2024 (11) TMI 1245 - AT - Income Tax

Difference/variation in sales/turnover shown in ITR and GST Returns - Assessee is following project completion method consistently - whether the Assessee is entitled to follow the project completion method as per its own choice or not ? - HELD THAT - Coming to the instant case, admittedly, as the Assessee is consistently following the project completion method, and therefore there was no logic or plausible reason to discard the accounting method being continuously followed by the Assessee, hence the action of AO in rejecting the project completion method followed by the Assessee and applying percentage completion method is un- sustainable and contentions raised by the Ld. DR in support of decision of AO qua this aspect, are untenable and hence the same are rejected and project completion method approved by the Ld. Commissioner is sustained. In the instant case, the admittedly Assessee out of 228 flats, has entered into agreements to sell of 24 flats only, which is admittedly 10.5 % only. The Assessee has also been able to demonstrate that though the project of Assessee consists of 23 storey residential building which is saleable, however, during the assessment year under consideration it has completed 1st slab only and thereafter the project was/is on hold owing to certain legal impediments and financial difficulties, as appears from the letter of the bank (supra) whereby the Bank has declared the loan availed by the Assessee as NPA and therefore the Assessee during the assessment year under consideration, has completed 10% of the project/saleable building only and few clients have made agreements to sell but not the sale deeds and therefore, the parameters/conditions as prescribed for application of percentage completion method though not admitted but even otherwise has not being achieved. On the aforesaid analyzations, we are of the considered view that even otherwise for the sake of argument though submitted but not admitted by the Assessee, still the Assessee has not achieved the minimum threshold to declare the revenues received and therefore contentions raised by the Ld. DR that the Assessee has completed 38.71% of its project and therefore the Assessee would have recognized the revenue under the percentage completion method and/or thus the Ld. Commissioner had erred in concluding that only 10% of the project has been completed, are also untenable, hence rejected. Payments qua Commission/Brokerage Expenses - DR claimed that because the Assessee has paid the brokerage commissions and therefore, it should have recognized the revenue received - HELD THAT - We observe the AO proposed the addition on this count and in response to that, the Assessee by filing its reply has claimed that it had appointed Indiabulls Distribution Services Limited (IDSL) as a Marketing Agent on Commission Basis during the AY under consideration, to act on behalf of the Assessee. IDSL had a monopoly to sell flats to the various customers, as it appears from the copy of Agreement with IDSL. Whatever the commission paid to IDSL was, as per the Agreement and not on the basis of sales of TDR during the year. The Assessee also provided the copy of Ledger Account and details/invoices of commission paid through NEFT/Cheque/RTGS. We observe that the aforesaid reply/claim of the Assessee has duly been considered by the AO and accepting the same as correct, admittedly no addition on this count was made by the AO. Even otherwise in view of judgment of DLF Universal Ltd. 2015 (4) TMI 981 - DELHI HIGH COURT by the Hon ble High Court of Delhi, the expenses incurred on brokerage and commission in terms of agreement entered into with IDSL, are allowable in full in the year, in which the same were incurred. In our view, just on the reason that the Assessee has paid the commission and brokerage amount during the year under consideration, the percentage completion method cannot be applied. On the aforesaid analyzations, the present contention raised by the ld. DR is also not tenable. Differences between sales shown in the GST return and Income Tax Return - We are in concurrence with the contention of the Ld. Sr. Counsel that different statutes such as GST Act and the Income Tax Act as applicable to the instant case, are having their own parameters and cannot be equated with each other. As in the CGST Act, the consideration which is received or receivable is supposed to be disclosed, as it appears from the definition and therefore in compliance to the terms of GST Act, the Assessee has shown the amount received or receivable and paid the relevant taxes as per CGST Act accordingly. Whereas for the income tax purposes, as the Assessee has been consistently following the project completion method and therefore treated the consideration received on account of flats sold, as advances as current liabilities, but not as sales/turnover. Hence, in our considered view, the difference between the turnover shown in GST Return and ITR has been properly reconciled by the Assessee before the authorities below, as well as before us and therefore addition made by the AO on this aspect, at all is not sustainable and therefore has rightly been deleted by the ld. Commissioner. Consequently, on the analyzations made above, the decision of the Ld. Commissioner in deleting the addition under consideration is sustained and the appea filed by the Revenue Department is dismissed. Disallowance of architect and professional fee - Assessee has not furnished copies of bills/vouchers of payment and ledger accounts of the parties, details of the genuineness of the transactions as well as PAN details and addresses of many parties as wrong and has also not furnished any details qua TDS deducted - HELD THAT - It is admitted fact that the assessment proceedings were carried out during the covid-19 period, when the entire Nation was on hold and therefore the reasonable cause for not submitting the relevant documents before the AO cannot be ruled out and thus, we are inclined not to take any adverse view. As the Assessee has rectified its mistake by filing appropriate document and/or willing to rectify its mistake, therefore in our considered view, the real adjudication of the issue under consideration would take place. Hence, for the substantial justice and proper decision of the issue under consideration, we are inclined to remand the instant issue to the file of the AO for decision afresh, suffice to say by affording reasonable opportunity to the assessee to substantiate its claim by producing relevant documents and reply/clarification, requires if any, by the AO. Disallowance u/s 40(a)(ia) - disallowance qua transportation charges paid to the transporters - As observed above by us that admittedly the assessment proceedings were carried out during the covid-19 period, when the entire Nation was on hold and therefore the reasonable cause for not submitting the relevant documents before the AO cannot be ruled out and thus, we are inclined not to take the adverse view. In our considered view, the documents submitted by the Assessee qua transporters appear to be essential and important for adjudication of the issue involved. And the amount involved qua four transporters out of above eight is substantive and therefore the Assessee by filling the relevant documents qua such 04 transporters, justified its claim as bonafide and reasonable. It is the mandate of the Law that the income tax is chargeable or payable on the Real income but not otherwise, thus, considering the facts in totality, we deem it appropriate to remand the instant issue under consideration as well, to the file of the AO with a direction to decide afresh.

Summary

Issues Involved:

1. Difference in sales/turnover as per Income Tax Return (ITR) and GST returns.
2. Adoption of project completion method by the Assessee.
3. Disallowance of architect and professional fees.
4. Disallowance under section 40(a)(ia) of the Income Tax Act for transportation charges.

Detailed Analysis:

1. Difference in Sales/Turnover as per ITR and GST Returns:

The primary issue was the discrepancy between the sales figures reported in the Income Tax Return (ITR) and the GST returns. The Assessing Officer (AO) added Rs. 35,25,19,560 to the Assessee's income, treating it as undisclosed sales, due to the difference between the sales reported in the GST returns and the ITR. The Assessee explained that the discrepancy arose because advances received from buyers were shown as sales in the GST returns as per GST laws, whereas for income tax purposes, the Assessee followed the project completion method, showing these advances as current liabilities. The Commissioner of Income Tax (Appeals) deleted the addition, accepting the Assessee's explanation that the project was incomplete and revenue recognition was not warranted under the project completion method. The Tribunal upheld the Commissioner's decision, noting that the Assessee had consistently followed the project completion method and the difference was adequately explained.

2. Adoption of Project Completion Method:

The Assessee consistently adopted the project completion method for revenue recognition, arguing that the project had not reached the threshold for revenue recognition as per the relevant accounting standards. The Revenue contended that the Assessee had completed more than 25% of the project, thus necessitating revenue recognition. However, the Tribunal held that the Assessee was entitled to choose the project completion method, as recognized by the Supreme Court and various High Courts, and the AO could not compel a different method unless there was a clear loss of revenue. The Tribunal found that the Assessee had not completed 25% of the project, and thus, revenue recognition was not required.

3. Disallowance of Architect and Professional Fees:

The AO disallowed Rs. 1,25,67,743 claimed as architect and professional fees due to lack of supporting documentation. The Assessee admitted to errors in providing PAN details but claimed to have rectified the mistake by submitting correct information later. The Tribunal noted that the assessment occurred during the COVID-19 pandemic, which might have contributed to the Assessee's inability to provide complete documentation. The Tribunal remanded the issue back to the AO for fresh consideration, allowing the Assessee an opportunity to substantiate its claim with the necessary documents.

4. Disallowance under Section 40(a)(ia) for Transportation Charges:

The AO disallowed Rs. 5,27,107 under section 40(a)(ia) for non-deduction of TDS on transportation charges. The Assessee argued that the transporters were assessed under section 44AE and provided acknowledgments from some transporters as additional evidence. The Tribunal, considering the challenges of the pandemic period, remanded the issue back to the AO to verify the Assessee's claims and the additional evidence provided, directing the AO to reassess the matter afresh.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upheld the deletion of the addition for undisclosed sales, and accepted the project completion method adopted by the Assessee. The Tribunal remanded the issues of disallowance of architect fees and transportation charges back to the AO for fresh consideration, allowing the Assessee to provide further evidence. The Assessee's appeal was dismissed as infructuous, given that the issues raised were already addressed in the cross-objection.