2025 (7) TMI 1578

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....of order 22/04/2021 for A.Y. 2018-19. 2. All the appeals have same nature of facts and have a common issue. Therefore, all the appeals were heard together, and are disposed of by this common order. Appeals for A.Y. 2018-19 in ITA No.5456/Mum/2024 and ITA No.5469/Mum/2024 are taken as lead case. ITA No.5456/Mum/2024 (Revenue's Appeal) 2.1 The revenue has raised the following grounds: - "In respect of the Appellate Order No. ITBA/NFAC/S/250/2024-25/1067836963(1) dated 21.08.2024 in the case of KAVYA KCD DEVELOPERS, PAN AAKFK9427B for the AY 2018-19. I hereby authorize ITO, Ward-42(1)(3), Mumbai to file an appeal to the INCOME TAX APPELLATE TRIBUNAL, Mumbai, on the following grounds: - 1. On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in restricting the profit in the hands of the assessee to 10% of balance amount of Rs. (3,77,09,150 - 2,56,30,626) 1,20,78,524/-against the 30% of Rs. 3,77,09,150/-, done by AO, which represented WIP added during the year while following percentage completion method. 2. On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of Rs. 2,32,46,520/....

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....ggrieved assessee filed an appeal before the CIT(A). The Ld.CIT(A) has reduced the percentage from @10% on the balance amount to Rs. 1,20,78,524/- (Rs.3,77,09,100/- - Rs. 2,56,30,626/-) which comes 12,07,852/- was added upheld the addition. Further, related to payment of interest to Kavya Builcon Pvt Ltd, the Ld.CIT(A) allowed the ground of the assessee. The appeal was partly allowed. Being aggrieved, both assessee and revenue filed appeal before us. 4. The Ld.AR, in argument stated that the assessee is continuing with project completion method and still, the assessee is incurring loss on the project as the assessee has not been able to sell the project. The Ld.AR submitted the paper book which is containing pages 1 to 56, which is kept on record. The Ld. AR in argument stated that both the issues are explained before the Ld. AO by the letter dated 15/03/2021 which is annexed in APB pages 47 to 49. The Ld. AR invited our attention in the relevant paragraphs of the submission which are reproduced as follows:- "With reference to above said Notice and under instruction from our above-named client, we have to submit the following details: "1) In the instant case, c....

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....lied on the order of the Ld. CIT(A) and the relevant paragraphs 4 (a) & 4(b) are reproduced below: - "4(a) Ground no, 1: In this ground, the appellant contested the addition made by the AO on the basis of percentage completion method. I have considered the facts and circumstances of the case and I have also gone through the assessee's submissions. As per facts of the case, opening work in progress at the beginning of the year was at Rs. 19.94.44.802 and there was addition to the work in progress during the year to the extent of Rs 3.77.09/150/After this addition, final work in progress as on year end stands at Rs23.715392 The assessee submits in the above work in progress interest component was also included which was payable to one of the partner M/s Kavya Buildcon Pvt. Ltd amounting to Rs. 2,56,30,626/-. Accordingly, the assessee submits that substantial portion of incremental work in progress is only interest component, therefore there is no reason to make any addition on percentage completion method. From the verification of facts, it is seen that the AO erred in estimating profit at the rate of 30 on incremental work in progress. The AO did not bring....

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....um and submits that it is eligible as per provision of section 400. The assessee is rightly debited the eligible interest as per provision of section 40b of the IT Act, therefore, the addition made by the AO is not warranted Accordingly addition is hereby deleted. In the result, the appeal is partly allowed." 6. The Ld. DR contended that the assessee has not incurred any revenue, as evident from the Profit and Loss Account. It was further submitted that the assessee has been consistently recognizing work-in-progress related to expenses. Therefore, the Ld. Assessing Officer has rightly adopted the percentage completion method and, accordingly, justifiably disallowed the claimed amount. The Ld. DR supported the impugned assessment order. 7. We have heard the rival submissions and carefully perused the material available on record. During the course of proceedings, the assessee clearly stated and furnished a certificate issued by a Chartered Accountant regarding the estimated and incurred costs (refer to APB pages 50-51) and asserted that it is following the Project Completion Method of accounting. The Ld. AR submitted that the revenue does not have the authority to alt....