2019 (1) TMI 929

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....e Ld. CIT(A) was right in allowing the expenses of Rs. 3,08,64,906/- under various heads as Revenue Expenditure instead of Capital expenditure as held by the AO ignoring the facts that the assessee had only one project in hand at Chennai and was following project completion method of revenue recognition. The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax Circle-3(2)(2), Mumbai [AO] u/s 143(3) of the Income Tax Act, 1961 on 23/03/2015 wherein the income of the assessee was determined at Rs. 6.96 Lacs after certain disallowances as against revised returned Loss of Rs. 365.91 Lacs e-filed by the assessee for the impugned AY. As evident from grounds of appeal, the sole dispute involved under appeal is related wi....

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.... 3. Aggrieved, the assessee contested the same with success before Ld. CIT(A) vide impugned order dated 16/05/2016 wherein Ld. CIT(A) concurred with the stand of the assessee by making following observations:- 5.1.1 This ground pertains to disallowance of business expenses of Rs. 3,08,64,906/- and capitalizing it to WIP. I find the assessing officer has discussed this issue at para 7 of his order. The assessing officer held that "As stated above, in the preceding paras as the assessee has only one project in hand and the advances received by the assessee in the business is wholly received from one project and the assessee adopted the method of accounting to arrive at profit at the completion of the project, hence all the expenses relating....

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....the assessee was following completed contract method of accounting and therefore, all the expenditures were to be capitalized since the project was not completed during the year. Per Contra, Ld. Auhtorized Representative for Assessee [AR] Shri. Chetan Karia, drawing our attention to the financial statements of the assessee, controverted the finding of the Ld. AO that the assessee was following completed contract of accounting. The revenue, upon confrontation of the aforesaid contention by the bench, placed on record letter dated 06/04/2018 issued by Ld. AO, in this regard. 5. We have carefully heard the rival contentions and perused relevant material on record. After due consideration of the factual matrix, we find that the revenue is una....