Income Tax Appellate Tribunal - Mumbai
Jaydeep Construction ,Mumbai vs Pcit-41, Mumbai on 17 April, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
"F" BENCH MUMBAI
BEFORE HON'BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER &
HON'BLE SHRI BIJAYANANDA PURUSETH, ACCOUNTANT
MEMBER
ITA No. 2086/Mum/2023
(Assessment Year: 2018-19)
Jaydeep Construction Vs.
Principal Commissioner
Shop No. 07/08, Patidar of Income Tax-41
Complex, Kannamwar Room No. 541, Kautilya
Nagar, Vikhroli (East), Bhavan, C-41 to C-43,
Mumbai - 400083, G Block, BKC, Bandra
Maharashtra (East),
Mumbai - 400051
PAN/GIR No. AAFFJ0346M
(Applicant) (Respondent)
Assessee by Shri Tanmay Phadke
Revenue by Shri Vivek Perampurna (CIT-DR)
Date of Hearing 20.01.2026
Date of Pronouncement 17.04.2026
आदे श / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the assessee challenging the impugned order 31.03.2023 passed u/s 263 of the Income Tax Act, 1961 ('the Act'), by the Office of the Commissioner of Income Tax PCIT, Mumbai -41 for the assessment year 2018-19. The following grounds are reproduced below:
2 ITA No. 2086/Mum/ 2023"Grounds for all the issues 1 On the facts and in the circumstances of the case and as per the law, the learned principal Commissioner of income tax, Mumbai-41 ("the learned PCIT") erred in concluding that the assessment order dated 27.02.2021 is erroneous and prejudicial to the interest of the revenue requiring the revision under section 263 of the Act. The revision made by the learned PCIT is illegal and without jurisdiction and thus, the order dated 31.03.2023 passed by the learned PCIT may be reversed/quashed.
2. On the facts and in the circumstances of the case and as per the law, the learned PCIT erred in invoking the explanation 2 to section 263 of the Act blanketly and mechanically without appreciating that the assessment order dated 27.02.2021 was neither erroneous nor prejudicial to the interest of the revenue. Thus, the order dated 31.03.2023 passed by the learned PCIT may be quashed/reversed.
Revision on the issue of non-declaration of profits of the project (i.e. project completion method or percentage completion method)
3. On the facts and in the circumstances of the case and as per the law, the learned PCIT erred in considering the assessment order erroneous and prejudicial to the interest of the revenue on the application of the provisions of section 43CB of the Act when the show cause notice was not issued on the same and the Appellant was never provided an opportunity of being heard on the application of Section 43CB of the Act. Thus, the revision of the assessment order being without jurisdiction, bad in law and in violation of the principle of justice. Thus, the order dated 31.03.2023 passed by the learne d PCIT may be quashed/reversed.
4. On the facts and in the circumstances of the case and as per the law, the assessment order accepting the project completion method as followed by the Appellant is neither erroneous nor prejudicial to the interest of the revenue. Thus, the order dated 31.03.2023 passed by the learned PCIT directing the learned assessing officer to compute the income on a percentage completion basis on the alleged 3 ITA No. 2086/Mum/ 2023 applicability of section 43CB of the Act being without jurisdiction, illegal and bad in law may be quashed.
5. On the facts and in the circumstances of the case and as per the Inw, the learned PCIT has reached the erroneous conclusion that the income accrued to the Appellant on the receipt of advance and the registration of the agreement as the risk and rewards were transferred. Thus, the said observation may be reversed and the project completion method as followed by the Appellant and accepted by the learned assessing officer may be upheld.
Revision on the issue of invocation of Section 43CA of the Act with respect to the agreement registered on 22.09.2017
6. On the facts and in the circumstances of the case and as per the law, the learned PCIT erred in reaching the conclusion that the provisions of section 43CA of the Act apply to the transactions entered into on 04.11.2010 (prior to the incorporation of section 43CA. Thus, the observation of the learned PCIT regarding the applicability of Section 43CA of the Act being untenable in law may be reversed.
7. Without prejudice to the above, on the facts and in the circumstances of the case and as per the law, the learned PCIT failed to appreciate that even if the section 43CA of the Act is held applicable, no income is liable to be assessed since the Appellant has been following a p roject completion method and the income can be added only in the year in which the project gets completed. Thus, the assessment order is neither erroneous nor prejudicial to the interest of the revenue and the order dated 31.03.2023 passed by the PCIT may be reversed/quashed.
8. Without prejudice to the above, on the facts and in the circumstances of the case and as per the law, the learned assessing officer may be directed to consider the applicability of Section 43CA(3) and 43CA(4) of the Act and make the addition if any only in the year in which the project is completed.
Verification of GST Payable of Rs. 3,83,732/ -4 ITA No. 2086/Mum/ 2023
9. On the facts and in the circumstances of the case and as per the law, the learned PCIT failed to appreciate that the GST of Rs. 3,83,732/- was paid on 18.04.2018 requiring no revision in this regard since the assessment order is neither erroneous nor prejudicial to the interest of the revenue. Thus, the order dated 31.03.2023 passed by the learned PCIT may be quashed/reversed.
Verification of interest expense On the facts and in the circumstances of the case and as per the law the learned PCIT failed to appreciate that the Appellant has been following a project completion and did not avail any expenditure of interest in the year under consideration ruling out any disallowance of such interest expenditure in the present year. The assessment order is neither erroneous nor prejudicial to interest of the revenue and thus, the direction of revision may be reversed.
Revision on the issue of unsecured loans of Rs. 2,47,20,530/-
11. On the facts and in the circumstances of the case and as per the law, the learned PCIT erred in revising the assessment order to the extent directing the learned assessing officer to verify the unsecured loans of R s. 2,47,20.530, Thus, the order dated 31.03.2023 passed by the learned PCIT in this regard may be quashed/reversed.
Miscellaneous ground:
12. The Appellant craves leave to add, alter, rescind, or amend any of the above grounds of appeal.
"
2. Ground Nos. 6 to 12 : At the very outset, the Ld. AR appearing on behalf of the assessee submitted that he did not wish to press Ground Nos. 6 to 12 in the present appeal. Therefore, considering the submissions of the Ld. AR, Ground Nos. 6 to 12 raised by the assessee stand dismissed as not pressed.
5 ITA No. 2086/Mum/ 20233. Ground Nos. 1 to 5 raised by the assessee are interrelated and interconnected, and relate to challenging the order of the Ld. PCIT in invoking Section 263 of the Act, holding that the assessment order is erroneous and prejudicial to the interest of the Revenue. Therefore, we have decided to adjudicate these grounds through the present consolidated order.
4. We have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, we notice that the assessee is a builder/developer and had been following the project completion method and was not recognizing any revenue since the project with "Prathamesh pearl" was in progress.
5. This fact was verified by the Assessing Officer during the course of assessment proceedings as it was observed by the AO that the assessee, despite receiving advances from customers, did not offer the income. Accordingly, necessary explanations were sought from the assessee while issuing notices under Section 142(1) of the Act.
6. In reply thereof, the assessee categorically pointed out that it is engaged in the business of a builder and developer and specifically mentioned that it was following the project completion method. However, the AO still insisted that the assessee explain why the income should not be determined as per ICDS-III, which corresponds to Section 43CB of the Act.
6 ITA No. 2086/Mum/ 20237. In reply thereof, the assessee submitted that ICDS-III is not applicable to "builders/developers" and applies only to persons carrying on "construction contracts." In support thereof, the assessee also referred to the FAQs issued by the CBDT vide Circular No. 10/2017, a copy of which has been placed on record at Paper Book Page No. 25.
8. After considering the details during the course of assessment proceedings, the AO was satisfied and accepted the return of income by passing an order under Section 143(3) of the Act dated 27.02.2021.
9. Subsequently, the Ld. PCIT, after considering the said assessment order, proposed to revise the order under Section 263 of the Act and issued a show-cause notice to the assessee. One of the issues raised therein was the determination of profits on the basis of advances received from customers. A copy of the said show-cause notice is placed at Paper Book Page No. 4.
10. In response, the assessee filed detailed submissions. As regards the non-declaration of profits of the project, it was specifically submitted that the same could not be recognized due to the adoption of the project completion method as a builder/developer. It was also pointed out that this method was consistently followed and that the issue of revenue/profit recognition had already been specifically examined by the AO during the assessment proceedings. Only after considering the submissions of the assessee did the AO accept the project 7 ITA No. 2086/Mum/ 2023 completion method and refrain from making any addition in this regard.
11. We notice that the issue now raised by the Ld. PCIT while invoking Section 263 of the Act had already been examined in detail by the AO during the assessment proceedings, and the AO had adopted a plausible view. Therefore, the same could not form the subject matter of revision under Section 263 of the Act, as it neither renders the assessment order erroneous nor prejudicial to the interests of the Revenue. Relevant portions of the assessee's submission in response to the show-cause notice are placed at Paper Book Pages 11-12.
12. Even after considering the said submissions, the Ld. PCIT was not convinced and directed the AO to determine the profit of the project on the percentage completion method in light of Section 43CB of the Act. While reaching the said conclusion, the Ld. PCIT relied upon the decision of the Coordinate Bench of the ITAT in the case of Hi- Tech Estate and Promoters Pvt. Ltd. vs. PCIT [2020] 117 taxmann.com 965 (Cuttack).
13. After having meticulously gone through the facts of the present case and the decisions relied upon by the respective parties, we found that neither the AO nor the Ld. PCIT disputed the fundamental fact regarding the nature of the assessee's business. It is an admitted and undisputed position that the assessee is a builder/developer.
8 ITA No. 2086/Mum/ 202314. In our view, since Section 43CB of the Act applies only to construction contractors and not to builders/developers like the assessee, the non-declaration of profit for the year under consideration due to non-completion of the project was in accordance with law.
15. In other words, the assessee has categorically submitted that the project completion method adopted by it was perfectly valid and did not require any disturbance or interference by the Ld. PCIT. We further noticed that the Coordinate Benches of the ITAT, in a series of decisions, have consistently held that Section 43CB does not apply to builders/developers and that profits from such projects are taxable only in the year of completion.
In this regard reliance has been placed upon the decisions in the cases of :
16. Since the Ld. PCIT, while deciding the issue, had relied upon the decision of the Coordinate Bench of the ITAT in the case of Hi- Tech Estates & Promoters Pvt. Ltd. vs. PCIT (2020) 117 taxmann.com 965 (Cuttack Trib.), it has become important to 9 ITA No. 2086/Mum/ 2023 analyse the facts of that case and its applicability to the case of the assessee.
17. After considering the decision in Hi-Tech Estates (supra), we noticed that the assessment year in dispute therein was 2013- 14, when Section 43CB of the Act was not on the statute books. Therefore, at the very outset, the material contained in that decision is not applicable to the facts of the present case.
18. Even otherwise, in the said decision, the assessee had followed the project completion method, which was denied by the department. When the matter reached before the ITAT, the project completion method of that assessee was allowed. However, the Coordinate Bench of the ITAT, in its decision, made only a passing observation regarding Section 43CB of the Act and concluded that Section 43CB mandates that the percentage completion method is applicable from assessment year 2017-18.
19. In our view, the said observation is not applicable to the facts of the present case for the reason that, firstly, the Coordinate Bench of the ITAT made only a passing observation regarding the applicability of Section 43CB of the Act, and the question of interpretation of Section 43CB was neither adjudicated nor in dispute before the Coordinate Bench. Even otherwise, on perusal of the said decision, it is evident that neither the assessee nor the department advanced any arguments or submissions on the aspect of Section 43CB of the Act. Thus, for these reasons, the said decision pertains to 10 ITA No. 2086/Mum/ 2023 assessment year 2013-14, when the provisions of Section 43CB had not come into existence. Secondly, the aspect of applicability of Section 43CB of the Act to builders/developers was not considered.
20. Since the Coordinate Benches of the ITAT, in a series of decisions as mentioned above, have consistently taken the view that Section 43CB does not apply to builders/developers and that the profits of such projects are taxable only in the year of completion, therefore we, while adhering to the doctrine of binding precedents, and while relying upon the decisions in DCIT vs. G.K. Wonders (supra), DCIT vs. Aaryan Builders LLP (supra), and DCIT vs. Amardeep Construction (Group entity of the Appellant) (supra) to conclude that the direction of the Ld. PCIT to the AO for determining profits on the basis of the percentage completion method under Section 43CB of the Act is clearly untenable and unsustainable in the eyes of law. Accordingly, we set aside the same and uphold that the project completion method followed by the assessee is correct and justified.
11 ITA No. 2086/Mum/ 202321. Even otherwise, the AO, during the assessment proceedings, after considering and verifying the facts in detail, had taken a plausible view, which cannot be considered erroneous or prejudicial to the interests of justice. Therefore, revision of the same is untenable in view of the decisions in the cases of :
22. Therefore, considering the totality of the facts and circumstances discussed above, and also taking into consideration the judicial pronouncements, we hold that the impugned order passed by the PCIT is bad in law and unsustainable. Consequently, we allow Ground Nos. 1 to 5 raised by the assessee.
23. In the net result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 17.04.2026 12 ITA No. 2086/Mum/ 2023 Sd/- Sd/-
(BIJAYANANDA PURUSETH) (SANDEEP GOSAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated 17/04/2026
आदे श की प्रतितिति अग्रेतिि/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. सं बंधित आयकर आयु क्त / The CIT(A)
4. आयकर आयु क्त(अपील) / Concerned CIT
5. धिभागीय प्रधतधिधि, आयकर अपीलीय अधिकरण,मु म्बई/ DR, ITAT, Mumbai
6. गार्ड फाईल / Guard file.
/ आदे शानुसार BY ORDER, सत्याधपत प्रधत //True Copy// उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai