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2024 (1) TMI 152 - AT - Income TaxWorking out profit as per the percentage of completion method OR project completion method - disallowing part of the expenses claimed by it as deduction - disallowance in this case is admission by one of the director - CIT(A) deleting the addition because the applied percentage completion method in assessment order is correct as the Project Completion Method was not in existence before 01.04.2003. HELD THAT - The aspect that disallowance in this case is admission by one of the director is ignored by the Ld. CIT(A). He has accepted the explanation that the admission was wrong. The Ld. CIT(A) has accepted the detailed submissions in this regard and observed that he has examined these submissions and the books of the assessee. We find that these aspects considered by the Ld. CIT(A) were never before the Assessing Officer. We find that this is contravention of Rule 46A. Hence, in the interest of the justice, we remit this issue to the file of the Assessing Officer to consider the issue afresh considering the submission made before the Ld. CIT(A). Appeal filed by the Revenue stands allowed for statistical purposes.
Issues Involved:
1. Deletion of addition of Rs. 5,17,61,420/- by Ld. CIT(A)-1, Agra. 2. Application of Percentage Completion Method versus Project Completion Method. 3. Compliance with Accounting Standards. 4. Allowability of specific expenses. Summary of Judgment: 1. Deletion of Addition of Rs. 5,17,61,420/-: The Revenue challenged the deletion of an addition amounting to Rs. 5,17,61,420/- by the Ld. CIT(A)-1, Agra. The Assessing Officer (AO) had made this addition based on the percentage completion method, which was disputed by the assessee. The Ld. CIT(A) found that the AO did not draw any adverse inference from the documents impounded during the survey and accepted the assessee's change in accounting method from project completion to percentage completion. 2. Application of Percentage Completion Method versus Project Completion Method: The AO noted that the assessee initially agreed to change its accounting method from project completion to percentage completion during the survey. However, the AO disallowed certain expenses, claiming they should be included in the estimated project cost. The Ld. CIT(A) observed that the AO did not find any specific discrepancies in the books of accounts and the impugned addition was made by disallowing nine expenses claimed by the assessee. 3. Compliance with Accounting Standards: The AO contended that the assessee did not follow Accounting Standard AS-7. However, the Ld. CIT(A) agreed with the assessee that AS-7 pertains to construction contracts and not to real estate developers. The Ld. CIT(A) found that the assessee provided sufficient evidence for the expenses claimed and followed the Guidance Note issued by ICAI. 4. Allowability of Specific Expenses: The Ld. CIT(A) noted that out of the disallowed expenses, Rs. 1,96,82,204/- had been capitalized and Rs. 13,23,232/- (depreciation) had been added back while computing taxable income. The remaining disallowed expenses were categorized as finance charges and marketing expenses, which the Ld. CIT(A) found to be legally deductible based on the assessee's explanations and judicial precedents. Remand to Assessing Officer: The Tribunal observed that the Ld. CIT(A) accepted explanations and submissions that were not before the AO, contravening Rule 46A. Therefore, in the interest of justice, the Tribunal remitted the issue back to the AO for fresh consideration. Conclusion: The appeal by the Revenue was allowed for statistical purposes, and the matter was remanded to the AO for reconsideration.
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