THE ACIT, CIRCLE - 2(1), Vijayawada V. M/s Agri Gold Construction Pvt. Ltd., Vijayawada

ITA 505/VIZ/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8817 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 28-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEBAKUMAR SONOWAL
• Keywords: Business income; Depreciation; Rule of consistency
• Section: 263

Judgement Text

ITA NO.505/VIZAG/2014 M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.505/VIZAG/2014 ( / ASSESSMENT YEAR: 2011-12) ACIT, CIRCLE - 2(1), VIJAYAWADA M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA [PAN NO. AADCA5210E ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI DEBAKUMAR SONOWAL, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 03.01.2018 / DATE OF PRONOUNCEMENT : 10.01.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) {CIT(A)}, VIJAYAWADA VIDE APPEAL NO.602/CIT(A)/VJA/13-14 DATED 27.6.2014 FOR THE ASSESSMENT YEAR 2011-12. ITA NO.505/VIZAG/2014 M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA 2 2. THE ASSESSEE IS A CIVIL CONTRACTOR FILED ITS RET URN OF INCOME DECLARING TOTAL INCOME OF ` 3,73,54,496/-. THE CASE WAS SELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE A.O. FOUND THAT SOME VOUCHERS IN RESPECT OF GRAVEL, SAND PURCHASE, METAL CHIP PURCHASES AND LABOUR CHARGES WERE INCURRED ON SELF-MADE VOUCHERS AND SOME OF THEM WERE NOT MAINTAINED PROPERLY. THE ASSESSEE EXPLAINED THAT THE EXPENDITURE WAS INCURRED AT VARI OUS PLACES AT THE FIELD STATIONS AND IT IS NOT POSSIBLE TO MAINTAIN THE VOU CHERS PROPERLY AND SOME OF THE VOUCHERS MADE WERE MISPLACED. THE A.O. , CONSIDERING THE FACTS OF THE CASE HELD THAT ASSESSEE FAILED TO SUBS TANTIATE EXPENSES, ACCORDINGLY ESTIMATED THE INCOME @ 12.5% ON CONSTRU CTION ACTIVITY AND 8% ON SALE OF PLOTS CLEAR OF ALL THE EXPENDITURE AN D DEPRECIATION. SECONDLY, THE A.O. TREATED THE INTEREST INCOME OF ` 7,43,76,762/- AS INCOME FROM OTHER SOURCES AND ASSESSED SEPARATELY. THIRDLY, THE A.O. FOUND DURING THE COURSE OF SCRUTINY OF BALANCE SHEE T THAT THERE WAS A DECREASE IN THE CURRENT LIABILITIES TO THE EXTENT O F ` 155.96 CRORES WITH REGARD TO THE VENTURE ADVANCES TRANSFERRED TO THE S ISTER COMPANY OF THE ASSESSEE M/S. AGRI GOLD FARM ESTATES INDIA PVT. LTD . THE ASSESSEE HAS TRANSFERRED THE LIABILITY ALONG WITH COLLECTED AMOU NT ON THE CORRESPONDING EXPENSES. THE ASSESSING OFFICER TREAT ED THE TRANSFERRED AMOUNT OF VENTURE ADVANCES AS DEEMED SALES AND ESTI MATED THE INCOME ITA NO.505/VIZAG/2014 M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA 3 @ 8% ON ` 155.96 CRORES, WHICH WORKED OUT TO ` 12,47,68,000/-. SIMILARLY, THE A.O. FOUND THAT THE ASSESSEE COMPANY HAS REFUNDED ` 184.08 CRORES TO THE CUSTOMERS WHO HAVE OPTED OUT O R DUE TO BREACH OF CONTRACT FROM VENTURES. THE A.O. TREATED THE REFUN D OF AMOUNTS TO THE CUSTOMERS ON ACCOUNT OF BREACH OF CONTRACT AS DEEME D SALES AND ESTIMATED THE INCOME @ 8% ON ` 184.08 CRORES AND COMPUTED THE TOTAL INCOME AT ` 40,35,89,103/-. 3. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD. CIT(A) SCALED DOWN TH E ESTIMATION OF INCOME FROM 12.5% TO 8% IN RESPECT OF CONSTRUCTION CONTRACTS AND FROM 8% TO 5% ON SALE OF PLOTS AND ALSO ALLOWED THE DEPR ECIATION. WHILE SCALING DOWN THE ESTIMATION OF INCOME, THE LD. CIT( A) FOLLOWED EARLIER YEARS ASSESSMENTS MADE BY THE A.O. IN THE ASSESSEE S OWN CASE. IN RESPECT TO THE INTEREST INCOME, THE CIT(A) OBSERVED THAT THE ASSESSEE COMPANY HAS INCLUDED THE INTEREST EARNED FROM THE D EPOSITS OF IDEAL BUSINESS FUNDS IN THE BUSINESS INCOME AND THE TREAT MENT OF INCLUDING INTEREST INCOME IN THE BUSINESS INCOME HAS BEEN FOL LOWED CONSISTENTLY FOR THE PAST SO MANY YEARS. THEREFORE, THE LD. CIT (A) FOUND THAT THERE IS NO REASON TO DISTURB THE CONSISTENT METHOD OF AC COUNTING FOLLOWED BY THE ASSESSEE AND RELIED ON THE DECISION OF THIS TRI BUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 AND HELD T HAT THE INTEREST ITA NO.505/VIZAG/2014 M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA 4 INCOME IS REQUIRED TO BE ASSESSED AS BUSINESS INCOM E AND NOT AS INCOME FROM OTHER SOURCES. ACCORDINGLY, DELETED THE ADDIT ION MADE BY THE A.O. 4. WITH REGARD TO THE ESTIMATION OF INCOME ON DEEMED SALES OF ` 155.96 CRORES AND ` 185.05 CRORES, THE CIT(A) OBSERVED THAT THE ASSESSEE HAD TRANSFERRED AN AMOUNT OF ` 155.96 CRORES TO ITS SISTER COMPANY I.E. M/S. AGRI GOLD FARMS INDIA PVT. LTD. R EPRESENTING THE INSTALMENTS COLLECTED ON ITS ACCOUNT AFTER DEDUCTIN G THE RELATED MARKETING EXPENSES AS EVIDENCED BY THE LEDGER EXTRA CT PRODUCED BY THE ASSESSEE. ACCORDINGLY, HELD THAT IT IS NOT JUSTIFI ED TO HOLD THE TRANSFERRED AMOUNT AS SUCH AND ESTIMATING THE INCOME ON SUCH AM OUNT. SIMILARLY, IN THE CASE OF REFUND OF ADVANCES AMOUNTING ` 184.08 CRORES, THE CIT(A) OBSERVED THAT THE ASSESSEE HAS REFUNDED THE AMOUNTS RECEIVED FROM THE CUSTOMERS AS ADVANCES FOR BREACH OF CONTRACT AND TH ERE WAS A DECREASE IN THE LIABILITIES TO THAT EXTENT AS WELL AS THE AS SETS. THEREFORE, CIT(A) HELD THAT THERE WAS NO ELEMENT OF SALES INVOLVED IN REFUND OF ADVANCES, ACCORDINGLY, DELETED THE ADDITION MADE BY THE A.O. WITH REGARD TO THE ESTIMATED INCOME ON DEEMED SALES OF REFUNDS. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE THIS TRIBUNAL AND RAISED THE FOLLOWING GROUN DS OF APPEAL: ITA NO.505/VIZAG/2014 M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA 5 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), VIJAYAWADA IS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES BRIEFLY SUBMITTED IN THE STATEMENT OF FACTS, THE DECISION OF THE LEARNED CIT(A) TO ASSESS THE IN COME FROM CONSTRUCTION WORK 8% & ON THE SALE OF PLOTS S% AS AGAINST @ 12.5% & 8% AS ADOPTED BY THE AO, RESPECTIVELY , IS NEITHER BASED ON ANY MATERIAL NOR ON VALID BASE AND HENCE HER DECISION IS UNJUSTIFIED 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS UNJUSTIFIED IN HOLDING THAT THE PRINCIPLE OF CONSISTENCY IS TO BE ADOPTED IN THIS CASE SINCE THE FACTS AND CIRCUMSTANCES VARY FROM YEAR TO YEAR AND THIS ISSUE IS BEING CONTESTED BEFORE SUPERIOR APPELLATE AUTHORITIES! CO URT. 4. THE LD.CIT(A), ON THE FACTS AND CIRCUMSTANCES BRIEF LY SUBMITTED IN THE STATEMENT OF FACTS , HAS NOT TAKEN RELEVANT MATERIA L FACTORS FOR DETERMINING THE RATE OF PROFIT ON EACH OF THE ABOVE SOURCES. 5. THE ID. CIT(A) HAS WRONGLY APPLIED THE RATIO OF A DE CISION RENDERED BY THE HON'BLE ITAT ON ISSUES COVERED U/S.263 WHICH IS NOT JUSTIFIED ON THE FACTS AND CIRCUMSTANCES OF THIS CASE. 6. THE LEARNED CIT(A) , BEING THE FIRST APPELLATE AUTH ORITY IS DUTY BOUND TO BRING THE FACTS AND CIRCUMSTANCES OF THE ISSUES BEF ORE HER AND APPLY THE CORRECT PROVISIONS OF LAW WHICH SHE HAS FAILED TO D O SO IN THIS CASE. 7. THE LD.CIT(A) OUGHT TO HAVE CONSIDERED THAT THE INT EREST EARNED ON THE BANK DEPOSITS IS AN INCOME UNDER THE HEAD 'OTHER SOURCES ' AS HELD BY THE HON'BLE ITAT BENCH IN THE CASE OF M/S.KNR CONSTRUCTIONS LIMITED. 8. THE LD.CIT(A) HAD ERRED IN ALLOWING THE APPEAL FOLL OWING THE DECISION OF THE HON'BLE ITAT MADE ON UNCONNECTED FACTS AND CIRCUMST ANCES OF THIS CASE AND WHEN AN APPEAL AGAINST SUCH DECISION IS ALSO PENDIN G BEFORE THE HON'BLE HIGH COURT OF ANDHRA PRADESH & TELANGANA. 9. THE ID, CIT(A) WITHOUT EXAMINING THE MANNER AND MET HOD IN WHICH THE ASSESSEE HAS ACCOUNTED PART OF ITS INCOME ON THE SA LE OF PLOTS WHILE IT IS NOT DOING SO ON THE TRANSFERS MADE ON THE TRANSACTI ONS ACCOUNTED UNDER THE CURRENT LIABILITIES VIZ., SALE ATTRIBUTABLE TO TRANSFER OF VENTURE TO ITS SISTER CONCERN AND ON THE REFUND OF ADVANCES, UNJUS TIFIABLY DELETED THE ADDITIONS. 10. ON THE FACTS AND CIRCUMSTANCES BRIEFLY SUBMITTED IN THE STATEMENT OF FACTS, IT IS PRAYED THAT THE HON'BLE ITAT MAY RESTORE THE MATTER S CONSIDERED BY IT AS JUST TO THE AO FOR APPROPRIATE EXAMINATION AND DUE ASSESSME NT. ITA NO.505/VIZAG/2014 M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA 6 6. GROUND NOS.1, 10 & 11 ARE GENERAL IN NATURE, WHI CH DOES NOT REQUIRE SPECIFIC ADJUDICATION. 7. GROUND NO.8 IS RELATED TO THE PENDING APPEAL BEF ORE THE HONBLE HIGH COURT AGAINST THE ORDER OF THE ITAT, WHICH ALS O DOES NOT REQUIRE SPECIFIC ADJUDICATION. 8. GROUND NOS.2 TO 6 ARE RELATED TO THE ESTIMATION OF INCOME. AS DISCUSSED ABOVE, THE A.O. ESTIMATED THE INCOME @ 12 .5% ON CONSTRUCTION CONTRACTS AND 8% ON SALE OF PLOTS CLEA R OF DEPRECIATION AND ALL OTHER EXPENSES WHICH IS PARTLY CONFIRMED BY THE CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE REVENUES CASE IS THAT THE A.O. HAD CONSIDERED ALL THE FACTS AND ESTIMATED THE INCOME @ 12.5% ON CONSTRUCTION CONTRA CTS AND 8% ON SALE OF PLOTS, HENCE THE SAME REQUIRED TO BE UPHELD . THE ASSESSEES CASE IS THAT THE ASSESSEE HAS MAINTAINED THE BOOKS OF ACCOUNTS, WHICH WAS DULY AUDITED AND SUPPORTED BY VOUCHERS AND BILL S, HENCE THERE IS NO CASE FOR RESORTING FOR THE ESTIMATION OF INCOME. I T IS OBSERVED THAT THE A.O. HAS NOTICED THE DEFECTS SUCH AS EXPENSES UNDER THE HEADS GRAVEL, SAND PURCHASE, METAL CHIP PURCHASES AND LABOUR CHAR GES, ETC. WERE INCURRED ON SELF-MADE VOUCHERS OR THERE WERE NO BIL LS AND VOUCHERS IN SOME CASES. THE QUANTUM OF AMOUNT OF THE EXPENDITU RE INCURRED UNDER ITA NO.505/VIZAG/2014 M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA 7 THE RELEVANT HEADS AND THE QUANTUM OF EXPENDITURE F OR WHICH THE EXPENDITURE WAS INCURRED ON SELF-MADE VOUCHERS AND THE AMOUNT OF EXPENDITURE FOR WHICH NO DETAILS, WAS MADE AVAILABL E AND WAS NOT QUANTIFIED BY THE A.O. IN THE EARLIER YEARS THE A. O. HAS ACCEPTED THE ESTIMATION OF INCOME @ 8% ON CONSTRUCTION CONTRACTS AND 5% ON SALE OF PLOTS, AND THE SAME IS EVIDENCED BY THE LD. CIT(A) S ORDER. THE A.O. HAS NOT BROUGHT ON RECORD ANY MAJOR CHANGES IN THE EXPENDITURE INCURRED BY THE ASSESSEE AND ANY SUSPICIOUS NATURE OF EXPENDITURE, OR INFLATION OF EXPENDITURE. THE ASSESSEE HAS MAINTAI NED THE REGULAR BOOKS OF ACCOUNTS AND THE BOOKS OF ACCOUNTS WERE DULY AUD ITED BY THE QUALIFIED CHARTERED ACCOUNTANTS. THOUGH RULE OF RE SJUDICATA DOES NOT APPLY TO THE INCOME TAX PROCEEDINGS, THE RULE OF CO NSISTENCY DOES APPLY TO THE INCOME TAX PROCEEDINGS. THIS VIEW IS SUPPOR TED BY THE HONBLE SUPREME COURT JUDGEMENT IN THE CASE OF KANMUDIN NAR AYAN DALAL (2001) 117 TAXMAN 375 (SC) AND SATISH PANALAL SHAH 117 TAXMAN 373 (SC). FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT IS OBSERVED THAT THE A.O. DID NOT REJECT THE BOOKS OF ACCOUNTS BEFORE RE SORTING FOR ESTIMATION OF INCOME. IN THE ABSENCE OF ANY EVIDENCE BROUGHT ON RECORD TO HOLD THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE IS UNR EASONABLY HIGH AND QUANTIFICATION OF UNVERIFIABLE NATURE OF EXPENDITUR E AND FRESH FACTS TO RESORT HIGHER ESTIMATION OF INCOME, WE DO NOT SEE A NY REASON TO ITA NO.505/VIZAG/2014 M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA 8 INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND WE H OLD THAT THE LD. CIT(A) HAS RIGHTLY APPLIED THE ESTIMATION OF INCOME @ 8% ON CONTRACT RECEIPTS AND 5% ON SALE OF PLOTS. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS UPHELD AND THE REVENUES APPEAL ON THESE GROUNDS ARE DISMISSED. 10. GROUND NO.7 IS RELATED TO THE ASSESSMENT OF INT EREST INCOME UNDER THE HEAD OTHER SOURCES. DURING THE ASSESSMENT YEAR , THE ASSESSEE HAS RECEIVED THE INTEREST OF ` 7,43,76,762/- AND OFFERED IT UNDER THE BUSINESS INCOME. THE SAID PRACTICE OF OFFERING THE INTEREST INCOME UNDER THE HEAD BUSINESS INCOME WAS FOLLOWED BY THE ASSESSEE FOR THE LAST SO MANY YEARS, WHICH WAS ACCEPTED BY THE DEPAR TMENT. THE ASSESSEE HAS PLACED THE SURPLUS FUNDS RECEIVED FROM THE CUSTOMERS AS DEPOSITS IN BANKS FOR TEMPORARY PERIOD AND EARNING INTEREST INCOME. HENCE, THE INTEREST INCOME EARNED BY THE ASSESSEE I S INTER-RELATED TO THE BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE. ACCO RDINGLY, THE ASSESSEE HAS ADMITTED THE SAME AS BUSINESS INCOME. THE ISSU E OF ASSESSMENT OF INTEREST UNDER THE HEAD BUSINESS INCOME WAS CONSIDE RED BY THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 IN ITA NO.452/VIZAG/2012 AND HELD THAT THE INTEREST INCOME ON DEPOSITS MADE OUT OF SURPLUS FUNDS FROM THE BUSINESS RECEIPT FOR TEMPORARY PERIODS IS ASSESSABLE UNDER THE INCOME FROM BUSINESS. THE HON BLE ITAT WHILE ITA NO.505/VIZAG/2014 M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA 9 ADJUDICATING THE ISSUE RELIED ON THE DECISION OF HO NBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. LOK HOLDINGS AND HONB LE KOLKATA HIGH COURT IN THE CASE OF EVEREADY INDUSTRIES LIMITED VS . CIT AND ANR (2010) 323 ITR 312. FOR READY REFERENCE, WE EXTRACT THE R ELEVANT PARAGRAPH OF THE HONBLE ITAT ORDER, WHICH READS AS UNDER: 6.6 BE THAT AS IT MAY, THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF LOK HOLDINGS, HAS HELD AS FOLLOWS:- INTEREST EARNED BY ASSESSEE A PROPERTY DEVELOPER, BY MAKING TEMPORARY DEPOSITS OF SURPLUS MONEY OUT OF ADVANCES RECEIVED BY IT FROM INTENDING PURCHASES IS BUSINESS INCOME AND CANNOT B E ASSESSED AS INCOME FROM OTHER SOURCES. 6.7 THE HONBLE KOLKATA HIGH COURT IN THE CASE OF E VEREADY INDUSTRIES INDIA LTD. (SUPRA) HAS HELD AS FOLLOWS: AO WAS RIGHT IN TREATING THE INTEREST INCOME EARN ED BY THE ASSESSEE BY INVESTING SURPLUS FUND OF THE BUSINESS IN SHORT TERM DEPOSITS AS BUSINESS INCOME IN ACCORDANCE WITH SUB R (1) OF R 8 OF IT RULES. 6.8 THUS, THE ISSUE WHETHER INTEREST INCOME ON DEPO SITS MADE OUT OF SURPLUS MONEY FROM ADVANCE RAISED FOR PURCHASE IS A SSESSABLE UNDER THE HEAD INCOME FROM BUSINESS OR NOT HAS BEEN ADJUDIC ATED IN FAVOUR OF THE ASSESSEE BY THOSE TWO HIGH COURTS. HENCE THE V IEW TAKEN BY THE ASSESSING OFFICER IS A POSSIBLE VIEW. UNDER THE CI RCUMSTANCES, THE LEARNED CIT CANNOT SUBSTITUTE THE POSSIBLE VIEW OF THE ASSESSING OFFICER WITH HIS OWN VIEW IN AN ORDER PASSED U/S 263 OF THE ACT AS HELD BY VARIOUS HIGH COURTS AS WELL AS THE HONBLE SUPREME COURT. THUS, WE UPHOLD THE CONTENTIONS OF THE ASSESSEE AND CANCEL T HE ORDER OF THE CIT. 11. RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE IT AT AND FOLLOWING ORDER OF THE HONBLE BOMBAY HIGH COURT AND HONBLE KOLKATA HIGH COURT, WE HOLD THAT THE INTEREST INCOME RECEIVED ON DEPOSI TS REQUIRED TO BE ASSESSED UNDER THE BUSINESS INCOME BUT NOT AS SEPAR ATE SOURCE OF INCOME. HENCE, WE UPHOLD THE ORDER OF THE LD. CIT( A) AND DISMISS THE APPEAL OF THE REVENUE ON THIS GROUND. ITA NO.505/VIZAG/2014 M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA 10 12. GROUND NO.9 IS RELATED TO THE ESTIMATION OF INC OME ON DEEMED SALES. THE A.O. ESTIMATED THE DEEMED SALES ON TRAN SFER OF VENTURES TO ITS GROUP COMPANY AMOUNTING TO ` 155.96 CRORES @ 8%. THE CIT(A) OBSERVED THAT THE ASSESSEE HAD RECEIVED ADVANCES FO R SALE OF PLOTS FROM THE CUSTOMERS ON BEHALF OF ITS GROUP COMPANY WHICH IS HAVING LANDS AND ALLOT THE PLOTS TO THE CUSTOMERS. IN THE PROCESS, THE ASSESSEE HAD TRANSFERRED THE ADVANCES SO RECEIVED FROM THE CUSTO MERS TO THE GROUP COMPANY M/S. AGRI GOLD FARMS PVT. LTD. REPRESENTING INSTALMENTS COLLECTED ON ITS BEHALF AFTER DEDUCTING THE MARKETI NG AND COLLECTION EXPENSES SO THAT GROUP COMPANY TO ALLOT PLOTS OR FL ATS TO THEIR RESPECTIVE CUSTOMERS. THE ASSESSEE HAS PRODUCED THE LEDGER EX TRACT BEFORE THE CIT(A) AND THE LD. CIT(A) AFTER EXAMINING THE DETAI LS FURNISHED BY THE ASSESSEE CONCLUDED THAT THERE WAS NO DEEMED SALES A ND IT IS MERELY A TRANSFER ENTRY WITHOUT ANY PROFIT ELEMENT, ACCORDIN GLY, DELETED THE ADDITION. ON CAREFUL VERIFICATION OF THE SUBMISSIO NS AND THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THERE WAS NO SA LES ELEMENT INVOLVED AND IT IS A SIMPLE TRANSFER OF THE BALANCES PAYABLE TO THE AGRIGOLD FARMS AND ESTATES PVT. LTD. AND THERE WAS NO CASE FOR EST IMATION OF INCOME OR FOR TREATING THE TRANSFER OF AMOUNTS AS SALES. THE LD. D.R. DID NOT BRING ANY EVIDENCE DURING THE APPEAL HEARING TO CONTROVER T THE FINDING OF THE LD. CIT(A) OR TO SUBSTANTIATE THE DEEMED SALES. TH EREFORE, WE DO NOT ITA NO.505/VIZAG/2014 M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA 11 FIND ANY REASON TO INTEREFERE WITH THE ORDERS OF TH E LD. CIT(A) AND THE SAME IS UPHELD. 13. THE NEXT ISSUE IN DEEMED SALES IS ` 184.08 CRORES RELATING TO THE REFUND OF ADVANCES TO THE CUSTOMERS BY THE ASSESSEE . THE ASSESSEE HAS RECEIVED THE BOOKING ADVANCES AND INSTALMENTS AGAIN ST THE PURCHASE OF PROPERTY PRODUCTS AND SALE CONSIDERATION. IN CASE IF THE PLOTS OR FLATS ARE NOT AVAILABLE FOR WHATEVER REASONS IN THE EXIST ING PROJECT LAYOUT OR COMPLEX, THE ASSESSEE WILL ALLOT SIMILAR PLOT OR FL AT OR PROJECT ELSEWHERE AND DELIVER WITHIN THE PERIOD THE AGREED PERIOD OR REFUND THE MONEY TO THE PURCHASER OR PROSPECTIVE PURCHASER ALONG WITH S OME SUITABLE OR REASONABLE OR PERMISSIBLE COMPENSATION. THE RELEVA NT CLAUSES WERE INCLUDED IN THE APPLICATION FORM BEING ISSUED BY TH E ASSESSEE TO ITS CUSTOMERS. ACCORDING TO THE TERMS AND CONDITIONS, THE ASSESSEE HAS REFUNDED THE ADVANCES SO RECEIVED TO THE CUSTOMERS FOR BREACH OF CONTRACT. SINCE THE AMOUNTS RECEIVED WERE REFUNDED TO THE CUSTOMERS ALONG WITH SOME SUITABLE COMPENSATION, THERE IS NO CASE FOR ANY PROFIT ELEMENT AND THE SAME CANNOT BE TREATED AS DEEMED SA LES. FROM VERIFICATION OF THE BALANCE SHEET, THE CIT(A) OBSER VED THE DECREASE IN LIABILITIES AS WELL AS CORRESPONDING ASSETS. THE R EVENUE HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT THERE WAS A SAL E INVOLVED IN THE TRANSACTION OF REFUNDS OR ADVANCES AND TRANSFER OF VENTURE TO THE GROUP ITA NO.505/VIZAG/2014 M/S. AGRI GOLD CONSTRUCTIONS PVT. LTD., VIJAYAWADA 12 COMPANIES. THEREFORE, WE HOLD THAT CIT(A) HAS RIGH TLY DELETED THE ADDITION RELATING TO DEEMED SALES. IN ADDITION TO THE ABOVE, ONCE THE A.O. HAS RESORTED FOR ESTIMATION OF INCOME ON SALES AS HELD BY HONBLE A.P. HIGH COURT IN THE CASE OF INDWELL CONSTRUCTION S 232 ITR 776 (AP) AND IN THE CASE OF DABROS INDUSTRIAL CO. PVT. LTD., HONBLE KOLKATA HIGH COURT JUDGEMENT 108 ITR 424 (CAL) NO OTHER ADDITION REQUIRED TO BE MADE. THEREFORE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE ON THESE GROUNDS. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 10 TH JAN18. SD/- SD/- ( . ) ( . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 10.01.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-2(1), VIJAYAWAD A 2. / THE RESPONDENT M/S. AGRI GOLD CONSTRUCTIONS PV T. LTD., D.NO.40-6-3, 1 ST FLOOR, FORTUNE MURALI PARK LANE, REVENUE COLONY, VIJAYAWADA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM