High Court affirms deletion of disputed amount from income tax assessment for AY 2006-07

The High Court upheld the decision of the ITAT and CIT(A) to delete the addition of Rs. 1,66,70,811 in the appellant's income tax assessment for AY 2006-07. The appellant's consistent use of the project completion method, recognized by the CBDT, was deemed valid. The High Court found no error in the lower authorities' decisions, emphasizing the appellant's adherence to a recognized accounting method. The appeal was dismissed as no substantial question of law was identified, affirming the deletion of the disputed amount from the appellant's income assessment.

---

---

Issues:
1. Whether the Appellate Tribunal correctly deleted the addition of Rs. 1,66,70,811 made on account of business income by the computed percentage completion methodRs.
2. Whether the Appellate Tribunal correctly held that the Accounting Standard 7 as prescribed by ICAI is not applicable to the assesseeRs.

Analysis:

Issue 1:
The appellant, a construction business owner, filed income for AY 2006-07. The Assessing Officer found discrepancies in income offered against projects undertaken by the appellant. The AO assessed the total income at Rs. 2,00,01,137, including an addition of Rs. 1,66,70,811 using the percentage completion method. The CIT(A) directed deletion of this addition as the appellant consistently followed the project completion method, which was recognized by CBDT. The ITAT upheld the CIT(A)'s decision. The appellant argued that both accounting systems cannot be used for the same income source. However, the High Court noted that the appellant regularly followed the project completion method, and the ITAT's decision was based on the Vraj Developers case, which was not challenged further. The High Court upheld the ITAT's decision, stating no error was found, and dismissed the appeal.

Issue 2:
The High Court emphasized that the appellant consistently followed the project completion method, which was recognized and approved by the CBDT. The CIT(A) observed that the Assessing Officer's decision was not justified as the appellant reported substantial profits in subsequent years using the same method. The ITAT also relied on the Vraj Developers case, stating that the choice of accounting method lies with the assessee if consistently followed. The High Court agreed with the ITAT and CIT(A) that the appellant's method was valid, and no error was found in their decisions. As the appellant's accounting system was not defective and consistently followed, the High Court upheld the deletion of the addition of Rs. 1,66,70,811. The High Court concluded that no substantial question of law arose, and the appeal was dismissed.

---