TMI Blog2011 (8) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... nt liabilities have increased to ₹ 3,47,71,188/- as compared to ₹ 1,73,59,157/- in the preceding year. The assessee was asked to explain the cause of substantial increase in current liabilities as the assessee had claimed in its earlier submission that it had not carried out any major development project during the year. The assessee was also asked to provide complete break up and explain the item Schemes Account which showed an amount of ₹ 3,45,42,423/-. The assessee s explanation was that the major changes in current liabilities are due to Scheme Account and the assessee furnished the break up of closing balance under different schemes as on 31st March, 2006. The assessee further furnished the explanation about the scheme. On perusal of the same the AO noticed an error to the effect that in the case of La Papillion as per Annexure-A, the opening balance was shown as NIL whereas in Annexure-A1 the opening balance on 31st March, 2005 was shown as ₹ 3,87,247/-. Further in all other schemes with respect to amount received during the year the narration indicated Add and the amounts are added to the opening balance while in the case of La Papilion, the nar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9400000 0 Sub-total scheme account 34542423 17004669 17537754 Other creditors 122238 339428 (-)217190 Statutory liabilities/provision Professional tax 80 80 0 Provision for expenses 13495 13980 (-)485 Provision for taxation 88189 1000 87189 TDS Payable 1163 0 3600 Provision for FBT 3600 0 3600 Sub-total statutory liabilities 106527 14980 91467 Total 34771188 17359157 17412031 The ld. AR for the assessee further submitted as under :- During the course of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the action of the AO for the additions of the difference between current liabilities as on 31.03.2006 of ₹ 34771188/- and current liabilities as on 31.03.2005 ₹ 17359157/- which is ₹ 17412031/- (Rs.34771188 ₹ 17359157 stated in schedule -7 of the balance sheet as on 31.3.2006) is against the facts of the case. (b) The assessee has been following the same practice since 1996 and the books of accounts have been audited every year and there is no qualification. (c) That vide letter dt.13.08.2008 the company has mentioned that during the year no project work had been carried out. In fact out of the three schemes, the company has abandoned two schemes Pruthvi Heritage and La-papillon. It is also most respectfully submitted that in para 3.4 of the order, the ld. AO himself has accepted that the amount is of booking amount and in absence of any evidence it cannot be termed as trade or revenue receipts of the appellant. The amount under consideration is of receipt of advances given earlier, collection of the booking amount, provision of taxation and expenses and in view of the said facts, the amount under consideration is not trade or revenue receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see u/s 145(3) of the I.T. Act. The receipt of ₹ 1,74,12,031/- is treated as trade receipt and I estimate the gross profit of the assessee @ 16% on the total receipt of ₹ 1,74,12,031/-. Thus the gross profit of the assessee is worked out at ₹ 27,85,925/- (Addition ₹ 27,85,925/-). This action of the AO is not sustainable in law. The assessee being a developer of the project profits in his case will arise on transfer of title of the property and any amount towards advances/booking amount cannot be treated as trading receipts in the year of receipt. This view of ours gets support from the decision of Jurisdictional High Court in the case of CIT vs. Asha Land Corporation 133 ITR 55. It is also a settled position of law that profits would arise only on completion of sale, so it is assessable in the year in which the sale took place as decided by another decision of Jurisdictional High Court in the case of CIT vs. Motilal C. Patel and Co. 173 ITR 666(Guj). We further find that method of accounting followed by the assessee has been accepted by the Revenue in earlier years. Therefore, rejecting the book results shown by the assessee during the year under appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company was not sustainable. Reliance was also placed on the decision of the Tribunal, Mumbai (SB) in ITA No.5030/Mum/04 in the case of ACIT vs. Bhaumik Colour (P) Ltd. dated 19.11.2008. 10. The ld. CIT(A) deleted the addition made by AO by observing as under :- 4.3 I have considered the facts of the case and the submissions as given by the A.R. along with the judicial decision, as relied upon. It is seen that Shri Narendra K. Kheskani was holding shares of both the appellant company and the lender company, however, as submitted by the A.R. that the appellant is not a registered shareholder of the lender company and hence I am in agreement with the contention that the provisions of sec.2(22)(e) are not applicable in the appellant s case. Further, the decision in the case of ACIT vs. Bhaumit Colour (P) Ltd. (supra) is applicable in the appellant s case. I, therefore, hold that the AO is not justified in making addition of ₹ 3,56,878/- as deemed dividend u/s 2(22)(e) of the I.T. Act and this ground is allowed. 11. After hearing both the parties, perusing the record and going through the provisions of section 2(22)(e), we are of the considered opinion that in the ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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