Grand Ville Realtors, Hyderabad V. DCIT, Hyderabad

ITA 504/HYD/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7170 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-07-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 07-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PHANI RAJU
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income; Search and seizure; Loose papers; Source of fund; Revenue expenditure
• Section: 142(1); 153A; 145; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, A.M AND SMT . ASHA VIJAYARAGHAVAN, J. M ITA NOS. 501 TO 507/HYD/2010 ASST. YRS. 2001-02 TO 2007-08 M/S. GRAND VILLE REALTORS, HYDERABAD. (PAN: AAACG 8863 E) VS THE DCIT, CENTRAL CIR - 2, HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY: : SHRI S. RAMA RAO RESPONDENT BY : SHRI PHANI RAJU DATE OF HEARING: 01-11-2011. DATE OF PRONOUNCEMENT: 14-12-2011. O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINS T COMMON ORDER OF CIT (A)-I, HYDERABAD DATED 15-2-2010 AND T HEY PERTAIN TO THE ASSESSMENT YEARS 2001-02 TO 2007-08. SINCE THE EFFE CTIVE ISSUE INVOLVED IN ALL THESE APPEALS IS COMMON AND IDENTIC AL, THESE ARE TAKEN UP TOGETHER AND DISPOSED OF BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 2 2. SINCE GROUNDS RAISED IN ALL THESE APPEALS ARE I DENTICAL AND COMMON, FOR THE SAKE OF BREVITY, WE REPRODUCE HEREU NDER THE GROUNDS RAISED IN ITA NO.501/HYD/2010. 1. THE ORDER OF THE CIT (A), HYDERABAD IS ERRONEOU S BOTH ON FACTS AND IN LAW. 2. THE CIT (A) ERRED IN CONFIRMING THE PENALTY LEVI ED BY THE ASSESSING OFFICER OF RS.19,23,856/ UNDER SECTION 27 1(1)(C ) OF THE I T ACT. THE LEARNED CIT (A) OUGHT TO HAVE SEEN THAT THERE IS NO CONCEALMENT OF INCOME AND CANCELLED THE PENALTY LEVIED. 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS IN REAL ESTATE BUSINESS ENGAGED IN BUYING AND SELLING OF LANDS, DEVELOPING THE LANDS INTO FARM SITES AS WELL AS DEVELOPING HOU SING PLOTS. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE CASE OF THE ASSESSEE IN JULY, 2006. DURING THE COURSE OF SEARCH, SUBSTANTIAL DOC UMENTS AND LOOSE PAPERS WERE SEIZED. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSING OFFICER ANALYZED THE PROFIT AND LOSS RETU RNED BY THE ASSESSEE FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. THE A SSESSING OFFICER FOUND THAT UP TO 2003-04, THE ASSESSEE HAD SHOWN LO SS ON THE SALES RECORDED. FOR THE ASSESSMENT YEAR 2004-05, THE AS SESSEE HAD DECLARED PROFIT BUT THAT WAS DUE TO A MAJOR DEVIATION IN THE ACCOUNTING POLICY. THE ASSESSING OFFICER TABULATED THE SALES AND THE N ET PROFIT SHOWN BY THE ASSESSEE FROM ASSESSMENT YEARS 2001-02 TO 2007-08 A ND FOUND THAT ONLY A TOTAL NET PROFIT OF RS.1,55,26,884/- HAD SUF FERED TAX ON A TOTAL ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 3 SALE OF RS.82,85,97,091/- RESULTING IN A PROFIT MAR GIN OF 1.87%. THE ASSESSING OFFICER ALSO OBSERVED THAT THE EXPENDITUR E DEBITED BOTH DIRECT AND INDIRECT WAS DISPROPORTIONATE TO THE SALES RECO RDED. FOR EXAMPLE, FOR ASSESSMENT YEAR 2001-02 AND 2002-03 PUT TOGETHER, T HE AGENCY COMMISSION WAS RS.4,92,33,002/- AGAINST A SALE OF R S.9,00,61,998/- WHICH COMES TO ROUGHLY 54.66% WHICH WAS ABNORMALLY HIGH. SIMILARLY, IN THE ASSESSMENT YEAR 2005-06, AS AGAINST THE COST OF LAND DEBITED AT RS.53,56,800/-, THE COST OF DEVELOPMENT WAS CLAIMED AT RS.5,09,47,634/-. THE ASSESSING OFFICER THUS CONCL UDED THAT THERE WAS A MIS-MATCH BETWEEN THE REVENUE RECOGNIZED AND THE CO ST DEBITED AND IT WAS ALSO NOTICED THAT THE VALUATION OF CLOSING STO CK WAS ARBITRARY WITHOUT ANY BASIS AND NO QUANTITATIVE DETAILS WERE FURNISHED TO SUBSTANTIATE THE VARIATION FOUND RESULTING IN DISTO RTION OF NET PROFIT FOR ALL THE ASSESSMENT YEARS. THEREAFTER THE ASSESSING OFF ICER ANALYZED THE QUANTITATIVE DETAILS OF LAND PURCHASED DEVELOPED AN D SOLD. DUE TO THE INCONSISTENCY IN THE REVENUE RECOGNITION, MISMATCH BETWEEN THE REVENUE AND THE COST AND THE ARBITRARY VALUATION OF CLOSING STOCK AS ALSO INFLATION OF EXPENDITURE, THE ASSESSING OFFICER HEL D THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE NOT RELIABL E IN SO FAR AS DETERMINATION OF PROFIT IS CONCERNED. ADDED TO THI S, THERE WAS NO CONSISTENCY IN THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE FROM YEAR TO YEAR AND ACCORDINGLY, THE ASSESSING OFFICER PROPOSED TO ESTIMATE THE PROFIT AT THE RATE OF 8% ON THE GROSS RECEIPTS FOR ALL THE ASSESSMENT YEARS AND ISSUED SHOW CAUSE TO THE ASSESSEE. THE ASSESSEE IN ITS REPLY DATED 15-12-2008, CONTENDED THAT THE PROPOSED ESTIM ATION WAS ON HIGHER SIDE AND CAME FORWARD TO ESTIMATE THE INCOME AT THE RATE OF 5% ON THE GROSS COLLECTIONS FOR THE FIRST FOUR ASSESSM ENT YEARS I.E., 2001-02 ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 4 TO 2004-05 AND 8% FOR THE REMAINING THREE YEARS 200 5-06 TO 2007-08. CONSIDERING THE EXPLANATION AND THE ACCEPTANCE OF P ERCENTAGE PROFIT METHOD THE ASSESSING OFFICER ESTIMATED THE NET PROF IT AT 5% FOR THE ASSESSMENT YEAR 2001-02 TO 2002-03 AND @8% FOR THE REMAINING FIVE ASSESSMENT YEARS. HOWEVER, SINCE THE INCOME OFFERE D BY THE ASSESSEE COMPANY WAS MORE THAN THE ASSESSED INCOME FOR THE A SSESSMENT YEARS 2006-07 AND 2007-08, THE ASSESSING OFFICER ADOPTED THE RETURNED FIGURE. THE PROFIT ESTIMATED BY THE ASSESSING OFFICER IS AS UNDER: A.Y. GROSS PROFIT NET PROFIT % VALUE (RS.) (RS.) 01-02 10,99,34,543 5% 54,96,727 02-03 8,39,36,452 5% 41,96,823 03-04 7,36,83,765 8% 58,94,701 04-05 20,49,54,445 8% 1,63,96,356 05-06 13,36,57,958 8% 1,06,92,637 06-07 12,23,81,900 8% 97,90,552 07-08 41,76,72,290 8% 3,34,13,783 4. IT WAS STATED BY THE ASSESSING OFFICER THAT THE INCOME OFFERED BY THE ASSESSEE COMPANY WAS MORE THAN THE INCOME ESTIM ATED FOR ASSESSMENT YEARS 2006-07 AND 2007-08. THE ASSESSING OFFICER ASSESSED THE INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEARS IN ACCORDANCE WITH THE PROFIT ESTIMATED AND INITIATED PENALTY PROCEEDI NGS UNDER SECTION 271(1)( C) OF THE ACT. IN RESPONSE TO THE PENALTY SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER, THE ASSESSEE SUBMI TTED THAT THE ASSESSING OFFICER DEVIATED THE METHOD ADOPTED BY TH E ASSESSEE AND THEREFORE IT CANNOT BE SAID THAT THERE IS ANY CONCE ALMENT OF INCOME. ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 5 THE DIFFERENCE IN INCOME ADMITTED AND THE INCOME AS SESSED AROSE ONLY ON ACCOUNT OF WORKING MADE BY THE ASSESSING OFFICER AND NOT BECAUSE THAT THE ASSESSEE CONCEALED ANY PARTICULARS OF INCO ME. THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSEE COMPANY CONSISTENT LY FOLLOWED THE SAID METHOD OF ACCOUNTING AND HENCE IT IS SUBMITTED THAT IT SHOULD BE ACCEPTED AS SUCH. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE EXPLANATION FURNISHED BY THE ASSESSEE AND IT WAS OB SERVED THAT THE ASSESSEE HAD NOT FOLLOWED ANY CONSISTENT METHOD OF REVENUE RECOGNITION. IN THE INITIAL YEARS I.E., UP TO ASSE SSMENT YEAR 2003-04, THE REVENUE WAS RECOGNIZED ON THE BASIS OF REGISTRA TION OF PLOTS AS WELL AS ON RECEIPT OF FULL CONSIDERATION FROM THE CUSTOM ERS, WHEREAS IN THE ASSESSMENT YEAR 2004-05, THE ASSESSEE COMPANY OFFER ED THE SALES ON THE BASIS OF REGISTRATION OF PLOTS PLUS WHEREVER TH E FULL CONSIDERATION IS RECEIVED AND ALSO PART PAYMENT RECEIVED IN CERTAIN CASES. FROM THE ASSESSMENT YEAR 2005-06 ONWARDS, THE SALES WERE REC OGNIZED ONLY ON THE BASIS OF REGISTRATION. THIS WAS ALSO ACCEPTED BY THE MANAGING DIRECTOR OF THE COMPANY IN HIS SWORN STATEMENT. TH EREFORE, THE ASSESSEES CONTENTION THAT THEY HAVE FOLLOWED CONSI STENT METHOD OF ACCOUNTANCY IS FAR FROM TRUTH. JUSTIFYING THE ESTI MATION MADE, THE ASSESSING OFFICER OBSERVED THAT THE EXPENDITURE BOO KED BY THE ASSESSEE COMPANY WAS AGAINST THE ADVANCES TOWARDS SALES OF P LOTS RECEIVED FROM CUSTOMERS AND NOT AGAINST THE SALES OFFERED IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER ALSO OBSERVED THAT IT IS DUE TO FILING OF INACCURATE PARTICULARS THAT THE BOOKS OF ACCOUNT WE RE PROPOSED TO BE REJECTED AND THE INCOME WAS ESTIMATED ON GROSS COLL ECTION. FURNISHING OF INACCURATE PARTICULARS ALSO LEADS TO CONCEALMENT OF INCOME. THE ASSESSING OFFICER RELIED ON THE DECISION OF HONBLE ORISSA HIGH COURT IN ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 6 THE CASE OF CIT VS. INDIAN METALS AND FERRO ALLOYS LIMITED (117 CTR 37). ACCORDINGLY, THE ASSESSING OFFICER HELD THAT THE AS SESSEE COMPANY HAD FILED VARIOUS INACCURATE PARTICULARS OF INCOME LEAD ING TO CONCEALMENT OF INCOME AND UNDER THE CIRCUMSTANCES IT WAS FIT CASE FOR LEVY OF PENALTY. THE ASSESSING OFFICER THEREFORE LEVIED PENALTY FOR THE ASSESSMENT YEARS 2001-02 TO 2007-08 AS UNDER:- A.YEAR PENALTY LEVIED 2001-02 RS.19,23,856/- 2002-03 RS.14,68,887/- 2003-04 RS.20,63,145/- 2004-05 RS.57,38,726/- 2005-06 RS.37,42,423/- 2006-07 RS. 1,88,475/- 2007-08 RS. 2,14,514/- AGGRIEVED AGAINST THE ABOVE PENALTIES LEVIED BY THE ASSESSING OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). ON APPEAL, THE CIT (APPEALS) AFTER DISCUSSING THE POIN TS ELABORATELY IN HIS ORDER AND BY FOLLOWING VARIOUS CASE-LAWS, HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN LEVYING PENALTIE S FOR THE YEARS UNDER CONSIDERATION AND CONFIRMED THE ACTION OF THE ASSESSING OFFICER. ACCORDINGLY, THE CIT (A) DISMISSED THE AP PEALS FILED BY THE ASSESSEE. FURTHER AGGRIEVED, THE ASSESSEE IS IN A PPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BUSINESS ACTIVITY OF THE ASSESSEE IS PURCHASE OF LANDS, DEVE LOPMENT OF SUCH LAND INTO SITES AND SALE OF THE SAME. THE ASSESSEE WAS FILING THE RETURNS OF INCOME REGULARLY AND THE DETAILS OF THE REGULAR RET URNS OF INCOME FILED ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 7 FROM THE ASSESSMENT YEARS 2001-02 TO 2007-08 ARE SU BMITTED. IT IS FURTHER SUBMITTED THAT THE ASSESSEE IS FOLLOWING A METHOD OF ACCOUNTING ACCORDING TO WHICH IT IS RECOGNIZING THE PROFIT AT THE TIME OF SALE BY REGISTRATION OR COMPLETE REALIZATION OF THE SALE PR ICE OF THE PLOTS. ACCORDINGLY, THE ACCOUNTS HAVE BEEN PREPARED AND TH E INCOMES HAVE BEEN ARRIVED AT THE BASED ON THE SAID METHOD OF ACC OUNTING. IT IS SUBMITTED THAT THE INCOME-TAX AUTHORITIES CONDUCTED SEARCH AND SEIZURE OPERATIONS ON 26-7-2006 AT THE PREMISES OF THE ASSE SSEE AND THE AUTHORITIES DID NOT FIND ANY INCRIMINATING MATERIAL DURING THE COURSE OF SEARCH. HOWEVER, IN ACCORDANCE WITH THE PROVISION S OF SECTION 153A OF THE ACT, THE ASSESSING OFFICER ISSUED NOTICES REQUI RING THE ASSESSEE HEREIN TO FILE THE RETURNS OF INCOME AND THE ASSESS EE ADMITTED ADDITIONAL INCOMES DURING THE COURSE OF SEARCH AND THE SAID AM OUNT WAS OFFERED WHILE FILING THE RETURNS OF INCOME. IT IS FURTHE R SUBMITTED THAT THE EFFECT OF THE ASSESSMENT IS REJECTION OF THE BOOKS OF ACCOUNT AND ESTIMATION OF INCOME AND THAT THE ASSESSEE WAS ADMI TTING THE INCOME AS PER THE METHOD OF ACCOUNTING FOLLOWED BY IT. THE A SSESSING OFFICER AFTER REJECTING THE BOOKS OF ACCOUNTS ADOPTED THE NET PRO FIT RATE OF 5% ON THE GROSS RECEIPTS SHOWN AND ACCORDINGLY ARRIVED AT A P ROFIT OF RS.54,96,727/- AS AGAINST THE LOSS ADMITTED OF RS.5 2,94,415/- AND IN THIS CONNECTION, THE ASSESSEE SUBMITTED THAT IT DID NOT FILE ANY INACCURATE PARTICULARS OF INCOME AND ALSO THERE IS NO CONCEALMENT OF INCOME IN THIS CASE. IT IS FURTHER SUBMITTED THAT WHATEVER THE DEVELOPMENT EXPENDITURE INCURRED IS DEBITED TO THE PROFIT AND LOSS ACCOUNT AND IT IS CONSIDERED FOR THE PURPOSE OF ARR IVING AT THE CLOSING STOCK. THEREFORE, THERE WOULD NOT BE ANY MIS-MATCH AND THE ASSESSING OFFICERS VIEW THAT THERE IS A MIS-MATCH OF THE COS T TO THE SALE IS NOT ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 8 CORRECT. WITH REGARD TO ARBITRARY VALUATION OF CLO SING STOCK, IT IS SUBMITTED THAT THE ASSESSING OFFICER IS NOT CORRECT IN MENTIONING THAT THE ASSESSEE ADDED BOTH DIRECT AND INDIRECT EXPENDITURE AND ADOPTED THE SAME AS OPENING STOCK. IT IS SUBMITTED THAT WHAT W AS ADOPTED IS THE CLOSING STOCK FOR THE YEARS UNDER CONSIDERATION AND THE ASSESSEE DEDUCTED PROFIT ELEMENT FROM THE TOTAL SALE VALUE A ND SHOWN IT AS THE CLOSING STOCK. IT IS SUBMITTED THAT THIS IS ONE OF THE METHODS OF VALUATION ADOPTED BY THE ASSESSEE AND THERE WILL NO T BE ANY DECREASE IN THE VALUE OF CLOSING STOCK AND, THEREFORE, THE ASSE SSING OFFICER IS NOT JUSTIFIED IN MENTIONING THAT IT WAS DONE WITH A VIE W TO REDUCE THE PROFIT MARGIN AND FURTHER SUBMITTED THAT THERE IS NO LOSS TO REVENUE IN THIS METHOD OF VALUATION OF CLOSING STOCK. WITH REGARD TO INFLATION OF EXPENDITURE, IT IS SUBMITTED THAT THE COST OF LAND AND DEVELOPMENT EXPENSES, AGENCY COMMISSION AND OTHER EXPENSES DEBI TED ARE ON HIGH SIDE AND DISPROPORTIONATE TO THE SALES RECORDED. I N SO FAR AS THE CLOSING STOCK IS CONCERNED, THE ASSESSEE DEBITED THE SAME V ALUE AND REDUCED THE PROFIT ELEMENT THERE FROM AND ARRIVED AT THE CL OSING STOCK AND THIS CLEARLY INDICATES THAT THERE WOULD NOT BE ANY INFLA TION IN THE EXPENDITURE EVEN IF THE REVENUE EXPENDITURE IS DEBITED TO THE P ROFIT AND LOSS ACCOUNT. IT IS CONTENDED THAT THE ASSESSING OFFICER IS NOT J USTIFIED IN MENTIONING THAT THE ASSESSEE FILED ANY INACCURATE PARTICULARS OF INCOME. IT IS FURTHER SUBMITTED THAT THE ASSESSING OFFICER MENTIONED THAT THE ASSESSEE DID NOT FOLLOW ANY CONSISTENT METHOD OF RECOGNITION OF REVE NUE AS ACCORDING TO HIM, UP TO THE ASSESSMENT YEAR 2003-04, THE ASSESSE E RECOGNIZED THE REVENUE ON REGISTRATION OF PLOTS AS WELL AS ON RECE IPT OF FULL CONSIDERATION FROM THE CUSTOMERS WHEREAS FOR THE ASSESSMENT YEAR 2004-05 THE REVENUE WAS RECOGNIZED ON THE BASIS OF REGISTRATION OF PLOTS AND ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 9 WHEREVER THE FULL CONSIDERATION OR PART OF CONSIDER ATION WAS RECEIVED. FOR THE ASSESSMENT YEAR 2005-06 AND ONWARDS THE SAL ES ARE RECOGNIZED ONLY ON THE BASIS OF REGISTRATION AND IN THIS REGAR D, IT IS SUBMITTED THAT UP TO THE ASSESSMENT YEAR 2003-04, THE REVENUE WAS RECOGNIZED ON THE BASIS OF THE REGISTRATION OF THE PLOTS AND ALSO ON RECEIPT OF FULL CONSIDERATION FROM THE PURCHASERS. HOWEVER, THE AS SESSEE ADMITTED WHEREVER THE POSSESSION WAS HANDED OVER TO THE PURC HASERS CONCERNED IRRESPECTIVE OF THE RECEIPT OF FULL CONSIDERATION A ND THEREFORE IN SOME OF THE CASES, EVEN WHEN THE TOTAL AMOUNT WAS NOT RECEI VED, THE SALE PRICE HAS BEEN CONSIDERED AS THE SALE. IT IS FURTHER SUBM ITTED THAT THE METHOD ADOPTED BY THE ASSESSEE WAS EXPLAINED AND THE ASSES SING OFFICER DID NOT PROVE THAT BY ADOPTING THIS METHOD, THE ASSESSEE HA S EVADED ANY PART OF TAX LIABILITY. IN THE CIRCUMSTANCES, IT IS SUBMI TTED THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN HOLDING THAT THE ASSESS EE FURNISHED ANY INACCURATE PARTICULARS OF ITS INCOME. IT IS SUBMIT TED THAT WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER AD OPTED A DIFFERENT METHOD FOR ARRIVING AT THE PROFIT AND THE IT WAS C ONSIDERED BY HIM THAT THE ADVANCES RECEIVED FROM THE PURCHASERS FOR THE P URPOSE OF DETERMINING THE REVENUE WHEREAS THE ASSESSEE RECOGN IZED THE REVENUE ONLY WHEN REGISTRATION WAS EFFECTED OR WHEN THE FU LL CONSIDERATION WAS RECEIVED. THE ASSESSING OFFICER ESTIMATED THE INCO ME AT 5% ON THE ADVANCES RECEIVED DURING THE YEARS UNDER CONSIDERAT ION. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFICER ONLY RESORTED TO ESTIMATION OF INCOME BY TAKING INT O CONSIDERATION THE GROSS ADVANCES RECEIVED AS AGAINST THE SALE PRICE A ND THE ASSESSEE ACCEPTED SUCH PROCEDURE ADOPTED BY THE ASSESSING OF FICER ONLY TO SAVE PROTRACTED LITIGATION. ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 10 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT DURING THE SEARCH AND SEIZURE OPERAT ION, CERTAIN DOCUMENTS AND LOOSE PAPERS WERE SEIZED WHICH ARE OF THE NATURE OF INCRIMINATING MATERIALS AND THESE HAVE BEEN ELABORA TED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2001-02. THE ASSE SSING OFFICER HAS ALSO TABULATED THE DETAILS OF VARIOUS VENTURES UNDERTAKE N AS WELL AS THE DETAILS OF BULK SALES UNDERTAKEN BY THE ASSESSEE CO MPANY. IT IS PERTINENT TO NOTE THAT SEARCH DETAILS TABULATED CON TAIN THE DETAILS OF BOTH DEVELOPED PLOTS AS WELL AS VACANT LAND I.E., SOME O F THE LAND WAS DEVELOPED AND SOLD INTO PLOTS WHILE REMAINING WAS S OLD IN THE FORM OF VACANT LANDS. IT IS FURTHER SUBMITTED THAT THE MA JORITY OF THE PLOTS SOLD WERE UNDER INSTALLMENT SCHEME AND THESE SCHEMES DEP ENDED UPON THE SIZE OF THE PLOT, RATE OF MONTHLY INSTALLMENTS, NUM BER OF INSTALLMENTS, AMENITIES DEVELOPED IN RELATION TO THE SCHEME ETC., AND THE MODUS OPERANDI OF THE ASSESSEE COMPANY WAS THAT THE ASSES SEE USED TO RECEIVE ADVANCES FROM THE CUSTOMERS THROUGH APPOINT ED COMMISSION AGENTS ON INSTALLMENTS BASIS HAND THE NATURE OF CO LLECTION THEREFORE WAS CONCLUDED TO BE ADVANCES RECEIVED AGAINST SALE OF P LOTS. IT IS FURTHER SUBMITTED THAT DUE TO DISALLOWANCE OF EXPENDITURE U NDER SECTION 40(A)(IA) OF RS.3,56,78,394/-, THE TOTAL INCOME WAS ARRIVED AT RS.1,72,75,655/- AND AFTER SET OFF OF CARRY FORWARD LOSS OF RS.59,09,181/-, TAXABLE INCOME WAS ARRIVED AT RS.1, 13,66,,474/- IN OTHER WORDS, FOR THE ASSESSMENT YEAR 2005-06 ALSO T HE ASSESSEE COMPANY HAS SHOWN BUSINESS LOSS OF RS.1,99,54,305/- . ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 11 7. IT IS FURTHER SUBMITTED THAT THE NET PROFIT AS PER PROFIT AND LOSS ACCOUNT WAS RS.18,65,042/- AND THE ASSESSEE HAS DIS CLOSED RS.5,35,81,500/- ON ACCOUNT OF SEARCH ACTION, I.E., OVER AND ABOVE THE REGULAR INCOME ADMITTED. HOWEVER, THE ASSESSEE CLA IMED BACK THE DISALLOWANCE MADE EARLIER FOR ASSESSMENT YEAR 2005- 06 ON ACCOUNT OF SECTION 40(A)(IA) AT RS.3,56,78,394/-, THE RETURNED INCOME WAS ARRIVED AT RS.2,40,35,868/- AND THIS INCLUDES DISCLOSURE OF RS.56,00,000/- MADE BEFORE THE DDIT (INVESTIGATION) AND THE ASSESSEE HA S ADMITTED AN AMOUNT OF RS.5,91,81,500/- ON ACCOUNT OF SEARCH REL ATED ISSUES OVER AND ABOVE THE REGULAR INCOME AND THE DETAILS OF WH ICH ARE SUBMITTED BEFORE US. IT IS SUBMITTED THAT THE ASSESSING OFF ICER ALSO NOTICED THAT DESPITE THE SEARCH OPERATIONS, THE ASSESSEE COMPANY FILED LOSS RETURNS FOR THE ASSESSMENT YEARS 2001-02 TO 2003-04 AND NIL RETURN FOR THE ASSESSMENT YEAR 2004-05. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS REGULAR NOTICES WERE ISSUED UNDER SECTI ON 143(2) AND 142(1) CALLING FOR THE INFORMATION AND THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS PRODUCED WERE THOROUGHLY EXAMINED BY THE ASSESSING OFFICER. AFTER ANALYZING THE NET PROFIT AS COMPUTE D BY THE ASSESSEE WITHOUT CONSIDERING ANY OTHER SOURCES OF INCOME, I T WAS POINTED OUT THAT UP TO ASSESSING YEAR 2003-04 I.E., THE FIRST THREE YEARS, THERE WAS NO NET PROFIT ON THE SALES RECORDED AND THE NET PRO FIT WAS ADMITTED ONLY FOR SUCCEEDING YEARS, AND AFTER SETTING OFF OF LOSS ES WITH PROFIT A NET PROFIT OF ONLY RS.1,55,26,884/- HAS SUFFERED TAX ON A TOTAL SALES OF RS.88,85,97,091/-. THEREFORE, THE PROFIT MARGIN AS DISCLOSED BY THE ASSESSEE WAS ONLY 1.87% AND FOR THE ASSESSMENT YEAR 2004-05, THE NET PROFIT OF RS.1,59,83,022/- WAS OFFERED. THIS POSIT IVE FIGURE WAS STATED ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 12 BY THE ASSESSEE COMPANY TO BE ON ACCOUNT OF A CHANG E IN ACCOUNTING POLICY, THE EXPENDITURE DEBITED BY THE ASSESSEE COM PANY UNDER THE VARIOUS HEADS WERE OBSERVED TO BE DISPROPORTIONATE TO THE SALE RECORDED. FOR THE ASSESSMENT YEARS 2001-02 AND 20 02-03, PUT TOGETHER, AGENCY COMMISSION OF RS.4,92,33,002/- WAS CLAIMED ON SALES OF RS.9,00,61,998/- WHICH IS 54.66%. THIS IS ABNOR MAL. SIMILARLY, WITH REGARD TO COST OF LAND AND DEVELOPMENT EXPENSES ALS O AND FOR ASSESSMENT YEAR 2005-06, DEVELOPMENT EXPENDITURE WA S CLAIMED AT RS.5,09,47,634/- AS AGAINST COST OF LAND DEBITED AT RS.53,56,800/- WHICH IS AGAIN AN ABNORMALITY. THIS LEADS TO A CON CLUSION THAT THERE IS A MISMATCH BETWEEN REVENUE SHOWN AND COSTS DEBITED. THE ASSESSING OFFICER ALSO NOTICED THAT THE VALUATION OF CLOSING STOCK IN EACH OF THE YEARS UNDER CONSIDERATION WAS ARBITRARY AND NOT SUP PORTED BY ANY DOCUMENTATION. NO QUANTITATIVE DETAILS WERE FURNI SHED TO SUBSTANTIATE THE DETAILS OF CLOSING STOCK AND THE ASSESSING OFFI CER COMPUTED THE QUANTITATIVE DETAILS OF THE VARIOUS PROJECTS AND AL L THESE PARTICULARS ARE AVAILABLE FROM PAGE-6 OF THE ASSESSMENT ORDER ON WA RDS IE., QUANTITATIVE DETAILS AS ON 31-3-2000, 31-3-2001, 31-3-2002, 31-3 -2003, 31-3-2004, 31-3-2005, 31-3-2006 AND AS ON 31-03-2007. THE LEA RNED FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAD A CLEAR FI NDING THAT THE ASSESSEE COMPANY HAD NOT BEEN FOLLOWING ANY CONSIST ENCY IN THE METHOD OF REVENUE RECOGNITION. UP TO THE ASSESSMEN T YEAR 2003-04, THE REVENUE WAS RECOGNIZED ON THE BASIS OF REGISTRA TION AS WELL AS ON RECEIPT OF FULL CONSIDERATION FROM THE CUSTOMERS. F OR THE ASSESSMENT YEAR 2004-05, THE COMPANY RECOGNIZED REVENUE OFFERE D ON THE SALES ON THE BASIS OF REGISTRATION OF PLOTS PLUS WHERE-EVER FULL CONSIDERATION WAS RECEIVED. ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 13 8. IN THIS YEAR, PART PAYMENTS RECEIVED WERE ALSO OFFERED AS SALES AND FOR THE ASSESSMENT YEAR 2005-06 ONWARDS, SALES WERE RECOGNIZED ONLY ON THE BASIS OF REGISTRATION. THE SAME ALSO S TATED BY SRI MV NARENDRANATH REDDY, THE MANAGING DIRECTOR OF THE AS SESSEE COMPANY IN THE COURSE OF THE SWORN STATEMENT RECORDED DURING T HE ASSESSMENT PROCEEDING BY THE ASSESSING OFFICER. IT IS FURTHER SUBMITTED THAT THE FINDINGS OF THE ASSESSING OFFICER AS ALSO THE STATE MENT OF THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER GAVE A CLEAR FINDING THAT THERE WAS INCONSISTENCY IN THE METHOD OF ACCOUNTING FOLLOWED WITH REFERENCE TO THE RECOGNITION OF REVEN UE. THE ASSESSING OFFICER THEREFORE AFTER ELABORATE DISCUSSION HAD TO TAKE RECOURSE TO SECTION 145(3) OF THE ACT AND THE BOOKS OF ACCOUNTS WERE REJECTED. BY OFFICE LETTER DATED 19-11-2008 AND 5-12-2008 THE AS SESSEE WAS ISSUED DETAILED SHOW CAUSE AS TO WHY THE BOOKS OF ACCOUNTS SHOULD BE REJECTED AND PROFIT BE ESTIMATED @8% ON GROSS RECEIPTS IRRES PECTIVE OF THE SALES OFFERED FOR ALL THE ASSESSMENT YEARS UNDER CONSIDER ATION. THE PERCENTAGE PROPOSED TO BE ADOPTED BY THE ASSESSING OFFICER WAS HIGHLY REASONABLE IN THIS PARTICULAR LINE OF BUSINESS, ESP ECIALLY IN VIEW OF THE FACT THAT IT WAS A SELLERS MARKET OF HYDERABAD CIT Y THE PROPOSED ESTIMATION WAS REASONABLE AND JUSTIFIED. TO SUCH S HOW CAUSE, THE ASSESSEE COMPANY BY ITS REPLY DATED 15-5-2008, TRIE D TO SUBSTANTIATE THE METHOD OF ACCOUNTING IMPLIED AND ALSO CONTENDED THAT 8% WAS ON THE HIGHER SIDE. IN SUPPORT OF THIS, IT IS SUBMITTE D THAT THE VENTURES UNDERTAKEN WERE PLANTATIONS VENTURES AND THEREFORE MAINTENANCE COSTS WERE HIGH. AS THE VENTURES WERE AWAY FROM CITY LIM ITS EARNING HUGE PROFIT WAS NOT POSSIBLE, TRANSPORTATION COST FOR TA KING PROSPECTIVE BUYERS TO THE SITE WOULD BE MORE COMPARED TO OTHER PROJECT WITHIN THE CITY AND ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 14 THE INITIAL YEARS COMMISSION PAYMENTS AND OVERHEAD S WERE MORE DUE TO THE DISTANCE FACTOR. 9. IT IS FURTHER SUBMITTED THAT WITH THE ABOVE SU BMISSIONS, THE ASSESSEE COMPANY CAME FORWARD TO AGREE FOR AN ESTI MATE OF 5% OF THE GROSS COLLECTIONS FOR THE FIRST FOUR YEARS AND 8% F OR THE NEXT THREE YEARS. IT IS SUBMITTED THAT THE SUBMISSIONS AND PROPOSALS OF THE ASSESSEE COMPANY WERE ACCEPTABLE TO THE ASSESSING OFFICER WI TH A SMALL VARIATION THAT THE ESTIMATE OF 5% OF GROSS COLLECTIONS WAS LI MITED ONLY TO THE FIRST TWO YEARS AND 8% OF GROSS COLLECTIONS WERE ADOPTED FOR THE NEXT FIVE YEARS. THE CASE LAWS AND JUDGMENTS RELIED UPON BY T HE REVENUE IN ADDITION TO THOSE RELIED UPON BY THE LOWER AUTHORIT IES ARE AS UNDER:- 1) (2007) 291 ITR 2002) (GUJ) CIT VS. CHANDRA VILAS HO TEL 2) (1982) 136 ITR 435 (ALLA) CIT VS. SWAROOP COLD STOR AGE AND GENERAL MILLS 3) (1995) 219 ITR 157 (MAD) CIT VS./ KRISHNA SWAMY & S ONS 4) (1998) 238 ITR 415 (GUJ.) A.M. SHAH & CO. VS. CIT 5) (1987) 171 ITR 405 (PAT) CIT VS. MD. WARASATH HUSSA IN 6) (1997) 232 ITR 588 (ALL) SUSHIL KUMAR SHARATH KUMAR VS. CIT 7) (1982) 146 ITR 492 (ALL) ADDL. CIT VS. LAXMI INDUST RIES AND COLD STORAGE CO. LTD. 8) (1991) 205 ITR 607 (MP) ADDL. CIT VS. CHANDRAKANTA & ANOTHER 9) (1999) 243 ITR 818 (KER) PC JOSEPH & BROS. VS. CIT 10) (1979) 120 ITR 144 (MAD) CIT VS. KRISHNA & CO. 11) (1973) 98 ITR 564 (DEL) POLO SINGH & CO. VS. CIT ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 15 12) (1980) 122 ITR 567 (RAJ) CIT VS. DR. RC GUPTA & OTH ERS 13) (1979) 122 ITR 828 (ALL) MIRZAPUR CONSTRUCTION CO. VS. CIT 14) (1979) 122 ITR 719 (KER) UNION ENGINEERING CO. VS. CIT 15) (1999) 63 TTJ 252 (ITAT, COCHIN) ITO VS. LEELA MAMM EN 16) (1981) 133 ITR 19 (DEL) JASWANT RAI AND ANOTHER VS. CBDT & OTHERS 17) (1972) 90 ITR 422 (KER) CIT VS. GATES FOAM AND RUBB ER CO. 18) (1976) 113 ITR 587 (CAL) CIT VS. PB SHAH & CO. 19) (1979) 124 ITR 376 (MAD) RATHNAM & CO. VS. IAC 20) (200) 72 ITD 474 (ITAT, BANGALORE) ACIT VS. SN KANN APPA AUTOMOBILES PVT. LTD. 21) (2006) 283 ITR 230 (MAD) M. SAJJANRAJ NAHAR VS. CIT 22) (1990) 186 ITR 571 (SC) GC AGARWAL VS. CIT ASSAM NAGALAND ETC. 23) (1997) 230 ITR 855 (ALL) MOHD FAROOQ VS./ CIT & ANO THER 24) (1998) 239 ITR 386 K.L. SWAMY VS. CIT & ANOTHER 25) (1993) 211 ITR 35 & 117 CTR 37 CIT VS. INDIAN METAL S AND FERRO ALLOYS LTD. 26) (2010) 325 ITR 229 (KER) K. SREEDHARAN & CO. VS. AC IT & ANOTHER 27) (2010) 327 ITR 510 (DEL) CIT VS. ZOOM COMMUNICATION PVT. LTD. 28) (2010) 328 ITR 53 (DEL) CIT VS. HARPARSHAD & COMPAN Y LTD. 29) (2008) 306 ITR 277 (SC) UNION OF INCOME & OTHERS VS . DHARMENDRA TEXTILES PROCESSORS AND OTHERS 30) (2010) 323 ITR 302 (BOM) INDUS ENGINEERING CO AND ANOTHER VS. ACIT (INV) & OTHERS ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 16 31) (2010) 323 ITR 527 (KER) P. RAJASWAMY VS. CIT 32) (2010) 323 ITR 529 (KER) CIT VS. M.K. ALI 33) (2009) 316 ITR 58 (MAD) KAMAL BASHA VS. DY. CIT 34) ORDER OF THE TRIBUNAL IN THE CASE OF SMT. V. KUMARA SWAMY NAIDU IN ITA NO.108/HYD/2009 DATED 14-5-2010. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, THE INC OME OF THE ASSESSEE DETERMINED ON THE BASIS OF ESTIMATION OF NET PROFIT AS FOLLOWS:- A.Y. GROSS PROFIT NET PROFIT % VALUE (RS.) (RS.) 01-02 10,99,34,543 5% 54,96,727 02-03 8,39,36,452 5% 41,96,823 03-04 7,36,83,765 8% 58,94,701 04-05 20,49,54,445 8% 1,63,96,356 05-06 13,36,57,958 8% 1,06,92,637 06-07 12,23,81,900 8% 97,90,552 07-08 41,76,72,290 8% 3,34,13,783 ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HA S FOLLOWED DIRECT METHOD OF ACCOUNTING WHILE DETERMINING THE INCOME O F THE ASSESSEE. ON UNEARTHING VARIOUS DISCREPANCIES IN THE COURSE O F SEARCH ACTION AND ON THE REASON OF UNACCOUNTED SALES, THE ASSESSEE DI SCLOSED THE ADDITIONAL INCOME BY WAY OF ESTIMATING THE SAME. A CCORDING TO THE LOWER AUTHORITIES, THE ASSESSEE HAS ITSELF SUGGESTE D THE ESTIMATION OF PROFIT, A CERTAIN PERCENTAGE OF GROSS RECEIPTS I.E. , ITSELF INDICATIVE OF THE FACT THAT THE ASSESSEE WAS WELL AWARE OF THE LOW PR OFIT BEING DISCLOSED BY THE ASSESSEE FROM YEAR TO YEAR. FURTHER, THE LO WER AUTHORITIES DREW ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 17 INFERENCE THAT AS THE ASSESSEE HAS NOT FILED ANY AP PEAL AGAINST THE ESTIMATION OF INCOME BY THE LOWER AUTHORITIES, THER E WAS CONCEALMENT OF INCOME BY THE ASSESSEE AS PER THE PROVISIONS OF SEC TION 271(1)(C ) OF THE I T ACT. THE PROVISIONS OF SECTION 271 (1) O F THE ACT PROVIDE THAT THE PENALTY CAN BE LEVIED IF THERE WAS CONCEALMENT OF INCOME AND THE ASSESSEE HAS FURNISHED ANY INACCURATE PARTICULARS O F INCOME. ACCORDING TO THE ASSESSEE, THE ASSESSING OFFICER FOUND FAULT WITH THE ASSESSEE IN FOLLOWING A PARTICULAR METHOD OF ACCOUNTING WHERE P ARTICULAR METHOD OF ACCOUNTING WAS ADMITTEDLY FOLLOWED BY THE ASSESSEE CONSISTENTLY FROM YEAR TO YEAR AND IT IS UNFAIR TO DISTURB THE METHOD OF ACCOUNTING BY THE ASSESSING OFFICER AND REJECT THE BOOKS OF ACCOUNT A ND ESTIMATE THE INCOME OF THE ASSESSEE. IN THE PRESENT CASE, THE A SSESSING OFFICER ESTIMATED THE SALE VALUE THEREAFTER ESTIMATED THE I NCOME VARYING BETWEEN 5 TO 8%, AS SEEN FROM THE ABOVE TABLE. THE INCOME IS ONLY ESTIMATED AND THERE IS NO CONCLUSIVE EVIDENCE REGAR DING THE AMOUNT OF CONCEALMENT AND THAT IS ONLY ARBITRARY ESTIMATION O F THE INCOME. THE ASSESSEE FOLLOWED ONE PARTICULAR METHOD FOR RECOGNI ZING THE REVENUE. HOWEVER, THE ASSESSING OFFICER CHANGED THE METHOD O F RECOGNITION OF INCOME. IT IS ALSO A FACT ON RECORD THAT THE INCOM E DECLARED BY THE ASSESSEE FOR ASSESSMENT YEARS 2006-07 AND 2007-08 I S MORE THAN THE INCOME DETERMINED BY ESTIMATION. IN OUR OPINION, MERELY BECAUSE THE ADDITION HAD BEEN MADE ON ESTIMATE BASIS UNDER THE PROVISIONS OF SECTION 145 (1) OF THE ACT BY ADOPTING THE VIEW THA T THE INCOME SHOWN IN THE BOOKS OF ACCOUNTS WAS TOO LOW AS THERE WERE DEFECTS IN THE METHOD OF ACCOUNTING EMPLOYED AND IT DOES NOT AUT OMATICALLY LEAD TO A CONCLUSION THAT THERE WAS FAILURE ON THE PART OF TH E ASSESSEE TO RETURN THE CORRECT INCOME BY MEANS OF FRAUD OR GROSS OR WI LLFUL NEGLECT , YET THE ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 18 QUANTUM OF PROOF TO DISCHARGE, AS IT WAS REQUIRED IN A CIVIL CASE I.E., PREPONDERANCE OF PROBABILITIES. FURTHER, THE ADDITI ON MADE BY THE ASSESSING OFFICER FOR ALL THE ASSESSMENT YEARS HAS NOT COMPLETELY BASED UPON THE SEIZED MATERIAL AND IN CERTAIN ASSESSMENT YEARS, IT WAS NOTICED THAT THE INCOME DECLARED BY THE ASSESSEE IS MORE TH AN THE ESTIMATED INCOME AND IN THAT CASE, THE ASSESSING OFFICER ADOP TED THE RETURNED INCOME ONLY. FOR EXAMPLE, FOR ASSESSMENT YEARS 200 6-07 AND 2007-08, THERE WAS DISCREPANCY IN THE RATES OF NET PROFIT AD OPTED BY THE ASSESSMENT OFFICER AND FOR ASSESSMENT YEARS 2001-02 AND 2002-03, IT WAS ESTIMATED AT 5% AND FOR ASSESSMENT YEARS 2003-0 4 TO 2007-08, IT WAS ESTIMATED AT 8%. 12. THE LOWER AUTHORITIES ARE NOT SURE ABOUT THE E XACT RATE OF GROSS PROFIT. IT SEEMS THAT THERE IS SOME CONFUSION IN TH E MINDS OF THE LOWER AUTHORITIES. THIS BEING SO, THERE IS NO CONCLUSIVE EVIDENCE THAT THE ASSESSEE HAS CONCEALED INCOME FOR ALL THESE YEARS U NDER CONSIDERATION. FURTHER, THE CIT (A) HELD THAT THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST THE QUANTUM ADDITION AND HENCE HE HAS CONFI RMED THE PENALTY BUT THE FACTS ARE THAT THE FINDINGS RECORDED IN THE ASSESSMENT ORDER CONSTITUTE GOOD EVIDENCE IN THE PENALTY PROCEEDINGS BUT THOSE FINDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR THE PURPOSES O F THE PENALTY PROCEEDINGS. IN DECIDING WHETHER PENALTY CAN BE IM POSED IN A GIVEN CASE, THE ENTIRETY OF THE CIRCUMSTANCES MUST BE TAK EN INTO ACCOUNT. THERE MAY BE CASES WHERE ADDITIONS MAY BE MADE PURE LY ON ESTIMATE WITHOUT REFERENCE TO ANY EVIDENCE/MATERIALS BEING O N RECORD. IN SUCH A CASE, IT COULD BE ARGUED WITH SOME FORCE ON THE F IGURES WHICH ARE MERELY BASED ON GUESS WORK OR ESTIMATE. BUT, IN A CASE WHERE AFTER ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 19 DETAILED INVESTIGATION, THE ASSESSEE WAS CONFRONTED WITH EVIDENCE AND MATERIALS AND HE FAILED TO DISLODGE THE FACTUAL POS ITION ON THE BASIS OF WHICH ADDITIONS WERE MADE, THE CASE STANDS ON A DIF FERENT FOOTING. IN SUCH A CASE, IT IS ALWAYS OPEN TO DRAW AN INFERENCE OF CONCEALMENT OR OF FURNISHING INACCURATE PARTICULARS OF INCOME RESULTI NG FROM DELIBERATE UNDERESTIMATE OF INCOME. IN OTHER WORDS, THE INCOM E-TAX AUTHORITIES MUST BE SATISFIED ON THE EXAMINATION OF THE CUMULAT IVE EFFECT THAT THE ONLY REASONABLE INFERENCE FROM SUCH FACTS OR MATERI ALS THAT COULD BE DRAWN WAS THAT THE DISPUTED AMOUNT ADDED AS A RESUL T OF ESTIMATE REPRESENTED THE INCOME AND THAT THE ASSESSEE HAD CO NCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF IN COME. IN THE PRESENT CASE, IN OUR OPINION, THE ENTIRE ADDITION IS BASED UPON ESTIMATED BASIS AND THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST T HAT ADDITION WITH THE INTENTION TO MAINTAIN GOOD RELATIONSHIP WITH THE DE PARTMENT. THUS, THE ENTIRE ADDITION IS NOT BASED UPON THE COMPLETE SEIZ ED MATERIAL. THIS BEING SO, WE HAVE TO TAKE A VIEW THAT THE ASSESSEE HAS NOT DELIBERATELY CONCEALED OR FURNISHED INACCURATE PARTICULARS OF IN COME. IN VIEW OF THIS, IN OUR OPINION, THIS CASE IS NOT A FIT CASE FOR LEV Y OF PENALTY. 13. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSE E STAND ALLOWED. ORDER PRONOUNCED IN THE COURT ON 14-12-2011 . SD/ - (SMT. ASHA VIJAYARAGHAVAN) SD/ - (CHANDRA POOJARI) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 14-12-2011. ITA NOS.501 TO 507 OF 2010 GRAND VILLE REALTORS, HYDERABAD. ======================== L.L 20 COPY FORWARDED TO: 1. C/O SHRI S. RAMA RAO, FLAT NO.102, SHRIYAS ELEGANC E, STREET NO. 9, HIMAYATNAGAR, HYDERABAD. 2. DCIT, CENTRAL CIRCLE - 2, HYDERABAD. 3. CIT(A)-I, HYDERABAD. 4. CIT, AP, HYDERABAD. 5. THE D.R., ITAT, HYDERABAD. JMR*/ TPRAO