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TMI Blog2019 (7) TMI 1675X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax (Appeals) may please be deleted." 3. Grounds raised by the Revenue in ITA No.3390/Ahd/2016 read as under: "1. Whether on the fact and the circumstance of the case and in law, the Ld.CIT(A) was justified in deleting the addition of Rs. 3,38,44,000/- made by estimating the income at 25% on the advance received from its customers without appreciating the fact that the assessee has worked as a contractor therefore the AO has rightly applied the revised provisions of AS-7. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has ought to have upheld the order of the Assessing Officer. 3. It is, therefore, prayed that the order of the CIT (A) may be set aside and that of Assessing Officer may be restored to the above extent." 4. The assessee filed its Return of Income for the A.Y. 2009-10 on 09.03.2010 showing total income of Rs. 1,32,140/-. The Assessing Officer processed the same u/s.143(3) of the Income Tax Act on 16.12.2011 determining the total income at Rs. 1,32,140/-. Thereafter the case of the assessee was reopened u/s.147 of the Income Tax Act by issuing notice u/s.148 of the Income Tax Act on 10.03.2014 which were duly served upon the assessee aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long as sale deed has not executed and the amount received from the above parties only represented advance and the same was not taxable as no income was accrued to the assessee. In view of the Hon'ble Gujarat High Court decision in the case of CIT vs. Asha Land Corporation [133 ITR 55 (Guj)]. The Authorised Representative of the assessee filed detailed reply which the Assessing Officer mentioned in the assessment order. After considering the reply filed by the assessee as well as the books of accounts the Assessing Officer has decided the legal issue against the assessee as well as they do not accept the contention raised by the assessee in its reply and finally stated that the expenditure was not admissible u/s.40A(3) of the Income Tax Act ad added to the total income of the assessee vide order dated 31.03.2015 u/s.143(3) r.w.s 147 of the Income Tax Act. 7. Aggrieved by the assessment order dated 31.03.2015 passed u/s.143(3) r.w.s. 147 of the Income Tax Act the assessee filed appeal before the ld.First Appellate Authority vide impugned order dated 08.09.2016 who partly allowed the appeal filed by the assessee in which the addition in dispute has been deleted and the legal iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.02,2015 raised objections on the reopening of the assessment which were duly disposed of by the AO on 13.03.2015. The appellant submitted vide his submission dated 22.06.2016 that the reopening was erroneous as he had filed the correct return of income and had shown all the income from the all sources and had disclosed the complete details in the audit report submitted during the assessment proceedings. The advances received of Rs. 13,53,76,000/- from Pusti Enterprise Pvt. Ltd. was duly disclosed in the books of account as advances received from customer. It was contended that the AO has reopened the case on the ground that 25% of Rs. 13,53,76,000/- i.e. Rs. 3,38,44,000/- was the income which had escaped from taxation and it is nowhere mentioned as how the profit was arrived by the AO at 25% of the advances received by the appellant. It was also submitted that the AO observation that the appellant had not disallowed the expenditure of Rs. 3,76,496/- u/s 40A(3) is also erroneous as the said expenditure was not claimed by the appellant against income in the P&L account and the entire' expenditure had been transferred to work in progress. The appellant contended that the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that the said income for any assessment year has escaped assessment. The expression *escaped assessment' clearly connotes a very basic postulate that the income for a particular assessment year went unnoticed by the Assessing Officer and because of it not being noticed by him for any reason, it escaped assessment. The meaning of the expression 'escaped assessment' is so simple and straight that It does not leave anyone in doubt that power under section 147 could be invoked by the Assessing Officer if it is a case of escape of assessment of income for a particular year. 6.1.5 The provisions of section 147 require that the Assessing Officer should have 'reason to believe' that any income chargeable to tax has escaped assessment. The word 'reason' in the phrase 'reason to believe5 would mean cause or justification. If the Assessing Officer has a cause or justification to think or suppose that income had escaped assessment, he can be said to have a reason to believe that such income had escaped assessment. The words 'reason to believe' cannot mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... feet and accordingly the appellant had received more than 80% of the total cost as advanced on 31.03.2008 and the property was to be handed over before 30.12.2008. But the property was not handed over on or before 30.12.2008 and the appellant had shown WIP in his balance sheet for FY 2008-09, 2010- 11 and 2011-12. The AO held that the appellant was not following the accounting system as prescribed under AS-7 relating to construction contract, made the addition of Rs. 3,38,44,000/- @25% of the total receipts of Rs. 13,53,76,000/-. The appellant submitted that the out of the total area the appellant had agreed to sell the part of the building i.e. 34720 sq. feet, of area at different rates to M/s Pusti' Enterprise Pvt. Ltd. for a total consideration of Rs. 16,76,50,400/-. In the year under construction a very limited construction work was carried out of Rs. 4,39,20,677/- which included the cost of the land of Rs. 3,44,04,150/-. It was further contended that no sale deed was executed for the property in the relevant assessment year. 6.2.2. On the perusal of the details, it is observed that during the relevant assessment year a very limited construction work was carried out as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,44,000/- cannot be sustained for the reasons discussed above and therefore, the ground of appeal are being allowed." 11. After going through the finding given by the ld.First Appellate Authority on the issues involved in the Revenue appeal in which the ld.First Appellate Authority has deleted the addition in dispute, we are of the view that in compliance of the agreement no registered sale deed was executed in the year under consideration and the amount of total area sold was also reduced from 34720 to 18954 sq.ft for the total consideration of Rs. 11,76,70,000/- instead of the original amount of Rs. 16,73,50,400/-. Therefore, the Assessing Officer has wrongly determined the profit @25% of Rs. 13,53,76,000/- without any basis or material in position merely on the basis of presumption which is not sustainable in the eye of law. Even otherwise, the sale deeds in dispute was executed in financial year 2015-16 for which the assessee has offered its income. Therefore, the ld.First Appellate Authority has rightly deleted the addition in dispute by passing the detailed order mention above. Therefore, no interference is called for in the well-reasoned order passed by the ld.First Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X
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