Tribunal Rules in Favor of Assessee on Project Completion Method & Section 80IB

The Tribunal allowed both appeals of the assessee, setting aside the decisions of the Ld. CIT (Appeals) and the Assessing Officer. The Tribunal upheld the assessee's use of the project completion method over the percentage completion method, citing Supreme Court precedents. The rejection of audited figures of loss and denial of deduction under section 80IB were also overturned. Penalty proceedings under section 271AAA were deemed infructuous.

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Issues Involved:
1. Confirmation of income by adopting the "percentage completion method."
2. Rejection of the "project completion method" and audited figures of loss returned.
3. Eligibility for deduction under section 80IB of the Income Tax Act.
4. Non-adjudication of penalty proceedings under section 271AAA of the Income Tax Act.

Detailed Analysis:

Issue 1: Confirmation of Income by Adopting the "Percentage Completion Method"
The Ld. CIT (Appeals) confirmed the income of Rs. 90,43,690/- against the loss of Rs. 20,80,021/- by adopting the "percentage completion method" for the housing projects of the assessee company. The Assessing Officer issued a show cause notice under section 142(1) of the Act, stating that the assessee had not followed accounting standards AS-7 and AS-9 as required under sections 145(2) and 145(3). Consequently, the Assessing Officer invoked section 145(3) to reject the books of account and computed the profit using the percentage completion method. The Ld. CIT(A) upheld this approach, agreeing that the assessee should have followed AS-7 and AS-9 for a true and fair presentation of its accounts. However, the Tribunal found that the assessee had consistently followed the project completion method, which is an accepted accounting method as per the Supreme Court's rulings in CIT v. Bilahari Investment Pvt. Ltd. and CIT v. Hyundai Heavy Industries Co. Ltd. Thus, the Tribunal set aside the decision to adopt the percentage completion method and allowed the ground raised by the assessee.

Issue 2: Rejection of the "Project Completion Method" and Audited Figures of Loss Returned
The Ld. CIT (Appeals) rejected the project completion method adopted by the assessee and the audited figures of loss returned. The assessee argued that it had consistently followed the project completion method, which is permissible under accounting standards. The Tribunal noted that the project completion method was regularly employed by the assessee and that the real estate developer is not a pure contractor but a seller of flats/goods. The Tribunal found no justification for the revenue authorities to reject the project completion method and concluded that the accounts presented a true and complete picture of the profits. Therefore, the Tribunal set aside the rejection of the project completion method and the audited figures of loss returned.

Issue 3: Eligibility for Deduction Under Section 80IB of the Income Tax Act
The Ld. CIT (Appeals) held that the assessee was not eligible for deduction under section 80IB of the Income Tax Act while confirming the assessable income. However, since the Tribunal allowed the ground related to the adoption of the project completion method, it did not consider it necessary to render a decision on the eligibility and allowability of the deduction under section 80IB. The Tribunal noted that this issue should be considered in the year of completion of the project.

Issue 4: Non-Adjudication of Penalty Proceedings Under Section 271AAA of the Income Tax Act
The learned CIT (Appeals) did not adjudicate upon the initiation of penalty proceedings under section 271AAA of the Income Tax Act. The Tribunal treated the last ground in appeal as infructuous in these proceedings and dismissed it.

Conclusion:
The Tribunal allowed both appeals of the assessee, setting aside the decisions of the Ld. CIT (Appeals) and the Assessing Officer regarding the adoption of the percentage completion method and the rejection of the project completion method. The Tribunal upheld the assessee's consistent use of the project completion method and dismissed the grounds related to penalty proceedings as infructuous. The order was pronounced in the open court on 25/04/2013.

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