TaxTMI 
TaxTMI 
2026 (1) TMI 177
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....he said addition was based on a voluntary and unambiguous statement recorded under oath u/s 131 of the Act, admitting undisclosed profit from the sale of flats and shops? 2. Whether on facts and in law, the Ld.CIT(A) was justified in holding that Section 43CB of the Income Tax Act, 1961, was inapplicable to the assessee merely because the assessee had historically followed the Project Completion Method, without appreciating that substantial sales had occurred and income had in fact accrued during the relevant year, and that the principle of consistency in accounting methods cannot override the fundamental rule of taxation based on real income that has arisen or accrued? 3. Whether on facts and in law, the Ld. CIT(A) erred in holding that the assessee was entitled to continue following the Project Completion Method (PCM) despite substantial progress in construction and execution of agreements for sale, thereby failing to recognize real income that had accrued during the year? 4. Whether on facts and in law, the Ld.CIT(A) failed to appreciate that the assessee had not filed any formal retraction or credible documentary evidence to negate the voluntary discl....
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....timated total profit would be around 8%. However, no basis of 8% was provided or worked out. The estimated profit at 8% rate was worked out to Rs 18.18 crore on the turnover amount to 227.28 crore. The Ld. AR has submitted that it has booked total of Rs. 230,68,38,123/- till 31/03/2019 and the assessee has submitted a 'without prejudice contention' that if percent completion method is accepted then at the most Rs. 7.38 crores (2306838123 X 8 % X 40%)based on 40 % work was completed as on 31/03/2019 can be added. The contention of the assessee to add only 40% is not acceptable. It is noted that the assessee has not included in its return of income, the profit from project "Anutham" which it had declared in the Survey proceedings. Hence, the entire sales amount is required to be factored in to work out the profit from project "Anutham". The assessee had accepted the profits @8% of the sale booked till the date of survey u/s 133A of the Act. (i.e.: 18/02/2019). Hence, for the impugned assessment year, the amount of profit to be worked out would be 8 % of the total sales which the assessee has booked till 31/03/2019. Thus, the amount of profit from project "Anutham" would be Rs. 18,45,....
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.... partner of the assessee company accepted the net profit 8% rate on the turnover, but during the filing of return the assessee partner retracted the statement and no such income was declared in the ROI. Further stated that the assessee is flowing the Project Completion Method (PCM) and after completion of the said project the assessee declared the profit in respective assessment year. 6. It was further argued that during the survey statement of Shri Jeram Jetha Gami partner of M/S Amardeep Constructions was recorded under section 131 of the Act on 18-02-2019. As per the statement the partner stated that till date, the agreement value of flats and shops sold is Rs. 227.28 crores and therefore the estimated profit at 8% works out to Rs. 18.18 crores. Considering the sales, I hereby offer an amount of Rs. 18,25,00,000/- for the impugned assessment year. I further assure that I will pay the tax liability as early as possible as per question no. 17 of statement recorded. The written submission filed before the CIT(A) dated 27-04-2024, APB page no. 48 to 52, it was submitted that the assessee is following project completion method and the same is accepted in the AY 2017-18. Also, copy....
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....pletion method for recognizing revenue and expenditure by the said developers. The CBDT has also clarified in the FAQ issued on 23rd March, 2017 vide Circular No 10/2017 (Reply to Question No. 12) that this ICDS is not applicable to Real Estate Developers. The Q:12 is as follows: Q:12: Since there is no specific scope exclusion for real estate developers and Build- Operate (BOT) projects from ICDS IV on Revenue Recognition, please clarify whether ICDS III and ICDS IV should be applied by real estate developers and BOT operators. Also, whether ICDS applicable for lease. A:12: At present there is no specific ICDS notified for real estate developers, BOT projects and leases. Therefore, relevant provisions of the Act and ICDS shall apply to these transactions as may be applicable. The CBDT has tacitly accepted that ICDS III not applicable to Real Estate Developers. The AS-9 is applicable in case of the real estate developers as the significant risks and rewards are transferred only when the sale is completed, and the occupancy certificate is received from Bombay Municipal Corporation (BMS). 9. The assessee is following project completion method since its incepti....
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....stent with the completion of the project. Thus, all TDS amounts since AY 2017 have been accumulated and remain unclaimed amount to Rs. 3.38 crore. The Ld. AR respectfully relied on the decision of the Hon'ble Gujarat High Court in the case of Manjusha Estates (P) Ltd. vs Income Tax Officer 393 ITR 644, wherein it has been held that Tribunal was not right in law in rejecting project completion method which was followed consistently by assessee and instead applying work-in-progress method and taxing 80 per cent thereon as net profit. 11. Regarding the statement recorded under section 131 during survey 133A of the Act, the Ld. AR respectfully relied on the following decision of: (a) Hon'ble Madras High Court in the case of S. Khader Khan Son vs Commissioner of Income Tax 300 ITR 157 wherein it has been held that section 133A does not empower any ITO to examine any person on oath; so, statement recorded under section 133A has no evidentiary value and any admission made during such statement cannot be made basis of addition. (b) The same decision Hon'ble Madras High Court affirmed by the Hon'ble Supreme Court of India in the case of CIT vs S. Khader Khan Son 352 ITR....
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....completion method of accounting as under. As per working in the above chart, the profit for A.Y. 2020-21 on the basis of percentage completion method is Rs. 13,67,96,960/. Later on, the AO issued a show cause notice to the appellant on 20.09.2022, asking it as to why the difference of Rs. 1,97,12,000/- (Rs. 13,67,96,960 - Rs. 11,70,84,960) should not be made taxable. In response to the show cause notice, the appellant had filed submission. However, same was not acceptable by the AO. Accordingly, the same was added to the total income of the appellant. 6.3 During the appellate proceedings, the appellant submitted that the appellant firm since its inception is following Project Completion method and the same is accepted by the department in all earlier assessments. Following the Principle of Consistency Rule without any change in law and facts, the method consistently adopted by the appellant cannot be changed. The appellant has relied upon the following judgments. 1. Decision of Gujarat High Court in the case of Manjusha Estates (P) Ltd Vs ITO reported in (2017) 393 ITR 644. 2. Decision of ITAT- Mumbai in the case of Prem Enterprises ITO reported ....
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....lier years and the same has been accepted by the department, applicability in a standalone year when project completion method was accepted in other years, applicability in a case when the project started much before AY 2017-18, CBDT Circular No. 10/2017 which clarified that no specific ICDS was notified for real estate developers, the 2017 proposed ICDS by CBDT which is still under discussion etc. 5.18 Considering the above facts, the judicial precedents and the detailed discussions, I am of the opinion that since the appellant has been consistently following project completion method and the methodology has not been challenged by the AO in any other year from AY 2016-17 to AY 2024-25, even after the survey, except the present AY, the applicability of percentage completion method for one single AY is incorrect and not justified. Accordingly, this ground of appeal is allowed." 13. In argument related to Section 43CA of the Act the Ld. AR stated that though the safe harbour limit was increased 10% in Finance Act, 2020 with effect from 1-4-2021, i.e., AY 2021-22. The tolerance limit of 10% is retrospectively affected related to impugned assessment year. He invites our att....
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....ction 43CA, 50C and 56 of the act are analogous sections having similar provisions of taxing incomes arising out of transactions in immovable property but taxing different type of assets. The different sections have provisions to tax income from capital gains (section 50C), business profits (section 43CA) and other sources (section 56) arising out of transactions in immovable property. 6.10 In the light of the above, respectfully following the judicial precedents, I am of the opinion that as the variation is only 7%, the same is within the safe harbour limit of 10%. Accordingly, the contentions of the appellant are accepted, and the AO is directed to delete the addition of Rs. 7,43,474/- made on account of difference of sale consideration and value adopted by stamp valuation authority. Accordingly, the ground of appeal no. 5 is allowed." 14. After considering the rival submissions, the material available on record, and the judicial precedents cited, we observe that the assessee has been consistently following the Project Completion Method (PCM) for recognition of revenue since inception, and the same method has been accepted by the Department in all preceding assessment....