Rajendra M. Chorge, V. DCIT,Satara Cir.,Satara,

ITA 643/PUN/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49838 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 27-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VIPIN GUJARATHI
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES, PUNE BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.643/PN/2009 ASST/YEAR: 2005-06 SHRI RAJENDRA M.CHORAGE, SATARA. (PAN AAWPC8945L) .. APPELLANT VERSUS DY. COMMISSIONER OF INCOME TAX, SATARA CIRCLE, SATARA. .. RESPONDENT ITA 739/PN/2009 ASST.YEAR: 2005-06 ASST.COMMISSIONER OF INCOME TAX, SATARA CIRCLE, SATARA. .. APPELLANT VERSUS SHRI RAJENDRA M.CHORAGE, SATARA. (PAN AAWPC8945L) .. RESPONDENT ASSESSEE BY: SHRI VIPIN GUJARATHI DEPARTMENT BY: SH RI NEERA MALHOTRA O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER : THESE ARE CROSS APPEALS FILED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) II, PUNE DT.23 -3-2009. 2. THE GRIEVANCE OF THE ASSESSEE AND THAT OF THE RE VENUE RELATES TO THE COMMON ISSUE OF AN ADDITION OF RS.13,03,353 MAD E BY THE AO ON ACCOUNT OF THE PROFIT ON WORK IN PROGRESS AND THE A SSESSEES GROUND RELATES TO SUSTAINING OF AN ADDITIONS OF RS 5,05,298/- BY THE CIT(A). ON THE OTHER HAND, THE REVENUES APPEAL WITH SEVEN GROUNDS RELATES TO (I) DELETION OF BALANCE OF ADDITIONS (RS.13,03,353 - RS 5,05,298) AND (II) ESTIMATION OF PROFITS @ 8% AGAINST THE 15.09% ADOPTED BY THE AO. CONSIDERING THE INTERLACING OF THE ISSUES RAISED IN BOTH THE APPEALS, THE CROSS APPEALS ARE BEING DISPOSED IN THIS COMPOSITE ORDER. 2 3. RELEVANT FACTS OF THIS ISSUE ARE THAT THE ASSES SEE WAS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND RUNNING AN STD BOOTH. ON A PERUSAL OF THE RETURN OF INCOME AND THE DOCUMENTS A VAILABLE BEFORE THE AO, IT WAS FOUND THAT THE ASSESSEE CONSTRUCTED A STADIUM UNDER THE ZILLAH KRIDA SANKUL SCHEME DURING THE YEAR AND THE PROJECT COST OF CONSTRUCTION IS AROUND RS 14 CRORES. DURING THE YEA R, THE EXPENDITURE INCURRED ON THE PROJECT WORKS OUT TO RS. 86,37,199/ -. THE OPENING BALANCE AS ON 1-4-2004 IN THE SAID SCHEME WAS SHOWN AT NIL AND NO SALES WERE EFFECTED DURING THE YEAR IN RESPECT OF T HE SAID SCHEME THEREBY SHOWING CLOSING WIP AT RS.86,37,199/-. ACCO RDINGLY, THE ASSESSEE DID NOT RECOGNISE THE INCOME AND THEREFORE , DECLARED ANY PROFIT OUT OF THE SAID SCHEME FOR THE REVENUE IN TH E PROFIT AND LOSS ACCOUNT ALTHOUGH THE ASSESSEE MAINTAINED THE PER CE NTAGE COMPLETION METHOD ACCOUNTING BASED ON THE WORK IN PROGRESS (W IP). THE SAME IS EVIDENT FROM THE RECORDS OF THE ASSESSEE AND ALSO T HE TAX AUDIT REPORT AND THE APPENDED NOTES ON ACCOUNT. NOTE NO 4 IS REL EVANT AND IT PROVIDES FOR REVENUE RECOGNITION THE ASSESSEE FOR T HE YEAR AND IT AN ADMITTED FACT THAT THE THE PROFIT WAS TO BE BOOKED AS PER PERCENTAGE COMPLETION METHOD OF ACCOUNTING BASED ON THE WIP. T HE ASSESSING OFFICER THERE AFTER COMPLETED THE ASSESSMENT AFTER ISSUE OF REQUISITE NOTICES AND OPPORTUNITIES TO THE ASSESSEE AS PER TH E PROVISIONS OF THE INCOME TX ACT, 1961 (THE ACT). IN DOING SO, THE AS SESSING OFFICER COMPUTED THE TAXABLE PROFIT FOR THE YEAR @ 15.09% ON THE WIP OF RS.86,37,199 AND THE SAID PROFITS WORKS OUT TO RS.1 3,03,353 AND TAXED THE SAME AS THE INCOME OF THE ASSESSEE FOR THE AY U NDER CONSIDERATION. THE ASSESSING OFFICER ALSO MADE VAR IOUS OTHER ADDITIONS AND COMPLETED THE ASSESSMENT. 4. AGGRIEVED BY THE SAID ADDITIONS MADE BY THE ASSE SSING OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND M ADE VARIOUS SUBMISSIONS AT DIFFERENT POINTS OF TIME. AS PER THE ASSESSEE, RECOGNISING ANY INCOME ON THE WORK IN PROGRESS OF R S.86,37,199 IS UNCALLED FOR IN VIEW OF THE ACCOUNTING STANDARD PRI NCIPLES IN FORCE. AS PER THE ASSESSEE, CONSIDERING THE INITIAL STAGES OF THE PROJECT IN HAND IE BEING THE FIRST YEAR OF THE PROJECT, NO INCOME N EEDS TO BE RECOGNISED, CONSIDERING THE SIZE OF THE CONTRACT. OTHER SUBMISSION OF THE ASSESSEE IS THAT THE CONTRACT RECEIPTS ACTUALLY REALISED DURING THE YEAR IS ONLY RS. 39,29,294/- . WITHOUT PREJUDICE, THE ASSESSEE SUBMITTED THEREFORE, THE RECOGNISING OF THE INCOME, IF ANY, FOR THE YEAR 3 MUST BE RESTRICTED TO THE SAID AMOUNT OF MONEY RECE IVED BY THE ASSESSEE DURING THE YEAR. THE CIT(A) CONSIDERED TH E SAID OBJECTIONS OF THE ASSESSEE AND HELD THAT THE ASSESSEE FAILED T O IMPLEMENT THE ACCOUNTING PRINCIPLE AS7 IN ITS TRUE SPIRIT AND ACC ORDINGLY, HE REJECTED THE RELEVANT SUBMISSION OF THE ASSESSEE. 5. ON THE OTHER OBJECTIONS RAISED WITHOUT PREJUDICE RELATING TO RECOGNISING THE INCOME IF ANY ON THE REALISED CONTR ACT RECEIPTS IN THE YEAR, THE CIT(A) DISCUSSED THAT THE ASSESSEE IN FAC T RAISED A COUPLE OF RA BILLS DURING THE PREVIOUS YEAR I.E. 31-3-2005 AN D SENT THEM TO THE DISTRICT AUTHORITIES, SATARA FOR REALISATIONS. PARA GRAPH 4.9 OF THE ORDER OF THE CIT(A) IS RELEVANT IN THIS REGARD. FURTHER, THE CIT(A) EXAMINED THE PROPER GROSS PROFIT RATE TO BE APPLIED IN THIS REGARD AND OPINED THAT THE ASSESSING OFFICERS DECISION TO RESORT TO THE R ATE OF 15.09% IS WITHOUT ANY BASIS AND THE SAME IS ON HIGHER SIDE . DURING THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE BROUGHT TO THE NOTICE OF THE CIT(A) THE PROVISIONS OF SEC.44AD OF THE ACT AND AT TEMPTED TO IMPRESS THE CIT(A) ON THE NEED FOR ADOPTING THE PROFIT RATE OF 8 PER CENT ON THE CONSTRUCTION CONTRACTS. THE ASSESSEE SUBMITTED THA T THE PROVISIONS OF SEC 44AD OF THE ACT APPLY TO THE FACTS OF THE CASE CONSIDERING THE CONTRACT RECEIPT ACTUALLY RECEIVED AT RS.39,23,294 I.E. BELOW RS.40 LAKHS. IN THIS REGARD, THE ASSESSEE RELIED ON THE DECISION OF PUNE BENCH TRIBUNAL IN THE CASE OF BALAJI CONSTRUCTIONS 72 ITD 559. HOWEVER, LD CIT(A) REJECTED THE ASSESSEES SUBMISSI ONS IN PRINCIPLES ON THE APPLICABILITY OF SEC.44AD OF THE ACT FOR THE REASON THAT THE TOTAL SUM OF SAID 2 RA CONTRACT BILLS RAISED ON 4-3-2005 EXCEEDED THE SUM OF RS.40 LAKHS PRESCRIBED IN THE ACT. HOWEVER, HE C AME TO THE CONCLUSION THAT PROFIT PERCENTAGE AT 8% WOULD BE AP PROPRIATE FOR THIS LIMITED PERIOD OF 4 MONTHS OF THE INITIAL YEAR OF T HE PROJECT. AS PER THE CONTENTS MENTIONED AT PARA 4.13 OF THE IMPUGNED OR DER, THE TOTAL BILL AMOUNT OF THE TWO IMPUGNED RA BILLS WORKS OUT TO RS . 79.89 LAKHS WHEREAS THE AMOUNT CERTIFIED BY THE ARCHITECT AFTER THE MEASURING THE COMPLETED WORKS AND RELEVANT VERIFICATION WORKS COM PLETED AT RS.63.16 LAKHS. HOWEVER, IT IS A FACT, ASSESSEE REC EIVED THE PAYMENT FROM THE GOVERNMENT IN THIS YEAR ONLY RS.39.3 LAKHS BY 31-3-2005. FINALLY, THE CIT(A) PROCEEDED TO ESTIMATE THE PROFI TS AT 8% ON THE SAID CERTIFIED SUM OF RS 63.16 LAKHS (CERTIFIED BY THE ARCHITECT) AND DETERMINED THE PROFITS AT RS 5,05,298/-. THUS, THE CIT(A) HELD THAT THE INCOME IS REQUIRED TO BE RECOGNISED AND OFFERED IN RESPECT OF THE 4 CONTRACT WORKS/AMOUNTS CERTIFIED BY THE ARCHITECT. FURTHER, ON THE GROSS PROFIT ISSUE, THE CIT(A) WAS OF THE OPINION T HAT THE ESTIMATION OF PROFIT ON THE SAID AMOUNT AT 8% WOULD BE PROPER. ACCORDINGLY, THE CIT(A) GAVE PART RELIEF TO THE ASSESSEE. 6. AGGRIEVED WITH THE DECISION OF THE CIT(A) IN HOL DING THAT THE CONTRACT AMOUNT OF RS.63,12,220 IS REQUIRED TO BE S UBJECTED TO TAX, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL, VIDE ITA NO.643/PN/2009. AGGRIEVED WITH THE RELIEF GIVEN BY THE CIT(A) TO THE ASSESSEE BOTH ON THE CONTRACT RECEIPTS AS WELL AS T HE REDUCTION OF GP RATE FROM 15.09% TO 8% , THE REVENUE IS IN APPEAL, VIDE ITA NO.739/PN/2009. DURING THE PROCEEDINGS BEFORE US, B OTH THE PARTIES CONCURRED ON THE PROPOSAL TO DISPOSE OF THESE APPEA LS BY THIS COMPOSITE ORDER AS THE ISSUES ARE INTERLACED AND TH E FACTS ARE COMMON. 7. ON THE ISSUE OF RECOGNISING OF THE INCOME, LD CO UNSEL FOR THE ASSESSEE SUBMITTED THAT INCOME ON THE MEAGRE WORKS DONE SHOULD NOT BE RECOGNISED DURING THIS YEAR, IN VIEW OF THE FACT THAT THE PROJECT IS IN THE INITIAL STAGES AND ONLY SMALL AMOUNT OF WORK IS COMPLETED CONSIDERING THE SIZE OF CONTRACT AS WELL AS THE ACC OUNTING POLICY ADOPTED BY THE ASSESSEE IN THIS REGARD. LD COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE NOTES TO THE ACCOUNTS IN GENERAL AND PRINCIPLES RELATING TO INCOME RECOGNITION IN PARTIC ULAR. REGARDING THE REVENUES GROUND RELATING TO THE GP RATE, LEARNED C OUNSEL FOR THE ASSESSEE FAIRLY MENTIONED THAT THE ORDER OF THE CIT (A) IS IN ORDER AND THE DOES NOT CALL FOR ANY INTERFERENCE IN THIS REGA RD. 8. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTAT IVE ON THE ISSUE OF CONTRACT RECEIPTS FOR PURPOSES OF INCOME RECOGNI TION, ARGUED, STATING THAT THE ASSESSEE DOES NOT HAVE A CLEAR CUT ACCOUNT ING POLICY FOR THE IMPUGNED PROJECT/SCHEME UNLIKE FOR THE SHOPS AND FL ATS FOR THE IMPUGNED CONTRACT ACTIVITIES. FURTHER, HE ARGUED S TATING THAT THE ASSESSEE HIMSELF RAISED 2 RA BILLS TO THE TUNE OF R S 79,89,174/- AND THE ARCHITECT ALSO CERTIFIED THE WORKS TO THE EXTENT OF RS.63 LAKHS. THEREFORE, THE CIT(A) HAS FAIRLY DEALT WITH THE ISS UE AND IT DOES NOT CALL FOR ANY INTERFERENCE FROM US, WHEREAS ON THE ISSUE OF GP RATE, THE LEARNED DEPARTMENTAL REPRESENTATIVE TOOK OBJECTION TO THE DECISION OF THE CIT(A) WHO INVOKED THE PROVISIONS OF SEC.44AD O F THE ACT IN 5 APPLYING THE PROFIT RATE OF 8% AS AGAINST 15.09% AD OPTED BY THE ASSESSING OFFICER. THE REASONS GIVEN BY THE CIT (A) IN THIS REGARD I.E. 4 MONTHS PERIOD DOES NOT QUALIFY THE RELIEF GRANTED B Y THE CIT(A) TO THE ASSESSEE. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AS WELL AS THE PAPER BOOK FILED BY THE ASSE SSEE. WE SHALL TAKE UP THE ISSUE RAISED IN THE APPEAL OF THE ASSESSEE FIRST I.E., RECOGNITION OF THE INCOME IN THE INITIAL YEAR OF THE CONTRACT I F THE SAME IS JUSTIFIED. THE CONTRACT IN QUESTION IS WORTH CRORES AND THE AS SESSEE RAISED 2 R A BILLS AMOUNTING TO RS 79,89,174/- ON THE WORK COMPLETED. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS RAISED THE AB OVE BILLS WHICH ARE NOT ONLY DULY CERTIFIED BY THE ARCHITECT BUT ALSO P ARTLY APPROVED BY THE COLLECTORATE FOR DISBURSEMENT. FURTHER, IT IS EVIDE NT FROM THE FACTS THAT THE ASSESSEE RECEIVED THE SAID DISBURSEMENT TO THE TUNE OF RS.39,23,291/- BY THE END OF THE PREVIOUS YEAR UNDE R CONSIDERATION. CONSIDERING THE ABOVE FACTS, WE ARE OF THE OPINION THAT THE CONTENTS OF PARAGRAPH 4.13 OF THE IMPUGNED ORDER OF THE CIT(A) ARE FAIR AND DOES NOT CALL FOR ANY INTERFERENCE. FOR THE SAKE OF COM PLETENESS, THE SAID PARAGRAPH IS REPRODUCED HEREUNDER.. 4.13 CONSIDERING THE ESTIMATED PROFITABILITY OF TH E PROJECT OF WHICH WORKING HAS BEEN GIVEN WITH LETTER DATED 17.3.2009, WHICH SHOWS A PROFITABILITY OF 7.6% AND CONSIDERING THAT IN THE R.A BILL, AS PE R THE CONTRACT CONDITIONS THE MARGIN OF 5.98% ON COST HAVE BEEN CONSIDERED FOR RA ISING THE BILL, THE PROFIT RATE OF 8% IS CONSIDERED TO BE APPROPRIATE FOR THIS LIMITED PERIOD OF 4 MONTHS AT THE BEGINNING OF THIS CONTRACT, THOUGH TECHNICALLY SPEAKING THE PROVISIONS OF SECTION 44AD COULD NOT BE APPLIED HERE. HOWEVER, TH E ASSESSEES CLAIM THAT THE PROFIT BE ESTIMATED ON RS 39,23,294/-, WHICH WA S THE ACTUAL PAYMENT RECEIVED UPTO 31.3.2005 OUT OF THE TWO R.A BILLS SU BMITTED IS NOT ACCEPTABLE. THIS IS BECAUSE OF THE FOLLOWING DETAILS OF THE R.A BILLS RAISED Y THE ASSESSEE BY 31.3.2005 ON THE BASIS OF WORK COMPLETED. BILL NO BILL SUBMITTED DATE BILL SUBMITTED BY CONTRACTOR BILL CERTIFIED DATE BILL CERTIFIED BY ARCHITECT (RS) 1 04.03.05 51,26,877 15.03.05 29,64,040.11 2 14.03.05 28,62,297 03.06.05 33,52,180.62 TOTAL 79,89,174/- 63,16,220.73 THEREFORE, SINCE THE TWO R.A BILLS HAVE BEEN RAISED BY 14.3.2005, IT IS INFERRED THAT THE CORRESPONDING WORK WAS COMPLETED BY THE AS SESSEE BY THIS TIME. OUT OF THE TOTAL BILL AMOUNT OF RS 79,89,174/- CLAIMED BY THE ASSESSEE IN RESPECT OF THESE TWO BILLS, THE AMOUNT CLAIMED BY THE ASSESSEE IN RESPECT OF THESE TWO BILLS, THE AMOUNT CERTIFIED BY THE ARCHITECT AFTER MEASUREMENT/VERIFICATION IS RS 63,16,220/-. THEREFORE, IT WAS CERTIFIED THAT THIS MUCH WORTH OF WORK WAS COMPLETED; THOUGH PAYMENT OF ONLY RS 39,23,291/- WAS RECEIVED BY THE ASSESSEE OUT OF THE ABOVE BY 31 ST MARCH, 2005. HENCE, TAKING THE RATE OF 8% ON THE AMOUNT APPROVED FOR PAYMENT OUT OF THE FIRST TWO R.A BILLS, WHICH IS 63,16,220/-, ESTIMATED PROFIT OF RS 5,05,298/- IS WORKED OUT AS PER A.S-7. THEREFORE, THIS AMOUNT OF RS 5,05,298/- WOULD BE SUSTAINED OUT OF THE 6 ADDITION MADE AT RS 13,03,353/- AND THE BALANCE IS DELETED. GROUND OF APPEAL NO 1 IS, THEREFORE, PARTLY ALLOWED. 10. FROM THE ABOVE, WE FIND THAT THE FIRST APPELLAT E AUTHORITY HAS CONSIDERED THE MERCANTILE METHOD AND THE PERCENTAGE COMPLETION METHODS OF ACCOUNTING FOLLOWED BY THE ASSESSEE. FUR THER, HE ALSO CONSIDERED PROPERLY THE ACCOUNTING PRINCIPLES- AS-7 IN MATTERS OF RECOGNISING THE INCOME ON THE CERTIFIED WORKS DONE BY THE ASSESSEE AND R A BILLS SUBMITTED TO CONTRACTOR FOR PAYMENTS. WE HAVE ALSO PERUSED THE NOTE NO 4 OF THE NOTES ON CLAUSES TO THE ACCOUNTS AND FIND THAT THERE IS NO POLICY IN THE MATTER OF RECOG NISING INCOME ON THE IMPUGNED RECEIPTS AND DOES NOT INDICATE THE CASH BA SIS AS ARGUED BEFORE US BY THE ASSESSEE. IN FACT, THE ASSESSEE IS SILENT ON RECOGNISING INCOME IN RESPECT OF THE PROFITS EARNED OUT OF THE IMPUGNED PROJECT. IN THE INSTANT THE ASSESSEE HAS N OT RECOGNISED INCOME ON THE RECEIPTS RECEIVED IN THE YEAR ON CASH BASIS TOO. THEREFORE, WE REJECT THE ARGUMENTS OF THE COUNSEL. CONSEQUENTLY AND ACCORDINGLY, WE AFFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. IN EFFECT, THE GROUNDS RAISED BY THE ASSESSEE AND THE REVENUE ON THIS ISSUE ARE DISMISSED . 11. PROFIT RATE- 8% VS 15.09% : NEXT ISSUE FOR CONSIDERATION RELATES TO PROPER PROFIT RATE TO BE APPLIED ON THE CHARGEABLE CONTRACT AMOUNTS CERTIFIED BY THE ARCHITECT. WE HAVE DISCUSS ED THIS ISSUE IN THE PRECEDING PARAGRAPHS THAT THE INSTANT YEAR IS THE F IRST YEAR OF THE PROJECT AND THE ASSESSEE SUBMITTED TWO R A BILLS TO THE CONTRACTEE AMOUNTING TO RS 79,89,174/- AND IN FACT, THE CONTRACTEE CLEARED THE CLAIMED BILLS TO THE EXTENT OF RS 39,23,291/- TOO. HOWEVER, THE ASSESSEE DID NOT RECOGNISE THE INCOME ON THE SAID CLAIMS ON THE GROUNDS OF MEAGRE WORKS DONE AND ALSO UNDER THE SHELTER OF THE RELATED ACCOUNTING PRINCIPLES. IN THE PROCESS, THE ASSESSEE HAS NOT OFFERED ANY INCOME CHARGEABLE TO TAX IN THIS YEAR. DURING THE A SSESSMENT PROCEEDINGS, THE AO NOT ONLY RECOGNISED INCOME ON T HE ENTIRE WIP AS CLAIMED IN THE BOOKS BUT ALSO SUBJECTED THE SAME FO R DETERMINING THE TAXABLE INCOME APPLYING THE PROFIT RATE OF 15.09% BASED ON THE DATA DISCUSSED IN HIS ORDER. DURING THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) OBSERVED THAT THE SAME IS NOT SUPPORTED BY A NY COMPARABLE CASES OR ANY CREDIBLE EVIDENCE. HOWEVER, CONSIDERI NG THE VOLUME OF THE WIP WHICH IS CLOSELY DOUBLE OF THE AMOUNT OF RS 40 LAKHS REFERRED TO IN THE PROVISIONS OF SECTION 44AD OF THE ACT, TH E CIT(A) ADOPTED 8% 7 GP RATE TAKING A CUE FROM THE SAID PROVISIONS. THIS IS DONE DESPITE INAPPLICABILITY OF THE PROVISIONS TO THE FACTS OF T HIS CASE WHERE THE TURNOVER EXCEEDED RS.40 LAKHS. THE LIMITED ISSUE T O BE DECIDED BY US IS AS RAISED BY THE REVENUE RELATES TO WHETHER 8% G P RATE ADOPTED BY THE CIT(A) IS JUSTIFIED IN THE GIVEN FACTS OF THE C ASE IN THE YEAR UNDER CONSIDERATION. BEFORE US, LD DR FOR THE REVENUE ME NTIONED THAT THE CIT(A) ERRONEOUSLY ADOPTED THE PROVISIONS OF SECTIO N 44AD IGNORING THE FACT THAT THE SAID SECTION IS APPLICABLE ONLY T O THE SMALL CASES OF CIVIL CONSTRUCTION WITH GROSS RECEIPTS PAID OR PAYA BLE DID NOT EXCEED RS 40 LAKHS. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE RELIED ON THE IMPUGNED ORDER AND MENTIONED THAT THE SAME IS R EASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. 12. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER S OF THE REVENUE AND THE AVAILABLE PAPERS BEFORE US. ON FACT S WE FIND THAT THE WORK IN PROGRESS (WIP) AS PER THE BOOKS OF ACCOUNTS IS RS. 86,37,199 /-. ASSESSEE RAISED A COUPLE OF RUNNING ACCOUNT (RA ) BILLS AMOUNTING TO RS 79,89,174 /- . THE WORKS CERTIFIED BY THE ARCHITECT AFTER THE MEASURING THE COMPLETED WORKS AND RELEVAN T VERIFICATION WORKS COMPLETED AT RS. 63.16 LAKHS AND THE CONTRACT RECEIPTS ACTUALLY REALISED DURING THE YEAR IS ONLY RS .39,29,294/- . CIT(A) APPLIED THE 8% PROFIT RATE TO THE SUM OF RS. 63.16 LAKHS, THE CERTIFIED WORKS BY THE QUALIFIED ARCHITECT. WE HAVE EXAMINE IF 8% MEANT FO R THE CASES OF GROSS RECEIPTS BELOW RS 40 LAKHS IS JUSTIFIED TO APPLY TO THE CASES WITH TURN OF RS. 63.16 LAKHS. IN THIS REGARD, WE FIND THAT THE LIMIT OF RS 40 LAKHS SPECIFIED IN THE PROVISIONS OF SECTION 44AD OF THE ACT IS AS OLD AS 1994 AND WE ARE DEALING WITH THE AY 2005-06. THE SA ID LIMIT HAS NOT BEEN REVISED DESPITE LAPSE OF NEARLY A DECADE. AS S UCH THE LIMIT OF RS 40 LAKHS IS AN ARTIFICIAL IN NATURE AND NOTHING IS BROUGHT TO OUR NOTICE AS TO THE SANCTITY OF THE SAID LIMITATION. THIS IS IN THE KNOWLEDGE OF EVER BODY THAT THE SUM OF RS 40 LAKHS OF 1994 IS CE RTAINLY OF HIGHER VALUE IN FY 2004-05 AND IT MAY EVEN EXCEED THE IMPU GNED SUM OF RS 63.16 LAKHS. AS SUCH, THERE IS NO CONVINCING REPLY FROM THE REVENUE TO THE QUERIES ON WHY RS 40 LAKHS AND WHY NOT RS 63.16 LAKHS. THEREFORE, CONSIDERING (I) THE ARTIFICIAL NATURE OF THE LIMIT OF 40 LAKHS SPECIFIED IN THE ACT, (II) UNREVISED NATURE OF THE SAID LIMITS DESPITE THE LAPSE OF ALMOST A DECADE SINCE 1994, (III) THE SUM OF RS 63.16 LAKHS CERTIFIED BY THE ARCHITECT IN THE YEAR UNDER CONSID ERATION, (IV) RS.39,29,294 WAS ALREADY RECEIVED BY THE ASSESSEE I N THE YEAR UNDER 8 CONSIDERATION, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 13. IN THE RESULT, APPEAL OF THE ASSESSEE AND THE R EVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 22 -6-2011. SD/- SD/- ( I.C.SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 22-6-2011 *VNR C.C.TO: 1. SRI KRISHANLAL B.NAGPAL,M/S NATIONAL TEMPO HOUS E, 386, RASTA ETH, PUNE. 2. ACIT, CENTRAL CIRCLE 2(4), PUNE. 3. CIT(A) II, PUNE 4. CIT, PUNE 5. DR, ITAT, PUNE BY ORDER ASSISTANT REGISTRAR PUNE BENCHES, PUNE