DCIT, CHENNAI V. M/s. Helios Estate Pvt. Ltd., CHENNAI

ITA 2036/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8011 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 04-07-2016
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: B RAMAKRISHNAN
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI ... , !'.. # $ % , & '( ) [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D. S. SUNDER SINGH, ACCOUNTANT MEMBER ./ I.T.A.NO. 2036/MDS/2016 / ASSESSMENT YEAR : 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(2) CHENNAI VS. M/S. HELIOS ESTATE PRIVATE LIMITED NO.12, SOUTH MADA STREET, SRINAGAR COLONY, SAIDAPET, CHENNAI 600 015 [PAN AADCV 6206 H ] ( *+ / APPELLANT) ( ,-*+ /RESPONDENT) / APPELLANT BY : SHRI PAT H LAVATH PEERYA, CIT /RESPONDENT BY : SHRI B. RAMAKRISHNAN, CA ! / DATE OF HEARING : 29 - 09 - 2016 '# ! / DATE OF PRONOUNCEMENT : 25 - 11 - 2016 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-6, CHENNAI, DA TED 05.05.2016, FOR ASSESSMENT YEAR 2012-13. -:2:- ITA NO.2036/16 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DEVELOPMENT AND SALE OF REAL ESTATE. F OR THE ASSESSMENT YEAR 2012-13, THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.09. 2012 DECLARING A TOTAL INCOME OF RS.25,78,37,560/-. THE ASSESSMENT WAS COMPLETED UN DER SECTION 143(3) OF THE ACT ON 30.03.2015 ON THE ASSESSED TOTAL INCOME OF RS.54 ,85,81,580/-. IN THE ASSESSMENT ORDER ADDITION TO THE EXTENT OF RS.29,07 ,42,017/- WAS MADE, ON THE GROUNDS THAT THE SAME HAVE BEEN MADE THROUGH JOURNA L ENTRIES, AND HENCE ARE TO BE TREATED AS EXPENSES WHICH WERE NOT INCURRED DURING THE YEAR. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A).THE LD CIT(A) ALLOWED THE ASSESSEES APPEAL AND THE REVENU E IS IN APPEAL BEFORE US. 3. ALL THE GROUNDS OF APPEAL ARE RELATED T O THE ADDITION OF RS.29,07,42,017/-. APPEARING FOR THE REVENUE, SHRI PATHLAVATH PEERYA, LD.D.R. ARGUED THAT THE ASSESSEE HAS DEBITED THE PROVISIONS ON CONSTRUCTION WHICH IS NOT ALLOWABLE EXPENDITURE UNDER THE INCOME-TAX ACT, 1961 AND THE ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITION. 4. ON THE OTHER HAND, THE LD. A.R. OF THE A SSESSEE ARGUED THAT THE ASSESSEE IS FOLLOWING THE PERCENTAGE OF COMPLETION BASED ON SUR VEY METHOD AND CLAIMED EXPENSES AMOUNTING TO RS. 29,74,38,728/- TOWARDS CO NSTRUCTIONS COSTS. THESE COSTS WERE RELATING TO THE REVENUE RECOGNIZED FOR THE SAI D ASSESSMENT YEAR BASED ON PERCENTAGE OF COMPLETION METHOD. OUT OF THE SAID A MOUNT, THE LEARNED ASSESSING OFFICER DISALLOWED A PORTION OF RS.29,07,42,017/- B Y NOT CONSIDERING THE SAME AS CONSTRUCTION COST ATTRIBUTABLE TO INCOME OFFERED. T HE ASSESSEES METHOD OF ACCOUNTING IS IN LINE WITH THE ACCOUNTING STANDARD 7 (AS 7) CONSTRUCTION CONTRACTS, IS ACCOUNTING FOR ITS REVENUE AND RELAT ED COSTS BASED ON PERCENTAGE OF -:3:- ITA NO.2036/16 COMPLETION (POC) METHOD. THE A.R. REITERATED THE SU BMISSIONS MADE BEFORE THE LD.CIT(A) WHICH IS EXTRACTED FROM THE LD. CIT (A)S ORDER IN PARA NO.5 AS UNDER: DETAILS OF THE PROJECT WORK UNDERTAKEN: THE COMPANY (HELIOS) OWNED A LAND TO THE EXTENT OF ABOUT 10.77 ACRES IN PADUR IN OLD MAHABALIPURAM ROAD. ON THIS LAND COMPANY DEVELOPED 4 PROJECTS NAMES, P5, P4, P2 & P3. EACH OF THEM IS A STANDALONE PROJECT AND HAS ITS OW N AMENITIES. APPROVALS FOR EACH OF THEM HAVE BEEN TAKEN FROM DTCP INDIVIDUALLY. THE DETAIL S OF EACH PROJECT, VIZ, LAND EXTENT OF DEVELOPMENT, TOTAL SALE AREA AND LAUNCH DATE OF EAC H PROJECT, IS TABLED AS UNDER: PRINCIPLE LAND EXTENT (IN ACRES) DEVELOPMENT AREA (IN SQ FT) LAUNCH DATE P5 1.59 130,.60 MAY-09 P4 2.47 219,928 MAY-09 P3 2.11 245,695 DEC-10 P2 2.28 257,705 DEC-10 P1 1.96 235,017 JUN-13 P15 (FUTURE DEVELOPMENT) 0.36 N/A TOTAL 10.77 1,088,405 ACCOUNTING FOR REVENUES AND COSTS ARE ALSO ACCOUNTE D BASED ON INDIVIDUAL PROJECT, BASED ON THE ACCOUNTING POLICY AS PER ACCOUNTING STANDARDS A PPLICABLE FROM TIME TO TIME. WHILE COMPLETING THE ASSESSMENT THE FOLLOWING DISAL LOWANCE WAS MADE BY THE ASSESSING OFFICER. 1. DISALLOWANCE OF PROVISION FOR CONSTRUCTION COSTS TO THE EXTENT OF RS.29,07,42,017/- THE APPELLANT IS FOLLOWING THE PERCENTAGE OF COMPLE TION BASED ON SURVEY METHOD AND CLAIMED EXPENSES AMOUNTING TO RS. 29,74,38,728/- TOWARDS CO NSTRUCTIONS COSTS. THESE COSTS WERE RELATING TO THE REVENUE RECOGNIZED FOR THE SAID ASS ESSMENT YEAR BASED ON PERCENTAGE OF COMPLETION METHOD. OUT OF THE SAID AMOUNT, THE LEA RNED ASSESSING OFFICER DISALLOWED A PORTION OF RS.29,07,42,017/- BY NOT CONSIDERING THE SAME AS CONSTRUCTION COST ATTRIBUTABLE TO INCOME OFFERED. THE APPELLANT, IN LINE ACCOUNTING STANDARD 7 (AS 7) CONSTRUCTION CONTRACTS, IS ACCOUNTING FOR ITS REVENUE AND RELATED COSTS BASED ON PERCENTAGE OF COMPLETION (POC) METHOD. THE STANDARD ALLOWS ASSESSEE TO FOLLOW PER CENTAGE OF COMPLETION BASED ON SURVEY METHOD, I.E., ON THE PHYSICAL COMPLETION OF CONSTRU CTION BASED ON THE VARIOUS ACTIVITIES INVOLVED IN DEVELOPING RESIDENTIAL APARTMENTS. -:4:- ITA NO.2036/16 THE RELEVANT EXTRACT OF AS-7 REGARDING THE RECOGNI TION OF CONTRACT REVENUE AND EXPENSES: (FULL EXTRACT HAS BEEN ENCLOSED) 21. WHEN THE OUTCOME OF A CONSTRUCTION CONTRACT CAN BE ESTIMATED RELIABLY, CONTRACT REVENUE AND CONTRACT COSTS ASSOCIATED WITH THE CONS TRUCTION CONTRACT SHOULD BE RECOGNISED AS REVENUE AND EXPENSES RESPECTIVELY BY REFERENCE TO T HE STAGE OF COMPLETION OF THE CONTRACT ACTIVITY AT THE REPORTING DATE. AN EXPECTED LOSS O N THE CONSTRUCTION CONTRACT SHOULD BE RECOGNISED AS AN EXPENSE IMMEDIATELY IN ACCORDANCE WITH PARAGRAPH 35. 29. THE STAGE OF COMPLETION OF A CONTRACT MAY BE DE TERMINED IN A VARIETY OF WAYS. THE ENTERPRISE USES THE METHOD THAT MEASURES RELIABLY T HE WORK PERFORMED. DEPENDING ON THE NATURE OF THE CONTRACT, THE METHODS MAY INCLUDE: (A) THE PROPORTION THAT CONTRACT COSTS INCURRED FO R WORK PERFORMED UPTO THE REPORTING DATE BEAR TO THE ESTIMATED TOTAL CONTRACT COSTS; OR (B) SURVEYS OF WORK PERFORMED; OR (C) COMPLETION OF A PHYSICAL PROPORTION OF THE CON TRACT WORK. PROGRESS PAYMENTS AND ADVANCES RECEIVED FROM CUSTOMERS MAY NOT NECESSARIL Y REFLECT THE WORK PERFORMED AS AT REPORTING DATE (MARCH 31) OF EVERY YEAR, POC BASED ON SURVEY METHOD IS CALCULATED. FOR SALE, ONLY THOSE APARTMENTS WHICH ARE REGISTERE D WITH SRO (SUB-REGISTRAR OFFICE) FOR SALE OF UNDIVIDED SHARE OF LAND DURING REPORTING YEAR WO ULD BE RECKONED AS SALE AND ON SUCH SALE, POC WOULD BE APPLIED TO ARRIVE AT THE SALE VALUE. THIS INCOME WILL HAVE TWO COMPONENTS, VIZ, A) ENTIRE POC, APPLIED ON THE NEW SALE THAT WERE RE GISTERED DURING THE REPORTING PERIOD AND B) INCREMENT POC OVER PREVIOUS YEAR POC, WOULD BE A PPLIED ON THE APARTMENTS THAT WERE SOLD AND REGISTERED UNTIL PREVIOUS REPORTING PERIOD . THE TOTAL (A) AND (B) WOULD BE CONSIDERED AS INCOME. IN ACCORDANCE WITH THE MATCHING PRINCIPLE, COST FOR SUCH SALE WOULD BE RECOGNIZED AS COST OF SALE. WHENEVER, THE APPELLANT INCURS COST ON THE P ROJECT, THE SAME WOULD BE TAKEN TO WORK IN PROGRESS. AT THE END OF REPORTING PERIOD, BASED ON THE SALE RECOGNIZED, RELATED COST WOULD BE RECKONED AS COST OF SALE. THE TOTAL AMOUNT OF C OST OF SALE WOULD BE DRAWN OUT FROM WORK IN PROGRESS. IN CASE, COST INCURRED IS INADEQUATE TO MATCH THE POC, NECESSARY PROVISION WOULD BE MADE IN THE ACCOUNTS. SIMILARLY, IN CASE THE COST INCURRED IS IN EXCESS OF POC THEN NECESSARY REVERSALS SHALL BE MADE TO WIP. ON THE SAME BASIS, PERIODICAL INVOICES ARE RAISED F OR SALE OF APARTMENTS BASED ON MILESTONE COMPLETION WOULD BE CREDITED TO ADVANCE APARTMENT S ALE. AT THE REPORTING DATE, PART OF THIS CREDIT WOULD BE TRANSFERRED TO INCOME BASED ON PERC ENTAGE OF COMPLETION METHOD. BALANCE WOULD BE SHOWN AS LIABILITY, AS EXCESS OVER BILLIN G REVENUE AND GROUPED UNDER CURRENT LIABILITIES. SHORTFALL, IF ANY, SHALL BE SHOWN AS ACCOUNTS RECEIVABLE. THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS HAS SUBMITTED THE LEDGER EXTRACTS OF PROVISIONS TO THE LEARNED ASSESSING OFFICER. IN TH E LEDGERS IT IS VERY MUCH CLEAR THAT THE PROVISIONS MADE IS BEING SET-OFF WITH THE CONSTRUCT ION WIP. THE LEARNED ASSESSING OFFICER ACCEPTED THE INCOME DECLARED AS PER PERCENTAGE OF C OMPLETION METHOD BUT DISALLOWED THE ATTRIBUTABLE COSTS TO EARN THAT INCOME AMOUNTING TO RS.29,07,42,017/-. THE ASSESSING OFFICER ERRED IN APPLYING THE MATCHIN G CONCEPT FOR INCOME AND COSTS. ASSUMING BUT NOT CONCEDING THE FACT THAT THE EXPENS ES FOR WHICH PROVISION MADE ARE TO BE DISALLOWED, THEN THE CORRESPONDING INCOME WHICH HAS BEEN RECOGNISED AND OFFERED BY THE -:5:- ITA NO.2036/16 APPELLANT ON THE BASIS OF POC METHOD, MUST ALSO BE REVERSED IN ACCORDANCE WITH THE MATCHING PRINCIPLE. THE APPELLANT FURTHER SUBMITS THAT THE CHARGE MADE TO THE P & L ACCOUNT WOULD NOT AFFECT THE TAX PAYMENT OR THE PROFIT EARNED BY THE APPELLANT O VER THE LIFE CYCLE OF THE PROJECT. THIS IS BECAUSE OF THE FACT THAT THE OVERALL REVENUE AND CO ST BETWEEN THE TWO METHODS REMAIN CONSTANT DURING THE PERIOD OF THE PROJECT AS A WHOL E. IT IS ONLY THE PERCENTAGE OF COMPLETION THAT VARIES BETWEEN THE TWO OPTIONS THAT ARE AVAILA BLE IN THE ACCOUNTING STANDARD. PLEASE REFER ANNEXURE FOR THE COMPARISON BETWEEN TWO OPTIO NS. WE ARE ENCLOSING IN ANNEXURE THE REVENUES THAT WOUL D BE RECOGNISED IN CASE THE ALTERNATIVE METHOD OF POC METHOD IF ADOPTED AS AGAINST THE SUR VEY METHOD. IT IS EVIDENT FROM THAT THE ASSESSEE HAS OFFERED MORE INCOME OF APPROX RS. 13.06 CRORE ON A COMPARISON BASIS TO THE ONE THAT HAS BEEN PRESCRIBED AS OF MARCH 2012 AS AG AINST THE ALTERNATIVE METHOD PRESCRIBED UNDER THE STANDARD. WE FURTHER SUBMIT THAT THE POC BASED ON SURVEY METH OD HAS BEEN ACCEPTED BY THE LEARNED ASSESSING OFFICER IN PREVIOUS & SUBSEQUENT ASSESSME NTS ALSO. NO ADDITION HAS BEEN MADE BY THE ASSESSING OFFICERS WITH REGARD TO THE METHOD OF ACCOUNTING AND ITS ALLOWABILITY IN THE PREVIOUS AND SUBSEQUENT YEARS. ONLY IN THE CURRENT YEAR THE LEARNED ASSESSING OFFICER HAS RAISED OBJECTIONS WHICH ARE NOT SUSTAINABLE. IT IS ALSO PERTINENT TO NOTE THAT THE PROJECT GOT COMPLETED DURING THE AY 2015-16. WE BRING TO YOUR KIND NOTICE THAT, THE HONBLE DELH I COURT IN THE CASE OF VIRTUAL SOFT SYSTEMS LTD VS. CIT (341 ITR 593) HAS UPHELD THAT WHEN THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING A PARTICULAR METHOD OF ACCOUNTING THAT HAS BEEN WID ELY RECOGNISED AND BACKED BY THE ACCOUNTING STANDARDS ISSUED BY A PROFESSIONAL BODY SUCH AS ICAI IT COULD NOT BE DISCARDED BY ASSESSING OFFICER. FURTHER, THE STANDARDS OF ACCOU NTING SPECIFIED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA SHALL BE DEEMED TO B E THE ACCOUNTING STANDARDS UNTIL THE ACCOUNTING STANDARDS ARE PRESCRIBED BY THE CENTRAL GOVERNMENT. SIMILAR VIEWS HAS BEEN UPHELD BY THE HONBLE HIGH COURT AT CALCUTTA IN THE CASE OF PRADIP COMMERCIAL P LTD VS. CIT (344 ITR 171 CALCUTTA) ALSO IN THE CASE OF UP STATE INDUSTRIAL DEVELOPMENT CORPORATION VS. CIT THE HONBLE SUPREME COURT (139 CTR 267) IT HAS BEEN HELD THAT WHERE THE ACCOUNTING PRINCIPLE FOLLOWED BY THE ASSESSEE IS IN CONSONANCE WITH THE GENERAL PRINCIPL ES OF ACCOUNTANCY THE SAME SHOULD BE APPLIED FOR THE PURPOSE OF ASCERTAINING THE PROFITS AND GAINS UNLESS THEY DO NOT CONFLICT WITH ANY EXPRESS PROVISION OF THE RELEVANT STATUTE. IN THE PRESENT CASE ALSO, THERE IS NO EXPRESS PROVISION IN THE IT ACT ABOUT THE METHOD OF ARRIVIN G AT THE INCOME FROM CONSTRUCTION BUSINESS. HENCE THE GENERAL APPLICABLE ACCOUNTANCY PRINCIPLE STATED IN ACCOUNTING STANDARD 7 FOR CONSTRUCTION CONTRACTS HAS TO BE FOLLOWED THE SAME HAS BEEN APPLIED BY THE APPELLANT. IN THIS REGARD THE SAME CANNOT BE DENIED BY THE LEA RNED ASSESSING OFFICER. 5. THE LD. CIT (A) ALLOWED THE ASSESSEES APPEAL IN HIS ORDER AS PER THE FINDINGS/OBSERVATION AS UNDER: (A) TO CHOOSE A RECOGNIZED METHOD OF ACCOUNTING AND FOLLOW IT CONSISTENTLY IS THE PREROGATIVE OF THE APPELLANT. IT IS UNDISPUTED THAT THE ASSESSING OFFICERS IN THE PREVIOUS YEARS AS WELL AS -:6:- ITA NO.2036/16 SUBSEQUENT YEARS HAVE ACCEPTED THE METHOD OF ACCOUN TING CONSISTENTLY FOLLOWED BY THE APPELLANT. B) THE OVERALL REVENUE AND COST RECOGNIZED IN THE PROFIT & LOSS STATEMENTS IN THE METHOD CONSISTENTLY FOLLOWED BY THE APPELLANT, AND IN THE VARIATION MADE BY THE ASSESSING OFFICER REMAIN THE SAME. IN THE TWO ALTERNATIVES, IT IS ON LY THE PERCENTAGE OF COMPLETION AND THE CONSEQUENT REVENUES AS WELL AS COSTS THAT ARE TO BE RECKONED VARY INTER SE. C) IF THE EXPENSES FOR WHICH THE PROVISIONS MADE A RE TO BE DISALLOWED, THEN THE CORRESPONDING INCOME ALREADY RECOGNIZED AND OFFERED BY THE APPELL ANT ON THE BASIS OF PERCENTAGE OF COMPLETION METHOD WILL ALSO REQUIRE TO BE REVERSED IN ACCORDANCE WITH THE MATCHING PRINCIPLE. THIS WILL RESULT IN COMPLETE DISRUPTION OF THE METH OD OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE APPELLANT IN ACCORDANCE WITH THE ACCOUNTING STA NDARD. D) THE HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA PRIVATE LIMITED VS CIT REPORTED ON 314 ITR 62 HAS HELD THAT A PROVISION IS PAST EVENT; (B) IT IS PROBABLE THAT AN OUT FLOW OF RESOURCES WILL BE REQUIRED TO SETTLE TH E OBLIGATION; AND (C) A RELIABLE ESTIMATE CAN BE MADE OF THE AMOUNT OF OBLIGATION. THE CASE OF T HE APPELLANT COMPANY MEETS ALL THESE TESTS. IT IS EVIDENT THAT AT THE END OF THE FINANC IAL YEAR, BASED ON THE SALE RECOGNIZED, RELATED COST IS RECKONED AS COST OF SALE. THE TOTAL AMOUNT OF COST IS DRAWN FROM WORK IN PROGRESS. PROVISION IS MADE IN ACCOUNTS IN CASE THE COST INCU RRED IS INADEQUATE TO MATCH THE PERCENTAGE OF COMPLETION. THIS METHOD BEING CONSISTENTLY FOLL OWED BY THE APPELLANT, AND ACCEPTED BY THE DEPARTMENT IN THE EARLIER YEAR AND AS WELL AS S UBSEQUENT ASSESSMENT YEARS, I FIND NO REASON TO DISTURB THE SAME. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. THE ASSESSEE IS A COMPANY IS ENGA GED IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE AND FOR THE A.Y.2012- 13 IT FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.25,78,37.560/-. THE ASSESSEE IS FOLLOWING THE PERCENTAGE COMPLETION METHOD FOR RECO GNIZING THE REVENUE AS WELL AS PROPORTIONATE EXPENDITURE. THE ASSESSEE HAS FURNISHED THE PROJECT WISE DETAILS OF SALEABLE AREA, PERCENTAGE O F COMPLETION AND UNSOLD AREA. SIMILARLY, THE BREAK-UP OF THE COSTS ARE ALSO SUPPLIED AT THE TIME OF HEARING SUCH AS COST OF CONSTRUCTION PER SQUARE FE ET, TOTAL COST, COST INCURRED TILL 31/03/2012, POC COST INCURRED AND BAL ANCE PROVISION TO BE PROVIDED. TILL 31/03/2012 THE BALANCE PROVISION TO BE PROVIDED WAS WORKED OUT TO BE RS.29,07,42,017/- WHICH WAS DISALL OWED BY THE -:7:- ITA NO.2036/16 ASSESSING OFFICER AND IS IN DISPUTE. THE ASSESSING OFFICER DISALLOWED THE SAME OBSERVING THAT FOR THE RELEVANT PREVIOUS YEAR IN RESPECT OF PROJECTS P2,P3,P4 AND P5 THE PROVISIONS HAVE BEEN MADE AS AT THE CLOSE OF THE YEAR THROUGH JOURNAL ENTRIES AND THE PROVISIONS ARE NOT ALLOWABLE EXPENDITURE. 7. THE LD CIT(A) RIGHTLY HELD THAT IT IS THE P REROGATIVE OF THE ASSESSEE TO CHOOSE THE METHOD OF ACCOUNTING AND FOLLOW IT CO NSISTENTLY. THE ASSESSEE HAS CHOSEN THE PERCENTAGE COMPLETION METHO D AND FOLLOWING IT REGULARLY AND THE AO ALSO DID NOT DISTURB THE SAME IN THE EARLIER YEARS. THE AMOUNT OF PROVISIONS SHOWN IN THE BREAK-UP OF I NVENTORIES AND IN THE PAYABLES RELATED TO THE BALANCE PROVISION TO BE PRO VIDED FOR THE REMAINING PART OF THE PROJECTS BUT NOT THE EXPENDITURE CLAIME D IN THE PROFIT AND LOSS ACCOUNT FOR THE REVENUES RECOGNIZED. THE ASSESSEE I S RECOGNIZING BOTH REVENUE AND THE EXPENDITURE ON MATCHING CONCEPT WH ICH IS ACCEPTABLE AND RECOGNIZED METHOD OF ACCOUNTING. THE ASSESSEE H AS ADMITTED THE REVENUE OF RS.75,46,74,850/- AND COST AT RS.53,89,0 ,927/- AS PER THE DETAILS FURNISHED AT THE TIME OF APPEAL HEARING. AS PER THE P&L ACCOUNT THE COST OF INVENTORIES WERE AT RS.45,72.79,826/- A ND THE TOTAL EXPENSES INCLUDING THE COST OF INVENTORIES AND ADMINISTRATI VE, MARKETING EXPENSES WERE AT RS.53,10,15,890/-. BEFORE THE CIT(A) THE AS SESSEE SUBMITTED A DETAILS OF PROVISIONS OF COC AND AS PER WHICH POC O N COST INCURRED WAS RS.60.87 CRORES. IT WAS NOT CLEAR FROM THE PROFIT AND LOSS ACCOUNT WHETHER THE ASSESSEE HAS CLAIMED ANY EXPENDITURE WH ICH IS IN CONTINGENT NATURE OR NOT. NO RECONCILIATION WAS SUBMITTED BY T HE ASSESSEE FOR THE -:8:- ITA NO.2036/16 EXPENDITURE DEBITED TO THE P&L ACCOUNT AND THE EXPE NSES CLAIMED AS PER POC METHOD. THE ASSESSEE ALSO NOT FURNISHED ANY RE CONCILIATION AT THE TIME OF HEARING BEFORE US. THE LD. CIT(A) AND THE A SSESSING OFFICER ALSO DID NOT MAKE ANY VERIFICATION ON THIS ISSUE. THEREF ORE WE DEEM IT FIT TO REMIT THE ISSUE BACK TO THE FILE OF ASSESSING OFFIC ER WITH A DIRECTION TO VERIFY THE EXPENSES DEBITED TO THE P&L ACCOUNT AND THE EXPENSES CLAIMED AS PER THE METHOD OF ACCOUNTING FOLLOWED BY THE ASS ESSEE AND DECIDE THE ISSUE A FRESH ON MERITS AFTER GIVING OPPORTUNITY T O THE ASSESSEE. ACCORDINGLY THE ASSESSMENT IS SET ASIDE FOR DENOVO CONSIDERATION. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH NOVEMBER, 2016, AT CHENNAI. SD/- ( ... ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER SD/- ( !'.. # $ % ) (D.S. SUNDER SINGH) & / ACCOUNTANT MEMBER %& / CHENNAI '( / DATED: 25 TH NOVEMBER, 2016 RD () *+ ,+ / COPY TO: 1 . / APPELLANT 4. - / CIT 2. / RESPONDENT 5. +./ 0 / DR 3. - () / CIT(A) 6. /2 3 / GF