NIRMAN REALTORS AND DEVELOPERS LIMITED ,MUMBAI vs. CIRCLE 2(3)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER)

ITA No. 3447/MUM/2025 Assessment Year: 2012-13

Nirman Realtors and Circle-2(3)(1), Developers Ltd., Aayakar Bhavan, Vs. 401, 402, Apollo Complex, R K Mumbai-400020. Sing Marg, Off Parsi Panchayat Road, Andheri East, Mumbai-400069. PAN NO. AACCN 7735 N Appellant Respondent

: Mr. Asish Thakurdesai Assessee by : Mr. Leyaqat Ali Aafaqui, Sr. DR Revenue by

: 03/12/2025 Date of Hearing : 22/01/2026 Date of pronouncement

ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 10.01.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2012-13, raising following grounds:

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assessment proceedings u/s 143(3) are invalid and bad in assessment proceedings u/s 143(3) are invalid and bad in assessment proceedings u/s 143(3) are invalid and bad in law as the assessing officer who passed the assessment law as the assessing officer who passed the assessment law as the assessing officer who passed the assessment order has not issued a notice u/s 143(2) of the Income Tax order has not issued a notice u/s 143(2) of the Income order has not issued a notice u/s 143(2) of the Income Act, 1961. Act, 1961. 2. On facts, in circumstances of the case and in law, the On facts, in circumstances of the case and in law, the On facts, in circumstances of the case and in law, the learned CIT learned CIT-A - NFAC, ought to have deleted the addition NFAC, ought to have deleted the addition of Rs. 1,84,86,824/ of Rs. 1,84,86,824/-. 2. Briefly stated, facts of the case are that the assessee filed Briefly stated, facts of the case are that the assessee filed Briefly stated, facts of the case are that the assessee filed return of income for the year under consid return of income for the year under consideration i.e. AY 2012 eration i.e. AY 2012-13 on 29.03.2014 declaring total income at Rs.1,08,15,970/-. The on 29.03.2014 declaring total income at Rs.1,08,15,970/ on 29.03.2014 declaring total income at Rs.1,08,15,970/ return of income was processed u/s 143(1) of the Income-tax Act, return of income was processed u/s 143(1) of the Income return of income was processed u/s 143(1) of the Income 1961 (in short ‘the Act’) accepting the returned income. The case 1961 (in short ‘the Act’) accepting the returned income. The case 1961 (in short ‘the Act’) accepting the returned income. The case was selected for scrutiny assessment an was selected for scrutiny assessment and notice u/s 143( d notice u/s 143(2) of the Act was issued on 22.09.2014 Act was issued on 22.09.2014, which was duly served upon the which was duly served upon the assessee. Thereafter, due to cadre restructuri Thereafter, due to cadre restructuring, jurisdiction of the jurisdiction of the assessee was transferred to assessee was transferred to the Assistant Commissioner of Income Assistant Commissioner of Income- tax -10(3)(1), Mumbai and a fresh 10(3)(1), Mumbai and a fresh notice u/s 142(1) of the Act dated notice u/s 142(1) of the Act dated 19.12.2014 was issued and served upon the assessee. Thereafter, 19.12.2014 was issued and served upon the assessee. Thereafter, 19.12.2014 was issued and served upon the assessee. Thereafter, the assessment was completed on the assessment was completed on 26.03.2015 where, the Assessing 26.03.2015 where, the Assessing Officer disallowed the claim of the loss of the assessee of Officer disallowed the claim of the loss of the assessee of Officer disallowed the claim of the loss of the assessee of Rs.1,84,86,824/-. The assessee preferred appeal before the Ld. . The assessee preferred appeal before the Ld. . The assessee preferred appeal before the Ld. CIT(A) on the legal ground challenging the validity of the notice u/s CIT(A) on the legal ground challenging the validity of the notice u/s CIT(A) on the legal ground challenging the validity of the notice u/s 143(2) of the Act by the Jurisd 143(2) of the Act by the Jurisdiction Assessing Officer. The Ld. iction Assessing Officer. The Ld. CIT(A) rejected the objection of the assessee. But on the merit of the CIT(A) rejected the objection of the assessee. But on the merit of the CIT(A) rejected the objection of the assessee. But on the merit of the addition, the Ld. CIT(A) directed the Assessing Officer for addition, the Ld. CIT(A) directed the Assessing Officer for addition, the Ld. CIT(A) directed the Assessing Officer for verification whether the sales referred by the assessee were verification whether the sales referred by the assessee were verification whether the sales referred by the assessee were including or excluding the ref including or excluding the refund to the three customers. und to the three customers.

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5.1The learned counsel for the assessee, while assailing the validity e learned counsel for the assessee, while assailing the validity e learned counsel for the assessee, while assailing the validity of the assessment under Ground No. 1, submitted that though a of the assessment under Ground No. 1, submitted that though a of the assessment under Ground No. 1, submitted that though a notice under section 143(2) of the Income notice under section 143(2) of the Income-tax Act, 1961 was issued tax Act, 1961 was issued on 22.09.2014 by the Deputy Commissioner of Income-tax, Circle- on 22.09.2014 by the Deputy Commissioner of Income on 22.09.2014 by the Deputy Commissioner of Income 8(2), Mumbai, the assessment was ultimately completed by the 8(2), Mumbai, the assessment was ultimately completed by the 8(2), Mumbai, the assessment was ultimately completed by the Assistant Commissioner of Income Assistant Commissioner of Income-tax, Circle-10(3)(1), Mumbai, 10(3)(1), Mumbai, pursuant to pursuant to pursuant to transfer of transfer of jurisdiction on account transfer of jurisdiction on account of cadre jurisdiction on account of of cadre cadre restructuring. It was contended that since the transferee Assessing restructuring. It was contended that since the transferee Assessing restructuring. It was contended that since the transferee Assessing Officer did not issue a fresh notice under section 143(2), the r did not issue a fresh notice under section 143(2), the r did not issue a fresh notice under section 143(2), the assessment framed under section 143(3) of the Act is void ab initio. assessment framed under section 143(3) of the Act is void ab initio. assessment framed under section 143(3) of the Act is void ab initio. Reliance was placed on the decision of the Coordinate Bench in Golf Reliance was placed on the decision of the Coordinate Bench in Reliance was placed on the decision of the Coordinate Bench in

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View Homes Ltd. v. ACIT in ITA No. 1037 and 1038/Bang/2019 in ITA No. 1037 and 1038/Bang/2019 View Homes Ltd. v. ACIT reported in (2021) 88 ITR (Trib.) 0115 (Bangalore), orted in (2021) 88 ITR (Trib.) 0115 (Bangalore),

5.2 The learned Departmental Representative, on the other hand, The learned Departmental Representative, on the other hand, The learned Departmental Representative, on the other hand, supported the order of the Commissioner of Income-tax (Appeals) supported the order of the Commissioner of Income supported the order of the Commissioner of Income and submitted that the notice under section 143(2) was validly and submitted that the notice under section 143(2) was validly and submitted that the notice under section 143(2) was validly issued by the jurisdictional Assessing Officer within the prescribed risdictional Assessing Officer within the prescribed risdictional Assessing Officer within the prescribed time and that the subsequent transfer of jurisdiction did not time and that the subsequent transfer of jurisdiction did not time and that the subsequent transfer of jurisdiction did not necessitate issuance of a fresh notice. necessitate issuance of a fresh notice. He further submitted that the He further submitted that the judicial precedents relied upon by the assessee had already been judicial precedents relied upon by the assessee had already been judicial precedents relied upon by the assessee had already been duly examined and distinguished by the first appellate authority. xamined and distinguished by the first appellate authority. xamined and distinguished by the first appellate authority.

6.1 It is further noted that, pursuant to cadre restructuring in the further noted that, pursuant to cadre restructuring in the further noted that, pursuant to cadre restructuring in the Income-tax Department, the jurisdiction over the assessee’s case tax Department, the jurisdiction over the assessee’s case tax Department, the jurisdiction over the assessee’s case was subsequently transferred to the Assistant Commissioner of was subsequently transferred to the Assistant Commissioner of was subsequently transferred to the Assistant Commissioner of Income-tax, Circle-10(3)(1), Mumbai, who thereafter continued the 10(3)(1), Mumbai, who thereafter continued the 10(3)(1), Mumbai, who thereafter continued the assessment proceedings and completed the assessment under ssment proceedings and completed the assessment under ssment proceedings and completed the assessment under section 143(3) of the Act. section 143(3) of the Act.

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6.2 The sole contention of the assessee is that upon such transfer The sole contention of the assessee is that upon such transfer The sole contention of the assessee is that upon such transfer of jurisdiction, the transferee Assessing Officer was required to of jurisdiction, the transferee Assessing Officer was required to of jurisdiction, the transferee Assessing Officer was required to issue a fresh notice under section 143(2) issue a fresh notice under section 143(2) of the Act. Admittedly, no of the Act. Admittedly, no such notice was issued by the transferee officer. such notice was issued by the transferee officer.

6.3 The crucial issue, therefore, is whether the absence of a fresh The crucial issue, therefore, is whether the absence of a fresh The crucial issue, therefore, is whether the absence of a fresh notice under section 143(2) by the transferee Assessing Officer notice under section 143(2) by the transferee Assessing Officer notice under section 143(2) by the transferee Assessing Officer renders the assessment invalid, when a valid no renders the assessment invalid, when a valid notice had already tice had already been issued by the jurisdictional Assessing Officer within the period been issued by the jurisdictional Assessing Officer within the period been issued by the jurisdictional Assessing Officer within the period of limitation.

6.4 The relevant finding of the Ld. CIT(A) of the issue in dispute is The relevant finding of the Ld. CIT(A) of the issue in dispute is The relevant finding of the Ld. CIT(A) of the issue in dispute is reproduced as under: reproduced as under:

“4. I have carefully considered the assessment order, the groun 4. I have carefully considered the assessment order, the groun 4. I have carefully considered the assessment order, the grounds of appeal, and the written submission of the appellant. of appeal, and the written submission of the appellant. of appeal, and the written submission of the appellant. In In In the the the written written written submission, submission, submission, the the the appellant appellant appellant challenged challenged challenged the the the assessment on the ground that due to cadre restructuring, the assessment on the ground that due to cadre restructuring, the assessment on the ground that due to cadre restructuring, the jurisdiction of the appellant was changed to ACIT 10(3)(1) Mumbai, jurisdiction of the appellant was changed to ACIT 10(3)(1) Mumbai, jurisdiction of the appellant was changed to ACIT 10(3)(1) Mumbai, and no revised notice under Section 143(2) of the Income Tax Act, ed notice under Section 143(2) of the Income Tax Act, ed notice under Section 143(2) of the Income Tax Act, which is the foundation of jurisdiction, was served on the which is the foundation of jurisdiction, was served on the which is the foundation of jurisdiction, was served on the appellant. Accordingly, the appellant challenged the proceedings appellant. Accordingly, the appellant challenged the proceedings appellant. Accordingly, the appellant challenged the proceedings as ab initio, relying on the decision of the Honourable Bangalore as ab initio, relying on the decision of the Honourable Bangalore as ab initio, relying on the decision of the Honourable Bangalore Bench of the Bench of the ITAT in the case of Gulf View Homes Limited vs ITAT in the case of Gulf View Homes Limited vs ACIT(Supra). With regard to the above, it is noted that as per the assessment With regard to the above, it is noted that as per the assessment With regard to the above, it is noted that as per the assessment order, the appellant's case was selected for scrutiny and a notice order, the appellant's case was selected for scrutiny and a notice order, the appellant's case was selected for scrutiny and a notice under Section 143(2) dated 22/9/2014 was issued and duly under Section 143(2) dated 22/9/2014 was issued and duly under Section 143(2) dated 22/9/2014 was issued and duly served on the appellant to assume scrutiny jurisdiction over the on the appellant to assume scrutiny jurisdiction over the on the appellant to assume scrutiny jurisdiction over the appellant. Subsequently, due to cadre restructuring in the Income appellant. Subsequently, due to cadre restructuring in the Income appellant. Subsequently, due to cadre restructuring in the Income Tax Department, the jurisdiction of the appellant changed to ACIT Tax Department, the jurisdiction of the appellant changed to ACIT Tax Department, the jurisdiction of the appellant changed to ACIT 10(3)(1) Mumbai, and a fresh notice under Section 142(1) dated 10(3)(1) Mumbai, and a fresh notice under Section 142(1) dated 10(3)(1) Mumbai, and a fresh notice under Section 142(1) dated 19/12/2014 was issued. In response to the same, the authorized /12/2014 was issued. In response to the same, the authorized /12/2014 was issued. In response to the same, the authorized representative of the appellant attended the hearing and representative of the appellant attended the hearing and representative of the appellant attended the hearing and submitted that the jurisdiction over the company lies with ACIT submitted that the jurisdiction over the company lies with ACIT submitted that the jurisdiction over the company lies with ACIT

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10(3)(1) Mumbai and expressed no objection to the assumption of 10(3)(1) Mumbai and expressed no objection to the assumption of 10(3)(1) Mumbai and expressed no objection to the assumption of jurisdiction. However, the appellant now contests However, the However, the appellant now contests appellant now contests the the the assumption of assumption of assumption of jurisdiction by ACIT 10(3)(1) Mumbai, citing that no fresh notice jurisdiction by ACIT 10(3)(1) Mumbai, citing that no fresh notice jurisdiction by ACIT 10(3)(1) Mumbai, citing that no fresh notice under Section 143(2) was issued by the incumbent office. I have under Section 143(2) was issued by the incumbent office. I have under Section 143(2) was issued by the incumbent office. I have also perused the decision of the Honourable Bengaluru Tribunal in also perused the decision of the Honourable Bengaluru Tribunal in also perused the decision of the Honourable Bengaluru Tribunal in the case of Gulf View Homes Limited, relied on by the appellant, e case of Gulf View Homes Limited, relied on by the appellant, e case of Gulf View Homes Limited, relied on by the appellant, and note that in that case, the original notice under Section 143(2) and note that in that case, the original notice under Section 143(2) and note that in that case, the original notice under Section 143(2) was issued by the transferor Assessing Officer on April 26, 2016, was issued by the transferor Assessing Officer on April 26, 2016, was issued by the transferor Assessing Officer on April 26, 2016, when he had no jurisdiction over the assessee as early as when he had no jurisdiction over the assessee as early as when he had no jurisdiction over the assessee as early as May 27, 2013. Accordingly, the assessment completed by the transferee 2013. Accordingly, the assessment completed by the transferee 2013. Accordingly, the assessment completed by the transferee officer based on the earlier notice issued by the transferring officer officer based on the earlier notice issued by the transferring officer officer based on the earlier notice issued by the transferring officer was held to be invalid. was held to be invalid. However, in the appellant's case, nothing has been brought to my However, in the appellant's case, nothing has been brought to my However, in the appellant's case, nothing has been brought to my notice to prove that the o notice to prove that the original notice under Section 143(2) dated riginal notice under Section 143(2) dated 22/9/2014 was issued by the Assessing Officer without 22/9/2014 was issued by the Assessing Officer without 22/9/2014 was issued by the Assessing Officer without jurisdiction as on the date of issue of notice. Rather, it is noted jurisdiction as on the date of issue of notice. Rather, it is noted jurisdiction as on the date of issue of notice. Rather, it is noted from the assessment order that it was due to the cadre from the assessment order that it was due to the cadre from the assessment order that it was due to the cadre restructuring and the consequent juri restructuring and the consequent jurisdictional change that the sdictional change that the appellant's case moved to ACIT 10(3)(1) Mumbai, and the said appellant's case moved to ACIT 10(3)(1) Mumbai, and the said appellant's case moved to ACIT 10(3)(1) Mumbai, and the said transferee officer continued with the assessment with the issue of transferee officer continued with the assessment with the issue of transferee officer continued with the assessment with the issue of notice under Section 142(1) of the Act and completed the notice under Section 142(1) of the Act and completed the notice under Section 142(1) of the Act and completed the assessment after hearing the appellant. assessment after hearing the appellant. In view of the above, I note that the fact of the appellant's case view of the above, I note that the fact of the appellant's case view of the above, I note that the fact of the appellant's case differ from that in the case of Gulf View Homes Limited, in as differ from that in the case of Gulf View Homes Limited, in as differ from that in the case of Gulf View Homes Limited, in as much as in that case, the original notice under Section 143(2) much as in that case, the original notice under Section 143(2) much as in that case, the original notice under Section 143(2) issued by the transferor officer itself was invalid for the reason issued by the transferor officer itself was invalid for the reason issued by the transferor officer itself was invalid for the reason that the said officer had no jurisdiction over the assessee. that the said officer had no jurisdiction over the assessee. that the said officer had no jurisdiction over the assessee. However, in the appellant's case, the original notice under Section However, in the appellant's case, the original notice under Section However, in the appellant's case, the original notice under Section 143(2) was issued by the jurisdictional Assessing Officer, and 143(2) was issued by the jurisdictional Assessing Officer, and 143(2) was issued by the jurisdictional Assessing Officer, and nothing has been brought on record to show that the said office nothing has been brought on record to show that the said office nothing has been brought on record to show that the said officer had no jurisdiction over the appellant's case. The transfer was had no jurisdiction over the appellant's case. The transfer was had no jurisdiction over the appellant's case. The transfer was effected consequent to the realignment of jurisdiction due to cadre effected consequent to the realignment of jurisdiction due to cadre effected consequent to the realignment of jurisdiction due to cadre restructuring in the Income Tax Department. restructuring in the Income Tax Department. In the above facts and circumstances, I do not find any merit in the In the above facts and circumstances, I do not find any merit in the In the above facts and circumstances, I do not find any merit in the appellant's argument challenging the assessment made, and 's argument challenging the assessment made, and 's argument challenging the assessment made, and accordingly, I dismiss the same. accordingly, I dismiss the same. 4.2. With regard to the addition of Rs. 1,84,86,824 on account of 4.2. With regard to the addition of Rs. 1,84,86,824 on account of 4.2. With regard to the addition of Rs. 1,84,86,824 on account of the disallowance of other allowances, the appellant submitted that the disallowance of other allowances, the appellant submitted that the disallowance of other allowances, the appellant submitted that this claim was due to the reversal of sal this claim was due to the reversal of sales booked in the es booked in the assessment year 2011 assessment year 2011-12. This reversal was necessitated by the 12. This reversal was necessitated by the cancellation of bookings from three buyers owing to delays and cancellation of bookings from three buyers owing to delays and cancellation of bookings from three buyers owing to delays and

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other issues related to the joint development agreement entered other issues related to the joint development agreement entered other issues related to the joint development agreement entered into by the appellant with the joint developer, E into by the appellant with the joint developer, Effile Properties ffile Properties Private Limited. Private Limited. To support this claim, the appellant submitted copies of the ledger To support this claim, the appellant submitted copies of the ledger To support this claim, the appellant submitted copies of the ledger accounts for the prospective buyers, namely Ashwini Pathak, accounts for the prospective buyers, namely Ashwini Pathak, accounts for the prospective buyers, namely Ashwini Pathak, Meenal Amit Israni, and Ruthai International. They also provided Meenal Amit Israni, and Ruthai International. They also provided Meenal Amit Israni, and Ruthai International. They also provided the sales account for the pro the sales account for the project "Sea Vista," which reflected the ject "Sea Vista," which reflected the reversal of sales for these buyers. Furthermore, the appellant reversal of sales for these buyers. Furthermore, the appellant reversal of sales for these buyers. Furthermore, the appellant argued that, as per Accounting Standard 7, expected losses on argued that, as per Accounting Standard 7, expected losses on argued that, as per Accounting Standard 7, expected losses on construction construction construction contracts contracts contracts should should should be be be recognized recognized recognized as as as expenses expenses expenses immediately. The appellant also submi immediately. The appellant also submitted the arbitration order for tted the arbitration order for the prospective buyers to whom the appellant made the settlement the prospective buyers to whom the appellant made the settlement the prospective buyers to whom the appellant made the settlement of the advances received, along with an affidavit clarifying that the of the advances received, along with an affidavit clarifying that the of the advances received, along with an affidavit clarifying that the disallowance of Rs.1,84,85,824 was not claimed again in the disallowance of Rs.1,84,85,824 was not claimed again in the disallowance of Rs.1,84,85,824 was not claimed again in the assessment year 2013 assessment year 2013-14 or in any subsequent year.” ” 6.5 In our considered view, the validity of a notice under section In our considered view, the validity of a notice under section In our considered view, the validity of a notice under section 143(2) has to be examined with reference to the jurisdiction of the 143(2) has to be examined with reference to the jurisdiction of the 143(2) has to be examined with reference to the jurisdiction of the Assessing Officer as on the date of issuance of the notice as on the date of issuance of the notice. In the as on the date of issuance of the notice present case, the notice dated 2 present case, the notice dated 22.09.2014 was issued by an 2.09.2014 was issued by an Assessing Officer who undisputedly had lawful jurisdiction over the Assessing Officer who undisputedly had lawful jurisdiction over the Assessing Officer who undisputedly had lawful jurisdiction over the assessee at that point in time. The subsequent transfer of assessee at that point in time. The subsequent transfer of assessee at that point in time. The subsequent transfer of jurisdiction, occasioned by administrative cadre restructuring, does jurisdiction, occasioned by administrative cadre restructuring, does jurisdiction, occasioned by administrative cadre restructuring, does not invalidate a notice lawfully not invalidate a notice lawfully issued earlier.

6.6 Once scrutiny jurisdiction is validly assumed by issuance of a Once scrutiny jurisdiction is validly assumed by issuance of a Once scrutiny jurisdiction is validly assumed by issuance of a notice under section 143(2) within the statutory time limit, the Act notice under section 143(2) within the statutory time limit, the Act notice under section 143(2) within the statutory time limit, the Act does not mandate the issuance of a second notice under section does not mandate the issuance of a second notice under section does not mandate the issuance of a second notice under section 143(2) merely because the case is transfe 143(2) merely because the case is transferred to another Assessing rred to another Assessing Officer thereafter. The transferee Assessing Officer is legally Officer thereafter. The transferee Assessing Officer is legally Officer thereafter. The transferee Assessing Officer is legally competent to continue the proceedings from the stage at which they competent to continue the proceedings from the stage at which they competent to continue the proceedings from the stage at which they stood at the time of transfer. stood at the time of transfer.

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6.7 The reliance placed by the assessee on the decision in The reliance placed by the assessee on the decision in The reliance placed by the assessee on the decision in Golf View Homes Ltd.(supra) Homes Ltd.(supra) is misconceived. In that case, the very is misconceived. In that case, the very notice under section 143(2) was issued by an Assessing Officer who notice under section 143(2) was issued by an Assessing Officer who notice under section 143(2) was issued by an Assessing Officer who lacked jurisdiction on the date of issuance of the notice, rendering lacked jurisdiction on the date of issuance of the notice lacked jurisdiction on the date of issuance of the notice the notice non-est in law. It was in that factual context tha in law. It was in that factual context tha in law. It was in that factual context that the assessment was held to be invalid. assessment was held to be invalid. The relevant finding of the The relevant finding of the Tribunal in the case of Golf View Homes Ltd. (supra) is reproduced Tribunal in the case of Golf View Homes Ltd. (supra) is reproduced Tribunal in the case of Golf View Homes Ltd. (supra) is reproduced as under:

“19.9. We find the facts of the present case are identical to the 19.9. We find the facts of the present case are identical to the 19.9. We find the facts of the present case are identical to the case already decided by the ITAT Kolkata case already decided by the ITAT Kolkata Bench in the case of Bench in the case of Rungta Irrigation Ltd. (supra). The issue in the case before the Rungta Irrigation Ltd. (supra). The issue in the case before the Rungta Irrigation Ltd. (supra). The issue in the case before the ITAT Kolkata Bench in the case of M/S.Rungta Irrigation Ltd. Vs. ITAT Kolkata Bench in the case of M/S.Rungta Irrigation Ltd. Vs. ITAT Kolkata Bench in the case of M/S.Rungta Irrigation Ltd. Vs. ACIT in ITA No.1224/Kol/2019 order dated 6.9.2019 was ACIT in ITA No.1224/Kol/2019 order dated 6.9.2019 was ACIT in ITA No.1224/Kol/2019 order dated 6.9.2019 was whether, non- -issue of notice u/s.143(2) by the AO who passed the ho passed the assessment order will render the order of assessment void or was assessment order will render the order of assessment void or was assessment order will render the order of assessment void or was it a curable defect. It was the plea of the Assessee that as held by it a curable defect. It was the plea of the Assessee that as held by it a curable defect. It was the plea of the Assessee that as held by the Hon'ble Supreme Court in Hotel Blue Moon 321 ITR 362 (SC), the Hon'ble Supreme Court in Hotel Blue Moon 321 ITR 362 (SC), the Hon'ble Supreme Court in Hotel Blue Moon 321 ITR 362 (SC), non-issue of notice u/s.143(2) by the AO who issue of notice u/s.143(2) by the AO who passed the order of passed the order of assessment renders the order of assessment a nullity. The factual assessment renders the order of assessment a nullity. The factual assessment renders the order of assessment a nullity. The factual details in that case were as follows: details in that case were as follows: Sl. No. Date Events Sl. No. Date Events 1. Upto 08.10.2008 DCIT, Circle 1. Upto 08.10.2008 DCIT, Circle-15(1), New Delhi was the 15(1), New Delhi was the AO of assessee on the basis of territorial AO of assessee on the basis of territorial jurisdiction. jurisdiction. 2. On 08.10.2008 CIT 2. On 08.10.2008 CIT-V, Delhi transferred the jurisdiction V, Delhi transferred the jurisdiction over the assessee's case u/s. 127 to DCIT,Central Circle-1, over the assessee's case u/s. 127 to DCIT,Central Circle over the assessee's case u/s. 127 to DCIT,Central Circle Ranchi. Ranchi. 3. From 09.10.2008 to 03.11.2017 DCIT, Central Circle-1, 3. From 09.10.2008 to 03.11.2017 DCIT, Central Circle 3. From 09.10.2008 to 03.11.2017 DCIT, Central Circle Ranchi was the AO of assessee for all proceedings under Ranchi was the AO of assessee for all proceedings under Ranchi was the AO of assessee for all proceedings under the Act. e Act. 4. 28.07.2016 ACIT, Circle 4. 28.07.2016 ACIT, Circle-21(1), New Delhi issued notice 21(1), New Delhi issued notice u/s. 143(2) to the assessee. u/s. 143(2) to the assessee. 5. 30.06.2017 ACIT, Circle 5. 30.06.2017 ACIT, Circle-21(1), New Delhi issued notice 21(1), New Delhi issued notice u/s. 142(1) to the assessee. u/s. 142(1) to the assessee.

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Moon (2010) 321 ITR 36 Moon (2010) 321 ITR 362 (S.C) wherein the Hon'ble Supreme Court 2 (S.C) wherein the Hon'ble Supreme Court has held that issue of a legally valid notice u/s. 143(2) is has held that issue of a legally valid notice u/s. 143(2) is has held that issue of a legally valid notice u/s. 143(2) is mandatory for usurping jurisdiction to frame scrutiny assessment mandatory for usurping jurisdiction to frame scrutiny assessment mandatory for usurping jurisdiction to frame scrutiny assessment u/s. 143(3) of the Act and absence of a valid notice u/s 143(2) is u/s. 143(3) of the Act and absence of a valid notice u/s 143(2) is u/s. 143(3) of the Act and absence of a valid notice u/s 143(2) is not a curable defect. not a curable defect. The Tribunal also noticed that it's view in the The Tribunal also noticed that it's view in the case of Hotel Blue Moon (supra) was reiterated by the Hon'ble case of Hotel Blue Moon (supra) was reiterated by the Hon'ble case of Hotel Blue Moon (supra) was reiterated by the Hon'ble Apex Court in the case of CIT Vs Laxman Das Khandelwal(108 Apex Court in the case of CIT Vs Laxman Das Khandelwal(108 Apex Court in the case of CIT Vs Laxman Das Khandelwal(108 taxmann.com 183). The relevant observations of the Hon'ble taxmann.com 183). The relevant observations of the Hon'ble taxmann.com 183). The relevant observations of the Hon'ble Supreme Court were extracte Supreme Court were extracted and are as follows: "5. At the outset, it must be stated that out of two questio ns "5. At the outset, it must be stated that out of two questio ns "5. At the outset, it must be stated that out of two questio ns of law that arose for consideration in Hotel Blue Moon's of law that arose for consideration in Hotel Blue Moon's of law that arose for consideration in Hotel Blue Moon's case the first question was whether notice under Section case the first question was whether notice under Section case the first question was whether notice under Section 143(2) would be mandatory for the purpose of making the 143(2) would be mandatory for the purpose of making the 143(2) would be mandatory for the purpose of making the assessment under Section 143(3) of the Act. It was assessment under Section 143(3) of the Act. It was assessment under Section 143(3) of the Act. It was observed: observed:- "3. The Appellate Tribunal held while affirming the decision "3. The Appellate Tribunal held while affirming the decision "3. The Appellate Tribunal held while affirming the decision of CIT (A) that non of CIT (A) that non-issue of notice under Section 143(2) is issue of notice under Section 143(2) is only a procedural irregularity and the same is curable. In only a procedural irregularity and the same is curable. In only a procedural irregularity and the same is curable. In the appeal fil the appeal filed by the assessee before the Gauhati High ed by the assessee before the Gauhati High Court, the following two questions of law were raised for Court, the following two questions of law were raised for Court, the following two questions of law were raised for consideration and decision of the High Court, they were: consideration and decision of the High Court, they were: consideration and decision of the High Court, they were: "(1) Whether on the facts and in circumstances of the case "(1) Whether on the facts and in circumstances of the case "(1) Whether on the facts and in circumstances of the case the issuance of notice under Section 14 the issuance of notice under Section 143(3) of the ncome 3(3) of the ncome Tax Act, 1961 within the prescribed time Tax Act, 1961 within the prescribed time-limit for the limit for the purpose of making the assessment under Section 143(3) of purpose of making the assessment under Section 143(3) of purpose of making the assessment under Section 143(3) of the Income Tax Act, 1961 is mandatory? And the Income Tax Act, 1961 is mandatory? And (2) Whether, on the facts and in the circumstances of the (2) Whether, on the facts and in the circumstances of the (2) Whether, on the facts and in the circumstances of the case and in view of the u case and in view of the undisputed findings arrived at by ndisputed findings arrived at by the Commissioner of Income Tax (Appeals), the additions the Commissioner of Income Tax (Appeals), the additions the Commissioner of Income Tax (Appeals), the additions made under Section 68 of the Income Tax Act, 1961 should made under Section 68 of the Income Tax Act, 1961 should made under Section 68 of the Income Tax Act, 1961 should be deleted or set aside?" be deleted or set aside?" 4. The High Court, disagreeing with the Tribunal, held, that 4. The High Court, disagreeing with the Tribunal, held, that 4. The High Court, disagreeing with the Tribunal, held, that the provisions of Secti the provisions of Section 142 and sub-sections (2) and (3) of sections (2) and (3) of Section 143 will have mandatory application in a case Section 143 will have mandatory application in a case Section 143 will have mandatory application in a case where the assessing officer in repudiation of return filed in where the assessing officer in repudiation of return filed in where the assessing officer in repudiation of return filed in response to a notice issued under Section 158-BC(a) response to a notice issued under Section 158 response to a notice issued under Section 158 proceeds to make an inquiry. Accordingly, the High Court proceeds to make an inquiry. Accordingly, the Hig proceeds to make an inquiry. Accordingly, the Hig answered the question of law framed in affirmative and in answered the question of law framed in affirmative and in answered the question of law framed in affirmative and in favour of the appellant and against the Revenue. The favour of the appellant and against the Revenue. The favour of the appellant and against the Revenue. The Revenue thereafter applied to this Court for special leave Revenue thereafter applied to this Court for special leave Revenue thereafter applied to this Court for special leave under Article 136, and the same was granted, and hence under Article 136, and the same was granted, and hence under Article 136, and the same was granted, and hence this appeal. this appeal.

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(c) served upon him in an improper manner. (c) served upon him in an improper manner. According to Mr. Mahabir Singh, learned Senior Advocate, According to Mr. Mahabir Singh, learned Senior A According to Mr. Mahabir Singh, learned Senior A since the Respondent had participated in the proceedings, since the Respondent had participated in the proceedings, since the Respondent had participated in the proceedings, the provisions of Section 292BB would be a complete the provisions of Section 292BB would be a complete the provisions of Section 292BB would be a complete answer. On the other hand, Mr. Ankit Vijaywargia, learned answer. On the other hand, Mr. Ankit Vijaywargia, learned answer. On the other hand, Mr. Ankit Vijaywargia, learned Advocate, appearing for the Respondent submitted that the Advocate, appearing for the Respondent submitted that the Advocate, appearing for the Respondent submitted that the notice under Section notice under Section 143(2) of the Act was never issued 143(2) of the Act was never issued which was evident from the orders passed on record as which was evident from the orders passed on record as which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of well as the stand taken by the Appellant in the memo of well as the stand taken by the Appellant in the memo of appeal. It was further submitted that issuance of notice appeal. It was further submitted that issuance of notice appeal. It was further submitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the under Section 143(2) of the Act being prerequisite, in under Section 143(2) of the Act being prerequisite, in absence of such notice, the entire proceedings would be absence of such notice, the entire proceedings would be absence of such notice, the entire proceedings would be invalid. invalid. 8. The law on the point as regards applicability of the 8. The law on the point as regards applicability of the 8. The law on the point as regards applicability of the requirement of notice under Section 143(2) of the Act is quite requirement of notice under Section 143(2) of the Act is quite requirement of notice under Section 143(2) of the Act is quite clear from the decision in Blue Moon's case2. The issue that clear from the decision in Blue Moon's case2. The issue that clear from the decision in Blue Moon's case2. The issue that howeve however needs to be considered is the impact of Section r needs to be considered is the impact of Section 292BB of the Act. 292BB of the Act. 9. According to Section 292BB of the Act, if the assessee 9. According to Section 292BB of the Act, if the assessee 9. According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, had participated in the proceedings, by way of legal fiction, had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be notice would be deemed to be valid even if there be notice would be deemed to be valid even if there be infractions as d infractions as detailed in said Section. The scope of the etailed in said Section. The scope of the provision is to make service of notice having certain provision is to make service of notice having certain provision is to make service of notice having certain infirmities to be proper and valid if there was requisite infirmities to be proper and valid if there was requisite infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be participation on part of the assessee. It is, however, to be participation on part of the assessee. It is, however, to be noted that the Section does not save comp noted that the Section does not save complete absence of lete absence of notice. For Section 292BB to apply, the notice must have notice. For Section 292BB to apply, the notice must have notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in emanated from the department. It is only the infirmities in emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to the manner of service of notice that the Section seeks to the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence cure. The Section is not intended to cure complete absence cure. The Section is not intended to cure complete absence of notice itself. ice itself. 10. Since the facts on record are clear that no notice under 10. Since the facts on record are clear that no notice under 10. Since the facts on record are clear that no notice under Section 143(2) of the Act was ever issued by the Section 143(2) of the Act was ever issued by the Section 143(2) of the Act was ever issued by the Department, the findings rendered. by the High Court and Department, the findings rendered. by the High Court and Department, the findings rendered. by the High Court and the Tribunal and the conclusion arrived at were correct. We, the Tribunal and the conclusion arrived at were correct. We, the Tribunal and the conclusion arrived at were correct. We, therefore, see n therefore, see no reason to take a different view in the o reason to take a different view in the matter." matter." 6.8 In contrast, in the present case, no material has been In contrast, in the present case, no material has been In contrast, in the present case, no material has been brought on record to demonstrate that the original notice under brought on record to demonstrate that the original notice under brought on record to demonstrate that the original notice under section 143(2) dated 22.09.2014 was issued without jurisdiction. section 143(2) dated 22.09.2014 was issued without jurisdiction. section 143(2) dated 22.09.2014 was issued without jurisdiction.

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On the contrary, On the contrary, the transfer of jurisdiction occurred only the transfer of jurisdiction occurred only subsequently subsequently subsequently due due due to to to administrative administrative administrative restructuring, restructuring, restructuring, and and and the the the transferee Assessing Officer lawfully continued the proceedings transferee Assessing Officer lawfully continued the proceedings transferee Assessing Officer lawfully continued the proceedings after issuing notice under section 142(1) and granting adequate after issuing notice under section 142(1) and granting adequate after issuing notice under section 142(1) and granting adequate opportunity of hearing. opportunity of hearing.

6.9 The findings recorded by the Commissioner of Income The findings recorded by the Commissioner of Income The findings recorded by the Commissioner of Income-tax (Appeals), distinguishing the facts of the present case from those in (Appeals), distinguishing the facts of the present case from those in (Appeals), distinguishing the facts of the present case from those in Golf View Homes Ltd.(supra) Golf View Homes Ltd.(supra), are well reasoned and in accordance , are well reasoned and in accordance with law.

6.10 In view of the foregoing discussion, we find no i In view of the foregoing discussion, we find no i In view of the foregoing discussion, we find no infirmity in the impugned order of the Commissioner of Income impugned order of the Commissioner of Income-tax (Appeals) on tax (Appeals) on this issue. The assessment having been preceded by a valid notice this issue. The assessment having been preceded by a valid notice this issue. The assessment having been preceded by a valid notice under section 143(2) issued by the jurisdictional Assessing Officer under section 143(2) issued by the jurisdictional Assessing Officer under section 143(2) issued by the jurisdictional Assessing Officer within limitation, the absence of a fresh no within limitation, the absence of a fresh notice by the transferee tice by the transferee Assessing Officer does not render the assessment invalid. Assessing Officer does not render the assessment invalid. Assessing Officer does not render the assessment invalid.

6.11 The ground No. 1 of the appeal of the assessee is accordingly The ground No. 1 of the appeal of the assessee is accordingly The ground No. 1 of the appeal of the assessee is accordingly dismissed.

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7.1 During the course of assessment proceedings, the Assessing During the course of assessment proceedings, the Assessing During the course of assessment proceedings, the Assessing Officer noted that the assess Officer noted that the assessee had claimed a deduction of ee had claimed a deduction of Rs. 1,84,86,824/- under the head “Other Allowances” in relation to its under the head “Other Allowances” in relation to its under the head “Other Allowances” in relation to its project Mahalaxmi. The assessee explained that it follows the . The assessee explained that it follows the . The assessee explained that it follows the Percentage Completion Method Percentage Completion Method and had recognized revenue at and had recognized revenue at 30% in Assessment Year 2011 30% in Assessment Year 2011–12 in respect of bookings made by 12 in respect of bookings made by three prospective buyers. three prospective buyers.

7.2 Subsequently, owing to delays in project execution and related Subsequently, owing to delays in project execution and related Subsequently, owing to delays in project execution and related issues under the Joint Development Agreement with M/s Eiffel issues under the Joint Development Agreement with issues under the Joint Development Agreement with Properties Pvt. Ltd. s Pvt. Ltd., the said buyers cancelled their bookings, and , the said buyers cancelled their bookings, and the assessee refunded the advances received. As a result, the the assessee refunded the advances received. As a result, the the assessee refunded the advances received. As a result, the assessee reversed the corresponding sales and claimed the assessee reversed the corresponding sales and claimed the assessee reversed the corresponding sales and claimed the resultant loss of Rs.1,84,86,824/ of Rs.1,84,86,824/-.

7.3 The Assessing Officer, however, The Assessing Officer, however, disallowed the claim on the disallowed the claim on the ground that the assessee failed to produce documentary evidence ground that the assessee failed to produce documentary evidence ground that the assessee failed to produce documentary evidence establishing cancellation of bookings and genuineness of the claim. establishing cancellation of bookings and genuineness of the claim. establishing cancellation of bookings and genuineness of the claim.

7.4 Before the learned CIT(A), the assessee reiterated that the Before the learned CIT(A), the assessee reiterated that the Before the learned CIT(A), the assessee reiterated that the claim represented reversal of sa claim represented reversal of sales already recognized in earlier les already recognized in earlier years. In support of its claim, the assessee furnished ledger years. In support of its claim, the assessee furnished ledger years. In support of its claim, the assessee furnished ledger accounts of the concerned buyers, namely accounts of the concerned buyers, namely Ashwini Pathak Ashwini Pathak, Meenal Amit Israni, and Ruthai International Ruthai International, along with the sales ledger , along with the sales ledger of the project Sea Vista Sea Vista. The assessee further submitted that, in assessee further submitted that, in accordance with Accounting Standard Accounting Standard–7, expected losses on expected losses on

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construction contracts are required to be recognized at the earliest construction contracts are required to be recognized at the earliest construction contracts are required to be recognized at the earliest possible stage.

7.5 An affidavit was also filed confirming that the impugned An affidavit was also filed confirming that the impugned An affidavit was also filed confirming that the impugned amount had not been claimed again in any subsequent assessment been claimed again in any subsequent assessment been claimed again in any subsequent assessment year.

7.6 Upon examination of the records, the learned CIT(A) accepted Upon examination of the records, the learned CIT(A) accepted Upon examination of the records, the learned CIT(A) accepted in principle that reversal of sales and the consequential loss is in principle that reversal of sales and the consequential loss is in principle that reversal of sales and the consequential loss is allowable. However, he observed that only the reversal pertaining to allowable. However, he observed that only the reversal pertaining to allowable. However, he observed that only the reversal pertaining to Meenal Amit Israni enal Amit Israni (Rs. 95,85,000/-) fell within the relevant ) fell within the relevant assessment year, whereas reversals relating to the other two parties assessment year, whereas reversals relating to the other two parties assessment year, whereas reversals relating to the other two parties were recorded in subsequent years. were recorded in subsequent years.

7.7 Further, the CIT(A) noted that if the assessee had already Further, the CIT(A) noted that if the assessee had already Further, the CIT(A) noted that if the assessee had already accounted for net sales after accounted for net sales after adjusting sale reversals, allowing an adjusting sale reversals, allowing an additional deduction would result in double benefit double benefit. Accordingly, additional deduction would result in he directed the Assessing Officer to verify whether the Profit & Loss he directed the Assessing Officer to verify whether the Profit & Loss he directed the Assessing Officer to verify whether the Profit & Loss Account reflected gross sales gross sales or net sales before allowing any relief. before allowing any relief. The relevant finding of the Ld. CIT(A) is reproduced as under: nt finding of the Ld. CIT(A) is reproduced as under: nt finding of the Ld. CIT(A) is reproduced as under:

“Upon thorough examination of the appellant's submission and the Upon thorough examination of the appellant's submission and the Upon thorough examination of the appellant's submission and the provided documents, including the ledger copies and sales account, provided documents, including the ledger copies and sales account, provided documents, including the ledger copies and sales account, it is noted that the appellant credited Rs.6,39,00,000 to the sale of it is noted that the appellant credited Rs.6,39,00,000 to the sale of it is noted that the appellant credited Rs.6,39,00,000 to the sale of Project Sea Vista Ledger. Against this, an amount of Rs. Project Sea Vista Ledger. Against this, an amount of Rs. Project Sea Vista Ledger. Against this, an amount of Rs. 1,00,35,000 is debited as sales returns due to flat cancellations by 1,00,35,000 is debited as sales returns due to flat cancellations by 1,00,35,000 is debited as sales returns due to flat cancellations by two parties: Meenal Amit Israni with Rs.95,85,000 and Madhav two parties: Meenal Amit Israni with Rs.95,85,000 and Madhav two parties: Meenal Amit Israni with Rs.95,85,000 and Madhav Desai with Rs.4,50,000. The net sale as of 31/03/2012, based on Desai with Rs.4,50,000. The net sale as of 31/03/2012, based on Desai with Rs.4,50,000. The net sale as of 31/03/2012, based on the closing balance, was Rs.5,38,65,000. losing balance, was Rs.5,38,65,000.

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Further verification of individual ledger accounts submitted by the Further verification of individual ledger accounts submitted by the Further verification of individual ledger accounts submitted by the appellant, namely those of Ashwini Pathak, Meenal Amit Israni, and appellant, namely those of Ashwini Pathak, Meenal Amit Israni, and appellant, namely those of Ashwini Pathak, Meenal Amit Israni, and Ruthai International, revealed that the reversal of sale was Ruthai International, revealed that the reversal of sale was Ruthai International, revealed that the reversal of sale was accounted for on 10th Ma accounted for on 10th May 2012 for Rs.67,50,000 in the y 2012 for Rs.67,50,000 in the case of Ashwini Pathak and on 31/03/2014 for Rs.93,00,000 in the case of Ashwini Pathak and on 31/03/2014 for Rs.93,00,000 in the case of Ashwini Pathak and on 31/03/2014 for Rs.93,00,000 in the case of Ruthai International. These reversals of sales are duly reflected in Ruthai International. These reversals of sales are duly reflected in Ruthai International. These reversals of sales are duly reflected in the Project Sea Vista Ledger account on the aforementioned dates. the Project Sea Vista Ledger account on the aforementioned dates. the Project Sea Vista Ledger account on the aforementioned dates. These facts clear These facts clearly indicate that the reversals of sales for Ashwini ly indicate that the reversals of sales for Ashwini Pathak and Ruthai International were carried out in subsequent Pathak and Ruthai International were carried out in subsequent Pathak and Ruthai International were carried out in subsequent years, which are not relevant for the assessment year 2012 years, which are not relevant for the assessment year 2012 years, which are not relevant for the assessment year 2012-13 under consideration. However, among the three parties for whom under consideration. However, among the three parties for whom under consideration. However, among the three parties for whom the sale reversa the sale reversal was claimed by the appellant, the reversal of l was claimed by the appellant, the reversal of Rs.95,85,000 for Meenal Amit Israni was made on 31/03/2012, Rs.95,85,000 for Meenal Amit Israni was made on 31/03/2012, Rs.95,85,000 for Meenal Amit Israni was made on 31/03/2012, which is relevant to the assessment year 2012 which is relevant to the assessment year 2012-13 and is, therefore, 13 and is, therefore, eligible eligible eligible for for for deduction deduction deduction during during during the the the assessment assessment assessment year year year under under under consideration. consideration. Upon reviewing the sales account for Project Sea Vista, the net sale ewing the sales account for Project Sea Vista, the net sale ewing the sales account for Project Sea Vista, the net sale for the project was shown as Rs.5,38,65,000, excluding the above for the project was shown as Rs.5,38,65,000, excluding the above for the project was shown as Rs.5,38,65,000, excluding the above sale reversals. If the income from sales accounted in the profit and sale reversals. If the income from sales accounted in the profit and sale reversals. If the income from sales accounted in the profit and loss account represents sales net of the sale reversal of loss account represents sales net of the sale reversal of loss account represents sales net of the sale reversal of Rs.1,00,35,000, the deduction claimed by the appellant amounts to ,00,35,000, the deduction claimed by the appellant amounts to ,00,35,000, the deduction claimed by the appellant amounts to double deduction. Consequently, the appellant may not be entitled double deduction. Consequently, the appellant may not be entitled double deduction. Consequently, the appellant may not be entitled to the allowance claimed in the profit and loss account. to the allowance claimed in the profit and loss account. to the allowance claimed in the profit and loss account. Conversely, if the appellant credited its profit and loss account with Conversely, if the appellant credited its profit and loss account with Conversely, if the appellant credited its profit and loss account with the gross sales of Project Sea Vista at Rs.6,39,00,000 before the the gross sales of Project Sea Vista at Rs.6,39,00,000 before the the gross sales of Project Sea Vista at Rs.6,39,00,000 before the reversal of Rs.1,00,35,000, the appellant may claim a deduction of reversal of Rs.1,00,35,000, the appellant may claim a deduction of reversal of Rs.1,00,35,000, the appellant may claim a deduction of Rs.95,85,000. Since this issue requires factual verification with the Rs.95,85,000. Since this issue requires factual verification with the Rs.95,85,000. Since this issue requires factual verification with the appellant's accounts, the assessing officer is direct appellant's accounts, the assessing officer is directed to verify the ed to verify the same and allow relief to the appellant if the gross sales of same and allow relief to the appellant if the gross sales of same and allow relief to the appellant if the gross sales of Rs.6,39,00,000 are credited to the profit and loss account without Rs.6,39,00,000 are credited to the profit and loss account without Rs.6,39,00,000 are credited to the profit and loss account without setting off the sales returns on flat cancellation of Rs. 1,00,35,000. setting off the sales returns on flat cancellation of Rs. 1,00,35,000. setting off the sales returns on flat cancellation of Rs. 1,00,35,000. 5. Subject to the above observations and 5. Subject to the above observations and directions to the assessing directions to the assessing officer, the appeal is partly allowed. officer, the appeal is partly allowed.” 7.8 We have considered the rival submissions and perused the We have considered the rival submissions and perused the We have considered the rival submissions and perused the material on record. It is undisputed that the assessee follows the material on record. It is undisputed that the assessee follows the material on record. It is undisputed that the assessee follows the Percentage Completion Method Percentage Completion Method, whereby revenue is recognized , whereby revenue is recognized in proportion to project completion. It is also evident that revenue had proportion to project completion. It is also evident that revenue had proportion to project completion. It is also evident that revenue had

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already been recognized in earlier years in respect of bookings that already been recognized in earlier years in respect of bookings that already been recognized in earlier years in respect of bookings that were subsequently cancelled. were subsequently cancelled.

7.9 Where revenue has been recognized in an earlier year and the Where revenue has been recognized in an earlier year and the Where revenue has been recognized in an earlier year and the ion is later reversed due to cancellation, the underlying transaction is later reversed due to cancellation, ion is later reversed due to cancellation, corresponding reversal must necessarily be factored into the corresponding reversal must necessarily be factored into the corresponding reversal must necessarily be factored into the computation of income computation of income for the year in which the cancellation for the year in which the cancellation occurs, in order to ensure correct determination of taxable profits. occurs, in order to ensure correct determination of taxable profits. occurs, in order to ensure correct determination of taxable profits. ability of the claim depends upon factual However, the allowability of the claim depends upon ability of the claim depends upon verification, particularly on: , particularly on: (i)The year in which the sales reversal he year in which the sales reversal was recorded, (ii) Whether the Profit & Loss Account reflects gross Whether the Profit & Loss Account reflects gross Whether the Profit & Loss Account reflects gross or net sales, and (iii) (iii) Whether allowing the claim would result in Whether allowing the claim would result in duplication of deduction. ion of deduction.

7.10 The Ld. CIT(A) has correctly appreciated this legal position and The Ld. CIT(A) has correctly appreciated this legal position and The Ld. CIT(A) has correctly appreciated this legal position and has, therefore, directed factual verification to determine:(i) whether has, therefore, directed factual verification to determine: has, therefore, directed factual verification to determine: the profit and loss account reflects gross sales, or the profit and loss account reflects gross sales, or (ii) (ii) whether sales reversals have already be reversals have already been adjusted in the net sales figure. en adjusted in the net sales figure.

7.11 Since the issue turns on factual verification of accounts and Since the issue turns on factual verification of accounts and Since the issue turns on factual verification of accounts and accounting treatment adopted by the assessee, and appropriate accounting treatment adopted by the assessee, and appropriate accounting treatment adopted by the assessee, and appropriate directions have already been issued by the Ld. CIT(A), we consider it directions have already been issued by the Ld. CIT(A), we consider it directions have already been issued by the Ld. CIT(A), we consider it just and proper to r just and proper to restore the matter to the file of the Assessing estore the matter to the file of the Assessing Officer for fresh verification. Officer for fresh verification. The Assessing Officer shall: The Assessing Officer shall:

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7.12 Accordingly, the ground No. 2 of the appeal of the assessee is Accordingly, the ground No. 2 of the appeal of the assessee is Accordingly, the ground No. 2 of the appeal of the assessee is allowed for statistical purposes. allowed for statistical purposes.

Order pronounced in the open Court on ounced in the open Court on 22/01/2026. /01/2026. Sd/- - Sd/- Sd/ (RAHUL CHAUDHARY RAHUL CHAUDHARY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 22/01/2026 Rahul Sharma, Sr. P.S.

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Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai