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2022 (6) TMI 887 - AT - Income TaxRevenue recognition - accrual of income - treating the 70% salaries as part of the Project cost instead of 50% as taken by the appellant company - as argued appellant has been following percentage completion method for computing its income and accordingly income was computed accordingly on consistent basis - CIT (A) indicates that the project is being substantially completed on year to the basis and CIT (A) has held that assessee is not permitted to postpone the revenue recognition - HELD THAT:- We find that the above order of ld. CIT (A) does not exhibit proper application of mind. As per ld. CIT (A), the project has been completed more than what the assessee has reflected. In such case, the addition should have been made according to the stage of completion as per the Revenue authorities. CIT (A) has made no examination or remanded the matter to the AO for finding of the actual completion. What is the justification of AO holding that 70% of the salary and wages should be debited to project account and not 50% is not at all spelt out by the AO or the ld. CIT (A). If the authorities below were of the opinion that assessee is falsifying his records than the books should have been rejected. This has not been done. Even if books have been rejected the estimation of income has to be done on a reasonable basis as per past performance or the prevalent industry norms. Devoid of any reasoning, addition of 20% of salaries and incentive to project account is solely based upon surmises and conjectures, hence not sustainable in law. Accordingly we set aside the orders of authorities below and delete the disallowance/addition made by the AO. - Decided in favour of assessee.
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