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Showing contexts for: sra project in M/S.Monarch & Qureshi Builders, Mumbai vs Principal Commissioner Of Income ... on 1 March, 2019Matching Fragments
6. That on the facts and circumstances of the case and in law, Ld. CIT erred in changing the method of accounting ^dividing the project into two phases on the basis of consent
3. In this case, the Pr.CIT observed as under:
The firm is in the business of construction. It has taken SRA project for development of Behrambaug, Oshiwara, Andheri-West. The firm has constructed slum buildings for the slum dwellers to be handed-over to them free of cost. The firm has constructed Ito 6 rehab buildings for the slum dwellers and handed over to them free of cost. The firm entered into an agreement with Ever shine Builders Pvt Ltd for construction of sale buildings (Ever Shine Building) comprising of 3 wings of 26 stories. As per the agreement, the right to construct & sale solely lies with the Evershine Builders Pvt Ltd and the amount received on sale shall be shared equally. On 10.12 2000 a survey had taken place at the assessee's premise. During the survey statement of Shri Ketan Shah Partner was recorded. He informed in the statement that Evershine Builders Pvt Ltd will construct the units on 18th to 21st floor of sale building against the rate of Rs 2300 per sq ft of saleable area. Project Gaurav Legend is still to be started full fledge. It is at plinth level and Evershine is constructed up to 17th floor. The sale proceeds evershine is to share @ 50 percent with the assessee from 1st to 17th floor. However, a dispute took place between Evershine Builders Pvt Ltd and the Assessee. Therefore, Evershine and the assessee reached to the consent terms dated Feb 2014 in pursuance to the suit no 1335 dated 2010 which they filed in the Hon High Court of Bombay. As per this document assessee would get following:
5.4 In the balance Sheet as at 31.03.2014 advances received against flats are at 143.78 Crs. As against it WIP is only 28.48 Crores. Thus advances more than 5 times of WIP have been received by the assessee as at 31.03.2014. it show that exorbitant profit margin is involved in this project which assessee is attempting to reduce by inflating costs such as additional land cost. Other items reflected in Balance Sheet which need scrutiny is loans and advances Rs 84.22 Crores. It must be carefully looked into whether these advances are for this SRA project. If not then it is nothing but siphoning off the surplus profit by way of loans and advances. Why advances have been given to Ravi Developments Rs.66.92 crores ? In the SRA construction project such a huge advance is not required to be given.
The method followed by the assessee is not a recognized method. Further, it does not lead to true and fair computation of total income.
6.3 Though the assessee has objected determination of profit from the SRA project in AY 2014- 15 on the ground that project is not complete. In revision proceedings this averment of the assessee has not been objected but as discussed in this order above, there is a distinct divide in the history of SRA Development project under taken by the assessee. The first phase ends in AY 2014-15. This phase ends with, the civil suit settled by the order dated 20.02.2014 passed by the Hon High Court of Bombay. During this period revenue receipts following the High Court Order computed at Rs 115.64 Crores have accrued to the Assessee Company in an irretrievable manner. Then why income should not be computed during the relevant previous year and subjected to tax in AY 2014-15? Had the Hon. High Court order had not been passed on 20.02.2014 there could have been doubt in computation of income on the ground that revenue receipts are in the nature of advances and income has not accrued thereon. But since order has been passed by the Hon High Court of Bombay, there is no doubt on income accruing to the assessee and therefore the A.O. is directed to compute on accrual basis the income and assess to tax.
6.4 therefore the AO is also directed to compute apart from determination of income on accrual basis in AY 2014-15 income on the basis of given facts for the first phase of the project is also and therefore, income should be determined for this phase by taking into consideration the revenue receipts on accrual basis and corresponding expenditures on matching principal basis. The method of accounting and determination of income followed by the assessee is neither consistent nor worthy of true and fair income. Therefore, the Assessing Officer should examine the books of account properly for all the years included in first phase and determine profit from SRA project. In case the AO is of the opinion that it necessary having regard to the nature and complexity of accounts, volume of accounts, doubts about correctness of accounts, multiplicity of transactions in the accounts or the specialized nature of business activity of the assessee and the interest of revenue that the case may be referred for Special Audit as per the provisions of the Section 142(2A) of Income Tax Act 1961 the AO may do so following due procedure in this regard.