TMI Blog2018 (1) TMI 1436X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee on the issue of advance receipts for plot booking by holding that the booking amounts were not purely in the nature of cash credit for which the assessee was required to prove the creditworthiness of the persons who books the plot with him. CIT(A) examined the issue in detail by verifying respective registry placed on records and details mentioned in the registry duly tallied with the payments shown by the assessee. Genuineness of the transactions stands proved with the copies of registries and the amounts refunded through banking channels. We, therefore, respectfully following the decision of coordinate bench in assessee’s own case for A.Y. 2005-06, detailed finding of CIT(A) which goes uncontroverted by the Revenue as well as in the given facts and circumstances of the case and the documents placed before the lower authorities, find no reason to interfere in the finding of Ld. CIT(A), deleting the addition. Addition on account of alleged extra cash found during the course of survey u/s 133A - Held that:- As during the course of survey proceedings inventory of cash found at the business premises was made and cash of ₹ 814340/- was found. ₹ 11198/- wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entions of the Ld. Counsel, because the assessee has paid extra payment over and above the advance for plot booking. There is no clause in the agreement about payment of extra amount. The plot booking has been cancelled after substantial time gap of 2 to 3 years. As there was no clause in the agreement for payment of cancellation charges, by debiting the extra amount of plot booking charges in trading account the assessee has increased the purchase cost reduced the gross profit. We, therefore, agree with the view taken by the Ld. CIT(A) that as the assessee has capitalized the amount of advance and recognized sales on the date of registry for sale deed the amount paid over and above the advance amount should be in the nature of capital expenditure and not Revenue expenditure. Disallowance u/s 80IB(10) - Held that:- The assessee executed 127 sale deeds and to sale the plots it had to incur the expenses at various stages. Out of the 127 sale deeds, 28 pertained to the Gaurav Nagar Extension for which the assessee is eligible for deduction u/s 80IB(10). We therefore, find substance in the finding of Ld. CIT(A) adopting 25% of total expenses for ‘Gaurav Nagar Extension’ project beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon order for the sake of convenience and gravity. First we take cross appeal for A.Y. 2006-07 2. Briefly stated facts as culled out from the records are that the assessee is engaged in the business of developing land and plotting and constructing houses there upon. Return of income was filed on 31.10.2006 declaring income of ₹ 190250/-. Survey proceedings u/s 133A of the Act was conducted on 15.03.2007, Income surrendered during the course of survey was retracted on the next day pleading that the surrendered was made under coercive presser and deserves state of mind. Case selected for scrutiny. Notices u/s 143(2) and 142(1) issued. Detail filed by the assessee were examined. The Learned Assessing Officer( in short Ld. AO) completed the assessment after making addition of ₹ 1,06,49,250/- for suppression of sales and also addition of ₹ 28,66,250/- for unverified creditors. The appeal by the assessee before the Ld. CIT(A) brought part relief. Now both the assessee and Revenue are in appeal before the Tribunal. 3. First common issue relates to alleged unaccounted sales addition of ₹ 1,06,49,250/-. The Ld. AO made the impugned addition observing that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and G.P. @ 22.5% and N.P. @ 2.70%. The accounts of the appellant are audited and it is maintaining regular books of account and quantitative details available in trading account. The appellant has raised objection of applying the provision of section 145(3) by the Assessing Officer And estimating the income of the appellant by the Assessing Officer. It is observed that there are certain discrepancies in the accounts of the appellant and appellant has not recorded sale proceeds in entirety in its books of accounts which are evident from the statement of the creditors who had given advance against the purchase of plot in Madhuban Colony, Dewas. Shri Rajesh Agrawal who had been working with the appellant as property broker has also admitted that during the survey u/s 133A that registry was made on lesser amount than the actual price of the plot. On that account he had surrendered ₹ 5,00,000/- during the survey, although later on he has retracted from his statement and explained that the entries recorded in the diaries were only estimates. But, it does not change the facts of the case that appellant has not recorded sale proceeds entirely in its books of accounts . The AO has rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y which appears to be on higher side considering the defects noticed by the AO. However, after considering all the discrepancies as observed, I hereby estimate the sales of the appellant after rejecting books of accounts by invoking provisions of section 145(3). It would be appropriate and meet the interest of justice if the sales is estimated at ₹ 1,00,00,000/- in place of 70,99,500/-. But the entire difference in the sale cannot be taken as income of the appellant and only net profit of the on the estimated sales can be taxed. 3.2.17 Hon'ble M.P. High Court in the case of CIT vs. BalchandAjit Kumar 135 Taxman 180 (M.P.). Hon'ble High Court has held that : The total sales cannot be regarded as the profit of the assessee. The net profit rate has to be adopted and once a net profit rate is adopted, it cannot be said that there is a perversity of approach. 3.2.18 Further the net profit as shown by the appellant cannot be applied in its case because in the case of the appellant there are suppressed sales and appellant has not recorded the entire sales in its books of accounts. Hon'ble ITAT, Indore Bench, Indore in the case of M/s Shree Ram Tractors vs. IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed. 8. Next issue raised by the revenue for A.Y. 2006-07 relates to unproved creditors of ₹ 28,66,250/-. 9. We have heard rival contentions and perused relevant material before us. We find that during the course of assessment proceedings, the assessee could not produce complete details of unsecured loan/creditors and advance received against plot booking to the satisfaction of Ld. AO. For this very reason, the Ld. AR calculated the amount of trade creditors and unexplained cash credit totaling to ₹ 1,35,15,500/- but made the impugned addition for unproved creditors at ₹ 28,66,250/- after giving benefit of deduction towards addition made for suppressed sales of ₹ 1,06,49,250/-. 10. We further find that the ld. CIT(A) deleted the impugned addition of ₹ 28,66,250/- observing as follows: 3.3.4 I have considered the finding of the AO and written submission of the appellant carefully. The AO has added ₹ 45,16,000/- of opening balances during the year under consideration. It is already decided by the CIT(A) in the case of the appellant for A.Y.2005-06 that addition in respect of earlier year advances was not justified in this year. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e given advance for plot booking. The appellant has filed the evidences which were on record. Remand report is called from the AO on the written submission of the appellant, but AO has not commented anything on this issue and not given any justification for sustaining addition after considering the supporting documents furnished by the appellant. 3.3.6 The appellant has not taken unsecured loans, the advances received by it against plot booking is not in the nature of cash credit, therefore appellant is not required to prove the creditworthiness of the depositors who have given advance against the booking of the plot. The appellant has provided the addresses to the AO on the basis of the information provided by the prospective buyers, if they were not found on the given address or not responded in proper manner to the AO appellant could not be penalized for their action. It is held by the Hon'ble ITAT, Indore Bench, Indore in the case of the appellant for the A.Y. 2005-06 that: it is not in dispute that the appellant was engaged in the business of developing and selling plots houses. The advances were received from the customers against the booking of plots/flats which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transactions stands proved with the copies of registries and the amounts refunded through banking channels. We, therefore, respectfully following the decision of coordinate bench in assessee s own case for A.Y. 2005-06, detailed finding of Ld. CIT(A) which goes uncontroverted by the Revenue as well as in the given facts and circumstances of the case and the documents placed before the lower authorities, find no reason to interfere in the finding of Ld. CIT(A), deleting the addition of ₹ 28,66,250/-. 12. As a result Revenue s ground No.2 for A.Y. 2006-07 is dismissed. Now we take cross appeal for A.Y. 2007-08 13. First common issue relates to addition of suppressed sales of ₹ 3,72,79,410/-. The Ld. CIT(A) estimated the sales at 2.5 crores and estimated net profit @ 8% thereby sustaining addition at ₹ 17,05,082/- and deleted the remaining addition of ₹ 3,55,74,328/-. We further find that very same issue came up before us during the adjudication of appeal for A.Y. 2007-08. As all the facts and circumstances remains the same which have not been disputed by both the parties, we are inclined to apply same view as taken while deciding the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the AO on the basis of the information provided by the prospective buyers, if they were not found on the given address of not responded in proper manner to the AO appellant could not be penalized for their action. It is held by the Hon ble ITAT, Indore Bench, Indore in the case of the appellant for the A.Y. 2005-06 that: it is not in dispute that the appellant was engaged in the business of developing and selling plots houses. The advances were received from the customers against the booking of plots/flats which were either paid in case or by cheques. In some cases advance was received in installments. As per the terms of booking, the registry was to be got done only after receipt of entire amount of sale consideration. Thus, the amount so received for booking the land/house was not strictly in the nature of case credit in so far as normally the assesses was not under obligation to return the and such booking payment/installment was got converted in to income in the year of receipt of entire amount of sale consideration of the respective plot/flats. The booking amount was, thus not purely in nature of cash credit for which the assesses was required to prove the creditwo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in proper manner to the Ld. AO then the assessee could not be penalized for their action. Genuineness of the transactions stands proved with the copies of registries. Assessee has been unable to prove source of cash credit of ₹ 35,37,500/- even up to the stage of appellate proceedings before first appellate authority and nor any substantial evidence has been placed before us. We, therefore, in the given facts and circumstances of the case, find no reason to interfere in the finding of Ld. CIT(A) confirming addition of ₹ 35,37,500/-. Thus, ground no.4 of the assessee s appeal is dismissed. 19. Apropos ground no.5 of assessee s appeal relating to addition u/s 68 of the Act at ₹ 3,30,000/-, we have heard rival contentions and perused the record placed before us. 20. We find that this addition related to 4 entries appearing in the name of Shri Ramesh Shinde, at ₹ 45,000/-, ShriDev Karan Yada, at ₹ 1,55,000/-, ShriLaxmi Narayan Chowkse, at ₹ 60,000/- and Shri Ashok Rao Thourat at ₹ 70,000/-. For all these four persons assessee miserably failed to provide any information sufficient to prove the genuineness and creditworthiness of the cash c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t signed by all the partners. This fact has not been disputed by the Revenue that Ld. AO failed to bring anything on record which could prove that the assessee made unexplained investment in purchase of profits except the admission of one of the partner. It is also observed that the alleged addition of ₹ 23,02,500/- was made on account of difference in stamp valuation of the land purchased on 28.09.2006 and 09.10.2006 at ₹ 31,1000/- and ₹ 31,10,000/- from Mr. Amritpal Singh Khanuja. The market price of this land as per the stamp valuation authority was ₹ 42,69,500 ₹ 42,44,000/- respectively. The difference of the market price and purchase cost of these two lands comes to ₹ 23,02,500/-. However, we do not find any basis in the finding of the Ld. AO applying provisions of section 50C of the Act, because provisions of section 50C of the Act applies on the seller of the property and not on the purchaser. The Ld. CIT(A) has rightly adopted this view holding that provisions of section 50C were not applicable on the assessee being the purchaser of the property and also during the survey proceedings no documentary evidence was found which may prove tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by Revenue in Ground No.1 as well as assessee s ground no.1 relates to disallowance of refund of advance money and cancellation charges paid by the assessee to its customers of ₹ 45,13,000/-. 28. We have heard the rival contention and perused material on record before us. We find that during the course of assessment proceedings the Ld. AO while verifying the claim of the cancellation charges being the extra amount paid together with the amount of advance observed that the assessee returned the amount of advance after a period of long time and paid extra amount to reduce the profitability and simultaneously increasing the cost of stock. He also observed that the modes operandi adopted by the assessee in A.Y. 2008-09 was not followed in the preceding A.Y. 2007-08. He also observed that there was a change in method of valuation thereby giving rise to applicability of section 145 of the Act. However, auditor did not report any deviation in method of valuation. In backdrop of these finding Ld. AO added the amount of ₹ 45,13,000/- to the income of assessee. When the issue came up before the Ld. CIT(A), it was revealed by him that actually total payment of advance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f capital expenditure and not Revenue expenditure. We, therefore, sustain the addition of ₹ 10,37,000/-. In the result ground no.1 of assessee s appeal is dismissed. 31. Apropos ground No.2 of Revenue s appeal challenging the deletion of addition of ₹ 10,86,557/- made by the AO by estimating net profit @ 8% on total sales of all the projects and adding the difference amount of the profit worked out and profit shown by the assessee thereby adding ₹ 10,86,557/- to the income of assessee, we have heard the rival contention and perused material on record before us. 32.We find that the Ld. AO invoked the provision of section 145(3) of the Act by observing that there is a change in the valuation of closing stock and accordingly estimated net profit @ of 8%. Ld. CIT(A) deleted this addition in lieu of his finding of confirming addition of ₹ 10,37,000/- sustained by way of disallowing the claim of cancellation charges. We also find that Ld. CIT(A) took the basis that the AO has not pointed out any defects in the books of account and did not compare the case of the appellant with the past history nor cited any comparable cases. 33. We, however, do not agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no reason to interfere in the finding of Ld. CIT(A) and uphold the same. As a result ground no.1 2 of the Revenue s appeal are dismissed. 36. Apropos Ground No.3 4 the Revenue has challenged the deletion of disallowance of ₹ 20,27,000/- on account of plot booking cancellation. 37. We have heard the rival contention and perused material on record before us. We find that this issue of plot booking cancellation came up in the appeal for A.Y. 2008-09 also. The assessee has furnished the party wise list of plot cancelled and the same forms part of appellate order of Ld. CIT(A). These details have been examined by the first appellate authority. The Ld. counsel for the assessee has been unable to controvert the finding of Ld. CIT(A). It is not disputed that assessee has furnished the list of plots to the Ld. AO for examination and is also offered the revenue from sale of these plots for taxation. In backdrop of these facts we uphold the finding of Ld. CIT(A) deleting the addition of ₹ 20,27,000/-. In the result ground No.3 4 are dismissed. 38. Apropos Ground no.5 relating to deletion of u/s 40(a)(ia) of ₹ 4,32,745/-, we find that the assessee paid the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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