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TMI Blog2004 (9) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... le determining the value of the gross work i.e. value of opening stock and cost of land on which the flats/shops were constructed – Held that Tribunal has rightly held that there was no error or prejudice to the interests of the Revenue in so far as non-inclusion of the cost of land – appeal is allowed in part and modify the order of the revisional authority and restrict the direction for fresh assessment by adding only cost of opening stock, to arrive at the gross profit and consequential income - - - - - Dated:- 2-9-2004 - Judge(s) : R. V. RAVEENDRAN., K. K. LAHOTI. JUDGMENT The judgment of the court was delivered by R.V. Raveendran C.J.- In this appeal by the Revenue under section 260A of the Income-tax Act, 1961 (for short "th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, there was no profit in regard to the sale of undivided share of the land. The difference between the actual cost of construction and the amount received as sale price towards construction was shown as the profit of the assessee. During the accounting year, corresponding to the assessment year 1992-93, the assessee did not sell any flat/shop. The Assessing Officer was of the view that the method of accounting employed by the assessee led to a fictitious profit being offered to tax and did not permit the correct income to be deduced. The Assessing Officer, therefore, adopted a different computation of income by exercising power under section 145 of the Act. The Assessing Officer determined the gross value of the work executed as Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the flats/shops were constructed. The revisional authority, therefore, directed the Assessing Officer to add the two amounts to the gross value of the work for the purpose of calculating 8 per cent, profit and redo the assessment accordingly. The said order of the revisional authority was challenged by the assessee by filing an appeal before the Income-tax Appellate Tribunal in I.T.A. No. 488/Jab/1997. The Tribunal by order dated November 15, 1999 allowed the appeal and quashed the order of the revisional authority. It held that even if the order of assessment was erroneous, it was not prejudicial to the interests of the Revenue and, therefore, the revisional authority was not justified in setting aside the assessment order in exercise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lenged in this appeal. The Revenue contends that the Tribunal erred in holding that the order passed by the Assessing Officer was not prejudicial to the interests of the Revenue. At all events, it is submitted that the omission to take the opening stock of Rs. 43,780 while calculating the gross value of the work, was clearly an error which was prejudicial to the interests of the Revenue. It is now well settled that the exercise of revisional jurisdiction under section 263 of the Act, which is supervisory, is contemplated only where the assessment order is erroneous and also prejudicial to the Revenue. It is no doubt true that in the method adopted by the Assessing Officer for arriving at the gross value of the work for the purpose of calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold the undivided share of the land was the actual cost price (that is, if the construction was 25 flats and while selling a flat with undivided 1/25th share in the land, the cost would be 1/25th of the actual cost at which the assessee acquired the land) and no profit was earned; and that the entire profit was derived by it out of the business activities, i.e., the cost of construction. This had not been disbelieved by the revisional authority. Even if it is assumed that there was profit in regard to the land, it was included in the cost of construction which was subject to assessment of tax during the relevant year of sale. Therefore, the revisional authority committed a serious error in directing that Rs. 52,19,774, being the cost of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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