AO ACTU ALLY INTENDED TO MAKE AN ADDITION OF DEVELOPMENT FUND OF RS.78,97,32 2/- AND NOT RS.23,28,084/- AS IS DONE IN THE COMPUTATION AND CO NCLUDING SENTENCE OF PARA 4. THE DEVELOPMENT FUND AMOUNTING TO RS.78,97,322/- ACTUALLY FORMED PART OF RS.3,79,27,8 74/-, THE BIFURCATION OF WHICH IS GIVEN AS UNDER: ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 26 MAINTENANCE CONTRIBUTION RS. 35,37,585 ELECTRICITY CHARGES RS 27,75,000 DEVELOPMENT EXPENSES RS.2, 36,91,967 DEVELOPMENT FUND RS. 78,97,322 IF THE FIGURE OF RS.23,28,084/- IS TAKEN OVER AND A BOVE RS.78,97,322/- THE SAME IS ALSO SUBJECTED BY APPLYI NG THE NET PROFIT RATE OF 15%. HOWEVER, BEFORE THE AO RESORT TO APPLICATION OF 15% OF RS.23,28,084/-, HE IS DIRECTED TO VERIFY WHETHER HE INTENDED TO MAKE AN ADDITION OF RS.78,97,322/- ON A CCOUNT OF DEVELOPMENT FUND OR OTHERWISE. WITH THESE REMARKS, I ALLOW RELIEF TO THE APPELLANT OF RS.67,12,724/- (789732215% OF 7897322=1184598). 6.3. ON A CRITICAL PERUSAL OF THE OBSERVATIONS OF THE LD.CIT (A), IT IS OBSERVED THAT THE FINDING OF THE LD.CIT (A), TO PUT IT MILDLY, WAS INDECISIVE IN THE SENSE THAT ON THE ONE HAND, HE OBSERVED THA T THE CLAIM OF DEVELOPMENT FUND OF RS.23,28,084 HAS BEEN REJECTED BY THE LD.AO, BUT, AT THE SAME BREATH, HE SAID THAT THE LD.AO ACTUALLY IN TEND TO MAKE AN ADDITION OF DEVELOPMENT FUND OF RS.78,97,322/- AND NOT RS.23,28,084/-. THE OBSERVATION OF THE LD.CIT (A) IS RATHER CONFUSI NG AS TO SAY WHAT HE MEANT IT. TO CLEAR THE CONFUSION, WE ARE OF THE CO NSIDERED VIEW THAT THE ENTIRE ISSUE SHOULD BE LOOKED INTO AFRESH WITH REFE RENCE TO THE AGREEMENTS ENTERED INTO. THIS HAS TO BE EXAMINED A ND VERIFIED BY THE ASSESSING AUTHORITY ON THE BASIS OF RELEVANT PARTIC ULARS WHICH WILL BE FURNISHED BY THE ASSESSEE. TO ENABLE THE LD.AO TO C ARRY OUT THE ABOVE DIRECTION, THE ISSUE IS REMITTED BACK TO THE FILE O F THE LD.AO FOR NEEDFUL. V. ITA NO.2137/A/2002 A.Y. 1997-98 BY THE REVENUE: 6.4. THE FIRST GRIEVANCE OF THE REVENUE BEING THAT THE LD.CIT (A) ERRED IN DELETING THE ADDITION OF RS.35,37,585/- OU T OF RECEIPTS ON ACCOUNT OF MAINTENANCE CONTRIBUTION AND ADDITION OF RS.25 ,75,000/- OUT OF RECEIPTS ON ACCOUNT OF ELECTRICITY CHARGES. ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 27 6.5. AT A GLIMPSE OF THE OBSERVATIONS OF THE LD.CI T (A), IT HAS BEEN NOTICED THAT WITH THE CONCURRENCE OF THE REASONS RE CORDED BY THE LD.CIT (A) FOR THE AY 1995-96 IN THE ASSESSEES OWN CASE, THE LD CIT (A) HAD DIRECTED THE LD.AO TO DELETE THE ADDITIONS OF RS.35 .37 LAKHS AND RS.27.75 LAKHS BEING MAINTENANCE CONTRIBUTION AND ELECTRIC ITY CHARGES. 6.6. AT THIS JUNCTURE, WE WOULD LIKE TO POINT OUT THAT THE FINDINGS OF THE LD.CIT(A) FOR THE AY 1995-96 IN THE ASSESSEES OWN CASE HAVE BEEN SET-ASIDE BY THIS BENCH IN THE ASSESSEES CASE (SU PRA) WITH DIRECTIONS TO THE LD.AO TO REFRAME THE ASSESSMENT AFRESH. THEREF ORE, THE DELETION OF THE ADDITIONS ALLOWED BY THE LD.CIT(A) IN THE CASE UNDER CONSIDERATION IS REVERSED WITH A DIRECTION TO THE LD.AO TO FOLLOW TH E STAND WHICH HE WOULD ADOPT IN THE ASSESSEES CASE FOR THE AY 1995-96 FOR THIS ASSESSMENT YEAR ALSO. IT IS ORDERED ACCORDINGLY. 6.7. THE SECOND ISSUE IS WITH REGARD TO GIVING REL IEF OF RS.67.12 LAKHS TO THE ASSESSEE BY DIRECTING THAT ONLY 15% OF THE TOTAL RECEIPTS OF RS.78.97 LAKHS RECEIVED BY THE ASSESSEE ON ACCOUNT OF DEVELOPMENT FUNDS ETC., 6.8. IRONICALLY, THIS ISSUE HAS SINCE BEEN DECIDED IN THE CASE OF THE ASSESSEE WHILE DEALING WITH ITS APPEAL FOR THE SAME A.Y. (SUPRA) AND, THUS, THIS GROUND OF THE REVENUE HAS BECOME REDUNDA NT. 6.9. IN RESPECT OF THE LD.CIT (A)S ACTION IN DELETING T HE ADDITION OF RS.2.36 CRORES OUT OF THE TOTAL RECEIPTS RECEIVE D UNDER THE HEAD DEVELOPMENT EXPENSES, WE HAVE NOTICED THAT THE LD .CIT (A) HAD, WHILE QUOTING AND EXTRACTING THE OBSERVATION OF THE LD.CIT (A) FOR THE ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 28 ASSESSMENT YEAR 1995-96 IN THE ASSESSEES OWN CASE, HOWEVER, OBSERVED: (ON PAGE 27).I HAVE CONSIDERED THE ABOVE ARGUMENT S OF THE AR. I FIND THAT THE COLLECTION ON ACCOUNT OF DEVEL OPMENT EXPENSES IS MADE BY THE APPELLANT TO MEET WITH THE EXPENDITURE THAT MAY BE INCURRED IN FUTURE. THE APPELLANT HAS ALREADY TRANSFERRED FROM THIS MAINTENANCE EXPENSES ACCOUNT FROM THE BALANCE SHEET TO THE PROFIT AND LOSS ACCOUNT AN AMO UNT WHICH IS TWICE THE EXPENDITURE INCURRED IN THE RELEVANT YEAR . THUS, THE APPELLANT HAS SHOWN MORE THAN 50% OF THE PROFIT ON THIS ACCOUNT FOR THE CREDITS TAKEN TO THE PROFIT AND LOSS ACCOUN T. I ALSO APPRECIATE THAT IT IS THE LIABILITY OF THE APPELLAN T TO CARRYING OUT THE DEVELOPMENT ACTIVITY FOR WHICH THE EXPENDITURE IS T O BE INCURRED AT FUTURE DATE. HOWEVER, THE COLLECTION TOWARDS THE D EVELOPMENT EXPENSES ACCOUNT HAS BEEN MADE FROM THE PERSONS WHO BOOKED THE PREMISES IN ADVANCE. HENCE, IN MY OPINION, THE COLLECTIONS SO MADE IS THE LIABILITY OF THE APPELLANT. IN ANY CASE, THE COLLECTION SO MADE IS THE RECEIPT OF THE APPELLANT AND IT CANNOT BE CONSIDERED AS INCOME FOR THE PURPOSE OF THE I.T. AC T. THE INCOME IS TO BE ARRIVED AT ONLY AFTER THE EXPENSES ARE DED UCTED FROM THE SALES/RECEIPTS OF THE APPELLANT. IN THE PRESENT CA SE THE EXPENDITURE IS NOT INCURRED OR NOT CLAIMED AT THE T IME OF COLLECTION. HOWEVER, THE APPELLANT HAS ADOPTED A M ETHOD OF TRANSFER THE AMOUNT FROM THE EXPENSES TO THE PROFIT AND LOSS ACCOUNT AS AND WHEN EXPENDITURE IS INCURRED AND SUC H AMOUNT CREDITED TO THE PROFIT & LOSS ACCOUNT IS TWICE THE AMOUNT OF EXPENDITURE. FROM THE DETAILS SUBMITTED BY THE APP ELLANT AS EXPLAINED IN PARA 3.2. ABOVE, I FIND THAT IN FACT T HE APPELLANT HAS CONSISTENTLY ADOPTED THE SAME METHOD OF CREDITING T WICE THE AMOUNT OF ACTUAL DEVELOPMENT EXPENDITURE INCURRED F ROM YEAR TO YEAR TO THE PROFIT AND LOSS ACCOUNT; THE APPELLANT HAS INCURRED SUCH EXPENDITURE FOR VARIOUS WORKS LIKE DEVELOPMEN T OF LAND, LEVELING THE SAME, FENCING, ROAD WORK, TUBE-WELL, E LECTRIC SUPPLY CABLE ETC., IN THE CIRCUMSTANCES, IN MY OPINION, T HE ABOVE DIRECTIONS OF THE CIT (A) IN APPELLATE ORDER FOR AY 1995-96 DO NOT TAKE INTO CONSIDERATION THE INCOME ASPECT BUT IT CO NSIDERS ONLY RECEIPTS OF THE APPELLANT WHICH IS NOT CORRECT. TO THIS EXTENT I DIFFER FROM THE SAID APPELLATE ORDER. THE METHOD O F ACCOUNTING FOR THIS ITEM OF RECEIPT AND INCOME THERE-FROM ADOPTED BY THE APPELLANT IS FOUND TO BE REASONABLE AND, THEREFORE, IT IS THE CORRECT INCOME WHICH IS OFFERED BY THE APPELLANT IN THE RELEVANT ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 29 YEAR. HENCE, I DIRECT THE ASSESSING OFFICER TAX ON LY THAT AMOUNT WHICH IS CREDITED TO THE PROFIT AND LOSS ACCOUNT IN THE YEAR UNDER CONSIDERATION AGAINST THE DEVELOPMENT EXPENDITURE I N STEAD OF THE FUNDS FOR WHICH COLLECTION IS MADE FROM PERSONS BOOKING THE PREMISES. THE APPELLANT THEREFORE GETS A RELIEF OF THE AMOUNT OF RS.2,36,91,967/- REFERRED TO ABOVE. 6.10. ON CRITICAL OBSERVATION OF THE FINDINGS OF T HE CIT (A) FOR THE AY UNDER CONSIDERATION, WE HAVE NOTICED THAT HE HAD DI FFERED WITH THE FINDINGS OF THE CIT (A) FOR THE AY 1995-96 IN THE A SSESSEES OWN CASE. AT THIS JUNCTURE, WE RECALL THE FINDINGS OF THIS BENCH FOR THE AY 1995-96 IN THE ASSESSEES OWN CASE WHEREIN WE HAVE SET-ASIDE T HE IMPUGNED ORDER OF THE CIT (A) IN ITS ENTIRETY AND RESTORED TO THE FILE OF THE AO WITH A DIRECTION TO LOOK INTO THE GAMUT OF THE ENTIRE ISSU E AFRESH AND TO TAKE APPROPRIATE ACTION. IF THIS BENCH WERE TO RECORD A DIFFERENT FINDING WITH REGARD TO AN INTER-LINKED ISSUE TO THAT OF THE PRES ENT ONE WHICH, WE APPREHEND, MAY INFLUENCE THE ASSESSING AUTHORITY TO FALL IN LINE WITH THE FINDING OF THIS BENCH ON THIS PARTICULAR CASE. IT I S AN UNDISPUTED FACT THAT EACH ASSESSMENT YEAR IS AN INDEPENDENT, DISTINCTIVE FROM THAT OF EITHER PRECEDING OR SUCCEEDING ASSESSMENT OF AN ASSESSEE. HOWEVER, THE ISSUES WHICH HAVE CROPPED IN THE PRESENT ASSESSEES CASE ARE RATHER UNIQUE, PECULIAR AND QUITE DIFFERENT NORMAL BUSINES S INVOLVING DIFFERENT HOUSING SCHEMES UNDER ONE ROOF WHICH HAVE RAMIFICAT ION OF THE INCOMES OF SUCCEEDING ASSESSMENT YEARS. TO KEEP THE INDEPEN DENCE OF THE ASSESSING AUTHORITY THAT HAS BEEN ASSIGNED THE JOB OF ARRIVING AT A CONCLUSION AFTER GOING THROUGH THE ENTIRE GAMUT OF THE SCHEMES FLOATED BY THE ASSESSEE IN OUR FINDINGS FOR THE A.Y. 1995-96 I N THE ASSESSEES OWN CASE (SUPRA), WE DEEM IT FIT TO REMIT BACK THIS ALS O TO THE FILE OF THE LD.AO IN CONFORMITY WITH THE CONCLUSION HE ARRIVES AT WHI LE REFRAMING THE ASSESSMENT ORDER FOR THE A.Y. 1995-96. ACCORDINGLY , WE REMIT BACK THE ISSUE TO THE FILE OF THE LD.AO FOR NEEDFUL. ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 30 6.11. THE NEXT GROUND IS DELETION OF DISALLOWANCE OF INTEREST OF RS.6,35,935/-. AFTER CONSIDERING THE CONTENTIONS O F THE ASSESSEE AS WELL AS THE REASONING OF THE LD.AO, THE LD.CIT (A) HAD O BSERVED THUS: 5.1. IN THIS CONNECTION, THE AR SUBMITTED THAT TH E OBSERVATIONS MADE BY THE ASSESSING OFFICER ARE BASED ON THE PRES UMPTIONS. IT IS SUBMITTED THAT THE PAYMENT TO THE STERLING HOUSI NG CONSTRUCTION P. LTD ARE MADE AS PER THE AGREEMENT T OWARDS COST OF CONSTRUCTION. THE AMOUNT PAID TO STERLING CLUB P LTD IS ALSO AS PER THE AGREEMENT AND IS NOT IN THE NATURE OF LOAN. AMOUNT OF STERLING RESORTS P LTD IT IS SUBMITTED HAS RUNNING ACCOUNT WITH ASSESSEE FOR BUSINESS TRANSACTIONS AND NOT A LOAN. NO NEXUS HAS BEEN ESTABLISHED BY AO OF FUNDS ON WHICH INTERE ST IS PAID AND BALANCE REFERRED TO ABOVE. IT IS FURTHER SUBMI TTED THAT THE OTHER DEPOSITS ARE LIKE TELEPHONE DEPOSITS, CAR BOO KING ADVANCES, GAS DEPOSITS WHICH ARE MADE IN THE COURSE OF BUSINE SS OF THE ASSESSEE AND HENCE IT IS NOT IN THE NATURE OF LOAN. IT IS FURTHER ARGUED THAT A SIMILAR QUESTION HAD ARISEN IN APPELL ANTS OWN CASE FOR AY 1995-96 WHERE THE ASSESSING OFFICER HAD MADE DISALLOWANCE OF RS.6,39,353/-. THE DISALLOWANCE SO MADE WAS DELETED BY THE CIT (A) VIDE PARA 55 OF THE APPELLAT E ORDER, AFTER CONSIDERING THE SAME SUBMISSION AS ARE MADE BEFORE ME. 5.2. I HAVE CONSIDERED THE ASSESSMENT ORDER AND TH E ABOVE SUBMISSIONS. AS THE ISSUE INVOLVED IN THIS YEAR IS SIMILAR TO THAT FOR AY 1995-96 AND FACTS SHOW THAT THE AMOUNTS ARE NOT IN THE NATURE OF LOANS BUT ARE GIVEN AS A PART OF BUSINESS ACTIVITIES, I AGREE WITH THE FINDINGS GIVEN BY THE CIT (A,. IN T HE APPELLATE ORDER FOR AY 1995-96 AND DIRECT THE ASSESSING OFFI CER TO DELETE THIS ADDITION. 6.12. WE HAVE CAREFULLY PERUSED THE FINDINGS OF TH E LD.CIT (A) WHICH CONTAINED THE ASSESSEES SUBMISSION THE JUSTIFICATI ON IN ITS CLAIM. IN THIS REGARD, WE WOULD LIKE TO POINT OUT THAT THE IMPUGNE D ORDER OF THE LD.CIT (A) FOR THE ASSESSMENT YEAR IN THE ASSESSEES OWN C ASE FOR THE A.Y. 1995-96 HAS SINCE BEEN SET-ASIDE BY THIS BENCH FOR THE DETAILED FINDINGS RECORDED THEREIN. THE LD.CIT (A) FOR THE PRESENT I SSUE HAD FOLLOWED THE ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 31 FINDINGS OF THE LD.CIT (A) FOR THE A.Y. 1995-96 [WH ICH HAS BEEN SET-ASIDE] IN DELETING THE ADDITION. THE ASSESSEE HAD VOUCHED THAT NO LOANS HAVE BEEN LENT TO ITS SISTER CONCERNS, BUT, PAID AMOUNTS TOWARDS COST OF CONSTRUCTION, AND SINCE IT HAD RUNNING ACCOUNT WITH STERLING RESORTS P LTD, IT WERE ONLY FOR BUSINESS TRANSACTIONS AS PER AGREE MENTS ENTERED INTO BETWEEN THEM AND SO ON AND SO FORTH. THE AUTHENTICI TY OF THE ASSESSEE HAD NOT BEEN CROSS VERIFIED BY THE LD.CIT (A) ON TH E FACE VALUE OF THE ASSESSEES ASSERTION AND RATHER IN CONFORMITY WITH THE FINDINGS OF THE LD.CIT (A) FOR THE A.Y. 1995-96 WHICH HAS BEEN SET- ASIDE BY THIS BENCH. 6.13. CONSIDERING ABOVE FACTS AND CIRCUMSTANCES OF THE ISSUE REFERRED ABOVE, THE ISSUE IS REMITTED BACK TO THE F ILE OF THE AO TO VERIFY THE CLAIM OF THE ASSESSEE WITH REFERENCE TO THE AGREEME NTS PURPORTED TO HAVE BEEN ENTERED TO BY THE ASSESSEE WITH ITS SISTER CO NCERNS TOWARDS COST OF CONSTRUCTION, CAR BOOKING ADVANCES, GAS DEPOSITS AN D IF WERE FOUND TO BE IN ORDER, THE ASSESSEE SHALL BE ENTITLED FOR ITS CL AIM. IT IS ORDERED ACCORDINGLY. VI. ITA NO.2163/A/2005 A.Y. 2001-02 BY THE REVENUE: 7. THE FIRST GROUND OF THE REVENUE BEING DELETION OF THE ADDITION OF RS.35,65,084/- MADE AFTER DEDUCTING THE INCOME O F RS.73,75,015/- OUT OF RECEIPTS ON ACCOUNT OF MAINTENANCE, ELECTRICITY CONTRIBUTIONS ETC., AGGREGATING TO RS.1.09 CRORES. 7.1. THE CIT (A) HAD OBSERVED THAT THE AMOUNTS OF MAINTENANCE CONTRIBUTIONS AND ELECTRICITY CHARGES WERE HELD AS RECEIPTS AS PER THE AGREEMENT AND THESE WERE TREATED AS NON REVENUE REC EIPTS AND THE ADDITIONS WERE, ACCORDINGLY, DELETED BY THE CIT (A) FOR THE ASSESSMENT YEARS 1995-96 AND 1996-97 IN THE ASSESSEES OWN CAS E. HE HAD, FURTHER, ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 32 OBSERVED THAT SINCE THE FACTS WERE SAME FOR THE AY 2001-02 AS WELL AS AY 1997-98 AND THE ADDITION MADE BY THE AO ON THE B ASIS OF THE ORDER FOR AY 1996-97 WAS DELETED BY THE CIT (A) AND FOLLOWING THE ORDER OF HIS PREDECESSOR, HE HAD ALLOWED THE RELIEF TO THE ASSES SEE ON THIS COUNT. 7.2. AT THIS POINT OF TIME, WE WOULD LIKE TO RECOL LECT THAT THE ENTIRE ISSUES INCLUDING THAT OF THE PRESENT ISSUE FOR THE AY 1995-96 HAVE BEEN REMITTED BACK TO THE FILE OF THE AO, THEREBY SET-AS IDING THE CIT (A)S ORDER, FOR FRAMING OF FRESH ASSESSMENT, THIS ISSUE UNDER CONSIDERATION IS ALSO REMITTED BACK TO THE FILE OF THE AO FOR SIMILA R TREATMENT. 7.3. THE OTHER COMMON GROUNDS FOR THE AY 2001-02 AND 2002-03 BEING THAT THE CIT (A) HAD ERRED IN DELETING THE DI SALLOWANCES OF RS.17,48,904/- AND RS.17,01,787/- FOR THE AYS 2001- 02 AND 2002-03 RESPECTIVELY OUT OF INTEREST EXPENSES CLAIMED BY TH E ASSESSEE. 7.4. A SIMILAR SET OF THE ISSUE TO THAT OF PRESENT ONE HAD CROPPED UP FOR THE ASSESSMENT YEAR 1997-98 IN THE ASSESSEE S OWN CASE, WHEREIN CONSIDERING FACTS OF THE ISSUE THE ISSUE WAS REM ITTED BACK TO THE FILE OF THE AO TO VERIFY THE CLAIM OF THE ASSESSEE WITH REF ERENCE TO THE AGREEMENTS PURPORTED TO HAVE BEEN ENTERED BY THE AS SESSEE WITH ITS SISTER CONCERN TOWARDS COST OF CONSTRUCTION, CAR BO OKING ADVANCES, GAS DEPOSITS AND IF FOUND TO BE IN ORDER, THE ASSESSEE SHALL BE ENTITLED FOR ITS CLAIM. AS THE PRESENT ISSUE IS IDENTICAL TO THAT O F THE ISSUE RAISED FOR THE 1997-98; THE FINDINGS RECORDED THEREIN IS SQUARELY APPLICABLE TO THE AYS UNDER CONSIDERATION. IT IS ORDERED ACCORDINGLY. 8. IN THE RESULT : (1) THE ASSESSEES APPEAL FOR THE A.Y. 1995-96 IS T REATED AS ALLOWED FOR STATISTICAL PURPOSES; (2) THE ASSESSEES APPEAL FOR THE A.Y. 1997-98 IS T REATED AS ALLOWED FOR STATISTICAL PURPOSES; ITA NOS.2696,144,806,1633,2137,2163&2164-AHD-2000,0 1,04,02,02,05&05 33 (3) THE REVENUES APPEALS FOR THE A.Y. 1995-96 (TWO APPEALS) ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES (4) THE REVENUES APPEALS FOR THE A.Y. 1997-98, 200 1-02 AND 2002-03 ARE TREATED AS ALLOWED FOR STATISTICAL PURP OSES. 5 %4 . 2#3 6$'7 28 / 02 /201 2 # 8 . 0 SD/- SD/- (G.C.GUPTA) (A.MOHAN ALANKAMONY) VICE PRESIDENT ACCOUNTANT MEMBER DATED :28/02/2012 %4 %4 %4 %4 . .. . *-9 *-9 *-9 *-9 :%93-7 :%93-7 :%93-7 :%93-7- -- - 1. () 2. *+() 3. '' - ? 4. ?- - 5. 9B *-$ , , C 6. E F5 %4 %, / ' , C TALUKDAR/ SR. P.S.
