Tribunal Sends Back 4.66 Cr Deferred Revenue Case Due to Documentation Gaps

The assessee filed its return of income for AY 2017-18. The AO found a discrepancy between the total receipts in Form 26AS of Rs. 14.30 crore and the income reported in the Profit & Loss Account being Rs. 9.63 crore. Due to Larsen & Toubro’s (L&T) financial limitations, the assessee clarified that it had postponed recognition of income under AS-9 for three projects, citing uncertainty in ultimate collection. Agreements with L&T for deferment were produced. However, the AO rejected the explanation on the ground that the assessee failed to submit necessary supporting evidence, including copies of bills raised, details of amounts deferred, and reconciliation of deferred income.

CIT(A) Held: CIT(A) upheld AO’s decision that the assessee did not provide evidence of uncertainty in collection and did not meet the requirements of AS-9 in confirming the disallowance. Aggrieved by this, the assessee filed the present appeal before the Income Tax Appellate Tribunal.

Main issue: In the absence of specific proof of revenue collection uncertainty and without providing comprehensive supporting documentation, was the assessee justified in postponing income recognition under AS-9?

ITAT Held: According to the ITAT, the assessee didn’t provide complete details to back up its claim of deferred revenue. The Tribunal found that important documents, such as bill-wise details, deferred revenue breakup, and proper justification as per AS-9, were missing. Although the deferment agreements were filed, the lack of reconciliation and evidence made it hard to confirm the validity of the deferment.

To ensure justice, the case was sent back to the AO for a fresh look. The assessee was asked to submit all necessary supporting documents during the new assessment proceedings.

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