TaxTMI 
TaxTMI 
2019 (1) TMI 340
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Rs. 123.36 crores as on 31.03.2011 and Rs. 136.30 crores as on 31.03.2012 received against the booking of plots / flats / Showrooms are Advances from customers and they stand duly accounted in audited books, reflected in audited financial statements and details thereof duly filed before the Ld. AO during original assessment proceedings. b. The outstanding advances given of Rs. 48.53 crores as on 31.03.2012 paid for purchase of stock in trade out of advances received from customers against the booking of plots / flats / Showrooms and they stand duly accounted in audited books, reflected in audited financial statements and details thereof duly filed before the Ld. AO during original assessment proceedings. c. The Income Tax of Rs. 77.79 Lacs deposited as disputed Income Tax demand for preceding years stands duly accounted in audited books, reflected in audited financial statements, details thereof already on record of Ld. AO and the same has no tax effect at all in the present assessment. d. The site expenses outstanding as Revenue W1P at Rs. 352.26 lacs as on 31.03.2012 as project expenses stands duly accounted in audited books, reflected in audited financial statements and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y and justification during the course of assessment proceedings was furnished but the same has not been reflected in the assessment order. 6. The Ld. DR on the other hand argued that the order of the Assessing Officer should be deemed to be erroneous as no enquiries have been conducted in this case. It was argued that the Assessing Officer has simply kept quite by considering the final accounts submitted by the Assessee but has not travelled beyond the final accounts, hence the action of the Ld. Pr. CIT is in consonance with the Explanation 2 of Section 263 of Income Tax Act,1961. 7. The matter has been examined as to whether this issue has been verified by the Assessing Officer or not during the assessment proceedings. 8. The Ld. AR submitted the details of the sundry creditors before the Assessing Officer vide letter dated 27/06/2014. The relevant parts of the reply are as under: In the initial period immediately after incorporation of the Company M/s Preet Land Promoters and Developers Private Limited decided to execute the mega housing project for the members of two societies namely the Dastkar Cooperative House Building Society Limited, Mohali Registration no. 2689 dated ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee has explained to the Assessing Officer the details regarding the transfer, completed contract method how current liabilities are accounted and method of calculation of profits. The same can be gauzed from the submissions of the Assessee filed before the Assessing Officer. In normal case, profits or gains are computed at the time when goods are sold by transferring the ownership. In the case of real estate transaction, the same principle is applied when completed contract method (CCM) is adopted. As real estate transactions have a peculiar nature for real estate developers (that unless the asset comes into existence, there could not be any "transfer"), following the completion method for revenue recognition the amount which is accepted as advance from the Customers is shown under the Current Liabilities (Sundry Creditors) and the profit or gain from the real estate activity is required to be computed in the year of completion of project , accordingly the amount standing as Sundry Creditors (Advances from Customers) is Transferred to the Revenue account under Sale Consideration, as per the Guidance Note on Revenue Recognition for Real Estate Transactions issued by ICAI. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....residential plots and later on to allot the same to the members of the society as per the list given by the respective societies. Hence we see no reason to examine the land cost and the sources obtained from these two societies. 10.3 However, regarding the other individuals in the instant case, the Assessing Officer has not conducted absolutely any enquiry pertaining to the advances received of Rs. 37,38,17,271/- which gives rise to situation where the assessment was done without any enquiry. As enunciated in the case of Rampyari Devi 67 ITR 84 unlike a Civil Court which is neutral to give a decision on the basis of evidence produced before it, the Assessing Officer is not only an adjudicator but also an investigator. He cannot remain passive on the face of a return which is apparently in order but calls for further enquiry. If there is a failure to make such an enquiry the order is erroneous and prejudicial to the Revenue. This is not a case where a decision has already taken by the Assessing Officer and where a particular view taken by the Assessing Officer has been nullified by the PCIT by taking a different view possible on the similar set of facts. The Assessing Officer perfo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd the taxation in the subsequent years. The amounts spent and subsequently capitalized or taken as work in progress would certainly a matter of examination in the year in which the amounts were spent or brought in to the books as it will have a corresponding effect in the future years on the taxation. Hence ,the contention of the Ld. AR that Revenue is not affected cannot be accepted as the expenditure has not been claimed. Accepting such argument amounts to giving a very narrow perspective to the principles of taxation. A wrong capitalization or an incorrect capitalization of expenses in the current year would have a cascading effect on the revenue and taxation. 14. The Assessing Officer has not conducted any preliminary enquiries about the genuineness of the advances received. Thus making it a fit case for revision under the provisions of Section 263. Further the judgments submitted by the Ld. AR viz. CIT Vs. MAX India Ltd. and Malabar Industrial Company Ltd. Vs. CIT have been duly examined and found that they cannot be applied to the facts of the case before us. In the case of Swaroop Vegetable Products Industries Ltd. 187 ITR 412 it was held that it is beyond dispute that und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of the books of accounts.He argued that Assessing Officer has not conducted in depth and complete enquiries regarding the expenses incurred. 19. Having perused the documents on record, we are not in agreement with the arguments of the Ld. DR that insufficient enquiry should be a reason for upholding of order under section 263. Ld. PCIT cannot determine as to what extent the enquiries have to be conducted for allowing an expenses as genuine. In this case, since the Assessing Officer has examined books of accounts, TDS details which allowed her to come to a reasonable conclusion, we cannot support the order of the Ld. PCIT on this ground. Interest free deposit from associated concern 20. The Ld. Pr. CIT held that the Assessing Officer has not examined the interest free deposit of Rs. 4 Crores received during the financial year 2011-12 from its associate concern namely AB Apartments Pvt. Ltd. with reference to the provisions of Section 2(22)(e). 21. Before us, the Ld. AR submitted that the assessee has no money invested in the shares of AB Apartments Pvt Ltd. We also find that the matter stands examined by the Assessing Officer with reference to the reply submitted by the asses....