Income Tax Appellate Tribunal - Mumbai
Faithfull Developers ,Mumbai vs Acit Cir-20(1), Mumbai on 11 December, 2025
IN THE INCOME TAX APPELLATE TRIBUNAL
"F" BENCH MUMBAI
BEFORE HON'BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER&
SHRI OMKARESHWAR CHIDARA, ACCOUNTANT MEMBER
ITA No. 6347/Mum/2025
(Assessment Year: 2018-19)
Faithfull Developers Vs. ACIT - 20(1)
747, Rekha Sadan Piramal Chamber
6, Parsi Colony Road, Dadar Lalbaug, Parel
Mumbai - 400014. Mumbai - 400012.
PAN/GIR No. AAAFF7720N
(Applicant) (Respondent)
Assessee by None
Revenue by Ms. Kavitha Kaushik , Sr. DR
Date of Hearing 03.12.2025
Date of Pronouncement 04.12.2025
आदे श / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the assessee challenging the impugned order dt. 04.09.2025 passed under section 250 of the Income Tax Act, 1961 ('the Act'), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2018-19.
T he Learned Co mmiss ioner of Income T ax (Appeals) erred in conf ir ming the addition made by the Le arned Assess ing Off icer ("AO") of estimated business prof it of .11,13,08,897/- co mputed on an estimated turnover of 2.74,20,59,318/- under Section 43CB of the Act, on mere assu mp tions and presu mp tions, on the grounds th at:
2 IT A N o . 6 3 4 7 / M u m/ 2 0 2 5 Faithfull Developers , Mumbai T he provis ions of Sec tion 43CB, mandating the percentage co mpletion me thod of accounting f or revenue recognition, are appl icable f rom 01.04.2017 ( i.e., f rom A.Υ. 2017-18 on wards) and extend to real es tate bus iness wh ich had alre ady been co mpleted in earlier years.
2 circu ms tances of the case and in law, the Le arned CIT (A) has erred in disallo wing the entire business expenses incurred during the year and consequently not allowing the business loss of .11,37,60,627/- to be carried f or war d to the subsequent year, without assigning any cogen t reason or justif ication. Per state men t - I.
2. None appeared on behalf of the assessee, when the case was called repeatedly. On perusal of the case file, we observed that the notice of the present hearing was already issued to the assessee through RPAD and also through e-mail id. [email protected] as per the report of registry. Since the notice was issued on the address given by the assessee and 30 days have already been lapsed from the date of issuance of notice therefore while drawing inference under the General Clauses Act, it s presumed that service has been validly effected upon the assessee on the address mentioned by the assessee. On the other hand Ld. DR present in the court is ready with the arguments. We have decided to proceed with the hearing of the case ex-parte and to decide the same by considering the material placed on record with the assistance of Ld. DR.
3. The assessee has raised two grounds which are interrelated and interconnected and relates to 3 IT A N o . 6 3 4 7 / M u m/ 2 0 2 5 Faithfull Developers , Mumbai challenging the order of Ld. CIT(A) in sustaining the additions made by Ld.AO. Therefore we have decided to adjudicate these grounds through the present consolidated order.
4. We have heard the Ld. DR, perused the material placed on record, judgemetns cited before us and also the orders passed by the revenue authorities. From the records we noticed that assessee is a partnership firm engaged in the business of development of land and construction of building and the case was selected for scrutiny and the assessment was completed by making additions on account of estimated business income and deemed rental income. Aggrieved by the said order the assessee preferred appeal which was partly allowed and additions with regard to estimated business income was sustained. Consequently the assessee has filed the appeal before us on the grounds mentioned herein above:
5. From the records, we found that these grounds have already been adjudicated in detail by Ld. CIT(A) and the operative portion of the same is contained in para 4 to 4.9 which is reproduced herein below:
4. Ground Nos. 1.2.3&4: All these grounds pertain to the estimation of business prof it at Rs.11.13.08.897/- u/s 43CB of the Act and hence all these grounds are taken up toge ther f or adjudic ation.
4 IT A N o . 6 3 4 7 / M u m/ 2 0 2 5 Faithfull Developers , Mumbai 4.2 T he appellan t developed a projec t n amely Mahalax mi SRA CHS L td and sale building n amely "Vic torian" situ ated at Jah angir Mer wan ji street, A mb awad i, Parel, Mu mbai-12.
T he project was co mpleted in the f inanc ial Year 2016-2017 relevan t to Assess men t Year 2017-2018 an d accor accordingly the revenue was off ered f or T ax in the Assess ment Ye ar 2017-2018 4.3 For the AY 2018-19, the AO observed that appellan t has not off ered inco me on percen tage co mpletion me thod. Hence, the AO issued sho w c ause to the appell ant that wh y the inco me should not co mpute under percentage comple tion me thod f ollo wing ICDS, as mand ated by section 43CB of the Act. Appellan t sub mitted bef ore that sec tion 43CB was no t appl icable to the applic ant since it was eng aged in real estate bus iness and not construc tion contr ac t. Af ter an alysing appellan t's sub miss ion AO concluded that re al estate business is also covered u/s 43CB of the Act and estimated the inco me under percentage co mplete me thod at Rs. 11,13,08,897/-
4.4 Dur ing the course of appeal proceedings, ap pellant sub mitted th at it was f ollo wing regul arly and consistently the pro jec t co mpletion me thod. For the FY 2016- 17, relev ant to AY 2017-18 in co me was off ered under pro jec t comple tion me thod wh ich was accepted by the depar tment. Hence, the appellan t should be allo wed to continue the project co mpletion me thod in the subsequent years also. T he inco me would be off ered on sale of f lats as and when the sale is co mpleted. Appellan t reques ted th at the addition of Rs.11,13,08,897/- based on the estimated prof it under 4.5 Appell an t's sub missions were caref ully considered. With in troduction of section 43CB, as in serted by the Finance Act 2020, with retrospective eff ect f rom 01/04/2017 percen tage co mpletion me thod, Section 43CB of the Act is reproduced as under: it is mandatory f or the businesses involving cons truction contract to off er inco me on "Co mpu tation of inco me f rom cons truction and serv ice contr acts.
5 IT A N o . 6 3 4 7 / M u m/ 2 0 2 5 Faithfull Developers , Mumbai 43CB. (1) T he prof its and g ains arising f rom a construction contr ac t or a of co mpletion me thod in accordance with the inco me co mpu tation and contr act f or provid ing services sh all be deter mined on the bas is of percentage disclosure standards notif ied under sub-section (2) of section 145:
Prov ided that prof its and gains services,- sar ising f rom a contr ac t f or providing (1) with duration of not more than ninety d ays shall be deter mined on the bas is of projec t co mpletion me thod;
(ii) involv ing indeter min ate nu mber of ac ts over a spec if ic period of time shall be deter mined on the b asis of straigh t line me thod.
(2) For the purposes of percentage of method, project co mpletion me thod or str aight line me thod ref erred to in sub-
section (1)--(0) the con trac t revenue shall include retention money;
(ii) the contr act costs sh all not be reduced by any in cidental inco me in the nature of interest, dividends or cap ital gains.
4.6 Appellan t's sub mission th at re al estate business will not be covered u/s 43CB, s ince it is dif f erent f rom construc tion contr ac t is not correct. In the c ase of Hi- tec Estates and Pro mo ters Priv ate Limited vs PCIT (2020) 117 taxman.co m 965(Cuttack-T ribunal), it was held that the provisions of section 43CB prescrib ing percentage co mpletion me thod are to be applied mandatorily with the eff ect f rom 14/04/2017 i.e. AY 2017-18 on wards. T he relevan t extr act of the T ribunal's decis ion is reproduced as under:
"29. A t the same time, we c annot ignore th at the leg islature, by Fin ance Ac t. 2018. has inserted Section 43CB to the Act w.e.f . 1-4-2017, wh ich provides the prof its and g ains aris ing f rom a construc tion contr ac t or a con trac t f or provid ing serv ices shall be deter mined on the bas is of percentage co mpletion me thod notif ied under sub-sec tion (2) of Section 145 of the Act. Thus, th is provis ion is (PCM) in accordance 6 IT A N o . 6 3 4 7 / M u m/ 2 0 2 5 Faithfull Developers , Mumbai with the inco me co mputation and disclosure standards appl icable f rom assess ment year 2017-18 on wards"
4.7 Fro m the above, it is clear that the percentage co mpletion me thod as mandated in section 43CB of the Act is appl icable to real estate business also. Hence, the appellan t's sub mission that section 43CB should not appl ied in the appellan t's case is not acceptable. T he AO's action on applying section 43CB in appell ant' s case is conf irme d.
4.8 T he appellant sub mitted that there were errors in co mputing the estimated inco me u/s 43CB of the Act. Appellan t sub mitted th at secured and unsecured loan were cons idered f or estimating the prof it. T he sales f igure was cons idered thrice wh ile co mputing es timated prof it. Appellan t also sub mitted th at certain direc t and indirec t costs were not considered wh ile co mputing the estimated prof its. AO is directed to cons ider the appell ant's sub mission with respec t to such errors and reco mputed the estimated prof its in accordance with l aw.
4.9 T hus, the addition made of Rs. 11,13,08,897/- u/s 43CB of the Ac t is conf ir med, sub jec t to re moval of errors as poin ted out by the appellan t. Appeal on th is ground is dis missed.
6. Since Ld. CIT(A) has considered all the contentions raised by the assessee, more particularly wherein assessee had submitted that real-estate business will not be covered u/s 43CB of the Act as it is different from construction contract. However, Ld. CIT(A) after relying upon the decision in the case of Hi-tec Estates and Promoters Pvt Ltd., Vs. PCIT [2020] 117 taxman.com 965 (Cuttack - Trib) had reached to the conclusion that the percentage completion method as mandated in Sec. 43CB of the Act is applicable to real-estate business also, 7 IT A N o . 6 3 4 7 / M u m/ 2 0 2 5 Faithfull Developers , Mumbai therefore rejected the contentions of the assessee and confirmed the additions made u/s 43CB of the Act.
7. No new facts or circumstances have been placed on record before us in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, we see no reasons to interfere into or to deviate from the lawful findings so recorded by Ld. CIT(A). Hence, the grounds raised and by the assessee stands dismissed.
8. In the result, the appeal filed by the assessee stands dismissed.
Order pronounced in the open court on 04.12.2025 Sd/- Sd/-
(OMKARESHWAR CHIDARA) (SANDEEP GOSAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated 04/12/2025
KRK, Sr. PS
8 IT A N o . 6 3 4 7 / M u m/ 2 0 2 5
Faithfull Developers , Mumbai
आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent.
3. सं बंिधत आयकर आयु / The CIT(A)
4. आयकर आयु (अपील) / Concerned CIT
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण,मु बई/ DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
/ आदे शानुसार BY ORDER, स ािपत ित //True Copy//
1.
उप/सहायक पंजीकार ( Asst. Registrar)
आयकर अपीलीय अिधकरण, मु बई / ITAT, Mumbai