Accounting Reconciliation and IND AS treatment upheld, additions for turnover discrepancy and notional interest deleted in appeal.

ITAT addressed two issues: first, whether a large turnover addition based on GSTR-1 versus books should stand - the tribunal accepted remand-stage documentary reconciliations, Form 26AS entries and bank credits showing milestone receipts attributable to earlier years and upheld the appellate deletion of the addition. Second, whether notional interest credited under IND AS warranted taxation in the impugned year - the tribunal accepted IND AS effective interest accounting, noted actual interest was taxed in later years and sustained deletion of the Section 56 addition. Both appellate deletions were affirmed in favour of the assessee.

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Issues: (i) Whether the addition of Rs. 2,18,61,14,060/- for difference in turnover (GSTR-1 vs profit and loss account) was rightly deleted by the CIT(A); (ii) Whether the addition of Rs. 26,06,30,847/- under Section 56 of the Income-tax Act, 1961 for notional interest on service concession receivable and deferred retention liability was rightly deleted by the CIT(A).

Issue (i): Whether the addition of Rs. 2,18,61,14,060/- on account of difference in turnover should be sustained.

Analysis: The assessee produced confirmations, Form 26AS entries and bank credits showing milestone payments were received and accounted in financial years 2017-18 and 2018-19; these documents were submitted as additional evidence during remand proceedings and the Assessing Officer, in his remand report, recorded that the discrepancy arose from invoices related to FY 2017-18 and 2018-19. The CIT(A) examined the accounting treatment under IND-AS and the documentary reconciliation between GSTR-1 and books and concluded that the amounts related to earlier years and could not be taxed again in the assessment year under consideration.

Conclusion: The deletion of the addition of Rs. 2,18,61,14,060/- is upheld in favour of the assessee.

Issue (ii): Whether the addition of Rs. 26,06,30,847/- under Section 56 for notional interest ought to be sustained.

Analysis: The assessee had credited notional interest to profit and loss account in compliance with IND-AS using the effective interest method and reduced the same in computation of income. The CIT(A) evaluated IND-AS treatment, noted that the interest became payable only after commercial operation date and that actual interest was offered to tax in subsequent assessment years; assessing officers in later years accepted the assessee's position. On these facts the CIT(A) deleted the addition and directed deletion by the AO.

Conclusion: The deletion of the addition of Rs. 26,06,30,847/- under Section 56 is upheld in favour of the assessee.

Final Conclusion: The Revenue's appeal is dismissed on both substantive issues, confirming acceptance of the assessee's reconciliatory additional evidence and IND-AS based accounting treatment for notional interest.

Ratio Decidendi: Where documentary evidence and remand report reconcile differences between GST records and books showing earlier-year receipt and where notional interest is recognized under IND-AS and actual interest is taxed in subsequent years, additions for turnover discrepancy and notional interest cannot be sustained in the impugned assessment year.

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