TaxTMI 
TaxTMI 
2020 (7) TMI 522
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....ting in recognizing the revenue in accordance with AS-7 as prescribed by the Institute of Chartered Accountants of India (ICAI) which is clearly stated in the audited financial statements and hence the directions made in the order passed under Section 263 are bad in law. 3. That the observations of Ld. Principal Commissioner of Income Tax-1 that profit element could not be established for want of project report are based on incorrect appreciation of material on record as all the relevant details have been verified by the Ld Assessing Officer at the time of assessment proceedings. Directions issued for fresh assessment are nothing but change of opinion which is not permissible under the proceedings initiated u/s 263, therefore the order passed u/s 263 is illegal and void ab-initio.. 4. That the relevant project completion and revenue recognitions are duly verified by the AO at the time of assessment proceedings. Hence, a mere assumptions that revenue has been under estimated on Surekha Vatika Project basing upon assumed figures and forming a change of opinion on that basis is contrary to law and hence, bad in law and hence, the order passed u/s.263 of the ....
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.... assessment denovo on this issue after giving the assessee reasonable opportunity of hearing to the assessee. 5. Aggrieved by the order of the ld Pr. CIT u/s.263, the assessee is in appeal before us. 6. Ld A.R. of the assessee submitted that the assessment order passed by the AO u/s.143(3) is neither erroneous nor prejudicial to the interest of the revenue. He submitted that at the time of original proceedings of assessment, the AO requisitioned the details of project was percentage completion, details of revenue recognised of each project, cost of the project, closing stock detail and its valuation, etc. Ld counsel also submitted that the Assessing Officer during scrutiny assessment proceedings u/s.143(3) of the Act, issued notice u/s.142(1) alongwith questionnaire on 30.7.2015 and 26.10.2015 (copy of which is placed at APB 43-46), which was replied by the assessee vide reply dated 24.12.2015 (copy placed at pages 52-56 of APB). Ld counsel submitted that the issuance of notice by the AO and reply filed by the assessee alongwith relevant documents and details clearly shows that the AO, during scrutiny assessment proceedings, has raised a query to the assessee regarding revenu....
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....ied by the assessee leading to incorrect revenue recognition of Rs. 12,04,63,062 in stead of proper method which recognised the revenue at Rs. 15,15,49,95,104 (estimated project cost x percentage completion of project). Ld A.R. vehemently pointed out that as per Architect Report available at page 92 of APB, it is clear that percentage of Surekha Vatika Project was 29% as on 31.3.2013 i.e. at the end of financial year 2012-13 relevant to assessment year 2013-14. Ld counsel further submitted that Pr. CIT has only considered the amount of revenue recognition and shown by the assessee at Vatika Project and by applying 29% to the total project cost and he alleged that revenue recognition has not been properly done by the assessee but these findings are not factually correct because the estimated project cost of Surekha Vatika is Rs. 53,44,66,000/- and out of the said project 29% was completed as on 31.3.2013 and 61% of year was booked by the assessee. Therefore, the assessee recognised revenue of Rs. 12,04,63,062/- which is 29% of 61% of project cost i.e. 29% of booked area of 61%and besides this, the assessee has also shown work in progress (WIP) for Surekha Vatika Project at Rs. 6,04,....
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....aire which were properly replied by the assessee. He vehemently pointed out that the PCM has been consistently followed by the assessee and being consistently accepted by the revenue without any dispute for the revenue recognition of all the projects. By following percentage completion method (PCM) and the amount of revenue recognised by the assessee for Surekha Vatika Project including work in progress of said project comes to more than the amount of revenue estimated by Pr. CIT. Therefore, the impugned order cannot be held as erroneous and prejudicial to the interest of the revenue. Ld counsel also submitted that not only for Surekha Vatika Project but the assessee has also recognised revenue for The Emerald project, which has also been noted by Pr. CIT in the first page of the impugned order u/s.263 of the Act, wherein, the estimated project cost was of Rs. 6,05,72,400/- of which 47% of project was completed as on 31.3.2013 and 70% of said project was booked by the customers by the assessee and the assessee recognised revenue of Rs. 2,05,03,866.04 as per 70% of the 47% viz; percentage of completion multiplied by percentage of booking of total project cost, which is clearly disce....
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....on method of accounting. As per the certificate of progress completion the project was 29% completed as at 31/03/2013. The assessee had received 61% of the customer booking as at 31/03/2013. Thus, as per the method consistently followed by the assessee, the revenue of Rs. 12,04,63,062/- was recognized, the computation is as under:- (a) Total Estimated revenue (Sales Value) 68,09,67,000/- (b)% of completion 29% (c)% of Booking Area as at 31/03/2013 61% (d) Revenue Recognized [(a)*(b)*(c)] 12,04,63,062/- (iv) The Balance of 29% of 39% (i.e. unsold area representing Work in Progress) duly reflected as WIP in the Profit and Loss Account. During the year under review WIP from Surekha Vatika project was Rs. 6,04,48,099/-. (WIP sheet enclosed under "Annexure B") (v) In the show cause notice, your authority has computed the revenue from the Surekha Vatika Project at flat 29% which represents the completion percentage as at 31/03/2013 without considering the booking area sold as at 31/03/2013 which was 61% of the total area and also ignored the Work in Progress out of that. The assessee humbly pleads that if the area sold/booked is not taken into....
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....t in addition to revenue recognition of Rs. 1,204,63,062.30 the assessee has also shown work in progress of Rs. 6,04,44,098.66, on Surekha Vatika Project, which has also been shown in the credit side of balance sheet and should have been included in the revenue recognition by the assessee of Surekha Vatika Project. 13. Therefore, we are in agreement with the contention of ld A.R. that Ld. Pr. CIT in revising the impugned assessment order alleges that the revenue Surekha Vatika Project should have been recognised at Rs. 15,49,95,140/- whereas the assessee has already recognised revenue much higher than the amount of Rs. 18,09,11,160/- (Rs. 12,04,63,062 + Rs. 6,04,48,098). Therefore, it is clearly discernible that the assessee has recognised revenue of Surekha Vatika Project at very higher side in comparison to the estimate made by Pr. CIT for alleging the assessment order as erroneous and prejudicial to the interest of the revenue. At the same time, we may also point out that in para 3 of the impugned order, Pr. CIT has taken up three projects viz; Surekha Vatika project, The Emerald and Surekha Regency Project but Pr. CIT has only disputed the method of revenue recognition adopt....
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....es of land/flat, details of project-wise percentage of construction as on 31.3.2013, estimate cost of each projects and estimate sales price thereof and closing stock details with detail valuation and method of valuation, which were submitted by the assessee and this fact has not been negated or disputed by Pr. CIT in the impugned order as well as during the arguments before us by Ld. CIT DR. 16. In view of copies of notices and replies of the assessee available at APB page 43 to 51, we are satisfied that during assessment proceedings, the AO made proper, sufficient and adequate enquiry on the issues including issue of revenue recognition of the assessee by following percentage completion method, project-wise revenue recognition. Therefore, it is not a case of no enquiry, inadequate enquiry or insufficient enquiry. Therefore, without holding so, the impugned assessment order cannot be tagged or alleged as erroneous and prejudicial to the interest of revenue. 17. In the case of Reita Biscuits Co.(P) Ltd (supra), Hon'ble P&H High Court has held that once the issue on the merits has been decided against the revenue then there is no need to take a different view on a technical....
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.... by the assessee, we are unable to see any valid reason to dispute the methodology adopted by the assessee for recognition of revenue of Surekha Vatika Project because if the revenue recognised by the assessee and work in progress shown by the assessee towards Surekha Vatika project is taken then the revenue recognised by the assessee on this project is much higher than the estimate made by the Pr. CIT in the impugned revisional order. 22. From a careful reading of the impugned order, we also observe that the Pr. CIT has not made any inquiries or exercise himself before alleging the assessment order as erroneous and prejudicial to the interest of the revenue. As principle rendered by Hon'ble Delhi High Court in the case of Jyoti Foundation (supra), it is ample clear that the assessment order which had been passed after proper inquiry/investigation on the question are per se clearly treated as erroneous and prejudicial to the interest of revenue because the revenue authorities failed to show that further inquiry/investigation was required or further scrutiny should be undertaken. The methodology adopted by the assessee for revenue recognition was being consistently followed by....