2016 (3) TMI 1440

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....nizing the income by applying the percentage of completion method as per Accounting Standard-7 issued by ICAI. 3. Brief facts of the case are that during the course of assessment proceedings, the AO observed that the assessee company is engaged in the business of real estate. The assessee filed its return of income on 22.09.2008 declaring the total income at loss of Rs.(-) 24,58,790/-. The case was selected for scrutiny and notice was issued and served on the assessee. In response to the notice, the AR of the assessee attended and furnished the details called for. The AO observed that as per Profit & Loss Account, no sales were declared during the year, however, the assessee had carried out construction work and collected advances agains....

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.... the ld. CIT (A), submitted the following arguments for deleting the addition :- (i) That the ICAI issued Accounting Standard (AS) 7 - 'Construction Contract' in the year 1983 which was later on revised in the year 2002. The AS-7 laid down the principles of accounting for 'construction contracts' in the financial statements of the Contractors. As per the revised AS-7, the accounting was to be done as per percentage/progressive completion method. The revised AS-7 is applicable only to Contractors. (ii) That Recognition/identification of income under the Act is attainable by several methods of accounting including the completed contract method or the percentage of completion method. (iii) Every asses....

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.... That Bombay High Court in the case of CIT v. Tata Iron & Steel Co. Ltd., where it was held that the method of accounting followed by the taxpayer company cannot be said to be unreasonable, and that in such a case, even if a better method could be visualized, the method consistently followed should be accepted. (ix) That the Supreme Court in the case of CIT v. Realest Builders & Services Ltd.[200B] 170 TAXMAN 218 (SC) has held that the tax department needs to provide facts and figures that the impugned method of accounting adopted by the taxpayer results in underestimation of profits for changing the method of accounting under section 145 of the Act. Otherwise, it will be presumed that the entire exercise is revenue neutral. (LATES....