I.T.O WD - 4(2),KOLKATA, KOLKATA vs. M/S MARTIN BURN CONSTRUCTION PVT LTD., KOLKATA

This appeal filed by the Revenue against the order dated 16.04.2013 passed by CIT(A)-IV, Kolkata for AY 2006-07. There is a delay of 04 days in filing the appeal by the Revenue and it is condoned. It is noted that the appeal was filed with a delay of 04 days and after hearing both the parties, we find the reasons stated by the Ld.DR are bonafide, therefore, the delay of 04 days is condoned.

In the impugned order, the CIT(A) observed that sale of commercial portion @ 826.75 per sq.ft., expenditure not claimed under the head “substructure & super superstructure” in profit & Loss account, AS-7, advance received for residential portion not included in sales consideration, discounts offered to parties for making full payments does not justify to reject the books of accounts and estimation of profits thereon, thereby, the CIT(A) held that books of accounts are completed as correct and deleted the addition. We find that the CIT(A) examined the record together with the two remand reports and come to the above conclusion in favour of the assessee. Further, it is observed that the CIT(A) placed reliance on the decision of Hon’ble Supreme Court in the case of Realest Buildings & Services Ltd. reported in 307 ITR 202 (SC). The relevant portion of the order of CIT(A is reproduced herein below:- 4.7. “In view of the above observation of A.O. and submissions made by the A.R. of the appellant by pursuing the materials on record the grounds Nos. 1 to 7 are decided as under: - a) Discrepancy of square meter being the basis of apportionment of expenditure as noted by the Assessing officer in assessment order had been fully explained in paragraph 4.8 of the statement of facts duly supported by copy of Conveyance Deed, Architect Certificate, Municipal Completion Plan, Statutory Auditor's Certificate dated 2nd March, 2009 and Architect Clarification Certificate. The appellant company had apportioned the cost of sales at 45.19% of the construction cost as per Profit & Loss Account which is Rs.7,22,82,601.82. On the other hand, if the cost of sales would have been apportioned at 45.3% (as noted by the Assessing officer in the assessment order) the total cost would have been Rs.7,24,56,912.99. On these count I agree with the submissions of the appellant and consider the cost of sales to be apportioned @ 45.19% which has been taken in the Profit & Loss Account, based on which return has been declared by the appellant. b) The observations of the Assessing officer based on which it was held by him that the completeness and correctness of the accounts of the appellant were not satisfactory and the books of accounts were rejected have been responded by the appellant at paragraph - 4.10 of the Statement of Facts, which have been reproduced herein before. The sale price of the commercial portion was cost of proportionate land area, sanction plan and foundation work of construction. In other words, it does not include cost of structure, super structure and completion activity being part of construction cost. The Sale Deeds for right to construction of commercial portion clearly demonstrate that the purchaser company was required to incur expenditure for cost of construction towards structure, super-structure and finishing. Therefore, I do not find any discrepancy on this count in the books of accounts. c) Observations made by the Assessing Officer regarding sale deed of commercial portion @ Rs.826.75 per Sq. ft., expenditure not claimed under the head "substructure & superstructure" in P&L a/c, AS-7, advance received for residential portion not included in sales consideration, discounts offered to parties for making full payments have been fully explained by the appellant. I have considered the observations of the Assessing officer and submissions of the appellant both and conclude that none of these factors contribute to under determination of profit of the appellant. And these reasons do not justify rejection of books of accounts & estimation of Profit in view of the appellants response at paragraph 4.10 of its submissions and statement of acts. d) Hon'ble Supreme Court had observed in cn v. Realest Buildings and Services Ltd.307 HR 202 (SC) at para-7 (Pg.204): "If the assessing officer comes to the conclusion that there is under estimation of profits, he must give facts and figures in that regard and demonstrate to the court that the impugned method of accounting adopted by the assessee results in underestimation of profits and is therefore rejected. Otherwise, the presumption would be that the entire exercise is revenue neutral. In this case, that exercise has never been undertaken. The Assessing Officer was required to demonstrate both the methods, one adopted by the assessee and the other by the Department. Observations of the A.O. don't provide the facts and figures in support of methods of accounting adopted by the appellant which had resulted in underestimation of profit for rejection of books of accounts. The A.O. had not demonstrated any method of accounts for correct determination of profit on income. Rather the A.O. had estimated the income based on a percentage of Sales considerations. (e) The AO had not identified any Accounting Standard notified u/s.145(2) of the Act which was not followed by the assessee. Hon'ble Supreme Court had observed in CIT v Padamchand Ramgopal 76 ITR 719 (Se) that minor mistakes cannot be a ground for rejection of books of accounts. (f) In view of the above and after consideration of A.O.'s Remand Report & appellant's comments thereon, it cannot be said that the completeness and correctness of the accounts of the assessee (ASSESSMENT YEAR-2006-07) are not satisfactory. And therefore, the books of accounts of the appellant cannot be rejected u/s. 145(3) of the IT. Act, 1961. Thus the contention of the appellant are found acceptable. The grounds of appeal succeeds. Accordingly, the addition of Rs.36,75,000/- as made by the Assessing officer is hereby deleted.”