2011 (11) TMI 35 - HC - Income Tax

Block assessment - Nature of cancellation charges - the addition was made by the assessing officer on the ground that the assessee ought to have charged cancellation charges from customers who cancelled their bookings and not on the basis of any material found during search. - CIT(A) and ITAT held that the addition for cancellation charges was not justified. - No substantial question of law arises - decided in favor of assessee.

Project completion method or the completed contract method - Accounting Standards 7 (AS7) - The finding of the CIT (A) was approved by the Tribunal with the observation that the department has accepted the assessee’s method of accounting namely, the project completion method and therefore there was no justification for adopting the percentage completion method for one year on selective basis. - In view of decision of Supreme Court in Commissioner of Income-Tax v. Bilahari Investment P. Ltd. (2008 -TMI - 3361 - SUPREME COURT) held that:- No substantial question of law arises - decided in favor of assessee.

Addition of ₹ 3,82,94,536/- being stamp duty and electrification charges recoverable by the assessee. - . It was explained that in case there is any surplus of the registration and electrification charges collected from the customers over the amounts paid to the State Government, the surplus would be shown as income in the year of receipt. The assessing officer rejected the explanation on the ground that revenue receipts and capital expenditure cannot be adjusted against each other. He, therefore, added the amount of ₹ 3,82,94,536/- as the assessee’s income. - when the assessee paid the registration and electrification charges they were not claimed as deduction in the profit and loss account. On these findings of fact the Tribunal agreed with the CIT(A) that the amount cannot be added. - Held that:- No substantial question of law arises - decided in favor of assessee.

Acceptance of additional evidence - Held that:- The Tribunal erred in its interpretation of the provisions of Rule 46A vis-à-vis Section 250(4). Its view that since in any case the CIT (A), by virtue of his conterminous powers over the assessment order, was empowered to call for any document or make any further enquiry as he thinks fit, there was no violation of Rule 46A is erroneous. The Tribunal appears to have not appreciated the distinction between the two provisions. If the view of the Tribunal is accepted, it would make Rule 46A otiose and it would open up the possibility of the assessees’ contending that any additional evidence sought to be introduced by them before the CIT (A) cannot be subjected to the conditions prescribed in Rule 46A because in any case the CIT (A) is vested with conterminous powers over the assessment orders or powers of independent enquiry under sub-section (4) of Section 250. That is a consequence which cannot at all be countenanced. - Decided in favor revenue.

Receipt of advances from customers - genuineness of the advances - Held that:- The issue relating to the addition of ₹ 1,61,67,600/- made under Section 68 of the Act is restored to the CIT (A) who shall comply with the requirements of Rule 46A and take a fresh decision on the merits of the addition in accordance with law.