TMI Blog2014 (8) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... made on the advances received during the year – the order is modified and the AO is directed to accept book results as such - assessee has spent various amounts other than project related expenditure, the expenditure in the P & L Account gets set off as a loss from business to the ‘income from other sources’- Decided in favour of Assessee. - ITA. No. 13/Hyd/2013 - - - Dated:- 31-7-2014 - Shri B. Ramakotaiah And Shri Saktijit Dey,JJ. For the Petitioner : Mr. S. Rama Rao For the Respondent : Mr. R. Mohan Reddy ORDER Per B. Ramakotaiah, A. M. 1. This is an assessee s appeal against the order of the Ld. CIT(A)-III, Hyderabad dated 17.10.2012 for the assessment year 2008-2009. 2. Assessee has raised 8 grounds. Grounds No. 1 and 8 are general in nature. Ground No.7 is about levy of interest under section 234B which is consequential in nature. Grounds No. 2 and 3 pertain to issue of estimation of income at 8% on the advances received by the assessee during the year. Ground No.4 pertain to the issue of non granting of deduction under section 80IB(10) of the I.T. Act. Grounds No. 5 and 6 pertain to bringing to tax interest income separately and not allowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have considered carefully the facts and evidence. There is no doubt about the fact that the appellant is entitled to follow a method of accounting which best suits its operations as long as the method is legal and consistent. In the current case the Assessing Officer has not challenged the method of accounting but from the appellant's own method of accounting he has raised a query regarding recognition of revenue and income. Therefore, the appellant's argument pertaining to method of accounting being questioned is incorrect. 5.3. It is a settled law that the books and supporting documents of any assessee are must to provide an accurate picture of its financial affairs. If, by looking at the books, the officer cannot obtain accurate information on the financial affairs, then rejection of books is in order. In the current case; I find that the Assessing Officer has rightly rejected the books as they did not provide any accurate information on the income earned and the exact financial affairs of the appellant. 5.3. Notwithstanding the rejection of the books, it is clear that the appellant is following the percentage completion method. As per this method, revenue proport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g completed as determined by the A.O. It is the submission that substantial part of the projects were not completed. Therefore, in the accounting policies being followed by the assessee as per the accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006 and Guidelines of Institute of Chartered Accountants of India, there is no need to estimate any income in the impugned assessment year. It was submitted that A.O. has wrongly invoked the provisions of section 145 and that too estimated the income on advances received when assessee has not even spent money on the project. He referred to the details extracted by the A.O. in the order on the ratio of work completed. It was submitted that assessee has announced the project and received advances to an extent of ₹ 12.11 crores from the customers, whereas amounts spent on the project was only ₹ 96.86 lakhs. Likewise, under Emerald project out of ₹ 6.04 crores received, assessee has spent only ₹ 48.28 lakhs. It was submitted that without even starting the project and spending substantial amount of the money on the project, profits cannot be estimated simply on advances received. He relied o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the A.O. there is a profit under the business at ₹ 96,54,110/- and deduction under Chapter- VIA was allowed at ₹ 52,68,366/-. In view of this, since, A.O. in later years has accepted the book results without rejecting the same, we do not understand how the A.O. could reject the books of accounts in the very first year in which assessee has started the project. It is also unfortunate that the Ld. CIT(A) neither examined the issues under percentage completion method nor examined the alternate claim of 80IB inspite of specific request on the issues. We are unable to understand the basis for which A.O. resorted to the estimation of incomes on the advances received when assessee s projects were just started and investment thereon was at 13.86% and 4.08%, out of the total estimated cost. We are unable to understand how on the percentage completion method, the A.O. could arrive at some profits when project was not even substantially started. As seen from the advances received and amounts invested in the project, the advances received are much more as the assessee s projects command respect in the market and customers simply paid advances once project was announced. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cademic in nature. We are of the opinion that A.O. should have verified the aspect of 80IB when assessee made a request to consider the claim as A.O. was rejecting the books and estimating the income. This was not done and the entire estimation was brought to tax putting assessee to inconvenience. Even the alternate claim was made before the Ld. CIT(A) and he also rejected the same, without applying his mind. At least the officer in the rank of CIT should have applied his mind to the issue, being a judicial authority rather than rejecting on flimsy grounds and supporting the action of AO. Even later years order by AOs should have been considered by Ld.CIT(A). Be that as it may, since we are not in agreement with the estimation of income, the issue of 80IB becomes academic in nature. 12. Considering the action of bringing to tax income under other sources , we noticed that assessee has shown income of ₹ 39,40,006/- as other income in the P L Account. Schedule-L to the books of accounts shows that the income is by way of interest on fixed deposits. In later years, this income was treated as income from other sources and deduction under section 80IB was not allowed. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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