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TMI Blog2018 (8) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 1,12,970/-. Later on, the Assessing Officer (AO) found that the assessee had purchased vacant land for a consideration of Rs. 11,46,460/- and had constructed a four storied building consisting of 12 flats with a total plinth area of 10,708 sq.ft. in G+3 structure. Out of 12 flats 9 flats consisting of 8250 sq.ft. were sold to nine other parties for a consideration of Rs. 53,23,000 under different documents. Remaining 3 flats consisting of 2458 sq.ft. were remained unsold. The AO noticed from the profit and loss account that against the sale of 12 flats for a consideration of 43,90,620/- and the site value of Rs. 12,49,670/-, the assessee had admitted the structure value at Rs. 31,40,950/- for impugned assessment year as per the report of panel engineer against the actual sale consideration of Rs. 69,81,824/-. Further, the AO also found that the assessee has received the parking area separately amounting to Rs. 10,54,944/-, but not admitted the same as income. Therefore, having reason to believe that the income chargeable to tax has escaped assessment, the AO has issued the notice u/s 148 and taken up the case for assessment. In the reassessment proceedings, the AO made the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s view is upheld by the Hon'ble Supreme Court in the case of M/s Rajesh Jhaveri Stock Brokers 291 ITR 500 (SC). Hon'ble apex court in the case of Rajesh Jhaveri Stock Brokers held as under: 16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,050/-. The difference between the sale consideration received by the assessee for 9 flats and the value admitted by the assessee in the profit and loss account was Rs. 31,40,950/- . The AO found that the assessee has constructed 12 flats on a vacant site with total plinth area of 10708 sq.ft. in G+3 building. Out of 12 flats, 9 flats consisting of 8250 sq.ft. were sold to nine other parties for a total consideration of Rs. 53,23,000/- under different documents. Remaining 3 flats consisting of 2458 sq.ft. were held with the assessee. The AO observed from the profit and loss account that the assessee has admitted structure value of 12 flats for Rs. 31,40,950/- and the site cost instead of the sale value of 12 flats and the site cost aggregating to Rs. 69,41,824/-, thereby short admission of Rs. 25,51,204/-. The AO called for the explanation from the assessee and the assessee filed explanation stating that the assessee is following the contract completion method and the income is admitted as per the stage of completion. In the instant case, 3 flats were not sold and with regard to the 9 flats, the construction was not completed, pending completion of construction, the assessee has ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted the entire sale proceeds of the project during the financial year 2005-06 to 2007-08 as per the stages of completion. According to the Ld.AR Rs. 31,40,950/- was related to the certified value of construction of 9 flats. Against which the assessee had entered into agreement for sale of flats at Rs. 43,60,000/-. However, though the assessee has constructed 12 flats, the assessee has not disclosed the closing stock related to the remaining 3 flats for which the addition was made by the AO and confirmed by the Ld.CIT(A). Though the assessee raised ground No.3 agitating the addition but not pressed during the appeal hearing. 12. From the information available on record, it is observed that the total project cost was Rs. 53,23,000/- and the assessee had admitted the income during the financial year 2005-06, 2006-07 and 2007-08. The assessee has sold 9 flats during the financial year 2005-06. Both undivided share of land and the flats were sold on the same date. It is undisputed fact that in practice semi finished flats are sold in this line of business and enter in to a separate agreement for completion of the remaining structure. The assessee also had entered into agreement fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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