TaxTMI 
TaxTMI 
2023 (11) TMI 752
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.... by Ld. Asstt. Commissioner of Income Tax, International Taxation Circle 2(2), Chennai [AO] u/s. 143(3) r.w.s. 144C(13) pursuant to the directions of Ld. Dispute Resolution Panel-2, Bengaluru issued on 16-06-2022 u/s. 144C(5) of the Act. The appeal is accompanied by stay application wherein the assessee is seeking stay of recovery of outstanding demand by the revenue. 2. At the time of hearing, Ld. AR did not press for ground no. 1 which is relating to limitation and jurisdiction. Ground No.3 is related to charging of interest and initiation of penalty proceedings which is consequential / pre-mature in nature requiring no specific adjudication. The only substantive ground is ground no.2 which read as under: - 2.1 That on the fac....
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.... the DRP/AO further erred in not excluding the Contract Revenue already inflated and added during the A Y 2017-18. 2.7 Further without prejudice, the DRP/AO erred on facts and in law in not directing that the Contract Revenue already considered & offered to tax in the succeeding years should be excluded otherwise it will lead to double taxation, which is impermissible. 3. The Ld. AR advanced arguments and supported the case of the assessee by drawing our attention to various documents / details as placed on record. The Ld. AR submitted that the assessee has executed fixed price contract and contract revenues earned by the assessee has duly been offered to tax over the life of contract in accordance with applicable Accounting Sta....
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.... to the amount of Rs. 1146.03 Lacs as reflected by the assessee in the financial statements. Accordingly, the assessee was show-caused to adopt estimated revenue and to disallow the estimated loss of Rs. 495.65 Lacs. 4.3 The assessee, inter-alia, submitted that the duration of the project got extended to financial year 2020-21 much beyond the agreed original contract period. It was further stated that the assessee followed percentage of completion method to recognize the revenue. The revenue projections submitted in the course of Sec. 197 proceedings were based on the estimated work completion. However, the revenue shown in financial statements were based on actual work certified by M/s Siemens which is based on survey of work performed.....
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....essee's case since the assessee has recognized contract losses for Rs. 495.65 Lacs in the current year. Though the assessee has accepted the total contract realizable value to be Rs. 121.52 Crores, it is offering only the sanctioned amount to tax in this year. The same has skewed the entire proportion of expense vis-àvis revenue and has not really remained in the nature of a Percentage Completion method. Accordingly, the projected revenue of Rs. 2587.75 Lacs was considered to be the turnover of the assessee and the shortfall in revenue for Rs. 1441.72 Lacs was added to the income of the assessee. The Ld. DRP merely endorsed the action of Ld. AO. Considering the direction of Ld. DRP, a final assessment order was passed by Ld. AO on 26....
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....formed. However, any expected excess of total contract costs over total contract revenue for the contract is recognized as an expense immediately irrespective of stage of completion of contract activity. Following the same, the assessee has recognized contract losses of Rs. 495.65 Lacs and there is no deviation from the accounting standard as alleged by Ld. AO. 6. We find that in the application made u/s 197, the assessee has merely projected the contract revenue and these estimations could not be taken to be the turnover of the assessee disregarding the actual revenue earned by the assessee. No defect in books of accounts has been pointed out by Ld. AO. The deviation in estimation and actual revenue stood explained by the fact that the ....