TaxTMI 
TaxTMI 
2016 (11) TMI 435
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....uture development expenses" claimed by the appellant assessee company were part of the cost of the Units sold in its construction project "Ashiana Aangan" and the revenue considered out of sale proceeds had to be matched with the entire cost of the Units (incurred & to be incurred) and therefore, allowance of such expenditures could not be termed as pre-judicial to the interest of revenue. (3) For those non-discussions of allowable expenditures in the assessment order does not lead to conclusion that the Assessing Officer had not made any enquiry in the course of assessment proceedings. (4) For that the Assessing Officer had allowed "further development expenses" as accrued expenses for Units sold in the housing project and such view is permissible in law to which the Pr. Commissioner did not agree with and under these facts the assessment order cannot be treated as erroneous and pre-judicial to the interest of revenue. (5) For that the assessment order passed u/s.143(3) of the Act passed by the Assessing Officer is not pre-judicial to the interest of revenue as because the tax has been demanded based on book profit u/s.115JB which is much higher than the....
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.... the Act issued notice to the assessee dated 11/12/2015 for clarification of the future development expenses. In compliance to the notice the assessee submitted that in real estate business it is not possible to incur all the possible ascertained cost before the handing over the possession of units to the customers. The company follows mercantile accounting method and accordingly we have to follow the matching concept i.e. matching the cost with the revenue. The costs to be incurred are properly estimated by way of work orders or purchase orders. The expenses claimed as "future development expenses" were the expenses required to be incurred after the completion of the project. As these projects were completed during the relevant AY and non accounting of the future cost will not represent the true financial picture of the assessee. Assessee also submitted that the details of "future development expenses" amounting to Rs. 2,24,85,000/- claimed by the assessee are the actual cost incurred immediately in the succeeding the year. In support of his claim the assessee has submitted the breakup of the future cost and the actual cost incurred as detailed below S.No Particulars Prov....
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....ss Accounts under the head "other projects related expenses". The provisions made in the books and actual amount incurred are narrated in the impugned assessment order uls.263. (2) Under the above facts and circumstances Ld. Assessing Officer had considered it to be an allowable expenditure under mercantile system of accounting. It is true that there is no discussion on this issue in the assessment order. It is also prevalent practice that all the allowable expenditures are not discussed in the assessment order, rather the expenses which are disallowed or added back are discussed at length in the assessment order. Therefore, nondiscussion of each and every allowable expenditure in the assessment order should not be termed as erroneous assessment order. (3) "Future development expenses" are a cost of the Unit in the housing project. The entire income on sale of respective unit had been considered as revenue at the time of handing over of possession to the buyer. Therefore, under the mercantile system of accounting the entire cost of the unit has been charged to the Profit & Loss Accounts. There is no error in doing so. In view of the same and under the facts of the....
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....t been crystallised in the year under consideration. Now the following question arises for our consideration. 1. Whether the AO has conducted the enquiry at the time of assessment with the regard to the future development expenses. 2. Whether the future development expenses represent the cost which has been crystallized. 3. Whether the order of the erroneous and prejudicial to the interest of Revenue. From the perusal of the assessment records we find that the necessary enquiry has not been made by the AO at the time of assessment. In such circumstances various courts have held the order of the AO as erroneous and prejudicial to the interest of Revenue. In this connection we rely in the judgement of Honourable High Court of Delhi in the case of Gee Vee Enterprises Vs. ACIT & Ors 99 ITR 375 where it was held as under:- "The position and function of the ITO is very different from that of a civil Court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil Court in the absence of any rebuttal. The civil Court is neutral. It simply gives decision on the basis of the pleading and evidence which comes ....
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.... not made sufficient enquiries before granting registration to the firm and it was not necessary for the CIT to have himself made enquiries before cancelling the assessment." 7.1 We also find that the future cost claimed by the assessee represents the estimated expenses as these have not been crystallized at the time of finalization of books of the accounts told these expenses have been estimated in scientific manner. These expenses have been estimated on the basis of the agreement for such expenses. These agreements have been made in the year under consideration for some future activities which will begin after the financial year. The cost of such activities has already been ascertained on the basis of the contracts. We concur with the view of the ld. AR in so far the manner adopted by the assessee for the determination of the future cost. However we find that the documents/ contracts made by the assessee for the future cost have not been verified by the AO at the time of assessment. The argument of the ld. AR that the assessee has paid the tax under section 115JB of the Act and even after making the disallowance of the future development cost the assessee shall still be lia....