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TMI Blog2025 (1) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed in the order u/s. 263 as well as issued already considered earlier. 2. Without prejudice to the above ground, on the facts and in the circumstances of your appellant's case and in law, the Honourable PCIT has erred in invoking provisions of the Section 263 and setting aside assessment order on two issues based on observations on which, on the both the issues are erroneous." Ground No. 1: Disallowance with regards to Revenue recognition 3. The brief facts of the case are that the assessee is engaged in the business of real estate business and construction of residential bungalows. On perusal of Profit & Loss Account, the PCIT observed that the assessee had only one project namely Shree Hari Residency relating to construction of bungalows. The assessee is following percentage completion method for recognizing revenue and valuation of closing work-in-progress. The PCIT observed that during the course of assessment, the assessee had submitted working of Revenue recognition of closing WIP and as per the said working submitted by the assessee, the estimated total revenue of the project was Rs. 17,83,06,286/-. The estimated total cost of the project was Rs. 15,51,00,000/- ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recognition policy of the assessee. Further, the Counsel for the assessee also submitted that the balance amount income of Rs. 2,30,45,468/- has also been offered to tax by the assessee in subsequent assessment years and details thereof were also furnished before the Ld. PCIT, as well. The Counsel for the assessee submitted that the fact that the balance amount of Rs. 2,30,45,468/- has been recognized as revenue in the subsequent years has also not been disputed by the Tax Authorities. Further, the Counsel for the assessee submitted that this basis of revenue recognition has been consistently followed by the assessee for various years, which have also been duly accepted by the Tax Authorities and it is only for this year that proceedings under Section 263 of the Act were initiated. 6. In response, Ld. D.R. placed reliance on the observations of Ld. PCIT in the 263 order. 7. On going through the contents of the order passed under Section 263 of the Act and the submissions of the assessee, we observe that the assessee has specifically submitted that the balance revenue had been recognized by the assessee in subsequent years and hence no prejudice was caused to the Revenue. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of 263 proceedings, the assessee submitted that the lease agreement was primarily for ground floor banquet hall. The Pearl hall on the second floor as well as other rooms were just to act subservient to the main banquet, when needed. Otherwise, these were reserved for club activities. The assessee submitted that it was entitled to use the banquet hall when there were no functions booked by Shree Events and Decorators i.e. the assessee. In fact, when the rooms were not being utilized for marriage seasons, these rooms were being used for the club activity of the assessee, so as to facilitate the club members. Therefore, basically there was no need for disallowance of depreciation, as the assessee itself had actually used the entire facilities throughout the year on different dates. 10. However, PCIT was of the view that as per the assessment order, description of the property let out was mentioned as banquet hall on "ground floor". However, on perusal of "rent agreement" furnished by the assessee during the course of assessment proceedings, it was observed that the assessee had rented 11 fully furnished guest rooms at first floor and Pearl hall at second floor, along with f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. placed reliance on the observations made by PCIT and stated that the Assessing Officer has incorrectly computed the area which has been let out by the assessee and has also, therefore, incorrectly computed the depreciation on the same. Therefore, there was an evident lack of enquiry by the Assessing Officer as to the correct amount of depreciation which was to be disallowed, thereby rendering the assessment order as being prejudicial to the interest of the Revenue. 13. We have heard the rival contentions and perused the material on record. 14. We observe that the assessee has stated before us that since effectively the entire area was being used by the assessee, therefore, the Assessing Officer erred in even disallowance of part of the depreciation claimed by the assessee. However, this is not the subject matter before us, since the assessee has not filed any appeal against this issue of partial disallowance of depreciation. Further, the fact that the with respect to the same property, the assessee can both claim deduction under Section 24 of the Act (with respect to part property which was let out) and depreciation for the balance part which was used by the assessee as it's ..... X X X X Extracts X X X X X X X X Extracts X X X X
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