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2020 (8) TMI 842 - AT - Income TaxDisallowance of the provisions for costs completed and contracts - HELD THAT:- As decided in own case for the A. Y. 2005-06 [2014 (9) TMI 313 - ITAT MUMBAI] assessee was following some system in estimating provisions. Therefore, without pointing out major defects it was not proper on part of the FAA to state that system was . FAA has given his finding without giving the reasons. In our opinion writing off of provisions in subsequent years cannot be basis for disallowing it. Accounting standards expect that assessee should write back such amounts in later years - No justification in confirming the disallowance without analysing the terms and conditions of the projects threadbare for which provisions were made during the year under apppeal. Disallowance for cost overruns on incomplete contracts - HELD THAT:- As decided in own case for the A. Y. 2005-06 [2014 (9) TMI 313 - ITAT MUMBAI] FAA has given his finding without giving the reasons. In our opinion writing off of provisions in subsequent years cannot be basis for disallowing it. Accounting standards expect that assessee should write back such amounts in later years. FAA has overlooked the fact that out of the provisions made by the assessee, ₹ 3. 70 Crores were actually spent by the assessee in the subsequent years to complete the unfinished projects or to render further services. Therefore, in our opinion, he was not justified in confirming the disallowance. Method of accounted under “Percentage of Completion Method” - HELD THAT:- CIT(A) while upholding the addition in question had not given any independent finding and had merely relied upon his order passed while disposing off the appeal of the assessee for the immediately preceding year i. e A. Y 2006-07[2019 (4) TMI 873 - ITAT MUMBAI]. We have perused the order passed by the Tribunal while disposing off the appeal of the assessee for A. Y 2006-07 wherein identical facts were involved, and finding ourselves to be in agreement with the view therein taken, respectfully follow the same. Resultantly, the order passed by the CIT(A) is set aside and the addition made by the A. O is vacated . Disallowance of Excess of Progress Billings on completed contracts project - HELD THAT:- As the assessee has accumulated cost as well as revenue under these projects in the Balance Sheet by following completed contract method. The revenue has accepted such accumulation during AYs 2004-05 & 2005-06 and this is the third year of accumulation under the projects. It is not the case of the revenue that the income under these projects have not been offered to tax in subsequent years. No case of revenue leakage has been established before us.Therefore, the action of revenue in disturbing the consistent method of accounting being followed by the assessee could not be held to be justified. Hence, we delete the impugned additions and allow these grounds of appeal.
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