High Court affirms ITAT's ruling on revenue recognition method, stresses accounting consistency.

The High Court upheld the ITAT's decision regarding the accountancy practices of the assessee for revenue recognition. The Court emphasized the importance of consistency in accounting methods, rejecting the Revenue's challenge. It concluded that the project completion method was appropriate for revenue recognition in this case, dismissing the Revenue's arguments for using the percentage completion method selectively. The judgment highlighted the significance of following established accounting standards for fair assessment of taxable income.

---

---

Issues:
1. Correctness of the ITAT's order in permitting the accountancy practices of the assessee for the relevant year.
2. Whether the project completion method or the percentage completion method is appropriate for revenue recognition in the case.

Issue 1:
The Revenue raised a question of law under Section 260A of the Income Tax Act, 1961, challenging the ITAT's order regarding the accountancy practices of the assessee. The Revenue contended that the ITAT erred in allowing the assessee's method of accounting for revenue recognition. The AO had added deemed sales in respect of 22 specific properties, following AS-7 for revenue recognition. However, the CIT(A) noted that the assessee had consistently followed a particular system of accounting, and the ITAT upheld this practice. The ITAT emphasized the importance of consistency in accounting methods and referred to a Supreme Court decision highlighting that the Revenue cannot change its stance on an issue already decided in favor of the assessee.

Issue 2:
The Court analyzed whether the project completion method or the percentage completion method was appropriate for revenue recognition in the case. The assessee and the ITAT relied on the decision in CIT vs. M/s. Excel Industries Ltd., where the Supreme Court emphasized that income tax cannot be levied on hypothetical income. The Court also referred to the ruling in CIT vs. Manish Build Well Pvt. Ltd., which highlighted that both project completion and percentage completion methods can achieve the same result. The Court concluded that the project completion method was suitable in this case, and the AO's selective adoption of the percentage completion method for certain transactions was illogical. The Court emphasized the importance of consistency in accounting practices and dismissed the appeal, stating that no substantial question of law arose.

In conclusion, the High Court upheld the ITAT's decision, emphasizing the importance of consistency in accounting practices and rejecting the Revenue's challenge to the assessee's method of revenue recognition. The judgment highlighted the need to follow established accounting standards and principles to ensure fair and accurate assessment of taxable income.

---