TMI Blog2009 (12) TMI 937X X X X Extracts X X X X X X X X Extracts X X X X ..... ber, 2009. However, on 20th October, 2009 none appeared on behalf of the assessee. Accordingly, the appeals are being disposed off on the basis of material available on record and after hearing the learned DR. I.T.A. No. 3568/Mum/2006 (By assessee): 3. In grounds of appeal No. 1, the assessee has challenged the order of the CIT(A) in confirming the reopening of the assessment made by the Assessing Officer u/s. 148 of the Income-tax Act, 1961 (the Act). 4. Facts of the case, in brief, are that the assessee company is engaged in the business of construction of buildings. For the year under consideration, the assessee had filed return of income showing loss of ₹ 7,01,387 which was processed u/s. 143(1)(a) of the I.T. Act on 15.3.2000. Later on, survey u/s. 133A was carried out at the business premises of the assessee on 14.3.2003. During the course of survey various documents were found and impounded. One such document was the letter dated 5.8.98 bearing reference no. 66:474 written by Shri I.M. Kadri, Architect to the Executive Engineer Building Proposals (City) Municipal Corporation of Greater Mumbai seeking Full Occupation Certificate on the ground that the building up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision, he held the project to be complete in the previous year relevant to the A.Y. 1999-2000. Further the certificate of I.M. Kadri, Architect dated 5.8.1998 shows that he has certified the completion of 34 floors which was impounded during the course of survey. Therefore, the Assessing Officer is justified in having prima facie material believing that the income from Petit House had escaped the assessment since the assessee has not disclosed the income from the said project in its return for A.Y. 1999-2000 although the project was substantially complete. 7. He also rejected the contention of the assessee that action of the Assessing Officer tantamount to change of opinion. He observed that the return filed by the assessee was processed u/s. 143(1)(a) of the Act. Subsequent to the process of return there was no assessment u/s. 143(3) of the Act. Relying on a number of decisions, he rejected this contention of the assessee also. 8. As regards the contention of the assessee that while completing the assessment u/s. 143(3) for the A.Y. 2001-02, the Assessing Officer has given a finding that the project consists of 34 floors in Petit House were not complete, even till 31.3.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis is an accepted system of accounting as the system gives a true and fair view of the financial position including profits earned by the assessee on various projects. Relying on a number of decisions, it was submitted that the Assessing Officer was not justified in disturbing the method of accounting followed by the assessee. 13. However, the CIT(A) rejected this ground of the assessee by holding as under: 3.1 I have considered the contention of the appellant. I agree with the contention of the appellant that the Project Completion Method is an accepted method of accounting. However, for the reasons discussed in para 2.4 above, I am of the view that the project was complete in the previous year relevant to the assessment year 1999-2000. It is the contention of the appellant that since the project was not 100?% complete as on 31.3.1999 the profits therefrom cannot be assessed in A.Y. 1999-2000. As discussed in foregoing para, the appellant had received full payment in respect of about 99% of flats. If the claim of the appellant that the project can be considered complete only when it is 100% complete is accepted, any assessee can delay the payment of taxes indefinitely b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case and in law, the ld. CIT(A), Mumbai erred in directing the AO to treat the compensation of ₹ 3,67,95,990/- paid to various persons as the cost of the project, ignoring the fact that assessee failed to furnish any evidence in support of the compensation claimed to have been paid by it. 18. Facts of the case, in brief, are that the assessee during the course of assessment proceedings submitted before the Assessing Officer that various persons had booked flats with the assessee by paying advances. However, since the project got delayed extraordinarily, some of the persons wanted to terminate their agreements with the assessee. The assessee entered into agreements with them agreeing to pay some compensation to them against which they terminated their agreements in respect of allotment of flats in favour of the assessee. The assessee thereafter allotted those flats which were terminated to some other persons and the sale consideration received was much higher than the compensation paid by the assessee to the original flat owners. The assessee included this compensation of ₹ 3,67,95,990 in the cost of project on account of compensation paid. 19. However, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y gone through the submissions made by the appellant. On perusal of the assessment order, it is seen that the AO rejected the claim of the appellant seeking inclusion of the compensation paid to the original allottees for surrender of flat in the cost of the project on the ground that the appellant had not filed confirmations from the concerned persons and also because of the fact that the appellant had failed to produce the original agreements entered into with these persons at the time of booking of flats to enable the AO to ascertain whether there was any clause allowing compensation at the time of the termination of booking. It was the claim of the appellant that the copies of agreement on the basis of which compensation was paid were filed before the AO. Since those copies were not taken note of by the AO during the course of asstt. Proceedings, vide letter dt. 5.7.2005, the AO was asked to examine the issue after giving opportunity of being heard to the appellant. The relevant part of the letter sent to the AO is reproduced hereunder: While computing the total income, the appellant had claimed deduction on account of compensation of ₹ 3,67,95,900/-. The AO did not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils prior to 18 to 20 years. Hence in absence of original agreement or confirmation from the parties to whom compensation for surrender of incomplete flats has been paid are not possible to verify. 4.8.2 I have carefully considered the contention of the appellant. I have also gone through the remand report received from the AO. Various evidences filed by the appellant like copies of bank accounts, copies of agreements etc., have also been examined by me. On perusal of various documents failed by the appellant, it is seen that the appellant had paid compensation to various persons, who had cancelled their bookings, through cheques/demand drafts. The appellant has filed copies of agreements on the basis of which these payments have been made before the ?AO as well as before me. In most of the cases, the sample copies of receipts obtained in respect of payment of compensation to various persons have been filed before the AO. Further, on perusal of copies of various bank accounts filed by the appellant, it is seen that all the cheques issued to various parties have been cleared. In the bank statements, the name of the person to whom the payment in respect of a particular cheque has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law, the Ld. CIT(A), Mumbai erred in directing the AO to allow the expenses of ₹ 2,94,80,530/- as part of the project cost ignoring the fact that these expenses were incurred in subsequent years and are in the nature of repairs. 25. Facts of the case, in brief, are that the assessee during the course of assessment proceedings claimed that it had incurred certain expenditure in respect of the project consisting of 34 floors after 31.3.1999 which should also be considered as part of the cost of the project. The amount of this expenditure was estimated at ₹ 90 lakhs. However, the Assessing Officer did not accept the claim of the assessee on the ground that no supporting evidences were filed to substantiate the claim of estimated expenditure on plastering and painting. 26. Before CIT(A) it was submitted that the figure of ₹ 90 lakhs given before the Assessing Officer was merely on estimate basis. However, the actual expenditure amounted to ₹ 3,45,69,104 which was incurred on the project consisting of 34 floors after 31.3.1999. By filing an additional ground, the assessee claimed deduction of this expenditure. It was submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was actual. However, we do not find any sound logic by the CIT(A) while accepting this figure as actual especially when the assessee failed before the Assessing Officer to substantiate the expenditure of ₹ 90.00 lakhs. In our opinion the powers of the Assessing Officer during the remand proceedings are limited. Since there is already variation between the figures given before the Assessing Officer and before the CIT(A), therefore, we in the interest of justice deem it proper to restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction that it has incurred expenditure of ₹ 3,45,69,104 towards cost of the project and which is not in the nature of repairs. The Assessing Officer shall decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The ground by the Revenue is accordingly allowed for statistical purposes. 30. Grounds of appeal No. 3 by the Revenue reads as under: 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), Mumbai erred in direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (-) 21,26,980/- 23,66,02,269/- Accounting year 2002-2003 Nil Accounting year 2003-2004 Nil 23,66,02,269/- Accounting year 2004-05 Rs. Rs. Less: Amount refunded to Renuka Khosla as no flat allotted 87,99,313/- Less: Deduction allowed as per ground of appeal no. 4(i) 17,00,000/- 1,04,99,313/- 22,61,02,956/- 32. Since this aspect was not examined he directed the Assessing Officer to verify the above figures of receipts and adopt the figures after verification. Aggrieved with such order of the CIT(A), the Revenue is in appeal before us. 33. Since we have already restored the grounds of appeal No. 2 by the Revenue to the file of the Assessing Officer and since the CIT(A) has directed t ..... 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