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TMI Blog2020 (12) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the assessee until and unless it contains the defects or there is any specific prohibition under the provisions of law. As such we are of the view that the principles of consistency should be adopted. Receipts which was treated by the assessee as deferred revenue income has been offered to tax by the assessee in the subsequent assessment years. In such a situation, we are of the view that there is no loss to the revenue for the simple reason that receipt has finally been suffered to the tax but in the subsequent assessment year - if any addition is sustained in the year under consideration then there has to be deletion of the corresponding amount of the income shown by the assessee in the subsequent assessment years otherwise it would lead to double addition to the total income of the assessee which is not desirable under the provisions of law. - Appeal of the Revenue is dismissed. - ITA No. 1090/Ahd/2017 - - - Dated:- 22-10-2020 - Mahavir Prasad, Member (J) And Waseem Ahmed, Member (A) For the Appellant : Dileep Kumar, Sr. DR For the Respondents : Anil Kshtariya, AR ORDER Waseem Ahmed, Member (A) The appeal has been filed by the Revenue for A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99/- against the Garden City Projects and ₹ 1,85,94,701/- against the bungalow project aggregating to ₹ 6,62,90,900/- only with respect to the development projects as discussed above. 7. The assessee accounted the receipts of ₹ 4,76,96,199/- against the land development projects of Garden City III, IV and V in the manner as detailed below: 1. Club Fee ₹ 2,89,200/- Accounted in P/L a/c 2. Maintenance Contribution ₹ 30,82,585/- Treated as non-revenue receipt 3. Electricity Contribution ₹ 23,45,000/- Treated as non-revenue receipt 4. Land contribution ₹ 24,92,803/- Transferred to land cost 5. Development fund ₹ 78,97,122/- Transferred to liability 6. Development expenses ₹ 2,36,91,967Transferred to liability 7. Professional Fee ₹ 78,97,122/- Accounted in P/L a/c 8. The assessee further submitted that the above men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Concession on life membership of Sterling Country Club. (ii) Concession on school, patron membership with priority of admission of children. (iii) Towards concession of bus service with priority in season tickets. (iv) Concession on Dispensary/Medical Centre/Shopping Centre with priority treatment. Towards any other amenities or services which developer may plan in future at his sole discretion. 12. However, the AO was of the view that the assessee was not under the obligation for providing such facilities as the same was completely at the discretion of the assessee. In case, the assessee does not provide such facilities, the purchaser would not compel for the same from assessee. Furthermore, there was no time frame for starting/providing such facilities to the customers. The AO also observed that during the year under consideration none of the facility was started by the assessee. 13. In view of the above, the AO held the aforesaid receipts represents the income of the assessee for the year under consideration under mercantile system of accounting. Accordingly, the AO rejected the contention of the assessee and made the addition of ₹ 78,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of related cost to the particular phase of construction and development project i.e. receipts and cost were recognized with respect to only phase of construction. The AO was therefore wrong in drawing a conclusion, that development expenses totaling to ₹ 44,98,587/- represents assessee's trading receipts which ought to have been credited to P L Account. The AO on the other hand also took on record that out of the sum of ₹ 44,98,587/-, the assessee has already credited ₹ 34,11,050/- to the P L Account. The appellant clarified that the amount of ₹ 44,98,587/- is booking amount/receipts which collection is made from persons booking the premises, in the books of account (P.B.P.10). Out of the same the Assessee has transferred ₹ 34,11,050/- on account of actual expenditure the balance amount of ₹ 10,87,537/-, is on account of liability yet to be honoured by the assessee. It is settled position in law that the outstanding liability (non- statutory) cannot be added back to the income of the appellant. 5.9 Apart from the fact as stated supra, the fact that need due consideration is that assessee is a public Ltd. company whose books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing officer has neither noticed any defects in the books of account maintained by the assessee and verified in the course of scrutiny nor he has brought any material on record to prove that expenditure claimed were not incurred or were bogus. Therefore, there is no justification in ignoring book result as given in audited accounts and making arbitrary addition. It is a sad state of affairs that despite getting the case passing through third stage of assessment and having clear cut direction from the ITAT, the AO failed to apply his mind to the given accounting standard and follow the berated line of argument without any application of mind. It is equally important to place on record that AO has not undertaken; any investigation/independent inquiries to arrive at any conclusion when the whole assessment was to be framed de-novo in consequent to the order of the Hon'ble ITAT. 5.11 The appellant is following mercantile system of accounting is a proper course to show the expenses on the basis of accrual and also show the income on the basis of accrual. It is seen from the agreement with the members that the appellant recovered from the members on account of land cost deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of development fund or the amenities to be provided out of this fund, is out context and contradictory to what he has noted in the order. Whereas at para 7 of the impugned assessment order the AO has categorically noted the details of facilities supposed to be provided from the development deposit. Thus, the amount of future liability on account of development work had been specified in the agreement between the parties, then that future obligation had to be taken into consideration. Therefore, the entire booking receipts of development fund cannot be taken into P L Account, what could be taken to the P L Account is the profit on the said transaction, which has precisely been done by the assessee. 19. The view taken by the Learned CIT(A) for the assessment year 1995-96 was also taken for the year under consideration. Accordingly, the Learned CIT(A) deleted the addition made by the AO. 20. Being aggrieved by the order of Learned CIT(A), the Revenue is in appeal before us. 21. The Learned DR before us vehemently supported the order of the AO. On the contrary the Learned AR before us filed a Paper Book running from pages 1 to 68 and submitted that it has been following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h we are of the view that the principles of consistency should be adopted. 26. In addition to the above, we also note that the receipts which was treated by the assessee as deferred revenue income has been offered to tax by the assessee in the subsequent assessment years. In such a situation, we are of the view that there is no loss to the revenue for the simple reason that receipt has finally been suffered to the tax but in the subsequent assessment year. Accordingly, we note that if any addition is sustained in the year under consideration then there has to be deletion of the corresponding amount of the income shown by the assessee in the subsequent assessment years otherwise it would lead to double addition to the total income of the assessee which is not desirable under the provisions of law. In view of the above and after considering the facts in totality, we are of the view that the order of the Learned CIT(A) does not suffer from any infirmity. Accordingly we decline to interfere in his order. Hence, the ground of appeal of the Revenue is dismissed. 25. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the Court on 22nd October, 2020 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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