DCIT Vs Hoysala Projects Pvt. Ltd. (ITAT Bangalore)
The appeal filed by the Revenue arose from the order of the Commissioner of Income Tax (Appeals)/NFAC dated 25.02.2025 for the assessment year 2017–18. The Revenue’s appeal was delayed by 176 days; however, the Tribunal condoned the delay after accepting the explanation as a sufficient cause and admitted the appeal for adjudication.
The assessee had originally filed its return of income declaring total income under normal provisions and book profit under Minimum Alternate Tax. The return was processed under Section 143(1), and later the case was selected for scrutiny. During assessment proceedings under Section 143(3), the Assessing Officer (AO) observed that the assessee had debited an amount of Rs. 8,89,35,310/- as “owner share of flat purchase – expenses.” The AO sought supporting documents and a detailed breakup of the expenses, but the assessee failed to furnish the required evidence. Consequently, the AO disallowed the entire expenditure and added it back to the income, determining a significantly higher assessed income.
Aggrieved, the assessee appealed before the CIT(A)/NFAC, contending that all relevant details had been submitted offline before the AO on 21.12.2019. The CIT(A) accepted this contention and noted that the AO had recognized revenue from the same projects (Ace-1 and Ace-2) while disallowing the related expenditure solely due to alleged non-compliance. It was also observed that in a subsequent assessment year (AY 2018–19), similar expenditure had been accepted. Further, the CIT(A) held that the AO’s approach of accepting income while rejecting corresponding expenditure amounted to inconsistency. The CIT(A) also relied on the fact that the books of account were audited and did not carry any qualification regarding income recognition or expense allocation. Based on these findings, the CIT(A) deleted the disallowance and allowed the assessee’s appeal.
