TaxTMI 
TaxTMI 
2020 (7) TMI 157
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....M/s. Gaur Group and is engaged in the business of real estate development. During the year under consideration the assessee is developing housing project in Sector 79, Noida, U.P. The return for the year was filed on 28.09.2014 declaring net taxable income of Rs. 12,59,710/-. The return was selected for scrutiny assessment under CASS and accordingly statutory notices were issued and served upon the assessee. 5. During the course of the scrutiny assessment proceedings the assessee was asked to explain why no revenue related to the project have been recognized. In its reply the assessee explained that the work was not completed to the extent of 30% and following the accounting policy no revenue was recognized during the year under consideration. 6. The assessee submitted the working of the cost of the project as under :- Phase-wise details of Project cost incurred up to 31.03.2014 Rs. in Crores Particulars Project Phase-1 Rs. Project Phase-2 Rs. Total cost Rs. Land 53.03 40.29 93.32 Interest to Noida Authority 2.50 1.90 4.40 Construction & Development Cost (including selling expenses) 51.93 2.43 54.35 ....
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....t Rs. 349.56 Crores) Total Saleable Area 9,59,770 9,59,770 Total sold area till 31.03.2014 5,08,150 5,08,150 Total sale consideration of Area Sold 241,43,45,761 241,43,45,761 Total amount received till 31.03.2014 67,63,25,582 67,63,25,582 Total Estimated Cost 362,60,00,000 349,56,00,000 Total land cost incurred till 31.03.2014 53,02,52,576 53,02,52,576 Total construction cost incurred till 31.03.2014 54,42,42,206 54,42,42,206 Total cost incurred till 31.03.2014 107,44,94,782 107,44,94,782 Percentage completion till 31.03.2014 with working. 29.63% 30.74% 10. Re-working the total cost of project the Assessing Officer made the addition of Rs. 17,32,78,878/- as under :- Total Sale Consideration as per the Agreeent to Sell executed (as stated by the assessee) Rs. 241,43,45,761 30.74% of the above. Rs. 72,21,69,887 Total Cost Incurred (as stated by the assessee) 107,44,94,782 Proportionate Cost = Total Cost x Area Sold / Total Area 56,88,91,009 Income for the period ending 31.03.2014. 17,32,78,878 11. Aggrieved by this the assessee carried the matter before the CIT (Appeal....
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....tants of India. The objective of AS 7 is to prescribe the accounting treatment of revenue and costs associated with construction contracts. Because of the nature of the activities undertaken in construction contract the date at which the contract activity is entered into and the date when the activities completed shall fall into different accounting periods. The relevant para of the said Accounting Standards read as under :- " Contract Costs : 15. Contract costs should comprise: (a) costs that relate directly to the specific contract; (b) costs that are attributable to contract activity ill general and can be allocated to the contract; and (c) such other costs as are specifically chargeable to the customer under the terms of the contract. 16. Costs that relate directly to a specific contract include: (a) site labour costs, including site supervision; (b) costs of materials used in construction; (c ) depreciation of plant and equipment used on the contract; (d) costs of moving plant, equipment and materials to and from the contract site; (e) costs of hiring plant and equipment; ....
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....timate of contract revenue or contract costs, or the effect of a change in the estimate of the outcome of a contract, is accounted for as a change in accounting estimate [see Accounting Standard (AS) 5. Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies]. The changed estimates are used in determination of the amount of revenue and expenses recognized in the statement of profit and loss in the period in which the change is made and in subsequent periods. " 16. As explained hereinabove the assessee has recognized the revenue in Assessment Year 2015-16 onwards when the completion exceeded 30%. The reasons for the reduction in the estimated cost of project from Rs. 362 crores as on 31.03.2014 to Rs. 349.53 crores as on 31.03.2016 has been well explained at para 37 of the AS 7 which is mentioned elsewhere and the reason for reduction in the estimated cost so far as the case in hand is concerned is due to selling cost which was earlier taken at Rs. 25 crores which was reduced rs. 12.35 crores. 17. It is pertinent to note that the assessment order for Assessment Year 2014-15 was filed on 29.09.2015. This means that the Assessing Officer was well....
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....se reasonings in the absence of any material change justifying the Revenue to take a different view of the matter - and if there was no change it was in support of the assessee - we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income Tax in the earlier proceedings, a different and contradictory stand should have been taken." 31. It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the Revenue cannot be allowed to flip-flop on the issue and it ought let the matter rest rather than spend the tax payers' money in pursuing litigation for the sake of it. 32. Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid t....