2021 (10) TMI 170 - HC - Income Tax

High Court directs Tribunal to reconsider income computation method, emphasizes fair adjudication

The High Court remanded the case to the Tribunal for fresh adjudication on whether the completion Contract Method or the percentage Completion Contract ... Completion Contract Method or the percentage Completion Contract Method for computation of income - Whether the percentage contract completion method is applicable to a developer? - HELD THAT:- Whether the completion Contract Method or the percentage Completion Contract Method for computation of income has to be adopted requires fair adjudication on the basis of facts. Therefore, the orders dated 27.08.2013 and 23.09.2013 passed by the CIT (Appeals) and so far the order of the AO vide orders dated 29.11.2010 and 16.12.2011 so far as it pertains to issue No.1 are hereby quashed and the matter is remanded to the Tribunal for decision afresh in accordance with law. It is needless to state that it will be open for both the parties to raise all contention as made available in law. Issues:1. Applicability of percentage completion method to the developer.2. Fairness and correctness of the working adopted by the assessing officer.Analysis:Issue 1: Applicability of percentage completion method to the developerThe appeal under Section 260A of the Income Tax Act, 1961 was filed against the order of the Income Tax Appellate Tribunal concerning the Assessment years 2008-09 and 2009-10. The primary contention revolved around the application of the percentage completion method to the developer. The assessee, a private limited company engaged in real estate business, challenged the Assessing Officer's decision to apply the percentage completion contract method, resulting in additions and disallowances in the assessment. The Commissioner of Income Tax (Appeals) partly allowed the appeals for both years, but the Income Tax Appellate Tribunal dismissed the appeals. The High Court, after considering the submissions, quashed the previous orders and remanded the matter to the Tribunal for fresh adjudication on whether the completion Contract Method or the percentage Completion Contract Method should be adopted for income computation. The Court emphasized the need for fair adjudication based on facts, allowing both parties to present their contentions.Issue 2: Fairness and correctness of the working adopted by the assessing officerThe second issue raised in the appeal was regarding the fairness and correctness of the working adopted by the assessing officer in applying the percentage completion contract method. The learned senior counsel for the assessee argued for setting aside the Commissioner of Appeals' order and remitting the matter to the Assessing Officer for fresh adjudication due to the factual complexities involved. It was contended that the Tribunal should have allowed the petition filed by the assessee and remanded the matter to the Assessing Officer. The Court acknowledged the submissions and decided to quash the previous orders, directing a fresh decision by the Tribunal in accordance with the law. As the matter was remitted to the Tribunal, the Court did not delve into answering the substantial questions of law raised in the appeal, ultimately disposing of the appeal.In conclusion, the High Court's judgment focused on the necessity for a thorough examination of the factual aspects concerning the applicability of the percentage completion method to developers and the fairness of the assessing officer's working. The decision to remand the matter to the Tribunal for fresh adjudication underscores the importance of a comprehensive and fact-based approach in tax assessments.