Shri Vikrant Yuvraj Bobde, Nagpur V. Income Tax Officer, Ward 6(1),

ITA 322/NAG/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3092 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 16-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Keywords: Unexplained investment; Valuation report
• Section: 143(3); 69

Judgement Text

1 ITA NOS. 322 & 259/NAG/2012 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 322/NAG/2012 ASSESSMENT YEAR : 2007 - 08. SHRI VIKRANT YOURAJ BOBDE, THE INCOME - TAX OFFICER, NAGPUR. VS. WARD - 6(1), NAGPUR. PAN AFTPB3696P APPELLANT RESPONDENT I.T.A. NO. 259/NAG/2012 ASSESSMENT YEAR : 2007 - 0 8. THE INCOME - TAX OFFICER, SHRI VIKRANT YOURAJ BOBDE, WARD - 6(1), NAGPUR. VS. NAGPUR. APPELLANT. RESPONDENT. ASSESSEE BY : SHRI ABHAY AGRAWAL. DEPARTMENT BY : SHRI NARENDRA KANE. DATE OF HEARING : 02 - 02 - 2016 DATE OF PRONOUNCEMENT : 31 ST MARCH, 2016. O R D E R PER MUKUL K. SHRAWAT, J.M. THESE ARE CROSS APPEALS EMANATING FROM THE ORDER OF LEARNED CIT(APPEALS) - II, NAGPUR DATED 14 - 03 - 2012. THE MAIN GROUND IS INTER - CONNECTED, HENCE THE APPEAL OF THE REVENUE AS WELL AS THE APPEAL OF THE ASSESSEE, BOTH ARE CONSOLIDATED AND HEREBY DECIDED BY THIS COM MON ORDER. 2. THE REGISTRY HAS INFORMED THAT THE APPEAL OF THE ASSESSEE WAS BELATEDLY FILED BY 60 DAYS. THE COND ONATION PETITION HAS BEEN FILED AND AFTER DUE 2 ITA NOS. 322 & 259/NAG/2012 CONSIDERATION OF THE REASONS EXPLAINED TO US, WE HEREBY DEEM IT PROPER TO CONDONE THE DELAY FOLLOWING THE DECISION OF COLLECTOR, LAND ACQUISITION VS. MST. KATIJI & ORS. 167 ITR 471 (SC). THE APPEAL OF THE ASSESSEE IS HEREBY ADMITTED AND TO BE DECIDED ON MERITS HEREUNDER. 3. A. ITA NO. 322/NAG/2012 (ASSESSEES APPEAL). THE ASSESSEE HAS RAISED T HE FOLLOWING GROUNDS : 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND MATERIAL ON RECORD INCLUDING VALUATION REPORT THE LEARNED C.I.T.(A) ERRED IN RETAINING THE ADDITION OF RS.18,93,897/ - OUT OF TOTAL ADDITION OF RS.1,31,00,000/ - AS UNEXPLAINED WORK IN PROGRESS MADE BY A.O. HE SHOULD HAVE DELETED THE ENTIRE ADDITION. 2. LEARNED C.I.T.(A) ERRED IN REJECTING THE VALUATION REPORT OF WORK - IN - PROGRESS MADE BY THE ARCHITECT ON MOST SCIENTIFIC BASIS. THERE WAS NO VALID REASON TO REJECT THE SAME. THE REPORT CONCLU SIVELY ESTABLISHED THAT THE CLOSING WORK - IN - PROGRESS DECLARED BY THE ASSESSEE IN IT BOOKS OF ACCOUNT WAS MOST REASONABLE AND THERE WAS NO MATERIAL TO REJECT THE SAME. 3.1 FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S 143(3) D ATED 31 - 12 - 2009 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS A DEVELOPER AS A PROPRIETOR OF SHRI RADHARAMAN CONSTRUCTION. DURING THE YEAR UNDER CONSIDERATION THE BUILDING PROJECT WAS AT TWO SITE S VIZ. RADHARAMAN NAGAR - 1 AND RADHARAMAN NAGAR - 2. AT BOTH THE SI T ES THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR THE DEVELOPMENT OF THE LAND AS WELL AS THE CONSTRUCTION. THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH SARVAGYA COOP. HOUSING SOCIETY, WHICH WAS HOLDING THE LAND AT BOTH THE PLACES. ACCORDING TO TH E TE R MS OF THE AGREEMENT IT WAS AGREED UPON TO PAY A SUM OF RS.16,800/ - PER FLAT TO THE LAND HOLDER IN RADHARAMAN NAGAR - 2 AND RS.7958/ - PER FLAT IN RADHARAMAN NAGAR - 1. AFTER RECORDING THESE BASIC FACTS THE AO HAD MADE AN OBSERVATION THAT THE ASSESSEES RE GULAR BOOKS OF ACCOUNTS WERE NOT AVAILABLE. IT WAS INFORMED THAT THE OFFICE OF THE CHARTERED ACCOUNTANT M/S RAMKRISHNAN & MAITRE ASSOCIATES WHO HAD AUDITED THE BOOKS U/S 44AB WAS SEALED BY THE BANK. ON 3 ITA NOS. 322 & 259/NAG/2012 ACCOUNT OF THE SAID FACT THE ASSESSEE HAS EXPRESSED HI S INABILITY TO PRODUCE THE BOOKS OF ACCOUNTS AS WELL AS OTHER RELATED DOCUMENTS. ONLY A COPY OF THE AUDIT REPORT WAS FURNISHED. IT WAS ALSO INFORMED THAT THE AUDIT WAS CONDUCTED ON THE BASIS OF COMPUTER GENERATED CASH BOOK, JOURNAL, LEDGER ETC. ACCORDING T O THE AO THERE WAS NO STOCK REGISTER AND THE CLOSING STOCK WAS VALUE D AT COST BASIS. IN THE ABSENCE OF BOOKS OF ACCOUNTS THE AO HAD PROCEEDED WITH THE ASSESSMENT AND THEREUPON NOTED FEW DISCREPANCIES. HE HAS FURTHER NOTED THAT THE ASSESSEE HAD DISCLOSED CLOSING W.I.P. AT RS.1,01,06,103/ - . SALES DURING THE YEAR WERE RECORDED AT RS.49,65,425/ - . THE ASSESSEE HAD FURNISHED THE DETAILS OF THE FLATS SOLD. AS PER THE SAID DETAILS, 18 UNITS WERE SOLD. THE ASSESSEE HAS FURTHER FURNISHED THAT THERE WERE 15 UNITS IN FINISHED CONDITIONS AND 35 UNITS WERE IN SEMI FINISHED CONDITION. THE TOTAL COST OF THE FINISHED UNITS WERE STATED TO BE RS.35, 53,600/ - . HOWEVER, THE ASSESSEE HAS NOT FURNISHED THE COST OF THE SEMI FINISHED UNITS. THE AO HAS NOTED THAT THE ASSESSEE HAS F URNISHED A COMBINED COST AT RS.65,52,503/ - . A STATEMENT OF THE APPELLANT HAS ALSO BEEN RECORDED. HE HAS INFORMED THAT RESIDENTIAL UNITS WERE UNDER CONSTRUCTION AND ABOUT 174 FLATS, 11 SHOPS AND 4 INDEPENDENT UNITS WERE TO BE CONSTRUCTED. THE AO HAS ALSO RE CORDED IN THE ASSESSMENT ORDER THE DETAILS OF THE FINISHED FLATS AND THE VALUE DECLARED BY THE ASSESSEE AS ON 31 ST MARCH, 2007. THE AO HAS ALSO RECORDED THE DETAILS OF SEMI FINISHED FLATS. THE ALLEGATION OF THE AO WAS THAT ON ENQUIRY IT WAS FOUND THAT MANY UNITS REMAINED TO BE INCLUDED IN THE CLOSING WORK IN PROGRESS . THEREFORE, THE ALLEGATION OF THE AO WAS THAT THE CLOSING WIP WAS NOT CORRECTLY DISCLOSED. THE AO HAS GIVEN THE FOLLOWING REASONS : - ON CAREFUL EXAMINATION OF DETAILS GIVEN BY THE ASSESSEE, IT WAS FOUND THAT MANY OF THE UNITS REMAINED TO BE INCLUDED IN THE CLOSING W.I.P. THE SOLD UNITS, SEMI FINISHED UN ITS & FINISHED UNITS WERE LOCATED IN DIFFERENT BUILDINGS. THE UNITS IN EACH BUILDING WERE SERIALLY NUMBERED BEGINNING FROM THE GROUND FLOOR. IT WAS SURPRISING TO NOTE THAT IN MANY BUILDINGS A UNIT WHICH WAS LOCATED ON UPPER FLOOR WAS SHOWN IN FINISHED STOC K, WHEREAS, UNITS POISED AT THE LOWER FLOORS WERE NOT INCLUDED IN THE CLOSING STOCK. THIS IS ALMOST IMPOSSIBLE & NO REASONABLE PRUDENT MAN 4 ITA NOS. 322 & 259/NAG/2012 WILL EVER BELIEVE THIS. MANY OF THE CONSTRUCTION ACTIVITIES ARE SIMULTANEOUSLY CONDUCTED FOR A BUILDING, SUCH AS SLAB ON A FLOOR, ELECTRICAL WIRING, PLUMBING WORK, STAIRCASE. THUS A FLAT PLACED ON A LOWER FLOOR OF A BUILDING, WILL BE AT LEAST IN SEMI FINISHED CONDITION, IF ONE OF THE FLATS ON A UPPER FLOOR OF THE SAME BUILDINGS COMPLETE OR IS IN SEMI FINISHED STATE. OTHE RWISE ALSO, ACCORDING TO THE ASSESSEE ONLY TWO UNITS WERE SOLD PRIOR TO F.Y.2006 - 07, EIGHTEEN UNITS WERE SOLD DURING THE F.Y.2006 - 07 & FIFTY UNITS WERE STATED TO BE FORMING PART OF THE CLOSING W.I.P. ALL THESE TOGETHER WERE MAKING ONLY SEVENTY UNITS, WHERE AS ACCORDING TO THE VERSION OF ASSESSEE THERE WERE 189 UNITS PLANNED. THE CONSTRUCTION ACTIVITY BEGAN, ACCORDING TO THE INFORMATION GATHERED & DOCUMENTS PRODUCED, WELL BACK IN THE YEAR 2004 ITSELF. IT IS ALSO EVIDENT FROM THE INFORMATION SUBMITTED ABOUT TH E SOLD UNITS & CLOSING W.I.P. THAT CONSTRUCTION ACTIVITY WAS IN PROGRESS FOR MANY BUILDINGS SIMULTANEOUSLY. BOOKING ADVANCES FROM 65 PERSONS AGAINST BOOKING OF DIFFERENT UNITS WAS SHOWN STANDING AS ON 31.03.2007 IN THE AUDIT REPORT. ON VERIFICATION IT WAS SEEN THAT OUT OF THESE 65 UNITS ONLY 22 UNITS WERE PART OF THE CLOSING W.I.P. & THE UNITS CORRESPONDING TO REMAINING 43 WERE NOT SEEN IN THE CLOSING STOCK. THEREFORE THERE WAS VERY STRONG INDICATION ABOUT THE SUPPRESSION OF CLOSING W.I.P. BY THE ASSESSEE. THE ASSESSEE WAS APPRISED OF THIS TYPE OF POSSIBLE OMISSION IN THE ACCOUNTS ON 24/12/09. LATER, HE WAS COMMUNICATED ABOUT IT BY WRITING A LETTER. METHOD OF VALUATION OF THE SEMI FINISHED UNITS WAS ALSO COMMUNICATED. THE RELEVANT PORTION IS GIVEN AS UNDER : - PLEASE GO THROUGH THE DETAILS OF CLOSING STOCK AND SOLD FLATS(CONTAINING IDENTIFICATION NOS.) WHICH WAS SUBMITTED BY YOU DURING THE COURSE OF ASSTT. PROCEEDINGS. CLOSING STOCK, ACCORDING TO THE SUBMISSION IS HAVING 15 FINISHED (14 FLATS AND 1 SHOP), VAL UED AT RS.35,53,600/ - , 35 SEMI FINISHED UNITS, CONSISTING 31 FLATS, 2 SHOPS AND 2 INDEPENDENT UNITS, VALUED AT RS.65,52,503/ - . NOW, ACCORDING TO YOUR STATEMENTS, THERE ARE TOTAL 189 UNITS IN RADHARAMAN - 1 SCHEME, WHICH CONSISTS OF 174 FLATS, 11 SHOP AND 4 I NDEPENDENT UNITS. HOWEVER, CLOSING STOCK AND SOLD UNITS TOGETHER MAKE ONLY 70 UNITS. WHICH MEANS, YOU HAVE NOT CONSIDERED 119 UNITS IN YOUR CLOSING STOCK. THESE MUST BE EITHER IN SEMI FINISHED OR FINISHED STATES AS ON 31.03.2007, WHICH ARE NOT CONSIDERED B Y YOU. THIS IS EVIDENT ON CAREFUL EXAMINATION OF EARLIER SUBMISSION FOR E.G. YOU SOLD FLAT NOS. 5 ITA NOS. 322 & 259/NAG/2012 FLAT NO BLDG. / PLOT NO. PURCHASER 10 /27 - 28 MADHAVI CHAPEKAR 8 23 - 24 SAPANA GHARDE 7 14/25 - 26 KAILASH BHOSLE 9 17/31 - 32 RANJANA YAWALKAR THE FLATS WHICH ARE LOCATED IN THE SAME BUILDING IN WHICH THESE SOLD FLATS ARE LOCATED, WILL BE AT LEAST IN SEMI FINISHED STATE BECAUSE THE STRUCTURE OF A BUILDING WILL BE CONSTRUCTED AS A WHOLE & ACTIVITIES LIKE SLAB, PLUMBING, ELECTRIFICATION WILL BE CARRIED OUT T OGETHER. THE METHOD OF VALUATION OF SEMI FINISHED UNITS WAS ALSO COMMUNICATED ALONGWITH THE SAME LETTER WHICH IS AS UNDER : - METHOD ADOPTED TO FIND AVERAGE VALUE OF SEMI FINISHED FLAT : (A) TOTAL SEMI - FINISHED UNITS AS PER YOU (INCLUDE TWO SHOPS) - 35 (B) VALUATION FOR THIS TAKEN BY YOU RS.65,52,503/ - SINCE, SHOP REQUIRE LESS CONSTRUCTION COST, ITS VALUE CAN BE TAKEN AS RS.1,00,000/ - PER SHOP. IN SEMI FINISHED STATE NOW 33 UNITS REMAIN. VALUE OF THESE 33 UNITS IS RS.63,52,503/ - (APPROX.). THE COST OF ONE SEMI - FINISHED UNIT COME TO RS.1.90 LACS. PER UNIT. 9. ON THE GIVEN DATE I.E. ON 30.12.09, NO EXPLANATION/OBJECTION TO THE SAID LETTER WAS FILED. IN ORDER TO KNOW, THE FACTUAL POSITION, TWO INSPECTOR OR RANGE - 6, NAGPUR SHRI RAJESH KOHAD & SHRI YASHIL DHAN I, VISITED THE SITE ON 30.12.2009. THEY MADE THE ENQUIRIES WITH THE RESIDENTS. IN THEIR REPORT, IT IS STATED THAT AT PRESENT THERE ARE 144 UNITS. MANY OF THESE WERE OCCUPIED 3 - 4 YEARS BACK. SOME UNITS ARE STILL VACANT. THE PROJECT IS NOT FULLY COMPLETED, A CCORDING TO THE PLAN YET. 9(A) THE TABULAR DATE GIVEN BELOW IS PREPARED ON THE BASIS OF INFORMATION GIVEN BY THE ASSESSEE, DURING THE COURSE OF ASSTT. PROCEEDINGS. THIS IS HELPFUL TO ESTIMATE THE NO. OF UNITS WHICH CAN BE LOGICALLY BELIEVED TO BE UNDER C ONSTRUCTION DURING THE F.Y. 2006 - 07. IT IS AS UNDER : BLDG./ PLOT NO. SOLD FLATS FLATS INCLUDED IN CLOSING STOCK FLATS NOT CONSIDERED ANYWHERE BUT WHICH DO EXIST BEING SITUATED LOWER FINISHED SEMI - FINISHED FLATS NO. TOTAL 1 --- 1,5 --- 2,3,4 3 2 3 --- 3 4 1,2 2 4 6 ITA NOS. 322 & 259/NAG/2012 5 --- 2,8 7,4 3,5,6 3 6 7 1,3 --- 4 2 1 8 9 --- --- 5,6,7,8 1,2,3,4 4 10 11 --- --- 4,5,6,7 2,3 2 12 14 --- 5 1 2,3,4 3 15 18 --- --- 3 1,2 2 19 20 --- --- --- --- --- 21 3,7 23 4,8 --- 1,2,5,6 4 24 25 10 5,7,9 8 1,2,3,4,6 5 26 27 8,10 --- 9 1,2,3,5,6,7 6 28 29 5,7 --- 6,8,10 1,2,3,4,9 5 30 31 5,9 --- 3,7 4,5,6,8 4 32 35 --- --- --- --- --- 36 37 --- 8 1,4 3,5,6,7 4 38 39 10 --- --- 1,2,3,4,5,6,7,8, 9 40 9 41 --- 10 9 1,2,3,4,5,6,7,8 8 42 TOTAL 65 THUS, ON THE BASIS OF AVAILABLE INFORMATION & GROUND ENQUIRY CONDUCTED BY THE INSPECTORS, I AM SATISFIED THAT AT LEAST 65 UNITS REMAINED TO BE INCLUDED IN CLOSING STOCK. THEIR VALUATION IS TAKEN AS TAKEN AS 1.90 LACS PER UNIT AS PER THE METHOD ALREADY COMMUNICATED TO THE ASSESSEE. THIS IMPLIED THAT S TOCK OF RS.1,23,50,000/ - REMAINED TO BE INCLUDED IN CLOSING STOCK. THIS AMOUNT OF RS. 1,23,50,000/ - IS TO BE ADDED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED INVESTMENT AS PER SEC.69 OF THE ACT. PENALTY U/S. 271(1)(C) IS INITIATED. 3.2 . AGAINST THE ADD ITION MADE U/S 69 AS UNEXPLAINED INVESTMENT IN CLOSING WIP OF RS.1,23,50,000/ - THE ASSESSEE HAD GONE IN APPEAL. 7 ITA NOS. 322 & 259/NAG/2012 4 . A DETAILED DISCUSSION WAS MADE BEFORE THE LEARNED CIT(APPEALS) AND IT WAS PLEADED THAT THE SAID SCHEMES WERE 70 KMS. AWAY FROM NAGPUR, HENCE THE LOCATION IS IN BACKWARD AREA. THE CONSTRUCTION HAS BEEN MADE FOR LOWER MIDDLE INCOME GROUP. AN ORDINARY CONSTRUCTION HAS BEEN MADE. THE ASSESSEE HAS EXPLAINED THAT THE OPENING WORK IN PROGRESS WAS RS.81,75,059/ - AND THE EXPENDITURE IN CONSTRUCTION DU RING THE YEAR WAS RS.59,70,537/ - , MAKING A TOTAL OF RS.1,41,45,576/ - . THE SALES DURING THE YEAR WAS RS.49,65,425/ - , HENCE THE CLOSING WORK IN PROGRESS WAS RS.1,02,10,425/ - . THE GROSS PROFIT WAS DISCLOSED AT RS.10,30,253/ - GIVING AN AVERAGE OF 20% RATE OF P ROFIT. IT WAS ALSO INFORMED THAT ONLY 18 UNITS WERE SOLD DURING THE YEAR. IT HAS ALSO BEEN PLEADED THAT SINCE THE CONSTRUCTION WORK WAS IN PROGRESS, THEREFORE, NO FIXED COST CAN BE EXACTLY ATTRIBUTED TO EACH UNIT WHICH IS IN PROGRESS. THE ASSESSEE HAS ALS O TRIED TO DEMONSTRATE THAT FLATS WHICH WERE IN FINISHED CONDITION WERE ON THE SECOND FLOOR WHILE THE F LATS AT THE FIRST FLOOR WERE ONLY PILLARS. THERE WAS NO FLAT CONSTRUCTION ON THE GROUND FLOOR AND ONLY PILLARS AND SLABS WERE CONSTRUCTED. IT WAS, THEREF ORE, PLEADED THAT IN A SITUATION WHEN THE CONSTRUCTION ACTIVITY WAS IN PROGRESS THEN IT WAS DIFFICULT TO COMPUTE THE EXACT INVESTMENT IN RESPECT OF EACH UNIT. THE AO HAS COMPUTED THE UNEXPLAINED INVESTMENT MERELY ON THE BASIS OF ASSUMPTIONS OR SURMISES. T HE ASSESSEE HAS TRIED TO EXPLAIN THE BUILDING - WISE PROGRESS IN THE CONSTRUCTION T O ESTABLISH THAT THE AO HAS MADE AN ASSUMPTION THAT THERE WOULD HAVE EXISTED 65 FLATS IN SEMI FINISHED FORM , EACH COSTING RS.1,90,000/ - AND THEREUPON ARRIVED AT THE FIGURE OF RS.1,23,50,000/ - AS COST OF WORK IN PROGRESS AS ON 31 ST MARCH, 2007 WITHOUT ANY SCIENTIFIC BASIS. AFTER CONSIDERING THE ARGUMENTS OF THE ASSESS AND THE RECORDS OF THE CASE, LEARNED CIT(APPEALS) HAS CALLED FOR A REPORT OF THE AO. IN REMAND PROCEEDINGS THE AO HAS SUBMITTED A VALUATION REPORT. THE REPORT OF THE AO WAS COMMUNICATED TO THE ASSESSEE AS WELL. AFTER CONSIDERING BOTH THE SIDES, LEARNED CIT(AP PEALS) HAD COMMENTED THAT THERE WAS SOMETHING SERIOUSLY WRONG IN THE SUBMISSIONS OF THE ASSESSEE, SPECIALLY WHEN THE BOOKS OF ACCOUNTS WERE NOT COMPLETELY AVAILABLE 8 ITA NOS. 322 & 259/NAG/2012 FOR INSPECTION. SIDE BY SIDE LEARNED CIT(APPEALS) HAS ALSO MENTIONED THAT THE VALUATION SUB MITTED BY THE VALUER WAS ALSO DEVOID OF SUBSTANCE. IN HIS OPINION IT WAS AN ACADEMIC EXERCISE. HOWEVER, A PART RELIEF WAS GRANTED BY LEARNED CIT(APPEALS ) IN THE FOLLOWING MANNER : APPELLANT HAS ALSO SUBMITTED DETAILED WIP [ANNEXURE - D] GIVING PLOTWISE/ FLA TWISE DETAILS OF WIP AND IT IS SEEN THAT NOW THE FIGURE OF WIP AS PER THIS DETAILED REPORT IS NOT RS.11,12,24,600/ - I.E. THERE IS DIFFERENCE OF RS.11,18,497/ - BETWEEN THE TWO FIGURES OF VALUATION. NEW ESTIMATED DETAILS : - RS.11,12,24,600/ - & AS PER BALANCE SHEET : - RS. 1,01,06,103/ - RS. 11,18,497/ - IT IS SEEN THAT APPELLANT HAS TAKEN THE BROAD PARAMETERS I.E. (A) BASIC FROM PILLARS & SLABS : 40% OF COST (B) SOME FINISHED AND SOLD IN NEAR FUTURE : 60% OF COST (C) ADVANCE STAGE OF CONSTRUCTION SO LD : RS.80% OF COST IMMEDIATELY AFTER F.Y. A] HE HAS GIVEN THIS CHART VIS - A - VIS A.O.S ESTIMATE AND IT CLEARLY INDICATES THAT A.O. HAD PRESUMED MANY FLATS IN ALMOST FINISHED FROM AND HENCE ESTIMATE BY A.O. WENT ON HIGHER SIDE. B] BUT IT IS ALSO TRUE TH AT APPELLANT IS TAKING FIXED % AGE AS 40% ,60% & 80% FOR VALUING THESE FLATS WHICH IS NEVER THE CASE IN A ONGOING PROJECT HENCE, THERE IS STILL SOME MARGIN OF ERROR AND TO PLAY THIS IT WILL MEET END OF JUSTICE TO ESTIMATE THE WIP TO RS.1,20,00,000/ - CRORES INSTEAD OF RS.1,12,24,600/ - FINALLY SHOWN BY APPELLANT. HENCE THE ADDITION MADE BY A.O. TO THE EXTENT OF [ RS.1,20,00,000 RS.1,01,06,103] = RS.18,93,897/ - IS CONFIRMED AND BALANCE ADDITION IS DELETED 5. SINCE PART RELIEF WAS GRANTED, THEREFORE, BOTH THE SIDES ARE BEFORE US. FROM THE SIDE OF THE APPELLANT, LEARNED A.R. MR. ABHAY AGRAWAL HAS PLEADED THAT DUE TO CERTAIN UNAVOIDABLE CIRCUMSTANCES THE BOOKS OF ACCOUNTS COULD NOT BE PRODUCED. THE NON PRODUCTION OF BOOKS OF ACCOUNTS SHOULD NOT BE CONSIDERED A 9 ITA NOS. 322 & 259/NAG/2012 FAULT OF THE ASSESSEE. LEARNED A.R. HAS PLEADED T HAT THE PERCENTAGE OF GROSS PROFIT DURING THE YEAR WAS ADEQUATE, HENCE THE BOOK RESULTS SHOULD HAVE BEEN ACCEPTED BY THE REVENUE DEPARTMENT. HE HAS ARGUED THAT THE VARIATION IN THE VALUE OF THE WORK IN PROGRESS WAS MERELY DUE TO ONE ESTIMATION AFTER ANOTHER ESTIMATION, AS IS VISIBLE FROM THE FOLLOWING DETAILS : SR.NO. PARTICULARS AMOUNT. 1. CLOSING WORK - IN - PROGRESS (WIP) AS PER AUDITED BALANCE SHEET. 1,01,06,103 2. CLOSING WIP DETERMINED BY THE LEARNED AO ON ADHOC BASIS. 2,32,06,103 3. CLOSING WIP DETERMINED BY THE LEARNED CIT(A) ON ADHOC BASIS. 1,20,00,000 4. CLOSING WIP DETERMINED BY AN INDEPENDENT, REGISTERED & LICENSED VALUER 91,36,000 5. CLOSING WIP DETERMINED BY THE ASSESSEE ON ROUGH ESTIMATE BASIS WITHOUT ACCEPTING THE SAID VALUATION. 1,12,24,600 THERE WAS NO UNDER - STATEMENT ON THE PART OF THE ASSESSEE. AN ADHOC AND ESTIMATED ADD ITIONS HAVE BEEN MADE. LEARNED A.R. HAS ALSO INFORMED THAT IN THE NEXT YEAR I.E. ASSESSMENT YEAR 2008 - 09 THE OPENING WIP AS SHOWN BY THE ASSESSEE WAS AT RS.1,01,06,103/ - WHICH WAS ACCEPTED BY THE REVENUE . LEARNED A.R. HAS ALSO PLACED RELIANCE ON A VALUATIO N CERTIFICATE ISSUED BY A REGISTERED VALUER. HE HAS PLEADED THAT ALTHOUGH IT WAS NOT BEFORE THE AO BUT THE VALUATION HAS BEEN DONE IN A SCIENTIFIC MANNER BY AN EXPERT WHICH SHOULD HAVE BEEN ACCEPTED WITHOUT ANY CHANGE BY LEARNED CIT(APPEALS). CHALLENGING T HE ESTIMATION MADE BY THE REVENUE AUTHORITIES HE HAS CITED FEW CASE LAWS IN SUPPORT AS UNDER : 10 ITA NOS. 322 & 259/NAG/2012 CIT V. DINESH JAIN (HUF) 352 ITR 629 (DEL.). CIT V. K. MANIKAM 258 ITR 175 (MAD.). CIT V. NARESH KHATTAR, HUF 261 ITR 664 (DEL.). CIT V. SADHNA GUPTA 352 ITR 595 (DEL.). CIT V. SMT. SURAJ DEVI 328 ITR 604 (DEL.). SMT. SEEMA DEVI BANSAL V. ACIT (ITA NO. 342/DEL/2012) (DEL ITAT) JCIT V. SHRI BITHALNATH MALIA (ITA NO. 15/KOL/2013) (KOL ITAT). 6. FROM THE SIDE OF THE REVENUE, LEARNED D.R. MR. NARENDRA KANE APPEARED AND CHALLENGED THE PART RELIEF GIVEN BY THE LEARNED CIT(APPEALS). HE HAS VEHEMENTLY PLEADED THAT THE ASSESSEE HAD NOT SUBMITTED THE BOOKS OF ACCOUNTS DELIBERATELY. A SPOT INSPECTION WAS CARRIED OUT AND THEREUPON THE AO HAS FOUND THE POSITION OF T HE FINISHED AND UNFINISHED FLATS. THE AO HAS ALSO TAKEN INTO ACCOUNT THE BOOKING ADVANCES RECEIVED BY THE ASSESSEE TO ARRIVE AT THE FIGURE OF VALUE OF THE WORK IN PROGRESS . ON THE BASIS OF EVIDENCES IT WAS FOUND THAT THERE WAS STRONG INDICATION OF SUPPRESSION OF CLOSING WIP. THE AO WAS FULLY SATISFIED THAT THE WORK IN PROGRESS WAS NOT CORRECTLY DISCLOSED BY THE ASSESSEE. ON THE BASIS OF THE INFORMATION COLLECTED BY THE AO HE HAS RIGHTLY HELD THAT 65 FLATS WERE NOT CONSIDERED BY THE ASSESSEE WHILE VA LUING THE STOCK. THEREUPON ON THE BASIS OF THE EXPENDITURE INCURRED AS WELL AS THE ADVANCES RECEIVED HE CAME TO THE CONCLUSION THAT EACH ONE WAS COSTING ABOUT RS.1,90,000/ - , HENCE MULTIPLYING THE SAME WITH 65 FLATS MADE AN ADDITION OF RS.1,23,50,000/ - WHIC H SHOULD HAVE BEEN APPROVED BY LEARNED CIT(APPEALS). 7. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE ALSO EXAMINED THE COMPILATION FILED, PRECEDENTS CITED AND THE ORDERS OF THE REVENUE AUTHORITIES. AT THE OUTSET IT IS NECESSARY TO MENTION THAT T H E BOOKS OF ACCOUNTS WERE NOT PRODUCED FOR VERIFICATION. DURING THE COURSE OF HEARING EVEN THE BENCH HAS ASKED THAT IF AT THAT TIME THE OFFICE OF THE CHARTERED ACCOUNTANT WAS SEALED BY BANK THEN ATLEAST NOW THE ASSESSEE SHOULD BE IN A POSITION TO PRODUCE THE BOOKS 11 ITA NOS. 322 & 259/NAG/2012 OF ACCOUNTS IN SUPPORT OF THE INCOME DECLARED. HOWEVER, LEARNED A.R. HAS EXPRESSED THAT HE IS NOT AWARE ABOUT THE LATEST POSITION WHETHER THE SEAL OF THE BANK WAS REMOVED FROM THE OFFICE OF THE CHARTERED ACCOUNTANT. IN THIS SITUATION WHEN THE CORROBO RATIVE EVIDENCES IN SUPPORT OF THE CORRECTNESS OF THE INCOME DECLARED WERE NOT AVAILABLE THEN THE NATURAL CONSEQUENCE IS THAT A BEST JUDGMENT ASSESSMENT OUGHT TO HAVE BEEN PASSED. SUCH BEST JUDGMENT ASSESSMENT, NEEDLESS TO SAY, OUGHT TO BE ON SOME FAIR EST IMATION. IN THE PRESENT CASE ALTHOUGH AN ESTIMATE WAS MADE BUT IT IS DIFFICULT TO HOLD THAT THE SAID ESTIMATION WAS WITHOUT ANY BASIS. THE AO HAD WORKED OUT THE ESTIMATION AFTER TAKING INTO ACCOUNT THE EXPENDITURE ON BUILDING MATERIAL AND OTHER CONNECTED E XPENDITURE AS WELL AS STAGE OF THE CONSTRUCTION ETC. FROM THE SIDE OF THE APPELLANT - ASSESSEE NO SPECIFIC FAULT HAS BEEN POINTED OUT. THE ASSESSEE HAS MAINLY RELIED UPON AN ANOTHER VALUATION OF A VALUER BUT ON DUE CONSIDERATION IT APPEARS THAT THE REGISTERE D VALUER HAS ALSO MORE OR LESS ADOPTED THE METHOD OF ESTIMATION. IT IS ALSO WORTH TO MENTION THAT THE SAID VALUERS REPORT WAS NOT FURNISHED BEFORE THE AO. ONCE THE CLOSING WORK IN PROGRESS AS DISCLOSED BY THE ASSESSEE WAS DOUBTED BY THE AO ON THE REASONIN G THAT CERTAIN UNITS REMAINED TO BE INCLUDED AND THOSE UNITS WERE FOUND CONSTRUCTED AT THE SITE, THEN THE AO HAD NO OPTION BUT TO APPLY A REASONABLE RATE OF CONSTRUCTION TO ARRIVE AT THE CLOSING WIP. THE ASSESSEE ON HIS PART HAS NOT DEMONSTRATED THAT THE I MPUGNED 65 FLATS WERE NOT IN EXISTENCE, THEREFORE, THE AO HAD GROSSLY ERRED IN VALUING THOSE 65 FLATS IN WIP. THE OBJECTION OF THE ASSESSEE IS PRIMARILY ON THE VALUE ADOPTED BY THE AO. WE ARE OF THE VIEW THAT THE LEARNED CIT(APPEALS) HAS, ON THE OTHER HAND , TAKEN A LENIENT AS WELL AS REASONABLE VIEW AFTER CONSIDERING THE RELEVANT FACTORS APPLICABLE IN CONSTRUCTION BUSINESS, THEREFORE, IT IS OF NO WORTH TO DISTURB THE FINDINGS OF LEARNED CIT(APPEALS). AS FAR AS THE CASE LAWS QUOTED BY LEARNED A.R. ARE CONCER NED, KEEPING BREVITY IN MIND, WE DO NOT CONSIDER IT NECESSARY TO DISCUSS ALL THOSE PRECEDENTS IN EXTENSO BECAUSE OF THE REASON THAT THE LAW PRONOUNCED IN THOSE DECISIONS WAS THAT IF AN ESTIMATED ADDITION WAS MADE NOT BASED UPON ANY 12 ITA NOS. 322 & 259/NAG/2012 INCRIMINATING MATERIAL OR COGENT EVIDENCE THEN SUCH UNSUPPORTED ESTIMATION WAS TO BE REJECTED. HOWEVER, THE FACTS IN THE PRESENT CASE ARE NOT AKIN TO THE FACTS OF THE PRECEDENTS CITED. FACTS OF THE CASE IN HAND WERE THAT THE REVENUE AUTHORITIES HAVE TAKEN INTO ACCOUNT THE NATURE OF THE CONSTRUCTION, COST OF THE CONSTRUCTION, ADVANCES RECEIVED, BUILDING MATERIAL CONSUMED AND THE PROFIT MARGIN OF THE ASSESSEE AND THEREUPON ARRIVED AT A CONCLUSION THAT THERE WAS AN UNDER - STATEMENT OF THE VALUE OF THE WORK IN PROGRESS. AS A RESULT, W E HEREBY AFFIRM THE PART RELIEF GRANTED BY LEARNED CIT(APPEALS). GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 8. B. ITA NO. 259/NAG/2012 (REVENUES APPEAL). GROUND RAISED BY THE REVENUE ARE AS UNDER : 1. THE LD. CIT(A) ERRED IN ESTIMATING THE TOTAL WIP AT A CONSOLIDATED FIGURE OF RADHARAMAN PROJECT 1 & 3 AT RS.1,20,00,000/ - IN AN ARBITRARY MANNER WITHOUT APPRECIATING THE FACTS THAT THE AO HAS WORKED OUT ADDITIONAL WIP AT RS.1,23,50,000/ - ON RADHAMAN PROJECT 1, NARSALA AND ADDITIONAL WIP OF RS.7,50,000/ - ON RADHARAMAN PROJECT - 3 PROJECT ART PIPLA TOTALLING RS.1,31,00,000/ - HOLDING THE SAME TO BE UNDISCLOSED INVESTMENT IN CLOSING WIP U/S 69 OF THE I.T. ACT AND NOT TOTAL CLOSING WIP HELD BY THE LD. CIT(A). 2. LD. CIT(A) ERRED IN NOT APPRECIATING AND DELETING THE ADDITIONS MADE U/S 69 OF THE I.T. ACT BY THE AO [ON ACCOUNT OF THE ADDITIONAL AMOUNT OF WIP WORKED OUT BY HIM IN RESPECT OF THE SAID TWO BUILDING PROJECTS] WITHOUT ASSIGNING ANY REASONS FOR SUCH DELETION OF ADDITIONS MENTIONED IN GROUND NO.1 ABOVE. 9. WHILE DECIDING THE ASSESSEES APPEAL IN FOREGOING PARAGRAPHS, WE HAVE AFFIRMED THE PART RELIEF GRANTED BY LEARNED CIT(APPEALS). THE REVENUE HAS CHALLENGED THE PART RELIEF GIVEN TO ASSESSEE. HOWEVER, THE SAME IS HEREBY AFFIRMED. AS A RESU LT, THE GROUNDS RAISED BY THE REVENUE ARE COVERED BY THE REASONING GIVEN HEREIN ABOVE. UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HEREBY REJECT THE GROUNDS OF THE REVENUE. 13 ITA NOS. 322 & 259/NAG/2012 10. SINCE THE GROUNDS RAISED BY THE REVENUE AS WELL AS BY THE ASSESSEE ARE DISMISSED, THEREFORE, BOTH THE APPEALS ARE DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WELL AS THE APPEAL OF THE REVENUE BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MARCH, 2016. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT M EMBER JUDICIAL MEMBER NAGPUR, DATED: 31 ST MARCH, 2016. COPY FORWARDED TO : 1. SHRI VIKRANT YIURAJ BOBDE, 7, MIRE LAYOUT, UMRED ROAD, NAGPUR - 4400 09. . 2. I.T.O., WARD - 6(1), NAGPUR. 3. COMMISSIONER OF INCOME - TAX - ,NAGPUR. 4. CIT(APPEALS) - II, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER . ASSISTANT REGISTRAR, ITAT, NAGPUR . WAKODE