AO must conduct assessment based on Ind AS financial statements not outdated GAAP statements for FY 2017-18 onwards

ITAT Kolkata held that AO erred in conducting assessment based on GAAP financial statements when assessee was required to prepare statements under Ind AS from FY 2017-18 onwards. AO examined inflated land cost using GAAP-based statements and percentage completion method, ignoring revised Ind AS statements filed during proceedings. Since GAAP statements became non-est after Ind AS adoption and CIT(A) summarily dismissed appeal without reasoning, ITAT restored matter to AO for de-novo assessment based on revised Ind AS financial statements. Appeal allowed for statistical purposes.

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Issues Involved:
1. Addition of Rs. 45,31,06,825 on account of alleged inflated cost of land.
2. Assessment based on GAAP vs. IND-AS.

Summary:

Issue 1: Addition of Rs. 45,31,06,825 on account of alleged inflated cost of land

The assessee, WBHIDCO, challenged the addition of Rs. 45,31,06,825 made by the Assessing Officer (AO) for overstating the cost of land. The AO based his assessment on the financial statements prepared under GAAP, despite the assessee's transition to IND-AS as mandated from the financial year 2017-18. The AO did not consider the revised financial statements prepared under IND-AS, which showed a different computation of income. The AO adhered to the WEBCON report for price escalation under GAAP but did not accept the IND-AS figures due to lack of documentary evidence. Consequently, the AO added Rs. 45,31,06,825 to the income, initiating penalty proceedings under section 270A for under-reporting of income.

Issue 2: Assessment based on GAAP vs. IND-AS

The assessee argued that the financial statements under GAAP were rendered non-est by the Board's resolution and CAG's direction to adopt IND-AS. The revised IND-AS accounts could not be filed within the time limit for revised returns. During assessment, the assessee submitted the IND-AS accounts, which showed a significant difference in the cost of land and overall income. The CIT(A) upheld the AO's addition without providing substantial reasoning, making a non-speaking order. The Tribunal noted that the AO should have considered the revised IND-AS financial statements, as they were approved by the Board and published in the public domain after CAG review.

Tribunal's Decision:

The Tribunal found merit in the assessee's arguments and observed that the AO should have based the scrutiny on the revised IND-AS financial statements. The CIT(A)'s dismissal of the assessee's appeal without proper reasoning was also noted. The Tribunal restored the matter to the AO for de-novo adjudication based on the IND-AS financial statements, ensuring a fair opportunity for the assessee to present relevant documents.

Conclusion:

The appeal was allowed for statistical purposes, directing the AO to reassess the case considering the revised IND-AS financial statements. The assessee is to be given a reasonable opportunity to support its claims.

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