TMI Blog2020 (7) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... TD. AND MAFATLAL INDUSTRIES P. LTD. [ 2013 (10) TMI 324 - SUPREME COURT] Assessing Officer / CIT (Appeals) were not justified in substituting the cost as on 31.03.2014 with the cost on 31.03.2016. The addition made by the Assessing Officer is not justified on the facts of the case. We accordingly direct the Assessing Officer to delete the addition - Decided in favour of assessee. - ITA No. 9017/Del/2019 - - - Dated:- 30-6-2020 - Ms. Sushma Chowla, Vice President And Shri N. K. Billaiya, Accountant Member For the Assessee : Shri S. Krishnan, Adv.; For the Department : Ms. Sunita Singh [CIT] DR; ORDER PER N. K. BILLAIYA, A. M. : This appeal by the assessee is preferred against the order of the CIT (Appeals)-35, New Delhi, dated 5.09.2019 pertaining to Assessment Year 2014-15. 2. The solitary grievance of the assessee is that the CIT (Appeals) erred in confirming the addition of ₹ 17,32,78,878/-made by the Assessing Officer on grounds of revenue recognition of the work completed to the returned income. 3. The representatives of both the sides were heard at length. Case records carefully perused and with the assistance of the counsel we have c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asked to furnish details of project completed as on 31.03.2015 and 31.03.2016. The assessee furnished the necessary details and on perusal of the same the Assessing Officer found that as on 31.03.2016 the total cost of project has been shown at ₹ 349.56 crores which is less than the total cost of project shown as on 31.03.2014 which was ₹ 362.60 crores. The Assessing Officer was of the firm belief that the total cost of project cannot get reduced in the subsequent year and was of the opinion that the total cost of project at ₹ 349.56 crores was completed as on 31.03.2014 and according to this the percentage of completion comes to 30.74% and, therefore, the assessee should have recognized the revenue as on 31.03.2014 itself. To a specific query the assessee vide letter dated 29.12.2016 which is at page 85 of the paper book explained as per requirement of income computation and disclosure standard assessee company have selling and marketing expenses (including brokerage) and from cost estimating sale to this estimated cost has come to ₹ 345.55 crores from ₹ 374.61 crores. 9. The Assessing Officer was of the opinion that the assessee could not furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod ending 31.03.2014. 17,32,78,878 11. Aggrieved by this the assessee carried the matter before the CIT (Appeals), but without any success. 12. At the outset, let us first consider the revenue recognition which is mentioned under significant accounting policies as part of the audited statement of accounts of the assessee which is at page 33 of the paper book and the same reads as under :- Sale of Flats : The Company is following Percentage of Completion Method of Accounting for construction projects. As per this method, the Sales and Revenue in the Profit Loss Account at the end of the Accounting year is recognized in proportion to the actual cost incurred as against the total estimated cost of project under execution with the Company subject to actual cost of project incurred being 30% or more of the total estimated cost of project. The estimates of the costs are reviewed periodically by the management and any effect of changes in estimates is recognized in the period such charges are determined. Further, revenue is recognized only for the confirmed booked flats / stocks as on the date of Balance Sheet appropriate contingency prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o and from the contract site; (e) costs of hiring plant and equipment; (f) costs of design and technical assistance that is directly related to the contract; (g) the estimated costs of rectification and guarantee work, including expected warranty costs; and (h) claims from third parties. These costs may be reduced by any incidental income that is not included in contract revenue, for example income from the sale of surplus materials and the disposal of plant and equipment at the end of the contract. 17. Costs that may be attributable to contract activity in general and can be allocated to specific contracts include: (a) insurance; (b) costs of design and technical assistance that is not directly related to a specific contract; and (c ) construction overheads. 106 AS 7 (revised 2002) Such costs are allocated using methods that are systematic and rational and are applied consistently to all costs having similar characteristics. The allocation is based on the normal level of construction activity. Construction overheads include costs such as the preparation and processing ot construction personnel payroll. Costs that may be attributable to contract act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue recognition in Assessment Year 2015-16 and, therefore, grossly erred in making additions in Assessment Year 2014-15 for income which has been duly recognized in subsequent assessment year. 18. The Hon ble Supreme Court in CIT Vs. Excel Industries Ltd. (2013) 358 ITR 295 (SC) has observed as under :- 29. In Radhasoami Satsang Saomi Bagh v. Commissioner of Income Tax, [1992] 193 ITR 321 (SC) this Court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same fundamental aspect permeates in different assessment years. In arriving at this conclusion, this Court referred to an interesting passage from Hoystead v. Commissioner of Taxation, 1926 AC 155 (PC) wherein it was said: Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers. 19. Considering the totality of the facts discussed hereinabove in the light of the subsequent assessments of the assessee the assessment orders of which are placed on record and considering the observations of the Hon ble Supreme Court (supra) we are of the considered view that the Assessing Officer / CIT (Appeals) were not justified in substituting the cost as on 31.03.2014 with the cost on 31.03.2016. The addition made by the Assessing Officer is not justified on the facts of the case. We accordingly direct the Assessing Officer to delete the addition of ₹ 17,32,78,878/-. The appeal is accordingly allowed. Order pronounced in the open court on : 30/06/2020. - - TaxTMI - TMITax - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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