AI Drafter 
TaxTMI 
TaxTMI 
2018 (9) TMI 952
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....e value of civil construction recorded by the appellant without bringing in to record any noticeable defects to reject the same though the entries in the books are duly supported by the bills and vouchers which were subjected to close scrutiny and audit by the Chartered Accountants. 4. The Learned CIT(A) erred in facts in not taking into consideration that the appellant maintained regular books of accounts and statutory audit as provided under section 44AB was conducted by the Chartered Accountants who had not made any adverse remarks as to the maintenance of the books of accounts. 3. The issue raised in the present appeal is against computation of work-in-progress. 4. Briefly, in the facts of the case, the assessee was engaged in the business of real estate and construction. For the year under consideration, the assessee had furnished return of income declaring total income at Nil. The assessee was part of Pride Group of companies. Survey under section 132 of the Act was carried out in the Pride Group on 07.09.2011. The assessee is one of the concerns belonging to Pride Group. The Government Registered Valuer Shri Nitin Lele was appointed for verification of cost in....
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....re in question was incurred for the purpose of business of assessee. The CIT(A) vide para 4.3.5 at pages 11 and 12 of the appellate order further observed as under:- "4.3.5 However, on verification of the financials for the year, it is noticed that no income was recognized from the subject project during the year and the entire expenditure incurred till 31.03.2010 was shown as closing work-in-progress vide Schedule VII of the P & L a/c. Therefore, it is not correct on the part of the Assessing Officer to treat the said expenditure as taxable income of the appellant for the year. The Assessing Officer ought to have reduced the expenditure of Rs. 26,26,900/- from the closing work-in-progress shown vide Schedule VII of the P & L a/c if he is of the view that the expenditure is not genuine in the light of the report of the Valuer. Therefore, there is merit in the alternate contention that the amount of Rs. 26,26,900/- cannot be taxed separately when no income was recognized from the project „The Mall‟ in this year. Accordingly for the year under consideration, the addition of Rs. 26,26,900/- made by the Assessing Officer treating the same as taxable income cannot b....
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....onsideration. The assessee was constructing project 'The Mall' and had included the said sum as part of its cost of construction and shown the same at the close of the year under the head 'Work-in-progress'. Pursuant to search action on the Pride Group of cases on 07.09.2011, of which the assessee was one of the sister concerns, the Government Registered Valuer was appointed in order to verify the cost of project developed by the assessee. In his report, the Government Approved Valuer noted expenditure of about Rs. 1.81 crores and stated that the said expenditure was incurred for material and direct expenses, out of which major expense was PMC charges of Rs. 1.44 crores. He also stated that during the period, no civil construction work was carried out. The Assessing Officer thus, disallowed sum of Rs. 26,26,900/- being bogus expenses claimed as construction expenses. The CIT(A) held that in the absence of details of cost of construction, the Assessing Officer was justified in doubting the genuineness of expenditure shown to have been incurred, but he further held that it was not correct on the part of Assessing Officer to treat the expenditure as taxable income of the assessee. He ....
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....aforesaid words appearing in Section 69B of the Act imply that before making an addition under this section, Assessing Officer was required to reach a positive finding that the assessee has spent an amount on cost of construction which is more than the amount recorded in the books of account. Ostensibly, the only basis brought out by the Assessing Officer to make the impugned addition under Section 69B of the Act is the report of the DVO estimating the value of construction at higher figure. The report of the DVO is at best, an estimate but not an evidence to prove any undisclosed investment in construction by the assessee, especially in a situation where no infirmity or discrepancy has been established by the Assessing Officer in the account books maintained by the assessee. The Hon‟ble Supreme Court in the case of Sargam Cinema (supra) held that no addition can be made on the basis of the report of the DVO without the books of account being rejected, wherein expenditure relating to the construction is recorded and such books of account have not been rejected by the Assessing Officer under Section 145 of the Act. Thus, on this count the addition deserves to be deleted. ....