Shri S.Rajendran, CHENNAI v. ITO, CHENNAI

CO 110/CHNY/2009 | 2006-2007
Pronouncement Date: 26-02-2010 | Result: Allowed

Appeal Details

RSA Number 11021723 RSA 2009
Assessee PAN AAACB3586B
Bench Chennai
Appeal Number CO 110/CHNY/2009
Duration Of Justice 7 month(s) 4 day(s)
Appellant Shri S.Rajendran, CHENNAI
Respondent ITO, CHENNAI
Appeal Type Cross Objection
Pronouncement Date 26-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 26-02-2010
Date Of Final Hearing 18-02-2010
Next Hearing Date 18-02-2010
Assessment Year 2006-2007
Appeal Filed On 22-07-2009
Judgment Text
IN THE INCOMETAX APPELLATE TRIBUNAL: B- BENCH:CHENN AI (BEFORE U.B.S.BEDI JUDICIAL MEMB ER AND SHRI ABRAHAM P. GEORGE. ACCOUNTANT MEMBER ) ITA NOS.1581 & 1582/ MDS/09 & CO NO.110 & 111/MDS/09 (ASST. YEARS 2000-01 & 2001-02) THE ACT CO.CIR. I(2) CHENNAI VS M/S BBC ASSOCIATES LTD 15 NEELAKANTA MEHTA ST. T.NAGAR CHENNAI 600017. (PAN AAACB3586B) (APPELLANT) (RESPONDENT/CROSS-OBJECTOR) APPELLANT BY: RESPONDENT/CROSS OBJECTOR BY: SHRI K.E.B.RANGARAJAN JR.STANDING COUNSEL SHRI T.BANUSEKAR ORDER PER ABRAHAM P.GEORGE ACCOUNTANT MEMBER THESE ARE APPEALS OF THE REVENUE AGAINST THE ORDER S DATED 22-07- 2009 OF THE CIT(A) FOR THE RESPECTIVE YEARS AND CRO SSOBJECTIONS OF THE ASSESSEE FOR THE SAME YEARS. ITA NOS. 1581-2 & CO 110&111/MDS/09 2 2. APPEAL OF THE REVENUE FOR ASST. YEAR 2000-01 IS TAKEN FIRST FOR DISPOSAL. 3. SHORT FACTS APROPOS ARE THAT THE ASSESSEE A PR OPERTY DEVELOPER HAD FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASS ESSMENT YEAR PURSUANT TO A NOTICE UNDER SEC.148 OF THE INCOME-TAX ACT 19 61 (THE ACT FOR SHORT) ON 10-02-2004 DECLARING NIL INCOME. DURING THE COUR SE OF ASSESSMENT AO REQUIRED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOU NT AND VARIOUS OTHER DETAILS. HOWEVER THESE WERE NOT PRODUCED AND ASSES SMENT WAS COMPLETED UNDER SEC. 144 OF THE ACT TO THE BEST OF JUDGMENT OF THE AO. HE REJECTED THE BOOK RESULTS ITSELF SHOWN BY THE ASSE SSEE IN ITS RETURN AND ON THE GROSS TURNOVER ESTIMATED NET PROFIT AT 8% AND C OMPLETED THE ASSESSMENT. 4. IN ITS APPEAL BEFORE THE CIT(A) SUBMISSION OF TH E ASSESSEE WAS THAT THERE WAS A SET BACK IN ITS BUSINESS DUE TO A SEARC H AND SEIZURE PROCEEDINGS CONDUCTED BY THE REVENUE IN MARCH 1996 RESULTING IN ENMASSE RESIGNATION OF EMPLOYEES AND DIRECTORS FROM THE COMPANY. ACCORDING TO THE ASSESSEE DUE TO SEARCH BANKERS A ND CREDITORS WITHDREW THEIR SUPPORT AND DAY TO DAY BUSINESS ACTIVITIES SU FFERED. ASSESSEE THEREFORE SOUGHT LEAVE FROM THE CIT(A) FOR PRODUCI NG THE BOOKS OF ACCOUNT AND OTHER RELATED RECORDS BEFORE THE AO. CIT(A) WAS OF THE OPINION THAT THERE WAS REASONABLE CAUSE FOR NON PRODUCTION OF B OOKS OF ACCOUNT AND ITA NOS. 1581-2 & CO 110&111/MDS/09 3 DETAILS. HE THEREFORE SOUGHT A REMAND ORDER FROM THE AO AND DIRECTED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT AND DE TAILS REQUIRED BY THE AO BEFORE THE LATTER. THE PERTINENT PART OF THE REM AND ORDER IS REPRODUCED HEREUNDER: AFTER CONSIDERING THE SUBMISSIONS I FIND THAT THER E WAS REASONABLE CAUSE FOR NOT PRODUCING THE BOOKS OF ACCOUNTS DUE T O SETBACK IN THE BUSINESS AND THEREFORE THE CASE IS TO BE REMANDED BACK TO THE AO FOR VERIFICATION. THE APPELLANT SHALL BE ENTITLED T O PRODUCE THE BOOKS OF ACCOUNTS AND SUCH OTHER DETAILS AS REQUIRED BY T HE AO DURING THE COURSE OF REMAND PROCEEDINGS. THE AO SHALL EXAMINE THE BOOKS OF ACCOUNTS AND OTHER DETAILS AND SUBMIT A REMAND REPO RT REGARDING ACCEPTANCE OF BOOKS OF ACCOUNTS MAINTAINED BY THE A PPELLANT. IN CASE THERE WERE DEFECTS IN THE BOOKS OF ACCOUNTS T HE AO SHALL SPECIFY THE DEFECTS IN THE BOOKS OF ACCOUNTS AND MA KE OUT A CASE FOR REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF IN COME. IN CASE THE INCOME IS TO BE ESTIMATED THE AO SHALL FURNISH COMP ARABLE CASES BASED ON WHICH THE INCOME OF THE APPELLANT CAN BE E STIMATED FOR BOTH THE ASST. YEARS. THE AO SHALL SUBMIT HIS REMAN D REPORT COVERING THE ABOVE POINTS WITHIN ONE MONTH FROM THE DATE OF RECEIPT OF THIS ORDER. 5. PURSUANT TO THIS A REMAND REPORT DATED 29-04-200 9 WAS RECEIVED BY THE CIT(A). THE REMAND REPORT COVERED ASST. YEAR 20 00-01 AS WELL AS ASST. YEAR 2001-02. AO IN THE SAID REMAND REPORT MENTIONE D THAT ASSESSEE HAD PRODUCED THE BOOKS OF ACCOUNT NAMELY CASH BOOKS BA NK BOOK PROJECT EXPENSES LEDGERS GENERAL EXPENSES LEDGER AND LEDG ER FOR ASSETS AND LIABILITIES ALONG WITH RELEVANT VOUCHERS. AFTER EX AMINING SUCH BOOKS FOR THE RELEVANT PREVIOUS YEAR VIZ. F.Y 1999-2000 THE AO CAME TO THE FOLLOWING CONCLUSION: ITA NOS. 1581-2 & CO 110&111/MDS/09 4 (I) ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF A CCOUNTING. (II) THE LEDGER PRODUCED BY THE ASSESSEE REFLECTED PROJECT EXPENSES OF ` 2 86 70 824/- AGAINST ` 2 87 24 179/- CLAIMED BY THE ASSESSEE. (III) THE TOTAL PROJECT EXPENSES AS PER BOOKS CAME TO ` 4 73 99 743/- AGAINST ASSESSEES CLAIM OF ` 4 77 98 162/-. (IV) INDIVIDUAL COST OF THE PROJECTS GIVEN BY THE ASSESSEE DID NOT TALLY WITH THE LEDGER ACCOUNTS. 6. FOR THE ABOVE REASONS AO WAS OF THE OPINION TH AT PROFIT OF INDIVIDUAL PROJECTS COULD NOT BE ARRIVED ON THE BAS IS OF THE BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE. AO HAD ALSO SOUGH T FROM THE ASSESSEE DURING THE REMAND PROCEEDINGS DETAILS OF OPENING STOCK CLOSING STOCK COST OF PROJECT VALUE OF CONSTRUCTI ON AGREEMENT ETC. AND ADMITTEDLY THESE WERE FILED BY THE ASSESSEE. AO DUR ING SUCH PROCEEDINGS INTIMATED THE ASSESSEE THAT THERE COULD NOT BE A SITUATION WHERE FLATS WOULD BE SOLD AT A LOSS SINCE REAL ESTA TE BUSINESS WAS BOOMING DURING THE RELEVANT PERIOD. AT THIS ASSESS EE CONSENTED FOR APPLYING AVERAGE GROSS PROFIT METHOD FOR PROJECTS I N WHICH IT HAD SHOWN LOSS APPLYING SUCH GROSS PROFIT TO THE TOTAL SALES TURNOVER. AO IN THE REMAND REPORT NOTED THAT AVERAGE GROSS PROFIT FOR T HE RELEVANT PREVIOUS YEAR CAME TO 3% AND AT PARA 3.7 OF THE REMAND REP ORT HE GAVE THE FOLLOWING CONCLUSION: ITA NOS. 1581-2 & CO 110&111/MDS/09 5 3 .7 IF THE AVERAGE PROFIT OF 3% IS ADOPTED THE PR OFIT ON THE SALE OF 19 FLATS (FOR ` 2 82 94 115) COMES TO ` 8 48 823/-. THE CARRY FORWARD UNABSORBED LOSS OF AY 1999-00 OF ` 2 57 726/- MAY BE ALLOWED TO BE SET OFF AGAINST THE ABOVE INCOME. 7. LD. CIT(A) BASED ON THE REMAND REPORT DIRECTED THE AO TO ADOPT 3% OF THE SALES TURNOVER OF 19 FLATS AS THE PROFIT FOR THE RELEVANT PREVIOUS YEAR AND ALSO DIRECTED THE AO TO SET OFF DEPRECIATION LO SS OF ` 2 57 726/- CARRIED FORWARD FROM ASST. YEAR 1999-00. 8. NOW BEFORE US LD. DR ASSAILING THE ORDER OF THE CIT(A) SUBMITTED THAT 6% WEIGHTED AVERAGE PROFIT OUGHT HAVE BEEN ADO PTED SINCE THIS WAS PERCENTAGE MENTIONED IN THAT PART OF THE REMAND R EPORT PERTAINING TO A.Y 2001-02. ACCORDING TO HIM REMAND REPORT SUGGESTED S ET OFF OF BROUGHT FORWARD DEPRECIATION OF ` 2 57 726/- ERRONEOUSLY. PER CONTRA LD. AR SUPPORTED THE ORDER OF THE CIT(A). 9. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE ORDERS. WE HAVE REPRODUCED THE PERTINENT PART OF THE REMAND RE PORT AT PARA 6 ABOVE. WE CANNOT FAULT THE AO FOR REJECTING THE BOOKS OF A CCOUNT SINCE THERE WAS CERTAIN LACUNAE NOTED IN THE FIGURES CLAIMED AS E XPENSES BY THE ASSESSEE AND THOSE APPEARING IN ITS LEDGER. NEVERT HELESS AT PARA 3.7 OF THE REPORT AO HAS CLEARLY STATED THAT CARRY FORWARD UNABSORBED ITA NOS. 1581-2 & CO 110&111/MDS/09 6 DEPRECIATION CAN BE ALLOWED AND THE AVERAGE PROFIT OF 3% CAN BE ADOPTED FOR THE RELEVANT PREVIOUS YEAR. IT IS SPECIFICALLY NOTED IN PARA 3.6 OF THE REMAND REPORT THAT ASSSSEES SUBMISSION AND CONSENT FOR APPLYING AVERAGE GROSS PROFIT WAS ACCEPTED BY THE AO AND ACC ORDINGLY HE HAD WORKED OUT THE PROFIT RATE 3%. CIT(A) GAVE EFFECT TO THIS REMAND REPORT. WE CANNOT FIND ANY FAULT IN THE ORDER OF THE CIT(A) IN THIS REGARD. THERE IS NO RULE THAT UNABSORBED DEPRECIATION OF EARLIER YEA RS CANNOT BE DEDUCTED AGAINST ESTIMATED PROFITS IN A LATER YEAR. THERE IS NO CASE FOR THE REVENUE THAT ASSESSEE WAS DOING A DIFFERENT BUSINESS IN THE RELEVANT PREVIOUS YEAR VIS--VIS EARLIER YEARS. WE THUS FIND NO MERIT IN THE APPEAL OF THE REVENUE WHICH STANDS DISMISSED. 10. NOW WE COME TO THE APPEAL OF THE REVENUE FOR A. Y 2001-02. ITS GRIEVANCE APPEARS AT GROUND NO.2 WHICH IS REPRODUC ED HEREUNDER: 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION M ADE BY THE AO ON THE GROUND THAT THE BOOKS WERE REJECTED IN THE R EMAND PROCEEDINGS. 2.1 THE LD.CIT(A) HAS FAILED TO NOTE THE FACT THAT THE ASSESSEE ITSELF HAS ACCEPTED THAT ITS BOOKS WERE NOT RELIABL E AND OFFERED FOR APPLYING AVERAGE GROSS PROFIT PERCENTAGE FOR THE AS ST. YEARS 2000-01 TO 2001-02. THE AO HAD SUGGESTED ESTIMATION IN THIS CASE ONLY AFTER THE CONSENT OF THE ASSESSEE AND ITS ACCEPTANCE THAT IT IS UNABLE TO EXPLAIN THE PROFIT SUCCINCTLY (PARA 3.6 OF AOS REM AND REPORT). 2.2 THE LD.CIT(A) HAS FAILED TO APPRECIATE THAT THE ASSESSEE HAS CLAIMED LOSS OF ` 23 10 151/- ON SALE OF FOUR FLATS IN BBC THALLAM AND LOSS OF ` 21 43 310/- ON SALE OF 15 FLATS IN BBC WEST END IN ASST. YEAR 2001-02 AND HAS BEEN UNABLE TO EXPLAIN H OW IT COULD SELL THE FACTS AT A LOSS AND FINDING OF AO FOR ASST. YEA R 2000-01 ON THIS ITA NOS. 1581-2 & CO 110&111/MDS/09 7 AND ASSESSEE ADMISSION FOR ASST. YEAR 2000-01 ARE E QUALLY APPLICABLE TO ASST. YEAR 2001-02. 2.3 THE ASSESSEE HAD BEFORE THE CIT(A) HAD TAKEN A DIVERGENT STAND THAT IT WAS NOT JUSTIFIED TO APPLY AVERAGE WE IGHTED METHOD TO ARRIVE AT THE PROFIT. IN VIEW OF THE CHANGE OF STAN D BY THE ASSESSEE BEFORE THE CIT(A) SUBSEQUENT TO THE REMAND REPORT THE CIT(A) OUGHT TO HAVE GIVEN AN OPPORTUNITY TO THE AO TO REBUT THE ARGUMENT OF THE ASSESSEE. 2.4 THE LD.CIT(A) HAS FILED TO NOTE THE FACT THAT THE ASSESSEE COMPANY HAD CONTINUED THE SAME PROJECTS AS DETAILED BY THE AO IN THE REMAND REPORT SUBMITTED FOR THE A.Y 2000-01 AND THAT THE AO APPLIED THE SAME ANALOGY WHILE SUGGESTING ESTIMATIO N FOR BOTH ASST. YEARS 2001-02 & 2001-02 ON WEIGHTED AVERAGE PROFIT OF 6% ON THE BASIS OF CONSOLIDATED REPORT FOR A.YRS. 2000-01 & 2 001-02. THE LD.CIT(A) IN THE ABSENCE OF MATERIALS ON RECORD WA RRANTING DIFFERENTIAL TREATMENT OUGHT TO HAVE APPLIED THE S AME ESTIMATION FOR BOTH ASST. YEARS. 11. AS MENTIONED IN THE GROUND AND AS ALREADY NOTED BY US THE REMAND REPORT GIVEN BY THE AO SEPARATELY COVERED ASST. YEA RS 2000-01 AND 2001- 02. FOR A.Y 2000-01 ASSESSEE HAD SUGGESTED APPLICAT ION OF AVERAGE GROSS PROFIT OF 3% ON THE TURNOVER AND THIS WAS ACCEPTED. NEVERTHELESS IN THAT PART OF THE REMAND REPORT COVERING ASST.YEAR 2001-0 2 LD. AO HAD SUGGESTED AVERAGE PROFIT OF 6.06% FOR THE RELEVANT PREVIOUS YEAR. ACCORDING TO THE REVENUE AO HAD SUGGESTED SUCH EST IMATION ONLY AFTER RECEIVING CONSENT FROM THE ASSESSEE AND ASSESSEE C OULD NOT EXPLAIN HOW CERTAIN FLATS WERE SOLD AT A LOSS. ITA NOS. 1581-2 & CO 110&111/MDS/09 8 12. FACTS RELEVANT ARE THAT DURING THE RELEVANT PRE VIOUS YEAR ALSO ASSESSEE WAS CONTINUING THE SAME BUSINESS. HOWEVER IN THE PART OF THE REMAND REPORT DATED 29-4-09 COVERING THE PREVIOUS YEAR RELEVANT TO A.Y 2001-02 AO DID NOT POINT OUT ANY DEFECT IN THE BOO KS PRODUCED BY THE ASSESSEE AS ALREADY MENTIONED BY US AT PARA -5 ABO VE FOR A.Y 2000-01 AO HAD POINTED OUT CERTAIN DEFECTS IN THE BOOKS OF ACCOUNTS ON ACCOUNT OF VARIATIONS BETWEEN ITS CLAIMS AND THE AMOUNTS APPEARING IN THE LEDGER UNDER CERTAIN HEADS. NEVERTHELESS FOR THE IMPUGNED ASST. YEAR NO SUCH DEFECTS WERE POINTED OUT BY THE AO. RELEVANT PART O F THE REMAND REPORT IS REPRODUCED HEREUNDER: 4. ASST. YEAR 2001-02 : SIMILARLY FOR THIS ASST YEAR THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNTS AT T HE TIME OF SCRUTINY PROCEEDINGS AND ALSO THE TAX AUDIT REPORT B EFORE THE ASSESSING OFFICER. SUBSEQUENT TO THE REMANDING OF THE CASE THE ASSESSEE WAS GIVEN AN OPPORTUNITY OF PRODUCING THE B OOKS OF ACCOUNTS AND ALSO THE COPY OF THE TAX AUDIT REPORT WHICH WAS STATED TO HAVE BEEN FILED IN CIRCLE II (INVESTIGATION). THE ASSES SEE WAS ALSO ASKED TO FILE THE COPY OF THE ACKNOWLEDGEMENT FOR HAVING FILE D THE TAX AUDIT REPORT IN CIRCLE II (INVESTIGATION). THE ASSESSEE PRODUCED THE COPY OF TAX AUDIT REPORT SIGNED BY ONE MR. K. SANTHANAM CA ON 30.8.2001. THE ASSESSEE ALSO PRODUCED THE COPY OF ACKNOWLEDGEME NT FOR HAVING FILED THE TAX AUDIT REPORT IN CIRCLE-II (INVESTIGAT ION) ON 25.10.2001 FOR THE AY 2001-02. THE ASSESSEE ALSO PRODUCED THE FOLLOWING BOOKS OF ACCOUNTS (I) CASH BOOK (II) BANK BOOK (III) GE NERAL EXPENSES LEDGER AND (IV) JOURNAL ALONG WITH RELEVANT VOUCHERS. TH E BOOKS OF ACCOUNTS PRODUCED WERE EXAMINED. AFTER EXAMINING THE BOOKS I SUBMIT MY REPORT AS UNDER. 4.1. DURING THE FY 2000-01 (AY 2001-02) THE ASSESS EE COMPANY CONTINUED THE SAME PROJECTS AS DETAILED PARA 3.1 AB OVE. DURING THE ITA NOS. 1581-2 & CO 110&111/MDS/09 9 YEAR THE ASSESSEE HAD SOLD 05 FLATS IN DIWAN RAMAN ROAD 04 FLATS IN BBC THAILAM GARDEN 15 FLATS IN BBC WESTEND AND 2 F LATS IN BBC KINGS VILLA. THE TOTAL SALE CONSIDERATION ADMITTED BY THE ASSESSEE IN THE P&L A/C WAS 2 75 76 800/-. THE COST OF THE PROJECT WHI CH IS DEBITED TO THE P&L A/C WAS ARRIVED AT BY THE ASSESSEE AS UNDER. 4.2 THE ASSESSEE WAS ASKED TO FILE THE DETAILS OF O PENING STOCK CLOSING STOCK COST OF THE PROJECT VALUE AS PER CO NSTRUCTION AGREEMENT ENTERED INTO DURING THE YEAR (I.E. INCOME RECOGNIZED ) AND ACTUAL AMOUNT RECEIVED FROM THE BUYER ALL PROJECT WISE. THE ASSESSEE FILED THE DETAILS. AS STATED ABOVE DURING THE YEAR THE ASSESSEE HAS SOLD 26 FLATS IN ALL THE DETAILS ARE AS UNDER. NAME OF THE PROJECT NO. OF FLATS SOLD COST OF FLAT SALE CONSIDERATION % OF PROFIT BBC DIWAN RAMAN ROAD 05 34 50 807 37 28 010 7.44% BBC THAILAM 04 85 43 651 62 33 500 NIL BBC WESTEND 15 1 67 26 985 1 45 83 675 NIL BBC KINGSVILLA 02 23 57 672 30 42 485 TOTAL 26 3 10 79 115 2 75 87 670 4.3 IF THE AVERAGE PROFIT OF 3% IS ADOPTED FOR THE AY 2001-02 AS IN AY 2000-01 THE PROFITS COMES TO RS.8 27 630 (2 75 87 670)(3%). 4.4 HOWEVER IF THE PROFITS SHOWN BY THE ASSESSEE O N THE PROJECTS FOR BOTH THE AYS 2000-01 AND 2001-02 IS TAKEN TOGET HER THEN THE AVERAGE PROFIT PERCENTAGE WILL BE 6.06% AS UNDER. AS DISCUSSED IN PARA 3.6 ABOVE THE AVERAGE PROFIT PERCENTAGE FOR B OTH THE ASSESSMENTS YEAR IS ARRIVED AT AS UNDER. AY 2000-01 : COST OF FLAT OF BBC THAILAM : RS. 16 45 541 COST OF FLAT OF BBC WESTEND : RS. 1 25 41 121 OPENING PROJECTS WORK IN PROGRESS : RS. 9 76 32 540 ADD: PROJECT EXPENSES FOR THE YEAR : RS. 2 08 80 837 RS. 11 85 13 377 LESS: CLOSING WORK IN PROGRESS : RS. 8 74 34 262 COST OF THE PROJECT DEBITED TO P&L A/C : RS. 3 10 79 115 ITA NOS. 1581-2 & CO 110&111/MDS/09 10 AY 2001-02 : COST OF FLAT OF DIWAN RAMAN ROAD : RS. 34 50 807 COST OF FLAT OF BBC KINGSVILLA : RS. 23 57 672 (1645541 X 8.53 + 12541121 X 2.28) + (3450806 X 7 .44 + 2357672 X 22.50 ) 1645541 + 12541121 + 3450807 + 2357672 = 6.06% 4.5 IF THE AVERAGE PROFIT OF 6.06% IS ADOPTED THE PROFIT ON THE SALE OF 26 FLATS (FOR RS.2 75 87 670) COMES TO RS.1 6 71 813/-. 13. THE VIEW TAKEN BY THE AO IN THE REMAND REPORT WAS STRONGLY OBJECTED TO BY THE ASSESSEE BEFORE THE CIT(A). ACC ORDING TO THE ASSESSEE AO COULD NOT SPECIFY ANY DEFECTS IN THE B OOKS OF ACCOUNT AND THEREFORE REJECTION OF BOOKS OF ACCOUNT AND ESTIMA TION OF INCOME COULD NOT HAVE BEEN MADE. ASSESSEE SUBMITTED THAT IT HAS PROD UCED BOOKS OF ACCOUNT AND ALL VOUCHERS BEFORE THE AO AND RELYING ON THE DECISION OF CIT VS. ABDUL AZIZ SAHIB (7 ITR 647) OF THE JURISDICTIO NAL HIGH COURT IT WAS ARGUED THAT WITHOUT SETTING OUT REASON FOR DISREGAR DING ACCOUNTS REJECTION OF BOOKS COULD NOT HAVE BEEN MADE. LD. CIT(A) WAS A PPRECIATIVE OF THIS CONTENTION. HE HELD THAT THE REJECTION OF BOOKS OF ACCOUNT WAS NOT JUSTIFIED. ACCORDING TO HIM EVEN IF THE BOOKS WERE IGNORED T HERE WAS NO REASON WHY A HIGHER PROFIT RATE OF 6% SHOULD HAVE BEEN ADO PTED FOR THE IMPUGNED ASSESSMENT YEAR WHEN ONLY 3% PROFIT RATE WAS ADOPT ED FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. HE THEREFOR E DELETED THE ITA NOS. 1581-2 & CO 110&111/MDS/09 11 ADDITION MADE BY THE AO AND DIRECTED HIM TO APPLY 3% PROFIT RATE AS DONE IN THE PRECEDING YEAR FOR THE IMPUGNED ASST. YEAR ALSO. 14. NOW BEFORE US LD. DR SUBMITTED THAT THE REMAND REPORT CLEARLY MENTIONED 6% TO BE THE AVERAGE PROFIT RATE FOR THE RELEVANT PREVIOUS YEAR AND HENCE THE CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE AO TO ADOPT 3%. PER CONTRA THE LD. AR SUBMITTED WITHOUT REJECTING THE BOOKS THE ESTIMATION ITSELF WAS UNJUSTIFIED. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS. RELEVANT PART OF THE REMAND REPORT OF THE AO IS REP RODUCED AT PARA-12 ABOVE. IT IS CLEAR THAT THE ASSESSEE HAD PRODUCED B OOKS OF ACCOUNT ALONG WITH RELEVANT VOUCHERS. ASSESSEE HAD ALSO FURNISHED DETAILS OF STOCK VALUE AS PER CONSTRUCTION AGREEMENT ACTUAL AMOUNT RECEIV ED FROM THE BUYERS ETC. THOUGH THE AO HAS REPRODUCED THE DETAILS GIVEN BY THE ASSESSEE IN THE REMAND REPORT HE HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNT. AS ALREADY MENTIONED BY US FOR A.Y 2000-0 1 CERTAIN DEFECTS WERE FOUND BY THE AO AND THEREFORE HE DID HAVE SUFFICIE NT REASON FOR COMING TO A CONCLUSION AS PROFITS COULD NOT BE ARRIVED AT ON THE BASIS OF SUCH BOOKS. BUT FOR THE IMPUGNED ASSESSMENT YEAR NO SUCH DEFECT S WERE FOUND AND IN OUR OPINION BOOKS OF ACCOUNT COULD NOT HAVE BEEN RE JECTED AT THE WHIMS AND FANCIES OF THE AO. IN SUCH A SCENARIO THE CIT( A) WAS MORE THAN FAIR TO ITA NOS. 1581-2 & CO 110&111/MDS/09 12 THE REVENUE IN DIRECTING ADOPTION OF 3% PROFIT RATE AS DONE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THERE IS NO SPECIFIC REASON GIVEN BY THE LD. D.R. AS TO WHY AVERAGE GROSS PROFI T FOR TWO YEARS HAD TO BE CONSIDERED ESPECIALLY WHEN BOOKS WERE NOT REJECTED . POSSIBILITY OF INCURRING OR NOT INCURRING LOSS ON SALE OF SOME FLA TS IN THE SCENARIO OF A BOOMING REAL ESTATE BUSINESS IS A GENERAL COMMERCI AL QUESTION BUT UNDER INCOME-TAX PROCEEDINGS WE HAVE TO WORK OUT T HE PROFIT OR LOSS IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND NOT I N ACCORDANCE WITH THE GENERAL INDUSTRIAL OUTLOOKS. WE ARE THEREFORE OF T HE OPINION THAT THE ORDER OF THE CIT(A) DOES NOT NEED ANY INTERFERENCE. APPE AL OF THE REVENUE STANDS DISMISSED. 16. NOW WE TAKE UP THE CROSS OBJECTIONS OF THE ASSE SSEE FOR THE RESPECTIVE YEARS. LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE CROSS- OBJECTIONS WERE SUPPORTIVE OF THE ORDERS OF THE CIT (A). SINCE WE HAVE ALREADY DISMISSED THE APPEALS OF THE REVENUE FOR TH E RESPECTIVE ASST. YEAR THE CROSS OBJECTIONS HAVE BECOME IN FRUCTUOUS . 17. TO SUMMARISE THE RESULT BOTH APPEALS OF THE RE VENUE AS WELL AS THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ITA NOS. 1581-2 & CO 110&111/MDS/09 13 ORDER PRONOUNCED IN OPEN COURT ON 03 -1-2011. SD/- SD/- ( U.B.S.BEDI) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI: 3RD JANUARY 2011 NBR CC: ASSESSEE/ ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE.