JOINT COMMISSIONER OF INCOME TAX (OSD), CENTRAL CIRCLE-I, NOIDA, NOIDA vs. M/S RUDRA BUILDWELL HOMES PVT. LTD., DELHI

Heard and perused the record. Assessee company is engaged in the business of real estate development, executing a single project “Rudra Aqua Casa” at Greater Noida (West). The return for AY: 2018-19 was filed and assessment was completed u/s 143(3) of the Act determining income at Rs.20,14,73,350/- and returned income of Rs.94,82,730/- but on account of alleged suppressed turnover an addition of Rs.10,63,68,619/- was made on the basis of difference between turnover as per service tax record and turnover as per ITR and Form 3 CD. The same is deleted by ld. CIT(A) observing that difference arose from on account of difference of basis of recognition on income in two different statutes. Then disallowance u/s 40(a)(ia) of Rs.8,56,22,003/- was made on account of difference between inadmissible amount in Form 3CD and the amount disallowed and the same also stand deleted by the ld. CIT(A) holding that only 30% is disallowable as the remaining is disallowed by the assesse. Accordingly, department is in appeal and has raised following grounds:

Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.10,63,68,619/- made on account of difference in turnover reported in GST returns and turnover declared in the Income-tax Return, without appreciating the factual and legal position on record' 2 Whether on the facts and circumstancesofthecaseandin1aw,theLd.CIT(A) has erred in accepting the assessee's claim of adoption of Percentage of Completion Method (POCM) without verifying the reconciliation of substantial variation between GST turnover and income offered to tax and without insisting upon cogent documentary evidences. 3. Whether on the facts and circumstancesofthecaseandinlaw,theLd.CIT(A) failed to appreciate that the assessee did not furnish project-wise reconciliation of receipts, stage of completion certificates, architect/engineer certification or any independent verification of percentage completion during the assessment proceedings, and therefore the acceptance of internal working furnished at the appellate stage is erroneous. 4. That the order of Ld. CIT(A)-3, Noida being erroneous in law and facts be set aside and order of the A.O be restored. 5. That the above grounds are without prejudice to each other and appellant craves leave to add, alter or amend any ground or grounds on or before the date of hearing of appeal.”

On hearing both sides as with regard to ground No. 1 to 3 we find that ld. DR has relied the impugned order of ld. AO but we find that additions rests on an alleged mismatch between two returns filed under two different revenues statutes. We are of the considered view that two different revenue statutes provide different reporting income for taxability on two different taxing events and unless the Income Tax Act 1961 specifically provides admissibility and consideration of income reported in another revenue statutes to be made basis for consideration of income under the Act too then on the basis of any mismatch between the returns filed under two different statutes, addition or a disallowance is not sustainable. In the case of assesse under the erstwhile services tax regime tax was deducted on advance received, even before service was rendered by position handed over i.e. on receipt/advance basis whereas under the Act revenue is recognized on percentage of completion method or mercantile basis only to the extent of stage of completion actually achieved as mandated by Section 145(1). Thus, advances not yet recognized as revenue under POCM were carried by assesse in the added balance sheet under advances from customers in the form of liability and duly disclosed the impugned assessment order nowhere costs any illegality in the manner of reporting income under the Act. In the revenue recognized of Financial Year 2017-18 correctly stood at Rs.5,10,47,004/- in line with POCM and accounting standards. The assessee’s audited books of accounts and audit report in Form 3CD have not been shown to be suffering from any discrepancy and the entire difference alleged in the form of mismatch is attributable to difference in accounting basis under the two different statute and ld. AO has not taken into consideration the said facts while ld. CIT(A) has duly considered these facts and circumstances and its findings in para 7 of the impugned order and the relevant para of the same is reproduced below:

Submission in respect of Ground No-1 Ground No. 1 The Ld. AO is not justified in facts and circumstances of 1 the case to make addition of Rs.10,63,68,619/- on account of difference in turnover in GST and ITR. 7.1That the Assessing Officer (AO) has concluded that the assessee has concealed income to the extent of Rs. 10,63,68,619/- based solely on a mismatch between turnover figures reported in the Service Tax Return (Rs. 15,74,15,623/-) and the Income Tax Return and Tax Audit Report (Rs. 5,10,47,004/-), without conducting any independent inquiry or verification. 7.2 That the Ld. AO presumed that the entire difference between the two figures to preset unaccounted turnover and undisclosed income and added it to the total income of the assessee purely on a presumption, without seeking any reconciliation or clarification. 7.3 That the addition has been made without invoking or applying the provisions of Section 145(3) of the Income Tax Act, 1961, i.e., without rejection of books of accounts maintained by the assessee. The assessee was not issued any notice or opportunity to explain the nature of the difference, nor was any inquiry conducted into the assessee's method of accounting or the basis of recognition of revenue. 7.4That the Ld. AO failed to analyze the nature of the receipts, the stage of completion of projects, or the revenue recognition method adopted by the assessee, which is critical in the case of real estate transactions. That the assessee is engaged in the business of real estate development and follows the Percentage of Completion Method (POCM) for recognizing revenue, as is appropriate and mandated for such businesses. 7.5That the assessee is engaged in the business of real estate development, which follows percentage of completion method. The details of Rs.15,63,58,844/- are as under: Particular Amount Amount received in April 1096442 Amount received in May 4280688 Amount received in June 28528088 Amount raised in June from Customer 112585646 Total 156358844

As far as ground no Ground 3 is alleging that no project-wise working or stage-wise completion details were furnished and that the learned CIT(A) merely relied upon the appellant's internal working. However, ld. AR demonstrated that the appellant had duly furnished the complete project-wise working for the relevant assessment year, which forms part of the audited financial statements and audit report. The same is available at page 199 of the Paper Book, while the relevant extracts as relied by the CIT(A) are also placed at pages 113, 123 and 124 of the Paper Book. Thus, the finding that no project- wise working was furnished is demonstrably erroneous.

We find no reason to interfere the aforesaid findings and accordingly grounds No. 1 to 3 raised by revenue in quantum appeal are sustained and no substance is left in the appeal against the penalty levied u/s 270A of the Act. The appeals of revenue are accordingly dismissed.