M/s New Home Developers (Dream city), , Bhuj V. Assistant Commissioner of Income Tax, Central Circle-2, , Rajkot

ITSSA 45/RJT/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3741 (ITAT-RAJKOT)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 02-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Depreciation; Search and seizure; Loose papers; Document seized; Opportunity of being heard; Corroborative evidences; Block assessment; Revised return; Documents seized; Revenue expenditure
• Section: 143(3); 153A; 145; 132; 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT , !'# $,%!& BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER SL. NOS. IT(SS)A NO(S) ASSESSMENT YEAR (S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 45/RJT/2017 2008-09 NEW HOME DEVELOPERS (DREAM CITY) C/O.KALPESH S. DOSHI & CO., 411, COSMO COMPLEX MAHILA COLLEGE CIRCLE RAJKOT 360 001 PAN: AAFFN 8523J THE ACIT CENTRAL CIRCLE-2 RAJKOT 2. 59/RJT/2017 2008-09 REVENUE ASSESSEE 3. 53/RJT/2017 2009-10 ACIT, CENTRAL CIR-2, RAJKOT M/S.NEW HOME DEVELOPERS (MEHUL PARK) 10, AMIT SHOPPING COMPLEX LAL TEKRI, BHUJ PAN:AAFFN 6442E ()* / ASSESSEE BY : SHRI KALPESH DOSHI, AR ,()-* / REVENUE BY : SHRI A.K. SINHA, DR ./-0 / DATE OF HEARING 16/03/2018 12 -0 / DATE OF PRONOUNCEMENT 11/ 04/2018 IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 2 - / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED TWO APPEALS CONCERNING ASSESSMENT YEAR (AY) 2008-09 ARE CROSS-APPEALS FILED BY THE ASSESSEE AND THE REVENUE RESPECTIVELY AGAINST THE ORDER OF THE COMMISSIONE R OF INCOME TAX(APPEALS)-11, AHMEDABAD [CIT(A) IN SHORT] DATED 02/02/2017 ARISING IN THE ASSESSMENT ORDER DATED 26/02/2016 P ASSED UNDER S.143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961 (HEREINAFT ER REFERRED TO AS 'THE ACT'). 2. ON SIMILAR FACTS, THE REVENUE HAS ALSO PREFERR ED APPEAL [IT(SS)A NO.53/RJT/2017] AGAINST THE ORDER OF THE CIT(A) DAT ED 17/01/2017 ARISING IN THE ASSESSMENT ORDER DATED 26/02/2016 PASSED BY THE ASSESSING OFFICER (AO) U/S.143(3) R.W.S.153A OF THE ACT RELEV ANT TO AY 2009-10 IN THE CONNECTING CASE OF ANOTHER ASSESSEE NAMELY NEW HOME DEVELOPER (MEHUL PARK). IT(SS)A NO.45/RJT/2017 (ASSESSEES APPEAL) & IT(SS) A NO.59/RJT/2017 (REVENUES APPEAL) AY 2008-09 3. THE ASSESSEE IN ITS APPEAL HAS ASSAILED THE ORD ER OF THE CIT(A) IN WRONGLY CONFIRMING THE ADDITION TO THE EXTENT OF R S.81,71,755/- TOWARDS IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 3 - UNACCOUNTED PROFIT AS PER SEIZED BALANCE SHEET. TH E REVENUE IN ITS CROSS- APPEAL [IT(SS)A NO.59/RJT/2018], ON THE OTHER HAND, HAS ALSO ASSAILED PART RELIEF GRANTED BY THE CIT(A) TO THE EXTENT OF RS.4, 97,98,883/- OUT OF TOTAL ADDITIONS OF RS.5,79,70,638/-. 4. AS CAN BE SEEN, THE GRIEVANCE OF THE ASSESSEE AS WELL AS THE REVENUE ARISES FROM COMMON ISSUE OF ADDITION OF RS. 5,79,70,638/- TOWARDS UNACCOUNTED PROFIT PARTLY CONFIRMED BY THE CIT(A). 5. BRIEFLY STATED, THE ASSESSEE IS A PARTNERSHIP-FI RM ENGAGED IN PURCHASE AND LAND DEVELOPMENT AND CONSTRUCTION RELA TED ACTIVITIES. THE ASSESSEE HAS CARRIED OUT A PROJECT IN THE NAME OF DREAM CITY FOR DEVELOPMENT OF PLOTS AT BHUJ, GUJARAT. THE BUSINES S OF THE ASSESSEE IS STATED TO BE PURCHASE OF LAND AND SELLING THE SAME AFTER ITS DEVELOPMENT IN PLOTS. A SEARCH ACTION UNDER S.132 OF THE ACT WAS CARRIED OUT IN THE GROUP CASES INCLUDING THE PREMISES OF THE ASSESSEE ON 30/ 07/2013. CONSEQUENTLY, PROCEEDINGS UNDER S.153A OF THE ACT W AS INITIATED AND ASSESSMENT WAS FRAMED UNDER S.143(3) R.W.S. 153A OF THE ACT. IN THE COURSE OF THE SEARCH ASSESSMENT, THE AO INTER ALIA NOTED THAT IN THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF SHR I MANJI DEVJI DHALANI (MDD) [FATHER OF THE PARTNER OF THE ASSESSEE-FIRM], A BALANCE SHEET WAS FOUND SHOWING LIABILITIES AND ASSETS OF THE PAR TNERSHIP-FIRM FOR THE IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 4 - PERIOD SPANNING OVER 01/04/2001 TO 05/09/2012. THE AO MADE EXTENSIVE REFERENCE TO THE AFORESAID BALANCE SHEET FOUND FRO M THE POSSESSION OF MDD AND HIS STATEMENT DATED 29/01/2014 RECORDED UND ER S.131 OF THE ACT. A REFERENCE TO THE STATEMENT RECORDED OF PART NER SHRI HAIDAR ALI ARORA WAS ALSO MADE IN THE ASSESSMENT ORDER. THE AO NOTED THAT THE ASSESSEE HAS WORKED OUT PROFITS ON ESTIMATION BASIS @ 6% OF THE GROSS TURNOVER ARISING FROM SAID PLOTTING SCHEME OF LAND AND OFFERED THE SAME TO TAX OVER VARIOUS YEARS. THE AO AFTER TAKING NOT E OF THE REPLIES RECEIVED FROM THE ASSESSEE FROM TIME TO TIME CAME T O THE CONCLUSION THAT PROFIT MENTIONED IN THE SEIZED BALANCE SHEET AMOUNT ING TO RS.5,79,70,638/- IS THE TRUE AND REAL PROFIT OF THE FIRM. WHILE HOLDING SO, THE AO OBSERVED THAT THE PROFIT FROM THE BUSINESS V ENTURE IS DULY RECORDED IN THE SEIZED MATERIAL ITSELF AND THE ENTI RE PROFIT PERTAINS TO THE YEAR UNDER CONSIDERATION ONLY. THE AO ACCORDINGLY PROCEEDED TO MAKE ADDITIONS OF RS.5,79,70,638/- BEING THE OPENING BAL ANCE OF THE NET PROFIT AS RECORDED IN THE AFORESAID SEIZED BALANCE SHEET F OR THE PERIOD 01/04/2001 TO 05/09/2012 AS THE UNACCOUNTED PROFITS OF THE ASSESSEE- FIRM. 6. AGGRIEVED BY THE AFORESAID ACTION OF THE AO HOLD ING RS.579.70 LAKHS AS UNACCOUNTED PROFIT ON THE BASIS OF SEIZED BALANCE SHEET OF THE CUMULATIVE PERIOD, THE ASSESSEE PREFERRED APPEAL BE FORE THE CIT(A). THE IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 5 - CIT(A) TOOK NOTE OF THE VARIOUS CONTENTIONS OF THE ASSESSEE MADE BEFORE HIM SUCH AS; PROFIT @6% WAS ESTIMATED ON THE TURNOV ER OF THE PROFIT SPANNING OVER AYS 2006-07 TO 2009-10 WHICH WAS DISC LOSED IN THE RETURNS FILED UNDER S.153A OF THE ACT. IT WAS ALSO CONTENDED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE ROUGH BALANCE S HEET SEIZED IN THE COURSE OF SEARCH DID NOT REPRESENT A STATEMENT BASE D ON ACTUAL BOOKS OF ACCOUNTS. IT WAS CONTENDED THAT AFORESAID BALANCE SHEET IS MARRED WITH APPARENT AND CLEAR DISCREPANCIES AND THEREFORE CANN OT BE RELIED UPON. THE CIT(A) FINALLY CAME TO THE CONCLUSION THAT THE ASSESSEE IS ENTITLED TO DEDUCTION OF COST OF LAND INCLUDING LAND DEVELOPMEN T EXPENSES AMOUNTING TO RS.3,07,31,455/- FROM THE IMPUGNED PR OFIT OF THE PROJECT AMOUNTING TO RS.5,79,70,638/- IN ORDER TO DETERMINE NET PROFIT OF THE PROJECT. THE CUMULATIVE PROFIT WAS ACCORDINGLY DET ERMINED BY THE CIT(A) AT RS.2,72,39,183/- WHICH WAS ALLOCATED IN T HE AY 2006-07, 2007-08 AND 2008-09 ON CERTAIN PROPORTIONATE BASIS. THE UNACCOUNTED PROFIT OF RS.81,71,755/- THUS DETERMINED ON PROPORT IONATE BASIS WAS ACCORDINGLY CONFIRMED IN THE HANDS OF THE ASSESSEE AND THE RELIEF TOWARDS BALANCE AMOUNT OF RS.4,97,98,883/- WAS GRANTED TO T HE ASSESSEE. IT WOULD BE PERTINENT TO REPRODUCE THE RELEVANT OPERAT IVE PARA OF THE ORDER OF THE CIT(A) WHICH READS AS UNDER:- THE FACTS OF THE CASE, FINDINGS OF THE AO AND SUBM ISSIONS OF THE APPELLANT HAVE BEEN CONSIDERED. ADMITTEDLY, THE PROJECT WAS STARTED IN THE F.Y. 2005-06. THE PLOTS WERE SOLD 'TO SEVERAL MEMBERS AND PAYMENT WAS RECEIVED IN 40 INST ALLMENTS. THE FIRST INSTALLMENT STARTED IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 6 - IN JANUARY 2006 AND ALL THE INSTALLMENTS WERE RECEI VED BY THE MONTH OF JUNE 2009. THIS FACT WAS CONFIRMED IN THE STATEMENTS RECORDED U/S 132(4) BY THE PARTNERS OF THE ASSESSEE FIRM. IT WAS ALSO EXPLAINED THAT THE PROJECT WAS MOSTLY COMP LETED BY 2008 AND VARIOUS EXPENSES INCLUDING COST OF LAND, DEVELOPMENT EXPENSES ETC. W ERE REQUIRED TO BE DEBITED. THE DDIT (LNVESTIGATION), GANDHIDHAM ALSO MENTIONED THIS FA CT ON PAGE 396 OF THE APPRAISAL REPORT. UNDISPUTEDLY, THE BOOKS OF ACCOUNTS WERE NOT MAINTA INED BY THE APPELLANT. COPIES OF THE LEDGERS OF SOME OF THE CLIENTS ALSO SHOWED THAT MOS T OF THE INSTALLMENTS WERE RECEIVED FROM JANUARY 2006. THE DETAILS OF INCOME, EXPENDITURE AN D PROFIT FOR THE PERIOD OF 12 YEARS WERE SUMMARIZED ON PAGE 3 OF THE ORDER. THUS, THE PROFIT OF RS.57970638/- MENTIONED IN THE BALANCE SHEET REPRESENTED PROFIT OF ALL THE RELEVAN T* ASSESSMENT YEARS AND NOT THAT OF THE A.Y. 2008-09 ONLY. AS A MATTER OF FACT, THE OPENING BALANCE WAS MENTIONED AT RS.57970638/- AND THERE WAS NO PROFIT IN THE F.Y. 2012-13. IN OTH ER WORDS, THE PROFIT, IN ANY CASE, REPRESENTED PROFIT FROM THE F.Y. 2001-02 TO 2011-12 . HOWEVER, THE FACT, THAT THE PROJECT WAS STARTED IN F.Y. 2005-06 AND COMPLETED BY THE F.Y. 2008-09, CANNOT BE IGNORED FOR ASCERTAINING AND ALLOCATING THE QUANTUM OF PROFIT I N THIS PERIOD OF 4 YEARS. IT MAY BE MENTIONED THAT, ADMITTEDLY, THE BUSINESS OF THE ASSESSEE WAS THAT OF PURCHASE OF LAND AND SELLING THE SAME AFTER ITS DEV ELOPMENT IN PLOTS. THE COST OF THE LAND WAS AVAILABLE IN THE SAID BALANCE SHEET. THIS FACT HAS BEEN ACKNOWLEDGED BY THE AO IN THE ASSESSMENT ORDER ITSELF. THE CLAIM OF COST OF THE L AND WAS REJECTED FOR THE REASONS WHICH WERE CONTRARY TO THE FACTS OF THE CASE AND THE LAW ON THE ISSUE. THE GROUNDS FOR DENIAL OF THE COST OF THE LAND WERE THAT THE ONUS WAS UPON THE AS SESSEE TO PROVE THAT THE COST WAS NOT DEBITED FOR ARRIVING AT THE PROFIT MENTIONED IN THE SEIZED BALANCE SHEET AND THAT THE ASSESSEE DID NOT FURNISH ANY PROOF OF PURCHASE OF THE LAND. 6.3 THE AO DID NOT DOUBT ABOUT SALE OF THE PLOTS O F THE LAND AND ALSO ACCEPTED THEIR SALE CONSIDERATION AS INCOME OF THE ASSESSEE. IT SEEMS T HAT THE AO WAS GROSSLY CONFUSED AND COULD NOT APPRECIATE DIFFERENCE BETWEEN NATURE OF F IXED ASSETS AND THE ASSETS HELD AS STOCK IN TRADE. IF HE HAD ANY DOUBT ABOUT THE COST OF THE LAND, HE SHOULD HAVE CONDUCTED INQUIRIES ABOUT THE SAME DURING THE ASSESSMENT PROCEEDINGS. T HERE WAS NO INFORMATION ON RECORD WHICH COULD SUGGEST THAT THE AO GATHERED ANY MATERI AL EVIDENCE ON RECORD TO REFUTE THE ASSESSEE'S CLAIM FOR COST OF THE LAND AS REVENUE EX PENDITURE. ADMITTEDLY, THE COST OF THE LAND WAS MENTIONED IN THE SEIZED MATERIAL AS DISCUSSED A BOVE. IT WAS OBSERVED THAT THE AO DID NOT FOLLOW MATCHING PRINCIPLE FOR INCOME AND EXPENS ES AS MENTIONED IN THE SEIZED DOCUMENT TO ARRIVE AT CORRECT AMOUNT OF PROFIT. THE FACTS OF THE CASE EVIDENTLY ESTABLISHED THAT THE AO ADOPTED DIFFERENT STANDARDS ON THE SAME ISSUE FOR D IFFERENT PURPOSES. ONCE HE HIMSELF HAD ADMITTED THAT THE DOCUMENTS OF THE LAND WERE SEIZED BY THE DEPARTMENT THEN IT WAS NOT CORRECT TO SAY THAT THE ASSESSEE DID NOT FURNISH DETAILS OF PURCHASE OF THE LAND. THE APPELLANT FURNISHED COPY OF THE SUBMISSION FILED BEFORE THE AO ON 8.2.2016. IT WAS CATEGORICALLY SUBMITTED THAT THE COST OF THE LAND MENTIONED IN THE SEIZED BALANCE SHEET WAS OF RS.30731455/- INCLUDING LAND DEVELOPMENT COST WHICH WAS NOT DEBITED TO THE P&L ACCOUNT AS THE BOOKS WERE NOT CO MPLETED AND SUBMITTED REWORKING OF PROFIT OF THE PROJECT ACCORDINGLY. SIMILARLY, IN SU BMISSION DATED 5.1.2016, FILED IN THE OFFICE OF THE AO ON 5.1.2016, THE ASSESSEE REITERATED THAT IN VESTMENT WAS MADE IN LAND AS STOCK IN TRADE FOR THE SAID PROJECT. THEREFORE, AFTER HAVI NG REGARD TO THE FACTS AND CIRCUMSTANCES OF IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 7 - THE, CASE, TO MY UNDERSTANDING THE AO WAS NOT HAV ING ANY VALID REASON TO DENY THE CLAIM OF COST OF THE LAND AND LAND DEVELOPMENT EXPENSES AGA INST RECEIPTS FROM SALE OF THE PLOTS. THE AO ON THE ONE HAND ACCEPTED THE INFORMATION RELATED TO THE AMOUNT OF NET PROFIT AVAILABLE IN THE SEIZED MATERIAL, HOWEVER, ON THE OTHER HAND HE CONVENIENTLY IGNORED THE PARTICULARS RELATED TO THE COST OF LAND AND LAND DEVELOPMENT EX PENSES. ONCE THE CONTENTS OF THE BALANCE SHEET WERE MADE BASIS FOR MAKING ASSESSMENT THEN TH E AO WAS DUTY BOUND TO FOLLOW THE MATCHING PRINCIPLE FOR DETERMINING THE INCOME OF TH E ASSESSEE. THE AO WAS PREDOMINANTLY INFLUENCED BY PRESUMPTIONS AND SURMISES AND TOTALLY IGNORED THE FACTS ON RECORD OF THE CASE. THUS, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE C ASE, IT IS DIFFICULT TO AVOID A CONCLUSION THAT THE ACTION OF THE AO WAS UNJUSTIFIED, CONTRARY TO T HE FACTS OF THE CASE AND ALSO NOT IN CONFORMITY WITH THE LAW. ACCORDINGLY, THE AO IS DIR ECTED TO ALLOW COST OF LAND INCLUDING LAND DEVELOPMENT EXPENSES AMOUNTING TO RS.30731455/- BEF ORE ARRIVING AT PROFIT FROM THE PROJECT. THERE WAS NO DISPUTE BETWEEN THE AO AS WELL AS THE APPELLANT ABOUT THE FACT THAT THE ASSESSEE WAS NOT HAVING BOOKS OF ACCOUNTS, THE PROJ ECT WAS STARTED IN THE F.Y. 2005-06 AND THAT ALL THE DEVELOPMENT WORK WAS COMPLETED TILL TH E END OF THE F.Y. 2008-09. THEREFORE, ON THE BASIS OF THE MATERIAL ON RECORD IT CAN BE REASO NABLY UNDERSTOOD THAT MOST OF THE RECEIPTS AND EXPENSES OF THE PROJECT WERE FALLING WITHIN THE FINANCIAL YEAR 2006-07 TO 2008-09. AS A MATTER OF FACT, THERE WAS NO INFORMATION IN TH E ASSESSMENT ORDER ABOUT TOTAL RECEIPTS FROM SALE OF PLOTS OF THE PROJECT. THE ONLY INFORMA TION AVAILABLE IN THE SEIZED BALANCE SHEET WAS RELATED TO THE BALANCE IN THE CAPITAL ACCOUNTS OF THE PARTNERS, FIXED ASSETS, CURRENT ASSETS, LIABILITIES AND NET PROFIT AS ON 5.9.2012. THE AO HAVE COMPLETED THE ASSESSMENT ONLY ON THE BASIS OF INFORMATION AVAILABLE IN THE SEIZED BALANCE SHEET. THEREFORE, THE FINDING OF THE AO THAT THE PROFIT, MENTIONED IN THE SEIZED BALANCE SHEET, WAS EARNED ONLY IN THE ASSESSMENT YEAR UNDER CONSIDERATION WAS NOT BASED O N ANY COGENT MATERIAL ON RECORD. THE BASIS OF TREATING THE ENTIRE INCOME FROM THE PROJEC T IN THE A.Y. 2008-09 WAS THAT THE ASSESSEE DID NOT FILE ITS RETURNS U/S 139(1) FOR THE EARLIER YEARS I.E. EXCEPT THE A.Y. 2009-10. HOWEVER, THIS FINDING OF THE AO WAS FACTUALLY NOT CORRECT AS THE ASSESSEE FILED RETURN OF INCOME FOR THE AY. 2008-09 ON 4.9.2008 AND COPY OF THE SAME WAS EN CLOSED ON PAGE 28 OF THE PAPER BOOK. THE ASSESSEE FURNISHED COPY OF AUDITED ACCOUNTS FOR AND FROM THE A.Y. 2006-07 TO A.Y. 2008-09. HOWEVER, HE DID NOT FURNISH ANY EVIDENCE F OR THE A.Y. 2006-07 AND 2007-08. AFTER PERUSAL OF THE CONTENTS OF THE ASSESSMENT ORD ER, THE ENTRIES MENTIONED IN THE SEIZED BALANCE SHEET AND THE FINDINGS OF THE INVEST IGATION CARRIED OUT BY THE DDIT(LNV) GANDHIDHAM, IT WAS ESTABLISHED THAT THE RECEIPTS OF THE PROJECT MAINLY PERTAINED TO THE 1 A.Y. 2006-07 TO 2009-10. SINCE THE PROJECT WAS MOSTLY CO MPLETED BY THE F.Y. 2007-08 THE POSSIBILITY OF MAXIMUM PROFIT EARNED FROM THE PROJE CT SHOULD BE FALLING IN THE PERIOD OF THE FOUR YEARS. NEITHER THE APPELLANT FURNISHED ANY INFORMAT ION WITH SUPPORTING EVIDENCE NOR DID THE AO GATHER ANY COGENT EVIDENCE ON RECORD TO ASCERTAI N CORRECT AMOUNT OF TOTAL RECEIPTS AND PROFIT OF THE PROJECT. THE CLAIM OF THE APPELLANT T HAT HE EARNED PROFIT OF RS.32309661/- UP TO THE F.Y. 2006-07 RELEVANT TO A.Y. 2007-08 AND EARLI ER YEARS WAS ALSO NOT BASED ON ANY MATERIAL EVIDENCE PARTICULARLY WHEN THE ASSESSEE DI D NOT MAINTAIN ANY BOOKS OF ACCOUNTS AND ALSO DID NOT FILE RETURNS OF INCOME FOR THE ASSESSM ENT YEAR 2006-07 AND 2007-08. HAD HE FILED RETURNS OF INCOME FOR THE SAID ASSESSMENT YEA RS HE SHOULD HAVE FURNISHED EVIDENCE OF IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 8 - THE SAME BEFORE THE ASSESSING OFFICER OR IN THE APP EAL PROCEEDINGS. THEREFORE, THE CONTENTION OF THE APPELLANT WAS NOT HAVING ANY FORC E AND ACCORDINGLY THE SAME IS REJECTED. IN THE GIVEN PECULIAR FACTS AND CIRCUMSTANCES OF TH E CASE, TO MY UNDERSTANDING, IT WOULD BE JUST AND PROPER TO ADOPT PROFIT, AS MENTIO NED IN THE SEIZED BALANCE SHEET, AS GROSS PROFIT FOR THE FOUR ASSESSMENT YEARS SUBJECT TO DED UCTION OF CLAIM OF COST OF THE LAND INCLUDING LAND DEVELOPMENT EXPENSES OF RS.30731455/-. THEREAF TER, THE PROFIT WOULD BE ALLOCATED IN THE ASSESSMENT YEAR 2006-07 TO A.Y. 2009-10 BASED ON TH E PERIOD OF 40 MONTHS BROADLY STARTING FROM JANUARY 2006 AND ENDING IN JUNE 2009 ON PROPOR TIONATE BASIS. THUS, THE WORKING OF THE PROFIT IN THESE YEARS WOULD BE AS BELOW:- GROSS PROFIT OF THE PROJECT RS.57970638 LESS COST OF LAND INCLUDING ITS DEVELOPMENT EXPENSES RS.30731455 NET PROFIT OF THE PROJECT RS.27239183 PROPORTIONATE PROFIT ON THE BASIS OF MONTHLY INSTALLMENTS FOR THE YEAR UNDER CONSIDERATI ON WOULD BE AS BELOW:- A.Y.06 - 07 A.Y. 07 - 08 A.Y.08 - 09 2042938 8171755 8171755 THUS, THE ASSESSED INCOME OF THE APPELLANT WOULD BE RESTRICTED TO RS.8171755/-. ACCORDINGLY, THE GROUND OF APPEAL IS PARTLY ALLOWED . 7. AGGRIEVED BY THE ADDITIONS PARTLY CONFIRMED TO T HE EXTENT OF RS.81,71,755/-, THE ASSESSEE PREFERRED APPEAL BEFOR E THE TRIBUNAL. LIKEWISE, THE REVENUE HAS ALSO PREFERRED APPEAL AGA INST THE PART RELIEF GRANTED BY THE CIT(A). 8. AT THE TIME OF HEARING, THE LD.AR FOR THE ASSESS EE AT THE OUTSET REFERRED TO THE CUMULATIVE BALANCE SHEET FOUND AND SEIZED FROM THE IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 9 - POSSESSION OF MDD IN THE COURSE OF SEARCH WHICH IS CENTRAL TO THE ENTIRE ACTION OF THE AO. REFERRING TO THE AFORESAID BAL ANCE SHEET, THE LD.AR POINTED OUT THAT THE BALANCE SHEET IS NOT FOR ONE Y EAR BUT IS FOR THE PERIOD FROM 01/04/2001 TO 05/09/2012. THE LD.AR ACCORDING LY SUBMITTED THAT THE FIGURES OF LIABILITIES AND ASSETS MENTIONED IN THE IMPUGNED BALANCE SHEET IS CUMULATIVE FIGURE SPANNING OVER 12 YEARS . THE LD.AR NEXT SUBMITTED THAT THE NET PROFIT OF RS.5,79,70,638/- AS CAN BE SEEN IN THE IMPUGNED BALANCE SHEET, IS THE CUMULATIVE FIGURES AND IS ONLY AN OPENING BALANCE AS ON 05/09/2012. AT THIS JUNCTURE, THE LD.AR CONTENDED THAT THE NET PROFIT AS MENTIONED IN THE BALANCE SHE ET IS THUS NOT ATTRIBUTABLE TO ANY PARTICULAR YEAR BUT A CUMULATIV E FIGURE ON THE BASIS OF INCOMPLETE ACCOUNTS. THE LD.AR THEREAFTER REFERRED TO LAND ACCOUNT, LAND DEVELOPMENT ACCOUNT ETC. AGGREGATING TO RS.3 ,07,31,455/- APPEARING UNDER THE HEAD FIXED ASSETS ON THE ASSE TS SIDE OF THE BALANCE SHEET AND SUBMITTED THAT COST OF SUCH ACQUISITION O F LAND AND DEVELOPMENT EXPENSES THEREON ARE IS THE NATURE OF R EVENUE EXPENDITURE AS THE LAND IS HELD AS PART OF THE STOCK-IN-TRADE UND ER SALE BY WAY OF PLOTS. THE LD.AR THEREAFTER SUBMITTED THAT THE BANK BALANC ES SHOWN IN THE BALANCE SHEET ARE NOT RECONCILED. THE LD.AR NEXT P OINTED OUT THAT THE AMOUNT APPEARING IN THE RESPECTIVE CAPITAL ACCOUNT OF THE PARTNERS ARE THE AMOUNT WITHDRAWN BY THE PARTNERS FOR THE PURPOSES O F INCURRING DEVELOPMENT EXPENSES WHICH ACCOUNT HAS NOT BEEN IN CORPORATED IN THE IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 10 - SEIZED BALANCE SHEET. IT WAS CONTENDED THAT ALL TH ESE FACTS SHOWING SERIOUS INCOMPLETENESS IN BALANCE SHEET WAS POINTED OUT BEFORE THE LOWER AUTHORITIES TOO. THE LD.AR THUS IN SHORT SU BMITTED THAT THE BALANCE SHEET IS TOTALLY INCOHERENT AND INCOMPLETE AND IS THUS NOT REFLECTIVE OF TRUE STATE OF AFFAIRS FOR THE PURPOSE S OF DETERMINATION OF ASSESSED INCOME. IT WAS POINTED OUT BY THE LD.AR THAT THE BALANCE SHEET WAS PURPORTEDLY KEPT WITH A VIEW TO KEEP TRAC K OF COLLECTION PART AND SALES. IT WAS SUBMITTED IN ELABORATION THAT TH E EXPENSES FOR DEVELOPMENT, REMUNERATION OF PARTNERS, COST OF LAND , COST OF CONSTRUCTION OF CONCRETE ROADS, INCENTIVES, ADMINISTRATIVE EXPEN SES, TRANSPORTATION CHARGES, ETC. ARE NOT INCLUDED IN THE ROUGH BALANC E SHEET. THE LD.AR SUBMITTED THAT SUCH A ROUGH BALANCE SHEET OF 12 YE ARS THUS DO NOT REPRESENT THE ACTUAL STATE OF AFFAIRS OF THE ASSES SEE. THE LD.AR POINTED OUT THAT THE SEARCH ASSESSMENT WAS FRAMED BY THE AO CONSIDERING THE ENTIRE PROFIT OF THE PROJECT SWEEPINGLY AS APPEARIN G IN THE ROUGH BALANCE SHEET IN THE YEAR UNDER CONSIDERATION (AY 2008-09) ITSELF DE HORS THE FACTS AND CIRCUMSTANCES NARRATED ABOVE. THUS, THE SEARCH ASSESSMENT BASED ON SUCH ROUGH BALANCE SHEET WAS CLEARLY OPPOS ED TO THE FACTS AND DEPICTS TOTAL NON-APPLICABLE OF MIND ON THE PART OF AO. THE CIT(A) WHILE GRANTING PART RELIEF ADMITTED THE COST OF LAN D ETC. TO BE DEDUCTIBLE FROM NET PROFIT NOTED IN THE BALANCE SHEET. HOWEVER THE CIT(A) ALSO CONVENIENTLY IGNORED THE VARIOUS COSTS INVOLVED FOR DEVELOPMENT AND IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 11 - SELLING OF PLOTS AND ASSUMED THE BALANCE FIGURE OF NET PROFITS NOTED IN THE BALANCE SHEET AS SACROSANCT SUBJECT TO APPORTIONMEN T OF THE GROSS INCOME OVER THE PERIOD OF PROJECT. IT WAS CONTENDE D THAT WHILE DETERMINING THE INCOME ARTIFICIALLY, THE CIT(A) FAI LED TO NOTE THAT THE OTHER ASSESSEE NAMELY, MAVANI DEVELOPERS HAVE SIMIL ARLY REPORTED 6% INCOME OF TURNOVER ENGAGED IDENTICAL BUSINESS WHIC H HAS BEEN DULY ACCEPTED BY THE REVENUE IN ASSESSMENTS. LIKEWISE, 6% OF TURNOVER AS INCOME IN THE CASE OF CITY DEVELOPERS I.E. SISTER- CONCERN OF THE ASSESSEE COVERED UNDER SAME SEARCH HAS ALSO BEEN ACCEPTED BY THE COORDINATE BENCH OF ITAT WHERE THE ASSESSMENT FRAMED WAS SIM ILARLY BASED ON ROUGH BALANCE SHEET OF THE ASSESSEE. THE LD.AR HEA VILY RELIED UPON THE DECISION OF THE COORDINATE BENCH OF TRIBUNAL IN THE CASE OF CITY DEVELOPERS COVERED IN SEARCH TOGETHER WITH THE ASS ESSEE ENGAGED IN THE IDENTICAL BUSINESS WHERE THE FACT (INCLUDING ROUGH BALANCE SHEET) ARE STATED TO BE IDENTICAL ON ALL VITAL ASPECTS. THE L D.AR SUBMITTED THAT THE COORDINATE BENCH OF ITAT AFTER DETAILED ANALYSIS OF SIMILARLY PLACED FACTS HAVE ACCEPTED THE ESTIMATION OF NET PROFIT AT 6% OF THE TURNOVER AS DECLARED BY THE ASSESSEE AND SET ASIDE THE ADDITIO NS MADE ON THE BASIS OF BALANCE SHEET SPANNING OVER 10 TO 12 YEARS AS NOT RELIABLE. THE LD.AR ACCORDINGLY SUBMITTED THAT IN VIEW OF THE DISPUTE S INCE BEING COVERED BY THE DECISION OF THE COORDINATE BENCH IN THE IDENTIC AL FACTS AND CIRCUMSTANCES OF THE CASE, SIMILAR RELIEF REQUIRES TO BE EXTENDED TO THE IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 12 - ASSESSEE AND THE ADDITIONS PARTLY CONFIRMED BY THE CIT(A) REQUIRES TO BE SET ASIDE AND CANCELLED. 9. THE LD.DR ON THE OTHER HAND, RELIED UPON THE ORD ER OF THE AO AND CONTENDED THAT THE PART RELIEF GRANTED BY CIT(A) RE QUIRES TO BE REVERSED. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW, MATERIAL REFERRED AND RELIED UPON AND THE DECISION CITED. THE SOLITARY QUESTION THAT ARISES F OR ADJUDICATION IN THE APPEAL OF THE ASSESSEE AND THAT OF REVENUE IS WHE THER THE ADDITION TOWARDS UNACCOUNTED PROFIT CAN BE MADE IN THE HANDS OF THE ASSESSEE BASED ON CUMULATIVE NET PROFITS NOTED IN ROUGH BAL ANCE SHEET INVOLVING NEARLY 12 YEARS AS FOUND IN THE COURSE OF SEARCH FR OM THE POSSESSION OF THE FATHER OF THE ASSESSEE IN THE GIVEN SET OF FAC TS. 10.1. THE ROUGH BALANCE SHEET FOUND IN THE COURSE OF SEARCH IS THUS PIVOTAL FOR THE PRESENT CONTROVERSY. HENCE, BEFORE WE PROCEED TO DEAL WITH CONTROVERSY, IT WILL BE EXPEDIENT TO REPRODUC E THE EXACT CONTENTS OF THE ROUGH BALANCE SHEET AS DISCOVERED IN THE COURSE OF SEARCH. IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 13 - NEW HOME DEVELOPERS DREAM CITY 1 ST FLOOR, PADMAKALA BUILDING, NEAR JIVANDEEP BLOOD BANK, VJAY NAGAR, HOSPITAL ROAD, BHUJ (KUTCH) PIN-370001. BALANCE SHEET 1-APR. 2001 TO 5-SEP. 2012 LIABILITIES AS ON 5-SEP.2012 ASSETS AS ON 5-SEP.201 2 LOANS (LIABILITY) CAPITAL ACCOUNT CURRENT LIABIL ITIES 6,95,795 SUNDRY CREDITORS 7,01,755.00 CHARITY A/C (-) 6,050.00 (10) AMARBEN MAVJI RABDIYA (10) LALJIBHAI RABDIYA (10)MIHIR CHOTHANI 21,14,200.00 20,06,275.00 24,68,500.00 (10) V ISRAM DEVJI DHANANI 19,81,500.00 (18)NILAMBEN YAKUBBHAI KHATRI 47,96,359.00 NET PROFIT OPENING BALANCE 5,79,70,638.00 (20) SAMUBEN MANJI DHANANI 45,11,380.00 CURRENT PERIOD - (5) HAIDARALIBHAI 18,07,637.00 5,79,70,638 (7)RAJENDRA SINH JADEJA 18,94,340.00 FIXED ASSETS 3,09,43,180 LAND A/C 2,40,96,550.00 LAND DOCUMENT 1,40,000.00 COMPUTER 1,11,920.00 FURNITURE EXP. 99,805.00 LAND DEVELOPING A/C 21,71,255.00 RESORT LAND A/C 43,23,650.00 CURRENT ASSETS 36,60,312 DEPOSITS (ASSET) 1,00,000.00 LOANS & ADVANCES (ASSET) 9,00,000.00 SUNDRY DEBTORS 19,70,143.00 CASH IN HAND 5,874.00 BANK ACCOUNTS 6,84,295.00 TOTAL 5,86,66,343. TOTAL 5,86,66,343. 10.2. AS REPEATEDLY POINTED OUT ON BEHALF OF THE AS SESSEE, THE SEIZED ROUGH BALANCE SHEET AS REPRODUCED HEREINABOVE INVOL VES PERIOD OF 12 YEARS OR SO. THE NET PROFIT APPEARING IN THE LIAB ILITIES SIDE DOES NOT INDICATE ANYTHING TO PROVIDE BASIS FOR THE ASSUMPTI ON THAT THE ENTIRE PROFIT BELONGS TO THE FINANCIAL YEAR (FY) 2007-08 RELEVANT TO AY 2008-09 IN QUESTION. IT IS ALSO SEEN THAT THE LAND WHICH, IN TURN, IS STATED TO BE SOLD BY MAKING PLOTS THEREOF HAS NOT BEEN REDUCED FROM T HE TURNOVER. THE NET IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 14 - PROFIT IS ACTUALLY GROSS PROFIT WITHOUT GIVING EFFE CT TO THE COST OF LAND AND DEVELOPMENT EXPENSES. NEEDLESS TO SAY, THE COST OF LAND AND DEVELOPMENT EXPENSES IS THE DIRECT COST INCURRED HA VING REGARD TO THE NATURE OF BUSINESS OF THE ASSESSEE. THE ASSESSEE H AS DEMONSTRATED THAT THE BALANCE SHEET IS MERELY A ROUGH BALANCE SHEET WERE MANY IMPORTANT FIGURES ARE NOT RECONCILABLE AND THE EXPENSES FOR D EVELOPMENT EXPENSES, ADMINISTRATIVE EXPENSES, ETC. IS NOT FOUND TO BE AC COUNTED FOR. IT THE LIGHT OF THESE, WE FIND FORCE IN THE PLEA OF THE ASSESSE E THAT THE ROUGH BALANCE SHEET WHICH IS THE SOLITARY BASIS FOR MAKING WHOPPI NG ADDITIONS IS A BELEAGUERED EVIDENCE AND CANNOT BE RELIED UPON. S IGNIFICANTLY, IT IS THE CASE OF THE ASSESSEE THAT THE ROUGH BALANCE SHEET W AS PREPARED WITH AN OBJECTIVE TO KEEP TRACK OF THE COLLECTION AND SALES AND THUS DOES NOT REPRESENT THE COMPLETE STATE OF AFFAIRS OF THE ASSE SSEE-FIRM. AS STATED, THE STATE OF AFFAIRS OF THE ASSESSEE-FIRM CAN BE DEDUCE D FROM THE AUDITED FINANCIAL STATEMENTS ONLY FILED IN THE ASSESSMENT P ROCEEDINGS. THE PROFIT OFFERED BY THE ASSESSEE AT 6% OF THE TURNOVER AS ES TIMATED INCOME IN LINE WITH THE SIMILAR BUSINESS OF OTHER ASSESSEE ENGAGED AND SIMILARLY PLACED QUA THE ASSESSEE I.E. MAVANI DEVELOPERS AND NEW HOME D EVELOPERS (MAHUL PARK) ETC. IS THUS A REASONABLE ESTIMATE. M OST IMPORTANTLY, WE ALSO TAKE COGNIZANCE OF THE PLEA OF THE ASSESSEE TH AT A SEARCH WAS SIMULTANEOUSLY CONDUCTED IN THE CASE OF SISTER-CONC ERN NAMELY, CITY DEVELOPERS ENGAGED IN IDENTICAL BUSINESS AND A SIMI LAR ROUGH BALANCE IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 15 - SHEET WAS ALSO FOUND IN THAT CASE. IN THAT CASE, T HE COORDINATE BENCH OF ITAT IN IT(SS)A NOS.46 TO 50/RJT/2017 &ORS. ORDER D ATED 06/12/2017 HAS SET ASIDE THE SIMILAR ADDITIONS TOWARDS UNACCOU NTED PROFIT NOTED IN SUCH BALANCE SHEET AND ENDORSED THE DECLARATION OF NET PROFIT @ 6% OF THE TURNOVER AS OFFERED BY THE ASSESSEE ON IDENTICA L FACTS. 10.3. A PERUSAL OF THE ORDER OF THE COORDINATE BENC H IN CITY DEVELOPERS SHOWS THAT THE FACTS SITUATION IN THAT CASE MATERIA LLY TALLIES WITH THE FACTS SITUATION OF THE PRESENT CASE WITH INSIGNIFICANT VA RIATIONS. IN THAT CASE, THE COORDINATE BENCH HAS DECLINED TO ACCORD PRIMACY TO SUCH ROUGH AND INCOMPLETE BALANCE SHEET, SEIZED IN THE CASE OF CIT Y DEVELOPERS ALSO, OVER THE MATERIAL FACTS AND CIRCUMSTANCES EXISTING IN THE CASE. THE RELEVANT PARAS DEALING WITH THE IDENTICAL ISSUE C ROPPED UP IN CITY DEVELOPERS(SUPRA) IS REPRODUCED HEREUNDER FOR READY REFERENCE:- 3. BRIEF FACTS ARE THAT THE ASSESSEE IS A PARTNERS HIP FIRM AND CAME INTO EXISTENCE ON 21.6.2006 BY WAY OF PARTNERSHIP DEED E XECUTED BETWEEN EIGHT PARTNER VIZ.; (I) AMIT KANTILAL MEHTA, (II) SACHIN DAMODAR SHAH, (III) NITESH VISHRAM DHANANI, (IV) HAIDERALI ARORA, (V) ABDULLA M. KHATRI, (VI) HEMANT JAYANTILAL JOSHI, (VII) MAHADEV RANCHOD DHILLA, AND (VIII) PRANAVJEETSINGH B. ZALA. IT WAS ENGAGED IN LAND DEVELOPMENTS, PURCHAS E AND SALE OF LAND. IT HAS CARRIED OUT A PROJECT IN THE NAME AND STYLE OF CIT Y DEVELOPERS FOR DEVELOPMENT OF PLOTS AT BHUJ. IT HAS INTRODUCED A SCHEME FOR SALE OF PLOTS TO MEMBERS. UNDER THAT SCHEME, IT HAS INTRODUCED TWO TYPES OF PLOTS VIZ. 200 YARDS AND 100 YARDS. BUYERS WERE REQUIRED TO PAY P URCHASE PRICE IN 40 EQUAL INSTALMENTS I.E. FOR PLOT OF 200 YARDS RS.2,500/- P ER MONTH FOR 40 MONTHS WAS REQUIRED TO PAY. SIMILARLY, FOR THE PLOT OF 100 YA RDS RS.1,500/- PER MONTH WAS IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 16 - REQUIRED TO PAY FOR 40 MONTHS. INSTALMENTS HAD STA RTED IN THE MONTH OF OCTOBER, 2006. THE ASSESSEE HAD HELD A MEETING OF ALL BUYERS AND GIVEN BENEFIT OF VARIOUS GIFTS ON THE BASIS OF MONTHLY DR AW CARRIED OUT BY THE ASSESSEE-FIRM. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE UNDER SECTION 132 OF THE INCOME TAX ACT ON 30.7.2013. A NOTICE UNDER SECTION 153 OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICE, RETURNS WERE FILED ON 5. 1.2016 AND INCOME OF RS.21,16,940, RS.16,20,850/-, RS.9,18,630/-, RS.2,1 7,210/-, RS.15,270/- AND RS.9,720/-, WERE DECLARED BY THE ASSESSEE IN ASSTT. YEARS 2009-10 TO 2014-15 RESPECTIVELY. THE FACTS ON ALL VITAL POINTS ARE CO MMON EXCEPT VARIATION IN QUANTUM. THE ASSESSMENT ORDERS ARE ALSO IDENTICALL Y WORDED EXCEPT THE AMOUNTS MENTIONED IN FIGURE, THEREFORE, FOR THE FAC ILITY OF REFERENCE, WE ARE TAKING UP FACTS MAINLY FROM THE ASSTT.YEAR 2009-10. THE LD.AO HAS OBSERVED THAT DURING THE COURSE OF SEARCH, CERTAIN LOOSE PAP ERS, BILLS, VOUCHERS, BALANCE SHEET, PROFIT & LOSS ACCOUNT ETC. WERE FOUND. THE AO HAS SUMMARISED DETAILS OF PAPERS FOUND DURING THE COURSE OF SEARCH. THEY READ AS UNDER: 5 THUS, THE SEIZED MATERIALS CONTAIN THE FOL LOWING DOCUMENTS: A. P&L ACCOUNTS FOR VARIOUS YEARS, B. BALANCE SHEETS FOR VARIOUS YEARS C. RATIO ANALYSIS. D. DETAILS OF EXPENSES E. CASH BOOK F. WORKING OF COMMISSION TO AGENTS G. COLLECTION DETAILS WITH DATES, H. DAY BOOK SHOWING DAY TO DAY TRANSACTIONS. 4. THE LD.AO HAS MADE AN ANALYSIS OF PAPERS FOUND D URING THE COURSE OF SEARCH. ON PAGE NO.2 TO 12 OF THE ASSESSMENT ORDER , HE BRIEFLY REPRODUCED CONTENTS OF THE PAPERS. THE LD.AO THEREAFTER OBSER VED THAT PAGE NO.24 AND 25 OF THE ANNEXURE A/1 IS A CONSOLIDATED BALANCE SHEET AS WELL AS PROFIT & LOSS ACCOUNT FOR THE PERIOD 1.4.2006 TO 29.4.2013. ACCO RDING TO THE LD.AO, IN THIS CONSOLIDATED PROFIT & LOSS ACCOUNT, PROFIT HAS BEEN WORKED OUT AT RS.11,20,11,305/- WHICH IS TO BE ALLOCATED IN DIFFE RENT ASSESSMENT YEARS. THE ASSESSEE HAS WORKED OUT PROFIT AT 6% OF THE TURNOVE R AND OFFERED THE INCOME. THE LD.AO ISSUED A SHOW CAUSE NOTICE INVITING EXPLA NATION OF THE ASSESSEE AS TO WHY INCOME BE NOT WORKED OUT ON THE BASIS OF CONSOL IDATED PROFIT & LOSS IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 17 - ACCOUNT PREPARED BY THE ASSESSEE FOUND DURING THE C OURSE OF SEARCH. THE ASSESSEE HAS FILED DETAILED REPLY EXPLAINING EACH P AGE REFERRED BY THE AO AND POINTED OUT THAT THESE ARE INCOMPLETE COMPILATION O F THE INFORMATION WHICH DOES NOT GOAD ANY ADJUDICATING AUTHORITY TO A LOGIC AL CONCLUSION. THE REPLY OF THE ASSESSEE HAS BEEN REPRODUCED BY THE AO ON PAGE NO.13 TO 16 OF ASSESSMENT ORDER. HOWEVER, THE LD.AO DID NOT ACCEPT THE STAND OF THE ASSESSEE. HE COMPUTED THE PROFIT OF THE ASSESSEE ON THE BASIS OF CONSOLIDATED PROFIT & LOSS ACCOUNT. HE WORKED OUT AN ADDITION OF RS.2,56,40,1 24/- FOR ASSTT.YEAR 2009- 10. 5. ON APPEAL, THE LD.CIT(A) THOUGH CONCURRED WITH T HE AO BUT OBSERVED THAT THESE ARE INCOMPLETE ACCOUNTS. THE AO HAS NOT CARRIED OUT PROPER EXERCISE. THE LD.CIT(A) EXCLUDED THE COST OF LAND AT RS.5,25,85,825/- IN PROPORTION TO EACH ASSESSMENT YEAR AND WORKED OUT A DDITION OF RS.1,26,43,782/- FOR THE ASSTT.YEAR 2009-10. RELEV ANT FINDING RECORDED BY THE LD.CIT(A) READS AS UNDER: 7. THE FACTS OF THE CASE, IN BRIEF, ARE THAT IN TH E SEARCH ACTION INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED AND C ONTENTS OF THESE DOCUMENTS WERE MENTIONED BY THE AO EN PAGE NO.2 TO 12 IN THE ASSESSMENT ORDER. THE DETAILS OF INCOME, EXPENDITUR E AND PROFIT FOR EACH FINANCIAL YEAR WERE SUMMARIZED IN TABLE-1 ON PAGE 1 2, FT WAS OBSERVED THAT THE *TABLE-1' ON PAGE 12 OF THE ORDER WAS HAVI NG THE SAID INFORMATION FOR THE PERIOD FROM THE F.Y. 2006-07 TO F.Y. 2013-14 BUT EXCLUDING THE PERIOD OF THE F.Y, 2007-08, RELEVANT TO THE A.Y. 2008-09, PROBABLY FOR THE REASON THAT THE RETURNED INCOME FI LED U/S 153A WAS ACCEPTED WITHOUT ANY ADDITION. TOTAL AMOUNT OF RECE IPT, EXPENDITURE AND PROFIT OF THESE FINANCIAL YEARS, INCLUDING THE-F.Y. 2007-08, WAS WORKED OUT TO.RS.174798416/-, RS.62787110/- AND RS,1120113 05/- RESPECTIVELY. THE CONSOLIDATED P&L ACCOUNT AND BALANCE SHEET FOR THE PERIOD FROM 1.4.2006 TO 29.4.2013, AS MENTIONED IN PAGE 24 AND 25 OF THE ANNEXURE A-1 OF THE SEIZED MATERIAL, WERE REPRODUCED ON PAGE NO. 10 AND 11 RESPECTIVELY M THE ASSESSMENT ORDER. THE COST OF TH E LAND FOR RS.52585825/- WAS AVAILABLE IN THE SEIZED MATERIAL AND APPEARING IN IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 18 - THE BALANCE SHEET ON PAGE 11 OF THE ASSESSMENT ORDE R. THIS FACT WAS ACKNOWLEDGED BY THE AO IN THE ASSESSMENT ORDER ITSE LF. 7.1 THE GROUNDS FOR DENIAL OF THE CLAIM OF COST OF THE LAND WERE THAT THE LAND WAS SHOWN AS FIXED ASSET IN THE SEIZED BALANCE SHEET AND THAT THE ASSESSES DID NOT FURNISH DETAILS OF PURCHASE OF THE LAND. THUS, THE ASSESSEE'S CLAIM WAS REJECTED FOR THE REASONS WHICH WERE CONTRARY TO THE FACTS OF THE CASE AND THE LAW ON THE ISSUE. 7.2 FAST OF THE CASE, SUBMISSIONS OF THE APPELLANT AND FINDINGS OF THE AO HAVE BEEN CONSIDERED. THE AO HAS ADMITTED THE FACT ON RECORD, AS MENTIONED IN PARA 3 IN ASSESSMENT ORDER THAT THE BU SINESS OF THE ASSESSES WAS THAT OF LAND DEVELOPMENT AND SELLING T HE SAME AFTER ITS DEVELOPMENT IN PLOTS, FT WAS OBSERVED FROM PAGE NO, 3 OF THE ASSESSMENT ORDER THAT THE SEIZED DOCUMENTS CONTAINED DETAILS O F RECEIPTS FROM SATE OF PLOTS OF LAND, COPIES OF PURCHASE BILLS AND EXPE NSES AS REPRODUCED BY THE AO IN PAGE 10 OF THE ASSESSMENT ORDER. THE PAGE NO.7 OF THE SEIZED LOOSE PAPERS MARKED AS ANNEXURE A-1, WAS HAVING IN FORMATION RELATED TO THE LAND, 7.3 THE AO DID NOT-DOUBT SATE OF THE PLOTS OF THE L AND, ACCEPTED THEIR SALE CONSIDERATION AS INCOME AND ALLOWED INDIRECT E XPENSES INCURRED BY THE ASSESSES FT SEEMS THAT THE AO WAS GROSSLY CONFU SED AND COULD NOT APPRECIATE DIFFERENCE BETWEEN NATURE OF FIXED ASSET S AND THE ASSETS HELD AS STOCK IN TRADE, IT WAS AN ADMITTED FACT THAT THE LAND WAS PURCHASED ARID AFTER CARRYING OUT DEVELOPMENT IT WAS CONVERTE D INTO PLOTS AND SOLD TO SEVERAL CLIENTS. IF HE HAD ANY DOUBT ABOUT THE C OST, OF THE LAND, HE SHOULD HAVE CONDUCTED INQUIRIES ABOUT THE SAME DURI NG THE ASSESSMENT PROCEEDINGS. THERE WAS NO INFORMATION ON RECORD WHI CH COULD SUGGEST THAT THE AO GATHERED ANY MATERIAL EVIDENCE ON RECOR D WHICH COULD REFUTE THE ASSESSEE'S CLAIM FOR COST OF THE LAND AS REVENUE EXPENDITURE. ADMITTEDLY, THE COST OF THE LAND WAS MENTIONED IN T HE SEIZED MATERIAL AS DISCUSSED ABOVE. THE FACTS OF THE CAST EVIDENTLY ES TABLISHED THAT THE AO ADOPTED DIFFERENT STANDARDS ON THE SAME ISSUE FOR D IFFERENT PURPOSES. IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 19 - 7.4 ONCE HE HIMSELF ADMITTED THAT THE DOCUMENTS OF THE LAND WERE SEIZED BY THE DEPARTMENT THEN IT WAS NOT CORRECT TO SAY TH AT THE ASSESSEE DID NOT FURNISH DETAILS OF PURCHASE OF THE LAND. THE AP PELLANT FURNISHED COPY OF THE SUBMISSION FILED BEFORE THE AO ON 13.1.2016, IT WAS CATEGORICALLY SUBMITTED THAT THE DETAILS ON PAGE NO.7 OF THE SEIZ ED MATERIAL, MARKED AS ANNEXURE A-1, WERE RELATED TO LAND PURCHASED BY THE ASSESSES FIRM FOR ITS DREAM PARK PROJECT SIMILARLY, IN FURTHER SU BMISSION DATED 12.2016, FILED IN THE OFFICE OF THE AO ON 8.2.2016, THE REITERATED ITS CLAIM OF CAST OF THE AND SUBMITTED REWORKING OF PRO FIT OF THE PROJECT, FT WAS ALSO EVIDENT FROM THE ABOVE THAT THE AO WAS HAV ING IN HIS POSSESSION EVIDENCE RELATED TO PURCHASE OF THE LAND AND ALSO THE INFORMATION FURNISHED BY THE ASSESSES. THEREFORE, T O MY UNDERSTANDING, THERE WAS NO VALID REASON TO DENY THE CLAIM OF COST OF THE LAND AGAINST RECEIPTS FROM SATE OF THE PLOTS. THE AO WAS PREDOMI NANTLY INFLUENCED BY PRESUMPTIONS AND SURMISES TOTALLY IGNORED THE FACTS ON RECORD OF THE CASE OF THE APPELLANT 7.5 THUS, IN .THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, IT IS DIFFICULT TO AVOID A CONCLUSION THAT THE ACTION OF THE AO WAS UNJUSTIFIED, CONTRARY TO THE FACTS OF THE CASE AND ALSO NOT IN CONFORMITY WITH THE LAW. 7.6 THERE WAS NO DISPUTE BETWEEN THE AO AS WELL AS THE APPELLANT ABOUT THE FACT THAT THE ASSESSES WAS NOT HAVING BOOKS OF ACCOUNTS. SIMILARLY, THE TURNOVER MENTIONED IN TIE SEIZED MATERIAL WAS A LSO ACCEPTED BY BOTH OF THEM. THE PROJECT WAS STARTED IN THE F,Y. 2005-0 6 AND AIL THE DEVELOPMENT WORK WAS COMPLETED TILL THE END OF THE F.Y. 2008-09, THEREFORE, MOST OF THE EXPENSES AND RECEIPTS WERE F ALLING WITHIN THE FINANCIAL YEAR 2006-07 TO 2008-09, 7.7 THE APPELLANT DISCLOSED HIS INCOME IN THE RETUR NS FILED U/S 153A ON ESTIMATE BASIS. HOWEVER, THE ASSESSMENTS WERE COMPL ETED SOLELY ON THE BASIS OF THE SEIZED COPY OF PROFIT AND LOSS ACCOUNT AND BALANCE SHEET, EXCEPT FOR THE A.Y. 2008-09 WHEREIN THE AO ACCEPTED THE RETURNED INCOME FILED BY THE ASSESSES, WHICH WAS ESTIMATED A T THE RATE OF 8% OF THE RECEIPTS, AS MENTIONED IN THE ORDER. AFTER HAVI NG REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND POSITION OF LAW O N THE ISSUE, IN MY IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 20 - CONSIDERED OPINION, IT WOULD BE FAIR AND JUST TO WO RK OUT INCOME OF THE ASSESSES FROM THE PROJECT AFTER ALLOWING INDIRECT E XPENSES AS CONSIDERED BY THE AO AND COST OF THE LAND FROM THE TOTAL RECEI PTS. THEREFORE, WORKING OF THE INCOME OF THE ASSESSEE FROM THE PROJ ECT, AFTER TAKING INTO CONSIDERATION INDIRECT EXPENSES AND COST OF LAND, F ROM THE PROJECT WOULD BE 34% (59425481/174798416X100) OF THE TOTAL RECEIP TS. THUS, CONSIDERING THE BUSINESS TURNOVER OF RS,37187595/-, AS ADOPTED BY THE AO, THE TAXABLE PROFIT FOR THE YEAR UNDER CONSIDERA TION WOULD OF RS.12643782/-. ACCORDINGLY, THE ASSESSEE GETS PART RELIEF OF RS.12996342/-. 6. THE ASSESSEE HAS FILED WRITTEN SUBMISSION BEFORE THE LD.CIT(A) WHICH ARE AVAILABLE IN THE PAPER BOOK IN EACH ASSESSMENT YEAR ON PAGE NOS.1 TO 24 OF THE PAPER BOOK. SIMILARLY, THE LD.COUNSEL FOR THE ASSESSEE HAS FILED GIST OF HIS ARGUMENTS IN TABULAR FORM. HE COMPILED DETAILS IN TABULAR FORM EXHIBITING TURNOVER CONSIDERED BY THE AO AS WELL AS BY THE ASS ESSEE FOR WORKING OUT INCOME, NET PROFIT DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME, NET PROFIT ACCEPTED BY THE AO IN THE ASSESSMENT ORDERS AND NET PROFIT AFTER GIVING EFFECT TO THE CIT(A)S ORDER. THESE DETAILS READ AS UNDER : AY 2008-09 AY 2009-10 AY 2010-11 AY 2011-12 AY 2012-13 AY 2013-14 AY 2014-15 TURNOVER 55525192 37187595 27014150 9916476 3620026 254500 162000 NET PROFIT DECLARED BY ASSESSEE % OF NET PROFIT 1962064 3.53% 2231256 6.00% 1620849 6.00% 594989 6.00% 217202 6.00% 15270 6.00% 9720 6.00% NET PROFIT ASSESSED BY AO % OF NET PROFIT ACCEPTED BY AO 25640124 68.95% 9210712 34.10% 5413872 54.59% 2661377 73.52% 101091 39.72% 39557159 24418.00% NET PROFIT ASSESSED BY CIT (A) % OF NET PROFIT NA NA 12643782 34.00% 9184811 34.00% 3371602 34.00% 1230808 34.00% 86530 34.00% 55080 34.00% IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 21 - APPEALED BY DEPT APPEALED BY DEPT NET PROFIT ASSESSED BY AO FOR AY 2013-14 IS RS. 101 091/-. HOWEVER, AS PER SEIZED MATERIAL, IT IS LOSS O F RS. 101091/-. 7. THE ASSESSEE IS CHALLENGING ACTION OF THE REVENU E AUTHORITIES IN ASSTT.YEARS 2009-10 TO 2013-14, WHEREAS REVENUE IS CHALLENGING ORDERS OF THE LD.CIT(A) IN THE ASSTT.YEAR 2009-10 AND 2014-15. 8. GRIEVANCE OF THE ASSESSEE IS THAT ADDITION MADE BY THE AO, OVER AND ABOVE NET PROFIT DECLARED BY THE ASSESSEE DESERVES TO BE DELETED, WHEREAS GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN ALLOWING COST OF LAND BEFORE WORKING OUT TAXABLE PROFIT IN THE HANDS OF THE ASSESSEE. THUS, ON AN ANALYSIS OF THE RECORD, WE ARE OF THE VIEW THAT SOLE CONTROVERSY REQUIRED TO BE RESOLVED BY US IS WHETHER ON THE BASIS OF ALLEGE D CONSOLIDATED PROFIT & LOSS ACCOUNT AND BALANCE SHEET, INCOME OF THE ASSESSEE I N THESE ASSESSMENT YEARS SHOULD BE WORKED OUT OR IT IS TO BE ESTIMATED AS DO NE BY THE ASSESSEE. BEFORE ADVERTING TO THE FACTS AND THE SEIZED MATERIAL IN P ARTICULAR, WE DEEM IT APPROPRIATE TO TAKE NOTE OF SECTION 145 OF THE INCO ME TAX ACT, 1961. IT READS AS UNDER: METHOD OF ACCOUNTING. 145. (1) INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OR 'INCOME FROM OTHER SOURC ES' SHALL, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE COMPUTED IN A CCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY E MPLOYED BY THE ASSESSEE. (2) THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFICI AL GAZETTE FROM TIME TO TIME INCOME COMPUTATION AND DISCLOSURE STAN DARDS TO BE FOLLOWED BY ANY CLASS OF ASSESSEES OR IN RESPECT OF ANY CLASS OF INCOME. (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED AB OUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WH ERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) HAS NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, OR INCOME HAS NOT BEEN COMPUTED IN ACCORDANCE WITH IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 22 - THE STANDARDS NOTIFIED UNDER SUB-SECTION (2), THE A SSESSING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTIO N 144. SECTION 145 145. (1) INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OR 'INCOME FROM OTHER SOURC ES' SHALL, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE COMPUTED IN A CCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY E MPLOYED BY THE ASSESSEE. (2) THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFICI AL GAZETTE FROM TIME TO TIME [ACCOUNTING STANDARDS] TO BE FOLLOWED BY ANY CLASS OF ASSESSEES OR IN RESPECT OF ANY CLASS OF INCOME. (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED AB OUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WH ERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) [OR ACCOUNT ING STANDARDS AS NOTIFIED UNDER SUB-SECTION (2), HAVE NOT BEEN REGUL ARLY FOLLOWED BY THE ASSESSEE], THE ASSESSING OFFICER MAY MAKE AN ASSESS MENT IN THE MANNER PROVIDED IN SECTION 144.] 9. A BARE READING OF SECTION 145 WOULD REVEAL THAT IT PROVIDE THE MECHANISM HOW TO COMPUTE THE INCOME OF THE ASSESSEE. ACCORDIN G TO SUBSECTION 1, THE INCOME CHARGEABLE UNDER THE HEAD PROFIT AND GAINS O F BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURCE SHALL BE COM PUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTANCY EMPLOYED BY AN ASSES SEE REGULARLY, SUBJECT TO SUB-SECTION 2 OF SECTION 145 OF THE ACT. SUB-SEC TION 2 PROVIDES THAT THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFICIAL GAZET TE FROM TIME TO TIME, THE ACCOUNTING STANDARD REQUIRED TO BE FOLLOWED BY ANY CLASS OF ASSESSEE IN RESPECT OF ANY CLASS OF INCOME. THUS, IT INDICATES THAT INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTAN CY FOLLOWED BY AN ASSESSEE I.E. CASH OR MERCANTILE, SUCH METHOD HAS T O BE FOLLOWED KEEPING IN VIEW THE ACCOUNTING STANDARD NOTIFIED BY THE CENTRA L GOVERNMENT FROM TIME TO TIME. SUB CLAUSE 3 PROVIDES A SITUATION, THAT IS , IF THE ASSESSING OFFICER IS IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 23 - UNABLE TO DEDUCE THE TRUE INCOME, ON THE BASIS OF M ETHOD OF ACCOUNTANCY FOLLOWED BY AN ASSESSEE THAN, HE CAN REJECT THE BOO K RESULT AND ASSESSED INCOME ACCORDING TO HIS ESTIMATION OR ACCORDING TO HIS BEST JUDGMENT. THE ASSESSING OFFICER IN THAT CASE IS REQUIRED TO POINT OUT THE DEFECTS IN THE ACCOUNTS OF ASSESSEE AND REQUIRED TO SEEK EXPLANATI ON OF THE ASSESSEE QUA THOSE DEFECTS. IF THE ASSESSEE FAILED TO EXPLAIN TH E DEFECTS THAN ON THE BASIS OF THE BOOK RESULT, INCOME CANNOT BE DETERMINED AND ASSESSING OFFICER WOULD COMPUTE THE INCOME ACCORDING TO HIS ESTIMATIO N KEEPING IN VIEW THE GUIDING FACTOR FOR ESTIMATING SUCH INCOME. 10. NOW LET US CONSIDER PAPERS FOUND DURING THE COU RSE OF SEARCH AND USED BY THE AO FOR WORKING OUT TAXABLE INCOME OF THE ASS ESSEE. TWO IMPORTANT DOCUMENTS WHICH ARE BEING CONSIDERED BY THE AO ARE REPRODUCED IN THE ASSESSMENT ORDER AT PAGE NO.10 AND 11. THESE ARE P ROFIT & LOSS ACCOUNT AND BALANCE SHEET FOR THE PERIOD STARTING FROM 1.4.2006 TO 29.4.2013 AND BALANCE SHEET FROM 1.4.2013 TO 29.4.2013. THEY READ AS UND ER: CITY DEVELOPERS PROFIT AND LOSS A/C 1-APR-2008 TO 29-APR-2013 PARTICULARS 1/4/2006 TO 29/04/2013 PARTICULARS 1/4/2006 TO 29/04/2013 DIRECT EXPENSES 6,27,87,110.98 INDIRECT INCOME 17 ,47,98,416 LAND DEVELOPMENT EXP 89,38,365.00 ALTAFBUZARG 1,83 ,000.00 REMUNARATION 1,71,83,923.00 ARCHNABEN BHATT 3,60,0 00.00 SALARY EXP 9,04,200.00 ASHVINBHAITREVIDI 17,32,500.00 ADMINISTATIONEXP 1000.00 AZIZBHAIRAMYA 35,25,000.00 ADVERTISEMENT EXP. 15,35,235.00 BABUBHAI 3,00,000 .00 BANK CHARGES EXP. 54,433.98.00 BALVANT JOSHI 52,00 0.00 CHARITY 76,164.00 BHARTBHAIGOR 21,10,400.00 DARSHAN J. VORA 61,000.00 BHART S. SHAH 7,47,500.0 0 DISCOUNT 46,270.00 BHOJABHAIBAKOTRA 60,000.00 DIWALI GIFT 71,020.00 DINESHBHAI HADIYA 57,65,000.00 DOCUMENT FEE 13,50,200.00 DIPAKBHAISHETHIYA 18,36, 000.00 DRAW EXP. 13,56,988.00 DIPESHBHAI SHAH 23,80,000.00 INTEREST A/C. (CCH-2) 12,35,141.00 DR. ATULGOSAR 9 ,17,000.00 LAND DEVELOPING(YAKUBBHAI) 8,28,000.00 GAUTAMBHAI 3,11,500.00 LAND DEVELOPMENT A/C. (NEW) 59,029.00 GEETABEN TRI VEDI 1,43,65,000.00 LAND DEVELOPMENT EXP. (CEMENT ROAD) 49,38,020.00 HABIBBHAI KHATRI 30,57,000.00 OFFICE EXP. 7,19,364.00 HARIBHAIAHIR 20,20,400.00 OFFICE EXP. (GANDHIDHAM) 99,100.00 HARICHAND SHAH 1,11,000.00 OFFICE EXP. (MUMBAI) 7,86,530.00 HITESHBHAIBALDANIY A 34,99,200.00 OPENING EXP. 76,120.00 HITESHBHAISORATHAI 6,82,500.00 PGVCL (CALL) 60,678.00 ISWARBHAICHAVDA 6,60,000.00 P.J.VORA& CO. 94,000.00 JAGDISHBHAIBHINDE 5,92,000.00 PRIZE DISTRIBUTION 1,85,74,637.00 JAYESHBHAISORTH AI 11,72,000.00 RENT PAID A/C. 5,20,000.00 J.B. ZALA 52,000.00 SALARY EXP. 4,20,693.00 J.C. JADEJA 16,31,500.00 S.NO-681-682-685PAKI 4,35,000.00 LALIT A. MEHTA 5, 54,500.00 S.NO-693 N.A. 9,62,477.00 MADEVABHACHU 8,91,000.00 STATIONERY/PRINTING/ZEROX 4,50,563.00 MAHENDRABHAI TRIVEDI 1,88,37,470.00 SUSPENCE 3,93,309.00 NANDISH D. AJANI 1,41,18,079.00 IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 24 - TELEPHONE BILL EXP 86,835.00 PARESHBHAI SHAH 21,12 ,500.00 TRAVELLING EXP. 4,67,816.00 PRABTHSINGH 1,44,96,55 0.00 NET PROFIT 11,20,11,305.02 PARTHANILBHAI SHAH 77,79,450.00 PRADIPBHAI M THACKER 36,51,000.00 PRAFULBHAI JOSHI 4,85,500.00 PRATIPAL C. JADEJA 3,25,000.00 PRIYAMAHESWARI 24,29,800.00 PUNJABHAICHAVDA 1,28,06,600.00 RAFIK ARORA 9,07,000.00 RAMESHBHAIPANDE 2,24,000.00 RAMESH THAKKER 25,63,000.00 RAMNIKBHAI D. MARU 1,51,37,900.00 SADHNALALIT MEHTA 7,03,500.00 SELF 56,45,300.00 SURESHBHAISOTHIYA 9,25,000.00 UTARA MOTA 84,82,000.00 VAGHELABHAI 76,89,464.00 VALJIBHAI PATEL 20,81,500.00 VARSHABENSORTHIYA 3,51,988.00 INTEREST ON LOAN A/C. 2,30,465.00 RATE DIFF. A/C. 22,47,350.00 TOTAL 17,47,98,416.00 TOTAL 17,47,98,416.00 CITY DEVELOPERS BALANCE SHEET 1-APR-2013 TO 29-APR-2013 LIABILITIES AS AT 29-APR -2013 ASSETS AS AT 29-APR-2013 LOANS (LIABILITIES) CAPITAL ACCOUNT 3,57,84,172.00 ABDULLAHBHAI KHATRI 39,65,467.00 PROFIT & LOSS A/C. 11,20,11,305.02 AMIT KANTILALMO TA 56,21,786.00 OPENING BALANCE 11,19,45,755.02 HAIDARALIBHAI AROR A 50,55,772.00 CURRENT PERIOD 65,550.00 HEMANTBHAI JOSHI 37,13,545.00 MAHADEVBHAIAAHIR 21,72,830.00 DIFF IN OPENING BALANCES 25,00,000.00 NITESHVISHRA M DHANANI 83,42,568.00 PRANAVJITSINHZALA 8,94,770.00 SACHIN D. SHAH 60,18,336.00 TDS(2009-2010) (-)902.00 CURRENT LIABILITIES 25,23,662.00 SUNDRY CREDITORS 3,98,113.00 FREING BENEFIT TAX A/C 6,988.00 FREINGE BENEFIT TAX-2007/2008 6,450.00 LAND TAXES A/C 2,82,400.00 SELF ASSESSMENT TAX-2007/2008 5,26,426.00 SELF ASSESSMENT TAX A/C. 4,77,117.00 T.D.S(2007-2008) 5,20,244.00 T.D.S(2008-2009) 3,05,924.00 FIXED ASSETS 5,30,01,808.00 COMPUTER 1,27,080.00 FURNITURE 2,81,400.00 LAND A/C. 4,77,42,750.00 LAND A/C(CITI SQUARE PLOT) 1,88,328.00 LAND A/C. (NEW) 37,54,750.00 LAND A/C (PRIME) 9,00,000.00 WATER DISPENSER 7,500.00 CURRENT ASSETS 2,32,01,663.02 TEMP A/C (-)5,000.00 SUNDRY DEBTORS 1,83,49,045.00 CASH-IN-HAND 38,568.00 BANK ACCOUNTS 45,88,585.02 MUKESHLAXMAN PATEL 2,30,465.00 TOTAL 11,45,11,305.02 TOTAL 11,45,11,305.02 IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 25 - ACCORDING TO THE AO PROFIT SHOWN IN THIS PAPER IS R S.11,20,11,305/-. THE ASSESSEE HAS GIVEN ITS EXPLANATION. ALONG WITH THE SE PAPERS, THE AO HAS MADE REFERENCE TO PAGE NO.12 OF ANNEXURE A/1. NARRATION IN THIS PAGE HAS BEEN NOTICED BY THE AO ON PAGE NO.3 OF THE ASSESSMENT OR DER AND THIS NARRATION READS AS UNDER: 12. CITI DEVELOPERS (01.04.08 TO 31.03.09) PROFIT & LOSS ACCOUNT: INDIRECT EXP. 11547471 INDIRECT INCOME 37187595 NET PROFIT 25640124 11. THE LD.AO HAS ASSUMED PROFIT FOR ASSTT.YEAR 200 9-10 AT RS.2,56,40,124/-. THE ASSESSEE HAS GIVEN ITS EXPLA NATION AND SUBMITTED THAT TOTAL TURNOVER WAS RS.3.71 CRORES. HOW PROFIT OF R S.2.56 CRORES CAN BE MADE FROM SUCH TURNOVER. IT WAS ALSO SUBMITTED THAT FOR ACHIEVING TURNOVER OF RS.3.71 CRORES ONLY RS.10.93 LAKH HAS BEEN DEBITED AS DEVELOPMENT EXPENSES, WHICH IS ONLY 2.93%. DEVELOPMENTS EXPENSES IN SIMIL AR KIND OF PROJECT, WHERE ASSESSMENTS ARE COMPLETED BY THE AO IN THE SAME CIR CLE ARE MUCH MORE. OFFICE EXPENSES ARE SHOWN ONLY RS.1.11 LAKHS. THER E IS NO OTHER STATUTORY DEDUCTION CLAIMED; LIKE REMUNERATION TO THE PARTNER S, DEPRECIATION ETC. 12. IT IS PERTINENT TO OBSERVE THAT BEFORE LD.CIT(A ) AS WELL AS BEFORE THE LD.AO THE ASSESSEE HAS POINTED OUT VARIOUS DEFECTS IN THE ALLEGED PROFIT & LOSS ACCOUNT AND FIGURE ENUMERATED IN THE ALLEGED BALANC E SHEET. THE LD.COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TOWARDS WRITTEN SUBMISSIONS FILED BEFORE THE LD.CIT(A) AS WELL AS SPECIFIC DEFECTS CULLED OU T BY THE ASSESSEE SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE. IT IS PERTINENT T O TAKE NOTE OF THESE FACTUAL DISCREPANCIES HIGHLIGHTED BY THE ASSESSEE IN THE SY NOPSIS. THIS DATA WAS MAINLY PREPARED TO CHECK THE SALES A ND INSTALMENT RECEIVED ON VARIOUS BOOKINGS OF THE PLOT AND NOT EX ACTLY TAKEN FOR THE BOOKS OF ACCOUNTS. IT CAN BE FURTHER SEEN THAT MOST OF THE LOOSE PAPER S ARE FOUND RELATED TO BOOKING COLLECTION. IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 26 - THE BOOKS OF ACCOUNTS WERE INCOMPLETE AND COULD NOT BE COMPLETED AS ONE OF THE PARTNERS DIED AND THERE WERE ALSO DISPUT ES AMONGST PARTNERS. THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET FOUND A RE NOT RELATED TO THE ACTUAL BOOKS AND CANNOT BE USED AS A BASIS FOR MAKI NG ADDITION. THE REFERENCE MAY BE MADE TO LOOSE PAPERS FOUND AS THE BALANCE SHEET IS ONLY FOR THE PERIOD, APRIL 2013, CASH BOOK IS AL SO FOR APRIL 2013 AND THE RATIO ANALYSIS SHOWS VERY INADVERTENT FIGURES. THE BOOKS OF ACCOUNTS ARE NOT COMPLETE AND VARIOUS EXPENSES ARE REQUIRED TO BE DEBITED LIKE COST OF LAND AND OTHER RELATED EXPENSES, DEVELOPMENT EXPENSES, MATERIAL PURCHASES, CONSTRUCT ION OF CONCRETE ROAD, OTHER AMENITIES PROVIDED LIKE GARDENING, CLUB HOSE FACILITY ETC. , TRANSPORTATION EXPENSE AND MANY SUCH EXPENSES. IT CAN BE FURTHER SEEN THAT THE PROFIT AND LOSS ACC OUNTS ARE PERTAINING TO 7 YEARS TOGETHER AND NO IMPORTANT ENTRIES LIKE WORKIN G-IN-PROGRESS, CLOSING STOCK EFFECT, DEPRECIATION, REMUNERATION TO PARTNER S, YEAREND ENTRIES, PROVISION FOR TAXATION, PROFIT AND LOSS DISTRIBUTIO N ETC. ARE PROVIDED IN THE SAID ACCOUNTS AND THEREFORE SUCH BOOKS CANNOT BE RE GARDED AS PROPER AND COMPLETE IN THE PROFIT AND LOSS ACCOUNT ALSO NO MATCHING PRI NCIPLES FOR INCOME AND EXPENSES HAVE BEEN WORKED OUT AND THEREFORE CORRECT PROFIT CANNOT BE WORKED OUT FROM THE SAID LOOSE PAPER. THE 'A' HAS SUBMITTED THE AUDITED ACCOUNTS BUT THE SAME HAVE NOT BEEN CONSIDERED AND THE ADDITIONS HAVE BEEN MADE SOLELY ON THE BASIS OF LOOSE PAPERS IT CAN BE CROSS TALLIED WITH THE PARTNERS ACCOUNT I N THE CASE OF SHRI HEMANTBHAI JOSHI, WHOSE BLOCK ASSESSMENTS ARE COMPL ETED U/S 153A R.W.S. 143(3) AND THE CAPITAL ACCOUNT WITH THE FIRM IS DULY ACCEPTED WHEREIN THE AMOUNT SHOWN AS DEBIT BALANCE OF RS.2,6 2,018/, WHEREAS IN CASE OF FIRM THE AMOUNT OF DEBIT BALANCE IS RS. 37, 13,545/ IN THE BALANCE SHEET ANNEXED. THE SIMILAR FACTS ARE THERE WITH OTH ER PARTNERS ALSO. THE BANK BALANCE ALSO DOES NOT TALLY WITH THE BANK STATEMENT, THE BANK BALANCE SHOWN AS ON 29/04/2013 AS PER BALANCE SHEET IS RS.45,88,585/ IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 27 - WHEREAS AS PER BANK STATEMENT IT IS ONLY RS. 7,343/ 06, THE COPY OF BANK STATEMENT - THE 'A' HAS ALSO EXPLAINED VARIOUS DISCREPANCIE S IN THE LOOSE PAPER, THE SAME IS REPRODUCED VIDE PAGE NO. 8 PARA 16 ONWA RDS IN THE PAPER BOOK. - IT IS ALSO FURTHER STATED THAT THE COST OF LAN D AND VARIOUS OTHER EXPENSES ARE NOT DEBITED IN THE LOOSE PAPER. THE SA ME HAS BEEN ALLOWED BY THE LD. CIT(A) AND HAS ESTIMATED PROFIT @ 34% - THE LAND DEVELOPMENT EXPENSES AS PER THE VOUCHE RS FOUND IS RS.3,79,02,130/-, WHEREAS AS PER LOOSE PAPER IS RS. 1,47,64,414/-. THEREFORE, THE EXPENSES TO THE EXTENT OF RS. 2,31,3 7,716/- ARE REQUIRED TO BE DEBITED. - THERE ARE ALSO VARIOUS RECEIVABLES AS PER BALAN CE SHEET AND DUE TO DISPUTES WITH CUSTOMERS THERE ARE MANY OUTSTANDING INSTALMENTS AND MORE THAN 300 TO 350 PLOTS ARE CANCELLED AND THEREF ORE THE AMOUNT RECEIVABLE IN THE BALANCE SHEET IS VERY OLD OUTSTA NDING AND THE SAME CAN BE REGARDED AS BAD-DEBTS. - THE DEBIT BALANCE SHOWN IN PARTNERS ACCOUNT IS MAINLY ON ACCOUNT OF VARIOUS EXPENSES INCURRED BY PARTNERS BY WITHDRAWIN G AMOUNTS FROM THE FIRM, HOWEVER THE EXPENSES ARE NOT ACCOUNTED FOR IN THE ROUGH ACCOUNTS AND THEREFORE PROFIT CANNOT BE PROPERLY DEDUCED FRO M SUCH ACCOUNTS. - THEREFORE, EVEN AFTER RECONCILIATION OF ABOVE I TEMS PROFIT FOR THE BLOCK PERIOD WHICH IS WORKED OUT AS PER THE PAGE 13 PARA 40 OF THE PAPER BOOK IS LOSS OF RS.1,67,14,283/- AS AGAINST THAT THE A HAS SHOWN INCOME FOR THE BLOCK PERIOD OF RS.76,75,970/-. - THEREFORE THE ESTIMATION OF PROFIT @ 6% IS QUITE F AIR AND REASONABLE. 13. WE HAVE CROSS-VERIFIED ALL THESE DEFECTS POINTE D OUT BY THE ASSESSEE WITH FIGURES MENTIONED IN THE PROFIT & LOSS ACCOUNT AS W ELL AS IN THE BALANCE SHEET REPRODUCED ABOVE. FOR EXAMPLE, THE ASSESSEE HAS HI GHLIGHTED THAT COST OF LAND AND VARIOUS OTHER EXPENSES ARE NOT DEBITED IN THE L OOSE PAPERS. WHEN THESE DEFECTS WERE POINTED OUT BEFORE THE LD.CIT(A), THEN THESE EXPENSES WERE IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 28 - ALLOWED TO THE ASSESSEE. BUT ASSESSEE HAS POINTED OUT THAT LAND DEVELOPMENT EXPENSES AS PER VOUCHERS FOUND DURING THE COURSE OF SEARCH ARE RS.3,79,02,130/- WHEREAS AS PER LOOSE PAPER IT IS R S.1,47,64,414/-. THUS, THE EXPENDITURE TO THE EXTENT OF RS.2,31,37,716/- ARE R EQUIRED TO BE DEBITED. WHEN THIS FACT WAS BROUGHT TO THE NOTICE OF THE AO, HE D ID NOT FEEL NECESSITY TO EVEN VERIFY CLAIM OF THE ASSESSEE. THE LD.AO ONLY PARTI ALLY CONSIDERED THE FIGURE MENTIONED IN THE LOOSE PAPER AS GOSPEL TRUTH AND CO MPUTE THE INCOME. IT IS PERTINENT TO OBSERVE THAT DOCUMENTS FOUND DURING TH E COURSE OF SEARCH IS TO BE READ AS A WHOLE AND LOGICAL CONCLUSION OR INFERENCE ARE TO BE DRAWN BY TAKING ALL FIGURES IN THEIR SETTING AS A WHOLE. THE AO CA NNOT TAKE A COGNIZANCE OF A PARTICULAR ITEM AND IGNORE OTHERS, IF DOCUMENT DOES NOT LEAD TO ANY LOGICAL CONCLUSION THEN DOCUMENT DESERVES TO BE IGNORED FOR DETERMINING TAXABLE INCOME OF THE ASSESSEE. WE HAVE MADE A REFERENCE T O SECTION 145 AND OBSERVED THAT THIS SECTION CONTEMPLATES THAT INCOME HAS TO BE DETERMINED IN ACCORDANCE WITH METHOD OF ACCOUNTANCY FOLLOWED BY T HE ASSESSEE, AND IF THE AO IS ENABLE TO DEUCE A TRUE INCOME ON THE BASIS OF METHOD OF ACCOUNTANCY OR ON THE BASIS OF BOOKS OF ACCOUNTS, THEN HE CAN REJE CT THE BOOK RESULT AND ESTIMATE INCOME ACCORDING TO HIS BEST JUDGMENT. IN THE PRESENT CASE, COMPLETE BOOKS OF ACCOUNTS WERE NOT SUBMITTED. NO DOUBT DOC UMENTS FOUND DURING THE COURSE OF SEARCH CONTAINED CERTAIN INCOMPLETE DETAI LS. IT IS QUITE DIFFICULT TO DEDUCE TRUE INCOME OF THE ASSESSEE FROM THOSE LOOSE PAPERS AND THE ALLEGED PROFIT & LOSS ACCOUNT CONSIDERED BY THE AO. IT IS ALSO IMPORTANT TO NOTE THAT AS FAR AS TOTAL LAND HOLDING POSSESSED BY THE ASSESSEE AND THE SALE PROCEEDS ARE CONCERNED, THOSE WERE NOT DISPUTED BY THE ASSESSEE ITSELF. IN OTHER WORDS, TURNOVER REFLECTED IN THE PAPERS WERE NOT DISPUTED BY THE ASSESSEE. THIS TURNOVER HAS BEEN ACCEPTED BY THE AO ALSO FOR DETER MINING THE INCOME. DIFFERENCE BETWEEN THE ASSESSEE AND THE AO IS THAT PARTICULARS OF INCOME OR REVENUE RECEIPTS NOTICED IN THESE LOOSE PAPERS WERE NOT COMPLETE. RATHER VARIOUS EXPENDITURES HAVE NOT BEEN SET OFF AGAINST THESE RECEIPTS, AND THEREFORE, THAT FIGURE SOLELY CANNOT BE TAKEN AS IN COME OF THE ASSESSEE IN A PARTICULAR YEAR. THIS FACT IS VERIFIABLE BY THE DE TAILS COMPILED BY THE ASSESSEE IN TABULAR FORM AND NOTICED BY US IN PARA-6 OF THIS ORDER. THE AO DID NOT MAKE ANY ADDITION IN THE ASSTT.YEAR 2008-09. IN TH E ASSTT.YEAR 2009-10 PROFIT WORKED OUT AT 68.9% WHICH WAS REDUCED TO 34.10% IN THE ASSTT.YEAR 2010-11. SIMILARLY, IN THE ASSTT.YEAR 2011-12 IT ROSE TO 54. 59% AND IN THE ASSTT.YEAR IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 29 - 2012-13 IT WAS WORKED OUT AT 73.52% WHICH AGAIN COM ES DOWN TO 39.72% IN ASSTT.YEAR 2013-14. WHEN GIVEN EFFECT TO THE TOTAL FIGURE IN ASSTT.YEAR 2014- 15, THE PROFIT ROSE TO 24418.00%. THOUGH ADDITION I S NEGLIGIBLE, BUT A COMPARATIVE STUDY OF THE FIGURES IN TERMS OF PERCEN TAGE GIVES VERY DISTORTED METHOD. IT SUGGESTED THAT METHOD ADOPTED BY THE AO AND APPLIED ON A SAME LINE OF BUSINESS IN DIFFERENT YEARS GIVEN DIFFERENT RESULT. SIMILARLY, THE LD.CIT(A) HAS ALLOWED COST OF LAND AND TRIED TO GIV E A UNIFORM RESULT OF PROFIT AT 34%. BUT IF THE COST OF LAND IS TO BE ALLOWED, T HEN WHY OTHER EXPENSES MENTIONED IN THOSE PAPERS SHOULD NOT BE ALLOWED. A N OVERALL STUDY OF ALL THESE DETAILS, IT REVEALED THAT THESE DETAILS DID NOT GOA D ANY ADJUDICATING AUTHORITY AT RIGHT CONCLUSION OR RIGHT INFERENCE. IF WE TAKE ON E ANGLE FOR DETERMINING TAXABLE INCOME, THEN SOMETHING WILL BE LEFT OUT FRO M A DIFFERENT ANGLE. 14. AT THE TIME OF HEARING, OUR ATTENTION WAS BROUG HT TO VARIOUS OTHER SIMILARLY SITUATED ASSESSEES WHOSE ASSESSMENTS HAVE BEEN MADE IN THIS VERY CIRCLE BY THE SAME AO WHO HAS ACCEPTED RESULT SHOWN BY THESE ASSESSEES AND ESTIMATED INCOME IN THE RANGE OF 1.5% TO 5.8%. OUR ATTENTION WAS DRAWN TOWARDS ASSESSMENT ORDER PASSED IN THE CASE OF M/S. MAVANI DEVELOPERS. COPIES OF ASSESSMENT ORDERS FOR THE ASSTT.YEARS 201 2-13 AND 2013-14 HAVE BEEN PLACED ON RECORD AT PAGE NOS.124 TO 128 OF THE PAPER BOOK. SIMILARLY, COPIES OF THE ASSESSMENT ORDER IN THE CASE OF M/S.N EW HOME DEVELOPERS WHO ARE SIMILARLY SITUATED HAVE BEEN PLACED ON PAGE NOS .131 TO 149 OF THE PAPER BOOK. IN ALL THESE CASES, INCOME DECLARED BY THEM HAS BEEN ACCEPTED BY THE AO ON AN ESTIMATE BASIS WHICH IS FAR BELOW THE INCO ME DECLARED BY THE ASSESSEE AT THE RATE OF 6% OF THE TURNOVER. 15. ONE OF THE IMPORTANT DISCREPANCIES POINTED OUT BY THE ASSESSEE WAS THAT SHRI HEMANTBHAI JOSHI IS PARTNER IN THE ASSESSEES FIRM. AN ASSESSMENT ORDER WAS PASSED IN HIS CASE UNDER SECTION 153A R.W.S. 14 3(3) OF THE ACT. HIS CAPITAL ACCOUNT WITH THE FIRM WAS ACCEPTED. HE HAS SHOWN D EBITED BALANCE OF RS.2,62,018/-. WHEREAS IN THE CASE OF FIRM DEBIT B ALANCE OF RS.37,13,545/- IN THE BALANCE SHEET REPRODUCED BY THE AO HAS BEEN SHO WN. THESE ARE TWO CONTRADICTORY FIGURES OF DEBIT BALANCES AGAINST THE NAME OF ONE OF THE PARTNERS. SIMILAR IS THE SITUATION WITH REGARD TO BANK BALANC E. IN THE BALANCE SHEET BANK BALANCE AS ON 29.4.2013 WAS SHOWN AT RS.45,88,585/- WHEREAS PER BANK IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 30 - STATEMENT IT IS ONLY RS.7343/06. COPY OF THE BANK STATEMENT WAS SHOWN TO THE AO. THESE ARE THE BASIC CONTRADICTION AMONGST OTHER S IN THE BALANCE SHEET REPRODUCED BY THE AO IN THE ASSESSMENT ORDER VIS-- VIS ACTUAL FIGURE AVAILABLE OTHERWISE. THUS, THEY SHOW THAT THE DOCUMENTS WHIC H HAVE BEEN CONSIDERED BY THE AO ARE NOT A COMPLETE DOCUMENT WHICH CAN GOAD T HE AO TO ARRIVE AT A CONCLUSION TO DETERMINE TAXABLE INCOME OF THE ASSES SEE. 16. IF THE ACCOUNTS EITHER MAINTAINED BY THE ASSESS EE OR THE PAPER CONSIDERED BY THE AO DID NOT GOAD ADJUDICATING AUTH ORITY TO DEDUCE THE CORRECT INCOME OF THE ASSESSEE, THEN SECTION 144 OF THE ACT PROVIDE A MECHANISM FOR DETERMINATION OF INCOME. IT IS ACCOR DING TO THE BEST JUDGMENT OF THE AO. WE DEEM IT PERTINENT TO TAKE NOTE OF TH IS SECTION, WHICH READS AS UNDER: '144. [(1)] IF ANY PERSON (A) FAILS TO MAKE THE RETURN REQUIRED [UNDER SUB-SE CTION (1) OF SECTION 139] AND HAS NOT MADE A RETURN OR A REVISED RETURN UNDER SUBSECTION (4) OR SUB-SECTION (5) OF THAT SECTION, OR (B) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB- SECTION (1) OF SECTION 142 [OR FAILS TO COMPLY WITH A DIRECTION ISSUED UNDER SUB-SECTION (2A) OF THAT SECTION], OR (C) HAVING MADE A RETURN, FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (2) OF SECTION 143, THE [ASSESSING] OFFICER, AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIAL WHICH THE [ASSESSING] OFFICER HAS GATHERED , [SHALL, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, MAKE THE ASSESSMENT] OF THE TOTAL INCOME OR LOSS TO THE BEST OF HIS JUDGMENT AND DETERMINE THE SUM PAYABLE BY THE ASSESSEE [* * *] ON THE BASIS OF SUCH ASSESSMENT: [PROVIDED THAT SUCH OPPORTUNITY SHALL BE GIVEN BY T HE ASSESSING OFFICER BY SERVING A NOTICE CALLING UPON THE ASSESS EE TO SHOW CAUSE, IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 31 - ON A DATE AND TIME TO BE SPECIFIED IN THE NOTICE, W HY THE ASSESSMENT SHOULD NOT BE COMPLETED TO THE BEST OF HIS JUDGMENT : PROVIDED FURTHER THAT IT SHALL NOT BE NECESSARY TO GIVE SUCH OPPORTUNITY IN A CASE WHERE A NOTICE UNDER SUB-SECT ION (1) OF SECTION 142 HAS BEEN ISSUED PRIOR TO THE MAKING OF AN ASSES SMENT UNDER THIS SECTION.] [(2) THE PROVISIONS OF THIS SECTION AS THEY STOOD I MMEDIATELY BEFORE THEIR AMENDMENT BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 (4 OF 1988), SHALL APPLY TO AND IN RELATION TO ANY ASS ESSMENT FOR THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR AND REFERENCES IN THIS SECT ION TO THE OTHER PROVISIONS OF THIS ACT SHALL BE CONSTRUED AS REFERE NCES TO THOSE PROVISIONS AS FOR THE TIME BEING IN FORCE AND APPLI CABLE TO THE RELEVANT ASSESSMENT YEAR.] ' 17. IT IS PERTINENT TO NOTE THAT THAT SECTION 144 W OULD SUGGEST THAT IN ORDER TO ESTIMATE INCOME, LEARNED ASSESSING OFFICER HAS TO EXERCISE HIS DISCRETION WHICH SHOULD BE IN CONSONANCE WITH BEST OF HIS JUDGMENT. WE ARE CONSCIOUS OF THE FACT THAT IN VARIOUS AUTHORITATIVE PRONOUNCEMENTS, IT HAS BEEN PROPOUNDED THAT IN MAKING A BEST JUDGMENT ASSE SSMENT, THE ASSESSING OFFICER MUST NOT ACT DISHONESTLY OR VINDICTIVELY OR CAPRICIOUSLY. HE MUST MAKE, WHAT HE HONESTLY BELIEVE TO BE A FAIR ESTIMAT E OF THE PROPER FIGURE OF ASSESSMENT AND FOR THIS PURPOSE HE MUST BE ABLE TO TAKE INTO CONSIDERATION, LOCAL KNOWLEDGE, REPUTATION OF THE ASSESSEE ABOUT H IS BUSINESS, THE PREVIOUS HISTORY OF THE ASSESSEE OR THE SIMILARLY SITUATED A SSESSEE. IT IS ALSO PERTINENT TO MENTION THAT JUDGMENT IS A FACULTY TO DECIDE MAT TER WITH WISDOM, TRULY AND LEGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBI TRARY, CAPRICE OF AN ADJUDICATOR, BUT ON SETTLED AND INVARIABLY PRINCIPL ES OF JUSTICE. THUS, IN A BEST JUDGMENT, EVEN IF, THERE IS AN ELEMENT OF GUES S WORK, IT SHOULD NOT BE A WILD ONE, BUT SHALL HAVE REASONABLE NEXUS TO THE AV AILABLE MATERIAL AND CIRCUMSTANCES OF EACH ASSESSEE. IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 32 - 18. IN THE LIGHT OF THE ABOVE, IF WE EXAMINE THE RE CORD AND PERUSED OTHER ASSESSMENT ORDERS OF THE ASSESSEES, WHO ARE SIMILAR LY SITUATED, UPON WHOM SEARCH WAS CARRIED OUT, AND THEIR INCOME WAS DETERM INED ON THE BASIS OF ESTIMATION, A REFERENCE CAN BE MADE TO THE ASSESSME NT OF MAVANI DEVELOPERS AND NEW HOME DEVELOPERS ETC. THESE ARE ASSESSEES W HO ARE ASSESSED IN THE SAME CIRCLE AND ENGAGED IN SIMILAR LINE OF BUSINESS . THEIR INCOMES HAVE BEEN ULTIMATELY DETERMINED IN BETWEEN 1.5% TO 5.8% NET P ROFIT OF THE TURNOVER. THE ASSESSEE HAS DECLARED NET PROFIT AT 6% OF EH TURNOV ER. THE TOTAL TURNOVER FIGURE HAS NOT BEEN DISPUTED AS TAKEN BY THE ASSESSEE. TH US, THE TURNOVER FIGURE AS CONSIDERED BY THE AO WOULD REMAIN THE SAME. ONLY EFFECT OUGHT TO BE GIVEN BY THE AO IS THAT HE WOULD WORK OUT PROFIT AT 6% NE T OF THE TURNOVER CONSIDERED BY HIM AS WELL AS ADMITTED BY THE ASSESSEE. IN VIE W OF THE ABOVE DISCUSSION, WE ALLOW ALL THE APPEALS OF THE ASSESSEE AND DISMISS A PPEALS OF THE REVENUE. 19. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLO WED, AND THAT OF THE REVENUE ARE DISMISSED. 10.4. EVIDENTLY, THE FACTS SITUATION IN THE CASE O F ASSESSEE AND THAT OF CITY DEVELOPERS ARE STRIKINGLY SIMILAR. THUS, IN P ARITY WITH THE VIEW TAKEN BY THE COORDINATE BENCH, WE FIND CONSIDERABLE MERIT IN THE APPEAL OF THE ASSESSEE FOR SETTING ASIDE THE PART ADDITION S SUSTAINED TO THE EXTENT OF RS.81,71,755/- BY THE CIT(A). APART FROM THE D ECISION RENDERED IN THE CITY DEVELOPERS (SUPRA), WE ALSO SEE POTENCY IN THE PLEA ON BEHALF OF THE ASSESSEE THAT NET PROFIT OF 6% ON TURNOVER HAS BEEN ACCEPTED BY THE AO IN THE COMPARABLE CASE OF MAVANI DEVELOPERS IN T HE ASSESSMENT COMPLETED UNDER S.153A OF THE ACT. THUS, THE PROFIT S REPORTED BY THE ASSESSEE IS IN CONFIRMITY WITH COMPARABLE CASES. CO UPLED WITH THIS, THE ASSESSEE HAS ADEQUATELY DEMONSTRATED THAT SUCH ROUG H BALANCE SHEET IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 33 - CONTAINING FIGURES OF MANY YEARS TOGETHER SUFFERS W ITH INFIRMITY OWING TO INCOMPLETENESS IN RESPECT OF RECORDING OF EXPENSES , RECONCILIATION ETC. AND THUS DO NOT PROVIDE REASONABLE BASIS FOR ADOPT ING THE NET PROFITS AS MENTIONED THEREIN IN SO FAR AS ASSESSMENT YEAR 2008 -09 IN QUESTION IS CONCERNED. IN THE TOTALITY OF CIRCUMSTANCES, WE FI ND MERIT IN THE APPEAL OF THE ASSESSEE. IN THE CONVERSE, WE FIND LITTLE M ERIT IN THE APPEAL OF THE REVENUE. ACCORDINGLY, THE ADDITIONS SUSTAINED BY T HE CIT(A) TO THE EXTENT OF RS.81,71,755/- TOWARDS UNACCOUNTED PROFIT IS CANCELLED AND SET ASIDE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IN IT(SS) A NO.45/RJT/2017 FOR AY 2008-09 IS ALLOWED, WHEREAS APPEAL OF THE REVENU E IN IT(SS)A NO.59/RJT/2017 FOR AY 2008-09 IS DISMISSED. 12. WE SHALL NOW ADVERT TO REVENUES APPEAL IN IT(S S)A NO.53/RJT/2017 FOR AY 2009-10 IN THE CASE OF DIFF ERENT BUT CONNECTED ASSESSEE; NAMELY, NEW HOME DEVELOPERS (MEHUL PARK) , BHUJ. THE REVENUE IN THE INSTANT CASE IS AGGRIEVED BY THE ORD ER OF THE CIT(A) DATED 17/01/2017 ARISING ASSESSMENT ORDER PASSED BY THE A O DATED 26/02/2016 UNDER S.143(3) R.W.S.153A OF THE ACT CONCERNING AY 2009-10. IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 34 - 12.1. THE REVENUE HAS CHALLENGED THE ACTION OF THE CIT(A) IN DELETING ADDITION OF RS.1,72,93,343/- WHICH IS ALLEGED TO B E THE PROFIT OF THE ASSESSEE AS PER SEIZED BALANCE SHEET. 12.2. BRIEFLY STATED, IN THE COURSE OF SEARCH, ROU GH BALANCE SHEET OF PROJECT MEHUL PARK WAS FOUND FROM THE RESIDENTIAL PREMISES OF SHRI MANJIBHAI DEVJIBHAI DHANANI (MDD) SIMILAR TO THE RO UGH BALANCE SHEET FOUND IN THE CASE OF OTHER ASSESSEE NAMELY NEW HOME DEVELOPERS (DREAM CITY). THE BALANCE SHEET RELATES TO NEARLY 25 DAYS RUNNING FROM 01/04/2008 TO 26/04/2008 SHOWING A NET LOSS OF RS.1 ,44,170/- FOR THE PERIOD FALLING IN THE FINANCIAL YEAR (FY) 2009-10 I N QUESTION. THE OTHER FACTS ARE BROADLY SIMILAR IN MATERIAL PARTICULARS QUA NEW HOME DEVELOPERS (DREAM CITY) RELEVANT TO AY 2008-09. TH E CIT(A) AFTER TAKING COGNIZANCE OF THE FACTS INVOLVED, DELETED AD DITION MADE BY THE AO. THE CIT(A) ALSO OBSERVED THAT THE PROFIT MENTI ONED IN THE BALANCE SHEET CLEARLY DOES NOT BELONG TO THE ASSESSMENT YEA R IN QUESTION. 12.3. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) DEALING WITH THE ISSUE IS REPRODUCED HEREUNDER:- THE FACTS OF THE CASE, FINDINGS OF THE AO AND SUBM ISSIONS OF THE APPELLANT HAVE BEEN CONSIDERED. ADMITTEDLY, THE PROJECT WAS S TARTED IN THE F.Y. 2004-05. THE PLOTS WERE SOLD TO SEVERAL MEMBERS AND PAYMENT WAS RECEIVED IN 36 INSTALLMENTS. THE INSTALLMENTS STARTED FROM JANUARY 2006 AND RECEIVED UP TO THE F.Y. 2007-08. THIS FACT WAS CONFIRMED IN THE ST ATEMENTS RECORDED U/S IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 35 - 132(4) BY THE PARTNERS OF THE ASSESSEE FIRM. IT WAS ALSO EXPLAINED THAT THE PROJECT WAS MOSTLY COMPLETED IN THE F.Y. 2007-08 AN D VARIOUS EXPENSES INCLUDING COST OF LAND, DEVELOPMENT EXPENSES ETC. W ERE REQUIRED TO BE DEBITED AS THE BOOKS OF ACCOUNTS WERE NOT COMPLETED. THE DD IT (INVESTIGATION), GANDHIDHAM ALSO MENTIONED THIS FACT ON PAGE 396 OF THE APPRAISAL REPORT. UNDISPUTEDLY, THE BOOKS OF ACCOUNTS WERE NOT MAINTA INED BY THE APPELLANT. COPIES OF THE LEDGERS OF SOME OF THE CLIENTS PLACED IN THE PAPER BOOK ALSO SHOWED THAT MOST OF THE INSTALLMENTS RECEIVED FROM SEPTEMBER 2004. AS PER CONTENTS OF THE SEIZED DOCUMENTS THE PROFIT SHOWN A S OPENING BALANCE REPRESENTED PROFIT OF THE EARLIER ASSESSMENT YEARS AND IN ANY CASE IT DID NOT REPRESENT PROFIT OF THE YEAR UNDER CONSIDERATION. A S ALREADY DISCUSSED, THE PERIOD OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSM ENT YEAR UNDER CONSIDERATION WAS ONLY OF 26 DAYS IN THE MONTH OF A PRIL, 2008. 7.1 THE FINDING OF THE AO THAT THE ASSESSEE DID NOT FILE RETURNS FOR THE EARLIER ASSESSMENT YEARS WAS ALSO PARTIALLY CORRECT BECAUSE COPIES OF RETURNS FOR THE A.Y. 2008-09 AND 2005-06 WERE FURNISHED BY THE APPELLANT ALONG WITH AUDITED BALANCE SHEETS, P&L ACCOUNTS AND THEIR ANNE XURES ON PAGE 71 TO 88 IN THE PAPER BOOK. IN THE AUDITED P&L ACCOUNT FOR A.Y. 2005-06 THE ASSESSEE DISCLOSED RECEIPTS FROM INSTALLMENT INCOME OF THE P ROJECT AT RS.682600/-, AND RS.1696700/- IN THE A.Y. 2008-09. ALL THESE FACTS L EAD TO A CONCLUSION THAT THE PROJECT WAS STARTED IN THE F.Y.2004-05 RELEVANT TO A.Y. 2005-06 AND COMPLETED BY THE F.Y. 2008-09. THEREFORE, THE FINDING OF THE AO THAT THE PROFIT MENTIONED IN THE SEIZED DOCUMENT REPRESENTED INCOME FOR THE A .Y. 2009-10 WAS FACTUALLY NOT CORRECT. HE DID NOT GATHER ANY COGENT MATERIAL ON RECORD WHICH COULD SUPPORT HIS FINDING THAT THE PROFIT MENTIONED IN TH E SEIZED DOCUMENT PERTAINED TO THE A.Y. 2009-10 ONLY. THE CONTENTION OF THE APP ELLANT WAS THAT THE ENTRIES CONTAINED IN THE LOOSE PAPERS DID NOT GO TO PROVE T HAT THE PROFIT PERTAINED TO THE YEAR UNDER CONSIDERATION. THUS, THE APPELLANT D ISCHARGED HIS ONUS BY FURNISHING THE SAID EXPLANATION FOR THE CONTENTS OF THE DOCUMENT. THEREFORE, IT WAS LEGAL OBLIGATION OF THE AO EITHER TO CORROBORAT E THE CONTENTS OF THE DOCUMENT WITH TRANSACTIONS OF THE ASSESSEE BY INDEP ENDENT MATERIAL OR DOCUMENTARY TESTIMONY OR CONNECT THIS DOCUMENT WITH ANY BUSINESS TRANSACTION BEFORE TREATING THE PROFIT AS INCOME FOR THE YEAR U NDER CONSIDERATION. IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 36 - 7.2 IT IS SETTLE POSITION OF LAW THAT ANY DOCUMENT RELIED BY THE AO HAS TO BE READ AS A WHOLE IF INCOME IS TO BE ASSESSED ON THAT BASIS ALONE. THE OTHER CONTENTS OF THE DOCUMENT, TAKEN INTO POSSESSION DUR ING THE SEARCH, SHOULD ALSO BE SIMULTANEOUSLY CONSIDERED. ONCE A PRESUMPTION IS DRAWN THAT THE CONTENTS OF THE DOCUMENT ARE TRUE THEN HE CANNOT HAVE FURTHE R PRESUMPTION THAT THE ASSESSEE SHOULD PRODUCE MATERIAL IN SUPPORT OF THE OTHER CONTENTS OF THE SEIZED DOCUMENT. THEREFORE, IN ABSENCE OF ANY MATERIAL IN THE FORM OF DOCUMENT, THE AO CANNOT DENY BENEFIT OF ANY OTHER INFORMATION CON TAINED IN THE DOCUMENTS TO THE ASSESSEE. THE AO, AS DISCUSSED HEREIN ABOVE, WA S UNABLE TO PROVE THAT THE PROFIT MENTIONED IN THE SEIZED DOCUMENT DID NOT PER TAIN TO THE EARLIER YEARS. AS A MATTER OF FACT, IN THE SEIZED MATERIAL PROFIT WAS CATEGORICALLY SHOWN AS OPENING BALANCE AND THERE WAS LOSS IN THE YEAR UNDE R CONSIDERATION. IN OTHER WORDS, THE AO ALSO DID NOT GATHER ANY MATERIAL EVID ENCE ON RECORD WHICH COULD REFUTE THE ASSESSEE'S CLAIM THAT THE PROFIT, MENTIONED IN THE SEIZED MATERIAL, PERTAINED TO EARLIER YEARS AND THAT THERE WAS NO PROFIT IN THE YEAR UNDER CONSIDERATION. 7.3 THERE WAS NO DISPUTE BETWEEN THE AO AS WELL AS THE APPELLANT ABOUT THE FACT THAT THE ASSESSEE WAS NOT HAVING BOOKS OF ACCO UNTS, THE PROJECT WAS STARTED IN THE F.Y. 2004-05 AND THAT ALL THE DEVELOPMENT WO RK WAS COMPLETED TILL THE END OF THE F.Y. 2008-09. IN VIEW OF THE GIVEN FACTS AND CIRCUMSTANCES, IN MY CONSIDERED OPINION, IT CAN BE REASONABLY CONSIDERED THAT MOST OF THE EXPENSES AND RECEIPTS OF THE PROJECT WERE FALLING WITHIN THE FINANCIAL YEAR 2005-06 TO 2007-08. 7.5 THEREFORE, IT WOULD BE JUST AND PROPER TO ADOP T PROFIT, AS MENTIONED IN THE SEIZED BALANCE SHEET, AS GROSS PROFIT OF THE FO UR ASSESSMENT YEARS PERTAINING TO THE FINANCIAL YEAR 2005-06 TO 2007-08 . THEREAFTER, THE PROFIT WOULD BE ALLOCATED AMONGST THE ASSESSMENT YEAR 2005 -06 TO A.Y. 2008-09 BASED ON THE PERIOD OF 36 MONTHS BROADLY STARTING F ROM SEPTEMBER 2004 AND ENDING IN AUGUST 2007 ON PROPORTIONATE BASIS. AFTER HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS DIFFICULT TO AV OID A CONCLUSION THAT THE PROFIT MENTIONED THE BALANCE SHEET DID NOT PERTAIN TO YEAR UNDER CONSIDERATION. ACCORDINGLY, THE ADDITION IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 37 - 12.4. IN CONSONANCE WITH THE FINDING IN NEW HOME DE VELOPERS (DREAM CITY) IN IT(SS)A NOS.45/RJT/2017 & 59/RJT/2017 AND HAVING REGARD TO THE FACT THAT THE ROUGH BALANCE SHEET ITSELF SHOWS THAT THE PROFIT SHOWN THEREIN IS ONLY AN OPENING BALANCE AND NOT THE PROF IT GENERATED DURING THE YEAR, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). THEREFORE, WITHOUT ELABORATION, WE STRAIGHTAWAY AGREE WITH THE CONCLUSION DRAWN BY THE CIT(A) AND THUS FIND NO REASON TO INTERFERE. 13. IN THE RESULT, REVENUES APPEAL IT(SS)A NO.53/R JT/2017 FOR AY 2009-10 IS DISMISSED. 14. IN THE COMBINED RESULT, ASSESSEES APPEAL IN IT (SS)A NO.45/RJT/2017 IS ALLOWED, WHEREAS REVENUES APPEAL S IN IT(SS)A NOS.59/RJT/2017 & 53/RJT/2017 ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 11 / 04//2018 SD/- SD/- ($) ( ) %! ! ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD , DATED 11/ 04 /2018 ...,.%.../ T.C. NAIR, SR. PS IT(SS)A NOS.45 & 59/RJT/2017 (AY 2008- 09) M/S.NEW HOME DEVELOPERS (DREAM CITY) VS. ACIT (CRO SS APPEALS) AND IT(SS)A NO.53/RJT/2017-AY 2009-10 ACIT VS.M/S.NEW HOME DEVELOPERS (MEHUL PARK) - 38 - / COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. ,() / THE RESPONDENT. 3. #7# 0 80 / CONCERNED CIT 4. 80 ( ) / THE CIT(A)-11, AHMEDABAD 5. :;<%0%. , , /DR,ITAT,RAJKOT 6.