TaxTMI 
TaxTMI 
TaxTMI 
2016 (10) TMI 556
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....estate projects. In the course of the assessment proceedings, the Assessing Officer noted that the assessee was engaged in the following three projects during the AY 2004-05: 1. Himasai Pujitha, Block A, L.B. Nagar 2. Himasai Gardens, Gandhi Nagar 3. Sai Parkview Aptt., Banjara Hills Project It was engaged in the following two projects during the AY 2005-06: 1. Himasai Pujitha, Block A, L.B. Nagar 2. Himasai Gardens, Gandhi Nagar 2.1 The AO noted that the assessee had prepared separate works accounts for each project. The entire amount received from customers were recognized as sales during the year and the entire expenditure incurred during the year was taken to the works account. The closing work-in-progress at the end of the year ....
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....submitted that in the assessee's line of business, the material which was purchased from shops was supported by bills whereas expenditure on items like sand, brick, metal, labour etc., was supported by self-made vouchers and the Assessing Officer's objection to such self-made vouchers was without basis. The AR also submitted that the expenditure on such items was not very high, that the estimation of income at 15% was on the higher side for the assessee's line of business, that rejection of books for this reason was unjustified and that the Assessing Officer had not considered the remuneration paid to Directors and interest on capital/unsecured loans of the shareholders. The* AR further submitted that assessment in the assessee&....
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....ethod of accounting followed by the assessee to show the profits of Banjara Hills project as it did not reflect the true profits of the year. Under the circumstances the CIT(A) gave the following directions in his order: "05(b) In the given facts and circumstances of the case, I am of the view that the correct profits can be computed by following the percentage completion method prescribed in Accounting Standard-7. The assessee has shown the total cost of project at Rs. 129.24 lakhs including the cost of land. The total revenue recognized on the sale of all the flats was of Rs. 148 lakhs. Hence, the profit of various years involved in this project can be computed as under on the basis of details furnished by the assessee during the appeal ....
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....sidential apartments. He, therefore, held that estimation of the assessee's income at 12.5% of the gross receipts from the two projects, Gandhi Nagar and LB Nagar, net of all deduction including depreciation and remuneration and interest to partners, is fair and reasonable. 8. The CIT(A) observed that for Gandhi Nagar project, the assessee had not effected any sales for AY 2002-03 and 2003-04 and, therefore, not declared any profits from it. Further, no income was estimated from this project in assessment or by the CIT(A). For this reason, the CIT(A) directed the AO to estimate profits (and income) from this project on the basis of sales effected by the assessee for three relevant years as follows: AY Sales (Rs.) Income @ 12.5 (Rs.)....
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.... common in both the appeals under consideration: 1. The Ld. CIT(A) did not fully followed the previous order of the CIT(A) given for the Ay.2002-03 to Ay.2003-04. 2. The Ld. CIT(A) estimated the appellants income at 12.5% of the gross receipts, net of all deductions which is not fair. 3. The directions given in the case of Gandhi Nagar Project are not fair and correct." 12. We heard both the parties and perused the orders of the lower authorities. Assessee is engaged in the execution of contract works/sub-contract works, and the dispute involved in the present appeal, in the first place relates to rate to be adopted for estimating the income of the assessee out of the contract receipts; and then allowability of depreciation and remun....