TaxTMI 
TaxTMI 
2013 (2) TMI 288
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..../2007 declaring total income of Rs. 20,64,775/- and the same was processed on 24/07/2008. The Assessing Officer conducted a survey u/s 133A on 28th February, 2008 and during the survey a statement on oath was recorded from Shri B. Sunil Kumar, Executive Director of the assessee. In accordance with the declaration made in answer to question no. 18, revised return of income was filed on 10th March, 2008 declaring additional income of Rs. 30,04,317/-. The assessee has been maintaining its accounts on mercantile basis and in accordance with AS-1. Accordingly, the assessee accounted for income on the basis of sale of plots registered during the financial year relevant for AY 2007-08 and on matching principles, the development expenditure estimat....
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....come was filed on 31/10/2007 as a valid return, the revised return filed on 10/03/2008 is also a valid return. Consequently, the Assessing Officer had no reason to ignore the revised return. b) The Assessing Officer proceeded on his computation of income by adopting the income as per original return of income, which was based on the profit and loss account drawn in accordance with the books of accounts regularly maintained and audited. The Assessing Officer did not find any defects in the audited accounts. Consequently, he had no reason nor gave an reason to disallow the provision made in the accounts towards an estimated cost of site development for an aggregate sum of Rs. 1,48,45,500/- as debited in the P&L account (....
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.... absence of any defects found by the AO in the accounts of the appellant, rejection of only one item from the P&L a/c has no basis. Similarly, the AO could not ignore the revised return filed validly. d) Significantly, as extracted by the AO on page 2 of the assessment order, revised returns filed for the assessment years 2005-06 and 2006-07 declaring higher income, computed @8% on the turnover have been accepted in scrutiny assessments by his predecessors." 4. After considering the submissions of the assessee, the CIT(A) observed that consequent to the survey action, the assessee filed a revised return offering an additional income of Rs. 30,04,317/- as per the commitment given by the Executive Director in his swor....
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.... to develop the site as per the statutory approvals from the authorities and such an exercise would necessarily result in outflow of resources to meet the obligation. Therefore, a reasonable and reliable estimate of the obligation to develop the site has been made by the assessee by adopting an average rate of Rs. 250/- per sq.yd for the proposed expenditure. The CIT(A) further observed that as seen from the assessment order, the Assessee had demonstrated before the AO that whenever the amounts have been spent, appropriate adjustments had been made in the books of account to establish the fact that the assessee has been honoring the commitment made to its clients. The CIT(A) found from assessment order that the AO has not taken cognizance o....
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....duced any evidence to substantiate the provisional site development expenditure of Rs. 1,48,45,000/-. 2. The CIT(A) erred in facts and in law in ignoring the fact that the assessee had shown Rs. 2.60 crores as outstanding liability as on 31/03/2007 relating to provisional site development expenditure which would mean that such expenditure has not disbursed i.e. expenditure being predominantly labor. 3. The CIT(A) erred in facts and in law ignoring that the assessee builder had stated details of site development expenditure at Rs. 28.85 lakhs. 4. The CIT(A) erred in facts and in law ignoring the fact that the assessee had characterized the site development expenditure as provi....
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....ained that whenever the amounts are actually spent, appropriate reversal entries are made for adjustment in the provision for site development account. The issue for consideration is whether this expenditure is a crystalised or a contingent liability. We are of the opinion that liability on accrual basis has to be recognized when the assessee is following the mercantile method of account in accordance with AS-I, which is recognized in section 145 of the IT Act. The expenditure committed to be incurred in terms of sale agreement besides the regulations prescribed by the local authorities are expenditures, which are partly actually incurred and partly to be incurred. It is not a mere provision but liability in praesenti. 9. The decision of....