AASHIRWAD BUILDERS,RAJKOT vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 1(1), RAJKOT, RAJKOT

We have heard both the parties on this preliminary issue and noted that the assessee has explained the sufficient cause for such small delay. Therefore, considering the facts narrated in the affidavit for condonation of delay, we condone the delay of 10 days and admit the appeal of the assessee for hearing.

The relevant material facts, as culled out from the material on record, are as follows. The return of income, showing income of Rs. 20,84,420/-, was filed by the assessee, on 26.10.2015. The assessee engaged in the business of real estate project of construction and sale of residential flats. The accounts of the assessee are audited and Audit Reports dated 27.09.2015, in Form No. 3CA & 3CD were filed during the assessment proceedings. The case was selected for Limited Scrutiny in CASS. Notice u/s. 143(2) dated 28.07.2016 of the I.T. Act was issued and was duly served upon the assessee. Notice u/s 142(1) of the I.T. Act dated 21.03.2017 was issued and served upon the assessee calling for various details relevant to the assessment in the case of the assessee. In response to said notices, assessee attended from time to time and furnished the details called for.

For unaccounted sale, on verification of case record and assessee's submission, it was noticed by the assessing officer that the assessee has not shown actual sale during the year. Therefore, a show cause notice was issued to the assessee. The contents of the show cause is as under:

In response to the show-cause notice, the assessee submitted its reply before the assessing officer, however, the assessing officer rejected the explanation furnished by the assessee and did not accept the explanations of the assessee, for the following reasons:

Aggrieved by the order of the assessing officer, the assessee, carried the matter in appeal before the Ld. CIT(A) who has confirmed the action of the assessing officer, observing as follows: “Taxpayer follows the Project Completion Method. This means profit or in this case sale is booked only when actual sale takes place. Here in taxpayers case "SALE" is the catch word. Taxpayer books it only when actual sale of flats takes place. The difference between Rs. 3.92 cr and Rs 4.41 cr is the sale of flat to Parag Dinesh Bhai Padaliya for Rs 49 lakhs. The assessing officer is requested to give credit for service tax payment of this flat at Rs. 4900000 to Parag Dinesh Bhai Padaliya. The assessee books only sale of flats as part of P and L account. Last year the sale is Rs 900000 where as Rs. 44100000 is sale booked this year which is reflected in the P and L account. The variation in stock reflected in the P and L account is Rs 32995241. For arriving at the correct profit the stock variation last year has to be reduced from the stock variation this year. The current year is 2014-15 Fy for which the financials are available. For FY 2013-14 the stock position is as follows – FY 2013-14 51317530 FY 2014-15 84312771 The difference of Rs. 32995241 which is the incremental value is brought in the P and L account as stock variation. In this connection it is pointed out that assessee has to regularly follow a method of accounting. Each years audited financials will show closing stock as on 31/3. The difference will be part of the income. Here the assessee has wrongly reduced the stock variation from the receipts. Instead of reducing it, it should be treated as income. Instead of adding the incremental value, the taxpayer has wrongly reduced the incremental value from the profits. The assessing officer is directed to add Rs. 32995241 being the stock which is added additionally. The addition of Rs. 32995241 is upheld.

Aggrieved by the order of the Ld. CIT(A), the assessee is in further appeal before us.

The Ld. Counsel for the assessee has also raised additional ground of appeal before the Bench, which is reproduced below:

We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. In the context of above additional ground, and for the main grounds, the ld.Counsel for the assessee submitted that in the present case, against the addition made by ld. AO for Rs. 2,06,26,420/-, towards suppressed turnover, the ld. CIT(A) in order u/s. 250 of the Act, has first discussed the fact that appellant has shown higher turnover of Rs. 4.41 crore against turnover of 3.92 crores as per Service tax Returns. Then, CIT(A) discussed, variation in stock (i.e. Difference between value of Opening Stock and Closing Stock), and held as follows:

The conjoint reading of discussion and conclusion in CIT(A)'s Order, it appeared that original addition made by ld. AO for Rs. 2,06,26,420/- towards suppressed turnover, is replaced by another addition of Rs. 3,29,95,241/- towards variation in value of opening and closing stock, and that new addition is upheld. In view of aforesaid bona fide belief and understanding, no grounds of appeal were raised in relation to addition of Rs. 2,06,26,420/- towards suppressed turnover, in the Form-36 before the Tribunal.Since Id. CIT(A) has, though discussed the issue of suppressed turnover, but has not given any findings on the same, even that issue requires to be considered and finalized.In view of the above facts the assessee raised additional ground of appeal for adjudication.

We find that the above mismatch has arisen, due to non-submission of correct reconciliation by the assessee, as noted by us above. The assessee has also not submitted completion certificate of the authority. Besides, we note that the ld. CIT(A) has not given any finding on addition of Rs.2,06,26,420/- towards suppressed turnover, raised before him. Considering these facts, we remit this issue back to the file of the learned CIT(A) with the direction to the learned CIT(A) to adjudicate the addition of Rs.2,06,26,420/-, and we also direct the assessee to furnish the correct reconciliation statement with documentary evidences, before learned CIT(A) showing service tax data, Aashirwad Builders vs. DCIT advance received from customers, service tax paid on flat sold, and amount received as per service tax data. The assessee is also directed to submit completion certificate. Considering the facts and circumstances of the case we are of the considered view that the assessee deserves one more opportunity to contest his case on merit before ld.CIT(A). In the interest of justice, we set aside the order of Ld.CIT(A) and remit the matter back to the file of CIT(A) with a direction to pass fresh order in accordance with law after granting adequate opportunity of hearing to assessee. The assessee is also directed to be vigilant and to furnish all details, reconciliation and explanation as needed by Ld.CIT(A) and should not seek adjournment without valid reason. With this direction, the grounds of appeal raised by the assessee, including additional ground, are treated as allowed for statistical purposes.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Order is pronounced in the open court on 11/09/2025