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TMI Blog2023 (12) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... Housing Infrastructure Development Corporation Limited based on the concept of fair market value whereas the accounts under GAAP are prepared on Historical Cost Concept. The assessee prepared revised financial statement as per Ind AS and the same was approved by the Board of Directors The financial statements prepared as per GAAP became non-est during the course of assessment proceedings itself. Under these facts and circumstances, where the case of the assessee was selected for scrutiny on various issues, the ld. AO ought to have carried out the scrutiny proceedings on the basis of revised financial statements as per Ind AS and should have accepted the revised computation of income filed by the assessee and all the other details as necessary should have been called for in order to complete the scrutiny proceedings. Perusal of the impugned order indicates that the ld. CIT(A) had summarily dismissed the assessee s grounds without giving any reasoning before confirming the impugned addition and the order of the ld. CIT(A) is purely a non-speaking one. Since time limit to file revised return lapsed before the preparation of financial statements as per Ind AS and AO has also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s without considering the fact that the said conversion was made, inter alia, applying the Percentage of Completion Method (POCM), whereby the book profit was earned on cost of land sold at actuals, being Rs. 172,46,50,000/- and the sale of land appears at Rs. 280,58,13,000/-, thereby there could not have been any inflation on account of the cost of land. 5. That the Ld. CIT (Appeals) has grossly erred in ignoring the contention of the appellant vide its submissions dated 06 February 2023. 6. That the Appellant craves leave to add, modify or withdraw any ground or grounds of appeal before or at the time of hearing of the appeal. 3. From perusal of the above grounds, we notice that the sole issue involved in this appeal is regarding addition of Rs. 45,31,06,825/- made by the Assessing Officer on account of alleged inflated cost of land. Facts in brief are that the assessee, namely, WBHIDCO, is a wholly owned company of Government of West Bengal. The main object of the assessee is development, operation and maintenance of infrastructural activities like development of land, drainage, construction of roads including highway project and housing and other activities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Ind AS and based on the new standards the cost of land should be Rs. 172,46,50,000/- instead of Rs. 215,55,62,718/-. The assessee claimed that this amount of Rs. 172,46,50,000 doesn't contain the component of price escalation at 7.25% (based on WEBCON report). However, the assessee provided no working of how this cost was arrived at. The assessee has over the years adhered to the WEBCON report, citing the price escalation as a necessary addition to the cost of land. The assessee has given no explanation as to why then the price escalation of land was not adhered to when the accounting standards were revised. As mentioned in para 4.8 based on discussions made in the order, it has already been observed that as per the accounts of the assessee under GAAP, there was a component of price escalation in the cost of land sold. But, the assessee claims that the same price escalation is not done when the accounts were revised to the Ind AS, and this claim is not supported with any documentary evidence. Thus, without proper evidence, the claims of the assessee cannot be accepted. As per the revised accounts as per Ind AS, assessee sold 5022.19 cottah for Rs. 172,46,50,000/- i.e. still a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer for scrutinising the case of the assessee and did not oppose the request of the ld. Counsel for the assessee if all the issues raised in the instant appeal are restored to the ld. Assessing Officer for afresh examination. 6. We have heard rival contentions and perused the material placed on record. We notice that the assessee is aggrieved with the finding of ld. CIT(A) confirming addition of Rs. 45,31,06,825/- made West Bengal Housing Infrastructure Development Corporation Limited by the Assessing Officer alleging over statement of cost of land and before us, the ld. Counsel for the assessee, has filed a following written submissions giving facts of the case as well as series of events which occurred after the filing of ITR and before the completion of assessment proceedings ground-wise submissions:- 1. GROUNDS OF APPEAL 1 : This ground of Appeal is general in Nature and as such does not need any comment at this juncture. 2. GROUNDS OF APPEAL 2 : Under this ground of appeal the Appellant submits that 1) the Assessing Officer has assessed the Income on the basis of the Statements of Account of the Appellant under GAAP. 2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the AO as well as CIT(A) vide our replies / submissions dated 27.01.2021, 25.02.2021 and 07.05.2021 against the Notices u/s 143(2), 142(1) and the Show Cause Notice, enclosing all the supporting documents / statements and audited accounts. 4) Note 41 of the Audited Statements of Accounts (Pages 165 to 167) has disclosed the first time adoption of IND AS and its impact of recognition of revenue and expenses based on Percentage of Completion Method (POCM) and this has been done in compliance with the Guidance Note on Accounting for Real Estate Transactions issued by ICAI. 5) The AO as well as the CIT(A) has failed to realize that the Revenue and Expenses have been recognized in the Accounts on actual basis based on percentage of Completion since the New Town Project is still not completed which is evident from the facts and figures tabled in Pages 4 and 5 of the Paper Book. The impact of the Conversion of Accounts from GAAP system to IND AS on the revenues and Expenses are detailed in Page 6 of the Paper Book. It is evident that on conversion of Accounts under IND AS, i.e. at actual on POCM the Loss before Tax under GAAP to the extent of Rs. 390,735,031/- has turned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Loss Account on actual basis. In view of the above and considering the facts that AO has erred in estimating the Cost of Land sold at Rs. 127,15,43,175 /-, as estimated on the basis of the Cost incurred till 01.04.2006 at Rs. 6037,39,00,000/-, instead of the Cost of Land sold at actuals, as debited to WIP Account as well as Profit Loss Account duly audited and reviewed by CAG before being published in public domain and accepted by all statutory authorities, we pray for the deletion of disallowance / add back of Rs. 45,31,06,825/-(Page 30 of the Paper Book). 7. On going through the above facts narrated by the ld. Counsel for the assessee in the written note and the same being uncontroverted by the ld. D/R, we find that the assessment proceedings carried out by the Assessing Officer are based on the financial statements prepared as per General Accepted Accounting Principles in India i.e., GAAP. However, as per the guidelines given by the Government of India, the assessee was required to prepare the financial statements for FY 2017-18 and onwards as per Ind AS which is a new system of accounting West Bengal Housing Infrastructure Development Corporation Limited based on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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