2014 (2) TMI 844

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ng to the issue are stated in brief: The assessee is a partnership firm and is engaged in the business of construction and sale of apartments. During the Financial Year 2006-07 it had acquired a plot of land admeasuring 12000.60 sq.mtrs. As per the approved plan, it proceeded to construct 212 flats. The assessee followed percentage completion method for the purpose of estimating profit from the above said profit. In the financial year ending 31.3.2007 (assessment year 2007-08), the assessee incurred expenditure to the tune of Rs.7,12,03,190/- and the profit thereon was estimated at 11.69%, i.e. at Rs. 83.30 lacs. However, for the year ending 31.3.2008 and 31.3.2009, the assessee did not offer any income, though it incurred further expenditu....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....out the completion of project. Hence, in view of the heavy interest liability and uncertainty, the assessee did not offer any income for the year ending 31.3.2008 and 31.3.2009. The assessee also submitted that the market picked up in the subsequent years and hence the booking of the flats also picked up, which resuslted in a comfortable working capital position and hence, substantial progress was made in the project during the year ending 31.3.2010 and 31.3.2011. The assessee also submitted that it has offered income @ 9.53% for the AY 2010-11 and at 9.73% for the AY 2011-12. 2.2 The AO did not accept the submissions made by the assessee. Since the assessee was following percentage completion method, the AO took the view that the assess....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....nd 31.3.2009. The ld counsel submitted that the assessee did not make much progress during the year ending 31.3.2009. Though the total amount incurred during the year ending 31.3.2009 was Rs.3.36 crores, it mainly consisted of indirect expenses of Rs.3.04 crores. The said indirect expenses mainly consisted of interest expenditure of Rs.2.76 crores paid to the bank. He submitted that the interest expenditure cited above is excludedn, then it can be found that the assessee has incurred a sum of about Rs. 60 lacs during that year. Further, the assessee had incurred expenses on materials only to the tune of about Rs.24 lacs, which was far lesser than the amounts spent in the immediately preceeding year. Accordingly, he submitted that there was ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....income for the year under consideration also and hence the AO was right in estimating income. 5. We have heard rival contentions and carefully perused the record. We notice that the assessee had incurred a sum of Rs.7.12 crores, Rs.10.76 crores and Rs.3.36 crores respectively during the year ending 31.3.2007, 31.3.2008 and 31.3.2009, on implementation of the project. According to the assessee, the amount of Rs.3.36 crores incurred during the year ending 31.3.2009 included interest element of Rs.2.75 crores, meaning thereby, the assessee has effectively incurred a sum of about Rs.60 lakhs only during the year under consideration on implementation of project. However during the subsequent periods, i.e., during the year ending 31.3.2010, 31....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....come would be offered for all the years on some equitable basis. The excess or shortage, if any, in the income so offered over the years would finally be evened out in the year in which the project is completed, i.e., in the last year of the project, the balance amount of profit (Total profit generated out of the project less the profit already offered in earlier years) would be offered as income. In effect, even if the assessee fails to offer income for any of the years comprised in the project period, the same would be offered as income in the last year of the project. Thus the excess or shortage of income, if any, offered in a particular year would have cascading effect in the final year of the project. 8. However, in the instant case....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....nsiderable progress in subsequent years and it has also offered income in those years requires verification at the end of the assessing officer, since we have expressed our view by considering the said claim put forth by the Ld A.R. Hence, in our view, these facts and figures requires examination at the end of the AO. Accordingly, we feel it proper to set aside the issue contested before us to the file of the assessing officer for the limited purpose of examining the accounting figures relating to the subsequent years that were furnished before us. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the AO for examination of details discussed above. If on examination, the AO finds that the clai....