TaxTMI 
TaxTMI 
2017 (5) TMI 730
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....& 18-10-2010 u/s 143(3) of the Income Tax Act, 1961 (hereinafter 'the Act'). 2. The only issue in this appeal of assessee in ITA No. 546/Mum/2009 for AY 2005-06 is against the order of CIT(A) confirming the adhoc addition of 3% of work in progress at Rs. 2,63,44,750/-. For this assessee has raised following grounds: - "Ground No 1 (I) The learned Commissioner of Income tax (Appeals) erred in confirming the action of the A.O. in disregarding the method of accounting followed by the appellant consistently and assessing the appellant on the income of an ad- hoc figure of Ps. 2,63,44750/- (at 3% of Work-in-Progress Rs. 87,81,58,362/- (ii) He failed to appreciate that the appellant was following Project Completion m....
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....tificate dated 30-11-2007 of the architect which is as under: - RCC Work 90% complete approx. Finishing Work 80% complete approx. External Dev. & services 70% compete approx. 4. According to AO, the considerable amount of work in progress is completed and sale amount has been received for total 282 flats having been sold equivalent to the area of 4424 sq. meter out of total saleable area of 50089.36 sq. meters. The assessee was asked to show cause as to why percentage completion method should not be adopted in view of AS-7 issued by ICAI. The assessee replied that what has been received is part consideration i.e. advance and at the time of sale consideration, the construction of apartment is not completed and t....
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.... of profits as per Percentage completion Rs. 2,63,44,750/- Revised total income Rs. 2,63,30,850/- Assessed u/s. 143(3) of the I.T. Act. Give credit for taxes paid, if any. Issue Demand Notice/Challan accordingly. the ITNJS-150 forms part of this order." Aggrieved, assessee preferred the appeal before CIT(A). 5. The CIT(A) also confirmed the action of the AO by observing in Para 6.1 to 6.3 as under: -. "6.1 I see that as per the certificate dated 30.11.2007 (of the architect) of the appellant Shri Farhad Kharegat, the percentage-wise construction completed is as under: - RCC Work 90% complete approx. Finishing Work 80% complete approx. External Dev. & services 70% compete approx. ....
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....appear to be very reasonable by applying 3% on WIP and rejecting the project completion method followed by the appellant Therefore. I confirm the action of the Assessing Officer" Aggrieved assessee came in second appeal before Tribunal.-. 6. We have heard the rival contention and gone through the facts and circumstances of the case. Admittedly, the assessee is regularly following project completion method of accounting for computation of its income. Admittedly, the assessee has also not completed the construction, as per Revenue, as it has completed the construction of 4,244 sq. Meter of area as against the area of 50,089.63 sq. meters. The AO also admitted that the RCC work is completed up to 90%, finishing work is completed up to 80....
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....CTR 203 (Bom) wherein the principle of complete contract method was accepted on the basis of consistency. The relevant finding of Hon'ble High Court are that once the completed project method has been constantly followed since beginning of the business and the assessing authorities have accepted the same in the preceding years, the construction of projects in hand during the relevant assessment years were not complete at all and were at the various stages of construction/development. There is no dispute to the fact that the income returned was only on account of other receipts and the AO adopted the fixed percentage of profit method in respect of construction projects and added to the income. Hon'ble High Court laid down the proposition tha....
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....before us, that the entire exercise, arising out of change of method from completed contract method to deferred revenue expenditure, is revenue neutral. Therefore, we do not wish to interfere with the impugned judgment of the High Court. 21. Before concluding, we may point out that under section 211(2) of the Companies Act, Accounting Standards ("AS") enacted by the Institute of Chartered Accountants have now been adopted [see: judgment of this Court in J.K. Industries case (supra)]. Shri Tripathi, learned counsel for the Department, has placed reliance on AS 22 as the basis of his argument that the completed contract method should be substituted by deferred revenue expenditure (spreading the said expenditure on proportionate basis....