TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 1117
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....n the balance-sheet filed along with the said return, closing work-in-progress was shown by the assessee at Rs. 17,49,74,365/-. Since the opening work-in-progress shown by the assessee was Rs. 18,02,20,356/-, the Assessing Officer required the assessee to explain as to why the closing work-in-progress shown as on 31.03.2012 was so low. In reply, it was submitted by the assessee that the two Projects, namely 'Parijat' and 'Pratyee' were completed during the year under consideration. It was also submitted that the total area of flats constructed in the said two projects was 80,141 sq,ft, and 1,36,470 sq.ft., out of which flat area of 73,912 sq.ft. and 64,610 sq.ft. was sold out of 'Parijat' and 'Pratyee' Projects respectively. It was further submitted that the total cost of construction and other expenses incurred during the year under consideration were Rs. 12,57,23,965/- and after adding the same to the opening work-in-progress, the total value of closing work-in-progress as on 31.03.2012 became Rs. 30,59,49,321/-. It was submitted that the total cost attributable to 'Parijat' Project and 'Pratyee' Project completed during the year under consideration was Rs. 6,53,15,103/- and Rs. ....
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....he assessee. He estimated the area of unsold flats completed by the assessee at 35% and worked out the value of closing work-in-progress at Rs. 19,08,87,526/- as against the value of closing work-in-progress shown by the assessee at Rs. 17,49,74,365/-. Accordingly the difference of Rs. 1,59,13,161/- was added by the Assessing Officer to the total income of the assessee on account of under-valuation of closing work-in progress. 4. During the course of assessment proceedings, it was also noted by the Assessing Officer that construction material worth Rs. 70,15,063/- was purchased by the assessee at the fag end of the year. According to the Assessing Officer, the said material should have been disclosed by the assessee as closing stock and since the assessee had failed to disclose the same in the Balance-sheet, the Assessing Officer required the assessee to offer its explanation in the matter. In reply, it was submitted by the assessee that the said purchases made at the fag end of the year were included in the cost of construction and the same were duly reflected in the closing work-in-progress. It was submitted that the closing stock of material thus was duly disclosed in the form ....
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...., general expenses apportioned to the Project, cost of completed projects transferred to P&L A/c. on proportionate basis and the balance closing work-in-progress were also prepared and furnished by the assessee before the ld. CIT(Appeals) as under:- Name of the project Opening(A) Work done during the year(B) General expenses(C) Cost transferred to P/L A/c.(D) Balance (A+B+C)- (D) General expenses for all project 12,53,324 12,53,324 NIL Gopalpur 300479 100800 401279 Panagarh 55690 509278 654968 Parijat 48464768 15597011 1253324 60238280 5076823.20 Prabortak 24521262 23358957 2506648 0 50386867.40 Prtayayee 89612867 51451876 5639958.90 69455750 77248951.90 Purulia 47468 0 47468 Puspak 79327 71900 151227 Santiniketan 8454961 4316175 12771136 Tapoban 8688234 17757426 1879986.30 28325646 Total 180225056 113163423 12533241.20 130947354 174974366 6. As regards the objections raised by the Assessing Officer in the assessment order while rejecting the closing work-in-progress shown in the balance-sheet, a detailed ....
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....flated expenditure or under reported the sales revenue. PARA No-3C OF THE ASSESSMENT ORDER:- In this para the Ld. DCIT has mention that, the cost apportioned to the projects Parijat and Pratyayee is Rs. 6,53,15,103.00 and Rs. 14,67,04,701.00 respectively is not correct. Sir, as per our submission (Which was given at the time of scrutiny) it was ample clear that Rs. 6,02,38,280.00 was apportioned to the project PARIJAT and Rs. 6,94,55,750.00 was apportioned to the project PRATYAYEE. Sir, the Ld. DCIT was totally confused-in framing the assessment order, moreover vie have submitted the entire books of accounts to the Ld. DCIT, so his contention is not tenable that he could not verified the expenses. PARA No-3D OF THE ASSESSMENT ORDER:- In this para the Ld. DCIT has said that "The audited balance Sheet shows advance from customer received amounting to Rs. 22,77,07,424.00 nobody will give advance unless the work is completed substantially. Hence the value of closing work in progress ought to be more than the advance from customer. Sir, here I would like to state that, it is totally a hypothetical assumption by the Ld. DCIT and it is not based on any fact of material avail....
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....er if the sale part and general expenses are ignored then the appellant has shown its WIP to the extent of Rs. 3,05,92,179/-. It is further to point out that subsequently in this case survey was also conducted. The certain books of account were impounded. The A.O. was asked to inform if any incriminatory material has been found during the course of the survey which shows suppression of sale or cost of construction. The A.O did not report any such fact. Considering the fact that the appellant was maintaining project wise cost and corresponding sale and its closing balance the A.O's action for estimating closing at the rate of 35% without any basis is not tenable hence, assessment made by the A.O on this account is hereby deleted. The ground of appeal is allowed". 8. As regards the addition of Rs. 70,15,063/- made by the Assessing Officer on account of the alleged undisclosed closing stock, the submission as made on behalf of the assessee before the Assessing Officer and reiterated before him was found acceptable by the ld. CIT(Appals) and he deleted the said addition for the following reasons given in his impugned order:- "In this case, it is seen that A.O. has simply stand....
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.... By applying the Net Profit rate of 5%, the undisclosed income of the assessee from the completed two Projects was worked out by the ld. CIT(Appals) at Rs. 27,50,748/- and the Assessing Officer was directed by him to make the addition to the total income of the assessee to that extent. 10. Aggrieved by the order of the ld. CIT(Appeals), the revenue and assessee both are in appeals before the Tribunal on the following grounds: Revenue's appeal in ITA No. 1204/KOL/2017 (1) In the facts and circumstances of the case, the Ld. CIT (Appeals) Durgapur has erred by deleting addition of Rs.l,59,13,1611- by accepting the contention of the assessee without considering the fact that claim of the assessee of receiving of advances against the projects were not supported by agreements. (2) In the facts and circumstances of the case, the order of Ld. CIT (Appeals) Durgapur is erroneous as he reduced addition of Rs. 70,84,7211- to Rs. 27,50,748/- on estimation basis by taking 5% of sale next year ignoring the fact that this undisclosed stock was found as not disclosed in audited Balance Sheet. (3) In the facts and circumstances of the case, the Ld. CIT (Appeals) Durgapur has erred by delet....
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.... the work-in-progress, the assessee was not required to disclose separately the closing stock of material in the balance-sheet and it was not a case of undisclosed closing stock as alleged by the Assessing Officer. 14. We have considered the rival submissions and also perused the relevant material available on record. The assessee in the present case is a Company, which is engaged in the business of real estate development. As claimed before the authorities below as well as before the Tribunal, the income of the said business was recognized by the assesee-company as per the Project Completion Method followed consistently. It is observed that there were several projects that were undertaken by the assessee-company of real estate development, out of which two Projects, namely 'Parijat' and 'Pratyee' were completed during the year under consideration. The income of the said Projects completed during the year under consideration was accordingly recognized by the assessee to the extent of flats sold during the year under consideration as per the method of accounting followed by it and corresponding expenses proportionate to such sale booked under work-in-progress were debited to the P....
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....ur opinion, properly understood the working of closing work-in-progress as made by the assessee and deleted the addition made by the Assessing Officer on account of the alleged under valuation of closing work-in-progress. We, therefore, uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and dismiss Ground No. 1 of the Revenue's appeal. 15. As regards the issue relating to the addition of Rs. 70,84,721/- made by the Assessing Officer on account of the alleged undisclosed closing stock, we have already noted that the total cost of construction incurred during the year under consideration was included by the assessee company in work-in-progress. Since the entire material purchased for the construction was included in the cost of construction and thereby in the work-in-progress, there was no question of showing any material purchased at the fag end of the year which was not utilized for construction in the closing stock separately. As rightly contended on behalf of the assessee and accepted by the ld. CIT(Appeals), the material purchased at the fag end of the year, which had remained un-utilized for construction was duly reflected in the valu....