Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “C” Bench, Mumbai
Before: Shri B.R. Baskaran (AM) & Shri Pawan Singh (JM)
O R D E R Per B.R. Baskaran (AM) :-
The appeal filed by the assessee is directed against the order dated 28.10.2010 passed by the learned CIT(A)-30, Mumbai and it relates to A.Y. 2007-08.
The assessee is aggrieved by the decision of the learned CIT(A) in confirming the business income computed by the Assessing Officer.
The assessee is a builder. She was offering income under the percentage completion method. In A.Y. 2005-06 the Assessing Officer noticed that the assessee has not completed project for quite a long time and accordingly proceeded to compute the income as under :-
2 Percept Finserve P. Ltd.
Difference between advance and WIP 75,58,750 as on 31.3.2005 Less : exp. Incurred for A.Y. 2006-07 3,75,000 44,65,000 “ A.Y. 2007-08 10,50,000 Cost of plot 9,65,000 Compensation paid 4,07,038 Exp. to be incurred A.Y. 2008-09 16,67,962 Balance net profit 30,93,750 The assessee accepted the above method and accordingly paid the tax demand raised by the AO in AY 2005-06. The AO followed same method to compute income for the assessment year under consideration, i.e., in AY 2007-08. Accordingly the AO computed income as under:- Difference between receipts and WIP as 75,37,500/- Discussed above Less : cost of land 9,65,000 Amount of expenditure incurred for A.Y. 3,75,000 2006-07 4,07,038 17,47,038/- Compensation paid to flat owners 61,90,462/- Total additional profit Less : additional profit assessed for A.Y. 30,39,750/- 2005-06 Additional profit for A.Y. 2007-08 31,50,712/- We notice that the AO has assessed a sum of Rs.30,39,750/- only in AY 2005- 06 as against the computed amount of Rs.30,93,750/-. Hence the AO gave credit of Rs.30,39,750/- only in AY 2007-08. Accordingly the AO assessed the above said income of Rs.31,50,712/- in AY 2007-08. The Ld CIT(A) also confirmed the same.
The assessee submitted that the assessee had received advances to the tune of Rs.1,94,13,750/- upto 31.3.2005 and had incurred expenses (WIP) of Rs.1,18,55,000/- upto that date. Accordingly the AO adopted the difference amount of Rs.75,58,750/- for computing income in AY 2005-06. Between AY 2005-06 and AY 2007-08, the assessee had received additional advance of Rs.18,03,750/- and incurred additional expenses of Rs.14,25,000/-. Hence the AO computed the difference in AY 2007-08 as under:-
3 Percept Finserve P. Ltd.
Advance received (1,94,13,750/- + 18,03,750/-) 2,12,17,500 Less:- WIP (1,18,55,000/- + 14,25,000/-) 1,32,80,000 ---------------- 79,37,500 =========== 5. The assessee submitted that the assessee has offered the additional advance amount of Rs.18,03,750/- as her income in AY 2008-09 and hence inclusion of the same in AY 2007-08 would lead to double assessment of same income. He further submitted that the AO has allowed a sum of Rs.16,67,962/-, being the additional expenses to be incurred in AY 2008-09, while computing the income in AY 2005-06. However the AO refused to allow the same while computing income for AY 2007-08.
On the contrary, the Ld D.R supported the orders passed by Ld CIT(A).
We have heard the parties and perused the record. It is the submission of the assessee that the additional advance of Rs.18,03,750/- has been offered by her in AY 2008-09. However, we notice that the above said amount was received by the assessee in the years relevant to AY 2006-07 and 2007-08. Hence, we are of the view that the tax authorities have rightly taken the above said amount in computing the income for AY 2007-08. In our view, the assessee may not be right in offering the above said advance amount in AY 2008-09. It is also well settled proposition that double assessment of same receipt is not permissible under the Act.
We notice that the AO has computed the income of AY 2005-06 by computing the profit from the project on the basis of advance amount received and also by deducting there from all expenses including estimated expenditure that may be incurred in the year relevant to AY 2008-09. However, while computing the income for AY 2007-08, the AO has refused to give such kind of deduction. We notice that the assessee has been receiving additional advance amount from flat buyers and also incurring additional expenditure. We notice that the method adopted by the AO to determine the income in AY 2005-06 took into consideration the additional expenditure that may be incurred.
4 Percept Finserve P. Ltd.
Hence we are of the view that the AO should have allowed the expenditure that has actually been incurred in AY 2008-09 for the purpose of computing income for AY 2007-08, since the purpose of the exercise was to ascertain the income from the project and to assess the incremental income. Since the books of accounts relating to AY 2008-09 should be available by now, we direct the AO to consider the project expenses actually incurred by the assessee in the year relevant to AY 2008-09 for the purpose of computing the income for AY 2007- 08.
We have noticed that the AO has followed the method of ascertaining incremental income from the project every year, the same method should have been adopted by the assessee for ascertaining the income for AY 2008-09, under the principles of consistency. It appears that the assessee has not followed the said method and accordingly offered the additional advance amount of Rs.18,03,750/-, referred above, as income for AY 2008-09. Since the double taxation of same receipt is not permissible, the assessee may move appropriate petition before the tax authorities in this regard, which may be considered by them liberally.