Relationship Properties Private Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that addition based on ad hoc method not justifiable since assessee followed Percentage of Completion Method for revenue recognition adhering to guidance note on Accounting of Real Estate Transactions issued by ICAI. Accordingly, appeal of assessee allowed.
Facts- The assessee is engaged in the real estate development, entered into a Development Agreement dated 28th March, 2011 with ETA Star Info Park, ETA Karnataka Estates Limited and ETA Constructions (India) Limited for development of a residential complex at Binnypet, Bengaluru. The assessment was completed on 3012-2019 u/s 143(3) of the Act, with an addition to the income of assessee for Rs. 229,29,00,338/- on account of alterations to the working of percentage of completion method and revenue recognition, thereby the total income of assessee has been determined at Rs. 217,68,87,760/- (as against the loss of (Rs. 11,60,12,579/-) declared by the assessee.
CIT(A) partly allowed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that in term of interpretation of accounting principles as explained by the ICAI in their Guidance Note on Accounting for Real Estate transactions (Revised 2012), we are convinced that the assessee had rightly worked out the revenue recognition for its both the projects, which was attempted to shuffle by the revenue under distorted working modalities, with own presumptions, with no explanatory reasons assigned to such conclusions. Both the authorities below have abruptly rejected the claim of assessee but have not come forward with any plausible reasoning to do so. Consequently, we are unable to subscribe and persuade with the findings of Ld. AO as well as the conclusion drawn by the Ld. CIT(A), without any cogent points to such decisions. We, therefore, direct the revenue authorities to vacate the addition made by the Ld. AO, which is further reduced in remand proceedings and to the extent finally sustained by the Ld. CIT(A), on account of addition to revenue by disputing the working of revenue recognition under percentage of completion method (POCM). In result, ground of the present appeal of the assessee stands allowed.
