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Practical Case Study on Faceless e-Assessment u/s 143 on Revenue Recognition & Expenditure Booking in Real Estate Business

Written by  2020-09-07   498

Practical Case Study on Faceless Assessment u/s 143(3) on the Issue of Accounting for Revenue Recognition & Expenditure Booking in Real Estate Business

The issue of revenue recognition and expenditure booking in real estate business of the assessees is also a common scrutiny criterion under CASS.

There are two acceptable methods of accounting for Revenue Recognition & Expenditure Booking in Real Estate Business:

     (i)  Percentage of Completion Method: Under this method the revenue and expenditure of the real estate project are booked in proportion to the completion of such real estate project.

    (ii)  Completed Contract Method: Under this method the revenue and expenditure of the real estate project are booked only after the completion of such real estate project.

The Income Computation & Disclosure Standard (ICDS) stipulates adoption of ‘Percentage of Completion Method’ for revenue recognition and expenditure booking in real estate business and as such the Revenue Authorities always insist on adoption of this particular method only in the Books of Account of the assessees.

However, there are a catena of judgments of the Hon’ble High Courts, wherein the ‘Completed Contract Method’ for revenue recognition and expenditure booking in real estate business has also been held as acceptable method subject to the condition of consistency in the manner of adoption of this method by the assessee.

One such real time scrutiny case concerning the ‘Percentage of Completion’ method in the real estate business of the assessee is being discussed and demonstrated as under:

Step 1: Visiting the ‘e-filing portal’ in Income Tax site:

The assessee is required to visit the ‘e-filing portal’ in the Income Tax site by visiting the link: https://www.incometaxindiaefiling.gov.in/home

The assessee is required to click on ‘Login Here’ tab under the tab ‘Registered User’ located on the right side of the screen.

Step 2: Login to the ‘e-filing portal’ in Income Tax site:

The assessee needs to fill in his ‘user id’ which is his ‘PAN’ along with the password’ and ‘captcha code’. After filing in all the details, the ‘Login’ button is to be clicked.

Step 3: Visiting ‘e-Proceedings’ tab:

After logging in, the assessee needs to select ‘e-Proceedings’ hyperlink from under the ‘e-Proceeding’ tab.

The assessee is redirected to a new page and this new page displays all the assessment notices’ under section 143(1)(a)/143(2)/148, for different assessment years, which the assessee might have received, along with the under mentioned information:

      u  PAN,

      u  Assessment Year,

      u  Proceeding Name,

      u  Option for e-Proceeding,

      u  Proceeding Status,

      u  Proceeding Limitation Date,

      u  Proceeding Closure Date, and

      u  Action.