2017 (10) TMI 874

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..... Of-course, the assessee has raised ancillary and incidental issues relating to rejection of books of account as well as violation of rules of natural justice. 3. Brief facts are, the assessee a domestic company is engaged in the business of purchase, construction, acquiring, running, etc., of all types of resorts, hotels, motels, holiday home, guest house, restaurants, Café, etc. For the assessment year under dispute, the assessee filed its return of income on 27th October 2007, declaring total income of Rs. 28,820. During the assessment proceedings, the Assessing Officer found that the assessee has entered into a MoU with Bhuminath Construction on 8th June 2006, for development of a-Class Hotel at Sanpada, Navi Mumbai. As per t....

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....e of computation of mutually agreed compensation is available. Thus, rejecting assessee's contention, the Assessing Officer proceeded to estimate the profit on the construction of the project at 8% of the cost incurred by the assessee on the project which worked out to Rs. 36 lakh. Accordingly, the Assessing Officer added back the amount to the income of the assessee. Being aggrieved of the addition made by the Assessing Officer, assessee preferred appeal before the first appellate authority. 4. Before the learned Commissioner (Appeals) the assessee objecting to the addition made by the Assessing Officer submitted that proper opportunity was not given to the assessee by the Assessing Officer. It was submitted, under the MoU, the contract....

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....he reason for termination of MoU appears to be to convert the project into a residence building in place of a hotel. He also observed that from the Balance Sheet, it was revealed that cost of construction of the project was partly made out by the assessee from borrowed funds of Rs. 94,94,882. He also observed, the assessee has paid interest of Rs. 9,60,000, which is more than the compensation received. Thus, on the aforesaid analysis of facts, the learned Commissioner (Appeals) upheld the addition made by the Assessing Officer. 5. Learned Authorised Representative submitted before us that cost of construction was also founded by Bhuminath Construction free of interest. He submitted, if the interest component on the amount advanced by Bhu....

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...., however, once the Assessing Officer has found defects in the books of account and estimated income, books of account are impliedly rejected. He submitted, there is no specific clause in MoU providing the mode and manner of payment of compensation. Therefore, the basis for payment of compensation being not transparent, the claims of the assessee cannot be accepted. 7. We have heard rival contentions and perused the material available on record. It is evident, there is no dispute about the fact that the assessee and Bhuminath Construction have entered into MoU for development of a Hotel. It is also a fact that as per the terms of MoU, Bhuminath Construction will advance a sum of Rs. 5 crore in installments to the assessee for development....