M/S. BHOPAL VIKAS PRADHIKARAN,BHOPAL vs. THE DCIT 1(1), BHOPAL

आदेश / O R D E R

PER KUL BHARAT, J.M: This is an appeal filed by the Assessee against the order of Commissioner of Income Tax(Appeals)-31, New Delhi, Camp at Bhopal dated 30/06/2016 pertaining to Bhopal Vikas Pradhikaran assessment year 2010-11. The Assessee has raised following grounds of appeal: “1. That looking to the facts and circumstances of the case the learned Commissioner of Income tax (A) has erred in upholding and not giving finding on the method of accounting adopted by the assessee which was not Mercantile 'and was following only cash system of accounting. 2.That looking to the facts and circumstances of the case the learned Commissioner of Income tax (A) has erred in not given any finding on the return filed by the assessee disclosing a loss at Rs. 5,53,4 1 ,624/-, plus brought forward losses of previous years as per records.

4. That looking to the facts and circumstances of the case the learned Commissioner of Income tax (A) has erred in confirming and estimated net income of the Appellant at 8% on the gross turnover and assessing the total income at Rs.3,OI,46,037/- against the returned loss of Rs. 5,53,41,624/- shown by the Appellant without considering the past history of the case. Your petitioner submits that the learned Assessing Officer should have if he was not satisfied with the position of accounts referred the matter for the Special Audit VIs 142(2A) of the Income tax Act.

5. That looking to the facts and circumstances of the case the learned Commissioner of Income tax (A) has erred in upholding that books of accounts is not matching with the audited account and the genuineness of the expenditure debited could not be ascertained. Your petitioner submits that the accounts were Audited and Tax Audit was conducted and the same was submitted with the Income tax Return filed by the Appellant.

6. That looking to the facts and circumstances of the case the learned Commissioner of Income tax (A) has erred in not considering the brought forward losses position as per the records which was to be set-off against the current years income and have not given any finding on this matter.

7. That looking to the facts and circumstances of the case the ld. Commissioner of Income Tax (A) has erred in initiating the penalty proceedings u/s 271(1)(c) of the Income Tax Act when there was neither concealment nor furnishing of the inaccurate particulars of income.”

Bhopal Vikas Pradhikaran

2. Bhopal Vikas Pradhikaran, Bhopal is a Statutory Authority constituted vide notification No. 3344/32176 dated 15.09.1976 under section 38 of M.P. Nagar Tatha Gram Nivesh Adhiniyam, 1973 by Govt. of M.P. as an apex body for planning and co-ordination of deve1cpment activities in Madhya Pradesh comprising of Bhopal and its influence area with responsibilities as specified in section 49 of M.P. Nagar Tatha Gram Nivesh Adhiniya. In fulfilling the above needs the Pradhikaran Construct Houses, Flats, Commercial and Cultural premises, develop plots and sell the properties (Kindly peruse page No.1 to 7 of our paper book.). The decisions are made as per Delegation of powers. The channel for decision making process are as follows in descending order: - I. State Government 2. Board of Directors 3. The Chairman 4. Chief Executive Officer 5. Superintending Engineer, Chief Town Planner.

6. Executive Engineer, Officer of Special Duty, Account Officer etc.

0/0 on cost of S.No. Particulars of charges construction (i) Supervision Charges 10% Audit, Building permissio charges & (ii) 1 1/2% n Miscellaneou (iii) Development on the cost of Building 4 1/2% Construction Work charges and Contingencies if (iv) On Actual any basi Bhopal Vikas Pradhikaran

(Kindly peruse Page no. 8 of our Paper book)

We would further like' to submit that under the deposit work in the Government projects, EWS projects, Janbhagidari and some other projects there are no supervision charges and in certain other cases the supervision charges is only 4 to 5% of the deposit work.

Grounds of Appeal Ground No.1 This ground in appeal is against the Learned CIT (Appeals) upholding that the appellant is following Mercantile system of Accounting which is not correct. The Appellant is regularly following the Cash system of accounting in the past years as well as in the above subject year which have also been confirmed by the Statutory Auditor in is Tax Audit Report. Kindly peruse Page" No.35 of our Paper book which stated the said fact. The direction may be given by the Honourable members of the said fact. Ground No.2 This ground in appeal is against the Learned CIT (Appeals) not given any finding and have upheld the order of the learned Assessing Bhopal Vikas Pradhikaran

Officer and not considering the position of the return filed by the Appellant disclosing the deficit at Rs.5,53,41,624/- as well as the correct position of brought forward losses of the earlier years as per Page no. 59 of Paper book. That the learned CIT (Appeals) has overlooked our returned position which was on the basis of Audited Accounts and the Tax Audit Report of the Statutory Auditor. Even the Auditor had neither made any qualification in the audit report nor in the notes of accounts, which may kindly be perused at Page No. 34, 53 and 54 of our paper book. It is a golden rule that True and Real Income has to be computed on the basis of books of accounts and audited accounts which the learned CIT (Appeals) have failed to do, he may be so directed. Ground No.3, 4 & 5 As these 3 grounds are inter related and for which our arguments are submitted together. - Rejection of our books of accounts Vis 145(3) - Estimating the Net Income on the gross turnover. Not considering the returned position of deficit. Not referred for special audit Vis 142(2A). - The allegation that the books of accounts not matching with the audited accounts and the genuineness of the expenditure debited could not be ascertained, whereas the accounts were audited and the Tax audit was conducted by an independent Chartered Accountant. The Learned Commissioner of Income tax (Appeals) without going into the details of facts of the matter rejected our books of accounts Vis 145(3) of the Income Tax Act, 1961. The Learned Assessing Officer ignoring our detailed submission and not considering that the Pradhikaran is a statutory local authority and there was no mens rea or dishonest intentions to furnish any inaccurate particulars, has rejected our books of accounts. In this respect as far as the discrepancies pointed out by the learned Assessing Officer and which were before the learned CIT (Appeals) who have not appreciated our position and have upheld the decision of the learned Assessing Officer. We would submit before you the details of the discrepancies in a tabular format with the complete clarification and contention of the Appellant in respect of all the discrepancies which is enclosed with this written synopsis from Page no. 1 to 5, which may kindly be perused. That the appellant is keeping manual accounts but at the time of audit and finalization of the accounts various entries were made to rectify erroneous entries, omissions, posting in wrong heads and Bhopal Vikas Pradhikaran other mistakes on the direction of auditor. Thus, computerized accounts were prepared on Tally software only to facilitate the audit process and identify the mistakes, which was considered by the statutory auditor to finalize audit. It is also pertinent to note and submit that the authority has a local resident audit from the M.P. Local fund audit, by whom vouchers are vouched on day to day basis and after which they are entered in the manual books of accounts. We would also like to submit that the appellant's cases for the past and subsequent years were under scrutiny and the orders were passed uls 143(3). The copies of assessment order relevant to AY 2008-09, 2009-10, ~011-12 and 2012-13 are enclosed at Page no. 13 to 20 of our Paper book from which you will kindly peruse that the returned position have been accepted by the department in each of the above years. From the above position and clarification your honour will appreciate that there is no allegation or assertion either that the accounts are materially misstated or expenses were not supported with evidence and income is not recorded as per the system followed. The discrepancies or clerical mistake which were identified during the course of audit/computerization of accounts were rectified and consequently no discrepancy had remained in the Audited Accounts, so as to be said to have any material impact on the final result in the position of accounts. The copy of the audited accounts is enclosed at Page no. 34 to 54 of our Paper book. More so, -the appellant had brought sufficient material on record to clarify the discrepancies identified by the AO however, The revenue authorities have failed to give strong and sufficient reasons to indicate the books of accounts of the appellant are unreliable, incorrect and incomplete before rejecting the same. Further neither the AO nor the CIT (A) has pointed out any particular item of expenditure which is not vouched. In light of the claim that the assessee has maintained proper books of account and is also in possession of all documentary evidences. to support his income and expenditure, there is no question of invoking section 145(3) and rejecting the system of accounting regularly followed by the appellant year after year. We submit the ratios of various judgements which support our position, which are enclosed with this written submission from Page no. 6 to 8. We would also like to submit that the Ld. AO once have evoked the provisions uls 145(3) then he should have passed the assessment order uls 144, whereas he has passed the order uls 143(3) of the Bhopal Vikas Pradhikaran

Income Tax Act, 1961. In this respect it is submitted that the Ld. AO has not given a specific finding that the correct profit could not be deduced from this method. On the other hand, the Ld. AO noticed certain discrepancies which were already rectified in audit and finalization of accounts and alleged that the books of account do not depict the true picture of assessee's business and assessed income of the appellant taking 8% of the Gross receipts. Even at the cost of repetition, it is submitted and prayed that the Ld. AO in assessment disregarded the conditions and circumstances of the Appellant and failed to appreciate that the appellant is a City Development Authority which works as an organ of the State Government. It has been created only for the purposes of development of city and to enhance the living standard of citizens of Bhopal and NOT to generate surplus or earn profit. Thus, it is clearly a non-profit making organization. It is a well-known proposition of law that if a Revenue Officer is to make an assessment to the best of his judgement, he must not act dishonestly, or vindictively. Moreover, he must exercise his rational judgement in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment and for this purpose he may take into consideration assessee's circumstances, his past history, his own knowledge of the previous returns and the assessments of the assessee and all other matter which he thinks would assist him in arriving at a fair and proper estimate. However, in the current case, the Ld. AO in determining the income of the appellant applied the rate of profit at 8% of the Gross Receipts. Being a Government Development Authority, it cannot be taken at par with other construction firms or business organization that are said to be commercial profit making concerns. The learned Assessing officer has not given any comparable case for taking 8% profit for such type of authorities.”

Order was pronounced in the open court on 28.03.2019.