TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Tribunal rules for assessee, excludes land cost, rejects sales suppression claim, values unsold flats.</h1> <h3>Dy. Commissioner of Income Tax, Central Cir-8 (4), Mumbai Versus M/s. Eskay Constructions Pvt. Ltd.</h3> Dy. Commissioner of Income Tax, Central Cir-8 (4), Mumbai Versus M/s. Eskay Constructions Pvt. Ltd. - TMI Issues Involved:1. Working of income from the real estate development project.2. Addition of Rs. 4 crores due to alleged suppression of sales.3. Valuation of unsold flats as on 31.03.2010.Issue-wise Analysis:1. Working of Income from Real Estate Development Project:The assessee, a builder and developer, follows the percentage of completion method for accounting. The dispute arose over the percentage of work completed and the corresponding revenue recognition for the project at Cuffe Parade, Mumbai. The Assessing Officer (AO) calculated the percentage of work completed as 77.16% by including the cost of land, while the assessee declared it as 67.38%, excluding the cost of land. The Commissioner of Income Tax (Appeals) [CIT(A)] sided with the assessee, stating that land acquisition is the initial step and should not be included in the work-in-progress calculation. The Tribunal upheld the CIT(A)'s view, confirming that the percentage of work completed should be 67.38%.2. Addition of Rs. 4 Crores Due to Alleged Suppression of Sales:The AO added Rs. 4 crores to the income, suspecting that the assessee received 'on money' for selling a flat at a lower price compared to earlier sales. The CIT(A) deleted this addition, noting that property prices fluctuate and the AO had no evidence of actual receipt of additional money. The Tribunal upheld the CIT(A)'s decision, emphasizing that additions based on mere suspicion without evidence are not sustainable. The Tribunal cited the Supreme Court's rulings in K.P. Varghese v. ITO and CIT v. Sati Oil Udyog, which require concrete evidence of understatement of consideration.3. Valuation of Unsold Flats as on 31.03.2010:The assessee valued the unsold flats at the lower of cost or market value, which is a generally accepted accounting principle. The CIT(A) disagreed, valuing the unsold flats at the average sale price, leading to an addition of Rs. 85,18,702. The Tribunal overturned this, referencing Supreme Court decisions (Chainrup Sampatram vs CIT and United Commercial Bank vs CIT) that support valuation of inventories at the lower of cost or market value. The Tribunal directed the AO to accept the assessee's valuation method.Conclusion:The Tribunal allowed the appeals of the assessee and dismissed the revenue's appeal. It upheld the exclusion of land cost in the percentage of work completed, rejected the addition based on alleged suppression of sales due to lack of evidence, and accepted the valuation of unsold flats at the lower of cost or market value. The order was pronounced on 10/07/2019.
TaxTMI 