Tribunal rules against tax additions, deems AO's methods unjustified. Case law cited. Revenue appeal dismissed.

The Tribunal upheld the CIT(A)'s decision to delete additions of Rs. 7,10,94,646 and Rs. 1,46,25,071. It found the A.O.'s application of the percentage of completion method and adoption of circle rates unjustified, as the methods were not mandatory or supported by valid grounds. The Tribunal referenced case law to support the CIT(A)'s reasoning, ultimately dismissing the Revenue's appeal. The decision was rendered on 31.03.2015.

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Issues Involved:
1. Deletion of addition by CIT(A) of Rs. 7,10,94,646 made by the A.O. by applying the percentage of completion method.
2. Deletion of addition by CIT(A) of Rs. 1,46,25,071 made by the A.O. as unaccounted sales proceeds received in cash.

Issue-wise Detailed Analysis:

1. Deletion of Addition by CIT(A) of Rs. 7,10,94,646 by Applying Percentage of Completion Method:

The Revenue appealed against the CIT(A)'s order that deleted the addition of Rs. 7,10,94,646 made by the Assessing Officer (A.O.) using the percentage of completion method. The A.O. argued that the assessee should have adopted this method for income computation. However, the assessee consistently followed the method of accounting income based on the actual sale when possession was handed over and the sale deed was registered. This method was accepted by the Department in preceding and succeeding years under section 143(3) of the Income Tax Act.

The CIT(A) accepted the assessee's contention that the percentage of completion method was neither mandatory under section 145(2) nor notified by the Central Government. The CIT(A) found no valid basis for the A.O. to change the method of accounting for a single year selectively. The Tribunal upheld this view, noting that the percentage of completion method is not prescribed under sections 145/145A, and applying it selectively would distort the true profits and gains of the business. The Tribunal referenced judgments from the Delhi High Court and ITAT in similar cases, affirming the CIT(A)'s decision to delete the addition.

2. Deletion of Addition by CIT(A) of Rs. 1,46,25,071 as Unaccounted Sales Proceeds Received in Cash:

The Revenue also contested the deletion of Rs. 1,46,25,071, which the A.O. added as unaccounted sales proceeds received in cash. The A.O. based this addition on the circle rate for stamp duty purposes, which was higher than the declared sale rates in the registered sale deeds. The CIT(A) found no evidence that the assessee received any sales consideration over the declared amount and rejected the A.O.'s reliance on the circle rate for estimating income.

The Tribunal supported the CIT(A)'s finding, noting that the Revenue failed to provide material evidence proving that the assessee received additional sales proceeds. The Tribunal referenced the Delhi High Court's judgment in CIT vs. Discovery Holdings Pvt. Ltd., which held that the value adopted for stamp duty cannot be used to assess business income. The Tribunal upheld the CIT(A)'s decision to delete the addition, dismissing the Revenue's appeal on this ground.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order that deleted the additions of Rs. 7,10,94,646 and Rs. 1,46,25,071. The Tribunal found no justification for the A.O.'s application of the percentage of completion method or the adoption of circle rates for estimating unaccounted sales proceeds. The decision was pronounced in the open court on 31.03.2015.

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