TaxTMI 
TaxTMI 
2004 (9) TMI 47
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....essing Officer did not accept the said return and completed the assessment under section 143(3) of the Act by order dated February 24, 1995, by taking recourse to section 145 of the Act. The assessee was a builder-cum-contractor, engaged in executing construction contracts for others and also constructing flats/shops as a building developer. The method of accounting adopted by the assessee was as follows: The value of land purchased for putting up the building with flats/shops intended for sale, was treated as a capital expense and debited to the balance-sheet. When it commenced construction in the said plot of land, the cost of material and labour (construction cost) was treated as revenue expenditure and debited to the profit and loss ac....
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....rofit from the work as 8 per cent. of the gross value of the work executed and consequently determined the profit from construction as Rs. 3,46,500. To this, he added Rs. 75,650 at 10 per cent, profit at the job works executed. Thereafter, by adding other income, etc., the total income was arrived at Rs. 4,83,369. After deducting the depreciation of Rs. 2,89,292, the Department determined taxable income at Rs. 1,96,080 as per order dated February 24, 1995. The assessee accepted the same. Being of the view that the order of the Assessing Officer was erroneous and prejudicial to the interests of the Revenue, the Commissioner of Income-tax, Jabalpur, after issuing a show-cause notice under section 263 of the Act, passed a revisional order dat....
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....r, despite recording this finding, the Assessing Officer estimated the income of the assessee at a higher figure. The Assessing Officer estimated the net profit of the assessee at 8 per cent, of the expenditure incurred by the assessee in the construction of flats. In my opinion, no income accrues till the flats are sold and, therefore, estimation of income on the basis of expenditure incurred was not the proper basis. Further, the Commissioner of Income-tax in the order passed under section 263 is of the opinion that while estimating the income, the Assessing Officer ought to have included the cost of land as well as the cost of opening stock. As I have already opined that the income cannot be presumed on the basis of expenditure incurred.....
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....ion 263 of the Act. The position is, however, different in regard to the direction to add the cost of the land, namely, Rs. 52,09,774. Firstly, the Assessing Officer was calculating the deemed income of value of the work executed and not on the value of flats/shops sold. Therefore, necessarily what had to be taken into account was the value of the work executed and not the value or the cost of the land. Therefore, the Assessing Officer rightly did not take the value of the land. In the view we have taken, it is unnecessary to consider whether, in the absence of any sale of flats constructed by the builder, estimation of profit on the basis of expenditure incurred for construction and calculating a percentage thereof as deemed profit was pe....