TMI Blog2022 (4) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted in the prior two years as well. We are in agreement with contention of the ld. counsel that once having accepted this methodology for the past years, the Department cannot reject the methodology in the third year of the project, following the principle of consistency. We also note that the assessee has brought to our knowledge that the cost of land is allocated through registered sale deed and is determined at the time of entering the agreement which is then later transferred in the hands of the land owner. We also note that once the cost of land has already been taxed to the land owner and offered to tax in its hands, the adjustment done by the ld. Assessing Officer by ignoring the registered deed and consistent method of allocation would lead to double taxation AO erred in law and fact in rejecting the books of accounts of the assessee which the Department has accepted in prior years on the same set of facts. However, we note from the orders of ld. Assessing Officer and the ld. CIT(A) that the appellant has not produced any evidence in support of its claim that whatever advances have been shown by the appellant in the balance sheet, the same have been transferred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the additions of ₹ 49,81,069/- made by the AO and confirmed by CIT(A) should be deleted. 3. The brief facts of the case are that the appellant is a land developer and has entered into an agreement for development of the project with the land owners. The consideration received from prospective flat buyers is divided into two parts, one part goes to the land owner towards land price and one part goes to the appellant towards construction of project, which is the income of the appellant. The portion towards cost of construction is taken by the appellant in its books of account as revenue and shown in the profit and loss account and the portion towards land cost is taken to the liability side where it is credited to the account of the land owner and shown as liability . 4. During the course of assessment proceedings, the Assessing Officer noticed that there is no consistency in allocation of funds received from flat buyers towards land cost and towards construction portion, which is the revenue of the assessee. The Assessing Officer on examination of one of the sale deeds noted that the ratio is 29.38% towards land cost and 70.62% towards construction. On being asked, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee has not been able to explain why it paid 45.1% to the land owners. Regarding the argument of double taxation, the ld. CIT(A) held that the appellant has not produced anything to prove that this income has been offered for taxation in the hands of the land owners. Even from the submission filed by the appellant during the course of appeal proceeding, it can be seen that proportion of the land cost to the total cost comes to 28.91% whereas the proportion of the construction cost comes to 71.09%. The chart is based on the working of actual bifurcation mentioned in the sale deeds entered by the assessee with prospective flat buyers. The ld. CIT(A) further noted that even in the chart furnished by appellant there is substantial variation for land rates within the same block, which proves that land cost has been adopted by the appellant at its own convenience and free will and the appellant has tried to show more towards land cost since only the construction cost is forming part of the revenue of the appellant. Therefore, the ld. CIT(A) held that the books of account of the appellant have been rightly rejected by the Assessing Officer and addition made by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the books of the assessee were rightly rejected u/s. 145(3) of the Act. 7. We have heard the arguments of the parties and perused the material on record. To sum up, the main arguments of the assessee are that the land cost varies from block to block and therefore the same is variable. The cost of land gets allocated through registered sale deed and the same is transferred to the land owner. The assessee of the project has been consistently following this methodology of cost allocation where through registered deed the consideration of cost of flat is determined and later transferred to the land owner. Therefore, the ld. counsel for the assessee has submitted that in case the consideration for land cost to the extent of 15% (which comes to ₹ 49,71,556/-) is again taxed in the hands of the assessee, it would lead to double taxation. This is the last year of the project and the methodology of cost allocation has been accepted in the prior two years as well. We are in agreement with contention of the ld. counsel that once having accepted this methodology for the past years, the Department cannot reject the methodology in the third year of the project, following the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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