TaxTMI 
TaxTMI 
2025 (7) TMI 1425
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....f the case show that assessee is a partnership firm carrying on business of real estate development as builders & developers, filed its return of income on 30.10.2018 at a total income of Rs. 1,98,12,669/-. The return was picked up for complete scrutiny to examine the income from real estate business and default in TDS. 3. Assessee firm was incorporated on 1.1.2010 with the main object of construction of residential apartment. During the year it has developed housing projects viz., Elegant Valley at Raj Rajeshwari Nagar and Elegant Esplanade, Bangalore. The ld. AO noted that assessee has sold flats in its various projects such as Elegant Embassy North, Elegant Embassy South, Elegant Esplanade, Elegant Grandeur, Elegant Orchid & Elegant Valley wherefrom total revenue earned was Rs. 38,36,79,497/-. Over and above, further revenue of Rs. 28,37,26,666/- also had been accounted for sale. Assessee has maintained its books of accounts and revenue was recognized on Percentage Completion Method and during the year 47 % of The project is completed. However, the ld. AO noted that for AY 2016- 17 itself, the assessee has shown the percentage completion at 56.8%, Therefore this year it canno....
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.... completed during the year. Hence, he extracted the details submitted by the assessee and noted that assessee should have shown the revenue of Rs. 222.72 crores on project wise percentage completion method. Out of the above, assessee has already disclosed an amount of Rs. 45.34 crores up to 31.3.2018 and therefore he made an addition of Rs. 177.38 crores on account of revenue recognition u/s. 69A of the Act. 6. The AO further noted that as per information available with revenue, assessee has made a cash deposit of Rs. 77,25,100/- in Dhan Laxmi Bank. The source of the above deposit was explained by assessee as withdrawal from 3 current accounts. Assessee also submitted copies of cash book and cash statement. Thus claim of assessee is that source of cash deposit is withdrawal from the bank account of assessee on earlier occasion. The ld. AO did not believe the explanation of the assessee. Further subsequently the assessee submitted that source of cash deposit of Rs. 77,25,100 is out of small booking advance received from various customers as well as rental income received. The ld. AO asked the assessee to provide details of name, address, PAN of customer, date of receipt of above ....
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....ed that the ld. AO asked information from the assessee, but same was not provided while deleting the addition. The ld. CIT(A) did not explain how he is satisfied with the income offered by the assessee. Further the ld. CIT(A) has also not given any finding with respect to the observation of the ld. AO, but merely deleted the addition stating that assessee has already offered income higher than the added by the ld. AO. Therefore, according to her, the order of the ld. CIT(A) is not sustainable. 13. The ld. Sr. Advocate, Shri K. Chaitanya, submitted that the ld. CIT(A) has upheld the order of the ld. AO with respect to infirmities in the books of account. He held that as assessee has already offered higher sum than sum added by the ld. AO in the earlier years and some of the projects have already been completed, based on the details submitted by the assessee, based on which the AO has made the addition, the ld. CIT(A) deleted the addition. The ld. AO has not rejected the books of account and after the verification of the books of account only, addition was made. He, even otherwise, stated that the addition made by the AO u/s. 69A of the Act is not sustainable. He further referred ....
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....tion of project as 47% and has recognized revenue accordingly But from the information available with the department, it was gathered that during the AY 2016-17, the assessment order has been passed in the instant case with percentage of completion taken at 56.8% and revenue has been recognized accordingly by making the addition of the difference to the income of the assessee. Further it is also seen that the estimated cost of project as per assessment order of 2016-17 was Rs. 1,31,79,83,090/-, however in for AY 2018-19 assessee has submitted that the estimated cost is Rs. 1,05,88,62,900/-. It is beyond anybody's comprehension to note as to how the cost of the project and percentage of completion of project has reduced from AY 2016-17 to AY 2018-19." Accordingly, the AO issued a notice to the appellant to provide complete information with respect to all the projects undertaken by the appellant since its inception in order to ascertain the exact percentage of completion and the correct figure for revenue recognition. The appellant vide reply dated 22.03.2021 filed details giving the names of the projects, their commencement date, the estimated project cost in each case,....
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.... estimated cost of the projects is almost equal to the cost of construction incurred till March 2018, implying thereby that the projects are almost complete. 12.4 In the table assessee was asked to submit the construction cost incurred till 31.03.2017 and construction cost incurred in FY 2017-18. It can be seen, from the table reproduced above assessee has not submitted the details correctly. 12.5 During the relevant AY assessee has shown project expenses of Rs. 33,29,30,184/- in the P&L A/c, however from the details submitted by assessee vide letter dated 22.03.2021, it is seen that the total construction cost incurred during the relevant AY is a mere Rs. 5.12 Cr 12.6 No cost has been shown as incurred by the assessee against projects Elegant Whispering Winds and Elegant Exotica in the submission dated 22.03.2021 whereas the in table as given by assessee vide letter dated 05.03.2021, he has submitted that these two projects have started during the year and has also mentioned total built-up area against these projects. No project can be constructed without incurring cost. 12.7 During FY 2017-18 the total sale agreement/sale deed value of area sol....
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....e a gross error in assuming that these five projects were completed in AY 2018-19 and in recognizing the entire revenue accruing to these projects in AY 2018-19 whereas the same had been recognized and brought into the books of account of the assessee in the assessment years prior to AY 2018-19. The assessee stated that the AO violated the principles laid down in the Income Computation and Disclosure Standards-III (ICDS) that has been devised u/s 145(2) of the I.T. Act and has also disregarded the provisions of Accounting Standard-7 (AS-7). As per the ICDS-III. the contract revenue and expense should be recognized as revenue and expense based on the stage of completion of the contract. Accordingly, the revenue has to be determined by the percentage of completion method. The appellant stated that contrary to the ICDS-III guidelines issued by the Income Tax Department, the AO has computed revenue from these projects using the Project Completion method and has thus recognized the entire revenue of these five projects in AY 2018-19. This action of the AO also amounts to double taxation as the entire income from these five projects has been offered to tax in the assessment years prior t....
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.... 3. Elegant Esplanade commenced in FY 14-15 4. Elegant Grandeur commenced in FY 14-15 5. Elegant Orchid commenced in FY 12-13 6. Elegant Valley commenced in FY 14-15 7. Elegant Whispering Winds commenced in FY 17-18 8. Elegant Exotica commence in FY 17-18. The assessee's contention is that as regards the first five projects, the same were completed before AY 2018-19 and the revenue from these projects has been recognized in previous assessment years. The AO, on the other hand. held that these project were completed in AY 18-19 and thus recognized the entire revenue from these five projects in AY 18-19 itself. Now, if we examine the assessment order for AY 16-17 in the assessee's own case under section 143(3) dated 22.12.2018, it is seen that the assessee has been following the percentage completion method and out of the estimated cumulative project cost of Rs. 1,31,79,83,090/- the assessee had already incurred an expenditure of Rs. 74,85,82,785/- by 31.03.2016. The scrutiny assessment for AY 16-17 shows that the assessee had been following the percentage completion method for recognizing revenue and was not following t....
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.... clear that, he has accepted all the findings of the ld. AO about infirmities in the details submitted by assessee. Regarding the quantum of addition, he has held that as the assessee has already offered higher income than what is estimated by the ld. AO, no further addition is required to be made. Even in the grounds of appeal also the only grievance of the LD AO is that he has not been given any opportunity to verify the claim of the assessee. In this case ld. CIT (A) has also agreed with all contentions of the ld. AO and upheld all the findings of the ld. AO. For the purposes of the quantum of addition, he examined various tables reproduced in the assessment order and from the same tables he found that though the findings of the ld. AO is correct, but the quantum of addition is not correct as assessee has already offered higher income than determined by the ld. AO in earlier years. Therefore, for the amount of revenue to be offered for this year, the Ld. AO should have taken in to account revenues already offered by the assessee in earlier years. Thereafter, only the balance addition should have been made. He found that, on the same principles, the income already offered by the ....
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....ssessee also submitted the statement showing the withdrawals and deposits made by the assessee in various banks. On the basis of above statement, the ld. AR submitted that there is no inconsistency in the submission of the assessee. Assessee has deposited the above sum in the bank account by withdrawal from the bank as well as on receipt small advances from the customers. He referred to the cash book at pages 548-549 of PB wherein amount of cash deposit in the bank account of Dhan Laxmi Bank is explained. He further referred to page 541 of PB wherein he explained that a sum of Rs. 78,25,100 was deposited in Dhan Laxmi Bank and on each date when the same was deposited in the bank account, what was the cash balance available as cash on hand in the regular books of account. It was submitted that identical statement was also relied upon before the ld. CIT(A), but he did not consider the same in the right perspective. 21. The ld. CIT(DR) vehemently supported the order of the ld. CIT(A) and submitted that when the submission of the assessee at the lower authority is inconsistent, the explanation made by the assessee could not be accepted and therefore addition is confirmed. She submit....