TaxTMI 
TaxTMI 
2024 (6) TMI 1127
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....erroneous and prejudicial to the interest of the revenue. 3. The facts in brief are that the assessee, a partnership firm, is engaged in the business of real estate construction. The assessee has undertaken a project namely "Soham Sanidhya and Bungalow" which consist of 44 units of bungalow, 177 units of flats and 31 units of Shop. During the year under consideration, the assessee sold 8 units of bungalows for a value of Rs. 4,05,86,464/- only. In the return of income filed for the year under consideration, the assessee has declared income of Rs. 96,65,030/- which was subsequently accepted by the AO in the assessment order passed under section 143(3) of the Act. 4. However, the learned PCIT on perusal of assessment records found that proj....
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....tandard accepted the returned income of the assessee. The ld. PCIT further found that no inquiry whatsoever was made by the AO regarding the method of valuation of closing stock of Rs. 19,75,26,263/- which was neither anywhere stated by the assessee. The learned PCIT also found that there were several questions raised in the notice issued under section 142(1) of the Act which were not replied/explained by the assessee, but the AO did not bother to examine the same. 5. Thus, the learned PCIT in view of the above observation held that the AO has passed the assessment order under section 143(3) of the Act without proper inquiry and application of mind which makes the assessment order as erroneous insofar prejudicial to the interest of the rev....
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....e may pass such order as circumstances justify which may include enhancing or modifying the assessment, canceling the assessment, and directing the AO to make fresh assessment. The Hon'ble Supreme Court in the landmark judgment in the case of Malabar Industrial Co. Ltd vs. CIT reported in [2000] 243 ITR 83 (SC) has analyzed the provisions of section 263 of the Act and held that to invoke the provision of section 263 of the Act, the ld. Commissioner has to satisfy two conditions, the first being order passed by the AO is erroneous and second being the order is prejudicious to the interest of the revenue. In the absence of any one of the conditions, the provision of section 263 of the Act cannot be invoked. The relevant observation of the Hon....
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.... has started the project in the AY 2015-16 and started to recognize revenue from the project from the year under consideration (i.e. A.Y. 2017-18) and sales from all the 44 bungalows has already been recognized in the books of accounts till AY 2022-23 based on execution of sale deed. Thus, the method employed has been consistently followed. The income arising from the sale of bungalows has been offered and due tax has been paid accordingly. 9.2 From the above, we note that the dispute is only regarding the method of revenue recognition and method of valuation of closing stock. There is no dispute or allegation about genuineness of sale value of the bungalow or cost of the project, or any other expenditure incurred by the assessee. Accordin....
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....e other hand, percentage of completion method tries to attain periodic recognition of income in order to reflect current performance. The amount of revenue recognised under this method is determined by reference to the stage of completion of the contract. The stage of completion can be looked at under this method by taking into consideration the proportion that costs incurred to date bears to the estimated total costs of contract. 18. The above indicates the difference between completed contract method and percentage of completion method. 19. In the judgment of the Bombay High Court in Taparia Tools Ltd.'s case (supra) it has been held that in every case of substitution of one method by another method, the burden is on the Departm....