TaxTMI 
TaxTMI 
2020 (1) TMI 1132
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....were paid commission only for claiming bogus expenses.'' 2.1 In Ground No. 1, the Revenue is aggrieved that the ld. CIT(A) has erred in deleting the addition of Rs. 3,96,99,161/- made by the AO. 2.2 Brief facts of the case are that the assessee is engaged in the business of Real Estate. It has e-filed its return of income for A.Y. 2015- 16 on 26/09/2015 declaring a total income at Rs. Nil/- (loss of Rs. 1,59,40,582/-). During the year under consideration, assessee booked sales of two projects namely Hanging Garden at Jaisinghpura & Grandeur at Swej Farm, Sodala, Jaipur. Out of them, project Hanging Garden was completed long back in preceding years but in project Grandeur construction expenses were also incurred during the year under consideration. The assessee regularly follows the Project Completion Method of accounting, according to which income from sale is recognised when entire consideration is received and possession/registry is done. The AO during the course of assessment proceeding observed that the projects Hanging Garden & Project Grandeur have been completed but in the Balance sheet of the company, the advances relating to Project Grandeur amounting to Rs. 3,96,99,161/....
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....,161/- made by the AO. 2.4 During the course of hearing, the ld. DR relied on the order of the AO praying that the ld. CIT(A) has erred in deleting the addition of Rs. 3,96,99,161/- made by the AO. 2.5 On the other hand the ld.AR has supported the order of the ld. CIT(A). However, to this effect, the ld.AR of the assessee relied on the decision of ITAT Bangalore Bench in the case of S.K. Properties vs ITO (2017) 162 ITD 419. 2.6 We have heard the ld. counsel of both the parties and perused the materials available on record. In this case, the AO made the addition of Rs. 3,96,99,161/- by treating the entire advance received from the customers as income of the assessee by holding that the assessee has not followed percentage completion method whereas as per the Guidance Note issued by ICAI the assessee is required to follow percentage completion method of accounting. It is noted from the available records that the assessee is regularly following an accounting policy whereby sales is recognized by following project completion method . According to this method, the sales are recognized when the sale deed is executed and possession of the flat is given to the buyer. There is no provis....
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....uble taxation. The AO has not considered the expenditure incurred by the assessee against such receipt. In the present case in the project Grandeur, total value of stock as on 31- 03-2015 was Rs. 6,10,28,779/-. Therefore, deduction on account of cost against the receipt of Rs. 3,96,99,161/- ought to have been allowed instead of assessing the receipt as income. Hence, taking into consideration the facts and circumstances, we find no reason to interfere with the order of the ld. CIT(A). Thus Ground No. 1 of the Revenue is dismissed. 3.1 In Ground No. 2, the Revenue is aggrieved that the ld. CIT(A) has erred in granting relief of Rs. 24,79,385/- out of total addition of Rs. 25,79,385/- on account of disallowance of commission expenses ignoring the fact that these persons could not furnish the details of the flats or project of flat number or person to whom they has allegedly sold the flats. This proves that they were paid commission only for claiming bogus expenses. 3.2 Brief facts of the case are that during the year assessee claimed commission expenses of Rs. 80,79,385/- in respect of following projects:- * Hanging Garden- Rs. 39,04,385/- * Grandeur- Rs. 41,75,000/-  ....
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....essee had filed certain details of commission expenses and out of details furnished by the assessee, the AO summoned some parties in order to verify the claim raised by the assessee with regard to rendering of services by those persons. After recording the statements of those persons , the AO denied such expense on the ground that those who were summoned by him were having no knowledge regarding the commission work done by them and they could not submit the details of flats or project of flat number of persons to whom they had allegedly sold the flats. On the contrary, the ld. CIT(A) restricted the disallowance to one person who had denied the receipt of commission of Rs. 1.00 lac and had allowed the relief to other persons by holding that those persons were assessed to tax. Tax has been deducted at source and out of 07 persons whose statements were recorded, 06 persons accepted the fact of receipt of commission. After verifying the statements recorded by the AO in respect of total commission payment made by the assessee of Rs. 25,79,385/-, we found that statements of those persons summoned u/s 131 of the Act were recorded on oath and as per their statements it is found that these ....