Appeals Dismissed, Emphasizing Consistency in Accounting Methods & Legal Provisions

The ITAT dismissed both appeals filed by the Revenue, affirming the CIT(A)'s decisions on all issues. The judgments emphasized consistency in accounting methods, adherence to legal provisions, and the principle of not withholding deductions allowed in initial assessment years.

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Issues Involved:
1. Deletion of disallowance of deduction under section 80IB(10) of the Income Tax Act, 1961.
2. Allocation of common expenses between eligible and non-eligible units.
3. Alternative addition made by the AO.
4. Deletion of addition based on the order of the earlier year.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance of Deduction under Section 80IB(10):
The Revenue challenged the deletion of disallowance of deduction under section 80IB(10) amounting to Rs. 4,54,86,974/-. The assessee, a real estate developer, claimed the deduction for its project "Vedika E-Series," asserting compliance with section 80IB(10) conditions. The AO disallowed the deduction, arguing that the project was first approved by Kudasan Gram Panchayat on 16-03-2005 and not completed within the stipulated time. The CIT(A) found that the first approval was granted by GUDA on 06-02-2008, and the project was completed by 30-03-2012, thus within the prescribed time. The ITAT upheld the CIT(A)'s decision, emphasizing consistency and the absence of any negative remarks from the AO regarding the Panchayat's approval.

2. Allocation of Common Expenses:
The Revenue contested the CIT(A)'s decision to not allocate common expenses based on turnover, resulting in a higher deduction under section 80IB(10). The AO had observed a discrepancy in the allocation of common expenses between eligible and non-eligible projects. The CIT(A) noted that the assessee consistently allocated expenses based on saleable area, a method accepted by the Revenue in previous and subsequent years. The ITAT upheld this method, citing the principle of consistency and the Supreme Court's ruling in CIT vs. Excel Industries Ltd.

3. Alternative Addition Made by the AO:
The AO alternatively suggested that common expenses should be apportioned between sales and work-in-progress (WIP). This resulted in an addition of Rs. 4,51,16,680/-. The CIT(A) rejected this approach, stating it disregarded accepted accounting principles and the percentage of completion method (PCOM) followed by the assessee. The ITAT agreed, emphasizing the principle of consistency and noting that such apportionment would not impact the overall income in the long run.

4. Deletion of Addition Based on the Order of the Earlier Year:
The Revenue challenged the deletion of an addition of Rs. 11,41,532/- related to expenses incurred in the assessment year 2009-10. The AO disallowed the claim, citing non-acceptance of the CIT(A)'s earlier decision and cash expenditure. The CIT(A) followed the ITAT's earlier orders allowing the deduction. The ITAT upheld the CIT(A)'s decision, noting no contrary judgment or reversal by a higher forum.

Conclusion:
The ITAT dismissed both appeals filed by the Revenue, affirming the CIT(A)'s decisions on all issues. The judgments emphasized consistency in accounting methods, adherence to legal provisions, and the principle of not withholding deductions allowed in initial assessment years.

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