DCIT Vs Amardeep Constructions (ITAT Mumbai)
Builder Followed Law, AO Followed Statement – Tribunal Chooses Law- No Completion, No Revenue: ITAT Blocks ₹18 Cr ‘Phantom Profit’ Addition. 43CA Safe Harbour Now 10% – ITAT Applies Retrospectively. The Tribunal held that income cannot be taxed merely on a survey statement when the builder consistently follows the Project Completion Method. Additions of ₹19.2 crore were deleted. Assessing Officer cannot switch to percentage completion arbitrarily. The Tribunal rejected the addition based solely on a partner’s survey statement, holding that real income arises only on project completion, not on estimated basis. The ITAT Mumbai reaffirmed that developers using PCM cannot be forced to adopt percentage completion merely because sales occurred before completion. Consistency principle upheld. Relying on Supreme Court precedent in S. Khader Khan Son, ITAT held that a survey-time statement cannot justify an income addition without corroboration or actual completion. Tribunal ruled that advances and sales before project completion don’t create taxable income under PCM; the builder rightly deferred recognition until occupancy. The Tribunal applied the 10% tolerance limit to earlier years, following judicial precedents, deleting addition where sale price-stamp value difference was only 7%.
Assessee, a real estate developer, followed the Project Completion Method (PCM) since inception. A survey u/s 133A was conducted on 18.02.2019. It was found that Assessee had sold 182 out of 310 flats & 33 out of 37 shops, with total sale value of ₹227.28 crore, & advances were also received. However, no income from this project (“Anutham”) was declared in the return for AY 2019-20, as the project was still incomplete.
