ITAT directs AO to verify income transfer to landowners for taxation based on consistency & evidence

The ITAT allowed the appeal, directing the AO to verify if income had been transferred to landowners and offered for taxation in their returns. The decision was based on the principle of consistency and the need for evidence to support the appellant's claims.

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Issues:
Appeal against order of CIT(A) regarding understatement of construction receipts for assessment year 2012-13.

Analysis:
1. The appellant, a land developer, entered into agreements for project development with landowners. Funds from flat buyers were divided between land cost and construction cost. The Assessing Officer found inconsistencies in fund allocation and rejected the books of account. The AO applied a ratio of 29.42% towards land cost and 70.5% towards construction, resulting in an understatement of income by Rs. 49,71,556.

2. Before the CIT(A), the appellant argued against the rejection of the method of bifurcation, citing inconsistency in revenue recognition and potential double taxation. The CIT(A) upheld the AO's decision, noting discrepancies in the appellant's calculations and lack of evidence regarding income offered for taxation by landowners. The CIT(A) confirmed the addition made by the AO.

3. The appellant contended before the ITAT that the rejection of the method was unjustified, emphasizing consistency in cost allocation methodology. The ITAT agreed with the appellant, citing principles of consistency and legal precedents. However, noting the lack of evidence regarding income transfer to landowners, the ITAT remanded the matter to the AO for verification.

4. The ITAT allowed the appeal, directing the AO to verify if income had been transferred to landowners and offered for taxation in their returns. The decision was based on the principle of consistency and the need for evidence to support the appellant's claims.

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