DCIT, CIRCLE-5(1), BHUBANESWAR vs. M/S. SRI JAGANNATH PROPERTIES & DEVELOPERS, BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No. 283/CTK/2017 Assessment Year : 2013-2014

DCIT, Circle -5(1), Vs. M/s. Sri Jagannath Bhubaneswar. Properties & Developers, Plot No. N-1, A-66, IRC Village, Nayapali, Bhubaneswar. PAN/GIR No.ABQFS 9305 R (Appellant) .. ( Respondent)

C.O. No.05/CTK/2018 (arising out of ITA No.283/CTK/2017) Assessment Year: 2013-14.

M/s. Sri Jagannath Vs. DCIT, Circle -5(1), Properties & Developers, Bhubaneswar. Plot No. N-1, A-66, IRC Village, NayapaLi, Bhubaneswar PAN/GIR No.ABQFS 9305 R (Appellant) .. ( Respondent)

Assessee by : Shri K.C.Jena, AR Revenue by : Shri A.K. Mohapatra, CIT DR

Date of Hearing : 28/08/ 2018 Date of Pronouncement : 31/08/ 2018

O R D E R Per N.S.Saini, AM This is an appeal filed by the revenue against the order of

the CIT(A)-1, Bhubaneswar dated 31.3.2017 for the assessment

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year 2013-14. The assessee has also filed cross objection to

support the decision of the CIT(A).

“ On the facts and in the circumstances of the case, the CIT(A) is not justified in law as well as on facts in deleting the addition of Rs.9,00,00,000/- made by the AO on account of underreporting of income from business, when the assessee did not follow the percentage completion method while following mercantile system of accounting.” 3. The brief facts of the case are that the Assessing Officer

observed that the assessee had been following a peculiar

completed project method to recognize income from construction

projects. As per the method followed by the assessee every flat is

considered as a project since completion time of each flat is

different, and as soon as a flat is sold or if there is sizeable

completion of the flat, the income is taken into consideration.

Before the Assessing Officer, the assessee explained that it follows

PCM with certain degree of completion. The Assessing Officer was

of the view that as per income computation and disclosure

standards (ICDS)-III, the assessee was bound to follow PCM

strictly. The Assessing Officer in this regard rejected the

contention of the assessee that ICDS-III could not be applied to

assessment year 2013-14 since the same was applicable only

from assessment year 2016-17. The Assessing Officer referred to

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the guidance note on accounting for real estate transaction

(revised 2012 issued by ICIA) laying down that PCM is mandatory

under certain conditions and thereafter proceeded to calculate the

receipts which the assessee should have shown applying PCM.

Thus, he arrived at the figure of Rs.16,87,48,276/- being receipts

which the assessee should have taken into consideration for

calculation of profit. Since the assessee had disclosed receipts of

Rs.7,03,53,078/-, he took the balance revenue for determination

of profit as Rs.9,83,95,198/-. From this gross revenue, he allowed

deduction on estimate to the extent of Rs.83,95,198/- towards

administrative, financial and other overhead expenses and

determined the profit to be taxed at Rs.9 crores and added the

same to the total income of the assessee. The details of

computation of income under percentage completion method is as

under:

@ Total cost of the project Rs.22,98,45308/- # Expected sales receipts-for the projects. Rs.27,21,74,638/- % Total cost incurred - till 31.03.2013 Rs. 14,32,75,344/- (which is 62% of the total cost of the project) 62% of Rs.27,21,74,638 is Rs.16,87,48,276/-

Till date the assessee declared Rs. 7,03,53,078/-"

under:

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“ 2.1 Learned Assessing Officer (in short 'A.O') has adopted Percentage Completion Method although it is not mandatory for A. Y 2013-14. Further, it is apparent that learned A.O has referred to Companies Act at many places in page No. 3 of the order where as the assessee is a partnership firm and those narrations do not apply to it. In the language of learned A.O, Percentage Completion Method for such business activities engaged into by the assessee for determination of income for the purpose of income tax has been made mandatory in the Income Tax Act, 1961 vide sub-clause (2) of section 145 w.e.f 01.04.2015 through Income Computation and Discloser Standards -III (ICDS-III) .Thereafter he has tried to justify application of Percentage Completion Method (in short 'PCM') to companies even before 01.04.2015. It is still not clear why learned A.O has used irrelevant and inapplicable facts to this partnership firm. So, his justification for application of PCM is strongly erratic, baseless and liable to be rejected.

2.2 In term of clause (b) [out of Events (a) to (d) of Guidance Note an Accounting for Real Estate transactions (Revised 2012) issued by the ICAI as quoted by ld. A.O % CM can be applied when the stage of completion of the project reaches a reasonable level of development. A reasonable level of development is not achieved if the expenditure incurred on construction and development cost is less than 25% of the construction cost. In this case except in three projects (as narrated below) out of seventeen running projects construction cost is less than 25%of the project cost. Secondly in every year there is some sale which has been taken to income. Under PCM, the income of a project is distributed over the tenure of the project. In this case revenue is recognized even when a project is partly completed (which has been accepted by learned A.O), as a result learned A.O contradicts himself by launching his view that full income is recognized after the entire project is completed leading to application of PCM. This view of the appellant is amply clear as turnover from some of the running projects have been taken to income in respective years.

In PCM a project is likely to be completed in more than one year time and revenue recognition flows at the end of the project. There is a marked departure in this case. Revenue is recognized in every year as sale deed is executed although the project may run for 4 years. When the revenue as such is recognized every year what is the need to recognize revenue on the basis of cost incurred and element of profit attached to it. The purpose of embarking PCM, in this case becomes redundant.

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2.3. Ld A.O has taken cost of the project as Rs.22,98,45,308/-, total cost incurred as Rs.14,32,75,344/- which are erroneous and not in tune with the records and statements submitted. Further, the revenue of Rs 7,03,53,078/-till date is wrong as the gross receipt for F.Y 2011-12 is Rs.2,83,65,384/-and For F.Y 2012-13 is Rs.7,03,53,078/-, F.Y 2010-11 is Rs.2,47,76,200/-giving cumulative figure of Rs.12,34,94,662/- from the running projects Hence, all the figures taken to calculate income under PCM are blatantly wrong and baseless.' Ld A.O has taken all projects in one basket. Further each project is to be considered separately to know the amount spent, project cost, income under PCM. The margin of 18% taken, the basis of finding out margin, the figure taken on sales, cost, closing WIP are simply absurd, baseless and on estimated basis. Further, neither any adverse remark on books of accounts have been given nor books of accounts have been rejected. Hence, addition of Rs.9,00,00,000/- has no basis and on estimated basis, hence liable for deletion. Further as narrated in Para 2.5 adoption of PCM is not mandatory.

2.4 Out of closing WIP of Rs.2,73,68,844/- Rs.2,40,98,078/- belongs to 14 projects which have incurred marginal expenditure and even less than 25% of the projected cost of the concerned project So, REM are not applicable to these projects. Out of rest amount of Rs.32,70,766/- in three projects, it can be noticed from the WIP-sheet already submitted, some flats are pending to be completed. If at all PCM is applied your esteemed authority can take the figure of Rs.32,70,766/- for three projects namely Jagannath Estate, Jagannath Prava, Jagannath Park Enclave as cost incurred for PCM method. Element of estimated profit on these projects are approximately Rs.6,16,257/- (i.e. Rs.1,84,650+Rs.3,07,047+Rs.1,24,560),

Further, total cost of each project is irrelevant for PCM as in some cases revenue have already been recognized. These three projects have recognized revenue this year and earlier years substantially. They are at flag-end of their completion. So, income under PCM has not been taken on these projects too. PCM should not be applied because of risk of incurring loss in remaining flats as substantial revenue has been considered. If profit under PCM is taken and there is loss next/last year which is more than the profit under PCM the then loss cannot be adjusted as it is assumptive method. Also guidance note of ICAI entails that probable loss under PCM is to be written off first.

2.5 It is pertinent to mention that the assessee followed the method of evaluation of work in progress and income recognition consistently over the past so many years. It is settled position of law that if method oi of work in progress and income recognition

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are consistently followed it is not desirable to shake the figures. Further, over the years income is being, by the assessee till the last product is sold, thereby there is no revenue to the department if entire project period is taken as a whole.

According to the Accounting Standard 7, two methods of accounting contracts commonly followed by the contractors are the "percentage completion method" and the "completed contract method". The cc incurred on year to year basis are taken into consideration for determine the profit of the contract as a whole on year to year basis or at the end the project depending upon the method of contract accounting followed b; the assessee. The difference between the project completion and percentage of completion methods is that where as in the latter case the revenue is recognised on annual basis as the contract activity progresses based on the completion reached, subject to determination of the ultimate profit or loss from the project on its completion, in the former case, no revenue is recognized till the project is fully or substantially completed. Thus it is evident that under both the above referred methods, the costs incurred in the project, are accumulated on year to year basis till the project is finally completed. In other words the costs incurred in the first year are carried forward to as work-in-progress in the second year. The following judicial pronouncements bat for the assessee in implementing project completion methods and consistently following it.

The assessee, in the business of real estate development had been following the project completion method of accounting for many years and the same had been accepted by the Department. The method is also recognized by the guidelines issued- by the Institute of Chartered Accountants of India. For this year, it was rejected but the assessee succeeded in the first appeal. The Tribunal decided in Hill View Infrastructure P. Ltd. v. Deputy CIT [2014] 34h ITR (Trib) 128 (Chandigarh) that the assessee's system of accounting did not distort the income over the years so that there was no justification for rejecting the same following the decisions.in CIT v. Bilahari Investment P. Ltd. [2008] 299 ITR 1(SC) and CIT v. Manish Build Well P. Ltd. [2011] 245 CTR (Delhi) 397.

For the assessment year 2009-10, the assessee in its reply to the query raised by the Assessing Officer inter alia, claimed that it had been consistently following the method of booking of revenue on the completion of the flat when full payment had been made to it by the person concerned and possession was delivered to him. Though the Assessing Officer rejected the plea of the assessee,

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the Commissioner (Appeals) accepted it. This was confirmed by the Tribunal. On appeals:

Held, dismissing the appeals, that the assessee had been consistently following one of the recognized methods of accountancy, i.e. the project completion method, for computation of its income. In the absence of any prohibition or restriction under the Act for doing so, it could not be held that the approach of the Commissioner (Appeals) and the tribunal was erroneous or illegal in any manner so as to call for interference by this court. No substantial question of law rose. Commissioner of Income-Tax v. Principal Officer, Hill view Infrastructure (P.) Ltd.[2016] 384 ITR 451 (P&H).

Keeping the above explanations in view it is not a rational and lawful approach to apply PCM in this year as income is shown in every year out of the running projects and the project completion method has been applied consistently following over earlier years. Further there is no loss of revenue to the department if full project period is taken as a whole. So, there is no justification of addition of income in adoption of PCM. The figure of Rs.9 crores is neither correct on facts nor sustainable at all in law.”

sustained the disallowance of Rs.6,16,258/- and deleted the

balance addition of Rs.8,93,83,742/- by observing as under:

“ I have considered the matter in detail. It is quite clear that the AO's calculation of the profit following PCM is not based on correct figures. It appears that the AO has not properly understood the actual facts and figures. The AO has wrongly taken a sum of Rs.5,83,68,452/- as construction expenses which is in fact represents development expenses relating to sale of land. The AO has also not taken into consideration the individual construction projects while applying PCM. Even as per the guidance note of the ICIA, PCM cannot be applied to a project unless it reaches a reasonable level of development and a reasonable level of development is not achieved unless the expenditure incurred on construction and development is at least 25% of the total estimated construction cost. The AO has ignored all these postulates and applied PCM to all the projects taken together. It is seen from the details that out of 17 ongoing projects only 3 projects are eligible to be taken into consideration for determination of profit on PCM since the expenditure on those projects has been more than 25% of the estimated cost of

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construction. The details are annexed to this order as annexure-1. Applying PCM, the profit to be taken into account for purpose of taxation from these 3 projects comes to Rs.6,16,258/-. Hence, if PCM is applied, the addition to be correctly made is Rs.6,16,258/- as calculated in Annexure-1 as against Rs.9,00,00,000/- estimated by the AO based on wrong figures and wrong assumptions.

4.2.1 The assessee has objected to the application of PCM on the ground that ICSDS-III is not applicable for the AY 2013-14 under appeal. ICDS-III may not be applicable for the AY 2013-14, but the guidance note of ICAI makes PCM the most appropriate method for determining income on construction projects. ' Moreover, the method followed by the assessee is a peculiar method which is neither completed project method nor PCM. I also find that for the immediately preceding AY 2012-13, the AO has applied PCM and made an addition of Rs.3,81,110/- on account of extra profits. The assessee has apparently accepted this addition which, is evident from the fact that no appeal against the assessment order for the AY 2012-13 has been filed before the CIT(A).”

Officer whereas ld A.R. of the assessee supported the order of the

CIT(A).

lower authorities and materials available on record. Before us, ld

D.R. could not point out any specific error in the order of the

CIT(A). Ld D.R. could not controvert the findings of the CIT(A)

that according to guidance note of accounting for real estate

transactions (Revised 2012) issued by the ICAI, percentage

completion method can be applied when the stage of completion

of the project reaches a reasonable level of development. A

reasonable level of development is not achieved if the expenditure

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incurred on construction and development cost is less than 25%

of the construction cost. In the instant case, except in three

project out of seventeen running projects, construction cost is less

than 25%of the project cost. Out of the closing work in progress

of Rs. 2,73,68,844/-, Rs.2,40,98,078/- belongs to 14 projects

which have incurred marginal expenditure and even less than

25% of the projected cost of the concerned project. So,

percentage completion method are not applicable to these

projects. Out of rest amount of Rs.32,70,766/- in three projects, it

is noticed from the WIP-sheet already submitted, some flats are

pending to be completed. If at all percentage completion method

is applied on Rs.32,70,766/- for three projects, namely, Jagannath

Estate, Jagannath Prava and Jagannath Park Enclave, element of

estimated profit in the project works out to Rs.6,16,257/-. We

find that the CIT(A) after considering the entire facts of the case,

has allowed relief of Rs.8,93,83,742/- and sustained the

disallowance of Rs.6,16,258/-. Therefore, we find no infirmity in

the order of the CIT(A), which is hereby confirmed and ground of

appeal of the revenue is dismissed.

“On the facts and in the circumstances of the case, the CIT(A) is not justified in law as well as on facts in deleting the addition of Rs.5,43,99,650/- made by the AO on account

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of suppression of sale receipts on sale of land/plot, when the assessed has booked loss on it.”

adopting cover up tactics suppresses the income from sale of land

by booking losses. He observed that it is a well-known fact that in

land transactions, there cannot be any loss, particularly in the

case of land business/trading. From the profit and loss account

for the year ended on 31.3.2013, the Assessing officer noted as

Opening stock of land : Rs.20,99,81,069 Purchase of land Development Expenses Rs. 4,82,41,928 Development expenses : Rs. 5,83.68,452 Total: Rs.31,65,91,449

Less: Closing Stock of land : Rs.15,82,06,068 Cost of land sold Rs.15,82,06,068

Total sale receipts including- construction (development) expenses. : Rs. 11,66.56,562 Loss (-) Rs: 4,17,28,819

From the above, the Assessing Officer inferred that the assessee

has actually booked a loss of Rs.4,17,28,819 from the sale of

land/plots which is 26.35% of cost of land. He observed that it is

unthinkable that any prudent businessman would sale the land

more 25% below the cost price. For argument sake I state that, it

would have made sense that these pieces of land were sold at cost

price. Therefore, the Assessing Officer rejected the computation

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of the assessee and determined the profit margin @ 8% of

Rs.15,83,85,385/- being the cost of land sold, which works out to

Rs.1,26,70,831/- and after disallowing the loss claimed by the

assessee at Rs.4,17,28,819/- added the amount of

Rs.5,43,99,650/- to the income of the assessee.

under:

“ In respect of addition on plot the appellant desires to place below the recasted cost of sale without altering the figures of Id A.O. but only removing development expenses. Particulars Figures as per assessee Figures as per Id A.O. Opening stock of land 20,99,81,069 20,99,81,069 Purchase of land 4,82,41,928 4,82,41,928 Development expenses 5,83,68,452 Nil (as already taken as cost of flats but not of plots) TOTAL 31,65,91,449 25,82,22,997 Less:- Closing stock of land 15,82,06,068 15,82,06,068 Cost of land sold 15,83,85,381 10,00,16,929 Total Sales 11,66,56,562 10,62,94,059 Porift/f(Loss) (4,17,28,819) 62,77,130

Rs.5,83,68,452/- is the construction cost incurred during F.Y 2012-13 and has been correctly taken to WlP-sheet(enclosed). So this sum is related to construction of apartment/flats, but not plots. As found from profit & loss accounts figures of plots & flats have been shown separately. Ld A.O has wrongly included it in cost of plots. The appellant has removed it from plotting scheme in the above table as it is already included in apartment scheme. These figures of the assessee have been derived from the books of account, WJP statement and other documents submitted before ld-A.0 by the assessee. Prima facie, it is noticed that there is substantial profit on sale of plots. So, the addition of Rs.5,43,99,650/- is not justified.

Most respectfully it is submitted that even if 8% profit is taken (as considered by Id A .O) profit would have been Rs.85,03,524/- whereas in the profit and loss a/c it is Rs.62,77,130/-So, if A.O's version is accepted the addition would have been Rs.22,26,394/- instead of

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Rs.5,43,99,650/-.These are based on the concepts and figures accepted by Id A.O but placed at correct positions by the assessee.

In this case profit has been shown by the assessee in sale of plot. There is neither any mistake in books of accounts nor any figure of profit and loss account reported by your esteemed authority. There is no rejection of books of accounts by Id A.O, Under the circumstances there can not be estimation of profit even if loss would have been incurred. For argument sake it can be noted that loss incurred in any organization does not automatically lead to rejection of result and estimation of profit. So, deservingly on sale of plot there is no justification, prima facie for addition to income. Law does not permit estimation of profit by whims and caprices. In this case Id A.O has rejected the computation of income for plot but has not rejected books of accounts. Without rejection of books of accounts (which are primary records) computation of income cannot be rejected. Without rejecting books of accounts no estimation to income is accepted as per settled position of law. The following judicial rulings endorse this view.

Held, allowing the appeal (i) that there is no provision under the Act where by income of an assessee can be estimated in disregarded of the books of account produced before the department, which books are not rejected under section 145. If the department chooses not to go by the books of account produced, it is a must for the AO to reject them on the basis of a reasoned order pointing out the specific defects therein. This had not been done. The books of account produced could not be disregarded merely on the specious observation that they wee not reliable having been prepared after detection. Amarjit Singh v ITO (2016) 48 itr (Trib) 622 (Amritsar)

3.3. As per section 145(3) of the Act where the Assessing Officer is not satisfied about the correctness or completeness of the account of the assessee, or where the method of accounting provided in sub-section (1) of section 145 of the Act or accounting standard as notified in sub-section (2) of section 145 of the Act have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner as provided in section 144 of the Act. Thus, according to the statutory provisions of section 145(3), the Assessing Officer has to record his dissatisfaction about the correctness and completeness of the accounts of the assessee before rejecting books of account.

In this case Id A.O has rejected the computation of the assessee. Even if he could have resorted to rejection of books of accounts his grounds like incurrence of loss is not sustainable on facts as there is no loss. Further in this case there is profit of Rs.62,77,130/-. With his result and the settled position of law that low profit cannot be a reason for rejection of books of accounts and book result. So discarding the book result in this case is against settled position of law Some of the case laws are cited below.

That the Department failed to point out the defects in the accounts of the Mumbai office. Rejection of the accounts of the Mumbai office without any defects having been pointed out therein was wrong. Therefore, the Commissioner (Appeals) had rightly accepted the audited accounts in respect of the Mumbai head office of the assessee. Deputy Commissioner of Income-Tax v. Telsa Technologies and Oxidation P. Ltd. [2014] 34 ITR (Trib) 452 (Mumbai).

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During the assessment proceeding for the assessment year 2005-06, it was noticed by the Assessing Officer that the gross profit rate of the assessee had reduced from 18.52 per cent, in the preceding year to 15.71 per cent, in the year in question. On being asked, the assessee explained that there was an increase in the prices of steel round bar during the year which led to the decline in the gross profit rate. Rejecting the books of account, the Assessing Officer adopted the gross profit rate of the preceding year at 18.52 per cent, which resulted in a gross profit addition of Rs. 1.19 crore. On appeal by the assessee, the Commissioner (Appeals) deleted the addition holding that the Assessing Officer had assigned no reason for rejecting the books of account. The Assessing Officer had not controverted the quantity or value of the closing and opening inventory, The books of account were properly maintained by the assessee.. It had .maintained all the stock registers required for the purposes of the payment of excise duty. The Tribunal upheld the finding.

Held, dismissing the appeal, that the view adopted the Tribunal was based on appreciation of the material on record. Hence the Tribunal was justified in law in (a) upholding the deleting of the addition on account of lower gross profit. Principal Commissioner of Income tax vs Talbros Engineering Ltd. [2016] 386 ITR 154 (P&H).

The books of accounts were duly audited and no defects had been pointed out regarding the sales,, purchase or profit. The purported defects were confined tp cash book which had, no nexus with the trading results. Instances of irregularities in cash payment could not warrant ipso facto rejecting of books of accounts. At best disallowance could, have been made under section 40A(3) of the Act Hence, the books of accounts were incorrectly rejected as it was not a, case where it could be held that the books of accounts was incorrect or incomplete or correct profits could not be deduced - Samwon Precision Mould Mgf (India)P.ltd v .Income Tax Officer [2016] 48 ITR (Trib)630(Delhi).

In so far as the estimation of gross profit made by the Assessing Officer modified by the CIT(Appeals), tribunal has rightly held that when the books of accounts of the assessee had not been rejected and assessment having not been framed under section 144 of Income Tax Act the said authorities were in error in resorting to an estimation of income and such exercise undertaken by them v/as not sustainable. Section 145(3) of the Act lays down that the Assessing Officer can proceed to make assessment to the best of his judgment under section 144 of the Act only in the event of not being satisfied with the correctness of the accounts produced by the assessee. In the instant case the Assessing Officer has not rejected the books of accounts of the assessee. To put it differently the Assessing Officer has not made out a case that conditions laid down in Section 145(3) of the Act are satisfied for rejection of the books of accounts. Thus, when the books of accounts are maintained by the assessee in accordance with the system of accounting, in the regular course of his business, same would form the basis for computation of income. In the instant case it is noticed that neither the Assessing Officer nor CIT(Appeals) have rejected the books of accounts maintained by the assessee in the course of the business. As such tribunal has rightly rejected or set aside the partial addition made by Assessing Officer for arriving at gross profit and sustained by the CIT(Appeals) and rightly held that entire addition made by the Assessing Officer was liable to be deleted. The said finding is based on sound appreciation of facts and it does not give rise for framing substantial question of law.- CIT v ANIL KUMAR AND CO. 386 ITR (2016)702(KARN)

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Held, that for the assessment year 2006-07, the Tribunal confirmed the decision of the Commissioner (Appeals) and deleted the addition on the ground that the Assessing Officer erred in concluding that there was a difference between the sales and quantitative details of the assessee. The Assessing Officer rejected the books merely on the basis of surmises. The factors pointed out by the assessee for not being able to make sales was not refuted. No discrepancy was pointed out in the books of account of the assessee concerning the expenditure incurred and claimed by the assessee. Nothing was brought to establish that the assessee was charging_ a sale price higher than that noted in the books of account. Since the facts were identical to the facts for the assessment year 2006-07, the addition made on the ground of rejection of books of account was to be deleted. - Yamaha Motor India P.ltd v Assistant commissioner of Income Tax. [2015J37 ITR (Trib) 208 Delhi)." 11. After considering the submissions of the assessee, the

CIT(A) deleted the addition of Rs.5,43,99,650/- observing as

under:

“ I have considered the matter with reference to the facts on record. The contention of the assessee that the AO has not understood the facts and figures correctly is correct. The whole confusion has arisen because the AO presumed that the development expenses of Rs.5,83,68,452/- related to land development though the expenses actually related to construction projects. It is also clear that the total sales of plot taken at Rs.11,66,56,562/- by the AO is not correct since the assessee had receipts from construction contract works of Rs.1,03,62,503/- which the AO wrongly included in the receipts from land sale. This is evident from the table at para 3.1 of assessee's written submission reproduced above. The assessee has, in fact disclosed profit of Rs.62,77,130/- from land sale which the AO has calculated at a loss of Rs.4,17,28,819/- by adopting wrong figures. The profit disclosed by the assessee on land sales comes to around 5.91% which appears to be reasonable". "Moreover, the only reason given by the AO in the assessment order to reject the book result in respect of land sales is disclosure of loss from such transactions. Now since the assessee has not disclosed any loss from land sales, the very rea- given by the AO to reject the book result does not exist. Hence, the profit disclosed by the assessee has to be accepted. In view the above discussion, the addition of Rs.5,43,99,650/- made by the AO is deleted.”

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Officer whereas ld A.R. of the assessee supported the order of the

CIT(A).

lower authorities and materials available on record. Before us, ld

D.R. could not point out any specific error in the order of the

CIT(A). Ld D.R. could not bring any material on record to

controvert the findings of the CIT(A) that the Assessing Officer

presumed that the development expenses of Rs.5,83,68,452/-

related to land development though the expenses actually related

to construction projects. Further, the total sales of plot taken at

Rs.11,66,56,562/- by the Assessing Officer was not correct since

the assessee had receipts from construction contract works of

Rs.1,03,62,503/-which the Assessing Officer wrongly included in

the receipts from land sale and that the assessee has in fact

disclosed profit of Rs.62,77,130/- from land sale which the

Assessing Officer has calculated at a loss of Rs.4,17,28,819/- by

adopting wrong figures. The profit disclosed by the assessee on

land sales comes to around 5.91% which appears to be

reasonable. Further, the only reason given by the Assessing

Officer in the assessment order to reject book results in respect of

land sales was disclosure of loss from such transaction. Since the

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assessee has not disclosed any loss from land sale, the very

reason given by the Assessing Officer to reject the book results

does not exist. Hence, the profit disclosed by the assessee has to

be accepted. We find that the CIT(A) after considering the entire

facts of the case, has deleted the addition of Rs.5,43,99,650/-.

Therefore, we find no infirmity in the order of the CIT(A), which is

hereby confirmed and ground of appeal of the revenue is

dismissed.

order of the CIT(A). As the assessee has no grievance against the

order of the CIT(A), the cross objection filed by the assessee is

infructuous and accordingly, dismissed.

objection of the assessee are dismissed.

Order pronounced on 31/08/2018. Sd/- d/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 31/08/2018 B.K.Parida, SPS

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Copy of the Order forwarded to : 1. DCIT, Circle -5(1), The Appellant : Bhubaneswar.

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