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2019 (3) TMI 1942 - ITAT MUMBAIRevision u/s 263 by CIT - non recognition of revenue - Method of accounting - Non booking of sale of TDRs (Transferable Development Rights) received against the SRA Project - as per AO has failed to examine and conducted inquiries as regards the nature of TDRs and sale proceeds of TDRs vis-a-vis the agreement with SRA - credit of the receipt from sale of TDR to current liability awaiting the discharge of assessee’s total obligations under the slum rehabilitation project - HELD THAT:- The issue of income and receipt arising out of sale of TDR, the detailed thereof and the method of accounting for profit recognition adopted by the assessee were duly available before the AO. Hence from the above it is evident that Ld. CIT is totally incorrect in observing that the sale of TDR and the profit method of the assessee was not examined by the AO. Whether the method of accounting adopted by the assessee and accepted by the AO is a legally permissible one not? - We note that the observations of the revenue authority on the incorrectness of the method of accounting adopted by the assessee are not by reference to any Accounting Standards or any provision of the Act - AO has noted that the method of accounting adopted by the assessee cannot over ride the Income tax Act. Here we note that there is no specifications as to which provision of income tax provides that the method of accounting adopted by the assessee is incorrect. We find that the percentage completion method for revenue recognition in case of assessee engaged in real estate development is well recognized as per the ICAI guidelines as well as case laws in this regard. In this regard, we may refer that the Hon’ble Supreme Court explained the 'Project Completion Method or Completed Contract Method' and 'Percentage of Completion Method' in the case of C.I.T. Vs. Bilahari Investment Pvt. Ltd. [2008 (2) TMI 23 - SUPREME COURT] - Thus, we note that the adverse comments passed on the assessee’s method of accounting is in contravention to settled accounting principle and case laws. Assessee submission is quite germane that the sale of TDR cannot be considered in isolation of the assessee obligation under the SRA agreement to complete the slum rehabilitation project. The reading of the agreement in this regard clearly shows that assessee was under obligation to complete the slum rehabilitation project as per the agreement. The said agreement has to be considered on an overall basis and the construction of the parts of the agreement has to be done in a harmonious manner. As rightly contended by the Ld. Counsel of the assessee TDRs were meant to provide finance to the assessee company to complete the project. In such circumstances the assessee has credited the amount received on sale of TDR to current liability which is utilized in the development of the project - this treatment by the assessee finds support from ITAT decision in the case of Skylark Build [2012 (6) TMI 440 - ITAT, MUMBAI] The method adopted by the assessee and accepted by the assessing officer is legally permissible one. Once it is held that the method adopted is a legally permissible one, it has been held in the Catena of case laws that learned Commissioner of income tax cannot exercise of jurisdiction under section 263 of the act if he is of a different opinion. Thus the view adopted by the assessing officer is a permissible one. Hence, we are of the considered opinion that exercise of jurisdiction under section 263 of the IT Act by the learned Commissioner of income is liable to be quashed. - Decided in favour of assessee.
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