PRAMUKH REALTORS, MUMBAI v. ASST CIT 15(2), MUMBAI

CO 188/MUM/2013 | 2007-2008
Pronouncement Date: 04-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 18819923 RSA 2013
Assessee PAN AAGPF3465N
Bench Mumbai
Appeal Number CO 188/MUM/2013
Duration Of Justice 7 month(s) 8 day(s)
Appellant PRAMUKH REALTORS, MUMBAI
Respondent ASST CIT 15(2), MUMBAI
Appeal Type Cross Objection
Pronouncement Date 04-04-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted Not Allotted
Tribunal Order Date 04-04-2014
Assessment Year 2007-2008
Appeal Filed On 26-08-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH MUMBAI BEFORE SHRI R.C.SHARMA A M & DR.STM PAV A LAN J M ITA NO. 18 41 / MUM/20 1 1 ( ASSESSMENT YEAR : 200 7 - 08 ) ACIT 1 5(2) MATRU MANDIR ROOM NO.113 TARDEO MUMBAI - 400 008 VS. M/S PRAMUKH REALTORS 1301 BLDG. NO.5 C - WING KAMLA VIHAR BORSA PADA KANDIVALI (W) MUMBAI - 400 068 PAN/GIR NO. : A A GPF 346 5 N ( APPELLANT ) .. ( RESPONDENT ) AND . 18 8 / MUM/20 1 3 (ARISING OUT OF ITA NO.1841/MUM/2011) ( ASSESSMENT YEAR :2007 - 08 ) M/S PRAMUKH REALTORS 1301 BLDG. NO.5 C - WING KAMLA VIHAR BORSA PADA KANDIVALI (W) MUMBAI - 400 068 VS. ACIT 1 5(2) MATRU MANDIR ROOM NO.113 TARDEO MUMBAI - 400 008 PAN/GIR NO. : A AGPF 3465 N ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : MR. M.L.PERUMAL /AS SESSEE BY : MR. K. GOPAL DATE OF HEARING : 1 1 TH MARCH 201 4 DATE OF PRONOUNCEMENT : 4 TH APRIL 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTI ON FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 24 - 12 - 2010 FOR THE ASSESSMENT YEAR 200 7 - 08 IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT. ITA NO. 1841 /20 1 1 &CONO.188/13 2 2 . FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN ITS APPEAL: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1 03 49 450/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON - TALLYING OF BILLS AND VOUCHERS PRODUCED DURING THE ASSESSMENT PROCEEDINGS WITH THE AMOUNT M ENTIONED IN THE PROFIT AND LOSS ACCOUNT. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF ONLY RS. 8 34 648/ - ON ACCOUNT OF THE UNDER VALUATION OF SALES IN CASE OF FLATS AND SHOPS WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE FAILED TO EXPLAIN THE DISCREPANCY DURING ASSESSMENT PROCEEDINGS. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED CIT(A) HAS ADMITTED ADDITIONAL EVIDENCES REGARDING THE RE - CONCILIATION OF DI SCREPANCY IN EXPENSES POINTED OUT BY THE ASSESSING OFFICER IN PROFIT AND LOSS ACCOUNT WITHOUT FOLLOWING THE PROCEDURE LAID DOWN IN RULE 46A OF THE INCOME - TAX RULE 1962. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT A SSESSEE IS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER. BY REJECTING BOOKS OF ACCOUNTS U/S.145(2) THE AO MADE ADDITION BY ESTIMATING INCOME OF 15% ON SALE PROCEEDS AND WORK - IN - PROG RESS. BY THE IMPUGNED ORDER THE CIT(A) SUBSTANTIALLY DELETED THE ADDIT ION. IN THIS APPEAL THE REVENUE IS BASICALLY AGGRIEVED FOR DELETING THE MAJOR PART OF THE ADDITION MADE BY THE AO BY REJECTING THE BOOKS OF ACCOUNTS. THE FACTS EMERGED FROM THE ORDER OF THE LOWER AUTHORITIES ARE THAT WHILE VERIFYING THE TOTAL PURCHASE ACCO UNT OF A.Y. 2006 - 07 THE AO FOUND THAT TOTAL EXPENDITURE OFRS.17 73 105/ - DID NOT MATCH WITH THE EXPENDITURE SHOWN IN PROFIT & LOSS A/C THEREFORE ACCORDING TO HIM SOME OF THE EXPENSES ARE NOT RECORDED IN BOOKS OF ACCOUNTS AND PAYMENTS ARE MADE UNACCOUNT EDLY . ACCORDING TO THE ASSESSING OFFICER THE DETAILS FILED BY THE ASSESSEE CONTAINED PURCHASE BILLS OR ITA NO. 1841 /20 1 1 &CONO.188/13 3 RELATED TO PURCHASE OF MATERIAL ONLY WHEREAS IN PROFIT & LOSS A/C NO SUCH PURCHASE IS EXPENDITURE DEBITED. ONLY AN AMOUNT OF RS. 9 46 185/ - IS RELATED TO LABOUR CHARGES. FURTHER T HE AO OBSERVED THAT COST OF CONSTRUCTION FOR WORK COMPLETED IN F.Y. 2005 - 06 IS OF RS.1 12 35 262/ - WHICH DOES NOT TALLY WITH COST OF CONSTRUCTION SHOWN IN RETURN OF INCOME. FURTHER AO A LSO OBSERVED THAT DURING THE YEAR PROJEC T HAS BEEN COMPLETED AND TOTAL COST OF THE PROJECT HAS BEEN SHOWN TO THE EXTENT OF RS.9 08 63 346/ - WHEREAS BILLS AND VOUCHERS PRODUCED DURING THE ASSESSMENT PROCEEDINGS IS ONLY OF RS.17 73 1 05/ - AND 1 12 35 262 / - THEREFORE. ACCORDING TO THE AO ASSESSEE IS NOT HAVING SUFFICIENT EVIDENCE TO PROVE THE GENUINENESS AND REASONABILITY OF SUCH HUGE EXPENSES DEBITED IN PROFIT & LOSS A/C. FURTHER IT IS OBSERVED BY THE AO THAT SOME OF THE FLATS/SHOPS ARE NOT SOLD OUT AT THE SAME PRICE AS IS CHARGED IN RESPECT OF O THER FLATS/SHOPS. THUS THERE IS A VARIATION IN SELLING PRICE. . THEREFORE APPELLANT WAS ASKED THROUGH ORDER SHEET HAVING DATED 16.12.2009 FOR EXPLANATION OF VARIATION IN SELLING P RI CE AND LOW PROFIT RATIO. IN RESPONSE TO THE QUERY APPELLANT HAS SUBMITTED REPLY WHICH IS ACCORDING TO THE AO UNSATISFACTORY HENCE LD. AO HAS SUMMARIZED HIS FINDINGS IN PARA 8 OF ASSESSMENT ORDER AND THEREAFTER HAS REJECTED THE BOOK RESULT AND HAS ESTIMATED THE NET PROFIT @ 15% OF THE TOTAL SALE VALUE AND CLOSING WORK - IN - PROGRES S AND HAS THEREFORE ESTIMATED THE INCOME OF T HE APPELLANT AT RS.1 40 59 278/ - . 4 . BY THE IMPUGNED ORDER CIT(A) HELD THAT REJECTION OF BOOKS OF ACCOUNTS BY INVOKING PROVISIONS OF SECTION 145(2) WAS NOT JUSTIFIED. ITA NO. 1841 /20 1 1 &CONO.188/13 4 THE CIT(A) ALSO CONSIDERED VARIATION IN SEL LING PRICE OF DIFFERENT FLATS AND AFTER RECORDING DETAILED FI N DING AT PARA 5.4 H E CONFIRMED THE ADDITION TO THE EXTENT OF RS.8 34 648/ - OUT OF TOTAL INCOME ASSESSEE BY THE AO AT RS. 1 40 59 278/ - . THE PRECISE OBSERVATION OF THE CIT(A) WAS AS UNDER : - 5. I HAVE GIVEN CAREFUL THROUGH TO THE RIVAL SUBMISSIONS OF THE APPELLANT AND FINDING OF THE ASSESSING OFFICER AND HAVE ALSO EXAMINED THEM IN THE LIGHT OF MATERIAL AVAILABLE ON RECORD. I HAVE ALSO CAREFULLY CONSIDERED THE VARIOUS REASONS GIVEN BY THE ASSESSING OFFICER FOR REJECTING THE BOOK RESULT. I FIND THAT AO HAS REJECTED ENTIRE BOOK RESULT ON A VERY FLIMSY GROUND AS NONE OF THE REASONS EXCEPT VARIATION IN SELLING PRICE AND VALUE DETERMINED BY THE STAMP DUTY AUTHORITIES IS FACTUALLY CORRECT. THE OBSERVATIO N IN PARA 4 OF THE ASSESSMENT ORDER IS APPARENTLY WRONG BECAUSE OF THE OBVIOUS FACTS THAT IN PROFIT & LOSS A /C APPELLANT HAS SHOWN TOTAL PURCHASE EXPENDITURE OF RS.7 20 442/ - AND THERE IS A DEBIT OF EXPENDITURE OF MATERIAL AND LABOUR OF RS. 9 46 185/ - . WHIL E MENTIONING THE DETAILS OF EXPENDITURE OF CURRENT YEAR IN PARA 4 OF THE ASSESSMENT ORDER LD. AO HAS WRONGLY PRESUMED EXPENDITURE APPEARING AT SL. NO. 1 27 28 AND 62 AS PURCHASE OF MATERIAL WHEREAS THE FACT IS THAT THESE ARE THE LABOUR CHARGES. IF THESE MISTAKES ARE RECTIFIED THEN NET PURCHASE COMES TO RS.7 20 442/ - ONLY. IT APPEARS THAT LD. AO HAS NOT PROPERLY VERIFIED THE LABOUR CHARGES OF RS.9 46 185/ - WHILE MENTIONING THE TOTAL EXPENDITURE APPEARING ON VARIOUS BILLS. THE RECONCILIATION STATEMENT SUBM ITTED BY LD. AR IS FOUND TO BE CORRECT HENCE THE FINDING OF THE LD. AO IN PARA 4 OF THE ASSESSMENT ORDER IS UNSUBSTANTIATED - ONE. MERELY ON THE BASIS OF UNFOUNDED PRESUMPTION THE BOOK RESULT CANNOT BE REJECTED. THE RECONCILIATION IS AS UNDER: - PG.NO. PA RTICULARS AMT. AMT. PURCHASES AS TAKEN BY ASSESSING OFFICER 17 73 105 LESS: 62 LABOUR CHARGES INCLUDED IN PURCHASES 6 81 600 28 LABOUR CHARGES INCLUDED IN PURCHASES 14 020 27 LABOUR CHARGES INCLUDED IN PURCHASES 2 096 1 LABOUR CHARGES I NCLUDED IN PURCHASES 29 095 29 PURCHASES OF RS.17 050 BUT CONSIDER 17 059 9 7 26 820 PURCHASES AS PER 10 46 285 ITA NO. 1841 /20 1 1 &CONO.188/13 5 TRADING ACCOUNT LESS DISCOUNT ON PURCHASES 3 25 843 PURCHASES AS PER AUDIT REPORT 7 20 442 5.2 FURTHER LD. AO HAS MISTAKEN THE ENTRY WHILE DESCRIBING IN PARA5 OF THE ASSESSMENT ORDER MENTIONING THE DETAILS OF COST OF CONSTRUCTION CLAIMED BY THE APPELLANT. CONTRARY TO THE FINDINGS OF THE AO APPELLANT HAS RECONCILED THE FACT EXPLAINING THAT LD. AO HAS WRONGLY TAKEN COST OF PURCHASE AT RS.1 12 35 262/- WHEREAS THE CORRECT FIGURE IS OFRS.1 77 35 956/ - . THE RECONCILIATION WAS IS AT PAGE NO.15 OF THE PAPER BOOK. 5.3. IT IS VERY EVIDENT FROM THE RECONCILIATION OR CLARIFICATION THAT LD. AO HAS WRONGLY TAKEN FIGURE OF PURCHASE AT RS.L 12 35 262/ - AGAINST THE ACTUAL DEBIT OF EXPENDITURE UNDER HEAD MATERIAL AND LABOUR OF RS.L 77.35 956/ - IN A.Y. 2006 - 07. IT IS ALSO RELEVANT TO MENTION THAT IN A.Y. 2005 - 06 CASE WAS ALSO IN SCRUTINY AND REGULAR ORDER U/S 143(3) DATED 11.12.2007 WAS PASSED BY THE ASSESSING OFFICER ACCEPTING THE GENUINENESS AND CORRECTNESS OF CLAIM OF COST OF CONSTRUCTION. WHEN COST OF CONSTRUCTION HAS BEEN ACCEPTED BY ASSESSING OFFICER IN A. Y. 2005 - 06 AND FURTHER IN A.Y. 2006 - 07 THERE IS NO VISIBLE DISCREPANCY THERE IS NO PO INT FOR THE AO TO CONFUSE HIMSELF AND THEN PRESUME OTHERWISE THAN A CORRECT CLAIM OF THE APPELLANT. IT IS THEREFORE VERY APPARENT THAT LD. AO HAS BASED HIS JUDGEMENT ON MIS - REFERENCE MIS-CALCULATION AND MIS - APPRECIATION OF FACTS OF THE CASE. 5.4 IT IS H OWEVER PERTINENT TO MENTION THAT OBSERVATION OF LD. AO IN RESPECT OF VARIATION OF SELLING PRICE IS CORRECT TO THE EXTENT THAT THERE IS NO VALID REASON FOR SELLING OUT THE FLATS/SHOPS AT LOWER PRICE IN SUBSEQUENT YEARS AGAINST THE MINIMUM EXPECTED SELLING PRICE PRESCRIBED BY THE REGISTRAR OF MOVABLE PROPERTIES AND MENTIONED IN READY RECKONER DULY UPDATED BY THE GOVERNMENTAL AUTHORITIES. AS SUCH THE EXPLANATION OF THE APPELLANT CANNOT BE 100% ACCEPTABLE SO FAR AS VARIATION IN SELLING PRICE IS CONCERNED. NEVE RTHELESS BOOK RESULT CANNOT BE REJECTED AND PROFIT CANNOT BE ESTIMATED @ 15% OF SALE AMOUNT AND WORK - IN - PROGRESS. LD. AO HAS OBVIOUSLY MADE UNSUBSTANTIATED PRESUMPTION OF INCOME WITHOUT REFERRING ANY COMPARABLE CASE OR WITHOUT POINTING OUT ANY EVIDENCE OTH ER THAN VARIATION OF SOME SALE PRICE WHICH CAN REVEAL SUBSTANTIAL SUPPRESSION OF INCOME. UNLESS COGENT EVIDENCE IS THERE IN POSSESSION NO SUCH ASSUMPTION CAN BE MADE IN GENERAL HOWEVER SIMULTANEOUSLY SOME FACTS DRAW ATTENTION THAT AS COMPARED TO SELLIN G PRICE OF EARLIER YEAR EVEN LATER ON THERE IS A CONSIDERABLE VARIATION OF SELLING PRICE AS COMPARED TO THE MARKET VALUE ASCERTAINED BY THE STAMP DUTY AUTHORITY. HOWEVER THE EXPLANATION THAT FLAT NO. A - 304 SOLD OUT IN 'A - WING' TO THE OLD TENANTS ALLOTT ED FLAT AND BOOKING WAS DONE AT THE TIME OF AGREEMENT ONLY HENCE THE SELLING PRICE COULD NOT BE EXPECTED TO BE MORE BEING A PECULIAR CAUSE AND APPELLANT WAS UNDER OBLIGATION OF THE OLD TENANTS FOR TAKING NOC FOR DEVELOPMENT OF PROJECT SOMEWHAT CONVINCING ONE. FURTHERMORE THERE IS MINOR VARIATION IN RESPECT OF MARKET VALUE TAKEN BY STAMP DUTY AUTHORITY AND PRICE SHOWN BY THE APPELLANT IN ITA NO. 1841 /20 1 1 &CONO.188/13 6 RESPECT OF FLAT NO. B - 312 THE ARGUMENTS OF LD. AR IS FOUND ACCEPTABLE BECAUSE THIS FLAT WAS ALSO BOOKED IN DECEMBER 200 3. AS REGARDS FLAT NO. D - 204 THE EXPLANATION OF THE APPELLANT! AR IS ALSO FOUND CONVINCING - ONE THAT IT WAS SOLD OUT IN THE MONTH OF MARCH 2004 TO A CORPORATOR OF THE AREA AS THIS FLAT WAS PURCHASED IN HIS WIFE'S NAME WHO HAD HELPED THE APPELLANT IN COMPL ETION OF VARIOUS FORMALITIES AND COMPLETION OF PROJECT. TO THAT EXTENT THE ARGUMENTS OF THE LD. AR ARE APPEARS TO BE ON SOUND FOOTING HENCE THE VARIATION IN SALE PRICE AS COMPARED TO MARKET PRICE IN EARLIER YEAR THAT TOO IN RESPECT OF PECULIAR CIRCUMSTAN CES IS NOT DISCARDABLE OR UNACCEPTABLE BUT THE EXPLANATION IN RESPECT OF OTHER FLAT BOOKED SUBSEQUENTLY FROM MAY 2004 TO DECEMBER 2006 ARE NOT CONVINCING ONE BECAUSE IN SUBSEQUENT PERIOD IT IS WIDELY KNOWN THAT THERE WAS BOOM IN REAL ESTATE MARKET AND TH ERE WAS NO REASON TO WELL OUT SUCH HOUSE PROPERTY AT LOWER RATE THAN PREVAILING MARKET PRICE. THEREFORE THE ARGUMENT IN RESPECT OF FLAT NO. D - 401/C - 101 D - 403/C - 03 C - 604 C - 502 C - 503 AND C - 504 IS NOT TENABLE AT ALL. AS SUCH CONSIDERING THE FACTS AND CI RCUMSTANCES OF THE CASE AND LOCALITY OF THE AREA IT CAN BE CONCLUDED THAT SELLING PRICE OF THE FLAT WOULD HAVE NOT BEEN ON LOWER SIDE AS COMPARED TO THE MARKET PRICE BEING A MINIMUM FIXED PRICE BY REVENUE AUTHORITY HENCE ACCORDINGLY DIFFERENCE OF SELLIN G PRICE AS APPEARING AT SR. NO.4 TO 10 REPRODUCED AT PAGE 8 OF THIS ORDER IS TO BE TAKEN AS ADDITIONAL INCOME. ACCORDINGLY TOTAL OF DIFFERENCE OF THESE ITEMS BARRING ITEM NO.8 BEING A MINOR DIFFERENCE COMES TO RS.8 34 648/ - IS @ REQUIRED TO BE ADDED TO T HE TOTAL INCOME AGAINST THE UN - SUBSTANTIATED GENERAL ESTIMATION OF NET PROFIT OF RS. 1 40 59 278/ - . WITH A VIEW TO REMOVE DOUBT IT IS HEREBY MADE CLEAR THAT VARIATION IN SELLING PRICE AS COMPARED TO THE PRICE AS PER READY RECKONER ADOPTED BY THE STAMP DUTY AUTHORITY TAKEN FOR ADDITION BECAUSE OF THE ONLY REASON THAT EXPLANATION OF THE LD. AR IS NOT ACCEPTABLE OR CONVINCING ONE AS LATER ON THERE CANNOT BE LESS SELLING PRICE THAN EXPECTED MINIMUM MARKET PRICE OF THE SHOPS/FLATS. HOWEVER THIS FINDING DOES NOT CONTRADICT THE FINDING THAT MERELY ON VARIATION OF SELLING PRICE AS COMPARED TO READY RECKNOR THE BOOK RESULT CANNOT BE REJECTED AND PROFIT CANNOT BE ESTIMATED ACCORDING TO THE SWEET WILL. FURTHER MORE THE FINDING OF THE LD. AO IS FACTUALLY INCORRECT SO FAR AS THE FIGURE OF PURCHASES AND COST OF CONSTRUCTION IS CONCERNED. HOWEVER THE VARIATION IN SELLING PRICE AS MENTIONED ABOVE CANNOT BE THE BASIS FOR REJECTING THE WELL FOUNDED BOOKS OF ACCOUNT DULY AUDITED BY THE AUDITOR UNLESS SUBSTANTIAL DEFECT I S BROUGHT ON RECORD AND COGENT EVIDENCE OF SUPPRESSION OF PROFIT IS UNEARTHED. HERE IS NOT THE CASE ALIKE THEREFORE THERE IS NO REASON FOR REJECTING BOOK RESULT IN A VERY GENERAL MANNER. NEVERTHELESS ONE CANNOT EXPECT THAT VARIATION IN SELLING PRICE CANN OT BE ADDED TO THE TOTAL INCOME OF THE APPELLANT BECAUSE IT IS BASED ON PRESUMPTION. IT IS PERTINENT TO MENTION THAT THIS PRESUMPTION IS NOT WITHOUT ANY BASIS OR CONVINCING EVIDENCE. LD. AR HIMSELF GIVEN THE DETAILS OF SUCH VARIATION 111 PARA 6 OF HIS WRIT TEN ARGUMENT DATED 23.11.2010. THEREFORE THIS VARIATION CAN BE TAKEN FOR ASSESSMENT. ACCORDINGLY AO IS DIRECTED TO TAKE THE ADDITIONAL INCOME OF RS.8.34.648/- AS AGAINST THE ESTIMATED INCOME OF RS.1 40 59 278/ - . ITA NO. 1841 /20 1 1 &CONO.188/13 7 5 . AGAINST THE ABOVE ORDER OF CIT(A) T HE REVENUE IS IN APPEAL BEFORE US AND THE ASSESSEE HAS ALSO FILED CROSS OBJECTION FOR SUSTAINING THE ADDITION OF RS. 8 34 648/ - . 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT THE ASSESSEE IS A BUILDER AND DEVELOPER. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS COMPLETED ITS PROJECT OF SLUM AREA. THIS PROJECT WAS STARTED IN THE YEAR 2003 AND THE SAME WAS COMPLETED DURING THE ASSESSMENT YEAR 2007 - 08 UNDER CONSIDERATION. T HE ENTIRE PROFIT ON SALE OF PROJECT WAS SHOWN ONLY DURING THE YEAR UNDER CONSIDERATION. THE AO AFTER OBSERVING AS UNDER REJECTED THE BOOK RESULTS OF CURRENT YEAR UNDER CONSIDERATION : - THE DETAILS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE PART ICULARS OF INCOME AND EXPENDITURE SHOWN IN THE RETURN OF INCOME AND THE BILLS AND VOUCHERS PRODUCED RELATED TO THE COST OF CONSTRUCTION IT CAN BE CONCLUDED THAT A. THE AMOUNT OF BILLS VOUCHERS PRODUCED DO NOT TALLY WITH THE AMOUNT MENTIONED IN THE PROFI T & LOSS ACCOUNT. B. SOME EXPENSES ARE NOT ROUTED THROUGH P & L ACCOUNT WHICH MEANS SOME PAYMENT WERE MADE OUT OF BOOKS FROM UNDISCLOSED SOURCES. C. THE EXPENSES DEBITED TO THE P & L ACCOUNT LIKE LABOUR CHARGES DURING THE F.Y.2006 - 07 ARE NOT SUPPORTE D WITH ANY OF THE DOCUMENTARY EVIDENCE AS NO SUCH EVIDENCE IS PRODUCED IN SPITE OF SPECIFICALLY ASKED TO THE ASSESSEE. D. FOR EARLIER YEARS ALSO THE BILLS VOUCHERS PRODUCED DO NOT MATCH WITH THE COST OF CONSTRUCTION CLAIMED TO HAVE BEEN INCURRED. E. NO PROPER JUSTIFICATION/EXPLANATION WAS FURNISHED REGARDING VARIATION IN SELLING PRICE. F. ALL THESE EXERCISE IS DONE BY THE ASSESSEE TO SUPPRESS THE SALE AND TO BOOK SOME UNREASONABLE EXPENSES TO EVADE THE TAXES WHICH FINALLY RESULTED INTO LOW PROFIT RATIO. ITA NO. 1841 /20 1 1 &CONO.188/13 8 6.1 THE CIT(A) HAS DEALT WITH THE OBSERVATION OF THE AO WITH REGARD TO THE REASONS FOR REJECTION OF BOOKS OF ACCOUNT AND STATED THAT ASSESSEE HAS REGULARLY MAINTAINED ACCOUNTS WHICH WERE AUDITED AND FOUND THAT THERE IS NO SUCH MISTAKE WHICH EMPO WERED THE AO TO REJECT THE ENTIRE BOOK RESULTS AND APPLY NET PROFIT RATE ON THE GROSS SALES. THE CIT(A) ALSO OBSERVED THAT THE AO HAS NOT PROPERLY VERIFIED THE LABOUR CHARGES AND MATERIAL PURCHASES EXPENSES AND FOUND THAT THE RECONCILIATION STATEMENT SUBMI TTED BY THE ASSESSEE WAS CORRECT. HE DEALT WITH THE RECONCILIATION STATEMENT AND CONCLUDED THAT THE AO HAS WRONGLY TAKEN COST OF PURCHASES AT RS. 1 12 35 262 / - IN PLACE OF CORRECT FIGURE OF RS. 1.77 35 956/ - . AFTER CONSIDERING REASONS GIVEN BY THE AO FOR REJ ECTION OF BOOKS OF ACCOUNTS THE CIT(A) HELD THAT REJECTION WAS NOT CORRECT HOWEVER HE HAS CONSIDERED VARIATION OF SELLING PRICE AS POINTED OUT BY THE AO WHEREIN IT WAS FOUND THAT FLATS/SHOPS WERE SOLD AT LOWER PRICE IN SUBSEQUENT YEARS AGAINST THE MINI MUM EXPECTED SELLING PRICE PRESCRIBED BY THE REGISTRAR OF MOVABLE PROPERTIES AND MENTIONED IN THE READY RECKONER. AFTER GIVING DETAILED OBSERVATION WITH REGARD TO SELLING PRICE OF EACH AND EVERY FLAT VIS - - VIS VALUE ADOPTED BY SUB - REGISTRAR FOR STAMP DUTY HE SUSTAINED ADDITION OF RS. 8 34 648/ - . 6.2 AFTER CONSIDERING THE ENTIRE MATERIAL PLACED ON RECORD VIS - - VIS NATURE OF ASSESSEES BUSINESS WHO IS A BUILDER AND DEVELOPER WE FIND THAT THE FLAT SOLD BY THE ASSESSEE DURING THE YEAR CONSTITUTED ITS STOCK - IN - TRADE THERE IS NO JUSTIFICATION FOR MAKING ANY ADDITION BY TAKING THE ITA NO. 1841 /20 1 1 &CONO.188/13 9 VALUE ADOPTED BY SUB REGISTRAR FOR STAMP DUTY PURCHASED AS PER PROVISIONS OF SECTION 50C . SINCE THE FLAT SO SOLD CONSTITUTED STOCK - IN - TRADE THERE IS NO JUSTIFICATION FOR UPHOLDING THE ADDITION ON THE BASIS OF NOTIONAL VALUE DETERMINED BY STAMP DUTY AUTHORITIES AS AGAINST ACTUAL SALE PRICE RECEIVED BY THE ASSESSEE INSOFAR AS THERE IS NO EVIDENCE ON RECORD TO HOLD THAT ASSESSEE WAS IN RESPECT OF CONSIDERATION IN EXCESS OF WHAT WAS ST ATED IN THE SALE - DEED. PROVISIONS OF SECTION 43CA WAS INTRODUCED BY FINANCE ACT 2013 SO AS TO BRING TO TAX NET FULL VALUE OF CONSIDERATION ON TRANSFER OF ASSETS OTHER THAN CAPITAL ASSETS W.E.F.1 - 4 - 20 1 4 I.E. A.Y.2014 - 15 . SINCE IN THE INSTANT CASE THE ASSE SSEE IS A BUILDER THE FLATS SO SOLD ARE NOT ITS CAPITAL ASSETS BUT STOCK - IN - TRADE. THUS THERE IS NO JUSTIFICATION ON THE PART OF THE CIT(A) FOR MAKING/SUSTAINING ADDITION ON THIS COUNT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2007 - 08 . HOWEVER AT THE VERY SAME TIME WE FOUND THAT THE INCOME DECLARED BY THE ASSESSEE AT RS. 28 65 180/ - ON SALE PROCEEDS OF RS. 8 68 17 250/ - GIVES RISE TO THE PROFIT RATE OF 3.30% WHICH IS VERY LOW IN CASE OF A BUILDER AND CONTRACTOR. EVEN THOUGH THE MISTAKES POINTED OU T BY THE AO IS NOT SO FATAL AND SUFFICIENT TO REJECT THE ENTIRE BOOK RESULTS OF THE ASSESSEE BUT AT THE VERY SAME TIME THE OBSERVATION MADE BY THE AO TO THE EFFECT THAT VOUCHERS DO NOT TALLY WITH THE AMOUNT MENTIONED IN THE PROFIT AND LOSS ACCOUNT SOME OF THE EXPENSES ARE NOT ROUTED THROUGH P&L ACCOUNT MEANS PAYMENTS WERE MADE OUTSIDE THE PROFITS AND LOSS ACCOUNT EXPENSES DEBITED IN THE P&L ACCOUNT WAS NOT SUPPORTED BY PRO PER VOUCHERS CANNOT BE ITA NO. 1841 /20 1 1 &CONO.188/13 10 BRUSHED ASIDE OUTRIGHTLY IN VIEW OF VERY LOW PROFIT DEC LARED BY THE ASSESSEE AS A BUILDER AND DEVELOPER. HENCE WE MODIFY THE ORDER OF BOTH THE LOWER AUTHORITIES AND DIRECT THE AO TO TAKE PROFIT AT 5% OF THE SALE PROCEEDS WHICH RESULTS IN NET PROFIT OF RS. 43.43 LAKHS. THUS WE UPHOLD ADDITION OF RS. 14.78 LAKHS (RS.43.43 - 28.65) AS AGAINST THE ADDITION OF RS. 8.34 LAKHS UPHELD BY CIT(A) KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS DEFECTS POINTED OUT BY THE AO IN THE EXPENDITURE VOUCHERS AS WELL AS EXPENSES NOT ROUTED THROUGH PR OFIT AND LOSS ACCOUNT. IN THE RESULT INSTEAD OF SUSTAINING ADDITION OF RS.8 34 648/ - WE SUSTAIN ADDITION OF RS.14.78 LAKHS. 7 . IN THE RESULT APPEAL FILED BY THE REVENUE AND CROSS THE OBJECTION FILED BY THE ASSESSEE ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH APRIL . 201 4 . 4 TH APRIL 2014 SD/ - SD/ - ( ) ( DR. S.T.M.PAV A LAN ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 04 /04 /2014 /PKM PS ITA NO. 1841 /20 1 1 &CONO.188/13 11 COPY OF THE ORDER FORWARDED TO : / BY ORDER ( ASSTT. REGISTRAR) / ITAT MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) MUMBAI. 4. / CIT 5. / DR ITAT MUMBAI 6. GUARD FILE. //TRUE COPY//