AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (3) TMI 1584
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.... 2. The grounds of appeal raised by the assessee in the memo of appeal in ITA no. 5776/Mum/2013 for assessment year 2005-06 filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") read as under:- 1. The Learned CIT (Appeals) has erred in by calculating the net profit @12. 68% on closing WIP. The reasons assigned by him for doing the same are wrong and insufficient. Provision of the Act ought to have been properly construed before estimating the same. Regards being had to the facts and circumstances of the case, the said estimation ought not to have been made. 2. The Learned CIT (Appeals) has erred in by confirming the adoption of percentage completion method instead of project completion method adopted by the assessee. The reasons assigned by him for doing the same are wrong and insufficient. Provision of the Act ought to have been properly construed before adopting the same. Regards being had to the facts and circumstances of the case, the said adoption ought not to have been made. 3. Order passed is bad in law and contrary to the provision of the Act. 4. Appellant leaves to add/ modify/ delete/ alter any/ all....
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....observed that the assessee has only incurred expenditure of Rs. 2,46,733/- towards purchases during the year under consideration and no other expenditure was incurred towards the cost of the project which led AO to conclude that the project of the assessee was complete while the income has not been offered for taxation. The assessee did not furnish area wise details of the project on year to year basis nor the assessee produced books of accounts before the AO. The AO also observed that in subsequent years the advances shown by the assessee as on 31-03-2005 have come down which also shows that the project was complete and the assessee ought to have declared the profit from the said project . The AO observed that the assessee is showing WIP and against which advances are shown, the assessee has to be given benefit of cost of construction because as per 1961 Act income is to be brought to tax and not the receipts, thus the AO estimated income to the tune of 40% of the advance of Rs. 1,11,85,163/- being shown as on 31-03-2005 which comes to Rs. 44,74,065/- and the same was brought to tax by the AO vide assessment order dated 24. 12. 2009 passed u/s 143(3) r. w. s. 263 of the 1961 Act. ....
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..... 08%. Thus, from the material available on record as also from the submission of the appellant himself, it is clear that the project was almost complete. Hence on this premise also, the appellant was required to disclose net profit on accrual basis on the entire project as no substantial work was required to be done further. 4. 2 Now, only issue which remains to be decided is the rate of profit. It is noticed that the appellant himself has disclosed a net profit of 12. 68% on the total sales of Rs. 1,51,05,580/- in three years as detailed above and hence there cannot be a better comparable case than the appellant's own case. In view of these facts, I am of the considered view that a net profit rate of 12. 68% is required to be applied on the construction work completed by the appellant instead of advances received. Accordingly, the A. O. is directed to apply a net profit of 12. 68% on closing WIP of Rs. 1,63,74,535/- and assess the net profit accordingly. Needless to mention that the cost of sales made in earlier years have been deleted from the WIP and hence the closing WIP is only required to be considered for estimation of the profit for the year under consideratio....
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....ad suffered taxation in AY 2008-09. 7. We have considered rival contentions and perused the material on record including case laws relied upon by both the parties . We have observed that the assessee is a builder & developer and is a proprietor of two concerns viz. M/s. Suvidha Developers & M/s. S. V. Developer. We have observed that the assessee has claimed to be developing this project since 1995 on which income has been claimed to be offered to taxation on project completion method instead of percentage completion method . It is claimed that the Revenue has accepted this method of accounting in earlier years and during the impugned assessment year only the Revenue has applied percentage completion method. The AO applied net profit of 40% on WIP to assessee income on percentage completion method on this project while learned CIT(A) assessed the income @12. 68% based on profit declared in earlier years. The assessee has claimed to have offered to tax entire income arising from this project in AY 2008-09 when the project was claimed by the assessee to have been completed. These contentions of the assessee need verification by the authorities below as it require verification of f....
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....almost 75% of the developed area was handed over to the buyers who made full payment and the sale deeds were also executed. Thereafter, possession of 20% of the remaining area was handed over to the buyers. The possession of the balance 5% of the developed area could not be handed over to the remaining buyers because they could not make full payment and take possession. On these findings the CIT (A) held that the allegation of the assessing officer that the assessee was adopting a method of accounting namely the project completion method, to suit its convenience to book income was baseless. A further finding recorded by the CIT (A) is that there was no manipulation in the books of accounts. So far as the method of accounting is concerned, the CIT (A) held that the project completion method is a well recognized and accepted method of accounting and was the only method suitable for any developer who has to deliver a completed product to the buyer. Ultimately the CIT (A) held as under:- "Thus on overall perusal of the assessment order it is seen that neither any defect has been pointed out by the assessing officer in the method of accounting followed by the appellant nor any ....
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....er the completed contract method, the revenue is not recognized until the contract is complete. Under the said method, costs are accumulated during the course of the contract. The profit and loss is established in the last accounting period and transferred to the profit and loss account. The said method determines results only when the contract is completed. This method leads to objective assessment of the results of the contract. On the other hand, the percentage of completion method tries to attain periodic recognition of income in order to reflect current performance. The amount of revenue recognized under this method is determined by reference to the stage of completion of the contract. The stage of completion can be looked at under this method by taking into consideration the proportion that costs incurred to date bears to the estimated total costs of contract. The above indicates the difference between the completed contract method and the percentage of completion method. " (underlining ours) 9. After the above judgments of the Supreme Court it cannot be said that the project completion method followed by the assessee would result in deferment of th....
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....nst investment in land pertaining to A. Y. 2003-04, Rs. 50,89,283/- against un-genuine creditors pertaining to A. Y. 2006-07 and Rs. 53,11,000/- as cash pertaining to A. Y. 2008-09. Accordingly, the assessee revised the return of income for earlier years and filed return for the year under consideration by duly disclosing the declaration amount as income. Apart from this declaration, the assessee has disclosed profit of Rs. 90,66,117/- from proprietary concern M/s. S. V. Developer and claimed loss of Rs. 9,98,408/- from M/s. Suvidha Developers the other proprietary concern. Thus the total returned income declared by the assessee was Rs. 1,33,78,801/- and after claiming the deduction u/s 80C at Rs. 1,00,000/-, the total taxable income was Rs. 1,32,78,801/-. During the course of the assessment proceedings u/s 143(3) r. w. s. 143(2) before the AO, the assessee's counsel Shri. Hasrnukh Palan voluntarily submitted that due to accountants mistake the compensation received in A. Y. 2008-09 from M/s. Chheda Housing by M/s Suvidha Developers remained to be considered as income. It was submitted that the accountant due to his ignorance treated this compensation as loan. Accordingly, the asse....
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.... by the Assessing Officer for incorrect claim of loan of Rs. 30 lakhs. Then he came forward for disclosing a sum of Rs. 30 lakhs received as compensation for the taxation purposes vide letter dated 20/09/2010 stating that the sum was shown as loan by mistake. In his written submission, filed during the course of appellate proceedings, the appellant has stated similar reasons that the disclosure was made voluntarily and hence no penalty was imposable. In support of his contentions, he has relied upon various case laws as mentioned in the written submission reproduced in Para 3 above. From the facts of the case, thus it is clear that the assessee had no intention to disclose the compensation of Rs. 30 lakhs as income particularly when the chances of a scrutiny assessment are very rare as only less than 3% cases are scrutinised. Under these circumstances, the penal provisions are to be invoked in order to create effective level of deterrence so as to ensure voluntary compliance in disclosing the correct income in the returns of income. Since, the appellant has come forward for disclosing the income of Rs. 30 lakhs falsely shown as loan only after service of notices under Section 143(2....
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....The learned DR also relied upon the decision of the Hon'ble Supreme Court in the case of Mak Data Private Ltd (2013) 38 Taxmann. com 448(SC). The Ld. AR on the other hand relied upon the decision in the case of CIT vs. Bhavin Kumar M Dagli (2017)79 taxman. com 392 (Guj). 13. We have considered rival contentions and have perused the material on record including case laws relied on by both the parties. We have observed that the assessee is a builder & developer and proprietor of two concerns mainly M/s. Suvidha Developers & M/s. S. V. Developer. The assessee was surveyed by the revenue u/s. 133A on 05. 09. 2008 . Several books of accounts/documents during the course of survey were found which were inventorised by Revenue . Statement of son of the assessee was recorded and he made certain disclosure of income . The assessee filed return of income for the impugned assessment year on 29-09-2008. When the assessment proceedings u/s 143(3) r. w. s. 143(2) were going on, the assessee declared voluntarily income of Rs. 30,00,000/- being compensation received from Chedda Housing which was earlier declared as loan in the books of account and the same was offered as an income during the cou....