2015 (10) TMI 307 - AT - Income Tax

Method of accounting - income recognition - Addition made on estimation basis by AO on construction of housing projects - assessee a company is engaged in the business of real estate development and construction - Held that - Identical estimation of profit relating to Bit-III Housing Project in the preceding AY 2008-09 came up for consideration before the ITAT 2014 (1) TMI 1182 - ITAT HYDERABAD as held once the assessee recognised the income in accordance with the supplementary agreements, the CIT(A) cannot substitute his assessment to say that the assessee has postponed the tax liability. The CIT(A) observed that there is no basic deviation in the method followed by the assessee regarding recognising of income. However, he observed in the same breath that there is basic flaw in the method followed by the assessee to have threshold limit of 30% as the said threshold limit can be differed by various means. When there is no deviation in recognising the income by the assessee, the CIT(A) cannot recompute the profit of the assessee by observing that there is basic flaw in the method followed by the assessee to have threshold limit of 30% as the said threshold limit can be differed by various means, which is unwarranted. Accordingly, the findings of the CIT(A) are vacated and the grounds raised by the assessee are allowed.- Decided in favour of assessee. Disallowance u/s 40(a)(ia) - AO noticing that assessee has not remitted the TDS amount within the due date - Held that - There is no dispute to the fact that assessee has remitted the TDS amount before the due date of return for the impugned assessment year as provided u/s 139(1) of the Act. The Hon ble Calcutta High Court in case of M/s Virgin Creations (2011 (11) TMI 348 - CALCUTTA HIGH COURT ) interpreting the provisions of section 40(a)(ia) has held that if TDS amount is remitted to the Govt. account prior to the due date of return, u/s 139(1), there will be no disallowance u/s 40(a)(ia) as first proviso to section 40(a)(ia) brought to the statute by Finance Act, 2010 will apply retrospectively. Thus as first proviso to section 40(a)(ia) being retrospective in operation, if the TDS amount is remitted prior to the due date of return u/s 139(1), no disallowance is to be made u/s 40(a)(ia) of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Relevance of grounds raised by the department in the appeal.
2. Addition made on estimation basis for construction of housing projects.
3. Disallowance under section 40(a)(ia) of the Act for non-remittance of TDS amount before the due date.

Analysis:
1. The judgment pertains to appeals by the department against a common order of the CIT(A)-IV, Hyderabad for AY 2009-10 and 2010-11. The Tribunal dismissed certain grounds raised by the department as not relevant for the appeal, as they did not arise from the assessment order or the CIT(A)'s order. The issues not related to the appeal were deemed infructuous and not required to be adjudicated.

2. The primary issue in Ground No. 5 of both appeals concerned the addition made on an estimation basis by the Assessing Officer (AO) for the construction of housing projects. The assessee, engaged in real estate development, recognized revenue based on the percentage completion method. The AO, disagreeing with the revenue recognition policy, estimated the profit for a specific project and added it to the income. The CIT(A) deleted the addition based on a precedent set by the ITAT for the preceding assessment year, where it was held that the assessee's method of recognizing income was acceptable. The Tribunal upheld the CIT(A)'s decision, emphasizing that the CIT(A) cannot substitute his assessment if the income recognition is consistent with the agreement terms.

3. Ground Nos. 6 & 7 in the appeal related to the disallowance of a specific amount under section 40(a)(ia) of the Act for non-remittance of TDS within the due date. The AO disallowed the amount, but the CIT(A) ruled in favor of the assessee, citing the retrospective operation of the first proviso to section 40(a)(ia). The Tribunal, following judicial precedents, including decisions by the Calcutta High Court and the jurisdictional High Court, upheld the CIT(A)'s order. It was established that if the TDS amount is remitted before the due date of filing the return, no disallowance is warranted under section 40(a)(ia) of the Act.

In conclusion, the Tribunal dismissed the appeals by the Revenue for both assessment years based on the detailed analysis and application of legal principles to the issues raised in the appeals.