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Mehsana Circle Vs Mehsana M/s.Shree Riddhi Corporation 32, Amikunj Society Near Technical School, Kalol
May, 23rd 2012
              " A " BENCH, AHMEDABAD


               .I.T.A.              No.2330/Ahd/2009
            (      Assessment Year : 2006-07)

The DCIT                       
                  M/s.Shree Riddhi Corporation
Mehsana CircleVs. 32, Amikunj Society
Mehsana           Near Technical School, Kalol
  PAN/GIR No. : ABDFS 2322 P
( Appellant) ..       (/Respondent)

             Appellant by         :   Shri James Kurian, Sr.D.R.
           Respondent by :            Shri Gaurav Nahta, A.R.

            Date of Hearing
                                  : 19/03/2012
             Date of Pronouncement : 22/5/2012

                               /O R D E R


      This is an appeal filed by the Revenue arising from the order of the
Learned CIT(Appeals)-Gandhinagar dated 15.5.2009. Grounds raised are
hereby decided as follows.

2.    Ground No.1 reads as under:-
      1. The Ld.CIT(A) was not justified in deleting the addition of
      Rs.64,93,905/- made U/s.69 of the I T Act on account of
      undisclosed investment in land.
                                                    ITA No.2330/Ahd/2009
                                    DCIT vs. M/s. Shree Riddhi Corporation
                                                       Asst.Year - 2006-07


2.1. Facts in brief as emerged from the corresponding assessment order
passed u/s.143(3) of the I.T. Act, 1961 dated 08.12.2008 were that the
assessee-firm is in the business of construction and development of
shops.     The assessee has purchased a land for a sum of Rs.55,34,694/-
and the stamp duty plus registration expenses were incurred at
Rs.5,50,000/-, thus totalling to Rs.60,84,694/-. The matter was referred
to the valuation Cell and the DVO vide Report dated 25.11.2008 has
adopted the rate at Rs.2,500/- per sq.meter as against the rate declared by
the assessee as per the registered sale-deed at Rs.1,100/- per sq.meter.
The DVO has thus valued the property at Rs.1,25,78,600/-.             It was
contested before Assessing Officer that the Jantri rate as per the
certificate issued by Sub-Registrar Kalol for the said period was ranging
from Rs.800/- to Rs.1,000/- per sq.meter, however, as against that, the
assessee has paid Rs.1,100/- which was higher than the Jantri price. The
DVO has adopted Rs.2,500/- per sq.meter which was an imaginary
figure.    However, since the DVO has given the valuation and the
Inspector was deputed who has also confirmed the same rate, therefore,
the Assessing Officer has determined the valuation at Rs.1,25,78,600/-.
The assessee had shown the investment at Rs.60,84,694/-, therefore the
difference between the two, i.e. Rs.64,93,906/- was taxed as unexplained
investment u/s.69 of the I.T.Act.

3.       The matter was carried before the Learned CIT(Appeals) who
has appreciated the facts of the case as also the law applicable and,
thereafter deleted the addition as follows:-
                                            ITA No.2330/Ahd/2009
                            DCIT vs. M/s. Shree Riddhi Corporation
                                               Asst.Year - 2006-07


"2.3.1.     The chart as provided by the Authorised
Representative also throws light into the incorrect data used
by the D.V.O./A.O. in terms of land area. Further, the jantri
rate or the rate adopted by the State Government for levying
Stamp Duty is an important indicator which cannot be simply
ignored. Whereas the Assessing Officer has not made any
reference to the jantri rate, he has not rebutted the appellant's
assertion of the same being Rs.800/- per The
appellant has also fortified it by providing the comparative
instances whereas the Assessing Officer has not done so. As
far as the Inspector's report is concerned, the same is
meaningless in the context as it is not supported by any
reference, any data or any inquiries or any legal sanction. It
is amazing how the Assessing Officer is ready to hold the
verbal and bland statement of the Inspector against the
overwhelming documentary evidences of the assessee.

2.3.2. Therefore, the from the entire discussion as above, it
comes out clearly that neither the Assessing Officer nor the
D.V.O. have brought out any concrete documents or issues on
record to hold that the appellant's declaration of purchase
price in his purchase deal is not the market value of the land
in question.

2.3.3. Notwithstanding that even if the market value was to
differ from the purchase value, there is no way the difference
would directly lead to the addition u/s.69 unless the Assessing
Officer has in his possession certain material to show that
what has been declared by the appellant in its documents is
not the correct position and the transaction has taken place at
a value different than shown in the documents. The pre-
condition in section 69 is that "assessee should have made
investments which are not recorded in the books of accounts".
At no stage, any such evidence has been brought on record to
hold that the appellant had paid more than what is the
apparent consideration recorded by the purchase/conveyance
                                                   ITA No.2330/Ahd/2009
                                   DCIT vs. M/s. Shree Riddhi Corporation
                                                      Asst.Year - 2006-07


      deed. As has been reiterated by various Courts and
      Tribunals, such an information is a necessary material
      condition to invoke provisions of section 142A or section 69.

      2.3.4. Therefore, considering all facts of the case, the addition
      of Rs.64,93,905/- u/s.69 is uncalled for and is deleted."

4.    From the side of the Revenue, ld.Sr.DR Mr.James Kurian
appeared and placed reliance on the observations fo the Assessing
Officer.   On the other hand, from the side of the assessee,
Ld.AR.Mr.Gaurav Nahta has placed reliance on the decision of
Hon'ble Supreme Court in the case of Sargam Cinema vs. CIT
reported at (2010) 328 ITR 513 and on the compilation filed
containing the copies of the Agreement executed as well as other
corroborative evidence along with the finding of the ld.CIT(A).

5.    We have heard both the sides. We have also perused the
material placed before us.      The basis on which the DVO had
suggested the higher valuation appears to be incorrect.                The
admitted factual position is that the Jantri rate of the area in question
for the relevant period was lower than the stamp duty which was
paid by the assessee. The assessee has produced the copy of the
sale-deed duly registered and, accordingly, recorded the sale
consideration along with stamp duty in its books of account. As far
as the position of accounts is concerned, no defect was pointed out
by the Assessing Officer. Under the totality of the circumstances of
                                                    ITA No.2330/Ahd/2009
                                    DCIT vs. M/s. Shree Riddhi Corporation
                                                       Asst.Year - 2006-07


the case, we are not inclined to interfere with the findings of
Learned CIT(Appeals), hence, we hereby confirm the deletion of
addition. This ground is hereby dismissed.

6.     Ground No.2 reads as under:-

       2. The Ld. CIT(A) was not justified in deleting the addition of
       Rs.13,59,504/- on account of undisclosed sale consideration of

6.1.   The assessee has shown purchase of land at Rs.39,63,951/- and
thereupon disclosed the work-in-progress. The total work-in-progress
was stated to be at Rs.85,73,618/-. The Assessing Officer's presumption
was that the assessee had shown Rs.60,84,694/- towards work-in-
progress, however, the land was purchased totalling to Rs.47,25,190/-.
Therefore, the difference was land which was sold during the year. The
reason given, though very strange, was as follows:-
       "The assessee has shown Rs.60,84,694/- in the purchase account
       and the work in progress, the assessee has shown the land
       purchased amounting Rs.47,25,190 in the work in progress. It
       means that on which land the construction have been made by the
       assessee that land worth/cost of Rs.47,25,190/- and the difference
       of the land comes to Rs.13,59,504/-. It means the assessee has
       sold the land during the year amounting to Rs.13,59,504/- which
       does not reflect in the balance-sheet of the assessee in the assets
       side. In the assets side he has shown only work in progress which
       is consisting land value of Rs.47,25,190/-. From the balance sheet
       it proves that assessee has shown the cost of land lower than the
       purchase land it prove that assessee has sold land of
       Rs.13,59,504/- during the year from out of books and he has
       earned this money."
                                                   ITA No.2330/Ahd/2009
                                   DCIT vs. M/s. Shree Riddhi Corporation
                                                      Asst.Year - 2006-07


7.    The matter was carried before the Learned CIT(Appeals) who has
deleted the addition in the following manner:-
      "3.3. The matter has been given due consideration and it is clear
      that the Assessing Officer has not appreciated the accounting
      entries made by the assessee in coming to his conclusion. The
      appellant apparently is following a mixed system of project
      completion as well as work in progress method of disclosing its
      receipts, as is evidenced by the working at pages 135, 136 and 137
      of the paper-book (part of which is reproduced in the assessment
      order also). It is not the case of the Assessing Officer that the
      method of accounting followed by the assessee is not acceptable.
      His apprehension is only that by the method adopted by the
      Assessing Officer the land amounting to Rs.13,59,504/- has
      vanished from the books of account and hence stands sold and
      hence needs to be taxed. It is clear that the said value of
      Rs.13,59,504/- is duly incorporated in the figure of rs.37,35,497/-
      shown against the heading "work done" in the assessee's Profit &
      Loss Account, which in turn has been derived from notionally by
      applying the ratio of total expenditure incurred till 31/03/2006 to
      total project expenditure (24.3242%)to the total revenue of
      Rs.1,53,57,075/- received. Therefore, in the context, there appears
      to be no case to hold that the land in question stood sold
      separately and that such sale has been brought to tax. Also the
      Assessing Officer having made the estimation of sale at
      Rs.23,00,000/-, without any basis went on to reject the books but
      added only Rs.13,59,504/-. This clearly is an inconsistent logic
      and approach.
      3.3.1. Hence, considering all the facts, the addition of
      Rs.13,59,504/- is deleted."

8.    Having heard the submissions of both the sides and considering the
material placed on record, we are of the considered view that the addition
made by the Assessing Officer was without any cogent basis. It appears
that the Assessing Officer has presumed that the appellant had sold out a
                                                    ITA No.2330/Ahd/2009
                                    DCIT vs. M/s. Shree Riddhi Corporation
                                                       Asst.Year - 2006-07


portion of the land. That presumption is without any basis considering
the explanation offered by the assessee; reproduced below:-
       "2.1. The Ld. Assessing Officer has pointed out difference from
       the total cost of land and cost of land shown as part of WIP at the
       year-end. In this regard, the Ld.AO has referred details of work in
       progress furnished by the appellant vide letter dated 21-07-2008
       (refer pg no.132 to 136), part of the same is reproduced on pg
       no.10 of the assessment order, where out of total expenditure of
       Rs.110,40,366/- a part of expenses of rs.24,66,748/- are reduced
       and balance of Rs.85,73,618/- is computed as work in progress
       (refer pg no.136). Below to the said working on pg no.136 there is
       computation of work completed i.e. work done of Rs.37,35,497/,
       which is finally shown as part of Profit & Loss a/c (refer pg no.6),
       thus the reduction of land cost of Rs.13,59,504/- and expenses of
       Rs.11,07,244/- totaling to Rs.24,66,748/- are valued as cost of
       expenses of work done (refer pg no.138).

       2.2. As per accounting policy the work completed / work done of
       Rs.37,35,497/- shown as part of Profit & Loss a/c, which contents
       land cost of Rs.1359,504/- and expenses of Rs.11,07,244/- totaling
       to Rs.24,66,748/- and difference of both these items is gross profit
       i.e. Rs.12,68,749/-, thus the cost of land as disputed by the AO is
       part of work done I work completed, as referred on pg no.136,
       137, 138and pg no.6 of the paper book. The same is shown
       separately from work in progress. Thus, the value of alleged land
       of Rs.13,59,504/-, treated by the AO as unaccounted sales, is part
       of work done (i.e. revenue side) and properly recorded and shown
       in the Profit & Loss A/c., which is not appreciated by the AO. Had
       the AO called for the explanation, the same might be explained to
       the AO and as the AC failed to understand the accounting
       systems, he taken the derivation has sales of land as

8.1.   We find no fallacy in the above explanation primarily because of
the fact that the Assessing Officer had failed to appreciate the method of
accounting adopted by the assessee. The additions being made merely on
                                                                ITA No.2330/Ahd/2009
                                                DCIT vs. M/s. Shree Riddhi Corporation
                                                                   Asst.Year - 2006-07


assumption thus do not survive. The reasoning given by the Learned
CIT(Appeals) are hereby confirmed. Ground raised by the Revenue is
9. In the result, the appeal of the Revenue is dismissed.
                Sd/-                                                        Sd/-
( A. MOHAN ALANKAMONY )                                ( MUKUL Kr. SHRAWAT )
   ACCOUNTANT MEMBER                                      JUDICIAL MEMBER

Ahmedabad;             Dated           22/ 05 /2012

      T.C. NAIR, Sr. PS
      Copy of the Order forwarded to :
1.     The Appellant
2.     The Respondent
3.     Concerned CIT
4.      The CIT(A)-Gandhinagar
5.      DR, ITAT, Ahmedabad

6.      Guard file.
                                                                    BY ORDER,

                  True Copy
                                                           ITAT, Ahmedabad

     1. Date of dictation ...18.5.12 (dictation-pad attached pg 1to 8)
     2. Date on which the typed draft is placed before the Dictating Member
        18.5.12.................. Other Member.....................
     3. Date on which the approved draft comes to the Sr.P.S./P.S.................
     4. Date on which the fair order is placed before the Dictating Member for
     5. Date on which the fair order comes back to the Sr.P.S./P.S.........22/5/12
     6. Date on which the file goes to the Bench Clerk..................... 22/5/12
     7. Date on which the file goes to the Head Clerk..................................
     8. The date on which the file goes to the Assistant Registrar for signature
        on the order..........................
     9. Date of Despatch of the Order..................
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