M/s. Bhopal Vikas Pradhikaran, Bhopal V. THE DCIT 1(1), Bhopal

ITA 974/IND/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0692 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-03-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 23-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: AJAY K CHHAJED
• Keywords: Rejection of books of accounts; Revised return
• Section: 271(1)(c); 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCHE, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.974/IND/2016 ASSESSMENT YEAR: 2010-11 BHOPAL VIKAS PRADHIKARAN, PRAGATI BHAWAN, PRESS COMPLEX, M.P. NAGAR, BHOPAL-462011 / VS. DCIT - 1(1) BHOPAL ( APPELLANT ) ( RE VENUE ) P.A. NO. AAALB0040K APPELLANT BY SHRI AJAY, K. CHHAJED, ADV. RE VENUE BY SMT. ASHIMA GUPTA, CIT - DR DATE OF HEARING: 18.03.2019 DATE OF PRONOUNCEMENT: 28.03.2019 / O R D E R PER KUL BHARAT, J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-31, NEW DELHI, CAMP AT BHOPAL DATED 30/06/2016 PERTAINING TO BHOPAL VIKAS PRADHIKARAN 2 ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT LOOKING TO THE FACTS AND CIRCUMSTANCES OF T HE CASE THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN U PHOLDING AND NOT GIVING FINDING ON THE METHOD OF ACCOUNTING ADOPT ED BY THE ASSESSEE WHICH WAS NOT MERCANTILE 'AND WAS FOLLOWING ONLY CASH SYSTEM OF ACCOUNTING. 2.THAT LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN NOT GIVE N ANY FINDING ON THE RETURN FILED BY THE ASSESSEE DISCLOSING A LOSS A T RS. 5,53,4 1 ,624/-, PLUS BROUGHT FORWARD LOSSES OF PREVIOUS YEARS AS PE R RECORDS. 3. THAT LOOKING TO THE FACTS AND CIRCUMSTANCES OF TH E CASE THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN UPHOLDIN G THE REJECTION OF OUR BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF INC OME TAX ACT, IGNORING OUR SUBMISSIONS AND REFERRED CASES AND EXPLAN ATIONS AND NOT CONSIDERING THAT THE PRADHIKARAN IS A STATUTORY LOCAL AUTHORITY AND THERE IS NO MENS' -REA OR DISHONEST INTENTIONS TO FURNISH ANY INACCURATE PARTICULARS AND ALSO OVERLOOKING THE FACT S, THAT THERE WAS NO DISCREPANCIES IN THE BOOKS OF ACCOUNTS. 4. THAT LOOKING TO THE FACTS AND CIRCUMSTANCES OF TH E CASE THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN CONFIRMI NG AND ESTIMATED NET INCOME OF THE APPELLANT AT 8% ON THE G ROSS TURNOVER AND ASSESSING THE TOTAL INCOME AT RS.3,OI,46,037/- AGAINST THE RETURNED LOSS OF RS. 5,53,41,624/- SHOWN BY THE APPELLANT WITHOUT CONSIDERING THE PAST HISTORY OF THE CASE. YOUR PETIT IONER SUBMITS THAT THE LEARNED ASSESSING OFFICER SHOULD HAVE IF HE WAS NOT SATISFIED WITH THE POSITION OF ACCOUNTS REFERRED THE MATTER FO R THE SPECIAL AUDIT VIS 142(2A) OF THE INCOME TAX ACT. 5. THAT LOOKING TO THE FACTS AND CIRCUMSTANCES OF TH E CASE THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN UPHOLDING THAT BOOKS OF ACCOUNTS IS NOT MATCHING WITH THE AUDITED A CCOUNT AND THE GENUINENESS OF THE EXPENDITURE DEBITED COULD NOT BE A SCERTAINED. YOUR PETITIONER SUBMITS THAT THE ACCOUNTS WERE AUDI TED AND TAX AUDIT WAS CONDUCTED AND THE SAME WAS SUBMITTED WITH THE INCOME TAX RETURN FILED BY THE APPELLANT. 6. THAT LOOKING TO THE FACTS AND CIRCUMSTANCES OF TH E CASE THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN N OT CONSIDERING THE BROUGHT FORWARD LOSSES POSITION AS PER THE RECOR DS WHICH WAS TO BE SET-OFF AGAINST THE CURRENT YEARS INCOME AND HAV E NOT GIVEN ANY FINDING ON THIS MATTER. 7. THAT LOOKING TO THE FACTS AND CIRCUMSTANCES OF TH E CASE THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN INITIATI NG THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT WHE N THERE WAS NEITHER CONCEALMENT NOR FURNISHING OF THE INACCURAT E PARTICULARS OF INCOME. BHOPAL VIKAS PRADHIKARAN 3 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLE D AS THE ACT) WAS FRAMED VIDE ORDER DATED 25.02.2013. THE ASSESSING OFFICER WHILE FRAMING ASSESSMENT ISSUED A SHO W CAUSE NOTICE CALLING UPON THE ASSESSEE TO EXPLAIN LEDGE R ENTRIES OF THE EXPENDITURE UNDER THE BUDGET 20(3), 20(9), 20(8), 25(12),25(18), 27(8), 27(10), 33(8), 31(1), 31(2), 31(3), 31(7), 31(14), 31(15), 31(18), SUB HEADING 3(12) SUB HEADING, 12(3), 32(3),12(4),11(1),11(2)10(14) WITH I NCOME & EXPENDITURE ACCOUNT. 3. THE ASSESSING OFFICER OBSERVED THAT IN THE SUBMISS ION ASSESSEE HAS ADMITTED THAT FOR BUDGET HEAD 20(9) I.E. I SBT, THE POSTING IN THE LEDGER IS LESS BY RS.300, FOR BU DGET HEAD 20(8) VEDVATI YOJNA THE POSTING IN THE LEDGER IS IN E XCESS OF RS.51498. SIMILARLY FOR BUDGET HEAD 20(12) THERE IS AN EXCESS ENTRY OF RS.19200 FOR BUDGET HEAD 27(1) THERE IS THE ENTRY IN THE LEDGER IS SHORT BY RS.10000/-. FOR BUD GET HEAD 33(999998) AND 32(16) THE ASSESSEE HAS ADMITTED THAT CERTAIN VOUCHERS WERE NOT ENTERED IN THE LEDGER SIMI LARLY BUDGET HEAD 12(4) AND 11(1) THE AMOUNT OF RS.116464 AND RS.1886358 RESPECTIVELY WERE NOT ENTERED IN THE LED GER. FOR HEAD 11(2) IT IS STATED THAT THERE IS TOTALING ERROR IN THE BHOPAL VIKAS PRADHIKARAN 4 LEDGER. FOR OTHER BUDGET HEADS, THE ASSESSEE HAD RELIE D ON THE COMPUTERIZED PRINT OUTS FURNISHED BY THE CA. TH E ASSESSING OFFICER, THEREFORE, REJECTED THE BOOKS OF ACCOUNTS AND PROCEEDED TO FRAME ASSESSMENT BY ESTIMATING THE PROFIT. THE ASSESSING OFFICER ADOPTED PROFIT @ 8% OF THE GROSS RECEIPTS AND ADDED THE SAME INTO THE INCOME OF T HE ASSESSEE. THEREBY, THE ASSESSING OFFICER MADE ADDITION OF RS. 3,01,46,037/-. 4. AGGRIEVED BY THIS THE ASSESSEE PREFERRED AN APPEAL B EFORE THE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS SUSTAINED ADDITION, DISMISSED APPEAL OF THE ASSESSEE. 5. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 6. GROUND NO.1, 3 & 5 ARE IN RESPECT OF METHOD OF ACCOUNTING AND REJECTION OF BOOKS OF ACCOUNT. 7. APROPOS THESE GROUNDS LD. COUNSEL FOR THE ASSESSE E HAS REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. THE SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED AS UNDER: THE ASSESSEE IS A LOCAL AUTHORITY AND A GOVERNMENT OF M.P. UNDERTAKING. 1. THE STATE GOVERNMENT ESTABLISHED CITYLGRAM DEVELO PMENT AUTHORITIES FOR THE EXPANSION & DEVELOPMENT OF NOTIFIED CITIES, WHICH ALSO INCLUDES BHOPAL. THE DEVELOPMENT AUTHORITY DOES THE WORK OF EXPANSION BY PROVIDING HOUSE ACCOMMODATIONS, COMMER CIAL COMPLEXES, PUBLIC UTILITY PREMISES, PLAY GROUNDS, E NTERTAINMENT BHOPAL VIKAS PRADHIKARAN 5 CENTRES, PUBLIC UTILITY CENTRES ETC. WITHIN BHOPAL MUNICIPAL AREA. THE VARIOUS SCHEMES OF INFRASTRUCTURE DEVELOPMENT OF THE GOVERNMENT OF MADHYA PRADESH ARE IMPLEMENTED BY THIS AUTHORITY. 2. BHOPAL VIKAS PRADHIKARAN, BHOPAL IS A STATUTORY A UTHORITY CONSTITUTED VIDE NOTIFICATION NO. 3344/32176 DATED 15.09.1976 UNDER SECTION 38 OF M.P. NAGAR TATHA GRAM NIVESH ADHINIYAM , 1973 BY GOVT. OF M.P. AS AN APEX BODY FOR PLANNING AND CO-ORD INATION OF DEVE1CPMENT ACTIVITIES IN MADHYA PRADESH COMPRISING O F BHOPAL AND ITS INFLUENCE AREA WITH RESPONSIBILITIES AS SPECIFI ED IN SECTION 49 OF M.P. NAGAR TATHA GRAM NIVESH ADHINIYA. IN FULFILLIN G THE ABOVE NEEDS THE PRADHIKARAN CONSTRUCT HOUSES, FLATS, COMME RCIAL AND CULTURAL PREMISES, DEVELOP PLOTS AND SELL THE PROPERT IES (KINDLY PERUSE PAGE NO.1 TO 7 OF OUR PAPER BOOK.). THE DECISIONS ARE MADE AS PER DELEGATION OF POWERS. THE CHANNEL FOR DECISION MAKING PROCESS ARE AS FOLLOWS IN DESCENDING ORDER: - I. STATE GOVERNMENT 2. BOARD OF DIRECTORS 3. THE CHAIRMAN 4. CHIEF EXECUTIVE OFFICER 5. SUPERINTENDING ENGINEER, CHIEF TOWN PLANNER. 6. EXECUTIVE ENGINEER, OFFICER OF SPECIAL DUTY, ACCOUN T OFFICER ETC. 4. THUS, THE WHOLE OBJECTIVE OF ESTABLISHING THE BH OPAL VIKAS PRADHIKARAN IS TO PROMOTE THE INFRASTRUCTURE DEVELO PMENT AND IMPROVING THE QUALITY OF LIFE OF PEOPLE ON NO PROFI T NO LOSS BASIS. HOWEVER, AS PER THE GUIDELINES OF HOUSING AND ENVIRO NMENT DEPARTMENT OF GOVERNMENT OF M.P., BDA HAS WORKED OUT THE COST OF THE RESIDENTIAL/COMMERCIAL PROPERTIES ETC. THE CHARG ES FOR ITS ACTIVITIES WHICH ARE ADDED ON THE COST ARE AS PER TH E DETAILS BELOW: S.NO. PARTICULARS OF CHARGES 0/0 ON COST OF CONSTRUCTION (I) SUPERVISION CHARGES 10% (II) AUDIT, BUILDING PERMISSIO N CHARGES & 1 1/2% MISCELLANEOU (III) DEVELOPMENT ON THE COST OF BUILDING 4 1/2 % CONSTRUCTION (IV) WORK CHARGES AND CONTINGENCIES IF ANY ON ACTUAL BASI BHOPAL VIKAS PRADHIKARAN 6 (KINDLY PERUSE PAGE NO. 8 OF OUR PAPER BOOK) WE WOULD FURTHER LIKE' TO SUBMIT THAT UNDER THE DEPOS IT WORK IN THE GOVERNMENT PROJECTS, EWS PROJECTS, JANBHAGIDARI AND S OME OTHER PROJECTS THERE ARE NO SUPERVISION CHARGES AND IN CER TAIN OTHER CASES THE SUPERVISION CHARGES IS ONLY 4 TO 5% OF THE DEPOS IT WORK. 5. IT IS PERTINENT TO NOTE THAT THE ABOVE CHARGES W HICH ARE BEING CHARGED BY THE AUTHORITY ARE ACTUALLY THE REIMBURSEM ENT OF THE EXPENSES INCURRED TO SOME EXTENT ON ACCOUNT OF PERS ONNEL, ADMINISTRATION AND OTHER EXPENSES INCIDENTAL TO THE DEVELOPMENT OF SUCH PROJECTS AND NO PROFIT MARKUP IS ADDED. AS PER THE DETAILS SUBMITTED ABOVE, YOUR HONOUR WILL KINDLY APPRECIATE THAT THIS AUTHORITY IS A CITY DEVELOPMENT AUTHORITY WHICH WOR KS AS AN ORGAN OF THE STATE GOVERNMENT. IT HAS BEEN CREATED FOR THE PURPOSES OF DEVELOPMENT OF CITY AND IN ANY CASE, NO T TO GENERATE SURPLUS OR EARN PROFIT. THUS, IT IS CLEARLY A NON-P ROFIT MAKING ORGANIZATION. THIS CAN BE VERY WELL BE PERUSED FROM THE POSITION O F THE STATEMENT OF RETURNED! ASSESSED LOSSES AT PAGE N O.59 OF OUR PAPER BOOK WHERE IN THE POSITION OF THE PAST YEARS ARE DEPICTE D WHICH MOSTLY ARE DEFICIT. 6. FOR THE ABOVE ASSESSMENT YEAR 2010-2011 THE APPE LLANT FILED ITS INCOME TAX RETURN AT A DEFICIT OF RS. 5,53,41,624/- ON 15.10.2010 AND A REVISED RETURN FILED ON 05.01.2011 SHOWING THE SAME DEFICIT AND IN WHICH THERE WAS A REFUND OFRS.13,8 7,607/-. THE LEARNED ASSESSING AUTHORITY HAS ISSUED NOTICES AND FI XED THE CASE FOR HEARING DIS 143(2) OF INCOME TAX ACT. FURTHER, THE CASE WAS ATTENDED FROM TIME TO TIME (KINDLY PERUSE PAGE NO. 55 TO 58 OF OUR PAPER BOOK). GROUNDS OF APPEAL GROUND NO.1 THIS GROUND IN APPEAL IS AGAINST THE LEARNED CIT (APP EALS) UPHOLDING THAT THE APPELLANT IS FOLLOWING MERCANTIL E SYSTEM OF ACCOUNTING WHICH IS NOT CORRECT. THE APPELLANT IS R EGULARLY FOLLOWING THE CASH SYSTEM OF ACCOUNTING IN THE PAST YEARS AS WELL AS IN THE ABOVE SUBJECT YEAR WHICH HAVE ALSO BEEN CONFIRMED BY THE STATUTORY AUDITOR IN IS TAX AUDIT REPORT. KINDLY PERUSE PAGE' NO.35 OF OUR PAPER BOOK WHICH STATED THE SAID FACT. THE DIRECTION MAY BE GIVEN BY THE HONOURABLE MEMBERS OF THE SAID FACT. GROUND NO.2 THIS GROUND IN APPEAL IS AGAINST THE LEARNED CIT (APP EALS) NOT GIVEN ANY FINDING AND HAVE UPHELD THE ORDER OF THE LEARNED ASSESSING BHOPAL VIKAS PRADHIKARAN 7 OFFICER AND NOT CONSIDERING THE POSITION OF THE RETU RN FILED BY THE APPELLANT DISCLOSING THE DEFICIT AT RS.5,53,41,624/- AS WELL AS THE CORRECT POSITION OF BROUGHT FORWARD LOSSES OF THE E ARLIER YEARS AS PER PAGE NO. 59 OF PAPER BOOK. THAT THE LEARNED CIT (APPEALS) HAS OVERLOOKED OUR RETURNED POSITION WHICH WAS ON THE BAS IS OF AUDITED ACCOUNTS AND THE TAX AUDIT REPORT OF THE STATUTORY A UDITOR. EVEN THE AUDITOR HAD NEITHER MADE ANY QUALIFICATION IN THE A UDIT REPORT NOR IN THE NOTES OF ACCOUNTS, WHICH MAY KINDLY BE PERUSED AT PAGE NO. 34, 53 AND 54 OF OUR PAPER BOOK. IT IS A GOLDEN RULE TH AT TRUE AND REAL INCOME HAS TO BE COMPUTED ON THE BASIS OF BOOKS OF A CCOUNTS AND AUDITED ACCOUNTS WHICH THE LEARNED CIT (APPEALS) HAVE FAILED TO DO, HE MAY BE SO DIRECTED. GROUND NO.3, 4 & 5 AS THESE 3 GROUNDS ARE INTER RELATED AND FOR WHICH OUR ARGUMENTS ARE SUBMITTED TOGETHER. - REJECTION OF OUR BOOKS OF ACCOUNTS VIS 145(3) - ESTIMATING THE NET INCOME ON THE GROSS TURNOVER. NOT CONSIDERING THE RETURNED POSITION OF DEFICIT. NOT REFERRED FOR SP ECIAL AUDIT VIS 142(2A). - THE ALLEGATION THAT THE BOOKS OF ACCOUNTS NOT MAT CHING WITH THE AUDITED ACCOUNTS AND THE GENUINENESS OF THE EXPENDITU RE DEBITED COULD NOT BE ASCERTAINED, WHEREAS THE ACCOUNTS WERE AUDITED AND THE TAX AUDIT WAS CONDUCTED BY AN INDEPEND ENT CHARTERED ACCOUNTANT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WIT HOUT GOING INTO THE DETAILS OF FACTS OF THE MATTER REJECTED OUR BOOKS OF ACCOUNTS VIS 145(3) OF THE INCOME TAX ACT, 1961. THE LEARNED ASSESSING OFFICER IGNORING OUR DETAILED SUBMISSION AND NOT CONS IDERING THAT THE PRADHIKARAN IS A STATUTORY LOCAL AUTHORITY AND THERE WAS NO MENS REA OR DISHONEST INTENTIONS TO FURNISH ANY INACCURA TE PARTICULARS, HAS REJECTED OUR BOOKS OF ACCOUNTS. IN THIS RESPECT AS F AR AS THE DISCREPANCIES POINTED OUT BY THE LEARNED ASSESSING OF FICER AND WHICH WERE BEFORE THE LEARNED CIT (APPEALS) WHO HAVE NOT APPRECIATED OUR POSITION AND HAVE UPHELD THE DECISION OF THE LEARNED ASSESSING OFFICER. WE WOULD SUBMIT BEFORE YOU THE DE TAILS OF THE DISCREPANCIES IN A TABULAR FORMAT WITH THE COMPLETE CLARIFICATION AND CONTENTION OF THE APPELLANT IN RESPECT OF ALL THE D ISCREPANCIES WHICH IS ENCLOSED WITH THIS WRITTEN SYNOPSIS FROM PAGE NO. 1 TO 5, WHICH MAY KINDLY BE PERUSED. THAT THE APPELLANT IS KEEPING MANUAL ACCOUNTS BUT A T THE TIME OF AUDIT AND FINALIZATION OF THE ACCOUNTS VARIOUS ENTRI ES WERE MADE TO RECTIFY ERRONEOUS ENTRIES, OMISSIONS, POSTING IN WR ONG HEADS AND BHOPAL VIKAS PRADHIKARAN 8 OTHER MISTAKES ON THE DIRECTION OF AUDITOR. THUS, C OMPUTERIZED ACCOUNTS WERE PREPARED ON TALLY SOFTWARE ONLY TO FAC ILITATE THE AUDIT PROCESS AND IDENTIFY THE MISTAKES, WHICH WAS CONSIDE RED BY THE STATUTORY AUDITOR TO FINALIZE AUDIT. IT IS ALSO PERTINENT TO NOTE AND SUBMIT THAT THE AU THORITY HAS A LOCAL RESIDENT AUDIT FROM THE M.P. LOCAL FUND AUDIT, BY WH OM VOUCHERS ARE VOUCHED ON DAY TO DAY BASIS AND AFTER WHICH THEY ARE ENTERED IN THE MANUAL BOOKS OF ACCOUNTS. WE WOULD ALSO LIKE TO SUBMIT THAT THE APPELLANT'S CA SES FOR THE PAST AND SUBSEQUENT YEARS WERE UNDER SCRUTINY AND THE ORDE RS WERE PASSED ULS 143(3). THE COPIES OF ASSESSMENT ORDER RELEVANT TO AY 2008-09, 2009-10, ~011-12 AND 2012-13 ARE ENCLOSED AT PAGE NO. 13 TO 20 OF OUR PAPER BOOK FROM WHICH YOU WILL KIND LY PERUSE THAT THE RETURNED POSITION HAVE BEEN ACCEPTED BY THE DEPAR TMENT IN EACH OF THE ABOVE YEARS. FROM THE ABOVE POSITION AND CLARIFICATION YOUR HONOU R WILL APPRECIATE THAT THERE IS NO ALLEGATION OR ASSERTION EITHER THA T THE ACCOUNTS ARE MATERIALLY MISSTATED OR EXPENSES WERE NOT SUPPORTED W ITH EVIDENCE AND INCOME IS NOT RECORDED AS PER THE SYSTEM FOLLOWED. THE DISCREPANCIES OR CLERICAL MISTAKE WHICH WERE IDENTIF IED DURING THE COURSE OF AUDIT/COMPUTERIZATION OF ACCOUNTS WERE RE CTIFIED AND CONSEQUENTLY NO DISCREPANCY HAD REMAINED IN THE AUDI TED ACCOUNTS, SO AS TO BE SAID TO HAVE ANY MATERIAL IMPACT ON THE FINAL RESULT IN THE POSITION OF ACCOUNTS. THE COPY OF THE AUDITED ACCOUN TS IS ENCLOSED AT PAGE NO. 34 TO 54 OF OUR PAPER BOOK. MORE SO, -THE APPELLANT HAD BROUGHT SUFFICIENT MATE RIAL ON RECORD TO CLARIFY THE DISCREPANCIES IDENTIFIED BY THE AO HOWEV ER, THE REVENUE AUTHORITIES HAVE FAILED TO GIVE STRONG AND SUFFICIENT REASONS TO INDICATE THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE UNRELIABLE, INCORRECT AND INCOMPLETE BEFORE REJECTING THE SAME. FURTHER NEITHER THE AO NOR THE CIT (A) HAS POINTED O UT ANY PARTICULAR ITEM OF EXPENDITURE WHICH IS NOT VOUCHED. IN LIGHT OF THE CLAIM THAT THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNT AND IS ALSO IN POSSESSION OF ALL DOCUMENTARY EVIDENCES. TO SUPPORT HIS INCOME AND EXPENDITURE, THERE IS NO QUESTION OF INVOKING SECTI ON 145(3) AND REJECTING THE SYSTEM OF ACCOUNTING REGULARLY FOLLOW ED BY THE APPELLANT YEAR AFTER YEAR. WE SUBMIT THE RATIOS OF VARIOUS JUDGEMENTS WHICH SUPPORT OUR POSITION, WHICH ARE EN CLOSED WITH THIS WRITTEN SUBMISSION FROM PAGE NO. 6 TO 8. WE WOULD ALSO LIKE TO SUBMIT THAT THE LD. AO ONCE HAV E EVOKED THE PROVISIONS ULS 145(3) THEN HE SHOULD HAVE PASSED THE ASSESSMENT ORDER ULS 144, WHEREAS HE HAS PASSED THE ORDER ULS 14 3(3) OF THE BHOPAL VIKAS PRADHIKARAN 9 INCOME TAX ACT, 1961. IN THIS RESPECT IT IS SUBMITTED THAT THE LD. AO HAS N OT GIVEN A SPECIFIC FINDING THAT THE CORRECT PROFIT COULD NOT BE DEDUCED FROM THIS METHOD. ON THE OTHER HAND, THE LD. AO NOTICED CERTAIN DISCRE PANCIES WHICH WERE ALREADY RECTIFIED IN AUDIT AND FINALIZATION OF ACCOUNTS AND ALLEGED THAT THE BOOKS OF ACCOUNT DO NOT DEPICT THE TR UE PICTURE OF ASSESSEE'S BUSINESS AND ASSESSED INCOME OF THE APPEL LANT TAKING 8% OF THE GROSS RECEIPTS. EVEN AT THE COST OF REPETITION, IT IS SUBMITTED AND P RAYED THAT THE LD. AO IN ASSESSMENT DISREGARDED THE CONDITIONS AND CIRCU MSTANCES OF THE APPELLANT AND FAILED TO APPRECIATE THAT THE APPEL LANT IS A CITY DEVELOPMENT AUTHORITY WHICH WORKS AS AN ORGAN OF TH E STATE GOVERNMENT. IT HAS BEEN CREATED ONLY FOR THE PURPOS ES OF DEVELOPMENT OF CITY AND TO ENHANCE THE LIVING STANDAR D OF CITIZENS OF BHOPAL AND NOT TO GENERATE SURPLUS OR EARN PROFIT. T HUS, IT IS CLEARLY A NON-PROFIT MAKING ORGANIZATION. IT IS A WELL-KNOWN PROPOSITION OF LAW THAT IF A REV ENUE OFFICER IS TO MAKE AN ASSESSMENT TO THE BEST OF HIS JUDGEMENT, HE MUST NOT ACT DISHONESTLY, OR VINDICTIVELY. MOREOVER, HE MUST EXE RCISE HIS RATIONAL JUDGEMENT IN THE MATTER. HE MUST MAKE WHAT HE HONES TLY BELIEVES TO BE A FAIR ESTIMATE OF THE PROPER FIGURE OF ASSESSME NT AND FOR THIS PURPOSE HE MAY TAKE INTO CONSIDERATION ASSESSEE'S CI RCUMSTANCES, HIS PAST HISTORY, HIS OWN KNOWLEDGE OF THE PREVIOUS RETURNS AND THE ASSESSMENTS OF THE ASSESSEE AND ALL OTHER MATTER WHI CH HE THINKS WOULD ASSIST HIM IN ARRIVING AT A FAIR AND PROPER EST IMATE. HOWEVER, IN THE CURRENT CASE, THE LD. AO IN DETERMI NING THE INCOME OF THE APPELLANT APPLIED THE RATE OF PROFIT AT 8% OF THE GROSS RECEIPTS. BEING A GOVERNMENT DEVELOPMENT AUTHORITY, IT CANNOT BE TAKEN AT PAR WITH OTHER CONSTRUCTION FIRMS OR BUSINESS ORGAN IZATION THAT ARE SAID TO BE COMMERCIAL PROFIT MAKING CONCERNS. THE LE ARNED ASSESSING OFFICER HAS NOT GIVEN ANY COMPARABLE CASE FOR TAKING 8% PROFIT FOR SUCH TYPE OF AUTHORITIES. 8. ON THE CONTRARY, LD. DEPARTMENTAL REPRESENTATIVE (DR ) SUPPORTED THE ORDER OF THE AUTHORITIES BELOW AND SUBM ITTED THAT THE ASSESSING OFFICER HAS POINTED OUT SPECIFIC DE FECTS IN THE BOOKS OF ACCOUNT, THEREFORE, THE ASSESSING OFFICE R WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. BHOPAL VIKAS PRADHIKARAN 10 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORDS AND GONE THROUGH THE ORDER S OF THE AUTHORITIES BELOW. IT IS NOTICED THAT THE BASIS OF REJECTIONS OF THE BOOKS OF ACCOUNT AND THE METHOD OF ACCOUNTING BY THE ASSESSING OFFICER WAS THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE DID NOT MATCH WITH AUDITED ACCOUNTS AND THEREFORE, THE GENUINENESS OF THE EXPEND ITURE COULD NOT BE ASCERTAINED. THE CONTENTION OF THE ASSESS EE IS THAT THE ASSESSEE HAS BEEN FOLLOWING THE SAME METHOD AND THE ASSESSING OFFICER IN OTHER YEARS HAD ACCEPTED THE BOOKS RESULTS. THERE IS NO REASON TO ADOPT A DIFFERENT METHO D AND REJECT BOOKS OF ACCOUNT, IT IS CONTENTION OF THE ASSE SSEE THAT ALL THE QUERIES OF AO WERE DULY EXPLAINED. THIS CONTEN TION OF THE ASSESSEE IS NOT ACCEPTABLE UNDER THE FACTS OF TH E PRESENT CASE. THE AO IN HIS ORDER HAS POINTED OUT SPE CIFIC DEFECTS WHICH IN OUR VIEW ARE SUFFICIENT TO REJECT O F BOOKS OF ACCOUNTS. THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE FINDING OF THE AUTHORITIES BELOW. 10. NOW COMING TO THE GROUND NO.4, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WR ITTEN SUBMISSIONS. IT IS SUBMITTED THAT APPELLANT IS A DEVELOPMENT AUTHORITY WHICH WORK FOR EXECUTION OF S OCIAL BHOPAL VIKAS PRADHIKARAN 11 WELFARE HOUSING SCHEMES OF STATE GOVERNMENT, THEREFOR E EARNING PROFIT CANNOT BE APPLIED THAT THE A CIVIL CONT RACTOR. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD SUGGESTING THAT THE ASSESSEE IS EARNING PROFIT @8%. IT IS CONTENDED THAT ASSESSEE IS NOT WORKING ON COMME RCIAL BASIS AND DOES NOT EXIST FOR PROFIT MAKING. THE AUTHORI TIES BELOW FAILED TO APPRECIATE THE FACT THAT ASSESSEE HAS BE EN UNDERTAKING THE PROJECTS RELATED TO ECONOMIC WEAKER SECTIONS (EWS) PROJECTS, JANBHAGIDARI ETC. AND SOME OT HER PROJECTS WHERE NO SUPERVISION CHARGES ARE CLAIMED AND OTHER CASES THE SUPERVISION CHARGES IS ONLY 4 TO 5%. THE ASSESSEE HAS CARRIED OUT PROJECT IN ACCORDANCE WITH THE GUIDELINES OF HOUSING AND ENVIRONMENT DEVELOPMENT OF GOVERNMENT OF M.P. AND COST PRESCRIBED BY THE AUTHORI TIES BELOW. LD. COUNSEL VEHEMENTLY ARGUED THAT THE ADOPTING @8% IS HIGHLY EXCESSIVE, AND ARBITRARY IN NATURE. 11. ON THE CONTRARY LD. DR OPPOSE THE SUBMISSIONS AND SUBMITTED THAT THE ASSESSEE IS ACTING AS A CONTRACTOR, THEREFORE THE ASSESSING OFFICER WAS JUSTIFIED TO APPL Y 8% IS DONE IN THE CASE OF CIVIL CONTRACTORS. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORDS. THE LAW IS WELL SETTLED WHERE THE ASSESSING OFFICER REJECTS BOOKS OF ACCOUNTS, HE IS BHOPAL VIKAS PRADHIKARAN 12 REQUIRED TO ESTIMATE PROFIT WHILE ESTIMATING THE PROF IT, THE ASSESSING OFFICER IS NOT ONLY MADE THE ESTIMATION ON T HE BASIS OF MATERIAL AVAILABLE BUT ALSO EXAMINE THE SURROUNDING FACTS. IN THE PRESENT CASE THE ASSESSING OFFICER HAS MECHANICALLY APPLIED @ 8% TREATING THE ASSESSEE AS A CIVIL CONTRACTOR WITHOUT LOOKING INTO FACT THAT THE ASS ESSEE HAS ALSO BEEN CARRYING OUT SOCIAL WELFARE SCHEMES FOR EW S UNDER AEGIS OF THE GOVERNMENT OF M.P. THEREFORE, TH E PROFIT RATE AS APPLIED BY THE ASSESSING OFFICER AND CONFIRMED B Y THE LD. CIT(A) CANNOT BE SUSTAINED. LOOKING TO THE FAC TS OF THE CASE AND THE FACT THAT ASSESSEE IS ALSO CARRYING OUT SOCIAL WELFARE SCHEMES. WE RESTRICT THIS PROFIT @ 4%. THIS GROUND OF THE ASSESSEES APPEAL IS PARTLY ALLOWED AS INDICATED HEREINABOVE. 13. GROUND NO.2 & 6 ARE INTER CONNECTED AND ARE RELATED TO CLAIM OF SET OFF BROUGHT FORWARD LOSSES OF PREVIOUS Y EARS. 14. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LD. C IT(A) HAS NOT DECIDED THIS ISSUE DESPITE THE FACT THAT A SPEC IFIC GROUND WAS RAISED. 15. LD. DEPARTMENTAL REPRESENTATIVE (DR) OPPOSED THE SUBMISSIONS. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORDS. WE FIND THAT BEFORE THE L D. BHOPAL VIKAS PRADHIKARAN 13 CIT(A) THIS GROUND WAS RAISED BY THE ASSESSEE, HOWEVER NO FINDING IS GIVEN BY THE LD. CIT(A). THEREFORE, CONS IDERING THE FACTS, WE DEEM IT PROPER TO RESTORE GROUND NO.2 & 6 TO THE FILE OF THE LD. CIT(A) FOR DECISION A AFRESH. LD. CIT (A) IS HEREBY DIRECTED TO DECIDE THIS ISSUE IN ACCORDANCE W ITH LAW. 17. GROUND NO.7 IS IN RESPECT OF INITIATION OF PENALT Y U/S 271(1)(C). 18. LD. COUNSEL FOR THE ASSESSEE HAS NOT MADE ANY ARGUMENT MORE OVER THIS GROUND IS PREMATURE, AO HAS NO T IMPOSED ANY PENALTY. THEREFORE, THIS GROUND OF THE ASSESSEES APPEAL IS DISMISSED. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITANO.974/IND/2016 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28.03.201 9. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIAL MEMBER INDORE; DATED : 28/03/2019 PATEL, P.S/. . . BHOPAL VIKAS PRADHIKARAN 14 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR, INDORE