TaxTMI 
TaxTMI 
2025 (3) TMI 1798
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....k In Progress(WIP) reflected by the assessee. The assessee was engaged in the business of civil construction and originally, the assessee had filed its return of income for the impugned assessment year i.e. Asst.Year 2013-14, declaring total income at NIL. Thereafter the case of the assessee was selected for scrutiny assessment and order passed under section 143(3) of the Act by determining total income at NIL i.e. accepting the returned income filed by the assessee. Subsequently, notice under section 148 of the Act was issued to the assessee by the AO assuming jurisdiction to reopen the case of the assessee vide its notice dated 26.2.2014. The assessee was provided with copy of the reasons for reopening,to which objection was filed by the assessee, which were disposed of by the AO by a speaking order, and thereafter after giving due opportunity of hearing to the assessee, the assessment framed on the assessee, and addition made to its income of Rs. 2,08,05,352/- under section 69 of the Act on account of unexplained investment, being the difference in the figure of Advance for sale of land and WIP recorded by the assessee in its Books of accounts. The order of the AO was confirmed ....
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.... r.w.s 147 of the Act dt.30/11/2019, neither considered the material placed on record nor followed various judicial pronouncements including latest citation of Supreme Court and High Court in favour of the assessee on identical issue. 6. The learned AO has erred on both on the fact and in law by passing the assessment order u/s. 143(3) r.w.s 147 of the Act dt.30/11/2019, making unfair and frivolous additions which are not at all expected by the learned AO. The Ld. AO raised huge demand of Rs. 1,15,71,970/- by determining total income of Rs. 2,08,05,352/- on account of unexplained investment u/s 69 of the Act, ignoring the fact that appellant has duly disclosed both WIP and advance payment in its Balance Sheet. Hence, unfair addition needs to be deleted. 4. We have heard both the parties. Copy of the reasons for reopening of the case of the assessee was placed before us at paper book page no.43-46 and the same are as under: 5. As is evident from a bare perusal of the same, the AO formed a belief of escapement of income, noting that, the records of the assessee revealed the assessee to have made advance payment for purchase of land amounting to Rs. 9,40,51,000/-. But t....
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....ad paid advance of Rs. 9,40,51,000/- during the impugned year, and the balance of Rs. 2,08,05,352/- was paid in the succeeding year, when the purchase deed was registered in the name of the assessee. Therefore, clearly the advance of the land in no way reflected any asset by way of the land, coming in to the possession of the assessee. 8. As for the work-in-progress of Rs. 7,32,45,648/-, the same had nothing to do with the advance paid of land. The said amount clearly reflected expenses incurred by the assessee during the year in its ongoing project which remained incomplete as at the close of the year. Both the advance for land and WIP have been reflected by the assessee separately as its assets in its balance sheet. Which means both have been separately accounted for and there is no connection between the same. Meaning thereby that land has not been included in WIP by the assessee but reflected separately as advance paid in its books, since it is not owned by the assessee admittedly. 9. The AO, however has completely misunderstood the accounting done by the assessee. The AO has believed the land still to be acquired by the assessee to form part of its WIP since he noted WIP....
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....47 of the Act dt. 30/11/2019, making unfair and frivolous additions which are not at all expected by the learned AO. The Ld. AO raised huge demand of Rs. 1,15,71,970/- by determining total income of Rs. 2,08,05,352/- on account of unexplained investment u/s 69 of the Act, which needs to be deleted. The Appellant had paid advance payment for acquisition of land of Rs. 9,40,51,000/- during AY 2013-14 and has duly shown that advance payment in its Balance Sheet as advance. In WIP Figures of Rs. 7,32,45,468/- firm has shown all expenses except advance payment for acquisition of land as legal title not transferred in the firm name. In the next year ie, AY 2014- 15 when legal title transferred in the firm name, firm has shown payment of land in its WIP statement for AY 2014-15 which is duly verified and accepted by the assessing officer in assessment proceedings u/s 143(3) of the Act. "Hence, on the merit of the case, "issue is not related to income escapement", issue relates to whether advance payment made for acquisition of land to be shown under WIP or under Advances in closing Balance Sheet of the firm". Ld. Assessing officer passed the assessment order u/s....
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....- as its WIP in the said year, is not clearly established by the appellant. Accordingly I am inclined to concur with the observation and decision of the AO in as much as the appellant was unable to recognize the entire amount of payment of Rs. 9,40,51,000/- during the year under consideration. Therefore, I do not find any infirmity in the order of the AO and I am of opinion that AO's decision of invoking provision of section 69 of the IT Act is justified and in accordance with law. Accordingly the addition of Rs. 2,08,05,352/- by invoking provision of section 69 of the I.T Act stand confirmed. In view of the above discussion the grounds no. 4 to 6 of the appellant are dismissed. 13. In view of the above, we have no hesitation in holding that the AO had no reason at all to believe escapement of income of the assessee. That the reasons recorded by the AO only reflect his ignorance of accounting; that the facts on record reveal that the assessee had followed correct accounting practice, and advance for land reflected at Rs. 9,40,51,000/- was merely an advance, no asset had been acquired by the assessee by way of land which is also the case of the Revenue; and in the absence of ....
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....IT/11B/001/2017-18 dated 5.1.2018 raised an objection that on Scrutiny of balance sheet, profit and loss a/c and submission received on 17/08/2015 reveled that during the FY 2012-13 relevant to _Y2013-14 the assessee purchased developed land (NA for Residential units) vide purchase deed no. 5758 dt 20/04/2013 at Gandhinagar at cost of Rs.12,00,00,000. It was noticed from the payment schedule of the deed (page 16 to page 20) that during the F.Y.2012-13 the assessee firm made .stal payment of Rs.94,0,51,000 for the purchase of land and balance amount of Rs.2,59,49,000/- was paid during the F.Y. 2013-14. As per the DEED OF PARTNERSHIP dt.29/05/2012 of the assessee firm i.e. M/S HEAVEN ASSOCIATES commenced business w.e.f.29/05/2012 i.e. from the FY 2012-13 (i.e. AY 2013-14). The assessee had shown closing balance of WIP 73245648 in the Profit and Loss a/c and Balance Sheet of the Year 2012-13 "Commencing year). revenue audit has pointed out that the difference of unexplained .... ment of 20805352/-( 94051000/- - 73245648/-) was not explained in the 3CD Report as well as submission kept on record which has resulted into under assessment of the whole of the difference amount of 20,805,35....
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....ng year). The difference of unexplained investment of Rs.2,08,05,352/- 94051000/- - 73245648/-) was not explained in the 3CD Report as well as submission kept on record which has resulted into under assessment of the whole of the difference amount of Rs.2,08,05,352/- which has resulted in escapement of income during the assessment. 6. Basis of forming reason to believe and details of escapement of income: - The Assessee has purchased developed land (NA for Residendal units) vide purchase deed No. 5758 JC 20/04/2013 at Gandhinagar at cost of Rs.12,00,00,000/ -. From the payment schedule of the deed (page 16 to page 20) that during the financial year 2012-13 the assessee firm made total payment of Rs.94,0,51,000 for the purchase of land and balance amount of Rs.2,59,49,000/- was paid during the financial year 2013-14. As per the DEED OF PARTNERSHIP dt.29/C5/2012 of the assessee firm i.e. M/S HEAVEN ASSOCIATES commenced business w.e.f.29/05/2012 I.e. from the FY 2012-13 (i.e. AY 2013-14). The assessee had shown closing balance of WIP 73245648 in the Profit and Loss a/c and Balance Sheet of the Year 2012-13 for the year under assessment. However, the difference of unexplained invest....