AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 321
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue. For this assessee has raised the following grounds: - "1. a. The order u/s. 263 of the Income Tax Act, 1961 passed Commissioner of Income Tax is void and bad ab initio. as the order of assessing officer is neither erroneous nor prejudicial to the interest of revenue. b. The learned Commissioner of Income Tax grossly erred in setting aside the assessment made by the assessing officer u/s. 143(3) of the Income Tax Act 1961 and directing afresh assessment even when the order of assessing officer was neither erroneous nor prejudicial to the interest of revenue. Without prejudice to the foregoing and on the facts of the case 2. The learned Commissioner of Income Tax grossly erred in holding that the order of the assessing officer is erroneous as the same was accepted without proper enquiries/ verification and causing prejudice to the interest of revenue. 3. The learned Commissioner of Income Tax grossly erred in ignoring that: a. specific queries were raised by assessing officer and responded by appellant regarding method of accounting and interest claim by appellant. b. Assessing officer examined past records of the appellant and details of past assessments were on re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h has not recognized the sales receipts of Rs. 50,04,70,01/-' on change of accounting has not removed the proportionate cost from the profit and loss accounts. It is apparent that the Assessing Officer has failed to examine these relevant aspects of the assessment and pass a speaking order. He has also failed to him discharge his duty to make proper enquiry on available leads in the material before hi. All these failures have tax implications in crores. 5. It is settled proposition of Law that failure of the AO to carry out relevant and meaningful enquiries as warranted by the facts and circumstances of the case renders the assessment order erroneous and prejudicial to the interest of the revenue. " 4. Finally, PCIT-1, Mumbai revised the assessment only one aspect that the AO did not examine the implication of different accounting methods followed by the assessee for the purpose of maintenance of the books of accounts and for the computation of income for tax purposes under the head of profits and gains of business or profession. He also observed that its implication on computation of tax was also not examined. He also noted that the AO has not verified the previous years as....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... shall examine the taxability of sale receipts of Rs. 5004,70,01I/- and shall also examine the allowability of interest expenses of Rs. 16,93,62,309/- pertaining to work-in-progress vis-a-vis percentage completion method adopted by the assessee. The A.O. will complete the assessment in the light of the discussion made in this order after considering the prevailing Law and the submissions of the assessee. " Aggrieved, assessee is in appeal before Tribunal. 5. We have heard rival contentions and gone through the facts and circumstances of the case. Before us, the learned Counsel for the assessee Shri Madhur Agarwal, first of all took us through the letter of the assessee filed before AO dated 05.01.2015 filed during the course of scrutiny assessment, wherein the complete details in respect of method of accounting followed while preparing books following Percentage completion method (PCM) and for income tax purposes following Completed Contract Method (CCM) on the basis of original contract price received for the project cost for all the profits on actual sale after reducing the actual cost of construction is disclosed and filed. The learned Counsel for the assessee referred the le....
X X X X Extracts X X X X
X X X X Extracts X X X X
....disposing the application is enclosed herewith as annexure 1. The department has not filed any leave petition to the Supreme Court against this order and therefore it can be said that the method adopted for income tax proceedings i.e. Completed Contract Method has been approved by the Bombay High Court. Moreover, in A.Y. 2010-11 and AY 2011-12 in case of MIs. THDC, the assessing officer himself has accepted the method of accounting followed for income-tax purposes while passing the assessment order u/s. 143(3) of the Income Tax Act, 1961 i.e. completed contract method. Enclosed herewith are ITAT orders for AY 1997-98 to AY 2002-03 and assessment order of AY 2010-11 as annexure 2-4. Your goodselves will appreciate that there is no prescribed method of accounting in the Income Tax Act, 1961 for construction for the year under consideration. There are two methods under which the construction accounting can be done i.e. percentage completion method and completed contract method. The assessee has the choice to adopt any one method however it is essential that consistency should be maintained in following whichever method is once opted for, else it would lead to erroneous results. In....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r consideration, the assessee has paid a sum of Rs. 188,977,964/- as interest on borrowed funds and accordingly claimed it as deductible u/s. 36(1)(iii) of ITA. In the books of accounts, out of this, Rs. 169,362,309/- has been apportioned to projects as explained above on utilization basis. In the Profit / Loss account interest cost is reflected as follows: - Interest Expenses 188,977,964 Less:- Appointment to projects 169,362,309 Charged to Profit/Loss 19,615,655 Kindly appreciate this allocation of funds to various projects in books, cannot be equated with project specific borrowings. Thus in the books of accounts it is only the balance Rs. 19,615,655 which is claimed in the Profit & Loss account." 7. The AO after going through the details framed assessment and there is no issue of non-verification of facts or non-application of mind by the Assessing Officer. Here, in the present case, the AO has properly completed the assessment after raising a query and after receiving reply was satisfied about the claim of the assessee. Even otherwise, on merits the learned Counsel argued that this system of accounting followed by assessee regularly has been approved by Trib....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d of accounting from 'completed contract method' to 'percentage completion method' and since the CIT(A), following the decision of the Tribunal in the assessee's own case in earlier years, has directed the AO to assess the income from projects on completed contract method, therefore, in the absence of any contrary material brought to our notice by the Revenue, we do not find any infirmity in the order of the CIT(A). This ground by the Revenue is accordingly dismissed." 9. It means that in earlier years this is a consistent practice, followed by assessee, there is no change in the method of accounting in this year which give rise to any taxable income or taxable profit. Further, the AO in AY 2013-14 and 2014-15 has accepted this method as it is while framing assessment under section 143(3) vide order dated 09.03.2016 and 16.12.2016 respectively. The learned CIT Departmental Representative heavily relied on the following case laws: - "1. CIT vs Amitabh Bachchan [69 taxmann.com (SC). 2. Arvee International vs. Additional CIT (ITA No. 3543/M/03, ITAT, Mumbai Bench) 3. Deniel Merchants Vs. ITO [SL To Appeal -23976/2017] 4. Horizon Investment Co. Ltd vs. CIT [ITA No. 1593/M/13, ....