MBM Developers Vs DCIT (ITAT Bangalore)
Income Tax Appellate Tribunal (ITAT) Bangalore heard the appeal filed by MBM Developers against the National Faceless Appeal Centre (NFAC) regarding income assessment for the year 2018-19. The case arose from an assessment order under Section 143(3) read with Section 144B of the Income Tax Act, 1961, which determined the taxable income at ₹4.16 crore after adding ₹2.92 crore due to discrepancies in income recognition under the Percentage Completion Method (PCM). The Assessing Officer (AO) found that MBM Developers had misallocated expenses, leading to an understatement of income. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s findings, stating that the assessee failed to provide substantial documentation supporting its accounting treatment. The key contention revolved around whether the expenses deducted under PCM were correctly accounted for, with the assessee arguing that the computation method was consistent with past assessments and that it had already declared a higher income.
After reviewing the submissions, ITAT Bangalore found that neither the AO nor the CIT(A) had conclusively verified the income computation. The tribunal noted that the financial records lacked clarity on key aspects such as total saleable area, the actual sales completed, estimated project costs, and proper revenue recognition. Due to insufficient evidence supporting income and expense allocation, the tribunal remanded the case back to the AO for reassessment. The AO was directed to verify income recognition, project expenses, partner remuneration, and loan interest deductions with proper documentation. The appeal was thus allowed for statistical purposes, with the tribunal emphasizing the need for proper substantiation of claims before a final determination could be made.
