2010 (6) TMI 877 - AT - Income Tax

Tribunal upholds decision on project completion timing, rules in favor of assessee, emphasizing consistency and additional evidence.

The Tribunal upheld the CIT(A)'s decision that the project was not completed during the relevant accounting year, rejecting the Revenue's argument. It was ... - Issues Involved:1. Whether the project undertaken by the assessee was completed during the relevant accounting year.2. Whether the profits from the project should be assessed in the said year.Summary:Issue 1: Completion of the ProjectThe Revenue contended that the CIT(A) erred in holding that the project undertaken by the assessee was not completed during the relevant accounting year. The Assessing Officer (AO) argued that the project was substantially completed during the year, as the total sale consideration was received and some agreements with buyers were registered. The AO also referenced the revised Accounting Standard-7, which recognizes the percentage of completion method as the only method for computing profits from construction business. However, the assessee provided evidence, including an Occupation Certificate and a certificate from the architect, indicating that the project was not completed as of 31.03.2005. The CIT(A) accepted the assessee's submissions, noting that the project was completed in the financial year ended 31.03.2007, and thus, the profits should be recognized in that year.Issue 2: Assessment of ProfitsThe AO estimated the profits at 8% of the total advances received by the assessee, amounting to Rs. 62,67,860/-, and assessed this as the income for the year under appeal. The CIT(A) disagreed, stating that the assessee consistently followed the project completion method since the assessment year 1994-95, which was accepted by the Department. The CIT(A) also noted that the revised Accounting Standard-7 was not applicable to the assessee, as it was developing the project on its own, not as a contractor. The CIT(A) concluded that the project was not completed in the relevant accounting year, and thus, the profits should not be assessed in that year.Conclusion:The Tribunal upheld the CIT(A)'s decision, emphasizing the rule of consistency and the additional facts supporting the assessee's claim. The Tribunal confirmed that the project was not completed as of 31.03.2005 and that the revised Accounting Standard-7 did not apply to the assessee. Consequently, the appeal filed by the Revenue was dismissed.Order:Order pronounced in the Open Court on 30th June 2010.