The ITO, Ward-9(4), Surat V. M/s. Sapna Land Developers, Surat

ITA 3572/AHD/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0250 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-09-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 27-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S SANDHU
• Keywords: Gross profit estimation; Unexplained cash credit; Additional evidence; Corroborative evidences
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND A.N. PAHUJA , ACCOUNTANT MEMBER) ITA NO.3572/AHD/2008 [ASSTT.YEAR : 2005-2006] ITO, WARD-9(4) SURAT. VS. M/S.SAPNA LAND DEVELOPERS 2 ND FLOOR, FIROZ CHAMBERS KHANDBAZAR, SURAT. REVENUE BY : SHRI B.S.SANDHU ASSESSEE BY : SHRI TUSHAR P. HEMANI O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THIS APPEAL BY THE DEPARTMENT RELATES TO THE ASSESSMENT YEAR 2005-2006. THE ASSE SSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF DEVELOPMENT AND ORGANIZE RS OF LAND. IT FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING. THE APPEAL ARISES OUT OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT O N 27-12-2007. 2. THE FIRST GROUND TAKEN BY THE DEPARTMENT IS THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,07,09,490/- MADE BY T HE ASSESSING OFFICER AS UNEXPLAINED CASH CREDITS. THE SECOND GROUND IS THA T THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,71,433/- MADE BY THE AO ON ACCOUNT OF ADVANCE INSTALMENTS. SINCE BOTH THE GROUNDS ARE CONNECTED T O EACH OTHER AND WERE ALSO ARGUED BEFORE US IN THAT WAY, WE TAKE BOTH OF THEM FOR DECISION IN A CONSOLIDATED MANNER. 3. WHILE COMPLETING THE ASSESSMENT, THE AO NOTICED THAT THE ASSESSEE HAD CREDITED THE ABOVE SUM AS ADVANCE INSTALMENTS FROM CUSTOMERS. THE ASSESSEE ALSO RECEIVED RS.1,71,433/- AS BOOKING AMOUNT FROM THE MEMBERS. THE AO CALLED UPON THE ASSESSEE TO EXPLAIN THE NATURE OF T HE CREDITS APPEARING AS LIABILITY IN THE BALANCE SHEET. IT WAS POINTED OUT BY THE AO THAT THE ASSESSEE HAD ONLY SUBMITTED A PROMOTIONAL BROCHURE OF THE SC HEME UNDER WHICH THE PAGE - 2 ITA NO.3572/AHD/2008 -2- MONIES WERE COLLECTED AND THE MONTHLY SUMMARY LEDGE R ACCOUNT OF THE ADVANCE INSTALMENTS RECEIVED FROM THE CUSTOMERS, WHICH ACCO RDING TO HIM WAS NOT SUFFICIENT FOR COMPLETING THE ASSESSMENT. HE POINT ED OUT TO THE ASSESSEE THAT THE NAMES AND ADDRESSES OF THE MEMBERS, THEIR PERMA NENT ACCOUNT NUMBERS, INDIVIDUAL DEPOSIT AMOUNTS AND THE SOURCE OF DEPOSI TS WERE NOT SUBMITTED BY THE ASSESSEE. IT WAS FURTHER POINTED OUT BY THE A O THAT THE ASSESSEE HAS NOT SPELT OUT THE CONSIDERATION TO BE PROVIDED BY IT FO R TAKING THE AMOUNTS FROM THE MEMBERS. HE ACCORDINGLY PROPOSED TO ADD THE ENTIRE ADVANCES RECEIVED FROM THE MEMBERS AS UNEXPLAINED CASH CREDITS. 4. OBJECTING TO THE PROPOSAL OF THE AO, THE ASSESSE E SUBMITTED BY LETTER DATED 26-12-2007 AS FOLLOWS: A) THE NATURE OF THE MONIES RECEIVED FROM THE CUSTO MERS WAS EXPLAINED IN THE PAPERS RELATING TO THE SCHEME, AS PER WHICH THE ASSESSEE PURCHASES PLOTS OF LAND IN THE INTERIOR VILLAGES AN D SELLS THE SAME TO THE PARTIES. THE PAYMENT HAS TO BE MADE BY THE PARTIES IN 75 MONTHLY INSTALMENTS OF RS.330/- EACH. THE INSTALMENTS ARE CREDITED TO AN ACCOUNT CALLED ADVANCE INSTALMENTS FROM CUSTOMERS ACCOUNT B) AT THE TIME OF BOOKING THE PLOT, THE MEMBER HAS ALSO TO PAY RS.251/- WHICH IS CREDITED TO THE MEMBERS BOOKING ACCOUNT. C) WHEN ALL THE INSTALMENTS ARE PAID THE ASSESSEE A RRANGES TO SELL THE PLOT TO THE MEMBER AND ALSO GIVE POSSESSION THEREOF . IT IS AT THIS TIME THE TOTAL CONSIDERATION RECEIVED FROM THE MEMBERS TO WH OM THE PLOTS WERE SOLD IS TRANSFERRED TO THE TRADING ACCOUNT AS SALES OF PLOT, THE CORRESPONDING DEBIT BEING GIVEN TO THE ADVANCE INS TALMENTS FROM CUSTOMERS ACCOUNT AND THE MEMBERS BOOKING ACCOU NT. PAGE - 3 ITA NO.3572/AHD/2008 -3- D) THE ADVANCE INSTALMENTS FROM THE CUSTOMERS AND T HE MEMBERS BOOKING ACCOUNT ARE THUS IN THE NATURE OF ADVANCE F OR THE SALE OF PLOTS AND NOT IN THE NATURE OF CASH CREDITS. E) DURING THE RELEVANT ACCOUNTING YEAR 57 MEMBERS P AID THE FULL CONSIDERATION AND THE PLOTS WERE TRANSFERRED IN THE IR NAMES AND POSSESSION WAS ALSO GIVEN. THE AMOUNTS STANDING T O THEIR CREDIT AS ADVANCE INSTALMENTS AND MEMBERS BOOKING AMOUNT WER E TRANSFERRED TO THE SALE OF PLOTS ACCOUNT. F) IF ANY CUSTOMER IS IRREGULAR IN MAKING THE PAYME NT OF THE INSTALMENTS OR WISHES TO GET BACK THE MONIES AND TH E BOOKING AMOUNT, THE ASSESSEE WOULD RETURN THE MONIES TO HIM AND DEL ETE HIS NAME FROM THE LIST OF CUSTOMERS. THIS IS DONE AFTER GETTING BACK THE ORIGINAL RECEIPTS FROM THE CUSTOMERS. G) THE YEAR UNDER CONSIDERATION IS THE FIRST YEAR O F SALE OF PLOTS AND AS POINTED OUT EARLIER 57 MEMBERS WERE SOLD THE PLO TS. THE AO OBSERVED THAT THE ASSESSEE MERELY EXPLAINED THE MODUS OPERANDI BUT DID NOT ADDUCE ANY DOCUMENTARY EVIDENCE IN COMPLIAN CE WITH THE AOS REQUISITION. IN THE ABSENCE OF THESE DETAILS THE AMOUNT OF RS.1,07,09,490/- SHOWN AS ADVANCE INSTALMENTS AND RS.1,71,433/- SHOW N AS MEMBERS BOOKING AMOUNT WERE TREATED AS UNEXPLAINED CASH CREDITS AND ADDED UNDER SECTION 68 OF THE ACT. 5. THE ASSESSEE FILED AN APPEAL TO THE CIT(A) AND A LONG WITH THE WRITTEN SUBMISSIONS ALSO ATTACHED THE SUPPORTING EVIDENCE. IT WAS POINTED OUT THAT IN ADDITION TO THE PROMOTIONAL BROCHURE RELATING TO TH E SCHEMES FLOATED BY THE ASSESSEE, THE ASSESSEE ALSO PRODUCED BEFORE THE AO THE MEMBERS REGISTER CONTAINING THE COMPLETE DETAILS OF THE MEMBERS SUCH AS THEIR NAMES AND PAGE - 4 ITA NO.3572/AHD/2008 -4- ADDRESSES, IDENTIFICATION NUMBERS, NUMBER OF INSTAL MENTS RECEIVED FROM THEM ETC. SPECIMEN COPIES OF SOME PAGES FROM THE MEMBE RS REGISTER WERE FILED BEFORE THE CIT(A). IT WAS ALSO CONTENDED BEFORE THE CIT(A) THAT THE CUSTOMERS LEDGER ACCOUNTS CONTAINING THE AFORESAID DETAILS WERE PRODUCED BEFORE THE AO IN THE COURSE OF THE ASSESSMENT PROCE EDINGS AND SPECIMEN COPIES OF SOME PAGES OF THE CUSTOMERS LEDGER WERE FILED BE FORE HIM. THE ASSESSEE ALSO FILED COPIES OF THE RECEIPTS ISSUED TO THE MEM BERS FOR RECEIVING THE AMOUNTS FROM THEM. AS REGARDS THE MEMBERSHIP BOOK ING AMOUNT, IT WAS SUBMITTED BEFORE THE CIT(A) THAT THE MEMBERSHIP FEE REGISTER WAS PRODUCED BEFORE THE AO WHICH ALSO CONTAINED THE NAMES AND AD DRESSES OF THE MEMBERS, THE PARTICULAR SCHEME IN WHICH THEY WERE MEMBERS, T HE DATE OF BOOKING, THE RECEIPT NUMBER UNDER WHICH THE MEMBERSHIP FEE WAS A CKNOWLEDGED, THE BOOKING AMOUNT, CUSTOMER IDENTIFICATION NUMBER ETC. SOME SPECIMEN COPIES OF SOME OF THE PAGES OF THE ABOVE REGISTER WERE ALS O FILED. BASED ON THE ABOVE SUBMISSIONS, IT WAS CONTENDED BEFORE THE CIT(A) THA T NEITHER THE AMOUNTS RECEIVED FROM THE MEMBERS AS ADVANCE INSTALMENTS NO R THE MEMBERSHIP BOOKING AMOUNT COULD BE ASSESSED UNDER SECTION 68. 6. ON AN EXAMINATION OF THE EVIDENCE AND THE SUBMIS SIONS OF THE ASSESSEE AS ABOVE, THE CIT(A) RECORDED THE FOLLOWING FINDING S: A) THERE IS NO DOUBT ABOUT THE NATURE OF THE ASSESS EES BUSINESS WHICH WAS TO BUY AND SELL PLOTS OF LAND. IN FACT T HE AO HAS EXAMINED THE PROFITS SHOWN BY THE ASSESSEE FROM THE SCHEME KNOWN AS ILAHI PARK AND HAS EVEN MADE AN ADDITION TO THE PROFIT FROM THE SCHEME ON ESTIMATE. THE AO IS THEREFORE C LEAR ABOUT THE NATURE OF THE ASSESSEES BUSINESS. B) IN THE ABOVE BACKGROUND, THE AO SHOULD NOT HAVE MADE ANY ADDITION UNDER SECTION 68 OF THE ACT WITHOUT EVEN M AKING ANY PAGE - 5 ITA NO.3572/AHD/2008 -5- INQUIRES FROM THE MEMBERS WHO GAVE THE ADVANCE INST ALMENTS AND THE BOOKING AMOUNTS TO THE ASSESSEE. C) THE ASSESSEE HAS MAINTAINED THE REGISTERS FOR IN STALMENTS AND THE MEMBERSHIP FEES RECEIPTS IN WHICH COMPLETE DETAILS RELATING TO THE MEMBER ARE STATED. THEREFORE, IF ANY DOUBTS WE RE ENTERTAINED BY THE AO HE OUGHT TO HAVE MADE INQUIRIES WITH THE MEMBERS BY TAKING APPROPRIATE PROCEEDINGS AGAINST THEM AND CAL LED UPON THEM TO CONFIRM THE EXPLANATION OF THE ASSESSEE. D) IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE ALSO FILED A DETAILED STATEMENT SHOWING THE NAMES OF VAR IOUS SCHEMES, THEIR LOCATION, TOTAL NUMBER OF PLOTS, SIZE OF THE PLOT, SALE OF THE PLOTS, BALANCE PLOTS ON HAND AT THE END OF THE YEAR ETC. A COPY OF THE STATEMENT WAS FILED BEFORE THE CIT(A) ALSO. T HE AO HAS ASSESSED THE PROFITS EARNED BY THE ASSESSEE FROM TH E SALE OF THE PLOTS. E) NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO TO SHOW THAT THE DETAILS, DOCUMENTS, REGISTERS ETC. PRODUCED BEF ORE HIM BY THE ASSESSEE WERE NOT RELIABLE OR ACCEPTABLE ON THE BAS IS OF ANY INQUIRIES CONDUCTED BY HIM. THERE IS NO MATERIAL T O SHOW THAT THE AMOUNTS RECEIVED FROM THE CUSTOMERS BELONGED TO THE ASSESSEE- FIRM ITSELF. F) THE AO, HAVING ASSESSED THE PROFITS FROM THE ILA HI PARK SCHEME ON THE BASIS OF COMPARISON WITH THE PROFITS MADE BY THE ASSESSEE IN OTHER SCHEMES, HAS CONTRADICTED HIMSELF IN HOLDI NG THAT THE CUSTOMERS ARE NOT GENUINE AND THE AMOUNTS SHOWN IN THEIR NAMES IN THE ASSESSEES BOOKS AS ADVANCE INSTALMENTS OR M EMBERSHIP FEES BELONGED TO THE ASSESSEE-FIRM ITSELF. IT IS I MPROBABLE THAT A PAGE - 6 ITA NO.3572/AHD/2008 -6- PERSON WOULD BOOK A PLOT FOR HIMSELF IN THE NAME OF ANOTHER PERSON WITH THE HELP OF HIS OWN MONIES AND WOULD SE LL THE SAME TO HIMSELF TO SHOW A NOTIONAL PROFIT AND PAY TAX TH EREOF. G) THE AO HAS REJECTED THE EVIDENCE ADDUCED BY THE ASSESSEE ON IMPROPER CONSIDERATIONS AND ON SUSPICION, SURMISE A ND CONJECTURES. THIS IS CONTRARY TO THE LEGAL POSITIO N ADUMBRATED BY THE SUPREME COURT IN LALCHAND BHAGAT AMBICA RAM VS. CIT, (1959) 37 ITR 288, SREELEKHA BANERJEE VS. CIT, (196 3) 49 ITR 112 AND HOMI JAHANGIR GHEESTA VS. CIT, (1961) 41 IT R 135. ON THE BASIS OF THE AFORESAID FINDINGS, THE CIT(A) DELETED THE ADDITIONS OF RS.1,07,09,490/- AND RS.1,71,433/-. 7. IN SUPPORT OF THE FIRST TWO GROUNDS, THE LEARNED CIT-DR CONTENDED THAT THERE IS NO MENTION OF THE FACT THAT THE ASSESSEE P RODUCED THE MEMBERS REGISTER BEFORE THE AO AND EVEN IN THE LETTER DATED 26-12-20 07 WRITTEN TO THE AO (PAGE 13 OF THE PAPER BOOK), THE ASSESSEE HAS REQUESTED F OR AT LEAST TWO DAYS TIME TO SUBMIT THE REQUIRED INFORMATION REGARDING DETAILS O F MEMBERS FROM WHOM THE ADVANCE INSTALMENTS AND BOOKING AMOUNTS WERE RECEIV ED WHICH ITSELF SHOWS THAT THE ASSESSEE DID NOT PRODUCE THE MEMBERS REGIS TER BEFORE THE AO. HE ALSO POINTED OUT THAT THE ASSESSMENT WAS GETTING BARRED BY TIME ON 31-12-2007 AND THE LETTER WAS WRITTEN BY THE ASSESSEE ON 26-12-200 7 AND THE ASSESSMENT WAS COMPLETED ON 27-12-2007 WHICH ALSO SUGGESTS THAT TH E ASSESSEE DID NOT PRODUCE THE MEMBERS REGISTER BEFORE THE AO. IT IS CONTENDE D THAT THE FINDING OF THE CIT(A) TO THE CONTRARY IS NOT CORRECT. IT IS SUBMI TTED THAT THE CIT(A) DID NOT COMPLY WITH THE REQUIREMENTS OF RULE 46A OF THE I.T .RULES WHEN HE CONSIDERED THE DETAILS FILED BY THE ASSESSEE BEFORE HIM AND BA SED HIS DECISION ON THEM; AT BEST HE COULD HAVE GIVEN AN OPPORTUNITY TO THE AO B Y WAY OF REMAND REPORT FOR MAKING AN INQUIRY FROM THE MEMBERS TO CORROBORATE T HE ASSESSEES EXPLANATION. PAGE - 7 ITA NO.3572/AHD/2008 -7- THE LEARNED CIT-DR THEREFORE PRAYED FOR RESTORATION OF THE MATTER EITHER TO THE AO OR TO THE CIT(A) FOR FRESH INQUIRY AND ORDERS. 8. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHE R HAND SUBMITTED THAT ALL THE EVIDENCE WAS ADDUCED AT THE ASSESSMENT STAGE IT SELF AND NO FRESH EVIDENCE WAS LED BEFORE THE CIT(A). HE DREW OUR ATTENTION T O THE PAPER BOOK FILED BY THE ASSESSEE AND IN PARTICULAR TO THE REPLY OF THE ASSESSEE TO THE QUESTIONNAIRE ISSUED BY THE AO. THE COPY OF THE REPLY IS AT PAG ES 1 TO 4 OF THE PAPER BOOK. THE LETTER DATED 26-12-2007 REFERRED TO BY THE LEAR NED CIT-DR, IT WAS POINTED OUT, CONTAINS SEVERAL ENCLOSURES AND IN PARTICULAR OUR ATTENTION WAS DRAWN TO THE COPIES OF THE LEDGER ACCOUNTS OF THE MEMBERSHIP BOO KING WHICH WERE ENCLOSED TO THE SAID LETTER. THESE COPIES ARE AT PAGES 40 T O 48 OF THE PAPER BOOK. ON 26- 12-2007 ANOTHER LETTER WAS WRITTEN BY THE ASSESSEE TO THE AO, A COPY OF WHICH IS AT PAGE 49 OF THE PAPER BOOK. THE ASSESSEE HAD ENCLOSED TO THIS LETTER, THE COPIES OF THE LEDGER ACCOUNTS OF COLLECTION OF ADVA NCE INSTALMENTS FROM THE CUSTOMERS. THESE ACCOUNTS OCCUPY ALMOST 200 PAGES OF THE PAPER BOOK, FROM PAGE 50 TO 244. THEY SHOW THE NAMES AND ADDRESSES OF THE MEMBERS, THE NUMBER OF THE INSTALMENT RECEIVED, THE AMOUNT RECEI VED AND DISCOUNT IF ANY GIVEN. IT WAS SUBMITTED THAT EVEN UNDER COVER OF L ETTER DATED 26-10-2007 (PAGE 5 OF THE PAPER BOOK), THE ASSESSEE HAD FURNISHED ST ATEMENTS SHOWING MONTHWISE DETAILS OF ADVANCE INSTALMENTS RECEIVED FROM THE BE GINNING OF THE SCHEME TILL THE YEAR UNDER CONSIDERATION. IT IS POINTED OUT T HAT THIS INFORMATION WAS GIVEN AT A TIME WHEN SUFFICIENT TIME WAS LEFT FOR COMPLET ING THE ASSESSMENT. IT IS ALSO POINTED OUT THAT IT WAS ONLY ON 24-12-2007, BARELY SEVEN DAYS BEFORE THE ASSESSMENT WAS GETTING BARRED BY TIME THAT THE AO A SKED FOR ALL THE DETAILS OF THE CASH CREDITS IN RESPONSE TO WHICH THE ASSESSEE SUBMITTED THE RELEVANT DETAILS BY LETTER DATED 26-12-2007 WHICH INCLUDED COPIES OF THE LEDGER ACCOUNTS OF MEMBER BOOKING RECEIPTS. OUR ATTENTION WAS ALSO D RAWN TO PARA-7 OF THE STATEMENT OF FACTS FILED BEFORE THE CIT(A) IN WHICH IT WAS STATED BY THE ASSESSEE THAT THE AO WAS NOT CORRECT IN SAYING THAT THE ASSE SSEE DID NOT SUBMIT THE PAGE - 8 ITA NO.3572/AHD/2008 -8- DETAILS OF THE MEMBERS FROM WHOM ADVANCES AND BOOKI NG AMOUNTS WERE RECEIVED. IT WAS FURTHER POINTED OUT THEREIN THA T BY TWO LETTERS DATED 26-12- 2007 COMPLETE DETAILS OF THE MEMBERS AND THEIR ADDR ESSES WERE FURNISHED TO THE AO. IT IS CONTENDED BY THE LEARNED COUNSEL FOR TH E ASSESSEE THAT WHEN THE LEDGER EXTRACTS FROM THE BOOKS OF ACCOUNTS WERE FUR NISHED TO THE AO, IT AMOUNTS TO PRODUCING THE MEMBERS REGISTER ITSELF AN D IF THE AO HAD DOUBTED THE LEDGER ACCOUNTS HE COULD HAVE GOT IT VERIFIED W ITH THE MEMBERS REGISTER. IT IS CONTENDED THAT WHEN COMPLETE DETAILS ABOUT THE M EMBERS AND THE ADVANCES GIVEN BY THEM AND THE BOOKING AMOUNTS PAID BY THEM WERE FURNISHED TO THE AO HE WAS NOT JUSTIFIED IN SAYING THAT THE CASH CREDIT S WERE NOT PROVED. THE LEARNED COUNSEL FURTHER RELIED ON THE FINDING OF TH E CIT(A) THAT HAVING REGARD TO THE NATURE OF THE ASSESSEES BUSINESS THE AO WAS NOT JUSTIFIED IN TREATING THE INSTALMENTS AND MEMBERS BOOKING AMOUNT AS CASH CRED IT AND ASSESSING THEM UNDER SECTION 68. IT WAS THEREFORE PLEADED THAT T HE FINDINGS OF THE CIT(A) SHOULD BE UPHELD. 9. IN HIS REPLY, THE LEARNED CIT-DR POINTED OUT THA T IN THE LETTER DATED 26- 10-2007 (PAGE 5 OF THE PAPER BOOK) THE ASSESSEE FIL ED ONLY THE BARE MINIMUM INFORMATION FROM WHICH NOTHING CAN BE GATHERED AND THAT IS WHY THE AO WAS COMPELLED TO ASK FOR FURTHER INFORMATION BY LETTER DATED 24-12-2007. IT WAS SUBMITTED THAT THE CIT(A) HAS IGNORED THE FINDINGS OF THE AO AND HAS RUSHED TO DISPOSE OF THE APPEAL. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. THE FACTS NARRATED IN THE PRECEDING PARAGRAPHS WOULD SHOW THAT THE ASS ESSEE DID FILE THE RELEVANT DETAILS REGARDING THE MEMBERS WHO PAID THE ADVANCE INSTALMENTS AND THE BOOKING AMOUNTS BEFORE THE AO. COPIOUS DETAILS INC LUDING LEDGER ACCOUNT EXTRACTS HAVE BEEN FILED BY THE ASSESSEE. THEY WER E ALL FILED BEFORE 24-12- 2007. IN FACT MOST OF THE DETAILS WERE FILED UNDER COVER OF LETTER DATED 26-10- 2007. THE DETAILS CALLED FOR BY LETTER DATED 24-12 -2007 WERE FILED ON 26-12- PAGE - 9 ITA NO.3572/AHD/2008 -9- 2007. THE ASSESSEE IS IN THE BUSINESS OF BUYING AN D SELLING LANDS AND ITS MODUS OPERANDI IS TO BUY PLOTS OF LAND IN VILLAGES WHICH HAD SCOPE FOR DEVELOPMENT, TAKE MEMBERS WHO ARE WILLING TO BUY THE PLOTS, COLL ECT MONTHLY INSTALMENTS FROM THEM AS ALSO AN INITIAL BOOKING AMOUNT AND TRA NSFER THE LAND TO THEM ONCE THE INSTALMENTS ARE FULLY PAID. WHEN THE LAND IS T RANSFERRED, THE ADVANCES ARE TREATED AS SALES AND TAKEN TO THE TRADING ACCOUNT. THE AO, AS POINTED OUT BY THE CIT(A), HAS NOT DISPUTED THE MODUS OPERANDI OF THE BUSINESS AND HAS EVEN PROCEEDED TO ESTIMATE THE PROFITS OF THE ILAHI PARK SCHEME. THE CIT(A) HAS HELD THAT THE AO HAS FAILED TO KEEP IN MIND THE NAT URE OF THE ASSESSEES BUSINESS WHILE EXAMINING THE CONTRIBUTION MADE BY T HE MEMBERS IN MONTHLY INSTALMENTS, EVEN THOUGH HE WAS FULLY AWARE OF THE BUSINESS OF THE ASSESSEE. WE ARE INCLINED TO AGREE WITH THE DECISION OF THE C IT(A) AND ALSO WITH HIS OBSERVATION THAT THE AO HAS TAKEN CONTRADICTORY STA NDS. IF HE ACCEPTS THAT THE BUSINESS OF THE ASSESSEE INVOLVED TAKING OF MONTHLY ADVANCES FROM THE MEMBERS AND BOOKING AMOUNTS FROM THEM AND THAT THE INCOME AROSE FROM THE SALE OF THE PLOTS IN THE YEAR IN WHICH THE PLOTS WE RE REGISTERED IN THE NAMES OF THE MEMBERS AND POSSESSION GIVEN, THEN IT FOLLOWS T HAT THE AMOUNTS SHOWN AS ADVANCES OR INSTALMENTS FROM THE MEMBERS STOOD PROV ED. THE AO HAS NOT DISPUTED THE FACT THAT THE ADVANCE INSTALMENTS STOO D TRANSFERRED TO THE SALES ACCOUNT WHEN THE PLOT WAS TRANSFERRED IN THE NAME O F THE MEMBER. THUS, THE CREDITS IN THE ACCOUNTS OF THE MEMBERS ARE NOTHING BUT ADVANCE PAYMENTS OR INSTALMENTS IN ANTICIPATION OF THE SALE PURSUANT TO THE BOOKING OF THE PLOT IN THE PARTICULAR SCHEME. DURING THE RELEVANT ACCOUNTING YEAR, THERE WERE 57 SALES AND THE ASSESSEE HAS CONTENDED BEFORE THE AO IN ITS LETTER DATED 26-12-2007 THAT THE INSTALMENT AND BOOKING AMOUNTS STANDING TO THE CREDIT OF THESE MEMBERS WERE TRANSFERRED TO THE SALE OF PLOTS ACCOU NT WHICH WAS TAKEN TO THE TRADING ACCOUNT. IF THIS CLAIM IS NOT DISPUTED, AS IT HAS NOT BEEN DISPUTED BY THE AO, THEN IT FOLLOWS THAT THE AMOUNTS SHOWN IN THE A CCOUNTS OF THE MEMBERS CANNOT BE ASSESSED AS CASH CREDITS UNDER SECTION 68 OF THE ACT. THIS ASPECT OF THE MATTER HAS ALSO BEEN HIGHLIGHTED BY THE CIT(A) AND WE ARE IN AGREEMENT PAGE - 10 ITA NO.3572/AHD/2008 -10- WITH HIS VIEW ON THIS ASPECT. THE PAPERS COMPILED IN THE PAPER BOOK ALSO SHOW THAT ALL THE DETAILS WHICH ARE RELEVANT AND WHICH S HOW THE NATURE AND SOURCE OF THE AMOUNTS CREDITED IN THE ADVANCE INSTALMENTS ACC OUNT AND THE MEMBERS BOOKING ACCOUNT HAVE BEEN FILED BEFORE THE AO. IN THESE CIRCUMSTANCES, WE ARE UNABLE TO DIFFER FROM THE VIEW TAKEN BY THE CIT (A). WE ARE ALSO NOT INCLINED TO ACCEPT THE SUBMISSION OF THE LEARNED CI T-DR THAT THE CIT(A) ERRED IN NOT FOLLOWING THE PROCEDURE PRESCRIBED BY RULE 4 6A. IT HAS NOT BEEN POINTED OUT BY HIM AS TO WHAT WAS THE ADDITIONAL EVIDENCE A DDUCED BEFORE THE CIT(A) BY THE ASSESSEE. SINCE COMPLETE DETAILS WERE FILED BEFORE THE AO HIMSELF, THERE IS ALSO NO NEED TO SEND BACK THE MATTER FOR FRESH C ONSIDERATION. EVEN IF THE AO DID NOT HAVE THE TIME TO EXAMINE THOSE PAPERS, THE CIT(A) WHOSE POWERS ARE CO-TERMINUS WITH THOSE OF THE AO HAS EXAMINED THEM AND HAS TAKEN THE DECISION. IT IS THEREFORE UNNECESSARY TO RESTORE T HE MATTER FOR FRESH EXAMINATION. THUS, THE FIRST TWO GROUNDS TAKEN BY THE DEPARTMENT ARE DISMISSED. 11. THE ONLY OTHER GROUND WHICH REMAINS IS GROUND N O.3 WHICH IS AGAINST THE RELIEF OF RS.49,555/- GIVEN BY THE CIT(A) BY DE LETING THE ADDITION FOR LOW GROSS PROFIT. THE AO NOTED THAT THE RATE OF GROSS PROFIT FROM ILAHI PARK SCHEME WAS ONLY 13.75% AS AGAINST THE GROSS PROFIT OF 66.6 0% IN RESPECT OF THE OTHER TRANSACTIONS IN THE PLOTS. HE ACCORDINGLY ESTIMATE D THE GROSS PROFIT OF ILAHI PARK ALSO AT 66.60% WHICH RESULTED IN THE ADDITION OF RS.49,555/-. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE DETAILS OF THE PUR CHASES AND SALES OF PLOTS IN ILAHI PARK WERE AVAILABLE IN THE MEMBERS REGISTERS PRODUCED BEFORE THE AO. IT WAS ALSO CONTENDED THAT THE AO CANNOT MAKE A SWEEPI NG COMPARISON BETWEEN PLOTS LOCATED AT DIFFERENT PLACES AND SEEK TO ENHAN CE THE RATE OF GROSS PROFIT OF ILAHI PARK PLOTS. THE CIT(A) AGREED WITH THE ASSES SEES SUBMISSIONS AND ALSO HELD THAT THE AO DID NOT DISPUTE THE PURCHASE PRICE OR SALE PRICE OF THE PLOTS IN ILAHI PARK. HE FOUND THE COMPARISON MADE BY THE AO , IRRESPECTIVE OF THE PAGE - 11 ITA NO.3572/AHD/2008 -11- LOCATION OF THE PLOTS, TO BE TOTALLY UNJUSTIFIED. ACCORDINGLY, HE DELETED THE ADDITION. 12. AFTER HEARING BOTH THE SIDES, AND AFTER GOING T HROUGH THE ORDERS OF THE DEPARTMENTAL AUTHORITIES, WE ARE INCLINED TO UPHOLD THE DECISION OF THE CIT(A) SINCE THE REASONS GIVEN BY HIM ARE SOUND AND THOSE GIVEN BY THE AO ARE BASED ONLY ON CONJECTURES AND SURMISES. THE AO HAS ALSO OVERLOOKED THAT THE SAME RATE OF GROSS PROFIT CANNOT BE ACCEPTED FROM PLOTS LOCATED AT DIFFERENT AREAS. WE THEREFORE CONFIRM THE DECISION OF THE CIT(A) AND DI SMISS THE GROUND. 13. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED, WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT 23 RD OCTOBER, 2009. SD/- SD/- (A.N.PAHUJA) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 23-10-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD