SUSHMA PRAKASH,DELHI V. ASSSITANT COMMISSIONER OF INCOME TAX, CIVIC CENTRE, NEW DELHI

ITA 2880/DEL/2024

AI Insights

The case involves Sushma Prakash, a real estate businesswoman, who appealed against the order of the CIT(A) which upheld the AO's decision to add Rs. 5,59,00,000 to her income for the Assessment Year 2018-19. The addition was based on the AO's rejection of the 'Percentage Completion Method' (POCM) of accounting used by the assessee, which recognized revenue when at least 30% of the total consideration was received. The Tribunal found that the AO had not justified the rejection of this method, which had been consistently accepted in previous years, and noted that the entire amount had been taxed in the subsequent year, rendering the addition revenue neutral.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839848 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2018-2019
• Appeal Filed On: 07-06-2024
• Other Referred Cases: Excide Industries vs. CIT, Radhasoami Satsang vs CIT, CIT vs Realest Builders & Services Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REVENUE
• Keywords: Set aside; Rule of consistency; Principle of natural justice
• Section: 143(3); 234B

Judgement Text

"2880_DEL_2024_SUSHMA PRAKASH_ACIT 1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI BEFORE SHRI YOGESH KUMAR US, HON’BLE JUDICIAL MEMBER & SMT. RENU JAUHRI, HON’BLE ACCOUNTANT MEMBER ITA No. 2880/DEL/2024; Assessment Year: 2018-19 Sushma Prakash 33, Sundar Nagar, New Delhi 110003 Vs ACIT (APPELLANT) (RESPONDENT) PAN No. AAMPP9225G Assessee Represented by: Shri Pardeep Dirodia, CA Shri R. K. Kapoor, CA Shri Prince Chugh, CA Revenue/Department Represented by: Shri Arvind Kumar Trivedi, Sr. DR Date of Hearing: 16.02.2026 Date of Pronouncement: 25.02.2026 ORDER PER RENU JAUHRI : The above captioned appeal is preferred by the assessee against the order dated 24.07.2025, passed by Ld. CIT(A)/NFAC, Delhi u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as, “Act”] for A.Y. 2018-19. Assessment was framed by AO u/s 143(3) r.w.s 143(3A) & 143(3B) of the Act., vide order dated 10.04.2021. 2. The assessee has raised following grounds of appeal: “1. That the order passed by Ld. CIT(A). National Faceless Appeal Centre (NFAC) (hereinafter referred to as Ld CIT(A)) upholding the assessment order is had in law and on the facts of the assessee. 2. That the Ld. AO/ CIT(A) grossly erred on facts and in law to enhance the income of the appellant from Rs. 4,87,24,070 by an Printed from counselvise.com 2880_DEL_2024_SUSHMA PRAKASH_ACIT 2 | P a g e amount of Rs. 5.59,00.000 and determining the taxable income of Rs. 10,46,26,090 on wholly illegal and untenable grounds. 3. That the Ld. CIT(A) grossly erred in law in mechanically confirming the AO's action of (i) Rejecting the assessee's bonafied and consistently followed Percentage of Competition Method (POCM), method of Accounting (ii) Not following the rule of consistency as upheld by the Hon'ble SC in the case of Excide Industries (358 ITR 295), which is bad in law and is prayed not to be upheld. 4. That the Ld. CIT(A) grossly erred in law in not granting a virtual hearing as was sought by the assessee during the appellate proceeding which is against the principles of natural justice and fair play is prayed to be set aside. 5. Without prejudice, the Ld AO/CIT(A) grossly erred in law in bringing to tax the whole amount of agreed sale consideration at Rs. 5,59,00,000/- without considering the costs incurred or to be incurred in respect of same very properties amounting to Rs. 4,71,58,179/- which was duly available on records in respect of each property and taxing only net income/profits of Rs. 87.41.821/- 6 That the Ld. CIT(A) should have appreciated that it is only the profits amounting to Rs. 87.41.821/- from business transactions which can be brought to tax and not whole of the sale price. Thus, the order passed by the Ld. CIT(A) upholding AO's action of taxing the entire consideration per contra to business profit is bad in law and is prayed to be set aside. 7. That the Ld. CIT(A) failed to appreciate that the business profits from the sale of said properties has already been offered to tax in AY 2019-20 & AY 2021-22 as per assessee's regular followed POCM Method, thus erred in law in taxing the same income twice which is bad in law and against the principle of Income Tax provision, it is prayed to be set aside. 8. That the penalty-initiated u/s 270A of the Act for the reason of under-reporting as well as mis-reporting of income is wholly illegal & untenable and is prayed not to be upheld. 9. That the Ld. AO as well as Ld. CIT(A) erred in law in not specifying the exact charge as to whether the initiation of penalty u/s 270A was for underreporting of income or misreporting of income. Printed from counselvise.com 2880_DEL_2024_SUSHMA PRAKASH_ACIT 3 | P a g e 10. That the interest charged u/s 234A, 234B and 234C of the Act is wholly illegal and untenable and is prayed not to be upheld. 11. The aforesaid grounds of appeal are without prejudice to one another. 12. The appellant craves leave to add, amend alter, change vary or substitute any of the aforesaid grounds or raise an additional ground if it becomes necessary to do so in the interest of justice.” 3. Brief facts of the case are that the assessee filed her return for A.Y. 2018- 19 declaring total income of ₹ 4,87,24,070/-. Assessee is engaged in the business of real estate and declared income from various, projects following ‘Percentage Completion Method’. During scrutiny proceedings, Ld. AO observed that in the method followed by the assessee. The revenue was accounted for when at least 30% of the total consideration had been received. However, the method of accounting mentioned in the Audit Report was Mercantile System. 3.1 Accordingly, Ld. AO held that the assessee is neither following percentage completion method nor any other recognized method which is in tune with the mercantile system of accounting. He, therefore, proposed to make an addition of ₹ 5,59,00,00/- after computing the agreed sale consideration in respect of 5 properties which was not reflected in the sales during the year and issued a show cause notice. 3.2 After rejecting the assessee’s contention that she had been consistently following the same method for earlier years also, Ld. AO completed the assessment at an income of ₹ 10,40,26,090/- after making the addition as above. 4. Aggrieved, the assessee preferred on appeal before Ld. CIT(A). After considering the assessee’s submissions, Ld. CIT(A) held that the impugned additions were rightly made by the Ld. AO and dismissed the appeal vide order dated 09.05.2024. 4.1 Further aggrieved the assessee is in appeal before the tribunal. Although several grounds have been raised the sole substantive issue involved is the Printed from counselvise.com 2880_DEL_2024_SUSHMA PRAKASH_ACIT 4 | P a g e addition of ₹ 5,59,00,000/- made on account of sales not included in the profit & loss account. 5. Before us, Ld. AR has vehemently argued that the Ld. AO could not have disregarded the accounting policies consistently followed by the assessee over the years which have also been accepted by the department in preceding and succeeding years after scrutiny. He has further submitted the Ld. AO was not justified in making the impugned addition without rejecting the books of accounts. In this regard, following chart has been filed by the Ld. AR: S. No. Assessment Year Method Applied Remarks Enclosures 1. 2013-14 Percentage of Competition Method (POCM) Accepted by the Ld. AO Scrutiny Assessment order along with notes to accounts of audited financial statement enclosed 2. 2014-15 Percentage of Competition Method (POCM) Accepted by the Ld. AO Scrutiny Assessment order along with notes to accounts of audited financial statement enclosed 3. 2015-16 Percentage of Competition Method (POCM) No Scrutiny Assessment NA 4. 2016-17 Percentage of Competition Method (POCM) No Scrutiny Assessment NA 5. 2017-18 Percentage of Competition Method (POCM) Accepted by the Ld. AO Scrutiny Assessment order along with notes to accounts of audited financial statement enclosed 6. 2019-20 Percentage of Competition Method (POCM) No Scrutiny Assessment The returned income has been accepted in the intimation order u/s 143(1) of the Act 7. 2020-21 Percentage of Competition Method (POCM) No Scrutiny Assessment The returned income has been accepted in the intimation order u/s 143(1) of the Act 8. 2021-22 Percentage of Competition Method (POCM) No Scrutiny Assessment The returned income has been accepted in the intimation order u/s 143(1) of the Act 9. 2022-23 Percentage of Competition No Scrutiny Assessment The returned income has been accepted in the intimation order Printed from counselvise.com 2880_DEL_2024_SUSHMA PRAKASH_ACIT 5 | P a g e Method (POCM) u/s 143(1) of the Act. However, there was a difference of Rs. 22,43,020/- in the final tax payable due to change in tax rate under the special rate of income 10. 2023-24 Percentage of Competition Method (POCM) No Scrutiny Assessment The retuned income has been accepted in the intimation order u/s 143(1) of the Act. 5.1 Further reliance has been placed by the Ld. AR on several decision of the Hon’ble Apex Court in support of his contentions, some of which are as under: (a) Excide Industries vs. CIT (358 ITR 295 (SC)) Honble SC in the case of Exide Industries's [358 ITR 295 (SC)] has held that \"since, a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee. Consequently, there is no reason for us to take a different view unless there are very convincing reasons, none of which have been pointed out by the learned counsel for the Revenue.\" (b) Radhasoami Satsang vs CIT(193 ITR 321)- Held, that in view of the fact if there is no change in the nature of activities & facts are quite similar then Assessing Officer has to follow the principle of consistency & he cannot take a different view contrary to as taken & duly decided/accepted in earlier assessment years. (c) CIT vs Realest Builders & Services Ltd. (307 ITR 202(SC)) “If the Assessing Officer comes to the conclusion that there is underestimation of profits, he must give facts and figures in that regard and demonstrate to the Court that the impugned method of accounting adopted by the assessee results in underestimation of profits and is, therefore, rejected. Otherwise, the presumption would be that the entire exercise is revenue neutral. In the instant case, that exercise had never been undertaken. The Assessing Officer was required to demonstrate both the methods, one adopted by the assessee and the other by the department. In the circumstances, there was no reason to interfere with the conclusion given by the High Court.\" 5.2. Finally, Ld. AR has submitted that the whole exercise is revenue neutral as the impugned amount has been included in the following year’s income. 5.3 On the other hand, Ld. DR has argued that the assessee was not reflecting correct profits by following arbitrary method of revenue recognition as there was Printed from counselvise.com 2880_DEL_2024_SUSHMA PRAKASH_ACIT 6 | P a g e no basis for fixing benchmark of 30% completion of construction for revenue recognition. 6. We have heard the rival submissions and perused the material placed on record. The judicial pronouncements on the issue have been carefully seen in the context of the facts at hand. We note that the assessee’s method of accounting has been accepted by the department in earlier years and even after scrutiny, no addition has been made on this account in any of the earlier years as is evident from the chart submitted by the assessee. Further, we also find merit is the argument that the entire exercise is revenue neutral as the total amount has been brought to tax in the following assessment year. 6.1 We find no justification for making the impugned addition in the year under consideration after rejecting the assessee’s method of accounting. Accordingly, the addition of Rs. 5,59,00,000/- is, hereby, deleted. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the Open Court on 25-02-2026. Sd/- Sd/- (YOGESH KUMAR US) (RENU JAUHRI) Judicial Member Accountant Member Dated: 25.02.2026 Pooja Mittal, Sr.PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi Printed from counselvise.com "