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2012 (9) TMI 352 - AT - Income TaxBest Judgement assessment - alleged suppression of gross profit - real estate - Punjab Urban Planning & Development Authority (PUDA) Rules prescribed wastage of land for the developer at 40.33% and developer is not entitled to sell that part - assessee following mercantile system of accounting debited provision of the expenditure on development in the trading account and correspondingly included the same in closing stock - claimed construction expenses and PUDA fees fully - deducted non-saleable area out of total land while accounting for closing stock - Revenue contending construction expenses and PUDA fees to be debited proportionately on the basis of area of land sold as divided by the total area of colony and deducting cost of non-saleable area of land on proportionate basis of land sold viz-viz total area of land Held that:- A.O. has ignored the rule of consistency when the assessee had been adopting mercantile system of accounting and development expenses have been accounted for on mercantile system basis and have been accepted by the Department in the preceding year. Though by debiting development expenses in the trading account and correspondingly by crediting amount to the closing stock does not affect the revenue. As per PUDA rules, a developer has to account for 40.33% as wastage is not under dispute. PUDA fees and construction charges have been incurred wholly and exclusively for the purpose of business. In the absence of any defects in the books of account, the AO is not justified in invoking the provisions of section 145(3) and therefore no addition is called in the facts and circumstances of the present case - Decided in favor of assessee
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