Incorrect factual basis in expense disallowance led to remand for fresh adjudication on the correct project record.

Expenses claimed for real estate projects assessed under the percentage completion method were not finally upheld because the appellate finding on deletion of disallowance rested on incorrect or incomplete facts, including a mistaken assumption about the remand report and the project record. The Tribunal treated the factual basis as unreliable for a conclusive determination and restored the issue for fresh adjudication by the Commissioner (Appeals) on the correct record and after considering the necessary evidence. The disallowance question was therefore reopened rather than conclusively decided on the merits.

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Issues: Whether the deletion of disallowance of finance cost and other expenses by the Commissioner (Appeals) could be sustained when the finding was based on incorrect or incomplete facts, and whether the matter required restoration for fresh adjudication.

Analysis: The dispute concerned expenses claimed in relation to real estate projects where income was recognised under the percentage completion method. The record showed that, in the case of some assessees, the Commissioner (Appeals) proceeded on the basis of facts and procedural assumptions that did not match the actual record, including an incorrect assumption regarding the remand report and the factual position of the project. In these circumstances, the correctness of the quantum disallowance could not be finally affirmed on the material before the Tribunal. The proper course was to restore the issue so that the Commissioner (Appeals) could decide the matter afresh on the correct facts and after considering the requisite evidence.

Conclusion: The deletion of disallowance was set aside and the issue was restored to the Commissioner (Appeals) for fresh adjudication.

Final Conclusion: The Revenue obtained a remand of the contested expense disallowances for reconsideration on the correct factual basis, and the substantive allowance claim was not finally upheld.

Ratio Decidendi: Where the appellate finding is founded on incorrect facts or a mistaken procedural premise, the appropriate course is to set aside the finding and restore the matter for fresh decision on the correct record.

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