Verification of compensation paid for delayed possession required before deduction claim could be accepted as work-in-progress treatment.

A claim for deduction of compensation paid for delay in handing over possession was not accepted on the existing record because the supporting development agreement was produced for the first time before the appellate forum and the description of the payment was inconsistent across proceedings. The factual basis of the claim therefore required verification. The matter was restored to the Assessing Officer to examine the agreement, determine the true nature of the payment after giving reasonable opportunity of hearing, and, if it is found to be compensation for delay in handing over possession, treat it as part of work-in-progress.

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Issues: Whether the disallowance of Rs. 12 lakh claimed as compensation paid for delay in handing over possession was to be sustained or the matter required verification of the development agreement and re-examination by the Assessing Officer.

Analysis: The assessee's claim that the payment represented compensation to the owner of the flats for delay in handing over possession rested on an agreement produced for the first time before the appellate forum. The record also showed inconsistency between the description of the payment in the return and the explanation given during assessment. Since the agreement constituted additional evidence not examined by the lower authorities, the factual basis of the claim required verification. The appropriate course was therefore to set aside the appellate order and remit the matter to the Assessing Officer to examine the agreement and determine the true nature of the payment after giving reasonable opportunity of hearing.

Conclusion: The issue was restored to the Assessing Officer for verification, and if the payment is found to be compensation for delay in handing over possession, it is to be treated as part of work-in-progress.

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