TMI Blog2023 (3) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... nder consideration. In the given case, the answer stands in negative. It is for the reason that there is a single assessee maintaining two sets of financial statements. Transactions shown by the assessee in the personal capacity can only be disturbed in the year to which it pertains. As far as, the year in dispute is concern, there is no addition in the capital account of the assessee to be verified in pursuance to the provisions of section 68 - Hence on this score only, the finding of the learned CIT (A) is not required to be interfered. Addition in the capital account of the assessee - we note that it was representing the duplicate entry made in the books of accounts inadvertently. As such the amount of ₹1.96 gross was already part of the personal assets shown by the assessee in the personal capacity. This error was rectified by the assessee subsequently in the financial year 2014-15. This fact has not been doubted by the AO. Accordingly we hold that, such addition of ₹1.96 crores is not sustainable and the finding on this issue of the learned CIT (A) does not required to be disturbed. Difference in the opening capital of the assessee - we note that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Heights we note that such WIP was transferred to the company namely Classic Build Project Pvt. Ltd which was shown as loan by the assessee in his books of accounts. Thus in such a situation we are of the view that no profit can be estimated on such WIP. WIP Kankariya we note that such WIP consist amount incurred for purchase, expenses for demolition of old structure on land and certain initial expenses. The total cost incurred till the year under consideration was less than 10 % of estimated project cost (2.5 crore). Therefore, considering the fact that project was in early stage the question of estimating any income from such WIP does not arise. WIP - Marathas Society we note that such WIP was representing the cost of the land with minor expense such as security and electricity. With respect to such WIP no project was approved yet. In other words, no activity of whatsoever was carried out on such land shown as WIP by the assessee. Accordingly, we are of the view that there is no question of estimating the profit with respect to such WIP shown by the assessee. In view of the above and after considering the facts in entirety, we do not find any infirmity in the order of lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vocate with Shri Parimalsinh B. Parmar , A. R ORDER PER WASEEM AHMED , ACCOUNTANT MEMBER : The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax ( Appeal ) - 3, Ahmedabad , dated 10/02/2017 arising in the matter of Assessment Order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to the Assessment Year 2011-2012. 2. The Revenue has raised the following grounds of appeal: (1) That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.2,92,54,271/- made u/s 68 of the I.T.Act on account of unexplained Cash Credit. (2) That the Id.CIT(A) erred in law and on facts in deleting the addition of Its. 71,81,534/- made as against the net profit shown. (3) That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.22,86,644/- made on account of estimated profit on WIP. (4) That the ld.CIT(A) erred in (aw and on facts in deleting the addition of R.S. 7,79,32,338/- made on account of unexplained credits. (5) That the ld.CJT(A) erred in law and on facts in deleting the addition of Rs.8,10,355/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsonal assets and liabilities which were brought to the books of accounts of the proprietary concern as on 1 April 2010. The assessee in support of his contention has furnished the list of the assets and liabilities which were brought to the proprietary concern as on 1 April 2010 which is placed on page 8 of the assessment order. As such the difference in the assets and liabilities incorporated in the books of the proprietary concern was shown as addition in the capital account of the assessee. 4.3 The assessee with respect to the addition in the capital account by ₹1.96 crores submitted that there was a piece of land which was purchased by him on behalf of the company namely Classic Build Project Pvt. Ltd for its project classic heights and the same was subsequently transferred in the AY 2012-13. 4.4 However, the AO was not satisfied with the submission of the assessee on the reasoning that there was no evidence furnished by him (the assesse) that he was having the capital of ₹ 87,03,758/- in the personal capacity. As such the assessee by way of passing the journal entries has incorporated various assets without furnishing any supporting vouchers/bills of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n filed for the year ending 31st March 2010 has shown capital balance of Rs. 34,78,955/- only. Hence, the assessee to substantiate that he has capital of Rs. 87,03,758/- in personal capacity other than proprietary business concern has filed the source of such capital balance. Likewise, the assessee with respect to credit of Rs. 1.96 crore furnished copy of ledger account of classic height in the books of Silver Construction Co where such amount was shown. The assessee also furnished copy of leger account of Shri B. Narsinhndani New A/c where several entries aggregating to Rs. 5,87,42,201.87 were appearing. However, no supporting document was furnished to substantiate such ledger account. 6. The learned CIT(A) after considering assessee s submission and remand report deleted the addition made by the AO by observing as under: I have considered the facts mentioned in the assessment order and the remand report of the AO and the submission filed by the appellant carefully. The AO has) stated in Remand Report that the appellant could not explain the issue inspite of number of opportunities during assessment proceedings- The appellant is doing business as a proprietor of M/s. Silve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.'s by passing following entries In books of account: All assets shown in personal balance sheet aggregating to Rs.5,87,42,201/- transferred to asset a/c in the books of silver construction Co. All liabilities shown in personal balance sheet as on 01/04/2010 aggregating to Rs.5,00,38,444 /-transferred to liability a/c in the books of silver construction Co net balance i e. Total of assets less total of liabilities of personal set of books to Rs. 87,03,758/- credited to capital a/c of silver construction Co. The net balance i.e Total assets less total of liabilities of personal set of books amounting to Rs.87,03,758/- credited to capital a/c silver construction Co. Therefore, capital account of Baracatali Narsidani in the books of Silver Construction Co. is due to merging of personal assets and liabilities as appearing in the personal set of books as on 31/03/2010 with that of Silver Construction Go's books. PB-2 (PP-99 to 102) indicates ledger account for the explanation by the appellant. In Silver construction Co. books as on 31/03/2010 there was an account having opening balance of Rs. 10,48,001/- in the name of Baracatali Narsidani Capital a/c wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side of his capital account based on the documentary evidences. But the assesse has failed to do so. 9. On the contrary, the learned AR before us filed paper book running from 1 to 435 and contended that there were certain additions in the capital account of the assessee on account of merger of the personal assets and liabilities with the proprietary concern. All the assets and liabilities were pertaining to the earlier years and therefore the same cannot be made subject to tax under the provisions of section 68 of the Act in the year under consideration. All the transactions recorded in the personal and the propriety concern were duly reflected in the income tax return. Likewise, all the details relating to the personal assets and liabilities were duly furnished before the AO during the assessment and remand proceedings. 9.1 Both the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 10. We have heard the rival contentions of both the parties and perused the materials record. In the present case, there were certain additions in the capital account of the assessee amounting to Rs. 2,92,54,271/- which were treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is for the reason that there is a single assessee maintaining two sets of financial statements. Thus, the transactions shown by the assessee in the personal capacity can only be disturbed in the year to which it pertains. As far as, the year in dispute is concern, there is no addition in the capital account of the assessee to be verified in pursuance to the provisions of section 68 of the Act. Hence on this score only, the finding of the learned CIT (A) is not required to be interfered. 10.3 For the addition of ₹1.96 crores in the capital account of the assessee, we note that it was representing the duplicate entry made in the books of accounts inadvertently. As such the amount of ₹1.96 gross was already part of the personal assets shown by the assessee in the personal capacity. This error was rectified by the assessee subsequently in the financial year 2014-15. This fact has not been doubted by the AO. Accordingly we hold that, such addition of ₹1.96 crores is not sustainable and the finding on this issue of the learned CIT (A) does not required to be disturbed. 10.4 Likewise, the difference in the opening capital of the assessee, we note that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 71,81,534/- after reducing the amount of profit i.e. Rs. 22,61,017/- already shown by the assessee. 13. Aggrieved assessee preferred an appeal to the learned CIT (A). 14. The assessee before the learned CIT (A) submitted that the AO while calculating the cost incurred by the assessee to work out the turnover of the assessee has considered the opening WIP which has already been made subject to tax in the earlier year. Therefore, the basis adopted by the AO is not reliable. 14.1 The assessee further submitted that he has completed its project to the tune of 30% and based on 30% completion of the project after taking the booking which is to the tune of 45% has calculated the turnover which is as per the accounting standard 7 issued by the ICAI. The assessee further contended that he has been showing reasonable profit in all the years beginning from assessment year 2010-11 to 2016-17 which were duly accepted by the revenue except in the year under consideration. Thus in view of the above, the assessee prayed not to make any addition to the total income. The learned CIT (A) after considering the submission of the assessee deleted the addition made by the AO by o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees. AS-7 which is proportionate method or project completion method have guidance value so far as instant case is concerned. The reasons given by the AO for not applying AS-7 are misconceived as far as facts of the case are concerned, wherein cost of project is intact available. [Secondly, the appellant has shown 12.137% profit over a period of time i.e. A. Y.2010-11 to A. Y.2016-17 wherein book results have been accepted by the department except A.Y.2011-12 under consideration, This is not the new issue, the principle of consistency required to be followed as has been held in various below mentioned case laws: (i) DCIT Vs. Sulabh International Social Service Organisation [350 ITR 189 (Patna)] (ii) CIT Vs. Ranganathar Co. [316 ITR 252 (Mad)] (iii) Gopai Purohit Vs. Jt. CIT [334 ITR 308 (SC] The facts of the case are also similar in this year as compared to the project period (A.Y.2010-11 to A.Y.2016-17) and unsettling the accepted accounting system so applied by appellant would create avoidable litigation. On the other hand, the appellant has made out a strong case by placing all the facts on record In view of this, ground No.2 of appeal is allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is reasonable in the real estate activities. At the time of hearing, the learned AR has not brought anything contrary to the finding of the learned CIT (A). Thus, keeping in view the principles of consistency, we do not find any reason to disturb the finding of the learned CIT (A). Hence the ground of appeal of the revenue is hereby dismissed. 19. The 3rd issue raised by the revenue is that the learned CIT (A) erred in deleting the addition made by the AO by estimating the profit of Rs. 22,86,644/- only on WIP. 20. The AO during the assessment proceeding found that the assessee in the immediate preceding assessment year i.e. A.Y. 2010-11 has shown certain project in CWIP and also offered income on the same which are detailed as under: 1. WIP Heights Rs. 2,90,593/- 2. WIP Kankariya Rs. 17,21,672/- 3. WIP Maratha Society Rs. 1,32,32,028/- 20.1 However, the assessee during the year under consideration has neither shown such project as opening WIP nor offered any income on such project. On question by the AO, the assessee submitted that the WIP Heights belongs to the company namely M/s Classic Build Project Pvt. Ltd. The expenses were incurred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d submission of the assessee deleted the addition made by the AO by observing as under: Decision: I have considered the facts mentioned in the assessment order and the land report of the AO and the submission filed by the appellant carefully. The assessing officer has estimated the profit @ 15% on projects such as Maratha Society and Kankaria Project. The assessing officer has admitted that there was newspaper cuttings and notice dated 13.03.2013 form AMC relating to dispute in construction work of Maratha Society but has not accepted the contention of the appellant. The appellant has submitted PP 57 to 90/PB- 1 for A.Y.2009-10 to A.Y , 2011-12 to indicate that the project approval had not been in their possession. The appellant has submitted that no work has been undertaken in respect of these projects except incidental expenses. It is contended by the appellant that in absence of any developmental work or bookings the income cannot be recognized as per AS-7. The AO has mentioned in remand report that no new evidence has been placed on record. I have gone through the evidences on record and am convinced that no profit can be estimated on virtually dead investments wherein no w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no profit can be estimated on such WIP. 26.2 Likewise, the WIP Kankariya of ₹ 17,21,672/-, we note that such WIP consist amount incurred for purchase, expenses for demolition of old structure on land and certain initial expenses. The total cost incurred till the year under consideration was less than 10 % of estimated project cost (2.5 crore). Therefore, considering the fact that project was in early stage the question of estimating any income from such WIP does not arise. 26.3 Regarding the WIP-Marathas Society of ₹1,32,32,028/-, we note that such WIP was representing the cost of the land with minor expense such as security and electricity. With respect to such WIP no project was approved yet. In other words, no activity of whatsoever was carried out on such land shown as WIP by the assessee. Accordingly, we are of the view that there is no question of estimating the profit with respect to such WIP shown by the assessee. In view of the above and after considering the facts in entirety, we do not find any infirmity in the order of learned CIT(A). Hence the ground of appeal of the revenue is hereby dismissed. 27. The next issue raised by the Revenue is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Document executed in respect of 90 customers 41950530 2 Document pending but amount received by cheque 10954042 3 Document pending amount received by cash-parties having PAN Confirmation 7668000 4 Document pending amount received by cash-parties not having PAN but having proper ID proof with background of agriculture and small business 41 60000 5 Payment made by classic homes society to silver construction co. out of FY 2009-10 closing bank balance by withdrawing from bank by cheque 13199766 TOTAL 77932338 29.2 The assessee in support of his claim submitted following documentary evidences: (v) Copy of ledger A/c of Classic Home Co-op Society from the books of Silver Construction Co (vi) Copy of Contra A/c from the books of Classic Home Co-op Society Ltd. (vii) Copy of Balance sheet of Classic Home Co-op Society Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lo establish the identity of the concerned creditors/suppliers. It is also observed that the resultant profit arising from the relevant transactions of purchase and sale of sunflower seed was duly disclosed by the assessee in the trading account. Having regard to all these facts of the case, we aj o/the view that the addition made by the A. O. and confirmed by the CIT(A) by treating the trade ^K^it rs as unexplained cash credits under section 68 is not sustainable. We therefore delete the Same, and allow ground No. 3 of assessee 's appeal. In view of facts on record, I am in agreement with the argument submitted by the appellant in view of facts of the case and comments contained in remand report, the conditions to invoke provisions of Section 69 are not prevalent hence the addition of Rs.7,79,32,338/- is hereby deleted. The ground No.4 is allowed. 29.4 Being aggrieved by the order of the learned CIT(A) the Revenue is in appeal before us. 30. The learned DR before us submitted that there were receipts to the assessee from the society but the same was not recorded in the books of accounts of the assessee. Therefore, the same should be treated as unexplained cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t within the meaning of the provisions of section 68 of the Act. Furthermore, the amount received by the assessee represents the business receipts which is outside the purview of the provisions of section 68 of the Act. Thus, the learned CIT (A) deleted the addition made by the AO. 33.1 On perusal of the details of the parties/customers/members who have acquired the property in the scheme developed by the society, which is placed on pages 140 of the paper book, we note that the amount was received by the assessee for the purpose of the construction. The assessee against such money has shown work-in-progress as evident from the financial statement which are placed on pages 23 to 39 of the paper book. At this juncture, it is also important to note that the assessee following the project completion method has also offered the income on the amount of money received by him and therefore we are of the view that no separate addition under the provisions of section 68 of the Act is warranted. At the time of hearing, the learned DR has not brought any iota of evidence contrary to the finding of the learned CIT(A). Hence, the ground of appeal of the revenue is hereby dismissed. 32. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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