TMI Blog2014 (4) TMI 386X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the AO Decided against Assessee. - ITA. No. 884/Hyd/2008 - - - Dated:- 2-4-2014 - Shri B. Ramakotaiah And Shri Saktijit Dey,JJ. For the Petitioner : Mr. Ajay Gandhi For the Respondent : Ms. K. Haritha ORDER Per B. Ramakotaiah, A.M. This appeal is by assessee against the Order of the CIT(A)-II, Hyderabad dated 29.02.2008 for the A.Y. 1998-1999. 2. The issue in this appeal has a chequered history. Before adverting to the issue, the grounds raised by the assessee are extracted as under : 1. That the learned A.O. has wrongly appreciated the directions issued by Hon ble ITAT regarding valuation of opening stock which will disturb the entire previous years result. 2. That the learned A.O. has not followed the directions issued by the Hon ble ITAT regarding ascertainment of cost of sale which should not be less than contract price. 3. That the order of learned A.O. is based on totally arbitrary and wrong assumption that the additions were evenly made for the entire building. 4. That the learned A.O. has adopted wrong formula in adjusting land owner s share. 5. That entire calculations made by learned A.O. is arithmetically wrong. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.1. In short, the ITAT rejected the method adopted by the assessee for arriving at the cost of sales. At the same time, the Hon ble ITAT observed that the calculation of the A.O. also seems to be erroneous for the reason that cost of the completed shop cannot be less than the contracted price payable to the contractor to whom the work was outsourced or the price company incurs to complete the construction by itself. Moreover, the A.O. has to necessarily consider the cost of construction incurred by the assessee company on area belonging to the land lords which is attributable to the areas shown i.e., cost per sq. ft. of land sold should be arrived. The Hon ble ITAT by way of an example given in para-11 of the order had explained how the A.O s calculation cannot be accepted. With the above direction, the Hon ble ITAT set aside issue to the file of the A.O. to carry out necessary valuation as per law after giving opportunity to the assessee. The ITAT also directed the assessee to appear in person or though counsel before the assessing authority and cooperate fully in furnishing the information as may be required for properly evaluating the work in progress. With the above backgro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k in progress including the details of sales and area sold in quantity over the period of project. At our instance, the assessee also placed on record the assessment order dated 30.03.2001 and the correspondence at the time of original assessment and the balance sheet and P L account for the year ending 31.03.1998. Ld.Counsel explained the method of arriving at cost of sale to contend that no addition was required. 9. Ld. D.R. however, supported the orders of the A.O. in determining the closing work in progress as assessee has failed to furnish the necessary details in arriving at the correct valuation of work in progress. 10. We have considered the rival contentions and perused the papers placed on record. At the outset, we must admit that the issue is little complicated, not only for want of information from the assessee but also due to delay in finalising the proceedings for A.Y. 1998-99 at this point of time. The undisputed facts are that the assessee had built a total area of 97422 sq. feet consisting of apartments as well as shopping complex, of which 19,100 sq. feet was the landlord share and the salable area was 78322 sq. feet. However, the assessee was unable to fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he average contract price without informing how much area was constructed in a particular year. Without having the area constructed, it is very unreasonable to go by the average rate of price for the whole saleable area, when the facts indicate that assessee constructed on its own some area and balance by the contract given to third party at a fixed year wise rate. Therefore, averaging the rate and justifying cost of sale as was done by the assessee cannot be accepted. Another reason was that the cost of sale now arrived at was at Rs.1,31,96,248/- as against Rs.1,26,34,767/- shown in the books of accounts. Assessee has not justified how it arrived at the cost of sale in the books of accounts which was already analysed by the ITAT in its order earlier. Without reconciling, assessee furnishes a different figure now. Not only that, area sold for A.Y. 1998-99 was for arriving at the cost of construction at Rs.1,31,96,248/- was stated to be area sold of 29588 sq. feet whereas, assessee has shown only 27,965 sq. feet area in the statement given extracted above. Thus, the statements given by the assessee even at this stage cannot be relied upon. 10.3 As per the cost figures given in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,ft being constructed up to 31.03.1998. As against this, the assessee wants us to work-out the cost spent by the assessee to be divided by total area of 78,332 sq.ft. of the entire project area. Instead of working out the actual area constructed, assessee wants to take advantage of cost incurred up to that date on the total area, without establishing the total area got constructed as on 1997-1998. As per the total cost and sale details furnished extracted above in table-III, the cost incurred on the project up to A.Y. 2003- 2004 was Rs.3,21,31,907/- out of which, at the end of 31.03.1998, assessee has incurred Rs.2,06,60,499/- as admitted. Therefore, assessee s submission of adopting the values on a total area to be constructed with only partial cost incurred up to that date is not correct. As rightly pointed out by the A.O. and the CIT(A), assessee is not forthcoming in giving any information with reference to the area constructed year-wise. 10.5. As seen from the flat area sold in each year, the average cost of the flat area sold in 1997-98 was at Rs.463/-, in 1998-99 it was about Rs.467/-, in 1999-2000 at Rs.430/- in A.Y. 2000-01 as per the details given it was Rs.458/- even ..... X X X X Extracts X X X X X X X X Extracts X X X X
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