TaxTMI 
TaxTMI 
2009 (12) TMI 687
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....torda project" was comprising of 18 shops and 40 flats whereas the other project namely "Porvorim project" was comprising of six flats and two duplex houses. He also noted that one land at Navelim admeasuring 34,000 sq. mts. was also being developed by the assessee-firm and construction work of factory building of Desai Cement Co. P. Ltd. (DCCPL) was also in progress. During the course of assessment proceedings, the assessee was called upon by the Assessing Officer to furnish various details relating to the said projects. He also verified the books of account and other relevant record maintained by the assessee which were produced before him during the course of assessment proceedings. On such verification, he pointed out various defects in the books of account maintained by the assessee. One of the main defects so pointed out by the Assessing Officer was in regard to the method followed by the assessee to recognise its income which was subsequently changed to project completion method from the percentage completion method followed in the earlier years. No satisfactory explanation in this regard could be offered on behalf of the assessee except stating that the method followed by i....
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....der section 40A(3) of Rs. 40,961 and prior period expenditure to be disallowed of Rs. 6,771; written submissions are made and the assessee has not made any major arguments against the proposed disallowances during the course of hearing dated March 28, 2007. Therefore, these amounts are brought to tax accordingly based on the facts brought out in the audit report under section 142(2A) of the Income-tax Act. Their main objections are with regard to three issues, i.e., the undervaluation of closing work-in-progress of Fatorda project and work done for DCCPL. On the third issue, i.e., sundry creditors, the assessee's authorised representative has requested to take a lenient view. (ii)The assessee's submissions are considered. As regards work done for DCCPL, they have stated that the actual work to this extent was not carried out. No proof or evidences for this statement nor any evidence to prove that the facts brought out in the special audit report are false were furnished before me. The assessee's authorised representative has stated that the DCCPL has capitalised the work done only the profit portion should be brought to tax in the hands of the assessee. I do not agree with the ass....
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....s the profits were under stated. This Undervaluation has to be brought to tax for some particular year since it relates to the profits understated of the project in its entirety. The assessee claims now that the opening work-in-progress also is undervalued. If the opening work-in-progress was undervalued, which represents profits not offered to tax, it should be brought to tax in some year since the profits of the entire project are under stated to that extent. Since the understatement has been unearthed during this assessment year it should rightly be brought to tax in this year itself since the project has been treated as completed during this year only. Moreover, if the assessee claims that opening work-in-progress is undervalued, how is it going to pass entries in respect of this undervaluation in its books of account? The stock account has to be debited and therefore the profit and loss account has to be credited to that extent which would result in increase in closing stock figure leading to the profits which were undervalued being offered to tax. Therefore, the assessee's arguments are meaningless and do not negate the fact that the understatement of profits has occurred whi....
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....eceivable against sales - extra work not accounted Rs. 3,76,173 3. Sales/work done for Desai Cement Co. Pvt. Ltd., not accounted Rs. 27,11,203 4. Undervaluation of closing work-in-progress of Fatorda project Rs. 18,68,014 5. Bogus and infructuous creditors/loans Rs. 24,83,453 5. The above additions made by the Assessing Officer, inter alia, were disputed by the assessee in an appeal filed before the learned Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals), however, did not find any merit in the contentions raised on behalf of the assessee while challenging the said additions and after rejecting the same for the reasons elaborately given in his impugned order, he confirmed the said additions made by the Assessing Officer. Aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the assessee has preferred this appeal before the Tribunal. 6. In ground No. 1 raised in this appeal, the assessee has challenged the additions of Rs. 18,12,615 and Rs. 3,76,173 made by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) on account of sale proceeds of the flats and ....
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....lared by the assessee-firm as its income was more than the entire sale proceeds received by it from the two projects including extra work done aggregating to Rs. 1,07,89,131. He contended that there was thus no suppression of any sale proceeds by the assessee from the two projects and the value of work done in the said project already declared by the assessee being more than the total amount of sale proceeds realised, no separate addition on account of sale proceeds of. the flats or extra work done was called for. He submitted that similar is the position with regard to the "Porvorim project" in respect of which work done to the tune of Rs. 39,06,770 was already declared by the assessee as against the actual sale proceeds of Rs. 36,57,068 realised till 31-3-2004. He also submitted that the amount of Rs. 18,12,614, in any case, was received by the assessee as against sale of flats the possession of which was given in the earlier years as per the Assessing Officer's own stand and not in the year under consideration. He contended that the said amount, therefore, could not be treated as income of the assessee for the year under consideration and addition made thereof is not sustainable....
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....ar and not in the year under consideration. We find it difficult to agree with this contention of learned counsel for the assessee. The assessee admittedly having followed the project completion method, the entire income from both the projects accrued to it in the year in which the projects were actually completed by it and the dates of handing over the possession of the flats was not all that relevant to ascertain the exact year of accrual of such income. As already observed, it was duly established by the Assessing Officer that the projects were substantially completed by the assessee in the year under consideration and the income of the said project thus was liable to be brought to tax in the hands of the assessee in that year. We also do not find merit in the contention of learned counsel for the assessee that the value of work already completed by the assessee as declared in the returns of income being more than the sale consideration of flats actually sold, no further addition was required to be made to its total income on this count as done by the Assessing Officer. In our opinion, the method followed by the Assessing Officer himself in determining the income of the assessee....
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....he assessee as advance from the Desai Cement Co. treating the same as its contract receipt. 13. The amount of Rs. 27,11,203 received by the assessee from DCCPL was claimed to be received as advance against work. As noted by the Assessing Officer, the said amount, however, was capitalised by DCCPL in its books of account and depreciation thereon was also claimed on the ground that the work assigned to the assessee was already completed. The contrary stand taken by the assessee that the said work was not done by it for the year under consideration, therefore, was not accepted by the Assessing Officer and the entire amount of Rs. 27,11,203 representing value of work done during the year under consideration was brought to tax by him in the hands of the assessee. The learned Commissioner of Income-tax (Appeals) confirmed the said addition made by the Assessing Officer rejecting the stand of the assessee that no work was actually done by it for DCCPL for the year under consideration. He also declined to accept the alternative contention raised on behalf of the assessee that only profit element of the value of work done amounting to Rs. 27,11,203 could be brought to tax as its income and....
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....the contract work done by the assessee for DCCPL over the years should be taken into account to ascertain the reasonability or the profit. The profit arising out of execution of contract work in the earlier years as declared by the assessee was already accepted by the Department and addition on account of the said profit being lower, if any, could have been considered in those years alone and not in the year under consideration. In our opinion, the expenses incurred in connection with the execution of contract are therefore required to be allowed as deduction. The onus in this regard, however, is on the assessee to establish the factum and quantum of such expenses by filing the necessary supporting evidence to claim the said deduction. Further, the assessee is also required to establish the source of funds for meeting the said expenses failing which the amount thereof would be liable to be added this income under section 69C. We therefore, restore this issue to the file of the Assessing Officer with a direction to allow the claim of the assessee for deduction of expenses if he is able to establish the factum and quantum of such expenses incurred in connection with the execution of ....