2011 (2) TMI 1403 - AT - Income Tax

Summary

Issues involved: Assessment of income u/s 143(3) for AY 2006-07, application of Project Completion Method, disallowance of expenses and interest, appeal against CIT(A) order.

Assessment of income u/s 143(3) for AY 2006-07:
The Revenue appealed against the CIT(A)'s order for the Assessment Year 2006-07, challenging the computation of income based on Project Completion Method and the deletion of disallowed expenses and interest. The Assessing Officer disallowed brought forward expenses and interest, adding them back to the total income. The CIT(A) directed the income computation based on Project Completion Method.

Application of Project Completion Method:
The assessee claimed expenses under Administration and Other Expenses and brought forward expenses against the sale proceeds of land, stating adherence to Project Completion Method. However, no evidence of construction on the land was found, leading to the conclusion that the Project Completion Method was not applicable. The Revenue's grounds were allowed in this regard.

Disallowance of expenses and interest:
The Assessing Officer disallowed brought forward expenses and a portion of interest on an estimate basis. The matter of interest deduction was referred back to the Assessing Officer for reevaluation, considering business purposes and legal precedents. The Revenue's appeal was partly allowed for statistical purposes.

This judgment highlights the importance of substantiating claims with evidence, especially in the context of accounting methods and expense deductions. The decision emphasizes the need for a thorough examination of facts and adherence to legal principles in income assessment proceedings.