DCIT, CIRCLE-1, MUZAFFARPUR V. M/S ASHA REALTY DEVELOPERS PVT LTD, MUZAFFARPUR

ITA 10/PAT/2021

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which had deleted certain additions made by the Assessing Officer (AO) related to the income recognized by M/s Asha Realty Developers under the Percentage Completion Method (PCM) and additions under section 43CA concerning the difference between the stamp duty value and actual sale value of properties. The Tribunal examined the application of PCM in revenue recognition and the correct interpretation of section 43CA, ultimately agreeing with the CIT(A)'s findings and dismissing the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791851 (ITAT-PATNA)
• Duration Of Justice: 4 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 08-02-2021
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MD. AH CHOWDHARY
• Assessee Lawyers: G.P. TULSIYAN
• Keywords: Additional evidence; Sale consideration of property below Jantri Value; TDS
• Section: 43CA

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “PATNA” BENCH, PATNA BEFORE SHRI DUVVURU RL REDDY, VP AND SHRI RAJESH KUMAR, AM ITA No. 10/PAT/2021 (Assessment Year: 2015-16) DCIT, Circle-1 Aaykar Bhavan, Near Nehru Stadium, Sikandarpur, Muzaffarpur-842001, Bihar Vs. M/s Asha Realty Developers Rajju Sah Lane, Mithanpura, Ramna, Muzaffarpur-842002, Bihar (Appellant) (Respondent) PAN No. AAJCA0485F Assessee by : Shri G.P. Tulsiyan, AR Revenue by : Shri Md. AH Chowdhary, DR Date of hearing: 27.11.2025 Date of pronouncement: 09.12.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), Patna-2 (hereinafter referred to as the “Ld. CIT(A)”] dated 29.06.2020 for the AY 2015-16. 2. At the outset, we observe from the appeal folder that there is a delay of 149 days in filing the appeal by the department in support of which a condonation petition was filed. It was stated in the condonation petition that the delay has occurred due to time taken in obtaining the administrative approvals from the competent authorities, which took quite a long time and accordingly, the delay being beyond the control may be condoned. The ld. AR, on the other hand, did not oppose the condonation of delay. Considering the reasons cited before us, we are inclined to condone the delay and admit the appeal for hearing. Printed from counselvise.com Page | 2 ITA No.10/PAT/2021 M/s Asha Realty Developers; A.Y. 2015-16 3. The first issue raised by the Revenue is against the deletion of addition of ₹3,96,94,221/- by the learned CIT (A) as made by the learned AO in respect of closing stock calculated under Percentage Completion Method by the learned AO. 3.1. The facts in brief are that during the course of assessment proceedings, the learned AO noted that the assessee has recognized the revenue short by ₹3,96,94,241/- in the books of accounts and accordingly, recalculated the Revenue to be recognized as per the Percentage Completion Method and thus, made an addition of ₹3,96,94,241/-, ias per detail herein:- Name of the project Project stage Total salable area Booked area Area as % of total sailable area Cost of construction Chargeable sale as shown Total Sale value Diff. Asha Vihar 100% completed 27436 26826 97.78 43,270000 4,50,06,000 4,50,06,000 Asha vihar Phase-II 100% 33868 33868 100 6,00,19,604 7,50,11,000 7,50,11,000 Asha Plaza 100% 14088 14088 100 2,67,04,291 33,37,68,000 3,37,68,000 S.G. Smriti 97.37% 19825 14684 74.07 4,75,58,147 3,74,24,102 3,84,34,500 10,10,398 B.L. Singhania 27.12% 22355 7641 34.18 1,79,05,051 65,21,687 2,40,47,530 1,75,25,843 Asha Vihar Ph- III 22.11% 46165 8754 18.98 19069421 Nil 2,11,58,000 2,11,58,000 3,96,94,241 3.2. The learned AO made the addition to the total income of the assessee. 3.3. In the appellate proceedings, the learned CIT (A) allowed the appeal of the assessee by observing and holding as under:- “3. Addition on the basis of turnover adopted by the appellant in PERCENTAGE COMPLETION METHOD has been made by the AO of Rs. 3,96,94,221/-. The AO has applied PERCENTAGE COMPLETION METHOD for determining the turnover to be recognized by the appellant in his profit and loss account on the basis of books of accounts and submissions made by the appellant at the time of scrutiny. The AO has Printed from counselvise.com Page | 3 ITA No.10/PAT/2021 M/s Asha Realty Developers; A.Y. 2015-16 given detailed calculations, in which he has pointed out the difference in actual turnover recognized by the appellant in his profit and loss accounts as against the turnover which should have been recognized on the basis of principles of PERCENTAGE COMPLETION METHOD. The AR of the appellant has submitted following facts: 1. As the real estate contracts are long period contracts, where the period of revenue as well as expenditure on the project extends beyond ONE FINANCIAL YEAR, there is a need to recognize revenue, as the work progresses on the MATCHING CONCEPT so that the real income is taxed in each assessment year. 2. For the sake of uniformity and logical conclusions, the revenue recognition in REAL ESTATE TRANSACTIONS, has been deferred till at least 25% of the projected Progress of the project has taken place in a previous year. 3. At least 25% of the saleable project area is secured by contract of agreement with buyers 4. . At least 10% of the total revenue as per the agreements of sale or any other legally enforceable documents are realized at the reporting date However as per Generally accepted accounting principles, the Expenditure on the project shall continue to be accounted for on accrual basis. At the same time advance/part payments against such agreements for sale shall be received by the entity. below: Further the AR of the appellant has explained the MATCHING CONCEPT as 1. Only the revenue can be recognized proportionately on the basis of sale agreements actually executed, whether payment received or receivable in the previous year based on percentage completion of the project. 2. The expenditure on project which has been recognized in total, even owing to area not sold/agreement entered, the cost owing to such area, shall form the WORK IN PROGRESS, which shall be carried forward. 3. Even though the payment in respect of area sold, might not be received in proportion to the work completed on project, the revenue on such area, shall be recognized on the percentage completion basis on accrual basis. 4. The accounting entries at S.NO:03 & 04. shall upheld the MATCHING CONCEPT and also the REAL INCOME theory. 5. No part of the revenue shall escape over the whole period of the project, as the progressive revenue recognitions over year aggregated together shall match the total REVENUE available from the completed project envisaged. I have gone through the assessment order as well as appellant submission I find that there is no disagreement between the AO and the appellant with regard to project completion stage, total saleable area, booked area, percentage of booked area as compared to saleable area, and cost of construction. The difference has occurred in the chargeable value of sale recognized by the appellant in his profit and loss accounts as per PCM METHOD & PCM METHOD VALUE as calculated by the AO. The fact of difference has been explained by the appellant as being conceptual error, whereby the AO has not applied the actual recognizable value on PCM METHOD based on the extent Printed from counselvise.com Page | 4 ITA No.10/PAT/2021 M/s Asha Realty Developers; A.Y. 2015-16 of percentage completion of the individual projects with total revenue ought to be generated on full and final completion of individual projects. The primary source of PCM METHOD calculations and modality is the GUIDANCE NOTES OF I INSTITUTE OF CHARTED ACCOUNTNS OF INDA, issued in respect of Real Estate Transactions. The guidance not emphasizes on recognition of revenue as well as expenditure on the basis of extent of project completion. Thereby the MACHING CONCEPT is observed and adhered. The error has occurred in the calculation by AO, inwhich AO has taken wrongly the full value and final completion of individual projects instead of percentage value based on the extent of percentage completion of individual projects for the purpose of revenue whereas expenditure has also to be recognized to the extent of percentage completion. Hence it is in my opinion that the difference in the turnover recognized as revenue by the AO suffers from apparent error and as such difference is factually not correct. I therefore delete the addition of Rs. 3,96,94,221/-.” 3.4. After hearing the rival contentions and perusing the materials available on record, we find that the learned CIT (A) has recorded a finding that there was no difference between the learned AO and the appellant with regard to Percentage Completion stage ,salable area, booked area, percentage of booked area as compared to total salable area, percentage of book area as compared to salable area and cost of construction. The learned CIT (A) noted that the difference has arisen in the chargeable value of the same recognized by the appellant in the Profit and Loss account as per Percentage Completion Method vis-à- vis as calculated by the learned AO. The learned CIT (A) noted that there was an error on the part of the AO while computing this and accordingly, after giving a detailed and reasoned finding, the learned CIT (A) deleted the addition. Therefore, we do not find any infirmity in the order of the learned CIT (A) on this issue and consequently, uphold the same on this issue by dismissing the appeal of the revenue on this issue. 4. The next issue raised by the Revenue is against the order of learned CIT (A) deleting the addition of ₹40,97,800/-as made by the learned AO u/s 43CA of the Act in respect of various plots sold by the Printed from counselvise.com Page | 5 ITA No.10/PAT/2021 M/s Asha Realty Developers; A.Y. 2015-16 assessee. The Revenue has also challenged the deletion of addition by admitting additional evidences by the learned CIT (A). 4.1. The facts in brief are that the learned AO during the course of assessment proceedings, called upon the assessee to produce the sale deeds which were registered during the relevant year. The assessee furnished all the deeds along with complete details and the learned AO computed the difference between the stamp duty value and actual value at ₹40,97,800/- in respect of 15 flats at page no.3 and added the same u/s 43CA(1) of the Act. 4.2. In the appellate proceedings, the learned CIT (A) deleted the addition by holding that the learned AO has wrongly computed the difference between the sale value and stamp duty value of the flats by ignoring the fact that the agreements in these flats were executed in the earlier assessment years and therefore, the sale value in the year in which the agreements were executed were to be taken. The learned CIT (A) accordingly deleted the addition by observing and holding as under:- ““1. I have gone through the assessment order and the submission of the AR. The addition on account of difference in MVR has been done by the AO on the basis of criteria of u/s 43CA of difference in the agreement/sale value of the property and the Municipal value given in the agreement for stamp duty purpose. The AO has compared the agreement value of the flats sold by the assessee with the stamp duty value and determined a difference of Rs. 40,97,800/- which is the basis of addition. I have gone through the order of the AO and corresponding submission by the appellant. The appellant has emphasized that the provisions of Sec. 43CA has been interpreted by the AO in isolation of the PROVISO to that Section. The appellant has further argued that the proviso to this section gives a relief to the assessee, where the agreement has been executed before the date of actual sale deed and such agreement has been accompanied with consideration other than in cash in such cases the MVR value on the date of such agreement shall prevail over the MVR value as in the actual sale agreement. The appellant has produced a complete list, detail, bank accounts, copy of agreements, MVR notifications of Govt. of Bihar and copy of sale deeds which is placed on record and the verification of the same reveals that there is no taxable differential amount covered u/s 43CA of I.T Act 1961. L am therefore of the view that the addition of AO is not legally correct. Hence the addition of Rs. 40,97,800/- is here by deleted.” Printed from counselvise.com Page | 6 ITA No.10/PAT/2021 M/s Asha Realty Developers; A.Y. 2015-16 4.3. After hearing the rival contentions and perusing the materials available on record including the appellate order, we find that there is no mistake in the order of learned CIT (A) as the learned CIT (A) has recorded a clear-cut finding that the learned AO has wrongly taken the stamp duty valuation in the year in which the sale deeds were executed. Whereas, the stamp duty valuation has to be taken in the year when the agreements to sale were executed with respective buyers. We have also examined these agreements and note that the buyers have paid money by account payee cheques at the time of entering into the agreements for sale with the assessee. Therefore, we do not find any infirmity in the order of learned CIT (A) and accordingly, we uphold the same by dismissing the appeal of the Revenue on this issue. 5. The issue raised in ground no.3, is against the deletion of addition by the learned CIT (A) as made by the learned AO on account of interest amounting to ₹27,758/-, which was added by the learned AO on account of interest on service tax and TDS. After perusing the facts on record and the appellate order, we find that the interest on service tax and TDS is not penal in nature and is liable to be allowable deduction under the Act as admissible deduction. Accordingly, we dismiss the appeal of the Revenue on this issue. 6. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 09.12.2025. Sd/- Sd/- (DUVVURU RL REDDY) (RAJESH KUMAR) (VICE PRESIDENT) (ACCOUNTANT MEMBER) Patna, Dated: 09.12.2025 Sudip Sarkar, Sr.PS Printed from counselvise.com Page | 7 ITA No.10/PAT/2021 M/s Asha Realty Developers; A.Y. 2015-16 Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Patna 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "