The timing of income recognition depends on actual transfer of ownership in real estate transactions, emphasizing that landowners may follow project completion methods independently of developers.

ORDER

PER KESHAV DUBEY, JUDICIAL MEMBER:

These appeals at the instance of the revenue are directed against the orders of the ld. CIT(A)-15, Bengaluru passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”) of the above named assessees for the assessment years 2016-17, 2018-19 & 2019-20.

2. The revenue in all these seven appeals has raised two common grounds of appeal i.e. firstly the ld.CIT(A) has erred in deleting the addition made by the AO under the head Profits & gains of business or profession based on percentage completion method for income arising from revenue sharing from JDA and secondly the ld.CIT(A) ignored the fact that the significant risk and rewards of ownership had already been transferred under the JDA and thus income should be recognized in the year of accrual by adopting percentage of completion method. Since the issue in all these seven appeals are common in nature, these are clubbed together heard together and disposed of by this common order for the sake of convenience and brevity.

3. We take up the revenue’s appeals in ITA No.779/Bang/2025 as lead case for adjudication and the findings of this appeal shall apply mutatis mutandis to all the other revenue appeals. The revenue has raised the following grounds of appeal in No.779/Bang/2025:

4. Now the brief facts of the case are that the assessee “Anushka Realty INC.” is engaged in real estate activity and filed its return of income declaring total income of Rs.43,56,389/-. A search and seizure operation u/s. 132 of the Act was conducted in the case of M/s. Bowring Institute and Mr. Avnash Amarlal and in the connected case, a survey u/s. 133A of the Act was conducted at office premises of the assessee company situated at City center, JC Road, Bengaluru on 20/07/2018. During the course of survey and post survey enquiries, it is found that the assessee has entered into Joint Development Agreement as tabulated below:-

4.1 During the course of survey and post survey proceedings, it was found that the assessee has not reported any business income in respect of receipts from M/s. DNR Corporation Pvt. Ltd and M/s. Purvankara Projects Ltd and hence there was reason to believe that there was an escapement of income during the AY 2016-17, and accordingly the case was reopened by issuance of notice u/s. 148 of the Act dated 25/01/2021after obtaining the approval from the statutory authorities u/s. 151 of the Act. The assessee filed its return of income only on 17/11/2021i.e. almost after 11 months and accordingly notice u/s. 143(2) of the Act was issued through ITBA and duly served upon the assessee. Notice u/s. 142(1) of the Act was also issued to the assessee calling for certain details, and in response to the same the assessee submitted the details as called for. After verification of all the details filed by the assessee, the AO completed the assessment by holding as under:-

4.2 During the course of survey proceedings at the office premises of the assessee, copy of JDA dated 7.5.2013 entered with M/s. Purvankara Projects Ltd. and copy of JDA dated 30.10.2024 entered with M/s. DNR Corporation Pvt. Ltd. was found and impounded. On perusal of the JDA agreement, it is found that JDA clearly specifies in clause 1.1 that revenue from the sale of development will be shared in the ratio of 29.55% : 70.45% (M/s. Anushka Realty Inc. : M/s. Purvankara Projects Ltd.). Further, in clause 3.2 it is also mentioned that the developer promises that the revenue share if the owners (i.e. 29.55% of the realization) shall be calculated based on this condition of developer achieving super built up area of 2.5 times of land comprised in the s