NAVRATNA ORGANISERS & DEV. PVT. LTD.,AHMEDABAD vs. THE ACIT, CIRCLE-5,, AHMEDABAD

आदेश/O R D E R

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 2 PER RAJPAL YADAV, JUDICIAL MEMBER: These appeals are by the Revenue and the assessee. ITA No.2634/Ahd/2011 and 1875/Ahd/2013 for the Asstt.Years 2008-09 and 2009-10 are directed at the instance of the Revenue against orders of the ld.CIT(A)-I dated 5.9.2011 and 4.4.2013. Assessments have been reopened in both these years by issuance of notice under section 148 of the Act. Additions have been made by the AO, which were confirmed by the ld.CIT(A), and therefore, ITA No.895 and 896/Ahd/2017 are directed at the instance of the assessee against separate orders of the ld.CIT(A)-7 dated 28.2.2017 passed in both these years. Similarly, IT(SS)A.No.577/Ahd/2011 and ITA No.2183/Ahd/2016 are Revenue’s appeal for the Asstt.Year 2002-03 and 2012-13 against order of the ld.CIT(A)-1 dated 30.8.2011 and order of the ld.CIT(A)-9 dated 20.6.2016.

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 3 4. There are only two issues agitated by the Revenue in the Asstt.Year 2008-09; they are (a) the ld.CIT(A) has erred in deleting addition of Rs.10,54,50,250/- added by the AO on account of income from Kalhar Project; (b) the ld.CIT(A) has erred in deleting addition of Rs.3,67,86,220/- which was added by the AO on account of estimation of profit at the rate of 8% on work-in-progress of various projects. The issues raised in the Revenue’s appeal for the Asstt.Year 2008-09 are concerned, they common with the grievances of the Revenue in the Asstt.Year 2009-10 also, wherein the Revenue has pleaded that the ld.CIT(A) has erred in deleting the addition of Rs.4,34,90,414/- which was added by the AO by estimating profit at 8% of work-in-progress of various projects, and (b) deletion of Rs.4,84,35,702/- with respect to Kalhar project. We take all these grounds of appeal together.

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 4 Rs.10,54,50,250/- deserves to be assessed as income of the assessee. He confronted the assessee as to why this should not be treated as its business income. In response to the query of the AO, assessee filed detailed submissions which have been reproduced by the AO, and such submissions read as under: “2.1 We have very carefully considered the contents of item No.(1) and we have to state that there is no justification in the proposal that excess of collection over expenses in respect of Kalhar Bunglows and other projects should be treated as business income of our company. It is submitted that said proposal could have been said to have lawful force if the projects - were completed and all the units -were handed over to the members and all other legal formalities -would have concluded without any farther obligation on part of either company or the owner of the projects. It is asserted that till completion of all the formalities and till construction of the units.and till handing over of the units the collections are always in nature of liability have no characteristics of income. It is most respectfully submitted that under provisions of the Income tax Act, 1961 only income chargeable to tax can be considered as part and parcel of total income. It is submitted that any collection or any amount received by an assessee which does not have characteristic of an income cannot be considered as income in computation of the total income. 2.2 We have to state that our company has collected the booking amounts, from the various members in respect of the various projects owned by the other entities and such collection in fact are towards a liability on part of our company and are embedded with an obligation for constructing a house and have no characteristic of income at all. It may be appreciated that if a person has booked bunglow of Rs. 50 lacs our company will make an advance collection from the said party of a certain amounts of the agreed sales consideration The collections will be utilized towards construction of the units and thereafter the collection will be made by our company from the said members as and when the construction work made a progress. It is submitted that if our company has made collections ofRs. 20. lacs till 31st March, 2008 and if expenditure has been incurred on the bunglow till 31st March, 2008 of Rs. 10 lacs the amount of Rs. 10 lacs is being reflected as excess collection over expenses which in fact is towards a liability on the part of our company in as much as we have to spend substantial amount out of this excess collection of Rs. 10 lacs towards the construction of the bunglow. It may be appreciated that every year the necessary entries of the profits are being made by way of development fees and every year the necessary entries are being made on handing over of the constructed property and on execution of all the legal formalities. It may be appreciated that as on 31st March, 2007 the collection for Kalhar booking was Rs. 21.88 Crores as against which as on 31st March, 2008 collection has been reflected at Rs7.30 Crores. The reduction in Kalhar booking amount is on account of transfer of booking amounts to the respective societies on completion of the bunglows and on execution of all the legal documents. The

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 5 loans and advances under the head details of project reflects expenditure incurred on construction and also advances made towards the construction. It may be appreciated that as on 31st Mar.ch, 2007 the aggregate debit was Rs. 16.65 crores as against which aggregate debit as on 31st March, 2008 was Rs. 4.61 lacs. It may be appreciated that the reduction is on account of transfer of cost of the construction to the respective societies on completion of the bunglows and on handing over the possession of the bunglows to the members. It may be appreciated that each and every income derived by our company from the business operations has been correctly considered and there is no income which has not been considered by our company. The excess collection is in fact not in the nature of income but it is a difference between the amounts collected and the amount expended on the project and in fact substantially represents amounts to be expended on construction of the bunglows. It may be appreciated that there may be an instance where the expenditure incurred by our company may be more than the amount collected. Such excess expenditure can never be considered as our expenditure deductible in computation of the total income. Such contingency may not be repetitive -where the scheme is for development and construction and development of apartments. It is submitted that the collection is in nature of liability and therefore the question of any income does not arise. 2.3. It may be appreciated that as on 31st March, 2008 the excess of expenditure towards credit/collection in respect of Kollanade Central Project was Rs. 40.69 Crores. It is submitted that the said project -was constructed and developed by our company. However, unfortunately our company could not realize the targeted collection on account of recessionary trend in commercial premises and therefore Rs. 40.69 Crores have been reflected as excess of expenditure over the collection in respect of Kollanade Project. It may be appreciated that said excess expenditure has been reflected by our company as a capital cost and cannot be considered as the deductible expenditure on computation of the total income. It is respectfully submitted that if the proposition stated by your goodself is accepted that the said proposition will have to be applied for all the projects and all the excess expenditure over the collections will have to be allowed as deduction in computation of the total income. The complete details in respect of all the projects have been placed on your records. It is submitted that Rs. 365000/- under the head booking Kalhar represents miscellaneous booking collected towards commercial project proposed to be developed. However, the collection has been reflected as such as hitherto no construction work has been yet started and if the commercial project is found unviable or even if refund of booking amount is demanded in that event Rs. 365000/- will have to be refunded back by our company. It may therefore, be appreciated that Rs. 365000/- is in nature of liability and can never be considered as our income.”

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 6

this way, he made addition of Rs.10,54,50,250/-. Dissatisfied with this addition, the assessee carried the matter in appeal before the ld.CIT(A). The ld.CIT(A) has deleted this addition by observing as under:

“4.5 It is an undisputed fact that the appellant is a developer and therefore, providing its services to various entities for which development agreements are executed and accordingly development fees is charged. Simply for the reason that the appellant is associated with the projects since beginning or it has overall control over the projects, it cannot be treated as owner of the projects. . 4.6 The appellant in the paper book has provided complete details and break up of Rs.10,54,50,250/- which were filed during assessment proceedings also. It is observed that the major liabilities inter alia are consisting of "Kalhar Bunglow booking amount". The other credit balances are in respect of creditors for expenses, creditors for goods and creditors for labour as on 31st March, 2008. The appellant has provided the statements giving names and complete details of booking amounts, names and complete details of creditors for expenses, names and complete details of creditors for goods, names and complete details for creditors for labour which were also placed on the records of the assessing officer. It is contended that each and every individual credit entry has been accepted by the assessing officer as genuine and duly supported by documentary evidences acceptable in the eyes, of law. It is therefore asserted that since each and every individual entry has been accepted as a genuine liability the balance of Rs.10,54,50,250/-is also a genuine liability on the part of the appellant company. 4.7 It is submitted by the appellant company that on completion of the construction and on allotment of bunglows, the booking amount and the cost of the construction are being transferred to the respective societies. The appellant has provided a statement showing the details of Kalhar Booking as at 31st March, 2007, 31st March, 2008, 31st March, 2009 and 31st March, 2010. It is observed that Kalhar booking amount which was Rs. 21,87,62,854/- as on 31st March, 2007 had stood substantially reduced to 'Rs. 7,30,81,763/- as on 31st March, 2008 and amount also stands reduced thereafter. The reduction in booking amount is attributable to transfer of booking amounts in favour of the societies on allotment of the bungalows. The project cost also stands reduced on transfer . of project cost to the respective societies. The various sundry creditors are reflecting the business liabilities on the part of the appellant company duly supported by documentary evidences viz. invoices, professional bills, debit notes etc. The representative of the appellant company has explained that the appellant is engaged in the business of development and construction and on the basis of the services provided by the appellant debit notes have been raised upon the societies and the" fees received by the appellant company have been credited to the Profit and Loss account and have been considered in computation of the total income. In my opinion having regard to all the facts Rs. 10,54,50,250/- is legally existing liability on the part of the appellant company and therefore it is not in nature of income. Addition of Rs.10,54,50,250/- made by the assessing officer is therefore deleted. This ground of appeal is accordingly disposed off.”

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 7 8. The ld.DR relied upon the orders of the AO, whereas, the ld.counsel for the assessee put reliance upon the order of the ld.CIT(A).

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 8 ld.representatives. In the Asstt.Year 2008-09, WIP of Rs.45,98,27,752/- was noticed by the AO. He estimated 8% profit on such WIP and made addition of Rs.3,67,86,220/-. On similarly analogy, he noticed WIP of Rs.54,36,30,173/- in the Asstt.Year 2009-10 and estimated profit at Rs.4.34 crores. These additions have been deleted by the ld.CIT(A). Similar addition was made in the case of the assessment in the Asstt.Year 1997-98 which was deleted by the ld.CIT(A). Dispute travelled upo the Tribunal vide ITA No.1114/Ahd/2005 and the Tribunal has upheld the deletion. Copy of the Tribunal’s order has been placed on record. 11. On due consideration of all the materials, we are of the view that the assessee was working as a developer. It was not owner of work-in-progress. Moreover, on completion of project, it used to offer receipt received in the shape of development fees and such receipts have been recognized on completion of project. Consistently, this has been shown by the assessee. The AO has made an addition on hypothetical basis by treating the WIP belonged to the assessee. It has been contended before us that the AO has invoked Accounting Standard-7 which otherwise applicable on contractor. The assessee is a developer, and AS-7 is not applicable. After going through the finding of the ld.CIT(A) and relying upon the order of the ITAT in the assessee’s own case for the Asstt.Year 1997-98, we are of the view that 8% profit on alleged WIP cannot be estimated in the case of the assessee. Hence, the ld.CIT(A) has rightly deleted this addition in both the years. No other ground has been agitated by the Revenue in the Asstt.Year 2008-09. Hence, its appeal is rejected.

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 9 13. Brief facts of the case are that in the Asstt.Year 2009-10, the AO has made addition of the above amount on relying upon alternative submissions made in the Asstt.Year 2008-09. The AO has observed that from perusal of ledger account of various parties of Kalhar project for the Asstt.Year 2009-10, it revealed that memorandum of satisfaction was signed by the assessee with these members in the Asstt.Year 2008-09, but it has received payment from certain members in F.Y.2008-09 relevant to the Asstt.Year 2009-10. The AO was of the view that once memorandum of satisfaction was signed between the assessee-company and the ultimate buyers, and thereafter if some amount was received, then it should be the income of the assessee. He took note of details of such sum received by the assessee in the assessment order, and thereafter made addition of Rs.1,97,07,844/-.

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 10 “11. The AO has held that the sum of Rs.1,97,07,844/- which is received from the members after the memorandum of satisfaction was signed with them is the income of the appellant. The AO has relied on the contention of the appellant and held that once all the liabilities cease then the surplus received from booking of the units becomes the income of the appellant. The above contention of the AO is not correct. AM that the appellant has stated in the submission quoted by the AO is that the appellant does not account for the receipts from the unit owners as his income. He rather treats these amounts as liability which is discharged by carrying on the development work and constructing the units. Once the units are complete then the liability of the appellant is discharged the shortage or surplus would belong to the owner of the project. What the appellant is entitled to is the Development fees and the construction fees. This Development fee and construction fees is the only income of the appellant. Whether any surplus arises in the booking and expenses account is not the income or loss of the appellant. Thus the question of taxing the amount received against booking from members would not arise because these amounts cannot be the income of the appellant.

11.1 Further, the contention of the appellant that the customers had requested that the memorandum of satisfaction be signed and that the appellant signed the memorandum of satisfaction only to accommodate such members who had been cooperative and out of business expediency and that the memorandum of satisfaction was signed after receiving post dated cheques from them appears to be logical. It is not understood why any person would pay the appellant anything to the appellant or the owner after the appellant had signed the memorandum of satisfaction saying that all the dues payable had already been paid. The money has come from such persons despite their haying received the memorandum of satisfaction from the appellant discharging them from all liabilities because the appellant had already received post dated cheques from them which the appellant deposited in its bank accounts on the stipulated dates.

11.2 It is also seen that the total payment including the payments received after the signing of memorandum of satisfaction from these persons is the same as shown to be received from these persons in the memorandum of satisfaction. Thus the extra amounts collected after the signing of memorandum of satisfaction from these 19 person actually represents the money received from them at the time of signing the memorandum of satisfaction in the form of post dated cheques.

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 11 11.3 In view of the above, it is clear that the amount of Rs.1,97,07,844/- was part of the total consideration to be received from these persons against units allotted to them. The total consideration received from these persons is exactly the same as was to be received from them. Thus the contention of the AO that this constitutes income of the appellant is not correct. In fact, the amounts have the same character as money received from other person to whom units are allotted and with whom no memorandum of satisfaction has been signed as yet. These amounts also constitute liability of the appellant towards the owner of the project to whom the entire receipts of units sold have to be transferred. As already discussed the income of the appellant is only development fees and construction fees. In view of the above the addition made by the AO is not justified.”

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 12 The assessee has filed copy of the accounts demonstrating how the amounts received were appropriated towards construction or land cost. Surplus if any would be given to the society. Its right is confined to the development fees only. Therefore, no alternative addition could be made. The ld.CIT(A) has rightly deleted the addition.

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Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 14 narration recorded by him in his diary. The AO failed to note that the assessee is not vendor. It was only a developer. He drew our attention towards copy of the sale deed available on page no.29 to 48 of the paper book. Thus, if any cash payment was being made, then that is to be assessed in the hands of the vendor and not the assessee. The ld.DR, on the other hand, submitted that Shri Dalwadi has alleged payment to the assessee, and the assessee is the real owner of the plot in dispute, therefore, it has rightly been assessed in the hands of the assessee.

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 15 AND WHEREAS the Vendor No.3, as recommended by the Developer, and transaction finalized by Developer and Purchaser, have agreed to execute necessary Conveyance for the said Plot in favour of the Purchaser, being thee presents. Though, the said Plot No.151 and undivided share in land of internal roads and common open lands belongs to the Vendor No.3, and sale consideration also will be received by Vendor No.3, to pass legal, proper and perfect title to the Purchaser, the Vendors have agreed to execute the Conveyance jointly.

NOW THIS INDENTURE WITNESSETH THAT IN CONSIDERATION of the premises and IN FURTHER CONSIDERATION of the sum of Rs.10,32,000/- (Rupees Ten Lac Thirty Two Thousand Only) said by the Purchaser to the Vendor No.3, being the full consideration or sale price for the said Plot (payment and receipt whereof the Vendor No.3 doth/do and each of them doth hereby admit and ….”

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 16 According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.”

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 17 2008-09 and 2009-10, wherein we have held that projects were not owned by the assessee. They did not belong to the assessee. It was entitled for development fees which will accrue to it on completion of project. On the basis of WIP done by the assessee, its income cannot be estimated. Therefore, relying upon our finding in the Asstt.Year 2008-09 (supra), we allow this fold of grievance of the assessee and delete the addition made in all three years.

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 18 32. First issue agitated by the Revenue is that the ld.CIT(A) has erred in deleting the addition of Rs.6,02,89,356/- which was added by the AO by estimating the profit at 8% of WIP. There is no disparity of facts. We have already considered this issue in the Asstt.Year 2008-09 and 2009-10. We have observed that the assessee is not owner of the project. Therefore, respectfully following our order in those years (supra) we do not find any merit in this ground of appeal. It is rejected.

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 19 average value towards administrative expenditure under Rule 8D. The ld.CIT(A) has not given any justification for deleting this amount. The AO has reproduced submissions made by the assessee, wherein it has submitted that interest expenditure was not incurred by the company for the purpose of deriving exempt income, but it has not given any explanation qua expenditure attributable towards administrative purpose. Considering the above aspects, we allow this ground of appeal partly and confirm addition of Rs.1,36,936/- out of Rs.2,93,430/- made by the AO. This ground of Revenue is partly allowed.

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 20

the AO has made the above addition on account of cessation of liability or non-genuineness of the liability available in the accounts. The assessee has demonstrated that on account of regrouping and re-classification in the accounts, such a figure has been worked out which has been reconciled. The details submitted by the assessee before the ld.CIT(A) in this connection reads as under: “19. During the course of appellate proceedings, the appellant has furnished the details of regrouping / reclassification made in respect of balance-sheet of A.Ys.2002-03 and 2003-04. The appellant has furnished the following reconciliation. BALANCE SHEET AS ON 31.03.2002

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 21 (C) 67,01,609 + (0) 1,58,76,642 + (E) 57,18,483 = Total CR 2,82,96,734 REGROUPING Current Assets etc. as on 31.03.2002 as per balance sheet (31.03.2002) DR 4,38,88,863 Current Assets as on 31.03.2002 as per balance sheet (31.03.2003) DR 2,95,50,871 Reduction in DR on account of regrouping 1,43,37,992 Contributions for Karma etc. reflected in schedule A as on 31.03.2002 In balance sheet as on 31.03.2003 on account of regrouping CR1,09,24,084 Contributions for-Karma etc. reflected in schedule A as on 31.03.2002 -Nil Increase in credit balance on account of regrouping CR 1,09,24,084 Contributions for Kalhar etc. reflected in schedule A as on31.03.2002 In balance sheet as on 31.03.2003 on account of regrouping CR 30,34,658 Contributions for Kalhar etc. reflected in schedule a as on 31.03.2002 Nil Increase in credit balance on account of regrouping CR 30,34,658 Break up of Regrouping (DR) 1,43,37,992 + 1,09,24,084 + 30,34,658 = 2,82,96,734

“20. I have considered the remand report of the Assessing Officer as well as appellant's further submission dated 15.03.2010, reproduced above. As the regrouping/reclassification of the balance-sheet figures has been carried out by the appellant company, therefore, onus to explain the same with plausible reasons lies with the-appellant. However, to my mind, the Assessing Officer in the remand report, reproduced above, has failed to carry out the relevant verifications as per directions issued vide this office letter dated 08.01.2010 (reproduced above), wherein, Assessing Officer was required to verify the assessee's contention that no liability has been reduced or increased in both the balance-sheets and it was because of the regrouping / reclassification, there appears to difference of Rs.2,82,96,734/- in two balance-sheets. In view of the above, the Assessing Officer is directed that while giving effect to this appellate order, reverify as to whether the appellant has merely carried out regrouping / reclassification of certain liabilities and whether such an exercise has given rise to any income due to cessation of any liabilities.

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 22 The Assessing Officer is directed to make addition only if any cessation of the liabilities has taken place. The Assessing Officer is further directed to pass the speaking order on this point.”

: ORDER GIVING EFFECT TO THE ORDER OF THE CIT(A)s ORDER : In view of the Ld.CIT(A)-I, Ahmedabad's order No.CIT(A)-I/CC- l(l)/256/2008-09 dtd.23/3/2010, the total income of the assessee company is computed as under:

Total income as per order u/s.153A(l)(b) rws 143(3) of the I.T. Act dtd.31/12/2008 Rs.3,48,06,040/-

Less: Addition deleted by the Ld.CIT(A) (1) Business income Rs. 404140/- (2) Unexplained cash credit Rs. 225000/- (3) Unexplained liability Rs.5817422/- Rs. 64,46,562/-

Revised total income Rs.2,83,59,478/- i.e. Rs.2,83,59,480/-

In respect of addition of Rs.2,82,96,734/- made on account of unexplained cash credits, the Ld.CIT(A) has directed the A.O. to verify whether the appellant has merely carried out regrouping/reclassification of certain liabilities and whether such an excise has given rise to any income due to cessation of any liabilities. In this circumstances, the assessee was requested vide letter dtd.18/5/2010 to discharge its onus with supporting evidence as per the direction of Ld.CIT(A). The date of hearing was fixed on 8/6/2010. On the said date, the assessee failed to comply. Hence, on the basis of material available on records, it is held that the assessee is not eligible for any relief on this issue.

Issue demand notice and challan. Recalculated tax and interest, if applicable. Sd/- (Abhishek Kumar) Asstt. Commissioner of Income-tax Central Circle-1 (1), Ahmedabad Date: 13/07/2010

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 23 42. Dissatisfied with this, the assessee came in appeal and filed detailed submissions. The ld.CIT(A) has noticed these submissions, and thereafter deleted the addition. Relevant finding of the ld.CIT(A) is worth to note, which reads as under: “6.3 The appellant company in the paper book has provided inter alia photocopies of the balance sheet as at 31st March, 2002/1st April, 2002 and the balance sheet as on 31st March, 2003 wherein on account of regrouping unsecured loans have been reflected at Rs. 1,99,65,030/-. and Rs.1,32,63,421/-. The appellant company has also provided photocopies of audited balance sheets wherein current liabilities have been reflected at Rs. 2,24,53,679/- and Rs.14,81,72,926/- which has also reflected current assets at Rs. 4,38,88,863/- and Rs. 2,95,50,871/-. The company has also placed on records a statement showing . complete details, and break up of current liabilities and provisions and also current assets, loans and advances for both the years. The company has also placed on records a statement showing complete break up in respect of addition of Rs. 2,82,96,734/- and its .detailed reconciliation. On careful consideration of all the accounting documents it is observed that the various accounts have been regrouped and reclassified on account of which there is a matching reduction in the account of the assets and also in the account of the liabilities. It is observed due to regrouping the aggregate balance of assets and aggregate balances of liabilities have been reduced. Each and every reduction under liability is matched with the reduction in the assets merely on account of regrouping and therefore the question of any benefit does not arise.

6.4 The appellant has also provided closing balance in respect of each and every party, as on 31st March, "2002/1st April, 2002 and" 31st March, 2003. and it is noticed-that the closing balances have been carried forward on 1sl April, 2002 without any change in figures. The company on reconsideration of the relevant facts merely regrouped and reclassified the accounts. Amounts collected by way of booking from members were reflected as unsecured loans as on 31st March, 2002 were regrouped and reclassified as contribution from members as on 1st April, 2002 and was shown under the head project cost. On account of this exercise of regrouping there was reduction in aggregate of unsecured loans on liability side and reduction in project cost on asset aside. It is also observed that certain accounts reflected as unsecured loans which in fact represented creditors for expenses were regrouped as sundry creditors from the unsecured loans and thereby reducing

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 24 balance of unsecured loans and increasing balance in group of sundry creditors. This exercise of regrouping and reclassification stands proved and established on examination of exhaustive details and accounting records. It is observed that accounts in respect of certain parties namely Asim Studio, Manubhai Patel, Rajnibhai Popatlal which were reflected as unsecured loans as on 31st March, 2002 have been reclassified as sundry creditors and/or contribution from members on the correct analysis of facts. The aggregate collection of Rs. 33,53,41,540/- from various schemes which was reflected as liability/unsecured loans independently in the balance sheet has been transferred to booking account from .members and accordingly reflected in the head cost of the project. The appellant has placed on the records name of each and every creditor, amount of each and every creditor as on 31st March, 2002/1st April, 2002, 31st March, 2003 details of regrouping and reclassification on basis of which it becomes evident that there is no reduction in liability nor there was any cessation of liability. On account of regrouping of balances from unsecured-loans to booking amounts the question of generation of any income and addition thereof does not arise. Contentions raised by the appellant are duly, supported by exhaustive accounting details. The breakup of each and every closing balance,- complete details of regrouping etc. have been filed. Admittedly neither there is any income nor any benefit nor any cessation of liability and under the circumstances addition to Rs.2,82,96,734/- is deleted. This ground of appeal is accordingly allowed.”

Navratna Organizers & Developers P.Ltd. Vs. ACIT (Nine Appeals) 25 details were already submitted to the AO during the appellate hearing also, when remand report was called for. The difficulty is that the AO does not want to apply his mind and does not want to carry out the exercise directed by the higher authority. He on lame excuse of assessee failing to give supporting evidence again made addition. The ld.CIT(A) again verified it and deleted. Before us, nothing has been produced by the AO as to how reconciliation, regrouping and reclassification of the liabilities in the accounts are wrong. No report from the AO has been called for by the CIT(Admn.) who authorizes for filing of appeal. Even before us, the ld.DR unable to demonstrate how the liability has ceased and this addition deserves to be made. Taking into consideration the details submitted by the assessee, discussion made by the ld.CIT(A) in the quantum order i.e. dated 23.3.2010 and re-appreciated again by the ld.CIT(A) in the impugned order, we do not find any merit in this appeal. It is dismissed.

Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER

Ahmedabad; Dated 23/01/2019