Hi Tejas,
The system behavior is as mentioned by Christian Zeuch.
To check the behavior, create a PO referencing a contract > Save the PO. To check the release value against the contract, go to ME33K > Contract Number > Select the line item used in the PO > Additional Data (Shift + F5) > Release Documentation > Scroll to the end of the list to get the Qty and Value released till date (The PO previously created would be present in the list.
Now delete the PO > Save and check the release value (Go out of the Release Documentation screen and get back in). You can notice that the release value of the contract has been updated.
Hope this helps 
Cheers,
Yateesh