TaxTMI 
TaxTMI 
2021 (10) TMI 508
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....hat the CIT(A) has grossly erred in not appreciating that the appeal was against an order u/s 143(3) passed in compliance to directions u/s 144A, and order u/s 264 was simply to amend direction u/s 144A to the effect that estimated cost of project should be adopted at a figure of Rs. 434,51,74,472/- [599185397 (+) 178380432 (+) 3567608643] while computing income as per AS-7. 4. That the Ld. CIT(A) has misdirected itself and erred in holding that the issue has already been considered by the Pr. CIT, Ghaziabad while passing order u/s 264, ignoring the fact that Pr. CIT in its order u/s 264 has strongly refrained to give any direction against the order of Addl. CIT, since the matter was being taken to Hon'ble High Court, stating "I refrained to give any direction in this regard against the order of Add. CIT." 5. That in view of the above order of CIT(A) be quashed and it be held that AS-7 could not be applied to compute assessee's income, as held by Hon'ble High Court in assessee's own case in the immediately preceding year." 2. A perusal of the above grounds of appeal reveals that the short issue to be decided in appeal is as to whether the assessee, who is a real estate develop....
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....d method was accepted through out in the past. The assessee has been regularly following Project Completion Method of accounting and the revenue was recognized at the time of registration of the residential unit in the name of the customer: Till the time of registration of the residential units the amounts received from the customers were being treated as advances and were reflected in the Balance Sheet as Liabilities. The cost associated with the development and construction of the residential units was being shown under the head 'work-in- progress'. In this regard it is seen that Project Completion Method followed by the assessee is a recognized method of accounting prescribed by the Institute of Chartered Accountant of India. Before its revision in 2002, > AS-7 was applicable in the case of both the Construction Contractors and Real Estates Builders and Developers. AS-7 prescribed both the Percentage Completion Method and the Project Completion Method and it was the choice, of the assessee to follow either one of the methods. The ICAI has clarified that the revised AS-7 is applicable only in the case of Construction Contractors and in the case of Real Estates Builders and Develo....
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....s and in some cases these rights were transferred to third parties. However, this does not in any manner affect the treatment of the said amounts in the books of the Assessee. As noted hereinbefore, the expenses of construction were not debited to the P & L account of the Assessee. It was shown as cost of construction or block of building. It is only as and when a. conveyance deed was executed or possession delivered that the receipt was shown as income. The explanation added by way of Notes to the Accounts was not taken note of by the ITAT when it came to the conclusion that the percentage completion method should apply to the Assessee." 5.8. We set aside the order of the Ld. CIT(A) on the issue and direct the Assessing Officer to delete the entire additions on this account. Ground Nos.1 to 3 of the assessee's are accordingly allowed." 3. The Ld. AR has further invited our attention to the order dated 20.04.2017 of the Hon'ble Allahabad High Court, in ITA No.119 of 2017, stating that the Departmental appeal, against the order of the Tribunal dated 27.10.2016 (supra), has been dismissed by the Hon'ble High Court. The relevant part of the order of the Hon'ble High Court is repr....
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....to maintain its accounts according to AS-7 or AS-9. In this connection, the Tribunal has recorded a finding that the respondent-assessee had been regularly following the project completion method of accounting (AS-9) and that no defects were ever found in its books of accounts or the method of accounting and the said method of accounting was accepted and recognized by the Department. The project completion method i.e. AS-9 followed by the respondent-assessee is also a recognized method of accounting, prescribed by the Institute of Charted Accountants of India and the revised AS-7 is applicable in the case of Contractor. A Division Bench of this Court in Commissioner of Income Tax Vs. Kishore Bandhu (P.) Ltd., 2008 (11) MTC 22 (Allahabad) relying upon a decision of the Madras High Court in Commissioner of Income Tax Vs. S.l. Property Development Limited, (2002) 256 ITR 601 opined that where the assessee had adopted and followed one of the recognized methods of accounting consistently and the Department had accepted it in the earlier years, it would not be fair to compel the assessee to change the method in the current year or to draw any adverse interference therefrom. In Co....