2014 (5) TMI 479 - AT - Income Tax

Quantum of income construction activity - working of the profit computed at the time of the survey towards (a) Opening WIP (b) total saleable area (c) Average cost of construction - Held that - It is only the income for the entire year and not that for a part of the year or a truncated period thereof, that could be subject to tax as the income for the relevant assessment year, and which therefore has to be for the full year - the assessee having not furnished any explanation/s substantiating its claims during the assessment proceedings - there is no case for the deletion of the entire addition as made in assessment - there being no finding regarding the income for the second half of the year, more particularly considering that the construction cost had crystallized, and which would therefore obtain for the second half of the year as well, during which there has been economic activity by way of sales This would become much more apparent and striking in view of the glaring and vast unexplained differences between the results obtaining for the two parts - the matter is factually indeterminate, it would be fit and proper that the issue of determination of income for the year is set aside to the file of the AO for fresh adjudication Decided in favour of Revenue.

Issues:
1. Correct quantum of income assessment under section 143(3) of the Income Tax Act, 1961 for A.Y. 2008-09.
2. Errors in the assessment order regarding opening work-in-progress, total saleable area, and average cost of production.
3. Dispute over assessing income for the entire year versus income up to the date of survey.
4. Revenue's appeal against the CIT(A)'s decision on the income returned by the assessee.
5. Discrepancies in sales, area sold, rates, costs, and profits between pre and post-survey periods.

Detailed Analysis:

1. The case involves a dispute over the correct quantum of income assessment for the assessee under section 143(3) of the Income Tax Act, 1961 for the assessment year 2008-09. The assessee, a construction company, was engaged in a project named 'Pooja Enclave' in Mumbai. The assessment involved determining the income based on the project's construction progress and financial calculations.

2. The assessment order faced challenges regarding errors in the assessment related to the opening work-in-progress, total saleable area, and average cost of production. The CIT(A) allowed the assessee's appeal after the Assessing Officer accepted the errors identified during the remand proceedings.

3. A key issue was the dispute between the Revenue and the assessee regarding the assessment of income for the entire year versus income up to the date of survey. The Revenue argued for assessing income at least up to the date of survey, while the assessee emphasized that the income for the entire year should be considered for taxation.

4. The Revenue appealed against the CIT(A)'s decision to accept the income returned by the assessee, contending that the assessment should account for the profit earned up to the date of survey. The Tribunal rejected the Revenue's argument, emphasizing that the income for the entire year should be assessed and subject to tax, not just the profit up to the survey date.

5. Significant discrepancies were noted in sales, area sold, rates, costs, and profits between the pre and post-survey periods of the project. The Tribunal highlighted these differences and directed the Assessing Officer to reevaluate the income determination for the year based on the findings of the remand report and in accordance with the law, providing the assessee with an opportunity to present its case.

In conclusion, the Tribunal allowed the Revenue's appeal for statistical purposes and remanded the issue of income determination for the year back to the Assessing Officer for a fresh assessment based on the remand report's findings and legal considerations.

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