Tribunal upholds deletion of profit addition by AO for construction firm

The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to delete the addition made by the Assessing Officer to the construction firm's income. The Tribunal cited consistency with a previous decision in favor of the assessee for a similar case in the assessment year 2011-12. The revenue's appeal was dismissed, affirming the deletion of the profit addition by the AO for the assessment year 2012-2013.

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Issues:
1. Whether the addition made by the Assessing Officer on account of percentage completion method was justifiedRs.

Analysis:
The appeal was filed by the revenue against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2012-2013. The assessee, a construction firm, declared 'Nil' income for the year under consideration. The Assessing Officer (AO) selected the case for scrutiny and questioned the method of recognizing revenue used by the assessee. The AO added the profit earned by the assessee during the accounting year to the total income, stating that every assessee must follow either cash or mercantile system of accounting as per section 145 of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) partly allowed the appeal filed by the assessee and deleted the addition made by the AO.

The revenue challenged the decision, arguing that the AO rightly rejected the explanation given by the assessee and determined the profit earned during the accounting year as per the amended section 145 of the Act. The counsel for the assessee cited a Mumbai Tribunal decision in favor of the assessee in a similar case for the assessment year 2011-12. The Tribunal considered the revenue's grievance that the CIT(A) wrongly deleted the addition made by the AO. The Tribunal upheld the CIT(A)'s decision based on consistency and fairness, directing the assessee to provide evidence that the entire profits from the project had been offered for taxation in subsequent years.

The Tribunal found the facts and issues in the present case to be identical to the assessee's case for the assessment year 2011-12, where the issue was decided in favor of the assessee. Following the previous decision and the findings of the co-ordinate Bench, the Tribunal upheld the CIT(A)'s decision and dismissed the revenue's appeal. The appeal filed by the revenue for the assessment year 2012-2013 was ultimately dismissed.

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